|Sunday Jul 27, 2014 - New broker bond: The 75K solution?
By Colin Barrett http://www.joc.com
Q: I’ve been hearing a lot about the requirement that motor carrier brokers carry a bond for $75,000. Most of the commentary I’ve encountered has been from the broker industry, and most of it, of course, has been negative. The common idea seems to be that the new requirement is unfair to smaller brokers, and will tend to price them out of the industry.
I’m not sure I agree with this. I acknowledge that a $75,000 bond will be something of a hardship on the small broker, but I think that’s partially offset by the fact that it will help keep fly-by-night scam artists out of the industry. I’ve seen it happen much too often: Somebody opens a new brokerage, lowballs prices to shippers to attract business, sets up with carriers that are scrambling for traffic themselves, moves a lot of freight in a short period of time, collects from the shippers, stiffs the carriers and then disappears. Not long afterward, you often see the same individual setting up shop somewhere else to repeat the same scenario. Anything that will keep these people out of the industry must be a good thing.
Even so, is that the only purpose of the increased bond requirement? I ask this because among all the comments I’ve read about the bond, I don’t seem to find any from people — especially the shippers and carriers that the bond is supposed to be protecting — who express the opinion that it’s beneficial in that regard. Do you disagree?
Apparently, Congress is of the view that $75,000 is a more appropriate bond requirement for the contemporary brokerage industry in terms of offering protection to those who might be injured if a broker went out of business. But will it really have that effect? If so, why don’t I hear people defending it on this basis? Or is the real purpose of the new requirement simply too thin out the ranks of those setting up as brokers?
A: Well, you have something of a point.
The original requirement for a broker bond was conceived in the 1940s when the brokerage industry was structured very differently than it is now. In that era, brokers didn’t collect freight charges from shippers, nor pay carriers directly. The only money they ever had in their hands was that owing to them. The $10,000 bond amount seemed quite appropriate in those circumstances.
Once brokerage morphed into its current form beginning in the early 1980s, however, that $10,000 bond became a joke. A typical broker might incur debts far in excess of that sum in a single day.
The new $75,000 requirement is still the same joke, albeit one with bigger numbers. The amount still falls woefully short of the obligations that even a very small failing broker is likely to leave behind.
For example, one kind reader has shared with me some of the situations that have arisen with a broker who went out of business. The bonding company was so swamped with claims that it felt compelled to turn the matter over to the courts for resolution. The sum of the claims didn’t merely exceed the $75,000 bond, but they dwarfed it, to the point that the best creditors could hope for was a few cents on the dollar after the bond amount was apportioned.
Much worse than that, because the bond company felt obliged to take recourse to the courts for allocation of the payout, claimants were required to pursue their claims through the court system — a process that required them to pay a filing fee of several hundred dollars each (or else forfeit their claims). Add it up. For many claimants, the filing fee would be more than they could reasonably hope to recover.
And it gets worse, in fact. You could scarcely expect the bonding company not to ensure its own representation before the court. So the bonding company would incur legal expenses in conjunction with this matter. One of the bonding company’s early requests to the court was that those legal expenses be treated as a priority claim against the bond, meaning they would come off the top before any money was distributed to other claimants.
Because any claimant with enough money at stake to warrant paying the filing fee also will incur its own legal fees, I can’t imagine anyone except the lawyers is likely to show any profit from this mess.
Thus, to answer your question, I don’t think the $75,000 bond is likely to offer any real protection to shippers or carriers in the case of a broker default.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.
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|Sunday Jul 27, 2014 - Lack of truck drivers jackknifes Swift profits
By Michael Gray and Post Wire
Swift Transportation, the largest trucker in North America, saw its shares crater 16 percent on Friday after it said it could not find enough truck drivers and that it would hurt future earnings.
The firm, which has a large facility near the Port of Elizabeth in New Jersey, said it was “constrained” by a challenging driver market, which led to higher turnover than was anticipated.
“There has been a driver shortage that has been getting incrementally worse as the economy improves and they have to fight for employees with the housing sector,” Lee Klaskow, an analyst, told Bloomberg.
