Welcome to Delta Nu AlphaWelcome to Delta Nu Alpha

Dark Clouds on the Horizon – Dark Clouds on the Horizon – Issues Involving Truck TransportationIssues Involving Truck Transportation

Webinar - February 21, 2008Webinar - February 21, 2008

With Avery Vise, Editor, With Avery Vise, Editor, Commercial Carrier JournalCommercial Carrier Journaland Henry E. Seaton, Seaton & Husk, L.P.and Henry E. Seaton, Seaton & Husk, L.P.

Henry E. SeatonHenry E. SeatonSeaton & Husk, LPSeaton & Husk, LP2240 Gallows Rd.2240 Gallows Rd.Vienna, VA 22182Vienna, VA 22182

www.transportationlaw.netwww.transportationlaw.net

Henry E. Seaton is a graduate of Duke University (A.B. ’70) and Henry E. Seaton is a graduate of Duke University (A.B. ’70) and Vanderbilt School of Law (J.D. ’73). He has practiced law for 30 years in Vanderbilt School of Law (J.D. ’73). He has practiced law for 30 years in the Washington D.C. area representing motor carriers and brokers. He the Washington D.C. area representing motor carriers and brokers. He is a member of the Vienna, VA based law firm of Seaton & Husk. The is a member of the Vienna, VA based law firm of Seaton & Husk. The firm specializes in freight claims, freight charge collection, contracting firm specializes in freight claims, freight charge collection, contracting issues, carrier representation before the FMCSA and bankruptcy issues.issues, carrier representation before the FMCSA and bankruptcy issues.

Mr. Seaton writes a monthly column on transportation law for the Mr. Seaton writes a monthly column on transportation law for the Commercial Carrier Journal (CCJ) and is the author of Commercial Carrier Journal (CCJ) and is the author of Protecting Motor Protecting Motor Carrier Interests in ContractsCarrier Interests in Contracts. He serves as commerce counsel for the . He serves as commerce counsel for the National Association of Small Trucking Companies. He was the Delta Nu National Association of Small Trucking Companies. He was the Delta Nu Alpha Transportation Professional of the Year in 2001 and is a frequent Alpha Transportation Professional of the Year in 2001 and is a frequent speaker and lecturer regarding cargo claims, freight charges, speaker and lecturer regarding cargo claims, freight charges, contracting and risk/insurance issues effecting carriers and brokers. contracting and risk/insurance issues effecting carriers and brokers. Mr. Seaton can be reached at HESeaton@aol.com. For articles and Mr. Seaton can be reached at HESeaton@aol.com. For articles and other information, please see other information, please see www.transportationlaw.netwww.transportationlaw.net..

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Thank YouThank YouCorporate Sponsors!Corporate Sponsors!

Kings ExpressKings ExpressLandstar RMCSLandstar RMCSApex Capital LPApex Capital LP

*USA Transportation Services, *USA Transportation Services, InternationalInternational

*Champagne Logistics*Champagne Logistics*Greatwide Truckload Management*Greatwide Truckload Management

About DNAAbout DNA

Fraternity of transportation professionalsFraternity of transportation professionals Open to all with interest in educationOpen to all with interest in education Interdisciplinary – shippers, carriers, third Interdisciplinary – shippers, carriers, third

party logisticians and studentsparty logisticians and students Traditional chapter format – Milwaukee, Traditional chapter format – Milwaukee,

Chicago, Rockford, Nashville, Bowling Chicago, Rockford, Nashville, Bowling Green, Grand Rapids, Louisville, Le High Green, Grand Rapids, Louisville, Le High ValleyValley

Student chapters at Western IL UniversityStudent chapters at Western IL University Scholarship programScholarship program

Syllabus of Future Webinars Syllabus of Future Webinars Contains Chronic and Acute Contains Chronic and Acute

Industry ProblemsIndustry Problems Format is issue presentation followed by Format is issue presentation followed by

open question and answer.open question and answer. Diverse opinions are encouraged.Diverse opinions are encouraged. Goal is to assess issues, impart Goal is to assess issues, impart

information and better prepare listeners as information and better prepare listeners as knowledgeable professionals in any knowledgeable professionals in any industry which too frequently ignores day-industry which too frequently ignores day-to-day problems of contracts, claims and to-day problems of contracts, claims and operations in favor of “supply chain operations in favor of “supply chain management.”management.”

