and fears. In the more than 20 years that the Commission has had control over motor-carrier rates, surely some aggrieved party would have filed a complaint with the Commission, if ground for such complaint existed, attacking such motor-carrier rates and assailing use of the so-called forwarder-tonnage club. The Commission, on its own motion, instituted one proceeding in which it called into question a large number of contracts filed by forwarders and motor carriers under section 409, as amended in 1950. The parties to the contracts, both forwarders and motor carriers, indicated their complete satisfaction with the terms, conditions, and compensation of such contracts. The proceeding was never prosecuted. That fact has been cited by some people as an indication that something is wrong with the law, whereas it is the best possible indication that there was nothing wrong with the contracts. The Commission has itself highlighted the most conclusive regard in which its tonnage-club theory is at fault. In its initial report, which states facts that have not been disputed, the Commission stressed the similarity between the motor-carrier "piggyback" operations and those that the bill would authorize for forwarders. Since motor carriers control many, many times the volume of traffic that moves in forwarder service, it is obvious that they are in a far more advantageous position than the forwarders would ever be to demand rate concessions from the railroads. And yet the Commission has neither alleged that such a potentiality exists where motor carriers are concerned, nor suggested that legal safeguards be erected to pre vent it. Thus far I have dealt with the Commission's conclusions regarding the bill as written. I come now to what we regard as its counterproposal, which as I have said we do not think is germane to the subject under consideration. In its supplemental report the Commission said, in apparent recognition of the fact that section 409 already provides for contracts between forwarders and motor carriers, that it was "not prepared at this time to oppose" such contracts between forwarders and railroads as to piggyback traffic, provided certain safeguards should be thrown around them. What the Commission recommends by way of safeguards is a complete rewrite of section 409 so as to reverse its present purpose, which is to authorize contracts in the nature of divisions, and convert it into a rate section. The Commission urges that the bill, as well as the present law, be amended to provide: 1. Contracts must be filed on 30 days' notice, the same as rate tariffs. 2. Contracts would be subject to suspension pending investigation. 3. When contracts are called into question the burden of proof would be on the forwarders and rail or motor carriers parties thereto. 4. The compensation provided by contracts could not be lower than published tariff rates of rail or motor carriers where the line-haul distancce was 450 miles or more. 5. Penalties would be provided for violation of terms of contracts. These recommendations would completely alter the meaning and purpose not only of the present bill but of present law. They reflect erroneous concepts long since considered and rejected by Congress. The contracts now authorized by section 409, as well as those contem plated by the bill, would be treated under the Commission's proposal as though they provided for rates, whereas the Congress has declared that such contracts provide for charges which are comparable to and should be treated as divisions among carriers. In reporting the 1950 amendment to section 409 the House Interstate and Foreign Commerce Committee said: The proviso in section 409 *** closely parallels the provisions of the Interstate Commerce Act which govern divisions of revenue among common carriers subject to parts I, II, and III participating in joint rates (secs. 1 (4) and 15 (6) of pt. I; secs. 216 (c) and (f) of pt. II; and secs. 305 (b) and 307 (e) of pt. III). It is thus clear that (except where the limitation as to distance applies) the compensation which may be agreed upon under the proposed contracts is comparable to compensation which would be received under a division of a joint rate rather than to compensation received under a published tariff rate (Rept. No. 2489, 81st Cong.). Divisions among carriers, under the sections quoted above, are not required to be published. Except in very rare instances they are not even filed with the Commission. Obviously they could not be suspended, because the Commission has no knowledge of them unless they are drawn to its attention by one of the parties to such divisions. The Commission now has, under section 409, substantially the same powers and duties with regard to contracts between forwarders and motor carriers as it has with respect to divisions between other carriers, motor, rail, and water. Under the bill the Commission would also have those same powers with regard to contracts between forwarders and railroads as to piggyback service. Since the subject matter is the same relationships and charges as between common carriers and not as between carriers and shippers-why does the Commission need additional powers where forwarders are concerned? We think, in