The July 1 implementation of long-awaited changes to hours-of-service (HOS) rules isn’t expected to be a completely smooth ride, as both industry and law enforcement will need to make significant adjustments to accommodate them.

“We expect there will be some growing pains with this,” Steven Keppler, executive director for the Commercial Vehicle Safety Alliance (CVSA), told Fleet Owner. “The changes are not too complicated but they do impact a truck driver’s work day. And from the enforcement side, the changes create additional work for our folks in terms of logbook data reviews.”

By contrast, during last week’s Roadcheck 2013 “kickoff event” held at the FedEx Field football stadium in Landover, MD, Anne Ferro, administrator of the Federal Motor Carrier Safety Administration (FMCSA), told Fleet Owner that she didn’t think there would be too much disruption caused by the HOS changes.

“We think HOS reform is going to go smoothly; the vast majority of carriers and drivers are informed about the changes,” she said. “We recognize that these [HOS] changes will significantly affect 7% to 10% of the driver population but we believe carriers are making adjustments to compensate for that.”

CVSA’s Keppler pointed out that his group helped distributed 75,000 three-by-five information cards detailing the upcoming changes to HOS rules during the June 4 through 6 Roadcheck safety blitz – and that his organization ended up receiving several follow-up phone calls from drivers and carriers alike unaware of the impending rule changes and seeking more details.

“A number of carriers called us to ask for more information, so it just shows that despite as much outreach as you do, there are still folks that remain uninformed,” he said. “In some ways, though, we almost have too much information out there scattered about on too many websites, and with the many court challenges to the rule changes, many may have been second-guessing what might really happen.”

The changes due to occur July 1 cover several aspects of current HOS rules:

  • The reforms limit a driver's work week to 70 hours within a seven-day period, whereas under current rules, truck drivers can work on average up to 82 hours
  • Starting July 1, truck drivers cannot drive after working eight hours without first taking a break of at least 30 minutes. Drivers can take the 30-minute break whenever they need rest during the eight-hour window.
  • The reforms will require truck drivers who maximize their weekly work hours to take at least two “night-rest” periods from 1:00 a.m. to 5:00 a.m. This “night-rest” requirement is part of the rule's "34-hour restart" provision that allows drivers to restart the clock on their work week by taking at least 34 consecutive hours off-duty.
  • Drivers can only use restart provision only once during a seven-day period.

Most freight experts believe the rule changes will reduce trucking productivity, leading to far tighter truck capacity. However, that may not be an entirely bad thing for the industry as those same experts think tighter capacity will allow carriers to win rate increases.

 “We still think there will be a [trucking] productivity hit of 3% due to the HOS rule changes, with some segments felling it harder than others, but that’s enough to help change the rate environment,” Jonathan Starks, transportation analyst for FTR Associates, told Fleet Owner.

Starks noted that while freight volumes have been growing, albeit slowly, the trucking industry has only been able to win rate increases in the 1% to 2% range. “It really takes an operational change to spur rate changes,” he said. “The [trucking] market already is experiencing tight capacity since the latter half of 2012. So with the HOS changes occurring, we should see momentum for higher rates build in the second half of the year.”

Richard Mikes, managing partner of Transport Capital Partners (TCP), noted last month during a webinar hosted by Wall Street investment firm Stifel Nicolaus that he thinks HOS reform should reduce TL productivity by 1.4% to 4%, further limiting capacity – and added to the regulatory pressure posed by FMCSA’s Compliance Safety Accountability (CSA) program and the acute shortage of drivers, a “capacity crunch” will be significant and hit quickly.

“We are just absolutely tight on capacity right now,” he said. “It won’t take much [freight] demand to generate a [capacity] shortage.”

John Larkin, Stifel’s head of transportation capital markets research, noted that with “flattish demand” and “flattish supply” characterizing the current environment, the TL industry appears to be right on the cusp of a capacity shortfall.

Any one of a number of factors could push up demand, he explained during the webinar, from pent up demand from the delayed arrival of spring this year, the acceleration of the rate of new home construction, or Hurricane Sandy rebuilding efforts.

There could also be a “push down” in supply as well, resulting from the aforementioned impact of HOS changes, the ever-worsening driver recruiting and retention battle, the failure of small/disadvantaged carriers.

“Either would thereby tighten supply and demand even if the economy continues to grow only at a modest 1.5% to 2% GDP [gross domestic product] growth rate or better,” Larkin pointed out. “With tightening supply and demand, the potential for improved rate increases improves and we think that rate increases will then once again outstrip the rate of cost increases, especially for large TL carriers.”