CCPAC accreditation of 3 courses for cargo CCPAC accreditation of 3 courses for cargo claims specialists.claims specialists.

Upcoming Webinar TopicsUpcoming Webinar Topics3/18/2008 3/18/2008 Accident Liability Travels Up The Supply ChainAccident Liability Travels Up The Supply Chain4/15/2008 4/15/2008 Contract Waivers – 50 Reasons to Keep Bill of Contract Waivers – 50 Reasons to Keep Bill of

Lading Lading Terms and Conditions, and Federal Terms and Conditions, and Federal RulesRules

5/13/ 2008 5/13/ 2008 Multimodal Cargo Claim Issues – A PrescriptionMultimodal Cargo Claim Issues – A Prescriptionfor Confusionfor Confusion

6/17/2008 6/17/2008 Contracts of Carriage – A Study of Controversial Contracts of Carriage – A Study of Controversial Provisions Which Divide Shippers, Brokers and CarriersProvisions Which Divide Shippers, Brokers and Carriers

7/15/2008 7/15/2008 FMCSA Safety RegulationsFMCSA Safety Regulations8/19/2008 8/19/2008 The Scourge of Double BrokeringThe Scourge of Double Brokering9/16/2008 9/16/2008 Cargo Claim Mitigation, Adjustment and Salvage Cargo Claim Mitigation, Adjustment and Salvage

IssuesIssues10/21/200810/21/2008 INCOTERMS – The Language of the Global INCOTERMS – The Language of the Global

EconomyEconomy11/18/2008 11/18/2008 Supply Chain Security Issues – Alphabet Soup andSupply Chain Security Issues – Alphabet Soup and

New RegulationsNew Regulations

For more information and to register, go to For more information and to register, go to www.deltanualpha.orgwww.deltanualpha.org

Approved for Certified Claims ProfessionalApproved for Certified Claims ProfessionalAccreditation Council (CCPAC) Credit (1.5 CEUs)Accreditation Council (CCPAC) Credit (1.5 CEUs)

Dark CloudsDark Cloudson the Horizonon the Horizon

Acute Problems FacingAcute Problems Facing

Truck Transportation in 2008Truck Transportation in 2008

The EconomyThe Economy

The Credit CrunchThe Credit Crunch

Economic DownturnEconomic Downturn

Insolvency Issues

Economic DownturnEconomic Downturn

The effect of economic downturn on The effect of economic downturn on transportation:transportation: Unforeseen bankruptciesUnforeseen bankruptcies Unforeseen credit risksUnforeseen credit risks Effect on brokers/effect on carriersEffect on brokers/effect on carriers Critical vendor status, effect on small Critical vendor status, effect on small

vendors (i.e. Quebecor World)vendors (i.e. Quebecor World)

"It's only when the tide goes out "It's only when the tide goes out that you find who has been that you find who has been

swimming naked. The tide is swimming naked. The tide is going out and it won't be a going out and it won't be a

pretty sight."pretty sight." -- -- Warren BuffettWarren Buffett

Credit Crunch Leading to Credit Crunch Leading to DownturnDownturn

New Housing Construction DownNew Housing Construction Down Forecast truckload cut backsForecast truckload cut backs Little or no growth by major fleetsLittle or no growth by major fleets New truck sales down – cost/pre-buyNew truck sales down – cost/pre-buy No “Red Iron” against the fence is aimNo “Red Iron” against the fence is aim Growth in intermodal/rail and dedicatedGrowth in intermodal/rail and dedicated ““Alumni” are returning as sign of driver Alumni” are returning as sign of driver

shortage abatingshortage abating

Insolvency ThreatsInsolvency Threats Effect of shipper bankruptcy on carriersEffect of shipper bankruptcy on carriers

Critical vendor status for fewCritical vendor status for few Carrier is general unsecured creditor Carrier is general unsecured creditor

which loses pre-petition receivable and is which loses pre-petition receivable and is hit with preferencehit with preference

