Speed bumps

Nation’s motor carriers navigate FMCSA rules for industry.

By Jon Ross

   More than 12 years ago, President Clinton signed a bill to create the Federal Motor Carrier Safety Administration, tasked with spreading safety throughout the trucking industry.
   Almost immediately, the agency set about creating new hours-of-service guidelines limiting the amount of time drivers can commit to working without taking a break, and just as quickly, opposition to the rulemaking cropped up.
   A decade and multiple runs through the court system, a revised hours of service law is back on the table, leading an unparalleled slate of regulations that could cause tightened capacity and rate increases throughout the trucking industry this summer. Carriers in the LTL (less-than-truckload) market have been preparing for the rule change, which goes into effect July 1 and is seen as the biggest regulatory impact on the current state of the trucking market.
   Opposition to the hours of service rule is being challenged in the courts by the American Trucking Associations and a host of other organizations. In fact, the ATA, viewing the group’s court challenge through the lens of previous successfully challenged cases, recently asked the FMCSA to delay the rule’s start date until after the court came to a decision. The federal agency said no, setting up the possibility that if the court strikes down the law after July 1, carriers will have spent time and resources getting set for a law that will almost immediately be rescinded upon commencement.
   The fact the rulemaking exists isn’t the primary problem; it’s the uncertainty it creates. If the D.C. Court of Appeals votes to keep the law intact, carriers don’t really know how the rules will be implemented. Passage of the rule through the courts isn’t guaranteed, however.
   “The D.C. circuit has been very skeptical to the point of overturning the rule in the past, so I don’t think there’s any reason to be more optimistic this time,” said James H. Burnley IV, a partner at law firm Venable. “Given the complexities of the rule, there are probably more points of potential weakness should the court wish to overturn it, so at this point, I think there’s just great uncertainty everywhere.”
   Burnley added the FMCSA’s decision not to delay the law could possibly lead to “a fair amount of chaos,” if the rule is overturned.
   The complexities of the rule can lead to unintended consequences. Burnley anticipates a structural change ahead for LTL carriers if the modified rules of service regulations are implemented. The new guidelines could force these carriers to alter routes to comply with the rest periods and terminals could effectively end up being in the wrong place for an optimum work environment. On the truckload side, he said, the hours-of-service regulation will only exacerbate the coming driver shortage.
   Smaller companies will struggle more with adapting to the new environment, Burnley expects, simply because they don’t have as many resources at their disposal.
   “It is complex and it is sufficiently different from the current rule that I think you could safely say it will change a good many business practices in the industry,” he said.
   The impact of the rule, and others down the road, will certainly affect the pending driver shortage situation across all areas of the trucking industry. During its “The State of Freight” webinar, FTR Associates’ Noel Perry predicted that all the regulations — he counted 14 — will lead to a need for 200,000 additional drivers by the third quarter of 2013. That demand will increase by 100,000 drivers the following year. These numbers, of course, point to a tough year on capacity, but carriers in the LTL market see things a little differently.
   For some LTL carriers, the hours of service change isn’t too much of a stretch from what drivers normally go through on a daily basis. In this case, hours of service implementation will have a negligible effect on rates and capacity.
   “It’s really not much different than what we currently do,” said Karla Staver, Saia’s director of safety. She noted Saia has been anticipating the new rules and will jump into action if needed. “Our drivers take a break between the fourth and the sixth hour. We do want them to get out and walk around.”
   The 34-hour restart provision is the biggest challenge for LTL drivers who work on nighttime routes. Saia officials will reexamine the routes for their intra-regional freight over weekends because of the rule, said Rob Bulick, the carrier’s director of linehaul. He estimated the restart might affect 20 percent of the company’s drivers, but it ultimately won’t be a huge stumbling block for the carrier.
   “We’ll just fluctuate to be able to achieve the same things,” he said. “I don’t think it would come to the point where it would affect our operation enough where it would have a significant impact on rates.”
   In fact, Staver thinks the hours of service changes are far from over, whenever they end up being implemented. Changes will continue to come before the regulation finally achieves what it’s intended to achieve.
   “I don’t think they’re completely at where they want to be,” she said. “I don’t know that these are the ones that are going to make the impact that they’re looking for.”
   She added the hours of service restart could mean that all those drivers who had to rest over the weekend would hit the road at the same time during rush hour Monday morning. This would surely impact
   productivity, placing trucks on the road with commuters, school buses and all the other traffic that clogs roadways each morning.
   “The intention isn’t always the effect,” she said.
