Section 22, so far as it applies to Government traffic, has been in the act substantially as it now stands since 1887. A slight change was made in 1889, and other subjects have been added to the section since that time. At the time the original act was passed, the Government was a comparatively small shipper and small user of the passenger facilities of the carriers. In recent years, however, Government use of freight and passenger facilities has increased enormously. During World War II, the Government was by far the largest single shipper of freight and the largest user of passenger service in the United States. The same is probably true today. For many years the Government also had the benefit of land-grant rates, which undoubtedly limited the use of section 22. The section was utilized, however, by many carriers forming competitive routes in order to meet the rates available to the Government under the land-grant privileges. With the repeal of the land-grant statute in 1945, section 22 became the main vehicle through which special rates are obtained by the Government. The national transportation policy has among its objectives to "foster sound economic conditions in transportation" and to encourage the maintenance of reasonable charges without "unfair or destructive competitive practices." Some present practices under section 22 seem to us to be not in furtherance of those objectives. For example, at the hearing held in 1950, pursuant to Senate Resolution 50, the executive secretary of what is now the Movers' Conference of America testified that it was originally contemplated that the section 22 privilege of transporting at free or reduced rates was to be used only in the case of a public catastrophe, such as a flood or drought, or where the volume of tonnage justified an appropriate reduction from filed tariff rates, but that the privilege has degenerated into an abuse by which the Government demands savings produced by cuthroat competition between the carriers. He stated that the Army has received as many as 30 bids or quotations for the transportation of a single lot, not a load, of household goods for 1 of its personnel, and that such quotations averaged 35 percent and sometimes were as great as 50 percent under the lawfully filed tariff rates. He contended that any resultant economy is purely illusory in view of the cost of red tape involved in such a procedure and the poor and irresponsible service which must necessarily follow a condition where the contract for carriage is not representative of its true cost. He admitted that at least half the fault rests with the carriers who participate in such unsound bidding or quoting for Government traffic, but that human nature being what it is, the unsound economic results of such system are inevitable. printed hearings, pp. 887-890.) (See The situation also seems to have had a detrimental effect on the Government departments involved. At the present time, section 22 quotations are not required to be filed with this Commission, and it is our understanding that such quotations or bids are filed with the Defense Department in extremely large numbers. Procurement officers, desirous of obtaining the cheapest transportation, have felt obliged to spend inordinate amounts of time examining bids for even the most inconsequential movement. The Commission is now giving consideration to a rule which would require the filing with the Commission of quotations to the Government under section 22 in Ex parte No. 192, Reduced Rates Under Section 22-Special Filing Rule. Although we are in accord with the general theory that the Government should pay the full tariff rates on property transported by it, the same as any other shipper, we do not believe that complete elimination of the section 22 privilege as to Government transportation would be equitable or in the interest of the national defense. In war or threatened war, there are required by the Government a great many freight movements of commodities as to which there are -no published rates or over routes and between points as to which frequently no reasonable rates apply. Often it is wholly unlikely that any commercial demand for the use of such routes, or in some cases for transit, storage, or other services, exists or ever will exist. There is also the obvious necessity, in emergencies, for arrangements under which the secrecy of movements could be preserved. Instead of making section 22 completely unavailable to the Government, as proposed by H. R. 525, we suggest steps short of outright repeal of the privilege to correct the undesirable situations which seem to have developed. As indicated above, we would support elimination of the section 22 privilege with respect to household goods shipped by the Government. We would also favor, as recommended in the Commission's annual reports for the past several years, a bill which would make section 22 contracts binding on both parties, in the absence of fraud or clear error. We believe such amendments would, to a great extent, remove the causes of much of the present criticism of practices under this section. Three members of the Commission favor the enactment of H. R. 525. One of the members of the Commission is setting forth his views in a separate statement. We do not recommend the enactment of H. R. 525 at this time. RICHARD F. MITCHELL, Chairman. COMMISSIONER CROSS' SEPARATE VIEWS This bill, in my judgment, does not provide a complete solution