[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                    HOW LOGISTICS FACILITATE AN EFFICIENT 
                       FREIGHT TRANSPORTATION SYSTEM
=======================================================================


                                (113-27)

                                HEARING

                               BEFORE THE

                                PANEL ON

                  21st-CENTURY FREIGHT TRANSPORTATION

                                 OF THE

                              COMMITTEE ON

                   TRANSPORTATION AND INFRASTRUCTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 26, 2013

                               __________

                       Printed for the use of the
             Committee on Transportation and Infrastructure


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             COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE

                  BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska                    NICK J. RAHALL, II, West Virginia
THOMAS E. PETRI, Wisconsin           PETER A. DeFAZIO, Oregon
HOWARD COBLE, North Carolina         ELEANOR HOLMES NORTON, District of 
JOHN J. DUNCAN, Jr., Tennessee,          Columbia
  Vice Chair                         JERROLD NADLER, New York
JOHN L. MICA, Florida                CORRINE BROWN, Florida
FRANK A. LoBIONDO, New Jersey        EDDIE BERNICE JOHNSON, Texas
GARY G. MILLER, California           ELIJAH E. CUMMINGS, Maryland
SAM GRAVES, Missouri                 RICK LARSEN, Washington
SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
CANDICE S. MILLER, Michigan          TIMOTHY H. BISHOP, New York
DUNCAN HUNTER, California            MICHAEL H. MICHAUD, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas  GRACE F. NAPOLITANO, California
LOU BARLETTA, Pennsylvania           DANIEL LIPINSKI, Illinois
BLAKE FARENTHOLD, Texas              TIMOTHY J. WALZ, Minnesota
LARRY BUCSHON, Indiana               STEVE COHEN, Tennessee
BOB GIBBS, Ohio                      ALBIO SIRES, New Jersey
PATRICK MEEHAN, Pennsylvania         DONNA F. EDWARDS, Maryland
RICHARD L. HANNA, New York           JOHN GARAMENDI, California
DANIEL WEBSTER, Florida              ANDRE CARSON, Indiana
STEVE SOUTHERLAND, II, Florida       JANICE HAHN, California
JEFF DENHAM, California              RICHARD M. NOLAN, Minnesota
REID J. RIBBLE, Wisconsin            ANN KIRKPATRICK, Arizona
THOMAS MASSIE, Kentucky              DINA TITUS, Nevada
STEVE DAINES, Montana                SEAN PATRICK MALONEY, New York
TOM RICE, South Carolina             ELIZABETH H. ESTY, Connecticut
MARKWAYNE MULLIN, Oklahoma           LOIS FRANKEL, Florida
ROGER WILLIAMS, Texas                CHERI BUSTOS, Illinois
TREY RADEL, Florida
MARK MEADOWS, North Carolina
SCOTT PERRY, Pennsylvania
RODNEY DAVIS, Illinois
MARK SANFORD, South Carolina
                                ------                                7

              Panel on 21st-Century Freight Transportation

                JOHN J. DUNCAN, Jr., Tennessee, Chairman
GARY G. MILLER, California           JERROLD NADLER, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas  CORRINE BROWN, Florida
RICHARD L. HANNA, New York           DANIEL LIPINSKI, Illinois
DANIEL WEBSTER, Florida              ALBIO SIRES, New Jersey
MARKWAYNE MULLIN, Oklahoma           JANICE HAHN, California


                                CONTENTS

                                                                   Page

Summary of Subject Matter........................................    iv

                               TESTIMONY

David Abney, Chief Operating Officer, UPS........................     4
Tracy Rosser, Senior Vice President, Transportation, Wal-Mart 
  Stores, Inc....................................................     4
Edward R. Hamberger, President and Chief Executive Officer, 
  Association of American Railroads..............................     4
Scott Satterlee, Senior Vice President, C.H. Robinson, on behalf 
  of the Transportation Intermediaries Association...............     4
Mark V. DeFabis, President and Chief Executive Officer, 
  Integrated Distribution Services Inc., on behalf of the 
  International Warehouse Logistics Association..................     4
Richard H. Fisher, President, Falcon GlobalEdge, on behalf of the 
  Airforwarders Association......................................     4

               PREPARED STATEMENTS SUBMITTED BY WITNESSES

David Abney......................................................    27
Tracy Rosser.....................................................    36
Edward R. Hamberger..............................................    39
Scott Satterlee..................................................    58
Mark V. DeFabis..................................................    69
Richard H. Fisher................................................    73

                       SUBMISSION FOR THE RECORD

Edward R. Hamberger, President and Chief Executive Officer, 
  Association of American Railroads, response to request for 
  information from Hon. John J. Duncan, Jr., a Representative in 
  Congress from the State of Tennessee...........................    20


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  HOW LOGISTICS FACILITATE AN EFFICIENT FREIGHT TRANSPORTATION SYSTEM

                              ----------                              


                        WEDNESDAY, JUNE 26, 2013

                  House of Representatives,
      Panel on 21st-Century Freight Transportation,
            Committee on Transportation and Infrastructure,
                                                    Washington, DC.
    The panel met, pursuant to call, at 1:00 p.m., in Room 
2167, Rayburn House Office Building, Hon. John J. Duncan, Jr. 
(Chairman of the panel) presiding.
    Mr. Duncan. The panel will come to order. Good afternoon 
and welcome to this hearing of the Panel on 21st-Century 
Freight Transportation.
    Before I begin, I want to let everyone know we are 
expecting a vote series anywhere from 1:45 to 2:30 this 
afternoon.
    With that, I recognize Mr. Miller.
    Mr. Miller. Mr. Chairman, I request unanimous consent that 
the chairman be permitted to declare recess during today's 
hearing.
    Mr. Duncan. Without objection, so ordered.
    Today's hearing examines the relation between logistics and 
a productive, efficient, and safe freight system. The movement 
of goods across the country may not always grab headlines, but 
the efficiency of freight transportation has a major impact 
upon the lives of every American on a daily basis. From the 
clothes we wear to the cars we drive to the food we eat, the 
freight transportation system impacts all aspects of our 
everyday lives.
    The logistics industry is valuable to the Nation's freight 
system because logistics improve the efficiency of the supply 
chain. The logistics industry adds value to the supply chain by 
improving the planning, implementation, and control of the flow 
of goods from point of origin to point of consumption.
    As I have said before, the purpose of this panel is to 
provide recommendations to the committee on ways to modernize 
the freight networks and make the United States competitive in 
the 21st century. We have been given cross-jurisdiction across 
all the different subcommittees, and we are going to try to do 
our best with that opportunity. We have been working hard 
toward our goal, holding multiple hearings and roundtable 
discussions and visiting critical freight facilities in 
southern California and a few days ago in the greater Memphis 
area.
    We also have before us today an outstanding group of 
witnesses. I am interested to hear from them regarding their 
operations as well as any recommendations they have on ways to 
improve our Nation's freight system, and we would appreciate 
their specific recommendations.
    First, we have David Abney, the chief operating officer of 
UPS. UPS is the world's largest package delivery company, 
delivering over 16 million packages to almost 9 million 
customers every day.
    Second, we have Tracy Rosser, the senior vice president of 
transportation at Wal-Mart Stores, Inc. Walmart operates over 
4,000 stores across all 50 States and is a large user of all 
modes of transportation.
    Third, we have Ed Hamberger, the president and CEO of the 
Association of American Railroads. AAR represents all of the 
Class I railroads as well as over 170 short line railroads and 
regional lines.
    Next we have Scott Satterlee, a senior vice president at 
C.H. Robinson, testifying on behalf of the Transportation 
Intermediaries Association, TIA. C.H. Robinson is a leading 
third-party logistics company, and TIA is the professional 
organization for the third-party logistics industry.
    Fifth, we have Mr. Mark DeFabis, president and CEO of IDS. 
Mark is testifying on behalf of the International Warehouse 
Logistics Association, IWLA. IDS is a warehouse logistics 
company from Indianapolis, Indiana, and IWLA represents 
warehouse-based logistics companies.
    Finally, we have Richard Fisher, president of Falcon 
GlobalEdge, testifying on behalf of the Airforwarders 
Association, AFA. And Falcon is, of course, a logistics company 
focusing on air cargo. In his capacity as chairman of AFA, he 
represents 360 similar companies.
    I thank all of our witnesses for joining us today, and I 
now recognize our ranking member, Mr. Nadler, for his opening 
statement.
    Mr. Nadler. Thank you, Mr. Chairman.
    Mr. Chairman, thank you for holding this hearing today and 
for your leadership as this panel carries out its work. Through 
hearings, roundtables, and site visits we have made steady 
progress in spotlighting the challenges facing our freight 
transportation system. Today we have the opportunity to hear 
how companies serving a variety of critical functions in the 
movement of goods employ logistics to maximize the efficient 
movement of freight. What these private entities are doing to 
move commerce is remarkable. Some testimony will underscore 
what is very visible to consumers, such as UPS moving 16 
million packages throughout the world every single day. Other 
testimony will reveal a largely hidden network of third-party 
forwarders and warehousers and warehouse-based supply chain 
management. Each of these companies, through innovation and 
adaptability, ensure that the movement of freight across the 
country does not come to a screeching halt. Advancements in 
logistics have made our Nation's roadways, railways, waterways, 
and skies realtime warehouses thanks to Just in Time delivery. 
Yet the transportation systems that facilitate freight 
movements have not evolved to meet the changing demands. 
Logistics and technology can only help companies maximize the 
efficiency of operating on the existing transportation network, 
and the bottom line is that the existing infrastructure becomes 
less and less adequate to maintain our Nation's global 
competitiveness. While freight volumes across the globe are 
exploding, our international competitors are rapidly upgrading 
their transportation networks to meet the needs of the global 
economy.
    With our Nation's population expected to exceed 400 million 
by 2050 and freight volume is expected to grow by 60 percent in 
the next three decades, future demands on our intermodal 
freight network will require a bold new vision and approach to 
addressing these challenges. Providing a vision for a 21st-
century freight transportation system and ensuring that funding 
is available to upgrade and maintain the infrastructure in 
which freight moves remains the responsibility of the Federal 
Government. We must work to bridge the gaps that exist in all 
modes--highway, rail, water, and air--between current system 
capacity and our growing goods movement needs. Robust 
investments across our freight network will ensure that 
shippers and logistics providers will have good choices to make 
among modes. We must also work to specifically identify and 
address freight bottlenecks that cause congestion, slow the 
movement of goods, and come at a cost to our economy.
    We will hear from Mr. Abney today that if every UPS vehicle 
is delayed just 5 minutes each day, it would cost UPS $105 
million annually. Particularly with respect to surface 
transportation, we do not currently have a reliable way to fund 
large-scale transportation investments whose impacts can be 
felt regionally and nationally. These high-cost projects 
overwhelm the ability of any State to take on and, as a result, 
most often do not advance. We need a dedicated source of 
funding outside of the existing State-based system to foster 
and prioritize these investments which are crucial to freight 
movement.
    I am pleased to hear that the witnesses on this panel agree 
with this assessment. Some are willing to go further and 
recommend ways to fund freight movement. I look forward to an 
active discussion today and at future meetings of this panel 
not only on investment needs but on revenue options to meet the 
enormous challenges before us.
    I thank you and I yield back.
    Mr. Duncan. Well, thank you very much, Mr. Nadler.
    Does anybody else wish to say anything? Any other 
statements at this time?
    All right. We will go ahead and proceed with the witnesses. 
I think I have chaired about 250 or 300 hearings since I have 
been here. And they have thrown me. They have reversed the 
order for the first time. So we are going to go backwards. I 
guess it doesn't make any difference. It fooled me though.
    Our first witness will be Mr. David Abney, the chief 
operating officer of UPS. Mr. Abney.

