House committee report calls for delay of ELD implementation

While the Federal Motor Carrier Safety Administration’s (FMCSA) Electronic Logging Device mandate remains on track to take effect this coming December, the House Appropriation’s Subcommittee on Transportation, Housing & Urban Development and Related Agencies issued a report that directs the FMCSA to consider delaying the implementation of ELD, according to a research note issued by investment firm Stephens this week.

The report, which is part of the House committee’s proposed Fiscal Year 2018 budget, focuses on the regulatory compliance burdens on small carriers while directing the FMCSA to consider delaying ELD implementation, the Stephens note stated.

FMCSA formally announced in late 2016 that the federal mandate for electronic logging devices (ELD) for commercial motor carriers was official and would take effect in December 2017, basically confirming the inevitable in some ways within the freight transportation and logistics sectors. The objective of the rule, according to FMCSA, is to strengthen commercial truck and bus drivers’ compliance with hours-of-service (HOS) regulations that combat fatigue. The rule will take full effect on December 10, 2017, two years after the date of the final rule being issued. ELDs automatically record driving time and monitor engine hours, vehicle movement, miles driven, and location information.

Many trucking observers maintain that the need for ELDs is obvious, with most explaining that the industry has been reliant on paper logs for far too long. And there could likely be economic benefits through ELD usage, as observers say it could likely reduce the effective number of miles a driver could log, further tightening trucking capacity at a time of ongoing limited truck driver supply, rising pay, and higher overall fleet costs.

"In light of the heavy burden of this mandate, especially on small carriers, the Committee directs the Department to analyze whether a full or targeted delay in ELD implementation and enforcement would be appropriate and, if so, what options DOT has within it statutory authority to provide temporary regulatory relief until all ELD implementation challenges can be resolved,” the House committee said. “FMCSA shall provide a report on its findings to the House and Senate Committees on Appropriations within 60 days of enactment of this Act."

Despite the House committee’s intent of delaying the ELD implementation, Stephens wrote that the likelihood of DOT delaying or suspending the ELD mandate is negligible.

In its report, the House committee said that the cost of compliance for ELD implementation is projected to exceed $2 billion, a figure Stephens said was overstated. And it added that “while large carriers already deploy similar technologies for fleet management, smaller carriers will disproportionately bear new costs associated with the mandate and with no compensating benefit to their bottom line.”

Stephens went on to explain that based on FMCSA estimates, average costs of an ELD are around $495 per truck, coupled with a total range of $165-$800 per truck on an annualized basis. The firm said it believes ELD benefits could potentially outweigh the costs, with time spent on paperwork alone potentially being reduced by around 20 hours per year. And as ELD become commoditized, Stephens said that related costs of owning and operating an ELD will continue to head down.  

Mike Regan, chief relationship officer at TranzAct Technologies, said in a previous interview that the impact of the ELD rule on truckload capacity is still to be determined, given the implementation period.

“There are those that say this is actually a good thing for capacity, because many large carrier are already using ELDs are going to be able to determine where their trucks are,” he said. “In the quest for the ‘Uberization’ of trucks, this rule may be something that facilitates that push. But the real wildcard is that nobody knows just how much capacity is running illegally right now, so you can speculate on that. Some large carriers already using them say it has reduced their capacity by 3-to-5 percent.”

This sentiment by such a respected figure in the trucking industry highlights how the ELD mandate remains top of mind from a regulatory and operational perspective.

Stephens Inc. analyst Brad Delco commented in a 2016 research note that ELDs will more effectively and efficiently track a driver's Hours-of-Service (HOS) duty status, while helping to prevent the intentional falsification of records.   

“As a result, we believe there will be a leveling of the competitive playing field, which will give no carrier a distinct advantage over another due to falsifying log books,” he wrote. “We believe this will result in a more rational pricing environment where best-in-breed carriers with a low-cost operation can compete by having greater flexibility to raise driver pay per mile, which historically could have been trumped by a driver running more (albeit illegal) miles.”

What’s more, Delco said that by his firm’s estimates, around 70 percent of the industry is without ELDs, explaining that the falsifying of logbooks is prevalent, with the ELD mandate expected to reduce capacity by up to 10 percent in utilization, and will have a positive impact on supply/demand dynamics for the entire TL industry, which could be in addition to supply correction that is occurring with weak equipment orders.