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to circuitous railroad routes meeting the rates of direct railroad routes; and
Whereas several individual commissions, members of this association, and the National Industrial Traffic League supported an application which the railroads made to the Interstate Commerce Commission for blanket fritt from the provisions of section 4, only insofar as it relates to circuitous railroad routes meeting the rates of direct railroad routes ; and
Whereas the Interstate Commerce Commission, after due consideration is ped a report and order in which it declared its complete agreement with the objets tives of the application, but found it necessary to deny the relief sought u the ground the Commission does not possess the requisite authority; and
Whereas, at the request of the Interstate Commerce Commission, there has been introduced in the Congress H. R. 6208 which would amend section of the Interstate Commerce Act so as to permit the Commission to grant the relief sought and to remove the major obstruction to the program of tamil simplification being progressed by this association's special committee on tant simplification in conjunction with other cooperating committees; and
Whereas the executive committee of this association has been informed them is no objection to H. R. 6208 on the part of any competing forms of transportstion or on the part of any shipper groups : Now, therefore, be it
Resolved, that the executive committee of the National Association of Rail. road and Utilities Commissioners does hereby announce its support of IL R 6208: and be it further
Resolved, that the executive committee authorizes and directs the alation's representatives in the Washington offee to advise the appropriate chair men of committees and subcommittees of the House and the Senate that this association supports H. R. 6208 and that it does not feel it necessary, in the public interest, nor desirable to delay consideration of this legislation by holding a public hearing.
Mr. I LARRIS. The Chair has a communication from Mr. F.0. Davis executive vice president, Potash Company of America, together with a statement which he asks to be included in the record. It will be received. (Statement referred to follows:)
PotasH COMPANY OF AMERICA,
Washington D. C., April 27, 1936. Hon. Orex HARRIS, Interstate and Foreign Commerce Committee,
House of Representatires, Washington, D. O. Dear Sir: There is attached, hereto, a copy of a statement which I bare prepared in support of H. R. 6141.
I should greatly appreciate it if you would file this statement in the procedings covering the aforementioned bill and shall further appreciate any more sideration which your committee gives the position of my company in this matter. Sincerely yours,
F. 0. Davis,
Executive Vice President. My name is Fred 0. Davis. I am executive rice president, treasurer, and a director of the Potash Company of America. My offices are in Carlsbad, .S. del. which is the headquarters of that company.
I have been employed by the Potash Company of America continuously for the past 21 years, Serving in various capacities. The Potash Company of Amerne is currently the largest producer of refined potash in the world. Approximately 93 prcent of the company's potash production, and that of other producers a well, is used to produce fertilizer, so pusential to farming. The remaining i perrent is consumed in the production of various chemicals.
The principal sources of potash production in the United States are Carlstad, X. Mex., and Trona, Calif. As between these two, Carlsbad accounts for at ut 3 million tons annually, or approximately 90 percent of the refined potash pro duced in the l'nited States. Potash produced in Carlsbad moves to retinere almost exclusively by railroad, some 00,000 cars being loaded in the past year.
I mention this fact to show that the potash industry is in the nature of what is sometimes described as a rail-bound industry, which is to say an industry which must rely mainly or exclusively on railroads for its transportation.
Of such industries, it is sometimes said that they would be harmed by the passage of H. R. 6141, and especially by what are described as its ratemaking provisions. Specifically, I have heard it said by interests opposing the bill, that if competition is to be permitted greater play in the making of rates, the tendency would be for railroads to reduce rates on the competitive traffic and make up their alleged losses through the imposition of higher rates on shippers of noncompetitive or rail-bound traffic such as the company I represent.
I cannot agree with those who support this view. The opposite should be true.
When railroads reduce rates on competitive traffic, the objective is to increase their revenue by increasing the traffic volume in an amount sufficient to more than offset the effect of the reduced rate. And when this happens, the result should be to benefit-not harm—the shippers of noncompetitive traffic because it should reduce the burden of overhead and fixed expense which would otherwise have to be borne entirely by the traffic remaining on the rails.
