Freight Carriers Association / North American Transportation Council
July1998
NASSTRAC'S Fifth Annual Conference For A Financial Review of The Trucking Industry
By: Dave Sirgey
The National Small Shipment Traffic Conference (NASSTRAC) held its fifth annual Financial Review of the Trucking Industry June 15, 1998. NASSTRAC is the largest shipper association in the United States.
At the conference the state of the U.S. trucking industry was viewed from the shippers, carriers, economists and financial analysts perspectives.
The shippers' perspective presented by Jack Barry of Pegasus International, stressed the need for the carriers to offer customized value added services that meet the needs of the shippers.
Examples of value added services were: ¨ Helping shippers to speed up collections; ¨ Reducing the cost of ordering; ¨ Providing information relative to inventory etc.
In the shippers' view if differentiating value added services are not offered, transportation is a commodity. When transportation is a commodity the shipper will focus on only one thing; reducing the price of that commodity. The shippers also see continued growth in time sensitive smaller shipments. Carriers' presentations stressed customer service, the use of superior technology and guaranteed delivery. They also pointed out that regional carriers will continue to expand and long haul carriers will go after shorter lanes where the current growth is taking place. This will continue to increase price competition.
Wall Street's view of the trucking industry is broader in nature than that of transportation service users and providers. When carriers require capital, Wall Street looks for a return on their money and compares the return with that generated in other industries. Successful companies will obviously be more attractive in this competition for capital.
The economists' view of the industry was that the marketplace the industry has operated in the last year was extraordinary, it will never get any better. The carriers have been enjoying a robust economy, falling fuel prices and a stable pricing environment. With everything going its way the LTL trucking industry still only managed a net return of 3% after taxes. The economists' feel the perfect conditions may have already peaked and demand is beginning to soften a bit. This news may be ominous for the trucking industry.
NASSTRAC PETITIONS SURFACE TRANSPORTATION BOARD:
NASSTRAC has filed a petition with the STB seeking reopening of Docket No. ISM 35002 in which the STB denied a request for suspension and investigation of the new bill of lading. The petition seeks reopening for the limited purpose of striking from the decision two paragraphs commenting on 49 U.S.C. Section 14706 (c) (1) (A) and (B) that comment on limited liability. The paragraphs appear to interpret the US code as authorizing carriers to enforce limitations on liability without specific approval from the shipper.
The petition notes that the STB does not have jurisdiction over liability limitations and therefore does not have authorization to interpret matters pertaining to liability. The petition also notes that the Carmack amendment is still in effect and in no way was it repealed or amended by the Interstate commerce termination Act (ICCTA).
NASSTRAC included as appendices to the Petition letters from the Senior Trial Lawyer of the Federal Highway Administration (FHWA) Department of Transportation and the Chief, section of rates and Informal cases of the STB. The FHWA letter is referenced in the following article. The STB letter states that the ICCTA transfers functions with respect to liability to the Department of Transportation and that the interpretation of the issue is not subject to the jurisdiction of the STB.
The NASSTRAC petition also cites the most recent decision in the United States Court of Appeals for the Sixth Circuit in Toledo Ticket Co. v. Roadway Express, Inc., 133 Fed 439 (6th Cir. 1998) which held that in situations involving released value rates: There must be a released value rate in the carrier's tariff; the shipper must be given a fair opportunity to choose between the two levels of liability; the carrier must obtain the shipper's written agreement to limited liability; and the carrier must issue a bill of lading for the shipment.
LEGALITY OF INADVERTENCE CLAUSES QUESTIONED:
Transportation loss and damage, Inc. requested an informal opinion as to the enforceability of rules that limit carrier liability in the absence of a specific agreement with the shipper. Examples of such rules would include NMFC items that limit carrier liability where the value is not declared by the shipper (i.e. glassware, NOI - $19.00 per pound), or rules that state that carriers will not handle freight with an invoice value exceeding $25 per lb. but if such freight is inadvertently accepted it will be considered to be released by the shipper at $25 per pound per package.
In response to the inquiry a Senior Trial Lawyer with the Federal highway Administration has advised:
"Under the Carmack amendment carriers are generally liable for the actual loss or damage to property transported in interstate commerce. Section 14706(c)(1)(A) permits carriers to establish rates which limit their liability to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation. In other words the carrier can not lawfully limit its liability as a common carrier without the express agreement of the shipper.
