If you think the trucking industry – and the U.S. business community in general – is facing more regulatory efforts by the federal government than ever before, you’re right: especially in terms of Federal Register page counts.
And the costs of complying with all of those fast-multiplying rules may become too great to bear for many smaller carriers, some analysts believe.
According to analysis conducted by Clyde Wayne Crews at the Competitive Enterprise Institute (CEI), the Federal Register topped out at 82,036 pages in 2015 – more than 600 pages longer than the previous record of 81,405 set back in 2010.
In fact, Crews said six of the seven record-setting Federal Register annual page counts occurred during the Obama administration.
Among this year’s pages are some 3,378 final rules and regulations and of those final rules, 545 are recognized as having effects on small businesses. Then there are the 2,334 proposed rules issued in 2015, which remain under various levels of federal consideration, Crews noted.
(By the way, that doesn’t include the 29 executive orders issued by the President last year, he stressed.)
More than a few of those rules affected trucking last year – the most recent being the long-awaited electronic logging device (ELD) mandate – with more expected in 2016, noted John Larkin, managing director and head of transportation capital markets research at Stifel Financial Corp., in a recent industry outlook brief.
“Regulations impacting transportation and logistics will generally fall under the general headings of safety, fuel efficiency, and environmental quality,” he said.
But that is not to say that additional, costly federal rules and regulations impacting the labor markets – including minimum wage, healthcare, equal opportunity, etc. – will be overlooked by the Obama Administration as it comes down the home stretch, so to speak,” Larkin noted.
While most such regulatory initiatives are generally “well-intentioned” in his view – “After all who, isn’t in favor of more fuel efficiency, cleaner air, fewer highway fatalities, more pay for all, and less coercion in the workplace?” – Larkin pointed out that there is a “significant cost” associated with those aimed at trucking.
“Often contrary to the well-meaning intentions associated with the rule and regulation purveyors, there are unintended consequences,” he stressed. “Compliance with a litany of often complicated and ambiguous regulations is a challenge even for the biggest and most sophisticated firms in an industry [and] the situation is no different in the transportation and logistics industry.
Larkin warned that what he describes as an “oncoming cavalcade of rules and regulations” often places the smallest and most financially fragile companies in a predicament: Either comply or exit.
Derek Leathers, president and COO of TL carrier Werner Enterprises, noted this very conundrum in the context of the new ELD rule back in September of last year during a presentation at the annual FTR Transportation Conference.
“Some 60% of the industry does not have them [ELDs] and those early adopters [that installed them] suffered a 3% to 5% productivity hit – and it took 12 to 18 months to get it back,” Leathers said.
“But the 60% that have not adopted ELDs will likely take a 5% to 10% productivity hit. Put in the wash, that is a significant loss of capacity,” he emphasized. “And some won’t be able to recover from that.”
The industry won’t feel it early on when the mandate is implemented, however; it will be with the second part, the ‘last wave’ of carriers to adopt ELDs, when the cost and productivity burdens may be too much for some to bear.
“There’s a long learning curve with ELDs and you have to find that ‘snap back’ when productivity recovers,” Leathers explained. “But for some, once they lose 4% to 5% productivity, they don’t come back.”
As a result, Stifel’s Larkin said that since many smaller trucking and logistics firms suffer an inherent cost disadvantage as they lack purchasing economies and scale efficiencies, the incremental cost off compliance with a “cacophony” of rules and regulations often can push smallish operators out of an industry segment altogether.
“This is exactly how we expect this onslaught of regulations will impact the transportation and logistics industry,” he noted. “The compliance costs associated with all the forthcoming rules and regulations will simply make many of the smaller firms less economically viable or not economically viable at all.”