[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




                     THE FEDERAL REGULATORY BURDEN

=======================================================================

                         ROUNDTABLE DISCUSSION

                               before the

            SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, MARCH 4, 2003

                               __________

                            Serial No. 108-C

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house


                                 ______

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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      FRANK BALLANCE, North Carolina
JIM DeMINT, South Carolina           DONNA CHRISTENSEN, Virgin Islands
SAM GRAVES, Missouri                 DANNY DAVIS, Illinois
EDWARD SCHROCK, Virginia             CHARLES GONZALEZ, Texas
TODD AKIN, Missouri                  GRACE NAPOLITANO, California
SHELLEY MOORE CAPITO, West Virginia  ANIBAL ACEVEDO-VILA, Puerto Rico
BILL SHUSTER, Pennsylvania           ED CASE, Hawaii
MARILYN MUSGRAVE, Colorado           MADELEINE BORDALLO, Guam
TRENT FRANKS, Arizona                DENISE MAJETTE, Georgia
JIM GERLACH, Pennsylvania            JIM MARSHALL, Georgia
JEB BRADLEY, New Hampshire           MICHAEL MICHAUD, Maine
BOB BEAUPREZ, Colorado               LINDA SANCHEZ, California
CHRIS CHOCOLA, Indiana               ENI FALEOMAVAEGA, American Samoa
STEVE KING, Iowa                     BRAD MILLER, North Carolina
THADDEUS McCOTTER, Michigan

         J. Matthew Szymanski, Chief of Staff and Chief Counsel

                     Phil Eskeland, Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Huizenga, Don, American Foundries Association....................     2
Alford, Harry C., National Black Chamber of Commerce.............     5
Green, Rob, National Restaurant Association......................     6
Mahorney, Bill, American Bus Association.........................     8
Herzog, John, Air-Conditioning Contractors of America............    11
Maslyn, Mark, American Farm Bureau...............................    13
Coratolo, Giovanni, U.S. Chamber of Commerce.....................    15
White, Deborah, Food Marketing Institute.........................    17
O'Connor, Patrick, International Warehouse Logistics Association.    21
Fineran, National Association of Manufacturers...................    24
McDonald, Walt, National Association of Realtors.................    26
Trautwein, Janet, National Association of Health Underwriters....    28
Purcell, Frank, American Association of Anesthetists.............    31
Laird, Betsy, International Franchise Association................    34
McCracken, Tom, National Small Business United...................    36
Campagna, Shanna, National Beer Wholesalers Association..........    38

                                Appendix

Opening statements:
    Schrock, Hon. Ed.............................................    42
Prepared statements:
    Alford, Harry C..............................................    43
    Trautwein, Janet.............................................    46

                                 (iii)

 
              ROUNDTABLE ON THE FEDERAL REGULATORY BURDEN

                              ----------                              


                         TUESDAY, MARCH 4, 2003

                  House of Representatives,
                       Committee on Small Business,
           Subcommittee on Regulatory Reform and Oversight,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:05 p.m. in 
Room 2360, Rayburn House Office Building, Hon. Edward Schrock 
[chairman of the subcommittee] presiding.
    Chairman Schrock. I think we will go ahead and get started. 
There are some that are not here yet. They certainly cannot 
blame it on the weather, but in the interest of time, because I 
want to spend as much time hearing what is on your mind as 
possible, I would like to call this meeting to order and, first 
of all, to thank you all for being here.
    This is a very important subject to me. I think if there is 
one thing I have heard in the two-plus years that I have been 
in Congress, it is the unnecessary government regulation, not 
only at the federal level but the state level, that absolutely 
impedes business doing what they are supposed to do, and that 
create jobs for hard-working Americans, and I am kind of tired 
of what I am hearing out there, and we need to do something 
about it. We need to get some of this stuff under control, and 
hopefully you all are going to be able to help me with this.
    I am honored to be the chairman of this Subcommittee, and 
if there is any Subcommittee that I really am happy to have, 
this is the one because of there is one person who believes 
more in limited government than me, I do not know who it is. 
That is going to be my goal.
    I really look forward to working with you all as we address 
the immense regulatory burden affecting small businesses. 
Countless efforts to reform and rein in overreaching regulators 
have met with increasing resistance from the government 
bureaucracy, even when it is in the hands of a small business-
friendly administration.
    This is the second roundtable we have hosted, and I hope to 
take from both of these events some priorities for the 108th 
Congress for this Subcommittee. In a time when our economy 
relies so greatly on small businesses to keep our country 
moving, we cannot afford to stifle that progress by continuing 
to pile on costly regulation that disadvantage these 
businesses. Half of our national work force is employed by 
small businesses, and two-thirds to three-fourths of net new 
jobs are created by small business. Now is the time to do 
everything in our power to limit the reach of the regulators 
and lower the cost of regulation to small businesses.
    [Mr. Schrock's statement may be found in the appendix.]
    Chairman Schrock. I look forward to hearing from you all 
today. I ask that you hold your opening statements to three 
minutes, if you can, so that would give us more time for lively 
discussion afterwards, and I think we will just go right ahead, 
and I will recognize our first witness, Don Huizenga of the 
American Foundries Society, for his opening remarks. Thanks for 
being here.

     STATEMENT OF DON HUIZENGA, PRESIDENT AND CEO, KURDZEL 
  INDUSTRIES, ON BEHALF OF THE AMERICAN FOUNDRIES ASSOCIATION

    Mr. Huizenga. Chairman Schrock and members of the 
Subcommittee, I thank you for holding this roundtable and 
providing the opportunity to share important information about 
the regulatory challenges facing our domestic metal-casting 
industry.
    My name is Don Huizenga, and I am president and CEO of 
Kurdzel Industries. I am here on behalf of the American 
Foundries Society, AFS, where I served as the president last 
year. I have submitted a formal statement for the record that 
provides detailed information about the American Foundries 
Society and the metal-casting industry.
    There are two important points of interest that I would 
like to share with you before I discuss the most significant 
regulation facing American foundries. The U.S. foundry industry 
is comprised almost entirely of small businesses where 95 
percent have under 500 employees and qualify as small 
businesses for regulatory purposes. More importantly, though, 
80 percent have fewer than 100 employees, and nearly one-third 
operate with less than 20 employees.
    Most of the people around this table represent industries 
that exist because of metal castings. Also, I want to be clear 
that AFS supports reasonable and feasible rules and standards 
that achieve the goals of a clean environment and safe work 
place.
    Today, I would like to briefly discuss the iron and steel 
foundry MACT. This draft rule was proposed two days before 
Christmas, and the public comment period ended about two weeks 
ago. This rule, if finalized as written, could decimate the 
foundry industry as we know it today. At a minimum, foundry 
closures and consolidations are likely. This is particularly 
sobering news for the Department of Defense, which is relying 
on the domestic foundry industry to arm our military.
    There are several flaws associated with this rule and the 
regulatory development processes EPA went through. These are 
explained in more depth in my written testimony and include, 
number one, the underestimation of costs and small business 
impacts; number two, the development of standards that are 
inappropriate--by that, I mean technically or economically 
infeasible and potentially unsafe in one case; the lack of 
industry knowledge by regulators currently involved in the 
process, with EPA losing staff critical to this rule at a 
crucial point in its development; and, lastly, based on the 
above issues, we feel unreasonable time constraints were put on 
the process.
    Let me briefly discuss each point. Regarding underestimated 
costs, EPA estimated the rule would have an annual cost impact 
of roughly $27 million. AFS estimates are closer to $300 
million. The EPA's figures were compiled by contractors who 
routinely perform services for the agency. The industry's 
figures were compiled by environmental and facilities 
engineers, who propose, install, and operate these same control 
systems and really understand the intricacies of the stated 
requirements.
    For example, one of the standards in the rule would require 
half the regulated facilities to replace current control 
devices with newly prescribed equipment at a cost exceeding $2 
million each. EPA not only underestimated the size of the new 
bag houses but neglected to consider that new duct work and 
fans would be needed to support the larger air flow, and the 
energy usage would increase as well.
    For one of Kurdzel's foundries, the control equipment costs 
were $3 million versus $2 million by the EPA, and retrofit 
costs were three times their two times EPA projected, making 
the total capital and installation costs for us at one facility 
$9 million versus the EPA's projected $4 million.
    Miscalculations like this are consistent throughout the 
agency's assessment and helped explain the different cost 
assessments between the AFS and the agency. There are also 
significant hidden costs associated with this rule, with 
inspections, monitoring, reporting, and record keeping. Even 
the agency's costs, which have been low, are projected to be 
$39,000 per ton of HAP removed on an annualized basis.
    Most critical is that, as a result, EPA certified that this 
rule would not be a significant regulatory action, therefore, 
blocking further analysis of less-burdensome alternatives to 
the approaches in the proposal.
    A.F.S. is challenging EPA's economic assessment, requesting 
that EPA undertake the necessary evaluation of regulatory 
alternatives and seek OMB review.
    Number two, underestimated small business impact. AFS 
asserts that a number of small businesses that would be 
impacted by this rule is more than twice the number estimated 
by EPA. The impact would, indeed, have a significant impact on 
a substantial number of small foundries. Our foundry is a small 
business and will be hit hard by the requirements of the rule. 
As stated, we have estimated an initial cost of eight to $9 
million just to convert a single piece of equipment required by 
one rule at one of our plants. This does not take into account 
the numerous additional standards and requirements imposed on 
many other aspects of our foundry.
    This is a pound of Lowry's salt. That costs $2.99. To 
collect one pound of metal HAPs, hazard air pollutants, it will 
cost us $19,000, based on the initial cost of installing new 
equipment. The price of gold is $5,600 a pound. That gives you 
an analysis comparison of what we are talking about. This is 
ridiculous. It does not make a lot of sense.
    A.F.S. is challenging, as a result, EPA's small business 
assessment and requesting a panel to identify less-burdensome 
alternatives to reduce the impacts on small business.
    Technically and economically infeasible standards. In many 
cases, these rules are not appropriate for the foundry industry 
where costs are so excessive to achieve compliance that the 
requirements cannot be justified. For example, the requirements 
to install collection on metal pouring stations at the mandated 
face velocity requirements equates to a cost of $4,144,344 per 
ton of HAP metals collected, based on annualized cost 
information supplied by the agency. The same requirement may 
hinder additional MACT requirements for lighting off mold 
vents, again, absurd, but once more only addresses one example 
of one requirement to one specific area in our foundry.
    As I indicated, some of these requirements are unsafe or 
dangerous. Required manual light-off of each and every mold is 
putting staff assigned to this task in danger of attempting to 
comply with this law.
    E.P.A. lacks the knowledge of our industry. AFS has 
invested time and resources for over 10 years, working closely 
with the agency, to educate EPA staff on foundry processes and 
the industry as a whole. These efforts have included plant 
tours, numerous meetings, a Foundry 101 class for EPA staff and 
contractors, and submission of a variety of technical 
information on the industry. Unfortunately, the project manager 
for our MACT, from its inception 10 years ago, retired a year 
before the proposal was published. Likewise, his immediate 
supervisor, also involved since Day One, retired three months 
prior to the proposal. As a result, six months ago, we were 
faced with a brand-new staff that were not familiar with our 
industry and had no institutional knowledge of our rulemaking. 
To compound this, the process was at a point where language 
could not be shared or distributed by the agency prior to the 
draft being published.
    The problems resulting from the staff change manifested 
themselves in the form of standards that were abandoned years 
ago being reintroduced in this rule and the inclusion of 
additional requirements that do not fit foundry practices.
    Time constraints. We recognize we have been working with 
EPA on this rule for over 10 years, so claiming no time may 
seem unreasonable. However, because of the staff changes and 
the need to revisit many issues that were resolved by previous 
managers, accelerating this MACT to be completed by any due 
date other than the last one is not appropriate. We have 
pointed this out to the agency as well.
    Simply stated, the new staff was not allowed sufficient 
time to understand the intricacies of the industry and the rule 
under development.
    In conclusion, AFS appreciates the opportunity to share our 
views with you today, and we do look forward to the opportunity 
to work with you to further improve the federal regulatory 
process and the rule developed from it, and I talked as fast as 
I could, Congressman. Thank you very much.
    Chairman Schrock. Thank you. Harry Alford from the National 
Black Chamber of Commerce, we are delighted to have you here 
today.

  STATEMENT OF HARRY C. ALFORD, PRESIDENT/CEO, NATIONAL BLACK 
                   CHAMBER OF COMMERCE, INC.