“You see some carriers passing on rate increases to drivers, but for whatever reason, Swift has had a harder time attracting and retaining drivers,” he added
The American Trucking Association has issued repeated warnings that the North American trucking market has lost more than 30,000 drivers in the past few years and anticipates that shortfall could skyrocket to 200,000 in the next decade, according to a statement on its Web site.
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|Sunday Jul 27, 2014 - Trucker Sentenced For Hauling Marijuana With Produce
A La Palma, California truck driver was sentenced in Lincoln Thursday for hauling hundreds of pounds of marijuana into the state.
Forty-nine-year-old Julio Sanchez was given two to four years and credited for 261 days already served. He'd pleaded no contest to attempted possession of a controlled substances for sale. Prosecutors had lowered the original charge and dropped another in exchange for Sanchez's plea.
The Nebraska State Patrol says 730 pounds of pot was found hidden in boxes of produce found inside a semi driven by Sanchez last November. The marijuana's street value was estimated at $2.5 million.
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|Sunday Jul 27, 2014 - What’s still holding back rail service?
When rail service tanked last winter, a key culprit was easily visible. In the center of the polar vortex, the intermodal hub of Chicago was besieged by a never-ending series of bruising winter storms and frigid temperatures that hampered operations and drove the local railroads into the ground. But now it’s the middle of summer. The snow melted long ago, but service continues to sputter, showing little improvement from levels seen during the depths of winter. Why?
Average train speedsTrain speeds came in at 28.3 mph for the week of the July 4th holiday, though they have recovered slightly in the two weeks since.
For one, the brutal winter was a big contributor to the slowdown, but it wasn’t the only cause. Rail service began to slip long before. Four-week average speeds for all intermodal trains topped out in early 2013 at 33.4 mph. Speeds since then have seemingly been riding the down escalator, coming in at 28.3 mph for the week of the July 4thholiday, though they recovered slightly in the two weeks since. With the exception of one week in 2008, you have to go back to 2006 to find speeds as low as they were in early July.
When rail service starts to deteriorate, the first signs are usually visible in the classification yards and intermodal terminals. As weather or other events disrupt operations, the yards back up because trains aren’t dispatched in a timely fashion. Clogged terminals mean there’s nowhere to put arriving inbound trains.
Unlike a truck, you can’t park a mile-long double-stack train just anywhere. Spare track is expensive, and the days when the railroads had lots of excess track on which to park the occasional train are long gone. So when terminals bog down, the trains end up getting parked on the mainline. The locomotives on those parked trains aren’t available in the terminal to handle outbound trains.
Average intermodal train speedsIntermodal trains have slowed year-over-year.
When space does become available in the yard, a “dog catch” relief crew must bring the train home. But these crewmembers likewise aren’t available to move outbound trains. Meanwhile, those parked trains also are filling passing sidings that otherwise would be used in normal operations, or converting sections of double-track mainlines to single track.
This slows operations, reducing train velocity and further impairing the productivity of locomotives and crews. The result is a downward spiral that becomes ever more difficult to break. As operations slow and yards clog, ever-greater numbers of locomotives and crew — both long-lead items — are needed just to stay even, much less reduce the backlog.
Now layer on top of this a surge in volume, not just in intermodal but virtually across the board. All but a few major rail carload commodity groups are showing strong gains in the second quarter. Unlike trucking companies, the railroads have little ability to control demand. Confronted with a shortage of trucks or drivers, the motor carrier can decline offered loads, providing the organization with the breathing room to recover. The railroads, with their common-carrier responsibility, don’t have an equivalent mechanism.
Rail carload and intermodal volumes have been up strongly. Over the most recent four-week period, intermodal was up 7.7 percent year-over-year, and rail carloads were up 5.9 percent. Some of this was catch-up volume from the winter service disruptions. Utility coal stockpiles need rebuilding, and mountains of grain from last year’s bumper crop need to move. Some of the growth is volume shifting to intermodal because of the shortage of over-the-road drivers.
Average yard dwell timesYard dwell times are on the rise.
Another factor was import volume moving early through the West Coast to avoid potential disruptions that loomed with the July 1 expiration of the International Longshore and Warehouse Union contract.
Although intermodal is setting new records, the same can’t be said for rail carload. Even with the recent surge, rail carload volume (excluding intermodal) is running more than 6 percent behind pre-recession levels, and the railroads have invested billions of dollars in their networks since then.
