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HEALTH AND PERSONAL CARE LOGISTICS CONFERENCE WASHINGTON UPDATE April 2011. John M. Cutler, Jr. McCarthy, Sweeney & Harkaway, P.C. 1825 K Street, N.W., Suite 700 Washington, DC 20006 (202) 775-5560 jcutler@mshpc.com. OVERVIEW. November elections changed political dynamic
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HEALTH AND PERSONAL CARE LOGISTICS CONFERENCEWASHINGTON UPDATEApril 2011 John M. Cutler, Jr. McCarthy, Sweeney & Harkaway, P.C. 1825 K Street, N.W., Suite 700 Washington, DC 20006 (202) 775-5560 jcutler@mshpc.com
OVERVIEW • November elections changed political dynamic • Gridlock is worse, as predicted, and may lead to Government Shutdown • Key personnel changes are John Boehner replacing Nancy Pelosi as House Speaker, and John Mica replacing Jim Oberstar as Chairman of House T&I • Tea Party and other Republican Freshmen are becoming a force on Capitol Hill
INFRASTRUCTURE • Everyone knows we need to spend more • Fuel taxes not increased since 1993 and not indexed for inflation • Many bipartisan, expert studies urge higher fuel taxes, possible VMT, and a greater focus on freight • House T&I produced draft Highway Bill that looked like the most comprehensive approach to the problem in history • Funding was the insurmountable problem
INFRASTRUCTURE(continued) • No action during lame duck session • Loss of former House T&I Chairman Oberstar is blow to effort to increase investment • New House T&I Chairman Mica is knowledgeable and concerned, but faces same funding problem that blocked action under Oberstar • White House proposal is ambitious and unrealistic
WHITE HOUSE TRANSPORTATION BUDGET • $556 billion total spending over 6 years • $336 billion for roads and bridges, 48% more than SAFETEA-LU • $119 billion for transit, 127% more than SAFETEA-LU • $53 billion for high speed rail • $30 billion for an Infrastructure Bank, which could provide leverage for far more spending
CHAIRMAN MICA’S CURRENT THINKING • Do more with less • Three-pronged approach - Use existing fuel tax revenue (NO TAX INCREASE) - Add unspent stimulus bill money - Stretch funding by making highway projects cheaper and faster • Get next Highway Bill enacted into law by the end of current fiscal year (9/30/11), two years after SAFETEA-LU expired
PROSPECTS FOR SUCCESS • The White House budget sounds good but has little chance of success • The Mica approach is unlikely to meet needs - almost $12 billion would need to be cut to match spending and projected fuel tax revenue, due to front-loaded obligations - stimulus funding included less than $30 billion for highways and bridges, and most of that is spent or obligated
PROSPECTS FOR SUCCESS(continued) • Gridlock in Washington makes it difficult to pass anything that is at all controversial • No earmarks pledges make it harder to attract votes • Private equity is unlikely to fill the gap and tolling remains unpopular
PROSPECTS FOR SUCCESS(continued) • ATA President Bill Graves and Senate Finance Committee Chairman Max Baucus predict no new Highway Bill in 2011 or 2012, when Presidential elections will make everything harder • Will success even be achievable in 2013? • Assuming funding is found, who will provide it? • Assuming funding is found, where will it go?
RAILROADS ARE DOING GREAT • Raising rates and fuel surcharges and making record revenues and profits • Warren Buffett couldn’t be happier with Berkshire Hathaway’s purchase of BNSF • Wall Street loves the railroads • Rockefeller bill stalled • STB rail competition proceeding unlikely to change anything anytime soon
RAILROADS ARE DOING GREAT(continued) • DOT loves railroads, extending record funding and calling for more freight to move by trains, not trucks • Trucking productivity growth stalled • Rail intermodal service quality is improving • Watch rail fuel surcharge antitrust case • Watch S. 49, Railroad Antitrust Enforcement Act of 2011
AIRLINES • FAA Reauthorization Bill passed by House • 2007 FAA Act, which has been extended 17 times, may finally be updated • Veto threat due to provision overturning NMB ruling facilitating unionization
AIRLINES(continued) • No FedEx labor provision • Funding for NextGen Air Traffic Control system • More slots for Reagan National Airport in Washington
WATER CARRIERS • FMC relieves NVOCCs from requirement of filing tariffs with the Commission if they - make free copies of rules tariffs available to public - enter written agreements before accepting covered shipments - retain documents for 5 years • New Negotiated Rate Arrangements cannot be amended, so they are most likely to be used for short term or one-off deals • NVOs can still use NVOCC Service Arrangements (NSAs).