    Mr. Alford. Thank you, Mr. Chairman. I am delighted to be 
here. I have a written statement, and I will hold my comments 
to my three minutes, hopefully.
    The big problem is being in the past. We had an Office of 
Advocacy that was set up under the Regulatory Flexibility Act 
of 1980. Then it was reinforced with SBREFA, Small Business 
Regulatory Enforcement Fairness Act of 1996.
    The big problem had been that previous administrations did 
not allow the Office of Advocacy to do its job. We have an 
administration today that values the Office of Advocacy, and 
through enforcement of those two laws and through Executive 
Order 13272, which requires the Office of Advocacy to teach 
compliance with those two laws to all of the agencies, we have 
seen a great breath of fresh air, and the small business 
community is, indeed, delighted with the new focus and the new 
vigor that the Office of Advocacy is having.
    In addition, there has been a new position at the SBA known 
as the Ombudsman Office of the SBA, and currently the ombudsman 
is holding hearings throughout country soliciting views and 
opinions of regulatory fairness or unfairness. I know many of 
our constituents participated in the two hearings in Kansas 
City, Missouri, and here in Washington, D.C., just about two 
weeks ago. It is touring around the country, and I think that 
is going to be very helpful.
    We have had bad times in the late-1990's. We had an EPA 
that was forcing regulation down our throats. The NAAQS, 
National Ambient Air Quality Standards, and Title VI 
enforcement of the Civil Rights Act; they were running 
roughshod. They were onerous, and the courts in our advocacy 
stopped them in their tracks.
    We plan, now that we have good times, we plan to cooperate 
with the U.S. Chamber of Commerce in supporting their new 
Institute for Sound Regulation, which will have an oversight 
impact on the new regulations as they come out. Also, we will 
follow the Data Quality Act, which says that any new laws must 
require agencies to use sound science and statistics to support 
agency regulations and policy. Using half of the science and 
cherry picking the data can no longer be accepted. Too bad that 
was not around a few years ago.
    There is also, despite that we have got new legislation, we 
have got reinforcement, we have got a good committee here in 
Congress, and everybody has joined in to make sure that the 
field is level for small business. There is still some outside 
activity, what I call ``slick injection,'' and one is there was 
a lawsuit by the Forest Conservation Council and the Friends of 
the Environment versus the SBA, and they were suing the SBA for 
granting 7[a] loans out in suburban Virginia here, saying that 
it was going to have an adverse impact on the environment. It 
was too much pro-sprawl.
    To our shock, we, the National Black Chamber of Commerce 
and the Small Business Survival Committee, had to forcefully 
interject ourselves into this lawsuit because SBA was going to 
settle with these two environmental groups and require small 
businesses who were going to take out loans in suburban 
Virginia to get certificates from various EPA agencies up and 
down the Mid-Atlantic to get the certificates to show that 
there would be no negative impact on the environment by them 
putting up an apartment building or a 7-Eleven store.
    It was not going to happen. The common business person was 
not going to be able to go through all of that routine. So, in 
effect, the 7[a] loan program was going to just stop in its 
tracks. So far, we have been successful in arguing it in the 
court, and hopefully the SBA will not settle this matter for 
the position of the environmental groups.
    So vigilance is the key; cooperation and coalition building 
amongst all of our groups, and a good working relationship with 
Congress. We look forward to the 108th Congress being a friend 
of ours.
    [Mr. Alford's statement may be found in the appendix.]
    Chairman Schrock. Great. Thank you, Harry. Rob Green from 
the NRA, and that means National Restaurant Association. We are 
glad to have you here, too.

STATEMENT OF ROB GREEN, DIRECTOR OF WORK FORCE POLICY, NATIONAL 
                     RESTAURANT ASSOCIATION

    Mr. Green. Thank you, Mr. Chairman. I appreciate that. I am 
the director of work force policy with the National Restaurant 
Association, and thank you very much for holding this 
roundtable. We think it is an excellent opportunity to get 
everybody together and talk about priorities.
    We share a lot of concerns and priorities of folks around 
this table, and today I just want to talk about three specific 
ones. Before I do that, I just want to indicate that seven out 
of ten restaurants employ fewer than 20 employees, and fully 92 
percent of restaurants have fewer than 50 employees, so we are 
truly a small-business industry, and I know you know that very 
well, and I appreciate that.
    Chairman Schrock. I live in Virginia Beach, and there are 
hundreds and hundreds and hundreds of restaurants.
    Mr. Green. Yes, and we want to make sure that number grows.
    Chairman Schrock. I do, too. I do, too, in Virginia Beach. 
Let us make that clear.
    Mr. Green. Absolutely for the record. The three issues 
today I want to talk about are the Section 541 regulations, 
white-collar regulations, being put forward by the Department 
of Labor. The second issue are some technical rules 
implementing the Americans with Disabilities Act, and the third 
issue is FDA prior-notice rules dealing with importation of 
food.
    The first issue as an issue that has been a longstanding 
concern to the restaurant industry. That is classification of 
employees and who qualifies for overtime. The current 
regulation which govern the issue were last updated in 1954, 
and, in fact, a large segment of the restaurant industry did 
not even exist in 1954, and that is the quick-service segment, 
or fast food, as we commonly know it.
    So we are very enthusiastic that the Department of Labor is 
taking time to review these regulations, and basically they say 
that anybody in an administrative, professional, or executive 
capacity is exempt from overtime. Now, the trouble is how do 
you determine who is exempt and who is nonexempt, and for 
restaurants where managers really do everything there is to do 
in an operation--they roll up their sleeves, and they are 
working the front of the house, the back of the house--it is a 
challenge to try to determine a day-to-day responsibility of a 
manager and an assistant manager, so many small businesses who 
do not have human resources departments have really run afoul 
of the existing regulations, and there are a lot of class-
action lawsuits which have come into play in recent years, and 
there is multimillion-dollar liability exposure that can occur.
    So we are very enthusiastic that the department is very 
close to issuing proposed regulations, hopefully in the next 
month or so. Restaurant industry priorities include clarifying 
and simplifying the existing regulations so a small business 
can really understand whether or not they are in compliance; 
secondly, recognizing unique features of restaurant 
management--the multitasking is one issue which we are focusing 
on; and ensuring that the salary thresholds for determining 
exemptions are fair to the restaurant industry, and our 
managerial salaries tend to be a little lower than some other 
industries, so we want to make sure that the department 
recognizes that. And we are hopeful that when these regulations 
are issued in draft form, we will be able to comment, and we 
will be working with the Subcommittee to let you know of any 
concerns we might have.
    The second issue deals with some technical rules 
implementing the Americans with Disabilities Act, and there is 
something called the U.S. Architectural Transportation Barriers 
Compliance Board, which is an independent entity that looks at 
access issues under the ADA. They set out proposed guidelines 
in 1999 which include accessible kitchen designs for persons 
with disabilities, and that really impacts the restaurant 
industry, and our concern is that they really did not look at 
the costs of both altering existing kitchens and also for new 
construction, what that cost will be, particularly on small 
business.
    So we petitioned the access board, as it is known, to look 
at changes to that, working with other groups in this room and 
others around the table, including SBA. We feel we have made 
some headway, but I think the decision now rests with the 
Department of Justice, and that should be coming very shortly. 
So if a decision is reached that is still unfair to the 
industry, we will probably be in touch and want to work with 
you on that issue as well.
    The third issue is relatively recent. Regulations were 
recently put forward by the Food and Drug Administration, as 
required by the Bioterrorism Act passed by Congress last year, 
and the issue is really what happens to imported food and how 
much prior notice does an importer have to give, and what we 
found for restaurants is that it could become a very big issue. 
We have a situation where all importers are required to give 
prior notice before imports are received, and the notice has to 
be given to FDA electronically, and it has to be no more than 
five days preceding the goods' arrival or no less than 12 noon 
on the day before shipment arrives. But if you are a 
restauranteur who is looking at a catch of the day or a small 
shipment from Canada or Mexico, it becomes very problematic to 
try to anticipate what is going to be in a shipment, 
particularly seafood, cheese--wine is issue.
    In the restaurant industry, we deal with very small 
shipments, usually for very short periods of time, again, for 
menu specials on a week-to-week basis, for one-time events, for 
catering, and the like, and we see a potential here where each 
small restauranteur becomes an importer, and the requirements 
that are listed by these regulations in terms of information 
required are very onerous. So there is a lot of paper work, and 
the on-line aspect is very troublesome as well because if you 
have a network problem, a server problem, even within your own 
small business, you could automatically trigger a delay in 
receiving your shipment. When it is fresh fish or perishable 
food, it can really become a big, big problem, and if you are 
importing wine from Italy, let us say, and you are buying 
something on the Internet, it is an interesting process.
    So we look forward to filing comments in the next month or 
so and trying to work with you and your staff, Mr. Chairman, on 
addressing this issue if it needs to be addressed, and thank 
you very much.
    Chairman Schrock. Thank you. Thank you very much. Bill 
Mahorney from the ABA, which you might think is the Bar 
Association. It is not. It is the American Bus Association. We 
have too many acronyms in our federal government, but we are 
delighted to have you here, too.

 STATEMENT OF BILL MAHORNEY, DIRECTOR OF SAFETY AND REGULATORY 
               PROGRAMS, AMERICAN BUS ASSOCIATION

    Mr. Mahorney. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here and speak to you about some issues that 
are of interest to our membership. As you said, I am Bill 
Mahorney. I am the director of safety and regulatory programs 
with the American Bus Association.
    We are a national trade association of the inner-city bus 
industry. We have about 850 members who actually operate buses, 
and that is from Greyhound down to the bulk of the industry, 
which has less than 10 buses, a lot of charter and tour. In 
fact, of the 4,000 bus companies that are in the continental 
United States, 90 percent of them have less than 10 buses, so 
we really are an industry made up of small businesses. We also 
have about 3,500 members of our association who support the 
travel and tour industry, hotels, motels. I think we probably 
at this table have a lot of common members.
    Since time is short, I am just going to highlight a couple 
of issues and mention some others very briefly. One of the 
things that has really affected some of our members, especially 
our smaller members, is competition from transit companies. 
Private motor coach companies face increasing competition from 
federal-subsidized transit agencies, against the regulations 
put forth by the FTA in Section 604. Basically, the regulations 
say if there is a private company that is willing and able to 
do it, you will not compete, and to do that, they would need to 
send a notice to us and to another motor coach association, the 
United Motor Coach Association, so we can notify our members, 
so if one of our members wants to bid on that job, they can. 
That does not always occur.
    The federal regulations do attempt to limit this public 
sector competition, but there are a lot of loopholes. When we 
have these problems, we lose a lot of contracts, we lose a lot 
of our charter business, and a result of that is a lot of our 
smaller companies do go out of business, and then there is no 
service in some areas at all because some of the transit will 
not go in certain areas, but some of the charter businesses 
they are losing helps keep them afloat.
    Some of the things we would like to see, and I would like 
to say that we have had a very good relationship with Jenn Dorn 
at the FTA at this time. They have been very supportive, and 
her general counsel, Will Sears. We have had a lot of our 
companies that have been challenging some of the transit 
companies who have been providing this illegal service, and we 
have gotten some very good support from Ms. Dorn, and we are 
very appreciative of that.
    Chairman Schrock. In the form of what?
    Mr. Mahorney. Well, they have ruled in our favor, in favor 
of our members. They have supported the regional 
administrator's decisions and basically, even through appeals, 
have, in fact, upheld the charter rules, which we are very, 
very appreciative of.
    What we would like to see from a regulatory standpoint is 
we would like to see clarification and strengthening of 
transit-competition rules that would include a stronger 
definition of charter service. In fact, we would like to see 
statutory language. Currently, it is just regulatory language, 
and we would like to have a prohibition against public transit 
agencies operating beyond their urban area.
    We would like to see stronger penalties for violations of 
the transit-competition rules, including compensatory damages. 
The appeals process, even the appeals that we have won; they 
take enough time where a small company is still taking an 
incredible beating, so we would like to see those moved along 
at a faster pace, and also if there would be something to make 
the operator whole after a transit agency is found to be in 
violation.
    We would like to create an ombudsman at the FTA for private 
operators and an auditing mechanism to resolve some complaints 
without long and costly proceedings between the parties. We 
think that would help quite a bit.
    We would like to see the creation of a bus and rail 
passenger advisory committee to promote discussions between the 
modes and advise the secretary of transportation on how to best 
promote the industries because we do think that there are a lot 
of opportunities for us to work together as well.
    We would also like to establish a pilot program for bus and 
van parking and providing grants to transit agencies to 
encourage them to make their parking facilities available for 
private motor coach operators during peak hours where 
practicable. In D.C., it is a huge issue. We have no place to 
park, and if we could use some of their parking spaces when 
they are open, we think it would really help us out quite a 
bit.
    The second issue is hours of service of drivers. There is 
currently a final rule that is at the OMB that we still have 
some concern about. We are concerned that motor coaches may be 
included in the rule, to the detriment of the industry and to 
the traveling public. We do not know if that has occurred, but 
we still have quite a bit of concerns.
    The rule change purports to increase the safety of 
commercial motor vehicle drivers by preventing fatigue, but any 
inclusion of our industry, we think, will have the opposite 
effect. The rule is a truck rule, at least it was the last 
time. We are very anxious to see how it comes out this time, 
but some things we would like to make really clear is there is 
no evidence or science to support changing the hours-of-service 
rules for our industry. There might be for trucks, but for 
buses there is really no evidence or science. It has never been 
studied.
    In fact, we did a study. We commissioned a study from the 
University of Michigan Transportation Research Institute that 
showed that there was one fatigue-related fatality every two 
and a half years in the bus industry, and that is using the 
Forrest data. That is using the same data that DOT uses.
    The thing that was most disturbing to us at the time in the 
May 2000 proposal was, and I quote, ``for purposes of this 
proposal, the FMCSA has assumed that bus drivers operate in 
ways similar to the truck drivers,'' and that is simply not the 
case. What we would like to do is be separated out from that 
rule, and if they want to address us, address us separately. Do 
the research. We will work them, and we will see, number one, 
if there is a problem, and, number two, if there is a problem, 
how we can address it from a bus standpoint, not from a truck.
    There are several other regulatory issues that affect our 
small businesses that I will just mention. Americans with 
Disabilities Act compliance; we need more funds. The 
Transportation Research Board has said we need about $40 
million a year to comply. We are getting about seven. So that, 
we would like to see about three to four times as much money in 
that program because putting a lift on a coach costs about 35 
to $40,000.
    We are concerned still about the low-sulfur, diesel-fuel 
requirements. We are concerned about cost and availability.
    We would like to see more research in the motor coach end. 
There has been a lot of talk of seat belts and that type of 
thing. NTSA has never crash tested a bus, and we would like to 
see them do it. We would absolutely like to see them do it. The 
reasoning has been that there is not enough of a safety problem 
within the motor coach--it is a two-edged sword. We are glad we 
do not have a safety problem, but if they are going to address 
the vehicle itself, the only way to do it is through crash 
testing, and unfortunately they need a lot of money to do that, 
so that is something we have asked Congress to provide NTSA 
with the funds they would need to crash test some motor coaches 
and make some decisions on not only seat belts but on window 
design, roof design, et cetera.
    We also want to make sure that there is a safe and fair 
implementation of NAFTA in a full reciprocity with Mexico as we 
go across the borders.
    Just one last thing I would like to mention, even though 
this is a federal forum, our members have been increasingly 
affected by individual state regulations that conflict 
sometimes with federal law. We have recently had an example of 
this in Illinois, which passed a law requiring anyone who 
transports Illinois school children to possess an Illinois 
school bus driver permit.
    The law makes no provision for out-of-state drivers to 
obtain this permit and thus prevents them from transporting 
Illinois school children at all. This effectively prohibits 
carriers in neighboring states from doing that business within 
the state, and we have a lot of members who are losing tens of 
thousands of dollars in this. We think this is not only a 
violation of the commerce clause of the Constitution, but it 
also conflicts with the spirit of the commercial driver's 
license program.
    Mr. Chairman, we certainly appreciate the opportunity to 
speak to you on these issues, and I do have some additional 
information that I would like to submit for the record on some 
of these issues.
    Chairman Schrock. Thank you, Bill.
    Mr. Mahorney. Thank you very much.
    Chairman Schrock. My whole life, especially the 24 years 
that I served in the Navy, I never believed that government 
should compete unfairly with commercial enterprise. That is 
something we always try to do. They do it. They do it a lot, 
but it just does not make sense. They do not have the 
infrastructure. They do not pay the taxes. You guys do, and 
that is something that needs to be kept in check. There is no 
question about that.
    Mr. Mahorney. I appreciate that. You know, we feel that we 
can definitely do it cheaper, without a doubt.
    Chairman Schrock. And better. Whenever the government gets 
in it, need I say more?
    John Herzog. He is from the Air-conditioning Contractors of 
America, and we are glad to have you here, too.

