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REGARDING HOUSE BILL H. R. 9771

Under this bill freight forwarders seek permission to be able to acquire other earriers which they cannot do under existing law. Freight forwarders claim that this is not equitable since other authorized operators can own or control freight forwarders. Congress in its wisdom, for sound reason, specifically provided that freight forwarders could not own or control other carriers. The reason obvious Freight forwarders provide an assembling or consolidating service at terminal point, but rely on other carriers for actual physical transportation services. Actually, the consolidating and assembling services provided by freight forwarders at terminal points are analogous to pickup and delivery services provided by rail and motor carriers in connection with their line-haul service. Rail and motor carriers provide a complete transportation service whereas freight forwarders provide only a small segment of a complete transportation service. The distinction between the service provided by a freight forwarder and rail or motor common carriers has long been recognized by Congress. The demarcation is well defined. Now freight forwarders desire to enter into other transportation fields and provide a complete transportation service as do rail and motor carriers. This action should not be sanctioned by Congress.

It is to be specifically pointed out that in so doing, freight forwarders would be in a position, if they were able to acquire motor carriers, to dry up service to and from small communities. As previously seen, freight forwarders generally concentrate their efforts in large cities where there is a heavy volume of traffic. If they were allowed to acquire motor carriers to further their own ends, many small communities that rely on motor carriers to provide service to and from commercial and industrial areas would find themselves without necessary transportation services. This would be particularly so as to the sparsely settled areas in New England and other comparable sections of the country. The public should not be deprived of essential services merely because freight forwarders desire to expand their fields of endeavor at the expense of other interested persons.

Furthermore, it is submitted that this bill introduced by the freight forFarders goes hand in hand with House bill H. R. 9548 in that it would be another lever whereby the freight forwarder could drive down rates among existing carriers to the detriment not only of the transportation industry but to the general and shipping public as well. This would be accomplished by the freight forwarder bidding the carrier it owns or controls against other authorized carriers in order to obtain rate concessions.

INTEREST OF YOUR NEW ENGLAND CARRIERS Your carriers named herein are all domiciled in New England and a predominant amount of their business involves New England. Collectively their gross revenues exceed $30 million yearly. They all operate and maintain thousands of pieces of motor-vehicle equipment, terminals located throughout the six New England States and employ thousands of people in conducting their operations. They have expended their funds and energies in expending their services to and for the public.

At the present time most of the carriers named herein are conducting operations which are unprofitable or close to being unprofitable because of existing business conditions in New England. As a matter of fact, the Interstate Commerce Commission in a recent proceeding-New England Motor Rate Increases, 1955—stated that the motor carrier transportation business in New England is in dire financial condition. In the same proceeding after detailed findings as to the condition of the trucking industry in New England, which the Commission found to be near catastrophe, it approved a 6-percent increase in rates in New England in order to preserve the trucking industry in New England and guarantee to the public a continuance of adequate and efficient service.

It is submitted that passage of the two bilis named above will result in further diversion of traffic and revenues from existing motor carriers in New England. Freight forwarders as shippers should be required to pay the applicable rate on any given shipment to the motor or rail carrier that transports it the same as any other shipper or class of shippers. They should not be allowed to enter into other fields of transportation merely because they desire to enlarge their scope of operations.

It is to be observed that the freight forwarders have given no sound reason wherein the public would benefit through the enactment of the two bills herein in question. Obviously the freight forwarders would benefit at the expense of existing rail and motor carriers. When the latter suffers the public suffers. It is incumbent upon Congress to protect the interests of the public and not to foster the interests of any specific group such as the freight forwarders.

For the reason hereinbefore stated, it is submitted that approval of House bills H. R. 9548 and H R. 9771 would not be consistent with the public interest since would put the freight forwarders in a position to be able to destroy existing rate structures and existing carrier services, upon which the public must rely.

It is urged that your committee report both of these bills unfavorably.