Carriers should be tightening credit terms Carriers should be tightening credit terms while strapped shippers seek greater days while strapped shippers seek greater days to payto pay

Effect on small carriers of factoring and Effect on small carriers of factoring and recourse financing is significantrecourse financing is significant

Effect of shipper bankruptcy on Effect of shipper bankruptcy on brokersbrokers If broker is “at risk,” shipper insolvency If broker is “at risk,” shipper insolvency

will have major adverse effectwill have major adverse effect TIA contract makes broker sole obligor for TIA contract makes broker sole obligor for

paymentpayment Sophisticated brokers follow different Sophisticated brokers follow different

approach – as the disclosed pay agent of approach – as the disclosed pay agent of shipper, their obligation is to pay carrier shipper, their obligation is to pay carrier onlyonly if paid by the customer if paid by the customer

Role of broker is major legal dispute Role of broker is major legal dispute between broker and carrier communitybetween broker and carrier community

i.e. TIA and ATA broker/carrier contracts take i.e. TIA and ATA broker/carrier contracts take different position on thisdifferent position on this

Effect of broker insolvency on Effect of broker insolvency on carriers and shippers:carriers and shippers: Venture capitalists and brokers Venture capitalists and brokers

unfamiliar with industry have advanced unfamiliar with industry have advanced 3PL large loans based on “security 3PL large loans based on “security interest,” entire receivable and cash interest,” entire receivable and cash flow analysisflow analysis

If lender gets nervous or over-extended If lender gets nervous or over-extended it can “flush the trade” – suck out cash it can “flush the trade” – suck out cash and escalating payables, prior to and escalating payables, prior to bankruptcybankruptcy

In bankruptcy, carriers can organize to In bankruptcy, carriers can organize to claim priority – ACI, World Partclaim priority – ACI, World Part

Effect of broker insolvency on shipper Effect of broker insolvency on shipper - double payment: - double payment:

(1) (1) Pursue shippers under recourse Pursue shippers under recourse theory. See theory. See Hawkspere Shipping Hawkspere Shipping Company, Ltd. v. Intamex, S.A.Company, Ltd. v. Intamex, S.A., 330 F.3d , 330 F.3d 225 (4th Cir. 2003); 225 (4th Cir. 2003); National Shipping National Shipping Co. Of Saudi Arabia v. Omni LinesCo. Of Saudi Arabia v. Omni Lines, 106 , 106 F.3d 1544 (11th Cir. 1997); F.3d 1544 (11th Cir. 1997); Strachan Strachan Shipping Co. v. Dresser Industries, Inc.Shipping Co. v. Dresser Industries, Inc., , 701 F.2d 483 (5th Cir. 1983); and Oak 701 F.2d 483 (5th Cir. 1983); and Oak Harbor v. Sears, 420 F. Supp 2d Harbor v. Sears, 420 F. Supp 2d 1138,1148 (W.D. Wash. 2006)1138,1148 (W.D. Wash. 2006)(2)(2) Advance constructive trust (Blue Advance constructive trust (Blue Thunder)Thunder)

Productivity and Demand Down/Cost Productivity and Demand Down/Cost UpUp

Equipment costEquipment cost Pre-buy sticker shock ($120k Tractor; $22k Pre-buy sticker shock ($120k Tractor; $22k

Trailer)Trailer) Fuel costFuel cost

Surcharge issuesSurcharge issues Pegs and formulasPegs and formulas ConsistencyConsistency

Labor Cost/ProductivityLabor Cost/Productivity HOSHOS

Flexibility and sleeper berthFlexibility and sleeper berth Circadian straight jacketsCircadian straight jackets CongestionCongestion

The future of HOS and EOBRThe future of HOS and EOBR

Hours-of-service rulesHours-of-service rules Appeals court voided 11 hours of driving Appeals court voided 11 hours of driving

and 34-hour restart on procedural and 34-hour restart on procedural groundsgrounds

FMCSA issued an interim rule retaining FMCSA issued an interim rule retaining those provisionsthose provisions

Public Citizen sued, but the court sided Public Citizen sued, but the court sided with FMCSAwith FMCSA

Comment period extended until March 17 Comment period extended until March 17 Risk: Merits of rules not yet consideredRisk: Merits of rules not yet considered

