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agencies to substitute their judgment for that of the Commission, a task for which the Government traffic management agencies are, as was pointed out by the former Assistant Comptroller General of the United States, neither qualified nor authorized to perform.
An important consideration here is that the Government as a shipper must pay the freight charges incurred on its shipments and is not in a position, therefore, to decide without bias what the rate should be. Experience has shown, and written testimony reflects, that the Government does not give full cognizance to the factors considered by the Commission in determining the reasonableness of a rate.
The Government, for example, does not consider the effects of drastic rate reductions on other modes of transportation. It does not consider the effects of rate reductions on the traffic of commercial shippers. It does not consider whether reduced rates are lower than necessary to meet competition.
It is primarily because the Government, in the role of a shipper, is not without prejudice that the lack of the suspension power acts as a disadvantage to the Government, for it places the Government traffic management agencies in the position of substituting their judgment for that of the Commission, and thereby they subject themselves to much abuse and many derogatory remarks.
Now, with respect to the compensatory aspects of section 22 rates, Mr. Jelsma in some detail pointed out that the statements made by the Department of Defense with reference to section 22 rates being somewhat higher than commodity rates was not a fair representation of the situation as it exists today.
Assuming, however, that there are some section 22 rates higher than commodity rates, that can be justified, as is pointed out in the paragraph quoted from the Bureau of Transport Economics and Statistics at the bottom of page 16.
As far as security is concerned, there is within the province of the Interstate Commerce Commission today the ability to provide for the security of military shipments. An example is the ICC special permit No. 868 which is now in effect regarding the transportation of munitions by truck, and there are several other examples to justify the statement that the Commission is presently able to provide for the security of military shipments.
In part VIII, Mr. Chairman—and I am getting to the conclusion of this statement the provisions of section 22 which allow "free or at reduced rates to the Government” inherently invite rate abuses of the worst type. It allows discrimination as between commercial and military shipments to take place on the same commodity, between the same two points, and over the same route.
It provokes distrust between carriers in different modes of transportation, as well as carriers within the same mode of transportation. It has an upsetting effect on the financial stability of carriers since the Government can and does seek overcharges from carriers many years after the movement took place.
It permits rates to spiral downward unchecked. It promotes the substitution of judgment on the part of Government traffic management agencies in matters relating to the reasonableness of rates for that of the Commission.
It imposes a burden on commercial shippers who must necessarily pay higher rates to offset the effeects of unrestrained rate reductions
to the Government. It promotes discrepancies in matters relating to the handling of rates on the part of Government agencies, and it places an enormous administrative burden on the Government transportation agencies.
I will not take the time, Mr. Chairman, to refer to the 22 views by Government agencies, the various modes of transportation, and commercial shippers supporting the repeal of section 22.
I would like to move now to part X and conclude my remarks. In summing up my remarks, Mr. Chairman, that are 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.
I would like to, with your permission, Mr. Chairman, state that the National Tank Truck, the Regular Route Common Carrier, and the Irregular Route Common Carrier Conferences have asked me to include in the record their support of the Hinshaw bill, H. R. 525.
Thank you, Mr. Chairman.
Mr. Burns. We have 90 members which transport about 90 percent of all the ammunition and explosives moved for the military departments by truck.
Mr. HARRIS. Thank you very much.
Mr. DOLLIVER. What proportion of the munitions are carried by truck? What is the division between you and the rails and the other carriers ?
Mr. BURNS. We don't know the most recent figures, because the diversion of tonnage to the railroads which has taken place by these destructive rate cuts is not reflected in the most recent figures available to us.
We were transporting around 50 percent of all the ammunition and explosives moved by truck prior to the inception of the rate cuts by the railroads.
Mr. DOLLIVER. About 50 percent?
Mr. DOLLIVER. What rejoiner do you have to the anticipated statements of the Government agencies that this repeal of section 22 is going to cost the taxpayers anywhere from one-half to 34 billion dollars? Do you have anything to say about that?
