OPINION: Truck OEM’s Made a Deal with CARB They Likely Regret
If you have attempted to purchase a new diesel powered truck in California (or even states that eagerly adopted CARBs ACT rule), you have probably run into a roadblock where the dealership cannot sell you the truck you want or need.
This is directly the result of a deal struck between CARB and the Truck and Engine Manufacturers Association, its members, and the Ford Motor Company. That deal is often referred to as the Clean Truck Partnership (CTP).
Truck dealers are complaining that they must meet zero-emission vehicle (ZEV) sales quotas in order to sell diesel powered trucks and since nobody wants a ZEV, the dealerships are limited in meeting customer demands for diesel equipped trucks even though their sales are still permitted, with a caveat.
Truck dealership have blamed the Advanced Clean Trucks regulation as the primary cause, but it isn’t that simple. It certainly is a factor, but a bigger factor is the agreement made by the OEM’s with CARB related to the Heavy-Duty Omnibus engine standard adopted by CARB in 2021 (and still awaiting an EPA waiver) further reducing emissions standards for NOx and PM. Currently, California and federal emissions standard are not harmonized and will be only marginally different by 2027.
Based on dealer and fleet owner complaints to CARB, they performed an analysis of the issue and issued a report on September 25, 2024.
Basically, CARB threw “cold water” on the dealership complaints and zeroed in on OEM sales mandates for dealerships to meet. CARB’s analysis stated, “Through discussions with manufacturers, dealers, and fleets, it appears numerous manufacturers have begun to inform their customers they will be applying future requirements to purchase ZEVs before they can acquire combustion vehicles to each of their dealer or upfitters regardless of the types of vehicles they sell as ZEVs. Some have expressed plans to begin implementing a rigid policy to require each dealer or upfitter to purchase a certain number of ZEVs from the manufacturer before they can get any internal combustion vehicles (ICE) whether or not the manufacturer offers ZEVs in the market segment the dealer specializes.”
CARB states as per their agreement with the OEM’s, they could be choosing to use legacy emissions credits to meet the demand for diesel engine sales, but they’re not doing that. CARB stated in its findings, “In summary, the manufacturers are well-situated to comply with the ACT regulation’s requirements for the 2024 MY and there are more than enough available ACT credits that manufacturers could purchase, if necessary, to sell dealers what is needed.”
So, we’re caught in somewhat of a “he said, she said” situation, but not exactly. OEM’s have made a decision to ride the pork barrel of available public funding to push ZEV’s to their customers regardless of whether they meet duty-cycle requirements or whether they can get the necessary charging in-place. In a nutshell, the OEM’s made an agreement with CARB and choose to ignore their customers as well as associations who are suing to derail the ZEV mandate. The OEM’s invested in producing ZEV vehicles and at the least they want their R&D money back, so they are trying to force feed their customers something they don’t want at this time and it is blowing up in their face. They are giving up sales on diesel trucks as part of a gambit to force ZEV’s on customers not suited to early ZEV adoption, nor required to adopt them.
CARB is not blameless either. Their rigidity is holding fast to the ACT will actually hurt air quality improvements due to truck owners basically being forced to keep older trucks or go purchase later model used trucks (mostly out-of-state). We saw this same dynamic play out with the Truck & Bus regulation. After full implementation of the rule, there were reports that air quality improvements were hampered by CARB shoving its nose into the normal trade cycle of truck owners. Many chose to keep their older equipment longer by adding a DPF.
The CARB report also stated that the European units of most of the OEM’s are charging $88,828 more for a comparable ZEV in the U.S. than they sell for in Europe. CARB noted that the pricing for ZEV’s has actually decreased in Europe while increasing in the U.S. At CARB’s October 24 hearing one Board member expressed that CARB is being “ripped off” by the OEM’s.
A lot of government money, both local, state, and federal (as part of the Inflation Reduction Act) is being thrown at forced ZEV adoption. Apparently, the pillars of industrial capitalism also understand crony capitalism quite well and as we see with any activity or behavior subsidized by the government, costs always increase.
States that blindly adopt CARB regulations (CAA section 177 states) are feeling the pain too. Recently Oregon, Massachusetts, and New Jersey are at least discussing delaying their implementation of the Omnibus (and perhaps ACT) and New York is under increasing pressure to follow suit.
