In the May issue of Land Line Magazine, under the heading “Issues and Positions,” is an article titled “Damned if you do, and damned if you don’t” by OOIDA President Jim Johnston.

That is such an appropriate title for a discussion about the TRUCC Act – damned if you do, damned if you don’t. OOIDA introduced this legislation in response to the overwhelming concerns of members about the lack of a fuel surcharge being passed-through by brokers … but not every trucker is happy with the bill.

On the one hand, we have many decent, hardworking, and intelligent business people asking for help on this issue.

And then on the other hand, there is a very vocal minority that is against this legislation, mostly based on an ideological belief that we have a complete free market and nobody should interfere with the market. There is a school of thought that if somebody is not smart enough to get their costs covered, they should go the way of the dodo bird.

Free-market sentiments are not completely unfounded. How many of us have said, “If so-and-so was not being unfairly subsidized, I could kick their ass competitively.”

Let’s get something straight right away. The TRUCC Act has nothing to do with setting rates. Let’s not forget, as pleasing as it is to mouth the words “free-market,” we actually live in a highly regulated industry, and no amount of verbal banter about a “free market” will change that simple fact.

However, mandating that a broker or motor carrier pass through a fuel surcharge collected allegedly to off-set increased fuel prices is NOT government intervention in the marketplace or rate-setting.

It is NOT the coddling of those with supposedly less business acumen.

The TRUCC Act is about transparency and essentially solidifies regulation that IS on the books currently to the benefit of everyone.

That simple truth, however, has been lost in a fog of disinformation being spun by opponents of the TRUCC Act.

There are two other primary arguments being made against the TRUCC Act, and I must say, they are arguments sure to make the broker community proud. However, they are deceitful arguments and purposely cloud how rates and fuel surcharges actually work in the marketplace.

Number 1: If fuel surcharge pass through is mandated, brokers/motor carriers will simply stop collecting a surcharge from shippers, thus depriving truckers who currently receive one from getting it at all.

This false argument presupposes that if a broker is collecting a surcharge and not completely passing it through, we should be happy that we’re at least getting a small bite of the apple, instead of the whole apple.

This logic also implies that that if the broker cannot profit from collecting a fuel surcharge, they’ll quit billing for one, thus depriving the trucker of any surcharge.

This is fear-mongering that ignores marketplace realities.

The reality is that base freight rates have remained essentially unchanged, and truckers cannot haul anything – at current fuel prices – with those unchanged base freight rates.

Brokers and shippers both know this reality, and it’s not to their advantage to completely force truckers out of business with low base-rates, thus causing a shortage in the truck-available marketplace.

Keep you hungry? Sure, but not out-of business. That’s not in their best interests.

Shippers will continue to pay fuel surcharges for two primary reasons: To stabilize the truck-available market and to keep base freight rates from spiraling out-of-control.

Number 2: If fuel surcharge pass-through is mandated, and brokers cannot profit from collecting it, they’ll simply quit billing a surcharge and raise base freight rates so they can maintain their profit margins.

Again, this argument ignores how the marketplace actually works.

Shippers shop first by rate. That is how they do their comparisons. If a broker, for example, comes in with a base rate of 1.35 per mile plus full fuel surcharge, and another broker submits a flat-rate of 1.85 per mile and no fuel surcharge, the first broker will win the contract almost every time.

This is because shippers view surcharging as a necessary, but temporary adjustment to the base rate. They do not want to renegotiate rates with every fluctuation of the commodities market.

Yes, payments can go up, but they’re also likely to drop – and historically they’re correct.

Even right now you can read/listen to Wall Street analysts who have stated they wouldn’t be surprised to see fuel prices cut in half from their current value one year from now.

We don’t have supply-side problems – there are no shortages like in the ‘70s – driving fuel prices; it’s mostly speculators using commodities as their new craps table. Market fundamentals are not in place.

The same happened in the tech bubble and housing market.

Federal regulation already exists that brokers must give detail to the trucker about what a load pays. The same is true for motor carriers leasing owner-operators who are paid by percentage.

In the case of brokers unfortunately, you must go to their place of business instead of getting the detailed settlement required of motor carriers.

The TRUCC Act will simply improve on the requirement for disclosure and everybody is better off with that kind of transparency. The trucker, the shipper, and eventually the consumer who is actually paying the freight bill, all win – and so does the free-market, because no longer are significant transaction details, which current law will let you view, be shrouded in secrecy to the benefit of one party- the broker.

Opposing this sort of transparency on the part of a broker is like opposing getting the rated freight bill from a motor carrier you’re leased to and paid by percentage. You can oppose that protection given to you by law, but then don’t cry when you find out you were not really paid what you were entitled to by contract and the law.

If you’re paid by the mile, transparency probably is something not high on your list. But I’ll bet you care about not being shortchanged on the miles you drive.

If you are opposed to this legislation on “free-market” principles, then to be consistent you’d have to oppose to current law, which protects you from not being paid your contracted percentage of gross.

How many of you are willing to give up that protection?

Free markets work best when everyone is being dealt from the same deck of cards. Nobody should have to get screwed, then let word on street slowly cause, if ever, all the players to recognize the scheister at the table. It boggles my mind why anyone would oppose something designed to keep everyone honest.

--Joe Rajkovacz
OOIDA regulatory affairs specialist
joe_rajkovacz@ooida.com