When lower rail rates result in increasing the volume of a particular commodity moving by rail, there should be an impetus toward even lower rates for all commodities which should redound to the benefit of all shippers. This is because added volume to railroads means lower cost per unit of traffic handled. The report of the Presidential Advisory Committee on Transport Policy and Organization, which is the basis of the legislation proposed in H. R. 6141, noted that “other forms of transportation as a rule require additions to equipment in direct ratio to an increase in traffic handled, and this is not the case with the railroad industry."
I therefore concur with those who believe that permitting railroads, and, of course, other carriers as well, to reduce rates on competitive traffic, subject always to the power of the Interstate Commerce Commission to prohibit rates that are noncompensatory or discriminatory, is also in the best interests of the shippers of noncompetitive traffic. What the shippers of noncompetitive traffic have real reason to fear is that the competitive traffic will continue to be drained from the railroads, thereby increasing the burden of fixed expense to be borne by the traffic remaining on the rails.
Mr. HARRIS. Do we have anyone else present today who would like to file a statement?
Is there anyone who has anything to say before we adjourn?
We have received a statement from Mr. A. Wilford Larson, Chief, Transportation Division, Public Service Commission of Wisconsin. It will be received for the record.
(Statement referred to follows:)
STATEMENT BY A. WILFORD LARSON, CHIEF, TRANSPORTATION DIVISION, PUBLIO
SERVICE COMMISSION OF WISCONSIN This statement is being filed to set forth the position of the Public Service Commission of Wisconsin as it relates to bill H. R. 6141, now being considered by Subcommittee on Transportation and Communications of the Committee on Interstate and Foreign Commerce, House of Representatives.
The Public Service Commission of Wisconsin is aware that the regulation of transportation agencies cannot be a static thing. There are changing conditions that may warrant changes in the statutes relating to the regulation of transportation industries. It is our position, however, that the proposed legislation in the present form would not be in the public interest. Without any intention of implying that the commission is in accord with all the other provisions of the bill, the critical comments herein will be confined to those sections which seem to merit the most reconsideration, namely:
Section 2, relating to the statement of the national transportation policy in the act.
Section 6, relating to the extension of section 13 of the Interstate Commerce Act.
Section 7 (c), relating to the suspension powers of the Interstate Commerce Commission.
Section 8, which would repeal section 15a and create a new section 15a of the Interstate Commerce Act.
Section 2. Statement of the national transportation policy
The statement of national transportation policy does not in itself determine the functions of the Interstate Commerce Commission. However, the statement of policy may be used to interpret the actions taken under more specific sections of the act. Unless the statement of policy can be so stated that it is very difficult to get more than one interpretation, it can lead to confusion. For example, what is meant by “to encourage and promote full competition between modes of transportation at charges not less than reasonable minimum charges, or more than reasonable maximum charges"? It seems that any change in the statement of policy should be made only after very careful consideration and then with as few changes in wording as is absolutely necessary to achieve the desired clarity of that policy. Section 6. Relating to section 13 of the Interstate Commerce Act
Section 13 (4) of the Interstate Commerce Act now authorizes the Interstate Commerce Commission to prescribe rates, fares, charges, classifications, regulations, and practices to be applied on intrastate commerce if it is found those in existence cause any undue or unreasonable advantage, preference or prejudice as between persons or localities in intrastate commerce, on the one hand, and interstate or foreign commerce, on the other hand, or any undue, unreasonable, or unjust discrimination against interstate or foregin commerce.
The present bill, H. R. 6141, would also provide that the Interstate Commerce Commission shall order the discontinuance of any State service requirement which causes or will cause a net loss in revenue to the carrier or carriers involved, or otherwise unduly burden or will unduly burden interstate or foreign commerce. The bill does provide that the Interstate Commerce Commission must also find that there is or will be reasonably adequate service available by other carriers or modes of transport (including private carriage) in the event a particular service or facility involved is to be discontinued.
