Regulatory Overview From 30,000 Feet

1. Regulatory OverviewFrom 30,000 Feet T&LP and TLP&SA 39th Annual Conference San Diego, California April 22-24, 2013 Henry E. Seaton

2. Question:What is the Federal Government’s Role in Interstate Truck Transportation? • Government’s Answer: • Protect the traveling public against big trucks (reduce highway fatalities involving trucks to zero) • Ensure driver welfare • Get drivers home very night • Ensure drivers make living wage, can join union and get healthcare

3. What is Missing from this Equation? • The National Transportation Policy (49 USC 13101) • It is not the agency’s job to: • Promulgate rules of commerce. • Foster competition. • Encourage small privately owned businesses. • Promote efficiency.

4. How Does Government/FMCSA Promote Its Safety/Driver Welfare Agenda? • Eliminate owner-operators • Obama agenda • Department of Labor and state initiative • Obamacare • Restrictive work rules • CSA discriminates against owner-operators • Eliminate small and new carriers • New rules and technology burden • Frustrate use of older equipment through CSA methodology

5. How to Ignore Duty to Establish Uniform Rules of Commerce and Traditional Role of Federal Government in Favor of Pro-Safety Agenda

6. Argue Eisenhower is dead. Fixing the highways is the state’s job. • Sell a privatized interstate highway system to Australian and Spanish corporations. • Bypass rulemaking process: • Establish rules by “internet guidance” • Establish handpicked advisory committees • Seed committees with labor safety groups and “big players” seeking to curry favor and competitive advantage. • Backlog Rulemaking • Engage in informal “listening sessions”. • Agency eliminates cargo insurance requirement

7. The Result:The Agency’s Statement of its Core Principles “MAP-21 tracks FMCSA’s strategic framework to improve CMV safety by supporting its three core principles: • Raise the bar to enter the industry and operate on our roads; • Hold motor carrier and drivers to the highest safety standards to continue operations; and • Remove the highest risk drivers, vehicles, and carriers from our roads and prevent them from operating.” From PowerPoint, “Implementation of Moving Ahead for Progress in the 21st Century (MAP-21) by FMCSA

8. What Does MAP-21 Require? • 29 new rulemakings in 27 months • 34 programmatic changes • 12 uncompleted rulemakings (not counting CSA) • 15 new reports And the agency is going broke?

9. MAP-21 Safety Highlights(New Rules to be Promulgated) • Electronic logs • New drug clearinghouse • Chameleon carriers • New entrant requirements • New driver training requirements • Sleep apnea

10. Unfinished Safetea-Lu Mandates (2005) • URS – the missing 400,000 carriers • Consumer complaints • Hazmat • Patterns of safety violations

11. Two New Rules • URS – Unified Registration System • New fees and registration requirements for forwarders and brokers • Omnibus Rule • “Non-discretionary and self-executing” • “Likely to increase penalties and enhance safety directives”

12. Watch Out – The Omnibus Rule will include between 16 and 23 Rulemakings in 1 Federal Register NoticeInterim Final Ruleswill probably be issued.

13. Omnibus Rulemaking was Promised Before Christmas • What is in it? Only insiders know. • FFIT may be included: • Fighting Fraud in Transportation • Redefines instrumentalities of transportation • Increases bond to $75,000 • Makes every carrier a broker on convenience interlining and “cross dock” LTL • Excludes only “interchanged” freight

14. Will create as many as 50,000 new broker applications • Must be renewed every 4 or 5 years • 3 years experience required for new applicants • Effective date October 2013 • Existing carriers with broker authority must split into separate docket number • Current rules must be changed but agency has made no provision for this. There is no way the agency has the manpower to accomplish this task.

15. Publication of SMS Methodology and Agency’s Duty to Certify Carrier Safety The new rule is not ready for prime time, it is a work in progress and the release date has been extended 5 times so far.

16. In the meantime, the followinghas happened: • The agency was sued for premature publication of SMS scores and agreed to settlement affirming its preemptive duty to determine which carriers are safe to operate on the nation’s roadways (NASTC et al. v. FMCSA). • Notwithstanding the court settlement, the agency published guidance to shippers and brokers repudiating the preemptive effect of its own safety fitness determinations and advising shippers and brokers to use methodology in credentialing carriers (Guidance to Shippers and Brokers, May 2010). • Over 50% of shippers and brokers use SMS methodology out of fear of vicarious liability and suits today, notwithstanding the settlement in NASTC and universal criticism of the methodology.

17. Results of Publication of SMS Data • New lawsuits against shippers and brokers. • Insurers increasing rates and terminating coverage. • Additional safety burdens and costs placed on carriers with no proven decline in fatality rate.

18. Small carriers and owner-operators are particularly prejudiced by: • The methodology • The law of large numbers • Profiling • Owner-operator trucks are 4 times as likely to be inspected

19. In guidance, the agency has attempted to deputize the shipping public to second guess the agency’s ultimate safety fitness determination and prune the motor carrier industry of carriers branded as “bad apples”. • SMS is the plaintiff’s attorney crowbar to leverage its way up the supply chain.

20. If this issue is left up to the states, so much for the Commerce Clause, deregulation and free competition in the trucking industry. • See ASECTT et al. v. FMCSA, in the United States Court of Appeals for the District of Columbia, Case No. 12-1305 – filed July 16, 2012. • Briefs have been filed, issue is before the court.

21. Publication of SMS scores is currently ranked as the number one issue facing the industry. • Yet: • There is little press about the lawsuit; and • TIA and others decry improper use of information yet do not mention suit.

22. What is the issue and why is the suit so under-publicized? • Lethargy among shippers • Competitive advantage divides industry • Politics • Demonize Bad Apples • Ignore No Press • Change the subject HOS Supreme Court Appeal

23. What is it all about? • The issue is federal preemption : • It is the FMCSA’s job, not the public’s job, to certify safety. • The FMCSA is solely responsible for certifying highway safety in accordance with the Commerce Clause and need for uniformity. • Safe to operate equals safe to use.

24. Preemption is a Hot Topic • California Ports Authority case argued before the Supreme Court. • Owner-operator decision in Sanchez v. Lasership, Inc., 2012 U.S. Dist. LEXIS 122404 (EDVA) • Undoubtedly the Court in ASECTT will not reach the preemption argument but the agency’s abandonment of the doctrine of federal preemption and the application of one uniform safety standard is the biggest threat which the industry faces.