October 18, 1954, in I and S, Docket No. 6204 the Interstate Commerce Commission said the minimum reasonable rate by rail should be $13.67 per ton. This must be paid by Reynolds Metals and Aluminum Company of America for the movement of their pig aluminum from Texas to Davenport.

On the other hand, General Services Administration has a rate of $10.50 or $3.17 a ton less than the commercial rate. In the same train from the same origins in Texas to the same destination in Iowa, from the same smelter to the same delivery plant for stockpiling purposes, carloads of aluminum will move at different rates, the government getting a special rate. This special rate is not published or filed with the Interstate Commerce Commission; it is a secret rate. But the carriers do not deny its existence. Obviously, if the Government rate is a fair and reasonable one, it is a fair and reasonable one for the aluminum companies. If it is a fact, as said by the Interstate Commerce Commission, that the minimum rate should be $13.67 then how can a rate of $10.50 be just or lawful?

I would like to make a comment before I get into this next paragraph. There are many pious people working for the Government who say, "We do not know of any rates that are too low."

We have invited the carriers to come in and say, "if we have some rates that are too low where are they?"

They are disingenuous, to put it mildly. Here is a rate that obviously is too low, because it is below the rate the Interstate Commerce Commission said should be the minimum lawful rate.

There are just scores of these things. For example, the General Services Administration go out and get voluntary reductions-voluntary in the sense that if you do not give them to them, you will not get the business.

They jewed the rate down on cobalt from Niagara Falls to the eastern part of the State of New York so that they got a rate on a commodity that is worth over $5,000 a ton, they got the rates down below the prevailing rate established by the Interstate Commerce Commission on common iron bars. They know that rate is too low.

POSITION OF THE CARRIERS

The various carrier organizations either have or will make known to the committee their positions.

As far as rail transportation is concerned the railroads know the present section 22 situation is a foul mess which must be cleaned up. They know it is wrong but nevertheless they are dragging their feet because they also want other changes made in the law, so they won't be left out on an imaginary limb.

For one thing, they now use the secret rate method to avoid long delays incident to obtaining fourth-section relief. Truck companies are not subject to section 4 and the railroads feel if they have to move Government traffic on commercial rates they will be at a disadvantage in competing with the trucks. This is the same disadvantage they have now as to all traffic except Government traffic.

These section 22 maneuvers are in our minds scandalous and we think it ridiculous and a narrow approach to urge these conditions

be continued in order that the railroad companies may meet flea-bite competition on a tiny fraction of their total tonnage.

Two wrongs don't make a right; here we have thousands of things that are wrong and all of them collectively don't add up to a right. In contrast to the position of the railroads, practically all other forms of transportation are united with the shippers of the country in the belief that there should be imposed upon the Government itself the same morals it imposes on everyone else and support the view that section 22 is so widely and grossly abused that there is crying necessity for the relief which H. R. 525 will afford.

GOVERNMENT OBJECTIONS TO REVISED SECTION 22

During the many heated discussions about modification or repeal of the free or reduced rates provisions of section 22, some of the Government agencies have expressed devious and fantastically conceived objections. Without speaking disrespectfully of any of these objections because I am sure that in many instances they represent the considered views of men who I know to be honest and sincerewe believe they are replete with representations which are inaccurate, which are only half truthful and in some cases completely untrue. They disregard what we conceive to be a basic sound transportation policy, namely that all shippers should have equal treatment from common carriers.

