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Repurcussions of New Hours-Of-Service Rules Feared

TORONTO, Ont. - Industry insiders here and in the U.S. are warning new hours of service rules above and below the 49th parallel will result in increased costs for carriers. Not to mention an even grea...


TORONTO, Ont. – Industry insiders here and in the U.S. are warning new hours of service rules above and below the 49th parallel will result in increased costs for carriers. Not to mention an even greater driver crunch and a decrease in carrier capacity as some companies simply go belly up.

“The strong will survive and the weak won’t,” summed up Lana Batts, former president of the Truckload Carriers Association, and a board member for Canada’s Mullen Transport. (Batts is also president of Larsen, Batts, Welborn & Co. a consulting firm in Arlington, Va.) “And when I say strong I don’t necessarily mean big. It will be the carriers who are able to calculate and cover their costs accurately who will make it.”

Her comments were echoed by Canadian carriers, many of whom were represented at the Ontario Trucking Association’s convention held in November.

“There was definitely a consensus among carriers at our fleet session that there will be costs incurred by the new hours of service rules here and in the U.S., and though I hate to say it, some carriers will be forced out of business due to increased costs,” said Canadian Trucking Alliance CEO David Bradley, also president of the Ontario Trucking Association.

A capacity shortage due to productivity loss and carriers going out of business is also likely, Bradley said.

Indeed, at the Hours of Service Productivity Summit held at Georgia Technical Institute in October (which Batts attended as a representative for Mullen), delegates said they expected to see productivity decreases for carriers ranging from two to 19 per cent. Other industry insiders have pegged the productivity decline as high as 25 per cent. And a recent Wall Street Journal article appeared to confirm the prediction, adding trucking rates are expected to increase as a result.

Productivity will be lost under the new rules (both north and south of the border) because drivers will have to count more of the time they spend waiting at docks as on duty time, significantly slowing run times. (Schneider International has an interesting feature on its Web site which actually calculates the on duty hours that will be lost under the new regulations. To see it, visit Schneider at www.schneider.com and click on the hours of service icon in the top left hand corner of the home page.) And Canadian companies stand to fare even worse if a split sleeper berth provision isn’t included when the Canadian HOS kick in next fall.That’s because in the U.S. 1) the 10-hour off duty requirement may be satisfied by two sleeper berth rest periods, neither of which may be less than two hours, and 2) time spent in the sleeper berth, provided that a) it is at least two hours in length, and b) it is used as part of the 10 hour off-duty requirement, does not count toward the 14-hour per day driving limit. So eligible sleeper berth time extends the on-duty window. But Canada’s new rules, set for implementation Sept. 1, 2004, state drivers must rest for a minimum eight hours at a time, with no sleeper berth splits. They can take the other two hours of off-duty time at their discretion, but everything else counts as on-duty time.

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Canada wants split sleeper berth

The majority of Canadian players, it appears, want what the U.S. has. Canada stands to suffer from an even greater productivity loss if officials here don’t adopt the split sleeper berth provision, said Leo Van Tuyl, interim president of the Owner-operator’s Business Association of Canada (OBAC). It is quite likely that Canadian drivers will take advantage of the exception while operating under the U.S. rules, but doing so will force them into border region truck stops by the thousands as they reset their sleeper time to the Canadian clock, said Van Tuyl. “The transition from one operating system to the other will create horrendous parking problems at those truck stops,” he said. “And the enforcement of the eight-hours-off rule in Canada could initiate a ticket-writing frenzy among Canadian border-region enforcement officials.”

The Canadian rules, sans sleeper berth exception, could also result in even worse traffic during rush hour, especially through major city centres, slowing delivery even more, said Van Tuyl. “The Canadian rules mean drivers won’t be able to nap through rush hours. They’ll be forced to drive for more hours straight. There’ll be a lot more trucks on the road when you’re driving home after work. And they’ll be getting where they’re going more slowly.”

Bison VP of operations, Rob Penner, wants the sleeper berth exception too: “Absolutely, for three reasons: one, lost productivity due to the HOS; two, consistency of training – the ability of drivers to be in compliance depends entirely on their comprehension of the rules; and three, competitiveness.”

Penner pointed to a recent internal study by Bison, which found that without the sleeper berth provisions their drivers would lose a full 10 hours on the road per week under the new HOS. “And (the driver) will have lost 20 hours on the road at the end of two weeks, without the sleeper berth provision,” said Penner.