with respect to free transportation or reduced rates for governmental bodies. In addition to these exemptions, there are other exceptions written into the act which, when computed together, allow too many preferential and free riders. These burdens upon carriers are emphasized now that passenger deficits have amounted to such staggering proportions. I believe that a full study of the section 22 exemptions should be made to enable the Congress to approach the situation objectively, rather than merely to rescind the reduced rates provision as to the United States, State, and municipal governments as proposed in this bill. This matter is of magnitude and, in my opinion, fully warrants a thorough study by Congress as to the present day needs respecting the furnishing of transportation free or at reduced rates. Except in the case of war or any other national emergency the United States, State, or municipal governments should not be accorded reduced rates. It is reasonable to assume that the differences between the published tariff rates and such reduced rates in a large measure must be passed on to the shippers of commercial traffic or the users of passenger service. In view of the necessity of maintaining relatively high rates in order to provide adequate revenues for the carriers, I believe the national transportation policy would warrant the restriction of reduced rates to these agencies only during a period of national emergency. Furthermore, rates agreed upon under section 22 should be binding on both parties, in the absence of fraud or clear error. I also call attention to section 1 (7) of the act which relates to free passes and free transportation. HUGH W. CROSS. (NOTE. The following recommendation for legislation was introduced as H. R. 6208 and is submitted as the Commission's report thereon :) Hon. J. PERCY PRIEST, INTERSTATE COMMERCE COMMISSION, Washington, May 3, 1955. Chairman, Committee on Interstate and Foreign Commerce, DEAR CHAIRMAN PRIEST: I am submitting herewith for your consideration 20 copies of a draft of bill to amend section 4 of the Interstate Commerce Act, together with a statement of justification of the bill. After an intensive review of the operation of the fourth section of the act, with particular reference to its impact on the work of the Commission and the ratemaking function of the rail carriers, the Commission has come to the definite conclusion that this section should be amended so as to eliminate therefrom all unnecessary refinements of the long- and short-haul principle, but at the same time retain the central objective of the fourth section, i. e., departures from the longand short-haul principle over direct routes. The Commission would be very grateful for your assistance in introducing the bill and giving it early consideration. With kindest regards, I remain, Sincerely, Enclosures. RICHARD F. MITCHELL, Chairman. JUSTIFICATION The attached draft of proposed bill is intended to amend section 4 (1) of the Interstate Commerce Act so as to remove therefrom all unnecessary and unduly burdensome refinements of the long- and short-haul principle, which principle was originally designed to prevent the specific discriminatory practice of charging more for a shorter than for a longer haul. That principle is still valid today. Section 4 (1) of the act now prohibits any common carrier subject to part I or part III thereof from charging or receiving any greater compensation for the transportation of passengers, or like kind of property, for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance, or from charging any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of part I or III. It further provides that upon application the Commission may, in special cases, after investigation, authorize such carriers to charge less for the longer than for the shorter distances, and that the Commission may from time to time prescribe the extent to which such designated carrier may be relieved from the operation of the section, except that in exercising such authority the Commission shall not permit the establishment of any charge to or from the more distant point that is not reasonably compensatory for the service performed. The proposed amendment is specifically designed to make the fourth section self-operating with respect to the right of a circuitous route to meet the rate or rates legally established between competitive points over the more direct routes. No further authorization from the Commission would be required other than the standards laid down by other sections of the act. As an incident of this suggested change we are proposing to remove from section 4 the so-called reasonably compensatory provision. This, in our opinion, would eliminate from section 4 all of the unnecessary refinements of the long- and short-haul principle. would terminate our responsibility with respect to fourth section departures over circuitous routes, and would limit our jurisdiction to authorizations of relief over direct routes, upon application and after investigation, where special justification for such relief is shown. Experience has demonstrated that the public interest is not being served by the imposition of the restrictions in question. The history of their administration has proved them to be excessively burdensome to all concerned. Together they have resulted in disproportionate expenditures of time, labor, and funds by both the carriers and the Commission in