Freight Rates Rise as Capacity Tightens

Summer brings an increase in shipments, particularly produce shipments, across the nation every year.  This year, the industry faces tighter capacity due in part to California’s CARB regulations as well as a continuing decline in the number of drivers.  Read the following Transport Topics article for more information.

Tight Capacity, Govt. Actions Push Produce Freight Rates Up

By Rip Watson, Senior Reporter

This story appears in the June 10 print edition of Transport Topics.

Produce shipments are being squeezed by capacity constraints and government actions, driving up rates as market demand builds toward the usual late-June peak, according to industry officials.

Dan Vache, vice president of supply chain management for the United Fresh Produce Association, told Transport Topics last week that the pre-July 4 holiday push as crops ripen nationwide “really puts a strain on trucking and freight. It will be interesting to see what happens when capacity has to be there for that push.”

Even before the peak hits, “rates are definitely higher than 2012, and they will increase,” said Richard Bauer, executive vice president of RWI Transportation in Wilder, Ky. He estimated that rates throughout the United States are already 8% to 10% above last year.

“The market looks pretty good off the West Coast,” said Ed Ruhe, vice president of operations for Classic Carriers of Versailles, Ohio. “Rates are up 10% over last year. I don’t think there is the capacity out there, either because of [the California Air Resources Board] or the driver shortage.”

Ruhe referenced CARB’s stepped-up enforcement of its rules, which also were a concern voiced by Bauer and Kenny Lund, vice president of support operations for broker Allen Lund Co., based in La Canada, Calif.

Earlier this year, the state, where 50% of all U.S. produce is grown, began to issue fines to out-of-state fleets — as well as shippers and brokers — if trucks lacked state-mandated emissions control equipment such as energy-efficient refrigeration units and tires.

“I don’t know how many guys will stop going to California” because of the rules, Bauer said. “We are coming into the meat of the season there, and we don’t know what to expect.”

“In effect, [CARB has] confiscated some of the capacity,” said Lund, who estimated that 50% of the U.S. heavy-truck fleet doesn’t meet his state standards.

Driver supply is a factor, too.

“The driver market is very, very tight,” said Dan Cory, a broker for Fortune Transportation Co. in Windom, Minn. “If demand was up even more, it would be even more of a struggle to find drivers.”

Cory said rates this year are generally similar to last year, but that doesn’t mean prices always are level.

“When people are looking for a truck at the last minute, they will pay a pretty excessive rate,” Cory said.

“Capacity has definitely been constrained,” said Kerry Byrne, executive vice president at Total Quality Logistics, based in Cincinnati. “Any spike in demand will dramatically impact the market.”

Read the rest of this article on our June 21, 2013 post.

More Thoughts on National Freight Advisory Committee

As we noted in our June 11, 2013 post, the Department of Transportation recently announced the names of those who will serve on the National Freight Advisory Committee.  The following Transport Topics editorial addresses some concerns about the committee’s efficacy and focus.

Editorial: Crafting a National Freight Plan

The announcement of the roster of the National Freight Advisory Committee provides a reason to be guardedly optimistic the nation is prepared to make tough decisions regarding our transportation needs.

Of the 47 people named by Transportation Secretary Ray LaHood, three were trucking executives: Randy Mullett of Con-way Inc., Jack Holmes of UPS Freight and Paul Kelly of the intermodal division of A&S Services Group.

Holmes said he was pleased a diverse group was selected.

“Economic factors, demographic changes and the proliferation of international trade dictate that a broader freight transportation vision, one that includes connecting all modes of transportation . . . as well as a shared responsibility for funding, is now needed,” he said.

Likewise, Mullett spoke of building coalitions and exploring “different solution sets through a wide variety of lenses.” He added: “If we had one group overrepresented versus another, we probably won’t come up with a good solution.”

These comments are refreshing, because there are a few potential red flags.

First is the size of the panel. Could having 47 members prove too difficult to properly coordinate and plan for the issues at hand?

