HEALTH AND PERSONAL CARE LOGISTICS CONFERENCE WASHINGTON UPDATE OCTOBER 2009

1. HEALTH AND PERSONAL CARE LOGISTICS CONFERENCEWASHINGTON UPDATEOCTOBER 2009 John M. Cutler, Jr. McCarthy, Sweeney & Harkaway, P.C. 2175 K Street, N.W., Suite 600 Washington, DC 20037 (202) 775-5560 jcutler@mshpc.com

2. OVERVIEW • The focus in Washington has largely shifted from the economy to health care • Relative quiet as to transportation and supply chain issues is welcome • Infrastructure issues remain important but action is being delayed • So far so good on health, safety, and security fronts • Climate change issues still a concern

3. NEW FACES IN WASHINGTON • Dan Elliott is the new Chairman of the Surface Transportation Board and Joseph Szabo is the new head of the Federal Railroad Administration. Both formerly worked for UTU. • Ann Ferro has been nominated (not yet confirmed) as head of FMCSA • Good choice from our perspective – former head of Maryland Motor Truck Association and former Maryland Motor Vehicle Administrator • Safety Advocates, New York Times, and Senator Frank Lautenberg are not happy

4. NEW FACES IN WASHINGTON (CONTINUED) • Erroll Southers was recently nominated (not yet confirmed) to head the Transportation Security Administration. He is chief of security and intelligence for the LAX police, and a former FBI agent. • Too soon to tell what impact the new officials will have

5. INFRASTRUCTURE • Infrastructure investment remains the biggest transportation issue on the horizon • The rationale for investment a year ago was inadequate capacity • Today there’s less talk of capacity constraints and more talk of stimulating the economy • Whatever the rationale, increased investment is needed

6. HARD DECISIONS REMAIN • How much do we need to spend • How much can we afford to spend • How do we allocate funding as between - truck, rail, water and air - maintenance and new construction - transit, commuters and freight - rural, urban and other areas • What about oil import issues, climate change and cost effectiveness? Should more freight move by rail?

7. HOW DO WE PAY FOR WHAT WE NEED? • The U.S. is facing record deficits • The Highway Trust Fund required an $8 billion transfusion from general funds (i.e., taxpayers) in 2008 and more is needed • Fuel tax rates have not been increased since 1993 • National Surface Transportation Policy and Revenue Study Commission says raise fuel taxes 5 cents per year and transition to VMT tax • National Surface Transportation Infrastructure Financing Commission says raise fuel taxes 10 cents and transition to VMT

8. HOW DO WE PAY FOR WHAT WE NEED?(continued) • No politicians (including those in the White House) want to come out in favor of higher fuel taxes now, as DOT Secretary Ray LaHood found out • Privatization was the Bush DOT’s answer, but there’s little talk about privatization these days • Senators Jeff Bingaman (D-NM) and Chuck Grassley (R-IA) have introduced S. 884, removing privatized highways from consideration when federal highway funds are allocated

9. HOW DO WE PAY FOR WHAT WE NEED? (continued) • Tolling is also unpopular • ATA continues to oppose tolling of existing highways, and to fight excessive increases in tolls • Senator Kay Bailey Hutchison introduced S. 1115, prohibiting tolling on existing free federal highways

10. STIMULUS LEGISLATION • On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act, better known as the Stimulus bill • The $796 billion total includes roughly $30 billion for highways • The Stimulus bill and other governmental actions have helped shorten the recession, but much more is needed for infrastructure

11. HIGHWAY BILL REAUTHORIZATION • The main event for us is the next Highway Bill • SAFETEA-LU, the 2005 Highway Bill that expires 9/30/09, included $286 billion in funding for highway maintenance and construction and for transit • That amount was not enough, even ignoring roughly $26 billion in earmarks, including the “Bridge to Nowhere” • Chairman Oberstar wants a successor to SAFETEA-LU with far higher funding levels – $450 billion over 6 years

12. HIGHWAY BILL REAUTHORIZATION TIMING ISSUES • SAFETEA-LU expired 9/30/09, and has obviously not been replaced • Delays in enacting new Highway Bills are not uncommon. SAFETEA-LU was enacted almost 2 year after its predecessor expired • The Senate and White House have called for stopgap funding for 18 months • Rationale is that in 2011, after the 2010 elections, Congress may be able to come up with the funding we need

13. HIGHWAY BILL REAUTHORIZATION TIMING ISSUES (continued) • Chairman Oberstar wants quicker action on a new Highway Bill • Oberstar argues that major new funding is needed and will stimulate the economy • ATA, U.S. Chamber of Commerce, NAM and other groups support quicker action • House voted September 23, 2009 for a 3-month extension, till 12/31/09 • More extensions will almost certainly be needed, even if Congress acts before 2011

14. HIGHWAY BILL REAUTHORIZATION POLICY ISSUES • Oberstar draft Highway Bill has no amounts, so we don’t know total funding or how total would be allocated between highways and transit, or among states, or between highway construction and maintenance • Focus on freight is good, but bill also supports environment, congestion relief, clean air, safety, etc. What weight will be given to each? • Senate bill, S. 1036, Federal Surface Transportation Policy & Planning Act of 2009, introduced May 14 by Senate Commerce Committee Chairman Rockefeller (D-WV) and Surface Transportation Subcommittee Chairman Lautenberg (D-NJ), calls for 10% increase in freight transportation in “non-highway or multimodal services by 2020.”

