Korea to overhaul trucking sector to end corruptions, ensure drivers’ income

Minister of Land, Infrastructure and Transport Won Hee-ryong, third from the right at the meeting with the ruling party on Monday. [Photo by Kim Ho-young]

Cargo delivery companies that only earn income from “license leasing” will be removed from the industry and the minimum freight rate requirement will also be abolished.

The government outlined these cargo trucking reform plans on Monday during a meeting with the ruling party. The government has been working on reforms to revamp the trucking industry following a strike last year that almost paralyzed the national supply chain.

“Some supposed cargo delivery firms have been living off leasing their licenses and providing seals of approval for new trucks, but not on actual logistics work,”said Minister of Land, Infrastructure and Transport Won Hee-ryong. “They have been stealing from the hardworking truckers and shifted the costs onto their customers and consumers. The government will quash such absurd practices.” Vice Minister Eo Myeong-so highlighted the reforms would repeal the 60 year-long practice.

The logistics market in Korea is somewhat skewed due to the “license leasing” system as truck drivers have been on the road by signing a contract with a cargo delivery service that “leases” its cargo license plates for a fee. The transport ministry estimates that the number of commercial vehicle license plate leasing firms top 7,000. The number of trucks registered as being owned by such companies is around 230,000 nationwide, and about 100,000 of those trucks are estimated to belong to such leasing-only services.

The government and the ruling party agreed to revoke the licenses of these license-plate leasing companies that are engaged in any illicit or tax-evading schemes. Logistics service companies that do not provide actual labor will have to cut the number of trucks and could eventually be kicked out of the market. Practices like “license plate trading” will also be monitored. Cargo delivery firms have been known to sell their registered license plates once their former drivers leave the company. A registered license plate trades for around 50 million won ($39,000) in the market.

All cargo delivery firms, as well as truck owners, will now have to report their operations in order to ensure proper monitoring and transparent logistics logs. Penalties for firms that have very low or a near-zero number of actual operations will be strengthened, allowing them fewer vehicles or suspending their business licenses.

[Photo by Park Hyung-ki]

Truck owners will be able to register their vehicles in their own names when signing a contract with a cargo delivery firm. If they violate the new registration requirements, the delivery firms will face penalties to protect truck owners from any undue influence from the delivery firms in the process of renewing their contracts.

In the past, delivery firms often asked for 20 million won to 30 million won for a license plate, 7 million won to 8 million won to approve a new vehicle and 3 million won to 4 million won to change the registered name on the paper when they terminated a contract. Control of the supply and demand of cargo vehicles will see change, too

On fares, the current “safe trucking freight rates” system will be replaced by a “standard rate” system. The new rate system will serve as non-binding guidelines, as the previous system provoked conflict, particularly among consignors, as it required minimum fares. The requirement for the consignor to pay safety fares and penalties for any breach will be removed.

However, fare contracts between a delivery firm and a truck owner will remain mandatory as a protective measure for truck owners. “The standard rate system has reflected minimum rates to protect truck owners,” said ruling party lawmaker Sung Il-jong. “We have requested that the transport ministry review a proposal where a delivery firm can follow due procedures when making a claim to truck owners.”

The new rate system will cover container and cement trucks, and be applied until 2025 before it is fixed into law. The new rate system also changed the process of calculating total cost to reflect broader public data, such as tax payments and fuel subsidies, into the calculations and to have more objective members on the board that decides such fares.

Along with the “standard rate” system, a “standard agreement” will also be adopted to have interlinkages between freight fares and oil prices, as part of measures to reduce fluctuations of oil prices to truck owners’ income. Truck owners in other sectors will also be able to have more secure income by having oil price fluctuations reflected in their fares for freight above a certain volume or for long-term delivery agreements. The requirement to periodically submit a digital tachograph will be expanded to large trucks that carry 25 tons and more, and large tractors, expanding beyond the current dangerous goods carriers and buses.