 TESTIMONY OF DAVID ABNEY, CHIEF OPERATING OFFICER, UPS; TRACY 
ROSSER, SENIOR VICE PRESIDENT, TRANSPORTATION, WAL-MART STORES, 
   INC.; EDWARD R. HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE 
 OFFICER, ASSOCIATION OF AMERICAN RAILROADS; SCOTT SATTERLEE, 
    SENIOR VICE PRESIDENT, C.H. ROBINSON, ON BEHALF OF THE 
  TRANSPORTATION INTERMEDIARIES ASSOCIATION; MARK V. DEFABIS, 
PRESIDENT AND CHIEF EXECUTIVE OFFICER, INTEGRATED DISTRIBUTION 
    SERVICES INC., ON BEHALF OF THE INTERNATIONAL WAREHOUSE 
LOGISTICS ASSOCIATION; AND RICHARD H. FISHER, PRESIDENT, FALCON 
     GLOBALEDGE, ON BEHALF OF THE AIRFORWARDERS ASSOCIATION

    Mr. Abney. Chairman Duncan, Ranking Member Nadler, and 
members of the panel, thank you for the opportunity to testify 
about how UPS utilizes logistics to move freight and the 
opportunities we see to improve America's productivity.
    UPS plays an important role in freight transportation. I 
have four slides. If we can show the first slide. And you can 
just see that we have 400,000 UPS employees, many of which are 
in the United States. And we have almost 100,000 commercial 
vehicles. At any given time, the economic value of the goods 
and services that are in the UPS network are equal to 6 percent 
of the U.S. GDP and 2 percent of the world's GDP.
    If you look at slide two, I am just going to give you a 
quick example of logistics in action. And in this case, we have 
a supplier in Los Angeles, a manufacturer in New York, and a 
customer in Germany. And I am just going to focus on the 
transportation mode changes. So it goes by truck. And then when 
it gets to Chicago, to our catch hub, it gets shifted into 
rail. It will move by rail to New Jersey. At that point, it 
will have another mode shift. It goes back to truck. And then 
it gets delivered to the manufacturer where it is added and 
final assembled and then again it goes by truck. And then of 
course it would travel by air to Germany. And then it would be 
delivered.
    This is very common to see these shifts in our modes of 
transportation. And you know most times things go very well. 
But as the next slide will show, there are some challenges. And 
when those challenges occur, they can delay the movement of 
goods. And one of those is weak intermodal connections. So when 
you are trying to change from one mode to the other. Now a good 
example of a project that is going to correct one of these 
large ends is the project created in Chicago that Congressman 
Lipinski is involved in. We certainly appreciate your efforts 
there. There is always highway congestion in all the urban 
cities. We all know that. And then the air traffic controller 
delays could be because of many reasons, but our antiquated 
navigational system is one of those. You can see at the bottom 
of the slide that there is real cost to this congestion and to 
these delays. And as was quoted by Ranking Member Nadler, every 
5-minute delay to every one of our vehicles is $105 million. 
And what it causes us to do is to overstaff and to put more 
trucks on the road than we need to to make up for the 
congestion.
    The last slide, I just wanted to talk about solutions for a 
minute. And I will highlight the first three. And you can see 
the others. But over the decades, America's transportation 
infrastructure has been built in silos. So highways were built 
to connect to highways. Railroads were built to connect with 
railroads. Congress has tried to link them together, but it is 
still a patchwork. And America needs a freight system that is 
built like a network. And I encourage Congress to take a long-
term coordinated view of how the different modes can work 
together.
    For highways, the simplest improvement that we would 
recommend is to increase the length but not the weight of each 
trailer from 28.5 feet to 33 feet in twin trailer 
configurations. This would allow freight to move more 
efficiently, reduce the number of trucks on the road, and would 
provide environmental benefits without compromising highway 
safety. Because we are not increasing the weight limit, there 
is no risk of further damage to highways and bridges. UPS also 
supports raising the motor fuels tax and indexing it to 
inflation.
    The other mode I will mention is air transportation. And we 
endorse increased funding of the FAA's next generation air 
traffic control system, and we think those benefits have been 
well documented.
    So I joined UPS 39 years ago. I could not have imagined the 
incredible growth and global commerce or could I have imagined 
the role that UPS plays in facilitating America's economy. But 
I also cannot imagine that nearly four decades later, America's 
transportation infrastructure would still be stuck in the 20th 
century. This panel can help modernize infrastructure, build 
connections between different modes, address global barriers to 
freight movement, can move our freight transportation system 
into the 21st century, boosting America's efficiency, growth, 
and competitiveness. It is a critical mission, and all of us 
stand ready at UPS to assist you in this vital effort.
    Thank you very much.
    Mr. Duncan. Thank you very much, Mr. Abney.
    Our next witness is Mr. Tracy Rosser, who is senior vice 
president of transportation for Wal-Mart Stores, Inc.
    Mr. Rosser. Chairman Duncan, Ranking Member Nadler, 
distinguished members of this panel, thank you for the 
opportunity to speak with you today. My name is Tracy Rosser, 
and I am senior vice president of transportation for Wal-Mart 
Stores, Inc. I am responsible for domestic transportation, our 
private fleet operations, and global transportation.
    Walmart's logistics network is critical to providing goods 
to our customers throughout the world. The ability to replenish 
our stores and clubs quickly and at low cost has been a key 
contributor to our success. Technology, innovation, and the 
commitment of our associates continue to drive our mission in 
providing customers an outstanding shopping experience that 
saves them money so that they can live better.
    Walmart opened its first distribution center in 1970, using 
a system designed to quickly and efficiently replenish our 
shelves. Walmart logistics employs 77,000 associates at 150 
distribution centers and 87 transportation offices. We run 
6,200 trucks, 55,000 trailers, and we have 7,500 drivers in our 
private fleet operations. And I would say that our private 
fleet operations is among the safest, with a 1.56 million miles 
per preventible accident.
    Our fleet drivers log approximately 700 million miles per 
year, with the average truck driver logging more than 100,000 
miles a year. Our distribution center network typically serves 
from 90 to 100 stores and uniquely caters to the needs of 
specific stores within a 200-mile radius of those distribution 
centers. They move hundreds of thousands of cases each day, and 
our import facilities provide efficient methods of handling 
international merchandise. Walmart also has nine disaster 
distribution centers strategically located across the country 
stocked with relief supplies.
    We have set really ambitious strategic sustainability goals 
that include doubling our fleet efficiency by 2015 with 
solutions like cross-dock consolidations networks, lean 
routing, reduction of empty miles, and optimizing how 
merchandise gets loaded in our trailers. In 2012, we delivered 
297 million more cases, driving 11 million fewer miles than in 
2011. We continue to work with the trucking industry on a 
variety of innovative technologies, including hybrid and other 
advanced power trains, alternative fuels, aerodynamics, and 
advanced tire technologies. For 2012 alone, such reductions 
helped us avoid emitting 103,000 metric tons of carbon dioxide, 
the equivalent of taking 20,000 cars off the road. In addition, 
by reducing food miles between farmers and markets, reducing 
food waste and working with farmers to optimize production, we 
have been able to strengthen local economies and create 
logistical and environmental savings.
    With over 4,000 stores in the U.S. and locations in every 
State, Walmart is a user of all modes of transportation, from 
our ports to our rail networks to our highway infrastructure. 
The transportation infrastructure is an asset to our country, 
offering a competitive advantage that should be utilized to the 
fullest.
    Looking ahead, we believe it is important to focus on 
maintaining a system that yields the highest degree of safety, 
efficiency, and environmental stewardship. We encourage your 
panel to dedicate attention and funding on areas with the 
highest priority maintenance needs and areas of extreme 
inefficiency and congestion. Like other users, we have noticed 
that bottlenecks can develop across all modes, at points of 
significant freight movement, as well as in and around urban 
areas. When we find that customers in urban areas share a 
similar demand for goods and services in other areas of the 
country, the logistical costs of meeting those needs can be 
significant. In addition, as e-commerce grows, customers are 
demanding faster delivery tailored to their schedules. Without 
a focused effort to address timely movement of the freight 
through urban areas, restrictions and workarounds will continue 
to add cost, both environmental and economic. Although we pride 
ourselves on our ability to adjust quickly, challenges 
underscore the need for a national freight policy. State and 
local regulations often share similar goals of safety and 
efficiency, but the variety of measures can be cumbersome and 
costly to interstate commerce.
    We encourage the development of solutions that address the 
needs of our transportation network in as uniform a manner as 
possible. Maintaining a strong infrastructure will also help 
our suppliers to remain competitive. Walmart recently announced 
a commitment to buy an additional $50 billion in U.S. products 
over the next 10 years. As the economy continues to improve, 
domestic producers will rely on a lean, efficient 
transportation network to get their products to market quickly 
and cost-effectively.
    To conclude, as a significant user of the Nation's 
infrastructure, we understand the value of our Nation's system 
and of ensuring that it remains competitive in the decades to 
come. We encourage the use and development of safe, efficient, 
and sustainable solutions in freight movement. We also believe 
that attention and financial resources should be directed 
towards areas in high needs of maintenance, congestion points, 
and challenges of urbanization.
    Finally, a clear national freight policy can promote 
interstate commerce while meeting safety and efficiency needs 
and goals. Walmart appreciates that this panel has been tasked 
to consider ways to best meet the demands of the Nation's 
freight network. There is no easy answer here, and we look 
forward to working with you as you address the challenges 
ahead.
    Thank you again for your time today. I am happy to answer 
any questions. Thank you.
