Welcome back to the Let's Talk Logistics Newsletter.
WARNING: This edition is pretty dry.. but pretty necessary because the LTL world is still archaic and run by the NMFTA and NMFC codes (for now at least)!
Grab a coffee or a beer and dive in to read about the changes that will impact your shipping costs and classifications!
On October 3rd, the National Motor Freight Traffic Association (NMFTA) and its Freight Classification Development Council (FCDC) held a public meeting to discuss proposed changes to the National Motor Freight Classification (NMFC) guidebook as published in Docket 2023-3.
A Disposition document with the results of that meeting was issued on October 6th.
This article will outline the changes in this 2023-3 docket and commentary regarding the impact and actions taken. Per the Notice of Disposition, these changes will be effective on December 2nd, 2023.
Background
The NMFTA is currently undergoing a “Classification Imagination” to streamline and simplify the NMFC and its classification progress.
The FCDC considers 4 transportation characteristics when determining freight class: Density, Stowability, Handling, and Liability.
A primary activity emanating from this project is the wholesale cancellation of many similar NMF items and consolidating them into one or a handful of items whose class is based upon the 11-sub density table, shown below:
This docket was one of the largest ever, a whopping 124 pages long.
Let’s look into the more impactful changes proposed in the 2023-3 Docket and the outcome of those proposals as voted upon at the October 3rd meeting.
The 2023-3 Docket itself can be viewed at https://nmfta.org/wp-content/media/2023/08/2023_3.pdf.
The Notice of Disposition can be viewed at https://nmfta.org/wp-content/media/2023/10/2023_3_Disposition.pdf.
Subject 1: Foodstuffs Group
This proposal suggested consolidating 75 individual NMF items, ranging from Baby Food to Syrup, into two existing NMF items:
- 73260 Foodstuffs, Other Than Frozen, Group IV (an 11-sub density item)
- 73150 Flour, Meal, or Sugar (a 4-sub item classified based on density)
This aligns with the recent actions taken as part of the "Classification Imagination" project. It eliminates the need to distinguish between "Coffee Extracts" and "Coffee Substitutes" or between "Carbonated Beverages" and "Nutritional Drink/Shake Beverages" when classifying NMF items.
Going forward, shippers will only need to determine the weights and dimensions of their pallets to calculate density and thus determine the appropriate class.
It’s disappointing that the FCDC chose to not go all-in with this proposal and fold more Foodstuff items into the 11-sub structure of NMF item 73260.
Shippers still need to know how to differentiate between Flour/Meal/Sugar when classifying those types of commodities, and item 73150 only provides four subs (ranging from CL55 to CL125).
There are significant threshold impacts at certain density breakpoints. For instance, 10.1 PCF ends up being CL85 while 9.9 PCF is CL125. Molasses/Syrup NMF 74095 retains a static class of CL65. While syrup is generally a dense commodity, packaging plays a role in influencing its actual density.
Some pallets may be very dense, such as penalizing the shipper with a CL65 class, while others may have low density due to poor construction, penalizing the carrier.
When the FCDC reviews any commodity that has no significant stowing, handing, or liability issues, density is really all that matters. It’s in the best interests of the LTL industry that the FCDC consolidate and roll up such commodities using the 11-sub density table.
They should do this in all cases, even with commodities like syrup that may have a tight density profile. Simply put, some shipments of Syrup are flat-out not CL65.
The FCDC approved this subject. All in all, the changes are positive for the industry, both for carriers and shippers, from a simplification perspective. The FCDC did, however, miss the mark in a few cases to have a more complete impact.
From a cost perspective, the impact will vary by customer and by shipment. It should be minimal on an overall basis, as impacts favoring carriers will be offset by impacts favoring shippers.
Shippers are now more incentivized to build compact pallets that increase density and thus yield a lower class.
Subject 2: Fiberboard Intermediate Bulk Containers (IBCs)
This proposal aimed to enhance the standardized requirements for IBCs to mitigate costly damage claims arising from failures when these containers, holding liquid or powder commodities, are compromised. The proposed changes are not only beneficial, but they also serve to lower the risk for carriers.
