H. R. 6141 incorporates the provisions of draft legislation submitted to the Congress by this Department on May 5, 1955. The Department stated in its transmittal letter that the legislation was designed to implement the Report of the Presidential Advisory Committee on Transport Policy and Organization, and was intended to provide a useful tool for the Congress in considering the recommendations of the Advisory Committee.

The President appointed the Advisory Committee on July 12, 1954, under the chairmanship of the Secretary of Commerce, with the Secretary of Defense and the Director of the Office of Defense Mobilization as members, and the Secretary of the Treasury, the Postmaster General, the Secretary of Agriculture, and the Director of the Bureau of the Budget as ad hoc participating members. A working group of outstanding transportation experts assisted the Advisory Committee in preparing the report.

The President directed the Advisory Committee to examine existing Federal transportation policies and problems for the purpose of determining their effect on the overall needs of the Nation. He stated in his letter establishing the Advisory Committee that the vital interests of this Nation require that the transportation industry of the United States maintain itself at maximum effectiveness. The Government must provide effective leadership in assuring that its policies and programs affecting the various forms of transportation, whose services are so necessary to the public and to industry and which have such a vital bearing upon the national security, are best designed to aid them in performing fully the roles for which each is best suited. The President further stated that "a comprehensive up-to-date review of overall transportation policies and problems is needed as an aid in assuring the overall consistency of Government policies and programs concerning particular branches of the transportation industry."

Appointment of the Advisory Committee was another step in recent efforts to harmonize transportation policy with the Nation's need for a well-balanced and efficient transportation system. The Committee on Interstate and Foreign Commerce of the House of Representatives of the 80th Congress investigated the transportation situation in the immediate postwar years. The Secretary of Commerce, at the request of the President prepared in 1949 a report outlining major policy issues which needed to be resolved in order to achieve maximum effectiveness and consistency of Federal programs in the field of transportation. The Subcommittee on Domestic Land and Water Transportation of the Committee on Interstate and Foreign Commerce of the Senate issued a report in October 1951, after lengthy hearings and study. Extensive hearings were held during the 82d Congress on a series of proposed amendments to the Interstate Commerce Act, as amended. These and other studies, as well as information furnished by interested groups at invitation of the Advisory Committee, were found to be of value in formulating the recommendations in the report.

The principal purposes of the amendments made by H. R. 6141 to the Interstate Commerce Act, as amended, are (1) to place greater reliance on competitive forces in ratemaking; and (2) to assure the maintenance and further development of a financially strong and modern common-carrier system of transportation.

During the past 30 or more years, a striking change has occurred in the Nation's transportation system. Where once travelers and shippers relied almost solely on railroad facilities with the exception of certain limited areas served by water, they now have available a vast and complex system of different types of transportation service offered by public carriers and may, if they choose, travel or move their goods with their own facilities. The result is that the once-feared monopoly element which formerly characterized transportation and which prompted so much of our present transport policy has given way for all practical purposes to a highly competitive system.

Fair competition is the bulwark of a free economy and its fruits are nowhere more evident than in this country. Yet in the field of transportation the opportunity for fair competition is sharply limited by existing statutory restraints on ratemaking which have prevented the several modes of transportation from realizing their full economic capabiltiies. Placing greater reliance on competitive pricing, subject to appropriate control for public protection against discriminatory abuses and destructive competition, will stimulate advances in technology and managerial skills and lead to improved and more efficient service for the general public.

Historically, the common carrier industry has provided the bulk of essential services required to meet the commercial, social, and defense needs of the public for transportation. The law requires these carriers to serve all persons and shippers to the capacity of their facilities, on known schedules, at published rates and without discrimination. Their services are and will remain indispensable to industry, commerce, and agriculture in peace or in the event of war. Unfortunately, the serious financial situation of many of these carriers hinders their efforts to provide more attractive and efficient service. Their financial condition is partly the result of their inability under present regulatory restraints to meet competition from carrier services subject to less regulation and in some instances operating free of economic regulation. To preserve a strong and healthy common carrier industry, the regulatory scheme needs modification to provide a more equitable basis upon which common carriers may compete and attract a fair share of traffic which they are economically capable of handling.

