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posals. My question simply is this: Since that time, and in view of the report of the Interstate Commerce Commission, do you feel that there are substantial changes that you would recommend now, in the legislation before us? Or is it your feeling that the legislation as originally submitted still meets the problem as you see it?

Secretary WEEKS. Generally speaking, Mr. Priest, I think it does, regarding the basic principles involved, and the sections that are recommended to implement the accomplishment of those basic principles.

I have felt, as I think I quoted in my statement, Mr. Clark's statement, that the ICC agreed in principle with 8 out of 11 of our recommendations. And he also suggested that there were verbiage changes and phraseology changes that might bring us closer together.

In all of this rundown on the general subject, we have felt-and I quoted last September several cases where the Interstate Commerce Commission, as I saw it, had been very emphatic in their feeling that changes should be made with respect to the definition of private carriers and some recommendations or expressions of opinion on the desirability of changing the policy statement, and so on. So personally I do not feel that there need be any change except where it is pertinent to make specific changes, particularly in wording, in the accomplishment of these objectives, which are very complicated. I personally would be happy to see those done if we could get to the main objective.

The CHAIRMAN. In other words, you feel that changes that you would recommend now largely would be changes in language to clarify or carry out the purposes of the various proposed amendments.

Secretary WEEKS. Yes, sir.

The CHAIRMAN. Rather than any substantive change insofar as the objective is concerned.

Secretary WEEKS. Yes, sir.

The CHAIRMAN. Mr. Secretary, I shall not ask further questions at this time. I do want to make this one observation. I think the presentation of the Department, along with the Secretary, with the Department of Defense, in all of its great volume, has presented to the committee and to all of those who are familiar with the subject, something of the complexity of the problems that we face in considering this legislation, and something of the problem this committee faces.

I compliment the Department on a very fine presentation, well documented from the Department's viewpoint. I feel rather certain that in the course of the hearings we shall have other presentations perhaps equally well documented taking other viewpoints on the various proposals. And I think in view of this presentation, in both its volume and in the thoroughness with which it has been prepared, we are all convinced that we have a rather difficult job ahead of us, to consider this legislation as a whole and come out with what we hope might be legislation that would improve our national transportation system. Mr. Chairman, I have no further questions at this time.

Mr. WILLIAMS. Mr. Secretary, I am quite sure our chairman has expressed the feelings of the entire committee. We appreciate the cooperation that you have shown to the committee, and I would like to join him and other members of the committee in complimenting you on the manner in which you have handled this difficult problem before our committee.

I believe if the members do not have any further questions, we could excuse you at this time.

Mr. HINSHAW. Mr. Chairman, I think it ought to be called to the attention of the Secretary and those present for this hearing that the hearings which resulted in the Transportation Act of 1940 continued over a period of 10 long weeks, Mr. Weeks.

Mr. WILLIAMS. I am sure we will be seeing you again, Mr. Secretary.

Secretary WEEKS. Mr. Chairman, I appreciate the forbearance of the committee, and I will be back at any time.

will be back at any time. I do have an appointment at 4 that I ought to keep if I can. And so I appreciate the opportunity to get away. You have been very kind in listening to a rather long presentation. It is a rather involved subject. And that is the only excuse we have in tresspassing on your time.

Mr. HINSHAW. You do not intend to take these two gentlemen away from us?

Secretary WEEKS. Oh, no; I am going to leave them with you.

Mr. FLYNT. Mr. Chairman, I would like to add something substantially in the same phraseology as I did last September: that I certainly want to join with the chairman of our full committee and with my colleagues on this subcommittee in complimenting you (Secretary Weeks), Mr. Rothschild, and Mr. Ray, for the presentation which you have brought to us at this time. And while judging from my questions I may appear to disagree with certain of those recommendations and certain of the presentations, I want to make it absolutely clear that I have the utmost, in fact absolute, confidence in both the sincerity and the frankness with which you and your 2 associates have come before us in the last 2 days.

Secretary WEEKS. You are very kind, sir. Thank you very much.

Mr. WILLIAMS. We would like it very much if Mr. Rothschild and Mr. Ray and Mr. Smith could stay for a few minutes. I believe there are some questions for them. Mr. Hinshaw, I believe, had some questions for Mr. Smith when he was interrupted.

