Why/When will import volume spike?

Retailers are predicting up to a 9% jump in US containerized import volume before new tariffs hit on December 15.  The spike in imports is due to retailers front-loading their inventories.  This is to account for depleted inventory levels in the coming holiday season.  The National Retail Federation predicts that 2019 holiday sales will increase nearly 4% over last year.

Furthermore, a large percentage of that merchandise shipped by the end of September ahead of Golden Week celebrations in China.  Due to retailers front-loading their inventories, JOC.com predicts that October import volumes will fall 5.5% over 2018 October import volumes.  However, starting in late October to early November, import volumes will recover and rates will go up as a result as shippers rush to bring more inventory into the country ahead of the December 15 tariffs.

New industry regulations effect on import volume

The National Transportation Safety Board (NTSB) recently commented on the FMCSA’s proposed changes to HOS regulations.  NTSB Chairman Robert Sumwalt made a statement indicating that the proposed changes will weaken aspects of the HOS rules.  Although the changes in the rules seek to improve driver flexibility, they also open the door to potential driver abuse and coercion.

Furthermore, a 9% increase  in freight costs is predicted to happen next year due to IMO 2020 regulations.  With many ocean carriers already implementing measures to adhere to the upcoming IMO 2020 regulations, shippers should expect to see higher fuel costs for over-the-road carriers in the upcoming holidays.

Additionally, carriers costs are higher than ever before after the turbulent year of falling rates and new regulations in trucking.  As a result, the end consumer may end up being the one who absorbs the higher supply chain costs over the upcoming holiday season.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

Hurricane Dorian’s Effect on Freight Market

Last weekend many east coast ports were closed due to hurricane Dorian.  Ports affected by Dorian include the ports of Wilmington, Morehead City and the port of Virginia.  Freight market volume is typically affected by weather, and in hurricane Dorian’s case this is no exception.  DAT reported outbound reefer volume was up 14% from Lakeland, FL ahead of the storm.  Furthermore, rates followed suit with the average per mile rates jumping 8 cents in the Lakeland area.  Similar trends echoed up the East coast of the United States as the storm moved north.

According to the Director of Customer Operations at GlobalTranz, trucking demand increased as the storm moved out over the Atlantic.  However, companies are avoiding shipping on the spot market in the immediate aftermath of Dorian.  This is to avoid inflating the market further.  Shippers are waiting for market rates to return to normal before shipping commodities back into the affected areas.

Understanding the impact that extreme weather can have on the freight market is essential when planning ahead for your supply chain.

Q4 2019 and Early 2020 Freight Market Insights

The recent uncertainty of the U.S. economy, starting in late 2018, is causing confusion amongst market analysts, shippers and carriers alike.  According to JOC.com, the best solution to predicting the market conditions moving forward is to watch how the market shifts over the next 4 months.  Additionally, it is important to note the impending IMO 2020 regulations coming that will drive fuel costs up for the supply chain.

Between November of 2018 and July of 2019, the average spot rate fell nearly 20 cents per mile.  However, the market recovered some in August from the decline, down only 16% year-over-year, similar to 2017 market levels.  Furthermore, the end of August saw a 2% increase in DAT dry van rates. (See our previous article).

According to Mark Montague, DAT’s manager of industry pricing, the slight recovery at the end of August may indicate the market is not as bad as some people say.  Montague believes that September to December will provide good insight into the conditions moving forward into 2020.  During those months in 2013, DAT dry van spot rates rose $0.10 per mile, and in 2017 they rose $0.22 per mile.  Both 2014 and 2018 saw a strong freight market following their preceding years.  Additionally, 2015 and 2019 both saw a weak freight market following weak market conditions in the last 4 months of the preceding years.

Contracted freight predictions are based off of a number of indices, most notably the ATA monthly tonnage index.  ATA reported that truck tonnage was up 7.3% in July this year.  However, despite load volumes being up, multiple indices show that dry van contract rates are down year-over-year.  Going into 2020 shippers are expecting lower contract rates pending the spot rates stay low.

We recommend locking in contract rates for 2020 sooner than later while spot market rates are low.  If the spot market recovers at the end of 2019, shippers may find themselves looking at higher contract rates as a result.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com

FMCSA HOS Changes Aim to Increase Driver Safety and Schedule Flexibility

This past Wednesday the FMCSA made public their proposed changes to the hours-of-service (HOS) regulations.  The announcement comes just 1 month after the agency proposed new CDL regulations.  The FMCSA highlighted 5 changes to the regulations.

The most notable of which allows drivers to split up the 10-hour break from driving into 2 separate breaks.

