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they would be established expeditiously, would they not? Already established !

Mr. Smith. Yes, but I do not think we will ever come to that day in our time.

Mr. Hinshaw. Well, they did not think that we would repeal the Land Grant Rate Act, either, but we did.

Mr. Suits. There will always be a rate of some kind in the tariff for the movement of traffic. But surely the Government would not be espected to pay those on Government traffic if they are unreasonably high. And that is the difficulty today.

Mr. HINSHAW. Now, you say one of the advantages of utilization of section 22 is that retroactive application may be authorized where justified. Retroactive application for how long may be justified ?

Mr. Smith. I think we have had retroactive applications that went back as far as 6 months. In other words, the negotiations were started, and it took, we will say, 6 or 7 months to agree upon them, to agree upon what we were seeking. And after that was agreed upon, then they were made retroactive back in one instance, I believe, as far as 6 months. That is very, very unusual.

Mr. HINSHAW. Well, I would hope so. Because apparently the carrier had figured that he had that much money in his pocket, and then you renegotiated the rate and took it away from him.

Another advantage is that the cancellation of the quotation may be accomplished quickly when need for the quotation no longer exists?

I don't see that that is an advantage. Mr. Smith. I do not think that is worth wasting time on, because I would more or less agree with you that it is not any advantage. Although there might be some cases where, if a rate were established in the tariff and used by somebody, somebody else might find reason for complaining about a cancellation. I do not place much weight on that item (c).

Mr. HINSHAW. Thank you. Under (d), you say: Rates, fares, charges, and rules and regulations are not subject to suspension by the Interstate Commerce Commission. In other words, as I understand it, you would substitute the judgment of the Defense Establishment for that of the Interstate Commerce Commission, which is supposed to establish just and reasonable rates, and under the terminology “just and reasonable rates" you mean such rates as may, under economical management, and so forth, yield a return of something like 642 or 7 percent, do you not?

Mr. SMITH. Well, under the proposal which is here before the subcommittee, the rates would not be subject to suspension, but they would be subject to all other provisions, which is sections 1, 2, and 3, for example. In other words, they might go into effect, but they might be attacked by a complaint tomorrow, when the Commission would have to determine their reasonableness, the same as they would any other rate.

Mr. HINSHAW. Then, under (e), you say: Section 4 of the Interstate Commerce Act does not apply to inbibit the military departments using rates over circuitous routes more advantageous to Departments for security and other purposes.

And that is listed as an advantage to section 22.

Mr. SMITH. Yes, sir.

Mr. HINSHAW. Do you mean to say you can order rates over a circuitous route and obtain the same total rate as you would over the direct route?

Mr. SMITH. That is true under section 4. What we mean here is that we can get these departures from section 4 without the carriers first having to get approval of them from the Commission, which would have to be done under section 22.

Mr. HINSHAW. That is correct.

Mr. SMITH. And there are cases where circuity is a feature in connection with this, because it happens that we move traffic over routes which would cause a violation of section 4 in the ordinary course of business.

Mr. Hinshaw. Not being thoroughly familiar with such business, and not understanding why you would want to move military traffic over circuitous routes, there are no Indians in this country nowadays, and they are not going to be fooled by the direction in which you start out.

Mr. SMITH. You may have overlooked the fact that we have shipments in the military departments which for height reasons or width reasons cannot go over certain routes, because of the clearances of the tunnels and bridges.

Mr. HINSHAW. Why should you not pay more, then, to go circuitously? You cover more mileage and have more ton-miles. You incur more expense.

Mr. Smith. Wait a minute. We have to pay the rate that applies over that route. But it may be a rate that would be less for the longer haul than it would be for the shorter haul.

Mr. Hinshaw. That goes back to the land grant rates, then.
Mr. Smith. We have to pay the rate that applies over the route we
Mr. HINSHAW (reading):

(f) Security as to the commodity, movement, and other conditions often required in movement of highly classified material can more effectively be provided through the medium of section 22 publication.

Well, I suspect that we cannot inquire too closely into highly classified material, although I have been dealing with highly classified material for quite a few years in the Joint Committee on Atomic Energy, and they managed to get around the country.

Mr. SMITH. I think all the traffic of the Atomic Energy Commission moves under section 22 rates. Mr. Hinshaw. I think probably it does. They could establish a

HINSHAW rate for special material very easily if they wanted to, by classifying special material as special material A, B, and C. And that could be done very neatly, and nobody would be fooled

(9) Rates negotiated between the carriers and the Department of Defense which are published by the carriers pursuant to section 22 do not place a burden on commercial shippers, inasmuch as they are fully compensatory to the carriers. Are you sure that

you mean that statement ? Mr. SMITH. So far as the Department of Defense is concerned, I mean that statement generally, yes, sir.



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Mr. SMITH. Yes, and I think the Department of Defense pays relatively more than the commercial shippers pay.