Mr. HINSHAW. I wanted to inquire about some matters contained in Mr. Smith's statement.

On page 15 he starts out a dissertation on the reasons why the conditions surrounding military traffic differ materially from those surrounding industrial or commercial traffic. And he talks about the development of this country both industrywise and transportationwise. And then he says, and I quote:

However, as the interchange of goods increased in volume, individual industrial shippers and receivers induced the carriers to establish so-called commodity rates. These commodity rates are lower than class rates and have been established by the carriers largely because of the volume shipped and the regularity of movements.

Previously, he had said that the rates paid by the Defense Establishment or by the Government were about 14 percent higher than the commodity rates.

Now, I would like to ask Mr. Smith if the commodity rates are not available to the Government.

Mr. SMITH. I tried to make it clear that on the preponderance of the military traffic there are commodity rates, and therefore the preponderance of the military traffic moves on those commodity rates, the same as are paid by the private shipper. Now, the only case, with a

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few exceptions, in which we pay other than those rates, is in those instances where there are no such rates. And in those cases we appeal to the carriers for what we think is a reasonable rate that would be similar to a commodity rate. And those, when agreed upon, are tendered to us in section 22 quotations. But if there is a commodity rate, and if there is a reasonable rate, that is the rate we use in the Department of Defense.

Mr. HINSHAW. Are those rates higher, or lower, than the comparable commodity rates ?

Mr. SMITH. I have said from my observations, based on my 37 years of experience, that they are higher. And that is exactly what the Interstate Commerce Commission's Bureau of Transport Economics found, for 4 straight years.

Mr. HINSHAW. Then why do you not take advantage of the commodity rates ?

Mr. SMITH. That is just what I have been trying to say. If and when there is a commodity rate for a movement which we have, that is the rate which we use. There are many movements which we have where there is no commodity rate, because there has never been a commercial shipment or group of shipments to correspond to it.

Mr. HINSHAW. Will you suggest to us such a shipment that there has never been one! I would like to understand what you are talking about.

Mr. Smith. Well, I think a good example of that would be the great variety of movements which we have of ammunition and explosives. It just could not be expected that there would ever have been shipments by commercial shippers that would in any way correspond to those movements of ammunition and explosives.

Mr. HINSHAW. You mean to say that there are no commodity rates for explosives?

Mr. Smith. There are commodity rates, but there are no movements in the commercial field that would in any way compare with what we have in the military.

Mr. HINSHAW. Are you talking about volume, or direction, or what?

Mr. Smith. I am talking mainly about volume and direction.

Mr. HINSHAW. You mean to San Francisco from, let us say, Redstone Arsenal ?

Mr. SMITH. I mean to the many places at which the ammunition is used, processed, and is stored. I just do not think the commercial shipper would have any occasion to have traffic in the direction of that flow.

Mr. Hinshaw. Well, that is rather inconceivable to me. Because we have been shipping ammunition all over the United States ever since the Indian wars. And there certainly have been ammunition shipments up and down, crisscross, and sideways, in the United States, for a long time.

Mr. SMITH. Of course, in the case of ammunition and explosives, volume is another factor in that situation.

Mr. HINSHAW. Of course, any carload shipment is entitled to a commodity rate; is it not?

Mr. Smith. Well, that has always been my feeling; yes.

Mr. HINSHAW. And commodity rates are published on carload shipments of that character; are they not?

Mr. SMITH. If there are commodity rates for a movement which we have, that is the rate which we use. It is only when there are no commodity rates that we ask for something resembling a commodity rate. And then we get a section 22 tender. And those are the rates which have been found to be from 13 to 14 percent higher than the commodity rates.

Mr. Hinshaw. Now, are you perfectly willing to accept the commodity rates as minimum rates ?

Mr. SMITH. Yes, sir; if they are reasonable rates

Mr. HINSHAW. Oh no. Commodity rates established by the Interstate Commerce Commission as reasonable rates—you not to determine the reasonableness of it.

Mr. SMITH. Now wait a minute. The commodity rates are not established by the Interstate Commerce Commission. They are established by the carriers themselves.

