ELD mandate and agricultural exemption causes confusion
After produce shippers saw higher rates than usual and there were trucking shortages in January immediately following the ELD Mandate in December 2017, many thought that 2018 was going to be the year of the truck. Although it might seem like common sense that trucks might have a better negotiating position than previous business cycles, it’s not all sunshine and easy money for trucking firms facing their own challenges with this regulation. Produce shippers are looking for relief and some are looking to the Agricultural Exemption for hours of service with renewed interest.
While produce shippers have traditionally paid higher freight rates than other refrigerated commodities due to the heightened risks — higher claims incidence, multi-stops, longer loading/unloading times, season demand spikes — the ELD mandate has hit produce shippers harder than most other shippers. When circumventing HOS rules was the norm, trucks could just drive more miles (illegally) to make up for the loss in hours loading and unloading. Here’s what’s changed for produce shippers:
- Produce loading/unloading delays cause truck drivers to burn potential driving hours waiting for product to come in from the fields or to cool to proper temperature (delays are magnified with multiple pickups);
- Delays are causing produce shippers with strict order-to-delivery requirements to have to hire team drivers instead of solo drivers used in the past for the same lanes;
- High incidence of miscommunications on actual HOS availability per truck causing missed pickups, confusion, and further delays;
- Fewer trucking options overall;
- Trucking firms are asking for more money for the same lanes from last year, causing forecasting and budgeting problems.
So produce shippers may believe that trucking companies are making more money than they ever have, but that’s not always the case. It’s important to remember some smaller, nomadic trucking companies that haul produce never truly followed HOS rules. Now that the HOS is recorded in an impartial, electronic logging system, these traditional rule breakers are now struggling to adapt quickly and regain profitability. The collection of detention charges can be difficult, tedious and uncertain for smaller trucking companies to count on, these trucking firms are forced to account for this new reality. Here’s what’s changed for truckers hauling produce:
- Confusion on HOS rules and ELDs causing mistakes/miscommunications;
- It’s taking time to educate and train drivers on HOS and ELDs;
- Higher risks of violations hitting BASIC CSA scores with ELDs with additional costs incurred;
- Carriers in violation of keeping up-to-date records on their HOS and record of duty status can face civil penalties that range up to $10,000 per violation;
- Carriers can be put out of service for non-ELD compliance and HOS violations;
- Fewer hours to drive equals more money per loaded mile needed for the same revenue per truck.
So, What’s Happening Now?
Many produce shippers, feeling the costs and inconveniences of this new regulation, are looking for ways to improve their shipping. From consolidation in cold storages, selling from current inventory, working to become “shippers of choice,” to regulatory relief petitions/clarifications; produce shippers are trying new strategies to alleviate some of the challenges created by the ELDs.
One developing solution could come in the form of regulatory relief for produce shippers through the Agricultural Exemption for HOS. Part of the reason why this exemption is so heavily asked about by produce shippers is because of the potential cost savings when carriers can avoid recording HOS within a 150 air-mile radius of an exempt shipper (also known as a source). No HOS within 150 air-miles would help with some of the detention issues and may even shave days of transit off cross-country runs. The biggest roadblocks for shippers looking to qualify and utilize the Agricultural Exemption for HOS are the complexity and vagueness of the definitions for which commodities qualify, what timeframe the exemption lasts for, how the rule applies to multiple pickups or deliveries, and most importantly — getting carriers to turn off their ELDs in an environment where the stakes couldn’t be higher for non-compliance with HOS and ELDs. Uncertainty about how this exemption applies in the real world, who it applies to, and how to explain it has stopped use as a relief lever in the produce freight market today.
As a transportation intermediary, ReedTMS Logistics advises shippers and carriers to err on the side of caution with this exemption. Shippers and brokerages don’t want to risk penalties for coercing a driver or dispatcher into breaking HOS rules if the exemption doesn’t 100 percent apply.
(Mike Ryan is a branch manager and Matt Castriotta is a national salesperson at ReedTMS Logistics)