The carrier has the burden of showing that the shipper made an absolute deliberate and well informed choice to waive its statutory right to recover full value for lost or damaged goods. A carrier cannot limit its liability by implication, such as through tariff provisions establishing lower levels of liability absent specific shipper agreement to the contrary. For example, in Toledo Ticket Co. v Roadway Express, Inc., the Sixth Circuit held that the shipper's failure to declare a value on the bill of lading did not constitute an affirmative agreement sufficient to release the carrier from full value liability.
Section 14706 (c)(1)(B) requires carriers to provide to shippers, upon request a written or electronic copy of the rate, classification or rule upon which any rate applicable to a shipment is based. This is an informational requirement intended to provide shippers access to relevant pricing information in the absence of public tariffs for most shipments. The carrier would obviously have to include any inadvertence clause as part of the information provided to the shipper."
CANADIAN OPERATING AUTHORITY REQUIREMENTS
By: Ken Leising
While Eastern Canada has been deregulated for some time, the regulatory regime in the rest of the country continues to evolve, with several changes in the Western Canadian provinces since the new year. The following is a brief summary of the licensing requirements in each of the provinces for motor carrier transportation.
Newfoundland, Nova Scotia, Prince Edward Island, New Brunswick: These provinces have completely deregulated with the result that (with certain narrow exceptions such as for dump equipment) operating licenses are not required to transport goods to, from, or within Newfoundland, Nova Scotia, Price Edward Island or New Brunswick. Notwithstanding that operating licenses are not required, certain provincial requirements such as fuel tax filings and the requirement to maintain an extra-provincial corporate registration continue to exist.
Quebec: Intra-Provincial and Extra-Provincial Operating Licenses continue to be required, but are readily obtainable by carriers who satisfy fitness requirements.
Ontario: Intra-Provincial and Extra-Provincial Operating Licenses continue to be required, but are readily obtainable by carriers who satisfy fitness requirements.
Manitoba: Intra-Provincial and Extra-Provincial Operating Licenses continue to be required, but are readily obtainable by carriers who satisfy fitness requirements. While the province is not deregulated intra-provincially, as of January 1, 1998, an intra-provincial license is automatically issued to any carrier applying for extra-provincial operating authority.
Saskatchewan: Effective January 1, 1998, the province of Saskatchewan was deregulated and operating licenses are no longer required to transport goods to, from or within the province. Other provincial registrations such as fuel fax filings and extra-provincial corporate registrations continue to be a requirement.
Alberta: Effective April 1, 1998, the province was de-regulated. No operating license is required to transport goods to, from, or within Alberta. Other provincial requirements continue to apply, including the maintenance of an extra-provincial corporate registration. Those carriers with equipment which is base plated in Alberta will also be required to maintain a national safety code certificate.
British Columbia: While British Columbia has long been the last bastion of transportation regulation in Canada, and the last province to apply a public necessity, it has, in recent months, moved to an ease of entry regime. Operating licenses are still required in British Columbia for intra-provincial and extra-provincial operations, but are now readily obtainable by carriers who satisfy a fitness test.
PROPOSAL TO RELAX CABOTAGE RESTRICTIONS IN THE US
By: Ken Leising
A notice, which appeared in the Federal Register on May 19, announced US Customs' proposal to allow commercial vehicles participating in international traffic to transport goods between points in the US, as long as the local movement is incidental to an immediately prior or subsequent international trip. It proposes a more liberal definition of an incidental move than is currently the case: to qualify as incidental, a trip would need to be in the general direction of an export move, or part of the return movement of the vehicle to its base country.
If adopted as a final rule after public comments are reviewed by US Customs, the proposal would complete a three-stage process of harmonizing US and Canadian regulations governing trucking equipment cabotage. This is the result of a landmark four-year cooperative effort between the Canadian Trucking Alliance and the American Trucking Associations, along with the Canadian and US federal governments, to establish a level playing field for the domestic use of foreign-based trucks operating primarily in international commerce.
In December 1997, US Customs changed its interpretation of international traffic, to look to the origin and destination of goods carried, rather than the routes traveled by the vehicles themselves. In addition, vehicles moving in the US without a payload were no longer considered to be engaged in local traffic.
The changes that are now being proposed by US Customs will remove some important restrictions on the domestic uses of foreign-based equipment which do not exist in Canada.
The proposal is now subject to a sixty-day public comment period, after which US Customs will determine whether the rule will be implemented as proposed, or whether some changes are necessary. The CTA is calling on organizations involved in trade between Canada and the US to support the proposed rule change as it has been published.
