7. Government Assistance in Research and Development.

We have seen that the new projects for building roll-on, roll-off ships are largely private ventures, with a minimum of government assistance. In like manner, the construction and modernization of shore-side terminal facilities is the responsibility of shipping operators, port authorities, and the state and local communities that will benefit from expanded port operations.

In our free enterprise system it is quite proper that the primary responsibility for technological development, from drawing board to completed construction, should rest with private investors and operators. The part played by the Federal Goverment should be limited to the support of projects that for good reason cannot be accomplished without government help, or which, in the public interest, can be facilitated or expedited by such help.

Within the above limitations, it is believed that the government may quite properly contribute in certain areas of research and development. While no fine line of demarcation can be drawn between the activities in which the government should or should not engage, provision should be made on an "as needed" basis for government assistance in undertaking or participating in engineering studies, prototype ship and terminal facility construction and, if necessary, the operation of ships, terminals or experimental equipment during trial periods.

G. Joint Through Rates and Routes

The transportation system of the United States comprises a variety of transportation media which together make for a vast transportation network. Each of these transportation media has had its own development and none was regulated until it had attained a definite niche in our economic system.

Coordination of the country's transportation facilities as a national transportation policy has been stressed for only a little more than two decades. Prior to that time the country had depended largely upon the laissez-faire doctrine which brought about a regulatory policy in which competition was regarded as the keystone for protecting the public against unreasonably high rates and as the best means of promoting economy and efficiency. Minor departures were made from this principle, but such exceptions were not particularly significant. At that time, Congress believed that competition among carriers would result in more adequate, economical, and efficient service for the public and it pursued a policy of encouraging such competition by various means such as by exempting certain types or classes of carriers from regulation and compelling one type of carrier to coordinate its facilities with another.

The policy of coordinating the different parts of our transportation system is intended to develop a coordinated transportation system in which the agencies are brought together as complementary, but competitive parts of a unified organization. It is intended as a means of establishing complementary and cooperative relationships among the competing agencies of transportation, where practicable, with each agency

rendering the service for which it is best fitted with greater economy and efficiency. It is designed to bring forth the advantages of each form of transport in such a way as to permit the public to enjoy the inherent advantages of each.

Coordination and integration may be brought about either on an intra-agency or on an inter-agency basis. Inter-agency coordination may be obtained by the cooperation of different types of carriers as rail with water and rail with motor. Intra-agency coordination may be obtained by the cooperation of the same types of carriers as rail with water and water with water. Of the two types it is probable that inter-agency coordina-tion is more important to the public since it is a means of bringing together the separate transportation agencies into a more unified transportation system. In this connection, the "pickaback" operation of carrying truck trailers on railroad flat cars, and the carrying of both rail cars and highway trailers on roll-on, roll-off ships are examples of one type of inter-agency coordination.

Those who advocate an extension of the use of the principle of coordination assert that it maintains the forms of competition that are desirable within each class of carrier and at the same time it eliminates or at least minimizes to a substantial degree the types of competition that are considered to be uneconomic. Competition is kept within such bounds as to be helpful rather than destructive to the carriers and therefore the principle of coordination and integration is of benefit to the public. Joint routes and joint rates lower than a combination of local rates together with the advantages of through billing and fewer rate calculations will result in lower transportation rates to the public.

Legislation promoting the policy of coordination was enacted by Congress from time to time, but the intent of this legislation at first was not to create a national transportation system in which the inherent advantages of each transportation agency were to be recognized and preserved, but to protect water carriers from the competition of rail carriers and to enable water carriers to obtain traffic originating at and destined to interior points.

The Transportation Act of 1940 continued the policy, adopted in earlier legislation, of establishing through routes, joint rail-water rates, and traffic interchange facilities. Water common carriers are required to establish through routes with other water common carriers and with railroads and if they fail to do so, the Interstate Commerce Commission, after hearing, is empowered to make such arrangements. Similar arrangements may be made with motor carriers but under voluntary terms and conditions. They must provide reasonable facilities for the interchange of traffic with connecting water and rail lines and such facilities must be available to all shippers on equal terms. Common carriers also are forbidden to discriminate unjustly between connecting lines. In prescribing reasonable differentials between all-rail rates and joint rail-water rates, the Commission may determine the divisions of the revenue obtained from through shipments, but in passing upon a disputed division the Commission must consider the efficiency of the carriers involved, the revenue required by each carrier, the significance of the carriers to the public, the originating carrier, and any other

fact or circumstance which might entitle one carrier to a greater or less proportion than another, without regard to mileage.

Throughout all this legislation, Congress emphasized the need by water carriers for through rates, joint rates, and traffic interchange facilities in connection with railroads. While all carriers are dependent to varying degrees upon through rates and joint rates to make fuller use of their facilities, water carriers are especially dependent upon thos● two transportation practices. Otherwise, their services would be largely limited to the waterway over which they operate and would be restricted to the communities located within close proximity of the ports which are served. As a rule, no water carrier can be operated profitably by traffic developed within such narrow limits and the establishment of through rail-and-water routes, supplemented by joint rates, extend the benefits of water transportation services to localities not situated on a waterway. To be more specific, shippers located at an interior point usually cannot benefit from a waterway to any considerable degree unless land transportation agencies are willing or are compelled to interchange traffic with water carriers.

