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necessary, I will not cover part 2 but will request permission to have it incorporated in the record following my presentation.

Mr. HARRIS. You may have that privilege.
Mr. ARNOLD. Thank you.

(1) Changes in the national transportation policy: The first subject involves the proposed changes in the national transportation policy. The new language is found starting on the first page of H. R. 6141 under section 2. We take no position for or against the need for a changed transportation policy statement. However, it is our recommendation that any transportation policy statement which the Congress approves should include language which would direct that there be allowed revenues sufficient to enable the carriers under honest, efficient, and economical management, to provide the service needed by the public.

The Interstate Commerce Commission is already required to consider this important factor by section 15a of the act. However, we believe it should be incorporated in the statement of national transportation policy as a guide to other government agencies in their dealings with carriers.

(2) Discontinuance of unprofitable services: Section 6 (a) and (b) of H. R. 6141 found on page 7, among other things, would empower the Interstate Commerce Commission to order discontinuance or curtailment of unprofitable intrastate rail service under certain circumstances. The chamber membership feels strongly that this principle should be approved in order to permit correction of those situations which place an undue burden on interstate commerce. We therefore recommend approval of this objective.

(3) Maximum-minimum rate regulation: The next subject deals with the authority of the ICC to prescribe minimum or maximum, rather than precise rates and is found first in section 7 (a) of H. R. 6141 (p. 8). Currently the Interstate Commerce Commission may fix the precise rate a common carrier may charge for his service. This proposal would limit that authority to the setting of reasonable and just minimum or maximum rates only, while retaining those sections of the act which prohibit discrimination, preference, and prejudice.

Chamber policy, as stated before, urges that carriers should be “regulated only to the degree required by the public interest.” This position, coupled with the chamber's general philosophy that regulatory agencies should not substitute their judgment for that of management, would support this principle unless it is shown clearly to be contrary to the public interest.

(4) Reducation of suspension period : Section 7 (c) of H. R. 6141 (p. 11) proposes, among other things, that the suspension of new rates by the ICC, pending a decision as to their lawfulness, be limited to 3 months.

After careful consideration, the chamber membership feels that the present maximum period of 7 months is unduly long and may encourage procedural delays. We recommend that the 7 months' period be reduced but at the same time we feel that the 3 months' period is unreasonably short. We would favor, therefore, a suspension period somewhat less than 7 months.

(5) Repeal of the rule of ratemaking: Section 8 of H. R. 6141 (p. 13) proposes repeal of the present rule of ratemaking in section 15a of part 1 of the act and substitutes new language which would establish different standards for the Commission in its ratemaking procedures.

We treat the repeal of the present rule more extensively in part 2 of my statement, but I should like to say at this point that we urge that the first standard of the present rule (relating to the effect of rates on the movement of traffic) be eliminated and the third standard (relating to consideration of the revenue needs of the carriers) be retained in any revisions of section 15 (a).

Our transportation and communication committee also has given thorough consideration to other standards that have previously been considered in arriving at just and reasonable rates. Upon its recommendation, the chamber's membership a year ago adopted the following position, which we urge be included in the rule of ratemaking: Transportation rates on competitive traffic or services should not be prohibited by regulatory bodies because of their effect upon the rates, traffic, or conipetition of another form of transportation, provided such rates are not less than minimum reasonable rates for the type of carrier proposing them.

Mr. Chairman, with your permission I should like to digress from the chamber's statement and inject a personal observation which will be very brief.

The record in this hearing contains reference to an alleged trend in the ICC decisions to try and apportion or provide for the sharing of traffic among the various forms of transportation in establishing rates. Considerable testimony is also included saying this is not so, although there may be instances where an attempt was made to provide a fair opportunity for all types of carriers to compete for traffic.

The point I would like to inject is that regardless of the term used, any activity along these lines frequently results in much more than regulating traffic and actually involves sales of shippers.

Take as an example shipper A, who formerly has moved all his products to the customer by rail. The customer demands future shipments by motor carriers for such valid reasons as commodities arrive in better condition and shorter transit time eliminates warehousing the articles.