Mr. HARRIS. We have received a statement from Mr. James D. Mann, managing director, Private Truck Council of America, Inc., Sheraton Building, Washington, D. C. This will be received for the record. (The statement referred to follows:)

PRIVATE TRUCK COUNCIL OF AMERICA, INC.,

Washington, D. C., April 23, 1956. Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce,

United States House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: Even before hearings on the bill H. R. 6141 or other proposals to amend the Interstate Commerce Act, we feel compelled to bring to the attention of your committee the fact that the provisions of that bill with respect to operation of trucks by American commerce and industry are gravely wrong, and that the amendments recommended by the Interstate Commerce Commission in the same respect are infinitely worse.

The bill H. R. 6141, as pointed out in detail below, would, by a wholly unnecessary, seemingly innocent, and ambiguous amendment of the definition of "private carrier of property by motor vehicle," make possible a renewal of attacks by litigation upon the right of a business to operate its own trucks in the legitimate course of and for purposes of its own business, either in collecting its raw materials, delivering its products, performing its services, or otherwise.

The Interstate Commerce Commission, as also pointed out in detail below, would, by amendments proposed in its letter of December 22, 1955, to Chairman Magnuson of the Senate Committee on Interstate and Foreign Commerce, regarding an identical bill, S. 1920, not only make possible but virtually guarantee such attacks.

It is our respectful purpose here to point out briefly the objectionable features of the bill and of the Commission's proposal, and to summarize briefly the grounds of objection. The “private” operation of trucks, that is, the operation of trucks by and in the course of businesses other than that of for-hire transportation, is so fundamental, and those amendments present so serious a threat, to our economic liberties and welfare, that we respectfully submit that the sponsors of the bill and the Commission should disavow and withdraw those proposals.

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THE BILL H. R. 6141

The bill H. R. 6141 would make the following changes in the common, contract, and private carrier definition in section 203 (a) of the Interstate Commerce Act (the matter to be deleted is in black brackets; new matter is in italic):

"(14) The term 'common carrier by motor vehicle' means any person which holds itself out to the general public to engage in the transportation by motor vehicle in interstate or foreign commerce of passengers or property or any class or classes thereof for compensation, whether over regular or irregular routes, [except] including any person heretofore engaged in transportation as a contract carrier by motor vehicle which the Commission shall find in appropriate proceedings not to be engaged in transportation as a contract carrier by motor vehicle as defined hereby, but excluding transportation by motor vehicle by an express company to the extent that such transportation has heretofore been subject to part I, to which extent such transportation shall continue to be considered to be and shall be regulated as transportation subject to part I.

“(15) The term 'contract carrier by motor vehicle' means any person (which,] who [under individual contracts or agreements,] engages in the transportation

((other than transportation referred to in paragraph (14) and the exception therein)] by motor vehicle of passengers or property in interstate or foreign commerce for compensation (other than transportation referred to in paragraph (14) and the esception therein) on the basis of bilateral contracts for specialized or individualized service or services equivalent to bona fide private carriage by motor vehicle.

"(17) The term 'private carrier of property by motor vehicle' means any person not included in the terms 'common carrier by motor vehicle' or 'contract carrier by motor vehicle,' who (or which] transports in interstate or foreign commerce by motor vehicle property of wbich such person is the owner, lessee, or bailee, (when such transportation is for the purpose of sale, lease, rent, or bailment, or in furtherance of any commercial enterprise]: Provided, That such olonership, lease, or bailment was not undertaken for the purpose of such transportation."

The seeming purpose of the change in the term “private carrier of property by motor vehicle" is to prohibit so-called buy-and-sell operations.

A buy-and-sell operation is one in which a trucker engaging in what really amounts to for-hire transportation attempts to disguise it as private truck operation by the clumsy and legally ineffectual device of taking title to the goods during the movement. Such an operation is plainly unlawful under the present provisions of the act, which have been interpreted as providing that the test of distinction between for-hire carriage and private operation is the “primary business test."

That is the test which was firmly established by the Interstate Commerce Commision and the Federal courts in the case of Brooks Transportation Company v. United States ((1950) 93 Fed. Supp. 517, affirmed 310 U. S. 925) after years of litigation in that and other cases.