Desirability of Coordination and Integration. As a general principle, there appears to be general unanimity as to the desirability of coordination and integration as one policy which is significant in the development and maintenance of a national transportation system adequate to meet the growing needs of commerce, industry, and agriculture as well as those of the general public for economical and efficient transportation service. However, the coordination of transportation facilities involves certain practices which require carriers to share traffic and divide revenues with each other and as a result, objections have been raised by those transportation interests which prefer to carry the traffic by means of their own facilities as far as possible. Moreover, the Interstate Commerce Commission in matters of joint rates involving rail and water carriers has established the principle that the water carrier must absorb the entire differential under all-rail rates. It is obvious, therefore, that objections will be raised to certain practices which are deemed essential to the development of a coordinated national transportation system.

A report from the Secretary of Commerce to the President of the United States 1/ stated with respect to the subject that "a more effective utilization of the different forms of regulated transportation might result if greater use were made of joint rates, routes, and facilities. There are shipments which from a cost-of-performing-the-service standpoint could utilize a combination of transportation services from origin to destination. The law at present requires that rail and domestic water carriers establish such joint rates, but relatively few are in effect and there are likewise few joint rail-motor rates although such rates are permitted by statute. In the case of the regulated carriers, more vigorous actions should be considered to require the establishment of economically justified joint rates ... The purpose of such a step would be to encourage expanded use of transportation resources and allow shippers to recognize

1/ Issues Involved in a Unified and Coordinated Federal Program for Transportation, December 1, 1949, Page 71.

and use the inherent advantages of each form of transportation, an objective of the national transportation policy."

The above recommendation was made six years ago, but it appears qually sound today. It is evident that there is adequate legislative and regulatory authority to permit, and if necessary to impose an integrated system of one-package through rates on joint land-sea routes. The convenience and economy of such a system to shippers and consignees, as well as the need for offering joint rates in the solicitation of traffic also seem clear. On the initiative of the domestic shipping operators, and in their own interests, or on the initiative of the Interstate Commerce Commission as authorized by law, more positive action should be taken in the establishment of through rates on joint land-sea routes.

H. Revocation of Dormant Certificates

As indicated in the replies to the Maritime dry cargo questionnaire, the existence of dormant water-carrier certificates is considered by some members of the industry to be a deterrent to starting new coastwise and intercoastal services, and to investment in ships for these trades.

Part III of the Interstate Commerce Act does not provide for revocation authority and procedure such as are found in Parts II and IV of the Act or in the Civil Aeronautics Act. In U.S. v. Seatrain Lines, Inc. (329 U. S. 424), the Supreme Court indicated that the Commission is without authority to revoke water-carrier certificates or permits in whole or in part once they have become effective and the time fixed for requesting rehearing or reconsideration has passed.

For several years, the Interstate Commerce Commission in its annual reports has recommended that Part III of the Interstate Commerce Act be amended to provide for revocation of water-carrier certificates or permits.

In seeking this authority, the Commission advances the view that the existence of these dormant operating rights is not only a deterrent to the initiation of new operations, but that it also makes it difficult for the Commission to determine the extent to which new authorities should be granted, in view of the potential danger of creating a surplus of competitive service on a given route which might be detrimental to the interests of both the carriers and the public.

Legislation now before Congress would give authority to the Commission to revoke, amend, or suspend water-carrier certificates or permits for wilful failure to comply with the provisions of Part III of the Interstate Commerce Act. In brief, these bills would provide that water-carrier certificates and permits may be revoked (1) upon application of the holder, or (2) upon complaint or on the Commission's initiative after notice or hearing for wilful failure or on the Commission's initiative after notice or hearing for wilful failure to comply with the provisions of the Act, rules, regulations, and order issued thereunder or the certificate or permit. The proposed authority is similar to that already granted the Commission under Parts II and IV of the Act with respect to motor carriers and freight forwarders. However, in both Part II and Part IV the Commission may not revoke a certificate or permit unless

the carrier has failed within a reasonable time to comply with an order of the Commission commending rectification of the violation. The latter provisions have not been incorporated in the proposed legislation. Members of the industry are somewhat divided in their opinions as to the merits and needs of the proposed legislation.

Nevertheless, consideration of all the factors involved leads to the conclusion that the power to revoke operating certificates and permits should be given to the I.C.C. in accordance with legislation now before Congress. The interests of holders of dormant certificates would appear to be fully protected by the provisions of the proposed legislation, and the power to revoke for good cause should not only facilitate I.C.C. determinations, but should also remove a potential barrier to healthy development of coastwise and intercoastal shipping.