mended that the suits brought by the Government be dismissed. It has been claimed by the railroads that a Government victory would bring economic disaster to them and possible Government ownership of the railroads. The reparation suits have introduced an element of instability under section 22 agreements, since the finality of section 22 contracts is being seriously questioned. If successful, they present a possibility of extensive future litigation under section 22 agreements. The reparation suits have been one of the motivating factors behind the numerous proposals for repeal or revision of those provisions in sectin 22 referring to Government traffic.

Two bills containing amendments to section 22, S. 2355 and S. 2653, were discussed in the 82d Congress. S. 2355 was directed at establishing the finality of contracts entered into by common carriers and the United States Government under section 22, and S. 2653 was designed to prevent section 22 from applying to motor carriers transporting household goods for the Federal Government in interstate commerce. These bills were approved by the Senate Committee on Interstate and Foreign Commerce but objections in the Senate blocked their passage.

As to the position of State and municipal bodies under section 22, the repeal of section 22 would have little effect. Material moving in interstate commerce for the States has been carried on commercial rates in many cases. In addition, a significant amount of material is purchased by the States on a delivered basis. As to intrastate commerce the State and local governments would remain free to negotiate reduced rates with carriers willing to enter into such agreements, except to the extent that intrastate rates may be modified by the ICC under section 13 (4) of the act.

The Interstate Commerce Commission has taken the position that the Federal Government should pay the full tariff rates on property transported for it. In testimony before the Senate Committee on Interstate Commerce during the 82d Congress representatives of railroad, bus, trucking, and waterway interests advocated revision of those provisions of section 22 affecting Government traffic in order to establish for the future the finality of section 22 quotations. Shippers, large shipper groups, and others have advocated repeal of the provisions of section 22 which give preferential treatment to the Government, on the grounds that section 22 agreements have dcreased carrier revenue, resulting in necessarily increased rates being charged the general shipping public. The Senate Committee on Interstate and Foreign Commerce has suggested that if it is clearly shown that section 22 is placing an unreasonable burden upon the carriers, Congress should consider the possibility of repeal.

ACTION OF THE PANELS

In October 1952 the board of directors of the association raised the possibility of repealing those provisions of section 22 of part I of the act (and provisions of pts. II, III, and IV, making sec. 22 applicable to common motor and water carriers and freight forwarders), which permit reduced rates for Government property. A background of the subject was subsequently sent to the panels with some correlative questions.

At the coordinating committee meeting of January 6, 1953, the panel representatives indicated the positions that their panels had reached on section 22. The highway panel representative stated that his panel favored repeal of those provisions authorizing the carriage of Government property free or at reduced rates. User panel representatives also approved the proposal. The air panel representatives stated that their panel would also probably favor repeal with respect to those provisions relating to the carriage of passengers as well as property. Only the railroad and freight forwarder representatives were of the opinion that opposition to the proposal repeal would be forthcoming from certain members of their panels.

It was indicated that the opponents of repeal argued that section 22 provides a means for common carriers to obtain business which would otherwise go to contract carirers. A highway representative stated that under present ICC rules contract carriers are permitted to effect only long-term contracts and, therefore, should not be able to deal with the Government on short-term contracts. Questions were also raised as to (1) the effect of certain intransit privileges possible under section 22, (2) whether removal of section 22 would have any effect on the speed of setting rates on Government traffic, particularly in wartime; and (3) the advantages and disadvantages of having the carriers liable to reparation

suits, in comparison with renegotiation to which carriers would probably be subject if section 22 were repealed.

It was decided to refer the entire subject back to the panels, for a more specific consideration of the problem, asking the panel representatives to report on the following:

1. Shall provisions in section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act authorizing common carriers to transport property of the United States, State, and municipal governments free or at reduced rates be repealed?

2. Shall the parts of section 22 applying to transportation of persons for United States, State, and municipal governments also be repealed?

3. Shall there be some distinction made between the application of section 22 in war and peace, or between military and peacetime commodities?

4. If a panel is not in favor of repealing section 22, would it wish to offer any other suggestions, such as the establishment of the finality of section 22 contracts?

