We now find ourselves faced with a highly uncertain Presidential election. Senators Barack Obama (D-IL) and John McCain (R-AZ) represent dramatically different scenarios for logistics and transportation companies and the shippers that use their services.

So, just what are the implications of the 2008 election for the greater logistics community and how can shippers better prepare to make a decision? As the elections approach, here are four key topics that you should be watching closely as you seek to position your global supply chain operations or transportation business for success in 2009:

• The Employee Free Choice Act (or Card Check)
• One-hundred percent cargo inspection and the growing cost of compliance
• Threats to NAFTA
• The likelihood of tax hikes

The 2008 elections have the potential to bring about major change, with significant implications for the supply chain sector. So, let’s dig into these four areas of concern and take a better look at where the candidates stand.

A little-known Congressional bill could have enormous implications on both logistics services providers and the shippers that rely on them for seamless service. The bill, which is called The Employee Free Choice Act but more widely recognized as Card Check, could enable unions to mount recruitment drives via a new method: the public vote.

Historically, employees voted for or against a union via secret ballots. However, under the recently proposed Employee Free Choice Act, employees would vote for unionization via public election, not private ballot. Therefore, if a majority of employees were to vote for union representation via a public Card Check voting process, the National Labor Relations Board (NLRB) would be required to recognize the union.

In a public Card Check process, all the union needs to do is gather a list of employees declaring their support, and if the list reaches a majority, the company can be forced to go union. The implications are dramatic for logistics providers and shippers.

For example, after a Card Check process is implemented, logistics employers could lose the right to request an election or respond by educating their workforce on the pros and cons of unionization. Many non-union transportation companies fear that Card Check will put their companies at risk of union drives that could undermine the private vote, increase costs, and make their companies less competitive.

Shippers currently doing business with non-unionized companies might find their landscape changing as they face uncertainty and instability with their outsourced logistics vendors. If their vendors are forced to unionize, shippers will likely see evidence of service cuts and cost increases, or disruptions of service due to union activity.

On the issue of Card Check, the presidential candidates split on party lines. Democratic Senator Barack Obama has expressed his commitment to passing the Employee Free Choice Act legislation. Conversely, Republican Senator John McCain co-sponsored the opposing Secret Ballot Protection Act. With a Democratic Congress, a Democratic Senate, and polling showing a lead for the Democratic Presidential candidate, it appears very possible that we will see a Card Check bill pass.

The Department of Homeland Security has been actively pursuing initiatives to create more transparency throughout the supply chain, but with little regard to who will pay for it. Unfortunately, the burden is likely to fall on freight forwarding, customs brokerage, international logistics providers, shippers, and consumers—or the entire supply chain spectrum.

A recent development is the 100-percent inspection initiative. Ever since 9/11, Congress has debated legislation to screen all cargo. Some have obviously objected, saying that the commercial implications could be devastating. After the Democrats took control of Congress in 2006, the airline industry reacted to the increased likelihood of the passage of the legislation. “If you have 100 percent physical inspection of cargo, you are basically going to shut that part of the economy down,” said Jim May, president of the Air Transport Association.

Nevertheless, the Democratic-controlled Congress passed this proposal—now Public Law 110-53—as part of the 9/11 Commission Report Implementation Act. As a result, the Transportation Security Administration (TSA) must achieve 100 percent air cargo screening by August 2010. TSA may impose an unfunded mandate, requiring the private sector to take on the costs and responsibilities of screening and certifying all cargo prior to arrival at an airport.

The implications for logistics providers and shippers could be devastating. Potential consequences include increased costs of compliance and certification, increased freight rates, bottlenecks, delayed shipments, and reduction in air cargo. Shippers accustomed to a just-in-time business strategy will have to adjust to new timelines and begin paying costs for storage. Shippers may find themselves competing for slower, more costly, or riskier transportation channels such as ocean, rail, or truck. Small and medium sized supply chain businesses and shippers that lack deep pockets or flexibility in their business strategy may not survive the onerous requirements.

