Page images
[ocr errors]
[ocr errors]

portation to Government traffic has given rise to abuses and evils which are not in the public interest.” 1

2. Former director of the military traffic service, Kenneth L. Vore.—"I do not believe in having in existence a system that permits section 22 rates."

3. Commissioner Richard F. Mitchell.—“I am opposed to granting special rates to anyone, and that includes the Government."

4. Former Commissioner James K. Knudson.-"My interest in section 22 rates remains unabated, and may I express the hope that the second session of the 83d Congress will provide the relief in this respect to which common carriers in this country are, in my opinion, entitled.” *

5. The subcommittee Report on Transportation of the Hoover Task Force on page 99 of its report recommended that: “Section 22 of the Interstate Commerce Act be amended by eliminating the provisions which authorize the movement of Government passengers and property at free or reduced rates." 5

6. Transportation Association of America.-Clearly the provision quoted immediately above (sec. 22) is contrary to the principles of transport regulation. The only solution is to have it repealed.

7. Gordon C. Locke, executive secretary, Committee for Pipe Line Companies."I favor outright repeal of that part of section 22 of the Interstate Commerce Act, which allows the carriage, storage, or handling of property free or at reduced rates for the United States, or municipal governments."

8. Jack Garrett Scott, general counsel, National Association of Motor Bus Operator8.—"In any event, if there is justification for reduced Government rates we feel that the justification should be made to the Interstate Commerce Commission and not pulled out of a hat." 8

9. J. P. Harrington, chairman, freight traffic committee, New England Territory Railroads.—"Certainly, when traffic is taken away from the rail carriers because of some savings that can be made by the use of such a competing carrier, we are forced to conclude that the Government has lost its long-range view and is giving over entirely to the short-range view and when we see this thing repeated we do think that the Government by accepting such bids is leading into a field of cut rates and against any long-range transportation policy of value to this country."

10. štuart G. Tipton, general counsel, Air Transport Association.--"Based upon 'airline experience in selling transportation to the Government, it is clear that Government traffic managers are paying far too much attention to the immediate cost of a particular move and far too little attention to longer range governmental economy and the requirements of the national transportataion policy." 10

11. Harry S. Broun, chairman, Intercoastal Steamship Freight Association."We do not believe that cut rates to the Government are fair to the transportation industry or to commercial shippers. I will go further than that-it is my personal belief, and I do not say this facetiously, that the United States Government should pay higher freight charges than commercial shippers.” 10

12. Frederick G. Freund, director of traffic department, American Trucking Associations, Inc.-"To summarize, section 22 of the Interstate Commerce Act is outdated when viewed in the light of present-day conditions, as the horse and buggy is in present-day traffic. The granting of cut rates to the Government in effect subsidizes the world's largest shipper, encourages destructive practices between and among the various methods of transportation, and through the encouragement of destructive practices jeopardizes the financial stability of our transportation system.”

" 10

1 Report of the Presidential Advisory Committee on Transport Policy and Organization submitted to the President on July 12, 1954.

? Before the 1953 assembly of the Movers Conference of America as reported in the August 15, 1953, issue of In the Van, a publication of the Movers' Conference.

3 Before the 1953 assembly of the Movers Conference of America as reported in the August 15, 1953, issue of In the Van, a publication of the movers' conference.

4 In a letter sent to the 1953 assembly of the Movers Conference of America as reported in the August 15, 1933, issue of In the Van, a publication of the movers' conference.

5 From p. 99 of the Recommended Report of the Hoover Task Force Subcommittee on Transportation, dated March 1955.

6 P. 3 of information memorandum published by the Transportation Association of America entitled "Cut-Rate Government Transportation and Why Section 22 of the Interstate Commerce Act Should Be Amended."

7 Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 1954.

8 Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 1954.

• Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 1954.

10 Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 1954.


» 12

13. Herbert K. Hyde, Commissioner of Transportation and Public Utilities Serrice, General Services Administration.-"I do not thing that any government bas the right to say to other shippers of America or to the American taxpayers or penple who do shipping that our traffic, the Government's traffic, should be moved at a smaller or lesser charge than that imposed upon others of comparable size." 11

14. Warren B. Shepherd, general traffic manager, Aluminum Company of America.—"The so-called law of the jungle is kept in abeyance as to private traffic but it is allowed to run rampant as to Government traffic.'

