Bubble Chart showing the flow of good in the supply chain
image of STG Logistics truck
California’s Zero-Emission Electric HD Trucks
CA State – CA Air Resources Board (CARB) Advanced Clean Trucks Regulation (effective 3-15-21)

  • The CARB Advanced Clean Trucks (ACT) Regulation includes provision for 40% of Class 8 Tractors (e.g., those used for Port Drayage) sold in CA be zero-emissions (ZE) trucks by the year 2035, in a phased-in approach, beginning in 2024, The sales percentage schedule is as follows for the truck model years: 2024 (5%), 2026 (10%), 2028 (20%), 2030 (30%), 2032 and beyond (40%).

Ports of Los Angeles/Long Beach – Clean Truck Program

  • The Ports of LA/LB Clean Truck Program (CTP), launched in 2008 as part of the San Pedro Bay (SPB) Ports Clean Air Action Plan, currently limits Port access of diesel Drayage Trucks to model year 2010 and newer trucks and limits new registrations in the Port Drayage Truck Registry to model year 2014 or newer trucks. The Ports began collecting a Clean Truck Fee of $10 per TEU on loaded containers hauled by non-low-NOx or non-ZE trucks beginning 4-1-22, to be used to accelerate the deployment of clean trucks, in support of achieving the goal of a zero-emission drayage truck fleet by 2035.

CA State – CA Air Resources Board (CARB) Advanced Clean Fleets Regulation

  • The CARB Advanced Clean Fleets (ACF) Regulation, approved 4-28-23, includes requirements that all Port Drayage Trucks be zero-emissions (e.g., battery-electric or hydrogen fuel cell trucks) by 2035. The regulations allow diesel trucks currently in service with 2010 or newer model year engines to remain in service for their useful life (e.g., 800,000 miles or 13-18 years from engine certification), but not beyond 2035. The ACF reporting deadline is 12-31-23, after which only ZE trucks can be registered on the CARB online system and allowed to access Ports.

California Air Resources Board (CARB) regulations have been permitted through a waiver from the Federal EPA allowing California state-specific standards.

In December 2023 California regulators announced that they will delay enforcement of a rule that mandates all new drayage trucks put into service in the state after January 1 to be zero-emission vehicles until the federal government decides whether the rule needs a waiver from the Clean Air Act to go into effect. Industry sources say it could take nine months to a year for EPA to rule on the waiver question.

According to the American Transportation Research Institute (ATRI), new battery electric vehicles cost more than $425,000 – more than double the cost of a comparable diesel truck. Additionally, the cost to power a battery-electric truck, including equipment, installation, utility upgrades, and electricity, could be as high as $1.21 per mile – nearly double the cost per mile of diesel fuel.

Other barriers to adoption include the potential shortfall in electricity production, the added weight of BEVs (reducing payload capacity), and an inadequate public charging infrastructure.

As CARB’s requirement that all Port Drayage Trucks be zero-emissions by 2035 approaches, the risks of the availability of SoCal Port Drayage Carriers able to comply with this regulation also increase.

BNSF Train Moving Through Desert
BNSF’s Barstow International Gateway (BIG) Inland Port Project

  • BNSF Railway announced it will invest more than $1.5 billion to construct a state-of-the-art master-planned rail facility in Barstow California – and the first being developed by a Class 1 railroad.
  • The Barstow International Gateway (BIG) will be an approximately 4,500-acre new integrated rail facility on the west side of Barstow, consisting of a rail yard, intermodal facility, and warehouses for transloading freight from international containers to domestic containers.
  • Once the containers reach the Barstow International Gateway, they will be processed at the facility using clean-energy powered cargo-handling equipment, and then staged and built into trains moving east via BNSF’s network across the nation. Westbound freight will similarly be processed at the facility to more efficiently bring trains to the ports and other California terminals.
  • BIG will allow the direct transfer of containers from ships at the Ports of Los Angeles and Long Beach to trains headed to BNSF’s mainline up to Barstow, about 130 miles away, via the Alameda Corridor.
  • The Barstow inland port facility will improve LA/LB marine terminal container through-put velocity which will improve operations at the terminals. 
  • The Port of Long Beach will receive $283 million in federal funding for its massive Pier B rail facility project, which is designed to shift large amounts of cargo from trucks to rail in the years ahead to improve efficiency and clean the environment.
Image of trailers at a Yellow terminal
SoCal Ports vs East & Gulf Coast Ports
During 2023 we saw the port of entry pendulum swing to the East/Gulf Coast ports to avoid any potential disruptions and delays from West Coast ILWU contract negotiations. This pattern has been experienced during most of the past West Coast ILWU contract discussions.