Mr. HÎNSHAW. That has to be demonstrated. In other words, there is a Q. E. D. on that. And if you say they now pay 14 percent more, then I will submit to you a little later on, if you will sit back here and watch, some carriers that will claim the opposite. And it probably is 14 percent below commodity rates, especially in certain types of shipment.

Mr. SMITH. That was not our calculation. That was the calculation of the Bureau of Transport Economics and Statistics of the Interstate Commerce Commission.

Mr. HINSHAW. Well, I do not know whose calculation it was, but I think it can be demonstrated.

Mr. Chairman, I suspend and thank the gentlemen for his patience with me and his courtesy in answering the questions.

Mr. HARRIS. Mr. Hale, any questions?
Mr. HALE. Yes. I have 2 or 3.

On this question of circuitous routes: On page 16, you mention the north Africa and Normandy invasions. You say it was necessary to move 9 divisions of troops and their supporting equipment through 2 east coast ports, which was accomplished with a single set of transportation equipment, which you say means 1 railroad.

Mr. Smith. No, I probably should have said by one mode of transportation, as well as one set of transportation equipment. It was all done by the railroad.

Mr. HALE. All done by the railroad. Actually, in the case of north Africa, for example, did everything clear through one port?

Mr. SMITH. Throught 2 ports, 2 east coast ports.

Mr. Hale. Is there anything classified about that now? What were the ports?

Mr. SMITH. I couldn't tell you.
Mr. FLYNT. Norfolk and New York, I think.
Mr. SMITH. New York and Hampton Roads.

Mr. HALE. When, for example, you shipped the division through Norfolk, you did not get the same rate as you did shipping it through New York. You did not mean that?

Mr. SMITH. I don't think we have any reference here to what we paid. It is merely a matter that perhaps some of this traffic might ħave moved down through Birmingham in order to get up to Norfolk, but we had the privilege of circuity, here, in order to keep the traffic moving without congestion.

Mr. HALE. Yes. And I suppose if these east coast ports had been threatened for any reason, you might have wanted to use 6 or 8 instead of 2.

Mr. SMITH. That is right. And we might have wanted to use those on the gulf instead of those on the east coast.

Mr. HALE. Yes, but you say: “It does not apply to inhibit the military departments using rates over circuitous routes more advantageous to Departments for security and other purposes.” When you use a circuitous route, you pay the regular rate for the circuitous route, don't you?

Mr. SMITH. That is right. We pay the rate that applies over the route of movement.

Mr. Hale. In other words, you can ship anywhere you please and pay the

rate for the route which you select; is that right! Mr. SMITH. Yes, but we might get some adjustment of the rate over that route, if it is considered to be too high.

Let's see if some member of my staff can't give you a clearer answer on that.

Mr. Francis X. Dunleavy can maybe give you a better answer on that.

Mr. DUNLEAVY (Francis X. Dunleavy), assistant for traffic management). I didn't get the question, Mr. Hale.

Mr. Hale. I had better ask a new question. When you shipped, for example, through Norfolk, you paid regular rates through Norfolk; didn't you?

Mr. DUNLEAVY. Yes, sir. Are you referring to this instance with respect to the nine divisions?

Šír. HALE. Yes, that is the point.

Mír. DUNLEAVY. In that particular situation, those troops were moving from all parts of the country. The situations that confronted the military at that time were terrific shortages of equipment. Now, in order to move a division of troops and its equipment, it involves a minimum aggregate of 75 to 100 trains. In the face of that situation, arrangements were made with the railroads to set up a single set of equipment to accommodate a certain portion of the total moved. Then, through the movement of those troops and their equipment over routes over which traffic normally would not move, it was possible through the medium of section 22 to eliminate any normal obstacles that you would find in the tariffs to such moves. Now, for example, how that can work:

A movement from Camp Lejeune: passengers moving by rail from Camp Lejeune, N. C., as an example, to Norfolk. The only passenger service you would normally have by rail, through service, would be south to Wilmington, and north on other lines connecting with Norfolk. That is the way your through rates would apply. But under section 22, in the instance of the Norfolk & Southern Railroad, which is normally a freightcarrying railroad, troop movements would move direct over the freight line in passenger service. You do not have normal arrangements for the public on such movements. Section 22 works to the advantage of the military in such an instance.

Mr. HALE. You have got special passenger rates over a line which did not ordinarily carry passengers.

Mr. DUNLEAVY. That is correct.
Mr. Hale. What you might call an ad hoc rate.
Mr. DUNLEAVY. If you wish to use that term, yes.
Mr. HALE. Well, I like that term.

Mr. DUNLEAVY. Many movements where for example you move troops and their impedimenta, such movements are top secret, and to have to deal with them on a public basis would be really acting in an imprudent manner from the standpoint of security. In fact, it would be practically impossible.

Nr. Hale. But if you moved troops over ordinary passenger routes, do you not pay ordinary passenger fares !

Mr. DUNLEAVY. We have in effect, under probably what you would call the auspices of section 22, passenger agreements which grant to all travelers moving for the military a 10-percent reduction.

Mr. HALE. A 10-percent reduction?

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