Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
When the bill reauthorizing the nation's transport funding mechanisms became law in July 2012, much was made of the fact that it was the first multiyear funding law in seven years and that the federal government would be doling out $105 billion over the subsequent 27 months to pay for infrastructure projects.
Largely overlooked in the 1,656-page bill was language that on Oct. 1 changes forever how truck freight is laded, brokered, and transported. To some, it smacks of trucking reregulation. To others, it brings clarity and accountability to a business lacking in both. For those who make their nut moving freight, it reshapes the decades-old operation of property brokerage, which is a $300 billion-a-year business.
On that date, the federal government makes it more expensive for brokers to do business, enforces strict rules on what brokers and truckers can and can't do, and levies stiff fines for noncompliance. The law also forces shippers to be more vigilant in how they tender their goods for transport.
First off, there is the higher cost of brokering. Anyone seeking a broker's license will have to post a $75,000 surety bond, which ensures a carrier will be paid if a broker fails to do so. The more than seven-fold jump in the bond's original $10,000 ceiling has drawn the ire of smaller brokers, who argue it will drive many independents out of business and concentrate activity in the hands of larger brokers, a claim the main broker trade group, the Transportation Intermediaries Association (TIA), denies. The Association of Independent Property Brokers and Agents filed suit July 16 in federal district court in Ocala, Fla., to block the provision.
That may not cause a major problem, however. A survey released July 11 by Portland, Ore.-based consultancy DAT of 250 major truckers and brokers said two-thirds have already purchased the higher bond. Of those who hadn't, 79 percent said they were either shopping for the bond or intended to do so, DAT said. Only 3 percent said they didn't plan to buy the higher bond.
The big changes come elsewhere in the law. As of Oct. 1, a trucker can no longer take possession of freight from another trucker or a broker, a long-held and fairly common practice known as "double-brokering." A trucker cannot broker freight without a brokerage license, and that authority must be completely separate from the trucking operation. The trucker showing up at a shipper's dock must be the same carrier whose name appears on the bill of lading. If not, a shipper must create a new bill with the new trucker's name and identification number, and pay just the new carrier. Truckers can accept cargo only with their own equipment.
An exception to all of this is the so-called interline agreement, where the origin trucker accepts the load, drives a certain distance, and then tenders the goods to another trucker. In practice, however, such operations are rare because of the time and cost involved in transferring loads and because carriers are reluctant to give up revenue.
Brokers, meanwhile, can no longer take physical control of cargo and can only arrange the transportation for their shipper clients. A broker must ensure the trucker with which it has arranged the transaction is the carrier appearing at the shipper's dock. A broker cannot insure the cargo, except as a contingency, meaning its coverage would kick in if a carrier's policy fails, a rare occurrence. A broker cannot appear on the bill of lading as a carrier. In essence, the law transforms a broker into a shipper and strips it of any carrier-related functions.
As for shippers, they need to know that a trucker can no longer accept their freight for brokering purposes, and that a broker or a third-party logistics (3PL) company cannot physically touch the goods. Neither party can be on the bill of lading in the "carrier" section. A broker or 3PL can appear on the bill's section marked "3PL" and can receive freight bills.
The penalties for violating the laws are not cheap. The federal government can levy a maximum fine of $10,000 per load on the guilty party.
CHANGING ROLES
Experts said the law stops a trucker from holding itself out as the freight hauler, only to switch roles—unbeknownst to the shipper—into that of a broker. "If a carrier does not move the freight, it will have to disclose to the shipper that it is acting in another capacity ... No secrets can be kept," said Robert Mucci, a commercial risk management specialist with Worcester, Mass.-based Wolpert Insurance Agency Inc.
Mucci said the law would prevent a trucker who agreed to haul a load from claiming after the fact that it was not liable for a lost or damaged shipment because it was merely acting as a broker. Because the Federal Motor Carrier Safety Administration (FMCSA), a Department of Transportation sub-agency that oversees truck safety, will issue unique registration numbers to each party for their specific authority, "there will be a Berlin-type wall separating broker-arranged shipments from 'subcontracted' shipments," he said.
David G. Dwinell, who owned his first truck in 1958 and today instructs brokers on, among other things, how to avoid liability issues, called the law a "get-out-of-jail-free card" for well-run brokers who operate their business without controlling drivers' actions and who are not in possession of the cargo.
Dwinell called the provisions a prime example of well-intentioned legislative overreach. He said the elimination of double-brokerage wipes out an important source of revenue for a trucker, especially if it has too much business for its own fleet to move and needs to farm out excess loads. Over the years, truckers came to view the practice of double-brokerage as "their sacred right," he said.
Dwinell said the language was essentially crafted by the American Trucking Associations, the Owner-Operator Independent Drivers Association (OOIDA), and the TIA to protect their respective interests, and called it a stab at backdoor reregulation. He said the provisions would add friction to the trucking supply chain, deprive truckers of business, and invite more extensive safety enforcement by the states.
Truckers, Dwinell said, will bear the biggest burden. "The net effect of this will be incalculable," he said. When asked about the cost, he replied, "write the word 'billion,' pick a number out of the air, and put it in front."
A LONG LEGISLATIVE ROAD
The language is the culmination of several years of legislative wrangling designed to clean up a corner of the shipping world that sometimes operates in the shadows. Supporters say the provisions establish clear functional lines among the various players. It gives shippers peace of mind that the carrier on its bill of lading will be the same one that shows up to haul its freight, they say. And it curtails the sleazy act of "churning," where a trucker without brokerage authority grabs freight from a load board, gets an advance from the shipper or broker, flips the load to another carrier, and then disappears, leaving the second carrier empty-handed. Roughly one-quarter of owner-operators have had trouble at one point or another collecting from brokers or other intermediaries, according to OOIDA estimates. In some cases, the truckers never get paid, the trade group said.
The language in the law "spell[s] out responsibilities and protect[s] all involved," Robert A. Voltmann, TIA's president and CEO, wrote in May. "We believe that whoever hires a truck is responsible for paying for that truck."
Voltmann said truckers who rebroker freight without proper licensing expose themselves to a legal nightmare called "vicarious liability," where a company can be held responsible for accident-related damages even if it wasn't directly involved in the incident.
In recent years, the plaintiffs' bar has focused on the potential liability in carrier-to-carrier relationships to win big settlements for accident victims. By contrast, brokers who are properly licensed and who demonstrate robust carrier selection procedures have been, to some extent, insulated from legal exposure, Voltmann said. "Why would a carrier not avail [itself] of these protections?" he wrote.
Jett McCandless, founder and CEO of CarrierDirect, a Chicago-based firm that consults for carriers and 3PLs, said the law will deter low-rent truckers and brokers that, out of desperation, engage in behavior beyond the scope of the law and its ethics. Double-brokerage, he said, leaves shippers vulnerable to actions they have no visibility into or control over. "All of the controls they have in place, all of the reasons they did the procurement, go out the window," he said.
McCandless said the new rules would go a long way toward removing the bad actors and, by extension, make the business cleaner and the roads safer. "It legitimizes the space," he said.
Voltmann said it's high time truckers operating in brokerage be required to have separate broker authority and the bond that accompanies it. "Brokerage is not a hobby. It's a profession with certain responsibilities, including protecting other people's money," he said. "The majority of money touched by a broker, whether that broker is asset-based or nonasset-based, belongs to other people."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."