Consumers tend to think of imports and exports mainly in terms of federal and international regulations. That is not surprising, given the amount of influence Washington and various international trade bodies have over the industry. But did you know that even state laws can impact imports and exports? Just look at California.
While exporters work with organizations like Ohio-based Vigilant Global Trade Services to maintain trade compliance, importers looking at goods coming into the country through California ports are more concerned about how they are going to get those goods to customers.
The big issue in California right now is independent trucking. AB5, the California law enacted a couple of years ago to pretty much wipe out the gig economy threatens to further limit the already limited number of tractor-trailers available to carry shipping containers out of California ports. An injunction preventing the law from being enacted in the trucking industry has kept things at bay for now. But how long will it last?
Making Contractors Company Employees
California Assembly Bill 5 (AB5) became the law of the land in the Golden State on January 1, 2020. Backers of the law were not ashamed to admit that it was designed to severely limit the gig economy in California. It was aimed primarily at Uber and Lyft, though it has affected virtually every independent contractor in the state.
Ironically, the two ride-share companies were able to successfully negotiate an exemption for themselves months after AB5 became law. The very law intended to rein them in is now negatively affecting tens of thousands of other contract workers while Uber and Lyft continue as usual.
As far as the trucking industry is concerned, AB5 pretty much guarantees that no independent truckers will work in California again, should it be fully implemented. The California Trucking Association (CTA) has been fighting a protracted legal battle to make sure that never happens.
Federal Law Overrides AB5
The CTA’s legal position is based on a provision in the Federal Aviation Administration Act of 1994 that prevents states from enacting laws that impact services, routes, and prices related to interstate commerce. In other words, the CTA believes that federal rules allowing independent truckers access the California markets override California rules.
Several lower courts have ruled against the CTA but allowed an injunction prohibiting full implementation of AB5 to remain in place until the appeal process is complete. The case went before the U.S. Supreme Court in early November 2021. Rather than deciding whether or not they would hear the case, SCOTUS put it on hold and asked the U.S. Solicitor General to weigh in on it.
That means for now, the injunction remains in place as it has since January of 2020. Independent contractors can still haul cargo from California ports as they always have. But if the injunction is ever lifted, California ports could literally go out of business. There are simply not enough trucking companies with armies of employed drivers to handle the freight.
Onerous Regulation Continues
The California case is further evidence that onerous government regulations continue unabated. It is bad enough that importers and exporters have to jump through hoops at the federal level to maintain trade compliance. In many states, they also have to jump through additional hoops to keep lawmakers happy.
Legislators in California may think they are doing the right thing by way of AB5, but it may just come back to bite them. If history holds true in the Golden State, they will not realize how devastating the law is until it’s too late to recover from it.