Jeff Barry, operations manager of full truckload carrier Brenway Transport (based in Fredericton) agreed. His company’s trucks frequently travel to the States. “If the U.S. has the sleeper berth exception and Canada doesn’t it will screw everything up – our drivers will have to worry about two completely different systems,” he said. “They’ll take longer getting from A to point B. And they’ll have less freedom .”

But the freedom of drivers to choose when and how they rest isn’t what the Canadian hours of service regulations are about, said Brian Orrbine, chief of Transport Canada’s Motor Carrier Group Road Safety and Motor Vehicle Regulation Directorate. “Drivers tell us they know when they’re tired and when they need to take a break, but science tells us that’s not necessarily true,” he said. The directorate is considering the split sleeper berth provision but had not yet come to a decision when Orrbine spoke to Truck West. “It’s something we’re evaluating, in terms of both the economic and safety issues,” Orrbine said, adding the industry could expect to find out whether or not they’ll get the provision by the end of 2003. “There’s certainly a trade off when it comes to economics versus safety – you can’t look at one without the other.”

Who will pay?

Sleeper berth provision or no, the new hours of service rules here and in the U.S. are expected to decrease productivity and increase costs. And carriers say they can’t pay.

Could this mean a majority of carriers will finally raise rates? Indeed, some U.S. companies have already announced rate increases. Swift Transportation Co., a long haul LTL carrier, is initially putting in place fees based on how many stops its trucks make, according to an article that recently appeared on the front page of the Wall Street Journal. Later the company may institute an overall rate increase based on the impact of the HOS rules, according to the article. Schneider National, also U.S. based, announced a 5.9 per cent rate increase in September. And Con-Way Transportation Services, based in Michigan, also recently announced it will increase rates for its LTL companies but has not said by exactly how much or when. But whether Canadian carriers plan to raise rates alongside their U.S. counterparts remains in question. “There was certainly a consensus among the carriers at our fleet meeting that the cost increases should not be paid on the backs of carriers or drivers,” said the CTA’s David Bradley.

Rate increases, as always, will depend on the law of supply and demand, he pointed out. The majority of carriers Truck West spoke to were hesitant to declare increases, even though they agreed they shouldn’t and can’t cover more costs due to hours of service, etc. “It will depend on individual runs and how much time our drivers spend waiting at our customers’ docks, said Challenger Motor Freight president Dan Einwechter. “But if customers are making drivers wait too long someone’s going to have to pay the piper and it won’t be us.”

“It’s not going to come out of my pocket,” said Murray Mullen, owner of Mullen Transport. The company has no plans to add any assets (staff, tractors or trailers) in 2004, he said.

Bison management was more circumspect but equally clear on the “we’re not paying” concept.

And none of the companies interviewed had immediate plans to increase capacity, with drivers, tractors or trailers, due to the anticipated productivity decline. Clearly the message out there is that customers must pull up their socks or pay. And a capacity freeze is just what the doctor ordered to get them to do exactly that.

But the age-old question of whether shippers and/or their customers can be made to or reduce inefficiencies, and whether a capacity decline is really in the works, has yet to be seen, according to insiders. Even Batts admits the first quarter of 2004 is looking pretty unstable.

“What’s going to happen is this: if carriers raise their rates shippers will go shopping. There are going to be a lot of shippers switching companies at first. Then in the second quarter, when the companies who are cutting rates realize they can’t afford it or actually go out of business, the shippers will settle down.”

Shippers may go shopping, agreed Bruce Richards, president of the Private Motor Truck Council, but he had doubts about whether capacity decline, the driver behind increased demand and rate increases, is really in the industry’s future. “The problem with this market, for carriers, is that there are always new players coming in, who want to keep their trucks on the road.”

Ultimately it will be up to carriers to stand firm, said George Kuhn executive director of the Canadian International Freight Forwarders Association. “First, it’s not up to shippers to reduce wait times, it’s a terminal issue. As for increased costs it’s the importer or the exporter who can absorb them and then pass them on to the consumer if they have to.

But whether the less well-equipped will be able to prove their point to customers and keep running in the face of ever rising operating costs remains to be seen. And whether they do has everything to do with whether rates rise.


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