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Transportation News Bulletins - LTL and TL

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BTS says surface trade with Mexico and Canada down 20.2 percent in September
Tuesday, 01 December 2009 00:00

WASHINGTON—Trade using surface transportation between the United States and its North American Free Trade Agreement (NAFTA) partners Canada and Mexico was down 20.2 percent in September 2009 compared to September 2008, falling to $57.3 billion, according to data released by the United States Department of Transportation's Bureau of Transportation Statistics (BTS).

This was the second time in the last nine months there was not a year-to-year decline of more than 27 percent. The BTS said the value of U.S. surface transportation trade with Canada and Mexico was up 5.6 percent from August to September of this year. BTS officials said that month-to-month changes can be affected by seasonal variations and other factors.

The BTS said that the value of U.S. surface transportation trade with Canada and Mexico in September was up 4.3 percent compared to September 2004 and up 32.1 percent compared to September 1999, with imports and exports up 27.2 percent and 38.4 percent, respectively, compared to September 1999.

Surface transportation, according to the BTS, is comprised mainly of freight movements by truck, trail, and pipeline, and nearly 90 percent of U.S. trade by value with Canada and Mexico moves by land.

The BTS said the value of U.S. surface transportation trade with Mexico fell 10.0 percent year over year in September at $22.5 billion. Imports carried by truck were valued 7.0 percent lower in September 2009 compared to September 2008, said the BTS, and the value of exports carried by truck was down 9.0 percent, matching July. And Texas led all states in surface trade with Mexico in January at $7.8 billion.

And the value of U.S. surface transportation trade with Canada was down 25.7 percent year-over-year in September at $34.8 billion. Imports carried by truck were valued 24.5 percent lower in September 2009 compared to September 2008, said the BTS, and the value of exports carried by truck was down 15.1 percent. Michigan paced all states in surface trade with Canada in April at $4.5 billion.

Logistics Management, 12/1/2009

Michigan Proposes Raising Tolls Up to 85% at Blue Water Bridge Crossing to Canada
Monday, 30 November 2009 00:00

Tolls could rise as much as 85% for trucks traveling across the Blue Water Bridge into Canada from Michigan as the state proposes to raise its rates higher than what Canada charges to make the reverse trip.

The Michigan Department of Transportation said it needs to reap $8 million to $10 million in additional toll revenues to maintain the bridge, which carries Interstate 69 traffic from Port Huron on the U.S. side to Sarnia, Ontario.

The toll increase, if adopted after public hearings, would take effect on Jan. 5.

Trucks that currently pay Michigan $1.75 per axle to cross the bridge to Canada would have to pay $3.25 per axle. Passenger cars would pay a flat $3 toll, compared with the $1.50 toll they now pay.

Trucks made 595,193 trips from Michigan into Canada through October, according to Blue Water Canada, which operates the approaches to the bridge on the Canadian side.

Walter Heinritzi, executive director of the Michigan Trucking Association, said the association has not yet taken a position on the increase.

He added, however, that “we are sensitive to appropriate funding to fund Michigan’s infrastructure.”

Trucking needs bridges and good roads, he said, adding, “That’s how our people make their living.”

On the Canadian side of the crossing, the Ontario Trucking Association issued a statement blasting the proposed toll rates and said it has filed a formal objection with MDOT.

“OTA considers it entirely unreasonable and inappropriate that an 85% price hike would be imposed in one fell swoop with such short notice,” OTA President David Bradley said in the statement.

“Given the current economic times and the stress that has already been imposed on Michigan-Ontario trade, increases of this magnitude are untimely, to say the least,” Bradley said.

OTA acknowledged that on the Canadian side of the bridge, tolls are higher than those currently paid on the U.S. side, with cars paying $2.50 U.S. and trucks paying $2.75 U.S. per axle to cross over into Michigan.

OTA also said in its statement that it recognizes the need to generate infrastructure maintenance funding. OTA suggested that if necessary, though, the higher tolls should be phased in over a longer period of time or delayed six months.

OTA said it plans to raise its concerns at the public hearings MDOT has scheduled on the new toll rates.

The first hearing is scheduled for Dec. 1 at the MDOT Lansing Transportation Service Center. The second hearing is Dec. 2 at the Travel Information Center in Point Edward, Ontario. Hearings are planned that same day at the Port Huron Municipal Building.

Until Feb. 15, the Blue Water Bridge is the only crossing available to truckers carrying hazardous materials or oversize loads through Detroit to Windsor, Ontario.