comparison with the relatively small benefits derived. Moreover, almost all of the dissatisfaction with section 4, which is expressed periodically by carriers and shippers alike, appears to stem from the same burdensome provisions. Section 4 has been highly controversial since its inception both as to its substantive provisions and as to the manner and extent of its administration. In implementing this section the Commission initially adopted a vigorous policy, but due to the early attitude of the courts, especially the narrow interpretation given the words "under substantially similar circumstances and conditions" (which were contained in the original act) in I. C. C. v. Alabama Midland Ry. Co. (168 U. S. 144 (1897)), the Commission was compelled to abandon at least temporarily, its forceful approach. The enactment of the Mann-Elkins Act, June 8, 1910, however, gave new life to the section by eliminating the phrase "under substantially similar circumstances and conditions," and, as set forth in that act, section 4 appeared to contain all the essentials necessary for effective and efficient administration. The Transportation Act of 1920, however, added two refinements; viz, the "reasonably compensatory" provision and the so-called equidistant provision which proved to be troublesome. The latter provision was repealed by the Transportation Act of 1940, at which time the "reasonably compensatory" provision did not appear to be quite so objectionable by comparision. In retrospect, however, it is now equally clear that the carriers should not be required to secure our permission for the publication of rates over circuitous routes equivalent to the going rates over direct routes when in their managerial discretion such rates are necessary because of competitive factors. The Commission is now firmly of the view that the “reasonably compensatory" provision no longer serves any useful purpose, and that it may well be eliminated from section 4 without jeopardizing the public interest. And, in this connection, we wish to point out that under other sections of the act the Commission is constantly seeking assurance that all rates subject to its jurisdiction, including those published under section 4, are not unjust or unreasonable, unjustly discriminatory, nor unduly prejudicial or preferential. For this reason we do not believe that the proposed amendment would detract substantially from our jurisdiction, but would, on the other hand, allow us greater discretion in the administration of this section, which should inure to the benefit of the carriers and the public as well. It is our view that the central principle of the fourth section, i. e., control of departures from the long- and short-haul principle over the direct routes-is sound and should be retained, and that enactment of the proposed amendment would serve to streamline section 4. It would likewise enhance our administrative effectiveness and relieve the carriers of an unnecessary burden. INTERSTATE COMMERCE COMMISSION, Hon. J. PERCY PRIEST, Chairman, Committee on Interstate and Foreign Commerce, DEAR CHAIRMAN PRIEST: Your letter of February 10, 1956, addressed to the chairman of the Commission and requesting a report and comments on a bill, H. R. 9177, introduced by Congressman Hinshaw, to amend section 405 (a), part IV, of the Interstate Commerce Act, has been referred to our Committee on Legislation. After careful consideration by that Committee, I am authorized to submit the following comments in its behalf: Section 405 (a) of the Interstate Commerce Act, which H. R. 9177 would amend, provides, in general, that freight forwarders shall file with this Commission tariffs showing rates, charges, rules and regulations with respect to the transportation service subject to the act. Every forwarder subject to the Commission's jurisdiction should, therefore, have on file tariffs showing the rates and charges for all services covered by its permit. The proposed measure would amend this section by adding a proviso to paragraph (a) to the effect that a forwarder shall not be required to publish tariffs stating rates and charges to and from points or places at which the forwarder has no agent. Under section 404 (a) of the act, it is the duty of every freight forwarder to provide and furnish, upon reasonable request therefor, the service covered by its permit, and to establish, observe, and enforce just and reasonable rates and charges for that service. A forwarder, however, could not very well provide such service upon reasonable request unless it has on file with the Commission tariffs containing rates and charges for the service, since under the provisions of section 405 (e) a forwarder is prohibited from engaging in service subject to the act unless the rates and charges for such service have been filed and published. We also wish to point out that section 405 (a) requires 30 days' notice for the establishment of rates and charges. If H. R. 9177 were enacted, it would relieve the forwarder, in its discretion, from publishing rates and charges from and to certain points covered by its permit, solely on the basis of whether or not it has an agent at such points. Thus, a forwarder could curtail or extend its service at will, within the scope of its operating authority, merely by discontinuing or creating an agency. If, for example, a forwarder uses a motor carrier as its agent to serve certain points, it could discontinue that agency by canceling