Has DOT Enforcement Impacted Rates? | Episode 315

SPEAKER_00: 0:19

Welcome back. It's another edition of the Freight 360 podcast. We're going to talk about the uh enforcement of some of this uh what would you call it, the non-domicid CDL situation.

SPEAKER_01: 0:34

Yeah, I would just I don't really know how to define it. Every time I'm talking to someone about a two, I'm like, how do I explain this? I'm like, is it it's not really just non-domicidal? I think it's also just enforcement of existing regulations that never happened.

SPEAKER_00: 0:49

Well, we'll dig into all that today. We'll I'll I'll uh as we're recording and having this conversation, I'll pull up some of the most recent headlines um so we can reference the latest of what's going on. But uh first, if you are new, check out the rest of our content. If you're looking for something on sales or carrier development, just use the freight360.net website and hit the search bar and type in some keywords, and that'll help pull up all of our blogs, uh, long form podcasts, shorter educational videos. You've got the Freight Broker Basics course. If you're looking for a an educational, full length, we did that with DAT a few years back, and it's um it's definitely a uh a leading uh tool out there for folks in the industry that are new. So um leave us a comment, share, like, all the good stuff. Ben, uh we skipped sports last week. Um but this week I've just had like I just it was a sad week for me in general in sports because the Red Sox, who I'm a fan of, they lost they went up in game one um and if it was a three-game series and they lost games two and three and were knocked out in the wild card. So um but yeah, following the uh following the major league baseball playoffs, October's a fun one. So you got Yankees playing Toronto.

SPEAKER_01: 2:09

Dude, did you hear about the guy with the t-shirt? They were talking about it this morning who caught uh was it 61st Homer? Um take a look at it. They were just talking about it on um uh barstool sports. They were talking about in the interview. I'd listen to at the gym just before I stepped in here.

SPEAKER_00: 2:29

Um home run caught let me pull up barstool t-shirt.

SPEAKER_01: 2:35

I just get it. Um okay, cow Raleigh home run caught this.

SPEAKER_00: 2:42

Oh, yeah, he's a home run directed to a Mariners fan wearing a dump 61 here shirt.

SPEAKER_01: 2:47

Oh, that's and they said after he caught it, he took the shirt off and he had a dump 62 shirt underneath it, and they were joking, they were like, I wonder how many shirts he had on. Because like the odds that that home run hit that guy were like astronomical.

SPEAKER_00: 3:01

That's pretty funny. Dump 61 here. Wow, yeah. So anyway, that's uh that's uh baseball for you. So Seattle and Detroit, um, we'll continue to follow that. NFL Bills got their first loss, Philly got their first loss. There's no undefeated teams anymore. The Chiefs lost again. Sorry, Trey, if you're listening.

SPEAKER_01: 3:20

Um good weekend for the Steelers.

unknown: 3:23

What's that?

SPEAKER_01: 3:24

Even though they didn't play. Good weekend for the Steelers by week, and basically everyone in the AFC North lost.

SPEAKER_00: 3:30

Yeah. That's the that that's the thing with like football, is with such a short number of games compared to like baseball or basketball or hockey, um, one week can really shake up the standings, even if you're not playing. So yeah. Um, but we'll see. Got the Bills. I think we're playing Atlanta Monday night next week. So yeah, Monday night football. It's a double header, man. You got two games Monday night, so we'll see how that goes. Um, news, dude. I put this out in our news, our newsletter this week, but so the guy Fieri or Fiat, however you say his name, the stolen tequila that was earlier this year.

SPEAKER_01: 4:13

60 minutes.

SPEAKER_00: 4:14

Yeah, like it made um, you know, it's like months later, but like made national headlines, right? Like all across like like it was on 60 minutes, so naturally then like every major news outlet picks up a story on it. So whether it's, you know, Fox, CNN, News Nation, like ABC, literally everybody covered it then because it was such a big thing, but um he had two truckloads of of like premium tequila, like special batch that he had made for something, and a mix of double brokering and cargo theft all in one. And they ended up like they did recover half of it. Um, but the other half is still just like missing. But what I'm glad about is like in the wake of all this we've been doing with talking to lawmakers and trying to get legislation passed, um, nothing matters until people know about it, right? So I think that's that's where I think it's it's as much as it sucks, like you know, a million dollars worth of tequila, like, you know, it's a much bigger issue than that. And if it takes uh a celebrity to, you know, make it hit the headlines, then hey, that's that's where we're at.

SPEAKER_01: 5:28

Agreed. I kind of laugh because in one of the 60 Minutes articles, some or one of the posts I think I saw on LinkedIn, I think it might have been from 60 Minutes, they were interviewing like law enforcement in LA, and they said, you know, LA law enforcement has recovered something like$32 million worth of cargo theft in the past year. And I was like, wow. I'm like, I know of more than$40,000 worth of cargo theft, basically Southern California. So it's like that is super great and super happy that you know they are doing what they can, but I mean, it is nowhere close to putting a dent in the astronomical numbers of loads and dollars lost in the supply chain to this problem. Yeah. I thought about this last night. I think the TIA put out some numbers because it's really hard to gauge how much is being stolen every year, but I've read numbers at like 20 billion, 30 billion, and I think I've seen upwards of 40 billion. What have you seen on like estimated cargo theft from like incredible sources?

SPEAKER_00: 6:27

I had it in the the TIA downloads. Right. Um, I'll pull it up right now because they let's see what they well anyway. Um while I'm looking that up, um Keith Lewis from CargoNet. We had we did an episode with CargoNet early at the either ear earlier this year or last year, and it was like kind of cool, like see him on 60 Minutes. You know what I mean?

SPEAKER_01: 6:51

Oh, he was on 60 Minutes. I haven't watched the episode yet. I'm gonna have to take a take a look at it.

