New legislation aims to help owner-operators recoup fuel costs
Jeff Berman, Group News Editor -- Logistics Management, 5/1/2008
Editor’s note: This is an updated version to a story that initially appeared on April 25.
WASHINGTON—A new piece of bipartisan legislation pledges to help owner-operator truckers by passing along 100 percent of fuel surcharges charged to shippers to truckers, rather than freight brokers. But according to industry sources this bill may not be what it seems.
The bill, entitled “The Trust in Reliable Understanding of Consumer Costs (TRUCC) Act, was introduced by Senators Olympia J. Snowe (R-Maine) and Sherrod Brown (D-Ohio). The senators said in a statement that this bill “would free small business operators and carriers from the stranglehold of unscrupulous brokers and middle-men who charge shippers for fuel costs but refuse to pass those costs on to operators that actually pay for the fuel."
While this bill may promise to help owner-operators and independent truckers recover fuel costs, it is being met with opposition by various industry experts.
“It is an awful piece of legislation,” said Michael A. Regan, CEO of transportation rate analysts TranzAct Technologies. “In fact, it is the worst piece of transportation legislation of the new millennium.”
While the objective of this bill is not necessarily a bad one, noted Regan, he said it fails to understand a few key factors. The first one being how shippers buy transportation through a combination of service and price—with price being a combination of line-haul plus fuel surcharges.
At times, shippers get quoted a flat price that includes fuel, Regan explained. And the fuel surcharge, he said, is never broken out. The other aspect he cited is that members of the Owner-Operator Independent Drivers Association (OOIDA) are failing to understand that nobody is forcing small carriers to move loads.
“If they don’t like what they are being paid, they can say no,” said Regan. “But the worse thing about this bill is what it is going to do is create a legal morass that is going to make the bankrupt carrier situation look like a walk in the park, because now it will give them the opportunity to come in and file a case against carriers that use owner-operators, as well as brokers that use them. And they are going to want to see paperwork and documentation for litigation to disclose margins, which is none of their business.”
Regan asked that if OOIDA comes to the conclusion that its members did not get its money from the carrier are they going go back to the shippers. He said this situation is creating a “highway” that is going back to the shippers for litigation.
This bill comes less than a week after Senator Snowe introduced the “Diesel Parity Tax Act,” which would lower the federal diesel tax from 24.3 cents per gallon to 18.3 cents, matching retail diesel.
Snowe added that because there is currently no uniform fuel surcharge standard, small truckers are often at the mercy of freight brokers, logistics intermediaries, and larger trucking companies.
But Robert A. Voltmann, president and CEO of the Transportation Intermediaries Association dismissed Snowe’s contention that this legislation centers on fuel surcharges.
“It has nothing to do with fuel surcharges,” Voltmann told LM. “It is designed to set up new lawsuit traps for shippers, carriers, and intermediaries. If this was about fuel, it would be about a simple pass-through that you collect. That is not what this says; it goes much further.”
The reason he said it goes further is that the bill requires motor carriers, brokers, or freight forwarders providing or arranging truckload transportation or services to disclose their margins. In this situation, a motor carrier that uses owner-operators would have to declare what they made on a load versus what the owner-operators made on a load. Voltmann said that taking this approach would “turn back the clock on 28 years of deregulation” in the U.S., which has created the most dynamic logistics industry in the world and is one that the world wants to emulate.
Brokers, said Voltmann, are absolutely paying fuel surcharges to motor carriers, as opposed to profiting on them. He cited Wall Street filings of publicly-traded logistics companies would reflect higher margins if they were profiting on fuel. But, instead, the margins are going down for many of these companies, he pointed out.
“If the brokers were pocketing money, which is being alleged, then their profits would be going up,” said Voltmann. “And the biggest carriers that are the ones most capable of profiting on fuel are not. It is a total falsehood on the part of the OOIDA to get their agenda advanced by Congress, which is to re-regulate the industry and create new lawsuit traps. They ignore that you could not have a small motor carrier industry without brokers. Everybody knows the big carriers cannot handle everything. And shippers do not know how to count below 100 trucks. Some of our members have trouble counting over 100 trucks. Brokers are experts at finding the 80 percent of the industry that has five or fewer trucks, which are the same people the OOIDA claims to represent, but they don’t. All they represent is lining their own pockets with ill-gotten gains from suing motor carriers, and now they want to sue shippers and brokers, too. They are couching this in terms of helping the small motor carrier, but the only people they want to help are themselves, their own pockets, and their lawyers’ pockets.”
The OOIDA had a decidedly different take on Voltmann’s views.
“We think the good, honest brokers, will likely be supportive of this bill, because they recognize that their customers are not just shippers, but also truckers,” OOIDA spokesperson Norita Taylor said in an interview. “Right now, freight is slow. But it won’t always be that way. Plus, shippers will appreciate this bill because it provides the assurances that the higher amounts they are asked to pay out because of fuel prices are indeed being used for just that.”
Other recent fuel-related developments include:
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the American Trucking Associations calling on the White House to release oil from the Strategic Petroleum Reserve to curtail the run-up, which is hurting the economy and the trucking industry in particular; and
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Presidential candidate John McCain calling for the suspension of the motor vehicle fuel tax between Memorial Day and Labor Day.
"Shippers are accustomed to paying fuel surcharges when fuel costs spike," Senator Brown said in a statement. "But there is no guarantee these surcharges go to the people who pay at the pump. With diesel prices at an all-time high, this bill would help…truckers who find hauling goods too costly or impossible."
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If we start down the legislation process the temptation will be to provide a fixed surcharge allowance setup by the Government versus our current process allowing the freedom to negotiate a "realistic" surcharge allowance representing the Shippers total volume and operational parameters.
The Shipper can monitor the "pass-thu" assurances with their selected Freight Broker on a random verification process (with the actual Carrier handling the move), and, weed-out the unscrupulous companies.
Bruce Kohl - 2008-1-5 08:48:00 EDT -
We do NOT need more laws and regulations!!!
If the broker does not pass the surcharge, do not move the cargo: period
More regulations are bad for the trucker, broker, shippers and finally the consumer.
fran cele - 2008-30-4 17:27:00 EDT
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