The truck ferry service that normally moves such loads, which are prohibited on the Ambassador Bridge, is temporarily out of service while a new dock and terminal are being built on the Windsor side.

Transport Topics, 11/30/2009

Experts Say Tax-Saving Opportunities Abound for Trucking Companies, Despite Weak Profits
Monday, 30 November 2009 00:00

This year has been tough on trucking profits, but a broad spectrum of accounting experts said there are many tax opportunities available to cushion the blow.

Nine tax and accounting professionals identified more than two dozen potential savings methods in interviews with Transport Topics.

These options include new tax-cutting strategies, faster depreciation opportunities and favorable tax treatment of assets. Experts also highlighted key state and employee tax issues.

“With the economy in the shape that it is, [companies] may think they have exhausted the need for federal tax planning because fewer and fewer have taxable income,” said Randolph Smith, transportation industry managing partner at Grant Thornton LLP. “In fact, the right time to do tax planning is times like these.”

Ken Evans, U.S. transportation and logistics leader for PricewaterhouseCoopers, agreed.

“As 2009 nears an end and industry profits are shrinking—or evaporating altogether—fleet executives should be paying even greater attention to tax and accounting issues,” Evans said.

One key change is a rule allowing faster depreciation of equipment, which lowers 2009 taxes, said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants.

“If [truckers] put equipment in service by the end of the year, they will get a much faster write-off,” he said. “You can’t assume Congress will extend this. People should take advantage of this right now.”

A trip to a fleet terminal from the dealer’s lot qualifies as putting equipment in service, Ochsenschlager said.

He said $425,000 in depreciation can be claimed this year for a $600,000 equipment purchase with a five-year life. The balance is spread over four years.

The rules affect purchases totaling up to $800,000, and benefits are diminished above that amount, he added.

Elsewhere, classifying workers as employees or independent contractors is a major issue, because the Internal Revenue Service plans to conduct 6,000 audits of businesses during 2010 and change the criteria for defining the difference, several experts told TT.

Taxes are affected because fleets have payroll and withholding taxes for employees, but not for contractors.

The IRS has indicated it will use new criteria, including operations and control over workers, to make the determination, instead of the 20-factor test used today, said Mike Muldoon, a tax partner at PricewaterhouseCoopers.

Increased audits might “have a disproportionate impact on smaller companies” that could feel forced to count workers as employees, Evans said, because they don’t want to risk fines or settlement costs that could be harder for them to afford.

“IRS is very famous for rolling over people,” Clint Harris, owner of K&R Harris Tax Service, Oklahoma City, told TT, as he urged fleets to keep careful track of expenses. “They are very famous for bullying you out of your deductions.”

A little-noticed provision of a Nov. 6 law extending unemployment benefits allows fleets with revenue more than $15 million to apply 2009 or 2008 losses to cut tax liability from up to five years earlier, when profits were higher.

The previous limit for that device, called “net operating loss carrybacks,” was two years.

Fleets with revenue less than $15 million can carry back losses from both years.

“2009 was not a good year for most trucking and logistics companies,” Evans said. “Companies should do anything they can to take advantage of carryback rules. This is something companies can do fairly quickly to protect their liquidity.”

Other regulations allow fleets to expense maintenance and repair items instead of capitalizing them, paving the way for a so-called “catch-up deduction,” Muldoon said. He added that move could increase the current annual loss and enhance the carryback’s benefit.

Timing is critical in other ways.

“Fleets have some critical decisions to make before they file [tax] returns,” Smith said, such as whether to take deductions and recognize revenue in 2009 or 2010 as key accounting differences that affect taxes.

“If 2010 is a better year—and we hope it will be—that would be a better time to take the deductions” than if 2009 profits are slim or nonexistent, said Richard Mikes, managing partner at Transport Capital Partners.

“We are in a situation where we expect taxes will go up,” said Tim Almack, partner at Katz Sapper Miller. “Clients might try to move deductions to 2010 because they expect taxes will be higher in that year. A lot of them are trying to decide whether to slow down depreciation.”

Leasing can be attractive now, Mikes said, because lessors with tax liability can benefit by charging lower rates to lessees.

Another equipment-related opportunity is minimizing the number of licensed trucks during difficult times, he said.

Fleets’ current financial challenges also require attention.

“We want to be sure they have the working capital to survive,” Almack said.

One area of concern, he said, is whether banks view companies that have sought or received waivers from loan covenants as a going concern.