SPEAKER_00: 6:55

It's like a there's like a good um maybe like 12-minute clip that really highlights it all in detail, and like it they break down how the double brokering happened. Like basically, two these two trucks, like they forged their identity, they spoofed GPS tracking, like they did everything that we talk about. Um had they followed, they didn't name the brokerage that handled it, they just kept saying like the logistics company. Um but like had they followed the protocols that we preach, like this wouldn't have this wouldn't have happened. So um but yeah Keith Lewis. It's a it's a good one to check out. I'm I'm gonna pull up this uh this fraud thing here and see what what did you say your estimate was on it?

SPEAKER_01: 7:41

I'm gonna guess 30 billion because I've seen some at like 40 and some at 20.

SPEAKER_00: 7:46

Here's the uh the handouts that we got. Um they're saying our industry's revenue is 343 billion and then 35 billion is the cargo theft.

SPEAKER_01: 8:09

That would mean one in ten brokered loads are being stolen. Like just think about that.

SPEAKER_00: 8:13

I think that's just a cumulative. Um I have to zoom in here. 35 billion. So this is findings from the 2025 TIA fraud report survey. Uh$35 billion. Cargo theft remains the most costly form of fraud, with the National Insurance Crime Bureau estimating oh, annual losses up to$35 billion. Um, just think about that, right? And nearly one in four companies lost over$200,000 to fraud in just six months. So most victims are small businesses that make under$5 million a year. 34% say fake brokers are the number one threat, leaving freight lost, stolen, or undelivered. So yeah.

SPEAKER_01: 9:55

So even if you like really exaggerate that and consider all of everything that ships is like a trillion dollars, right? If that number is called 40 billion, right? That's four percent, right? That's four out of every hundred loads moving in the country is being stolen. Like, that is astronomical, that number, right? And I do want to pause, right? For like all the carriers out there, like we talk a lot about brokerage stuff and carrier, but like it is very important as a motor carrier. You are making a phone call, go to the FMCSA, look for the phone number or the main number of the brokerage you're getting a load from, if you get it from any load board, and just call and ask to speak to the broker that tendered you the load, right? That 30 second to one minute phone call would prevent so much of this.

SPEAKER_00: 10:43

Because this guy fiery thing is like they said the drivers had no idea that a crime was being committed. Correct.

SPEAKER_01: 10:50

Like most of the time they don't.

SPEAKER_00: 10:51

Oh, yeah. They were just given, like, hey, deliver this to a warehouse in Southern California.

SPEAKER_01: 10:56

And that's why we have to work together. The thing that I just keep thinking a lot about is like we really have addressed this as an industry from like the 3PL side. But to be honest, we need carriers to be doing the same thing. Meaning, like, just simple phone calls, Googling the main phone number for a freight brokerage, and just calling before you run that load. Like book the load, do whatever. But before you dispatch a driver, a two-minute phone call would avoid so many of these things. Because after the fact, when you run into one or I run into one, that's the first thing we do, and you find out immediately exactly what happened. You call them, they give you the tender, you call the brokerage they thought they got the load from, and they're like, that person doesn't work here. That's not us, that's fraud. And you're like, man, again, if both parties, all three shippers or brokers and carriers, just make a phone call to verify what they're getting via email would reduce so much of this. My guess is it would probably reduce like at least 75 to 80 percent of these things.

SPEAKER_00: 11:59

Yep. Process, man. So if you want, I highly recommend check out episode two hundred and twenty-two, cargo theft and hostage loads with Sal Marino and Keith Lewis of Cargo. Now, Keith is the one that's on the 60 Minutes clip that came out in December of 2023. So almost two years ago, we had we had uh did an episode with them. And um Keith, really impressive guy. Um, if I remember correctly, he came from a law enforcement background. And um he really he does a really good job in the 60 Minutes clip breaking down how how the crime is um put together and how it's executed in a way that makes sense to people that aren't in logistics. So even if you're new to brokerage, um, that's probably you, right? You you know, you don't understand the complexity of it. I definitely recommend check out our episode and check out the 60 Minutes clip because it's uh it's pretty eye-opening. But yeah, this was like cross-border stuff. So it came in from Mexico, uh, I think to like Laredo, very common cross-border point. And then from there, um, two trucks were supposed to go to Pennsylvania, and they had the tracking make it look like it was going there. And then they kept saying, like, oh, the truck's got a like basically broke down mechanical issue near DC, and the tracking all makes sense. And in reality, they just spoofed the GPS and the trucks actually went to California. So, and these two drivers that got hired, like basically trucking company gets hired, and it's not even the real trucking company that that they booked. Um, someone stole their identity, and then they turn around and use a brokerage authority that they likely stole and or impersonated, and they hire these two un unknowing drivers, probably owner operators, to uh to haul these loads to a warehouse in in LA.

SPEAKER_01: 13:52

So here's the equivalent, right? To give people an example, right, that are maybe new to this or trying to understand this. This would be like if armored cars that pick up money from a bank could be hired the day of, like an Uber driver, and somebody just hired a legitimate Uber driver to go and pick up money from the bank. They didn't know they were stealing money, and basically the thieves, it's like a perfect crime. I literally don't even have to go steal this thing. I could pretend to pay someone else that thinks they're picking it up legitimately, they'll deliver it to my house, they don't even know they stole it, and I don't even have to leave my house. In fact, I don't even need to be in the country. I can just hire unsuspecting drivers. Yeah, to just go steal things and deliver it wherever I want, never gonna pay them anyway, and nobody knows that I did any of this, and I don't even have to leave my country, like or wherever I am.

