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Mr. SMITH. Oh, no; they are not. Whether the carriers give us any rates at all that are reductions is entirely optional with them. This gives no right to the Government; it gives rights to the carriers to make lower rates.
Mr. Mack. Yes; that is true. But in reality, does it not put the Government in a position where they can drive down rates to whatever level they can finally get them down to?
Mr. SMITH. What you are asking is whether traffic is placed on a block by matching one carrier against another. I think unquestionably there have been instances of that. There may be some today, But they are in the minority. That is definitely prohibited in the Department of Defense. Our policy will not permit it.
Mr. Mack. What justification do you have for bidding on this basis; in other words, having each carrier bid for this hauling of military equipment?
Mr. SMITH. We do not do that in the Department of Defense.
Mr. Mack. I thought that the individual companies would offer their schedule of rates to you for a particular haul from one point to the other, for, say, the case of the household items, and so forth.
Mr. Smith. What we do in the Department of Defense: If we have traffic to move, and if we feel that the rates which are available in the tariff are unreasonably high, not as low as we should have, we negitiate with the carriers for an adjustment of rates, just the same as any other shipper would do. If that adjustment is agreed upon and is provided through a section 22 tender, it is possible that some other carrier, learning of that, will come along with a lower rate, of which we have absolutely no control, and tender it to us. If it is a worthwhile adjusetment, we may, after a period of 30 days, change our routing in order to take advantage of that lower rate. But we do not go out and ask for it.
Mr. Mack. I understand that you would automatically accept it, if it were cheaper than the first rate.
Mr. SMITH. Under normal conditions, we would be pretty nearly forced to accept. But we have a policy where we will not change our routing for a period of 30 days, because of a lower rate having come in.
Mr. Mack. But you would accept it is any rate were offered cheaper than the present first-rate, after the 30-day period?
Mr. SMITH. After the 30-day period, we would be almost compelled to do it, under the law.
Our feeling is that this proposal in H. R. 6141 will cure that situation.
Mr. MACK. Mr. Chairman, since the Secretary is here to answer questions of the committee, I would like to pursue this subject a little further later on.
Mr. WILLIAMS. All right.
I have 1 or 2 questions that I would like to pose to the Secretary or Mr. Rothschild.
If this legislation under consideration now should be enacted, I think the committee should have your opinion as to its effect on the rates, the revenues, and the traffic of the several different types of carriers, that is, rail carriers, motor carriers, water carriers, and
freight forwarders. Is it your opinion that this legislation would help or hurt; these various segments of the industry?
Secretary WEEKS. You want that answered now?
Mr. WILLIAMS. Either by you, or Mr. Rothschild. I would like a general observation on whether you think that the enactment of this legislation would help or hurt these various segments of transportation industry.
Secretary WEEKS. Well, I would answer it, Mr. Chairman, in this way. Transportation and traffic are a very volatile operation. It is moving all the time.
For example, I have in mind a new circumferential highway around my home city of Boston, on which, within the last 2 years, there has been over a hundred-million dollars worth of factory construction, plant construction, that has been put into effect.
Now, that business is, for all practical purposes, all trucking business. And as this highway program goes along, and limited access highways are made available, I would expect that particular phase of transportation would open up entirely new vistas.
Now, where a railroad, for example, on a long-haul operation might, in competition with the trucking interests, be able to offer a better rate under this proposed new transport policy, they might gain some business. But as opposed to that, the trucking business would normally take advantage of its natural and its inherent service capabilities in bringing to the shipper a service that exceeds anything that railroad or water transportation might be able to offer.
Over the long haul, looking ahead 5 years, and considering everything--my guess is that it would be more of a redistribution of traffic than a taking from one to the other. In fact, the trucking operations have increased, as compared to the rail operations over the last-how many years, Mr. Rothschild ?
Mr. ROTHSCHILD. Sixteen years.
Secretary WEEKS. About 16 years until they now exceed the rails in “revenues. I would expect that trend to continue, because they have such service capabilities that cannot be denied.
To sum it up, if I may, in my own opinion I would venture the opinion that it would be more of a redistribution than otherwise, and that as you develop the highway program, if it is developed, in accordance with the proposals now before the Congress, that would certainly open up new vistas for trucking operations.