WATER CARRIERS • FMC Chairman urges shipping lines and shippers to provide in their service contracts for use of FMC’s Consumer Affairs and Dispute Resolution Services (CADRS) office in service contracts • DOT making a push to promote barge transportation of freight • DOT cites ability of “marine highway system” to save energy and reduce congestion
CAUSE FOR CONCERN OVER TRUCKING • Fuel Costs • Lack of progress on Highway Bill • Hours of Service and Driver Shortage • CSA and Drive Shortage • DOT Policy • Truck Size and Weight Limits • Where is the good news for trucking?
HOURS OF SERVICE • Hours of Service rules in effect from 2003-2011 have worked well • Highway crash rates and fatalities have fallen, including 3% drop in 2010 • FMCSA nevertheless wants to reduce daily driving time by 1 hour (plus mandatory ½ hour break or two) • FMCSA also wants to regulate weekend sleep time (the “restart”) that could mean the required 34 hours off is actually as much as 48 hours off • Result could also force drivers coming off restart to drive during morning rush hour
HOURS OF SERVICE(continued) • Trucker and shipper requests for more flexibility for team drivers with sleeper berths were brushed aside • FMCSA support for these changes is skimpy and flawed • H&PCLC and many other carrier groups, shipper groups, and drivers filed comments opposing HOS rule changes • Prposed rules will exacerbate driver shortage • Court challenge certain; H&PCLC will support trucking industry
COMPLIANCE, SAFETY, ACCOUNTABILITY • New FMCSA program to improve trucking company and safety accountability and performance is being implemented • Rulemaking proceeding not likely to begin till this summer • H&PCLC will participate • Safer highways likely to result, as bad apples (drivers and trucking companies) forced to improve or seek other employment
COMPLIANCE, SAFETY, ACCOUNTABILITY (continued) • Greater complexity; danger of lost business due to misleading appearance of problems • Will not help driver shortage • Danger of exposure to personal injury lawsuits • Contract updates recommended
DOT POLICIES • For decades, DOT has supported all modes of transportation • Today, DOT favors rail, giving rail projects more funding • DOT needs major freight railroads to cooperate with High Speed Rail program • DOT may also be responding to environmental and congestion concerns
DOT POLICIES(continued) • DOT may also be defining the need for highway spending down, in light of deficit concerns and gridlock • DOT is also very interested in bike trails and “livability” • Bottom line: DOT Secretary LaHood is calling for shifting freight from trucks to trains
OTHER TRUCKING DEVELOPMENTS • GAO Study says freight trucking costs not passed on to consumers are 6 times greater than rail costs and 9 times greater than water costs • Congress is considering efforts to increase GVW from 80,000 lbs. to 97,000 lbs. HR 763 and HR 801, and S 747. • Railroads oppose, saying this will mean more trucks on roads, but gridlock is the main obstacle • FMCSA eliminates minimum insurance requirements for motor carriers
OTHER TRANSPORTATION DEVELOPMENTS (continued) • FMCSA wants EOBRs on 500,000 carriers, subject to penalties of up to $11,000 • Tentative new deal announced to resolve NAFTA debate over Mexican truckers serving U.S. destinations • Deal needed to end punitive Mexican tariffs on U.S. Goods • Safety and union concerns and gridlock make progress doubtful. FMCSA plan to provide EOBRs for Mexican trucks doesn’t help.
PORT DRAYAGE UNIONIZATION • Efforts continue to require independent truckers in port drayage service to become employees • Port of Long Beach showed that this is not necessary to reduce pollution • Goal is to facilitate efforts by Teamsters to organize drayage companies • ATA is in court fighting Port of Los Angeles on issue
SECURITY • TSA wants to screen 100% of inbound air cargo by the end of 2011, two years sooner than expected • Attempt to ship explosives in printer cartridges from Yemen is cause • Puerto Rico Port Authority proposed an expensive ($70 per container) x-ray screening program on all inbound ocean containers
SECURITY(continued) • Opposition from carriers and shippers, including H&PCLC, has led to revisions, including possible exemption for C-TPAT members • Crowley won court order halting program