Ochsenschlager said fleets whose debts have been modified by lenders can delay reporting any income arising from that modification until 2014.

Mikes, former chief financial officer of Ruan Leasing, offered a different perspective.

“I just don’t think people should be looking solely for tax deductions,” Mikes said. “It is more important for them to conserve the cash. If you are really managing cash properly right now, why would you spend $1 to get a 35-cent rebate [tax deduction]?”

Evans of Pricewaterhouse-Coopers had a similar view: “In the economy that we have had and continue to have, cash and access to cash and credit are extremely important for all transportation companies, no matter what their size.

“Until we see freight movement increasing, we are still in a very cautious and conservative management process of trying to conserve cash,” Evans said.

Bob Pitcher, a vice president with American Trucking Associations, urged fleets to take a broader perspective and pay attention to national tax issues now being debated in Congress, such as health care and climate change that would raise taxes and costs.

Another issue, he said, will be how to pay down a federal deficit swollen by stimulus spending.

Muldoon also spotlighted so-called “cost segregation,” which permits faster depreciation of portions of a larger asset such as a warehouse or major acquisition.

Property such as dock doors inside a warehouse can be depreciated in as little as five years, although the larger asset might have a 39-year life.

In a merger, Muldoon said, transaction cost analysis or similar items can be amortized, offering savings that aren’t available if they are treated as goodwill. That’s effectively the excess amount paid for an acquisition above the value of tangible assets.

Equipment valuations also are critical. Smith said differences between an asset’s tax value and its book value should be weighed with an eye toward deductions in the year it’s purchased.

So-called “like-kind exchanges,” in which companies that trade aging equipment for newer models, can defer the recognition of the gain as a result of trading in the equipment, Evans said.

Almack noted that writing down equipment from its book value to its net realizable value if it is held for sale should be considered to lower expenses.

Other recommendations mentioned by the experts:

  • Have—or obtain—expertise on tax/accounting matters.
  • Evaluate whether selling out now despite low valuations could pay off from a tax standpoint.
  • Be aware of alternative minimum tax exposure.

Mikes and Smith recommended that fleets assess their tax status as so-called “S” corporations or “C” corporations.

Mikes said one of the advantages of “C” corporations, which are popular with small family-owned fleets, is added flexibility in tax treatments on nontrucking income.

On the other hand, he and Smith said, the tax burden for an “S” corporation in the form of estate and gift taxes can be substantial and savings result from a conversion to “C” status.

Smith said switching to “S” status could save $70 million after tax for a $200 million annual revenue fleet with a steady growth rate, if principals sell out after 11 years have passed.

Transport Topics, 11/30/2009

Officials See Difficult Transition to VMT as Possible Replacement for Fuel Tax
Monday, 30 November 2009 00:00

WASHINGTON—Several lawmakers, Department of Transportation officials and experts have expressed concern with elements of a vehicle miles traveled tax, which some advocates tout as a replacement for the fuel tax. They also cautioned that a transition to VMT could be a slow process.

Roy Kienitz, DOT undersecretary for policy, said during a Nov. 18 briefing by the Senate Environment and Public Works Committee, any solution for overcoming declining revenue from the fuel tax would be “technically difficult and politically difficult.”

Kienitz was pressed by Sen. Tom Carper (D-Del.) about what DOT was doing “to prepare for a transition to a new sustainable funding stream.”

“It is a matter on which we’ve giving a fair amount of thought,” Kienitz said. He added that while DOT was “working really hard to prepare internally, none of that is something that’s become a proposal.”

Earlier this year, Transportation Secretary Ray LaHood floated the idea of a VMT charge as a replacement for the fuel tax, only to be rebuked by the White House.

Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, said she could not support a VMT fee, even though Congress will be looking at “a new sustainable source of funding” as it develops a new highway bill.

“It seems to me, within the VMT realm, without getting into those things that I would not vote for—which is meters in your car, and Big Brother checking in on you—I wouldn’t have any of that,” she said.

“There’s ways of having some kind of fees when you buy a car or you register a car, where you can say, ‘I’ve gone this many miles in the past’ and you pay your fair share. That’s all we’re asking for—your fair share,” Boxer said.

At the same time, Boxer acknowledged she had three hybrid cars—which she said is an example of why the fuel tax alone cannot meet the nation’s transportation funding needs.

“I drive a hybrid . . . and I am not paying my fair share at the gas pump and I’m using the roads,” she said.

Sen. George Voinovich (R-Ohio) agreed that Congress has “to look at other methods . . . because we are moving toward reducing the number of vehicle miles traveled.”