SPEAKER_00: 14:46

Yeah, Keith had pointed out too that they've identified I think it was something like 50 foreign countries that have been identified as um actively participating in this kind of fraud. So um seems about crazy.

SPEAKER_01: 15:00

So here's a good segue. I'm looking at X, of which I'm like kind of never on, but Steven, our producer, sends me this stuff. And it's funny, I realized yesterday why I think I don't spend time on social media. It makes me motion sickness, like scrolling through it, like it literally gives me a headache. And I'm like trying to find all these different articles and posts because a lot of this stuff hasn't really hit the news yet, but people all over the country have been talking about it. So, Craig Fuller, of which I'm not a huge fan of, but I will read his post from like 12 hours ago because I think it really does kind of identify what we're gonna talk about today. And it's, you know, freight is a commodity, supply and demand determines price. Supply is capacity, the number of trucks, demand are the number of things that need shipped in the country, right? So the demand for trucks are just all the things we buy, and the supply of trucks are just the number of drivers and trucks on the road. It really doesn't matter how many brokers and it really doesn't matter how many trucking companies. At the end of the day, it's how many shipments need moved and how many actual drivers with a truck can move them, right? Because whatever happens in the middle doesn't have anything to do with supply and demand. So what he says is the freight market volumes are terrible, meaning the number of shipments in our country being moved every day are at like 2019 and 2008 or nine levels, considering I think Cass put this report out last week, meaning like at the lowest point in the US economy in the past 25 years is right now, like 2019, right before the pandemic and during the great recession in 08-09. So for anyone out there wondering how the economy's doing, from a shipment point of view, there are the lowest number of shipments being moved almost in our entire lifetime, if maybe ever in the modern economy, like right on par with the two other lowest worst times. So whether you're pro or con tariffs or what you think about the future, right now, nobody's buying anything, nobody's manufacturing anything, and people shipping volumes are way down, used car sales are down, home building is down, home buying is down, home selling is down, home improvements are down, building offices are down, building almost any type of real estate is down or not moving at all. So, like there really isn't much going on in the country. So if that's happening, rates should be going down because there's less business for truck drivers to go and get or to haul, right? And what he says is anyone involved in trucking has been waiting for all of the excess capacity, meaning like there's been too many truck drivers for three and a half years, and so many such that usually every year to a year and a half, there's not enough business for the number of truck drivers, most of which will just get another job doing something else, work on farms, construction, wherever, offices. And then when there's a need, they'll come back in and make money driving the truck until the things that need moved are moved, right? But this hasn't happened in almost four years. So the interesting part is, and this is from Craig's post, the stories around immigration raids matter in the industry because a large percentage of new entrants into trucking are immigrants. Some of these immigrants have followed the law and have proper work permits, but many do not. A good portion of these drivers are also recruited by foreign organized crime syndicates that bring in truckers into the US from overseas under false pretenses. This is what everyone in trucking is watching. Because what happened last week can put this out, and we're gonna be doing an episode with him or Dean soon, I think yesterday, that spot rates started to just go up. Meaning, like what it costs to go move a shipment all of a sudden got more expensive. And that doesn't make any sense when the number of shipments is also going down. So economically speaking, that shouldn't occur, but it is, right? And what I find super interesting about this is because you and I have been talking about this for literally years now, is economically, the math doesn't math. Like rates shouldn't have stayed this low for this long. And there's really no rationale. And early in the after the pandemic, the rationale was lots of government money was out there, lots of trucking companies had saved a lot of money, so they were able to run freight less profitably than they normally would. So it made the cycle stagnant or longer, meaning like it just took longer for some of these trucking companies to decide to either lay drivers off or for people to go find other work. But that just never happened. And it never happened, again, for reference, this usually happens basically every year. This is almost four years. So we're at four times as long as this has ever happened in the modern trucking industry in 40-some years, which makes zero sense. And why I'm super interested in this is because about six weeks ago, Steven and some of the other folks he's been working with, who we've had on the show, Justin, Danielle, and Steven, have found some really egregious things on the carrier side between CDLs being issued with no name. I've literally seen these driver's license. There's just no name given on a driver's license. Yep. They are CDLs for non-domiciled, meaning like no address. So truck drivers were literally having IDs being shown with no name and no address, but somehow getting a CDL. Then they found massive ELD fraud, which meant drivers are only legally allowed to work, say, drive 11 hours in a day, are driving dozens of hours, if not the entire day by themselves, which is one, illegal, two, unsafe. And the Hope Trans accident in Texas that killed five people was like a perfect example of this. You had an immigrant from Cuba who had driven 21 hours on a US postal service load that was supposed to be a team, fell asleep, killed five people, right? So, like these things, to your point of awareness, are starting to become oh, I don't know, I guess aware, not to be redundant, of like people in the country are starting to understand like this is really bad, right? Okay. So to set the rest of the stage, right? Last week, I think it was last week, Secretary Duffy made an announcement who is the Secretary of Transportation for the federal government and said, Hey, we have uncovered massive issues and issuances of CDLs and regulations in the trucking industry. And then said, and for anyone that doesn't understand this, the federal government doesn't issue a truck driver's license, a CDL. Each individual state does that. So the federal government can't really just say you can or can't do this because the states are the one that issued these. However, a state issues it and then a truck doesn't necessarily work in that state. They drive all over the country. So it's kind of a weird setup where like your state issues your CDL, but then you're gonna go work in all these other states anyway. So what Secretary Duffy said was basically all non-domiciled CDLs need to be re-audited upon renewal for every single state. And they also need to go through the immigration system, which they had found they hadn't to verify this person is legally and able to work in the United States, to should be in the United States and have the ability and authority and training to run. Found I think 98% of the issues of the estimated 200,000 CDLs that are possibly issued that shouldn't have 98% give or take came from California. Another big portion came from New York, some PA. I can't really remember exactly which other states, but there were a few that had like way more issues, right? Now, here's the important part was they said if the states don't fix this, we will pull federal funding for the highways. So basically the federal government can't fix that part of it, but they said, we're just not going to give you any money to fix your roads if you don't fix this. So what has happened in the past week, and this is the thing that's hard to figure out, is it seems or appears like states are starting to try to fix this. Like I saw posts in South Carolina where drivers were basically posting, my CDL just literally got yanked today. They said I didn't have the right documentation, I now can't go to work. But nobody knows exactly what states are doing what yet, because I don't think they've announced it. And on top of that, it seems like the administration is using this to deal with the immigration thing they've been talking about, where they're just sending ICE agents, immigration agents, to truck stops in places for sure in Chicago, where they're pulling drivers over or they're checking for documentation. And the reports that I had heard yesterday were like hundreds of trucks were found on the side of the road where drivers just abandoned them, right? And ICE agents were literally taking people into custody for deportation. And a lot of trucking companies were reporting drivers just didn't show up for work, right? So, what all of that means is it very much seems like the enforcement of current regulations is making it so the industry should function the way it did. And the reason you can see that in the numbers is rates are going up in certain areas of the country that really haven't and economically shouldn't be, unless there is some anomalous outside reason creating this. And to me, I'm like super interested in seeing how this plays out and hearing your thoughts, which is why I want to talk about because you and I haven't had a chance to talk about any of this.

