NASSTRAC supports Highway Bill, opposes fuel surcharge provision

On March 10, 2005, the House of Representatives passed its version of a new Highway Bill, H.R.3, Transportation Equity Act: A Legacy for Users. In most respects, the National Small Shipments Traffic Conference (NASSTRAC) supported the bill. Additional funding for the nation’s highways and other infrastructure needs is needed and welcomed by NASSTRAC members, who urge the Senate to move forward on highway funding legislation quickly. However, NASSTRAC opposes a provision in a late amendment to H.R.3 which mandates fuel surcharges in contracts between truckload motor carriers, brokers and freight forwarders and their shipper customers.

The provision mandates fuel surcharges in truckload (TL) contracts based on prices exceeding a “Benchmark Price” for diesel of $1.10 per gallon. The surcharges may be collected based on mileage or on a percentage of the rate “or in any other manner the motor carrier, broker or freight forwarder elects.” The surcharge would end when diesel falls to $1.15 or less. There is no provision for indexing, and the surcharge could end up being permanent.

NASSTRAC does not oppose voluntary fuel surcharges, and many NASSTRAC members have agreed to such provisions in their contracts. The fuel surcharge provision does not apply to existing TL contracts that provide for fuel surcharges or adjustments, but will apply to all future contracts. The fact remains that a mandatory fuel surcharge is inconsistent with a deregulated marketplace for trucking.

Fuel costs are a cost of doing business not just for trucking companies but also for other carriers, and not just for carriers but also for many other businesses. NASSTRAC sees no reason why motor carriers but not other carriers, or other businesses, should be guaranteed recovery of cost increases under federal law.

Other inputs - electric power, natural gas, and thousands of raw materials - must also be paid for in conducting business. Recovery of cost increases for these inputs is not guaranteed by law. This provision is special interest legislation protecting certain carriers from the effects of inflation as to one input, at the expense of shippers and consumers.

Whether fuel cost increases should be recovered by carriers from shippers, and if so, how, is better decided through private negotiations in the marketplace.