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 vehu-le 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 so line-haul transportation is for a total distance of 450 highway-miles or more, sư h 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 aube ject to this part from entering into or operating under contracts with commʻs carriers by railroad subject to part I of this Act, governing the utilization by such freight forwarders of the services and instrumentalities of such comm/ < 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 ruch contracts it shall be the duty of the parties thereto to establish just, reasonabie, and equitable terms, conditions, and compensation which shall not unduly prefer or prejudice any of the participants thereto and shall be consistent with the mational 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 reasonabie rules and regulations as the Commission shall prescribe. Whenever, after bearing, upon complaint or upon its own initiative, the Commission is of opinia 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. And, 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 flatear 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 transpor tation 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 pres ent 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 suthorized 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. I offer that exhibit for the record, Mr. Chairman. EXHIBIT B QUESTIONS CONSIDERED BY INTERSTATE COMMERCE COMMISSION IN DOCKET 31375, MOVEMENT OF HIGHWAY TRAILERS BY RAIL, WITH SUMMARY OF ANSWERS THERETO (293 I. C. C. 93) Question 1 May a railroad transport its own freight (i. e., freight tendered it by shippers for movement by railroad, on railroad bills of lading, and at railroad rates) in its own trailers on flatcars, without holding any authority under part II of the Interstate Commerce Act? Otherwise stated, do such operations constitute carriage by railroad subject to part I or carriage by motor vehicle subject to part 11? Answer: "Yes" to first part of question. "As to the latter part, we are of the view, and so find, that the operations referred to constitute carriage by railroad, subject to part I of the act.” Question 2 If a railroad transports its own freight in trailers on flatcars, is the motor operation of the trailers in collection and delivery service at the termini of the rail movement an operation within the partial exemption of section 202 (c) (1) of the act? Answer: "Yes," The Commission pointed out that in the Peninsula case (292 I. C. C. 157) it had found that motor terminal operations for a water carrier are within the section 202 (e) exemption and said: "* we are of the view, and so find, that motor operation of trailers by a railroad in terminal-area collection-and-delivery service in connection with the railroad's trailer-on-flatear service is an operation within the partial exemption of section 202 (c) (1) of the act." Question 3 May a railroad, under provisions of tariffs duly published and filed by it, but without holding any authority under part II, transport freight-laden trailers on flatears, the trailers having a prior and or subsequent highway movement(a) by private carrier by motor vehicle; (b) by contract carrier by motor vehicle? Answer: (a) “Yes.” (b) "For the reasons stated below as to part (a) of question 10, we are of the view that a contract carrier may not utilize trailer-on-flatcar service to obtain transportation within the scope of its (the contract carrier's) permit." The Commission said that it did not suggest a railroad should police the operations of motor carriers, but that where the railroad has knowledge that the trailers are moving in contract carrier service it should not become a party to a violation of the law. The Commission further modified its answer by saying that a motor contract carrier might act as the agent of a shipper in forwarding trailers beyond the scope of its permit. Question 4 Under the conditions stated in question 3, may a railroad transport such trailers if the prior and/or subsequent highway movement is by common carrier by motor vehicle? If so, to what extent must the railroad ascertain and be subject to the limitations in the motor common carrier's certificate as to (a) territory and (b) commodities? Answer: "No" as to the first part of question. The latter part of the question is considered under question 7 (a). In answering the first part of the question the Commission pointed to its decisions in Substituted Freight Service (232 I. C. C. 683), and Motor-Rail Motor Traffic in East and Midwest (219 I. C. C. 245), wherein it was held that "for a motor carrier to act as a common carrier by motor vehicle and as a shipper by rail as to the same service is repugnant to the act," and said: "The view so stated is obviously sound." The Commission noted that its answer relates only to traffic moving by rail under open tariff and in the absence of a through route arrangement. Question 5 May a railroad engaged in trailer-on-flatcar service and a motor common carrier establish through routes and joint rates covering movement of the motor common carrier's trailers on the railroad's flatcars? Answer: "Yes" because authorized by section 216 (c) of the act. Question 6 May a railroad engaged in performing trailer-on-flatcar service under jointrate arrangements with some motor common carriers equally eligible under the law to participate in such arrangements? As between a railroad and a motor common carrier whose loaded and empty trailers are moving in the railroad's trailer-on-flatcar service, is the relation that of connecting carriers (a) where the arrangement is for substituted-rail-formotor service; (b) where the arrangement is for other than substituted-rail-formotor service? Answer: The Commission said it could not answer part (b) of the above question because the factual situation is vague and uncertain. As to 7 (a) the answer was "Yes". "In consonance with our conclusion as to question 1, above, we are of the opinion that trailer-on-flatear transportation is in fact transportation by railroad. And this is so whether the trailers are owned or operated by railroads, shippers, or motor common carriers." The Commissio referred to its decision in the Substituted Freight Service case, wherein it found that "where the substitution service consists of a combination of line-haul movements by rail and motor, it is in legal effect a joint service, no matter by what other name it may be designated." The Commission also dealt, in answering question 7 (a), with the question presented in 4, as to whether a railroad must ascertain and be subject to the limitations in the connecting motor carrier's operating certificate. It said that while the railroads are under no obligation to police the motor operations "we believe that, when they enter into joint-rate arrangements with such carriers, they should satisfy themselves that the motor carriers have authority to operate in respect of the commodities concerned between the points where the substituted service is performed." Question 8 May a railroad, under provisions of tariffs duly published and filed by it, but without any authority under part II, transport freight-laden trailers on flat-sts, the trailers having a prior and/or subsequent highway movement in freightforwarder service? Answer: "Yes." "In its relations with carriers by railroad, a freight forwarder is in many, perhaps, most, respects a shipper." Question 9 May a railroad engaged in trailer-on-flatcar service and a freight forwarder establish through routes and joint rates covering movement of the freight f <warder's trailers on the railroad's flatears? Answer: "No." In answering this question the Commission referred to the legal and legislative history concerning joint rates between freight forwarding and motor carriers, and said that under part IV forwarder-motor joint pres continued to be lawful until September 20, 1951. It added: "Since that date. forwarder joint rates of any kind have been unlawful." Question 10 May a railroad engaged in performing trailer-on-flatcar service under joint-rate arrangements with motor common carriers refuse to publish and file app pate tariffs and to transport the freight-laden trailers of (a) contract carriers br motor vehicle; (b) private carriers by motor vehicles; (c) freight forwardere) Answer: (a) "Yes" because "the motor contract carrier may not avail itself of such rail service.” Parts (b) and (c) considered together: "It is not feasible to give a defir" answer to these parts of the question except in a concrete case where a!" relevant facts are known and disclosed of record. In general, however, It is be said that the answer in each case will depend upon whether the shrpers request for trailer-on-flatcar transportation is a reasonable one in the rarten'ar circumstances presented." The Commission cited the proposal of the New York |