   Randy Mullett, Con-way’s vice president of government relations and public affairs, sees the new rule as handcuffing drivers into taking a half-hour break in a very specific spot in the day, something that will affect service. The truckload side, he said, will see a much bigger impact from these mandatory rest periods and the restart, but that it should be relatively easy to deal with in the LTL market without too many hiccups. Con-way’s drivers operate on a system, and dispatches are fairly consistent in terms of location, duration and workflow.
   Con-way officials are currently analyzing all of their routes to see how many would be affected by the ruling, where drivers would have to take breaks and the resulting impact on the company’s workflow. Con-way will work with the rules, but might have to add to its facilities due to increased traffic from drivers on break, or they could even hire supplemental labor if routings are significantly impacted.
   After the analysis is done, Mullett expects the company to settle on a plan of implementation 30 days or so before the rule-change deadline.
   “We know that there’s going to be implications, we just don’t quite know what those are yet,” he said. “We’re not doom and gloom about it.”
   Mullett doesn’t predict these changes will trickle down to shippers in any significant manner. He could see a modest change in capacity due to the rules, but this wouldn’t be enough to impact rates without other factors adding to a lack of trucks on the road.
   “People have been saying the market’s going to tighten up any way, drivers are going to get harder to hire, if all those things come together as a perfect storm kind of event, sure it could be costly to shippers,” Mullett said. “We’re certainly not modeling that at this point, and I certainly wouldn’t want to send any of those signals.”
   One current regulation that is having a significant impact on the LTL industry, and the trucking market in general, is the FMCSA’s Comprehensive Safety Analysis 2010 ratings that are geared toward propping up carriers that follow safety guidelines. The only problem, according to industry watchers and carrier officials, is that the rules are imperfect. Some say this will have even more of an affect on the LTL industry than the hours of service limits.
   Gordon Klemp, managing partner of the National Transportation Institute, discussed CSA during a trucking industry presentation hosted by Stifel Nicolaus, saying the concept was in the right place, but the execution is a bit misguided.
   “There’s nothing wrong with the concept,” he said. “The implementation and some of the rules, if you will, need to be tweaked or corrected because right now they create a problem rather than solving one.”
   These issues include, among other things, placing truck drivers at fault for crashes they didn’t cause and driver rating systems that are highly suspect. When carriers score a low rating due to these issues, shippers start to worry about vicarious liability and are likely to take their freight elsewhere.
   Burnley characterized CSA as an unfinished project that has nonetheless been implemented, which is forcing regulatory agencies to fix the problems midstream. The rating issues are “creating pervasive concern” in the industry, he said. “DOT has been trying in good faith to work though them, but they need to do more.”
   Misguided or not, the rules are putting safety front and center, and they will ultimately make carriers safer, once they get straightened out, Staver said. She didn’t know if the rules would be changed or not, saying everyone has their own opinion and nobody really knows what might happen.
   “Are the CSAs perfect? Absolutely not. But do they make us pay more attention to what we need to pay attention to? Absolutely,” she said.
   Bulick shares Staver’s assessment. “In general, most of them have been well intentioned and have generated positive results,” he said. “There are some specific ones that maybe aren’t as positive as others. Safety-wise, most of them are rooted in the right places.”
   ATA recently spoke out about how truck crashes are measured under CSA, saying accidents where the driver is not at fault shouldn’t be recorded in the database. ATA officials noted the regulatory body has been looking into how crashes are measured, but that studying the issue further is only delaying the only possible outcome.
   “Including these types of crashes in the calculation of carriers’ CSA scores, paints an inappropriate picture for shippers and others that these companies are somehow unsafe,” Bill Graves, ATA’s president and chief executive officer, said at the time.
   There are other regulations in the pipeline, but many of them don’t affect the LTL industry directly. Rules about hair follicle testing and driver training will mostly have a negligible impact. Mullett does predict, however, that changing fuel economy standards down the road will force carriers to buy new equipment. Ultimately, these upgrades are good for business, but they may cause some stress in the short term.
   “It will squeeze margins and it will cause rates to go up for our customers,” he said. “We’re always nervous about those things, but there will also be some advantages.
   Venable’s Burnley said these rule changes are part of a larger culture of regulation, not limited to any one industry, which has started ramping up domestically. The Obama administration, he noted, has begun using its available regulatory options aggressively.
   “They were actually slower in ramping up regulatory activity than many people expected they would be during President Obama’s first term,” Burnley said. “But they are now in gear and cranking away.”