Some things have moved forward and some things are still in limbo. Let’s get into it with the news we have as of right now.
United States-Mexico-Canada Agreement (USMCA)
On a multi-national scale, progress has occurred on NAFTA 2.0. Mexico officially ratified the agreement in an astounding 114-3 Senate vote after President Andres Manuel Lopez Obrador requested early approval. Now that Mexico has signed the deal, pressure is on the US Congress to move quickly as Congress’ recess begins at the end of summer. US Top Trade Envoy Robert E. Lighthizer has “called the pact the ‘strongest, most momentous agreement in U.S. history’.” He added that “it would ‘help stop the outflow of manufacturing jobs and return many to the United States.’”
As of the time of this publication, progress has yet to be made stateside as the US and Mexico work to close loopholes. The provisions in question that concern Democrats revolve around unfair labor conditions. If Mexico exports products that the US deems were created in unfair conditions, Mexico could theoretically block a dispute panel from being created. The House wants the deal to benefit US citizens, and disputing unfair labor conditions is a key part of protecting American (and Mexican) workers’ wages.
Canada and the United States spoke positively about the USMCA. However, during Prime Minister Justin Trudeau’s latest visit to the White House, talks primarily revolved around China. The Canadian Parliament originally planned to “press ahead with its ratification plans in tandem with the United States,” but their summer recess began June 21 without a vote. Even though their national elections are set for October, there is a general feeling Canada will continue forward with the agreement. According to Reuters, however, if the Conservative Party of Canada is elected as the majority, Conservative Leader Andrew Scheer claimed they “would ‘work to mitigate the damage this deal has done.’”
China and the United States
US-China relations are reliably…unreliable. Presidents Donald J. Trump and Xi Jinping both want favorable outcomes for their countries, and have therefore agreed to resume trade talks. This is following a hiatus in May when disagreements stopped all negotiations, which had just resumed after stalling in the previous quarter. During the recent G20 Summit in Japan, Trump and Xi announced they will work to come to an agreement. Both nations know that a deal would boost their stock indexes. As US national elections draw nearer, it’s in Trump’s political interest to secure a deal.
If a deal fails, the global economy risks suffering a recession, as China and the US make up a combined 40% of all gross domestic product.
Winners of the Trade War
As the trade war between the two powerhouses continues, other countries have benefited from tariffs placed on Chinese and US imports. The US has “narrowed” the bilateral deficit between ourselves and China, as President Trump vowed. Our trade deficit with the rest of the world, on the other hand, “has grown considerably faster than the US economy.” It should be mentioned this economy has been remarkably good, with actual consumer inflation rates below the Fed’s targeted rate.
Vietnam has seen a boost in exports as they ramped up production for mobile phones, clothing, and shoes to fill China’s gap. Mexico, too, has increased exports to the US. That being said, both Mexico and Vietnam saw Chinese manufacturers quickly move into their plants and ports to bypass the tariffs imposed on China. Therefore, China still sends exports to the US, but stamped as ‘Made in Vietnam’ and ‘Made in Mexico’. This development is a loophole policy makers are working to address.
Other countries have benefited directly as China moved away from some US imports. Brazil and Russia have seen direct benefits following this ongoing trade war. Should relations dissolve between the US and China, and they decide to shop elsewhere, France and Germany might be the top contenders as the US’s replacement. Those two in particular stand to benefit as their luxury exports are compatible to the US’s.
Effects of the ELD Mandate
As is well known, all fleets must transition to electronic logging devices (ELD) by December 16, 2019.
While the ELD Mandate was originally met with resistance (see original LDI 2019 Forecast), the data collected has since benefited the transportation industry as a whole.
Hours of Service (HOS)
The biggest positive change that the ELD Mandate has implimented is it “opened the door for FMCSA to look at hours-of-service requirement.” The White House’s Office of Management and Budget (OMB) is reviewing proposed HOS changes. The FMCSA intended to have their updated proposal out by June 7th, but have asked for patience as the review is in its “final stages.”
The FMCSA submitted their proposal to the OMB roughly three months ago and are waiting for the administration’s approval, however no actual time frame has been confirmed by the OMB. The tentative date to present the revised hours to the public for comments is July 31.
Once the revised HOS are available for public comment, the public will have 47 days to submit feedback. The comments will then close and the feedback will be reviewed. After analysis, the process to form a final ruling will then begin.
Ultimately, we won’t see any actual HOS change—if any at all—until sometime in 2020.
Dashboard mounted cameras, or dashcams, were installed in some fleets as part of the ELD mandate. The video received from these cams has benefited carriers in more ways than expected. Originally seen as invasions of privacy (and not to make an argument they aren’t), the data dashcams returned has proven more valuable than anticipated.
When a hard break was previously detected, investigators only knew when it happened. With dashcams, the reason for the hard brake is visibly clear, either indicting or exonerating the driver. Freightwaves reported the video feed is being analyzed not only for driver behavior, but highway conditions. Insurance companies have even been offering discounts for installing video cameras in commercial vehicles.
The video footage has been useful as training videos for new drivers on how to avoid hard breaks, sudden accelerations, and sharp turns. According to Transport Topics, in the first four months of training, KeepTruckin said their customers have reported that critical events decreased by 50%.
Canada Announces ELD Mandate with One Outstanding Difference
All in all, the mandate has been so sufficiently successful on a bureaucratic scale that Canada has announced they too will require ELD in their trucks. However, there is a difference to be aware of. The US electronic logging devices are allowed to be manufacturer certified as compliant with US law. Canada’s regulation will require electronic logging devices to be third-party compliant certified. This means that by June 2021, all carriers doing business across the border will need to update their ELD to comply with Canada’s requirements. Details on how this certification is attained will be announced at a later date.
Theft, Counterfeiting, and Fraud
Cargo theft in the US is trending to the usual $15 billion loss for the year. Counterfeit product “swaps” across the globe are expected to cost consumers $1.82 trillion in 2020. Therefore, its best practice to stay diligent during these sophisticated times. Tracking trucks through LDI Freight’s Macropoint integration is a huge help, as is track-and-trace on trailers or even pallets.
As a freight broker, be certain to emphasize your value to customers. In a popular scam, thieves pose as a fictitious carrier company scheduled to pick up freight. The shipper loads the cargo, none the wiser they are literally handing their products over to criminals. It’s not a new scam, but it does emphasize the importance of brokers during this freight-matching craze: our regular contact with drivers helps assure our customers the right truck showing up at the right place at the right time.
Stay Tuned to LDI’s Blog for More Quarterly Updates