This implies that the problem isn’t a shortage of track, at least in a general sense. There are, however, local problems, most notably on BNSF’s Northern Tier between the Midwest and Pacific Northwest. But the broad problem is a shortage of crews and locomotives, both long-lead items that can’t be ramped up quickly.
The western railroads have essentially locked up 2014 locomotive production with their current orders, so it’s not clear where the eastern roads, which have equivalent problems in terms of locomotive capacity, will find more horsepower. The advent of Tier 4 emission requirements on Jan. 1 further clouds the 2015 locomotive picture. The railroads are hiring crews and training them at an accelerated rate, but bringing them on line will be a long process.
Little time remains before the intermodal ramp-up to peak season, so it’s unlikely we’ll see substantive improvement in operations until after that pressure has eased. This means intermodal shippers shouldn’t expect any meaningful gains until the end of this year at best, and that’s assuming the polar vortex doesn’t make an encore appearance.
Lawrence Gross is president of Gross Transportation Consulting in Mahwah, New Jersey, and a partner at FTR Transportation Intelligence. A veteran with 34 years in the transportation business, he covers freight transportation, concentrating on the intermodal and trucking sectors from a transportation and equipment perspective. He is a frequent speaker at industry events. Contact him at email@example.com and follow him on Twitter: @intermodalist.
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|Sunday Jul 27, 2014 - Swift Transportation promises ‘enhanced’ driver pay as shortage crimps growth
William B. Cassidy, Senior Editor
Swift Transportation, the largest U.S. truckload operator, got even bigger in the second quarter, but potential growth was restrained, the company said, by a “challenging driver market.”
“Our driver turnover and unseated truck count were higher than anticipated,” Swift said in a letter to shareholders. In reaction, the company sold trucks to offset the impact of idle equipment.
“We believe the best investment we can make at this time, for all our stakeholders, is in our drivers,” the company said. “Our goal is to clear the path for our drivers by helping them overcome challenges, eliminate wait times and take home more money. We believe we can accomplish this through improved productivity and enhanced pay packages.”
Swift’s difficulty finding drivers in the second quarter signals the shortage of available drivers will be the leading check on over-the-road truckload capacity this peak shipping season. The company is one of the largest employers in trucking, with about 14,700 drivers and 19,600 employees at the end of 2013. Swift also has contracts with more than 5,000 owner-operators.
The so-called driver shortage is a roadblock to expansion, limiting incremental growth in truck capacity, and a prime reason truck rates are rising at a faster pace in 2014. The number of heavy truck or tractor-trailer drivers increased 1.9 percent in 2013, after rising 3.2 percent in 2012 and 2.9 percent in 2011, according to the U.S. Bureau of Labor Statistics. The number of drivers fell 13.4 percent from 2007 to 2010 and has risen only 8.1 percent since.
Increasingly, truckload carriers are caught in a Catch 22-like situation: They need more drivers to increase revenue, but the cost of those drivers is eating into profit margins and limiting their ability to hire more drivers. The likely solution will entail even higher truckload rates.
In its shareholder letter, Swift said rate increases will likely hit the 4 to 5 percent range this fall. Higher pricing supported a 3.7 percent increase in revenue per loaded mile, excluding fuel surcharges, in the second quarter, and pricing momentum is growing, the company said.
Even so, Swift is bracing for cost headwinds in the second half of 2014 as it tests and implements several driver initiatives. “The investment in our drivers will be more immediate and the benefits are expected to be derived over time,” the truckload carrier said. “We believe by making these investments now, we can deliver on our goals for 2015 and beyond.”
Overall, Swift’s total revenue rose 4.5 percent year-over-year to $1.08 billion, and 6.7 percent from the first quarter. But two out of four divisions reported lower revenue than a year ago, and three reported lower profits, including an operating loss at Swift’s intermodal division. The company’s net profit declined 19.4 percent from a year ago to $40.2 million as operating expenses rose 5.7 percent. Salaries, wages and benefit costs rose 6.3 percent.
