The 2:00 Minute Warning

If the headline for this week’s Two Minute Warning is a bit confusing, let me be brief and succinct in decoding it for you: Last week was a terrible week for shippers.

Why the doom and gloom? There are three things that have happened that could dramatically impact your freight costs and supply chain operations:

a.) With AB 5 now becoming law, the cost for drayage moves at California ports will likely increase by 25% to 40%! Last week, the U.S. Supreme Court declined to hear a case involving AB 5. Even though we have warned shippers about the potential impact of AB 5, many shippers have ignored these warnings and instead either hoped or believed it would never be implemented.

This legislation affects who is considered to be an independent contractor versus employee. The California Trucking Association, the American Trucking Association and the Owner Operators (OOIDA) have all fought this legislation because of its impact on trucking companies. With it now becoming the law of California, shippers will now have to factor in a significant increase in the cost of getting containers to their facilities. If you would like more information a Bloomberg article “US Court Ruling May Take 70,000 Truckers Off Road, Spur Jams” highlighted that owner-operators will have seven days to cease business once the injunction currently providing an exemption is lifted.

Overall, there are a lot of truck drivers in the California Trucking Association that have voiced that they’re not interested in becoming employees and would prefer to keep their independence. If this continues to move forward, it could result in a ton of confusion and be disruptive to your supply chain.

b.) On July 1, 2022 the contract between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) expired. Both parties have pledged to keep the ports open during negotiations, but shippers are concerned that productivity at the ports could be negatively impacted if there are prolonged negotiations and the ILWU starts to run the ports “according to the rules.” Such a move could create havoc with inventory strategies as companies try and figure out where and when they will be receiving goods coming in from overseas.

c.) Finally, effective June 21, 2022, the U.S. Customs and Border Protection (CBP) began to implement the Uyghur Forced Labor Prevention Act. This Act prohibits imports made by forced labor into the United States of products made in Xinjiang. We don’t have time to get into this legislation. Suffice it to say, that this will require a level of documentation about a company’s supply chain that will be very challenging for shippers.

In the near future we have a host of experts that will address AB 5 and the West Coast ports in an upcoming webinar. We will send out the invite when we finalize the details.

For now, the events of the past week have underscored the need for you and your team to consider the following three questions:

• Have I mapped my supply chain?
  
  
• In the past twelve months have I stress tested my supply chain and identified the risks and threats which could shut my company down?
  
  
• Do I have a written supply chain plan that identifies what has to be done, what it will take to get it done, and who has responsibility for seeing that it is successfully done?

If the answer to one, or worse all three of these questions is “No,” we can help. Simply send me an email or give us a call and I will connect you with some outstanding resources that can help protect your company’s supply chain and reduce your freight costs. We can help you understand your options and alternatives. Simply get in touch.

BY MIKE REGAN, CO-FOUNDER OF TRANZACT
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