15. Interstate Commerce Commission.-"We recommend that section 22 be amended so as to make the provisions thereof permitting the performance of transportation services for Federal, State, and municipal governments free or at reduced rates applicable only during the time of war, or threatened war, or other bational emergency." 13

16. National Council of Farmer Cooperatives.—“The council supports legislatire revision of the Interstate Commerce Act to provide for the movement of gurernmental traffic on the basis of commercial rates, charges, rules, and regulations, published in tariffs open to the public inspection (waiver of provisions abere emergency or national security is involved.” 14

17, National Industrial Traffic League.-Recommended that section 22 of the act he amended to conform with the principles stated by Congress when it repealed provisions under which the Government could demand special reduced rates for traffic moving over land-grant railroads.15

18. The Tennessee Products & Chemical Corp. and the Tennessee Consolidated Coal C0.-“A downward spiral of section 22 rates and charges is detrimental to tbe country's welfare and the public interest." 16

19. Senate Appropriations Committee (8. Res. 2034).—“It has long been recognized that transportation charges may be unreasonable because of being too low, and any policy of bargaining for rates or playing one carrier off against another with the primary objective of getting the lowest possible transportation rate without regard to the consequences for the carrier is promotive of destructive competitive practices and fosters unsound economic conditions in transportation eontrary to the national transportation policy * * *

** Accordingly all Government agencies * * are admonished to pay full heed to the national transportation policy in their dealings with carriers." 17

20. Dr. John Frederick, head, department of busincss organization and profresor of transportation, University of Marylanı.--"I would also favor the repeal of section 22, which gives the Government special rates over the ordinary shipper." 18

21 alter M. W. Splawn, former Chairman, Legislative Committee, Interolate Commerce Commission.-"In the light of our experience, we believe the United States Government should pay the full tariff rates on property transported for it, the same as any other shipper.'

Brief of the railroads filed uith the Interstate Commerce Commission in the mattery of Docket Er Parte No. 192 and Docket Ex Parte No. MC-47.—“The situation which has activated consideration by the Commission of the proposed male governing the tendering of section 22 quotations by motor common carriers and the railroads is free competition among the common carriers for government traffir without the safeguards established by the act for other types of traffic. This unfettered competition for such highly desirable freight has resulted in Te revenues received by the carriers for government traffic being below what thee otherwise might be, and below corresponding revenues received from commercial shippers. That such a situation exists is evidenced by the fact that the

[ocr errors]

" 19

From court transcript of testimony presented before the Subcommittee on Transportato and Communications, Committee on Interstate and Foreign Commerce in connection 1) HR. 525, on April 26, 1956.

a: Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 1634. 23 A9th Annual Report of the ICC dated November 1, 1955, p. 126.

P.3f memorandum published by Transportation Association of America on March 8, 1956 edotled "Background Material on Section 22 of the I. C. Act." I Transport Toples, November 30, 1953, p. 1.

Shot 23 of the proposed report of Examiner R. Edwin Brady on Docket Ew Parte S. 122.

IT-ansport Topics, August 9, 1954, p. 1.

- Frosi court transcript of testimony presented before the Subcommittee on Transportado and Communication, Committee on Interstate and Foreign Commerce in connection Eith II IL 525, on May 10. 1956.

Letter to Hon. Edwin C. Johnson, United States Senate, dated March 28, 1952.

Senate has recently admonished the Government agencies (referred to herein as view No. 19) for utilizing their shipper strength to drive down rates, stating that such action does violence to the national transportation policy." 20

PART X. CONCLUDING REMARKS In summing up the remarks I have made with regard to section 22, I can think of no better words to express the views of the conference I represent than the following statement made by one of our great transportation minds, the late Joseph B. Eastman, in testifying in support of repeal of the land grant rate concessions to the government:

"* * * It seems to me that the Government ought to pay the same rates for carriage of traffic as are paid by its own citizens, who really make up the Government * * *"

Mr. Chairman, on behalf of the members of the Munitions Carriers Conference, I respectfully urge that H. R. 525 be favorably considered by the members of this committee, so that this important piece of constructive transportation legislation can be acted on favorably at this session of Congress.


SECTION 22—ITS ORIGIN, EVOLUTION, INTENT Although section 22 was part of the original act to regulate commerce of 1887,' it has only been within recent years that controversies have raged over the equity or inequity of its provisions. What is this mysterious section around which so much discussion has taken place? Why was it included in the act to regulate commerce and what was its intent?

BACKGROUND OF GOVERNMENT RATE CONCESSION In our early transportation history we can see where the seed was sown for the growth of section 22, for in the act of June 1, 1796, regulating grants of land appropriated for military service, Congress indicated an early intent to receive some concession by requiring:

“* * * That all navigable streams or rivers within the territory to be disposed of, by virtue of the act, shall be deemed to be and remain public highways.

