Page images

If the present provisions of section 22 applying to the transportation of Government passengers and property free or at reduced rates is repealed, exemption from complying with rate publishing rules and regulations should be enacted only with respect to movements of traffic that should not be made public because they involved national security.

Comparison with H. R. 6141 and H. R. 525: The specific amendment of section 22 proposed in H. R. 6141 is identical to what is proposed in H. R. 525. It would repeal the right of Federal, State, and municipal governments to receive special, reduced rates for moving their traffic that are beyond regulatory control. TAA is in complete agreement with such a change.

We do not have positions on other provisions in H. R. 6141 that would exempt special Government rates from the suspension and section 4 provisions and allow such rates to be made retroactive or subject to being filed on short notice.

There is almost unanimous agreement among our component groups, although the railroads are divided on this proposal, to amend section 22 along the general lines of H. R. 525. Shippers, carriers, and, recently, the Interstate Commerce Commission, have all taken positions calling for changes in this section.

And I believe you will hear from a good many carrier groups and some shipper groups taking very much the same position that we are taking here.

In this particular instance, the committee has a separate bill before it, which was introduced prior to H. R. 6141.

Therefore, we strongly urge that the committee give this particular bill, H. R. 525, priority consideration so that legislative action can be taken this session of Congress.

We have attached to the testimony a small brochure especially on section 22, which sets forth in a more public relations kind of way the arguments against section 22.

(The document referred to is as follows:)



Section 22 was a part of the original act to regulate commerce passed in 1887. This section permits carriers to grant, in their discretion, preferential treatment to particular classes of shippers and travelers, including Federal, State, and municipal governments. The Supreme Court of the United States has said the purpose of section 22 was to settle conclusively that preferred treatment to certain types of passengers and shippers is not prohibited.

The provisions of section 22 are voluntary, according to the letter of the section. Section 22 agreements are reached in various manners by the Federal Government and the carriers. Public bidding, solicited tender by the carriers, and unsolicited tender have all been employed on occasion by the Government and carriers in determining a section 22 rate. Negotiated rates under section 22 are not published.

During World War II the Government was the largest freight shipper and purchaser of passenger service in the country, and since the Korean war, has again been a large customer of the transportation agencies. The quantity of Government traffic, as well as the repeal of the land-grant rates, greatly increased the importance of section 22 in recent years. For years, it was assumed that rates negotiated under section 22 were not subject to reparation. However, following World War II, the Federal Government brought reparation proceedings for amounts estimated at $3 billion. The Government attacked the reasonableness of the tariff rates and any section 22 rates negotiated on the basis of such tariff rates. The examiner conducting the proceedings recommended that the suits brought by the Government be dismissed. It has been claimed by the railroads that a Government victory would bring economic disaster to them and possible Government ownership of the railroads. The reparation suits have introduced an element of instability under section 22 agreements, since the finality of section 22 contracts is being seriously questioned. If successful, they present a possibility of extensive future litigation under section 22 agreements. The reparation suits have been one of the motivating factors behind the numerous proposals for repeal or revision of those provisions in sectin 22 referring to Government traffic.

Two bills containing amendments to section 22, S. 2355 and S. 2653, were discussed in the 82d Congress. S. 2355 was directed at establishing the finality of contracts entered into by common carriers and the United States Government under section 22, and S. 2653 was designed to prevent section 22 from applying to motor carriers transporting household goods for the Federal Government in interstate commerce. These bills were approved by the Senate Committee on Interstate and Foreign Commerce but objections in the Senate blocked their passage.

As to the position of State and municipal bodies under section 22, the repeal of section 22 would have little effect. Material moving in interstate commerce for the States has been carried on commercial rates in many cases. In addition, a significant amount of material is purchased by the States on a delivered basis.

As to intrastate commerce the State and local governments would remain free to negotiate reduced rates with carriers willing to enter into such agreements, except to the extent that intrastate rates may be modified by the ICC under section 13 (4) of the act.

The Interstate Commerce Commission has taken the position that the Federal Government should pay the full tariff rates on property transported for it. In testimony before the Senate Committee on Interstate Commerce during the 82d Congress representatives of railroad, bus, trucking, and waterway interests advocated revision of those provisions of section 22 affecting Government traffic in order to establish for the future the finality of section 22 quotations. Shippers, large shipper groups, and others have advocated repeal of the provisions of section 22 which give preferential treatment to the Government, on the grounds that section 22 agreements have dcreased carrier revenue, resulting in necessarily increased rates being charged the general shipping public. The Senate Committee on Interstate and Foreign Commerce has suggested that if it is clearly shown that section 22 is placing an unreasonable burden upon the carriers, Congress should consider the possibility of repeal.


In October 1952 the board of directors of the association raised the possibility of repealing those provisions of section 22 of part I of the act (and provisions of pts. II, III, and IV, making sec. 22 applicable to common motor and water carriers and freight forwarders), which permit reduced rates for Government property. A background of the subject was subsequently sent to the panels with some correlative questions.