   STATEMENT OF JOHN HERZOG, AIR-CONDITIONING CONTRACTORS OF 
                            AMERICA

    Mr. Herzog. Thank you, Mr. Chairman. I appreciate it, and 
we are going to address our comments--we agree with a lot of 
the other things that small business folks are talking about, 
but we are going to focus on just four specific things that 
primarily affect our members, and they affect everybody in this 
room because you all benefit from the air conditioning and 
heating that our members provide, and you would not be happy if 
they were not there.
    We actually want a new regulation, and I will explain why. 
We recommend extending the licensing requirement for purchasing 
refrigerants used in air-conditioning and heating equipment to 
include hydrofluorocarbons, which are call HFCs. Under the 
Clean Air Act, the older generation of ozone-depleting 
refrigerants are being phased out. The new generation are these 
HFCs I am talking about. They do not deplete the ozone layer.
    However, as with the older generation of refrigerants, 
there is still a strong argument to keep HFCs out of the hands 
of nonskilled, untrained, and noncertified consumers. Under the 
EPA, anybody that handles the older generation, and there is 
still a lot of those CFCs and HCFCs out there, has to be 
certified. If these people who are not skilled and not 
certified have access to these new refrigerants, they are going 
to be injured because the new refrigerants operate under much 
heavier pressure than the old ones, systems will be ruined, and 
refrigerants will be mixed so they cannot be reclaimed and, 
therefore, must be destroyed. This not only costs money and 
wastes resources, but it increases the likelihood that 
refrigerants will be illegally vented into the atmosphere. As a 
greenhouse gas, unregulated HFCs have a higher global-warming 
potential than the regulated gases that they are replacing.
    Next, we recommend changing the FTC regulation regarding 
door-to-door sales transactions. The purpose of the three-day 
right of rescission is to protect unsuspecting people from 
door-to-door, scam salesmen. Unfortunately, it also captures 
our members in this net and plumbers and electricians. Although 
our members are not door-to-door sales operations, because they 
do the work in the home, often in an emergency situation, they 
fall under the same requirement.
    The solution, we think, is regulatory relief when the 
customer initiates the contact. When your air-conditioning 
system goes down, and you call somebody to your home, the 
three-day right of rescission presents a real problem for our 
members because you can wiggle out of it after they have done 
the work.
    We also recommend giving specific authority and directions 
to the FTC to prevent unfair competition by a public utility 
and its unregulated affiliates. The Public Holding Utility Act 
is the only barrier to cross-subsidization between monopoly 
utility holding companies and their unregulated affiliates, yet 
the Senate included repeal of PHUA in last year's energy bill, 
and it will probably be done again this year.
    Many utility holding companies subsidize unregulated 
affiliates at the expense of consumers, including many small 
businesses with whom they compete. We do not fear the 
competition. What we fear is unfair competition, exactly what 
you were just talking about.
    The FTC approach is an alternative, equitable solution that 
overcomes most of the objections on the other approaches we 
have tried over the last five or six years we have been 
fighting this. We think it is a good way to do it. The FTC 
Reauthorization Bill came up last year in the Senate, and it 
should be brought up again this year.
    Next, we seek regulatory relief under Section 280(f) of the 
tax code for trucks and vans used in businesses. We propose new 
guidance that focuses less on the nature of the vehicle but 
more on how it is used. It should also allow new vehicles into 
the category that is currently vans and trucks without regard 
to weight limits, allow business owners to apply Section 179, 
expensing, to these vehicles, raise the dollar cap to more 
realistic levels, and shorten the depreciation time.
    Finally, we support the secretary of labor's plan to reduce 
musculoskeletal disorders through industry-specific, voluntary 
guidelines and urge Congress to allow this program to proceed, 
withholding consideration of legislation establishing a 
mandatory national standard until the science of MSD's cause 
and effect is clearly made.
    Thank you for the opportunity. We look forward to helping 
you implement these changes.
    Chairman Schrock. Thank you. Thank you very much. Mark 
Maslyn, we are glad to have you here. Mark is from the American 
Farm Bureau. Until recently, I did not have very many farms, 
and then they redistricted in our state, and now I have the 
whole Eastern Shore. It is all farms.
    Mr. Maslyn. I am glad to hear that.
    Chairman Schrock. Yes. I will bet you are. So I am learning 
real quick.
    Mr. Maslyn.I am very pleased and would be happy to help you 
learn that.
    Chairman Schrock. Great. Thanks.

         STATEMENT OF MARK MASLYN, AMERICAN FARM BUREAU

    Mr. Maslyn. Congressman, thank you very much for the 
opportunity to be here and for holding this hearing. I have 
included comment on a number of specific regulations in our 
written statement, and I am going to refrain from talking about 
those individually, and perhaps we can get into some discussion 
later on. But the fact that you did not have a lot of 
agricultural background; I would like to talk a little bit 
about farming today in the 21st century because it is different 
than what many people think.
    First of all, the Farm Bureau is organized in 50 states and 
2,700 counties, including the Territory of Puerto Rico. There 
are about two million farms in the country. About 80 percent of 
the food is produced on about 20 percent of the farms. The 
overwhelming majority of those farms are family-run businesses 
with assets in excess of a million dollars.
    It is a highly technical, highly scientific, and highly 
computerized industry today. Computers run virtually every 
aspect of the farm, from production to management to marketing. 
Our tractors and other equipment are guided by global position 
satellites. We farm by the foot and the square inch as opposed 
to by the acre and the field.
    Our markets today are international. We export about two-
thirds of everything that we produce, so our competition does 
as well. The European Union, a very large market for 
agriculture, subsidizes its agriculture to the tune of about 
five times on a per-farm basis the amount that is subsidized in 
the United States. In addition to that, they have about 90 
percent of the world's export subsidies.
    The United States farmer is a low-cost producer. We are the 
best producers in the world. My point that I am getting to is 
that regulation, any time that you add costs to the bottom 
line, we become less competitive, and that is of real concern. 
In Japan, their domestic subsidies amount to $32 billion a 
year. They also have about six percent of the export subsidies. 
We are about $16 billion in subsidies, and we have less than a 
percent of export subsidies.
    Regulations affect agriculture in many, many ways. The farm 
today is regulated far more by EPA than USDA. We are regulated 
literally by dozens of federal agencies, everything from USDA 
to EPA, the Fish and Wildlife Service, NOAA, the National 
Marine Fisheries Service, the Corps of Engineers--dozens of 
agencies, dozens of rules. We have a regulatory staff. Twenty 
years ago, we had two people that did regulatory work. Now we 
have a staff of 18 people, and most everybody does regulatory 
work, and about half of them do it full time.
    Far more of our attention in the last eight years has been 
devoted on regulatory work than on legislative work. That is 
where all of the mischief comes. That is where the problems 
are.
    Agriculture is a natural-resource-based industry, and, 
consequently, we have gotten to know the EPA all too well. 
Someone mentioned the international treaties and components. 
Recently, we have had an incidence where methyl bromide, a soil 
fumigant which was listed as an ozone depleter, is being phased 
out. By 2005, it will be phased out in this country. There are 
not substitutes. There are no alternatives for U.S. producers. 
If you grow tomatoes in Florida and strawberries in California, 
you have to have it.
    What is unfair and what has not been talked about here 
today has been the international component. Some of the 
treaties that we are entering into, some of the international 
agreements, regulate the United States to a different standard.
    Chairman Schrock. Say that again.
    Mr. Maslyn. They regulate the United States producer to 
different standards than the international community. For 
example, on methyl bromide, the phase-out in the United States 
is in 2005. In the rest of the world and in the undeveloped 
world, in China, and in Third World countries, it is 2015. They 
are actually building plants to produce methyl bromide in those 
countries. We cannot compete without it, the United States, and 
yet those countries are building plants. They will be raising 
crops and sending those crops back into the United States. It 
is not a question of whether the product is safe for use in 
terms of food production; it is just that we are held to a 
different standard because we are a developed country, and in 
the very near future, China will surpass the United States in 
its use of methyl bromide.
    That is one example, and I could give you many, many others 
in which the EPA in this particular instance has used 
information, and we have talked a little bit about the Data 
Quality Act and sound science, but there is a fair amount of 
dispute as to whether or not methyl bromide is seriously the 
problem that it was, and keeping in mind that most of the ozone 
depleters are naturally occurring, there is little difference 
in terms of the overall objective of researching the 
environmental goal set by the Montreal Protocol if you were to 
simply freeze the phase-out in the United States until an 
alternative was developed.
    That is just one instance, and it is important, no matter 
what agency we are dealing with, that we have the best science 
and the best information available on these products, and we 
are not dealing with political science but real science. Just 
about every department and agency that we deal with, we run 
into the same problems. It is the credibility of data that the 
agencies are using. We are competing with oftentimes 
predetermined outcomes, particularly when it comes to the 
chemicals, the inputs that we use to make a living.
    There are a number of other rules and regulations that we 
are dealing with right now. As I said, we have included them in 
our written statement. But they oftentimes will levy direct 
costs and indirect costs to us, and we are also faced with the 
problem of parallel regulations. Now, I worked in the state 
legislature in New York many years ago, and there is not a rule 
out there that the State of New York does not think that it can 
do better than the federal government, and there is an 
opportunity to one-up what the federal government does, and 
that occurs in almost every state.
    Farmers are oftentimes caught between what we do in our 
state capitals or in our county legislatures, particularly in 
the area of the environment. We all strive to be more 
protective of the public than the next individual.
    I want to close and thank you for holding this, and we look 
forward to working with you. You do very good and important 
work here, and however we can help and assist you to carry out 
your goals and objectives of this Committee, we would be happy 
to do so. Thank you.
    Chairman Schrock. Thank you. But we have got to do more 
than have hearings. We have got to rein these people in. There 
is a common thread through what we heard last week and a common 
thread what I am hearing today, and I will not mention the 
agency, but the initials are EPA. It just seems like they are 
out of control. Everything we do, it is EPA this, EPA that. So 
there is something really wrong there somewhere.
    Giovanni Coratolo, who is with the U.S. Chamber of 
Commerce, thanks for coming.