OEM’s because of selling out the needs of their customers to the desires of the environmental left have cut themselves into a deal (with CARB) where their desired vehicles sales and ROI are going to make it tough on them financially. Remember, their deal also includes ignoring any and all legal setbacks, even a Supreme Court decision in our favor that CARB and EPA are exceeding their authority and agreeing to only sell ZEV’s in California.
Talk about whipping the finger to your customer base.
CARB Retracts ACF Guidance to Small Fleets and Those that Hire Them
As a result of the Western States Trucking Association (WSTA) litigation in the Superior Court of California challenging CARB’s Advanced Clean Fleets (ACF) regulation, we have reached a partial settlement on how the ACF applies to small fleets and the entities that hire them.
Last November, CARB staff posted a Frequently Asked Questions (FAQ) document regarding “Common Ownership and Control.” In it were statements that appeared to broaden the definition of “Common Ownership and Control” so as to make more independent trucking fleets subject to the ACF zero-emissions truck purchase mandate. WSTA objected to the FAQ as “underground regulation” that expanded the ACF regulation’s applicability in a manner inconsistent with the adopted regulatory text.
A a result of WSTA’s litigation efforts, CARB has retracted the November 2023 FAQ “to avoid any confusion it may have caused.” CARB has instead posted a “Retraction of Fact Sheet” on October 16, 2024. WSTA considers this a partial victory in our efforts to reduce zero-emissions truck mandates for both our members and non-members until the truck technology works, infrastructure is built out and accessible and the total cost of ownership is on par with today’s fleet operations.
We will have an additional news release in coming weeks regarding our state litigation and our legal challenge will continue on all remaining unresolved claims.
Don’t Fall for Employee Retention Credit Scams
A growing number of employee retention credit scams are afoot, and you’ve maybe gotten some aggressive calls. Scammers are employing creative means of bilking businesses out of excessive fees or engaging in outright fraud.
This is leading to employers (including owner-operators) begging the question of, “is ERC a scam?” Yes and no.
The ERC is a refundable tax credit for businesses who continued paying employees while shutdown due to the COVID-19 pandemic or had significant declines in gross receipts from March 13, 2020–December 31, 2021. Eligible taxpayers can claim the ERC on an original or amended employment tax return for a period within those dates.
To be eligible for the ERC, employers must meet one the following conditions:
- They sustained a full or partial suspension of operations due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19 during 2020 or the first three quarters of 2021
- The business experienced a significant decline in gross receipts during 2020 or a decline in gross receipts during the first three quarters of 2021 PDF
- The employer qualified as a recovery startup business for the third or fourth quarters of 2021.
Only recovery startup businesses are eligible for the employee retention credit in the fourth quarter of 2021.
Eligible employers cannot claim this credit on wages reported as payroll costs to get PPP loan forgiveness or that they used to claim certain other tax credits at any time.
These third parties often charge large upfront fees or a fee that is contingent on the amount of the refund. They may also fail to inform taxpayers that wage deductions claimed on the business’ federal income tax return must be reduced by the amount of the credit.
If the business filed an income tax return deducting qualified wages before it filed an employment tax return claiming the credit, the business should file an amended income tax return to correct any overstated wage deduction.
Businesses should be cautious of schemes and direct solicitations promising tax savings that are too good to be true. Taxpayers are always responsible for the information reported on their tax returns. Improperly claiming the ERC could result in taxpayers being required to repay the credit along with penalties and interest.
For more “legal” information about the ERC, go to: https://www.irs.gov/newsroom/employers-beware-of-third-parties-promoting-improper-employee-retention-credit-claim
“Ghosting” Your US DOT Number: What it Means
Don’t Wait till Your Insurance Company Notifies You
By Joseph Rajkovacz
“Broker fraud” is a subject most everyone is familiar with, but what about “ghosting” of a motor carrier? With all the emphasis over the past couple of years on all kinds of broker fraud that ultimately leaves the trucking company holding worthless accounts receivable for work they’ve performed, getting your DOT number “ghosted” can very well completely and utterly destroy your companies survivability by becoming uninsurable. Size doesn’t matter, whether you have one or a hundred trucks, you need to be proactive in monitoring for this fraud. Here is a brief history of how that term came into use:
“Ghosting” is a term the U.S. Department of Homeland Security (DHS) assigned to a form of national security vulnerability in the days after 9-11. It involved drug cartels badging up trucks and trailers to mimic those of large national trucking companies in order to move their product throughout the U.S. DHS’s concern was always how this vulnerability could be used by terrorist organizations to move freely about the U.S. interior.