One break of at least 7 hours for sleep and a second break of at least 2 hours spent off duty is recommended for optimal driving. Additionally, drivers can use their half-hour break requirement on the “on-duty, not driving” status under the new changes. However, the 14-hour time window will pause whenever drivers take an off-duty break.  This allows drivers to extend their workday up to 17 hours.  However, the maximum time driving per 14-hours will remain at 11 hours.

The proposed changes to HOS rules seek to address schedule flexibility in the wake of ELD (electronic logging devices) regulations.  The FMCSA’s overall goal in publishing these proposed rule changes is to enhance road safety.  Additionally, the FMCSA said that these changes aim to result in cost savings for carriers by improving driver productivity.  The U.S. economy will save $274 million in costs under the rule changes.  The proposed changes are open to public opinion for 45 days, beginning on last Wednesday, August 14.

Freight Industry Voices Opinion on the Recent FMCSA HOS Changes

President of OOIDA stated that the proposed changes are a step in the right direction.  Furthermore, the American Transportation Research Institute (ATRI) reports that traffic slowdowns in 2017 resulted in overall operating losses in the industry of over $74 billion.  The thought behind the new 3-hour break rule is that in addition to adding flexibility to driver’s schedules, traffic congestion can be mitigated.

However, despite positive outlooks, some drivers believe that the proposed rule changes allow a way for carriers to force their drivers to work fatigued by extending the legal workday up to 17 hours.  Additionally, the main issue is that most drivers receive pay by the miles driven and not for the hours worked.  Therefore, by adding mandatory extra unpaid hours to their workday, drivers are missing out on pay.  President of Aerodyne Transportation, Alec Costerus, stated that if drivers are paid by the hour like everyone else, then there would be no driver shortage in the industry.

The last time hours-of-service regulations changes were proposed in 2003, freight industry leaders delayed the implementation of changes until 2011.  The delay came in the form of litigation in federal court and was based on claims that the initial changes would have a negative impact on drivers’ well-being and highway safety.

Lawmakers believe that there will be a repeat of litigation regarding the newest changes in hours-of-service regulations.  Furthermore, if the recent HOS rule changes go to federal court, then the rule changes will take a while to be final.

Visit BM2 Freight Services, Inc. for a freight quote.

Easier Access to CDL Knowledge Tests

Federal regulators are discussing easier access to knowledge tests for prospective trucks drivers to obtain their commercial driver’s license (CDL).  The American Trucking Association published a report on July 24 stating that the industry is short nearly 61,000 drivers.  Due to commercial truck driver shortages in the recent months, the Federal Motor Carrier Safety Administration (FMCSA) is taking steps to get more drivers behind the wheel.  The goal of the CDL regulation changes is to reduce burdens and expenses to CDL prospects without compromising safety standards.

The proposal says that states may choose to offer the CDL general and specialized knowledge tests to out-of-state drivers.  Furthermore, states that offer tests to out-of-state drivers will send test results to the applicant’s state of residence.  States that elect to test out-of-state drivers will need to modify their commercial learner’s permit (CLP) and CDL upgrade processes.  Additionally, states with higher entry-level driver standards will accept out-of-state skills test results from prospective drivers.  However, concerns arose regarding this ruling that states with higher standards will not accept out-of-state test results.

This proposal by the FMCSA is the most recent effort to reduce regulatory barriers for prospective drivers to obtain their CLP or CDL.  Additionally, in March of this year, the FMCSA presented another rule to reduce the cost of upgrading CDL classes.  The March rule alone will save prospective truck drivers an estimated $18 million per year.

FMCSA CDL Regulations Timeline

According to a recent Federal Registrar notice, published on July 18, the FMCSA is delaying provisions to its entry-level driver training.  The rule, originally set to go into effect on February 7, 2020, is currently set to go into effect on February 7, 2022.  The rule will set minimum standards of knowledge and on-the-road training for carriers.  Furthermore, the program will require out-of-state training providers to send electronic notifications and test results to the FMCSA driver’s state of residence.  The hope of extending the deadline is that the agency and parties involved have more time to complete the IT infrastructure needed to implement the program.

Additionally, the FMCSA opened a 60-day public comment period to gather feedback on the newest proposed regulation.  Authorities worry that states with higher testing standards than the federal minimum will not be okay with accepting out-of-state test results for drivers-in-training.  California and Washington are the 2 most notable states with higher testing standards for drivers.

BM2 Freight Services, Inc.

Phone: (859) 308-5100

Email: Sales@BM2Freight.com