Mr. WILLIAMS. Last fall, Mr. Secretary, there was a great deal of apprehension expressed before this committee on the part of the trucking interests with respect to the ratemaking provisions of this legislation, as recommended in the report of the Transportation Committee. They seemed to feel that because the railroad's out-of-pocket costs, so to speak, are lower than motor carriers would reach, the adoption of this legislation would place the motor carrier at a serious disadvantage competitively.
Would you care to express an opinion on that subject? Secretary. WEEKS. Well, I would express my opinion on that phase of the question in this way: The whole premise of our proposal is that if a given segment of the transportation industry can offer a better rate, the shipper and the general public are entitled to the service that is provided by that better rate. But I cannot, if I understand your question, see that any transportation segment that is on its toes and going after the business is going to suffer by this proposal.
Mr. WILLIAMS. Mr. Secretary, I am quite sure we will hear from the trucking interests before this is over; also the railroad interests, on this legislation; so I will not press that further.
I do have one question before proceeding further. Which features of the bill do you consider to be the most important and the most urgent?
Secretary WEEKS. Well, the two general proposals are to provide increased competition in rates, subject to the just and reasonable provision, and the nondiscriminatory provisions and to protect the common carrier. I can't say that I would consider either of those main facets to our proposal subordinate to the other. I think they are both very vitally important.
Mr. WILLIAMS. As I understand your answer, then, you would consider this more or less a package matter, and one feature of it is not necessarily more important than the other, taken out of the context of the bill?
Secretary WEEKS. It is a package matter. However, when you get into the various proposals, for example under the rate proposals, you have the minimum and maximum rates, you have the suspension, the volume rates, and the long-and-short-haul clause. When you get over into the common carrier area there are the private and contract carrier definitions, the freight forwarder, and the bulk commodity, and so on. Some of the individual appendixes to the main proposal may exceed the others in importance. But generally speaking, the competition feature and the protection and strengthening of the common-carrier feature, in my mind are equally important, and from that standpoint it would be a package proposition.
Mr. Flynt. Mr. Secretary, by the “just and reasonable" feature, and the competition feature to which you referred, do you include this feature which I find on page 3, section 3, subparagraph 4, with regard to charges not less than just and reasonable minimum charges, nor more than just and reasonable maximum charges ? Is that the feature to which you are referring?
Secretary WEEKS. Yes, sir. Where the bill provides that the ICC shall establish just and reasonable rates that are nondiscriminatory.
Mr. HINSHAW Will the gentleman refer to that page again?
Mr. HINSHAW. How can a rate be a just and reasonable minimum . and a just and reasonable maximum? I thought "just and reasonable” was just one rate; not a maximum and a minimum.
Secretary WEEKS. Well, there must be a provision that on the bottom side the rate cannot go below a just and reasonable rate, and perhaps even more importantly it cannot, on the top side, go above a just and reasonable level.
Mr. HINSHAW. How can there be two positions that are just and reasonable? I thought "just and reasonable” was a determination that the Commission was to make as a single rate; not a maximum and a minimum. I believe that that was the intention of the original act and the intention of the Congress in passing the act in 1940.
Secretary WEEKS. Do you want to answer that, Mr. Ray!
Mr. Ray. Yes. This amendment would, to a large extent, get away from the Commission's precise ratemaking power. However, in fact, Mr. Hinshaw, the Commission now has power to prescribe a just and reasonable minimum rate. This is not a new power And by far its greatest activity has to do with determining whether or not a given rate falls below a just and reasonable minimum, if that which is in question is a new and lower rate. On the other hand, if what is in issue is a published new and higher rate, then the question comes on whether or not it exceeds a reasonable maximum. And by far the greater, almost the entire, ratemaking activity, or rate-adjusting activity, of the Interstate Commerce Commission today, is exactly in this area of keeping lowered rates from passing too low and keeping rates in certain areas from rising to an unreasonable maximum.
Mr. HINSHAW. That is a new definition to me. I had not realized it was in the present act. I would want to be shown where it is and under what application it is carried. Because “just and reasonable” is a thing that is determined ordinarily by the courts, in the final analysis, and I think that there can't be a just and reasonable maximum and a just and reasonable minimum.