At the coordinating committee meeting of January 6, 1953, the panel representatives indicated the positions that their panels had reached on section 22. The highway panel representative stated that his panel favored repeal of those provisions authorizing the carriage of Government property free or at reduced rates. User panel representatives also approved the proposal. The air panel representatives stated that their panel would also probably favor repeal with respect to those provisions relating to the carriage of passengers as well as property. Only the railroad and freight forwarder representatives were of the opinion that opposition to the proposal repeal would be forthcoming from certain members of their panels.

It was indicated that the opponents of repeal argued that section 22 provides a means for common carriers to obtain business which would otherwise go to contract carirers. A highway representative stated that under present ICC rules contract carriers are permitted to effect only long-term contracts and, therefore, should not be able to deal with the Government on short-term contracts. Questions were also raised as to (1) the effect of certain intransit privileges possible under section 22, (2) whether removal of section 22 would have any effect on the speed of setting rates on Government traffic, particularly in wartime; and (3) the advantages and disadvantages of having the carriers liable to reparation

suits, in comparison with renegotiation to which carriers would probably be subject if section 22 were repealed.

It was decided to refer the entire subject back to the panels, for a more specific consideration of the problem, asking the panel representatives to report on the following:

1. Shall provisions in section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act authorizing common carriers to transport property of the United States, State, and municipal governments free or at reduced rates be repealed? 2. Shall the parts of section 22 applying to transportation of persons for United States, State, and municipal governments also be repealed ?

3. Shall there be some distinction made between the application of section 22 in war and peace, or between military and peacetime commodities?

4. If a panel is not in favor of repealing section 22, would it wish to offer any other suggestions, such as the establishment of the finality of section 22 contracts?

At the coordinating committee meeting of January 12, the chairman and representatives of the panels reported the positions of their respective panels on the

above four questions. The following panels strongly recommended affirmative 1 answers to the first question : Air transport, highway, pipeline, waterway, user,

investor. All of these panels also strongly supported an affirmative answer to question 2 above, except the waterway panel which took no position on this question. The railroad and freight forwarder panels took no position on either question.

No panels recommended affirmative answers to questions 3 and 4. The pipeline panel recommended that question 3 be answered in the negative.

COMMENTS OF THE POLICY BOARD The policy board, after reviewing the panel's positions, stated : We recommend repeal of those provisions of section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act permitting carriage of Government passengers and property free or at reduced rates. As a matter of principle, we do not believe there is any reason why the Government as a shipper should have special treatment over private shippers. Nor do we believe that as a matter of public policy the Government and carriers should be permitted to cause instability of the rate structure by negotiating with carriers unpublished rates which can adversely affect private enterprise.

There appears little doubt that in many instances low Government rates require higher rates to private industry than would otherwise be necessary.

RECOMMENDATION OF THE BOARD OF DIRECTORS The board of directors approved the following recommendation of the policy board:

“Provisions of section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act permitting carriage of Government passengers and property free or at reduced rates be repealed."

In addition, the board of directors has approved an interpretation of TAA's policy on section 22 of the Interstate Commerce Act, so as to meet the needs of Government security and emergency movements, as follows:

If the present provisions of section 22 applying to the transportation of Govfrument passengers and property free or at reduced rates are repealed, exemption from complying with rate-publishing rules and regulations should be enacted only with respect to movements of traffic that should not be made public because they involve national security.

[ocr errors]

COMPARISON WITH H. B. 6141 H. R. 6141 would repeal provisions of section 22 that permit carriers to furfish transportation service to the Government free or at reduced rates. It would also add a paragraph to section 15a authorizing rates for special application to the Government, but which would be subject to tariff filing and publication requirements of the act. These special rates could be filed on short notice of made retroactive if warranted, and the tariff requirements could be waived for security reasons. Such rates would not be subject to suspension or to the provisions of section 4 (long-and-short-haul clause), but subject to all other provisions of the act.


The specific amendment of section 22 proposed in H. R. 6141 is exactly what is proposed in H. R. 525, a separate bill now before your committee.

We believe it would be preferable to adopt legislation such as H. R. 525, calling for outright repeal of special reduced-rate privileges to the Government, with a proviso for exemptions from rate publishing rules and regulations for security

As to the addition to section 15a, we do not have a position on exempting special Government rates from the suspension and section 4 provisions, nor have we a position on allowing such rates to be made retroactive. We do agree that Government rates can be exempted from tariff requirements for security reasons.

Mr. BAKER. I will skip the detailed nature of the subject action of the panels and so forth that I spoke about and I will pass on to the next item, which is contract carrier regulations, which is the green sheet with Roman II on the upper right-hand side.

TAA position. The TAA board of directors after careful consideration of the views of its eight permanent policy formulating panels and its policy group, approved the following recommendation, with some members of the board dissenting :

Contract motor and water carriers shall be required to file, adhere to, and make public the rates they actually charge.

