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FMCSA’s Proposed Safety Rules

In January of this year, the Federal Motor Carrier Safety Administration (FMCSA) announced a proposal to change truck fleet safety rules.

truck inspection

According to the FMCSA, the goal is to monitor a larger number of trucking fleets than it has in the past. This could have a big effect on truck fleets: Currently, the agency rates fleets as satisfactory, conditional, and unsatisfactory, and the current rules prevent unsatisfactory fleets from operating. Under the proposed safety rules, though, the FMCSA would eliminate the “conditional” rating. Any fleet that isn’t satisfactory would no longer be able to operate. This will mean that fleets in violation of safety standards would not be given a chance to make appropriate changes. (The FMCSA argues that, under the current system, it is often not able to monitor fleets rated “conditional,” and as a result, required safety changes are never made.) Furthermore, the FMCSA estimates that it would base its safety ratings on road-side inspection of 75,000 trucks per month.

Opponents of this proposal (including the American Truck Association and the Truckload Carriers Association) don’t like the changes for several reasons. First, they say, the proposed safety rule standards are arbitrary, and are the same as those under the current Safety Measurement System (which Congress said were unclear). The guidelines the FMCSA will use to determine safety are statistically flawed, they say. Additionally, removal of a “conditional” rating will mean that a fleet found unfit will be barred from operation, with no practical option to appeal or improve the unfit rating. Ultimately, opponents argue, the proposed safety rules will make it harder for fleets to be judged accurately while doing little to improve safety.

Factoring News

The Way of the Future? Vehicle Miles Traveled Tax in California

The California legislature recently passed a bill that could change how vehicles are taxed. Instead of continuing to use the traditional method of — a tax on fuel consumption — California seems likely to adopt a “Vehicle Miles Traveled” tax. If put into place, this could have an effect on general driving habits, and could pose significant financial problems for trucking companies.

By making this change, California lawmakers (along with Washington and Oregon, who are considering similar programs) are responding to a decrease in the amount of fuel tax revenue the state has received in the past several years. Both a downturn in freight traffic and the rise of fuel efficient vehicles have wreaked havoc with the Golden State’s ability to pay for roads and other transportation-related services, and the Legislature sees this as a way to boost that deficit.

Here’s how it would work in California: The state currently enforces a 53 cent-per-gallon fuel tax (in addition to the federal tax of 18 cents/gallon). They would eliminate that 53 cent tax and replace it with a fee of 5 cents per mile driven. The state would install a GPS tracking device on all vehicles to monitor use, and assess a tax on that basis. Supporters of the tax argue that it will generate more revenue than an increased gas tax would, and would force those who use the roads more to pay for a greater percentage of their upkeep.

(Supporters also advocate for VMTs to be imposed at the federal level, given the Federal Highway Trust Fund’s ever-impending insolvency.)

There are voices (especially in the trucking industry) that oppose the vehicle miles traveled tax. The most common and obvious counterargument is those who drive for a living will bear a disproportionate share of the tax. Some argue that oversight of the VMT tax would be more costly than it’s worth, and suggest that evasion would be common. Others point out the astronomical costs associated with putting the tax in place (i.e., the cost of installing GPS devices in every car). And, perhaps most importantly, is the issue of privacy — many oppose the idea that the state will effectively have the ability to monitor and record the movement of every car on the road. (Some, including Sen. Barbara Boxer of California have suggested that the law could not pass at the federal level for this reason.)

The trucking industry will watch California’s pilot program closely. If adopted, it has the potential to greatly effect the way truckers do business in California and throughout the west.

Factoring News

Truckers’ Concerns, 2014 Edition

A recent study highlighted a number of truckers’ concerns, and some of the issues raised aren’t surprising. Research conducted by the American Transportation Research Institute shows that, though there are many standard transportation problems on the list, the most important are those relating to the current status of trucking regulations.

Leading off the list of truckers’ concerns was the 34 Hour Restart regulations enacted in 2013. We’ve already discussed those regulations in detail in a previous post, but it isn’t surprising that truck drivers are bothered by regulations that, they claim, make roads less safe while hampering productivity. Right behind 34 Hour Restart on the list was a similar issue: the “Compliance, Safety, Accountability” program that heightens safety requirements (and monitoring) related to freight movement. Perhaps the biggest questions surrounding the CSA program relate to enforcement, which hasn’t been consistent in the two years since it began. Other regulatory issues making the list included electronic logbook recording requirements (coming in at 5th) and truck fuel prices (8th), which may become more important as lawmakers debate whether to increase the fuel tax by twelve cents.

The remainder of the list indicates economic concerns: The driver shortage and driver retention; general concern about the state of the national economy; and transportation funding. (Contact us if you’re concerned about that last one — we can help!)

But what a difference a decade makes. In 2005, truckers’ concerns focused primarily on general economic issues. Today, while economic issues still make the list, it’s traffic and safety regulations that lead the way.

Factoring News

34 Hour Restart; Other Legislative Rumblings

In the last few weeks, there have been rumblings in Washington that might lead to regulatory changes for truckers.

In a hearing before the Senate Commerce Committee on June 30, representatives from the FMCSA and the trucking industry sparred over current safety regulations. The primary bone of contention, not surprisingly, was the 34 Hour Restart, a rule that took effect one year ago and limited the number of hours in a week that drivers can operate. Competing proposals before the Senate include one from Sen. Susan Collins (R-ME) that would put the 34 Hour Restart on hold until research into its effect was completed. On the other hand, Sen. Cory Booker (D-NJ) has proposed a bill that would keep the Restart in place permanently. Not surprisingly, truckers and trucking industry advocates remain unsatisfied with the 34 Hour Restart rules, which they suggest puts more trucks on the road during higher traffic times (and are actually less safe).