Mr. Ray. Did you wish me to mention that now?
Mr. HINSHAW. You can refer to it later. I do not want to wait for it to be looked up now. We are drawing close to 12 o'clock, when the House goes into session.
I would like to comment briefly on one very cogent statement made by Mr. Rothschild in his testimony, which I think applies throughout this entire legislation. He says, on page 55 of his statement:
Losses from unprofitable passenger-services must be recouped at the expense of other patrons, localities, or traffic. The Interstate Commerce Commission pinpointed this relationship in its 66th annual report: And then, quoting from that report, as follows:
This passenger deficit constitutes a burden which falls almost entirely on the carload freight traffic.
I think, Mr. Chairman, that no truer remark is made; and also that it is applicable across the board and does not only refer to passenger traffic and carload-freight traffic, but to all other types of traffic.
For example, if you are to carry Government freight at an out-ofpocket cost or a less-than-profitable rate, then, of course, it has to be made up someplace else, by some other form of traffic. That appears to me to be a good rule for us in the committee to follow; that any deficit one place must be made up in another. Now, I would like to know how, if you carry the freight of the largest single customer that transportation has, the Government of the United States, at anything like an out-of-pocket cost, you are going to make up the losses in other forms of traffic.
Mr. ROTHSCHILD. Mr. Hinshaw, if I understood Mr. Smith's testimony this morning, I don't think that the Government is buying transportation at a loss to the carrier.
Where they are using section 22, they are getting it at extremely low rates in most instances, I believe. I believe this testimony indicated that section 22 put the Government in the same position as a purchaser of transportation services that industry is in by reason of its use of commodity rates rather than class rates.
Mr. HINSHAW. That is what he said. But I will have to be shown. Mr. ROTHSCHILD. He is, I think, an expert in that field.
Mr. HINSHAW. Exactly so. He is an undoubted expert in the field. But we have about 50 other experts in this room who are equally expert, who will testify otherwise.
Mr. Ray. Mr. Hinshaw, the reference is in section 13, subdivision 4, of the present act, which gives the Commission power "to prescribe the rate, fare, or charge, or the maximum or minimum or maximum and minimum, thereafter to be charged.”.
Mr. HINSHAW. Does it say anything about "just and reasonable"?
Mr. ROTHSCHILD. Not in that section. It does in section 1, as I pointed out earlier.
Mr. SMITH. That has to do with the deficit feature.
Mr. Hinshaw. I believe that we are just about to quit, for luncheon, but I would like to point out that the purpose of the bill, as it is drawn, is to permit a carrier to compete for Government traffic, and other traffic too, I think, on an out-of-pocket cost basis.
Secretary WEEKS. No, sir. That we don't think is so.
Mr. HINSHAW. Why don't you think it is so? Because you have no minimum setup in the bill. Out-of-pocket cost is not a minimum.
Secretary WEEKS. There is minimum rate control in the present law. And no change is made in the Commission's prerogatives insofar as just and reasonable maximum and minimum rates are concerned. It simply is directed that it shall not take cognizance of the effect of the movement of traffic over one segment—the effect it may have on the amount of traffic carried by another segment. The ratemaking provisions do not, in our judgment, substantively change the obligations or the powers of the Commission on the minimum side.
Mr. HINSHAW. Well, that is a matter of conjecture.
Mr. WILLIAMS. Mr. Secretary, would it be possible for you to come back this afternoon?
Secretary WEEKS. I can. I could much better be back to morrow.
Mr. WILLIAMS. One or two members of the committee have indicated a desire to direct some questions to you personally. I am wondering if we might confine our further question period this morning to questions of the Secretary, and that will obviate the necessity of his coming back this afternoon?
Mr. HINSHAW. Mr. Chairman, I would like to continue my questioning, but I have an engagement that I am obliged to carry out. I will be back at 2.
Mr. WILLIAMS. We have tentatively set it up for 2 o'clock, if that meets with the approval of the other members of the committee. The State, Justice, and Judiciary appropriation, I believe, is before the House and will be debated in general debate for quite some time this afternoon, and I think it will be possible for the committee to meet at 2 o'clock.
However, I think if we could confine our questions to the Secretary, if he could stay here a few more minutes, we could dispose of his testimony this morning.