House panel hears arguments on surcharge bills

user-gravatar

By Todd Dills

The merits of recently introduced legislation that would require fuel surcharges on freight bills to be fully disclosed and fully passed along were debated by witnesses in a Capitol Hill hearing on Tuesday, May 6.

Owner-Operator Independent Drivers Association spokesman Todd Spencer offered members of the House Highways and Transit Subcommittee an example typical of the complaint the surcharge bills (H.R.5934 and S.2910) are meant to address: A government load paying $1,425 plus a $342 fuel surcharge was brokered to an independent owner-operator at a flat $600.

“The broker didn’t spend a dime of fuel and netted $1,167,” Spencer said. “That will continue to happen until there is a disclosure requirement that is an actual practice, not just a requirement in the laws of the 1960s.” Under current regulations, the average owner-operator, whether leased or independent, has about as much bargaining power in a freight transaction as a “guy at a payday-loan shop,” Spencer said.

Current regulations mandate only that truthful information be made “available” to parties to a freight transaction, said Suzanne TeBeau, chief counsel of the Federal Motor Carrier Safety Administration. The latest bills would strengthen the requirement if fuel surcharges are involved.

The new disclosure requirement would amount to a “return to tariffs” and a “re-regulation” of transportation, in which all carrier, broker and shipper margins would be public information, said Robert Voltmann, president of the Transportation Intermediaries Association.

This argument was challenged by U.S. Rep. Peter DeFazio, D-Ore., who led the hearing in the absence of U.S. Rep. James Oberstar, D-Minn., the subcommittee chair. Full disclosure among all parties to freight transactions would create a more equitable market, DeFazio argued. “Doesn’t this make it more competitive?” DeFazio asked. “Wouldn’t everybody benefit?”

“What rates are being offered by brokers and what rates are being sought by carriers” already are available publicly, Voltmann replied. “The charges are out there” on load boards, which function much like a stock market for freight, Voltmann said.

“So we have a well-organized casino,” quipped DeFazio.

“You get to see what the buyers can get, and what the sellers are asking for,” but not the terms of the final transaction, Voltmann said.

Voltmann also questioned whether brokers necessarily are profiting from fuel surcharges. Long-term broker contracts with shippers are much less dynamic that brokers’ relationships with the highly diversified supply of owner-operators, which means that during fuel price spikes, brokers often lose money on older fuel-surcharge rates, Voltmann said.