13. Herbert K. Hyde, Commissioner of Transportation and Public Utilities Service, General Services Administration.-"I do not thing that any government has the right to say to other shippers of America or to the American taxpayers or people 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." 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.' 99 12 99 11 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 national emergency." 13 16. National Council of Farmer Cooperatives.—“The council supports legislative revision of the Interstate Commerce Act to provide for the movement of governmental traffic on the basis of commercial rates, charges, rules, and regulations, published in tariffs open to the public inspection (waiver of provisions where emergency or national security is involved." " 17. National Industrial Traffic League.-Recommended that section 22 of the act be amended to conform with the principles stated by Congress when it repealed provisions under which the Government could demand special reduced rates for traffic moving over land-grant railroads." 18. The Tennessee Products & Chemical Corp. and the Tennessee Consolidated Coal Co.-"A downward spiral of section 22 rates and charges is detrimental to the country's welfare and the public interest." 19. Senate Appropriations Committee (S. 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 contrary 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." " 20. Dr. John Frederick, head, department of business organization and professor of transportation, University of Maryland.—“I would also favor the repeal of section 22, which gives the Government special rates over the ordinary shipper." is 21. Walter M. W. Splawn, former Chairman, Legislative Committee, Interstate 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." 19 Brief of the railroads filed with the Interstate Commerce Commission in the matters of Docket Ex Parte No. 192 and Docket Ex Parte No. MC-47.—“The situation which has activated consideration by the Commission of the proposed rale governing the tendering of section 22 quotations by motor common carriers and the railroads is free competition among the common carriers for government traffic without the safeguards established by the act for other types of traffic. This unfettered competition for such highly desirable freight has resulted in The revenues received by the carriers for government traffic being below what they otherwise might be, and below corresponding revenues received from commercial shippers. That such a situation exists is evidenced by the fact that the From court transcript of testimony presented before the Subcommittee on Transportaton and Communications, Committee on Interstate and Foreign Commerce in connection with HR. 525, on April 26, 1956. 1934. Panel discussion on Are Cut-Rates to Government Fair? Hartford, Conn., November 5, 9th Annual Report of the ICC dated November 1, 1955, p. 126. P. 3 of memorandum published by Transportation Association of America on March 8, 1956 entitled "Background Material on Section 22 of the I. C. Act." Transport Topics, November 30, 1953, p. 1. Sheet 23 of the proposed report of Examiner R. Edwin Brady on Docket Ex Parte Yo. 122. Transport Topics, August 9, 1954, p. 1. From court transcript of testimony presented before the Subcommittee on TransportaBand Communication, Committee on Interstate and Foreign Commerce in connection with H H. 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." PART X. CONCLUDING REMARKS 20 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. APPENDIX A 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 railroads 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. 21 Stat. 491. For turnpike application, see 4 Stat. 242. 3 4 Stat. 47. 44 Stat. 716. 5 176,220,656 acres were received. To Transportation, vol. I, p. 115. Federal Co-ordinator of Transportation, Public Aids 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 landgrant 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 33% 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.10 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." 99 12 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: 14 **** 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 received 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." Act of September 20, 1850, 9 Stat. 467. Act of July 27, 1866, 14 Stat. 297. 93 C. 8. 442. p. 966. * Congressional Globe, 1865, p. 890. 93 U. S. 442, p. 970. 14 Stat. 95. See also 14 Stat. 237, 14 Stat. 338. 14 Stat. 290, 14 Stat. 549. 18 Stat. 72, 74. *98 C. S. 442, p. 971. Federal Coordinator of Transportation, Public Aids to Transportation, vol. II, p. 42. CLAMOR FOR RATE REGULATION BEGINS 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 19 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 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 made no progress. 20 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." 99 21 23 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, 1885.22 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 conIcerned 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 16 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. 26 Ibid., pp. 7818, 7832. designed to prevent the very thing reduced rates to the Government imply— discrimination. The Reagan bill provided that nothing shall apply to property carried for the United States at lower rates of freight and charges than for the general public, while the Cullom bill states that nothing shall apply to the carriage, storage, or handling of property free or at reduced rates for the United States, State, or municipal governments. Early in 1887 the committee of conference reported a bill which was passed by the Senate on January 14, and by the House on January 21, 1887." This bill, which was a compromise insofar as the free transportation provisions of the Reagan and Cullom bills were concerned, was signed by President Cleveland on February 4, 1887, and became the Act To Regulate Commerce. Thus section 22 was born. EARLY EXPERIENCE UNDER SECTION 22 From the enactment of the act of 1887 up to and including World War II predominately all of the Government traffic was moved by the railroads under landgrant and rate equalization concessions. Section 22 was the medium that made these rate concessions lawful. During this period there were attempts made to clarify to some extent the general haziness which surrounded this anomalous section. In its first year of operation the Commission, for example, held in a case involving the issuance of mileage tickets: "That while the issuance of mileage tickets is authorized by section 22 of the act, that section does not relieve the carriers from the requirements of reasonableness and impartiality as to rates charged for such tickets." 19 28 And in its first annual report, the Commission stated with regard to section 22: * These provisions, it will be seen, are not intended to qualify to any injurious extent the general rules of fairness and equality which the act has been so careful to prescribe, and the exceptions may all be said to be authorized on public considerations." In 1892, in a section 22 proceeding before the Commission concerning unjust discrimination in the movement of passengers, the Commission said that: ***** Indeed, many, if not all, the excepted classes named in section 22 are those which, in the absence of this section, would not necessarily be held the subjects of unjust discrimination. Such, for instance, are property of the United States in favor of whom a reduction of rates had been made for many years before the passage of the act." 20 We can see in this early Commission opinion the rationalization of rate concessions to the Government. In 1913, however, the Commission took a somewhat different position with regard to unjust discrimination, stating in Dairymen's Supply v. Pennsylvania Railroad" that while portions of section 22 allow the carrier to transport property at free or reduced rates to fairs, it does not require that the carrier do so, adding that it was permissive of the carriers to furnish reduced rate transportation provided that it does not result in unjust discrimination under section 2 or undue preference or prejudice under section 3 of the act. Ten years later, in Nashville, C. & St. L. Ry. et al. v State of Tennessee et al.a the court took a more definite position, stating: **** Congress did not intend, by the provision (section 22) concerning reduced rates and free transportation, to create an instrument, by which the carrier was authorized, in its discretion, to subject interstate commerce to undue prejudice REPEAL OF LAND-GRANT RATES URGED With the outbreak of war in Europe in the late 1930's, our military shipments began to sharply increase and strong requests were made to repeal the landgrant rate concessions to the Government. The Transportation Act of 1940 finally relieved the railroads from their obligation to transport mail and Government traffic, but did not release them from their obligation to continue to transport ES. Rept. No. 46. Vichigan Central Railroad v. Chicago and Grand Trunk Railroad Company, First Annual Report of ICC, p. 91. 145 U. S. 263. 28 I. C. C. 408. =262 U. S. 318. |