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possibly, at certain assembling or break-bulk points. They usually serve offline points through the use of motor carriers, sometimes under contracts authorized by section 409 of the act. In many instances, however, the motor carrier itself does not maintain an agent or an office at the individual cities or towns, but serves them by having the truck driver stop at the shippers' and consignees' places of business to pick up or deliver freight moving in forwarder service. It would be difficult under these circumstances to determine whether or not a forwarder has an agent at a given point.
For the reasons hereinabove stated, we do not believe that enactment of H. R. 9177 would be in the public interest, and therefore recommend against its adoption. Respectfully submitted.
J. M. JOHNSON.
INTERSTATE COMMERCE COMMISSION,
Washington, April 23, 1956. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D. C. DEAR CHAIRMAN PRIEST: Your letter of March 1, 1956, addressed to the Chairman of the Commission and requesting a report and comments on a bill, H. R. 848, introduced by Congressman Harris, to amend section 409 of the Interstate Commerce Act, as amended, to authorize contracts between freight forwarders and railroads for the movement of trailers on flatcars, has been referred to our Committee on Legislation. After careful consideration by that committee, I am authorized to submit the following comments in its behalf :
H. R. 9518 would amend subsection 409 (a) of the Interstate Commerce Aci by inserting therein after “(a)”, the figure “(1)", and by adding thereto a new paragraph “(2)." The proposed new paragraph would authorize freight forTarders and common carriers by railroad, subject to certain conditions and limitations, to enter into contracts governing the utilization by such freight forwarders of the services and instrumentalities of such railroad common carriers and the compensation to be paid therefor for line-haul movement of freight loaded in or on trailers or other containers and transported on railroad cars suitable for such use.
For many years freight-forwarder operations were confined almost exclusivel, to service between concentration and break-bulk points, and consolidated shipments were moved in full carloads by rail carriers. The compensation received by the forwarder for this service usually was the margin of difference between the established less-than-carload rate and the carload rate. By the use of through carloads they provided a more expeditious service than the railroads on less-than-carload freight. About 30 years ago freight forwarders began to expand their services by employing motor common carriers to gather and distribute shipments in wide areas surrounding their concentration and breakbulk points. At the same time the forwarder began to use motor carriers for wine of its terminal-to-terminal movements in truckload lots. In this case, the forwarder's compensation is, generally, the difference between the established freight-forwarder rate, which usually parallels the less-than-truckload rate, and the purchase price of the combined transportation services performed by the underlying motor and rail transportation services. For some years freight forwarders have competed with motor carriers, particularly in connection with shipments moving to and from outlying areas.
From the heginning the forwarder made arrangements, by contract, for the services of motor carriers, and thereunder the compensation paid for such services has always been less than the charges of the motor carriers to shippers generally. Inder the present provisions of section 409, forwarders are authorized to continue soch arrangements with motor carriers on a contractual basis, except that in the (am of line-haul transportation between concentration and break-bulk points in truckload lots where such line-haul transportation is for a total distance of 450 highway-miles or more, the statute specifically provides that the contracts shall Dot permit payment to motor carriers of compensation which is lower than their established tariff rates and charges.
''In connection with the growth of trailer-on-rail-flatcar service, motor carriers have established class and commodity rate tariffs in which they reserve the right to substitute trailer-on-flatcar service for highway transportation. Such rates are applicable to the movement of freight under the plan whereby (1) the motor carrier originates and terminates the traffic, substituting trailer-on-flatcar service for motor-carrier highway service between terminals, and (2) the motor carrier issues the bill of lading covering the through movement.
A number of railroads have joined with motor carriers in the substituted-service plan and have entered into arrangements with motor carriers in which participating rail and motor carriers "divide” the applicable so-called joint rate and transportation charges. Under such arrangements the railroads receive for their trailer-on-flatcar services compensation, sometimes called divisions, which is less than their own tariff rates. Under this plan of through transportation the motor carrier has been referred to by the Commission as a connecting carrier. See Movement of Highway Trailers by Rail (293 I. C. C. 93).