    Mr. Duncan. Thank you very much, Mr. Rosser.
    Next is Mr. Edward R. Hamberger, who is the president and 
CEO of the Association of American Railroads. Mr. Hamberger.
    Mr. Hamberger. Mr. Chairman, thanks to you and the other 
members of the committee for the opportunity to be here to 
represent North America's freight railroads and address this 
important topic.
    A couple of years ago, Mr. Chairman, we came to the 
conclusion that the story of logistics and freight needed to be 
told on a wider basis. So we went ahead and put together a 
video. I do have a clip I would like to show you today under 
the theory that a picture is worth a thousand words. So this is 
about a minute and a half of what we believe are rail logistics 
in the supply chain.
    [Video shown.]
    It may not be as catchy as some other logistics videos I 
have seen, but we think it gets the point across. And I hope 
the point that you take away from it is that we see ourselves 
as an interrelated network. Obviously it was freight rail-
centric, but you saw a lot of our other modal partners in it. 
Working together with our partners and customers here, we 
create jobs, grow the economy, and keep American products 
competitive in world markets.
    Let me just get right to the end. How do we keep that 
going? In terms of public policy, we recommend, as my two 
previous colleagues did, that you continue to focus programs to 
improve the first mile and last mile connections where freight 
is handed off from one mode to another, from truck to rail or 
rail to truck, at intermodal terminals. Improving these 
connections will lead to large increases in efficiency and 
fluidity throughout the network.
    While we have been reinvesting more private capital than 
ever before, $25 billion this year alone, 40 cents of every 
revenue dollar back into the infrastructure--as you saw, $500 
billion in the last 30 years--sound public policy helps to 
ensure that these investments continue. So we would say, number 
one, please keep in place the current balanced economic 
regulatory structure governing our industry.
    Number two, please encourage more voluntary--and I 
emphasize voluntary--public-private partnerships for freight 
rail infrastructure improvement projects.
    Three, please try to improve the environmental and other 
permitting reviews to make them more efficient, by shortening 
the time it takes for these reviews of freight expansion 
projects, of course in ways that do not adversely affect the 
quality of those reviews.
    Fourth, we ask that you defer consideration of any truck 
size and weight legislation until the congressionally mandated 
study from MAP-21 is completed next year.
    And five, sort of more of a philosophy, ensure that various 
freight modes pay their own way. That is to say, the ``user 
pay'' concept has worked very well for developing and growing 
the infrastructure in the country. We believe that the ``user 
pay'' concept should continue into the future.
    Thank you for the opportunity to testify and I look forward 
to answering any questions.
    Mr. Duncan. Thank you very much.
    Our next witness is Mr. Scott Satterlee, who is with C.H. 
Robinson, on behalf of the Transportation Intermediaries 
Association.
    Mr. Satterlee. Chairman Duncan, Ranking Member Nadler, and 
members of the committee, thank you for the opportunity to 
testify at today's hearing. As one of the Nation's largest 
third-party logistics providers and a proud member of the 
Transportation Intermediaries Association, C.H. Robinson has a 
unique view on how goods and commerce flow from manufacturer to 
consumer. My name is Scott Satterlee, and I am senior vice 
president for C.H. Robinson. I joined C.H. Robinson in 1991. 
And I am responsible for overseeing the operations of our 175 
U.S. branch offices which employ more than 8,400 U.S. 
employees.
    C.H. Robinson was founded in 1905 and facilitates the 
movement of over 11.5 million shipments a year. We have been 
named the number one 3PL for 2 years in a row by Inbound 
Logistics magazine. Additionally, C.H. Robinson is a member of 
the Transportation Intermediaries Association. The TIA is a 
professional organization of the $162 billion third-party 
logistics industry. TIA represents over 1,300 member companies 
most of whom are small family-owned businesses.
    C.H. Robinson relies on all the Nation's freight capacity 
to manage our customer shipments on a daily basis. We do not 
own equipment with wheels. So we are mode-neutral when 
tendering shipments. We monitor and qualify over 45,000 U.S.-
based motor carriers for proper authority, valid insurance, and 
other data points. 82 percent of the carriers operate three or 
fewer trucks, and 98 percent of the carriers operate 25 or 
fewer trucks. Many of these companies do not have their own 
dedicated sales force, so companies like C.H. Robinson enhance 
their sales capabilities. We also have access to all Class I 
railroads for intermodal freight. We operate a series of 
gateways and consolidation centers for air freight and ocean 
freight and perform customs clearances as a licensed customs 
broker. Some shippers only use our services a handful of times 
when they need assistance finding a truck while other customers 
have fully integrated our services and even our people into 
their transportation departments.
    So how does freight get assigned and picked up across the 
country in a regional or long-haul marketplace? We act as a 
traditional freight broker for almost all of our transportation 
customers. If our rates and service levels are competitive, we 
bring thousands of carriers of all sizes to our customers that 
normally would never have a chance to access their freight due 
to technology, payment, or contracting requirements. For some 
customers, we also act as a 4PL or shipper's agent by executing 
the routing guide. In theory, transportation should be pretty 
simple. If you have a load you need transported, you locate a 
truck, you assign the truck, and wait for the freight to 
deliver. Unfortunately, many variables make the matching of a 
load with an available truck much more complex than that. For 
example, weather and traffic delays, equipment failures, 
changing regulation, lane capacity imbalances, business 
seasonality, and economic conditions all add tremendous 
complexity to the system. In addition, systematic problems, 
such as short lead times and heavy reliance on expedited 
services, excessive loading and unloading time, poor visibility 
to inbound or outbound freight, and securing surge capacity 
during busy seasons combine to add inefficiency to the 
country's transportation system.
    Property freight brokers and 3PLs like C.H. Robinson 
mitigate these factors that contribute to inefficiency by 
matching the right load to the right piece of equipment at the 
right time. Finally, we offer these recommendations where 
Government can reduce both chronic and unexpected exceptions, 
therefore increasing efficiency in the supply chain.
    One, provide shippers and brokers clarity in which carriers 
are safe to hire in regards to the CSA program. Freight brokers 
and shippers should not need to second-guess the FMCSA on who 
is authorized to operate on the Nation's roadways.
    Two, encourage our transportation system to have built-in 
modal flexibility. An example of modal flexibility would be an 
increase in rail ramps across the Nation or a viable shortsea 
shipping program.
    Three, make sure trucking remains a great opportunity for 
the small- and medium-sized entrepreneurs. They provide the 
flexibility and service to keep our entire transportation 
system in equilibrium. Barriers for small carriers include 
California's environmental regulations which is significantly 
different from the rest of the country.
    Four, help industry address the growing rise of 
sophisticated cargo theft. Regional cargo theft task forces are 
under increasing budgetary pressures from law enforcement 
agencies but provide industry and consumers valuable deterrent 
to a costly problem.
    Lastly, ensure consistency between food safety regulations 
and cargo claims regulations. It is now common for a shipper to 
request the destruction of hundreds of boxes of food without 
clearly establishing proof of actual damage. 3PLs are often 
caught in the middle of a tension between freight cargo claims 
responsibility and food safety fears.
    We are encouraged and optimistic that the next highway bill 
can and will find ways to improve the Nation's freight 
efficiency by addressing some of the noninfrastructure barriers 
to the efficient flow of freight across the country as well.
    Thank you.
    Mr. Duncan. Thank you very much.
    Our next witness is Mr. Mark DeFabis, president and CEO of 
Integrated Distribution Services. Mr. DeFabis.
    Mr. DeFabis. Chairman Duncan, Ranking Member Nadler, 
members of the committee, thank you for inviting me to testify 
today. I represent members of the International Warehouse 
Logistics Association and serve on the organization's executive 
committee.
    The IWLA is the only trade association for warehouse-based 
third-party logistics providers. These are companies like mine 
that offer warehouse-based supply chain management services to 
other businesses across North America.
    Independent warehouses are a vital part of the economy. We 
best serve our customers by identifying efficiencies that allow 
goods and materials to move with more velocity from creation to 
the end consumer while navigating the legislative and 
regulatory waters that affect goods movement. We do all of this 
while constantly looking for ways to achieve efficiencies 
within the overall supply chain. And our success is evidenced 
by the fact that logistics costs as a percentage of GDP have 
fallen almost in half from 16.2 percent of GDP in 1981 to 8.5 
percent in 2012.
    Our unique position in the supply chain allows us to 
understand just how goods move across the country and exactly 
where the system needs to focus to ensure smooth commerce in 
the future. Today's commercial freight is multimodal. And the 
warehouse-based 3PL is the point at which modal interchange 
happens. This is one reason IWLA members' facilities are 
located near every major airport, seaport, harbor, railyard, 
interstate interchange, and why adequate access to these 
locations is imperative.
    As I mentioned, velocity and security and accuracy within 
the supply chain are mission critical outputs. This is the 
reason that warehouse-based 3PLs provide a growing number of 
value-added services. These warehouses, once only big boxes 
where goods were stored, now may label, package, sort, blend, 
test, and save customers on transportation costs to speed the 
process. These same warehouses may also support made-to-order 
operations and handle returns processing and refurbishing of 
returns.
    Warehouse-based 3PLs also play a key role in another 
growing segment of the economy, Internet commerce. This 
