How California’s Regulations Are Affecting the Shipping Industry

March 5, 2024
March 5, 2024

As the world becomes more interdependent, legislative changes that once primarily impacted limited physical locations begin to have a global impact. California has long led the way in regulations for improving business sustainability and labor relations in the United States, but how do changing laws in that state influence international shipping? 

The answer is quite a bit. If the state were a country, it would be on track to be the world’s fourth-largest economy, and its lengthy miles of shoreline see considerable international traffic. Here are five ways California’s regulations are affecting the shipping industry. 

1. Environmental Regulations 

Several environmental regulations recently passed by California will affect the shipping industry in the coming years. One is stricter requirements on drayage trucks — those that carry goods from ship port to railway. These must meet zero-emission standards by 2035. 

Another regulation that may impact shipping is Senate Bill 253. This bill, recently approved by the governor, requires billionaire corporations to publicly disclose their carbon emissions by 2025 to discourage greenwashing. 

Additional plastic regulations may impact packaging, another consideration manufacturers and wholesalers make when transporting goods. California’s SB 343 prohibits using the recycling symbol unless the material is actually recyclable within the state. This move combats the exportation of plastic waste and encourages sustainable material use. Additionally, SB 54 requires 100% of packaging to be recyclable or compostable by 2032.

2. Labor Relations 

Different classes of workers exist in the United States, with employees afforded greater benefits and protection than independent contractors. The latter enjoy more freedom to manage their schedules and hours worked but can lose their livelihoods at the drop of a hat without having unemployment benefits to fall back on.

For years, companies exploited this legal gray area to deny workers benefits while paying such individuals lower employee rates. The result was a wave of low-wage contractors who didn’t earn enough to purchase health insurance or save for rainy days, contributing to rising inequality, poverty and homelessness. California passed Assembly Bill 5 to address this issue, which sets stricter rules for classifying workers as ICs. To be an IC, a person must: 

  • Work outside of the control of the employer 
  • Perform tasks outside of the typical business course of the employer
  • Be an established IC or tradesperson 

The last qualification is a critical decision. Companies such as Amazon already allow their fleets to choose between functioning as an employee or an IC — and follow a complicated paperwork process to ensure they adhere to the letter of the law. Other companies shipping within California must take similar measures if they use a combination of employees and ICs to avoid costly legal headaches. 

3. E-Commerce, Technological Innovations and Last-Mile Delivery 

E-commerce has played a significant role in shipping for decades, but its very longevity creates new headaches for business owners. That’s because customers today demand transparency to feel sufficient trust in ordering — many have been burned in the past by items that never arrived. Many organizations have turned to third-party shipping companies to provide tracking information. 

Smaller organizations may rely on dropshipping to get goods to customers' doorsteps. Dropshippers set up an online storefront for a manufacturer’s goods and oversee the item’s delivery, acting as intermediaries between wholesalers and consumers. 

Last-mile delivery has become a hot topic, especially as new environmental regulations heat up. Some companies have already begun using innovations such as drones to get goods to customers’ doorsteps, although they aren’t currently widely used. Other innovations, such as microfulfillment lockers, are more popular while easing traffic congestion and emissions. 

4. Infrastructure Investment 

Moving goods from one place to another requires more than trucks but the infrastructure for them to travel upon. That requires the work of the government, which also sets rules for their use. 

To combat climate change, California recently became the first state to require half of all heavy trucks sold to be fully electric by 2035. It’s a higher standard than that currently required by the EPA and represents a significant step forward in taking the global threat more seriously. 

However, it will also create logistical nightmares for business owners reliant on conventional fleets. Those who do substantial business in the state will feel additional pressure to upgrade or outsource to trucking contractors who meet the elevated standards. 

5. International Trade and Shipping 

It isn’t only trucks that produce pollution. Ships do,too, as many rely on auxiliary engines to keep their onboard functions running when they deliver goods from foreign lands. This scenario creates considerable particulate pollution around docks, which spreads and contributes to the rise in global temperature.

California’s new At-Berth Regulation requires such vessels to connect to shore power or use capture-and-control technology to reduce emissions. This new rule may require retrofitting some ships to ensure compliance, temporarily increasing supply chain costs. 

California Regulations’ Impact on the Shipping Industry

California’s massive economy and lengthy shoreline mean many of the nation’s goods pass through the state before entering private homes. The regulations it passes affect nationwide manufacturers and distributors, as well as businesses worldwide. 

The shipping industry must pay particular attention to these upgraded regulations when conducting business in the state. California leads the way on new rules designed to shift humanity toward a more circular, sustainable economy and serves as a model for how to make the transition.

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