SPEAKER_00: 24:49

So I pulled while you were while you were um talking through that, I pulled up some um recent, like as of today, um, news headline. So Secretary Duffy was on Fox News this morning uh talking about this.

SPEAKER_01: 25:03

He was. I haven't seen that yet.

SPEAKER_00: 25:05

So um if you go to just look him up on on X, you'll see uh the clip. But he says, um, we will hold states accountable for giving licenses to dangerous foreign drivers. Some can't even speak English and aren't even in the country legally. FMCSA's investigation should shock and outrage every American. So again, they're at the process where we are um basically bringing this into the spotlight, uh, you know, because you have to make people aware of what's going on before there's really a push to do anything about it. Further, the the Craig Fuller post, he posted again this morning. And what he did was he, and this this goes back to your supply and demand and the market cycle, he um overlaid tender rejections versus spot rates.

SPEAKER_01: 25:51

Okay, and there's usually a direct correlation, meaning Explain that for everybody what a tender rejection is, because I don't know that everyone necessarily understands.

SPEAKER_00: 25:59

So um tender rejection and spot rates tend to have a correlation, meaning uh tender rejection is when um when a motor carrier is contracted for a load or a, you know, they won a bid and they were contracted or awarded a lane. Um if they reject it, so you know, the tender comes over and they say, hey, we're not gonna haul that at that price, that's a tender rejection. Okay. When that happens, typically those loads will follow the waterfall or um uh routing guide for a large shipper and will go into the spot market, which is where a lot of brokers um operate day to day. Meaning, um, truck six months ago might have been awarded this, tender comes over this week, they say nope. And now a broker is working on it. And you tend to see when the when the tender rejections go up, the rates go up because capacity seems to be tightening. Okay. Now, uh we saw so we saw this in COVID, right? Tender rejections were at like a 30%, meaning like three out of 10 loads, carriers were like, I'm not hauling at a whatever rate per mile, freight's paying way more.

SPEAKER_01: 27:10

So think about it like this. If the number of shipments needing moved every day, just say is a hundred, and say there's a hundred truck drivers, hundred literal drivers on trucks for a hundred loads, you have equilibrium. So say that rate is two dollars a mile. As soon as, as a company, a country, we produce and buy two hundred truckloads worth of shipments per day. There's only a hundred truck drivers that already agreed to move for two dollars a mile. But all the companies with the freight they can't move, they go to the spot market and say, Well, I'll give you two dollars and 25 cents a mile to pick up my load today. And then some of the truck drivers go, Well,$2.25 to your point is better than two. So they call the customer, they always pick up from and go, sorry, truck's broken down today, driver's off sick, I can't move it. And they go and grab a load for$225 a mile. So that is the rejected load, but the truck just goes and picks up a load at a better at a bigger price. So normally when the economy expands and we buy and create more things, truck rates go up because those companies need to move things that didn't expect to have to move them, right? But now isn't going up.

SPEAKER_00: 28:17

Demand is going up, right? And the supply is is so um, yeah, there's that difference there. So normally when you see the rates go up, the tender rejections are also up for that exact reason that we just outlined. In this case, in the last month, rates have ticked up, tender rejections have gone down, all right, which is an inverse. Even if tender rejections stayed flat, which um they're at 5.67% right now. I think you know, 10 or below like 5 to 10, I I kind of consider like um you know, somewhere in in the what I've seen in my in my career as you know, standard. If you get like real low, it's a super loose market. If you get above 10, you that's a tight market. So yeah, you've got 5.67 is the tender rejection rate, and rate per mile went up, um looks to be about 5%. Okay. With no, and so so what he concluded through that is that um since tender rejection, and I'm quoting him directly, he said the divergence isn't normal and it's telling us the capacity is leaving the market. Since tender rejections measure carriers that normally participate in the contract market and are often compliant, we aren't seeing it in those data sets. It's the bottom feeders that have no regard for the rules that are exiting. And I think a lot of it comes from the pressure. So here's another article that I'll reference for you. Headline ICE helped remove 130 truck drivers from the road as part of a three-day enforcement.