    STATEMENT OF GIOVANNI CORATOLO, U.S. CHAMBER OF COMMERCE

    Mr. Coratolo. Thank you, sir. Thank you very much for 
holding this roundtable. The important work that you are doing 
is certainly very important to the chamber also. The U.S. 
Chamber of Commerce represents 3,000 state and local chambers 
and has an underlying membership of roughly three million, 96 
percent of which is small business, so regulation impacts us 
very highly.
    With the U.S. Chamber of Commerce, obviously, we represent 
a very broad constituency, so as we reach out and embrace these 
thousands of regulations that descend upon us on a yearly 
basis, we have to look a little more broadly as to how we 
attack them, and certainly part of the way that the small 
business community makes sure that regulation is sensitive to 
the small business community is what I call ``regulating the 
regulators,'' and a lot of this has been already said. We have 
to make sure that the body of legislation that is already on 
the books is followed through the agencies.
    We have a whole history of very potent regulations, 
starting with the Reg Flex Act of 1980, strengthened by SBREFA 
in 1996; Paperwork Reduction, actually strengthened by a small 
bill that was passed last year, the Paperwork Relief Act. All 
of this has put a lot of requirements of the agencies on the 
books, and yet a lot of agencies tend to ignore this. They 
themselves cannot hold themselves responsible for the 
legislative regulations that bear upon them as they would like 
small business to adhere to their regulations.
    So turnabout is fair play. If they expect small business to 
adhere to their regulations, they have to be an example.
    Chairman Schrock. But you see, they are the federal 
government.
    Mr. Coratolo. Exactly, exactly.
    Chairman Schrock. They think they do not have to.
    Mr. Coratolo. They are doing it for what they perceive as a 
better purpose.
    Chairman Schrock. Justifying their existence maybe.
    Mr. Coratolo. We have seen ergonomics several years ago, 
which really threatened to sink the small business community, 
costing over $100 billion. We saw that that was killed by a 
little-known congressional-review act that was actually tacked 
onto SBREFA. So, I mean, things like that; there are tools 
there that we have to make sure that the agencies use, and even 
currently the Washington State has reversed its mandatory 
ergonomics rule and made it voluntary because they saw the 
errors of their ways.
    So when we can enlighten agencies and make them more 
sensitive to the small business community when they do 
regulate, I think we a lot of times we can get along. I do not 
think there are any small businesses that want to violate or 
put in danger the health and welfare of their employees or the 
public. Obviously, they are not going to be in business too 
long.
    Part of what we have heard today is certainly data quality. 
The chamber is very supportive of making sure there is sound 
science when it comes to regulation, make sure that science is 
transparent. Certainly, when they have a premise when they go 
into the regulation, we have to be able to look at that and 
make sure that it is based on sound science, and they are not 
just trying to determine the outcome, which in too many cases 
they are.
    On the books right now, there is 610, Section 610 of 
SBREFA, where they are supposed to every so often review 
regulation and make sure that the underlying conditions are 
there. In fact, we had John Graham ask for regulations. Just to 
give you one small example, I submitted as part of that the 
sling rule, and here is a perfect example of how agencies tend 
to ignore small business. For years, we had a small business 
association that lobbied OSHA on this sling rule. It was a rule 
in which cranes and wire operators used to do slings for 
construction. The American Society of Mechanical Engineers had 
come up with a new standard that was safer, that provided less 
problems, that saved money, yet OSHA still followed this old 
sling rule. We said, look, the time has come to really look at 
this, examine it. Sometimes reviewing regulation is important, 
not just making new regulation.
    Very integral to making this whole body of what I call the 
legislation to hold agencies accountable work is the Office of 
Advocacy. It plays an integral part in what we do in trying to 
make sure that small business is represented within the 
administration. Part of what we like to see is that office 
strengthened. Right now, they have no particular line item in 
any budget. It is done at the discretion of SBA. A certain line 
item--they are the only office that is able to have judicial 
review and critique other agencies within the administration on 
their rulemaking and also make them sensitive to the small 
business community.
    We have heard Harry, and I sort of support his comments on 
the ombudsman. All of these particular areas go into 
orchestrating a cogent force in making the agencies adhere to 
what they should be doing in making the rules more sensitive to 
small business, and with that, I will submit some very detailed 
comments later.
    Chairman Schrock. Great. Thanks. Your comment about the 
Paperwork Reduction Act; we heard that from folks last week as 
well. I think what happens up here, Congress passes legislation 
with this intent in mind, and the regulators just say, We will 
just interpret that any way we want, and Congress be damned. 
And they do it, and unfortunately they have gotten by with it. 
They need to be reined in and their feet held to the fire, and 
you need to keep pounding on them, and that is something we 
need to do. We passed the legislation. We need to make sure it 
is implemented correctly, and it is not.
    Deborah White is from the Food Marketing Institute. We are 
glad to have you here. Thank you.

STATEMENT OF DEBORAH WHITE, REGULATORY COUNSEL, FOOD MARKETING 
                           INSTITUTE

    Ms. White. Good afternoon. Thank you very much for holding 
this roundtable and for inviting FMI to participate. I am 
regulatory counsel for FMI, and actually I was very interested 
in Mark's comment that he has got 18 people that are working on 
regulations. I am going to have to tell my boss that. He would 
love to have some more help.
    Anyway, FMI, we have about 2,300 members. They are food 
retailers and food wholesalers now that we have merged with 
Food Distributors International. We have 26,000 retail stores, 
and that represents about three-quarters of the grocery store 
dollars in the country, but fully half of our membership are 
single-store operators, and we are an aggressively regulated 
industry.
    People do not necessarily think of supermarkets as overly 
regulated, but we are aggressively regulated by the feds, the 
states, the locals. There are some 12 different food safety 
agencies alone, not to mention the Department of Labor and OSHA 
and the ergonomics issue that was brought up, and we certainly 
appreciate the work that was done with the Congressional Review 
Act. We were looking at problems. I think OSHA was proposing to 
limit how much weight could go into a grocery bag to 15 pounds. 
How are we going to get those 20-pound turkeys out of the 
store?
    So we agree that it is very helpful that OSHA is working on 
voluntary guidelines, a guideline-type approach, and we 
certainly support that. We hope they have an opportunity to do 
something useful with that.
    Chairman Schrock. Why was OSHA going to limit that to 15 
pounds? Someone might strain their back lifting?
    Ms. White. That was part of the ergonomic standard that was 
out there, but there are some things in a grocery store that 
weigh more than that, so----
    Chairman Schrock. Sure.
    Ms. White [continuing]. We were not sure exactly how that 
was going to work. But we are also regulated by HHS and DEA. We 
have pharmacies and OTC drugs, and so we are required to 
register with the DEA just to make sure that the cough and cold 
medicine is not used improperly. USDA's food and nutrition 
services, because we help to administer the WIC and the food 
stamp programs; the Environmental Protection Agency because we 
use refrigeration; the Department of Treasury for the financial 
services stuff we do; Department of Transportation for hours of 
service. That is also an issue because we have our own fleet. 
We come daily in contact with a great number of federal 
agencies.
    Today, though, I would like to talk about one particular 
regulation that is being developed right now, even as we speak, 
over at the U.S. Department of Agriculture. The Ag Marketing 
Service is working on that, and that is to implement a 
provision that was passed in last year's farm bill that would 
mandate country-of-origin labeling. Just by way of background, 
right now we are in a voluntary period. There are voluntary 
guidelines that were issued by USDA in October of last year. 
USDA is developing regulations that will implement the 
mandatory program come September 30, 2004.
    Briefly, by way of background because it is the law that is 
driving this issue, it is unlike any other food-labeling law. 
Most food-labeling laws, you have got a box of Wheaties. It has 
to have nutritional labeling, but it is General Mills or 
whoever makes the food that has to put that labeling 
information on it. Under the country-of-origin labeling law, it 
is the retailer who is mandated to inform the consumer about 
the country of origin for everything that falls into this class 
of product called a covered commodity.
    The definition of ``retailer'' in the act, the way that 
USDA interpreted it was they took the PACA definition, which is 
from another act, and it is anyone who buys or sells $230,000 
worth or produce in a calendar year. That may sound like a lot, 
but all of our single-store operators are covered by this. This 
is something that is going to put substantial regulatory 
burdens on our members. So even though it looks like there is a 
small business exemption, it is not, and because of the way it 
was drafted, because of the way the definition of ``retailer'' 
was drafted, there are some businesses that are excluded in 
their entirety. Anybody who does not sell any produce at all, 
like Omaha Beef, is not covered by the law, so the playing 
field is not level there. The law also does not cover 
restaurants. So to the extent that the share of stomach is 
divided between retailers and restaurants, again, our single-
store operators are competitively disadvantaged.
    The things that have to be labeled are anything that falls 
into this category called ``covered commodity.'' It is beef, it 
is pork, it is lamb, it is all fresh and frozen vegetables, and 
it is all seafood, which you not only have to specify the 
country of origin; you also have to identify the method of 
production. We, the retailer, are responsible for telling every 
consumer that walks in whether the shrimp that they are about 
to purchase was farm raised or wild caught.
    We are responsible, as this law has been interpreted by 
USDA, for telling every consumer what basically the biography 
was of every cow that goes into a package of hamburger. We have 
to report on where that cow was born, raised, and slaughtered. 
So it is an extensive amount of information that has to be 
provided.
    Chairman Schrock. Was that in last year's farm bill?
    Ms. White. It was part of last year's farm bill, yes, sir.
    It is an extensive amount of information that has to be 
provided, and it is information that the retailer does not 
have. We cannot look at a bunch of bananas and say, ``Oh, that 
is definitely from Costa Rica. It should not be marked product 
of Guatemala.'' We cannot look at a package of hamburger and 
say, ``Oh, well, that is clearly a product that was born and 
raised in Canada and slaughtered in the U.S. and not born in 
Canada and raised and slaughtered in the U.S.''
    Chairman Schrock. What is the purpose?
    Ms. White. Well, it depends on who you ask, what the 
purpose is. This has been variously advanced as consumer right 
to know, as food security, food safety, but if you look at it 
closely, it is clearly not any of those things because this 
applies to beef but not chicken. It applies to hamburger that 
you buy at your local Safeway, but it does not apply to 
hamburger purchased at McDonald's. It applies to peanuts. They 
are in the covered commodity definition, but they are only nut. 
It does not apply to pecans.
    So you look at this thing with not even too fine a look, 
and you can clearly tell that this is not really truly food 
security. This was advanced really in order to try to help some 
of the domestic producer communities.
    The Food Marketing Institute has long supported voluntary 
country-of-origin labeling. Our members have worked with the 
production community to help support Georgia peaches and 
Washington apples and beef from various states in the country, 
but this is an entirely different type of situation.
    Our concern is that once people understand what is really 
going to be required, they will start to realize that it is not 
just the small retailers that are going to have increased 
costs; it is also going to be the production community as well 
because the way USDA has interpreted this law, they are 
requiring that records be kept all up and down the food-supply 
chain for two years for each and every covered commodity, and 
they are requiring that the place of birth for all of these 
cows that will end up in your hamburger--my apologies to the 
sensitive--that place of birth has to be document, the place 
where the cow was fed has to be documented, and the place of 
processing has to be documented. So there are going to be costs 
that will be assumed by the entire production chain.
    Chairman Schrock. Each piece of meat will come with a mini-
encyclopedia, won't it?
    Ms. White. Our creative services people put together a 
little mock-up, and it is quite a little biography. For 
hamburger, hamburger typically comes from a variety of 
different sources. Retailers generally--or suppliers often 
blend meat from a few different sources to get the right lean 
level because consumers like 93/7, or they like 80/20, or 
whatever it is, and so from each of those different sources you 
may have product that has different biographies, so each of the 
biographies is going to have to be listed on the package of 
hamburger in descending order of predominance because it was 
not bad enough to have to list it all as it was.
    So we are talking about something that is really, it is 
laughable except that retailers are going to be responsible for 
this, and the penalties are serious. The penalties are up to 
$10,000 per violation of this act. We have got 600 different 
types of covered commodity in every single grocery store, and 
this is something that is going to be enforced not only by the 
feds but also by the states. So basically you have got small 
retailers sitting there with 600 opportunities, hundreds of 
thousands of items if you consider each apple a separate 
opportunity for a violation and subject to substantial 
penalties.
    USDA did a cost estimate on this.
    Chairman Schrock. Each apples has to have the biography on 
there?
    Ms. White. Well, apples are a little simpler. Hopefully, 
they will not have a complete biography. In fairness to USDA, 
it is not clear what the enforcement standard is going to be, 
but that is certainly one of the questions that we have. If 70 
percent of the apples are stickered, have we fulfilled our 
obligation to inform the consumer of the country of origin, or 
does it have to be 99 percent or 99.9 percent? What is the 
standard?
    U.S.D.A. did a cost estimate for this under the Paperwork 
Reduction Act, again, another example of why those statutes are 
important, and they estimated that it was going to cost $2 
billion for record keeping for the first year alone. That is 
enormous cost for this program, and we think it is probably 
underestimated. I think most people around the table would 
agree that the agencies generally understate the cost of their 
record-keeping assessment, and we agreed with that, and we 
filed comments along those lines.
    In any event, we talked about enormous penalties. We talked 
about the record keeping that is going to be required under 
this. Our membership extends from single-store operators up to 
the national chains and international chains, but it is the 
single-store operators that are going to be most disadvantaged, 
that are going to have the greatest difficulty spreading the 
costs of these penalties and the record keeping and the system 
that they are going to have to have in place in order to 
implement this program.
    So we think it is important for USDA to promulgate 
reasonable regulations under this statute, and we would urge 
this Committee to keep an eye on that. Thank you very much.
    Chairman Schrock. Mark, what is the Farm Bureau's pitch on 
this labeling thing?
    Mr. Maslyn. We support country-of-origin labeling, but we 
also share some of the concerns and feel that--in fact, for 
example, we have got problems in producing the livestock that 
are on the ground right now that will be subject to this 
biography when they come to slaughter, and we do not know how 
we are going to do that. We do not know how those records are 
going to be kept or maintained and what they should look like.
    We made the comment to the department that we think they 
have the opportunity to do this in a minimalistic way, as they 
have done with other programs.
    Chairman Schrock. Is it effective immediately?
    Ms. White. September 30, 2004 is when the mandatory program 
kicks in, but we are operating now under a voluntary guideline 
system, so it gives us an idea of how the agency interprets the 
statute.
    Chairman Schrock. Okay. Patrick O'Connor, welcome. Patrick 
is from the International Warehouse Logistics Association. We 
are glad to hear what you have to say. Thank you.

