Trucking is getting more challenging in California

CEO of LABELa San Diego-based logistics fulfillment company and member of the Business Council.

The management of my logistics fulfillment company recently met with an owner of a medium-sized transportation company. As we prepare for the challenges of the coming year, forecast our forecasts and find ways to satisfy our customers, we prioritize by conducting a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis. And we’re starting to consult with partners in the supply chain to better understand current trends and what’s happening in our industry.

When we started talking, the two topics dominated our evening discussion California Air Resources Board regulations and California Assembly Bill 5 (AB5) and their impact on our day-to-day business.

Rules of the California Air Resources Board

Not so long ago, most people were not aware of the importance of the supply chain in our economy and its effects on our daily lives. However, the onset of the global pandemic made us all acutely aware of the complex supply chain challenges as we regularly faced limited product selections and, worse, empty shelves.

To understand California’s huge role in international trade, we must realize that two Southern California ports (the Port of Los Angeles and the Port of Long Beach) 31% of all US container-based imports and exports by water. With these volumes, additional problems become part of the intricacies of the equation of the flow of goods in and out of the Golden State.

To reduce the impact on our environment, the California Air Resources Board has issued regulations to reduce various types of emissions from trucks, buses, and trailers. These regulations aim to both reduce greenhouse gas emissions by making them compulsory aerodynamic designs and low-resistance tires and also to reduce toxic emissions from diesel exhaust by requiring newer engines. As of January 1, 2023, all tow trucks over 26,000 lbs. gross weight of the vehicle must have engines from 2010 or later. And if you use the facilities of the Port of Long Beach, your truck must be from 2014 or newer. These regulations have required all operators in California to upgrade their fleets to comply.

A significant percentage of transportation companies are small businesses or owner-operators. Unfortunately, these regulations create a significant burden, forcing owners to make a substantial investment or close their operations. As the owner of a small logistics company, I always support other small businesses. I’ve seen many owner-operators start with a single truck and grow into a fleet.

My advice to small operators is to attend seminars, do your own research and, most importantly, visit the CARB web pages which provide abundant resources and help. Recognizing the difficulties small transport companies face, the organization has started programs to provide funding to help these small businesses upgrade their fleets. Companies can too apply for grants to demolish and replace old trucks.

If you can’t meet the truck replacement timelines, another suggestion is to apply low mileage exemptions. Please note that towing from ports and railways has the strictest rules.

California Assembly Bill 5

Many larger transportation companies employ small business owners or owner-operators to meet the demands of our supply chain. Unfortunately, some of them have stretched the law to misclassify workers as independent contractors to avoid paying taxes and workers’ compensation.

As an effort to level the playing field to protect workers’ benefits and rights and cope with emerging industries such as the gig economy, California lawmakers passed AB5. Basically, the primary purpose of the legislation is to enforce the classification of workers. AB5 sets an independent contractor test in law known as the “ABC” test. For more detailed information about AB5, Click here.

To help small business owners navigate the compliance criteria, the Employment Development Department offers seminars understand the distinction between employee versus independent contractor.

And to ensure you’re working with compliant companies, the State of California Department of Industrial Relations offers a database to search for port transportation companies or individuals with dissatisfied final court decisions, tax assessments or tax liens.

Final thoughts

For non-Californian truckers, start preparing because what starts on the west coast moves quickly to the east coast.

If your business relies on California trucking companies, be aware of potential equipment shortages and price increases. Act now. Talk to your current service provider(s) and ask them how they plan to meet these requirements. In addition, if necessary, look for alternative transport companies to meet your service needs.

Transitions are always painful. For some they are a burden, and for others they represent new opportunities to thrive. Climate change and global warming affect our daily lives. To reduce airborne pollutants, it makes sense to start upgrading to newer, more efficient trucks. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?