15. TRUCKING ISSUES • Truck Sizes and Weights • Hours of Service • NAFTA • LA/Long Beach Port Drayage • Bankruptcies

16. TRUCKING ISSUES(continued) • Freeze on longer/heavier trucks being challenged • Rep. Mike Michaud (D-ME) introduced a bill to allow 97,000 lb. GVW trucks on the highways. HR 1799 has 41 cosponsors. • However, Rep. James McGovern (D-MA) introduced HR 1618, SHIPA, expanding the freeze. SHIPA now has 120 cosponsors. • On Hours of Service, FMCSA decided to keep the current rules • Public Citizen and other safety groups have returned to court to attack the rules • H&PCLC has intervened in the court case to support the rules, along with ATA, NITL, Chamber of Commerce

17. TRUCKING ISSUES(continued) • Efforts to regulate drayage operations at Port of LA/Long Beach were recently overturned in court • Ports of LA/Long Beach asking Congress to amend FAAA Act, which deregulated intrastate trucking, to allow states to regulate port drayage • Main goal appears to be to promote unionization of drayage • H&PCLC part of a large coalition opposing this effort • DOT’s NAFTA pilot program was shot down by Congress. Mexico is retaliating with billions of dollars in tariffs, as it is entitled to do. • Trucking and broker bankruptcies raise concerns about failed companies, collection actions, and TRUCC Act

18. AIR AND OCEAN • Montreal Convention as replacement for Warsaw Convention • “Rotterdam Rules” as replacement for COGSA. Recently approved by 16 nations, including U.S., France, Spain, but not Germany or the UK. European shippers Council concerned about contract limiting ocean carrier liability. • Senate must ratify before Rotterdam Rules become U.S. law. • General tightening of liability coverage

19. RAIL ISSUES • Antitrust exemption for railroads unlikely to survive • Captive shipper legislation may pass this session • Railroad efforts to disclaim or limit liability for or duty to carry hazardous materials • Investment Tax Credit legislation still pursued by railroad industry

20. SECURITY • Effective date for 10 + 2 rules was January 26, 2009 • Phase-in year is three-quarters over, and penalties of up to $5,000 per violation may start after January 25, 2010 • CBP has held numerous outreach meetings around the country

21. SECURITY(continued) • TSA Cargo Security Screening Program on track for domestic freight • TSA’s Ed Kelly says 100% screening by August 2010 feasible for domestic cargo through CCSP • 100% screening of air cargo inbound from foreign countries by August 2010 unlikely due to need to coordinate as to foreign countries’ laws and practices • TSA has called for public comments by November 16, 2009 on CCSP. H&PCLC plans to express support. • 100% screening requirement being questioned in absence of technological solutions. Could Known Shipper approach return? Congressional action would be needed.

22. OTHER NEWS • Colorado Board of Pharmacy issued proposed rules imposing regulations on drug wholesalers that would also regulate carriers - carrier compliance with BOP rules required - not limited to Colorado - disclosure of drivers’ past criminal convictions “or violations of state and federal law” - reports to BOP of any theft or suspicious loss during delivery within 30 days - contract only with carriers meeting standards • H&PCLC fought this proposal and BOP backed down • More of this is likely, particularly if FAAA Act is watered down, as Ports of LA/Long Beach want

23. OTHER NEWS (continued) • Lacey Act is being phased in, with enforcement to begin • APHIS issued Federal Register Notice 9/12 - Enforcement delayed until 9/1/10 for import declarations as to products containing composite or recycled or reused material - Blanket declarations still being evaluated - Importers can use “spp” where possible species include all species in genus - Shorthand group designations like “SPF” for spruce, pine and fir, being considered, along with criteria - Comments are due November 2 • Efforts at a legislative fix continue, but no pending bill to fix problems

24. OTHER NEWS(continued) • Labor – Card Check Legislation – no news is good news • Climate change issues • H.R. 2454, American Clean Energy and Security Act of 2009, cap and trade bill, passed by House in June • S. 1733, Clean Energy Jobs and American Power Act, introduced 9/30/09 in Senate by Senators John Kerry (D-MA) and Barbara Boxer (D-CA) • Senate appears unwilling to enact House bill, so action may take some time.