EOBRsEOBRs Appeals court in July 2004 faulted Appeals court in July 2004 faulted

FMCSA for failing to consider EOBRsFMCSA for failing to consider EOBRs FMCSA in January 2007 proposed to FMCSA in January 2007 proposed to

require EOBRs for carriers require EOBRs for carriers demonstrating a pattern of demonstrating a pattern of noncompliancenoncompliance

Some enforcement relief for voluntary Some enforcement relief for voluntary installationinstallation

September 2008 targeted for final rule September 2008 targeted for final rule Risk: FMCSA proposal just the first stepRisk: FMCSA proposal just the first step

Mexican trucksMexican trucks Program began Sept. 6, 2007Program began Sept. 6, 2007 Currently 15 Mexican and 5 U.S. carriersCurrently 15 Mexican and 5 U.S. carriers Lawsuits by Public Citizen/Teamsters Lawsuits by Public Citizen/Teamsters

and OOIDA argued Feb. 12and OOIDA argued Feb. 12 Congress blocked funds to Congress blocked funds to establishestablish

cross-border program; DOT says it can cross-border program; DOT says it can continuecontinue an existing program an existing program

Risks: Cheaper competition and Risks: Cheaper competition and potential enforcement implications for potential enforcement implications for U.S. carriersU.S. carriers

Welfare CostWelfare Cost Worker’s Compensation ratesWorker’s Compensation rates State overtime issuesState overtime issues

Washington State initiativeWashington State initiative Infrastructure CostInfrastructure Cost

Privatization of interstate highwaysPrivatization of interstate highways Brown fields v. Green fields debateBrown fields v. Green fields debate Foreign Interest/Eisenhower is deadForeign Interest/Eisenhower is dead Secretary Peters supports privatizationSecretary Peters supports privatization Highway trust fund faces bankruptcy in 2009, Highway trust fund faces bankruptcy in 2009,

Congress has funding issuesCongress has funding issues How do you differentiate pricing?How do you differentiate pricing?

Dark CloudsDark Clouds Shipper auctions returnShipper auctions return

Cut rate pricingCut rate pricing Effort to establish lane-by-lane fuel Effort to establish lane-by-lane fuel

surchargesurcharge Extended credit termsExtended credit terms

Increase insolvency riskIncrease insolvency risk Exacerbate factoring costExacerbate factoring cost

Double brokering – who is the carrierDouble brokering – who is the carrier

Break OneBreak One

Turbulent WindsTurbulent Windsof Changeof Change

Identifying the oppositionIdentifying the opposition

Organized laborOrganized labor Safety advocate groupsSafety advocate groups Blue state labor relations boards and Blue state labor relations boards and

legislatureslegislatures Plaintiff’s BarPlaintiff’s Bar Pro Labor Senators and Pro Labor Senators and

RepresentativesRepresentatives Anti-Pollution advocatesAnti-Pollution advocates

EnvironmentEnvironment Anti-idling ordinancesAnti-idling ordinances State fuel requirementsState fuel requirements LA and Long Beach ports proposalLA and Long Beach ports proposal Union backed – tenuous tie to owner-operatorsUnion backed – tenuous tie to owner-operators

Safety AdvocatesSafety Advocates James P. Hoffa states, “The FMCSA is showing it as being James P. Hoffa states, “The FMCSA is showing it as being

held captive by the trucking industry" in response to the held captive by the trucking industry" in response to the new HOS decision.new HOS decision.

Joan Claybrook states: “The FMCSA is continuing the Joan Claybrook states: “The FMCSA is continuing the sweatshop conditions for truck drivers rolling down the sweatshop conditions for truck drivers rolling down the highway which endangers Americans all over the highway which endangers Americans all over the country.”country.”

What’s really needed is a repeal of the Fair Labor What’s really needed is a repeal of the Fair Labor Standards Act exemption so truck drivers will be paid Standards Act exemption so truck drivers will be paid overtime and can have a 9 to 5, 40 hour a week job.overtime and can have a 9 to 5, 40 hour a week job.

