On January 4, 2004, the U.S. Department of Transportation (DOT) will begin enforcing new Hours-of-Service work rules for drivers in the U.S. trucking industry. According to the DOT Federal Motor Carrier Safety Administration, the new regulations will provide an increased opportunity for drivers to obtain necessary rest and restorative sleep, and at the same time reflect operational realities of motor carrier transportation.

Truck transportation rates are also expected to increase due to these regulatory changes. Rate increases of four percent or higher are projected.

Primary changes in the regulation and expected business impacts include:

• Driver time on duty is expected to be reduced from 15 hours to 14 hours.

• Time behind the wheel may increase from 10 hours to 11 hours.

• Delay time experienced by drivers at marine terminals and other dock locations will count as applicable time on duty.

• Long haul and regional Truck Load (TL) carriers are expected to experience the greatest impact.

• Rates charged by trucking companies are already on the rise due in part to the closing or consolidation of 12,000 companies during the economic downturn of the past three years.

• New Hours-of-Service duty regulations are expected to increase the cost of business for trucking companies, as investment in additional equipment and labor will be necessary. Yet economists feel that new driver’s work efficiency will not equal current driver work efficiency, adding to costs. Additionally, tractor power units are projected to operate fewer miles per year, so more parking space for vehicles and trailers will be required.

• The new regulations could cost the trucking industry an additional $1.3 billion per year.

• Wages are expected to rise slightly to attract new drivers, as the pool of drivers covering current business volumes is currently inadequate. Higher labor costs will likely be passed along to shippers.

• Lower income for owner-operators could force more industry consolidation, reducing competition.

• For carriers, the margin-to-cost curve shows that as driver work hours curtail, cost savings (to companies cutting hours) are less than the increase in costs borne from hiring more drivers.

• Volumes shift to Intermodal rail service from TL/Over the Road (OTR) carriers could increase.

• The new work rules could help Less than Truckload (LTL) carriers to use extra driving time to add freight to shipments, as routes are predictable between pickups, receiving, consolidation and distribution terminals. TL companies following loads will be forced to optimize dispatch decisions, improving efficiency and service frequency.