    STATEMENT OF PATRICK O'CONNOR, INTERNATIONAL WAREHOUSE 
                     LOGISTICS ASSOCIATION

    Mr. O'Connor. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here today, and, again, I thank you, as 
everyone else has today, for holding this roundtable and giving 
all of us a chance to speak to you on issues affecting our 
members and our industries.
    The International Warehouse Logistics Association is a 
trade association of companies engaged in public and contract 
warehousing and related third-party logistics services. 
Essentially, a public warehouse or a contract warehouse is a 
private company that has undertaken inventory management, 
distribution, and other value-added services for the entity who 
actually owns the product.
    Our members provide such services as we have a member in 
New Jersey that handles the distribution and inventory 
management of all of the Starkist tuna on the East Coast. We 
have a member in Des Moines, Iowa, that handles all of the 
Kraft and Phillip Morris products for the entire Midwest. We 
have a member that handles the entire inventory for Tiffany's.
    So, as you can see, it is a variety of companies managing a 
variety of products. Our members are very involved in just-in-
time inventory, where manufacturers have outsourced the 
management of raw material component products, et cetera, 
relying on our members to provide the components, the raw 
material, to the production line just as it is needed.
    One of the concerns, one of the problems that we have 
always had, is that our industry, when we speak to federal 
agencies, it tends to fall on deaf ears, and that is in part 
because federal agencies do not often understand the role of 
public warehousing in the supply chain. Just one example of 
that: We have a situation that affects a number of our members 
that may be storing chemical products.
    A chemical product at some time exhausts its shelf life. It 
no longer meets the specifications necessary for that product. 
It is not unusual when that happens for the product owner, 
which can include many of the large companies in this country, 
to discard that product, tell the warehouse they do not want it 
back. They may continue to pay the storage cost on it, but what 
has happened to the warehouse is that product has now become a 
hazardous waste, and the warehouse now, if it tries to dispose 
of that, becomes a generator of a hazardous waste.
    We have talked to EPA about this and said to EPA, that 
infamous agency, What do we do? Can you help us put the burden 
back on the entity that discarded that product? EPA's response 
is, You really do not want to raise this with us because, in 
fact, when that chemical product exhausts its shelf life, you 
now are becoming a storer of a hazardous waste, and that is 
even worse. So just between you and I, let us just keep it 
quiet, and you guys just go about your business.
    We have a number of issues that we are involved with. We 
develop a regulatory agenda every year. I just want to touch on 
a couple of those today. I will have a written statement that I 
will leave with the staff. One, and I think some of our 
members--Bob Taylor from Norfolk Warehouse has spoken to you 
about this before--is the Surface Transportation Board and the 
issue of rail demurrage. Most of our members are located on 
rail sidings and use rail to receive product and to ship 
product out. We have been seeking for the last two years from 
the Surface Transportation Board a realistic mechanism to 
resolve demurrage disputes that occur with rail carriers. We 
have worked with the Surface Transportation Board to date with 
no avail, with no success.
    We are hopeful over time that Congress and the STB will 
consider providing for arbitration of these demurrage disputes 
that arise between a warehouse and a rail carrier. These 
disputes can often exceed $100,000, and these disputes often 
can be resolved in the favor of the warehouse if the warehouse 
has the time and money to take it to court.
    Just an example of what will happen in a demurrage dispute, 
a demurrage is essentially a charge for not unloading a rail 
car on a timely basis. The rail carrier may call Norfolk 
Warehouse and say, ``I am going to have five rail cars 
delivered to your siding to be unloaded on Friday.'' Under the 
rate agreement, the Norfolk Warehouse may have 24 hours to 
unload that rail car. But something may happen, and the rail 
carrier does not get those cars delivered on Friday, but he has 
told you they are coming on Friday. So in the rail carrier's 
records those arrived on your rail siding until you prove to 
him that they did not actually get there on Friday.
    But what happens is you also have five cars coming on 
Saturday. Those five cars arrive on Saturday, and then the five 
cars that were supposed to arrive on Friday also arrive, and 
suddenly you have them backed up. The cost and time you go 
through in trying to prove your case back to the rail carrier 
that these cars arrived at your siding at a time that was not 
your responsibility or fault. We have worked with the Surface 
Transportation Board. We have worked with the Class I rail 
carriers, but to date we have had no success.
    What we would like to see is an arbitration process where a 
warehouse could take its case to the Surface Transportation 
Board, and the Surface Transportation Board would take it to an 
arbitration process. I will say that the rail carriers do have 
a reason for being concerned about demurrage. It is not unusual 
for a lot of companies, such as your big-box warehouses, Wal-
Marts, Home Depots, to use the rail car as a warehouse on 
wheels, and the rail carriers have a real reason to be 
concerned that that is being abused.
    But in the case of a public warehouse, the public warehouse 
owner does not earn any revenue on the product that is in that 
rail car until it is unloaded and placed on the warehouse 
floor. As long as it is sitting out there on a rail siding, 
there is no revenue accruing to the warehouse.
    A second issue I would like to address, and it has been 
raised earlier in this roundtable, are the Food and Drug 
Administration's regulations regarding security of the food 
supply, as required by the Bioterrorism Act. Two regulations in 
particular that are of interest to us: the record-keeping 
requirements. This proposal has not been issued yet, but under 
the provisions of the act, every entity in the food supply 
chain, which will include food-grade warehouses, will have to 
keep a record of who the immediate person before them was in 
the system, who transported that product to the warehouse where 
it came from, and then you will have to keep a record of the 
immediate recipient of that product when it leaves your 
warehouse.
    We have talked at length with FDA about the fact that when 
a product leaves a warehouse, all we know is that it is going 
on a truck or a rail car. Once it leaves the warehouse grounds, 
it can be diverted. We have no way of knowing who the immediate 
recipient is going to be. But talk about falling on deaf ears; 
we have invited FDA to come out and visit a public warehouse, 
food-grade warehouse, see how food product comes in and how it 
leaves. FDA says, Thanks, but no thanks. We do not need to come 
out and visit you. We know how a public warehouse works. You 
quiz them on the operation of a public warehouse, and they have 
no idea.
    The other rule that is of concern is the registration 
requirement where any warehouse that handles food products will 
have to register with the Food and Drug Administration that 
they are, indeed, handling food product.
    Another issue are the various Customs requirements that are 
being developed because of concern with national security and 
border security. We clearly recognize the threat that exists 
from terrorism and the potential for weapons of mass 
destruction to enter this country via land, air, and sea. 
Virtually every container that comes through the Port of 
Norfolk will at one time or another come through a public 
warehouse. So we are really concerned about that and are 
working with Customs to make sure that they develop 
regulations, such as the Customs Trade Partnership Against 
Terrorism, that make sense. We are working with Customs in 
hopes that they will appreciate the role that the warehouse has 
in the supply chain and not try to adopt security requirements 
that are a one size fits all.
    In that regard, we are very concerned about the advance 
manifest information that is required under the Port Security 
Act. Customs is working now on requiring shipments coming into 
this country via air, land, or sea for the manifest to be 
reported electronically in advance of that product actually 
arriving in the United States.
    Of great concern to us is product coming across the 
northern and southern borders. The straw-man proposal that 
Customs released several weeks ago would have required that the 
manifest be delivered electronically to U.S. Customs 24 hours 
before the product was actually loaded on the truck. With just-
in-time inventory management on the northern and southern 
borders, it is not unusual for a warehouse in Laredo, Texas, to 
deliver a component to Sony across the border in Mexico, but to 
get that request from Sony at 12 o'clock noon and have it 
delivered to Sony across the border by 2 o'clock in the 
afternoon. We are very concerned that Customs is going to do 
great damage to the just-in-time, logistics-management system 
that has become so critical for many of the manufacturers in 
this country.
    One last issue that I want to mention, and, again, it has 
been raised here today, is DOT's hours-of-service regulation. 
We were distressed to find out that the hours-of-service rule 
had gone to OMB as a final rule. We were distressed that that 
would mean that there would not be a chance for the regulated 
community to review that rule, to comment on it, that it was 
going to be a fait accompli. We were greatly distressed because 
Congress had specifically told DOT not to issue a final rule 
until after a date certain. I think the assumption was that DOT 
would go back, review the original proposal, and come back out 
with a modified proposal to give industry a chance to respond. 
DOT has not done that.
    We are even more concerned now that we learned a week and a 
half ago that DOT had reached a settlement agreement with a 
number of consumer groups, and in that settlement agreement one 
of the components of that was that they agreed to issue an 
hours-of-service rule in final by May 31st of this year. We 
would urge Congress to exercise its authority to review that 
rule before that rule goes into effect.
    Again, Mr. Chairman, we appreciate the work you are doing 
on behalf of small business and look forward to working with 
you and your staff during this session of Congress. Thank you.
    Chairman Schrock. Thank you very much. Larry Fineran is 
from NAM, the National Association of Manufacturers. We are 
glad to have you here.

      STATEMENT OF LARRY FINERAN, NATIONAL ASSOCIATION OF 
                         MANUFACTURERS

    Mr. Fineran. Thank you for having me. The NAM is the 
nation's largest industrial trade association, representing 
14,000 members, 10,000 of whom are small and medium sized. The 
largest part of our focus is, of course, on the impact on small 
companies, although everybody associates us, unfortunately, 
with all of our big companies.
    On the regulatory front for small businesses, I think 
everybody around the table is familiar with the fact that it 
does impact small companies more, especially per employee, just 
because of the size. I came here originally just talking about 
the generalities and the things that we have done in the past. 
Giovanni and I had a meeting this morning where we talked about 
all of the laws that we have done. As part of the small 
Paperwork Relief Act process, SBA hosted an event today as 
well.
    There have been a lot of laws passed over the years 
designed to help particularly smaller businesses and in the 
name of small businesses, but, again, I just want to echo, they 
have not been as effective as they could be. And I think partly 
what role you could play would be to support the Office of 
Advocacy and even push the Office of Information and Regulatory 
Affairs a little bit. Don Graham has done a great job. He 
certainly has tried to get the message out to the agencies that 
they need to worry about these laws applying to small business, 
but, again, he has got how many agencies to deal with, and if 
the agencies, you know, tend to ignore him, he does not have 
any backup.
    So partially what you might be able to do, Mr. Chairman, 
would be to call the chief information officers, who were 
created under the Paperwork Reduction Act of 1995 to oversee 
the paperwork act, and ask them what they have done on behalf 
of the small businesses for some of the various agencies, 
particularly for the Department of Labor and EPA, because that 
is what they are there for. That is why they were created. I 
was around at the time, and I can tell you that that is what we 
were hoping for, that there would be somebody responsible in 
each of the departments, and particularly, again, with a focus 
on small business.
    With that, I would say, one of the issues facing the 
smaller companies--again, with the NAM, most of our members are 
more than 50 employees. I forget the percentage. It is about 15 
percent are less than 50, so we are probably a little bit 
larger businesses than others around the table, although we 
still come under a lot of SBA jurisdiction. But the focus for a 
lot of these companies is compliance.
    We can argue about the rule all we want before it is 
implemented, but then once it is implemented, what do I have to 
do to be in compliance with the law? And, again, hopefully, the 
single-point-of-contact idea in the Small Business Paperwork 
Relief Act, that will help a lot. As I mentioned this morning, 
imagine being a small businessman from Virginia Beach, one of 
the restaurant owners that you mentioned, and you call FDA and 
say, ``I am having trouble with this regulation. I need 
somebody to help me.'' The front-line operators are not exempt 
from this, and the agencies need to make sure that people know 
where to send people. So I think, again, that would be one 
thing.
    In terms of some of the other rules that have been 
mentioned and that have not been mentioned, one in particular 
is the Family Medical Leave Act has been a problem for a lot of 
our members of all sizes, and I understand that the Department 
of Labor, on the good-news front, is taking a look at that and 
trying to make it an easier regulatory scheme to follow, but 
there are still many abuses. I do not handle FMLA issues, but I 
was surprised when I found out that one of the problems is 
companies, and I think particularly for small companies it 
would be a problem, have been forced to give up perfect 
attendance awards for employees because of the way the rules 
are written. When you are dealing with small companies, it is 
like a family.
    I remember talking to one of our small business owners, who 
has been called to bail out people for DWI violations because 
they would rather call her than call their wife or their mother 
or whoever else because they trust her.
    So, anyway, for them to have to give up on something as 
simple as that is a travesty.
    The 24-hour rule as well has been mentioned as a major 
problem by our members. I was going to bring that up as well. I 
have used hours of service as my poster child for why you need 
a strong Office of Information and Regulatory Affairs. When 
they were developing the rule under the previous 
administration, I can only say, thank God for the Office of 
Advocacy, you know. They did a great job educating the business 
community and educating members of Congress, doing whatever 
they could in their outreach role of what a danger that rule 
would have been had it gone forward.
    As I tell people, you know, in terms of it is great to have 
the executive order in place, but when an administration 
chooses to ignore the executive order, there is nothing anybody 
can do about it. The rule, especially given SBA's comments, 
should probably have never been returned to the department for 
publication in the first place, yet it still was. Then again, I 
am kind of distressed now because I was not even aware it had 
gone to OMB as a final rule.
    So I am interested in seeing what it says, as, I guess, 
everybody else is. So I would just urge your attention to that 
rule because, again, as the Office of Advocacy was making very 
clear a couple of years ago, that rule is going to have a 
tremendous impact on smaller companies just because of the 
changes in delivery hours as well as smaller truck companies, 
et cetera.
    I would just say this, to leave it again with the agencies 
and how well they comply with the things that they are supposed 
to comply with. Giovanni, you used the sling rule. When we did 
a thing about a year or so ago for the cost-benefit report that 
OIRA puts out every year, we got one back which I just could 
not believe was true, and it was. We included it in our public 
comments last year.
    O.S.H.A. has some kind of regulation dealing with boat 
building dealing with resins, and they incorporated into the 
rule, into the C.F.R., the National Fire Protection Association 
standards of 1969. Now, people have petitioned them over the 
past 34 years to please update it because, of course, those 
standards have been updated, but they are still in the C.F.R. 
as the 1969 standards, unless they have done something in the 
year since we, hopefully, brought it to OMB's attention.
    I know the Marine Manufacturers Association and others have 
repeatedly petitioned them, and they just do not think that it 
matters that that is what it says. Unfortunately, where it does 
matter is if you are a boat manufacturer, marine manufacturer, 
and you have an inspector who just is having a bad day who 
decides to cite you because you are using the 2000 standards, 
the most recent, up-to-date standards, then technically you are 
in violation of the CFR.
    Now, again, the enforcement personnel, they all just wave a 
blind eye to it, but there is potential there for abuse, and 
why OSHA just cannot take the simple step of incorporating it 
or just saying the most recent standards instead of having to 
go through the Federal Register process each and every time it 
is updated. So I just wanted to put that on the record, too.
    Chairman Schrock. I do not know why your clients even stay 
in business sometimes. It is crazy, @is not it?
    Walt McDonald is from the National Association of Realtors.

