We have heard and read about 90% discounts because of the excess capacity and rate wars that feature discounting approaching 90% off list rates. How do your discounts and FAK and base rate years compare?

    The Motor Carrier Act of 1980 prohibited rate bureaus from interfering with any carrier's rights to publish its own rates eliminated most restrictions on commodities that could be carried, and deregulated the routes that motor carriers could use and the geographic regions they could serve.
    The law (MCA 1980) authorized truckers to price freely within a "zone of reasonableness," meaning that truckers could increase or decrease rates from current levels by 15 percent without challenge, and encouraged them to make independent rate filings with even larger price changes. 

    Before this law was passed, the industry had simply passed along higher wages and operating costs to shippers. The law would have far-reaching consequences, causing price competition and lower profit margins.

    A result of the law was that the number of new trucking firms increased dramatically, especially low-cost, non-union carriers. The Carriers still continue to operate the same way they operated in the 1980 before the Motor Carrier Act, even with antitrust immunity eliminated in 2008.

    Do you have a 90% or have you EXCEEDED the 90% discount level? It depends on a variety of factors:
    • FAK (Freight All Kinds) rates, such as FAK Class 50 from Class 50 to Class100.
    • Exception rating on Class 100 to Class 50
    • Point to point or pallet rates.
    • Base rate year tariff: 1995, 1998, 2005, and 2010.
    • CZARLITE rates, Carrier Independent rates, custom rates, pallet rates, point to point rates.
    • Truckload stop off pricing

    Let’s do some actual class 100 rates based on a shipment from origin ZIP 30310 Atlanta Georgia, and destination Zip 38110 Memphis Tennessee. We will use a FAK Class 50 from Class 50 to Class 100, weight of 1000 pounds.
    Base Rate Year              Discount                   Amount paid
    2010 Carrier Base              90%                            $79.96 Benchmark rate, anything lower EXCEEDS 90% discount
    2005 Carrier Base              77%                            $79.37
    1998 Jan. CZARLITE          65%                            $75.16
    1995 CZARLITE                 55%                            $78.75

    We have a higher than 90% discount and a landed cost below the $79.96, 2010 year carrier base rate in these examples. It would appear that the FAK range, base rate year trump all in bottom line cost.

    The FAK is NOT a NMFC invention; it was started by carrier and shippers. Remember the lower your FAK Class, the lower your cost per hundred pounds and fuel surcharge, and the lower your release value coverage. (FAK 50 has a release Value of $1.11 per pound). 


    Hank Mullen can be reached at hank.mullen@dynarates.com or  www.dynarates.com

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