THE INTERNET WILL HAVE A PROFOUND IMPACT ON THE LTL TRUCKING INDUSTRY
By: Micheline S. Tansey
It seems the explosive growth of electronic commerce has caught many in the trucking industry off-guard. Statistics on the proportion of the LTL carriers who currently have a web site and conduct business over the Internet are not available at this time. However, a cursory search of motor carrier web sites leads us to conclude that while the majority of the large national and regional carriers have web sites, among small-medium sized carriers those who are connected are in the minority.
The major impact on the industry is more than motor carriers merely being able to offer their services as well as a plethora of service enhancements (shipment tracking, order placement, rate quotations, delivery confirmation etc…) through their web sites. The major impact on the trucking industry is how electronic commerce changes the way the freight is shipped and received.
A recent article in USA Today reveals the 'digital economy' is growing at double the rate of the overall economy and represents more than 8% of the US gross domestic product. The information technology industry is now larger than the automotive industry. Internet traffic is doubling every hundred days and electronic commerce should reach $300 billion annually by the year 2002. To think that such commerce was practically non-existent only five years ago!
More and more consumers ordering over the internet will want to schedule delivery at times when they are home to accept the merchandise. Residential deliveries as well as the need for expanded delivery hours during evenings and weekends will grow. The demand for these consumer friendly services will grow proportionately with the expansion of electronic commerce.
TELEPHONE QUOTES - PERCEPTIONS v. REALITY
By: Micheline S. Tansey
For the past five years, FCA-NATC have conducted telephone quote surveys whereby the performance of LTL carrier's personnel is tested. Our interviewer impersonating a potential customer calls representative carriers on various lanes to request a rate quote for a specific shipment. So as to keep our evaluation unbiased, all calls are handled in the same fashion with the interviewer not volunteering any information (other than shipment origin and destination) but rather waiting for the employee to ask questions. The interviewer has a very detailed shipment scenario and is prepared to answer any question raised by the carier's employee.
We followed-up our last experiment with a survey asking the carrier's management to indicate their company's policies with regards to telephone quotes and matching them with the actual performance of their employee. This proved to be quite revealing!
For instance:
Some of the more significant findings were related to the discounts granted:
The carriers surveyed received detailed information and a comparison of their performance against that of their competitors. The 1998 telephone quote survey will be conducted later this year. If your company was not studied in the past and you would like to be included, please communicate with Dave Sirgey who will enroll you.
By: Dave Sirgey
At its last meeting the General Rate Committee reviewed current customs procedures on traffic moving into Canada from the US. The cost of clearing freight via PARS at the border and the difficulty in obtaining compensation for inland border clearances were discussed. The staff was instructed to obtain additional information regarding the following: ¨ the cost of inland clearance at various inland clearance points; ¨ the cost of PARS clearance at the border.
We will be preparing a survey to collect the necessary information in the near future. If you are interested in working with us on this project please contact Dave Sirgey at (800) 559-7421 ext. 214
By: Dave Sirgey
Revenue adjustments as a percent of total revenue for LTL carriers are higher than that of TL carriers. When analyzing the results of the survey we separated US and Canadian carriers as only US carriers include off bill discounts as a revenue adjustment. The range of revenue adjustments as a percent of total revenue for LTL carriers was as follows - US = 1 to 14%, Canadian = 1 to 4%
The most common reasons for revenue adjustments (excluding discounts) include the following:
Survey participants have received a comparison of their company's response to that of the LTL and TL aggregates.
By: Dave Sirgey
The frequency of appointment deliveries is increasing for 90% of the survey participants with about 35% seeing dramatic increases of over 25%.
It is clear from the responses that defining and measuring appointment deliveries is no easy task. Companys' definitions of appointment deliveries vary. For example if the customer requests delivery on a specific day that falls within normal service standards about half the respondents would classify it as an 'appointment delivery'. Even when using company specific definitions for appointment deliveries, only 24% of the respondents measure appointment deliveries as a percent of total deliveries. Integrating and aggregating service information reports regarding on-time deliveries and appointment deliveries is also a difficult task.
Survey participants have received a comparison of their company's response with the LTL and TL aggregates.
By: Dave Sirgey
The preliminary results of the survey indicate that for LTL carriers freight claims average .8% of total revenue. The percent ranges from almost zero to about 2%. For TL carriers in general the percentages are lower. About three-quarters of claims are the result of damage with the other quarter being lost or stolen.
The commodities most often damaged include:
The survey also indicated that one quarter of the respondents had experienced freight hijackings. Participants in the survey have received a comparison of their company's response with the LTL and TL aggregates.