all fairness, the Commission should be called upon to answer that question. Because if the Commission, in spite of the terms of the law, continues to regard contracts beween forwarders and other carriers as though they were rates applicable between carriers and shippers we do not understand how the purpose of the law can be achieved. On additional point raised by the Commission and certain other persons deserves notice. The bill refers to freight "loaded in or on trailers or other containers." Objection is made that the words "or other containers" could be construed to mean containers small enough to be loaded into boxcars. That is not the purpose of the language and we do not think it would be so construed. The purpose is to provide the flexibility necessary to anticipate changes in a rapidly developing service. Already experiments are being conducted with van-sized containers that might not properly be described as trailers. If the terms used by the bill are made too rigid it might be out of date before it becomes effective. To summarize briefly, we think that after all of the testimony is concluded these facts will stand out clearly: Freight forwarders, by the very nature of their operations, are peculiarly well adapted to engage in and to help develop piggyback service; they are presently prevented from doing so because of a lack of authority for necessary contractual arrangements on a basis comparable to that afforded their competitors the motor carriers; and the bill is based on ample legal precedent and conforms with sound regulatory principles and policies. For these reasons we urge your prompt and favorable action. on the Great Lakes under United States flag in the transportation of commodities in bulk. The transportation of commodities in bulk on the Great Lakes is a homogeneous mode of transportation. It is not in any appreciable degree commingled with any other mode of transportation. I would like, if you please, Mr. Chairman, to have filed for the record my prepared statement; and if it meets with your pleasure, I would simply like to scan the statement as I go along, pointing out the subjects which are discussed. Mr. WILLIAMS. You may proceed. Mr. JOHNSON. In the first place, there is an introductory statement in which we point out that the position that we are taking here is not inconsistent with one of the recommendations of the President's Advisory Committee with respect to the free play of competition in the field of transportation. Second is a description of the geography of the Great Lakes. Next, on page 3, is a discussion of the navigation rights of the Great Lakes, pointing out that the Great Lakes are international waters, where the transportation is both domestic and international, and, of course, with the opening of the St. Lawrence seaway the international aspects are likely to be of greater significance than they have been. heretofore. On page 4 we discuss the nature of Great Lakes bulk transportation, and on page 5 there is a table compiled in 5-year periods, showing the volume of that transportation; and, if you please, Mr. Chairman, you will note that it is a very substantial volume that is moved each season in these bulk commodities, namely, iron ore, limestone, coal, and grain. On page 6 there is a discussion of the water carriers engaging in this bulk transportation, and we point out that in accordance with the general maritime laws those carriers are either contract or private carriers. The transportation of commodities in bulk does not lend itself to a common-carrier service, and the reasons for that are pointed out in the statement under the heading on page 8. There is a very substantial economy, of course, which we discuss on page 10 of Great Lakes transportation. Briefly stated, it is about 1910 mills per ton-mile, as compared with about 115100 cents per tonmile by rail carrier. Over the years the Congress has dealt with three different acts which have formed the basis in some manner or other of the economic regulations of water transportation, and in each one of those acts, namely, the Shipping Act of 1916, the Intercoastal Shipping Act of 1933, and the Transportation Act of 1940, contemplated the transportation of commodities in bulk on the Great Lakes, and there were 3 basic reasons for those exemptions: (1) that the transportation of those commodities is conducted by contract and private carriers, not common carriers; (2) that it is not competitive with common carriers either by land or water; and (3) that it is competitive with foreign carriers, the most important of which are Canadian carriers. Mr. Chairman, our concern with H. R. 6141 and 6142 is the proposed redefinitions of the terms "common" and "contract carrier," and the repeal of the general bulk exemption. There is a specific contract carrier bulk exemption for the Great Lakes and at the time the Transportation Act was passed that exemption was considered highly adequate for the Great Lakes. Mr. HINSHAW. I think that several of us were here at that time and remember very well the plea that was made for the freight forwarders to be legalized, so to speak, by the enactment of part IV. Prior to that time they were people who were recognized by the Commission