New Trucking Regulations: Cost Increase, Driver Decrease
March 1, 2004 By Pulp & Paper Canada
Changing the original hours-of-service (HOS) regulations established in 1939, the U.S. department of transportation has imposed a new regime that will affect not only the drivers but the carriers and their clients as well. While the regulations ha…
Changing the original hours-of-service (HOS) regulations established in 1939, the U.S. department of transportation has imposed a new regime that will affect not only the drivers but the carriers and their clients as well. While the regulations have been instituted south of the border, the complex system has a far-reaching impact on both the economy and the productivity of the carrier industry. Along the way, it will affect, of course, the pulp and paper industry in Canada.
The reasoning behind the changes focused on improvement of motor carrier safety. Progress in technology reflected in both the network of highways across North America and the vehicles used by the motor carrier industry, combined with research into driver fatigue and sleep disorder, were all among the factors that led to the reform.
According to the official documentation of the Federal Motor Carrier Safety Administration (FMCSA) in the United States, “The new regulations provide an increased opportunity for drivers to obtain necessary rest and restorative sleep, and at the same time, reflect operational realities of motor carrier transportation.”
In the words of U.S. transportation Secretary Norman Mineta, there are economic benefits to the new rules.
“Over the last several years,” he said, “FMSCA has made great progress in reducing commercial vehicle crash fatalities and this rule should help continue that momentum. If we can lower the cost of moving freight by 1%, the additional benefit to the economy would be more than $98 billion annually.” In the United States, it is estimated that the new HOS rule will prevent 6,900 property damage-only crashes annually, saving the American economy $628 million a year.
But what are the costs
“Both the new U.S. hours-of-service rules and new security measures, will increase the costs of transportation in their own right; together they compound the situation,” said David Bradley, CEO of Canadian Trucking Alliance and president, Ontario Trucking Association.
Both trucking companies and highway truck drivers are usually paid by the mile. If the number of hours a driver can operate his vehicle is reduced, the driver earns less and the truck generates less revenue for the company.
“There is a change in the way time will be accounted for during a driver’s work shift. From now on drivers will have to clock all driving and non-driving time as part of a 14-hour work shift. This means a loss of productivity (on average by 10%) by the driver and the truck,” said Barrie Montague, vice-president of the Ontario Trucking Association.
Under the old system, a driver who was not driving or actively participating in the loading or unloading of his truck would log his time as “off-duty”. This would include time spent waiting for the customer to load or unload, break time for meals or other such time, time waiting for customs clearance and time waiting to be assigned another load. (see The New Rules, previous page)
New system key feature
Under the new HOS regulations, when the driver starts his day, the clock starts and it only stops 14 hours later. Loading, unloading, customs, break, meal, waiting time do not stop the clock as before and his ability to earn money is impaired. There is no elasticity in the system and this could result in aberrations such as the driver having to park the truck for 10 hours when he is 30 miles from the receiver because he has run out of hours.
Similarly, the carrier’s ability to earn revenue is reduced as productive capacity is reduced. Costs will increase as a result because it will be necessary for companies:
To pay drivers for lost driving time
To buy more trailers for more pre-loading
To hire more city drivers to do the pick-ups or drops heretofore done by highway drivers
To buy tractors for the new city drivers
To absorb overheads created by a reduced number of miles
The money can only come from one place — the shippers who use the services. This means it will be necessary for truckers to increase base rates significantly, in the 10% to 20% range. As well, it will be necessary to charge their customers for the inefficiencies that the customer imposes on the carrier such as waiting time at loading and unloading and significantly higher charges for multiple delivery shipments.
With awards for safety from the US department of transportation and as one of Canada’s 50 Best Managed Companies, Quebec-based carrier SGT 2000 Inc understands the impact of the new regulations and the concerns of both their drivers and their clients.
“It’s real, it’s live and the trucking industry only has a very short window before drivers start reacting to losing wages because of the new rules,” explained Gilles Caron, vice-president of finance for the company. “Carriers have to compensate their drivers for the wages they will lose as a result of the new hours-of-service rules or they will lose them and customers have to compensate the trucking industry for the loss of productivity and cost increases that these regulations have forced on it.”
Caron summed it up by saying, “Anything which causes drivers to exit the industry will exacerbate the problem.”
Trucking market dynamics
The biggest challenge facing trucking companies is the shortage of drivers. Trucking companies are constantly scrambling to find drivers. This results from the fact that competitive forces (i.e., deregulation of trucking in 1988 and the resulting pressure to maintain competitive rates) have kept driver wages at about the same level as they were 15 years ago. Drivers are generally not paid for things like border waiting time and are only paid for about one hour of time at loading or unloading when the time spent at the receiving or loading dock can be several hours.