Examples

The goalsThe goals Repeal FLSA exemptionRepeal FLSA exemption Make truck driving shift workMake truck driving shift work Kill flexibility in name of circadian Kill flexibility in name of circadian

rhythmrhythm

Blue State InitiativeBlue State Initiative Washington has extended its state Washington has extended its state

overtime law to include both inter- overtime law to include both inter- and intrastate trucking and the and intrastate trucking and the Supreme Court refused to hear an Supreme Court refused to hear an opinion.opinion.

California under the guise of California under the guise of “pollution control” proposes to “pollution control” proposes to eliminate owner-operators at port.eliminate owner-operators at port.

Eliot Spitzer in New York passed Eliot Spitzer in New York passed legislation requiring all truckers legislation requiring all truckers making pickups and deliveries in New making pickups and deliveries in New York to add New York worker’s York to add New York worker’s compensation to their certificate of compensation to their certificate of insurance.insurance.

State Laws – the Patchwork QuiltState Laws – the Patchwork Quilt

Uniform Carrier Registration – Uniform Carrier Registration – intends to simplify Bingo Card/ Single intends to simplify Bingo Card/ Single State Registration but State Registration but nownow must must comply with Secretary of State comply with Secretary of State requirement (e.g. NJ, PA, NJ et al)requirement (e.g. NJ, PA, NJ et al)

Serious Impediment for Small Serious Impediment for Small Irregular Route CarriersIrregular Route Carriers

Seizures and Major FinesSeizures and Major Fines

The THREAT of UnionizationThe THREAT of Unionization

A strong political forceA strong political force Targeting service industries which are not Targeting service industries which are not

exportable overseasexportable overseas Advocates in HOS, Mexican trucks, LA Advocates in HOS, Mexican trucks, LA

ports issuesports issues Major goals are to defeat independent Major goals are to defeat independent

contractor model and pass “Employee contractor model and pass “Employee Free Choice Act” (see Free Choice Act” (see www.teamsters.orgwww.teamsters.org – “Fed Up with FedEx”)– “Fed Up with FedEx”)

Pending Federal Legislation Pending Federal Legislation and the 2008 Electionand the 2008 Election

Employee Free Choice ActEmployee Free Choice Act Supported by Democratic majority in both HousesSupported by Democratic majority in both Houses Would eliminate requirement of election, Would eliminate requirement of election,

requiring union certification based on card signing requiring union certification based on card signing alonealone

Depriving management of opportunity to respondDepriving management of opportunity to respond Would require 30 mediation and could impose Would require 30 mediation and could impose

contract if no agreementcontract if no agreement Endorsed by Endorsed by bothboth Democratic candidates Democratic candidates

Obama-Durden-Kennedy BillObama-Durden-Kennedy Bill Possible repeal of FLSA ExemptionPossible repeal of FLSA Exemption Intended to eliminate safety harbor Intended to eliminate safety harbor

protection for treatment of independent protection for treatment of independent contractors as 1099 recipientscontractors as 1099 recipients

Sponsored by teamsters who claimSponsored by teamsters who claim 10.3 million workers in all industries are 10.3 million workers in all industries are

misclassified as independent contractors; andmisclassified as independent contractors; and Employers save upward of 30% in payroll costsEmployers save upward of 30% in payroll costs

The Perfect StormThe Perfect Storm Owner-operators play a significant part in Owner-operators play a significant part in

the truckload industrythe truckload industry Truth in Leasing Regulations (49 CFR 376) Truth in Leasing Regulations (49 CFR 376)

applies to leases with drivers of applies to leases with drivers of commercial motor vehicles (10,000 gwv)commercial motor vehicles (10,000 gwv) Imposes duty to “control” on carriers Imposes duty to “control” on carriers

(insurance, HOS, maintenance, safety, etc.)(insurance, HOS, maintenance, safety, etc.) Traditionally OOIDA class action suits under Traditionally OOIDA class action suits under

self-help provisions, 49 USC 14704, have been self-help provisions, 49 USC 14704, have been major area of litigationmajor area of litigation

Benefit from cheaper OCC/ACC insurance rates, Benefit from cheaper OCC/ACC insurance rates, no withholding, itemizing deductions, no withholding, itemizing deductions, differences in self employment tax v. differences in self employment tax v. employee/employer matchemployee/employer match

