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The transportation and logistics industry has seen a lot of changes in the past few years. Everything from new technologies to wavering economic climates has impacted the way carriers do business. 2019 brought with it a lot of regulatory concerns that are poised to create even more waves—for better or worse—in 2020.
In the past decade, the logistics world has struggled with a trucking crisis, supply chain transparency, fuel costs, tariffs, environmental issues, reverse logistics, extreme weather conditions, warehouse and inventory management, an increasing number of accidents (and insurance rates), and so much more.
Regulations are working to make these processes safer and more effective—but how will this affect the roadways this year?
As of January 1, 2020, the International Maritime Organization (IMO) has implemented and enforced a new fuel regulation for shipping transport overseas. They are limiting the amount of sulfur that is allowed in fuel oil for maritime vessels, from 2.5% sulfur content down to 0.5%.
The goal is to reduce sulfur emissions, which have been linked to air pollution and health problems (like respiratory and heart concerns). The IMO’s new regulation will promote cleaner fuel for ocean travel.
This is great news for the environment, but not so great news for on-land trucking companies. Currently, U.S. on-land trucking companies already use low-sulfur diesel. With a low supply of minimum-sulfur diesel available, a rise in demand for both trucking and ocean is likely to raise fuel prices substantially.
Hopefully, this will spur a change for all fuel to move towards greener options—which will, in turn, enable a higher supply to meet the high demand. For the time being, though, this regulation will likely raise fuel prices during 2020.
Although the FMCSA hasn’t changed its Hours-of-Service (HOS) regulation, there has been a lot of discussion about an anticipated regulatory change. Currently, CDL drivers can drive a max of 11/14 hours after 10 consecutive hours off duty. Once they hit that max, they need another 10 hours off before resuming on the road. There’s a three-hour window for on-duty tasks that aren’t on the road, like inspections or unloading.
Additional regulations include taking a 30-minute break after 8 hours on-duty and having 10 hours off-duty in sleeper births. They have also passed the ELD mandate, which caused some waves in the way trucking carriers operate in 2019.
The purpose of these HOS regulations is to minimize driver fatigue, which can lead to drowsy driving (and an increase in the number of accidents). However, a lot of companies and drivers disagree with these strict regulations, especially amidst the trucking crisis.
For that reason, there has been talk that the HOS might increase the allowed on-duty time in certain conditions, allowing drivers to “pause” on-duty time for weather conditions or traffic, and splitting up their sleeping time. These changes haven’t occurred yet and are mostly speculation, but a shift in hours on the road might change the way truckers are able to conduct business in 2020.
As of January 6, 2020, all CDL drivers are required to participate in the Drug & Alcohol Clearinghouse program. Required by the FMSCA, this program hopes to detect drug and alcohol violations and track driver history. The hope is that this will minimize driver violations and enhance safety on the road.
This program is, on the whole, an effective way to keep drivers safe and healthy.
However, it will have some unintended impacts on the transport sector in 2020. There is already a massive driver shortage. And it is quite possible that this program could worsen this shortage by blacklisting or ignoring some drivers' applications and resumes based on their history.
It’s likely that companies will need to offer more expansive and competitive packages to attract quality drivers—and this could further minimize margins during this trucking crisis period.
Insurance carrier rates have been on a steady increase for the past few years. And trucking companies have been feeling the effects. When it comes to regulatory concerns, this is a major one because it affects certain carriers' abilities to operate efficiently at full-scale.
This uptick in insurance rates is likely the result of a web of different reasons, including an increased number of claims, more “total loss” claims, increased distracted driving concerns, an increased number of miles per driver, and other unsafe practices on the road.
Though the reasons are mixed, one thing’s for certain: insurance rates have been on the rise… and dramatically so. A lot of trucking carriers can’t afford these high insurance rates, which is pushing smaller companies out of business. Larger companies have been raising their freight rates to try to offset insurance rates—which is causing an unwelcome strain on their clients.
There is some hope that HOS and drug testing regulations will raise insurance rates, but we haven’t seen this in practice yet.
Lastly, but probably the most impactful of regulatory concerns is all the trade tariffs that sprouted up last year.
In 2019, international tariffs put a major speed bump in trade. The 10% tariff on over $200 billion Chinese imports especially had a large impact, creating a slow down (if not a full halt) of imports from China. Ports lost a lot of revenue, so they tried to make up the difference by raising prices for companies. Businesses also had to make up for the tariffs and transport price increases by doing more business or raising costs. Overall, things felt a lot tighter in 2019 than they had in a while.
With the December tariff agreement between President Trump and China, though, these tariffs are going to be more lenient in 2020. There will actually be a significant boost in trade with China, which should explode both economies well. It will also bring a lot more goods to ports and transport carriers.
The concern here, though, is that in 2019 a lot of trucking carriers went out of business due to insurance rates, tariffs, and other causes of major price hikes… Now, with a major influx of goods, there might be a deepening of the current trucking and driver crisis. It’s time for companies to kick it into gear to improve demand forecasting, inventory, and route optimization.
The smart logistics companies like Redwood Logistics are preparing for a massive influx of imports, packages, and on-road traffic this year. We’re prepping our fleets, our drivers, and our technology for massive success. We understand how these regulatory concerns are going to impact our business, and we’re taking proactive steps to stay ahead of it.
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