A federal appeals court in New York on Friday, November 13, struck down the Trump administration's decision to withhold $73.5 million in federal highway funding from New York, in a dispute over commercial driver licences issued to foreign drivers that has direct consequences for immigrant truck drivers across the state. The US Court of Appeals for the Second Circuit ruled that the US Department of Transportation went beyond its legal authority when it penalised the state in April after New York refused to revoke some commercial driver licences, Reuters reported.
Source: Reuters via WIXX
In the words the court itself used, the Transportation Department's decision "runs afoul of fair notice principles, departs from the regulatory text, and underestimates the complexity of its supposedly 'common sense' requirement." That language is the heart of the ruling: the judges did not say the federal concern was invented, they said the department punished New York under a licensing requirement that was not clearly established in the regulations in force when the licences were issued.
How the dispute began: a federal audit of New York licences
The Federal Motor Carrier Safety Administration, the Transportation Department's trucking regulator, began an annual review of New York's commercial licensing programme in July 2025. Its final determination, issued on April 16, 2026, said 107 of 200 sampled records failed federal requirements: 101 licences remained valid beyond the expiry dates on the drivers' lawful-presence documents, and in six further records the agency said verification of lawful presence had not been demonstrated. On the strength of that finding, the department withheld four per cent of New York's fiscal 2027 allocations under the National Highway Performance Program and the Surface Transportation Block Grant Program — $73,502,543 in total.
Source: Bars Across — Second Circuit decision analysis
Federal officials have said New York issued approximately 32,600 non-domiciled commercial driver's licences and learner's permits — licences for drivers who live outside the state or outside the country but are licensed in New York. Transportation Secretary Sean Duffy framed the withholding as a safety and compliance action, and the department warned that the penalty could grow, threatening an additional $147 million a year. New York and its Department of Motor Vehicles petitioned the Second Circuit for review on April 24, arguing the licences were issued lawfully and that the funding loss would put New Yorkers at risk on the roads the money maintains.
The Transportation Department's own notice acknowledged that the audited transactions pre-dated its September 29, 2025 interim rule and were governed by the earlier regulatory text. The Second Circuit held the department to that earlier text — and found the penalty went beyond it.
What the court decided — and what it did not
The court invalidated the funding determination itself. It did not rule that every challenged licence necessarily satisfied all federal requirements, and it did not end the wider national argument over non-domiciled commercial licences. What it settled is narrower and, for states, powerful: Washington cannot take highway money away under a requirement it has not clearly written into its own rules, without fair notice to the state being penalised. Spokespeople for Transportation Secretary Sean Duffy and New York Governor Kathy Hochul did not immediately comment after Friday's ruling, Reuters reported.
For New York's government, led by Governor Kathy Hochul and Attorney General Letitia James, who took the federal government to court in April, the ruling restores — for now — money that pays for road maintenance, safety upgrades and major infrastructure projects across the state. For the Transportation Department, the decision leaves the underlying audit findings on the record but removes the financial weapon it used to enforce them in New York, unless it rewrites the requirement properly or appeals further.
Why this matters to Punjabi and immigrant truckers
Commercial licensing for foreign-born drivers is not an abstract policy fight for this site's readers. A large share of Punjabi diaspora families in New York, New Jersey and across the United States earn their living behind the wheel, and non-domiciled licences are the documents many immigrant drivers depend on. A state-by-state fight over whether those licences were issued correctly — backed by threats to revoke licences and cut highway funds — creates uncertainty for drivers whose paperwork was processed by a state office in good faith. Friday's ruling does not guarantee any individual driver's licence, but it does say a state cannot be financially punished into revoking licences under a rule that was not clearly in force.
What happens next
The immediate question is whether the Transportation Department accepts the ruling, seeks further review, or returns with a new, clearly written rule and a fresh compliance process — and whether its threatened additional $147 million a year in withholding is now off the table. Other states identified in the nationwide commercial-licence audit will be reading the fair-notice reasoning closely, because the same argument is available to them. For drivers, the practical position today is unchanged paperwork and a court decision that pushes the fight back to rulemaking — where any new requirement would have to be written down clearly before it can be enforced with funding penalties.