In order to provide appropriate policy guidance for the accomplishment of these basic purposes, the declaration of policy in the Interstate Commerce Act is restated so as to indicate that greater freedom should be allowed to carrier management in pricing of competitive services. Too often, carriers cannot pass on their economic cost advantages to the public because the declaration of policy and rate controls as administered by the Interstate Commerce Commission handicap experimentation with new rate and service concepts.

H. R. 6141 amends the ratemaking provisions of the act in the following principal respects: (1) limits the regulatory authority of the Commission to determination of reasonable minimum or maximum rates rather than precise rates; (2) modifies the Commission's power to suspend rates, shortens the suspension period, and shifts the burden of proof to carrier complainants; (3) revises the long-andshort-haul clause to permit carriers, without prior approval, to charge less for a longer than for a shorter haul if necessary to meet actual competition; and (4) makes volume rates lawful if such rates are based on cost differences and are established to meet competition.

The Commission is authorized under existing provisions of the act to prescribe maximum and/or minimum rates for common carriers subject to its jurisdiction upon a finding that the rate in issue is unreasonable or unjustly discriminatory or unduly preferential. The practical effect of these provisions is to allow the Commission to determine and prescribe the precise rate, the ceiling or floor of the rates to be observed, or the range of rates considered lawful. Limiting the Commission's rate authority to the prescription of maximum or minimum rates establishes a "zone of reasonableness" within which carriers would have freedom to adjust their rates and bid for competitive traffic in accordance with their best business judgment.

The Commission would still have adequate authority for curbing any attempts to institute ruinous rate-cutting for competitive traffic, and for preventing carriers from charging excessive rates where competition is limited or absent. In determining what constitutes a minimum reasonable rate, the Commission would be precluded from giving consideration to the effect of such rate on the traffic of any other mode of transportation, or the relationship of such rate to the rate of any other mode of transportation, or whether such rate is lower than necessary to meet the competition of any other mode. However, competitive carriers subject to the act could protect any rates which they believed would constitute less than reasonable charges. With respect to maximum reasonable rates, although the Commission could not prescribe a rate which was below the full cost of performing the service to which it applied, exclusive of losses in other services, it would be specifically charged with preventing the imposition of unreasonably high rates or noncompetitive traffic. No change would be made in the Commission's authority to correct unjustly discriminatory pricing or practices. Shippers and travelers have available today many alternate methods of transport to fill their transportation needs. Service characteristics such as in-transit time, packaging requirements and other incidental matters, and door-to-door handling vary considerably among the different modes of transport. Users in some instances will require a superior service; in others a less complete service will meet their needs adequately. Under the proposed amendments, carriers could better reflect differences in service quality in their rates and the public could purchase service at a price more in keeping with the quality desired. As the Advisory Committee report states, "If the market is to determine the appropriate use of each form of transportation in accord with shippers' judgments of the utility to them in terms of cost and service, rates must be allowed to reflect

cost advantages whenever they exist and to their full extent." While the amendments will permit closer alinement of rates with cost characteristics, value-ofservice considerations may still be fully effective within the zone of reasonableness.

H. R. 6141 repeals section 15 (a) of the act, which requires that the Commission in prescribing rates given consideration, among other factors, to "the effect of the [proposed] rates on the movement of traffic by the carrier or carriers for which the rates are prescribed." This repeal eliminates the requirement that the Commission substitute its business judgment for that of carrier management in these matters.

The proposed legislation makes three basic changes in the act relating to the Commission's power to suspend new rates, fares, or charges pending a decision as to their lawfulness. The first change would shorten the suspension period from 7 to 3 months. This change would assure prompt action in the disposition of such proceedings. The second change would authorize the Commission to suspend rates only when it determines that the proposed rate would probably be unlawful, that it would result in injury to the complainant, and that in the absence of suspension, the complainant has no other adequate remedy. This change would establish the power of suspension as a special and unusual remedy. Under existing provisions, suspension is too frequently invoked by competing carriers to harness the proponent or merely to delay decision. The third change would shift the burden of proof from the proponent to a complainant carrier, which is in accord with the Administrative Procedures Act.