The principal service to be considered in relation to this proposed change is passenger-train service. It has been consistently held that various States have jurisdiction over the operation of passenger trains within the respective States. The proposal to extend section 13 of the Interstate Commerce Act to apply to these services perhaps grows out of a belief that the State regulatory commissions have been unduly hesitant in authorizing discontinuance of passenger-train service. It is the position of the Public Service Commission of Wisconsin that any such belief is unfounded and further that it is in the public interest that final jurisdiction relating to such services should remain with the States.
There have been a number of applications to discontinue certain passenger trains before the Wisconsin commission during recent years. Many of these applications have involved the discontinuance of the last passenger train operat. ing on a particular line of railroad. Most of these applications have been approved. However, there were some applications in which the Wisconsin commission has found that the discontinuance would not be consistent with the public interest or the rendition of reasonably adequate service by the applicant.
In Wisconsin there are only 3,801 miles of road having passenger-train service as compared to 6,381 miles of road having freight-train service.
The needs of the public immediately involved in a proposed discontinuance of passenger-train service are usually local in character. Those needs, it seems can be better evaluated by State agencies than by a Federal agency. It is the position of the Wisconsin commission that the proposed changes as outlined in section 6 of bill H. R. 6141 would not be in the public interest. Section q (c) relating to the suspension powers of the Interstate Commerce
Commission This bill would reduce the effectiveness of the Interstate Commerce Commission's power to suspend rates until after investigation. Three months, the maximum period that rates could be suspended, is not sufficient time for the parties to prepare their testimony and for the Commission to properly evaluate the record and make a determination. The provision that the burden of proof will not be on the carrier filing the schedule if the complainant is also a carrier makes it impractical to make a proper determination, as the carrier filing the schedule is in possession of the material facts upon which the test of reasonable. ness might be based.
Section & dealing with section 15a of the Interstate Commerce Act
Section 15a of the Interstate Commerce Act is referred to as the rule of ratemaking.
The rule of ratemaking as now set forth in section 15a is positive in nature in that it sets forth matters that must be considered by the Commission in the exercise of its power to prescribe just and reasonable rates. The provisions of section 15a also permit the Commission to prescribe exact rates as long as they are found to be just and reasonable.
The rule of ratemaking as set forth in bill H. R. 6141 auhtorizes the Commission to determine whether particular rates are below a reasonable minimum or above a reasonable maximum. There is no positive consideration required to determine whether or not a particular rate will be lower than a reasonable minimum. There is, however, provision against taking certain things into consideration. There is no criterion upon which to base the reasonableness of a minimum rate in the bill.
It is provided in the bill that the Commission shall not require the charges to be reduced below the full cost of performing the services to which they apply, exclusive of losses in other services. It is not clear what is meant by "full costs" or "losses in other services.” If a "loss in other service" is measured by revenues being less than the full costs, then any rate or charge that was below the "full cost" would be considered a losing service.
If "full costs" means what is usually referred to as fully distributed costs, it would appear that the provision that the Commission could not require charges to be below that amount would be contrary to public interest. It has been well-established that some traffic just would not move on charges equal to fullydistributed costs. It thus would be in the public interest to require that charges on that traffic would be something less than "full costs."
Mr. HARRIS. We also have a statement from Mr. Francis E. Barrett, Jr., for the New England motor common carriers. That will be included in the record. (Statement referred to follows:)
BOSTON, Mass., April 24, 1956. Re House bills No. H. R. 9548 and H. R. 9771. CONGRESS OF THE UNITED STATES, House of Representatives, Committee on Interstate and Foreign Commerce,
House Office Building, Washington, D.C. GENTLEMEN: Enclosed herewith is statement of various New England motor common carriers of property named therein in opposition to the above bills.
It is respectfully requested that this statement be made a part of the record in the proceedings on said bills now before your committee. Very truly yours,
FRANCIS E. BARRETT, Jr.,
Attorney at Law.
