Business

California Is Single-Handedly Making The Supply Chain Crisis Even Worse

• California introduced new regulations for the trucking industry that would worsen supply chain issues and hurt industry workers, experts told the Daily Caller News Foundation. 
• “We in the industry know that if you think there was a supply chain problem over the last year, wait until you take this many trucks out of the marketplace that are not replaceable,” Joe Rajkovacz, director of Governmental Affairs and Communications at the Western States Trucking Association, told the DCNF.
• “I’m stressing, do I downsize my company to two drivers at the end of the year because I only have two trucks, or do I have four drivers and switch them out?” Bill Aboudi, the owner of AB Trucking in Oakland, told the DCNF.
• “For months, Californians and families across the country have been dealing with supply chain issues that mean empty shelves and skyrocketing prices,” Republican California Rep. Michelle Steel, told the DCNF. “This is the result of bad policies from Washington and Sacramento that are restricting the trucking industry and contributing to the congestion felt at our ports.”

California issued sweeping environmental regulations to reduce fossil fuel emissions throughout the state that will worsen the national supply chain crisis and cripple the trucking industry, industry leaders told the Daily Caller News Foundation.

The California Air Resources Board (CARB) issued a set of revised regulations called the Air Resources Board Truck and Bus Regulation, which required trucking companies in the state to upgrade their trucks with 2010 or newer engines by Jan. 1, 2023. The provision will add additional pressure to the supply chain crisis and cause many small trucking businesses to close or significantly reduce their workforce, industry leaders told the DCNF. 

“We in the industry know that if you think there was a supply chain problem over the last year, wait until you take this many trucks out of the marketplace that are not replaceable,” Joe Rajkovacz, director of governmental affairs and communications at the Western States Trucking Association, told the DCNF. “You can be talking about something we as a country have never seen before.”

The rule will take roughly 80,000 commercial trucks, or roughly 17% of the trucking fleet, off the road, adding significant pressure to the supply chain crisis, Rajkovacz said.

The provision would hit smaller trucking operations the hardest, Rajkovacz added. Like the auto industry, the trucking industry has experienced extensive supply shortages, making it expensive and difficult to buy used trucks and find additional parts.

“The way the industry works is that large operators turn over their fleets in a three-year or four-year cycle,” Rajkovacz said. “The used trucks end up in the marketplace and are absorbed by the small business community, but that is all upset right now.”

CARB’s Regulation

CARB started the rule to help meet the state’s emission standard and reduce greenhouse gases and diesel exhaust which have been associated with health and environmental problems.

“This regulation requires heavy-duty diesel vehicles that operate in California to reduce toxic air contaminants (TACs) emissions from their exhaust,” CARB said. The engine requirement would reduce various dangerous toxins from the vehicle’s emissions, which contribute roughly 70% of the cancer risk from airborne toxins.

“As heavy-duty on-road vehicles are such a significant source of pollutants, the Truck and Bus Regulation is one of the most far-reaching and important tools to reduce smog-forming and toxic emissions and protect public health in disadvantaged communities,” CARB said.

CARB denied to the DCNF that these regulations would hurt the supply chain, saying the current problems stem from “production in other countries, shipping and container issues and distribution and storage logistics.” It also pointed to port congestion around the world and reduced warehouse availability at the Port of Long Beach.

“There is simply no evidence to support any claim that the current supply chain issues have any connection to the state’s effort to clean up California’s trucks emissions,” a CARB spokesperson told the DCNF. “Over 85% of all heavy-duty trucks registered in California are already compliant with the state’s Truck and Bus Regulation and will continue to be after the final deadline of January 1, 2023.”

Impact On Small Businesses

Bill Aboudi, the owner of AB Trucking in Oakland, has 13 trucks in his fleet and has felt the direct impact of the rule. Of Aboudi’s 13 trucks, only 2 of them are compliant with CARB’s engine requirement, he told the DCNF.

“Of course, this rule will impact supply chains,” Aboudi said.

“This provision would destroy most of the trucking companies that I deal with,” he added. “I am 80% non-compliant and I don’t know how I will comply.”

Bigger companies are about 60% compliant and also are having trouble meeting CARB’s requirements, according to Aboudi.

Aboudi, whose company focuses on short distance transportation, said if he can’t move his customer’s cargo and larger trucking companies are down to almost 50% compliance, then “we lose those drivers and we lose those trucks – it will be a horrible situation.”

CARB told the DCNF that California has the largest state budget for clean cars and trucks, totaling almost $4 billion over the next three years. A portion of that budget is set aside for 1000 zero emission trucks, including electric and hydrogen powered vehicles, designed to operate short distances around the ports.

Aboudi characterized the zero emission trucks as astronomically expensive, leaving little justification in spending that much money to travel such a small distance.