Because the concept of freight forwarding is to provide a complete transportation service from point of origin to ultimate destination, the forwarder, although designated by statute as a common carrier, may not enter into the establishment of joint rates with railroads or other common carriers or arrange divisions therewith. Movement of Highway Trailers by Rail, supra. Therefore, unlike motor carriers, in moving their shipments the forwarders have always paid the railroads, and must continue to pay under the present law, their published tariff rates. The railroad-rate structure had been suitable to this method of operation by reason of the publication of all-commodity freight rates or other volume rates applicable to various commodities. However, with the advent of trailer-on-flatcar service it appears that freight forwarders will be unable to serve their patrons in extensive areas surrounding concentration and break-bulk points on a competitive basis with motor common carriers. Thus by economic necessity forwarders may be compelled to confine future service on freight to areas close to concentration and break-bulk points.
In order to utilize trailer-on-flatcar service between concentration and breakbulk points the forwarder must perform the functions of gathering and distributing individual shipments and issue bills of lading covering each shipment handled. These functions, as observed above, are substantially the same as those engaged in by motor carriers which participate in joint rates and divisional arrangements with railroads respecting their trailer-on-flatcar services. In this connection, the Commission, in Substituted Freight Service (232 I. C. C. 683 (690)), early recognized that a motor carrier acts in the capacity of a forwarder or shipper when it assembles the traffic tendered by the individual shippers into carload lots for rail transportation.
Under H. R. 9548, freight forwarders would be able to enter into contracts with railroads for the payment to them of compensation less than the tariff rates of rail carriers. Such contracts would permit utilization by forwarders of trailer. on-flatcar service which appears peculiarly suited to freight-forwarder operations since the forwarder, like the motor carrier, may operate more efficiently by eliminating the expensive and time-consuming loading and unloading operations at each end of the rail line haul, and thus perform a more expeditious service for the public. A need for such contracts may be necessary to enable the freight forwarders to continue providing a complete transportation service on a nationwide scale of benefit to the shippers in the small towns as well as in the large cities where the forwarders' concentration and break-bulk terminals are situated.
As in the case of contracts between forwarders and motor common carriers, contracts between freight forwarders and rail carriers would be required to be filed with the Commission, and be subject to inquiry by the Commission into the justness, reasonableness, and equitableness of the terms, conditions, and compensation of the contracts in the light of the national transportation policy.
We can see that the amendment of the act as proposed may not be in the best interest of transportation as a whole. The tremendous volume of traffic controlled by the freight forwarders may be used by them to induce railroads to enter into contracts with freight forwarders at rates so low that they may cast a burden on other traffic. We recognize that section 409 (a) now authorizes contract arrangements between freight forwarders and motor carriers, and we are not prepared at this time to oppose similar arrangements as to piggy-back traffic between the forwarders and the railroads. We believe, however, that certain safeguards should be thrown around the arrangements not only as presently provided in section 409 (a), but under the proposed amendment of that section.
We, therefore, urge that language similar to our recommendation No. 30 contained in our 69th annual report, and for the same reasons, be incorporated in any amendment of section 409. Recommendation No. 30 and the explanatory comment appearing on page 137 of the report read as follows:
“We recommend that section 409 be amended so as to (1) place the burden of proof on the parties to contracts between freight forwarders and common carriers by motor rehicle subject to part II of the act for the transportation of freight Schen such contracts are called into question, (2) prohibit such contracts at compensation lower than the motor carrier's tariff rates in all cases where the kine-haul transportation is for a total distance of 450 miles or more, and (3) proride penalties for the offer, grant, giving, solicitation, acceptance, or receipt of any rebate, concession, or discrimination resulting from the transportation of property at compensation less than that specified in such contract.
“The Commission's experience under section 409 (b) of the act in attempting to subject certain contracts between freight forwarders and motor common carriers for the transportation of freight to investigation has disclosed some major defects in the law, the most important of which is the failure to place the burden of proof on the makers thereof when such contracts are subjected to formal investigation.
“Section 409 (a) now prohibits such contracts at compensation lower than the motor carrier's tariff rates where the line-haul transportation in truckload lots' is for a total distance of 450 miles or more. The recommended amendment would prevent circumvention of such prohibition (by use of contract rates not subject to specified minimum weights), by eliminating the term truckload lots' and making the prohibition applicable to all cases where such line-haul distance is 450 miles or more. Such an amendment would also eliminate the necessity for the Commission to determine what Congress meant by truckload lots,' a term considered almost impossible to define with exactDess sufficient to stand up in court in a criminal proceeding.