Now the Classification of Now the Classification of Owner-Operators as Owner-Operators as

Independent Contractors is Independent Contractors is Under AttackUnder Attack

The issue of Federal tax law treatment was The issue of Federal tax law treatment was thought settled in an IRS ruling found at thought settled in an IRS ruling found at www.irs.gov/irs.cite/van.ops.pdfwww.irs.gov/irs.cite/van.ops.pdf, permitting , permitting carriers to sell equipment over time to carriers to sell equipment over time to owner/operators and still keep independent owner/operators and still keep independent contractor status for withholding purposes.contractor status for withholding purposes. The retention of drivers with equipment under The retention of drivers with equipment under

the owner/operator model has been successfully the owner/operator model has been successfully employed to encourage responsible drivers to employed to encourage responsible drivers to own and manage their own assets while taking own and manage their own assets while taking advantage of lower taxes. (i.e., No W-2 advantage of lower taxes. (i.e., No W-2 treatment, no FICA match, greater deductions)treatment, no FICA match, greater deductions)

Safe harbor provisions allowed a challenged Safe harbor provisions allowed a challenged carrier to rely on the custom and usage in the carrier to rely on the custom and usage in the industry when challenged or federal auditindustry when challenged or federal audit

State Law TreatmentState Law Treatment

(1)(1) Much of the economic incentive for the owner-Much of the economic incentive for the owner-operator model is the freedom of choice operator model is the freedom of choice afforded to the owner-operator to opt out of afforded to the owner-operator to opt out of traditional workers compensation coverage and traditional workers compensation coverage and obtain cheap but comparable occupational obtain cheap but comparable occupational accident occ/acc coverage.accident occ/acc coverage.

(2)(2) Application of mandatory workers compensation Application of mandatory workers compensation provisions on owner-operators is a state law provisions on owner-operators is a state law issue traditionally based on variations of a issue traditionally based on variations of a “controls test” which has morphed over time “controls test” which has morphed over time into a complex web of statutes and case law into a complex web of statutes and case law interpretations that vary by state.interpretations that vary by state.

(3)(3) Until fairly recently, the advantages of a Until fairly recently, the advantages of a one-size-fits-all independent contractor one-size-fits-all independent contractor agreement complying with the truth-in-agreement complying with the truth-in-leasing regulations outweighed the risk of leasing regulations outweighed the risk of state law reclassification, especially when state law reclassification, especially when the independent contractor was required the independent contractor was required to purchase occ/acc insurance affording to purchase occ/acc insurance affording coverage in case of injury on the job.coverage in case of injury on the job.

(4)(4) Yet pro labor industrial relations and Yet pro labor industrial relations and workers compensation boards at the workers compensation boards at the state level have upped the ante on the state level have upped the ante on the reclassification issue inspiring reclassification issue inspiring retroactive unemployment retroactive unemployment compensation tax penalties and ever compensation tax penalties and ever stricter control guidelines on the stricter control guidelines on the classification issue (e.g. IL, CO, CA, classification issue (e.g. IL, CO, CA, MA, et al).MA, et al).

(5)(5) Over 72 state law initiatives were Over 72 state law initiatives were introduced last year. Organized trucking introduced last year. Organized trucking has met with little success.has met with little success.

(6)(6) Although fact intensive in the absence of Although fact intensive in the absence of statutory relevance it is difficult to meet statutory relevance it is difficult to meet the 20 point control test when the owner-the 20 point control test when the owner-operator must be part of the carrier’s operator must be part of the carrier’s daily operations to effectively serve the daily operations to effectively serve the shipper.shipper.