increasing amount of e-commerce sales means more shipments are 
being delivered directly to the consumer. This fact 
demonstrates that commercial freight does not just move on 
interstate highways but extends all the way to the residential 
doorstep.
    This new model, based on value-added services, exposes 
warehouse-based 3PLs to regulations that previously only 
applied to manufacturers. One distinction between the warehouse 
and manufacturers is important to keep in mind. Warehouse-based 
3PLs do not own any of the products that move through our 
facilities. Ownership of the goods remains with the customer 
and the relationship is that of a bailor and bailee governed by 
Article VII of the Uniform Commercial Code. It seems that this 
relationship is often not understood or considered during the 
drafting of Federal rules and regulations. While warehouse 
operators are prepared to live by rules and regulations 
governing the handling and storage of various products, we can 
only act upon the direction and information supplied by our 
customer, the bailor. As bailee, we should not be held to the 
same level of liability that applies to the owner of the goods.
    From its unique position in the supply chain, the 
warehouse-based 3PL can see and is directly affected by 
bottlenecks and choke points within the commercial freight 
network. These often manifest themselves at the warehouse where 
increased costs are incurred to keep the supply chain moving in 
a coordinated fashion. A strong logistics industry enables a 
healthy and growing economy. But a strong logistics industry is 
only possible with freight policies that support the needs of 
the 21st-century supply chain.
    With this in mind, the members of the International 
Warehouse Logistics Association ask the committee to consider 
the following: Develop new approaches to infrastructure 
financing for all commercial transit modes. These can come via 
traditional revenue sources and through new sources, such as 
user fees, mileage-based taxes, and greater use of private 
investment. Implement policies to ensure that revenue 
designated for commercial freight projects cannot be diverted 
in the same way that Highway Trust Funds are today. Guarantee 
that fees that are collected on imports at the ports through 
the U.S. Harbor Maintenance Trust Fund are used for their 
intended purpose, dredging and maintaining the Nation's ports 
and waterways. Also, with expansion of the Panama Canal, many 
ports will need dredging to accommodate the larger ships 
transferring through the canal.
    We have made other recommendations as a part of our written 
testimony, and we would ask your attention to those as well. 
But on behalf of the International Warehouse Logistics 
Association, I thank you for your time. And our industry stands 
ready to work in partnership with the committee on ways to 
enhance commercial freight movement that would result in 
economic growth for the economy.
    Mr. Duncan. Thank you very much.
    Next is Mr. Richard Fisher, who is the president of Falcon 
GlobalEdge, for the Airforwarders Association.
    Mr. Fisher. Chairman Duncan, Ranking Member Nadler, and 
members of the committee, thank you for inviting me to testify 
before the committee today. I also would like to thank Chairman 
Shuster and Ranking Member Rahall for setting up this important 
panel.
    My name is Richard Fisher, and I am president of a 
forwarding company called Falcon GlobalEdge, and I am also 
chairman of the Airforwarders Association. Falcon GlobalEdge is 
headquartered in Boston and operates both domestically and 
internationally.
    Today I am testifying on behalf of the Airforwarders 
Association. Our association represents 360 member companies, 
employing tens of thousands of employees and contractors. AFA 
members range from small businesses to large companies 
employing thousands, with business models varying from domestic 
to worldwide operations, with some members operating their own 
aircraft. In short, we are the travel agents for freight. We 
move cargo throughout the supply chain in a time and cost 
efficient manner regardless of the transport mode that is 
chosen.
    The global economic downturn continues to erode forwarder 
margins in the face of increasing costs. And these expenses 
only escalate as the regulatory web expands. For example, in 
the case of an air shipment between Washington and Paris, the 
timely delivery of our customers' product is dependent on a 
myriad of U.S. Government agencies and regulations beginning 
with TSA and CBP. It is critical that both FAA and CBP are 
adequately staffed to manage flights and clear shipments 
quickly and efficiently. When going to or from the airport, 
shipments that move by truck fall under the purview of the DOT, 
and the trucker himself falls under the oversight of FMCSA. 
Ultimately, one import shipment arriving in the United States 
could meet 13 regulatory agencies at our border, and delays can 
and will result. Sun Tzu once said, ``The line between disorder 
and order lies in logistics.'' True in war and in forwarding.
    Aviation is a key for many of our members' businesses. 
According to the International Air Transport Association, air 
cargo transports over $6.4 trillion worth of goods on an annual 
basis, amounting to 35 percent of trade by value.
    Allow me at this point to thank the committee for resolving 
the FAA furlough situation and keeping our control towers open 
and operating. As an industry, we are heavily dependent on 
passenger carriers. As an aside, the administration's proposal 
to impose billions of dollars in new and higher aviation taxes 
should be flatly rejected. It is in our Nation's economic 
interest to have a healthy and robust aviation sector, and 
increasing taxes on airlines runs contrary to this goal. Our 
industry's operations are immensely complicated by new 
regulatory burdens. Conversely, the Government can assist by 
continuing to support the modernization of our antiquated air 
traffic control system by deploying what is called NextGen 
which has been alluded to by my colleagues. The benefits of 
NextGen have demonstrated that the technology can save flight 
time, greatly increase the safety of flight operations, and 
reduce emissions. I urge this committee to maintain its strong 
support for NextGen development.
    AFA members and their customers see the impact of high fuel 
prices every day by paying higher freight rates and higher 
prices at the pump. Still, we also realize that our shipments 
require good roads and bridges to get to and from the airport, 
and current funding sources are insufficient to maintain this 
vital infrastructure. For example, one in nine bridges in the 
United States remains structurally deficient. Proposed 
solutions range from increasing the Federal gas tax to a 
vehicle miles traveled tax. Before embracing the higher tax, we 
need assurance that existing taxes are being invested as 
intended. Given the new hours-of-service regulation that will 
take effect next Monday and requires as many as 40,000 new 
truckers, it is even more critical for the CSA program to 
better work for industry. We need to have surety on who is 
authorized to operate on our Nation's highways.
    In conclusion, I urge members of the committee to remain 
vigilant on the promulgation of additional regulations and its 
impact on the freight industry. Thank you for this opportunity. 
And I will be happy to answer any questions you might have.
    Mr. Duncan. All right. Thank you very much.
    I apologize, but we do have two votes going on on the floor 
right now. So we will have to be in recess until we conclude 
those votes. Thank you.
    [Recess.]
    Mr. Duncan. All right. I am sorry that we got interrupted 
by votes, and then we only had two votes but we had to have an 
announcement about the women Members' softball game tonight, so 
obviously, obviously very important business on the floor of 
the House, but we certainly appreciate all the testimony that 
all of the witnesses gave and now we will get into a little 
discussion.
    Mr. Abney, as you understand, I think, the purpose of this 
panel is to try to coordinate all our different subcommittees 
and come up with a way to always be trying to improve our 
freight mobility or freight transportation system, and you said 
in your testimony that our present system was built in silos 
and is more a patchwork of modes.
    If you could change one thing about how the Federal 
Government addresses our freight system, what would it be? What 
is the big thing that you see for UPS?
    Mr. Abney. You know, the big thing for us would be long-
term planning that would link the intermodal connection. So, 
those strategic locations in the U.S., whether it be for 
national importance or whether they be regional, but if those 
intermodal connections would be strengthened where we do switch 
from ocean to ground or from ground to rail, and Project CREATE 
is a good example of an area that is focused on that. But right 
now we just see that highways are meant to connect with 
highways and the railroads to railroads, and that would be the 
area we would like to see the biggest focus on.
    Mr. Duncan. Mr. Rosser, you want to take a stab at that?
    Mr. Rosser. Sure. Thank you, Chairman, for the question. I 
think you are already doing it, frankly. When you think about 
the issues that you are addressing, I think you are nailing it, 
so studying the problems, continuing research and engagement 
with the private sector like you are doing to understand where 
the issues are, continue to invest in the intermodal network in 
terms of identifying and finding those areas that add costs. 
So, our business, we are all about helping our customers save 
money so that they can live better, and those issues that Mr. 
Abney talked about are critical issues that add cost to our 
customers, and I think solving those issues on behalf of those 
constituents is a really important thing.
    And so I would just add, focusing on those things that 
improve the safety and efficiency of the network in total.
    Mr. Duncan. Let me ask you something else I am a little 
curious about. When, oh, I think just about a year after 9/11, 
the FedEx people told me that they had spent about $200 million 
on security measures that they wouldn't have spent if it hadn't 
been for 9/11, and it just really boggles my mind how much we 
have spent on the Federal level, the State level, all the local 
governments, and then all that the private companies have spent 
on security, and now we have this huge industry related to 
security.
    Is that spending, has it leveled off? I guess what I am 
thinking about, is a few months after 9/11, the Wall Street 
Journal had an editorial, and they said they noticed that all 
the departments and agencies were sending up requests for 
additional money for security and they said, from now on, a 
wise legislative policy would be that anytime the word 
``security'' was mentioned, a wise legislative policy would be 
