ABF Starts California Freight Surcharge
This story appears in the May 2 print edition of Transport Topics.
ABF Freight System has instituted a $5.92 surcharge for each shipment going to or from California because of the higher cost of doing business in the state.
“Like all companies in our industry, ABF Freight makes pricing adjustments from time to time based on changing conditions in order to appropriately reflect the cost of doing business in various regions,” said ABF spokeswoman Kathy Fieweger, who declined to elaborate.
ABF’s surcharge, seen as groundbreaking, raised concerns among com- petitors and transportation analysts.
“I can understand why they would feel they would need to be compensated for the additional costs of doing business in California, such as higher taxes and wages, higher residential and industrial property costs, substantial traffic congestion and more frequent and costlier litigation,” Ron Massman, CEO of the Dependable Cos., a Los Angeles-based carrier that does 80% of its less-than-truckload business in California, told Transport Topics. “But if I did this, I wouldn’t do it in the same way that they’ve chosen to do it. A fixed charge per shipment doesn’t seem to be the most efficient way to recover those costs.”
Satish Jindel, president of SJ Consulting Group, agreed.
“There are additional costs for companies doing business in California, and ABF is just looking to recover those costs,” said Jindel, citing regulations governing emissions, trailer refrigeration units, meal and rest breaks and independent contractors. “I’m glad they took the lead. I expect others to follow.”
But he said the $5.92 per shipment doesn’t make sense. “If I have a shipment of $100, that’s 6%, but if it’s a $1,000 shipment, that’s just 0.6%. That doesn’t seem right since it’s using up more of my truck.”
Instead, he said that he would recommend a percentage of every shipment, 2% or 3%. “It affects every carrier so every carrier should be looking to recover those costs.”
Chuck Clowdis, managing director for transportation for IHS Economics & Country Risk, noted that carriers have long charged more for such services as delivering into congested areas such as midtown Manhattan or on weekends. However, Clowdis told TT that he had never previously encountered a charge like ABF’s during his 36 years in transportation.
“This is the first time someone has said to the shipper, ‘We need more money to go to every location in a large state like California, not just a severely congested, or defined area, like downtown Washington, D.C., Manhattan or The Loop [in Chicago],” Clowdis said.
Clowdis said he understands special emissions controls on California trucks, which can’t predate 2008, cost about $16,000 to $20,000 to install per vehicle, but said he’s still baffled by the timing and price.
“Why now?” Clowdis said. “Why $5.92 per shipment? How much added cost does $5.92 compensate? All it does is [tick] off the shipper.”