     STATEMENT OF WALT McDONALD, PRESIDENT-ELECT, NATIONAL 
                    ASSOCIATION OF REALTORS

    Mr. McDonald. Good afternoon, Mr. Chairman. As you 
indicated, I am from the National Association of Realtors. In 
fact, I am the 2003 president-elect of NAR, and we would very 
much like to thank you and your Committee for the work you are 
doing and for the invitation to be here today, and we 
appreciate the opportunity to discuss with you some of the 
regulatory burdens that are facing the real estate industry.
    We are very sympathetic to a lot of the comments that have 
already been made, but I will share with you that our 
association is one of the largest trade associations in the 
country. We have over 860,000 members, and so it might come as 
a surprise to you when we say we are small business, but the 
truth is that the typical real estate brokerage company is a 
small business. Sixty-seven percent of the residential brokers 
in the United States have a sales force of five or fewer 
agents.
    My company is a good example of the indication of small 
business. I am from Riverside, California. I have a residential 
brokerage company in Riverside specializing in residential 
properties in the local area. We are definitely small business.
    Where there are numerous issues that our industry has been 
struggling with over the regulatory issues that we have been 
struggling with over the last months and years, the new, most 
current ones that we have a problem with are the telemarketing 
sales rules, the Endangered Species Act, and the isolated 
wetlands rules. All three of those are detailed in our written 
summary, which we have already given to your staff, but in an 
effort to meet your time constraints today, I am going to focus 
my comments on just two other issues.
    First of all, the RESPA issue, the Real Estate Settlement 
Procedures Act. As you probably are already aware, HUD 
Secretary Martinez issued a proposed rule last year to reform 
the RESPA Act. The goal of the reform was to simplify the home-
buying process and to reduce costs to the borrowers, and we 
applaud those goals. Rather than spend time explaining that 
proposal, though, which is more detailed in our written 
submission, I will merely try to impress upon you the concerns 
of our members and the concerns they have regarding the 
guaranteed mortgage package, referred to in the proposal as the 
GMP proposal, and why small businesses and consumers will be at 
risk if that is enacted.
    The impact of the proposal would, number one, limit 
packaging just large lending institutions. Number two, it would 
encourage borrowers to shop for loans based on an interest rate 
and a black box of settlement costs because those settlement 
costs are not identified in their proposals. Number three, it 
would eliminate a consumer's choice of service providers; and, 
number four, it removes the Section 8 protection so that 
lenders have the ability to charge borrowers whatever they 
want.
    Under this scenario, there is a likelihood that costs will 
increase for the consumer, the quality of service will probably 
decrease, and only the largest lenders will survive in this 
environment. The small- to medium-sized businesses will not be 
able to compete.
    What amounts to a broad relief for one segment of the 
industry, that being that Section 8 harbor or exemption, 
without evidence of consumer benefit or continued consumer 
protection, represents, we believe, a very flawed approach to 
reform and should definitely be revisited.
    The second issue that I would like to touch on, and I focus 
back to a comment that you made earlier, Mr. Chairman, when you 
said that oftentimes the regulatory environment goes way beyond 
the intent of Congress, and if there was ever a situation in 
which this was true, it is the issue of large banking 
conglomerates being allowed to enter the real estate brokerage 
and property-management business.
    The language that we were successful in inserting in the 
Fiscal Year 2003 Omnibus Budget Bill recently will bar federal 
regulators from allowing banks to engage in property management 
and real estate brokerage only until somewhere around October 
1st of 2003, which is a temporary fix. It is a temporary 
victory, but the threat is still there and certainly not over.
    NAR continues to push for the passage of legislation which 
would permanently prohibit federal banks from offering new real 
estate services. This is an issue we have always believed, if 
enacted, would result in significant negative consequences for 
the real estate industry, for the consumer, and especially for 
small business segments of our industry, and that it should be 
addressed by Congress, not by the regulators, because Congress 
is the one that created RESPA to start with.
    We appreciate the actions of Congress so far and the 
support that we have gained in attempting to pass this 
legislation, but we will continue to seek your help in getting 
this legislation, hopefully, out of Congress this year, and in 
the interest of time, I would end my remarks by thank you very 
much for the opportunity to appear before you this afternoon, 
and certainly we thank the participants in this roundtable for 
their efforts in solving some of these regulatory problems.
    Chairman Schrock. I know that bill did not get out last 
Congress, and I cannot remember if it is being brought back 
again or not.
    Mr. McDonald. Yes, sir. It was reintroduced in January as 
H.R. 111 and Senate Bill 98. Those are reintroductions of the 
bill last year that had garnered 240 cosponsors in the House, 
and that certainly should indicate the will and the intention 
of Congress, but we were unable to move that bill through 
successfully. The Senate bill, we did not push quite as hard, 
but I can tell you that it is highly unusual that a bill will 
come out of the Senate with eight to 11 cosponsors.
    Well, it came out originally with eight last year, and the 
reintroduction this year has 11 cosponsors in the Senate. We 
believe that with the right help from Congress we can 
successfully get those bills moved this year and that it will 
highly benefit not only our industry but the consumers as a 
whole.
    Chairman Schrock. Thanks, thanks. Janet Trautwein from the 
National Association of Health Underwriters. Big issues now, 
huh?
    Ms. Trautwein. Yes. We have a lot going on right now.
    Chairman Schrock. You do.

  STATEMENT OF JANET TRAUTWEIN, VICE-PRESIDENT OF GOVERNMENT 
      AFFAIRS, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS

    Ms. Trautwein. What I am going to talk to you about today 
differs a little bit than what a number of you brought up 
because I am going to say some nice things about the agencies.
    Chairman Schrock. Let us go to Frank Purcell.
    [Laughter.]
    Ms. Trautwein. But I am going to tell you why, starting 
off, that I have the opportunity to say that. It is because of 
the amount of regulatory activity we have, the number of 
agencies, again, that we are subject to federal and state 
regulation for, and I am going to go into some of these 
details, but I would point out that I am going to tell you 
about a lot of access we have, and I would say that we do have 
really good access here from our Washington office.
    You know, our members out there do not have that, and 
because we know the right people to call, it does not mean they 
do; they call us, and we have to hire staff in order to get all 
of their questions answered. So it is not a perfect world, and 
so when I say these nice things, I couch it in, you know, we 
have these relationships because we have to, and we are forced 
to have these relationships because the transactions are so 
many.
    So in getting into that, let me tell you a little bit about 
who we are. We have 18,000 members across the country. We are 
in every state. Our members are health insurance professionals, 
and they help small businesses and other health insurance 
consumers buy health insurance. Many of them are insurance 
agents and brokers; not all of them are, but many of them are, 
and they are considered a pretty integral partner for small 
business. Many times an agent or broker works as an H.R. 
department for a small business. This is quite common.
    I guess my first observation is that for small businesses 
and for our members, the most significant regulatory authority 
is actually at the state level, and states can make or break a 
health insurance market. It happens all of the time. It is a 
really sad situation when we see carriers that are unable to 
remain in a market because of the overly burdensome state 
regulatory environment. It is happening much more frequently 
than it has in the past, and it is a huge problem.
    They are the key to whether or not we have affordable 
health insurance coverage for people to buy, and although their 
actions are often well meaning, they often operate in a vacuum, 
and they do not understand what they are doing, and they pass 
regulations that impede markets from working the way that they 
ought to.
    I would add in their defense that, although they dream up 
lots of nice things, much of what they do is driven at the 
federal level, either by their attempts to comply with 
something that the federal government passed or their perceived 
inaction at the federal level, and so not everything is 
something that some state legislator dreamed up or that some 
constituent brought to them. There is some interaction there, 
and we are seeing much more interaction at the federal and 
state level.
    As Larry said, much of what our members are dealing with 
has to do with compliance once a rule is already in, and I 
would point out that we have had some great experience with the 
Department of Labor relative to compliance with one particular 
piece of legislation, the Health Insurance Portability and 
Accountability Act of 1996. I have seen some superb outreach 
from DOL in this regard. They have put up an interactive Web 
site where people can go in with a decision tree and decide 
what they need to do and how they should comply, and it has 
been very helpful. They have also gone out and held regional 
meetings across the country and invited employers of all sizes 
to attend, and our members have helped to bring those employers 
to those, and they have done a good job of that.
    The other thing I want to mention: We have had the 
opportunity to serve on a couple of negotiated rulemaking 
committees, and I would suggest that as a pretty useful 
process. One of the more recent ones that we served on had to 
do with the whole issue of sham MEWAS, not association health 
plans--this is a different issue--but multiple employer plans 
that are bogus plans that are set up with a bogus union, and 
they are not real, and what happens is people are left holding 
the bag on their claims. They think they are insured, and then 
they find that they are not. And so the idea of this negotiated 
rulemaking committee was to find ways to identify which plans 
are legitimate and which ones are not.
    There were many stakeholders brought around the table, and 
I point that out as a good process for Congress to include in 
legislation it passes because negotiated rulemaking makes 
pretty strong recommendations to the agencies, and those 
recommendations are made on a consensus basis from everybody 
that is at the table, and usually the right people actually are 
at the table when it comes around to that. If we had not had 
our own experience in working with these committees, I might 
not think that they were a good idea, but I think that they 
are, and I highly recommend them.
    We have also worked pretty closely with the Department of 
Health and Human Services on a number of things: health 
information privacy, which is not perfect, by a long stretch of 
the imagination; access to long-term care; and then also, most 
recently, on implementation of the health provisions of the 
Trade Adjustment Assistance Act. We have worked with them a lot 
on HIPAA and Medicare issues, and, in addition, on 
implementation of the grants for high-risk pools that were 
recently included in the TAA legislation.
    We find that these agencies are reaching a lot more than 
they ever did before, which is good. They know that they do not 
know everything. You could not say that really a few years ago, 
or maybe we just have more people that are learning. They are 
reaching out to us and saying, How is it in the real world? 
What would happen if we did this? And they are doing it before 
they issue the regulation, and if that can continue, then I see 
some light at the end of the tunnel on the process.
    We have worked a lot with GAO, CBO, and recently with the 
FDA on a pretty good educational campaign, which is 
underfunded, by the way, which is why we were working with them 
on it, relative to the value of generic drugs. Getting the cost 
of drugs down within an employer plan is pretty critical to 
making that insurance more affordable, and so FDA is doing a 
lot of things that people do not know about because they do not 
have the money to spread the word, so they are trying to find 
interested parties to spread it on their behalf, but they ought 
to be able to do some more on their own. So we think that is a 
real positive experience.
    One of the things that I would just broadly observe is that 
when we pass legislation, good, bad, otherwise, even really 
good legislation that we think we are going to really like, we 
think we are really going to like this, and then we have this 
overzealous legal interpretation of what it says, and what we 
come out with is not anything like what we started with, and we 
have got all of these balls and chains that should not have 
been on there on something that was supposed to provide more 
access. We have all of these impediments that are not supposed 
to be there.
    This happens all of the time. So I do not know what we do 
about that, but this overzealous interpretation is a huge 
problem. I do not know how we circle back to congressional 
intent in a better way than we are doing now, but we have got 
to find a way to do that. It is really a manipulation of the 
whole process, and it happens in many areas.
    The other thing that we have observed a lot within the 
agencies is duplication of efforts, particularly within CMS. We 
work with so many different people that we can observe that. We 
know that four groups are working on the same project, but they 
are so big, they do not know that four of them are, just 
because we are working on the different areas. They are doing 
better with this, but there is still a lot of duplication of 
efforts, which, of course, is a waste of our taxpayer dollars, 
and they could be working on more productive things.
    Chairman Schrock. They could get rid of the organization, 
as far as I am concerned.
    Ms. Trautwein. I would say that CMS has been really good 
lately in sending over bulletins that they write before they 
issue them to say, What is going to happen if we do this? They 
have done that. There is a group of people----.
    Chairman Schrock. HCFA would never have done that, would 
they?
    Ms. Trautwein. Never, never. It is much, much better than 
it has been, but it has a long way to go.
    Chairman Schrock. Good. Keep us posted on them because I 
was on the state health care commission when I was in the state 
senate for five years.
    Ms. Trautwein. They are doing a lot better. Again, the 
overzealous interpretation is still a problem. It is a fairly 
recent problem.
    I guess I will close there. I know we have other people 
that have something to say. It is not perfect, but it is much 
better than it used to be.
    [Mr. Trautwein's statement may be found in the appendix.]
    Chairman Schrock. Great. Thank you. Following on a medical 
theme, Frank Purcell is with the American Association of Nurse 
Anesthetists. That is the hardest word in the world to say, but 
I think I did it okay.
    Mr. Purcell. As a trained veteran of health care policy, 
you did very well.