SPEAKER_01: 29:51

Go ahead. Before you segue into that, because I want to read something else to the point you just made, right? Because then we'll segue right into that. Is this was also from Freight Waves. We have never seen this happen. Market change is occurring, but it's showing up in the tender data, right? It's not showing up. Exactly what you said. It said we're seeing something happening on the four-day spot rate map. Almost every market is blue, which means significant rate increases relative to what is actually being shipped. We have never seen rates surge with tender data not reflecting it ahead of time. This appears it has to be capacity leaving the market. And also points out the bigger trucking companies haven't really seen this and aren't aware because their rates haven't changed, which again matters because if you use any rating engine, most of the shipments are moved by large trucking companies. So if what we're seeing in smaller brokerages, call it$100 million or less or$50 million or less, we're seeing things that the bigger companies aren't seeing and the bigger rating engines, I don't think, are going to reflect yet because it's literally happening right now and started happening in like in the past couple of days. So segue into what you were saying because I'm like, this is really important of why the small companies are getting this information before any of the large companies, I think, are either able to react or are. Noticing that it's occurring.

SPEAKER_00: 32:29

So I'll give you one more data point and I'll I'll go just so we can balance our sources, right? So I'll look if we look at DAT's um uh market conditions, right? I just pulled the the current national average outbound capacity market conditions, meaning if you take every state that's out there and you just average them all together as a country, uh, and the colors are reverse on DAT, they consider red to be tight and blue to be loose. As a country currently, it is plus 49 on a scale from negative 100 to positive 100, meaning it is considered a very tight market nationwide right now. Okay. So there's your data set. I didn't pull up the uh the the rates. I could probably do that.

SPEAKER_01: 33:15

Um here's the other thing. Yeah, this is why I was super excited to talk to you about this, because we have a pretty diverse book of business at our brokerage, meaning like lots of different types of shipments moving in, lots of different types of equipment, really all over the country. It's not really centralized in any one place. So it's a pretty good sample size for kind of what capacity feels like, which is again not necessarily objective, but it kind of is. And I'll tell you what we've seen. Lanes and RFP stuff that we were looking at. I always talk to our team and I always ask the questions more of like what I would ask as a broker, not like running the brokerage, like, how many hits are you getting on every load post? Meaning, like, are you getting 10, 20 carriers reaching out on a lane? Are you getting two or three? Is it going up or down? Like, what does it feel like when you're trying to cover the load? Like a lot of demand, meaning a lot of trucks need it, or none. And every single person on our team for the past week is like, we thought it was maybe the end of the quarter, which was last week, and end of month. Usually lots more ship, so like capacity gets a little tight and it was hard to tell. But a lot of the guys on our team have been doing this a long time, and they're like, Ben, these are lanes we would get 20, 30 carriers trying to take this load every day of the week, no problem. We're seeing like two, three responses on some of these load posts. And I was like, every day last week. And it wasn't necessarily just one area, it was kind of everywhere. And I'm like, that's really interesting. Maybe it's month end, quarter end. But this week, similar things where they're like, yeah, we're still able to move the freight, but there's just a lot less carriers asking for these loads, which seems weird. And what we were talking about internally is just what you just explained, which is economically speaking, like it makes no sense. There's no reason that should be happening, but yet it is. And that's why it's super, I think, important for us to talk about it because Jason Miller, who I think puts out great stuff, really great metrics on like the economy, manufacturing, what goods are moving in and out of the country and the actual demand for trucks. And also, I think on the trucking side, him and I had a discussion on LinkedIn last week where I was like, hey, I'm really curious what you think could happen. Because this didn't really happen yet. It was starting to feel like it was. And I asked him, I said, if theoretically, because this was right after Duffy announced possibly losing 200,000 drivers over, which could be a year, so like no one knew how long that would be. Right. And basically everyone that we really respect and have talked to on the show were like, look, this has never happened. We don't think it'll have an impact on rates because like it always comes from the number of shipments, not necessarily the carrier side, to move the whole market. And I keep going back to what we talked about with Danielle and Gord on the show and Steven. And I'm like, okay, well, if the FMCSA is estimating 200,000 drivers, okay, one, that's significant, but how quickly they leave is really important. Because if it's a long time, maybe you don't notice that. But the other number that kept sticking in my head, and this is what I wanted your thoughts on too, is DOT week last year said I think it was 22% of the carriers inspected or drivers inspected had no CDL, like no CDL, right? And I'm like, okay, so if one in four trucks that they pulled over on a week, they told everybody they were pulling people over didn't have any CDL, and we know 200,000 current CDL holders have them that shouldn't have it. Guess what's not in that 200,000? It's not any of the truck drivers that have no CDL whatsoever, which the DOT announced and publicly put out there like one in four trucks we saw had no driver's license. So if 200,000 of them have licenses that shouldn't, and one in four trucks pulled over didn't have any, the number of drivers that really shouldn't be on the road could be anywhere from 200,000. It could be 800,000, it could be 600,000, it could literally be a million. Like no one has any idea what the number of drivers on the road as of last week either didn't have a license or shouldn't have a license. What we do know is that tons of states were just handing out CDLs with no verification, people were cheating on tests, never should have had them, no verification of employment or citizenship or ability to work in the country. Like this could be a giant, giant issue where if all of them just are scared they're going to either get deported or arrested and just leave the market, you could actually see a giant flip in the market that we've been waiting four years for that have never happened. It could theoretically happen right now, and rates could go up and just stay there because they shouldn't have been moving the freight in the first place with load volumes.

SPEAKER_00: 38:06

Nothing to do with load volume.

SPEAKER_01: 38:08

And like to me, here's the part what I'm so excited about, right?

SPEAKER_00: 38:11

Is because Hey, we're not, we're not so I want to clarify something. We're not advocating to make trucking expensive. We want rates to be back at a place where everybody is like and the roads to be safe. The roads to be safe, and the our our partner trucking companies that are out there that we do business with, we want them to be able to operate efficiently. Like the the carrier company that we have at my brokerage, um, we've downsized our fleet significantly in the last few years because it's the market's just not. Well, that's the point, right? Doesn't make sense to run MA trucks.

