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that such common carrier may charge less for longer than for shorter distances for the transportation of passengers or property if the charge established to or from the more distant point (a) is necessary to meet actual competition of another carrier or carriers, (b) is not less than a just and reasonable minimum charge, and (c) is not otherwise in violation of this part or part III.”

In line 16, page 7 of the bill the word "interstate" should be "intrastate."
On page 14, line 2, the word "mode" should be "made."

The proposed new section 15a (5) (p. 15, line 10, et seq.) which supersedes section 22 of the act provides for transportation service to the United States Government. It would appear reasonable and consistent with the authorization for rates, fares, charges, and rules and regulations of special application to substitute the word "for" for the word "to" mentioned above. It is therefore recommended that the said first sentence be changed to read as follows:

"The establishment, maintenance, publication, and application of rates, fare, charges, and rules and regulations of special application to transportation services for the United States, State, and municipal governments by carriers subject to this Act is hereby authorized."

On page 16, line 21 of the bill, the words "tenders or" should be added before the word "contracts." This change is required by the fact that very few actual contracts providing for free or reduced rates exist, whereas, thousands of unilateral rate tenders have been filed under section 22 of the act.

The fiscal effects of the bill cannot be estimated.

This report has been coordinated among the departments in the Department of Defense in accordance with procedures prescribed by the Secretary of Defense.

The Bureau of the Budget advises that there is no objection to the submission of this report for the consideration of Congress.

Sincerely yours,

Hon. J. PERCY PRIEST,

WILBER M. BRUCKER,
Secretary of the Army.

OFFICE OF THE POSTMASTER GENERAL,
Washington, D. C., November 17, 1955.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

DEAR MR. CHAIRMAN: Reference is made to your request for a report on H. R. 6141, a bill to amend the Interstate Commerce Act, as amended, so as to provide for a stronger national transportation industry, and for other purposes.

This bill is related to the transportation of persons and property by railways, motor carriers, and water carriers, and has but limited relation to the transportation of mail.

Section 8 of this bill would amend section 15a of the Interstate Commerce Act so as to provide, among other things, for the "establishment, maintenance, publication, and application of rates, fares, charges, and rules and regulations of special application for transportation service to the United States, State, and municipal governments by carriers subject to this act" subject to certain conditions. The provisions of law embodied in section 542, title 39, United States Code, authorize the Interstate Commerce Commission to fix rates for the transportation of mail by railways. Rates so fixed, however, do not apply to mails transported under special arrangements in freight trains, for which rates not exceeding the usual and just freight rates may be paid (39 U. S. C. 555). Hence, section 15a of the Interstate Commerce Act, as it would be amended by this legislation, would open up a possibility that carriers would file special freight rates for transportation service to the United States, lower than comparable rates for other shippers, which rates would be available to this Department, for bulk shipment of mail by freight. At the present time, limited use is made by this Department of this authority to ship mail at freight rates.

Section 9 of this bill would amend section 22 of the Interstate Commerce Act by deleting the United States as one of the parties to whom common carriers may offer free carriage or reduced rate for the transportation of persons or property. However, no change would be made in the provisions of law embodied in section 1 (7), title 49, United States Code, wherein free transportation is authorized for "railway mail-service employees and persons in charge of the

mails when on duty and traveling to and from duty, and all duly accredited agents and officers of the Post Office Department and the Railway Mail Service and post-office inspectors while traveling on official business, upon the exhibition of their credentials * * *." Thus, this bill does not affect the existing authority for free transportation of postal agents and officers traveling on official business. This bill does not affect the authority of the Postmaster General to enter into contracts with railway common carriers for the transportation of mails, which is embodied in sections 565 and 571, title 39, United States Code, and section 65 (a), title 49, United States Code.

The Interstate Commerce Commission does not exercise control over rates for the transportation of mail by motor carriers or water carriers, and this bill does not affect the Postmaster General's authority to contract with such carriers.

It is not believed that the enactment of this legislation would have any appreciable effect upon the revenues or expenditures of this Department.

In view of the foregoing, this Department would interpose no objection to the enactment of this legislation.