"The penalty provisions would be added to insure observance of the terms, conditions, and compensation of the contracts, for without them freight forwarders and motor carriers could violate their contracts with impunity since there appears to be some question as to whether or not the enforcement provisions of parts II and IV of the act cover this situation.”
We also recommend that the bill be amended so as to include a requirement that the contracts, not only with the railroads but with the motor carriers as well, be filed with the Commission on not less than 30 days' notice, the same as is now required of tariffs filed with the Commission, and, further, that the Commission be given power to suspend and investigate these contracts similar to the authority now contained in sections 15 (7), 216 (g), 307 (g), and 406 (e) of the act with respect to new or changed rates that are filed in tariffs.
We also wish to point out that the first proviso of section 409 (a) provides that the terms, conditions, and compensation under contracts between forwarders and motor carriers shall not unduly prefer or prejudice “* * * any other freight forwarder." We believe that a siinilar phrase should be inserted in the corresponding provision of the bill since it is doubtful whether the provisions of section 404 (c) of the act, relating to prohibitions against undue preference or advantage by any common carrier subject to part I, II, or III of the act to any freight forwarder, would apply to the terms, conditions or compensation set forth in contracts between freight forwarders and railroads. It is therefore suggested that the words "or any other freight forwarder" be inserted after “thereto" in line 9, page 2, of the bill.
It is further noted that while the title of the bill refers to the movement of trailers on flatcars only, the text of the proposed measure would include the movement of freight loaded in "other containers" without any limitation as to the type of railroad cars to be used. Since the phrase "other containers" could be (unstrued under the language of the bill as meaning containers of any size or description, including those loaded in boxcars or any other type of car, this provision would appear to go beyond the principal purpose of the bill according to its title. We therefore suggest that if it is intended that the application of the proposed niea sure shall be contined to the movement of freight in trailers, or other similar containers, on flatcars that the bill be amended so as to clearly 80 indicate. Respectfully submitted.
J. M. JOHNSON,
INTERSTATE COMMERCE COMMISSION,
Washington, April 19, 1956. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D. C. DEAR CHAIRMAN PRIEST: Your letter of March 9, 1956, addressed to the Chairman of the Commission and requesting a report and comments on a bill, H. R. 9771, introduced by Congressman Harris, to amend section 411 of the Interstate Commerce Act, as amended, with respect to relationships between freight forwarders and other common carriers, has been referred to our Committee on Legislation. After careful consideration by that committee, I am authorized to submit the following comments in its behalf :
Section 411 (a) of the Interstate Commerce Act, which H. R. 9771 would amend, now makes it unlawful for a freight forwarder, or any person controlling, controlled by, or under common control with a freight forwarder, to acquire control of a carrier subject to part I, II, or III of the act. The proposed measure would remove this prohibition by rewriting section 411 (a) so as to permit a freight forwarder to acquire control of one or more such common carriers, through stock ownership or otherwise, if approved by this Commission after reasonable opportunity for interested parties to be heard. Before approving any such proposed transaction, the Commission would be required to find, subject to such terms and conditions and such modifications as it shall find just and reasonable, that it would be within the scope of amended paragraph 411 (a) (1) and would be consistent with the public interest. In passing upon such transactions, the Commission would also be required to give consideration to the effect thereof upon adequate transportation service to the public and, where appropriate, to the interest of carrier employees affected. As a prerequisite to its approval, the Commission may require a fair and equitable arrangement for the protection of such employees.
While section 411 (a) (1) prohibits a freight forwarder, or any person controlling, controlled by, or under common control with a freight forwarder, from acquiring control of a carrier subject to part I, II, or III of the act, it should be noted that section 411 (g) permits such carriers to control or acquire control of a freight forwarder or freight forwarders.
When S. 210 (77th Cong.) which, as finally enacted, became part IV of the act, was under consideration by the Congress, the question arose as to whether or not carriers subject to part I, II, or III should be prohibited from having or acquir. ing control of freight forwarders, and, conversely, as to whether freight forwarders should be prohibited from acquiring control of such carriers. In commenting on this question, former Chairman Joseph B. Eastman stated in a letter dated March 12, 1941, to Senator Burton K. Wheeler, chairman of the Senate Committee on Interstate and Foreign Commerce, as follows:
“The conclusion that the public interest requires that the forwarder be an agency independent of carrier control is reinforced by the finding made in the Freight Forwarder Investigation mentioned earlier in this report (229 I. C. C. 201) that the control and domination of certain large forwarders by railroad companies resulted in violations of the act. The same considerations which preclude carrier control of forwarders also preclude forwarder control of carriers."
