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the Cabinet Committee, a similar recognition of the problem has been expressed by the Transportation Association of America. The only question is whether the language used by the bills offers the proper cure.
The freight forwarding industry recognizes the right of shippers to pool or consolidate their own freight for the purpose of effecting savings in freight rates. It is only when such consolidating activities are conducted as a transportation enterprise, for the purpose of gain or profit, that they are cause for any valid complaint on the part of the industry.
We have no revisions of langauge to suggest at this time. During the last several years representatives of the forwarding industry have undertaken to determine what type of revision of section 402 (c) would satisfy the shipper groups who oppose the language that has been brought forward into these bills. So far we have not been successful. We hope that those who speak on this provision of the bills before your subcommittee at these hearings will offer constructive suggestions and not merely voice objections to present language. If no such constructive suggestions are forthcoming then no one should be heard to object to whatever remedial measure this subcommittee and the Congress shall agree is best suited to the needs of the situation. We are confident that when the record is closed the need for remedial action will be clearly manifest and that regardless of what happens to other sections of the omnibus bill, an amendment to section 402 (c) should result,
FREIGHT FORWARDER BILLS—H. R. 9548, H. R. 9771, AND H. R. 9772
Now, I come to the freight forwarder bills, H. R. 9548, H. R. 9771, and H. R. 9772. Three of the bills which have been seheduled for hearing at this time, as I have previously indicated, propose to amend the regulations provided for freight forwarders under part IV of the act, and for identification I will call them freight forwarder bills.
Two of these bills, H. R. 9771 and H. R. 9772, are designed to correct inequities in part IV of the act, and propose to bring freight forwarder regulation into line with that provided for other common carriers under the act. The other, H. R. 9548, supplies the regulatory
. authority for freight forwarders to participate in a current and popular development in transportation known as piggyback.
The freight forwarding industry strongly endorses each of these bills, and reccommends them to your prompt and favorable consideration, for reasons which I will presently state in more detail.
Corresponding bills have been introduced in the Senate as follows:
Hearings were held on the Senate bills on April 9 and 10, 1956. Bill S. 3365 was favorably reported, without amendment, on May 24, 1956 (see Rept. No. 2040).
The other two bills are still under consideration by the Senate committee.
Testimony in opposition to one or the other of the Senate bills was offered by representatives of certain railroads and motor carriers as well as by persons who spoke for shippers or shipper associations
who consolidate their own freight. Almost without exception the objections follow lines of reasoning that were advanced in connection with previous freight forwarder legislation and have been emphatically rejected by Congress. Some of the objections interposed to the Senate bills have already been stated before your subcommittee during the present hearings, and others will undoubtedly be heard.
We could produce numerous witnesses, both carrier and shipper, who would rebut what has been said in opposition to these bills. Dut of respect for the time of the subcommittee, and in view of the fact that the answers to the objections are already very largely a matter of record, we have not asked authority to produce any such witnesses. However, so that you may have both points of view before you when you come to consider the validity of the objections, I will refer briefly to the opposing arguments as I proceed to discuss the bills.
The three bills I am about to discuss are not compliacted, and they do not involve any basic questions of regulatory policy since they do not propose to afford freight forwarders any rights or privileges not already enjoyed by all other regulated common carriers. They are designed rather to afford freight forwarders equal treatment under the law, and to remove present provisions which discriminate unfairly against forwarders and in favor of their competitors.
In the light of these facts we hope that your subcommittee will act promptly on these bills, irrespective of the time schedule which may be involved where othér bills now before you are concerned. The need for these bills is urgent and the justification for them will be clear when I have finished.
BILL H. R. 9548
(To amend section 409 of the Interstate Commerce Act, as amended, to authorize contracts between freight forwarders and railroads for the movement of trailers on flatcars.)
Bill H. R. 9548 would authorize the making of contracts between freight forwarders and railroads governing the movement of highway trailers on flatcars—a service popularly know as “piggyback."
To accomplish its purpose, the bill adds a new paragraph to section 409 (a) of the act. That section already authorizes contracts between freight forwarders and motor carriers and provides, in subsection (b), that such contracts shall be filed with and subject to the jurisdiction of the Interstate Commerce Commission. The same requirements would, of course, apply to contracts for "piggyback” between forwarders and railroads. In order to show the proposed changes in their proper context I have prepared, and there is attached to my testimony marked as “Exhibit A," a comparative print of section 409 with the amendments made by the bill underscored.
