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According to the latest government data, new-entrant out-of-service (OOS) orders issued to carriers will surge to an all-time high in 2023. This trend has mirrored the dramatic increase in new-carrier operating authorities issued since 2020.
In 2012, the Federal Motor Carrier Safety Administration started monitoring orders for new entrants that were out of service. Since then, according to the FMCSA's Motor Carrier Management Information System (MCMIS), such orders have risen to a record 24,363 in FY2022, and as of June 30 in FY2023, they have surpassed that total with 25,955.
Data will not be accessible until December for the entire fiscal year, which concluded on September 30. However, based on trends during the previous eight quarters, OOS orders in FY2023 most certainly exceeded 35,000.
"A motor carrier not domiciled in Mexico that applies for a U.S. Department of Transportation identification number to initiate operations in interstate commerce" is how the FMCSA defines new-carrier entrants.
The FMCSA launches a safety audit within the first 18 months of a new entry carrier's operation. If the carrier is unable to complete the audit, declines to do so, or cannot be reached, the agency issues an OOS order.
The FMCSA states that "a new entrant may not operate in interstate commerce on or after the effective date of the OOS order." Furthermore, "federal fines and penalties are imposed on a new entrant who operates a [commercial motor vehicle] in violation of an OOS order."
FMCSA did not immediately respond to requests for comment regarding the spike and its effects.
One hypothesis is that, since the pool of possible OOS recipients has grown, new OOS orders would follow the pattern of operating authorities reaching record levels over the past few years, which are primarily composed of single trucks or small fleets.
Daniel Koors, an owner-operator and council member of CDL Drivers Unlimited, an advocacy organization that enhances commercial drivers' living and working conditions, is not surprised that OOS orders are at an all-time high. He thinks current economic conditions in the trucking sector are accelerating the trend.
Koors said, "It's simple: there's not enough money in the market right now to maintain these new drivers." "Many are barely able to maintain their homes, let alone their trucks."
According to Koors, new entrants face challenges from fuel costs, freight rates, and maintenance costs.
In his opinion, the majority of the recent entrants who have failed are those who started during the pandemic. "They don't have the back-office support, they don't have the capital, they jumped in when things were hot, and they didn't set up the relationships needed to get them through this downturn."
If the record new-entry OOS orders are indicative of a general reduction in trucking capacity, this further supports the idea that a "capacity bubble" is about to burst, which could lead to increased freight prices while the market tries to adjust.