to give it twice the weight and four times the scrutiny, yet we 
are not doing that. The Congress votes for anything that has 
the word ``security'' attached to it. Then I go to these ports 
and I go to all these places and I see all the trucks have to 
stop and go through the machines and all that kind of stuff, 
and it just seems to me we have gone ridiculously overboard on 
all that stuff.
    But are your companies, or your association, what do you 
say? What do you find in that regard? Are you still having to 
spend a lot of money on security? Anybody?
    Yes, sir, Mr. Abney.
    Mr. Abney. Yes, I could answer for UPS, and the answer is 
that it continues to grow, and I wouldn't tie it to just 9/11. 
I would tie it to all the terrorism activity that has happened 
throughout, and one of the areas that we are really working on 
and working with the Federal Government on is to take a risk-
based approach. So while we deliver almost 16\1/2\ million 
packages a day, most of those packages, we would have no reason 
to suspect. So with the technology that we have that can put 
various parameters in and tying it into the Federal Government 
system, we can zero in on those areas that are--have the most 
risk of security, and that would be a better use of the dollars 
and it would allow you to target versus this shotgun approach.
    Mr. Duncan. Well, I just think it is sad that we are 
spending so much money on all of that. But Mr. Hamberger, in 
your testimony you mentioned the first mile and last mile 
connections are vulnerable to disruptions. Can you elaborate on 
that a little bit? What are your solutions there?
    Mr. Hamberger. Well, I think one of the areas that you 
probably saw when you were out in southern California concerns 
the transfer points from the ports to a railyard. For example, 
I know that one of our members has been working for 8 years to 
get an intermodal transfer station sited. We need to focus 
attention on improving the regulatory permitting review system. 
That station is going to take millions of trucks a year off the 
road, and they finally got their approval this year. And now, 
of course, they will be in court for the next couple of years 
fending off challenges. But it is that transfer point from one 
mode to another which needs attention.
    Mr. Duncan. All right. I have got many more questions, but 
I am going to go now to Mr. Lipinski first.
    Mr. Lipinski. Thank you, Mr. Chairman. Thank you for 
holding this hearing on logistics. I appreciate the 
participation of all the witnesses today, and a couple of 
things that I just want to mention, I probably won't have time 
for comments on this, but I just want to make sure I mention 
the--I think next year, and was mentioned as I think that is 
very important, that we move forward more quickly on that than 
we have, and also, what Mr. Nadler had mentioned in his opening 
comments about the importance of having a Project of National 
and Regional Significance, a fund so that we can make sure that 
we get the funding that is needed for some of these really, 
really big projects that are critical to our Nation.
    Mr. Abney, I appreciate your package flow example in your 
comments about CREATE and how important CREATE is when we are 
out in the ports of Long Beach and L.A. They talked about the 
importance 2,000 miles away of how important CREATE was to 
them.
    Your testimony highlights that Illinois is the 
transportation hub of the country. You know, I have the honor 
of representing Hodgkins, which is home of the UPS Chicago Area 
Consolidation HUB that you reference in your example. The 
facility employs over 6,000 people and forwards 1.3 to 1\1/2\ 
billion packages every day. It is also located adjacent to the 
BNSF Chicago Willow Springs intermodal facility which opened at 
the same time as the HUB in 1995. I visited that complex a 
number of times. I more was impressed not just by the logistics 
used there but also the men and women who work there.
    So, that example that you had shown us, Mr. Abney, I had 
noticed and actually Mr. Nadler had mentioned this to me as he 
was leaving, what impacts the decision about what modes to use, 
because I noticed it was as you moved by truck from California 
to Chicago and then by rail from Chicago to New York. What 
influences those decisions?
    Mr. Abney. Excellent question, and we have noticed that 
over the years, too, believe me, and you know, we put over 
3,000 loads or containers a day on the rails. We are one of the 
largest customers and we have been doing that my entire career 
at UPS. What causes us to put this particular segment on the 
road is time in transit. If we truck it to Chicago, we can cut 
at least a day's time in transit the way it works with the 
train schedules, and so we look at each of these lanes and 
where we can place it on the rail and maintain the time in 
transit, we certainly do so. That is our first option. Where we 
can improve time in transit, we have to measure the increased 
cost compared to the customer demand, and in this case to be 
able to reduce the days, time in transit, we put it on the 
road.
    Mr. Lipinski. But know you do move by rail also from--out 
from southern California to the Willow Springs CACH, I 
understand.
    OK. I wanted to ask Mr. Rosser. You had talked about 
increasing your efficiency of your trucks on the road. How did 
you, as a company, increase the sufficiency of movement?
    Mr. Rosser. Thank you for the question, Congressman 
Lipinski. So, we had an objective set forth back in 2005 where 
our CEO challenged us to double our fleet efficiency, our own 
trucks that we operate by 2015. I am glad to say that we are 
about 80 percent there and still have some work to do.
    Our focus has been on moving the most cases over the fewest 
amount of miles and in the most efficient equipment. So kind of 
a three-pronged approach, and the way we measure our efficiency 
is cases shipped per gallons of fuel burned, is how we measure 
that. I will tell you that in 2011 we delivered 297 million 
more cases and avoided 11 million miles. And I stated earlier, 
too, compared to 2007, we moved 658 million more cases, driving 
298 million less miles, which saved us about $875 million that 
we were able to pass along that savings to our customers.
    If you think about the approach, I will tell you that we 
are probably a little biased and we think we have the best 
truck drivers in the industry that are working for Wal-Mart 
Stores, and it starts with our people, and our truck drivers 
are very cognizant of fuel economy in our tractors. We work on 
some of the basics relative to fuel economy with engine 
calibrations, driver training, managing our speed, our 
maintenance programs, things of that nature. We are constantly 
looking with--at advanced technology with our vendor partners, 
looking at aerodynamics, weight, things of that nature, fuel 
efficient tires, et cetera. And then the other things that we 
are looking at that are fairly basic is just increasing what we 
are able to put on the trailer.
    We work with our merchants and our suppliers to reduce 
packaging size, so we are able to move more product in our 
trailers with more efficient packaging. We have used technology 
with loading techniques in managing our loading techniques to 
get more cases per trailer. For us, one additional case per 
trailer can save us and our network about $680,000 over the 
course of a year just getting that one extra case per trailer.
    We look at delivery frequency to our stores, multistop 
networks. We optimize the--utilize technology to reduce our 
network miles driven. Our supplier base is constantly changing. 
Our ship points are constantly changing, and so we have to 
constantly evaluate what the network looks like, and we do so 
on an ongoing basis to reduce miles driven, and so I will tell 
you that, you know, it is not any one thing. It is a recipe of 
a variety of basic fundamental operations that have allowed us 
to reach the 80 percent point of our goal.
    Mr. Lipinski. Thank you. I had another question, but let me 
just throw out if we don't get another round, I just wanted 
to--I was going to do this for a question for the record, Mr. 
Fisher and Mr. Abney, about the impact of night tower closures 
at airports because I know Midway, in my district, was 
threatened with that, Ontario was also threatened with that, 
and just interested in the impact, if that happened in the 
future, which is still threatened. But way over time now, so I 
yield back.
    Mr. Duncan. All right. Thank you very much. Mr. Webster.
    Mr. Webster. Thank you, Mr. Chairman. I had a question for 
Mr. Hamberger. Are there any Federal laws that are impeding 
efficient freight transportation?
    Mr. Hamberger. I think there are, as I mentioned, 
environmental permitting regulations that are slowing down the 
siting.
    Mr. Webster. OK. I will add that to my question, too, 
Federal regulations.
    Mr. Hamberger. Slowing down the siting of intermodal yards. 
I mentioned the one in southern California. What I have learned 
this morning is that at the other end of that yard where the 
railroad wanted to move the trailers and the containers across 
the country to Edgerton, Kansas, there was a dry riverbed. That 
situation led to a lawsuit before the State Supreme Court of 
Kansas challenging the Corps granting of a 404 permit to build 
an intermodal yard around that dry riverbed. So those kinds of 
regulations are something that I know the committee worked on 
in MAP-21. I know you have tried to do it in WRDA. If that 
moves, we would ask that you take a look at some way of 
streamlining regulations in the rail infrastructure building 
arena as well.
    Mr. Webster. All right. Thank you.
    Mr. Abney, how do you see the emergence of e-commerce 
affecting the logistics chain?
    Mr. Abney. You know, it has had a big effect on our 
business. It at one time, the largest part of our business, is 
about a little more than 50 percent now, was from shipper to 
another business, so B to B. And so we were delivering 50 to 
100 packages to a commercial stop. Now we see a lot more B to 
C, which is going to be one, one-and-a-half packages per stop, 
and it is just a fact of life and it is one thing that through 
our technology has allowed us to make changes to where we can 
address those needs.
    So, now we have an example of that, is UPS My Choice where 
an end consumer that has got a package coming to their house 
can request to have that package redirected, redirected to 
their office, redirected to their neighbor or held for a day 
until they are going to be home. So it is those kind of 
creative things that we do that allow us to adjust to this 
change. But--and we see it especially during Christmastime. You 
know, the percent of packages that we deliver to residential 
neighborhoods increases greatly and we have had to adjust our 
network to that.
    Mr. Webster. Thank you. Anyone else on that question?
    Mr. DeFabis. Congressman Webster, I would also say that 
