Carriers are back in the driver's seat. New hours-of-service regulations, tight capacity and an improving economy have made it possible for many carriers to charge detention fees, charges not seen on such a wide scale since the industry was regulated. These fees, carriers hope, will help make up for the 2% to 19% loss in productivity many in the industry expect because of the new hours rules.
Although we've only experienced results for the first quarter (and it's often the slowest of the year), carriers have not only charged shippers detention fees but early anecdotal reports indicate they've also begun to effectively collect them.
“This has been a tremendous success,” says Mark Rourke, vp, Brokerage Services Div. for Schneider National. “It's too early, so we don't have exact numbers yet on collections, but we're billing hundreds of thousands of dollars a week and we're collecting.”
Like others, Rourke credits early education efforts by carriers in helping shippers understand and tolerate detention fees. “This is one of the most accepted changes in the shipping industry,” he adds.
Publicly, shippers are a bit less vocal about detention fees. “We have not received a lot of feedback on fees,” notes Peter Gatti, exec. vp of the National Industrial Transportation League, whose 600 members represent some of the world's largest shippers. He would not speculate on whether this apparent lack of interest means that shippers are resigned to detention fees or that they believe they can rein them in by improving efficiency.
While shippers may be able to reduce detention fees, they can do little about the expected 6% to 8% rise in freight rates this year. “We have seen great concern from members about under-capacity, especially in the truckload segment, and there's been an upward spiral on rates.” He adds: “We're going to have some meetings about higher rates, but right now I can't dissect it and peg them to the hours-of-services rules.”
Notes an official of a large shipper: “It's simple supply and demand.”
According to most carriers, the average detention fee is running about $60 an hour after a one-hour grace period, but one question that arises is whether drivers are sharing in the detention fee bounty. Some carriers have raised driver pay in anticipation of collecting fees, but not all.
Owner-operators may be in the worst position. “More and more freight is moving through brokers who are taking the detention fee and not giving it to the driver or the carrier,” says Todd Spencer, exec. vp of the Owner-Operator Independent Drivers Assn. Says Spencer of the group's 102,000 members: “Some drivers are seeing detention fees and some are not.” He warns: “More carriers are billing for detention fees than ever in the past, and drivers had better negotiate a detention charge before they accept a load.”
For now, carriers have successfully instituted detention fees, mitigating an unfair situation in which shippers have for a long time undervalued and even abused carriers' and drivers' time.
Under-capacity, a growing economy and HOS rules have given carriers muscle to raise rates and discriminate among shippers, casting aside those who are less efficient about loading and unloading, but whether detention fees become permanently ingrained in the shipper/carrier world remains to be seen.
“Carriers can do a strutting rooster walk because they have us over a barrel on fees and rates. There's less capacity and the economy is growing, but that will eventually change,” says one shipper. “It always cycles around.”