In advising this Department with respect to its report to the chairman of the Senate Committee on Interstate and Foreign Commerce on S. 1920, a bill identical to H. R. 6141, the Bureau of the Budget stated that there would be no objection to the submission of the Department's report to the committee.

Sincerely yours,

Hon. J. PERCY PRIEST,

MAURICE H. STANS, Acting Postmaster General.

EXECUTIVE OFFICE OF THE PRESIDENT,
OFFICE OF DEFENSE MOBILIZATION,
Washington, D. C., October 28, 1955.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

DEAR MR. PRIEST: Reference is made to your letter of October 25 in which you request our comments concerning H. R. 6141, a bill to amend the Interstate Commerce Act, as amended, so as to provide for a stronger national transportation industry, and for other purposes.

Under conditions of full mobilization the transportation system of the United States would be under a severe and heavy burden and it is important that any general transportation policy be designed to strengthen as soon as possible the various elements of that system so that they would be better equipped to handle that load. All segments of the transportation system have important emergency roles and should be economically capable of providing the maximum service and the technical development needed in time of war.

The report of the Presidential Advisory Committee on Transport Policy and Organization recognized that a strong and flexible transportation system is in the best interest of national defense and recommended a number of measures designed to achieve that objective. The provisions of H. R. 6141 appear to reflect those recommendations for strengthening the system and we would be in favor of its enactment.

The Bureau of the Budget advises that it has no objection to the submission of this report.

Sincerely yours,

Hon. J. PERCY PRIEST,

ARTHUR S. FLEMMING, Director.
DEPARTMENT OF JUSTICE,
June 20, 1956.

Chairman, House Interstate and Foreign Commerce Committee,

House of Representatives, Washington, D. C.

DEAR MR. CHAIRMAN: It has come to the attention of this Department that your committee is conducting hearings at the present time on H. R. 525, a bill designed to amend section 22 of the Interstate Commerce Act, as amended, and for other purposes. The bill would repeal that part of section 22 of the Interstate Commerce Act which enables the various Government agencies, particularly the Department of Defense, to negotiate rates for the carriage of Government property with the various classes of carriers.

78456-56-pt. 1—3

The Department of Justice has had occasion to study the implications of this bill in connection with rather extensive litigation recently conducted by the Transportation Section of the Antitrust Division. The studies we have made in this connection indicate that the passage of this bill will greatly increase the cost of transportation of the Government, and in a way that will be inequitable when compared with the cost of normal commercial shippers. Studies by the Interstate Commerce Commission indicate that at the present time the general level of cost of Government shipping is higher than that of normal shippers. This, we understand, is due to the frequent necessity of the military to ship at class rates in order to perform the military mission involved. In addition our investigations have shown that regulation of rates for shipments of military property by either Federal or State agencies will place a serious burden on the defense effort and disrupt the lines of supply in many instances, particularly in times of emergency.

In

The Department of Justice strongly opposes the enactment of this bill. addition to removing one of the few remaining significant elements of competition in the field of transportation ratemaking, by abolishing the Government's privilege of seeking competitive rates among carriers of all classes, it is unjustified from the standpoint of rate equality between the Government and commercial shippers and is directly contrary to the military needs.

The Bureau of the Budget has advised that there is no objection to the submission of this report.

Sincerely,

WARREN OLNEY III,

Acting Deputy Attorney General.

EXECUTIVE OFFICE OF THE PRESIDENT,

Hon. J. PERCY PRIEST,

BUREAU OF THE BUDGET, Washington, D. C., February 24, 1956.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

MY DEAR MR. CHAIRMAN: This is in reply to your letter of February 3, 1955, requesting the views of the Bureau of the Budget with respect to H. R. 525, a bill to amend section 22 of the Interstate Commerce Act, as amended, and for other purposes.

This bill would amend section 22 of the Interstate Commerce Act so as to remove the present authority under which common carriers may establish reduced rates for Government traffic.

The problem of rates for Government transportation was, in the last year, given intensive study by the Advisory Committee on Transport Policy and Organization. The Committee recommended legislation to repeal section 22 and to provide new authority for special Government rates subject to most of the provisions of the Interstate Commerce Act. This proposal is incorporated

in H. R. 6141, now pending before your committee.