SPEAKER_01: 38:44

The two points that I think are really important to your point for the audience or anyone listen to this, right? Is who is being hurt the most when people break the rules, are outright just running illegally. It's the companies that are doing things correctly. The companies that maintain their vehicles at the correct maintenance, meaning like they're safe to drive on the road, which by the way is only what four out of five actually are safe to be on the road. That's just the equipment side. Then you have drivers that have been driving for decades, that drive legally, that play by the rules, that care about the safety of our roads, that are really good at their jobs and career truck drivers. Those are the companies and the drivers that are being penalized by the groups of people breaking the rules and running illegally, unethically and unsafely. So we're not saying we want things to be more expensive. What we're saying is they have been too cheap for too long because people were just outright breaking all of the rules, nobody was paying attention, people were getting killed, the roads weren't safe, and people that legitimately have run businesses for decades that are good drivers that care about safety on the roads and their equipment couldn't find a job or pay the bills because you've got people running illegally, working twice the hours for half the money because they don't have insurance, they don't maintain their equipment, and they're not training their drivers. So like it is a safety issue, it's an effective issue, and it's something that like should never have happened in the first place. So it's more about just correcting the fact that like it's basically been the Wild West for the past five or six years, where things have gotten so out of hand that things literally legitimately aren't safe. So, like it is an advocacy, I think, from our point of view, that things shouldn't have gotten that bad. But why I'm so excited about it, to your point, which makes it seem like I was excited about rates going up, I'm just excited because when we found this out a month or two ago, I was terrified because I had no idea how bad this was. And when we really got to see what was happening, I was scared to be on the road and genuinely fearful of how unsafe the roads were because of how bad this problem was. Then I was even more scared because the only, the only solution to that problem was the federal government, which hasn't exactly had a great track record of fixing things in a timely manner. And basically I was almost in this mental state of like, maybe I'm just gonna go find another career. Because if the government doesn't solve this, this is horrible. And it was physically making me sick. And like when I started seeing them actually start to enforce things that should have been enforced for a long time, I'm like, I think this is the first time in my entire life I've been like optimistic and hopeful about any specific aspect of what the federal government is doing.

SPEAKER_00: 41:34

So I'll give you here, here's a stat that'll make it very clear and obvious of what we're talking about here. Okay. You would expect the cost of anything to be in line with inflation, right? In general. Okay. If you benchmark 2022 to 2025, national inflation was at around it's it's around 11%. So the cost of living in general has gone up about 11% in the last three years. The cost of trucking rates have gone down roughly 45%. Down. Right? That is an inverse correlation by a lot, right? And when you're going when you're doing a negative um percentage, it it kind of shrinks how it is because you're you're taking the change off a larger number. So here's a perspective, right? Rates were about 275 a mile in uh three years ago, okay? And they're at like a dollar, we're talking without fuel right now, okay? And this is coming from freight waves data, right? So in uh let's see, equal to the beginning of the year, 270 a mile. Okay. And uh right now, this is with it upticking about a dollar seventy, right? So you're going down a dollar a mile. So if someone drives 500 miles in a day, that's$500 of revenue. That's they're doing the same job, but the revenue just goes down again. We're not asking more expensive. The consumers will pay for. This is trucking companies that can operate, um, you know, basically we don't we want the market to be at a normalized level, um, which has been taken away from them because of um a lot of the the bottom feeders that have come in and have abused the system and had you know haven't had to pay the price for it.

SPEAKER_01: 43:27

So and it's like to your point, right? Like for another analogy, let's just think about like something like physical, right? If Nate has a farm and I have a farm, right, and we both grow corn, okay, and the government says, you're only allowed to use fertilizers that don't cause cancer. Nate follows the rules, buys those fertilizers, right? So Nate can sell his corn for$10 a year because he's got to pay for the right fertilizer so he doesn't poison people. And then I have a farm across the street and I go, you know what? No one's looking. So I'm gonna buy fertilizer that is way cheaper, that causes cancer because no one knows anyway. And I can sell my corn for$5 an year. Nate has to go out of business because he can't compete with me. Why? Because Nate's playing by the rules and not poisoning people. I feel like no one's gonna look anyway, so I don't care who eats my corn, they're not gonna know it came from me anyway. So I put Nate out of business because I can sell my product cheaper than Nate. The exact same thing happened with trucking, right? You have companies that are like, we will drive illegally, we won't train our drivers, we won't pay to make sure they have the right citizenship, we won't pay the right taxes, we won't pay the right employment, we won't pay for the right insurance, and we're not going to maintain our vehicles. So they can run to Nate's point at$1.50 a mile when a legitimate trucking company, it costs them$1.50 a mile. At$2 a mile, they only profit 50 cents a mile. That is why the legitimate rule following people that have the country's literally depended on since its existence in transportation are going out of business while the people breaking the rules are just running amok with things, and you're seeing people die on the roads, and you're seeing things that economically should have never happened in the first place.

SPEAKER_00: 45:16

Exactly. So here is the news article that I was uh referencing earlier. Um, this is from CDL life. It's a ICE helped remove 130 truck drivers from the from the road as a part of a three-day enforcement at an Oklahoma port of entry, officials say. That's just one specific location. And we're talking about hundreds of thousands of drivers. Um, this is gonna be an ongoing mix of, I believe, enforcement and deterrence. So you're gonna have like I I saw a funny meme today that was like, um, this is the new driver got covid. Did you see that one? So it's basically like, you know, in 2020, if a carrier wanted to fall off a load, they would just be like, oh, the driver's got COVID. And now it was like a screenshot where the the carrier was like, uh driver got pulled over and uh didn't have a license, so he got pulled out of the truck. We can't we can't haul this load for you. Um so basically, like they fell off the load when they're claiming it's because of um you know the the driver not being legitimized.

