Reducing Hours, Increasing Costs
The trucking industry is currently waiting for the Obama administration to come to a final decision on hours of service restrictions which may reduce the allowable hours of service from eleven hours to perhaps as low as nine hours which would work to actually reduce capacity by a large number. As is often the case with more regulation, the less you get of it which means that consumer prices could skyrocket due to the decreased capacity. Simply put, decreased hours of service does not in any way lessen the demand for shipping services which will require carriers to hire more drivers to meet demand which simply means that the additional workers working less time will cause the carrier’s operating costs to jump which will naturally be passed on to the end user.
At this time the new rules have not been published but all indications are that it will result in a reduced hours of service requirement which will naturally increase the carrier’s costs which will be passed on to the consumer. Several large trucking companies including UPS, Conway, and Celadon have stated that it is difficult at this point in time to truly calculate the increased costs but all agree that no changes to the hours of service rules are needed and that the safety data from 2004 back that up. It will be interesting to see how the Obama administration chooses to handle this issue and whether the maxim will hold true that the more you regulate something the less you get of it.
DOT Issues New Rule for On-Board Recorders
The U.S. Department of Transportation recently issued a new rule requiring certain carriers and bus companies to install on-board recorders in all vehicles. This new rule is targeted at those carriers and bus companies that have serious patterns of hours-of-service violations. The new rule will apply to carriers found with 10 percent or more hours-of-service violations during a compliance review.
On-board recorders are devices attached to commercial vehicles that automatically record the number of hours drivers spend operating the vehicle. The Department of Transportation regulates the hours-of-service, which are designed to prevent commercial vehicle accidents by mandating certain rest periods for commercial operators.
Carriers required to install on-board recorders under this new rule will be required to maintain the recorders in all of their vehicles for a minimum of two years. This new rule also makes additional requirements for the on-board recorders themselves, including recordation of the time, date, and location of a driver’s status.
Beware of Brokers
An important part of the trucking industry is the use of brokers to create and facilitate business operations that can often be complex and provide an additional revenue stream for carriers. However, when using a broker you should proceed with caution to insure that you are actually paid for the shipping services performed. An unfortunate aspect of working with a broker is that you are wholly reliant upon the broker to be honest and trustworthy in remitting payment in a timely manner. However, there is a subset of federal law that works to protect carriers in situations where a broker has been paid but has absconded with the funds.
On each bill of lading there is ordinarily a Section 7 clause that must be filled out by the consignor or consignee stating whether the shipment is prepaid or if recourse is available to the carrier. The majority of the time, this Section 7 clause will be executed in such a manner that allows the carrier to go after the broker, the shipper, and the recipient of the goods for payment of freight charges if the broker fails to remit payment.
This is certainly a useful tool for carriers in securing payment as they are able to go after additional parties for whom they do not have a contractual relationship with to recover the shipping costs. This is also valuable in that it reduces the risk in dealing with an independent party who the carrier is trusting to provide payment for the shipping charges instead of dealing with the shipper directly.
On the flipside, if you are a business owner that is using a broker to coordinate any shipments, the best course of action is to insure that the Section 7 clauses are properly executed and marked prepaid if that is truly the case. However, the failsafe method for securing the broker’s payment to the carrier is to issue only joint checks in both the carrier’s name as well as the broker’s name which prevents the broker from pocketing the payment which could leave you on the hook for the shipping charges twice.
