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served by navigable rivers. It is also discriminatory by volume, in that inland waterway transport goes out after shipments in bulk, and is not interested in the little fellow who has only a few tons to ship.


There is little danger of destructive competition arising if different types of transportation are permitted to compete freely on the basis of their comparative costs. This freedom already exists in part e. g., for unregulated carriers to compete with the railroads. It is sometimes contended that, if the railroads are given a parallel right to compete back, they might make ruinously low rates until they drive their competitors out of business, after which they would greatly increase their rates. A little observation suggests the impossibility of any such development. With good highways everywhere and millions of trucks available, the very minute the railroads would try to raise their rates above costs of truck operation, the traffic would go right back onto the highway, almost overnight. The same situation would obtain regarding barge transportation. Because of the ease with which the unregulated competitor can quickly come back, if temporarily displaced by railroad competition of the cutthroat variety, there exists no incentive whatsoever for the railroads to engage in this form of competition.

VII It is frequently alleged that the railroads want to make below-cost rates on competitive traffic, and make up the difference by higher rates on so-called captive traffic. The traffic on which the railroads are most likely to want to reduce their rates is that which has practically abandoned the rails entirely. If the railroads should make rates on such traffic, sufficiently high to meet all outof-pocket costs plus some contribution to indirect or overhead costs—and if such rates should attract this traffic back to the rails—then the railroads would have gained some contribution to their overhead costs that they are not now getting. In other words, railroad rates which are above out-of-pocket costs and which will recover traffic not now moving by rail, will reduce the burden of overhead now borne by captive traffic-not increase the burden on the captive traffic, as erroneously alleged.

VIII If carriers of different types are permitted and encouraged to compete freely with each other on a basis of their comparative costs, they will inevitably learn more about their own and their competitors' costs than they know now. The result may well be not just that they will take traffic from each other, but also that they will yield traffic to each other, where study and experience gives them the knowledge that a competitor has a decided cost advantage. There is undoubtedly some traffic still moving by rail that could be moved more economically by truck, just as trucks are hauling some traffic that could be more economically hauled by rail. Competition between types of transportation on a basis of comparative costs would not mean, necessarily, that any one type would be hauling a greater or less proportion of the Nation's total traffic than it now hauls. But there would be assurance that the traffic each type would haul would be that for which it is economically best adapted. Today there is no such assurance.

I believe, if attention is given to the foregoing points which are designated by roman numerals I through VIII, inclusive, that, in course of time, full discussion by regulators, shippers, commerce lawyers, traffic officers of the various agencies of transportation, and students of economics will bring about a reasonable theory of ratemaking which will take account of transportation conditions as they actually exist.

But it should go almost without saying that a theory and practice of ratemaking, which was frozen into law and regulatory precedents at a time when virtually all inland traffic moved by rail and was subject to 100 percent regulation, is no longer adequate in a period when the alternative of unregulated transportation of one or more types is available to practically all shippers and receivers of freight. The proposals of the Cabinet committee, embodied in H. R. 6141 and 6142, are not revolutionary. They would not abolish regulation. They would merely adapt regulation in some degree to the changes which have come about in conditions in the transportation industry. Respectfully submitted.

JAMES G. LYNE. JUNE 8, 1956.

Mr. HARRIS. At this time we are very glad to have Mr. J. R. Staley, of Chicago, who is the vice president of the Quaker Oats Co., and here today representing the National Industrial Traffic League.

Mr. Staley, if we have inconvenienced you by the delay, we can only say we are sorry. STATEMENT OF JOHN R. STALEY, VICE PRESIDENT, THE QUAKER


Mr. STALEY. Mr. Chairman, I have two statements to make. They are in unrelated subjects. One has to do with H. R. 6208, the circuity, long- and short-haul bill, and the other has to do with H. R. 525, the section 22 amendment. I can not deal with both of them in the time which seems to be available. It seems that I will have to come back. This is my second trip here to Washington in an effort to tell you something about these things. I will be glad to come back later. "I will be glad to talk about either of these bills, whichever one you want first, H. R. 525 or H. R. 6208. If you will express a preference I will address my remarks to the one that you select.

Mr. HARRIS. Both of these subjects are at the heart of this transportation policy report and are included not only in the bills referred to, but are sections in the over-all bills which relate to the same subject. Therefore, you may proceed as you feel you would like to at this time.

Mr. STALEY. I shall address my remarks to H. R. 6208.