as being lawfully in the transportation business which they engaged in by virtue of the difference in the rail carload and less than carload lots, and that would be the space in which they operated, and we gave them an opportunity to operate. In other words, they consolidated freight; they put in a car, a shipment at a carload rate, although they charged something on the order of less than the carload rates to the shipper; and then they utilized the motor carriers at each end of the line haul. Now, am I incorrect in that? Mr. MORROW. No, sir; that is correct; that is an accurate statement. Mr. HINSHAW. Well, then, how can the motor carriers become competitors of the freight forwarders in the pickup and distribution business? Mr. MORROW. I suppose your question is directed to this situation I have described here and not the general question. Mr. HINSHAW. No; I am talking about it generally. Mr. MORROW. Generally? Mr. HINSHAW. Yes. Mr. MORROW. It always has been that the forwarders are competitors with motor carriers, and with the railroads, although they utilize those carriers in the provision of their service, just as I assume the Railway Express Agency, to a degree, is competitive, even with the railroads that it utilizes. Mr. HINSHAW. Of course, the Railway Express Agency is owned by the railroads and cannot be in competition with them. Mr. MORROW. Well, when it was independently owned. Mr. HINSHAW. That is a long time back. We do not need to discuss that. Mr. MORROW. Yes, sir. Mr. HINSHAW. That has been out of business, as a competitor for so many years that nobody but you and I remember that time-there may be a few people in this room who do. But, I am terribly concerned that you would consider the motor carriers and the rails as competitive, after the hearings in the origin of the act. Mr. MORROW. I do not know what to say to that, because it is a fact, and it always has been a fact, that the forwarders do compete with the motor carriers and the railroads, for the 1. c. 1. and 1. t. 1. traffic. Mr. HINSHAW. That is merely in salesmanship. But as to the competition where they employ the other types of carriers, at both ends of the operation, and carry these operations out on their own wheels, so to speak, they cannot be competitive except in the getting of business. Mr. MORROW. I am not quite sure I understand that question, Mr. Hinshaw. Mr. HINSHAW. Well, if a salesman goes out and sells customers on the idea that the using of the service that we offer is good. Mr. MORROW. Yes, sir. Mr. HINSHAW. Whoever we are. Mr. MORROW. Yes, sir. Mr. HINSHAW. It might be motor carrier, or railroads, or freight forwarders. Mr. MORROW. Yes, sir. Mr. HINSHAW. And so, we have competition so far as salesmanship is concerned. Mr. MORROW. Yes, sir. Mr. HINSHAW. And that is a good idea. I am in favor of that. But, for the freight forwarders utilizing both services, both carriers, first by motor truck and then by rail, to complete the operation, I do not see how there is any competition at all, except in salesmanship. Mr. MORROW. Well, that is probably true, Mr. Hinshaw, and I do not mean to imply that forwarders are competitive with the specific carrier that they use, for instance, the gathering and distributing motor carriers, because if the forwarder was not there, those motor carriers might not be able to participate in the through traffic. They could not receive it at the other end of the line, or some intermediate point. Mr. HINSHAW. The only service the freight forwarder performs is that of expediting and the hauling of pickup and delivery at both ends of the line haul, and expedition in that. Mr. MORROW. That is a major part of the service. Mr. HINSHAW. It has nothing to do except with consolidation and distribution. They do expedite it. But, consolidation does not give the service to the customer. That is just helping the freight forwarder make his money. Is that not right? Mr. MORROW. Yes, but they have expert organizations built up for the purpose of expediting freight all along the line. Mr. HINSHAW. Otherwise, anyone who is doing business with or using the freight forwarder is doing it for the purpose of obtaining expedition. Mr. MORROW. That is right. Mr. HINSHAW. That is the only excuse he has for living, offering his organization for better service to the shipper; is it not? Mr. MORROW. Yes, sir. Mr. HINSHAW. That is the reason why he can come in and get the full less-than-carload lot rates from the shipper. Mr. MORROW. Yes, sir. Mr. HINSHAW. He can get the full less-than-carload lot or the lessthan-truckload lot rates from the shipper and also get the carload or truckload rates from the carrier. Is that not true? Mr. MORROW. Yes, sir. Mr. HINSHAW. And in between is where his money lies with which to pay his expenses, and also to make his profit. Mr. MORROW. Yes, sir. Mr. HINSHAW. Now, are freight forwarders in the business of owning trucks? Mr. MORROW. Owning trucks? Mr. HINSHAW. Yes. Mr. MORROW. They own some within terminal areas, where they pick up and deliver and transfer freight. Some freight forwarders do have extensive local truck organizations, but they do not own over-theroad trucks. Mr. HINSHAW. What distance do their trucks operate from the ter |