DHS’s fear wasn’t irrational, in training for officers at the Transportation Security Operation Center originally located near Washington Dulles International Airport, the January 2001 suicide truck attack on the Capitol building in Sacramento causing $19 million in damage weighed heavy on the minds of security officials in Washington. The damage caused at the Sacramento Capitol from a tractor-trailer exemplified why trucks were banned from using U.S. 93 and crossing right on top of Hoover Dam as many of us used to do when running between Las Vegas and Phoenix.
The reason I bring this “old news” up now is because in the past two months I’ve had to assist two members who had their DOT numbers “ghosted.” They only became aware of this when they were notified by their insurance companies of getting cancelled because of horrible roadside inspections associated with their U.S. DOT numbers that were not theirs.
“Ghosted” Motor Carriers
One carrier had a single inspection where it looked like every violation possible was written up, including having no company identifier on the vehicle (legal name and U.S. DOT number). The other was a single truck company based in Phoenix that only transports exotic cars, but had over 100 inspections get tagged to his DOT number over the course of a couple of months.
In viewing the inspections, out-of-service violations noted on all the inspections were two times (on vehicle) to four times (on driver) worse than the national averages. In the case of the single bogus inspection, I assisted our member with a DATA Q challenge that went back to Texas DPS to try and get the inspection removed. I have had little luck in the past getting these inspections removed because the lead agency always asks for proof the truck was never leased or owned by the company, which is hard to do. It’s like being asked to prove a negative. In this particular instance I included his insurance declaration page showing just one truck insured and his ELD records for the time surrounding the inspection showing he was not ever in Texas.
Texas DPS did the right thing and removed the inspection, saving our member at the time of his insurance renewal. The other case was a nightmare. As quickly as an inspection was DATA Q’d and got removed, 10 more new ones popped up!
Temporary Resolution of Issue
The week of September 8-12, 2024 I attended the annual conference of the Commercial Vehicle Safety Alliance (CVSA) where law enforcement officials from throughout North America are present including feds from U.S. DOT.
I tried discussing the issue with various state law enforcement agencies, especially in Region IV (western U.S.) and was taken aback by the stubbornness in refusing to recognize there is a problem at roadside and inspectors are not (in my view) doing enough to validate a truck is actually running legit under the correct U.S. DOT number. This can be done with the vehicle registration.
As I am seeing in California, especially with owner-operators that converted from a sole-proprietorship to an entity (LLC or Corp.), they often leave their truck in their personal name (to avoid sales tax issues or because there is a loan on the vehicle), but neglect to include a rental/lease agreement between themselves and their own motor carrier identity. This is the only way to show the motor carrier has legal possession of the vehicle being operated. It’s identical to getting a Penske truck for short- or long-term use, you’ll have paperwork giving you legal possession of the vehicle. CHP has been dinging people for not having documentation showing the motor carrier has legal possession.
Yes, all documents can be fraudulently created by photo shopping them, but I strongly suspect too many of those “ghosting” a carrier’s identity are not savvy enough to cover all their bases. At any rate, many officers agreed this was a crime but didn’t seem willing to take a proactive stand. While dealing with two instances on my part may not indicate a growing national problem, I was not the only motor carrier representative at the conference discussing this issue. It’s clearly a budding new issue for the industry that has seen more than its share of problems to deal with.
My final attempt was to meet with the top federal official from FMCSA who is the Director of the Office of Registration. When I showed him the carrier profile in their data system, he agreed with me that more can be done at roadside in identifying this fraud. That said, he immediately emailed others in Washington D.C. and they contacted the company owner. The only way they could see in resolving this issue immediately was to issue a new DOT number and federal MC number by-passing the 10-day protest period for new operating authorities. This was the only viable solution since they could not stop all the adverse inspections getting reported under the DOT number. They needed to shut down the DOT number so officers at roadside could place vehicles operating under the DOT number minimally out-of-service or even impound the vehicles.
