Relieving Regulatory Pressures on Trucking Can Reduce Supply Chain Costs

Widespread reduction in federal regulatory constraints on trucking will offer supply chain managers more cost-effective freight hauling. In some areas those changes will come quickly, others will take more time, and in still others—particularly at the state and local level—favorable change may never materialize.

Federal rulemaking over the last eight years under the Obama Administration far exceeded anything seen under previous Presidents. President Trump has taken immediate action to stem this output.

Even before Trump took office Congress reacted to the flood of regulations issued by federal agencies since the election and before Obama left office. The House passed a bill called the Midnight Rules Act, which would allow Congress to invalidate rules in bulk that are passed in the final year of a presidential term.

Another, broader bill also was passed by the House at the same time, called the Regulations from the Executive in Need of Scrutiny (REINS) Act, requiring that any regulation issued with an annual economic impact of more than $100 million must be approved by Congress.

Both Midnight Rules and REINS Act bills must also be passed by the Senate and signed by the President before they become law. But they vividly depict a Republican-led Congress that is fed up with what it believes were extreme positions taken by bureaucrats hiding behind the threat of a presidential veto.

When it comes to federal regulations that impact trucking productivity and costs, there are a number of areas the new administration is expected to tackle. To boost both the supply of energy and keep prices low, the Environmental Protection Agency's previous emphasis on restricting energy exploration and development no longer holds sway.

Similarly, it is likely that draconian truck engine efficiency restrictions imposed by the National Highway Traffic Safety Administration will be reconsidered.

We can also be sure to see the end to the bizarre insistence by senior administration policymakers that independent contractors don't exist but are all simply misclassified employees. The Obama Administration organized broad assault in this area, supporting of its union allies, who are seeking to organize owner-operator truck drivers in everything from port drayage to package delivery. This pro-union help extended to drafting into the fight agencies whose missions had nothing to do with this issue, including the Occupational Safety and Health Administration (OSHA).

The Impact of FMCSA

The single area of federal regulation that has probably the biggest impact on trucking costs is in the area of safety, where federal officials stuck to their conviction that truckers routinely put profits before people. However, evidence surfaced even before the change in administrations that federal safety officials had seen the writing on the wall.

Speaking at the Transportation Research Board's annual conference late last year, a Federal Motor Carrier Safety Administration official said his agency already had started going slow in some areas even before the Trump inauguration.

"We've been consolidating what is in our current inventory," revealed Robert Miller, who is FMCSA's director of the Office of Policy, Strategic Planning and Regulation. Although the agency will continue working on rules that remain in the pipeline, he said, "we're not going to focus on significant rules right now."

He also anticipated that his agency would work well with the new Secretary of Transportation Elaine Chao, who earlier in her career served under President George H.W. Bush as Deputy Secretary of Transportation, second in command to the DOT secretary.

Miller also pointed out that FMCSA's regulatory agenda has been set largely by congressional mandate. "Congress has the authority to give us direction, and they have in the last several authorization bills." Embedded in legislation enacted between 2005 and 2016 were no fewer than 89 provisions calling for FMCSA to write or changes rules, he noted.

For much of that time, Republicans controlled either one or both houses of Congress. In addition, during last year's campaign Donald Trump specifically excluded safety and health regulations from his position that under his administration for every new regulation adopted, two would be removed.

The Regulatory Rollback Begins

But regardless of whether safety was the reason given for the adoption of so many FMCSA and other regulations, it is unquestionable that they added significantly to the nation's logistics costs. A prime example was the new hours-of-service rule and its 34-hour restart provision.

Effective in 2013, the rule required drivers to take 34-hour restart rest periods at least once every seven days, and that had to include two 1 to 5 a.m. periods. The trucking industry argued that the provision did nothing to improve safety and would significantly raise costs.

At the end of 2014 Congress included a suspension of the restart provision in a budget bill signed by President Obama. That suspension became a permanent withdrawal of that portion of the rules in late December when it was part of another budget bill passed by Congress and signed by the President.