Swift’s truckload revenue — which accounts for about 53 percent of the $3 billion company’s total revenue — actually shrank 2 percent year-over-year in the quarter to $459.1 million, excluding fuel surcharges, partly because Swift shifted some truckload resources to its dedicated division. Truckload profit, however, rose 7.7 percent to $69.6 million.
The dedicated business grew 22.1 percent, with revenue sans surcharges rising 23.1 percent in the quarter to $183.3 million. “We have seen a dramatic increase in demand for our dedicated service offering over the past six to nine months, which has led to strong growth, but the associated start-up costs have placed short-term pressure on margins,” Swift said. Also, although more drivers are attracted to dedicated work, which is often short-haul in distance, allowing for regular home time, dedicated driver pay per mile is higher, Swift said.
The dedicated division’s adjusted operating profit dropped 13 percent to $21.1 million.
Lack of drivers also crimped revenue at Swift’s Central Refrigerated segment, which saw revenue excluding surcharges drop 1.3 percent to $86 million and its operating profit drop 35.3 percent to $3.7 million. The refrigerated business, acquired by Swift last August, also fielded fewer trucks, and had higher costs due to ongoing systems integration with Swift.
Swift increased intermodal revenue, excluding surcharges, 11.9 percent to $80.8 million, driven by a 10.9 percent increase in loads. But the intermodal unit lost $495,000, compared with a $788,000 operating profit a year ago. The division is expected to get back on track as Swift expands its fleet of domestic intermodal containers, adding 500 containers in the late third quarter. “These new containers are expected to drive further revenue growth and improve margins as we drive efficiency in our operating assets and better absorb our fixed costs,” Swift said.
Contact William B. Cassidy at firstname.lastname@example.org and follow him on Twitter: @wbcassidy_joc.
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|Friday Jul 25, 2014 - An Eye Opening Look at the Trucking Industry
Following the fatal crash on I-55, a listener sent WJOL a letter detailing her experience with truckers and trucking companies. Below is her opinion unedited.
I spend a lot of time on the road as our jobs are onsite. I work with many truckers who are working at the Intermodals. This is what I have learned and I am passing it on as it concerns me.
Many of the truck companies own only 1-2 trucks. The owner will accept a job, at say, $1500. It is local and it is picking up a trailer at an intermodal and delivering it to a location, say, Peoria Caterpillar. The owner of the small firm hires a truck driver as an independent contractor at $800 for the job, leases the truck to the driver at a set fee and makes the driver buy the fuel. However, in order for the driver to collect the $800, he has to make the round trip including delivery of the trailer and pick-up of another trailer and return the truck with a full load, within 8 hours. If it is beyond the time limit the hired driver gets no money but is still responsible for the payment and bills.
You know how long it takes to drive to Peoria and back and this seems to be a reasonable amount of time, but if you get caught up in traffic., or it takes a while to load or unload the trailer, suddenly you are running short on time, so you speed, find shortcuts, etc to make sure you get your money.
Some of these truck owners do not do background checks, you only need to have a current CDL. Some of the drivers can speak no English and require a translator. They cannot read or write English, but yet they have a current CDL license. They can't read the signs put into place warning them of possible slowdowns or construction or time delays.
They are of several nationalities and numerous races of persons. Many have only been here a few short weeks, came here legally, and have this type of job waiting for them.
Thought you might want to know this.
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|Friday Jul 25, 2014 - Farmers, rail companies facing challenges moving grain
It has been a dramatic year for grain farmers.
A massive bumper crop followed by a hard time moving it across the prairies inspired the federal government to get involved and force rail companies to move more grain.
Grain production was at record high levels in 2013 – so high, in fact, that many farmers had no better options but to store rather than sell excesses over winter.
Grain glut hard on farmers
The 2013 grain glut really affected farmers like Curtis McRae.
“It gets stressful because grain is a perishable item,” said McRae. “The longer you sit on it the greater chance you'll have spoilage.”
Although CN and CP Rail have upped the pace they ship grain across the country, farmers are still unsure whether they will encounter problems similar to those presented by the 2013 grain glut.
Nearly 76 tonnes were harvested last year – more than could be moved on the market – leaving no other choice for McRae but to shutter mass amounts of grain in bins on his property.
Some grain elevators were so full around the province that grain was stored in giant piles outside.
