When the federal government's revised hours-of-service rules were released last April, they were greeted with a mix of relief and concern. There was no doubt that the old rules, which dated back to 1939, needed overhauling. But carriers and shippers alike worried that the new limits on total driving time would make it difficult for drivers to hold to their schedules. Now that the rules are about to go into effect, it's beginning to look like those changes could translate into millions of dollars in lost productivity and added costs.

The numbers swirling around the revision are staggering: Wal-Mart estimates it will spend $24 million on new trucks just to maintain its private fleet's current capacity; industry analyst Robert Delaney projects that carriers will need to hire 84,000 additional drivers; and the Federal Motor Carrier Safety Administration (FMCSA) threatens to level $11,000 penalties for each violation. With figures of that magnitude, carriers may have no choice but to pass some costs on to their customers.

The previous rules allowed 10 hours of driving time within a 15-hour on-duty period after eight hours off. The new rule permits 11 hours of driving out of a 14-hour on-duty period, following 10 consecutive hours off. Drivers are also limited to 60 hours on duty over seven consecutive days, or 70 hours over eight consecutive days. A new cycle may begin after a driver has been off duty for at least 34 consecutive hours.

For shippers, much of the added cost will stem from changes in the calculation of drivers' working hours. Under the old rules, time spent waiting had been considered off duty. But the new hours-of service clock doesn't stop once it's started, so every hour spent waiting to load or unload counts against a driver's daily limit. Any holdup, then, could run out a driver's time clock and leave a shipment stranded.

"The shippers' big concern, which is justifiable, is that they're going to get hit with cost increases due to delays at the dock," says John Thomson, president and CEO of Trans-core, a provider of technology services in Hummelstown, Pa. "You may have excellent synchronization, carriers get in and out, but you're still at risk if your customer holds up the carrier. They're not going to bill your customer, they're going to send it to you."

Some carriers have already made noises about adding fees for extended waits. It will be hard for shippers to argue against that kind of levy, Thomson says. "Shippers would push back against a wholesale increase in rates," he observes, "but one way to equitably pass along a realistic cost is, 'If you make me wait, you pay.'"

Many observers expect the new requirements will raise carriers' costs so much that they're bound to translate into rate hikes. "The hours-of-service rules will cause increased demand for drivers, probably driving up wages and benefits," said Rick Odell, president and CEO of Saia, the Duluth, Ga.-based LTL carrier, in a written statement to LM. Odell noted that 60 percent of LTL carriers' costs stem from those two areas alone.

Add those conditions to other mounting economic pressures, and higher rates appear inevitable. "With the softness of the economy in the past couple of years, there has been increased pressure to hold prices down," Odell said. "As the economy rebounds, and in conjunction with reductions in industry capacity, we expect the pricing environment to be stronger."

Some analysts agree that pricing for trucking services will get "stronger"—that is, higher—by 3 percent to 7 percent in 2004. Those figures take into account higher rates and accessorial charges.

Truckload carriers are more likely to suffer from the new regulations than are LTLs. LTL carriers, in fact, stand to gain business as a result of the new restrictions, according to a recent study conducted by transportation consultants Norbridge Inc. of Deerfield, Ill. That study suggests that truckload shipments that require multiple stops could shift to LTL. Even a small change could lead to double-digit gains on the LTL side: Switching just 0.5 percent of total annual truckload volume to LTL, for example, would translate into a 15-percent rise for that sector.

That fact is not lost on LTLs like FedEx Freight, which is ready and waiting for any business the truckload carriers are unable to handle. "FedEx Freight has a strategy to not only take care of our customers [for whom] we're currently handling LTL, but also [when they] reach out and ask us for help with the truckload," says Patrick Reed, president and CEO of FedEx Freight East. "A lot of the LTL carriers are ready and have the capacity to handle the additional business."