REVIEW OF RULES TARIFFS  

On March 1, 1999 we sent requests to all FCA and NATC participants and also the major U.S. LTL carriers asking them to send us a copy of their rules tariff. The response has been quite positive from both U.S. and Canadian Carriers, which should give us a good cross section of terms and conditions to analyze. To date our work on this project has mainly involved the indexing of each carrier's rules to facilitate our future analysis of them. Once the analysis has commenced we anticipate providing periodic updates to all involved carriers outlining our findings. Ultimately we will make available, three sets of streamlined, user-friendly rules, one for Canadian domestic traffic, one for U.S. domestic traffic and one for U.S./Canada traffic.

To add further value to our study we have sent a follow-up letter to the carriers asking them to complete a short survey. Our original request not only asked carriers to send their rules but also to indicate which ones are most often applied. Using the responses to that request we developed a list of the top 12 value added services. The new questionnaire simply asks carriers to rate their experience in assessing these charges in the three major markets. We will of course provide the consolidated results of this survey to all participating carriers. Individual carrier responses are always strictly confidential.

1. U.S. carriers operating in Canada publish a charge for Canadian Customs clearance regardless of whether it clears at the border or at an inland sufferance warehouse.
2. Most carriers provide summaries of Value added charges. However some carriers also provide information as to why it is necessary to charge for these services.
3. With deregulation strict Tariff formats are no longer required, thus some carriers have utilized their rules tariffs and/or summaries as marketing pieces. Carriers doing this may use full color cover pages with little (if any) of the standard Tariff Title Page information. They will also add information on their various services in addition to the standard rules.
4. U.S. carriers have made their fuel surcharge formula an Item in their rules tariffs. This is usually a simple chart that show the amount of fuel surcharge applicable when the U.S. National Average Fuel Index reaches certain levels.

If you wish to have your rules included in this study please send them to the attention of Ken Leising as soon as possible.

A meeting of NATC's General Rate Committee was held Wednesday May 26 at the Toronto Board of Trade. A primary topic of discussion at the meeting was the following rate restructure issues. A brief summary of each issue and the Committee's recommendations follow. It should be noted that these issues are not unique to the NATC rate structure but are prevalent in virtually all currently published U.S. - Canada rate structures, be they Bureau or individual carrier structures.

• ISSUE #1 - Converting Ontario and Quebec three digit postal code groupings to the full six digit postal code groupings used in Canadian domestic (FCA) Tariffs. Currently rates between ON or QC and U.S.A. are determined by using the first 3 digits of the Canadian postal code, meaning that all locations with the same three digit postal code have the same rate level. In the case of rural postal codes a three-digit code can encompass a large geographical area. By converting to the six digit basis used in FCA tariffs more flexibility will be gained as rates could be adjusted for a specific point without affecting numerous other locations. Of course any such conversion will result in rate changes to some locations. A re-rate of 14,000 carrier bills revealed that only 2.5% of the shipments would be subject to rate changes under a regrouping of ON and QC points. A breakdown of the 368 shipments subject to rate changes revealed that most changes are within + or (-) 5 %, with the extremes being +7 and (-20) %.

Committee Recommendation: Approval to implement this change through a future docket was authorized. The NATC staff was instructed to examine the rate changes that would occur to the larger municipalities, such as Vaughn, Concord and Woodbridge, to see if the changes could be eliminated or minimized. This may involve some adjustments to the current FCA groupings.

• ISSUE #2 - Equalization of Hull/Ottawa rates. Hull, QC is adjacent to Ottawa, ON, separated by the Ottawa River. Canadian domestic rates have historically treated Ottawa/Hull the same location. Within the NATC rate structures the points are treated separately and therefor often have different rates. The rates differ most dramatically when the US point is located in Middle Atlantic Territory (Northeastern U.S.). This is because the Bureau Tariffs that originally published rates between the U.S. and Quebec were split between NFTB and MAC, with the MAC structure publishing significantly lower rates. Thus equalizing Hull, QC rates with those of Ottawa, ON will result in significant increases from or to MAC Territory. Any rate changes to Hull also require adjustments for surrounding QC points in order to provide smooth rate progressions.

Committee Recommendation: A proposal was authorized to equalize Hull, Gatineau, Masson, Buckingham, Val Des Monts and Aylmer, QC with those currently published for Ottawa, ON. Points located within the postal code areas of J0T, J0V, J0W, J0X, J0Y and J0Z to be adjusted to rate levels reflecting a premium over the Ottawa rates; similar to the premium found in Canadian domestic Tariffs.

