Page 182 - BWM Oct 2012

182 | Business World Magazine | October 2012
CALIFORNIA’S IMPENDING
CAPACITY CRUNCH
Capacity is a hot topic for the nation’s trucking industry. From an onslaught of regulations
the last two years to a shrinking pool of older drivers, one would think trucking has enough
pressure to maintain profits. In addition, California, a state that has been slow to recover
from the recession, has made the situation for itself and its neighbors substantially worse.
The biggest threat toWestCoast capacity is a result of the Califor-
nia Air Resources Board’s aim to clean up the air quality through
enforcement of emissions from diesel truck engines. The rule
passed four years ago, but statewide enforcement did not be-
gin until 2011. In the beginning of the three-year program, the
first targetwas to remove or retrofit year 2000 or earlier engines
fromthe roads. But, according to aNovember 2011 report from
CalHEAT Research, 54 percent of Class 8 trucks on the road in
California were older than year 2000 models. Furthermore, through
vetting our own carriers, we have found that more than 60 percent
of themwith less than 10 trucks and single truck owner-operators
have no plans to adhere to the rules and don’t have the revenue
tomeet these deadlines.
California’s regulations
CARB oversees the enactment and enforcement of Assembly Bill
32, which applies to all privately and federally owned diesel trucks
and buses that operate in California. On Dec. 12th , 2008,CARBap-
proved theTruck and Bus Regulation to reduce the levels of par-
ticulate matter and nitrous oxides from diesel fueled trucks with a
gross vehicle weight rating of 14,000 pounds.
The regulation requires most operators to
repower, replace or retrofit existing die-
sel engines to meet 0.02 grams per brake
horsepower-hour of particulatematter be-
tween Jan. 1st, 2011 and Jan. 1st, 2016.
Depending on the compliance strategy
used, upgrade costs per unit range from
$15,000 to $80,000. By Jan. 1st, 2023,
all trucks and buses, with few exceptions,
must have model year 2010 engines and
emissions-compliant systems.
For carriers not based in California, a
three-day pass is a temporary permit that
allows a fleet owner to operate one vehicle per calendar year
in the state that does notmeet the emission reduction require-
ments of the Truck and BusRegulation.The fine for carriers in the
state who do not meet the requirements is a maximum penalty of
$10,000 per day, per truck.The rule also has language to include
fining brokers and shippers for not usingCARB-compliant carriers.
Owner-operators are not insulated from the regulation. They have
16 months before they are forced to buy or retrofit to cleaner
equipment. This will create a capacity issue inCalifornia thatmight
expand throughout the entire West Coast. Facing the current eco-
nomic uncertainty, do the smaller fleets buy new trucks that are-
more expensive or operate as usual, putting the shipper at risk of
fines?
Beyond California, in addition to the engine requirements, other
federal regulations will not help the capacity issue. A regulatory
measurement system called CSA (compliance, safety and account-
ability), which was rolled out to better use statistics of violations
and crashes, has allowed theDOTto inspect unsafe carriers and
owner-operators with greater accuracy.And mandatory electronic
onboard computers for all commercial vehicles aremaking head-
winds in theDOT.
What can you do?
From a shipping standpoint, the future of rate pricing looks unfair,
regardless of the economy. In the less-than-truckload shipping
sector, we have seen the large common carriers increase rates an
average of more than 5 percent, year over year. Our company, Doss
Logistics, an LTL flatbed provider based
in California, has been able to keep rate
increases substantially lower than the
national average during that same time
period by working closely with our cus-
tomer base to offset larger increases in
exchange for greater volumes of freight
and dedicated lanes. With the programs
we have created and new services that
allow better transit times to truckloads
with stops, our LTL and partial freight
network sends orders throughout theW-
estCoast and its neighbors.
In the next 16 months, AB 32 will be fully
enforced in California. If shippers and distributors take the time
to build relationships with West Coast carrier vendors and under-
stand the issues they face, together they will be able to lessen
the impact. Shippers on the West Coast need to start vetting their
smaller carriers and owner-operators to be sure they are compli-
ant and at least have a plan or face the possibility of much higher
pricing when California lowers the hammer.
The biggest threat toWest
Coast capacity is a result
of the California Air
Resources Board’s aim to
clean up the air quality
through enforcement of
emissions from diesel
truck engines.
Find out more at DossLogistics.com or call us directly at 800-654-7200