FedEx CasesFedEx Cases Precedent setting, distinguishable but Precedent setting, distinguishable but

threatening. The Court found owner-operators threatening. The Court found owner-operators should be reclassified as employees because:should be reclassified as employees because: Company had sole right to interpret Operating Company had sole right to interpret Operating

AgreementAgreement Routes could be refigured without driver sayRoutes could be refigured without driver say Driver’s work was core to the company’s businessDriver’s work was core to the company’s business Company controls who drives vehicleCompany controls who drives vehicle Company can effectively terminate contract “at will”Company can effectively terminate contract “at will”

The ConundrumThe Conundrum

Truth-in-leasing and safety Truth-in-leasing and safety regulations require exercise of control regulations require exercise of control but control destroys independence but control destroys independence under 20 Part Control Testunder 20 Part Control Test

Shippers impose just in time / Shippers impose just in time / guarantee service requirements but guarantee service requirements but under control test owner/operator under control test owner/operator must have right to turn down loadsmust have right to turn down loads

Political Response to ClassificationPolitical Response to Classification Increasingly states are interpreting the Increasingly states are interpreting the

control tests to require worker’s control tests to require worker’s compensation for owner-operators, the TCA compensation for owner-operators, the TCA has announced an initiative to create state has announced an initiative to create state exemptions recognizing the political exemptions recognizing the political atmosphere in Washington is not conducive. atmosphere in Washington is not conducive. Preemption not viable in pro labor Congress.Preemption not viable in pro labor Congress.

Trial lawyer adversaries make process Trial lawyer adversaries make process difficult.difficult.

A coalition of large trucking interests, small A coalition of large trucking interests, small trucking interests and owner-operators has trucking interests and owner-operators has not yet been formed. OOIDA has not lobbied not yet been formed. OOIDA has not lobbied in!in!

Conflict among carriers/ATAConflict among carriers/ATA

Alternative Excess Capacity Alternative Excess Capacity ModelsModels

Core carriers using “outside” carriersCore carriers using “outside” carriers Owner-operators urged to “take the last step” Owner-operators urged to “take the last step”

and become their own independently and become their own independently authorized FMCSA Carrierauthorized FMCSA Carrier

Benefits:Benefits: Liability becomes vicarious or contingentLiability becomes vicarious or contingent Avoid cut-through liability on workers compensation, Avoid cut-through liability on workers compensation,

withholding, overtime, etc. if buck stops with the name withholding, overtime, etc. if buck stops with the name on the dooron the door

Problem areas:Problem areas: Loss of economics of scaleLoss of economics of scale Vicarious liabilityVicarious liability Policing of small carriers safety record / negligent Policing of small carriers safety record / negligent

hiring issuehiring issue ““Controlling speed” – how to retain subcontractor?Controlling speed” – how to retain subcontractor? Broker/carrier conversion interline?Broker/carrier conversion interline? Cargo liability issuesCargo liability issues

Shipper and Broker Resistance Shipper and Broker Resistance to New Model Based on to New Model Based on

Scourge of “Double Brokerage”Scourge of “Double Brokerage”

Use of spot market/internet by Use of spot market/internet by unscrupulous middlemen;unscrupulous middlemen;

The ease of identity theft;The ease of identity theft; Confusion over “who is carrier” on bill Confusion over “who is carrier” on bill

of lading and broker resistance to of lading and broker resistance to identifying service provider on bill of identifying service provider on bill of lading.lading.

What can be done?What can be done? Asset based carrier clearly disclose its Asset based carrier clearly disclose its

brokered affiliate is arranging transportation to brokered affiliate is arranging transportation to shippershipper

Match carrier hired to name on door at the Match carrier hired to name on door at the time of pickuptime of pickup

Contingent cargo insurance and better Contingent cargo insurance and better understanding of Accord and insuranceunderstanding of Accord and insurance

Separate carrier and broker operations:Separate carrier and broker operations: Confusion when carrier and broker wear the same Confusion when carrier and broker wear the same

“hat”“hat” Violates 498 CFR 371Violates 498 CFR 371 Places “man in the middle” in liability loop (e.g. Places “man in the middle” in liability loop (e.g.

California, son of Schramm)California, son of Schramm) Vicarious liability – how much “checking out” is Vicarious liability – how much “checking out” is

enough – enough – join us next month!!join us next month!!

PreemptionPreemption What is it?What is it?