Now, on top of sitting on tonnes of grain, McRae is also holding out for prices to rise in hopes of getting more for his product.
CP, CN upping grain shipments
The federal government eventually stepped in and established rules on how much grain Canada's two main rail companies had to ship, hoping to ease some of the pressure from grain farmers.
Grain backlog points to need to modernize supply chain
Both CN and CP Rail said they are shipping more grain and boosting profits this summer.
There are fewer ships waiting for grain in the Vancouver port and near record levels being shipped out of Thunder Bay.
The railways said the grain would have moved anyway as the weather warmed up and shipping became easier.
But that's not how the grain companies see it.
“I don't think it would be in the magnitude it is,” said Keith Bruch with Paterson Global Foods “They were forced to put additional resources to grain, which I don't think would have happened without the mandate.”
Despite the increase in shipping, some think other farmers may not yet be out of the woods, with a lot of grain still waiting to be shipped.
“I think the pace has really picked up in terms of actually solving the glut problem,” said Derek Brewin from the University of Manitoba’s faculty of agriculture.
Brewin maintained, however, that the problem isn’t yet solved – that will depend on the size of this year’s crop.
Some experts have predicted bigger yields will soon become the norm.
McRae is just hoping when it comes time to move the grain this year, he'll have an easier time than last year.
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|Friday Jul 25, 2014 - Valid concerns about trucks
Grimsby Lincoln News
Re. Trucks among safest vehicles, Letter, July 17
Trucks are very safe vehicles indeed when operated in a safe manner and in a proper location.
The initial letter sent in seemed to address the lack of respect for speed limits and school zones along West Street in Smithville, particularly by trucks but also by cars. It suggests that driving straight through a town’s downtown region is not ideal.
It does not question that trucks aren’t safe vehicles or that they are not properly inspected. It doesn’t call in to question the importance of truck transportation to our economy.
At one point in time, Highway 8 in Grimsby and Beamsville was a major east-west through way. As those towns grew, truck traffic was diverted. Only essential trucks making deliveries in those towns or garbage trucks, as the writer sarcastically pointed out, drive on the main town roads there.
As townships develop and grow, transportation sometimes needs to be re-routed. There are plenty of options for trucks to quickly go around the town of Smithville and avoid travelling through school zones and by children. This would still allow for our economy to run and function.
To send in a response letter that attacks an individual on choosing to move to West Street is pathetic, especially without direct experience with the traffic issue in the area.
I also live on West Street and think that the town needs to address the traffic issue in general. As more subdivisions are built in Smithville and the town develops, it is becoming even more important to find alternative routes for the trucks.
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|Thursday Jul 24, 2014 - How truckers cope with ‘sweatshops on wheels’
BY KAREN LEVY
Karen Levy is a doctoral candidate in sociology at Princeton University and a fellow at the Data & Society Research Institute. This appeared in the Los Angeles Times.
LAST MONTH, after a tractor-trailer collided with a vehicle carrying actor Tracy Morgan and others, national attention focused — briefly — on the serious issue of fatigued truck drivers.
The truck’s driver, Kevin Roper, was charged with vehicular manslaughter in the death of comedian James McNair, one of the vehicle’s passengers, and prosecutors alleged Roper hadn’t slept in more than 24 hours. But then an initial report from the National Transportation Safety Board said that Roper had been working for 13½ hours at the time of the crash, just within the legal limit of 14 hours on duty with no more than 11 hours behind the wheel.
Let’s hope the discussion doesn’t stop there. The nation’s trucking system needs to be reformed, and the changes must address root economic causes underlying a range of unsafe practices.
I’ve spent the last three years researching truckers’ compliance with federal regulations limiting the hours they can work. I’ve spoken with hundreds of truckers and other industry stakeholders to try to figure out what drives truckers to work past the point of fatigue, and what can be done about it.
Truckers don’t work without sleep for dangerously long stretches (as many acknowledge having done) because it’s fun. They do it because they have to earn a living. The market demands a pace of work that many drivers say is impossible to meet if they’re “driving legal.”
In the face of rising consumer demand for overnight shipments and for fresh produce trucked from the opposite coast, shippers have upped the pressure both to move goods quickly and to keep costs low. Since many truckers are paid by the mile, they’re incentivized to stay on the road as much as possible. (As truckers are fond of saying, “If the wheel ain’t turnin’, you ain’t earnin’!”)
