DOT Releases Policy Recommendations Targeting Supply Chain Disruption

Dozens of ships anchored outside of America’s busiest ports, steadily spiking freight rates, and frustrated consumers inheriting both the paralyzing delays and the exorbitant price increases: these have been the painful realities within the global supply chain in recent years. In a whole-of-government effort to mitigate the root and proximate causes of the supply chain crisis, the Biden administration has responded with a roadmap for achieving a more efficient and more resilient supply chain. On 24 February, the U.S. Department of Transportation (DOT) released a report titled “Supply Chain Assessment of the Transportation Industrial Base: Freight and Logistics,” which provides multiple recommendations to address the ongoing supply chain crisis. Responding to Executive Order 14017: America’s Supply Chains, the report identifies and addresses ongoing challenges, while offering potential policy responses to strengthen the nation’s supply chain.

The central theme of the DOT’s thorough report is the necessity to build resilient supply chains to address current and future disruptions. As a result of several factors, including the growth of “just in time” supply chains, the overwhelming demand for import cargoes during the COVID-19 pandemic, industry consolidation, and a general lack of investment in infrastructure, DOT is concerned that the current supply chain lacks resilience. The report highlights that concern in stark terms, noting that the pandemic has compounded existing supply chain issues, which has resulted in temporary port closures, shortages across the supply chain, elevated levels of congestion, and increased prices for consumers. The release also highlights a number of barriers to supply chain resilience that the recommendations hope to mitigate, including equipment and warehouse capacity, workforce conditions, and data availability, among others.

The report recognizes that the federal government cannot unilaterally solve supply chain disruptions, as many of the component parts of the freight supply chain are owned and operated by the private sector, but notes that federal, state, and local agencies can still play an important part by funding infrastructure investments, appropriately regulating the industry, improving supply chain data flows, and supporting cross-sector or multi-jurisdictional efforts to address supply chain resilience.

The report makes 62 specific recommendations for action by the DOT and related agencies in order to address these challenges and attempt to bolster the nation’s supply chain. The recommendations cover the whole spectrum of transportation supply chain stakeholders, addressing both very broad and relatively narrow policies. The findings are further separated based on the level of complexity of achieving its goal balanced against the cost of implementation and other corresponding factors. Among the report’s key recommendations are:

• Investing in freight infrastructure, such as ports, bridges, and railroads, to enhance capacity and connectivity;
• Developing inland ports and warehouse locations, as well as investing in the inland waterway system;
• Coordinating with interagency partners to provide temporary solutions to ease port congestion, such as “pop-up” intermodal yards for containers;
• Providing technical assistance to support the planning and coordination of freight investments and operations and supporting workers employed in this sector, including through new apprenticeship programs and a focus on utilizing military veterans to fill civilian logistics jobs;
• Developing and implementing strategies to improve the trucking sector, including ensuring that there is truck parking availability consistent with land use and safety considerations;
• Supporting domestic manufacturing, ally-shoring and nearshoring efforts;
• Improving data and research into supply chain performance, including the tracking of freight and supply chain data, and encouraging the development of state-level freight planning; and
• Urging certain regulatory efforts, such as harmonizing the roles of the Surface Transportation Board (STB), Federal Maritime Commission, and the DOT and supporting certain transportation-related legislation/regulations, such as urging Congress to enact shipping regulatory reform, or encouraging the STB to require railroad track owners to provide rights of way to passenger rail.

This latest DOT release is just one initiative in the administration’s ongoing effort to address supply chain disruption and infrastructure investment. In addition to the report, the administration has recently announced numerous reforms, reports, and programs, including:

Port Infrastructure Development Program (PIDP): DOT’s Maritime Administration recently announced a notice of funding opportunity for the PIDP, which makes nearly US$450 million available in funding. The program is focused on port-related projects that improve the safety, efficiency, or reliability of the movement of goods into, out of, around, or within a port. Action on this program further demonstrates the Maritime Administration’s focus on addressing supply chain issues.

Trucking Action Plan: In December 2021, DOT announced the Trucking Action Plan, which focuses on the recruitment of more truck drivers and improvement in job quality to address the low retention rate. The plan includes partnering with the Department of Labor on apprenticeship programs, a pilot program for truck drivers between the ages of 18-21, driver compensation studies, a driver leasing task force, and more.

Additional Reports: The DOT report was one of seven reports that various agencies submitted in response to the same Executive Order. Most pertinent to transportation, the Department of Agriculture (USDA) also addressed transportation blockages in their supply chain report, entitled “USDA Agri-Food Supply Chain Assessment: Program and Policy Options for Strengthening Resilience.”

The DOT’s supply chain report is a wide-ranging plan of action that, if implemented according to all 62 recommendations, would impact the entirety of the transportation supply chain. Secretary Pete Buttigieg reinforced the criticality of the recommendations, noting that “decades of underinvestment in our infrastructure, unprecedented consumer demand amid our strong economic recovery, and continued pressure from the pandemic have all put immense strain on our supply chains’’ and “this report lays out critically important steps we can take – both right now, and in the years ahead – to help strengthen our supply chains, create good-paying jobs, and ensure that Americans can affordably and efficiently access the goods they rely on.”

However, some of the recommendations face direct opposition from industry stakeholders. The freight rail industry, for example, has noted that the recommendations encouraging the STB to impose new economic regulations on the industry, and require it to provide rights of way to passenger rail, will actually undermine the goals of the report by disrupting the fluidity of supply chains. As the Biden administration weighs further action, engagement from industry on the real-world implications of the recommendations will be crucial.

The concurrent crises of port congestion, supply chain disruption, and rising consumer product pricing have put considerable pressure on individuals and companies at every touchpoint of the global economy. As the federal government searches for answers to the productivity and resiliency challenges, these recommendations will guide the future actions of the DOT and the Biden administration. The K&L Gates transportation team is closely monitoring the implementation of the DOT supply chain report and encourages industry stakeholders to consider the impacts of the report on their businesses, and contact a member of the team to discuss any concerns.