STATEMENT OF FRANCIS E. BARRETT, JR., FOR New ENGLAND MOTOR COMMON
CARRIERS My name is Francis E. Barrett, Jr., and I am an attorney at law. My business address is 7 Water Street, Boston, Mass. I have been authorized by the following New England motor common carriers of property for hire to appear in opposition to House bills numbered H. R. 9548 and H. R. 9771 : Name of carrier and principal place of business :
The Adley Express Co., New Haven, Conn.
Freight-forward operations under part IV of the Interstate Commerce Act are peculiar. While the forwarders are designated as common carriers in rela. tionship to their customers, they employ other authorized carriers, railroads, motor carriers, and water carriers to perform their transportation services, and they are dependent upon the latter carriers for the peformance of their service. Generally the operation of a freight forwarder is to receive and assemble into carload or truckload parts large volumes of less-than-carload or less-than-truckload shipments. The freight forwarder then tenders the traffic to an authorized common carrier, motor, rail, or water, in truckload or carload lots and pays the carrier the carload or truckload rate. In return it charges its customers generally the less-than-carload or less-than-truckload rate applicable on any given shipment. The freight forwarders margin of profit lays in the difference between the less-than-carload or less-than-truckload rate it charges its customers and the truckload or carload rate it pays the motor or rail carrier to perform the physical transportation service. Generally speaking, freight forwarders provide service at only large cities where there is a substantial volume of freight.
REGARDING HOUSE BILL I. R. 9548
At the present time freight forwarders must pay to rail or motor carriers their lawfully published rates, with the exception of motor carriers where the line-haul is 450 miles or less. Under this instant bill the freight forwarders seek congressional relief from the requirements of existing law whereby they are required to pay authorized rail and motor carriers their lawfully published rates for transportation services provided. It is submitted that the use by motor carriers of so-called piggy-back services whereby their trailers are loaded on rail freight cars and transported from point to point affords no precedent or basis upon which Congress should allow freight forwarders to bargain and contract for rates. The so-called piggy-back service is a substitution of motive power used by motor carriers in some instances. It is to be remembered that in the so-called piggy-back operation the motor carrier is still acting as a common carrier as far as his shippers are concerned. The motor carrier provides a pick-up and delivery service, makes its own contracts with the shippers and utilizes its equipment and personnel providing service. The motor carrier has considerable investments in equipment, terminals, employees, and other properties. It furnishes its equipment containing freight which is to be loaded on rail freight cars for line-haul movement to destination.
Since the railroad and the motor carriers are both authorized common carriers, they may lawfully participate in joint rates. The motor carriers using piggy-back service provide the physical properties, equipment, and other necessary facilities to furnish line-haul transportation of their traffic whereas freight forwarders do not. In view of the large volume of traffic that freight forwarders control, they should not be allowed to bargain and contract for rates that they desire to pay on the basis that they may be put at a competitive disadvantage with motor carriers that utilize so-called piggy-back service for the movement of loaded and unloaded trailers, since motor carriers are actually furnishing physical property to the public as well as to the railroads in transporting their traffic in this manner.
If the freight forwarders were able to contract for rates that they desired to pay, they would be able to bid carrier against carrier with a resultant breakdown of existing transportation service presently being provided by rail and motor carriers. Furthermore, while freight forwarders may be designated as com. mon carriers under part IV of the Interstate Commerce Act, this particularly pertains to the freight forwarders relationship with its own customers. However, as far as the freight forwarders relationship with other carriers is concerned, the freight forwarder is essentially a shipper. Therefore, the proposition arises : If a freight forwarder can negotiate and contract with authorized carriers for the rates it desires to pay, why cannot other shippers or classes of shippers do the same thing? The answer is obvious. If this situation were to come about, the havoc that the Interstate Commerce Act was designed to alleviate would upset the shipping public and the transportation industry of this country and break down the efficient and economical transportation system that has grown under regulation through the past 20 years.
1 Since it is my belief that freight forwarders utilize the service of water carriers to a very limited extent if at all, for the purposes of this statement references will be made only to rail and motor carriers.