“Electric trucks are not there yet,” Aboudi said. “The range is limited and it is much more expensive, costing between $400,000 to $500,000.”

“We love these electric and hydrogen trucks but I can’t justify spending that much money,” he added. “We need the price of electric trucks to drop and we need to be flooding the market.”

CARB’s regulation has dramatically increased the price of second hand trucks which hits the smaller companies the most, Aboudi told the DCNF.

Before the COVID-19 pandemic and supply chain crisis, a used truck would cost Aboudi between $30,000 and $50,000. Now, that same truck costs anywhere between $80,000 to $120,000.

“CARB is asking me to pay top dollar for these trucks and I just cannot afford it,” Aboudi told the DCNF. “It’s like you asking me to buy a Porsche even though I can only afford a Toyota Corolla.”

“I’m stressing, do I downsize my company to two drivers at the end of the year because I only have two trucks?” Aboudi told the DCNF. “There is no way I’m paying $140,000 for these trucks.”

Meanwhile, Aboudi said the new provision adds to labor shortages within the industry.

“On top of this, we are losing good, experienced drivers because they also cannot afford these trucks,” Aboudi told the DCNF.

‘Woke Microeconomic Decisions’

The frustration has been felt across the trucking industry. A group of 26 trucking associations sent a letter to CARB, saying the provision would worsen supply chain issues and directly impact the industry and its workers.

“During normal economic cycles this final phase could have been achieved without disruptions in the supply-chain; that is no longer true,” the letter read.

“Both California’s and the nation’s economy are still adjusting to the effects from a global pandemic that has stressed supply chains worldwide and more importantly, led to insufficient production of new trucks primarily due to a worldwide shortage of components needed for final truck completion,” the letter read. “The well documented shortage of new truck availability has forced larger fleets to hold onto their older trucks for longer than is typical which in-turn has reduced the amount of used trucks in the secondary market causing prices of available trucks to skyrocket.”

CARB’s provision has also received criticism from supply chain experts and California lawmakers.

“These are typical Woke microeconomic decisions by ignorant bureaucrats that ignore the broader macroeconomic consequences both to the supply chain and fuel prices, Peter Navarro, former manufacturing adviser to former President Donald Trump, told the DCNF. “My advice to these fools is to wake up and smell the stagflation.”

A group of Republican California lawmakers, led by Rep. Michelle Steel, sent a letter to the Environmental Protection Agency (EPA) on April 1 ripping CARB’s regulations on how it directly impacts California’s transportation industry and thereby worsens the supply chain.

“These regulations and drastic overreach by CARB, have created a situation where there is no appetite for freight brokers, shippers, and motor carriers to operate in the State,” the letter read. “On top of that, capacity crunches and a lack of truck drivers have put the American economy on a road of logistical uncertainty.”

“For months, Californians and families across the country have been dealing with supply chain issues that mean empty shelves and skyrocketing prices,” Steel told the DCNF. “This is the result of bad policies from Washington and Sacramento that are restricting the trucking industry and contributing to the congestion felt at our ports.”

“It’s time to remove these burdensome regulations and get goods moving again,” Steel said.

Republican California Rep. Young Kim also blasted CARB’s provision over its impact on supply chains. 

“As communities across the country suffer from supply chain backlogs and labor shortages across industries, California is implementing new regulations to prohibit truckers from operating with vehicles from before 2010,” Kim told the DCNF.

“Instead of burdening our workers and small businesses with more regulations, we need to incentivize workforce opportunities and have all hands on deck to reduce supply chain backlogs,” Kim said. “These burdensome regulations should be suspended until we fix our supply chains, reduce inflation and get our economy back on track.”

Biden’s Trucking Action Plan

President Joe Biden held a press conference Monday to discuss the Trucking Action Plan, where he highlighted measures to improve the quality of trucking jobs, increase the number of drivers, and keep workers in the industry. Measures mentioned in Biden’s plan included more than doubling commercial driver’s licenses processing throughout 2022, improved recruiting for truckers, adding significant new drivers in the industry, helping veterans enter the employment pool and encouraging more women to become truck drivers.

“We can draw more Americans to work with increased wages, reduced wait times, and improved safety and so much more,” Biden said Monday. “There is a lot more we have to do.”

The Trucking Action Plan was first introduced on Dec. 16, 2021, to address growing supply chain problems throughout the country.

“The U.S. Department of Transportation and the U.S. Department of Labor launched a Trucking Action Plan to increase the supply of truck drivers by creating new pathways into the profession, cutting red tape to expand high quality training through Registered Apprenticeship, and laying the foundation for improving job quality to keep people in the profession,” the White House said in Monday’s press release.