He said even though less fuel is being consumed, in the near term, nothing other than an increase in the fuel tax would generate “the dollars you need.”

“Most people in the House and Senate are all worried about a vote on an increase in the gas tax,” he said. “You can’t do it without increasing the gas tax. There’s just no other alternative.”

During the hearing, Boxer praised “the truckers” for stepping forward to “look at a higher tax for gas . . . because they are so desperate to get the roads fixed up.”

Groups including American Trucking Associations have said they favor an increase in the fuel tax over other methods, such as tolling or a VMT, to pay for infrastructure.

At a National Journal-hosted policy lunch, Deron Lovaas, federal transportation policy director at the Natural Resources Defense Council, said road pricing and mileage fees are slowly gaining traction because there is “a growing consensus about the need to price transportation goods which will help to reduce emissions and improve traffic flow.”

Also at the Nov. 17 event was lawyer Jack Schenendorf, who was vice chairman of one of two congressional commissions that studied transportation finance. Though both commissions backed use of a VMT tax, he said the transition would take time.

“There’s no way to institute a large-scale pricing system in a two-year time frame,” he said “It is going to take a lot longer than that.”

Transport Topics, 11/30/2009

In the blink of an eye
Monday, 30 November 2009 00:00

Many fleets consider their mobile communication devices to be essential tools for managing drivers. But according to a new study, these devices actually multiply the risk of safety-critical events.

The Federal Motor Carrier Safety Administration contracted with the Virginia Tech Transportation Institute to study the relationship between distraction and safety-critical events. Commercial drivers were videotaped during their regular workday. Researchers correlated the behavior they observed in the cab with safety-critical events, defined as a crash, near crash or unintentional lane deviation.

The results found that drivers who sent text messages on a cell phone were 22 percent more likely to have a safety-critical event, while drivers who interacted with a dispatch device were 10 percent more at risk of having a safety-critical event than truckers who did not use these devices. The devices observed in the data set included a small keyboard; drivers often placed this keyboard on their steering wheels and typed with one or both hands while driving.

This study was released in late September just before the U.S. Department of Transportation’s two-day distracted driving summit in Washington, D.C. At the summit’s conclusion, Transportation Secretary Ray LaHood announced that DOT would seek to ban text messaging and restrict the use of cell phones by truck drivers as one of a series of steps to reduce highway deaths.

LaHood said items such as onboard computing or communications devices would be subject to some restrictions in a regulation that DOT would write “soon.” While DOT has the authority to regulate only commercial drivers, the American Trucking Associations supports federal legislation that would ban texting by all drivers. Such a bill already is under way and is sponsored by Sen. Chuck Schumer (D-N.Y.).

But any federal or state law—as well as a company policy—that bans drivers from texting is difficult to enforce. Besides the concern for public safety, fleets also have to consider the legal exposure of having records tying a driver to a conversation with dispatch while he was driving or supposed to be in a sleeper berth.

Fleets can exercise much more control over dispatch devices than cell phones. Many of today’s onboard computing platforms can be set to restrict drivers’ ability to write or read messages while the vehicle is in motion. They also can use text-to-voice technology so drivers can hear incoming messages and follow spoken turn-by-turn directions for navigation.

But perhaps the only way to really know if drivers are distracted is to record their behavior in the cab. Some carriers now are using in-cab palm-sized video event recorders (VERs) that are triggered by events such as hard braking, speeding and swerving. The devices record events both inside and outside the cab.

Through a wireless network, these video and audio snippets of risky events are passed from the vehicle to a third party that analyzes and scores each event, after which fleet managers can go to a website to view the clips and see coaching comments.

Ironwood, Mich.-based flatbed hauler James Burg Trucking uses such a system to manage drivers among its 70 trucks. “I’ve seen cases of a driver texting or someone in the cab (with them),” company president Jim Burg told attendees at last month’s American Trucking Associations Management Conference and Exhibition in Las Vegas. Burg said that within 90 days of using the system, the company’s number of safety-critical events dropped by 50 percent because drivers knew they were being recorded.

DriveCam has amassed a VER-based database of more than 14.5 million safety events. Driver distraction is the cause of about 10 percent of these events; 54 percent are due to cell phones, says Eric Cohen, marketing manager.

Now and going forward, the types of mobile devices and applications fleets use to improve driver productivity also should eliminate any distractions that would cause drivers to take their eyes off the road.

Commercial Carrier Journal, 11/2009

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