A number of the officials represent groups that have had disagreements with the freight hauling sector over the years — and many of these conflicts still exist today.

It is our hope that everyone will be able to put aside differences on specific issues and remain focused on creating a national freight plan.

Second, in building a consensus, we hope members remember how critical trucking is to the economy.

Trucking carries nearly 70% of all freight but has far less representation on this panel. Without remembering that indisputable fact, there is no way any plan can provide the intended benefits. Third, there is the serious question of whether the recommendations will fall on deaf ears, as has happened in the past.

In January 2008, the National Surface Transportation Policy and Revenue Study Commission recommended a significant federal fuel-tax increase, as well as higher truck and tire sales taxes and more highway tolls.

At the time, commission member Patrick Quinn, who was co-chairman of U.S. Xpress Enterprises until his death and a former chairman of American Trucking Associations, said the report offered an “unprecedented focus” on freight movements and freight corridors.

While motorists face more tolls today than when that report was issued, there has yet to be any fuel-tax increase or movement on a number of the panel’s other suggestions.

The hard work of that commission deserved far greater attention from Congress. Hopefully, the recommendations made by this commission will have a better fate.

National Freight Advisory Committee Members Named

The DOT released the names of those who make up the National Freight Advisory Committee, which will offer advice to the DOT on ways to “improve its freight transportation policies and programs.”  The committee will also provide insights on ways to implement MAP-21 (Moving Ahead for Progress in the 21st Century) provisions.  All members are non-DOT and only 3 members are from the trucking industry.  The following article is found on the Logistics Management website.

DOT announces members of National Freight Advisory Committee

By Jeff Berman, Group News Editor
June 03, 2013

United States Department of Transportation (DOT) Secretary Ray LaHood recently announced the 47 members of the National Freight Advisory Committee.

The National Freight Advisory Committee was established in February. DOT said the objective of the committee is to provide recommendations to the Secretary of Transportation on how DOT can improve its freight transportation policies and programs.

A significant component of last summer’s transportation bill, Moving Ahead for Progress in the 21st Century (MAP-21) established a national freight policy and called for the creation of a National Freight Strategic Plan which encourages state freight plans and advisory committees, and provides incentives for states that fund projects to improve freight movement, focusing on reducing congestion, increasing productivity, improving the safety, security and resilience of freight transportation.

DOT said the committee will provide advice and recommendations geared towards improving the national freight transportation system, which, it said, is critical to the nation’s economy and key to help meet the White House’s goal of doubling exports by 2015.

“The strength of our economy and the strength of our national freight system go hand in hand,” said LaHood in a statement. “The members of this committee understand firsthand the critical importance of freight movement, and their valuable insight will help ensure that our system is more secure and better connected.”

The nearly 50 members of the National Freight Advisory Committee are from outside the DOT, and the Deputy Secretary and Under Secretary of Transportation for Policy, as well as representatives from other Federal agencies with freight-related obligations will serve as ex-officio members, the DOT said.

It added that the members come with various perspectives on freight transportation and represent various modes of transportation, geographic regions, and policy areas, saying that shippers and transportation and logistics services providers, labor representatives, safety experts and government entities are all represented as well.

DOT said that members will serve two-year terms and meet at least three times per year, with the first meeting scheduled for June 25, 2013, at the Department of Transportation and will include an overview of MAP-21 Freight provisions and preliminary identification of NFAC activities.

The National Freight Advisory Committee was endorsed by various freight transportation experts when it was initially announced.

“This is a big deal and something we have asked DOT to do for some time,” said Mort Downey, Coalitions for America’s Gateways and Trade Corridors (CAGTC) Chairman former deputy Transportation Secretary under President Clinton. “As they proceed with their strategize freight plan and with the long term steps to carry out an effective freight program, such an advisory group can play a very critical role.”

CAGTC Executive Director Leslie Blakey also lauded it.

