March 2006 | Commentary | Fine Print

2005: Happy or Unhappy Anniversary?

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William J. Augello, Esq. is an adjunct professor at the University of Arizona's College of Law and author of Transportation, Logistics and the Law.

Last year marked the anniversary of several laws and events that revolutionized transportation regulation in the United States:

  • The 10th anniversary of the Interstate Commerce Commission's (ICC) demise.
  • The 25th anniversary of deregulation in the railroad industry.
  • The 25th anniversary of partial deregulation in the motor carrier industry.
  • The 28th anniversary of deregulation in the air cargo industry.
  • The 50th anniversary of the first sailing of a containership developed by Malcolm McLean.

But has deregulation benefitted the nation? Does Congress need to revisit the regulatory system? Before arriving at a conclusion, it helps to weigh the known outcomes of some of these acts:

1. As a result of the ICC's dissolution on Jan. 1, 1996, no government agency has a mandate to protect the shipping public. The few remaining legal regulatory protections were transferred to the Department of Transportation, with direction from Congress not to allocate scarce resources to resolve private disputes. As a result, shippers must turn to the courts to enforce whatever remedies remain in the law—not a practical or cost-effective way to resolve most transportation disputes.

2. The Federal Motor Carrier Safety Administration has ignored Congress' directive to eliminate the distinction between common and contract carriers.

3. The Surface Transportation Board has refused to exercise its statutory duty to adjudicate billing disputes.

4. Motor carriers have eroded the traditional liability limitations that pre-vailed under the Carmack Amendment, and have published limitations that the ICC formerly refused to permit.

5. Mergers and bankruptcies within the motor carrier industry have led to fewer sources for nationwide LTL coverage. Fuel surcharges, driver shortages, and insurance costs have reduced the pool of equipment available to shippers.

6. Railroads have practically eliminated the payment of loss and damage claims through numerous exculpatory clauses in their tariffs, exempt circulars, and contracts.

7. Consolidation within the rail industry has reduced shippers' options to only a few major railroads, resulting in many disgruntled "captive shippers."

8. Only one major U.S. airline, American Airlines, is solvent.

9. Foreign interests have purchased all U.S. ocean liners, and now the management of several major U.S. ports may be transferred to a UAE-based firm.

On the positive side, transportation and logistics costs have been substantially reduced since these major changes in transportation regulation. Motor carriers frequently offer shippers highly discounted rates, although small, unsophisticated shippers that lack transportation and logistics training are often still at the mercy of their carriers.

Finding Protection

Many shippers have learned to use contracts with their carriers to protect themselves against disputes over issues such as loss, damage, or delay claims; rates or tariffs; insurance coverage (or lack thereof); liability for freight charge payments; and failure to meet service commitments, among others.

One dark cloud is forming, however, over shippers, brokers and 3PLs: the Schramm decision. This recent court ruling states that the people who hire a trucker may be held liable for damages caused by the trucker if there is any evidence of negligence in their safety record. (See "A New Load of Liability Concerns," Inbound Logistics, May 2005.)

Only time will tell whether these developments of the past quarter-century have been in the shipping community's best interest, or whether it is time for Congress to conduct oversight hearings to determine if the current system needs fine-tuning to become more shipper-friendly.

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