My name is John R. Staley. I reside in Chicago, where I am employed as vice president of the Quaker Oats Co. I appear here on behalf of the National Industrial Traffic League as a member of the league's committee on rate construction and tariffs.

I also appear as a private citizen, a taxpayer, and an officer of the Quaker Oats Co.

Briefly, the National Industrial Traffic League is an organization of more than 1,600 shippers, some large and some small, located in every State in the Union, and shipping every character of traffic that moves by rail and highway and water. Its members consist exclusively of shippers or shippers' organizations. There are no carrier members in the league.

I should like to emphasize that we shippers in the league are the people who pay the freight charges on these railroads and trunkline and waterways and other mediums of transportation, and we pay the taxes that go with it.

The league wholeheartedly and emphatically supports the provisions of H. R. 6208 and urges that this bill be taken up and acted on at this session of Congress without regard to the more substantive changes of section 4, the long- and short-haul rule of the Interstate Commerce Act, proposed in H. R. 6141.

The league, by a great majority, is on record as favoring substantially the repeal of section 4. We realize, however, that project is not an easy one; many phases of it will require careful consideration by Congress. On the other hand, we believe the provisions of H. R. 6208 are noncontroversial. The bill was introduced by request of the Interstate Commerce Commission; it is overwhelmingly supported by

the shippers of the country and by the railroads. Also, I have been advised by a number of carrier associations such as the American Trucking Association, the Inland Waterway Association, and others, that they have no objection to the provisions of H. R. 6208. It is hard for me to believe this bill if enacted could do any possible injury or harm to any form of transportation. We expect to show, on the contrary, it will immensely benefit the shipping public, will save huge sums of money for the carriers, and greatly facilitate the transaction of business between carriers and shippers.

I shall not attempt to describe in detail the conditions of railroad freight tariffs following World War II—these little monstrosities (indicating). Suffice it to say, they had become an extraordinarily complicated collection of schedules from which it was almost impossible to determine rates with any degree of speed or accuracy.

After a great deal of conversation, prolonged delays, and excuses by the carriers, at the insistent urgence of the National Industrial Traffic League, the railroads on September 1, 1951, established a tariff research group consisting of a prominent professional staff organized to analyze the tariff difficulties and to make and implement recommendations designed to remove unnecessary tariff complications. To oversee the work of the research group, the railroads created a revolving administrative committee consisting of nine chief traffic officers from lines in various operating districts. The league appointed a corresponding committee of nine which likewise affords complete geographical representation. The two committees have worked closely together on a basis of absolute equality, and have consistently received wholehearted cooperation from the Interstate Commerce Commission, as well as the State commissions throughout the Nation. I am a member of that joint committee on the shippers' side.

Since it began its work, the joint committee has discussed and acted upon hundreds of propositions aimed at improving the efficiency and removing the complexities of freight tariffs. The results have been gratifying, producing enormous savings in time for all users of tariffs, whether they are railroads, or shipper patrons.

While the tariff research group explored every area of potential simplification and came up with many answers, they reached a point late in 1953 where further substantial improvement of freight tariffs was blocked by the requirements and limitations imposed in connection with the granting of fourth section relief.

This description of the tariff simplification program is given to make abundantly clear that the league's support of H. R. 6208 is not for the purpose of increasing the degree of circuity allowed in connection with operation of rates, nor is it for the purpose of creating more routes. Neither is it the purpose of this bill to repeal or nullify the provisions of section 4. In fairness it should be noted, however, the league has been on record for several years as favoring repeal by Congress of the long- and short-haul provision.

The league, in supporting H. R. 6208, recommends no change in the substance of the Commission's administration of section 4. It seeks only a change in the form of administration which will rid tariffs of unnecessary complexities and permit the fulfillment of a universal desire for simplified tariff publications. A change in the administration of section 4, which will make possible the elimination of the worst of the remaining tariff complexities, is hardly a controversial subject. It is in this spirit we approach and support H. R. 6208.

In this entire discussion and in what I may have to say hereafter, there is no thought of criticism of the Interstate Commerce Commission or its staff, and we intend to cast no reflections on their qualifications, experience, or performance of the difficult and complex task of detailed administration under the existing statute.

The joint committee in their program to simplify freight tariffs have operated from two bases—uniformity and brevity. This (indicating) isn't very brief. These make the major contributions to the end results of clarity and certainty.