what we--you know, as e-commerce grows, there is a number of 
services that are offered through UPS, FedEx, other parcel 
carriers, that also are these hybrid services that utilize the 
U.S. Postal Service for last-mile delivery for some of these 
lighter weight packages, and I would say that as we look at 
logistics in total there probably is some role that the Postal 
Service is playing today to facilitate e-commerce for delivery 
of those lightweight packages that needs to be considered as 
well. And as I said in my comments, the commercial freight now 
with e-commerce is moving all the way to the doorstep, so we 
can't just say that it is moving on the freeways. It is really 
moving into the residential streets, and how are we going to 
efficiently do that.
    Mr. Webster. Thank you. Yes, one more.
    Mr. Fisher. The Airforwarders Association, Mr. Webster, has 
a slightly different view. As it applies to our business, we 
just recently endorsed IATA's e-Air Waybill initiative, which 
is to transmit all information to air carriers in a 
standardized fashion electronically. We are a paper dependent 
business and have been for years, so we will see in the future 
all of that information going electronically to carriers, which 
will make us more efficient and make the carriage of freight 
more efficient as we go forward.
    From a personal perspective, in my own company, we have 
been electronic now for several years. We don't like paper. We 
have tried to get rid of it. All of our communications to our 
other offices are done electronically. There is very little 
document transfer, so it is the wave of the future for 
logistics to embrace e-commerce in that fashion.
    Mr. Webster. Thank you. Thank you, Mr. Chairman.
    Mr. Duncan. Thank you very much. I am going to go to Ms. 
Hahn, but I do have to tell you that people used to say that we 
had to go to all the computers to cut down on the paperwork, 
and all it has done is greatly increased the papers that come 
into our offices.
    Ms. Hahn.
    Ms. Hahn. Thank you. I really appreciate everyone coming 
here today and listening to your testimony, and I, too, always 
want to give a shout out to Chairman Shuster and Ranking Member 
Rahall for agreeing to impanel us to, as I understand, the 
first time come up with recommendations for a national freight 
policy as we move forward. So, I know everyone on this panel is 
listening very intently to your suggestions and your 
recommendations as we really try to come up with a national 
policy, understanding, fundamentally, how important goods 
movement is to our economy, to being competitive globally, to 
creating good jobs. So this is really, I think, a great moment 
in our history as we move forward to create one that makes a 
lot of sense.
    And one of the things I was going to ask, and any of you 
could respond. Should we look at doing something really bold 
like really start to talk about opening our ports for off-peak 
cargo movement? I know in 2002, when I traveled to Hong Kong 
and Singapore and saw those ports operating 24 hours a day 7 
days a week, I came back to Los Angeles and spearheaded what 
has been sort of an incremental program. It's called PierPASS 
and it has been pretty successful in moving cargo off peak. It 
is now 4 nights a week, and you know, maybe 1 day on the 
weekend, maybe not. Wondering how that would impact logistics 
for all of you if you weren't always trying to meet gates that 
were only open certain hours, and is that something we should 
look at as a policy for all of our ports in the country?
    I would like to hear your responses on that.
    Mr. Rosser. I will take first stab at that. Thank you for 
the question, Congresswoman Hahn. So our customers shop our 
stores 24 hours a day. And what we try to do in every decision 
we make is we start with what does the customer want, what do 
they expect, and then we work to solve their need. And as a 
consequence of our customers wanting to shop 24 hours a day, 
most of our stores are open 24 hours a day.
    Ms. Hahn. You know, I will say, Walmart was one of my 
partners when we were crafting the off-peak cargo movement 
policy at Los Angeles-Long Beach.
    Mr. Rosser. Yes, and thank you. And our distribution 
centers operate 24 hours a day and our trucks are running 24 
hours a day, trains are running 24 hours a day, and I would 
just--I would tell you that to the extent that we can fully 
utilize the assets that the country has, you know, we are open 
to those discussions to have, you know, the discussions where 
we can operate safely and efficiently and fully utilize the 
great assets that we do have as a country.
    Ms. Hahn. Thank you. Anybody else?
    Mr. Fisher. Yes. Thank you, Congresswoman Hahn. I want to 
congratulate you on the PierPASS program and which you have 
implemented, but I have to tell you I was terrified by it when 
I first saw it, but we have adapted, and I think that knowing 
that ocean transportation is an imperfect science, if many more 
ports had PierPASS programs and more open gate programs, we 
would be much more successful in getting product to our 
customers. I think it is a good idea.
    Ms. Hahn. Well, you know, it was one of the things I 
thought about when I worked on that was, again, I mean, 
obviously I would like to fix every highway, every bridge, 
widen freeways, more near dock, on dock, I would like to do it 
all, but in the meantime it seems like we could utilize our 
current infrastructure more efficiently, smarter, and it would 
give a lot of the goods movement industry an opportunity to 
travel our roads when the commuters are also not on the roads. 
I know that the truck drivers would love to not have us on the 
road with them because they don't think we know how to drive 
either, so I think it would, you know, really sort of move 
cargo, I think, in a more efficient way.
    The other thing--my time is almost up--you know, I am a big 
believer in spending the money that we are collecting for the 
purpose for which it was collected, and the harbor maintenance 
tax has been collected year after year after year. We have an 
$8 billion surplus. We are not spending that money for the 
purpose it was intended, which was to, first of all, dredge our 
harbors and ports and waterways so that we have, you know, 
efficient movement of cargo. So, I am advocating that, I have a 
bill that would encourage us to spend that money and also 
possibly look at--you talked about the last--the first mile and 
the last mile. I also think it would be something we might look 
at if ports have already completed their dredging. Is this 
money that we could use for landside infrastructure and 
improvement? I mean, we worry about cargo being diverted to 
ports in Canada, in Mexico. I have always been told that the 
number one reason cargo is diverted is not for some new 
regulation or environmental fee that we place on containers, 
but it is because of landside congestion. You-all want that 
stuff in and out and to the destination as quickly as possible. 
So I would like to hear you give an affirmative to Congress, 
actually, as part of this policy, spending the tax for the 
purpose it was intended in the locations that it matters. 
Please, please, please nod your heads affirmatively out loud 
for the record. You think that is a good idea that we should?
    Mr. Hamberger. Yes.
    Mr. Duncan. All right. Well, thank you very much, and we do 
need to do more with that harbor maintenance fund.
    Ms. Hahn. Yeah, we got it.
    Mr. Duncan. Mr. Hamberger, you mention in your testimony 
that the railroads are ready to handle the traffic from the 
expansion of the Panama Canal, and you know, this is my 25th 
year on this committee, and I can remember many years ago when 
they thought a 4,000 TEU ship was a pretty big ship, and then 
they started talking about, they thought an 8,000 TEU ship was 
huge, and now, of course, they are talking about--it is just 
mind boggling, the ships they are talking about.
    So, everything is in this together. I mean, when we were 
out in California, for instance, Matt Rose told us that his 
biggest customer now was the Hunt Trucking Company then, and he 
said a few years ago they were 90 percent trucking, 10 percent 
by rail. He said today they are 80 percent by rail, and there 
are other examples like that that I can give. But are there any 
particular choke points? Are there any places--for instance, 
all the ports are wanting to expand and so forth. Are the 
railroads set up to handle big increases from most of these 
ports or are there particular places where we need to do more?
    Mr. Hamberger. Well, of course, it is my job to answer yes, 
we are ready. But in fact it is impossible to predict exactly 
how the opening of the canal will impact traffic. There are so 
many factors that come into play, depending on what is being 
shipped. Is the timeliness of transit the most important thing? 
Is it the cost? What is the fee at the canal going to be? What 
will the landside facilities be? Will the ports be dredged? 
Which ports will be dredged? So it is impossible to predict 
exactly what the impact will be on the flow of commerce. But 
what I am trying to get across in my testimony is that our 
members are in fact investing with ports. I know in Florida, 
major investment is going on between the State and the Florida 
East Coast Railway. CSX is trying to make sure that the port in 
southern Florida is ready; the east coast carriers are spending 
money to be able to double-stack their tunnels. Tunnels maybe 
100 years old weren't designed for double-track or double-stack 
and so a lot of money is going into that. The intermodal yards 
that are being built in the center of the country are BNSF's 
investments out there and Union Pacific's investments on the 
west coast.
    So, we hope we are ready, we think we will be, but it is 
not something that is sneaking up on anybody here. Everybody is 
trying to be best positioned to handle the flow of commerce 
wherever it does hit.
    Mr. Duncan. Well, I guess--and you have covered some of it, 
but what I guess partly of what I was aiming at was like in 
southern California we saw that at the ports most things have 
to be trucked out to where the railroads are, and I am just 
wondering, are there places, the Panama Canal or other places 
in the country where we really need to expand the rail capacity 
or the lines coming in, anything like that? Are there any 
particular places where you see that we may have a problem in 
the years ahead?
    Mr. Hamberger. Well, let me get back to you for the record 
on that, but just to draw your attention to the fact that again 
each one of these Class I's has corridors in mind. I would be 
remiss if I didn't join Mr. Abney in thanking Mr. Lipinski for 
his leadership on the CREATE project. One-third of all railcars 
originate, terminate, or transit through Chicago, so that is an 
area we have been focused on and we need to get that to 
conclusion.
    But let me get back with more specifics for you.
    [The information follows:]