      STATEMENT OF FRANK PURCELL, AMERICAN ASSOCIATION OF 
                          ANESTHETISTS

    Mr. Purcell. Mr. Chairman, thank you very much for 
gathering us together for this roundtable on regulatory reform, 
and it is fitting that you have representatives from business, 
from many aspects of private enterprise, and also from health 
insurance and health care.
    Health care is one of the most highly regulated industries 
in the country at every level of government, and a substantial 
portion of that regulation exists for a good reason. When you 
go to the hospital or go to have a health care procedure done, 
you want to ensure that that person is not a government-
relations professional. You want to ensure that that person is 
a trained health care professional.
    In the case of nurse anesthetists, our 30,000 members 
around the country provide 60 percent of anesthetics 
nationally. They are the sole anesthesia provider in two-thirds 
of U.S. rural hospitals, and thanks to turning challenging 
cases into education and training and research and practice, 
the Institute of Medicine reported in 1999 that anesthesia 
today is 50 times safer than it was 20 years ago. So these are 
all very good stories to tell.
    Many of our nurse anesthetists, the vast majority of them, 
are either independent practitioners or employees active in 
small businesses. They are employees or owners, proprietors of 
a group practice with whom a hospital might contract or an 
ambulatory surgical center might contract in order to provide 
anesthesia services there.
    In the military area, which I know you are very familiar 
with, nurse anesthetists provide the lion's share of anesthesia 
to our service personnel, domestically and abroad and aboard 
the capital vessels of our great United States Navy.
    As far as federal regulatory issues are concerned, many of 
these will not come as a surprise to you. I will echo my 
predecessor and state that under President Bush and Secretary 
Thompson we have found the Department of Health and Human 
Services and the Centers for Medicare and Medicaid Services 
responsive to our concerns on a couple of issues. We have found 
them responsive to our concern that Medicare reimbursement for 
a time disadvantaged teaching hospitals from adequately 
securing clinical sites for the education of nurse anesthetists 
in their facility. We have come to a resolution with CMS on 
this, and it is going fine.
    We have found CMS willing to increase the number of cases 
that a rural hospital might perform and still qualify for cost-
based, pass-through funding in order to employ nurse 
anesthetists at that rural hospital. Again, CMS was extremely 
responsive. We worked together with them, and the result, we 
find, is going to help secure and expand the access to quality 
health care in rural areas that is very important.
    Lastly, HHS had, once it first issued its privacy rule to 
comply with the provisions of the Health Insurance Portability 
Accountability Act, the HIPAA, that initial privacy rule would 
have had a deleterious effect on many health care professionals 
who count on research to advance the practice. It would have 
made it nearly impossible to obtain records of difficult cases 
in health care. When things go wrong, one needs to find out 
what happened so that one can find out how to not make that 
happen and to train others in making sure that the improvements 
are made.
    Under that early version, those closed-claim studies would 
have been very difficult to perform. We are happy to report 
that under the HIPAA privacy rule final rule, though while it 
is not the easiest thing in the world--I recognize there are 
many difficult and challenging issues at hand there--that it 
does, however, permit us and other health care providers to 
engage in these closed-claim studies so that we can improve the 
quality of health care.
    The largest federal issue by far for nurse anesthesia, 
though, is Medicare reimbursement, and here regulation and 
legislation from Congress blur a great deal. Medicare is, as 
any agency, responsive to and obeys the orders that Congress 
gives. Congress gives orders which sometimes have effects which 
do not necessarily occur in the way that Congress intended.
    One of those areas is the area of Medicare reimbursement 
for health care services under Part B. For the past two years, 
Part B reimbursement for physicians and for nurse anesthetists 
and other health care providers suffered serious cuts, five and 
a half percent two years ago. It was scheduled for a reduction 
further of 4.4 percent for 2003. In the case of anesthesia, we 
are anticipating reductions of 3.4 percent for 2003.
    Now, these are exceptionally difficult things when you have 
got an increasing aging population, and the need to insure 
access for health care coverage, that when Medicare is, through 
obeying a formula Congress provided, that formula which 
incorporates factors other than simply health care, that that 
has really challenging effects upon our seniors and their 
families who count on and have paid for Medicare that should be 
excellent, which they deserve.
    Thanks to the work of Congress, just as part of the omnibus 
appropriation adopted the 13th of February, CMS on the 28th of 
February, have reversed the most difficult parts of the 2003 
physician fee schedule that had those cuts. So instead of a 
cut, Part B has increased 1.6 percent, and the anesthesia 
conversion factor used to compute anesthesia reimbursements, up 
2.7 percent. It does not correct the underlying formula 
problems in future years, but we know that through your 
leadership and the leadership of the administration and many 
others that work hard and mean well, we might be able to secure 
Medicare reforms that also secure citizens' access to care.
    Lastly, and a matter that is more clearly a legislative 
matter, but it arises in states and regulation and in law--I 
will be very brief on this--is the matter of medical 
malpractice liability reform. I do not have to discuss this in 
great detail with you because you have had great experience 
with this in the state house in the State of Virginia and also 
in the Congress, but the adoption of H.R. 5 is critical to 
ensuring that funding in health care is used for health care 
and not to expand the forces and issues that are not providing 
health care in this country.
    Like my predecessor in speaking, though, we have a number 
of federal regulatory issues. A number of issues, of course, 
arise in the States, and the chief regulator of nurse 
anesthetists and of all health care professionals are state 
laws, state rules, state regulations. Those govern the 
licensure of health care professionals, and with some notable 
exceptions, the federal government does not.
    But the challenge that nurse anesthetists face in the state 
is not necessarily the sling rule or the ergonomics rule. It 
sometimes is, as you know, the golden rule, which is he who has 
the gold makes the rules. And the challenge for nurse 
anesthetists and other health care providers which are not 
physicians is that they are trained--in our case, master's 
prepared--to provide the range of health care, in our case, to 
provide anesthetics in any instance and every instance, and 
yet, through political and other pressures, restrictions are 
placed on the practice of nurse anesthetists not because of 
health care-quality issues, although they like to pretend it is 
so, but because they would like to restrict nurse anesthetists 
from being active and vigorous and productive competitors in 
the marketplace.
    Those states' practice guidelines are reviewed. In a 
relatively recent Yale Journal of Regulation article by Barbara 
Safreit, which I would be happy to share with your staff, which 
goes into this issue in great detail and underscores the 
economic challenges and the loss of care that is provided to 
citizens of many states, especially in rural and urban 
underserved areas, because of these restrictive and unwarranted 
regulations.
    We are grateful, again, for the time that you have shared 
with us, and we thank you for your vigorous advocacy on behalf 
of health care and the military, and thank you for listening.
    Chairman Schrock. Thank you. Medicare reimbursement is a 
huge issue. I hear it all of the time at home. I do not know of 
any member of Congress that was excited about the cuts, so we 
knew that was not going to happen, and it is a good thing, but 
we have to do a better job at increasing that because it is 
just killing medical practices at home.
    I am glad that you both said what you said about the CMS 
because Tommy Thompson, when he first came up here, said that 
was something he was going to get his hands around, and 
obviously he has, and that is a good thing because it was kind 
of an organization when it was HCFA, totally out of control.
    Mr. Purcell. It was a challenge, and we know as well when 
Secretary Thompson first came aboard in the very first months 
of the Bush administration, he shared with us, as with others, 
my door is open to you. If you have a challenge or a problem, 
let me know.
    Chairman Schrock. And he means that. He does.
    Mr. Purcell. And cynics, folks would say, yeah, right. But 
we found him to be true to his word.
    Chairman Schrock. That is right.
    Mr. Purcell. And what more can you say about him?
    Chairman Schrock. That is right. That is great. Thanks.
    Betsy Laird with the International Franchise Association. 
Are you any relation to Melvin Laird, who used to be the 
secretary of defense?
    Ms. Laird. Only when I want to get a good seat at a 
restaurant.
    [Laughter.]
    Ms. Laird. No relation that I am aware of.

 STATEMENT OF BETSY LAIRD, INTERNATIONAL FRANCHISE ASSOCIATION

    Ms. Laird. I represent the International Franchise 
Association. We are here in Washington. We have been around for 
40 years. We represent over 800 franchise companies, 6,000 
franchisees, and suppliers of franchise businesses, and talk 
about job creation: Franchising provides eight million jobs a 
year. We account for over a trillion dollars in retail sales in 
the U.S. economy.
    The interesting thing is that many of our members started 
out as small businesses, and they have grown and expanded 
through the use of franchising. We represent folks like 
Marriott and McDonald's and Meineke and Mailboxes Etc. and lots 
of other companies that start with letters other than ``M.''
    Most of our membership is primarily composed of small 
businesses, however. The remarkable thing is most of them have 
revenues of less than $5 million, and they employ less than 50 
employees. One of the most interesting concepts is actually 
located in your district, and the name of the business is Geeks 
on Call.
    Chairman Schrock. Oh, yes, yes.
    Ms. Laird. What they are is two gentlemen got together and 
decided that they would go into computer repair, and they will 
come to your home, or they will come to your office. You have 
probably even seen their cars riding around town.
    Chairman Schrock. I have seen their ads. They wear black-
rimmed glasses with tape on them right here.
    Ms. Laird. That is right.
    Chairman Schrock. They have that geeky look.
    Ms. Laird. That is right. They have got some great 
marketing ideas.
    Chairman Schrock. They really do.
    Ms. Laird. They are a member of ours.
    Franchising is regulated at the federal and the state 
level. At the federal level, the Federal Trade Commission has 
what is called a ``franchise rule.'' It has been in place since 
the seventies and requires a franchise company to provide very 
comprehensive disclosure to potential franchisees before the 
purchase of a franchise business. The FTC is in the final 
stages of revising this rule, streamlining it. We are very 
supportive of the process, and we think it will significantly 
improve the rule.
    The interesting thing about franchising is it is spread out 
over 75 different industries, whether it is pharmaceuticals or 
cleaning your house or computer repair, et cetera. Several of 
our members have expressed to me specific concerns somewhat 
specific or targeted to their industry. For one thing, a number 
have actually raised questions about the availability of 7[a] 
loans, and the way that the SBA looks at factors in 
establishing who should be eligible for a loan.
    In the case of franchised businesses, oftentimes they look 
at the level of control between a franchiser and a franchisee. 
They also look at the aggregate size. When you take a small 
franchisee, who might be, say, a McDonald's owner/operator, and 
you add them into McDonald's corporate, as a result a lot of 
folks are probably being denied access to 7[a] loans when they 
are well deserving of such loans. So we might raise this issue 
before the Subcommittee, worthy of revisiting the standards 
that the SBA does have in place.
    Something else that I really need to bow down to the real 
expert in the room, which is Giovanni, something that they have 
worked on at the chamber and also the National Restaurant 
Association; it did not come up today, but I know a lot of our 
members are very worried about it, and that is social security 
mismatch and what the potential liability may be for employers 
that have workers where the social security numbers do not 
necessarily match up with the employee names.
    The IRS has announced that it is going to start a program 
in 2004 that will be retroactive to 2002 for a mismatch on W-2 
filings. Quite frankly, the concerns are that the IRS has not 
provided a lot of guidance about this issue. However, there is 
a potential for great and significant liability. Folks that are 
in the IRS field offices throughout the country are very 
confused and applying inconsistent applications or advice on 
how employers should proceed. Several of our folks have 
actually recommended that you might want to suspend the 2004 
enforcement process until clearer and more explicit guidance 
can be given for employers, so that would be an IRS issue.
    Rob Green talked about some of the other Department of 
Labor issues. We share many common members and are supportive 
of the NRA's stance on those.
    Lastly, we have a home health care issue, and that is an 
IFA member has raised to us kind of a growing trend, and that 
is the classification as our population becomes more and more 
elderly, and that population grows, the classification of home 
health care providers as either independent contractors of 
employers. We have a member company who provides companions to 
the elderly or those that are physically ill and need someone 
to come in and be a caretaker in their home.
    What is happening is at the state level there are nurse 
registries which will send a companion out to a home that needs 
help, and more and more it is becoming increasingly common that 
these companions are classified as an independent contractor. 
Therefore, these nurse registries are not paying into worker's 
compensation. A companion might get injured and does not do 
anything about it, goes to work for an employer as an employee, 
and then files a worker's comp claim.
    So our members are concerned that it is a way to sort of 
short shrift the system and had asked that I bring this up in 
the hope that the Subcommittee contact the IRS to stand behind 
its 20-question, employee-determination test, not make an 
exception to nurse registries, and not add in being able to 
circumvent current law.
    Thank you very much for your time and attention today.
    Chairman Schrock. Thank you. I appreciate that.
    Todd McCracken is with National Small Business United. 
Thanks.