“Creation of this Committee shows great leadership by the Administration and serves as further evidence of their commitment to improving U.S. freight mobility,” said Blakey in a statement. “Our Coalition has long-held that regular coordination and consultation between the private and public sectors at the national level would benefit freight movement and improve policy-making. This Committee will contribute practical experience to the process of implementing MAP-21 freight provisions, while helping to lay a path with creative concepts for freight in the next authorization.”

Supply Chain Visibility

We all know that visibility has been an important buzz word in the industry for quite some time.  Now more than ever, companies expect their technology solutions to provide end-to-end visibility of all transactions.  Learn more about the latest trends in the brief Logistics Management article below.

Viewpoint: Defining supply chain visibility

By Michael Levans, Group Editorial Director
May 01, 2013

In research conducted by Peerless Research Group (PRG) over the past few years, we’ve found that end-to-end, global supply chain visibility and event management capabilities are considered “must haves.” However, those same respondents struggle to tell you exactly what they need to do in order to achieve this.

We’ve set out this month to corral the elements of supply chain “visibility,” a utopian idea that has been highly conceptualized by analysts and consultants as we’ve become awash in data. Once realized and put to work, many contend that it will help logistics and supply chain operations create true competitive differentiation in a time when the cost of logistics errors and the subsequent impact on your brand could be devastating.

The idea seems simple enough from a pure transportation management perspective: It’s the ability to track and trace a shipment from pick up to delivery. But when you add in the critical data points from the other nodes of the supply chain, the concept remains elusive.

“Visibility is no longer restricted to track and trace on the transportation leg,” says CapGemini’s Tom Wrobleski in this year’s Technology Roundtable. “It means following a shipment from order through final delivery, with all the itinerant compliance and finance milestones in between, and then being able to act on that information when roadblocks occur.”

Our panelists on this year’s Technology Roundtable understand if you’re still scratching your head. Who wouldn’t want that capability?

But when you step back and examine the uniqueness and complexity of your operations, you may see thousands of data points, all being tracked—or not—by disparate systems, ill-trained warehouse/DC personnel, dozens of carriers, and well-meaning 3PL partners ready to serve up a tidal wave of information on your shipments.

To help tighten up operations and pull this data together, our four panelists each explore an important piece of the visibility puzzle that are probably already hard at work in your operation—mobile computing and ADC technology, TMS, WMS, and GTM. Each believes that the technology solutions currently available have put real-time visibility—as defined by Wrobleski—into reach for those who are determined to make the case for investment—or ready to fully optimize what they already have.

And while our panel does a terrific of exploring the role these technology elements play in operations improvement and visibility, our consulting team from Accenture takes us a step deeper by defining the cloud-enabled, transportation “control tower” concept that’s been inexorability linked to the visibility discussion.

The team contends that through a version of cloud-enabled “social networking,” logistics professionals can create, manage, and monitor a fully optimized transportation service network, putting real-time event management at your fingertips.

“Companies that only gave a passing nod to managing supply chain performance in the past have had epiphanies,” says Accenture’s Brooks Bentz. “Now they realize that it’s a critical strategic weapon in top-line growth, cost containment, and customer satisfaction—and the transportation control tower concept is now a critical link in measuring supply chain success.”

American Trucking Trends

The following Logistics Management post breaks down the highlights of American Trucking Association’s annual “ATA American Trucking Trends.”

ATA releases American Trucking Trends 2013

By Jeff Berman, Group News Editor
May 31, 2013

Stop me if you have heard this before: trucking is very important and moves a ton of freight in the United States every single year.

Am I overstating the obvious here? Well, yes, of course, but if you need more proof take a look at this year’s edition of the American Trucking Associations “ATA American Trucking Trends,” which the ATA released this week.