Mr. HINSHAW. And approved by the Interstate Commerce Commission.

Mr. Smith. And approved by the Interstate Commerce Commission. But there are many, many cases where neither commercial shippers nor the Department of Defense would be satisfied with a given commodity rate, because for some reason or other it would be, in our thinking, too high. And in my 30 years with the industrial shippers, many, many times have we sought adjustments of commodity rates, just as we would in the Department of Defense, if we thought they were too high.

Now, for those commodity rates which are in the tariff today, which in our judgment are reasonable for the service expected, we would be glad to pay them, and that is what we do pay.

Mr. HINSHAW. To go on with your statement, you say:

Over the years, the industrial commodity rate structure both in volume and pattern has developed until today private industrial shippers and receivers have a commodity rate structure for the greater majority of traffic privately moved. And then you make a citation. And continuing:

In marked contrast to the situation prevailing with respect to these commodity rates used by private industrial shippers and receivers, a great volume of traffic of the Government moves on class rates, or would move on class rates under section 22 of the act.

Are you speaking there of carload shipments, or less than carload shipments?

Mr. SMITH. Largely carload.
Mr. HINSHAW. Are there any less-than-carload shipments in it?
Mr. SMITH. Oh, yes.
Mr. HINSHAW. Is the volume considerable?

Mr. SMITH. In most cases the less than carload would move on class rates, regardless.

Mr. HINSHAW. Well, you say “in most cases.” You have the right to negotiate a rate, a separate rate, for a given movement less than carload or less than truckload, do you not?

Mr. SMITH. In most cases you cannot do much about a class rate on less than carload traffic. That is just it. What I mean, far less than carload, there is nothing that corresponds to a commodity rate.

Mr. HINSHAW. I understand that.

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Mr. Smith. But I have in mind here principally carload traffic, truckload traffic.

Mr. HINSHAW. And then you state: This situation is due to the fact that military installations are generally located in places remote or at some distance from the large industrial cities. These installations are constantly, for one reason or another, being deactivated or reactivated.

Why should the question of deactivation or reactivation have anything to do with the rates ?

Mr. SMITH. Because it would make a difference in the flow of the traffic, a change in the flow of the traffic. Now, if you have a constant movement between given points, there is no reason why you should not get your rates adjusted and keep them there. But if for some reason you start changing your origins or changing your destinations, then you have to do the job all over again.

Mr. HINSHAW. Then why should not the military rate or the Government rate be considerabły higher than the industrial rate or commercial rate?

Mr. SMITH. Well, now, I see no reason in the world why we should pay any higher rates for this.

Mr. HINSHAW. For off-line shipment of 10,000 carloads? You should not have to pay more because that is at some distance from the industrial cities and off line?

Mr. SMITH. No; I don't think we should pay any more.

Mr. HINSHAW. I should think you would want to pay a good deal more to get that done, just from the fact that it is at a remote place or at some distance from a large industrial city, and not get a reduction on that account.

Mr. SMITH. The point is that at the industrial cities or centers, or the large cities, usually rates have been established, if they are going to be established at all, on commercial traffic. Now, if you move out 25 miles from that community, that is not included within that adjustment. So you must, if you want to pay a reasonable rate, get an adjustment out to that point. And you do it through section 22. Or rather, you ask for a rate and you get it through section 22.

I don't see any reason why we should not have a reasonable rate. It might be 10 cents higher than the rate to the city. But it is certainly less than the class rate. We would not say that it should always be the same. That would be ridiculous. But nevertheless it should be something less than the class rate we would pay otherwise.

Mr. HINSHAW. Well, I should think just offhand, having once been in the transportation business myself, that to take a shipment or a series of shipments off line, a carrier would necessarily have to return empty, because there is no other back-haul traffic. And therefore you ought to pay a good deal more than the going rate for that kind of service; not a lesser rate.

Mr. SMITH. Well, I expect we do. And I think there would probably be many instances where we would not feel that we should have the same rate. But we should have something less than a class rate, even though it might not be as low as the rate to the city 25 miles away.

Mr. HINSHAW. That is probably true. Class rates do not apply very much to carload.

Mr. SMITH. Oh, yes; they do.

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