The roots of the rate concession Congress expected the Government should receive in exchange for grants of aid could be seen as early as 1824 when, in an act authorizing the State of Illinois to open a canal through public lands, it was stated :

** * * That the said canal, when completed shall be, and forever remain, a public highway for the use of the Government of the United States, free from any toll or charge whatever, for any property of the United States or persons in their service, on public business, passing through the same.'

Then, 10 years later, in an act which provided aid for the repair of a military road,' military shipments were exempted from the payment of tools by the following:

"* * * Provided That no toll shall be received or collected for the passage of any wagon or carriage, laden with property of the United States, or any cannon or military stores belonging to the United States, or to any of the States composing the Union.”

Moving on a few years we find that during the period 1850–71 the Federal and State Governments granted large acreages of land to the railroads to aid in railroad construction. And it is interesting to note that the majority of these landgrant acts, as they became known, provided some type of rate concession to the Government in exchange for the grants of land. The acts varied, however, as to the magnitude of these rate concessions. Some of the acts provided that:

20 P. 20 of the brief of the rallroads filed with the Interstate Commerce Commission in the matters of Docket Ex Parte No. 192 and Docket Ex Parte No. MC-47.

1 Sec. 22 provides for the movement of Government property at free or at reduced rates. 91 Stat. 491. For turnpike application, see 4 Stat. 242. 34 Stat. 47. 44 Stat. 716.

8176,220,656 acres were received. Federal Co-ordinator of Transportation, Public Aids To Transportation, vol. I, p. 115.

[ocr errors]

the said railroad and branches shall be and remain a public highway, for the use of the Government of the United States, free from toll or other charge upon the transportation of any property or troops of the United States. These railroads were referred to as free-toll lines. Others were called congressional-rate lines since the provisions in their acts required:

* That said railroad shall be a post route and military road, subject to the use of the United States for postal, military, naval, and all other governmental service, and also subject to such regulations as Congress may impose restricting the charge for such governmental transportation."

Up to the civil war little controversy existed with regard to these provisions since military shipments were small in number and volume. When it became a great sacrifice, however, for the railroads to transport the great civil war traffic in troops and supplies, many requests were made for interpretations of the landant rate concession provisions. An early interpretation, in August 1861, confined the concession to the United States to a free use of the mere roadway, but did allow a deduction of one-third of the usual price of transportation. In the same year the Secretary of War, Simon Cameron, wrote to Mr. W. H. Osborne, president of the Illinois Central Railroad, stating that:

** * * Payment for transportation of freights, stores, munitions of war and other public property, will be made at such reasonable rates as may be allowed to other railroad companies, subject however to the abatement of 3342 percent."

in 1862 the House passed a provision requiring free transportation but the Senate rejected it and induced the House to accept. And again in 1865 a movement was started in the House to force the Illinois Central to transport property for the government free of charge but no action was taken."

Since the free transportation provisions of the earlyland-grant acts were subject to varying interpretations, the later acts, beginning in 1866, began to specify in more definite terms the intent of the free transportation. In the act of July 13, 1866, for example, new phraseology was included :

* and the same shall be transported over said road, at the cost, charge and expense of the corporation or company owning or operating the same, when required by the United States to do so."

Or consider the following language in the act of July 26, 1866:

** • * That said company, after the construction of the road, shall keep it in repair and in use, and shall at all times transport troops, munitions of war, supplies and public stores upon its road, for the Government of the United States, free from all cost or charge therefor to the Government."

A crisis finally arose in 1874 when in the Army appropriation act of that year Congress provided that no payments should be made for the transportation of troops or property over free-toll railroads, or any other land-grant railroads, where the Land-Grant Act contained any condition whatsoever relating to the transportation of Federal troops and property. This act, however, permitted the railroads to institute suit against the Government, which they did, in order that the free-toll provisions of the act might be interpreted by the courts. And in 1877, in Lake Superior & M. R. Co. v. United States " the Court handed down the following opinion :

*** • . We are of the opinion that the reservation in question secures to the Government only a free use of the railroads concerned, and that it does not entitle the Government to have troops or property transported by the companies over their respective roads free of charge for transporting the same."

During this period of land-grant aid there were many railroads who re(eived no assistance, and who found themselves unable to compete with the reduce-rate lines for Government traffic. These railroads, therefore, began entering into equalization agreements with the Government whereby they agreed to meet the rates of the reduced-rate lines, other than those which could make no charges."