Congress failed to adopt Chairman Eastman's suggestion that carriers subject to part I, II, or III be prohibited from having or acquiring control of freight forwarders. This apparently resulted from the practical realization that forwarders had become necessary adjuncts to carrier operations and that among the former were wholly owned subsidiaries, affiliated corporations, or forwarders directly controlled by the carriers. An analysis of the statements and remarks of the committees and various Members of Congress concerning the provisions of the bill which ultimately became section 411 of the act (H. R. Rept. 1172 (p. 14), 77th Cong., 1st sess., Aug. 13, 1941 ; 77 Congressional Record 8218 and 8220, October 23, 1941; and 77 Congressional Record 4067, May 11, 1942), indicates that Congress was impressed with three considerations in permitting carrier control of freight forwarders. These considerations, as reiterated by Congressman Wolverton in reporting the bill approved by the conference committee back to the House, were as follows:
"First. The two largest forwarding operations in the country were developed under railroad affiliation and no complaint of their service appears to have been made by the shipping public.
"Second. Because of the universality of the service which railroads are required to perform, as among persons, localities, and as to different kinds of freight, their control of forwarding operations would tend to be more universal and less discriminatory than forwarder service conducted by individual operators having narrower rights and obligations.
"Third. The investments made by rail, motor, and water carriers in transportation properties, facilities, and equipment furnish substantial incentive on their part to provide and maintain for the public a permanent and stable service, and as a result their control of forwarding operations should insure to the public a greater permanency of service than if forwarding operations were only in the bands of those who have no real substantial investment in the properties and facilities which make such forwarding operations possible (77 Congressional Record 1067, May 11, 1942).”
This reasoning obviously would not apply to forwarder control of carriers.
Several of the larger forwarders continue to be subsidiaries or affiliates of major railroad systems, and they apparently continue to so operate under the Jermissive provisions of section 411 (g) without complaint. The restriction has prerented abuses from arising which might be the source of a disruptive effect on rates and service to the public.
The basic considerations which governed Congress in the enactment of section 411 (a) have not changed in any material respect. In its relations with the carriers which it utilizes for underlying transportation services, the freight forwarder is a shipper, and as such it routes or controls the movement of large amounts of freight. To permit forwarders to acquire control of carriers subject to the act would, in our opinion, open the way to opportunities for discrimination Dot only with respect to rates and charges, but also in respect of practices which would be difficult to control.
Editorially, it appears that the word "subjection" in line 8, page 2, of the bill should be "subsection." It also appears that the letter “(a)" in line 2, page 3, of the bill should be changed to “(1)."
For the reasons hereinabove stated, we believe that enactment of H. R. 9771 Fould be contrary to the public interest and therefore recommend against its adoption. If, however, the bill should receive favorable consideration by your committee, we suggest that in view of the broad language of the bill which would permit the acquisition of control “through stock ownership or otherwise" (italic sapplied), consideration be given to amending the bill so as to incorporate therein the pertinent provisions of section 5 (2) of the Interstate Commerce Act, entitled *Combinations and Mergers of Carriers." Respectfully submitted.
INTERSTATE COMMERCE COMMISSION,
Washington, April 19, 1956. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D. ('. DEAB (HAIRMAN PRIEST: Your letter of March 9, 1936, addressed to the Chairfan of the ('ommission and requesting a report and comments on a bill, H. R. 4772, introduced by Congressman Harris, to amend section 410 of the Internate Commerce Act, as amended, to change the requirements for obtaining a freight-forwarder permit, has been referred to our committee on legislation. after careful consideration by that committee, I am authorized to submit the following comments in its behalf:
H. R. 9772 would amend section 410 of the Interstate Commerce Act by elimihating subsection (d), and by appropriately redesignating the remaining substions. The subsection which would be eliminated reads as follows:
"id, The Commission shall not deny authority to engage in the whole or any part of the proposed service covered by any application made under this section $ey on the ground that such service will be in competition with the service sohject to this part performed by any other freight forwarder or freight forwarders."