SPEAKER_01: 46:22

Um why'd you hire him in the first place? That's your job.

SPEAKER_00: 46:25

So the joke is like you don't even have like you can just use that excuse now and and people could believe it the same way that you could just say they had COVID five years ago. Um but I think it's gonna be two full. Like I said, I think deterrents, so you're gonna have carriers that um just say, all right, clearly this is a you know, um, it was an easy target before and it's not anymore. So we're gonna focus our efforts on, you know, scamming or doing something nefarious in a different, you know, area of the of the economy. Okay. So there's that deterrence. And then you have the enforcement, where it's whether it's the um English proficiency, um, or the the ELP, right? The English English language proficiency, whether it's the the CDL um you not not having a valid CDL, or if they start to crack down on the you know, first name unknown, last name unknown, whatever. Um, probably a mix of both of those will lead to capacity leaving the market. It's capacity that just doesn't need to be there anyway, right?

SPEAKER_01: 47:28

Shouldn't have been there because they're not running legally.

SPEAKER_00: 47:31

Right, right. This is yeah, so this is legitimately a highway safety issue on top of a whole you know boatload of other things.

SPEAKER_01: 47:39

So here's another one. Here's some good, this is anecdotal data, meaning like these are stories that people put out there, but like this is from John Paul Hampstead, who's really credible and has been in the industry a long time, right? He said, This is what he had heard, this is yesterday, on ELP, English language proficiency and ice enforcement's impact on the truckload market. First, a 55 trucking company, 55 truck carrier out of Chicago told me most of their drivers just didn't show up to work this week. Number two, a vice president at a$1 billion freight brokerage told me, that's a Big Ten Four, buddy. And when I asked him if he saw a movement on the buy rates, meaning what they pay carriers in the past 48 hours, he said he's had loads in transit be disrupted due to ELP violations putting drivers out of service and margins compressed by 150 basis points. Meaning, like trucks that they booked on the road were getting pulled over by somebody and they were being found for using fraudulent ELPs and just yanking them off the road, which meant literally the truck that you booked that said they were running legitimately got pulled over somewhere and the load just isn't moving anywhere. And on top of that, seeing they're paying more because a lot of the cheaper carriers aren't there, which I want to circle back to in a second. But three, a director of pricing at a half a billion dollar brokerage told me margins on spot business have been under pressure on what they're paying trucks for the past two weeks, which is counter-seasonal, which is what we've been seeing. Four, a source at a large factoring company said he hasn't seen significant movement yet, but the bills could be on a little time lag, meaning like they haven't seen price changes on the factoring side, but that could be just because invoices lag a few days or a week in a lot of cases. So this data might not be showing up yet on the factoring side of things. And five, another vice president at a different billion-dollar brokerage said the Midwest is brutal. ELP and ICE enforcement is a material threat to capacity, but he doesn't think the tipping point has arrived yet. So these are huge companies, mid-sized companies, and small companies all seeing this before factoring companies. And I think a lot of the data is showing, but it's starting to appear. Because the one thing that always stuck with me, this has been for the past couple of years, whether it's clients or just people I've talked to, our colleagues, like I have heard more and more people tell me, like, here was the thing that made me think about it. People kept going, I have a big problem with my customer in transit times. And I'm like, transit times? I'm like, that is a weird thing to have a problem with. I've never really heard that being a problem so bad that like someone has ever talked about it, like at scale. And I'm like, I kept hearing it. And then I would ask them, like, what do you mean by transit times? They're like, well, the carriers I want to book for the price my customer wants to pay say they can run this load in one day. And my customer's saying it's been a two-day transit forever. So the shipper is like, this is a thousand mile load, called a 1200 mile load. And from the shipper's point of view, that's always taken two days, because roughly it's like 550 miles a day. Changes a little bit where you are, but like a rule of thumb, a truck drives about 550 miles a day. So a 1200 mile transit, right, or 1100 truck transit is a two-day trip with a truck unless you have two drivers. And all the brokers are like, look, I got carriers that'll run this in one day and I can get a buck 50 a mile from my customer, but my customer's telling me it has to load two days later. I can make the rate work, but they won't make the lane shorter, meaning the time from pickup to delivery. And I'm like, that shouldn't happen because legally a driver can't drive that fast that far. But I heard it everywhere. And I heard it so much that people doing RFPs were telling me this. They're like, listen, I can get rates to make all these rates work and I can get this business, but my customer won't shorten the transit time for me to book the carriers that will run it for a buck 40 a mile. And I'm like, like again, the math doesn't math. Like you can't make a truck go twice as fast. There's a national speed limit. They don't go 120 miles an hour and it weighs 80,000 pounds. So, like, the physics are impossible. You can't travel that fast that far. I'm like, so the only way that is physically possible is for a driver to drive illegally. And after hearing that for years, when we saw the ELP fraud, I'm like, oh my God, all this shit it all makes perfect sense. All these cheap rates were drivers. How they made up for running cheaper was they just worked longer illegally. And now when all of that disappears, you're seeing the industry function the way it should, which is exactly why you're seeing rates go up. It's not because they're getting more expensive, it's because they're going to where they should be. And the people that were breaking the law are too scared to keep breaking the law because people are paying attention.