As you may know, this book is comprised of more than a lot of industry-specific data to say the least. Some of the data offered up by ATA in this year’s edition include:
-trucks moved 9.4 billion tons of freight in 2012, or 68.5% of all domestic shipments. Both figures are up from the previous year;
-in 2012, trucking generated $642.1 billion in gross freight-related revenues, or 80.7% of the nation’s freight bills, also increases from 2011;
-there are 6.9 million people employed in trucking-related industries;
-the majority of trucking companies are small businesses – with 90.5% operating six or fewer trucks. Only 2.8% of fleets operate more than 20 trucks;
-Class 6-8 trucks traveled 137.2 billion miles in 2011 – up 4.7% from the previous year; and
-the trucking industry paid $36.5 billion in federal and state highway user fees and taxes in 2011 – a 10.3% increase from 2009

“As the nation continues to travel the road to recovery following the Great Recession it is becoming increasingly clear that trucking is leading the way,” said ATA Chief Economist Bob Costello in a statement. “The data in Trends should provide a road map for policy makers and business leaders as they continue to plot the course of that recovery.”

A solid and fluid trucking network is vital for our nation’s economic engine; that goes without saying. And while the trucking industry is currently in a relatively decent spot, there is always room for improvement while facing major challenges, too. These challenges include the pending HOS regulations change, which many industry stakeholders say could wreak havoc on supply chain management and logistics management, and other things like the truck driver shortage, and the increasingly beaten up state of our nation’s infrastructure.

Challenges aside, trucking’s presence in the overall economy and the supply chain world cannot be swept aside. It can be a tough industry to be consistently profitable all while carriers of all sizes keep a watchful eye on service levels, and safety, for good reason.

Much of what happens in the trucking world is directly tied to our economic growth for better or worse. And even with the aforementioned challenges, the industry keeps trucking along and keeping its eye on the ball.

2014 Capacity Crunch Will Require New Ideas & Strategies – Part 2

The following is a continuation of our May 28, 2013 post.  To read all the latest trucking news, visit TruckingInfo.com.

Regulations, Drivers, Truck Capacity Focus of Shipper Meeting

Panelists warn shippers to treat drivers with respect — or risk not having reliable truck service as capacity tightens.

May 2013, TruckingInfo.com – WebXclusive
By J.K. Jones, Contributor

Electronic Logs and Sitting at the Dock

The new rule mandating electronic on-board recorders, or electronic logging devices as they’re now being called, will probably be published sometime next year, Sanderson said, likely to be followed by legal challenges and a grace period for universal adoption.

“From a practical standpoint, it’s going to be five or six years from now,” Sanderson said, adding that he supports EOBRs and sees the potential for modest productivity gains rather than losses.

“The real pinch point could be when EOBRs are scheduled to be implemented,” Albrecht said, noting that while most large carriers have already adopted EOBRs, many, many small carriers have not. “However, until there is a level playing field, [shippers] are going to have a little bit of a relief valve from carriers willing to ‘run hot and heavy.’ There’s going to be a part of the carrier population willing to operate that way, and they’re not going to change. “But think twice,” he cautioned shippers.

“A lot of driver dissatisfaction has to do with hassles at the dock, when that driver has to sit and wait,” Sanderson said, adding that electronic logs can’t be fudged. “When the clock’s up, it’s up. And sitting really takes money out of the driver’s pocket. Just make sure that you’re better than the next guy by being a shipper that is friendly to drivers, and that you’re a shipper that a trucking company wants to do business with.”

Driver Pay and Respect

According to a BB&T driver survey, pay was the leading reason most leave their jobs, followed closely by the lack of recognition and respect, at more than 30%, Albrecht reported. He encouraged shippers to take steps to make drivers feel more welcomed.

“As an organization, you’ve got to get across to your people to treat these folks with respect,” Albrecht said.

With regard to driver retention, Albrecht suggested that tiered driver pay, based on meeting performance goals, will mean premium pay for premium drivers.