Comparison with H. R. 6141: H. R. 6141 would require contract carriers to publish actual rates charged, or at the carrier's option, the actual contract. TAA recommendation is limited to the publication of the rates only.

TAA has no position on the other recommendations in H. R. 6151 which would define “contract carriage” to require compliance with the standard that such service be conducted on the basis of bilateral contracts for specialized or individualized service or services equivalent to bona fide private carriage and would grant grandfather operating rights as common carriers to present contract carriers who would not come under the redefinition.

The TAA recommendation is made in the light of present conditions under the present law.

It has become more pertinent with a recent decision by the Supreme Court upholding the right of a contract carrier to: aggressively search for new business within the limits of his license.

We believe competition between contract carriers and common carriers should be made more equitable and that this proposal is one way of accomplishing this.

Additional statement on contract carrier regulations is attached.

(The additional statement on contract carrier regulations is as follows:)



A contract carrier is a for-hire carrier which in theory does not undertake to serve the general public as a common carrier does but instead limits its activities to serving one or a few shippers under individual contracts or agreements." Admittedly this distinction between serving the general public and contracting with individual shippers is not always clear one. It becomes more and more blurred as the number of shippers served by a contract carrier increases. The

1 Secs. 203 (a) (15) and 302 (e) of the Interstate Commerce Act define contract motor and water carriers, respectively, as carriers which engage in for-hire transportation other than common carrier transportation under individual contracts or agreements.

Interstate Commerce Commission, when confronted with this difficulty, has attempted to put substance into the distinction by emphasizing and illustrating the types of specialized service which should be offered by contract carriers. Others attempting to make the distinction have said that true contract carriage constitutes a substitute for private carriage.

The Motor Carrier Act of 1935, the legislation enacting Federal economic regulation of motor carriers, recognized contract carriers as a separate class of carriers and subjected them to a less restrictive form of regulation than common motor carriers. When Congress in the Transportation Act of 1940 assigned the regulation of domestic water carriers to the Interstate Commerce Commission, the same procedure was followed."

The regulation of contract motor and water carriers is similar to that of common carriers of the same form of transportation in many respects. For example, both common and contract motor carriers are subject to the same statutory regulation relating to safety, carrier accounting and reports to the Commission, consolidations and acquisitions of control, the issuance of securities, and the revocation of operating authority, and to similar but less comprehensive regulation on insurance.

As to controls over the right to operate, though the statutory language governing the issuance of contract motor- and water-carrier permits differs from that relating to the issuance of common motor- and water-carrier certificates, under the Commission's interpretation of these provisions both types of carriers mast produce evidence of need for the service they propose to give under the requested operating authority.

Through use of the power to grant or deny permits to operate, the Commission bas made some effort to restrict contract-carrier operations, particularly those of motor contract carriers, to what it has called specialized service. The relatively small number of shippers served and commodities hauled by a carrier as well as the performance by such carrier of unusual physical services suited to its customers' particular requirements have all been cited by the Commission as indications of this kind of specialization and as a means of distinguishing contract carriage from the broader undertaking of common carriers.

Some motor carriers seeking contract carrier operating rights under the "grandfather” provisions : or the authorization of a new contract-carrier service have been classified as common carriers because of their lack of this specialization. In other cases where the nature of the operations of the shippers served has necessitated the issuance of a contract motor-carrier permit to transport a great number of commodities, the Commission, in order that some specialization of service might be retained, has limited the kind of shippers that the carrier may serve.

While the Commission's approach has undoubtedly been tempered by certain provisions of the act which indicate a congressional intent to guard contract carriers against undue regulatory restrictions, its attempts to limit the scope of contract motor-carrier service have been motivated by its belief that the purpose of Congress in regulating contract carriers was to guard against the deterioration of the service offered by their common motor-carrier competitors. Several decisions of the Commission contain statements to this effect.

The major difference between the economic regulation of common and contract motor and water carriers is found in the field of rate regulation. On the one band, the appropriate regulatory authority has power to prescribe the maximum, minimum, or exact rates to be charged by common carriers when the existing rates are found to be unreasonably high or low or to result in unduly discriminatory relationships between competing shippers, products, or localities.

Contract motor and water carriers on the other hand are subject only to minimum rate regulation. Statutory provisions require that they file with the Interstate Commerce Commission and keep open for inspection minimum rate schedules, and the Commission may order such minimum rates to be increased if they are found to be unreasonably low. Reductions in the minimum rates can be made only after 30 days' notice and are subject to suspension by the

* There is virtually no contract carriage by railroads, and pipelines and freight forwarders are by statutory definition common carriers. See secs. 1 (3) (a) and 402 (a) (5) of the Interstate Commerce Act.

These provisions authorized the issuance of certificates and permits to common and contract motor and water carriers which could prove that they were in bona fide operation prior to Federal regulation, without requiring proof of the public convenience and neces. elty or consistency with the public interest of the service. See secs. 206 (a), 209 (a), and 309 () of the Interstate Commerce Act.

« PreviousContinue »