Consequences of new HOS
“For shippers, this means transit times will increase. Drivers will no longer be able to tolerate delays at shipping/receiving docks. Freight that requires drivers to wait, to help in the counting, loading/unloading process, or is subject to unplanned delays will be affected. JIT shipments, multi-stop loads, and appointments will be most vulnerable,” said Montague.
“The co-operation of shippers and receivers is critical in terms of the mitigating the productivity and efficiency impacts of the various new rules and in moderating the inevitable freight rate increases that must result,” said Bradley. He stressed the importance of co-operation between shippers and receivers in terms of mitigating the productivity and efficiency impacts of the various new rules and in moderating the inevitable freight rate increases that must result. The truckers, he said, “must get in and out of facilities quickly. We also need to ensure that all border crossing procedures are followed and that shippers take advantage of programs like FAST. The costs of delays cannot be borne exclusively by carriers, nor can they be absorbed on the backs of the drivers.”
In order to retain drivers, the industry will have to ensure that they do not lose wages as a result of the new regulations. In addition, the carriers will also have to be compensated for the loss of truck utilization in order to avoid financial losses. There are no accurate figures, but it is estimated that the loss of productivity and driver income could be high.
Serge Gagnon, President of XTL Transport agrees that this will cost the industry, directly and also through loss of productivity. “We’ve seen a 10% loss in the first month,” he said. “We’ve lost the flexibility we had before.”
What has to happen
With all this, it is only logical to expect higher rates, non-negotiable ancillary charges (waiting time, etc.) and higher costs for multiple-drop loads.
There has to be a major change in the culture of the relationship as both carriers and their customers adapt to the new reality. The overall principle is that shippers and receivers must make a serious effort to facilitate the flow of loads at their facilities and make every effort to reduce driver-waiting time.
“The problem that everyone is ignor
ing,” adds David Gerstel of Transportation Specialities, “is that we’re not just talking about transportation. We’re talking about controls over the trucking industry that go beyond safety for the driver or border security.” The problem was serious enough to cause piles of paperwork and many hours of delay at the border. “There have been many drivers who quit rather than face border crossings,” he said.
Caron thinks that there has been a lack of respect towards carriers. “There should be less tolerance of shippers and receivers who do not respect their carriers and who do not treat them as an intrinsic and valued part of the supply chain,” he says. “For too long, truckers have been treated as the Rodney Dangerfield of the supply chain and the driver bore the brunt of this attitude,” he said. “This has to stop.”
While it looks like the truckers and the carriers are doing their best to comply to the new regulations, the next year or two will be a difficult one for the industry and their clients as adjustments are made and the new regulations from Ottawa come into affect.
At the same time, the FMCSA announced that it is “expanding its research initiative on electronic onboard recorders and other technologies” to ensure record-keeping and compliance.P&PC
Sources: Gilles Caron (SGT2000), Ingrid Phaneuf (Trucking News), Transport Canada and Schneider National. US dollar estimates quoted are from the FMSCA.
VIEWS ON THE NEW RULES
Quite detailed and specific in their entirety, the current rules basically state that up to 11 hours of driving are allowed within a 14 hour on-duty period after 10 hours of consecutive off-duty time. After 60 hours on-duty in seven consecutive days or 70 hours on-duty in eight consecutive days, the driver must park the truck for 34 hours to reset his log to zero.
Schneider National Inc., one of the largest American truckload carriers, has clear and concise examples on their website of how the new rules will affect a driver’s log book. In the example given, under the old rule, a driver drove 100 more miles in a 24-hour period (based on a 50 mph average). The driver used 10 hours and drove 500 miles total. Under the new rules, the driver used eight hours and drove 400 miles before the clock ran out.
FINISHING, WAREHOUSING AND SHIPPING COMMITTEE
This committee of the Pulp and Paper Technical Association of Canada will have plenty to talk about during their next meeting, May 11-14, in Montreal. Along with a seminar, a roundtable discussion and a tradeshow, discussion of the new rules will be a key point.
“We always have a good crowd,” said Committee chairman Jean Guy Pelletier (Finishing and Shipping superintendent for Bowater Maritimes) confidently. About the new rules, Pelletier sees definite increases. “Increase price in loads, increase price in waiting times,” he summarized. “All carriers are looking at more money for truck loads.”
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