While the FCDC has granted approval for this proposal, it would be wise for LTL carriers to prohibit the tender of Fiberboard IBCs. This precaution is necessary because, despite the proposed changes, the risk of a substantial and costly spill remains unacceptably high when using Fiberboard IBCs.
To minimize such risks, shippers should be required to use IBCs constructed from materials that offer superior structural integrity compared to Fiberboard, which does not meet the necessary standards.
Subject 3: Wallboard Group
This subject proposed the cancellation of 14 items covering Wallboard commodities and rolling them into a new 12-sub item where class is based upon greatest dimension and density. The density groupings are less than 10 PCF, 10-15 PCF, and greater than 15 PCF. The greatest dimension groupings are not exceeding 96 inches, 96-192 inches, and exceeding 192 inches.
While this proposal is helpful in how it reduces 14 similar items down to 1 item, there’s concern about the threshold impacts with length and density at the breakpoints.
Example: given a shipment of Wallboard that is under 96 inches, a density of 10.1 PCF yields a class of CL85; but a similar density of 9.9 PCF yields a class of CL125. That is a 47% increase in price due to a density difference of only 2%. These threshold impacts can be greatly reduced by using the 11-sub standard density table.
But the newly proposed item also factors in length! So how do we account for Wallboard of varying lengths?
Well, I would argue that the LTL carriers already have this figured out and accounted for with their Over-Dimensional or Over-Length rules. There's no need for the NMFC to provide for a 1-class bump, say from CL65 to CL70 or from CL150 to CL125 as the length crosses over the 96” and 192” breaks. The NMFC should stop factoring length into classifications as LTL carriers already account for this.
Further, even if it is deemed appropriate for the NMFC to continue factoring length into classifications, it would sure be helpful if it did so using industry standards. Most LTL carriers begin applying their Over-Dimension rule when items have a length of 96 inches or more - but the NMFC uses a standard of exceeding 96 inches.
So if that shipment of Wallboard is exactly 96 inches, it gets the lowest class but carrier Over-Dimension rules apply. The NMFC does not begin applying a penalty via class until the length is 97 inches or greater.
Further, regardless of length threshold, the NMFC increases the class penalty as length “exceeds” a certain amount, whereas carriers do this when the length is “equal to or greater than” a certain amount. It behooves the NMFC to align here, but it is preferable to simply stop accounting for length, period.
The FCDC approved this subject. All in all, the changes are positive for the industry, both for carriers and shippers, from a simplification perspective; but the FCDC should evaluate how they are handling the length of commodities going forward.
With the prevalence of Over-Dimension rules by the LTL carriers, one could argue that assigning a higher class based on length amounts to double-dipping. From a cost perspective, the impact will vary by customer and by shipment and will generally favor carriers.
Subject 5: Water Heaters (Tank Type) group
This subject proposed expanding the classification basis for Tank-Type Water Heaters to consider both packaging type and density.
The density groupings are less than 6 PCF, 6-10 PCF, and greater than 10 PCF. The packaging type groupings are based on whether or not the water heaters are secured on skids or in crates, as well as specific packaging types.
This proposal is helpful - it adds density considerations that were not previously present, and the proposal applies significant penalties to water heaters tendered in a loose fashion which burdens the carrier with significant handling costs and loading costs while also increasing the potential for damage.
LTL carriers today prefer all shipments to be palletized or crated, or at least forklift-accessible.
One concern is that the density breaks lead to threshold issues where a small difference in density leads to a significant difference in class. This issue is noted above and can penalize both the carrier and the shipper depending on where the density falls.
The FCDC approved this subject with minor modifications to the packaging rules. All in all, the changes are positive for the industry, both for carriers and shippers, as classes are more closely aligned with carrier costs. Shippers can benefit from a lower class on denser shipments, but this proposal is generally expected to favor carriers.
Subject 6: Barrels group
This subject proposed to cancel the Barrels group and all of its existing 6 NMF items covering various types of barrels, drums, and pails. These items would be folded into a new 11-sub density item with class based on density.
While empty barrels tend to have a fairly tight density range from 2 to 10 PCF, the FCDC chose to apply their 11-sub density table rather than constructing an arbitrary table specific to barrels with a smaller number of subs.