Shipper A has competitors located in the local cartage area of this mutual customer where there is no economic regulation of motor carriers. Thus, these competitors can comply with the customers demand. However, shipper A's haul is subject to the Interstate Commerce Act. Consequently, after shipper A negotiates a realistic rate to move the traffic, it must be published. If there is any attempt to keep this new motor carrier rate in relationship so railroads can compete, the sales of shipper A could be involved.

Also, there may not be any movement for the different types of carriers to divide as the commodities would be moving by truck from competitors.

Another example is a commodity that again moves by rail. Because of more progressive material handling methods the customer demands dump-truck service. Again competitors may be located within the

local cartage area of this customer and be free of economic regulation. Thus the demand for dump-truck service could be met.

Any attempt to establish a motor-carrier rate in relationship with rail rates could influence sales. These two examples are real ones, and it was felt you might be interested in why one shipper feels motor-carrier rates should be based upon motor-carrier conditions and permitted as long as they are compensatory and otherwise lawful, without reference to existing rates and the effect upon other types of carrier.

(6) Dry-bulk commodity exemptions: Section 14 of H. R. 6141 (p. 29) proposes repeal of the present exemption from regulation of the carriage of dry-bulk commodities when not more than three commodities are carried in a single tow.

The chamber does not feel that the public interest requires extending regulatory controls to cover this important traffic. We recommend rejection of this proposal in the pending bills.

(7) Special rates to Government: As our final point, I would like to comment on the subject of special rates to Government in some detail.

Section 8, paragraph 5, and section 9 of H. R. 6151 (p. 15) proposes rates for special application to Government. These sections would replace the present authority found in section 22 of the act, which now permit such special rates. This proposal is not in accord with our viewpoint and we recommend against its adoption.

On the other hand, however, we believe that H. R. 525 does provide a sound basis for correction of the present abuses experienced under the special-rate privileges enjoyed by Government. We recommend, therefore, that H. R. 525 be the basis of this committee's recommendation on this subject.

If H. R. 525 were passed, the Government could still get reduced rates and fares, if warranted. The major difference between that and the present situation would be that they would get them through negotiations directly with the carriers, subject to the same rules and regulyations as any other shipper, instead of through unregulated bargaining with the carriers. We sincerely believe that such a change is necessary in order to plug the loophole now being used by a growing number of Government agencies to bargain for rates.

In actual practice, a Government official can and has played one carrier against another for a bargain rate much lower than the rate published in official tariffs. Due to the potential volume of Government business available—about $1 billion for the Defense Department alone—and because of section 22 provisions, the inducement to the carriers to make these concessions is tremendous. As a consequence, cuthroat competition has resulted.

DEVELOPMENT OF CHIAMBER'S POSITION

I should like to emphasize that the chamber's position in favor of amending section 22, similar to that proposed in H. R. 525, has not been taken without very thorough study and consideration by experts in the transportation field, including both users and suppliers of transport services. The chamber's 44-man transportation and communication committee studied carefully the effects of section 22 on our transportation industry before recommending that it be amended.

After its study, our committee, by an overwhelming majority, took the position that section 22 should be amended in such a way that governments would be subjected to the same tariff filing requirements and other regulatory controls as those applying to other traffic, excluding the long- and short-haul provisions, of which I shall say more later. This position has been fully supported by the chamber's membership

The large percentage of Government traffic is much he same as that moving in normal channels of everyday commerce. The household goods, canned goods, clothing—all this traffic should be subjected to the same type of regulatory control whether it is moved by the Government or a commercial shipper.

Stated in the simplest of terms, the chamber feels that all traffic, whether Government or commercial, that flows in normal transportation channels, should be governed by the same ratemaking standards. If the Government feels that it deserves special consideration for a particular movement that is unusual in character, the Interstate Commerce Commission should be the judge, so as to keep carrier concessions within reasonable limits. In other words, if the Government is to get preferential treatment, it should prove its case rather than take it as an inherent right.