GOVERNMENT EXAGGERATES ITS IMPORTANCE

One objection is that Government operations are not comparabie with those of commercial concerns because of their farflung interests and large volume of traffic. This is a grossly exaggerated circumstance. It is true the Government is an important shipper of freight, but it is far from being as important as some people would make it out to be. For example, during fiscal 1954 the Army shipped 328,000 carloads of freight and this was during a period of great activity owing to the Korean situation. During the same period, General Motors Corp. shipped 615,000 carloads of freight and an equal amount of tonnage over the highway. By comparison, the business of the Department of Defense doesn't look so big after all. One of the excuses frequently advanced is the large number of items which the Government ships. Reference is made to 2.5 million items. This sounds impressive until one begins to examine what is meant by an item. For example, in the huge catalog of 2.5 million items shipped by one of the departments, we find such things as 20,259 different sizes of nuts and bolts. Each of them is an item, but they are still just nuts and bolts. They have 13,055 items of screws, 940 gaskets, and 14,950 types of stencil paper. Gaskets are gaskets, and stencil paper is still "paper, oil board" in the classification; so this claim of immense variety and conglomeration of Government traffic is just a lot of drivel and should not be taken seriously.

ORDERLY PROCEDURE FOR ALL

Another objection is that carriers' associations are sometimes slow in handling rate adjustments. This is true and it is a good thing

rate proposals, which may have far-reaching effects upon other people, are given wide publicity and careful consideration by the numerous groups of carriers involved. Shippers have a right under laws recently enacted by this Congress to know of proposed changes in rates which another shipper, including the United States Government as a shipper, desire to have. The Government's traffic business should be organized in a businesslike way. Our company frequently has to go to the carriers to ask for adjustments in rates, and it takes us some time to get them. We stand it more or less patiently, and I don't know of any reason why the Government, many departments of which are not nearly as large shippers as we, should be given special consideration. They should stand in line and take their turn and be treated like citizens.

WILL H. R. 525 RAISE GOVERNMENT FREIGHT BILL?

Still another objection is that repeal of section 22 will increase cost of Government. Also, it is said elsewhere that traffic moving under special Government section 22 rates on the average pays higher rates than traffic moving on commercial rates. These statements are mutually exclusive. If it is going to cost the Government more money to pay commercial rates and yet they claim they pay higher rates under section 22 than commercial shippers pay, there is something wrong with those two statements. They both can't be right. If Government rate proposals are publicized as are commercial shippers' proposals, they may often get better rates because experienced commercial shippers will assist in seeing that proper rates are approved.

STOP THIS PREFERENCE

All of this discussion boils down to one thing. It is a fundamental principle of transportation regulation that all shippers should be treated alike, that rates should be fair and reasonable, they should be nondiscriminatory and they should be nonpreferential. These principles should apply to any shipper, whether it be a department of the Government or an individual State, or a community or the Quaker Oats Co. or any of the numerous hundreds and hundreds of shippers who are members of the National Industrial Traffic League.

There are other sections of the Interstate Commerce Act which we don't like and want changed but as long as they are the law we must live and do business under them. If the commercial concerns of this country, many of which are larger trafficwise than civilian agencies of the Government, can live under these principles of fair and equal treatment, there is no sound reason in our opinion why preference should be given to any part of the United States Government except perhaps in time of war.

Gentlemen, it is the sincere hope of the league that the provisions of H. R. 525, perhaps modified to provide for special treatment in time of emergency or war for the Department of Defense, be brought up and separately acted upon at this session of Congress. Nothing will be gained by delay except the continuation of an evil.

The Government of the United States, like Caesar's wife, should be above reproach, and yet we see it conducting its transportation activities in a manner which, if I as an individual citizen were to do the same thing, would land me in jail. Please make the Government behave itself and let's stop this midnight, secret, "dark of the moon,' in a corner, chiseling-either by the Government or by some of the weak-kneed sisters in the transportation industry. The rest of us shippers who must live by the book should not be penalized by having to pick up the check to pay for deficits in transportation costs because of unfairly low rates that accrue exclusively to the Government. And, I do thank you, Mr. Chairman and gentlemen.

Mr. HARRIS. We thank you, Mr. Staley.

I have the impression that all of us here understand very well what your position is with reference to section 22.

Mr. STALEY. Thank you, Mr. Chairman.

Mr. HARRIS. Mr. Williams?

Mr. WILLIAMS. I have no questions.

Mr. HARRIS. Mr. Hinshaw?

