(1) Basic knowledge of logistics in the U.S. and deregulation of logistics

The environment surrounding logistics in the U.S.

(1) Basic knowledge of logistics in the U.S. and deregulation of logistics
(2) Laws, regulations, and rules that you should know for warehouse management in the U.S.
(3) Key points of IT utilization in logistics operations in the U.S.
(4) WMS, with a track record of adoption in many countries and regions, now also available in the U.S.!
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*This information is as of August 2023
*Reference: Japan External Trade Organization (JETRO) websitehttps://www.jetro.go.jp/indexj.html (Japanese)

Regulations in the U.S. logistics industry are changing with the times. The trend toward deregulation has become active, particularly since 1980.

Deregulation and changes in the U.S. logistics industry

Since the 1980s, the U.S. has seen several moves to deregulate in the logistics industry. Such deregulation may have helped build efficient logistics networks and contributed to economic growth and job creation in the U.S. Along with this, the country has established appropriate safety measures and competition rules to date. This article will explain the deregulation of the transportation industry, electronic commerce, and advanced technology related to logistics in the U.S.

(1) Deregulation in the transportation industry

In 1980, the Staggers Rail Act of 1980 (Public Law 96-448) was passed on the deregulation of freight railway business, resulting in the liberalization of railway fare setting and freight contracts with shippers. The 40 major railroad companies were consolidated into seven by 2000. Four of the companies (two in the west and two in the east) control more than 90% of the railway operation, and railway fares fell by about 60% between 1980 and 2000. The country has implemented deregulation step-by-step to the present, not only in freight railway operators but also in trucking operators, making it possible to carry goods by truck across states. These measures have resulted in lower freight rates and have been a great benefit to shippers. The liberalization of transport contracts with shippers has also enabled logistics operators to build efficient logistics networks by providing flexible transport services. However, competition among trucking, airline, and railway companies then became intensified in domestic long-distance transportation. Accordingly, truck drivers, who enjoyed higher wages before the deregulation, have seen their wages fall sharply due to the fierce market competition derived from the deregulation, and their welfare benefits have become scarce. Low wages and tight working conditions make it difficult to hire new truck drivers. For this reason, logistics operators are required to devise ways to improve delivery efficiency in order to handle the increasing volume of goods with limited employees.

(2) Deregulation in electronic commerce

In order to promote electronic commerce (e-commerce), which is growing rapidly with the spread of the internet and mobile technology, the U.S. government has established rules related to electronic payments, including the electronic signature law, and has taken measures to deregulate cross-border transactions, such as eliminating and reducing tariff barriers based on trade liberalization. All these measures make it easier for businesses and individuals to sell their goods and services.

Japanese companies are also able to develop an e-commerce business in the U.S. without having to establish a local subsidiary. However, there may be some cases where you must obtain U.S. insurance based on an agreement with your corporate partner, which requires you to buy insurance or add the partner to your insurance coverage. In the unlikely event of trouble, establishing a local subsidiary in the U.S. is necessary in order to minimize the impact on Japan arising from potential international lawsuits.

In addition, it should be noted that any violations of the Organisation for Economic Co-operation and Development (OECD) guidelines approved in the U.S. in April 2016 may be deemed unfair by the Fair Trade Commission (FTC), the agency that monitors e-commerce. The FTC focuses on three aspects in particular: disclosure obligations, fair marketing, and data protection obligations.

Logistics operations in the U.S. related to e-commerce are becoming increasingly complex because of the need to understand these rules and regulations to take appropriate action for each.

(3) Deregulation on advanced technologies

With recent advances in drone technology, logistics using drones is gaining attention in the U.S., with the expectation that it will provide effective transport of goods in remote areas and emergencies. The U.S. government has announced that it will ease restrictions on commercial drone operations, helping logistics suppliers use drones to deliver goods and control inventory more efficiently.

In particular, on January 15, 2021, the Federal Aviation Administration (FAA) eased regulations by establishing two federal rules on the use of drones by the private sector. The two items for deregulation are "obligation to equip with a remote ID" and "regulations on flight operation over people." By obligating owners to carry remote IDs on their drones, the need for approval by the FAA was eliminated for certain situations, such as flying over people or at night. In the future, drones are also expected to play an important role in disaster rescue.

Drones and flight conditions subject to deregulation are as follows:

Gross weight: 55 lbs (approx. 24.9 kg) or less
Flight altitude: 400 feet (approx. 121.92 meters) or less
Flight speed: 100 miles per hour (approx. 160 km per hour) or less, etc.

As regulations and laws are expected to be eased and revised continually, companies are encouraged to keep up to date with the latest information from the FAA website, state guidelines, and various other rules.