This move is applauded, as our opinion noted above is that anytime the FCDC reviews a commodity with no handing, stowing, and liability issues, they should simply let density prevail and use the 11-sub standard. This ensures that the FCDC will not have to review the commodity again due to the changing density profile.
The FCDC approved this subject with minor modifications to improve clarity. All in all, the changes are positive for the industry, both for carriers and shippers, as classes are more closely aligned with carrier cost and future density-profile changes should not necessitate another review.
Shippers can benefit from a lower class on denser shipments, but generally, this proposal is expected to favor carriers.
Subject 7: Asphalt group
This subject proposed to cancel the Asphalt group and all if its existing 13 NMF items covering various types of asphalt/pitch/tar. These items would be folded into a new 3-sub density item with class based upon density. The density groupings are less than 22.5 PCF, 22.5-30 PCF, and greater than 30 PCF.
Asphalt does have a fairly tight density range of mostly 22.5 PCF or above; but nearly 20% of observations showed a density between 4 PCF and 22.5 PCF.
In our opinion, the FCDC should have simply proposed their 11-sub standard to cover all possible densities such that shippers are properly incentivized to keep densities high.
When density is all that matters, use the 11-sub standard.
One issue with the 11-sub standard is noted here, as it starts at CL60 and thus would not provide proper classification for shippers at the higher end of the density spectrum. The FCDC should consider at the least an expansion of the 11-sub standard to 13-subs whereby CL50 and CL55 are introduced. This would be fair for shippers, as carriers currently benefit from very dense items classified by the 11-sub standard.
We would argue that the FCDC should expand their standard density table to cover all 18 subs, but just adding 2 subs at CL50 and CL55 would be a great start. The FCDC deferred this subject for further review.
Subject 9: Grain Products group
This subject proposed to cancel the Grail Products group and 16 existing items. These items would be rolled into an existing item 89230 Grain or Grain Products CL65.
Grain Products is another commodity grouping with a tight density range. Over 82% of observations were 22.5 PCF or above. That density range aligns with CL65. However, 18% of observations fell below 22.2 PCF. A CL65 rating for such densities is not fair to carriers.
On the other end, over 33% of observations were 30 PCF or greater. Those shipments deserve a CL60 or lower rating, thus this proposal is not fair to shippers on denser shipments.
This is another case where the commodity has no handling, stowability, or liability concerns; really, only density matters. It would have been preferable to propose shifting these NMF items including Grain or Grain Products to a new item using the 11-sub density table. That would achieve a more optimal outcome.
The FCDC approved this subject. All in all, the changes are positive for the industry, both for carriers and shippers, from a simplification perspective. 17 unique NMF items were combined into one. But the FCDC should have shifted all to an 11-sub density standard. Carriers will come out slightly ahead with this change, as many shipments currently classed as CL50 will not go at CL65.
Subject 10: Burial Cases, Caskets, Coffins
This subject proposed to cancel 15 existing items defining burial cases, caskets, coffins, and body transfer containers. These items, currently classed by type of container, material construction, and packaging form would be replaced with a new item.
This new item would contain two subs using a density breakpoint at 4 PCF.
As with other subjects in this docket, Burial Cases, Caskets, and Coffins is another commodity grouping with a fairly tight density range. Nearly 90% of the density observations were between 2 and 8 PCF. However, the proposal to set class at CL250 or CL150 based upon a density breakpoint of 4 PCF is too often not fair to shippers or carriers.
A mere 5% difference in density at the 4 PCF breakpoint can lead to a doubling of the freight charges. The proposal is quite unfair to shippers at 3.9 PCF, and unfair to carriers at 4.1 PCF.
Further, this proposal does not do enough to encourage shippers to make their shipments as tight and dense as possible.
This is another case where the commodity has no handling, stowability, or liability concerns - so only density matters. It would have been preferable to propose shifting these NMF items to a new item using the 11-sub density table. That would achieve a more optimal outcome for all parties.
The FCDC approved this subject with minor modifications to improve clarity. All in all, the changes are positive for the industry, both for carriers and shippers, as complicated classification determination has been removed.
But, while class is now driven by density, there are simply too many situations where the resultant class is punitive to either the shipper or the carrier. More could have been done to align class with actual carrier cost.
Shippers can benefit from a lower class on denser shipments, but generally this proposal is expected to favor carriers.
