TRANSPORTATION POLICY

WEDNESDAY, JUNE 6, 1956

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TRANSPORTATION AND COMMUNICATIONS,

OF THE COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The subcommittee met at 10 a. m., pursuant to adjournment, in room 1334 New House Office Building, Hon. Oren Harris (chairman) of the subcommittee) presiding.

Mr. HARRIS. The committee will come to order.

We have a number of witnesses today who will testify on H. R. 6141 and various other bills on the subject.

The first witness this morning will be Mr. Giles Morrow, president, Freight Forwarders Institute, 610 Perpetual Building, Washington, D. C.

Mr. Morrow, we will be glad to have your testimony.

STATEMENT OF GILES MORROW, PRESIDENT AND GENERAL COUNSEL, FREIGHT FORWARDERS INSTITUTE, WASHINGTON, D. C.

Mr. MORROW. Mr. Chairman and members of the subcommittee, my prepared statement is necessarily rather lengthy because of the ground I have to cover and the fact that I will be the sole witness for the Freight Forwarders Institute. This is in effect, therefore, a consolidated statement covering a number of bills. I can shorten it a little if I may have permission from time to time to just skip over a paragraph or so and have the entire statement copied in the record.

Mr. HARRIS. You may have permission to put your entire statement in the record, Mr. Morrow, and give such brief explanations as you think are most appropriate and emphasize any points you wish to make in your presentation.

Mr. MORROW. I have been sufficiently identified by the chairman. The Institute is the national organization composed of and representing freight forwarders subject to regulation under part IV of the Interstate Commerce Act.

During the course of the hearings held by your subcommittee last September on the Report of the Presidential Advisory Committee on Transport Policy and Organization I presented testimony in behalf of the institute. My statement appears at pages 186-206, i clusive, of the printed report of those hearings. To avoid repetition, I will make reference from time to time to that testimony.

I included in my September testimony certain background facts which I will not now repeat. It is sufficient to point out that freight

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forwarders were regulated in 1942 by the addition of part IV to the Interstate Commerce Act, and that such regulation follows, in most basic respects, the pattern established by parts I, II, and III of the act for rail, motor, and water carriers.

To bring the record up to date, since my previous appearance the Interstate Commerce Commission has issued its statement Q-950 showing the statistics of operations of the 60 class A freight forwarders for the full year 1955. Such forwarders had gross revenues from transportation in 1955 of approximately $402 million. A little more than three-fourths of this amount, or $303 million, was paid by the forwarders to the underlying rail, motor, and water carriers which they utilized in the provision of their service. In 1955 the 60 large forwarders handled in their service 4.7 million tons of freight, consisting of more than 25 million individual shipments.

I shall state, as briefly as possible, the views and position of the freight forwarders with regard to such of the pending proposals as appear to us to have the most direct effect on the industry. That will include certain of the provisions of the omnibus transportation bills, H. R. 6141 and H. R. 6142, and all of the provisions incorporated in bills H. R. 9548, H. R. 9771, and H. R. 9772.

These last three bills are directed exclusively to the amendment of part IV of the act, and they have the wholehearted support of the forwarding industry. While they do not spring from any specific recomamendation contained in the Cabinet Committee report, they have for their purpose the strengthening of the common-carrier transportation system. I intend to show that these three bills are of immediate urgency, and that the facts on which they rest for support are easy to understand and evaluate.

My testimony will be divided into two major parts. First, I will undertake to deal with the provisions of the omnibus or Cabinet Committee bills, H. R. 6141 and H. R. 6142, insofar as they directly affect freight forwarders. In the second portion of my testimony I will deal with what I have referred to as the three freight-forwarder bills

OMNIBUS TRANSPORTATION BILLS-H. R. 6141 AND H. R. 6142

You have heard a great deal of testimony regarding the meaning and purposes of the various provisions of the omnibus bills, and the philosophy and intent of the report from which they stem. The chairman of the Cabinet Committee and his assistants and advisers, as well as some of his colleagues on the committee, have given you their concepts of the report and the implementing legislation and their reasons why they think the bills should be enacted. Every major forma of transportation, as well as shippers and others, has given your subcommittee the benefit of its views and recommendations. Any st tempted analysis by me of the broad purpose and underlying phlorophies involved in these proposed measures would therefore be repe titious.

Freight forwarders are common carriers who utilize the services of all forms of physical carriage, rail, motor, and water. They are coordinators of the services of the basic carriers that form the phys cal transportation plant. The strength and vitality of the forwarding industry depend in large measure upon a strong and healthy physi transportation system, in which each agency performs as efficienty

and economically as its capabilities permit. Any governmental policy or regulatory action which adversely affects any of the physical earriers ultimately will have an unfavorable effect on freight forwarders. So, the forwarding industry has a vital interest in the type of regulation that is applied to other common carriers in the transportation system, as well as that applicable to forwarders.