I offer the exhibit for the record, Mr. Chairman.
COMPARATIVE PRINT OF SECTION 409
(Proposed changes in italic) Sec. 409. (a) (1) Nothing in this Act shall be construed to prevent freight forwarders subject to this part from entering into or continuing to operate
under contracts with common carriers by motor vehicle subject to part II of this Act, governing the utilization by such freight forwarders of the services and instrumentalities of such common carriers by motor vehicle and the compensation to be paid therefor: Provided, That in the case of such contracts it shall be the duty of the parties thereto to establish just, reasonable, and equitable terms, conditions, and compensation which shall not unduly prefer or prejudice any of such participants or any other freight forwarder and shall be consistent with the national transportation policy declared in this Act: And provided further, That in the case of line-haul transportation between concentration points and break-bulk points in truckload lots where such line-haul transportation is for a total distance of 450 highway-miles or more, such contracts shall not permit payment to common carriers by motor vehicle of compensation which is lower than would be received under rates or charges established under part II of this Act.
(2) Nothing in this Act shall be construed to prevent freight forwarders subject to this part from entering into or operating under contracts with common carriers by railroad subject to part 1 of this Act, governing the utilization by such freight forwarders of the services and instrumentalities of such common carriers by railroad and the compensation to be paid therefor, for line-haul movement of freight loaded in or on trailers or other containers and transported on railroad cars suitable for such use: Provided, That in the case of such contracts it shall be the duty of the parties thereto to establish just, reasonable, and equitable terms, conditions, and compensation which shall not unduly prefer or prejudice any of the participants thereto and shall be consistent with the national transportation policy declared in this Act.
(b) Contracts entered into or continued pursuant to subsection (a) of this section shall be filed with the Commission in accordance with such reasonable rules and regulations as the Commission shall prescribe. Whenever, after hearing, upon complaint or upon its own initiative, the Commission is of opinion that any such contract, or its terms, conditions, or compensation is or will be inconsistent with the provisions and standards set forth in subsection (a) of this section, the Commission shall by order prescribe the terms, conditions, and compensation of such contract which are consistent therewith.
Mr. MORROW. In a statement dated April 6, 1956, generally supporting the comparable Senate bill S. 3366 the Interstate Commerce Commission suggested that the bill be amended by inserting the phrase "or any other freight forwarder" after the word "thereto” in line 9 on page 2. The freight forwarding industry has no objection to this amendment. However, in a later statement dated May 3, 1956, the Commission made certain other suggestions which we consider impractical and unsound, which I will discuss at a later point in my statement.
Mr. Chairman, the Interstate Commission has submitted these same suggestions, I understand, to your subcommittee, but all in a consolidated letter rather than in two letters. I did not have that before me when I prepared this testimony.
I will show that prompt enactment of bill H. R. 9548 is necessary, first because there is now no practical basis on which freight forwarders can legally utilize piggyback service, and second, because the motor carriers who compete with forwarders for traffic already are authorized to use the service on a contractual basis. I will also show that motor carriers not only one using piggyback service in a manner denied to forwarders, but through the medium of piggyback, are conducting operations that cannot be distinguished in any detail from freight forwarder operations, and thus are invading the field of activity of freight forwarders.
First, however, I will discuss briefly the nature of piggyback service, its present and potential uses, and the circumstances which gave rise to the pending bill.
The movement of highway trailers on railroad flatcars is not an innovation in transportation, but piggyback is presently being developed and experimented with on a scale never heretofore undertaken. It has attracted wide public attention and is being acclaimed by many people as the most dramatic and promising development on the transportation horizon.
Physically, piggyback consists in the gathering of traffic by motor vehicle moving the traffic in line haul via rail in a highway trailer loaded upon a flatcar, and, upon arrival taking the trailer from the flatcar and distributing the shipments.
Two basic plans for the use of piggyback have so far been put into use, with variations under each plan which need not be mentioned for purposes of this discussion. Under one plan the railroads haul their own freight—that is, freight solicited by the railroad, billed by the railroad, and moved in either railroad owned or leased trailers. The other plan contemplates cooperation with other common carriers, primarily motor common carriers at this stage. It consists in the movement of freight that is solicited, billed and rated by such other carriers, in trailers owned or leased by them.