The fourth section of the Interstate Commerce Act would be amended so as to eliminate the procedural requirement that common carriers subject to parts I and III of the act obtain approval of the Commission prior to charging less for a longer than for a shorter distance, and to authorize such carriers to charge less for longer than shorter distances if the charge is necessary to meet actual competition and does not result in less than a just and reasonable minimum charge. The section would also be amended so as to delete provisions prohibiting such common carriers from charging any greater compensation as a through rate than the aggregate of the intermediate rates. Other sections of the act affording adequate remedies against unjust or undue discriminations resulting from the application of rates of this character are not modified.

The bill specifically authorizes carriers to establish incentive and volume rates. The principle and validity of price differentials having suitable relation to the lesser cost of providing goods or services in quantity is generally accepted throughout our economy. However, carriers subject to the act, who possess inherent characteristics that might enable them to move great volumes over long distances, have not been sufficiently free to institute incentive pricing and pass on to the public the cost savings involved in hauling heavy volume traffic from one point of origin to a single destination.

H. R. 6141 makes several basic changes in the act which would strengthen the common carrier industry. These changes do the following; (1) redefine a private carrier by motor vehicle; (2) redefine motor and water contract carriage and require the filing of actual rather than minimum rates; (3) repeal the drybulk commodity exemption applicable to water carriagers; (4) provide definite statutory standards for determining which nonprofit shipper associations are entitled to continued exemption from the provisions regulating freight forwarders; and (5) empower the Commission to override States service requirements in certain instances.

The proposed redefinition of a private carrier of property by motor vehicle limits the applicable exemption to a person who transports by motor vehicle, property of which he is the owner, leasee or bailee and which property was not acquired for the purpose of such transportation.

The redefinition of contract carriage makes clear that such operations are limited to those of a specialized or individualized character under bilateral contracts or those equivalent to bona fide private carriage.

Neither of these amendments would affect in any way legitimate private or contract operations. In the case of private transportation, certain opportunistic operations which have proved injurious to sound public transportation would be brought under regulatory control. Contract carriers who are in effect operating as common carriers would be required to obtain proper operating authority. Provision is made for granting appropriate operating authority to persons affected by the amendments who are entitled to such authority by virtue of their past operations.

The requirement that contract carriers by water and motor file their actual rates or, in the alternative, contracts covering the transportation involved is intended to assist common carriers in competing with contract carriers. The present requirement that contract carriers file only their minimum rates, fares or charges makes it difficult for common carriers to compete effectively because they are unable to determine the actual rates being charged by such carriers. Under part III of the act, transportation by a water carrier of dry-bulk commodities is exempt from regulation when the space in the vessel in which such commodities are transported is being used for the carrying of not more than three such commodities. Barges in tow are considered single vessels for the purpose of this exemption.

Repeal of this exemption would subject common and contract carriers engaged in dry-bulk transportation on the inland waterways, coastal waters, deep sea routes, and the Great Lakes to regulation by the Commission. Such repeal would not affect the separate exemption applicable to transportation of liquid cargoes in bulk in specially designed tank vessels, or exemption applicable to transportation of dry-bulk commodities by contract carriers in non-ocean-going vessels on international waters. Provision is made for granting appropriate operating authority on a "grandfather" basis to carriers whose operations would no longer be exempt because of repeal of the exemption.

Subjecting these exempt operations to regulation by the Commission would equalize the opportunity for regulated carriers to compete for a large segment of dry-bulk traffic. Regulated carriers must, among other things, adhere to their published tariff rates, and are at a distinct disadvantage in competing with wholly unregulated carriers who handle nothing except dry-bulk commodities. These latter carriers need only to inspect published tariffs of regulated carriers to determine how low they must quote rates in order to bid successfully for available traffic. Furthermore, regulated carriers by water experience difficult operating problems in attempting to separate tows in an effort to qualify for the bulk exemption.

Operations of a shipper, or group or association of shippers, in consolidating or distributing freight for themselves, or for members thereof, on a nonprofit basis, for the purpose of securing carload, truckload, or other volume rates, are exempt from the regulation applicable to freight forwarders under part IV of the act. For years the Commission has reported great difficulty in distinguishing between operations of such shipper associations which claim to be exempt and those of regulated freight forwarders.

