Transcript FALL 2005 MEETING WASHINGTON REPORT

AMERICAN LIGHTING ASSOCIATION
CURRENT AND EMERGING ISSUES IN FREIGHT
TRANSPORTATION FACING YOUR BUSINESS
SEPTEMBER 2011
John M. Cutler, Jr.
McCarthy, Sweeney & Harkaway, P.C.
1825 K Street, N.W., Suite 700
Washington, DC 20006
(202) 775-5560
[email protected]
1
OVERVIEW
• Companies that manufacture and distribute
goods face new challenges in dealing with
transportation service providers and
intermediaries
• Trucking companies, railroads, air carriers,
ocean shipping lines, forwarders and brokers
also face new challenges
• Higher costs and potential reductions in capacity
and service quality are likely
• As usual, Washington, DC isn’t helping
2
CARRIER-SHIPPER ISSUES
• All carriers – ground, air and water – want to charge
more and reduce their own liability exposure
• These are givens, but the recession has increased the
leverage of many motor, rail, air and water carriers in
negotiations
• Capacity is tight, demand is rising and carrier costs for
fuel, financing, personnel and compliance are rising
• It all adds up to increases approaching if not exceeding
10% in many shippers’ transportation budgets
3
DEALING WITH TRUCKING COMPANIES
• TL carriers are exercising more pricing power than LTL
• All motor carriers are looking for fuel cost recovery
through surcharges
• Contract negotiations are more contentious – the ALA
model contract can help
• Be prepared for more detention charges
• Be prepared for resistance to one-way indemnification
clauses
• Protect against NMFC changes
4
DEALING WITH TRUCKING
COMPANIES (continued)
• Good liability coverage is harder to get
- Up to $100,000 per shipment is the best most
shippers can expect
- Trucking companies are looking to make that
coverage the exception rather than the rule
- Techniques include alternative coverages, e.g.,
lowest released value in NMFC
- Waiver of subrogation
- Avoid antiquated bills of lading
5
DEALING WITH TRUCKING COMPANIES
• Guard against being dragged into personal injury or wrongful
death cases arising out of highway accidents
• Your motor carriers need insurance and a Satisfactory safety
rating
• Your motor carrier must advise you immediately of any
changes in safety rating or insurance coverage
• Established, financially secure trucking companies tend to be
safer and should be preferred
• Consider using a service that monitors trucking company
safety
• Agree in writing that trucking company compliance with safety
requirements must supersede customer scheduling
instructions
6
DEALING WITH
BROKERS/FORWARDERS
• Many companies use them and they can be
excellent
• Read their contracts carefully – what do they
actually agree to do for you?
• Do they agree to deliver lower transportation
costs? If so, how good are their carriers?
• Do they agree to arrange for your goods to
move only via safe, experienced, financially
sound carriers?
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DEALING WITH
BROKERS/FORWARDERS (continued)
• Do they agree to indemnify you if there is an
accident/lawsuit?
• What cargo liability coverage will you get? Who pays
claims?
• Care in negotiating your contract can pay off
• Incorporate into your broker contract a requirement for
the broker to arrange for the service standards you want
from carriers
• Use financially responsible brokers to avoid paying
freight charges twice
8
DEALING WITH OCEAN SHIPPING LINES,
AIR CARRIERS AND RAILROADS
• Negotiating better liability coverage with
these carriers is difficult
• Domestic and international air cargo
coverage
• Liability for connecting trucking companies
may be governed by ocean or air industry
norms
• Rail intermodal is growing due to improved
service quality
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DEALING WITH OCEAN SHIPPING LINES, AIR
CARRIERS AND RAILROADS (continued)
• Contracting is possible but may not be worthwhile – too
many take-it-or-leave-it provisions
• Contracting with ocean shipping lines and NVOCCs is
subject to Federal Maritime Commission regulations at
46 C.F.R. Part 530 and 531
• Watch out for surcharges and volume commitments
• Be prepared for cross-border security requirements
• Bills of lading used for trucking may not work for
railroads in truck-rail intermodal
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GOVERNMENT POLICIES ARE LIKELY TO
MAKE THINGS WORSE
• Gridlock in Congress makes it difficult to do anything
• Deficit and debt concerns make it difficult to increase
spending
• Programs to promote economic growth cannot get
through Congress
• Executive branch regulatory agencies are subject to
reduced Congressional oversight
• Health, safety, environmental and security regulations
are growing for the transportation industry
11
INFRASTRUCTURE
• Everyone knows we need to spend more
• Fuel taxes not increased since 1993 and are 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
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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
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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
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PROSPECTS FOR SUCCESS
• The White House budget sounds good but has
little chance of success. The House Bill cuts
spending which need to be increased.
• 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
• Assuming funding is found, who will provide it?
• Assuming funding is found, where will it go?
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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
• DOT loves railroads, extending record
funding and calling for more freight to
move by trains, not trucks
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AIRLINES
• FAA Reauthorization Bill passed by House
• Can 2007 FAA Act, which has been
extended 21 times, finally be updated?
• No FedEx labor provision
• Veto threat due to provision overturning
NMB ruling facilitating unionization
• Next Gen air traffic control system
• Shutdown over subsidies to rural airports
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CAUSE FOR CONCERN OVER
TRUCKING
• Fuel Costs
• Lack of progress on Highway Bill
• Hours of Service, CSA and Driver
Shortage
• DOT Policy
• Truck Size and Weight Limits
• Where is the good news for trucking?
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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, to lowest levels ever
• 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
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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
• Carrier groups, shipper groups, drivers and over
100 members of Congress filed comments
opposing HOS rule changes
• Proposed rules will exacerbate driver shortage
20
COMPLIANCE, SAFETY,
ACCOUNTABILITY
• New FMCSA program to improve trucking
company and safety accountability and
performance is being implemented
• Rulemaking proceeding soon
• Safer highways likely to result, as bad apples
(drivers and trucking companies) are forced to
improve or seek other employment
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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 are recommended
22
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
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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
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OTHER TRANSPORTATION
DEVELOPMENTS
• FMCSA proposes to seek expanded
authority so it can regulate “shippers,
receivers, brokers and forwarders”
• FMCSA expresses concern about truck
drivers forced to wait to load or unload
• FMCSA says it wants to regulate the entire
commercial motor vehicle “transportation
life-cycle”
• Congress is unlikely to go along, but ALA
may want to monitor this proposal
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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, ending
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.
• 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 and want more trucking subject
to 80,000 lb. maximum.
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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
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