“Pay for performance is now back in vogue. Ten years ago it went out of vogue for pure pay raises,” he said. “But pay for performance is going to stick because of the regulatory climate, equipment is very expensive and fuel is way up. And EOBRs take some of the subjectivity out of the pay-for-performance programs from the late ‘90s.”

Still Sanderson, who spent several years in the trucking industry, including positions at J. B. Hunt Transport at Schneider National, recalled persistent worries of a driver shortage “Armageddon,” a concern that loomed large in 2004 but otherwise has never substantially materialized.

“It’s because the industry has taken smart actions. We’re not sitting still waiting for the shortage to overrun us.”

Capacity Deja Vu?

Indeed, Albrecht posed the question: Is there another 2004 out there?

“By most accounts, 2004-2005 was nirvana for trucking companies, and the ultimate migraine for shippers,” Albrecht said. “Supply was tight, but not because the van sector was booming.”

Capacity had been reduced through the confluence of substantial HOS changes, three years of carrier bankruptcies, Bush administration tax cuts and an economy that was doing fairly well. “But the actual trend underneath was that loads were shrinking,” Albrecht said. “These changes were coming on eight, nine, 10 years ago, and they’ve only accelerated as a result of the Great Recession.”

A recurrence of a truck shortage similar to 2004 is possible in 2014, but not likely, Albrecht explained, because most of those underlying factors are not present currently.

More importantly, shippers have taken steps to be prepared when truck capacity becomes extremely tight, with alternatives such as shifting more freight to intermodal or dedicated fleets, expanding the core carrier base and using more brokered loads and 3PL services.

“I’m not convinced it’s going to be as tight as ’04, but it is going to be tighter than what we’ve seen the last couple of years because of hours of service — that’s the one commonality with 2004,” Albrecht said.

Intermodal Trends

Albrecht reported that van loads are 19% below their 2006 peak, the result of an economic downturn and the supply chain alternatives shippers have explored. This is in contrast to flatbed, tank and refrigerated loads, which have recovered ground since the recession while van loads continue to fall.

“Intermodal is having a real impact,” Albrecht said, noting that the truckload market for runs of more than 700 miles is worth about $40 billion. Currently, intermodal is a $14 billion market, but that is expected to grow to $20 billion by the end of decade, if not sooner.

And that gain is coming out of the truckload share, a 15% loss. While domestic intermodal loads have increased for 11 years in a row, van truckloads have contracted in eight of the past 11 years. Domestic container growth has averaged 9.1% annual growth since 2007, compared to GDP growth of about 1.5%, according to Albrecht’s figures.

“East of the Rockies, we think there is tremendous opportunity to convert truckload to intermodal,” Sanderson added. Sanderson credits improved rail service, compared to the not-so-distant day when a rail load “would get there when it got there” — but the transportation cost savings were significant. Now, the schedules are tighter and the savings are less, though long-haul rail rates are still more than competitive with truckload.

“It’s no longer a big discount for poor service. It’s a smaller discount for truck-like service,” Sanderson said.

2014 Capacity Crunch Will Require New Ideas & Strategies

Shippers learned about strategies that will help them navigate the coming capacity crunch during the recent Transplace Shipper Symposium.  TruckingInfo.com covered the symposium; read the first part of the article below.

Regulations, Drivers, Truck Capacity Focus of Shipper Meeting

Panelists warn shippers to treat drivers with respect — or risk not having reliable truck service as capacity tightens.

May 2013, TruckingInfo.com – WebXclusive
By J.K. Jones, Contributor

Shippers must work smarter and cooperate closely with their carrier partners to offset expected losses in truck capacity caused by government regulation, according to presentations at the 11th Annual Transplace Shipper Symposium held earlier this month in Dallas.

“Everyone is in favor of safety. The trucking industry has done a phenomenal job,” Transplace CEO Tom Sanderson told the gathering of shippers, carriers, industry experts, analysts and academics. “But regulations that drive up our costs, that make life for the trucking industry more difficult and don’t improve highway safety, are not benefitting anyone.”

