Regulatory risk stems from statutes and regulations imposed on how you can conduct your business. Attaining and maintaining regulatory compliance requires substantial time, effort and expense, not just once but on an ongoing basis. Regulatory non-compliance imposes a substantial financial risk to your business success. Penalties and fines imposed for non-compliance can be substantial and, in some situations, result in the demise of your business.
As you know, transportation service providers and users face a myriad of regulations imposed on them by federal, state and local governmental bodies and agencies. The existing laws and regulations frequently change purposely and by virtue of court interpretation, and new laws and regulations are continually being enacted.
As we begin 2013, there are two regulatory compliance requirements that require immediate attention and probably action by your company, regardless whether it is a shipper, consignee, carrier, broker or forwarder. Below we address the new California Air Resource Board regulations; the second is the employee versus independent contractor issue and will be addressed on our next newsletter.
New California Air Resources Board (“CARB”) regulations took effect January 1, 2013 and impose requirements on virtually every participant involved in shipments moving into, out of, or through California. The new regulations include the Transport Refrigeration Unit (“TRU”) Airborne Toxic Control Measure (“ATCM”) along with additional Heavy-Duty (Tractor-Trailer) Greenhouse Gas Regulations (“GHG”). Moreover, the new TRU-ATCM and GHG regulations require action on your part in order to comply. Below are highlights of the new CARB regulations:
1. The Purpose. The main purpose of the new TRU-ATCM regulations is to minimize air pollution caused by trucks, tractors and trailers that transport commodities requiring refrigeration. CARB adopted regulations governing TRUs. However, CARB says it is not enough to simply impose requirements on the refrigeration unit manufacturers. In addition, CARB says it is necessary to have a procedure that requires use of those TRU-ATCM compliant refrigeration units to be used by motor carriers and that the broadest and best way to accomplish this is to impose requirements not only on manufacturers and carrier, but also on all parties that are involved in causing trucks to operate in or through California.
2. Applicability. The new TRU-ATCM regulations apply not only to drivers and carriers operating reefer equipment in California, but also to any other person or entity causing that to happen. Thus, the new regulations apply also to brokers, forwarders, shippers and receivers, regardless of where they are located. As an aside, someone undoubtedly will challenge the CARB’s jurisdiction (aka power and authority) to regulate entities that are not located in California, but you cannot ignore the new regulations because you “do not think” the rules are enforceable against your company. That is not an ultimate outcome you can rely on. Failure to comply with the new regulations would be foolhardy.
3. The Requirements. Essentially, the new TRU-ATCM regulations require that a subject entity operate only compliant reefer equipment used in California. Thus, drivers and carriers must only provide service with TRU-ATCM compliant equipment when operating in California. Moreover, brokers, forwarders, shippers and receivers must require drivers and carriers to use only TRU-ATCM and GHG compliant equipment when operating in California. In addition to this requirement, the driver/carrier must be provided with contact information of the broker, forwarder, shipper or receiver who was involved in dispatching the equipment to/from/within California. Violations of the TRU-ATCM and/or GHG regulations may result in fines up to $1,000 per occurrence.
4. Protecting Your Business. These days many different parties are involved in transporting a shipment. A shipper may hire a broker or forwarder, and that broker or forwarder may re-broker the shipment or hire a carrier, the carrier may use company owned or owner-operator owned tractors and trailers. Each of the relationships between these parties should be governed by an up-to-date contract. Too often contracts are not updated to conform to new regulations with unpleasant consequences.
As such, the new CARB regulations will require all parties (shippers, receivers, carriers, brokers and forwarders) to review their contracts (e.g. Shipper-Carrier, Broker-Carrier, Shipper-Broker, Equipment Leases, Owner-Operator Agreements, Load Confirmations, Bills of Lading etc.) to ensure the contracts require compliance with CARB regulations going forward and to indemnify the upstream party from any potential fines for non-compliance.
Brokers, forwarders, shippers and receivers will also need to ensure actual compliance by the carriers they use. Carrier compliance with the TRU-ATCM can be checked using ARBER, the online registration system established by CARB. This system can be accessed here. Confirming carrier compliance will need to be an ongoing process, much like checking carrier authority, licensure, and insurance currently.
If you have any questions on the new CARB regulations, or need help ensuring your contracts are up to date and require carrier compliance, please feel free to contact us.