The bill would give the Commission authority to make the exemption inapplicable, after hearing and investigation, where it finds that activities are not being conducted solely for the purpose, and within the limitations, specified in the act. In making its findings and determinations, the Commission would be required to consider, among other things, the facts and circumstances surrounding the organization and establishment of the activities, the scope of the activities, geographically and as to commodities handled and persons served, basis of charges for services, and the extent to which such activities are in competition with the services of regulated freight forwarders.

The Commission does not have authority under the act to order the curtailmeat or discontinuance of any unprofitable intrastate transportation service. Such auhority is usually within the jurisdiction of State regulatory commissions. These commissions are generally reluctant to grant permission for such curtailment because of opposition from local interests and employees of the carriers.

The bill provides that the Commission may order the discontinuance or curtailment of service under State service requirements where it finds that such requirements cause a net loss in revenue to carriers and persons subject to parts I and IV of the act, or otherwise unduly burden interstate or foreign commerce. However, the Commission must find that reasonably adequate service would be available to the public in lieu of the discontinued or curtailed service.

The passenger train service deficit continues year after year as one of the railroads' most serious financial problems. So long as railroads cannot obtain authority to eliminate unprofitable passenger services, the losses will continue to be borne from earnings realized from freight service.

Section 22 of the act authorizes carriers to provide free or reduced-rate transportation of property for the United States, State or municipal governments, and free or reduced-rate transportation of persons for the United States Govern

ment.

These rates are not subject to the filing and publication requirements of the act.

The bill would delete this authority from section 22 but would authorize carriers to establish rates of special application for the United States, State and municipal governments. These rates would be subject to all of the applicable provisions of the act except those relating to suspension and the long-and-shorthaul clause. Such rates could be filed on short notice or made retroactive, where the circumstances warranted. Also, the filing and publication requirements of the act could be waived when the security of the United States required it. Outstanding contracts exending reduced rates under section 22 to Federal, State, and municipal governmens would have to be filed and published and would be made subject to applicable provisions of the act.

Authority for rates of special application is continued because of the peculiarities of governmental procurement practices, the differences between transportation for the Government and that for the general public, and national security considerations.

The Department suggests that the following clerical or technical changes be made in H. R. 6141.

(1) On page 6, line 16, delete the words "proportional rates, or". The words were incorrectly retained when the amended section was drafted. Retention of the words would result in an ambiguity with respect to the purpose of the section to limit the authority of the Commission to the establishment of just and reasonable minimum or maximum proportional rates.

(2) On page 7, line 16 delete "interstate" and substitute "intrastate" therefor.

(3) On page 9, line 23, delete "wherever" and substitute "whenever" therefor.

(4) On page 18, line 21, delete the words "thereto and".

(5) On page 18, line 22, delete "personnel" and substitute "personal" therefor.

(6) On page 19, line 15, delete "thereto".

(7) On page 19, line 16, delete "and" as it first appears therein. (8) On page 29, line 16, delete the words "thereto, and".

(9) On page 43, line 17, delete the words "thereto and".

(10) On page 47, line 18, delete "fare".

This Department believes that H. R. 6141 is a complete and accurate implemention of the recommendations contained in the Report of the Presidential Advisory Committee on Transport Policy and Organization. The Department also believes that enactment of the bill would be in the public interest because it amends the Interstate Commerce Act so as to provide a sound national transportation policy for the regulation of carriers subject to the act. We urge that your committee give favorable consideration to the bill.

We have been advised by the Bureau of the Budget that it would interpose no objection to the submission of this report to the committee. Sincerely yours,

Hon. J. PERCY PRIEST,

SINCLAIR WEEKS, Secretary of Commerce.

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAU OF THE BUDGET, Washington, D. C., October 28, 1955.

Chairman, House Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

MY DEAR MR. CHAIRMAN: This is in reply to your letter of May 11, 1955, requesting the views of this office with respect to H. R. 6141, a bill to amend the Interstate Commerce Act, as amended, so as to provide for a stronger national transportation industry, and for other purposes.

H. R. 6141 was proposed to implement the various recommendations of the Advisory Committee on Transport Policy and Organization and it would seem that it substantially carries out these recommendations.

The Bureau of the Budget believes that the purposes and objectives of the report are sound, and we would have no objection to enactment of legislation along the lines of H. R. 6141.

Sincerely yours,

ROWLAND HUGHES, Director.