That test is the simple, commonsense rule that a person is to be regarded as a regulated, for-hire carrier if he really is engaging in the transportation business as such, but not if he is operating trucks only as a bona fide incident to his own pontransportation enterprise, and that which of these he is doing is to be determined from the total facts in the particular case. It is easy for anyone to understand, and in almost all cases the result of applying it is so obvious to anyone that there is no need for rulings by the Commission or the courts as to who are for-hire and who are private "carriers.”

In recognizing the “primary business test” as the only necessary and lawful test, the Commission and the courts rejected the contention of railroads and for-hire motor carriers that the test should instead be whether a person is operating trucks "for compensation.” That finally discredited and rejected contention would have lifted the words “for compensation" from their context in the common and contract carrier definitions (where they were used by Congress merely as a synonym for “for-hire") and given them the absurdly literal construction that anyone who received “compensation" for transportation he performed in his trucks was a common or contract carrier and could not lawfully operate without a certificate or permit—that “compensation” included either separately stated charges by sellers for delivery of their own products, or inclusion of allowances for delivery in setting prices, differences in plant or delivered prices, and so forth.

The absurdity of the "compensation test,” and that it would have ultimately classified all trucks as common or contract and none as private, was finally pointed out in the Brooks Transportation Co. case after 15 years of controversy and litigation.

It is plain to all that, under the primary business test, one who engages in forhire carriage of goods cannot, by taking title to the goods during the transportation, avoid its being so classified. That is so regardless of whether he might engage only in for-hire carriage, or might be a private carrier, if there are any such, who not only engaged in private operation which was a bona fide incident to his nontransportation business (for example, was a manufacturer delivering his products from his plant to his customers), but also attempted to engage in for-hire bauling of return loads. In either event, it is perfectly clear under the presint law that the taking of title to the goods in for-hire hauling of loads for others would not alter the for-hire status of that hauling.

There is nothing wrong with the present statute in this respect. To the extent that such "buy and sell” operations may occur, if they do, the problem is one of

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police work, of catching the violators of the already-clear statute. To change the statute would be no answer to that problem.

We respectfully oppose the change in the “private carrier" definition in H. R. 6141 for the reasons (a) that it is unnecessary, since “buy and sell operations" already are clearly prohibited by the present act as applied through the primary business test, so that the problem if any is one of policing, which a change in the statute would not help, (b) that such unnecessary changes are unwise, since they could be interpreted in unforeseen ways, and in any event would enable opponents of private operation to start the battle of litigation over again (it already has been shown by the comments of the Interstate Commerce Commission that the proposed revision is ambiguous and could lead to absurd results), and (c) that any reopening of the definition could result in still other and ill-advised amendments.

THE RECOMMENDATIONS OF THE INTERSTATE COMMERCE COMMISSION The recommendations of the Interstate Commerce Commission regarding the "private carrier” aspect of the bill, in the Commission's letter of December 22, 1955, to Chairman Magnuson, are infinitely worse, we respectfully submit, than the proposal in the bill itself.

The "for compensation" test, which would have, by interpretation of the pres. ent statute, destroyed much if not all of the right of industry to use trucks for its own materials, products, or services, had that test not been rejected in the Lenoir-Schenley-Brooks Transportation case, as described above.

The Commission's letter (with the strange comment that the Commission does not believe this "will have the effect of changing to a carrier for hire any person who was lawfully operating as other than a carrier for hire”) proposes to write that rejected "for compensation" test into the statute itself, by adding the following, as part of a proposed new section 203 (c):

"A person shall be deemed to be engaged in transportation for compensation if he receives for such services a reward or consideration, regardless as to whether the compensation, reward, or consideration is received directly or indirectly, through the device of leasing or renting vehicles, employment, the furnishing of drivers or other employees, or management services, the buying or selling of property, or in any other manner by which compensation, reward, or a consideration is received in return for the direction or control of or the responsibility for vehicles used in transportation by motor vehicle in interstate or foreign commerce."