Ports of LA/LB Competitive Advantages:

  • Largest size population on West Coast & 2nd Largest catchment area in North America
  • Great proximity to Northeast Asia 
  • Excellent transload operations dynamics
  • Channel depths and marine terminal infrastructure capable of handling the largest container vessels in the world
  • The majority of marine terminals have on-dock rail
  • Superior rail routes between the port complex & Southeast U.S.
  • More vessels & train services than all other U.S./Canada Gateway Ports

The Red Sea crisis coincides with drought restrictions in the Panama Canal. Asian cargo bound for East and Gulf Coast ports had previously been switched from Panama to the Suez Canal and is now being rerouted on even longer voyages around the Cape of Good Hope. The much shorter route from Asia to the West Coast is looking increasingly attractive.

At 14 knots, a direct voyage from Shanghai to New York via the Cape of Good Hope takes 43 days, according to Sea-Distances.org. A direct voyage from Shanghai to Los Angeles takes only 17 days (plus additional time for cross-country land transport).

It is estimated that 30% of Asia to East Coast U.S. Imports flow via the Suez Canal. If this is diverted to the SoCal ports it could create a significant surge.

Trade is swinging back to the ports of Los Angeles and Long Beach after a period in which pandemic-driven shipping disruptions and broader shifts in manufacturing pushed supply chains more heavily toward Gulf Coast and East Coast ports. The Southern California ports in September, October, and November recorded year-over-year increases in containerized imports of between 17% and 31%, according to ports data.

The Ports of Los Angeles & Long Beach volume numbers in December 2023 were 37% higher than the same month in 2022.

East Coast and Gulf Coast ports face further challenges this year. Importers are concerned about labor disruptions across the region as the ports now take their turn on contract talks.

Reshoring graphic

  • Offshoring has lost much of its appeal, owing to increased shipping times and costs, geopolitical concerns, national trade policies, national security, and the increased need for control and proximity to customers.
  • The United States' push to divert manufacturing and supply chains away from China is showing no signs of stopping.
  • The Reshoring Initiative, a U.S.-based private think tank, has projected nearly two million manufacturing jobs have been brought back to the country since 2010.
  • Chinese investors have made their adaptions, increasing their positions in up-and-coming manufacturing centers like Mexico and Vietnam to access the American market.
  • California received the highest manufacturing-led foreign direct investment ($64 billion) in the United States in 2021 according to the Bureau of Economic Analysis (BEA) data.
  • In the third year of COVID-19, supply chains are still fractured. That fragility didn’t begin the pandemic, however, it grew during recent decades as businesses focused on cost savings and efficiency gains.
  • U.S. Federal Government programs: Chips Act, Inflation Reduction Act, and Bipartisan Infrastructure Law introduced major financial incentives for opening manufacturing in the United States.
  • Mexico’s status as one of the world’s most competitive countries for attracting investments drives its overall re-shoring interests. Positive elements in favor of Mexico include:
  1. An open economy with access to the most important markets worldwide
  2. A strategic geographical position relative to the U.S.
  3. Increasingly skilled workforce
  4. Lower labor costs
  5. The U.S./China tariff war
  6. Transportation and logistics costs
  • As of July 2023, Mexico became the biggest trading partner of the U.S. surpassing China with around $462 billion worth of goods exchanged between the two countries.
AQMD impact map
Air Quality Management District (AQMD) – Warehouse Indirect Source Rule
Rule 2305 – The AQMD Warehouse Indirect Source Rule – Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program was adopted on May 7, 2021. The purpose of this rule is to reduce local and regional emissions of nitrogen oxides and particulate matter, and to facilitate local and regional emission reductions associated with warehouses and the mobile sources attracted to warehouses to assist in meeting state and federal air quality standards for ozone and fine particulate matter. 

This rule applies to owners and operators of warehouses located in the South Coast Air Quality Management District (South Coast AQMD) jurisdiction with greater than or equal to 100,000 square feet of indoor floor space in a single building.

Compliance and Reporting – The WAIRE Program is a menu-based point system that requires warehouse operators to earn WAIRE Points by completing actions off the WAIRE Menu, by implementing an approved Custom WAIRE Plan, or by paying a mitigation fee every year.

Warehouse facility owners are required to submit an informational report on their buildings (Warehouse Operations Notification), and warehouse operators are required to submit reports about facility operations and compliance approaches (Initial Site Information Report and Annual WAIRE Report). 
According to SCAQMD the percentage of WAIRE Points used by Main Category: 60% ZE Yard Hostler; 16% NZE Class 8 Truck Visits;11% Finalize 19.2 350 kW Charger project; 9% ZE Hostler Acquisition; 4% Other.

On December 14, 2023, a court ruling in the Central District of California, rebuffed objections by the trucking industry and airlines to the district’s program to enforce its rule, billed as a critical strategy to curb pollution from warehouse-bound diesel trucks.