House passes truckload fuel surcharge

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American Trucking Associations’ advanced seasonally adjusted for-hire Truck Tonnage Index rose 3.4 percent to 116.5. The increase over December represented the largest month-to-month gain in several years. The January index was 6.4 percent higher than January 2004.

Freight Transportation Services Index fell 0.4 percent to 128.4 in December from the November level of 128.9, according to the Department of Transportation’s Bureau of Transportation Statistics. The decline follows three consecutive monthly increases, although the December level is 4.5 percent higher than December 2003.

GE Commercial Finance completed the $4.6 billion acquisition of CitiCapital’s Transportation Financial Services Group. The combined entity finances approximately 431,000 commercial trucks, tractors and trailers.

XTRA Lease has purchased from GE Commercial Finance the trailer rental business formerly owned by CitiCapital. Separately, XTRA Lease is adding 4,000 trailers to its product line devoted to the storage and cartage requirements of for-hire carriers and private industry.

The U.S. House of Representatives last month quietly adopted a mandatory truckload fuel surcharge as part of the major highway bill (H.R. 3) working its way through Congress. The measure 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.” Separately, the House-passed bill does not include language sought by the Bush administration to codify current hours-of-service regulations. (See “Journal,” March 2005.)

As drafted, the fuel surcharge provision would require 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. That means, for example, that a carrier would have to pay a surcharge to an owner-operator even if the carrier did not collect a surcharge from its customer.

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The surcharge at a minimum would be the amount of the “increased cost of fuel” – the current price minus the benchmark price multiplied by the number of gallons of diesel fuel used in the transportation. The surcharge would kick in when the diesel price surpasses the benchmark price by 5 cents per gallon, and it would expire once the diesel fuel price equals or is less than the benchmark price. The mandatory surcharge would not apply, however, to any contract or agreement that provides for a surcharge or fuel cost adjustment as of the date of enactment.

Under the legislation, 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.

Based on EIA’s most recent weekly averages posted March 21, the per-gallon surcharge – if it were in effect today – would range between $1.18 in the Gulf Coast PADD to more than $1.48 in California.

An industry divided
The language adopted by the House closely resembles legislation advocated by the Owner-Operator Independent Drivers Association for several years. OOIDA was formed more than 30 years ago in response to rising fuel prices that put economic stress on independent truckers, says Todd Spencer, OOIDA vice president. “Between 2000 and 2001, a quarter of a million trucks were repossessed, and this was directly attributable to their owners’ inability to cover the cost of fuel,” Spencer said.

The Truckload Carriers Association also supports a mandatory fuel surcharge in concept, but it opposes the House-passed surcharge as currently drafted. TCA’s biggest concern by far is the mandatory pass-through, which in some cases could put carriers in the position of paying surcharges to owner-operators immediately and then having to sue shippers or brokers for payment.

“There is potential to create situations that could be damaging to carriers,” says TCA President Chris Burruss. “We want owner-operators to be made whole, but we don’t want carriers ending up getting hurt.”

This split between TCA and OOIDA is hardly new. The House passed largely the same legislation several years ago when Congress was about to adjourn and there was no hope of the measure becoming law. TCA objected then to mandatory pass-through in situations where the carrier did not receive the surcharge from a carrier or broker.

TCA is concerned about other provisions of the fuel surcharge legislation that could have unintended consequences as drafted. For example, the measure specifies that the Defense Table of Official Distances issued by the Defense Department’s Surface Deployment and Distribution Command is to be used to determine mileage. But trucking companies use several other standards for calculating mileage, and TCA doesn’t believe that carrier’s options should be limited by federal law. In addition, the legislation assumes fuel economy of 5 mpg. TCA believes that number should be reviewed annually by the Department of Transportation to ensure it accurately reflects real-world experience.

The American Trucking Associations has been silent on the issue because its members are sharply divided. Many less-than-truckload carriers, for example, are worried that a mandatory surcharge would open the door to reregulation. Several years ago, ATA’s board deadlocked over surcharges, which truckload wanted and LTL didn’t, and loosening of truck size and weight rules, which LTL wanted and truckload didn’t.

The last time a mandatory fuel surcharge passed the House, it did so as an independent piece of legislation that had no hope of enactment. This time, however, the provision is attached to a bill that is likely to be signed into law by President Bush eventually. 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.

Trucking-related amendments to H.R. 3
Rep. Jerry Moran (R-Kan.) – Revising the definition of agricultural commodity for purposes of the hours-of-service exemption for agricultural products during the time of harvest and planting. Agreed to by a vote of 257 to 167.

Rep. Christopher Cox (R-Calif.) – To allow states to enact laws regulating certain activities of tow truck operators. Agreed to by voice vote.