[ocr errors]
[ocr errors]

Act of September 20, 1850, 9 Stat. 467.

Art of July 27, 1866, 14 Stat. 297. $93 C. 8. 442. p. 966. Congressional Globe, 1865, p. 890. *93 (*. S. 442, p. 970. 11 14 sunt, 95. See also 14 Stat. 237, 14 Stat. 338.

14 Stat. 290, 14 Stat. 549. +18 Stat. 72, 74. * 33 (T. S. 442, p. 971. *Federal Coordinator of Transportation, Public Aids to Transportation, vol. II, p. 42.


To turn now for a moment to the regulation of rates, we find that relatively little was said in Congress about this subject until 1868, when evidence began to appear of a definite movement to regulate rates. In that year three different resolutions were introduced which looked toward the control of rates.16 The object of rate regulation in this early period, L. W. Haney reported in his Congressional History of the Railways, was predominantly cheap transportation. These bills introduced in 1870, in fact, were entitled “To Promote Commerce and Cheapen the Transportation of Mails.” 17 And in 1872 the Senate appointed a special committee to investigate the possibility of securing cheaper transportation between the interior and the seaboard.18

A few years later in 1877, Congressman Reagan of Texas introduced a bill to regulate commerce, and Congressman Watson of Pennsylvania introduced one in 1878, both of which were referred to the House Committee on Commerce. Congressman Reagan, however, happened to be chairman of this committee and his substitute bill H. R. 3547 10 was reported out and passed the House in December 1878. This bill of Reagan's incorporated much of the rate concession philosophy inherent in the early Federal aid to the States, and later in the land-grant acts, and by the following language laid the foundation for the inclusion of section 22 in the act to regulate commerce:

“That nothing in this Act shall apply to the carriage, receiving storage, handling, or forwarding of property less than the ordinary carload, or wholly within one state or territory, going to or coming from some foreign country, or to property carried for the United States at lower rates of freight and charges than for the general public, or to the transportation of articles free or at reduced rates of freight for charitable purposes, or to or from public fairs and expositions for exhibition."

Reagan's bill was referred to the Committe on Commerce in the Senate but no further action was taken. He introduced his bill again in 1879 and 1880 but ade no progress.

The beginning of the final stage in the evolution of section 22 arrived in December 1884 when the House passed Reagan's bill H. R. 5461. As contrasted with Reagan's 1877 bill, which provided for the movement of Government property at lower rates than charged the general public, the 1884 bill contained the following complete exemption :

"* * * That nothing in this act shall apply * * * to property carried for the United States."

While the House was passing Reagan's bill the Senate had been considering a similar bill of Senator Cullom of Illinois, and when the Reagan bill came up from the House the Cullom bill was passed by the Senate as a substitute for it on January 30, 1885.” At this juncture a select committee of five Senators was appointed, with Senator Cullom as chairman, to investigate and report upon the regulations of railways and water carriers, the findings of which resulted in the famous Cullom report. Based to a large extent on the findings of his committee, Senator Cullom reported Senate bill 1532 from the Committee on Interstate and Foreign Commerce on February 16, 1886, and it was passed by the Senate. Upon receipt in the House, however, the Reagan bill was passed as a substitute. And when the Senate disagreed with the Reagan substitute, conferees were appointed to resolve the differences. While these differences were basically concerned with the long-and-short-haul provisions, an antipooling clause, and enforcement procedures, it should be noted that differences in wording existed with relation to the transportation of Government freight at reduced rates. Since the land-grant acts had placed reduced rates to the Government on a fait accompli basis, the differences in the two bills revolved around wording which would make the reduced rates to the Government lawful in an act which was otherwise

[ocr errors]


18 Congressional Globe. 1867-68, pp. 1632, 2331. 17 S. Rept. 1871, p. 732. 18 Transportation Routes to the Seaboard, 43d Cong., 1st sess., S. Rept. 307, pt. 1. 19 Congressional Record, 1878–79. p. 93. 20 Interstate Commerce Debates, 48th Cong., 1884-85, p. 3. 21 Ibid., p. 10. 22 Congressional Record, 1884-85, p. 1254. 23 S. Rept. No. 46, 49th Cong., 1st sess. 24 Congressional Record, 1885-86, pp. 1464, 4432. 25 Ibid., p. 7756. 98 Ibid., pp. 7818, 7832.

« PreviousContinue »