The doctrine that under the Commerce Clause of the The doctrine that under the Commerce Clause of the Constitution, Federal Law can trump state laws in the Constitution, Federal Law can trump state laws in the name of uniformity and achieving an overriding Federal name of uniformity and achieving an overriding Federal purpose. Safety enforcement, F4A Act preempting purpose. Safety enforcement, F4A Act preempting intrastate authority requirements are examplesintrastate authority requirements are examples

How does it apply to WIC, state overtime, “clean How does it apply to WIC, state overtime, “clean and green initiatives?and green initiatives? Answer - So far it does notAnswer - So far it does not

The patchwork quiltThe patchwork quilt Conflicting requirements and lawsConflicting requirements and laws Current Congress is Current Congress is notnot favorable alternative favorable alternative

becausebecause of labor constituencies of labor constituencies Rowe v. N.H. Motor Transp. Ass'n, 522 U.S. ___ Rowe v. N.H. Motor Transp. Ass'n, 522 U.S. ___

(2008). (2008).

Segment Analysis of Effects of Segment Analysis of Effects of “Winds of Change”“Winds of Change”

Irregular Route TLIrregular Route TL Productivity reductionProductivity reduction

Sleeper berthSleeper berth New equipment costNew equipment cost PU and PD scheduling/inflexibilityPU and PD scheduling/inflexibility Price pressure – fuel surchargePrice pressure – fuel surcharge One man-one truck model in jeopardyOne man-one truck model in jeopardy I/C Model-small business cost advantages – 30% at I/C Model-small business cost advantages – 30% at

perilperil IntermodalIntermodal

Port access problemsPort access problems L.A. ports bill – union effortsL.A. ports bill – union efforts Credentialing – port cards and TWICCredentialing – port cards and TWIC

Dedicated and core carriersDedicated and core carriers Long term contract cost assumptions at Long term contract cost assumptions at

risk – not accounting for:risk – not accounting for: HOS chargesHOS charges Overtime chargesOvertime charges Restrictive week rulesRestrictive week rules Cost of unionizationCost of unionization

Easier to unionizeEasier to unionize Spill-over effect/non-_______ shipper feesSpill-over effect/non-_______ shipper fees

The patchwork quiltThe patchwork quilt Conflicting requirements and lawsConflicting requirements and laws Current Congress is Current Congress is notnot favorable favorable

alternative alternative becausebecause of labor of labor constituenciesconstituencies

Future enforcementFuture enforcement Comprehensive Safety Analysis 2010Comprehensive Safety Analysis 2010 Wireless roadside inspectionsWireless roadside inspections Risk: Carriers’ – and drivers’ – safety Risk: Carriers’ – and drivers’ – safety

records could be far more volatile records could be far more volatile and sensitive to flawed data.and sensitive to flawed data.

CSA 2010CSA 2010 Concept: Intervene early to correct Concept: Intervene early to correct

safety problems without a compliance safety problems without a compliance reviewreview

SEAs to be replaced by targeted BASICSSEAs to be replaced by targeted BASICS Each carrier reviewed every 30 daysEach carrier reviewed every 30 days Operational model testing in Colorado, Operational model testing in Colorado,

Georgia, Missouri and New JerseyGeorgia, Missouri and New Jersey FMCSA plans rulemaking by this summerFMCSA plans rulemaking by this summer See See www.fmcsa.dot.gov/csa2010www.fmcsa.dot.gov/csa2010

Wireless roadside Wireless roadside inspectionsinspections Concept: Replace physical inspection Concept: Replace physical inspection

with data uploads on driver and vehicle with data uploads on driver and vehicle statusstatus

FMCSA issued a report in July 2007 and FMCSA issued a report in July 2007 and conducted an initial test in August 2007conducted an initial test in August 2007

Agency met with technology vendors in Agency met with technology vendors in January to discuss concept and optionsJanuary to discuss concept and options

Likely model based on weigh station or Likely model based on weigh station or roadside inspection, but FMCSA also roadside inspection, but FMCSA also has discussed “ubiquitous screening.”has discussed “ubiquitous screening.”

Wireless roadside Wireless roadside inspectionsinspections

Source: FMCSA

Federaldatabases

Statedatabases

Enhancedscreeningstation

Enhanced screening concept

• Hours of service• CDL number• Other driver info, such as LDWS, collision warning

Other fault code info• Fuel system• Transmission• Air system• Electrical/electronic systems

Virtual inspection data Virtual inspection data pointspoints

Lightingsystemperformance

Source: FMCSA

• VIN• US DOT number Brake system

performanceTire condition