• ISSUE #3 - Increasing rates between Western Canada and the U.S.A. to allow the same level of discounting as U.S./ ON, QC rates. Due to the method by which they were originally constructed (combination rates over western border points) rates between western Canada points and the U.S. can often be substantially lower than rates between ON or QC points and the US for the same distance. Exhibits presented at the meeting demonstrated this, for both NATC and individual carrier rates, by comparing 500, 1000, 1500, 2000 and 2500-mile rates from Toronto with those for Winnipeg, Saskatoon, Calgary and Vancouver.
• ISSUE #4 - Rates between the Midwestern U.S. points and Calgary, AB are often higher than rates between the same U.S. point and Vancouver, BC, despite the greater distance to Vancouver. Again this situation occurs due the methods used in constructing the rates originally. In fact in most individual carrier rate structures this "anomaly" is true for almost all U.S. points not just Middlewest Territory.

Committee Recommendation: Regarding issues 3 and 4 the Committee authorized the formation of a subcommittee to work with NATC staff to examine the issue and recommend a step by step plan to eliminate the rate disparities found in the western Canada - U.S. rates.

Anyone with questions or suggestions concerning these issues or other issues they would like to see the GRC address should contact Ken Leising at ext. 203.

  FULLY IMPLEMENTED ON JULY 1, 1999  

Not only Quebec domiciled carriers are affected. If you: operate trucks on the highways of the Province of Quebec or deal with load brokers for shipments originating or terminating in the Province of Quebec, you are affected.

In a recent speech, Quebec's Minister of Transport announced that since the new bill took effect on April 1999 enforcement was lenient to give everybody a chance to get caught up and become compliant but that beginning with July 1, 1999 all the provisions of the bill will be fully enforced.

Violations entail some substantial fines and could eventually lead to the loss of permit to operate in the Province of Quebec.

If you are not familiar with the requirements of the law, please call Karen McSheffrey at 1-800-559-7421, Ext 218, and ask for a copy of the prior newsletter article giving detailed information on Bill 430.

In our last Newsletter we reported that U.S. Customs had approved changes in cabotage regulations that would allow Canadian Trucks to carry a U.S. domestic load after delivering a cross border shipment. Please note that this change is in regard to equipment only. U.S. immigration restrictions do not allow a Canadian to be the driver for a domestic shipment. Thus, under current regulations, a Canadian vehicle may be used to transport a U.S. domestic shipment provided that an American drives it.

This policy now matches that in effect for American truckers in Canada.

  Savings Can More Than Pay For Membership to FCA

The volume discount FCA-NATC has obtained with Sprint Canada can in many cases more than pay for your FCA or NATC membership.

The savings are most evident on US long distance calls (including incoming calls on your toll free lines). In many cases these rates are reduced from over 20 cents per minute to our 10.5 cents per minute rate.

If you are interested in hearing more, please give Dave Sirgey a call at (800) 559-7421 ext. 214.

We reported in our last newsletter the Surface Transportation Board's (STB) decision extending the rate bureau's antitrust immunity for another year and making further renewals contingent upon the bureaus lowering their class rates to 'market rates'. This was prompted by advocacy from shipper associations claiming that « some unsophisticated shippers may be paying these exorbitant prices. »

Through informal conversations with individual shippers, we find that since this order was issued, they realized the STB has no jurisdiction over the carriers who are not using bureau rates (none of the major US carriers are bureau members nor do they participate in bureau rates, and they handle in excess of 60% of LTL freight revenue.) It is common knowledge that most individual carrier rates are either slightly above, below or the same as bureau rates.

Instead of solving a perceived problem, this bureau rate rollback, if ever implemented, would create a nightmarish situation for shippers large and small as it would make it even more difficult to compare and evaluate rate proposals of various carriers. Said one shipper: 'We have not yet figured out how we are going to handle this situation if it occurs.' Needless to say, it would also complicate the life of all carriers as they would have to maintain yet another rate level (the rolled-back bureau rates) in the event some customer would ask it be used for their account.

As reported in a recent newsletter NATC, along with EC-MAC and RMB have filed a petition for reconsideration pointing out to the STB the vagaries of implementing their decision. If you would like a copy of this petition, please call Karen McSheffrey at 1-800-559-7421, Ext. 218.

The title of a recent Transport Topics article (March 29, 1999) « Get on 'Net, Or Get Left In The Dust » may appropriately describe the possible fate of trucking companies who are not keeping abreast of new technologies and using them to enhance their services.

