Central to move solid trains of cars in such service between New York, Chicago, and other points, restricted to motor common-carrier trailers, and added: "it is doubtful that all shipper requests for such service could be regarded as unreasonable."

Question 11

May a railroad, by provisions in its tariff, make its trailer-on-flatcar service available to private carriers but not to freight forwarders? Answer: "No."

Question 12

If a freight forwarder has a contract with a motor common carrier and if a trailer tendered to a railroad carries the identification of the motor common carrier, must the railroad providing trailer-on-flatcar service accept as compensation its division from the motor common carrier under the motor-rail joint rate rather than accept charges based on rates published in the railroad's tariff?

Answer: No answer because the factual situation is vague and uncertain.

Mr. MORROW. The Commission's answers to questions 5, 7, 8 and 9 establish the following propositions: That a railroad and motor carrier may establish "through routes and joint rates" covering piggyback service but that a railroad and freight forwarder may not do so; that "substituted rail-for-motor service" is in fact a "joint" service as to which joint rates may be established; and that freight forwarders may utilize piggyback service only on the basis of such rates as the railroads may publish for application to the traffic of the general public.

In analyzing the effect of the foregoing determinations it is important to bear in mind that freight forwarders are exclusively carriers of less-truckload and less-carload freight, and that motor carriers are their primary competitors. The published rates of freight forwarders are substantially the same as the comparable motor carrier rates, and for competitive reasons must remain so. It is axiomatic, then, that if a motor carrier is permitted to operate exactly as a freight forwarder does, but at a much lower underlying cost, he can undercut the forwarder rates to the extent necessary to attract the traffic.

Stated broadly, the combined effect of the Commission's answers is to freeze freight forwarders out of the piggyback field and at the same time to permit motor carriers to operate freight forwarder service under arrangements that are not open to the freight forwarding industry.

Forwarders are frozen out of the piggyback field by reason of the prohibitive prices they would have to pay under published tariffs of the railroads by reason of the competitive disadvantage at which they are placed as against their motor competitors-and because of the unsuitability of the rail piggyback tariffs to move forwarder traffic.

A little while ago I referred to the statement made in the piggyback case that the New Haven's tariff rates were 40 percent higher than its divisional charges to motor carriers. (The reference was to New Haven Local Freight Tariff I. C. C. No. F 4195, and unpublished Division Sheet No. F 517-C). It is reasonable to assume that the socalled divisional arrangements on other lines bear the same relationship to tariff rates.

There is a great deal more to providing transportation service han line haul. The generally recognized elements in transportation in

clude:

1. Solicitation.

2. Gathering and receiving.

3. Rating and billing.

4. Line haul.

5. Distribution to consignees.

6. Collection and accounting.

7. Claim investigation and handling. And a few others I could

name.

On piggyback service offered direct to the general public by the railroads, the rail carrier performs all of the elements of transportation enumerated. When it handles a trailer on a flatcar either for a motor common carrier or a common carrier freight forwarder, all of the ele ments except line haul are performed by the motor carrier or the freight forwarder. The 40-percent differential between so-called divisions with motor carriers and piggyback tariff rates to the public is justified by the lesser service the railroads are required to provide. Exactly the same justification exists on freight forwarder piggyback traffic.

Obviously, the forwarder could never compete for traffic within a 40 percent higher cost than his most formidable competitor. Even a lower differential would suffice to bar the forwarder from the field. The argument advanced by some who oppose the bill that freight forwarders are not now foreclosed from using rail piggyback service, but that they can and should utilize such service on the basis of the published tariff rates of the railroads is thus directly contrary to the facts. It might as well be said that motor carriers could also pay published tariff rates. It is a well known fact that motor carriers have not, with possible rare exceptions, used rail piggyback service in the past at published rates, but have engaged in such operations only where lower divisional arrangements have been made available to them. Pub lished rail tariff rates are no more suitable to the movement of trailers of motor common carriers than they are to the movement of forwarder freight in piggyback service.

It is not altogether surprising that some motor carriers oppose this bill, for it would afford them competition in a new and promising field where none exists today. However, some of the arguments which they have advanced in support of their opposition are little short of astonishing. In this category is the argument that the bill would place freight forwarders in the motor carrier business without a motor carrier certificate the theory of "invasion." A short time ago the motor carrier representatives were pressing this same charge against the railroads in the piggyback case before the Commission. There they argued, unsuccessfully, that to permit railroads to haul their own freight in trailers on flatcars would put the railroads in the motor carrier business wthout a motor carrier certificate. Now that the railroads are beginning to let the motor carriers in on the business the tune has changed and it is the forwarders who are charged with "invasion."