        As the committee knows, freight railroads fully 
        maintain and develop their transportation 
        infrastructure. As a result, the freight rail industry 
        is among the most capital intensive of any of America's 
        industries, annually reinvesting about 17 percent of 
        its revenue back into capital investments in the rail 
        network. A significant percentage of these expenditures 
        is used to expand capacity to handle more rail volume 
        more expeditiously. Investments considered each year by 
        the individual freight railroads include:

             Ladding new track to existing right-of-
            way, such as a second main line;
             Ladding or extending new sidings on 
            existing right-of-way;
             Lconstructing new intermodal or transload 
            facilities;
             Lnew, technology-based expansion, such as 
            signaling dark territory;
             Lnew locomotives that increase the 
            horsepower capacity of a railroad's fleet.

        Railroads evaluate a wide variety of factors in making 
        these investment decisions--including present and 
        future traffic demands (as determined by railroads 
        working closely with their customers at ports and 
        elsewhere) and the expected return on their private 
        invested capital. Our Nation's freight railroads are in 
        a good position now, and are working diligently to be 
        in an even better position in the future, to offer the 
        safe, efficient, cost-effective service that their 
        customers need no matter where those customers are, no 
        matter what the freight is, and no matter where the 
        freight is going. America's freight railroads have 
        reinvested $525 billion (including maintenance 
        expenditures) since 1980--including $25.5 billion in 
        2012--to create a freight rail network that is second 
        to none in the world. If there is any area where 
        railroads could use assistance in developing the 
        infrastructure necessary to support the Nation's 
        growth, it would be in having the ability to have an 
        expedited environmental permitting process particularly 
        as we need to add intermodal and other terminal 
        capacity.

