LC M. :64/21> % * “ 0:. IE? 7630191 3:. I M W€as3§1§ng5ftIi>;°} Uniwéérflitxr I S 1] «=7 -;I:‘2<.:‘wg kj.\f‘ ;J_ bl -fir?‘ ‘ '(;:E. R ,, .5 I I IlllllliiliiilifiiljI[E07jI[Li@I[@[MflflilFIfliiIIIIIII! TRUCKING: ECONOMIC REGULATION ISSUE BRIEF NUMBER IB760l9 AUTHOR: Stephen J Thompson Economics Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE MAJOR ISSUES SYSTEM ODATE ORIGINATED O3/25/76 DATE UPDATED 03/O2/82 FOR ADDITIONAL INFORMATION CALL 287-5700 0305 CRS- 1 IB760l9 UPDATE-O3/O2/82 ISSUE DEFINITION The Motor Carrier Act of I980 significantly reduced the amount of Federal economic regulation of interstate trucking. Changes in trucking regulation, and public debate over these changes, continues to) receive a considerable amount of interest in Congress. This issue brief discusses (l) characteristics of the trucking industry as they relate to economic regulation; (2) the Motor Carrier Act of I980, and (3) the continuing changes in economic regulation of trucking by the Interstate Commerce Commission (ICC). BACKGROUND AND POLICY ANALYSIS CHARACTERISTICS OF THE TRUCKING INDUSTRY The interstate trucking industry is composed of private carriers, ICC-regulated carriers, exempt carriers, and independent truckers sometimes also known as owner-operators. Private carriers are truckers who carry only commodities which they own. Private carriers are not allowed to carry commodities "for hire," except that they may transport commodities for wholly-owned subsidiary companies. Two categories of interstate truckers are regulated by the Interstate Commerce Commission: common carriers and contract carriers. Common carriers must accept all traffic which is tendered to them and which is within their operating authority. (The ICC currently has a rulemaking procedure underway that could reduce this obligation in the future.) Contract carriers provide specialized transport commodities for firms with which they have a signed contract. Some trucking, such as local newspaper delivery, and some commodities, such as certain agricultural commodities, are exempt from ICC regulation. Anyone can transport agriculturally exempt commodities in interstate commerce without obtaining ICC authority to do so. Agricultural cooperatives are allowed to obtain a limited amount of revenue by hauling regulated commodities "for hire." Much of the agriculturally exempt traffic is carried by truckers who own one, or a few trucks. These truckers are known as "independent truckers" or "owner-operators." ‘Many ownereoperators carry ICC—regulated commodities. They can do so by leasing their equipment (including the services of the driver) to ICC—regulated carriers. Owner-operators may transport regulated commodities, without a lease with a regulated trucker, so long as the owner is in the truck during the trip. Estimates of the number of owner-operators vary from 90,000 to 300,000. There are about 17,000 ICC-regulated trucking firms employing about 300,000 employees. About half the ICC-regulated traffic is estimated to be carried by owner-operators under lease agreements with ICC—regulated carriers. THE MOTOR CARRIER ACT OF 1980 On July l, 1980, President Carter signed the Motor Carrier Act of l980 P.L. 96-296 (94 stat. 793). The new law significantly reduced the amount of CRS- 2 IB760l9 UPDATE*O3/O2/82 economic regulation of trucking by the Interstate Commerce Commisssion (ICC)., The ICC, on July 3, 1980, began implementing the new law by issuing several notices of proposed rulemaking. The new law (1) made it much easier to obtain new operating authority; (2) limited the operations of rate bureaus; (3) allowed owner-operators to carry regulated commodities under certain conditions without a lease agreement with a regulated trucker; (4) tried to reduce abuses in the loading and unloading of commodities transported by owner-operators; (5) eliminated some restrictions in operating authorities; (6) provided for a study of trucking service to small communities; and (7) provided for annual Congressional oversight hearings for five years on the impact the Motor Carrier Act of 1980 is having on shippers and carriers. The Reed-Bulwinkle Act of 1948 protects motor carriers from «antitrust actions when setting rates through group action. This protection has been somewhat reduced by the Motor Carrier Act of 1980, and a further reduction is scheduled to take effect in 1984 as mandated by the 1980 act. Entry is regulated by the ICC, but entry requirements have been relaxed considerably as a result of the Motor Carrier Act of 1980, and the ICC has proposed to reduce these requirements further by eliminating the requirement that an applicant show the relationship of his application to the "public convenience and necessity" provision under current law. . As soon as the Motor Carrier Act of 1980 was enacted, a deregulation—minded ICC began immediately to implement trucking deregulation. However, most of those commissioners have now left the Commission and a new commissioner has been appointed chairman of the ICC by President Reagan. The new Chairman, Mr. Reese Taylor, is said by most proponents of deregulation to be reversing the deregulation that occurred both prior and subsequent to