   STATEMENT OF TOM McCRACKEN, NATIONAL SMALL BUSINESS UNITED

    Mr. McCracken. Thank you very much, Mr. Chairman. I will 
try to be brief today. Thank you for having us here. NSBU 
represents 65,000 small businesses all over this country in 
Washington on legislative and regulatory matters. You have 
heard a lot of really excellent specific examples from people 
today of real problem regulations, but I also want to carry 
another message, and that is it is not just the problem 
regulations that are a problem.
    You hear about regulations that are irrational, that have 
not been well thought through, that have particular distortions 
in various markets, but also the reality is that the most 
rational regulation adds another dollar that the business has 
to comply with, and you add them on top of one another and on 
top of one another, and not only do they have an enormous 
impact on the economy overall; they have a distorting impact on 
small companies.
    I am sure you are aware of a study that the SBA Office of 
Advocacy did three or four years ago that said that the average 
cost even then of regulations on companies that have fewer than 
20 employees is $7,000 per year per employee, , whereas for 
larger companies, those with over 500 employees, it is only 
$4,400 a year per employee. So there is a large gap there, 
obviously.
    So there is a distinct impact in the regulatory arena on 
small companies, and that is why we think it is so crucial that 
there are special tools for small companies to combat these 
regulatory burdens--the Regulatory Flexibility Act, the U.S. 
SBA Office of Advocacy, and so forth--and I will get to some 
more specifics about them in a minute.
    We should also bear in mind that those are actual outlay 
costs. We also have to realize there are huge costs for small 
companies in complying with the regulations that have nothing 
to do with actually writing a check to anybody or complying in 
a particular way, and that is simply--costs, the time. You have 
to remember that a small business owner is the chief executive 
officer, the chief financial officer, the chief information 
officer, the chief safety officer, the chief cook and bottle 
washer essentially of every business, and they often, 
especially in the smaller businesses, have to attend to all of 
these burdens personally, and it is an enormous share of their 
time, especially in some particular kinds of companies, to 
comply with all of these federal mandates. So we can guess what 
they are not doing while they are complying with the 
regulations. They are not increasing productivity. They are not 
innovating. They are not growing, hiring more people. They are 
not creating economic growth and wealth for their communities.
    So we think that the need, also in addition to sort of 
really stopping these really obviously bad regulations, but to 
try to find a good way we can get a handle on the overall 
regulatory burden as it stands.
    What are some solutions to some of these problems? Well, 
one is, as other speakers have suggested, to strengthen the 
Office of Advocacy. We have gone some part of the way there 
through the president's executive orders and other things, but 
there certainly is time for us to make that office more 
independent through a line item in the budget, and then the 
next step from that is to try to get them more resources so 
they can be much more effective advocates, even more so than 
they are right now, for small companies.
    The other is to strengthen the Regulatory Flexibility Act. 
We do not hear much about that these days, but there are what I 
would call loopholes in the RFA as it stands today, and those 
can be tightened up. I think one of the biggest ones, which was 
mentioned earlier, was the national ambient air-quality 
standards.
    A few years ago, we were part of a lawsuit at the time that 
we filed against the EPA because they did not go through any 
regulatory flexibility analysis or any process when they 
promulgated those rules, and the suggestion was that they had 
violated '96--actually the '80 law, technically, and the reason 
that they said they did not do it, which makes, I guess, a bit 
of sense, is, well, we did not really regulate small businesses 
at all. We told local and state communities, well, you are 
going to have to meet these standards. That is what we were 
there proposing to do. You ought to meet these standards, and 
it was really up to the state governments to figure how to do 
it, so we are not regulating small businesses; we are 
regulating localities. And they won.
    While they lost the overall case, the courts found for the 
EPA on the point that they did not have to comply with the 
Regulatory Flexibility Act in setting those standards. Now we 
have members of Congress and others who are promoting more 
regulations, global-warming regulations, that look like they 
will be shaped in much the same way.
    So I think the time is now to close that loophole in the 
Regulatory Flexibility Act so that we can begin to deal with 
some of these other laws that may be coming down the pike 
before too terribly long. And also a lot of these regulations 
are at the state level, so right now the Office of Advocacy, 
much to their credit, I think, is undergoing an effort to call 
attention to the RFA at the state level and encourage more 
states to develop their own Regulatory Flexibility Acts to deal 
with their state regulations, and we would encourage that as 
well.
    The final thing I would mention is, as, I think, Giovanni 
mentioned before, the Section 610 review that is in the law 
right now. No one listens to it, and I think that is the single 
best tool that could be utilized to get rid of needless 
regulations, not necessarily regulations that are wrong-headed 
or create huge problems in particular industries but which 
simply are on the books, that take up some modicum of time and 
energy for some people, and just ought to be gotten rid of. 
OIRA, to their credit, is undergoing a process similar to that 
of their own free will, but it is not under the Section 610 
auspices, and it really should be.
    With that, I will try to end there, and we can--for 
discussion. Thanks.
    Chairman Schrock. I think your most fascinating comment was 
even rational regulations add to the bottom line, yes.
    Shanna, you are the trooper.
    Ms. Campagna. I am happy to be here.
    Chairman Schrock. You sat through all of this. Is it 
Campagna?
    Ms. Campagna. Campagna.
    Chairman Schrock. Campagna.
    Ms. Campagna. Like lasagna.
    Chairman Schrock. Oh, lasagna. Okay. Shanna Lasagna from 
the National Beer Wholesalers Association. Thanks for being 
here.
    Ms. Campagna. Sometimes I get Shanna Champagne, but that is 
another group. I do not want to put Mr. Green on the spot, but 
I think I heard him make reference to buying wine over the 
Internet, which in most cases is a violation of the 21st 
Amendment, so I am sure--we will talk about that.
    Mr. Green. It is a technicality.
    Ms. Campagna. Right. That is another committee, too.

     STATEMENT OF SHANNA CAMPAGNA, LOBBYIST, NATIONAL BEER 
                    WHOLESALERS ASSOCIATION

    Ms. Campagna. Chairman Schrock, thank you for the 
opportunity to be here today. I am Shanna Campagna, a lobbyist 
with the National Beer Wholesalers Association. By way of 
introduction, let me just tell you a little bit about the beer 
wholesaling industry.
    As set forth in the 21st Amendment to the Constitution, 
beer wholesalers are the middle tier of the three-tier system 
for distribution of beer. We distribute beer from the brewers 
to the retail locations. Those beer trucks you see navigating 
safely down your home town streets delivering America's 
beverage to your local grocery store and FMI member; that is 
your beer wholesaler. The average wholesaler has annual sales 
of about $14.1 million, employs around 48 people, maintains and 
operates a fleet of 12 vehicles, and owns a temperature-
controlled warehouse. Most are family owned and operated.
    Regulation is a way of life for beer wholesalers. We are 
regulated every day by BATFE, the FCC, DOT, NTSA, and FMCSA, 
EPA, OSHA, the IRS, Treasury's new Tax and Trade Bureau, and 
many other federal as well as state agencies.
    I want to address the main way the Subcommittee might be of 
assistance to us, to our industry, in regard to our regulatory 
concerns. Commercial driver's license reform is tantamount to 
ergonomics within our industry. Beer is delivered by your local 
wholesaler via truck to bars, restaurants, supermarkets, and 
convenience stores.
    Our drivers generally double as our salespeople. Sales, 
delivery, and customer satisfaction are their primary 
responsibilities, and driving is secondary. They are in and out 
of their trucks all day servicing these accounts. In fact, they 
spend the majority of the time with their engines turned off 
and only drive about 25 percent of their work day. Further, 
they drive within about a 100-mile radius of their warehouse, 
if that, and spend the night at home with their families each 
night. They are not long-haul truck drivers.
    Currently, however, our drivers are required to have the 
same commercial driver's licenses as long-haul, interstate 
drivers. While NBWA fully supports rigorous testing standards 
for our drivers, it is unduly regulatory and unnecessary to 
require a driver engaged in intrastate commerce, where the 
operation of a truck is but a small part of the employee's job, 
to the same standards as someone delivering a load from Maine 
to California behind the wheel of an 18-wheeler.
    Beer wholesalers have inadvertently found themselves in the 
business of training CDL drivers for the large trucking 
companies. While not true in every market, a disproportionate 
number of our members find themselves providing costly training 
and licensing fees for CDL drivers who are then cherry picked 
from our operations to drive for the interstate trucking 
companies. The cost and burden of training drivers is one our 
members are willing to bear, but they are growing weary of 
training drivers for other companies.
    To this end, Congressman Howard Coble will soon, and that 
is likely tomorrow, introduce the CDL Devolution Act of 2003. 
The bill will return power to the states by allowing states to 
license intrastate drivers of commercial vehicles based on 
testing standards determined by the state. The emphasis is on 
allowing the states to regulate intrastate trucking, not 
mandating that the power return to the state. An identical bill 
was introduced by the congressman, Congressman Coble, in the 
107th and garnered the support of 86 House members.
    I submit to the Committee that this is exactly the type of 
regulatory relief that helps small businesses. Let states 
decide how best to regulate what happens within that state, if 
they so choose.
    Again, thanks for the opportunity to be with you today and 
for your interest in NBWA's regulatory issues.
    Chairman Schrock. I should know. Where did that bill go 
last year, nowhere?
    Ms. Campagna. No.
    Chairman Schrock. Did it come to the floor?
    Ms. Campagna. No.
    Chairman Schrock. It never came to the floor.
    Ms. Campagna. No. To some extent, we are looking to see 
what happens with reauthorization and getting some support for 
that. So since this is a reauthorization year, we are hoping to 
have some action on that.
    Chairman Schrock. I am very familiar with the beer 
wholesalers. In fact, my son, during the college summers, 
worked for one of them, did the driving.
    Ms. Campagna. And he has a CDL?
    Chairman Schrock. He what?
    Ms. Campagna. So he has a CDL.
    Chairman Schrock. What is a CDL?
    Ms. Campagna. A commercial driver's license.
    Chairman Schrock. Oh, no, no, no. He does not.
    Ms. Campagna. Well, he better not have been driving, then.
    Chairman Schrock. Well, he was, but he is out of college 
working here now.
    Ms. Campagna. Well, that wholesaler did not have this 
problem then. It is an issue where if a wholesaler has a 
distributorship and owns property across the street, and they 
load the trucks in the mornings, they have to have a CDL driver 
to come from across the street to bring the trucks across the 
street to load them and take them back.
    Chairman Schrock. I should not say he did not. He may have, 
and we just did not know, but they are good people.
    Ms. Campagna. Yes, they are.
    Chairman Schrock. Thank you all very much. You have hung in 
there for over two hours, and I appreciate this discussion. We 
usually have a period of questions and answers, but I think the 
day is growing long, and you probably all would like to get out 
of here.
    A lot of what I heard here today, we heard last week. There 
is a common theme running throughout a lot of this, and I think 
what that is going to do is help us formulate where we are 
going to go throughout the remainder of the two years of the 
108th Congress because there are clearly some things that need 
to be done, and they need to be done fairly quickly.
    I appreciate everything you have said here. I intend to 
read everything you have submitted. I will have to start doing 
that here pretty quickly because we have got to come up with 
our agenda. It just seems so overwhelming, really. There are so 
many things that when you talk, yes, we have got to fix yours, 
we have got to fix yours, we have got to fix yours, but there 
are so many common threads that run through all of your stories 
that I think if we can do some of that and get some substantive 
legislation in here on the floor, it would certainly help, and 
I intend to do that.
    We will be in contact with you again, I am sure, because we 
want your input. We are going to clearly have some hearings up 
here where we will sit up there and make it look more official 
than this, but your inputs are greatly appreciated and, I 
think, will guide us as we start heading through the rest of 
the 108th. If you all do not have further questions, I thank 
you, and this hearing is adjourned. Thank you very, very much.
    [Whereupon, at 4:15 p.m., the subcommittee was adjourned.]

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