In a session to explain recent legislative and economic impacts on freight transportation, attendees heard updates on the regulatory ABCs so familiar to the trucking industry — CSA, HOS, and EOBRs — along with the driver shortage, the rise in intermodal freight, and the possibility of a capacity crunch to rival 2004.

But shippers were told they won’t need a complex economic model to predict the arrival of a truck and driver shortage.

“Just look at your own service record,” said trucking analyst Thom Albrecht, managing director at BB&T Capital Markets, who shared the stage with Sanderson. “When you start to see a decay in either on-time pick up or on-time delivery, there’s probably a reaction up the chain and it’s probably tied to drivers. And watch your load tender/acceptance figures. When those begin to deteriorate, it’s either someone having problems with drivers, or your fleets are starting to play poker with you and they may not be honoring their commitments.”

While carrier representatives in attendance might have been disheartened to learn of innovative methods designed to reduce truckload freight costs, the event is a valuable gauge of shipper sentiment and a look at trends in industry practices.

Transplace was founded by a group of large carriers, so the meeting historically emphasizes cooperation, regardless of the swings in the transportation supply and demand marketplace.

Why Shippers Shouldn’t Use CSA

Sanderson opened his presentation with a discussion of his latest blog post, an update to his running criticism of the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability enforcement program launched in late 2010.

Sanderson is also the front man for ASECTT, a group suing to remove carrier scores in the CSA performance categories (BASICs) from public view.

Starting on a positive note, Sanderson characterized CSA as a mechanism designed to prioritize the enforcement resources of the Federal Motor Carrier Safety Administration.

“The original intent was good, and that’s still valid,” he said.

He also noted that many carriers appreciate the feedback and have used CSA data to improve safety within their operations.

His remaining remarks, however, were detailed and critical.

Sanderson told the shippers’ meeting that CSA is “in flux” and “not ready for prime time.”

Among its numerous flaws, he said, CSA still doesn’t measure most carriers. Of those carriers with enough inspection data to be scored in one of the BASICs, about 55% have at least one score above the intervention threshold, according to Sanderson’s analysis.

“That is absolutely crazy. When you look at the track record of the motor carrier industry, it’s a phenomenal record of safety over the last 30-plus years,” Sanderson said. “To brand over half the carriers that FMCSA measures as having some kind of deficiency is absurd.”

Additionally, the BASIC scores do not correlate with a carrier’s accident frequency, he suggested.

“The system is not suitable for use by the shipping public to determine which carriers they’re going to do business with,” Sanderson said.

Hours of Service and Productivity

The expected July 1 changes to the hours of service rule will take capacity off the highway, Sanderson said, which will lead to higher prices for shippers. He cited specifically the new 34-hour restart provision and its impact on scheduling for some segments, particularly those who rely on early morning deliveries.

The new 30-minute driver rest break may or may not prove to have a significant impact on productivity, he noted. Still, he pointed out a possible safety risk if drivers feel compelled to “make up for lost time” after the mandated mid-shift pause.

Tightly scheduled routes with multiple deliveries will feel the change more than over-the-road operations, Albrecht agreed. He also questioned how many drivers actually are going to be back on the road in exactly 30 minutes, and not 45 minutes or more.

“Some organizations are going to be left with a 1% to 2% impact on productivity, while others are going to see at least 10%,” he said. “The food warehouse industry is going to very vulnerable. It’s going to be very challenging.”

The net effect will be a 2% to 5% reduction in productivity, Sanderson said. Doing the math, even a comparatively modest impact will result in the need for another 100,000 drivers.

“Where are we going to find 100,000 more truck drivers?” Sanderson said. “And does anyone think that new drivers are going to be safer than the 3 million professional drivers on the road today? Not a chance.”

Albrecht added that a driver currently gets 660 minutes of time behind the wheel in the daily duty cycle.