enactment of the Motor Carrier Act of 1980. some of Mr. Taylor's critics charge that he was appointed ICC Chairman as payment of a political debt from President Reagan to the Teamsters for their support during Mr. Reagan's presidential campaign. Perhaps there is support in Congress for more deregulation of trucking than is occurring under the 1980 Act. One indication of such a position is contained in the Joint Economic Committee's annual report released in February 1982. In the report, Committee "Democrats and Republicans agreed that trucking deregulation should continue as rapidly as possible." (Journal of Commerce, Feb. 26, 1982, p. 3A.) In the annual report "Committee Democrats said ‘the Interstate Commerce Commission, under Chairman Reese Taylor, has moved abruptly and dramatically to reinstall cartel-like restrictions on the trucking industry, to the detriment of independent truckers, shippers, and consumers. The President should give explicit guidance to the (ICC) that it return to a policy of free entry, free price-setting and free competition in the trucking industry....’" Republican members of the Joint Economic Committee said "legislation enacted in 1980 on trucking deregulation (should) be fully implemented as soon as possible." I Mr. Taylor has responded in several ways to criticism that he has not deregulated trucking fast enough. First, he notes that the 1980 Act does not completely deregulate trucking but only reduces regulation. He reminds his critics that he is legally bound to follow all statutory requirements regarding trucking regulation. Second, he has requested that Congress change CRS- 3 IB760l9 UPDATE-O3/O2/82 the law that requires the ICC to determine whether an application for trucking operating authority is consistent with the "public convenience and necessity." He takes the position that the "p.c. & n. test," as it is called, is burdensome and not helpful. His critics say that if the requirement is dropped, the result could be more regulation or less regulation, depending upon the interpretation given by the ICC to the other test for obtaining trucking operating authority known as the "fitness test." Third, Mr. Taylor apparently is shifting the use of money and staff at the ICC to focus on broad or serious violations about which complaints have been received by the ICC rather than acting on its own initiative to find violations -- in freight rates on file with the ICC, for example- -- about which no complaints have been received. I LEGISLATION N/A HEARINGS U.S. Congress. Senate. Committee on Commerce, Science and Transportation Motor Carrier Reform Act of 1980. Hearings, 97th Congress, lst session. June 18 and July 9, 1981. Washington U.S. Govt. Print. Off., 1981. 273 p. Serial No. 97-58. REPORTS AND CONGRESSIONAL DOCUMENTS U.S. Congress. senate. Committee on Commerce, Science, and Transportation. Motor Carrier Reform Act of 1980. Report on S. 2245. Report no. 96-641. Calendar no. 684. Washington, U.S. Govt. Print. Off., 1980. 117 p. (96th Congress, 2d session). CHRONOLOGY OF EVENTS 02/00/82 -- The Joint Economic Committee issued its annual report in which the Committee's Democrats and Republicans agreed that trucking deregulation should continue as rapidly as possible. ‘ 11/17/81 -- The Joint Economic Committee held one day of hearings on the deregulation activities of the ICC pursuant to the Motor Carrier Act of 1980. 05/00/81 -- Both Houses began oversight hearings on the impact of the Motor Carrier Act of 1980. 07/00/80 -- The ICC began immediately to implement the new Act by issuing several proposed rulemaking procedures. 07/01/80 -- President Carter signed The Motor Carrier Act of 1980, significantly reducing the economic regulation CRS- 4 IB760l9 UPDATE-O3/O2/82 of trucking by the ICC. ADDITIONAL REFERENCE SOURCES Please note that the following bibliography has been supplemented by a 18 page CRS Special Report entitled "Trucking .Regu1ation: A Selected Bibliography" by Stephen J Thompson, March 1982. U.S. Library of Congress. Congressional Research Service. Drief Summary of the Motor Carrier Act of 1980 (P.L. 96-296), by Stephen J Thompson. Washington, October 1981. CRS typed report. 11 p. Costs and benefits of Federal regulation: an overview, by Julius W. Allen. Washington, July 19, 1978. CRS Report No. 78-152E. pp. regulation of transportation. 64-77 discuss Estimating the costs and benefits of Federal regulation: review of problems and accomplishments to date, by Julius W. Allen. Washington, September 26, 1978. CRS Report No. 78-205E. pp. 63-74 discuss regulation of surface freight transportation. Intrastate trucking: Stephen J Thompson. CRS Special Report No. economic regulation by States, Washington, October 23, 1978. FY79E-2. 19 p. DY Reducing Interstate Commerce Commission (ICC) entry and rate control over owner-operator truckers; H.R. 2777, by Stephen J Thompson. Washington, April 27, 1979. CRS Economics Division Report. 7 p. Trucking deregulation: a pro and con discussion, by Stephen J Thompson. Washington, Jan. 30, 1979. CRS Report No. 79-33E. 16 p. Trucking rate bureaus, by Stephen J Thompson. Washington, Feb. 26, 1979 and revised October 17, 1979. CRS Report No. 79-57E. 13 p.