H. R. 6141 attempts to retain for Government rates a special status consistent with the unusual character of Government traffic movements and the need for expedition, especially in national emergencies. Military shipments in particular need the flexibility and speed provided through special rate procedures in order to obtain reasonable rates. Large amounts of military shipments are not eligible for published commodity and exception tariff rates, which are lower than the overall class rates, since this military traffic does not coincide with the commercial traffic for which the lower commodity and exception rates are published. To require the Department of Defense to move its traffic on class rates would increase its freight costs. It could be expected that the Department would institute proceedings before the Interstate Commerce Commission to obtain the reasonable rates the Interstate Commerce Act prescribes.

It should also be noted that the Commission on Organization of the Executive Branch of the Government considered arguments for and against amending the Interstate Commerce Act in a manner similar to that proposed in H. R. 525 and concluded not to recommend amendment.

The General Services Administrator in the report he is making to your committee on this bill sets out in an attachment some pertinent reasons for maintaining authority for special Government rates. The Secretaries of Defense

and Commerce in the reports they are making to the Senate Interstate and Foreign Commerce Committee oppose enactment of a similar bill, S. 2114. Copies of these two reports are enclosed.

In light of these considerations, the Bureau of the Budget recommends against enactment of H. R. 525.

Sincerely yours,

PERCY RAPPAPPORT,
Assistant Director

DEPARTMENT OF THE ARMY,
Washington, D. C.

Hon. WARREN G. MAGNUSON,

Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C.

DEAR MR. CHAIRMAN: Reference is made to your request to the Secretary of Defense with respect to S. 2114, 84th Congress, a bill to amend section 22 of the Interstate Commerce Act in order to discontinue the authority under such section which authorizes the carriage, storage, or handling of property free or at reduced rates for the United States and the transportation of persons for the United States free or at reduced rates. The Secretary of Defense has delegated to the Department of the Army the responsibility for expressing the views of the Department of Defense.

Section 22 of the Interstate Commerce Act provides, in part, as follows:

"That nothing in this part shall prevent the carriage, storage, or handling of property free or a reduced rates for the United States, State, or municipal governments *** or the transportation of persons for the United States Government free or at reduced rates ***"

The purpose of S. 2114 is to amend section 22 by removing the permissive authority to transport persons for the United States Government at free or reduced rates and to carry, store, or handle property for the United States at free or reduced rates.

The Department of the Army,. on behalf of the Department of Defense, is strongly opposed to the enactment of S. 2114.

Historically, statutory authority relating to the regulation of the transportation field has provided for reduced rates to the Government. Since its original enactment, the Interstate Commerce Act has contained a provision in section 22 authorizing railroads to grant free or reduced rates for the shipment of property for the United States, State, or municipal governments. This authority has been extended to other modes of surface transportation as they were drawn within the regulatory orbit. In addition, the Transportation Act of 1940 further authorized surface carriers to grant free or reduced rates for the transportation of passengers to the United States Government. Reduced rates provisions have been beneficial to the Government and to the carriers.

The Department of Defense, today, is one of the world's largest shippers with all modes participating in military traffic. The commodities purchased and transported involve every conceivable commodity in the civilian economy as well as items peculiarly military in their use. The location of many military installations is not adjacent or intermediate to industrial or commercial cities and to that extent do not coincide with commercial traffic patterns. Consequently, because of these locations the use of commodity rates available to commercial shippers is precluded.

Prior to World War II there was an almost total absence of any large volume of military commodities, and, because of this fact, the legal rates available were based almost in their entirety on classification ratings. With the greatly expanded military commitments, global in nature, since the end of the war, large volumes are shipped in contrast to the period 15 years ago. Many shipments, however, are of a nonrecurring nature and publication of rates for such shipments in carriers' tariffs would produce paper rates; i. e., there would be little or no traffic moving under those bases. In effect, the repeal of section 22 would force all militarly departments to seek publication by tariff of rates to and from their many points or origin and destination with greatly increased expense to carriers and military departments. On those movements where the urgency of movement militated against the normal time-consuming ratemaking publication and regulatory processes, the charges that would accrue would be those class rates that would create unreasonably high charges on the urgent shipments.