The facts speak for themselves, and the facts show conclusively that it is the motor carriers who are invading another field of carriagefreight forwarding-by the manner in which they participate in piggyback service. A person who "assembles and consolidates・・ and performs or provides for the performance of break-bulk and distribut ing operations *** and utilizes *** the services of a carrier or carriers subject to part I" is a freight forwarder by statutory defini tion, no matter what name of convenience is given to the service. More than that, when a carrier certificated by the Commission to operate a

"motor vehicle"***"upon the highways," takes those vehicles off the highways and puts them on a railroad he ceases to be a motor

carrier.

Bill H. R. 9548 is not designed to correct these practices. The most that it would do is to open the door to forwarders and authorizes them to meet these new competitors on their own ground. But it emphasizes the urgency of this bill to understand exactly what is taking place.

Under the plan or method of operations which the Commission has approved as lawful, it is possible for a motor carrier having operating rights between New York and Chicago, for example, over a specified highway, to work out a joint rate arrangement with a railroad for piggyback service; completely abandon its highway route; and move all of its freight by rail between the two points. The motor carrier, in that case, would be nothing more than a gathering and distribution carrier handling shipments within the terminal areas of New York and Chicago. He would possess all of the characteristics of a freight forwarder and none of the characteristics of a motor common

carrier.

To show that the example is not farfetched but reflects actual practice, let me quote from some of the prior decisions cited and relied upon by the Commission in the Piggyback case. In Substituted Rail Service by Red Ball Transfer Co. (52 M. C. C. 75) the Commission said:

Red Ball is authorized to perform service between Chicago and Kansas City and St. Joseph. It has actually performed over-the-road truck service between the points, and it now proposes to substitute rail service for its over-the-road truck service. We are of the view that such substitution would be unlawful.

At another point in that decision the Commission said:

Red Ball anticipates that all of its service between Chicago and Kansas City and St. Joseph would be performed in the proposed substituted freight service, [Emphasis supplied.]

Details of the substituted service plan of operation were spelled out more specifically in Motor-Rail-Motor Traffic in East and Midwest, 219 I. Ĉ. C. 256, also cited by the Commission in support of its Piggyback decision. The Commission described the physical operation involved as follows:

At Chicago, for example, it (motor carrier) picks up freight offered for shipment by the use of gathering trucks operating over city streets and in the surrounding areas. These shipments and others moving from other points to Chicago by motortruck are assembled at its Chicago freight station for sorting and loading into the trailers ***. After a trailer is loaded, weighed, sealed, and locked it would be taken by the motor tractor of the motor carrier to the railroad yard at the point of interchange, backed up a ramp, and loaded on a flatear of the railroad. * * * Shipments loaded in the trailer destined to the Twin Cities and beyond would move by rail to St. Paul, where the motor carrier would unload the trailer from the flat car, take it to its freight station, and unload and distribute the shipments.

The foregoing quotation describes precisely the operation of a freight forwarder. Freight is gathered and consolidated by the motor carrier and tendered to the rail carrier for the consolidated line-haul movement. At destination the consolidated shipment is again received by the motor carrier and is broken up and distributed to individual consignees. That is freight forwarder service by definition

of the statute, but it is being conducted by a motor carrier without benefit of a forwarder permit.

And how does the motor carrier go about "dividing" the applicable through motor carrier rate with the railroad? The answer is found at page 253 of the decision from which I have just quoted:

The Great Western would receive as its division of the proposed joint rates, on traffic interchanged at Chicago and St. Paul, $42.50 for each loaded trailer, or $85 for each car carrying two loaded trailers.

It is interesting to note how this "division" was arrived at. The Commission reported, in its decision, that:

The division of $42.50 is based, according to respondents, on the approximate cost to the motor carrier of moving the trailers over the highway of 10 cents per trailer-mile for the highway distance of 425 miles between those cities

We think it puts a considerable strain on logic and defies legal precedent to call that type of a charge a "division." But whatever it is, the motor carrier is acting exactly as a freight forwarder would act in tendering such freight to the railroad, and the forwarder surely is entitled to as favorable a charge. And the cry of "invasion" comes with il grace from the motor carriers who are themselves the "invaders."

