Dealing with the escalating cost of cross-border transport
May 2, 2016
Despite efforts to harmonize laws and integrate processes, there remain costly barriers to cross-border freight movement. Carriers require a financial strategy to manage the ongoing and escalating costs.
The logistics and costs of moving freight seamlessly into the US create substantial hurdles for Canadian cross-border carriers. Despite ongoing efforts to harmonize laws and integrate processes, there remain significant and costly barriers to cross-border freight movement. DOT’s recent announcement of the mandatory use of Electronic Logging Devices (ELDs) for all commercial truck drivers is a noteworthy example.
The challenge for western-based carriers
For the majority of Canada’s western-based trucking companies, cross-border trade is an important element of business. Maintaining compliance with all US authority, permit and license standards is a necessity. Unfortunately, it’s also a business cost to be paid whether your trucks run periodically or frequently into the US. The addition of ELDs adds to the cost of fleet operations in the US.
Currently, according to the DAT North American Freight Index, volumes are at the lowest level in years. Despite the low Canadian dollar, truck movement south into the American markets has been limited, placing tremendous strain on many Canadian carriers.
Opportunities do exist in specific market sectors for Canada’s western-based freight carriers: The food industry, e-commerce and B.C.’s busy Vancouver and St. Rupert seaport traffic continue to provide the potential for large volumes of outbound freight. The challenge is to tap into these opportunities to keep your fleet moving during this suppressed economic period, awaiting the predicted return to normal conditions in 2017.
The reduction of tariff rates and easing of trade barriers created the misconception that border compliance became simpler. In fact, the complexities created by free trade agreements, security regulations and enforcement measures have resulted in significant additional costs and management overhead that hinder your trucking company’s profitability.
Focus on efficiency to bolster your bottom line as you prepare for a brighter future when the demand for south bound freight returns to expected levels. Competition for cross-border freight is stiff; ensure full compliance with customs and regulatory authorities on both sides of the border to maintain competitiveness. This is a huge challenge. Shippers must stay current with an increasing list of complex regulations and paperwork to remain compliant.
Crossing into the US in full compliance is only one side of the coin. Once across the border, being compliant with DOT regulations is essential to operating on US soil. As of December 18, 2017, it will be mandatory for all commercial truck drivers to use Electronic Logging Devices (ELDs) when operating on U.S. roadways. The cost to equip trucks with ELD and integrate them with your company’s data systems could reach upwards of $1,000 or more per unit. This creates yet a further burden on carrier operating costs. Consider resources to deal with this additional demand.
Have a financial strategy
Conventional financing, such as a commercial banking lines of credit impose restrictive financial covenants that limit your growth potential. Alternatively, an effective financial tool commonly used in the trucking industry is Freight Factoring, a cash flow solution designed to create easy and immediate access to working capital. By converting your invoice receivables into immediate cash, your trucking company has the financial resources to meet business expenses, pay for fuel and purchase essential equipment when required. Properly equipped with ELDs and fully compliant, your trucks are permitted to continue operations throughout the US to generate more revenues. Invoice Factoring is the only finance mechanism that automatically adjusts to the company’s unique rate of business growth. The more invoices your trucks generate, the more access the company has to immediate cash.
Mandatory ELDs are now a reality in the US and almost undoubtedly on the horizon for Canada’s domestic carriers. It is with good reason the DOT has provided almost 2 years of preparation time as the cost and logistics of integration are significant. Research your options early and establish a financial strategy to implement the requirements.
For more information on financial options for the trucking industry, visit Accutrac Capital online or call: 855-790-0906.
Charles Sheppard is the co-founder and President of Accutrac Capital, an industry leading invoice factoring company specializing in the trucking space. Charles oversees the daily responsibilities of sales & marketing, back office operations and portfolio management. Prior to starting the company, Charles Sheppard accumulated 15 years of accounting and financial services experience including 6 years at the senior management level within the trucking industry. Together with his partner Ken Judd, they share over 40 years in the trucking space, including hands-on experience managing, owning and operating successful trucking companies. Charles’ intimate knowledge of financial and accounting issues, especially as it relates to the transportation industry combined with a close association with industry experts affords him unique insights and valuable perspectives for truck company owners seeking to maximize profitability. All posts by Charles Sheppard