There are two principal reasons why rates negotiated under section 22 pro vide in many cases more remunerative earnings to the carriers than the earn ings derived from commercial shippers based on tariff rates. First, military shipments generally load heavier to the car or truck than do average com mercial shipments. Second, the distance of military movements is usually much longer than the distance for commercial freight movements.

Section 22's flexibility and expedition provides mutual benefits to the carrie as well as the Government and its use does not place a burden on commercia shippers. To the contrary, as Mr. W. A. Maloney, general attorney for th Association of American Railroads has stated (Traffic World, February 5, 1955 p. 24):

"*** To the extent that the railroads under section 22, obtain at com pensatory rates Government traffic that, in the absence of section 22, their com petitive ratemaking disadvantages would lose for them, the burden of shipper by rail is not increased but, on the contrary, is lessened by the contribution fror this traffic. Repeal of section 22 and placing the railroads under the same con petitive ratemaking handicaps when competing for Government traffic as the suffer when competing for commercial traffic would not relieve commercial ra shippers of any conceivable burden. ***”

Not only do the free or reduced rates provisions of section 22 provide th Government with a flexible and expeditious procedure for arriving at fair rate for military shipments, but they also are, in numerous instances, more remune ative than commercial rates to the carriers. Attached is a table which shows comparison of rail carload revenue earnings of section 22 traffic with tota carload traffic and a comparison of the rail carload grouping of "manufacture and miscellaneous" items with total carload traffic. It will be noted that th comparisons indicate that the gross revenue earnings of traffic moving at se tion 22 rates are 2 to 5 times the gross revenue earnings of rail carload traff in the "manufactured and miscellaneous" group of commodities. Therefor. justification for repeal of section 22 cannot be based on the premise that th carriers are transporting military traffic below the cost of operation.

It should also be pointed out thah by repealed the provision of section 22, whic authorizes rates on the transportation of property or personnel by or on beha of the United States, S. 2114 would eliminate the flexibility and expedition no afforded the carriers in establishing rates for the military departments wher the urgency of movement militates against the normal ratemaking processe Military plans and operations necessary for the preparation of mobilization an the defense of the United States are constantly undergoing changes. The chai of logistical support, of which domestic carriers form a vital link, must be re sponsive to emergency changes in military plans and operations. In that co nection, the rate problem is an important facet in the use of domestic carrier Inasmuch as the provisions of section 22 provide the flexibility and speed essentia in responding to the exigencies of military operations, this Department, on b half of the Department of Defense, is of the opinion that S. 2114, if enacted, woul work against the best interests of the United States Government.

The enactment of S. 2114 would also have a serious fiscal effect upon the Unite States Government, particularly the Department of Defense. At the existin level of traffic, the estimated additional cost to the Department for the movemer of freight would be $29 million and for the movement of passengers $8,100,00 Possibly some reduction in these amounts would result from tariff adjustments c rates and fares on United States Government traffic. However, as pointed ou before, time will not always permit military freight and passenger movements t be delayed awaiting tariff adjustments.

Reference is made to S. 1920, 84th Congress, a bill to amend the Interstat Commerce Act, as amended, particularly section 8 thereof which proposes a ne section 15a of the Interstate Commerce Act. The proposed new section 15a (5 provides for new rules to apply to reduced rates offered the United States, Stat and municipal governments. In its report on S. 1920 this Department offered t your committee recommendations for some minor amendments to the propose section 15a (5). The Department of the Army believes that the language of § 1920 concerning reduced rates for governments would remove the major abuse which are understood to have caused the movement for repeal of the applicatio of section 22 to the Federal Government. The Department of the Army, o behalf of the Department of Defense, strongly favors the approach of S. 1920 a contrasted to S. 2114.

For practical reasons, this report deals but briefly with the salient objection to S. 2114. In the event hearings are held on the bill, opportunity will be appre

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