    Mr. Duncan. OK. All right. Mr. Satterlee, you mentioned the 
need to reduce chronic delays due to congestion. You got into 
that pretty much in your testimony. Are there any ways in which 
you feel we can better allocate or better use our 
transportation funding to go at this congestion problem a 
little bit better? I mean, we all know it is there. Then, too, 
you mentioned that the typical lead time for shipments is only 
48 hours. Are there any ways that you know of that, you know, 
that we could work on that or do anything to help on that?
    Mr. Satterlee. Thank you, Mr. Chairman. Your question is a 
very good one. You know, it is challenging to answer when you 
think about all the different sorts of investments that you 
could make. You know, we think a little bit about congestion. 
We think about the supply chain as a whole. It is really about 
trying to drive as much efficiency and streamlining and 
simplifying things, you know, as necessary. And so, you know, 
from an infrastructural standpoint, you know, ways to be able 
to create opportunities for a more efficient transportation 
over the road with the asset-based players, you know, to be 
able to get from point A to point B more efficiently within the 
regulatory laws, investments in the road systems, all those 
sorts of things are, I think, have been discussed and are very 
important. And we think about it from a 3PL standpoint. You 
know, it is really about creating as much flexibility as you 
possibly can to be able to make as efficient and drive out 
inefficiencies by, you know, really decongesting, you know, the 
flow information and the flow of, you know, the transport of 
the goods themselves.
    And so the--you know, the specific things that would help 
from an infrastructural standpoint, I made a couple of 
comments, increasing rail ramps and the regulatory laws that 
may affect or help improve things like shortsea shipping 
programs, kind of like Congresswoman Hahn was referencing, you 
know, those things help speed up the infrastructure and the 
flow of goods. And so, you know, what we see is there is some 
things that affect both infrastructurally and regulatory that 
we think that the Government can put a little bit more energy 
in.
    Mr. Duncan. All right. Thank you. Mr. DeFabis, tell me 
about your business. All of you, all of the witnesses today 
know much more about their businesses than I do, but I know 
probably the least about your business. And what I am 
wondering, I am wondering several things, but tell me a little 
bit about your business. Did you see a big downturn 2 or 3 
years ago, and is it coming back now, and what do you see in 
the future for the warehouse logistics business?
    Mr. DeFabis. Thank you, Mr. Chairman. Well, in general, I 
think the warehouse logistics industry in the recent recession 
did see a downturn. Our particular business, my company is 
actually in the--80 percent of our revenue is from e-commerce, 
direct to consumer business, and we held up pretty well during 
that period of time and continue to see growth based upon the 
growth of e-commerce. I think more recently the general 
industry, warehouse-based logistics continues to see good 
growth because of the increasing reliance of manufacturers and 
others to outsource their logistics needs, and to concentrate 
all of their time and effort and capital on the things that are 
their core competencies and let someone like a warehouse-based 
3PL begin to handle the logistics side of it as efficiently as 
possible. And that is why I think you see more activities being 
done within the warehouse that were traditionally done at the 
manufacturers, whether those be sub-assembly work, 
refurbishments, repackaging kinds of activities, is that the 
manufacturers are starting to stick to the knitting, so to 
speak, and let those that are more appropriately placed begin 
to handle those activities. Also, they can save on the 
transportation cost. Since you have your products in a 
warehouse, don't move them from there to somewhere else to be 
repackaged, redone, then moved back to a warehouse to be 
delivered to an end customer. Leave them at that point and do 
as much of these value-added services as you possibly can 
before you move them out to the end user.
    But I think the industry continues to be very bright. If 
you look at the amount of Fortune 100 and Fortune 500 companies 
that outsource to 3PLs, that is going to continue to grow over 
time.
    Mr. Duncan. Well, thank you. Mr. Fisher, you mention in 
your testimony, you discuss the negative impact of regulations 
on time-sensitive freight movements, and in another committee 
on which I serve, a few days ago there was an expert who 
described herself as a progressive or liberal Democrat who 
generally is in favor of more regulations, but she said--and I 
have got the quote here. ``At the time each rule is created, it 
made sense, but over time, the increasing of rules and 
regulations ends up costing us money and frustrating the public 
and destroying jobs.'' And what I am wondering about, are there 
any specific regulations that you see as especially burdensome?
    Mr. Fisher. Thank you, Mr. Chairman. My testimony did 
indicate that we, as an organization, as the Airforwarders 
Association, along with other associations represented here 
today, are very concerned with FMCSA's new regulations under 
the CSA program. As you know, hours of service are going into 
effect on Monday, CSA is one of many acronyms that we deal with 
every day. Stands for compliance, safety and accountability, 
and within the CSA, there is a measurement system that is being 
promulgated called SMS, which stands for safety measurement 
system. We are concerned that recent statements by FMCSA stated 
that is not the case, that it is actually a prioritization 
system and doesn't have as much to do with safety.
    The point is, all of us in industry and our customers need 
to have a clear idea of what Government wants us to do, and 
there is much confusion about the promulgation of this 
regulation. In fact, there are a couple of lawsuits pending 
against FMCSA on this very subject. So that is just a 
microscopic version of one of the regulations that could add 
cost, add litigation and slow down the delivery of goods to our 
customers.
    Mr. Duncan. All right. Thank you very much. We are going to 
bring this hearing to a conclusion here in just a minute, but 
let me just ask you. One of the big things we are discussing 
here now or about to discuss is the Marketplace Fairness Act, 
Internet and sales tax. In every article you read, everybody 
says that we are going to go more and more with each passing 
year to doing business over the Internet. Well, each of you or 
some of you tell us what effect you think that will make on 
your businesses and what it means for our freight mobility and 
for our transportation system.
    Mr. Abney.
    Mr. Abney. Well, we certainly see the e-tailers growing 
their business quicker than most of the brick and mortar 
companies. What we are seeing, though, is more and more of our 
customers that do have that brick and mortar are moving to this 
omni-channel distribution to where they are looking at how they 
can utilize their brick and mortar and be able to compete with 
some of these large e-tailers.
    A good example of that is a retailer with 100 different 
stores. If they do have a customer that wants a product that is 
not in their store, obviously the second choice would be to 
ship it from distribution into that store and then ask the 
customer to come back and pick it up. Now, what we see them do 
is they have total visibility to their systems and they look at 
which is the nearest store that has that product, and instead 
of asking the customer to go to that store or shipping store to 
store, they will ship it from that other store and then the 
next day be able to deliver it to the customer's house or their 
residence. That is a way that they are able to compete more 
with the large e-tailers. And we are seeing a lot of interest 
in that area, and we are tailoring products and services around 
that retail part of our business where people can use this 
omni-channel distribution.
    Mr. Duncan. All right. Mr. Rosser, you know, I am a big 
baseball fan, but I have said for a long time that I don't 
believe the national pastime is baseball. The national pastime 
is going to Walmart on Friday or Saturday night, and I have 
found out that that is a really good place to campaign. You may 
not realize it. I don't set up headquarters there, but if I 
have some free time, I can always go in to buy some toothpaste 
or shaving cream and see a lot of people. Tell me how is 
Walmart--what effect Walmart is going to have if----
    Mr. Rosser. First of all, Mr. Chairman, thank you for your 
business, and we hope you had a great experience at the store, 
too. I will tell you in conjunction with what Mr. Abney said, 
it is a rapidly growing segment of business just in general, e-
commerce network, and in my testimony I stated that we have 
over 100 distribution centers. Well, what we are finding is 
exactly what Mr. Abney said. We have over 4,000 distribution 
centers when you think about the role of e-commerce in our 
network to help support our customer needs. In the e-commerce 
channel, generally what you will find is that customers expect 
immediacy in terms of response, and from the time they order 
their product to the time that they want it delivered, but what 
we are also finding is that customers want a degree of 
flexibility. There is some items that they do need quickly and 
there is some items that they can actually wait to get, maybe a 
little bit longer than today. But what we are trying to do is 
come up with solutions and a menu that allows us to meet 
whatever the customer's needs is. And I would just tell you 
that the solutions are out there in terms of delivering from 
our supplier through our distribution centers to our stores, 
what we call site-to-store. We have options out there for our 
customers so that we can actually order fill from our stores 
and send product directly to the customer's homes. So there is 
a variety of different solutions that we are actually testing 
right now across our entire network. So we are learning each 
and every day how to meet that customer's needs and I will tell 
you that we are working with all of our suppliers, our 
transportation partners to understand how we accomplish that 
mission to solve that equation for the customer. But it is a 
rapidly growing opportunity for the American consumer.
    Mr. Duncan. All right. Anybody else?
    Mr. DeFabis. I would say that the e-commerce segment is 
probably one of the fastest and most entrepreneurial segments 
of the economy right now. E-commerce entrepreneurs are coming 
up every day and we see them all the time. That is who 
basically our customers are. I think that what is driving e-
commerce is convenience for the customer. Some of it is price. 
It is selection and being able to shop over multiple vendors 
conveniently at home on multiple devices is what is driving 
that. If you want my personal opinion in terms of any impact 
that an e-commerce sales tax may have, I don't know that that 
is a big driver of e-commerce sales one way or the other. I 
think there are other factors that are driving the e-commerce 
economy.
    Mr. Duncan. You think that is being somewhat exaggerated, 
huh?
    Mr. Fisher, do you have any suggestions on how we could 
make the TSA or the CBP operations a little more efficient or a 
little less time-consuming?
    Mr. Fisher. Thank you for that question, Mr. Chairman. I 
have been afraid you would ask me that. I can tell you that 
both of those agencies believe in stakeholder involvement, and 
as an association the Airforwarders Association has been the 
go-to association for both TSA and CBP, more recently CBP under 
different programs, but we have found the private-public 
partnership with TSA to work very, very well. CBP historically 
has been known for their sharing of stakeholder information and 
using stakeholder information to develop programs. We are 
working currently with other organizations on the ACAS program, 
which is an advanced cargo air screening program, which is 
combined authority with TSA and CBP, and that program is coming 
along quite nicely.
    I don't have any really other suggestions as far as those 
two agencies are concerned.
    Mr. Duncan. All right. Mr. Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman. I know that we have 
some witnesses who have some time constraints here, so I will 
just be pretty quick here. Projects of National and Regional 
Significance, which I had mentioned before, do you--I just want 
to ask all of you, do you believe that it is important that we 
do what we did in SAFETEA-LU, have such a program and pay for 
it out of the Highway Trust Fund? MAP-21 had a program for 
2013, subject to appropriations. There are no appropriations. 
It is not authorized for 2014. But this is a way--there is some 
major projects in the country such as CREATE, but that is not 
the only one that can only be really--we can only really get 
completed, I believe, with large sums of money, and they are 
not going to go through formula funds for the States, they are 
not going to get it done that way. So does anyone have any 
thoughts on that, the need for such a program?
    Mr. Hamberger. Mr. Lipinski, I think you have it spot on. 
Yes, there is a need for such a program. I don't think you can 
expect a county in southern California to be able to deal with 
all the commerce coming through L.A.-Long Beach. You can't 
expect Cook County to deal with all the commerce coming through 
Chicago. So there needs to be Projects of National and Regional 
Significance. Whether or not they are funded in or out of the 
trust fund is an item that can be discussed, but the concept of 
recognizing that there are such projects was an important step 
forward when Congress did take that step.
    Mr. Lipinski. Does anyone else have any thoughts on that? 
And I certainly think it needs to be in the trust fund or else 
we are subject to the whims of the appropriators who aren't 
likely, just like we saw in 2013, to--it was zero funded there.
    Just very, very quickly, what I raised earlier, Mr. Fisher, 
Mr. Abney, the effect of if there are nighttime closures of 
towers, I don't see how we, right now, avoid doing anything but 
a CR for next year, so on October 1st we will once again be 
faced with, you know, FAA is going to have to make cuts, tower 
closures may again be out there. So how would those nighttime 
tower closures impact you?
    Mr. Fisher.
    Mr. Fisher. Well, closures would likely affect UPS more 
than members of the Airforwarders Association, but there would 
be delays for us as well. Any tower closure, regardless of the 
time of day, is going to affect transportation of air cargo, 
but particularly nighttime closures would affect the 
integrators more than forwarders who are putting their 
shipments on passenger aircraft, although there would be, 
obviously, some effect on those passenger flights, but our 
shipments are time critical. We cannot afford any delays, and 
tower closures anywhere would cause us a problem.
    Mr. Lipinski. Mr. Abney, you have anything to add to that?
    Mr. Abney. I do. For UPS, our biggest area of concern by 
far was Ontario. That is our western United States air hub. We 
have 27 operations that come in or out of Ontario between 9:30 
at night and 7:00 in the morning, and so from the west coast 
standpoint, it is the most important location we have. It was 
on the original list as a midnight closure. The FAA adjusted 
that list. They took Ontario off to our pleasure, but it is 
something that is an ongoing concern that will it come back and 
be on the list, and that would far out shadow any of the other 
facilities that were on that list as far as affecting our 
customers' packages.
    Mr. Lipinski. Again, I want to thank all of our witnesses, 
and we have a unique opportunity with this panel and under the 
chairman's leadership to really, when we come out with our 
recommendations that we are asked to do in October, to have a 
major impact on reauthorization of MAP-21. We know that there 
is a lot that has to be done, and so I thank you for your 
testimony here today.
    Mr. Duncan. Well, thank you very much. I will just close 
with this.
    I just, you know, for many years we had so many countries 
that were just completely underdeveloped. We had many, many 
other countries that were under the thumb of communism or 
socialism and we really didn't have much competition throughout 
the world.
    Now, you know, I have traveled all over the world and I 
remember, been to Vietnam a couple of times, and boy, they are 
just going gangbusters. I mean, you want to start a business 
over there, you just go out and start it, and it is a little 
bit harder to really let the free enterprise system work the 
way it could in this country, but we are going to have to. We 
have got much more competition now from all over the world than 
we ever had in years past, so we have got to do more, we have 
got to do better, we have got to be constantly seeking ways to 
improve, and we have to do that in all areas, but particularly 
in this area in regard to freight mobility, and so that is what 
we are trying to do with this panel.
    And I appreciate all your testimony, your suggestions. If 
you think of other things that you think we need to know about 
or take a look at, you certainly can submit that to our staff.
    But that will conclude this hearing. Thank you.
    [Whereupon, at 3:00 p.m., the subcommittee was adjourned.]

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