Q: We have a large customer with distribution facilities in Southern California that insists on charging us “commercial zone charges” even though those no longer are applicable in the Los Angeles area.
I believe commercial zones were created and monitored by the old Interstate Commerce Commission, and once deregulation rolled around most of the ICC functions were discontinued.
What can we use to push back on that customer that commercial zone charges in Southern California went the way of the dodo bird?
A: I sympathize, but you have several things wrong, and you’re looking in the wrong direction for your solution.
Although the former ICC was indeed responsible for defining commercial zones, the concept didn’t originate there. It was, and still is, to be found in the underlying statute, where it serves the purpose of identifying what motor carrier operations are and what aren’t to be defined as in “interstate or foreign commerce,” and thus subject to federal regulatory authority. See 49 U.S.C. Section 13901, which spells out that operations within the commercial zone of a metropolis are deemed to be operations within the metropolis itself, and thus federally exempt.
So, commercial zones necessarily still exist, even in Southern California; Code of Federal Regulations, 49 CFR Part 372. Regarding the ICC’s demise, the definitions didn’t simply go up in smoke; their maintenance was originally transferred to the Federal Highway Administration and, a few years later, retransferred to the Federal Motor Carrier Safety Administration of the U.S. Department of Transportation.
Granted, the FMCSA doesn’t exactly take this responsibility very seriously. The definitions are old and outmoded and are unlikely (in the extreme!) to ever be redone. But, antiquated as they are, they remain on the books; unlike the dodo, they continue to live in this world.
Now, as I said, the purpose of commercial zones was simply to establish the limits of federal jurisdiction; it had nothing to do with carrier rates or charges. It was, however, co-opted by carriers for that purpose back in the regulatory era, and in your case that practice has survived to the present day.
Why would carriers assess surcharges for pickups and deliveries within a commercial zone? There are some operational reasons, mainly relating to the traffic congestion, problems with parking, etc., commonly found in crowded commercial areas. But, of course, these things don’t begin and end abruptly with the demarcation of regulation-defined commercial zones, especially those whose borders are decades old.
No, the main reason is simply because they can. In days of yore, when carriers had to justify rates before a critical ICC, this was a differential they found they could support. So they jumped on it, and additional commercial zone charges became the norm of rate-making, and shippers came to accept it. When rate regulation diminished and ultimately vanished, the acceptance remained, so why would carriers voluntarily abjure the practice?
That’s not to say, however, that you’re entirely without recourse. It’s just that your recourse lies not in the law but — as always these days — in the commercial marketplace.
Commercial zone charges aren’t written in stone. Carriers are under no obligation to assess them; it’s just that neither are they under any obligation to forgo them. The whole issue is, as with any other area of carrier pricing, negotiable.
So, well, negotiate. Go to the carrier or carriers in question and say you don’t believe such charges are appropriate in the current circumstances and see what you can do to bargain them away.
To be sure, that may not be an easy task. Trying to get a carrier, or indeed any vendor, to give up revenue — especially in this economic climate — isn’t a walk in the park. And I’m sure you’ll get some sort of argument that the charges are “legally required,” which is balderdash but sounds good and deflects responsibility.
Still, if you’re persistent — you can show them this column to refute the “legally required” garbage — you may make headway. By playing off one carrier against another and giving or withholding traffic according to their responses, you may gradually persuade them to drop or at least reduce the add-ons.
That, however, is your only avenue to the result you’re trying to achieve, because I’m afraid the reality is that commercial zones, outmoded though they certainly are after all these years, are still around. Only negotiation can make the extra charges carriers are assessing on service there go away.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843- 559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.