House passes fuel surcharge

Without any fanfare, the U.S. House of Representatives last week passed a mandatory truckload fuel surcharge as part of the major highway bill (H.R. 3) working its way through Congress. The provision was included in an amendment offered by House Transportation Committee leaders that was described in the Congressional Record as making “a number of adjustments and technical changes.”

The House previously has passed a mandatory surcharge, but only as Congress was about to adjourn and when there was virtually no hope of final passage. This time, however, the provision is part of legislation that eventually will be signed into law by President Bush.

There is no guarantee that the truckload fuel surcharge will make it into the final version of the highway bill, however. If the Senate does not adopt the measure in its version, the surcharge will be subject to negotiation among House and Senate legislators who must agree on a single version of the highway bill.

As passed by the House March 10, the surcharge would be mandatory in “any contract or agreement, providing for truckload transportation or service involving a motor carrier, broker, or freight forwarder subject to jurisdiction under chapter 135 of this title that regularly provides such transportation or service.”

The legislation requires that any carrier, broker or freight forwarder using fuel it didn’t pay for – when an owner-operator provides actual transportation, for example – pass along the fuel surcharge to the person responsible for paying for fuel.

The surcharge at a minimum would be the amount of the “increased cost of fuel,” which is determined by subtracting a “benchmark price” from the current diesel fuel price and multiplying the difference by the number of gallons of diesel fuel used in the transportation.

The initial benchmark price would be $1.10, and it would be subject to an annual adjustment based on the percentage change in the previous calendar year’s Annual Truckload Producer Price Index.

The “current diesel price” is defined as the latest weekly average on-highway retail price posted by the Energy Information Administration for the Petroleum Administration for Defense District (PADD) or sub-district where a shipment is physically tendered to the motor carrier, broker or freight forwarder.

Based on EIA’s most recent weekly averages posted March 14, the per-gallon surcharge – if it were in effect today — would range between $1.03 in the Gulf Coast PADD to more than $1.34 in the West Coast PADD.

The legislation assumes that one gallon of diesel is used for every 5 miles of transportation, and the mileage is to be determined by using the Defense Table of Official Distances issued by the Defense Department’s Surface Deployment and Distribution Command.

Under the legislation, the surcharge, which must be itemized on invoices, would apply during any period in which the current diesel price surpasses the benchmark price by 5 cents per gallon. It would expire once the current diesel fuel price equals or is less than the benchmark price.

The mandatory surcharge would not apply to any contract or agreement that provides for a surcharge or fuel cost adjustment as of the date of enactment. Also, although the surcharge must be at least equal to a cents-per-gallon fuel surcharge, it may be expressed on a mileage basis, as a percentage of the freight charge or in another manner.