One thing that makes this possible is that truck drivers are explicitly exempted from the Fair Labor Standards Act, so they aren’t legally entitled to overtime pay or other protections designed to prevent their labor from being exploited.
Trucking firms today operate on razor-thin margins in a highly competitive industry, and many of them, according to the truckers I’ve interviewed, put tremendous pressure on their employees to break the law by staying on the road too long. Federal safety rules are frequently ignored in service of on-time delivery to the customer.
Independent drivers, who own and operate their trucks, feel the pressure, too. They often use brokers to land jobs, and they say they lose out on opportunities for work if they hew too closely to the rules. A customer doesn’t want to wait around while a trucker takes a nap, even if it is legally required. And, the drivers say, there’s always someone else willing to break the rules if it means getting a good haul.
In an attempt to increase truckers’ compliance with the hours-of-service rules, the Federal Motor Carrier Safety Administration — the federal agency in charge of regulating the trucking industry — is very likely to soon mandate that all truckers install electronic logging devices. Electronic monitors create less “fudge-able” records of truckers’ driving time, as compared with the easily falsified paper logs — which truckers sometimes call their “comic books” — that have been used for decades.
Guard against unsafe practices
These electronic systems will help guard against some unsafe practices, but they won’t address many of the biggest sources of trucker fatigue. Truckers will tell you that long stretches of “detention time” — the (typically unpaid) hours that a trucker must wait at a shipper’s terminal to be loaded or unloaded — are what really exhaust them, and force them to be on duty for far more hours than are legally permitted.
Most truckers are also unpaid for the many hours they spend completing mandatory inspections, dealing with repairs, filling out required paperwork, checking the security of their loads and many other important tasks that make up their long workdays. None of these activities will be addressed by electronic logs, and drivers will most likely continue to squeeze them into their required “rest” periods, as they have been doing for decades.
The road is an unpredictable workplace. As anyone who has driven on the highway knows, road travel is fraught with contingencies, from weather to congestion to accidents, all of which can make a trip take longer than anticipated. Add to that the other pressures to keep driving — economic incentive, employer pressure, the dearth of safe places to park and rest, and the desire to get home after days or weeks away — and you begin to get a sense for why truckers drive for as long as they do.
Economist Michael Belzer has compared trucks to “sweatshops on wheels” because of the low rates of pay, long working hours and unsafe conditions. To be sure, we should implement sensible rules that restrict drivers’ work hours to reasonable standards, and electronic monitoring may be a useful tool for doing so.
But electronic monitoring is an incomplete solution to a serious public safety problem. If we want safer highways and fewer accidents, we must also attend to the economic realities that drive truckers to push their limits.
- See more at: http://www.northjersey.com/opinion/opinion-how-truckers-cope-with-sweatshops-on-wheels-1.1055954#sthash.fTACP9bt.dpuf
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|Thursday Jul 24, 2014 - Future for trucking bright? ATA predicts so
Trucking will see continued growth both in freight and revenue in the next 10 years, according to the American Trucking Associations’ U.S. Freight Transportation Forecast to 2025. Between now and 2025, tonnage will grow 23.5 percent, ATA predicts, while freight revenues are predicted to grow a whopping 72 percent. However, adaptation by carriers will be key to enjoying the boom, says ATA, as regional growth patterns, technological changes and the evolution of manufacturing and distribution will make the industry more complex. Carriers that become “True logistics experts” will be the ones that come out on top, ATA’s report says. The report also predicts that truck’s share of freight will continue to grow in the next 10 years, though by just a few percentage points — from 69.1 to 71.4. Truckload volume will grow by about 3.5 percent a year through 2019 and then 1.2 percent annually in the next five years, the report predicts. But truckload carriers will use intermodal rail for longer hauls. ATA’s Forecast can be purchased as a bound volume or a downloadable PDF at www.atabusinesssolutions.com. Editor’s Note: This post was originally written by the staff of Overdrive Online. - See more at: http://www.betterroads.com/future-for-trucking-bright-ata-predicts-so/#sthash.zqUgWNZN.dpuf
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