With what seems like an economic hurricane blasting through the liner shipping industry, it may seem quixotic to be focusing on the land side of the equation as the biggest threat to stability in the international container trade. But the storm clouds on the horizon are evident. Port cartage is the weakest link in the international supply chain, and the final miles from port to customer may soon become the longest and hardest of them all.

On March 16, Total Transportation Services Inc., one of the larger local truckers serving the Los Angeles-Long Beach port complex, declared bankruptcy. In its court filings, the company, which has 140 owner-operators, cited adverse legal decisions regarding driver misclassification as well as downward pricing pressure from some of its major clients as the major reasons for the decision to file.

One month earlier, intermodal powerhouse Hub Group discarded its employee-driver port cartage division, closing it a year after converting it from the owner-operator model under pressure from driver classification court challenges.

Unfortunately, those examples aren’t the worst case. In fewer than 20 months, on Dec. 18, 2017, all trucks will have to be equipped with electronic logging devices, black boxes that will track driver hours and provide regulators with easy access to the true operating picture whenever they need it. 

That date will mark the end of paper logs and, with them, an end to fudging, pencil whipping, “errors” and outright deception when it comes to compliance with truck driver hours-of-service regulations. It will have a big impact on over-the-road trucking, with productivity losses estimated at 5 percent or perhaps more. But the impact may be more severe on the port cartage sector, which is far more vulnerable and far less prepared than the long-haul types.

Many of the big long-haul carriers already have installed ELDs and have become experienced at managing in the new digital environment. That’s not the case with local port cartage carriers, which will be starting from scratch. In many respects, their task is far more difficult than the long-haul carriers, because there is so much variability in their operations, with turn times subject to port congestion, highway jams, chassis availability issues and shipper holdups. Once a long-haul driver gets a load, the future becomes fairly predictable. So many miles will be covered in the available hours, and whether the destination can be achieved within that time can be determined. 

Again, that’s not the case with the local port trucker. There is almost no consistency or predictability to their operations from load to load. The question is: What happens when a driver gets into a backup on the 405 or ends up in a long line at the gate and runs out of hours? 

The ELD potentially will put another nail in the coffin of the owner-operator model for port cartage, at least as we know it today. The owner-operators, in the form of the Owner-Operator Independent Driver Association, are fighting the mandate, and OOIDA in April filed a court challenge to the ELD rule. 

OOIDA successfully challenged a previous attempt to implement ELDs and it may succeed again, but I think it’s unlikely. The ELD mandate has solid support from safety advocates and a large portion of the trucking industry. And the Federal Motor Carrier Safety Administration presumably has learned from its previous failure and crafted the current regulation and its implementation with the lessons from the previous successful court challenge in mind. 

Assuming the mandate holds, there are two main areas where the ELD challenge will play out: capacity and cost. It’s an open question whether sufficient capacity will exist to avoid disruption when the mandate is implemented. But it’s clear that costs will increase. Shippers must be prepared to open their wallets because the current dysfunctional model simply won’t endure under the pressure.

The cracks in the status quo are plain to see, as illustrated by the events of recent months. Some shippers may choose for now to keep the rate pressure on, with the assumption that they will always be able to find capacity because there will always be another drayage carrier in the wings willing to jump in when the incumbent fails. These shippers will pay up only when it’s necessary. But those who are more risk-averse or more forward-looking may want to start talking to their port cartage suppliers now, to evaluate their readiness for what’s coming and to ensure that the containers will get moved when and if the crisis occurs. It may cost a few dollars more in the short run, but that may be money well spent.