How is this Happening?
While a lot is not known at this time, I suspect there is linkage between this issue and both broker fraud and the incessant “dispatch service” phone calls many get. As part of a motor carrier getting qualified to haul for a broker, or contract with a dispatch service, they require all sorts of documentation, from operating authority certificates, insurance, etc., all documents needed to facilitate this type of fraud. However, I have seen in simply California only operations the same type of fraud. Phony motor carrier permits and CARB certificates, it’s quite easy to do these days.
Both motor carriers have used load boards to get work and as part of getting qualified to haul for any broker, even if they actually never haul a single shipment, the broker has base documentation from them.
While attending the CVSA conference I did have some officers acknowledge privately to me, they are seeing this issue predominately in the “hot-shot” segment of the industry. That is people with pick-up trucks and gooseneck trailers who apparently at random note a carrier’s legal name and DOT number and place it on their own vehicle in order to haul loads. One of the members I assisted does operate as a “hot-shot,” the one with over 100 bogus inspections operates a tractor-trailer.
There is also the possibility that “human trafficking” plays a role in what is happening. The drivers themselves quite possibly are being forced to operate in this manor to “pay back” the cost of getting them into the U.S. by multi-national cartels (DHS are you listening?). This speculation was stated to me by an ex-CHP inspector, and if accurate, without some major federal intervention this problem for motor carriers isn’t going away anytime soon.
Be Proactive
Monitor your U.S. DOT number, it’s easy to do. Just Google on “FMCSA SAFER” and you’ll be able to enter your DOT number and have your public profile pop up. Scroll down to “Inspections/Crashes.” 24 months’ worth of roadside inspection data will show (in the case of California based motor carrier, terminal inspections on your vehicles are uploaded).
You can go to the upper right of the page and click on “SMS Results” to perform a deeper dive into any inspections showing up. However, because of all the fraud happening inside DOT data system, you can no longer just simply enter your U.S. DOT PIN to see the most detailed information on each inspection which will also identify the driver. You must access through your FMCSA portal account which also requires a multi-step authentication process to access.
Should you see an inspection or inspections that are not yours, you’ll need to attempt the DATA Q process to get them eliminated. That also involves being able to access your FMCSA portal account.
Caltrans Determines On-Hauling Materials Not Covered Work
A determination made by Caltrans on July 8, 2024 and not yet publicly available, reversed a determination as to whether work on a specific project involving the on-haul of materials used for paving, grading, and fill at a public works site was covered work.
Materials were not integrated into the flow process of construction and the hauler had been hired by Granite Construction. Caltrans District Labor Compliance reviewed guidance and determined as the hauler was not hired by the material supplier, work for the on-haul of materials was covered, regardless of whether they were integrated into the flow process of construction.
The determination was disputed because materials were not integrated into the flow process. Caltrans original position was that because the trucking company was not hired by the material supplier, the material supplier exemption did not apply.
After an extensive review of existing law, regulations and DIR enforcement decisions, Caltrans stated the following criteria is to be used in determining whether work is covered:
- A contract/project advertised on or after January 1, 2023
- The materials are coming from a bona fide material supplier
- The materials are being used for paving, grading or fill
- The individual drivers work integrated into the flow process of construction
There is no substantiation under existing law, decisions and case law that supports the application of determining coverage based on the entity hiring the hauler, hence the work is not covered – Caltrans.
DIR Contractor Registration Website is a Mess
DIR Launched New Registration Portal and its Hit or Miss
Have you tried to renew your DIR Contractor Registration and pay the annual $400 fee? Unless you are one of the lucky ones, you’ve probably given up.
DIR launched a new registration portal and your old logins do not work. You must create a new user account and that can be where the fun begins. You may not receive an email confirming your account in which case you are dead in the water.
If you are lucky, you may create your account and then hit a submit button, but the page goes back to giving you the same registration page except all your info you entered is gone. We’ve assisted some members in attempting to register and in only one instance were we able to move past that registration page and it was by pure dumb luck. We hit the back button on the computer after a short while and presto! we opened a page that showed registration “In-Progress” with another button saying, “Complete Registration.”