Rep. Tom Osbourne (R-Neb.) – To allow, subject to a change in state law, the operation of commercial vehicle combinations not exceeding 81 feet, 6 inches for custom harvesters operating in the state of Nebraska. Agreed to by a vote of 236 to 184.

Rep. Mark Kennedy (R-Minn.) – To limit the bill’s congestion pricing pilot program so that it would (1) apply only to new lanes, use of which would be optional; (2) allow for tolls to be charged electronically; and (2) require the cessation of tolls once construction and maintenance costs had been recovered. Failed by a vote of 155 to 265.

Rep. Michael Conaway (R-Texas) – To exempt commercial motor vehicle operators working in field operations for the natural gas and oil industry from hours-of-service rules. Failed by a vote of 198 to 226.

Rep. John Boozman (R-Ark.) – To allow operators of a property-carrying motor vehicle to take up to two hours of off-duty time during their 14 hours on-duty, so as not to exceed 16 hours.

Rep. John Kuhl (R-N.Y.) – To increase to 150 air miles the radius within which carriers transporting agricultural commodities or farm supplies at the time of planting or harvest are exempted from maximum driving and on-duty time requirements for drivers.
–Avery Vise

Big Rig Ride benefits PTDI
More than 60 people riding 40 Harley-Davidson motorcycles braved a little rain on March 5 in Las Vegas to participate in the 3rd annual Big Rig Ride, which benefits the Professional Truck Driver Institute. Held in conjunction with the Truckload Carriers Association annual meeting, the Big Rig Ride raised $6,500 for PTDI, which certifies training courses for truck driving schools.

The Big Rig Ride was organized by Commercial Carrier Journal and sponsored by Bridgestone/Firestone, Caterpillar, Citgo, DNV Certification, Peterbilt Motors Co., Pilot Travel Centers, Qualcomm, Roadranger and Utility Trailer Manufacturing.

CCJ Equipment Demand Index
Another triple play for Texas

If May 2004 is any guide, Texas should be a busy place for all kinds of spot-market freight next month. The CCJ Equipment Demand Index shows that Texas led all states in equipment searches for the three most popular trailer types – dry van, flatbed and refrigerated. Texas also led all other states in the April index. Georgia was second in searches for dry vans, while Alabama was second in flatbed demand. Texas received a tighter challenge from second-place Florida in reefer searches.

The index, based on equipment searches performed by TransCore customers, shows the top 15 states in terms of demand for trucks in the spot market in the three most common equipment types: dry vans, flatbeds and refrigerated units. The index is intended to help fleet operators identify the most promising opportunities for backhaul and other spot-market freight in the month after its publication.

Mack seeks to broaden product line
Mack Trucks is looking for opportunities to broaden its product line, said Mack Trucks President and CEO Paul Vikner.

“We are looking at segments of the market where Mack has had a strong presence in the past,” Vikner told Randall Trucking Media editors at the Mack headquarters in Allentown, Pa.

That could include medium-duty and long-haul trucks, but Vikner said it is too early to say what Mack might do or when a decision would be reached. He noted that Mack is “the only Class 8 group in North America that does not have any medium-duty” products.

Mack’s share of the U.S. Class 8 market has been 10 percent to 11 percent in recent years, after a peak of 14.5 percent four years ago, Vikner said. The company does not plan to become the dominant Class 8 producer, but would like a bigger market share, he said.

Mack intends to focus on its three core markets: construction, refuse and regional distribution. In the regional niche, Mack lost market share in recent years partly because its capacity was limited by a transfer of production between plants. Also, Freightliner and its sister companies Sterling and Detroit Diesel made inroads after October 2002 because Mercedes-Benz engines (marketed through Detroit Diesel) still were exempt from the consent decree that held other heavy-duty engines to new emission standards.

Vikner declined specific estimates, but said customers should expect to pay thousands of dollars more for 2007 engines. As for fuel economy, “customers shouldn’t see any big impact from this.”
–Max Heine

Truckers News wins Neal award
The editors of Truckers News, one of CCJ’s sister publications, last month received a Jesse H. Neal National Business Journalism Award for its May 2004 cover story, “The High Price of Idling.” The honor for Best Single Article within the magazine’s category was presented at a ceremony at the Waldorf Astoria in New York City. The article was written by Senior Editor Sean Kelley. It was edited by Randy Grider, John Latta and Kristin Walters and designed by Richard Street.

Another Randall publication, Overdrive, was one of three finalists in its class for Best How-to Article. The entry was its August 2004 cover story, “Self-Help Toolbox.” Both magazines competed against business publications that have $3 million to $7 million in annual revenue. Almost 1,200 entries were submitted from all industries.

CCJ received a Neal award last year for “The Cost of Risk,” a six-part series addressing risk management in trucking.