One of the major stories in the transportation industry in recent years has been the explosive growth of last mile residential delivery. The global pandemic has only fueled demand for this localized and often technology-driven service. New businesses have inundated this space previously occupied by traditional couriers, parcel carriers, and household goods removal companies.
A challenge that often arises for the strategic growth of new and novel service offerings is the archaic regulatory environment for transport. The current system is based on the US Constitution’s trade clause and a regulatory understanding that transportation is a benefit and should be regulated as such, with a turn of the last century perspective on this proposal. Even after deregulation, the resulting regulatory landscape will largely remain designed for use in road traffic areas. Simply put, it doesn’t shock anyone that the speed of business and the speed of government are often inconsistent.
Last mile space and the business strategies that are developed to serve this market are often driven by certain myths that, while logical, are inconsistent with legal reality. The practical question that then arises is how we can navigate the maze of government requirements while moving our business forward. This challenge is as confusing to sales and operations managers as it often seems to be to regulators themselves.
Our team works every day to bring clarity to the dizzying variety of regulatory obligations by asking just a few specific questions: (1) What is the nature of trading; (2) what is the type of service; and (3) What are the operating characteristics? In our experience, the answers to these questions cross the noise, whether and which requirements apply. They create the clarity needed for safe strategic growth, risk management, and preparation for challenges.
Q1: What is the nature of trading?
Perhaps the most misunderstood concept about the last mile is the nature of trading. The federal government has exclusive jurisdiction over foreign and interstate trade under the trade clause of the US Constitution. State governments are responsible for domestic trade (transactions between points in a single state). Even at the local level, communities will have tight control over certain aspects of commercial activity within their borders.
Determining which tier of government has a say in the delivery of a service is the challenge – and given the geographic nature of the business, this is particularly challenging for transportation and logistics. In its simplest form, we move things from one point to another or offer services that add to those movements. These activities can include the entire transport from origin to destination or a stage between nodes in a complex supply chain.
The key to this threshold investigation is the nature of the trade itself. Courts examine the intent of the shipper at the point of origin to determine the nature of the trade and, therefore, what level of government has powers. Generally, if the shipper’s intention was to achieve throughput from one state to delivery at the final destination in another state, then it is generally an interstate trade. This also applies if several modes of transport are used (e.g. air and motor vehicle transport), if several carriers of the same mode of transport are used (e.g. storage that does not end the transport (e.g. short-term storage in a distribution center), and on the right facts, even if the final destination is not yet known (e.g. for positioning based on forecast short-term sales).
In summary, last mile delivery is just promoting international trade. This contradicts the popular belief that a certain vehicle has to cross state borders in order to trigger federal jurisdiction, which is not true. Crossing state borders is a strong indicator of international trade, but it is not necessary for this type of trade.
Q2: What is the type of service?
Once we know which level of government applies, we can determine which agency, administration, commission or similar body is responsible for the service. At the federal level, the dominant characters are familiar to many in the industry. The Federal Motor Carrier Safety Administration (FMC) is responsible for the operation of motor vehicles. The Transportation Security Administration (TSA) is responsible for air transportation, including indirect air transportation. The Federal Maritime Commission (FMC) is responsible for international sea transport. The Surface Transportation Board (STB) is responsible for the transportation of water in non-contiguous inland traffic and other forms of vehicle transportation, including the household goods service. Knowing the appropriate government agency can quickly determine the applicable laws, rules, regulations, and operational requirements.
Determining the competent authorities at the state level can be more of a challenge in the transport and logistics area. One reason for the complexity is that states organize their governments differently. The government agency with authority for vehicle transportation may be, for example, the Ministry of Transportation or the Public Utilities Commission, the Commerce Commission, or the Ministry of Motor Vehicles. Another reason for the complexity is that not all states regulate the same services in the same way. For example, some states do not sensibly regulate motor vehicle transportation by requiring domestic operating authorities analogous to FMCSA, including Delaware, Louisiana, and Alaska. Other states require the management of domestic operating authorities with different insurance requirements and other compliance requirements. Taking this example further, a company may offer domestic services in a number of states, some requiring a license and some not. Knowing which agency is responsible for every aspect of an operation and whether that responsibility is exercised through regulation puts the complexity in a nutshell.
In summary, it can be said that the delivery of the last mile is regulated by the FMCSA, whose business does not only focus on long-distance hauliers in commercial vehicles. If domestic trade falls within the scope, the competent authority in the jurisdiction will take control, e.g. B. the Public Utilities Commission. For better or for worse, not all states regulate operations equally, especially when it comes to the goods being transported or the type of vehicle used. In general, despite this deviation, the type of employment relationship between the carrier and the driver (employee or self-employed entrepreneur) or the relationship to the vehicle (z – similar to the federal law analysis.
Q3: What are the operating characteristics?
Finally, considering operational characteristics can be critical to understanding whether or not regulatory requirements are mandatory and how they affect operational performance and the cost of service delivery. Some common operational characteristics that operational requirements may be directed to include the type of goods being moved and the type of equipment used. Certain goods are regulated differently than others because of specific safety concerns and other public interests of the federal and state governments under which services are provided. Classic examples are household goods, alcohol products, and dairy products. These goods may require specific licenses, permits and operating procedures between different and overlapping government agencies. Most last mile services don’t trigger these categories, but it’s not without question.
Device types are the more common example of operational characteristics that are often confusing as new services are introduced. For example, very careful attention is paid to whether a commercial driver’s license (CDL) is required to operate a vehicle. While this is certainly important and involves significant obligations, the fundamental question is often whether it is a commercial vehicle (CMV). CMVs can include apparently light vehicles that exceed the threshold of 10,001 gross vehicle weight, such as: B. heavy sprinter vans or pick-up trucks that pull trailers. Despite the lack of CDL requirements, these vehicles trigger the application of most of the Federal Motor Carrier Safety Regulations. Another area of frequent confusion relates to passenger cars such as those used for last mile delivery operations. Even if there is a movement in domestic trade, certain states like Illinois and Pennsylvania are interested in regulating these loaner services while others, including Colorado and Georgia, don’t.
In summary, the product delivered and the vehicle class are relevant to understanding the exact regulatory requirements including the applicability of certain permits. It is not the case that individual deliveries of consumer goods or all light vehicle operations, let alone operations in private vehicles, are always unregulated. The opposite is very often the case.
Face the market with confidence
The complexity of operating the last mile can be effectively addressed with a strong game plan, as outlined here. Understanding the nature of trade limits the scope to the level of government that we should be concerned with most. The identification of the competent authority further restricts the scope to the applicable regulations and guidelines. If it is then checked whether the unique operating characteristics are taken into account in this applicable catalog of requirements, a feasible approach emerges – with confidence. Even if an agency questions compliance after starting a new operation, the ability to explain the answers to those questions clearly and concisely helps to convince or mitigate them.