At the coordinating committee meeting of January 12, the chairman and representatives of the panels reported the positions of their respective panels on the above four questions. The following panels strongly recommended affirmative answers to the first question: Air transport, highway, pipeline, waterway, user, investor. All of these panels also strongly supported an affirmative answer to question 2 above, except the waterway panel which took no position on this question. The railroad and freight forwarder panels took no position on either question.

No panels recommended affirmative answers to questions 3 and 4. The pipeline panel recommended that question 3 be answered in the negative.

COMMENTS OF THE POLICY BOARD

The policy board, after reviewing the panel's positions, stated:

We recommend repeal of those provisions of section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act permitting carriage of Government passengers and property free or at reduced rates. As a matter of principle, we do not believe there is any reason why the Government as a shipper should have special treatment over private shippers. Nor do we believe that as a matter of public policy the Government and carriers should be permitted to cause instability of the rate structure by negotiating with carriers unpublished rates which can adversely affect private enterprise.

There appears little doubt that in many instances low Government rates require higher rates to private industry than would otherwise be necessary.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The board of directors approved the following recommendation of the policy board:

"Provisions of section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act permitting carriage of Government passengers and property free or at reduced rates be repealed."

In addition, the board of directors has approved an interpretation of TAA's policy on section 22 of the Interstate Commerce Act, so as to meet the needs of Government security and emergency movements, as follows:

If the present provisions of section 22 applying to the transportation of Government passengers and property free or at reduced rates are repealed, exemption from complying with rate-publishing rules and regulations should be enacted only with respect to movements of traffic that should not be made public because they involve national security.

COMPARISON WITH H. R. 6141

H. R. 6141 would repeal provisions of section 22 that permit carriers to furnish transportation service to the Government free or at reduced rates. It would also add a paragraph to section 15a authorizing rates for special application to the Government, but which would be subject to tariff filing and publication requirements of the act. These special rates could be filed on short notice or made retroactive if warranted, and the tariff requirements could be waived for security reasons. Such rates would not be subject to suspension or to the provisions of section 4 (long-and-short-haul clause), but subject to all other provisions of the act.

The specific amendment of section 22 proposed in H. R. 6141 is exactly what is proposed in H. R. 525, a separate bill now before your committee.

We believe it would be preferable to adopt legislation such as H. R. 525, calling for outright repeal of special reduced-rate privileges to the Government, with a proviso for exemptions from rate publishing rules and regulations for security reasons. As to the addition to section 15a, we do not have a position on exempting special Government rates from the suspension and section 4 provisions, nor have we a position on allowing such rates to be made retroactive. We do agree that Government rates can be exempted from tariff requirements for security reasons.

Mr. BAKER. I will skip the detailed nature of the subject action of the panels and so forth that I spoke about and I will pass on to the next item, which is contract carrier regulations, which is the green sheet with Roman II on the upper right-hand side.

TAA position. The TAA board of directors after careful consideration of the views of its eight permanent policy formulating panels and its policy group, approved the following recommendation, with some members of the board dissenting:

Contract motor and water carriers shall be required to file, adhere to, and make public the rates they actually charge.

Comparison with H. R. 6141: H. R. 6141 would require contract carriers to publish actual rates charged, or at the carrier's option, the actual contract. TAA recommendation is limited to the publication of the rates only.

TAA has no position on the other recommendations in H. R. 6151 which would define "contract carriage" to require compliance with the standard that such service be conducted

on the basis of bilateral contracts for specialized or individualized service or services equivalent to bona fide private carriage—

and would grant grandfather operating rights as common carriers to present contract carriers who would not come under the redefinition. The TAA recommendation is made in the light of present conditions under the present law.

It has become more pertinent with a recent decision by the Supreme Court upholding the right of a contract carrier to:

aggressively search for new business within the limits of his license.

We believe competition between contract carriers and common carriers should be made more equitable and that this proposal is one way of accomplishing this.