SPEAKER_00: 52:36

Yeah. So I'll give you some more data here, right? And this comes from uh transport topics. And this is and this is looking like earlier this year, back to the summertime, you know, and and it this is picking up steam as it's getting more and more attention and there's more emphasis on inspections. Um during a 90-day stretch between June 25th, kick the kickoff of the ELP reinstatement and August 31st. So 90-day stretch in the summer there, federal roadside inspections, it's just federal, right? We're not talking your state um state troopers, right? Rose 67% to nearly 8,000 compared with 4772 during the same span last year. If you look at an individual month, um jumped 76% alone in the month of June to 2956 compared with 1680 uh in June of 24. So you're seeing massive increases of we're not so we're not saying that uh that the nefarious acts have increased. We're just saying that doing something about them has increased, right? Because you always say, you know, people hear like the the term like, oh, you're like all bark, no bite, right? Like you you say these threats, but you don't actually do anything with them. Um that is legitimately um what we're seeing here is that now, with an emphasis from um the federal government and the agencies on enforcement of the existing, this is like again, this is nothing new, right? ELP has been around for a very long time. Um, we're just actually doing something about it now. Okay. So I think that's where uh and again, this this data is you know through August, and we're in October now. So you're gonna see, I think, more in and more of this um as time goes on. So uh as far, you know, as far as the demand side of trucking, that's a totally different um part of the equation that I don't really see much happening there personally until we have some clarity on what's going on with everything from tariffs to um our just general policy making and um interest rates, you know, and that stuff is much more of a s a slower burn than a uh immediate um you know kick in the butt when it comes to fraudulent motor carriers that are gonna exit the market because you know, enforcement or or fear of enforcement.

SPEAKER_01: 55:01

Correct. And again, like I to Nate's point, I I don't want to, I can't I don't think we can say this enough is like we're not advocating we want things to get more expensive. Well we're super I think at least I'll speak for myself right now.

SPEAKER_00: 55:13

They're they're unreasonably below market, like people aren't getting paid what they're worth right now because of you know, an over oversupply of uh fraudulent folks posing as legitimate folks. That's it. It's it's in brokerage too, though. I mean, that's the whole the whole thing with double brokering, like the in all these MC numbers that are are getting burned through, it's the same thing. We're just seeing it on the carrier capacity side. Something that I never thought we'd be talking about on the show years ago, but we are because it's we've always been focused on you know fraud and brokerage, not on the capacity.

SPEAKER_01: 55:46

And here's the thing, here's the thing that I I to give people a little bit of like how could this have happened and how could this get that bad with the last few minutes? What I think happened, and this is Gord put this out, he did a really good interview on his show with Danielle, who we had recently, and the name of the podcast or the episode was called No Name Given. And it was on like fraudulent issue of CDLs. But what really what I think makes sense, and it all kind of puts this together, is during COVID, right, everybody stopped going anywhere and bought a bunch of things. So the number of shipments that needed moved in the country unexpectedly and very quickly increased. That was an increase in demand for truck drivers. And it was such a fast increase that it literally caused everything to cost more money. That's where inflation came from, right? The sudden spike in unexpected, the volume and the time at which it happened. So at the time, I think really probably the Biden administration was looking at like, how can we fix this before the economy collapses on itself and people don't have food on the store shelves, which was a real possibility. You couldn't buy toilet paper, you couldn't buy certain things because they literally weren't getting delivered. So, in that context, I think they were like, well, we need more drivers, we need them fast, and we need them cheaper, or we're literally not gonna function. So I think the intention was to increase a number of drivers quickly. It was the execution that I think made this problem so bad because they basically lowered the standards for CDLs. At the same time, you also had the people that literally issued CDLs not going to work. So you had less people that were supposed to make sure you had what you needed when you got a truck driving license, a CDL, and you lowered the bar to get more in. So you have less people at the door making sure everybody's supposed to be able to legally work. At the same time, you're trying to force people through. And Gord put the number out, but it was like astronomical. I think on a year, normally there's like 400,000 CDLs issued. During that period, or maybe it was just that year, it was something like 800,000 or a million CDLs were getting issued. So, like two or three times the amount of truck drivers were getting licenses with half the number of people supposed to issue them. So you had half the people and three times the people running through the door, right? And then I think nobody just went back and changed it or looked at it because it got worse and kept getting worse until it's gotten to a point where we're at now where it's so bad that like it's literally become like a safety hazard for like legitimately almost every family that is on the road person driving anywhere is at risk of being on the road next to somebody that shouldn't have a driver's license, can't read road signs, and maybe hasn't slept in a day or two. Like those are all very, very bad things for anybody, let alone people in our industry. So like I don't think maybe it was caused intentionally to create riskier roads or to harm people. I think the intention was to keep things functioning at a very, I don't know, unpredictable time where kind of nobody knew what was gonna happen or how long it was, and people were scared they weren't gonna get food or be able to get what they needed. So like I think it was well intentioned. I think it was just poorly executed and then never reviewed, and it just continued to get worse until we got to where we are today, which is why the industry has ended up in the position it's in after four years.

SPEAKER_00: 59:28

Yep. Precisely. Well, hey, we got through a lot of news headlines, a lot of stats today. We'll be definitely monitoring this and and seeing how rates and um tenor rejections, all all the all the metrics, curious to see how they pan out. Um, because don't forget, what's right around the corner is peak season, end of year.

SPEAKER_01: 59:49

So by the way, that should be starting now, and the data is already showing load volume is down year over year, and we are having a slower peak season than we've had in recent memory. So there's even less shipments while rates are going up, which is even more reason why everything we talked about shouldn't be happening unless something very, very wrong was happening.

SPEAKER_00: 1:00:09

Yep. That's right. All right, good episode, Ben. Final thoughts.

SPEAKER_01: 1:00:14

Whether you believe you can or believe you can't, you're right.

SPEAKER_00: 1:00:18

And until next time, go bills.