Mr. HINSHAW. I would gather from your statement, Mr. Staley, that the reason why the railroads have not joined the rest of the transportation industry in being in favor of repeal of section 22 is because they are either afraid of reprisals on the part of the transportation people in the Government, or because the rails have a guilty conscience. Now, which is it?

Mr. STALEY. Well, they do have a guilty conscience-that is inescapable but their excuse is that they can meet spotty competition of trucks, or barges, without having to worry about the fourth section. That seems to bother them a lot.

Another excuse they have is that the Commission, carrying out what they believe to be the intent of Congress, has said that rail rates when published to meet water competition should be somewhat lower than the actual water costs, and there have been many orders of the Commission accepting that principle.

Under section 22 the rail carriers could meet the water competition rates on the button and not have a differential higher than the water rate.

They are also apprehensive of the fact that contract carriers are not required to file their present precise rates with the Commission and they can meet that type of competition freely, using section 22.

I have not heard any of them wince at the suggestion that somebody will spank them, by taking some Government business away from them, if they go for section 22 repeal.

Mr. HINSHAW. Mr. Staley, in view of the fact that the gentleman who testified on behalf of the Government opposed section 22's repeal; also claimed great experience in the position that you hold-I believe he was with the Quaker Oats Co.

Mr. STALEY. Mr. Smith was associated with the General Mills and he said, as I remember his testimony, that he had had something more than 32 years of experience as industrial traffic manager.

I purposely stated my qualifications to show that I have not only had industrial experience, but a rather wide experience in rail traffic management, and also talked to you about my experience with the Hoover Commission to show you I am not just talking from imagina

tion or indignation, but based on firsthand knowledge and experience with the subject.

I have great respect for Mr. Smith, but I think our activities have been along different channels.

Mr. HINSHAW. Another thing that occurs to me, as a Member of the Congress, is the fact that the industrial shippers, commercial shippers I should say, are having to carry at least a portion of the load of the losses that are being sustained by the rail carriers in the transportation of passengers.

Mr. STALEY. Indeed we are, sir.

Mr. HINSHAW. And the transportation business generally of the rails.

Mr. STALEY. Yes, sir.

Mr. HINSHAW. Now, the loss from passenger transportation comes from a number of causes, and a good many more than I would know; but one of these causes is the agreement that they had to make originally with cities and towns which require that trains going through those cities and towns, or counties, or whatever the political subdivision may be, had to make stops in connection with such services; and also a large part of the expense appears in the form of taxes.

Is any effort being made by the National Industrial Traffic League to help the rails correct those situations?

Mr. STALEY. I cannot speak too learnedly on that subject, because I have not the information. I just do not know precisely. I will back up. Mr. Ott, who will represent the league in reference to H. R. 6141, will speak to that point.

Mr. HINSHAW. I am glad, because I think that is a very important thing. We cannot see the railroads losing $600 million a year on passenger transportation, which has to be made up by the services that they are offering to the shippers of goods

Mr. STALEY. Mr. Hinshaw, you have not said half of it. With these tremendous passenger deficits, these railroad companies are making tremendous rate cuts in quoting Government rates for passenger transportation.

Now here they are with a business that is causing them a big loss of money and they are further cutting the rates for the Government. It does not make any sense.

Mr. HARRIS. Will the gentleman yield?

Mr. HINSHAW. Yes.

Mr. HARRIS. Do they do that on their own in order to obtain the business, or do they do it at the instance of the Government?

Mr. STALEY. I do not want, to qualify as a passenger expert, but this Hoover Commission report covered that in some detail. They have a standard standing reduction for Government employees. I think it is 10 percent.

Now, the Department of Defense, as I understand the story, and as it is related in this transportation task force report of the Hoover Commission--that part was handled by another man--the Government has movements coming up, and they will ask an airline, or a busline, or a rail line, who will give them the best rates. They are auctioning off that passenger business.

Mr. HARRIS. Now, who determines that standing 10-percent reduction? How is that brought about?

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