Additional statement on contract carrier regulations is attached. (The additional statement on contract carrier regulations is as follows:)

CONTRACT CARRIER REGULATION

NATURE OF THE SUBJECT

A contract carrier is a for-hire carrier which in theory does not undertake to serve the general public as a common carrier does but instead limits its activities to serving one or a few shippers under individual contracts or agreements.1 Admittedly this distinction between serving the general public and contracting with individual shippers is not always a clear one. It becomes more and more blurred as the number of shippers served by a contract carrier increases. The

1 Secs. 203 (a) (15) and 302 (e) of the Interstate Commerce Act define contract motor and water carriers, respectively, as carriers which engage in for-hire transportation other than common carrier transportation under individual contracts or agreements.

Interstate Commerce Commission, when confronted with this difficulty, has attempted to put substance into the distinction by emphasizing and illustrating the types of specialized service which should be offered by contract carriers. Others attempting to make the distinction have said that true contract carriage constitutes a substitute for private carriage.

The Motor Carrier Act of 1935, the legislation enacting Federal economic regulation of motor carriers, recognized contract carriers as a separate class of carriers and subjected them to a less restrictive form of regulation than common motor carriers. When Congress in the Transportation Act of 1940 assigned the regulation of domestic water carriers to the Interstate Commerce Commission, the same procedure was followed."

The regulation of contract motor and water carriers is similar to that of common carriers of the same form of transportation in many respects. For example, both common and contract motor carriers are subject to the same statutory regulation relating to safety, carrier accounting and reports to the Commission, consolidations and acquisitions of control, the issuance of securities, and the revocation of operating authority, and to similar but less comprehensive regulation on insurance.

As to controls over the right to operate, though the statutory language governing the issuance of contract motor- and water-carrier permits differs from that relating to the issuance of common motor- and water-carrier certificates, under the Commission's interpretation of these provisions both types of carriers must produce evidence of need for the service they propose to give under the requested operating authority.

Through use of the power to grant or deny permits to operate, the Commission has made some effort to restrict contract-carrier operations, particularly those of motor contract carriers, to what it has called specialized service. The relatively small number of shippers served and commodities hauled by a carrier as well as the performance by such carrier of unusual physical services suited to its customers' particular requirements have all been cited by the Commission as indications of this kind of specialization and as a means of distinguishing contract carriage from the broader undertaking of common carriers. Some motor carriers seeking contract carrier operating rights under the "grandfather" provisions or the authorization of a new contract-carrier service have been classified as common carriers because of their lack of this specialization. In other cases where the nature of the operations of the shippers served has necessitated the issuance of a contract motor-carrier permit to transport a great number of commodities, the Commission, in order that some specialization of service might be retained, has limited the kind of shippers that the carrier may serve.

3

While the Commission's approach has undoubtedly been tempered by certain provisions of the act which indicate a congressional intent to guard contract carriers against undue regulatory restrictions, its attempts to limit the scope of contract motor-carrier service have been motivated by its belief that the purpose of Congress in regulating contract carriers was to guard against the deterioration of the service offered by their common motor-carrier competitors. Several decisions of the Commission contain statements to this effect.

The major difference between the economic regulation of common and contract motor and water carriers is found in the field of rate regulation. On the one hand, the appropriate regulatory authority has power to prescribe the maximum, minimum, or exact rates to be charged by common carriers when the existing rates are found to be unreasonably high or low or to result in unduly discriminatory relationships between competing shippers, products, or localities. Contract motor and water carriers on the other hand are subject only to minimum rate regulation. Statutory provisions require that they file with the Interstate Commerce Commission and keep open for inspection minimum rate schedules, and the Commission may order such minimum rates to be increased if they are found to be unreasonably low. Reductions in the minimum rates can be made only after 30 days' notice and are subject to suspension by the

2 There is virtually no contract carriage by railroads, and pipelines and freight forwarders are by statutory definition common carriers. See secs. 1 (3) (a) and 402 (a) (5) of the Interstate Commerce Act.