Subject 12: Electric or Mechanical Chairs
This subject proposed to cancel 3 existing items defining Dental/Hospital chairs and Foot or Pedicure chairs. These 3 items would be replaced with a new item covering various Electric or Mechanical chairs. This new item would contain three subs using a density breakpoints at 4 and 7 PCF.
The FCDC missed a great opportunity to provide further simplification. Earlier in 2023, the FCDC cancelled over 100 items covering various furniture commodities and rolled them into existing item 79300 Furniture and Furniture Parts which is an 11-sub density item. Item 79300 specifically applies on “Chairs NOI”.
Instead, the FCDC has proposed creating a new item just for these types of chairs.
This is another situation where the commodity reviewed has no handling, stowability, or liability concerns. Density is the prevailing consideration. The FCDC missed a great opportunity to simply roll these Electric or Mechanical chairs into NMF item 79300. This would have more closely aligned carrier costs with class, and eliminated the punitive threshold impacts that will harm both carrier and shipper with the proposal.
The FCDC approved this subject with minor modifications to improve clarity. The changes are of minor positivity for the industry. 3 items were consolidated down to 3, and density ranges were introduced to align carrier cost with the classification. But a great opportunity to maximize simplification was missed, and there are simply too many situations where the resultant class is punitive to either the shipper or the carrier due to threshold impacts. The FCDC could have done better here.
Subject 15: Safes or Vaults, and Parts
This subject proposed to cancel 5 existing items defining Safes/Vaults and their various parts sch as doors and safe deposit boxes. Safes and vaults have long been classified based upon the thickness of the walls and whether they are hollow. Thinner or hollow walled safes are classed at CL85 while safes with thicker walls are classed at CL70. Wall thickness and hollow composition are obvious proxies for density.
The FCD proposed creating a new 2-sub item with classes based upon density using a breakpoint of 15 PCF. While safes and vaults themselves tend to be quite dense, the density of safe/vault shipments is largely based upon the number of items tendered per skid.
A single safe on a skid has a naturally lower density than 4 of the same type safe tendered on a similar skid. Indeed, the density profile of safe shipments shows that while 40% of the observations fell within 15 and 22.5 PCF, there were significant numbers of observations above and below this level.
This was a perfect opportunity for the FCDC to deploy their 11-sub density standard for this commodity. Doing so would have more-closely aligned carrier cost with class, would have eliminated massive threshold impacts which are punitive to both carrier and shipper, and provided proper incentive for shippers to tender more-compact shipments of safes/vaults.
The FCDC approved this subject with minor modifications to improve clarity. The changes are of minor positivity for the industry. Simplification is provided as wall thickness and composition no longer dictate class. Density, which is much more objective and easier for any party to determine, drives class.
However, the multiple downsides are noted above. 3 items were consolidated down to 3, and density ranges were introduced to align carrier cost with the classification.
But a great opportunity to maximize simplification was missed, and there are simply too many situations where the resultant class is punitive Carriers will generally benefit from this change. This was another situation where the FCDC could have done much better to simplify the classification and align it with actual carrier costs.
Conclusion
Overall, the changes instituted with this 2023-3 docket are positive for the LTL industry. They simplify the classification process and more closely align carrier cost with classification. However, the FCDC continues to miss opportunities to super-charge simplification by doing more to reduce the number of applicable NMF items via consolidation.
The FCDC can do more to align the classification with actual carrier costs by more widely utilizing the 11-sub standard density table.
The argument here is that in any situation where a commodity has no significant handling, stowability, or liability concerns, density should prevail, and the 11-sub density table should be utilized. This does three things. First this more-closely aligns carrier cost to class.
Second, this eliminates the significant threshold effects that take place at density breakpoints which can be punitive to both the carrier and the shipper. And lastly, by utilizing the 11-sub table, it reduces the likelihood that the FCDC will have a need to review that commodity again in the future due to density changes.
Want help determining how these NMFC changes may impact your shipping costs? As an LTL shipper, getting ahead of rate changes heading into 2024 is crucial. Connect with us today for a full breakdown of your shipment characteristics, NMFC classifications, and LTL invoice history.
This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to report their findings and share opinions.
Want to get involved with these opinions we release? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.