Both candidates voted in favor of this inspection bill in the Senate. The trend toward heightened global security legislation and increased costs for logistics and transportation businesses is bi-partisan and will likely continue. It’s also likely that small business that cannot invest aggressively in new technology, services, or compliance costs will find it difficult to compete.

The North American Free Trade Agreement (NAFTA) also neatly frames the differences between the candidates. Since 1994, NAFTA has removed trade barriers in the form of protectionist tariffs on imports between the United States, Mexico, and Canada.

Senator Obama has attacked NAFTA, recently declaring: “Trade deals like NAFTA ship jobs overseas and force parents to compete with their teenagers to work for minimum wage at Wal-Mart.” Conversely, Senator McCain has spoken out in favor of NAFTA and other free trade accords, saying, “I believe that those agreements should be kept.”

If international tariffs are reinstated by the next party in power, what implications will that have on cross-border logistics and transportation companies and their partners? As imports are decreased, import-reliant logistics companies will lose relevancy. Shippers reliant on cross-border trade will lose competitive standing as they are forced to tax consumers.

The Bush tax cuts are another example of an endangered policy that stimulates opposite reactions from the candidates.

The Bush tax cuts were extensive. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) lowered individual income taxes for all taxpayers. In addition, the EGTRRA lowered the top income tax rate from 39.6 percent to 35 percent. Meanwhile, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) slashed the maximum capital gains and dividends rates from 20 percent and 35 percent, respectively, down to 15 percent.

These tax cuts were favorable for mergers and acquisition (M&A) activity. Logistics mergers boomed during the reduced capital gains era, fueled in part by the reduced capital gains that sellers stood to receive. Deals such as PWC Logistics/GeoLogistics, Jacobson/Wilpak, and ZLN/Interlog all took place during this favorable environment. In aggregate, 2007 represented the most active logistics M&A year ever recorded.

However, current levels are unlikely to continue. Senator Obama supports a 39.6 percent maximum income tax rate, but would increase capital gains and dividends to 24 percent. Senator McCain proposes maintaining the current tax levels. However, it is worth noting that Senator McCain is unable to ensure that taxes will not increase.

Tax legislation must be passed by the Congress; and if the 2009 Congress is solidly Democratic, as currently appears likely to be the case, then Senator McCain may be forced to reach an accommodation. In addition, the Bush tax cuts are currently scheduled to “sunset,” or expire, by 2011, at which point they revert to the pre-Bush levels. So, it seems reasonable to assume that taxes under a McCain presidency and a Democratic Congress would be unknown.

What does this mean for you? If you own a mid-sized logistics or transportation company, how would your after-tax results compare? Let’s assume that (a) you generate $5 million of earnings before interest, taxes, depreciation, and amortization (EBITDA), (b) a buyer pays you a 6x multiple for $30 million, and (c) you have a cost basis of $5 million. All things being equal, you would be taxed on a capital gain of $25 million.

In sum, it is unclear what taxes will be in 2009, but it seems likely that they will be higher. Hence, for tax-savvy logistics and transportation company owners, many will consider a potential sale in advance of the probable capital gain tax hikes. In turn, all company owners and operators should plan ahead for anticipated increases in the costs of doing business; and, of course, likely decreases in demand by shippers looking to decrease costs and spending.

The risks of Card Check, NAFTA rollbacks and tax hikes all loom large. So, how should you respond?

First, set your strategy. As market conditions shift, your business plans should reflect new realities. Second, if you own a transportation or logistics company, evaluate your business risks. Smart owners and entrepreneurs understand that timing is everything. This year could be a great time to sell, before trade slows, regulatory burdens expand ,and taxes increase.

Third, if you have an opinion on these legislative issues, get involved in the elections. Choose your candidate. Convey your opinion. Cast your vote. This presidential election could be a momentous year for shippers and the entire supply chain services area. Death and taxes may remain inevitable, as Ben Franklin once said, but with shrewd strategic planning, you can position for success.