These cases from which I have been quoting, and which were relied upon by the Commission as precedents in deciding the recent Piggyback case, reflect practices in the isolated instances of piggybacking that existed prior to the current boom. From all that appears of record, present arrangements between railroads and motor carriers for joint piggyback operations are based on the same so-called "substituted service" plan, whereby the motor carrier is the originating and delivering carrier and simply substitutes a rail for a motor haul for a part of the journey.

The facts as I have briefly outlined them show conclusively that there is both a practical need and an economic necessity for this bill, and that its prompt enactment is the only means of removing discrimi nation and equalizing opportunity among carriers. It can be demonstrated also that the bill conforms with sound legal principles and regulatory policies.

First of all, the bill is amply supported by precedent. Freight forwarders and motor carriers have coordinated their services on the bas of contracts or joint rates for more than 30 years since the motor carrier industry was in its infancy. Present section 409, which the bill amends, is the product of evolution and experience.

At the time when motor carriers were regulated in 1935, forwarders and motor carriers had an extensive system of joint service based on contracts between units of the two industries. After enactment of motor carrier regulation the contracts were converted to joint rate and divisional arrangements, which the law seemingly authorized. The ICC held that such joint rates between forwarders and motor carriers were not authorized by the Motor Carrier Act. In this it was sustered by the courts. (Acme Fast Freight, Inc., et al. v. U. S., et al., 31 F. supp. 968: aff'd 309 U. S. 638).

The joint forwarder-motor rates were nevertheless maintained, by reason of various suspensions of the Commission's orders, until for warders were regulated in 1942. The original Forwarder Act (pt. IV of Interstate Commerce Act) authorized continuance of the joint rates

for a temporary period, which was extended from time to time. When other methods proved inadequate as a basis for maintaining the joint service, section 409, authorizing contracts, was enacted in 1950.

Freight forwarders have not made contracts for the movement of their freight in rail service, at least in modern times, and part IV does not authorize such arrangements. Instead forwarders have utilized the published carload rates of the railroads. Over the years the railroads have developed mixed carload rates that would accommodate the type of freight and the mixtures of commodities that freight forwarders normally tender for consolidated rail movement. The "spread" between such carload rates and the 1. c. 1., rates charged by the forwarders has provided the forwarders' operating margin.

The incidental shipper relationship which forwarders sometimes assume in dealing with some of the carriers which they utilize has caused a good deal of confusion in the past regarding the status of freight forwarders. Much of the confusion has been inspired by those who opposed the granting of some right or privilege to freight forwarders so as to equalize their situation with that of other regulated common carriers. Despite the clear legal precedent for the present bill all of those who oppose its enactment, including carrier as well as shipper interests, revive the old argument that the status of freight forwarders is inconsistent with giving them rights to make contracts with railroads for piggyback service.

Long before forwarders were regulated, the Interstate Commerce Commission, in a formal proceeding, very clearly distinguished between the common carrier status of forwarders and the incidental relationship which they sometimes assume in dealing with other carriers. In the Charles Bleich Common Carrier Application case, 27 M. C. C. 9, 15-16, the Commission said:

Its (the forwarder's) primary characteristic is that of a carrier and only as an incident to its common carrier obligation does it assume the apparent status of a shipper, much the same as any common carrier by motor vehicle, which accepts a piece of freight for delivery beyond its terminus and forwards the same over the line of a connecting serv ice carrier, thereby becomes a shipper as to that particular transaction.

Still the argument has been revived again and again before committees of Congress, and each time it has been repudiated. In 1950 Congress undertook to put an end to such contentions once and for all, by amending the definition of a freight forwarder so as specifically to describe forwarders as common carriers. In reporting that amendment to the House of Representatives, the Committee on Interstate and Foreign Commerce said:

This [amendment to definition] will remove any anomaly and confusion regardIng the status of freight forwarders and make clear that they have the status of common carriers (H. Rept. 2489, 81 Cong., to accompany H. R. 5967).

Of the so-called dual status argument the House committee said, in the report above identified:

Even those who oppose the bill, for the most part, concede that freight forwarders are common carriers in their relations with the public. The opponents argue, however, that freight forwarders occupy a dual role and that when they deal with other carriers they are shippers only and should be treated as such. The term "common carrier" was used at common law, and has been adopted by statute, to describe the activities and responsibilities to the public. The