Back to square one
Don't look for any rate relief or improvements in capacity in the truck segment as a result of the decision by the U.S. Court of Appeals to vacate the hours-of-service (HOS) rules (see cover story). The Federal Motor Carrier Safety Administration (FMCSA) is widely expected to appeal the decision. In the meantime, the HOS rules will remain in place.
No one will hazard a guess what the HOS rules will look like at the conclusion of any review and/or appeals process, but let me take a calculated risk and say it certainly won't be cheaper for the industry or for shippers.
Public Citizen and the other petitioners who asked for the judicial review of the HOS rules fought the public safety battle to reduce driver hours. Unsatisfied with what they got, they apparently turned the argument to driver health, which the court says FMCSA did not adequately address in its rules.
The court reviewed the congressional mandate issued in 1995 and said the rules didn't satisfy that order and that the agency did not make a “rational connection between the facts found and the choice made.” FMCSA will either have to present stronger support for its decisions on the structure of the rules or it will have to conduct further in-depth studies to support or adjust the rules.
This is especially true for electronic onboard recorders (EOBR) which the FMCSA did not address — in defiance of the congressional order, according to the court. It's not sufficient to choose not to address a regulatory requirement because you have insufficient data. “Regulators by nature work under conditions of serious uncertainty and regulation would be at an end if uncertainty alone were an excuse to ignore a congressional command to ‘deal with' a particular regulatory issue,” said the court.
Translation: Study this issue and make a decision you can support with data.
Making the rational connection between facts and the resulting rules will take time, and current rules are likely to remain in place while that process goes forward. So there's no change for carriers; 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. 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.)
Motor carriers spent millions of dollars to adjust to the new rules. When I asked Tom Nightingale at truckload carrier Schneider National what this cost the carrier, he started to calculate a number and then gave up in frustration. So, take one short example from him — Schneider gave each of its 15,000 drivers six hours of classroom training on the new HOS rules. At an average of $60 per hour, driver time alone represents a cost to Schneider of $5.4 million.
Nightingale wasn't complaining. Safety and compliance are important to motor carriers, he says. But look for carriers to have to repeat that process when new rules are issued. Add the likely cost of the onboard recorders Congress wants, and costs are only going to go up for carriers.
Will a Supreme Court appeal help? The Supreme Court ruled against an argument that environmental studies were inadequate in the Mexico motor carrier access issue. The Appeals Court has loaded its decision with references to the inadequacy of FMCSA's research, so the Supreme Court may have a hard time disagreeing. Stay tuned — the battle's far from over.
Perry A. Trunick