The circuity limitations and other restrictions currently imposed in connection with the granting of fourth-section relief are in many respects at war with these two basic elements of simplification and they strongly tend to defeat clarity and certainty in rate schedules. Freight tariffs are many times as voluminous as really necessary simply because orders prescribing fourth-section relief have made it compulsory to establish singly or in combination specific routes, various and sundry circuity tables, or formulas for determining authorized maximum distances, purely arbitrary and artificial limitations, and numerous other potpourri.

The publication of specific routes from every origin to every destination in a tariff contributes more to the volume problem than any other type of publication required by the fourth section.

Frequently circuity limitations will be imposed in such a manner that it is practically impossible to reflect them in a tariff except by publishing the specific routes which are available under the terms of the order. What this does to the size of tariffs can be readily illustrated by an examination of a few commonly used agency issues. Here's what we see after some of these tariffs are "treated” following the issuance of circuity limitation orders:

The Southern Freight Tariff Bureau barytes tariff 839-A, 16 pages of rates and 91 pages of routes; 73.9 percent of the tariff is devoted to routes.

The Southern Freight Tariff Bureau superphosphate tariff gives 12 pages of rates and 56 pages of routes.

Southwestern Lines alcohol tariff gives 76 pages of rates, 283 pages of routes, 74.6 percent devoted to routes.

Central Territory Railroads grain tariff-I will refer to that again, 535-C, 55 pages of rates, 477 pages of routes.

The significance of the foregoing analysis is simply this: The first tariff requires 16 pages to publish the rates, but needs 91 pages to describe in detail the routes over which the rates apply.

To get away from the volume problem which often reaches astronomical proportions—and I am not exaggerating-tariffmakers may resort to other complicated methods of complying with these circuity limitations. One is a form of publication which shows a rate from a specific origin to a specific destination and opposite that rate the maximum mileage over which it may be applied; usually this is 1337/3 percent of the short-line distance. Incidentally, short-line distances are not operating distances, but on the average are about 10 percent lower than the length of normal operating routes. Then there will be given reference to as many as 50 or 100 mileage tables of various railroads which participate in the rates. The tariff user is supposed to examine the mileage tables of the lines comprising the

route he wants to use and see if the mileage over

the intended route is within the limitation imposed by the fourth-section order. This can easily take from 30 minutes to an hour's time, aside from the fact no railroad freight stations and shippers have all these mileage tables in their files. It is a synthetic answer.

What causes the problem is simply this: The carriers go to the Interstate Commerce Commission about a new set of rates they propose to publish—quite often, rates which the Commission itseif has prescribed. They say to the Commission, “Here is a system of rates we propose to establish. We have outlined certain origin and destination groups; we have set up key rates in conformity with the principles you laid down in your order, but we find ourselves with conditions where there are long- and short-haul departures chiefly because of circuitous routes where a longer line wants to meet a shorter line's rates."

Rates ordinarily reflect mileage, the rate from St. Louis to Memphis, for example, is based on the short-line distance of 298 miles; but the Missouri Pacific route is 327 miles and a rate over that route, based strictly on mileage, would be higher. Naturally, the Missouri Pacific wants to meet the short-line rate to Memphis and participate in the Memphis traffic; it also wants to—and may be required to maintain rates to other stations on its line based on the scale the Commission prescribed. The Commission has rarely, if ever, even hesitated to grant such relief. But because the "reasonably compensatory" clause in the present law is construed as applying to circuitous routes, as well as direct routes, the Commission has in nearly every case imposed certain limitations.

Sometimes it is a provision that routes must not be longer than 13313 percent of the short-line route; sometimes it is a stipulation that the rate must yield a specified minimum revenue per ton-mile or per car-mile over competing routes. The Commission staff employs numerous tricks and devices and there is no real uniformity in their approach. Anyhow, once the relief is granted with such restrictions, it immediately places on the railroad company the burden of determining in some manner what routes can be used and what routes can't. The railroads have resorted to some fantastic publications to achieve this purpose, and that's what we're complaining about. After the carrier finally devises a scheme or method of getting the routes stated in the tariff, every tariff user, including the shipper, the local freight agent, the auditor, and others, must try with a nutpick or something, to find out from the tariff if the route desired to be used is authorized. This is a continuing burden imposed on tariff users as long as the rates exist.

Determining the applicable routes may seem like a simple chore, but most people have no realization of the magnitude and complex nature of the railroad system of the United States. Recently we had occasion to take a look at the available and authorized routes on class rates, between two stations : Dallas, Tex., and Detroit, Mich. Believe it or not, there are available 4,717,664 authorized routes between these 2 towns. As there are several thousand other stations in Texas and Michigan, imagine how many routes would be involved between all stations in just these two states.

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