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The U.S. Court of Appeals (District of Columbia Circuit) has thrown out the new Hours of Service (HOS) rules that went into effect on January 4, 2004, and has sent the case back to the Federal Motor Carrier Safety Administration (FMCSA) for review.

According to Morgan Stanley analyst James Valentine, the status quo is likely to remain in place for some time. "Despite this decision, it is our understanding that trucking companies will continue to operate under the recently implemented HOS rules until the issue reaches a final decision pending more appeals, which could take months if not years," Valentine says.

If the new HOS rules are ultimately thrown out, the results are likely to be more negative than positive, Valentine believes. "Assuming that we revert to the former rules at some point in the future, carriers would have higher equipment and driver productivity, which in turn could be viewed as benefiting individual truckload [TL] company's earnings per share, but looked at on a macro level, this would create 1 percent to 3 percent more capacity in an industry that has historically been plagued by overcapacity, although this is not the case at present," he says.

What does this mean to shippers?

While the current rules stay in place for the time being, that means no opportunity to reduce rates or costs for shippers.

"When the decision was announced, shippers wanted to renegotiate contracts to remove conditions predicated on the HOS rules," says Perry Trunick, executive editor of Logistics Today, Material Handling Management's sister publication. "Many shippers are likely to hedge against the outcome they expect by either keeping contracts short or locking the carriers in at current levels if they anticipate the next set of rules will add cost. I'd vote for getting that long contract, but do your own due diligence before you sit down at the bargaining table."

To read the court ruling for yourself, go online to: http://pacer.cadc.uscourts. gov/docs/common/opinions/200407/03-1165a.pdf.

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