Under the first plan the freight moves at rail tariff rates, though the rates are generally constructed to meet motor competition and are on approximately the same level as corresponding motor carrier rates. Under the second plan the freight moves from origin to destination on a motor carrier rate in which the railroad “concurs." The railroad receives what is loosely termed a "division" for its share in the operation, but as I will presently show the division is a flat charge per trailer and differs in no respect from an ordinary contractual charge or rate.
The magazine “Railway Age” recently made a survey of piggyback service, and issued a comprehensive special report on the subject in its December 5, 1955, issue. The report consists of a road-by-road analysis of piggyback service as it existed at that time. It shows that 11 railroads initiated the service in 1955, making a total of 35 major railroads who in December, 1955, had some form of piggyback service in operation. Our own analysis shows that several have instituted service since then.
Of the 35 roads, 27 handled only railroad, or railroad billed freight, some of it originating with railroad-owned motor subsidiaries. Six railroads had entered into so-called joint rate agreements with motor carriers and handled the trailers and freight of such carriers. Two railroads had made arrangements to handle the trailers of shippers.
The rates which the railroads publish for the movement of freight in their own piggyback service contemplates a complete transportation service, from shipper's door to receiver's platform, all performed at railroad expense and under railroad responsibility. When the railroads take the trailers of motor common carriers, on the other hand, the majority of the functions involved in a transportation service are performed by the motor carrier. The only expense the railroad has in connection with traffic billed by motor carriers is that connected with the over-the-road haul, since the motor carrier does the solicitation, gathering and distribution, billing, rating, and everything else except to haul the trailer between the points of interchange with the railroad.
As a consequent the charges or so-called divisions made by the railroads for the movement of trailers of motor carriers are much lower than charges published by the rail carriers for the movement of their own traffic. În the so-called Piggyback case before the I. C. C., to which I will presently refer, one of the parties undertook an analysis of the published tariff rates of the New York, New Haven & Hartford Railroad, as compared with the road's divisional charges to motor carriers. It was found that the published rates for railroad piggyback where the railroad performed all the functions of transportation were approximately 40 percent higher than the divisional charges, applicable where the motor carrier performed most of the transportation functions apart from the line haul. (Brief of Knickerbocker Despatch, Inc., Docket 31375).
The price differential between the published tariff rates of the railroads and their contract rates with motor carriers covering piggyback service, as I will presently show, is one of the main reasons why freight forwarders are effectively barred from using the service at the present time.
With the great upsurgence of interest in piggyback, and the actual and announced plans of the railroads to institute the service, certain legal questions arose as to the details of its use. In 1953, the New York, New Haven & Hartford Railroad, one of the pioneers in piggyback service, petitioned the Interstate Commerce Commission for a declaratory judgment to remove uncertainties as to legal rights and responsibilities involved in its piggyback operations. The New Haven submitted 20 questions as to which it asked the Commission to provide authoritative answers.
In response to the petition the Commission instituted a proceeding, in January 1954, identified as Docket 31375, Movement of Highway Trailers by Rail. The Commission's order framed 12 "basic legal questions" as to which it invited comments on brief and later held oral argument.
The Freight Forwarders Institute participated in the proceeding in behalf of its members. In addition to suggesting what we considered to be the correct answers to the questions directly affecting freight forwarders, we urged the Commission to be guided by certain principles which we considered basic. Among them were:
(1) That freight forwarders should be afforded substantially like and equal treatment with other common carriers who might be authorized to utilize rail piggyback service.
(2) That no other types of carriers should be permitted to invade the field of freight forwarding under the guise of a piggyback operation.
The Commission gave its answers to the 12 questions in a report dated July 30, 1954 (279 I. C. C. 93). The result of the application of those answers runs counter to both of the principles which we urged in the case. I want to discuss the decision, not to argue that it was wrong, but to show that it uncovered a serious defect in the law where freight forwarders are concerned and indicated the necessity for corrective action.
Attached hereto, marked exhibit B, is a list of the 12 questions as framed by the Commission, with a brief summary, in my own language, of the answers which the Commission gave to each.