The Complete Registration button will take you to an application with all the same questions you have had to answer these past years, however the next glitch happens when asked about Worker Comp. The page doesn’t let you say sole prop/independent contractor as with the old system, it doesn’t give you that option. With a little persistence we were finally able to advance past that page without needing to enter policy information.
After all that we thought success was at hand! We were able to click on the fee payment portal but then the geniuses who devised this system using some third-party payment portal force you to create another login and password to pay your fee!
We got everything entered and finally hit the submit button, but the page goes blank and some sort of message pops up “data not found.” At that point we logged out for fear that doing anything more may result in multiple charges to a check card.
The next morning the bank did confirm the $400 fee was debited but going back into the DIR site, it still showed application pending and please complete application! We logged off and sent an email to DIR’s helpdesk (still waiting for a reply) regarding this whole fiasco. Our member wants their new certificate showing their new PW number, but it isn’t there. Our member called DIR and they said it sometimes takes 48 hours for their system to clear a payment!
One really must wonder who is responsible for such a messed-up launch of a new portal and why it was not sufficiently beta tested before being put out there… probably better to watch concrete dry than expect an answer to that question. The old system worked just fine and there were no delays.
We recommend you at least attempt to create your account (user name and password) and in the strong likelihood you are not able to successfully complete the registration process, protect yourself by sending an email to publicworks@dir.ca.gov describing the issue you are having with their registration portal.
We had our lobbyist contact DIR early on when this new portal launched about the problems and there seemed to be a hesitancy in acknowledging there was a major issue. At our urging DIR has finally placed the following notice on their website, might want to make sure your brokers know because until this is fixed, you probably won’t be successful in registering for the 2024-2025 fee period until they have fixed their IT issue. Here is the notice:
End of Year “To Do” List for Motor Carriers
If your truck registration renews in January and you have not filed your form 2290 yet, the IRS is doing its usual shutdown of the e-file system beginning on Dec. 26th. Sometime in January it’ll be re-opened. If you need to file, see our ad in the newsletter for 2290tax.com. Also, renewals for IFTA and New Mexico should be done before Dec. 31st as well as pay your 2024 UCR fee if it applies to you. There will be no grace period on the UCR fee. If its not paid and you use a scale-bypass service, you will be pulled into scales. Don’t forget to file and pay your $30 per truck CARB Clean Truck Registration fee before Dec. 31st. Failure to pay will result in a registration hold by DMV.
CHP Issues Final Rule Mandating ELD’s
On November 13th, the California Highway Patrol dropped their final rule mandating Electronic-on-Board (ELD) recorders for hours-of-service compliance for California only motor carriers. The effective date of the rule for effected motor carriers is January 1, 2024.
As soon as the final rule was published, the Association began to receive calls from members who were being spammed by ELD providers and being told there were no exemptions or exceptions to the mandate, and they had to install an ELD in their truck(s). To be nice, we’ll say any ELD company saying that to you is lying. We dealt with the same issue when the federal mandate went into effect five years ago.
As we reported in the Summer issue of WTN, many of our members will be unaffected by this mandate. If you operate under California’s short-haul exception (100 air miles/12 hour on-duty period), an ELD is not required.
If you exceed the short-haul limitations, you are required to complete a paper log (record-of-duty status or RODs) for that day. You are allowed to switch to paper RODs, but for no more than 8 days in any 30-day period without needing an ELD.
Other notable exceptions to the mandate are:
- The driver is in a driveaway-towaway operation, as defined in Section 303 of the Vehicle Code, in which the vehicle being driven is part of the shipment being delivered
- The vehicle being driven was manufactured before model year 2000, as reflected in the vehicle identification number (VIN) and as shown on the vehicle’s registration (this is mostly useful to owners of trucks that have a CARB low-use exemption)
If you have any questions related to this mandate, call the office (909-758-5060) and ask to speak to Brenda or Joe.
If you are required to have an ELD, the WSTA is recommending you contact a reliable supplier such as our affiliate Matrack.
Our Social Media Pages
