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On July 6th, 2012, President Obama signed into law the Moving Ahead for Progress in the 21st Century Act, otherwise known as MAP-21. Effective October 1, 2013, the law provides funding programs and other policy framework to streamline and grow the country's transportation infrastructure.
In addition to highway construction and maintenance, the legislation includes a number of provisions that directly affect interstate trucking companies and intermediaries. You can peruse the entire 584 page document here; however, if you are interested only in how it applies to trucking, you can skip to 328.
On its surface, the legislation sets out to advance several commendable objectives -- maintain and improve infrastructure, increase accountability of Federal highway programs, and improve overall safety. Yet, as discussed below, two major components of MAP-21 may stir controversy within the industry.
Hours of Service and EOBR's
The transportation industry is bracing for the controversial hours of service change handed down by the Federal Motor Carrier Safety Association (FMCSA), which will take effect this summer. The new rules are expected to reduce a driver’s average maximum allowable hours of work per week from 82 hours to 70 hours, a 15% reduction. Via MAP-21, Congress directed the FMCSA to conduct a field study on the safety impact of the new HOS rules.
Effective July 1, 2013:
- Limitations will be applied on “34-hour restarts” to include:
- (1) restart period must include two periods of 1 a.m. to 5 a.m.
- (2) may only be used once per week.
- Rest breaks – Drivers must now take a mandatory 30-minute break before driving more than eight hours.
MAP-21 puts FMCSA’s HOS changes in action by requiring all trucking companies to equip drivers with Electronic On-Board Recording Devices (EOBRs) within two years. The EOBRs will likely be more sophisticated than their current counterparts, as they’ll employ GPS technology to automatically record hours. Thus, gone are the days when drivers can get “creative” with their logs in order to cover those last few miles to reach a receiver, or even get back home. Driver’s paychecks are likely to suffer, and carrier costs are expected to rise due to hiring and training new drivers to make up for the reduction in available work hours.
Some of the predicted impacts of this change include:
- 5-10% reduction in carrier production
- Potential rate increases to offset the lost production
- Heightened congestion due to the two-night provision that forces drivers off less-congested night roads
- Disruptions in supply chains due to constrained capacity; carriers will be more hard-pressed than ever to meet customers’ on-time demands.
Surety Bond Increase
Perhaps the most publicized provision of MAP-21 is the surety bond increase from $10,000 to $75,000 for brokers and freight forwarders. The increase also applies to asset-based carriers with brokerage divisions. Carriers that broker loads will be required to obtain separate brokerage authority and post a bond. If a company has both broker and freight forwarder authority, two bonds will be required.
The bond increase is intended to protect trucking companies by making it more difficult for fly-by-night brokers to obtain surety, thereby purging fraudulent brokers from the industry. Legislators believe the $10,000 bond allows unscrupulous brokers to enter the marketplace and profit from scamming carriers. Since the bond is a guaranty reflecting a broker’s financial strength and inclination to pay freight bills in an agreed-upon manner, the increase is thought to reduce risk in the industry as a whole.
However, the consensus among some industry groups is that the implications of the surety increase will damage the industry. The Association of Independent Property Broker and Agents (AIPBA) is leading a coalition to repeal the increase. A majority of the broker world could be classified as "small businesses", and it’s estimated that close to 75% of them could not qualify for a bond of this magnitude. Some fear this opens the door for the larger freight brokers to take over the industry. With significantly reduced competition, the market as a whole could become less competitive and result in higher rates for shippers.
In the end, MAP-21’s impact will undoubtedly force customers to adjust their expectations and accept that there will be some uncertainly in their supply chain as the market adapts. Only time will tell whether MAP-21’s benefits will exceed the burdens imposed on the industry.
Please contact Aaron with questions on this post.