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From SCDigest's On-Target E-Magazine

- March 19, 2013 -


Supply Chain News: A Lot at Stake for Shippers, as Federal Appeals Court Hears ATA Suit on Hours of Service


FMCSA Bended Evidence to Fit Agenda, ATA Says; Agency Says Court Should Not Decide Issue that is Just a Scientific Dispute

SCDigest Editorial Staff

Show down at OK Trucking Corral this week, as a Federal Appeals Court began taking testimony Friday in the suit by the American Trucking Associations to stop or delay implementation of new Hours of Service rules from the Federal Motor Carrier Safety Administration.

Despite widespread industry objection, the FMCSA approved the rule changes in late 2011, but did not set them to go into effect until July of this year. There are a number of changes, but the two that appear of greatest concern to truckers (and thus shippers) involve new rules limiting the use of the 34-hour restart period to once every seven days, as well as inflexibly mandating 30-minute off-duty breaks during the workday after no more than eight hours of driving.

SCDigest Says:

In an environment already marked by growing shortages of truck drivers (turnover reached 98% in 2012, the ATA recently said, the highest level since 2007), the hours of service changes are sure to put a hit on driver and asset productivity.
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There are multiple legal threads going on here. Last summer, the ATA announced it would challenge the HOS rules in US Court of Appeals for the District of Columbia Circuit, on the grounds that the changes further restricting drivers' ability to work and drive would add tremendous cost to the economy and undue burden onto drivers. The ATA brief at the time called the rules "arbitrary and capricious" while providing minimal possible safety and health benefits. (See ATA Decides to Challenge Hours of Service Changes in Court.)

Those arguments in began Federal court last week. Meanwhile, in late January, the ATA sent a letter to the FMCSA asking it to delay implementation of the rules until after court decision is rendered, though the date of that decision is totally unknown. The rational, of course, is that it would be costly and disruptive to make carriers and private shippers comply with the new rules, only to see some or all of them struck down by the court.

The FMCSA would have none of that, however, and rejected the request. The ATA General Counsel Prasad Sharma then said that rather than deal in good faith with the substance of ATA's request, FMCSA hid behind an irrelevant, legalistic analysis. He added that while ATA merely asked for the agency to extend the rule's implementation deadline - a request the agency could grant so long as there is a reasonable basis to do so - FMCSA's chief counsel instead analyzed the request as though ATA were asking a court for an injunction forcing the agency to delay.

"So rather than giving ATA's request its natural reading, FMCSA contrived an analysis under an inapplicable test to critique the sufficiency of ATA's request," Sharma also wrote.

Testimony Begins

So with type of relationship between the ATA and FMCSA as backdrop, testimony in the court began last Friday.

The ATA's primary arguments for striking down the changes have to do with how the agency used statistical studies and approached the cost-benefit analysis required now for regulatory change.

"The existing rules have a proven track record, and the agency's purported reasons for tinkering with them were baseless," said Sharma in a statement Monday. "We're hopeful the judges will see through the agency's mere pleas for deference and after-the-fact explanations for a rule that was agenda-driven rather than evidence-based."

In its initial brief last July, the ATA said that the FMCSA "claims that restart restrictions and the off-duty break requirement are justified by the cost-benefit analysis in FMCSA's Regulatory Impact Analysis. That 'analysis,' however, is a sham."

(Transportation Management Article Continued Below)



It added that the "FMCSA stacked the deck in favor of its preferred outcome by basing its cost-benefit calculations on a host of transparently unjustifiable assumptions. FMCSA therefore cannot justify the 2011 final rule on the ground that it has net benefits."

However, Jonathan Levy, a Department of Justice attorney representing the FMCSA, countered those claims, saying the dispute boiled down to nothing more than "simple scientific disputes," and that therefore the government should be allowed to use its discretion in changing the rules.

He added that it is "not the court's duty to weigh in on that kind of dispute," and that the agency acted reasonably when it changed the rules.

But Erika Jones, an attorney with the Mayer Brown law firm representing the ATA, said "this rule is not likely to have been enacted as it was if the agency had used the [cost-benefit] data correctly."

Sometime shippers see these sorts of regulatory disputes only material to carriers, but that is far the case. In an environment already marked by growing shortages of truck drivers (turnover reached 98% in 2012, the ATA recently said, the highest level since 2007), the hours of service changes are sure to put a hit on driver and asset productivity.

Estimates of the impact vary by analyst and carrier, but most predict a loss of productivity in the mid-single digit range. In 2011, Schneider National executive Don Osterberg said that using his company's detailed modeling of its network, the rules would decrease productivity at Schneider by 5%. Not only does that effectively take 5% of capacity out of the system, it would require Schneider to increaser driver pay by about $3000.00 per year to keep the drivers whole.

Reduced capacity and a sharp increase in driver pay? Sounds like a recipe for much higher rates to us

Added Mike Regan, president at TranzAct Technogies and active member of NASSTRAC: "Anyone who has followed the HOS understands that the likelihood of an injunction or the implementation of the new HOS being delayed is remote. When the FMCSA last changed the HOS rules in 2003, the revised HOS rules remained in place throughout the litigation period. And that is why shippers and carriers should plan on the new rules taking effect in July 2013 regardless of what is happening on the legal front."

Regan also told SCDigest that "Make no mistake, the revised HOS rules will have a significant impact on truckload capacity, and smart shippers will factor the impact that tight capacity will have on rates."

What are your thoughts on this HOS legal action? Any prediction on how the Court will rule? Will the impact be significant or not if the rules stay? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.



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