The three basic changes proposed by the omnibus bills which would have a direct and important bearing on the freight-forwarding industry are:

(1) The change in the declarations of national transportation policy. (2) The changes in rate regulation and suspension provisions. (3) The provisions regarding exemption of freight-forwarder asso

ciations.

These changes will be discussed in the order stated.

NATIONAL TRANSPORTATION POLICY

The freight forwarding industry is opposed to the change in the declaration of national transportation policy as set forth in section 2 of bills H. R. 6141 and H. R. 6142. Our thinking agrees with that of the ICC as expressed in its letter dated December 22, 1955, addressed to Chairman J. Percy Priest of this committee.

Not only does the proposed new policy fail to recognize the inherent advantage of freight forwarding but it would have the additional effect (1) of lessening the protection which the industry has and needs against unfair and destructive competitive pricing and practices and (2) of permitting and encouraging an intensification of competition in the forwarding industry by liberalizing the standards for obtaining freight forwarder permits.

I will discuss the first of these anticipated effects in more detail when I come to consider the changes in rate regulation and suspension powers. As to the second, there is hardly any room for doubt that the new policy, if made effective, would remove the protection which the industry now has, inadequate though it be, from improvident and wasteful duplication of forwarder services. That is so because the national transportation policy, by the terms of the statute, is one of the basic standards which the regulatory agency must use in determining whether or not to authorize additional freight forwarder service.

Section 410 of the act, governing the issuance of freight permits, requires the Commission to issue authority to institute or extend forwarder operations if it finds

that the applicant is ready, able, and willing properly to perform the service proposed, and that the proposed service *** is or will be consistent with the public interest and the national transportation policy

Under another provision of the same section, the Commission is prohibited from denying an application solely on the ground that the proposed new service will be competitive with established freight forwarder service.

For a number of years now it has been apparent that the ease with which freight forwarder permits may be obtained is resulting in destructive duplication of forwarder service, with resultant impairment. of overall service to the public. One of the bills now before your

subcommittee, and which I will discuss at more length in a few moments, H. R. 9772, is designed to remedy the situation by removing the ban against considering competition in passing upon applications for forwarder permits.

If the new transportation policy proposed by the omnibus bills should be adopted it would not only nullify any beneficial effects that might otherwise result from the pending bill, H. R. 9772, but would further weaken the standards for granting forwarder permits. Under the present transportation policy, which applies as a standard in granting such permits, the Commission is admonished to "recognize and preserve the inherent advantages" of the forwarding industry, and to "foster sound economic conditions" within the industry. Under the proposed new policy the Commission would have no such duty, but would be directed to encourage rather than to limit competition.

For these and other reasons which will be more apparent after I have discussed the bill, H. R. 9772, we recommend that the proposed new declaration of national transportation policy, which finds expression in section 2 of the bills under consideration, be not adopted.

RATE REGULATION AND SUSPENSION PROVISIONS

The omnibus bills make the same changes in part IV of the act with regard to the establishment and administrative control of rates as are proposed to be made in parts I, II, and III of the act. There are, of course, some recommendations that do not apply to part IV, such as those regarding section 4, long and short haul, and the sections relat ing to proportional rates; but basically, the same rate machinery ap plies throughout the act and the bills propose the same changes therein. Under the terms of the bills, section 15a of part I of the act, which now applies only to railroads, would be completely revised and would apply to all carriers, including freight forwarders. This new section 15a would take the place of the ratemaking rule now found in section 406 (d), which latter section is repealed. See sections 8 and 21 (c) of the bills. It would also provide for the publication of volume rates and the establishment of special rates for Government traffic, the latter in lieu of free or reduced rates under section 22 which now applies to forwarders as well as other carriers.

The bills would also amend sections 404 and 406 of the act so as to limit the obligation of the forwarders and the power of the Com mission to the establishment and fixing of just and reasonable maximum and minimum, as opposed to precise, rates. They would also revise the suspension powers and procedures now found in section 4 6 (e) by (1) reducing the suspension period from 7 to 3 months, (2) making suspension an extraordinary type of remedy, and (2) pla~ ing the burden of proof upon the complainant if complainant is a carrier. Finally, section 406 (f) would be amended so as to give the Commission jurisdiction over State-made service requirements as weil as State-made rates. See sections 20 and 21 of the bills.

It should be noted here that while the freight forwarding induery does not advocate any change in section 22 of the act, which provides for free or reduced rates on Government traffic, if faced with the alternative of complete repeal of that section, as provided in the bill, HR 525, or modification of the section as provided for in sections ard 2 of the omnibus bills, the industry would favor the latter.