“The challenge for your organization is how can you help carriers find 20 or 30 more minutes a day,” Albrecht said. “A carrier can work smarter, but are you working with them to help them accomplish their goals? They can’t do it as a solo effort.”

The TruckingInfo.com article is continued in our May 31, 2013 post.

Shippers Can’t Get Enough of QuoteMyTruckload.com

Dan Goodwill of Dan Goodwill & Associates found out about our newest offering – QuoteMyTruckload.com and wrote a nice piece about it on his blog.  I’ve included the highlights here, but be sure to check out Dan’s blog, as well.  Dan also was kind enough to mention a new project we have underway to assist smaller operators who are challenged by the $75k surety bond. 

QuoteMyTruckload.com 

QuoteMyTruckload.com is one of the portfolio of services offered by InMotion Global Inc., an Interstate Logistics Group Company based in Saint Petersburg, Florida.  The company began as freight broker.  QuoteMyTruckload.com is the truckload quoting and rating module available through their InMotion Global TMS^® transportation management software solution that is targeted at large shippers moving heavy volumes of freight.  It utilizes the same patented truckload quoting technology.

The new automated service allows shippers to obtain immediate online truckload quotes in real-time; they can book their shipments in a matter of seconds. The InMotion Global team developed QuoteMyTruckload.com specifically for small- to medium-sized truckload shippers so they can quickly obtain firm truckload quotes online.  Shippers do not need an account to use QuoteMyTruckload.com. The system also allows users to obtain an unlimited number of truckload quotes each day so they can gauge ever changing market rates. The service can be accessed from any any tablet computer.

Tim Higham, President and CEO of InMotion Global said, “QuoteMyTruckload.com gives shippers a streamlined method to obtain quotes without having to sign a contract, create an account, or spend hours on the phone calling carriers and brokers for quotes. QuoteMyTruckload.com is truly unique in the marketplace and is the full truckload quoting website to use our patented InMotion Global TMS^® quoting technology.”

Higham added, “Shippers tell me they don’t have the time to e-mail or call dozens of carriers or brokers just to get a single truckload quote. So, we simplified the process for them and put a powerful tool in their hands. Our instant online quote process takes under 10 seconds from beginning to end and they can simply book the shipment if they like the quote.”

Tim Higham highlighted to me that the $75K freight broker surety bond is a challenge for some of the smaller operators and could cause some consolidation in the industry in the United States.  For brokers with limited funds, Mr. Higham indicated that he is seeking to expand his brokerage operation and is willing to take on the salary and benefits for successful qualified operators who wish to join his team.

Rebrokering is a Bad Idea, No Matter What You Call It – Part 2

The following is the continuation of an opinion piece from Transport Topics.  To read the beginning of the piece, visit our May 17, 2013 post.

Opinion: The Risks of ‘Rebrokering’

By Robert Voltmann
CEO, Transportation Intermediaries Association

Carriers that rebroker freight — again without separate broker authority and bond — usually are held to retain full liability as the carrier for the cargo (even though they did not transport it), but they will likely have no insurance protection for the actions of the brokered truck. However, legitimately licensed and bonded brokers acting as such are exempt from cargo liability under the 1906 Carmack Amendment, which has evolved to provide a uniform system of liability for interstate motor carriers. Why would anyone risk their company to save a few dollars?

The old ICC never allowed carriers to rebroker freight without proper authority. The advocates for unlicensed rebrokerage argue that it has become commonplace (mainly due to lax enforcement). That’s why ATA, OOIDA and TIA sought to move regulations that were ignored by the Federal Motor Carrier Safety Administration into law. Every industry needs a minimum of rules. MAP-21 re-establishes the rules for transportation — and the new law applies them fairly and evenly.

The arguments put forward to allow carriers to rebroker without separate authority are misleading at best. The rebrokering advocates argue that the MAP-21 provisions will have a devastating effect on drayage operators and agricultural haulers. None of this is true. Drayage within commercial zones is, in fact, exempt from regulation. In addition, most drayage is conducted by owner-operators. Ag haulers are exempt from regulation as well. When the rebrokering advocates are pushed, they have to admit that they want to rebroker general commodities without separate broker authority and bond, despite all the risks those activities entail.