One way to adjust to the 34 Hour Restart Rules / CC BY-SA 3.0 by Fourthords

One way to adjust to the 34 Hour Restart Rules / CC BY-SA 3.0 by Fourthords

Another issue mentioned during the July 30 hearing, by Sen. Roy Blunt of Missouri, concerned the FMCSA’s drug and alcohol testing rates. According to the FMCSA’s regulations (in 49 C.F.R. 382), though the initial required rate for drug and alcohol testing was 50% of the average number of drivers per year, the testing rate can be reduced to 25%. That is, if the trucking industry as a whole passes the random tests more than 99% of the time for two years, the head of the FMCSA may lower the rate of testing. Though the industry has passed the test each of the last two years, the rate of testing remains at 50%. As Sen. Blunt suggested, “there’s some point where that number goes down to 25%.”

Both of these topics arose in the wake of the resignation of Anne Ferro, the FMCSA chief, announced July 25 and effective at the end of August. Ferro’s tenure was marked by a notable increase in regulations aimed at promoting safety (including both of those discussed above, and the “Compliance, Safety, Accountability” program, which has had some notable issues of its own). The industry will undoubtedly watch closely as Ms. Ferro’s successor is chosen, and as Congress deliberates over the state of trucking regulations.

Factoring News

FMCSA Proposed Insurance Requirements For Trucking Companies

It’s well-known that, at the end of 2013, the Federal Motor Carrier Safety Administration increased the minimum insurance coverage requirements for freight brokers to $75,000. But it may be less widely known that the Department of Transportation has proposed increasing the insurance requirements for trucking companies as well. In a report issued in April 2014, the FMCSA suggested that, in the near future, the current minimum requirement of $750,000 could be increased to an amount much higher. (You can read the full report here.)

Volvo Truck, courtesy of Patrice Raunet Hollywood

Volvo Truck, courtesy of Patrice Raunet Hollywood

In its report, entitled Examining the Appropriateness of the Current Financial Responsibility and Security Requirements for Motor Carriers, Brokers, and Freight Forwarders – Report To Congress, the FMCSA suggested that current insurance minimums were not high enough. The previous minimums, the report says, were set during the 1980s, and the cost of damages over the past three decades has risen dramatically since then. During the same time, insurance rates have dropped a bit –meaning that an increase in the minimum insurance requirements may not bring trucking companies’ actual insurance costs to a level above what they were when the previous minimum was set. This led the authors of the report to conclude that:

”[T]he current financial responsibility minimums are inadequate to fully cover the costs of some crashes in light of increased medical costs and revised value of statistical life estimates.”

What is interesting about this conclusion, though, is that it does not appear to account for some other (possibly significant) numbers, which the report itself mentions a few pages earlier. There are 330,000 crashes per year involving trucks, but fewer than 3,300 of these crashes cause damage in excess of the current insurance minimum of $750,000. In effect, then, the FMCSA will increase its requirements for all trucking companies because fewer than one percent of accidents exceed the current minimums.

How much might the FMCSA increase the insurance requirements? It isn’t clear yet, because the agency has only begun the process of putting together a new rule. The report gives us a hint, though: it cites a study from the Pacific Institute for Research and Evaluation recommending a minimum policy limit of $10 million per crash.

We don’t know where the FMCSA will set the minimums in the future, or when they might do it. But we’ll have future posts on this issue, so make sure to check back.

Factoring News

The Truck Driver Shortage for Small Truckers

There’s a truck driver shortage in the trucking industry, but it may not be a bad thing for small trucking companies.

It’s been a problem that’s received significant press over the last couple of years: even as general unemployment remains a problem for the economy as a whole, the Wall Street Journal reports that the trucking industry continues to experience a driver shortage. At the time of this post, there were an estimated 25,000 unfilled trucking jobs in America, and, according to a report from the American Transportation Association, that shortfall could increase tenfold over the next decade.

There are a couple of possible reasons for the shortage. The WSJ article mentioned above suggests that it’s possible that younger drivers simply don’t like the idea of life on the road. It’s also possible that the federal regulations enacted in 2013 have played a role; since the new driving-time rules took effect, drivers are forced to stay on the road longer, but at the same pay rates. Another commenter suggested that a construction boom is contributing to the driver supply problems: individuals who would otherwise drive trucks have changed industries, and are working work locally.

Regardless of the cause of the continuing shortage, what does this mean for trucking companies in the short- and medium-term? It makes sense that a weak labor supply will have upward pressure on prices – in other words, driver wages will generally increase as trucking companies compete to hire a smaller pool of drivers. This would help drivers, of course; but it may also help smaller trucking companies.

As wages go up, over time, the price of loads will rise – that’s an obvious benefit. And as larger truckers are constrained by a dwindling driver supply, they’ll be able to deliver fewer loads. Copeland Trucking, as reported in the WSJ article referenced above, have been “turning away business because of unfilled openings.” These loads still need to be moved, and it may mean that flexible smaller companies can fill the gaps created by larger companies’ inability to hire drivers, as more loads become available.

The driver shortage is real, and it may not be going anywhere. But it may, in the long run, be a good problem to have for small companies.

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