Even before the rule was adopted, estimates of its negative impact on logistics costs ranged from 3%-7%, and since then experts estimate the real productivity loss at least 4%. These aren't the only federal rules adopted during the Obama Administration that drove up logistics costs. Whether you agree with what Congress did or not, you can be assured that this won't be the last time that Congress intervenes directly in the federal rulemaking process.

Another cost-hit on trucking stems from a regulation mandating the use of electronic logging devices (ELDs) on trucks, which goes into effect December 18, 2017. Although the device itself is priced at only a few hundred dollars, the ultimate cost to logistics is difficult to ascertain. On the plus side, many larger fleets have been using ELDs for quite a while. Those companies say ELDs have improved safety and eventually reduced costs. But you can still expect to see a cost-hit on trucking in the near term.

One negative is that ELDs are thoroughly detested by many truck drivers, some of whom have made it clear they intend to exit the business rather than have to work with them. Although many of these drivers are older and nearing retirement age, because of the dearth of young people entering the professional driving ranks, some fleets estimate their losses could be as high as 10% of their driver force.

Under study by FMCSA is the trucking industry's own request for a rule requiring speed limiters. The American Trucking Associations (ATA) argues that these devices will prevent speeding and make it more financially viable for safe truckers to compete against those who are willing to cut corners on safety and speed. That may be an end most devotedly to be wished for, but it is certain to increase the trucking cost component of the supply chain.

CSA and the Future

Another regulatory scheme under study is the Compliance Safety, Accountability carrier safety rating program. If the road to hell is paved with good intentions, then CSA must one of its most finely-wrought bricks. Intended to focus FMCSA's limited enforcement resources on the least-safe carriers, a CSA score is created through a statistical analysis of federal and state law enforcement inspections and accident reports.

In addition to guiding enforcement actions and policy development, the safety ratings created are placed on the Internet to guide shippers in their choice of carriers. Truckers have long complained that the published scores were inaccurate and extremely difficult to change once they were in place.

The problem was not that experienced shippers couldn't tell the difference between safe and unsafe carriers, but that their insurance companies told them not to use any carrier below a "satisfactory" rating.

FMCSA's management of CSA has been slammed not only by the trucking industry but also by the Department of Transportation's inspector general, the Government Accountability Office and Congress.

For a little over a year now CSA has been in limbo after Congress ordered that FMCSA take no further action while the program was studied by the National Academies of Science. The completed research report is expected this summer. The agency also opened a proposed rulemaking last year to replace the previous "satisfactory," "conditional" and "unsatisfactory" safety ratings that were difficult to change with a monthly rating system.

There are other rules in the FMCSA pipeline that the trucking industry believes will raise costs without significantly improving safety. One involves a potential driver detention regulation which could allow FMCSA to probe into shippers' as well as carriers' operations for the first time.

The premise is that subjecting drivers to lengthy delays at shipper and receiver facilities creates unsafe operations. FMCSA's Miller said a research report on the issue is expected to be released by his agency this spring However, he also admitted that it's not likely that a rulemaking proceeding will move forward in the new regulatory environment.

Also likely to be subject to greater scrutiny under the new Administration are regulations outlining what entry-level training for professional drivers must contain, which were published in December.

Under these rules any applicant seeking a commercial driver's license would be required to demonstrate knowledge proficiency and to have received behind-the-wheel testing on a driving range and on a public road, and the training must meet FMCSA standards.

This rule is supported by trucking industry groups like ATA, although an independent driver group and the Teamsters argue that it should include a requirement for a minimum number of hours for behind-the-wheel training.

ATA also has been supportive of possible rules mandating hair follicle drug testing, and screening drivers for sleep apnea. These rules are currently under development at FMCSA and if adopted, also may impact trucking productivity.  

David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsleteter of the American Chain of Warehouses Inc., as well as a member of the MH&L Editorial Advisory Board.