3 These provisions authorized the issuance of certificates and permits to common and contract motor and water carriers which could prove that they were in bona fide operation prior to Federal regulation, without requiring proof of the public convenience and necessity or consistency with the public interest of the service. See secs. 206 (a), 209 (a), and 309 (f) of the Interstate Commerce Act.

Commission upon complaint or on its own motion. While these contract carriers may not charge less than the filed minimum rates, they are free to charge more than such minimum rates to some shippers with whom they have contracts as long as the filed rates are "actually maintained and charged" on some part of their business.* Common carriers by all forms of transportation, however, must publish their actual rates and adhere to them in all cases.

The Commission has taken little action under the statutuory provisions for the regulations of contract carrier rates. The few significant proceedings have involved interpretation of section 218 (b), the rule of rate making for contract motor carriers, which states, among other things, that contract carrier minimum rates prescribed by the Commission shall give no undue advantage to contract motor carriers as compared with competing common motor carriers. The Commission has held that this language does not require contract carrier minimum rates to be raised to the level of common motor carrier rates so long as contract carrier costs are lower than those of the common carrier. In so finding the Commission relied on other provisions in section 218 (b) directing it, in prescribing contract carrier minimum rates, to consider contract carrier costs of service and the effect of such rates on the movement of contract carrier traffic. However, the ICC has recently recommended revising section 218 (b) so as to remove from contract carriers this rate advantage over common carriers.

The character of contract motor carrier operations today varies considerably. Some contract carriers are close substitutes for private carriers serving only one or a few shippers under long-term contracts. These carriers often have specialized equipment to suit the shipper's needs and schedule their operations so as to be an integral part of the shipper's manufacturing or distribution operation. Such service may involve transportation to or from remote or small noncompetitive points which common carriers are not desirous of serving, or may require schedules tailored to the shipper's needs that common carriers might be unable to provide.

Other contract motor carriers serve great numbers of shippers and haul a great many diverse commodities, thus approximating the service offered by common carriers. In such cases, contract carriers can compete for common carrier business without being subjected to the regulatory restrictions imposed on common carriers. The common carrier spokesmen emphasized the competitive advantage given to such contract carriers because of the fact that the actual contract carrier rates charged particular shippers, as distinguished from the published minimum rates, cannot be ascertained, while the common carriers' rates are open to the public.

As to the extent to which contract motor carriers participate in for-hire interstate transportation, the Interstate Commerce Commission staff has compiled some comparative statistics on common and contract motor carrier operations derived from reports of the regulated carriers. In 1953 motor common carriers hauled some 56 billion ton-miles of freight, as compared to about 7.9 billion ton-miles for the contract carriers.

ACTION OF THE PANELS

The issues raised by this subject as presented to the panels were whether the present economic regulation of contract carriers should be modified in any way. There was no recommendation in the panels that the present economic regulation of surface contract carriers be removed.

4 The original Motor Carrier Act, in a section which is not sec. 218 (a) of the Interstate Commerce Act, authorized the Commission at its discretion to require the publication of the actual transportation contracts as well as the minimum rate schedules; and the Commission, finding that some contract carriers had made a practice of publishing minimum-rate schedules lower than any rates provided for in the contracts, was prepared to order that the contracts themselves be placed on public file. After contract carriers and some shippers had vigorously protested this proposed step, certain amendments were incorporated in the 1940 Transportation Act. Sec. 218 (a) was amended to eliminate all reference to the publication of contracts, and language added to sec. 220 (a) prohibited the Commission from putting any contracts on public file except contracts containing rates which fail to conform to the appropriate minimum-rate schedule and contracts involved in litigation before the Commission. At the same time, the words "actually maintained and charged" were added to sec. 218 (a) to describe the kind of minimum rates which must be filed and published in order to prevent contract carriers from publishing fictitious rates. The above-described changes were also written into secs. 306 (e) and 313 (b) of pt. III of the act and are applicable to contract water carriers.

These amendments did not affect the Commission's power under secs. 220 (a) and 313 (b) to order the filing with it of all contracts as long as they were not published. At the present time the Commission has exercised this authority only with respect to contracts of contract motor carriers.