Initially, trucking companies used their Web sites as « brochures » where Web surfers could find out about their services. As E-Commerce exploded, many carriers seized the opportunity to develop interactive web sites where their customers can transact business. In addition to E-Mail, through some carriers Web-sites, customers can now request a pick-up, transmit a bill of lading, receive a P.O.D., trace a shipment, find a rate, and even, God forbid, file a claim. The race is on as motor carriers compete to add even more transactions and functionality to their sites.

There are many benefits and efficiencies to be realized by conducting business over the Web not the least of which is a much lower transaction cost for both the carrier and his customer. Tracing an LTL shipment over the Web costs only pennies compared to the $3.00 to $5.00 or so it costs through traditional methods. Since there are substantial transaction cost savings shipper groups through their educational programs are advising their members to get connected and deal with carriers who can transact business over the Web.

Are you keeping up? For the benefit of our members and customers, we have prepared a comprehensive listing of almost three hundred trucking companies' Web sites and listed what transactions each carrier offers on his site (Click here to link to the list of the trucking companies that was found using Yahoo!). If you would like a copy of the Internet Review Listing, please call Mary Anne Vehrs at 1-800-559-7421, Ext. 200.

In the United States the National Motor Freight Classification (NMFC) has long been the recognized standard of the LTL Trucking Industry, providing the basis for its rates.

Similarly the NMFC has long been used as the basis of U.S. - Canada LTL rates. It is much more recent that the NMFC was introduced in the Canadian domestic LTL market with the publication of FCA's class tariffs in the 1989.

We often receive calls from Canadian based carriers and shippers who require an explanation of the NMFC and how it works. Following is a brief summary of such an explanation.

The NMFC greatly simplifies the process of pricing the transportation of thousands of products moving in today's marketplace by grouping them into one of 18 classes. The class assigned to a particular product is based upon four characteristics of the product, namely density, stowability, handling and liability.

Density is usually the primary factor that determines the appropriate class for a product, with the most dense freight assigned class 50 and the least dense class 500. Of course if one of the other three characteristics is unusually significant then that can then alter the determination of the appropriate class.

The NMFC is published by the National Motor Freight Traffic Association, Alexandria, VA (703) 838-1837, http://www.erols.com/nmfta.

Due to the recent fluctuation of fuel prices in both Canada and the U.S. we thought it was an appropriate time to review the fuel surcharge calculations for Canadian Domestic, U.S. Domestic and US-Canada traffic.

Canadian Domestic Traffic

• Source of Fuel Prices: FCA/NATC Fuel Price Survey
• Base Fuel Price: 39.0 cents per litre (excludes GST)
• Calculation of Fuel Surcharge:
• LTL - % increase in fuel price x .076 (fuel/total expense ratio)
• TL - % increase in fuel price x .179 (fuel/total expense ratio)
• Current Results of Calculation: Based on 39.4¢per litre as of 6/3/99 LTL - 0.1%, TL - 0.2%

US - Canada Traffic

• Source of Canadian Fuel Prices: FCA/NATC Fuel Price Survey
• Source of U.S. Fuel Prices: DOE National Average Fuel Price
• Base Fuel Price: Canadian - 39.0 cents per litre (excludes GST), U.S. 112.0 cents per gallon.
• Calculation of Fuel Surcharge:
• Percent change in fuel price is weighted 60% U.S., 40% Canadian.
• LTL - % increase in fuel price x .076 (fuel/total expense ratio)
• TL - % increase in fuel price x .179 (fuel/total expense ratio)
• Current Results of Calculation: LTL - 0.0%, TL - 0.0%

U.S. Domestic Traffic

Many large U.S. carriers have adopted a fuel surcharge formula the same or very similar to the following:

Fuel Surcharge Bulletin

This bulletin is a must for any company that needs to track Canadian fuel prices and the fuel surcharge calculation. If you are not currently receiving this bulletin call Dave Sirgey at (800) 559-7421 ext. 214.

  CARRIER OPERATING RESULTS

In general the operating results for the 4th Quarter of 1998 were good. The operating ratios for both the US and Canadian LTL Industries improved as compared to the 4th Quarter of 1997.

The LTL Canadian carriers had an aggregate operating ratio of about 92.5 two points better than the US aggregate as released in EC-MAC's First Look.

The Canadian TL carriers operating results for 4th Quarter 1998 was right in the middle of the LTL groups at about 95.5. Carriers participating in the FCA/NATC financial survey have received detailed results comparing themselves with carriers of similar size and traffic mix. They have also been supplied with additional volume information.

This confidential survey has been conducted for the past 10 years. It allows carriers to determine if their company is operating at a level above or below the industry.

If you are interested in participating in the financial survey please contact Dave Sirgey.

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