That reads virtually as though lifted from one of the railroad or for-hire motor carrier briefs in the Lenoir-Schenley-Brooks Transportation proceedings, where those briefs argued that a furniture manufacturer which charged its customers for delivering its own products to them in its own trucks, and received allowances from its suppliers for picking up its supplies and materials, and a whisky wholesaler which charged its customers delivered prices roughly equal to its warehouse prices plus freight, were engaged in transportation "for compensation", ergo, having no certificates or permits, were engaged in unlawful operation as common or contract carriers.

A reading of the Commission's proposed amendment quoted above will show that it could apply to all trucks, leaving none free for "private" operation.

The entire text of that new section 203 (c) proposed by the Commission is as follows:

"Section 203 (c). Except as provided in section 202 (c), section 203 (b), in the exception in section 203 (a) (14), and in the second proviso of section 206 (a) (1), no person shall engage in any transportation for compensation, by motor vehicle, in interstate or foreign commerce, on any public highway or within any reservation under the exclusive jurisdiction of the United States, unless there is in force with respect to such person a certificate or a permit issued by the Commission authorizing such transportation.

“A person shall be deemed to be engaged in transportation if, through the selection, approval, or employment of drivers or other employees (other than as a bona fide officer or employee), through the control over facilities, or through other means, directly or indirectly, he exercises direction or control over the movement of passengers or property, or assumes responsibility for the persons or property being transported or for the operation of the vehicles over the highways.

“A person shall be deemed to be engaged in transportation for compensation if he receives for such services a reward or consideration, regardless as to

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whether the compensation, reward, or consideration is received directly or indirectly, through the device of leasing or renting vehicles, employment, the furnishing of drivers or other employees, or management services, the buying or selling of property, or in any other manner by which compensation, reward, or a consideration is received in return for the direction or control of or the responsibility for vehicles used in transportation by motor vehicle in interstate or foreign commerce."

The Commission explains that its recommended changes in the contract carrier definition, elsewhere in its letter, would have the effect of excluding various for hire or for compensation operations from both the common and contract carrier classifications. The first paragraph of section 203 (c) above, then, Fould altogether prohibit such operations in interstate commerce, since they would have no certificates of public convenience and necessity or permits. Thus, the Commission's proposals would create a new category of truck operations in interstate commerce one that would be wholly prohibited.

A reading of the last paragraph of the proposed new section 203 (c) will show how difficult it would be to place any limit on what would constitute transportation for compensation, and therefore (a) common carriage, (6) contract carriage, or (c) that new category of always unlawful truck operation.

As a practical matter, it might make little difference to which of those three classifications a present “private carrier” could be shifted as a result of the amendments, since even if his operations were held to be common or contract it might prove impossible for him to obtain a certificate or permit.

We earnestly appeal to you, and your associates on the House Committee on Interstate and Foreign Comerce, to insist on maintaining "the primary business test" to oppose any tampering with it, and to stop in their incipiency these reDewed attacks, which find expression in H. R. 6141 and the Commission's letter, upon the right of American industry to operate its own trucks in the bona fide course of its own nontransportation businesses.

Copies of this statement are being sent to the Interstate Commerce Commis-
sion, with the respectful request that the Commission reappraise and reconsider
its recommendations here referred to.
Respectfully submitted.

JAMES D. MANN, Managing Director. Mr. HARRIS. I am advised by the chairman of this committee that due to the primaries in several States on Tuesday of next week the executive session that had been called for that day will be postponed 1 day and will be held on Wednesday. Therefore, this committee will continue hearings on this subject on Tuesday morning. We will not meet on Monday.

It has been expected that a representative of the Railway Labor Executives Association will be here on Wednesday.

We will contact them and see if they cannot be here on Tuesday.

Following the brotherhood witnesses will be the Association of
American Railroads, which we hope to get to not later than on
Thursday.

With that information, the committee will adjourn until 10 o'clock
Tuesday of next week.

Mr. XALE. Mr. Chairman, may I say that I would be happy if the Association of American Railroads, in preparing their testimony, would direct some of it to this exact point of competition with the water carriers. I think that would be helpful to the committee.

Mr. HARRIS. Very well. The committee will now adjourn.

(Thereupon, at 12:32 p. m., the committee recessed, to reconvene at 10 a. m., Tuesday, May 8, 1956.)

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