its arrangements with the motor carrier. The forwarder would thereby be relieved under the proposed amendment of the duty of publishing rates to and from those points, and also of the obligation of serving the points involved, notwithstanding that they are covered by its operating authority and that it has a duty under section 404 (a) to provide service upon reasonable request. We do not believe that it would be in the public interest to leave to the discretion of the freight forwarder the extent to which it would choose to exercise the authority granted to it by the Commission. If forwarders were permitted to shift their service at will in such manner, shippers could never be certain as to what services would be available to them. The establishment of rates and the performance of services to or from some, but not all, of the points within the scope of the forwarder's permit could also result in prejudices or preferences which are forbidden by section 404 (b) of the act. If a forwarder does not wish to render service to and from all of the points covered by its operating authority, it should request that its permit be restricted accordingly. It is not clear from the proposed measure what is intended by the term “agent.” Freight forwarders do not as a rule use their own employees as agents except, possibly, at certain assembling or break-bulk points. They usually serve offline points through the use of motor carriers, sometimes under contracts authorized by section 409 of the act. In many instances, however, the motor carrier itself does not maintain an agent or an office at the individual cities or towns, but serves them by having the truck driver stop at the shippers' and consignees' places of business to pick up or deliver freight moving in forwarder service. would be difficult under these circumstances to determine whether or not a forwarder has an agent at a given point. It For the reasons hereinabove stated, we do not believe that enactment of H. R. 9177 would be in the public interest, and therefore recommend against its adoption. Respectfully submitted. Hon. J. PERCY PRIEST, ANTHONY ARPAIA, Chairman, Committee on Legislation. INTERSTATE COMMERCE COMMISSION, Washington, April 23, 1956. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR CHAIRMAN PRIEST: Your letter of March 1, 1956, addressed to the Chairman of the Commission and requesting a report and comments on a bill, H. R. 9548, introduced by Congressman Harris, to amend section 409 of the Interstate Commerce Act, as amended, to authorize contracts between freight forwarders and railroads for the movement of trailers on flatcars, has been referred to our Committee on Legislation. After careful consideration by that committee, I am authorized to submit the following comments in its behalf : H. R. 9548 would amend subsection 409 (a) of the Interstate Commerce Act by inserting therein after "(a)", the figure “(1)", and by adding thereto a new paragraph "(2)." The proposed new paragraph would authorize freight forwarders and common carriers by railroad, subject to certain conditions and limitations, to enter into contracts governing the utilization by such freight forwarders of the services and instrumentalities of such railroad common carriers and the compensation to be paid therefor for line-haul movement of freight loaded in or on trailers or other containers and transported on railroad cars suitable for such use. For many years freight-forwarder operations were confined almost exclusivel, to service between concentration and break-bulk points, and consolidated shipments were moved in full carloads by rail carriers. The compensation received by the forwarder for this service usually was the margin of difference between the established less-than-carload rate and the carload rate. By the use of through carloads they provided a more expeditious service than the railroads on less-than-carload freight. About 30 years ago freight forwarders began to expand their services by employing motor common carriers to gather and distribute shipments in wide areas surrounding their concentration and breakbulk points. At the same time the forwarder began to use motor carriers for some of its terminal-to-terminal movements in truckload lots. In this case, the forwarder's compensation is, generally, the difference between the established freight-forwarder rate, which usually parallels the less-than-truckload rate, and the purchase price of the combined transportation services performed by the underlying motor and rail transportation services. For some years freight forwarders have competed with motor carriers, particularly in connection with shipments moving to and from outlying areas. From the beginning the forwarder made arrangements, by contract, for the services of motor carriers, and thereunder the compensation paid for such services has always been less than the charges of the motor carriers to shippers generally. Under the present provisions of section 409, forwarders are authorized to continue such arrangements with motor carriers on a contractual basis, except that in the case of line-haul transportation between concentration and break-bulk points in truckload lots where such line-haul transportation is for a total distance of 450 highway-miles or more, the statute specifically provides that the contracts shall not permit payment to motor carriers of compensation which is lower than their established tariff rates and charges. |