FCA recommends 5.5% general rate increase

FORT ERIE, Ont. (June 28, 2002) — Canadian for-hire carriers will need to raise freight rates 5.5 per cent in order to offset rising operating costs like insurance, equipment, labour, and security, according to a group of trucking industry analysts.

The Tariff Advisory Committee of the Freight Carriers Association (FCA), a Fort Erie, Ont., group that monitors economic conditions in the industry, cited the Sept. 11 terrorist attacks as the primary cause of uncertain costs for trucking companies.

“The industry has also experienced a sharp increase in bad debts due to more and bigger bankruptcies in major activity sectors it is dependent upon,” the association said in a news release. “A rate increase to offset these cost increases is essential so the industry can continue to provide reliable and efficient service. … The committee therefore recommends a general increase in freight rates of 5.5% to become effective Monday, Aug. 5, 2002.”

Among the areas where costs are up sharply:

Insurance: Increased insurance premiums of 50 per cent or more, combined with increased spending on all aspects of security have increased carriers’ total cost by over 1% in some cases, the FCA said.

Labour: FCA estimated the labour cost increase to be 4.5 per cent, and the increase in training costs to be 2.6 per cent.

Equipment: Emissions standards that take effect in October “will significantly increase the cost of equipment as well as the cost of maintenance while it lowers fuel efficiency,” the group said. The lower value of the Canadian dollar also increases the cost of equipment.

Technology: Investment is required to remain competitive.

Bad debt: Severe bankruptcy rates among manufacturers, wholesalers, and retailers have increased bad debt among carriers. “The transportation and storage sector has itself has seen an increase of over 200 per cent in bankruptcy liabilities during the first quarter of 2002,” the FCA said.