CHAMBER'S SECTION 22 SURVEY

In an effort to help supply more information about the general application of section 22, the chamber has made an informal survey of its carrier membership. The number of replies to the questionnaire were gratifying and clearly showed that section 22 is used extensively throughout the country by all types of carriers, including barge, bus, express, intercoastal, rail, and truck companies. The only surface carriers that apparently do not offer section 22 rates are the petroleum pipelines.

Section 22 is used by at least 17 different Federal agencies, the major users being the Department of Defense and the General Services Administration. It is also used by other levels of Government.

All types of freight, as well as passenger, traffic are moved on section 22 rates. The returned questionnaires listed 75 specific freight classifications, 45 of which are completely nonmilitary in nature.

A number of specific examples were referred to us, some of which I will mention here. One Southwest shipper wrote as follows:

Section 22 quotation 1430, effective in June 1954, authorized substantial reductions in rates on whole grains shipped by the Commodity Stabilization Service, United States Department of Agriculture, from Oklahoma, Texas, and New Mexico, to Galveston, Houston, and Texas City for export. These section 22 rates have greatly demoralized grain, milling, and port interests in the Southwest.

All Texas ports from Corpus Christi to Orange are equalized so far as export rates are concerned. The above section 22 quotation substantially increases the value of all grains shipped by the Commodity Stablization Service through the ports of Houston, Galveston, and Texas City, but that increased value accrues to the United States Government only. It encourages the producer who owns grain subject to loan by the Government to let the Government take the grain because neither the producer nor the commercial grain dealer can ship under the

section 22 rates. There are large elevators at Corpus Christi and Port Arthur which are unable to compete in the exportation of grain under the foregoing section 22 rates.

Shipping interests in the Southwest and the grain jaarkets generally are very much disturbed about this quotation.

Another example of the increasing use of section 22 by State agencies:

Section 22 requests for alcoholic liquors in the territory of Frankfort and Louisville, Ky., only recently were made, that is, in the last 2 years or approxi. mately that time. Before that it was never discovered by the State liquor commissions that they could use this rate advantage.

And again:

While we believe there might be some justification for handling war material for the United States Government, we also believe that the extreme has been reached when State governments solicit section 22 quotations for the transportation of alcoholic liquors and paint. The State of Ohio, about a year ago, was quite active in obtaining quotations for the transportation of alcoholic liquors and the State of Michigan about 2 years ago endeavored to obtain quotations on paint moving into that State.

Perhaps the most startling example of the use of section 22 rates that the survey brought out was the reference to a class rate tariff, effective March 17, 1942, but still applicable to Government shipments in the middle Atlantic territory. We checked on this tariff and found that it was still in effect, for the Government only, as of June 1954. As a result, Government traffic could move between such points as Philadelphia-New York and Baltimore-New York at rates 46 to 49 percent, respectively, below the present class rates for commercial shippers.

We checked further and found that these class rates were even much lower than commodity rates between these points for such commercial traffic as canned foodstuffs, paints, wrapping paper, building materials, and beer and ale. In this instance, the Government, in effect, was given a blanket rate reduction on all its shipments in that particular territory that were even lower than commodity rates granted commercial shippers on the basis of volume movements.

WHAT SHOULD BE DONE

As Chairman Harris knows, there is broad support throughout the transportation industry and the shipper interests of the Nation for repeal of the special Government rate provision contained in section 22 of the present act.

As recently as last month the chamber sponsored a delegation which visited him, as well as Mr. Priest. The purpose of our meeting was to encourage early hearings on H. R. 525. In that group were representatives of the following national associations: Air Transport Association of America, American Merchant Marine Institute, American Trucking Associations, American Waterways Operators, Committee of American Steamship Lines, Committee for Pipeline Companies, Intercoastal Steamship Freight Association, Movers Conference of America, Munitions Carrier Conference, National Industrial Traffic League, and Transportation Association of America, as well as the chamber.

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