MAP-21 does not prohibit carriers from rebrokering freight to meet peak demands. The law just requires carriers to have separate broker authority and a bond and to indicate as much on shipping documents or a contract that they are operating under a broker’s license number issued by FMCSA. This must apply to all involved or no one.

Brokerage is not a hobby. It’s a profession with certain responsibilities, including protecting other people’s money. Most of the money touched by a broker, whether that broker is asset- or non-asset-based, belongs to other people. The MAP-21 provisions are not onerous, and they will stem a growing tide of shipper-specific bonds that could be a true burden for motor carriers and brokers.

The Transportation Intermediaries Association is the largest education, information and advocacy organization for third-party logistics professionals doing business in North America.

For more information on MAP-21, see the US DOT website.

Rebrokering is a Bad Idea, No Matter What You Call It

Those of us who operate third-party logistics companies have dealt with this problem for years.  The following Transport Topics opinion piece covers many of the pitfalls involved in rebrokering loads.

Opinion: The Risks of ‘Rebrokering’

By Robert Voltmann
CEO, Transportation Intermediaries Association

This Opinion piece appears in the May 13 print edition of Transport Topics. Click here to subscribe today.

Carriers that seek the ability to “rebroker” freight without separate broker authority and bond will keep the door open to marketplace fraud and nonpayment. Worse still, the practice will expose carriers to the ever-increasing risk of liability for accidents they did not cause. Calling rebrokering “convenience interlining,” “subcontracting” or something else makes no difference; the practice will create problems for the industry.

A few things to keep in mind: Brokers did not want a bond; motor carriers wanted the bond increased. “Interlining” as defined in MAP-21, the new transportation law signed by President Obama last year, follows the definition established by the old Interstate Commerce Commission, which never allowed carriers to rebroker freight, by any name, without separate broker authority. Additionally, owning or operating a truck is not necessary to get motor carrier authority. The questions those seeking to allow carriers to rebroker freight without separate broker authority and bond should be answering are: Who is responsible for freight payments, carrier selection liability and cargo liability? Let’s look at each of these.

Brokers did not want an increase in the bond. The Transportation Intermediaries Association agreed to it as part of an overall agreement with American Trucking Associations and the Owner-Operator Independent Drivers Association. These organizations wanted the bond increased and new regulations on broker bond/trust companies to better protect their members. It is ironic, then, to have other carrier organizations arguing that they don’t want the bond increased.

Because owning or operating a truck is not necessary to obtain motor carrier authority, if brokerage is not defined as it is in MAP-21 — and applied to everyone involved — the status quo of fraud will continue.

If carriers are allowed to rebroker freight without separate broker authority and bond, this opens the door to those who seek to cheat carriers, get motor carrier authority, grab loads from load boards, get an advance, flip the loads to carriers and disappear. The performing carriers will be left unpaid. This is one of the things that TIA, ATA and OOIDA sought to prevent. The provisions in MAP-21 spell out responsibilities and protect all involved. We believe that whoever hires a truck is responsible for paying for that truck.

When carriers rebroker freight without separate broker authority and bond, they also open themselves up to vicarious and negligent hiring liability — without any protections associated with brokerage. Many lawsuits of the past few years have involved the selection of carriers that were later involved in accidents where people died or were injured.

Millions of dollars in settlements or damages were awarded by courts and juries in these cases. In many of them, tort lawyers tried to establish increased liability when the case involved a carrier hiring another carrier. But a trend also emerged limiting the exposure of properly licensed brokers that have well-defined carrier selection procedures in place. Why would carriers not want to avail themselves of these protections?

Read the conclusion of this piece in our May 21, 2013 post.  For more information on MAP-21, see the US DOT website.