Mr. BURNS. It is a difficult question to answer, Mr. Congressman. It is almost an impossible question to answer. Obviously during the transitionary period, as we experienced when the land-grant rates were repealed, there would undoubtedly be some additional expense, but there is no way of estimating what that expense would be, and when the repeal takes place, through increased and more efficient traffic management on the part of the Government traffic agencies, there is good reason to believe that the Government may, in fact, be able to reduce their expenses with regard to the available rates that are now in effect for commercial shippers.
Mr. DOLLIVER. I would be glad to have you develop that thought a little. How does that follow from what you have just said?
Mr. BURNS. One of the reasons, Mr. Congressman, is the fact that, as was pointed out in the Department of Defense testimony—and this same administrative burden, I assume, would apply to other Government traffic agencies--they have to receive and process to the maximum all tenders received whether they are negotiated or the unsoli
There were received approximately 19,000 tenders last year, all of which must receive equal treatment, whether they are solicited or unsolicited. There is an enormous administrative burden, as Mr. Smith put it, to fully process all of those tenders.
Assuming that a reasonable rate pattern could be developed for the Government agencies, as we see it in the commercial field, and we have in the commercial traffic management agencies many large organizations that are the size of the Department of Defense, for example, to just use that agency, I see no particular difficulty once the interim period between
the cessation of section 22 and the inception of commercial traffic management on that small percentage of the traffic which does not move today on commercial tariff rates takes place.
It is just a small aggravating period perhaps when the transition takes place and that should, in my opinion, cause no undue difficulty to get the remaining percentage now moving on section 22 rates placed on the same basis and to receive the same treatment which the commercial shippers receive today.
(Mr. Burns later submitted the following supplementary statement:) SUPPLEMENTARY STATEMENT BY WILLIAM J. BURNS, MANAGING DIRECTOR, MUNI
TIONS CARRIERS CONFERENCE, INC., AMERICAN TRUCKING ASSOCIATIONS, INC., WASHINGTON 6, D. C., IN CONNECTION WITH H. R. 525, JUNE 8, 1956
My name is William J. Burns. I am managing director of the munitions carriers conference. At an appearance at the above-mentioned hearings on June 8, I was asked by a member of the subcommittee what rejoinder I have to the anticipated statements of the Government agencies that the repeal of section 22 would cost the taxpayers anywhere from $1 to $34 billion.
After analyzing the testimony of the Government witnesses, I would like to supplement my answer by stating that the $4 to $34 billion additional cost anticipated by the Government would appear to be far out of line. The total domestie freight transportation bill for the Department of Defense for the fiscal year 1955, for example, as reflected in the Department of Defense testimony before this committee, amounted to only $537 million. Assuming then, as the Department of Defense stated, that the preponderance of their traffic moves today under rates, charges, and rules and regulations which are duly published by the carriers and filed in tariff form with the Interstate Commerce Commission, only a small percentage of Department of Defense traffic moves today under section 22 rates. Should section 22 be repealed, therefore, the traffic now moving under section 22 could be moved under commodity rates in tariff form where justified.
As Mr. Dabney T. Waring, executive vice president of the middle atlantic conference, a freight rate and tariff agency, outlined in his statement attached to my testimony, the Government would have little difficulty in securing commodity rates on the same basis as commercial shippers where these rates could be justified. The Department of Defense witnesses did not state what percentage of military traffic moves on section 22 rates, but if we assume this percentage to be 20 percent the total freight charges paid by the Department of Defense on section 22 movements would approximate $107 million (20 percent of $537 million). Further assuming that section 22 rates are approximately 20 percent below going commercial rates on like commodities the repeal of section 22 would result in only an additional cost of $21 million (20 percent of $107 million). Much, if not all, of this figure could be decreased by the savings in the "enormous administrative burden" the Department of Defense must now incur in handling section 22 rates.
Since the Department of Defense admittedly is the largest single Government shipper of transportation, it is not understood how the Government can suggest that the taxpayers must incur additional cost of anywhere from $1 to $34 billion, especially since the Department of Defense and General Services Administration witnesses both have stated that the preponderance of their traffic today moves under established tariff rates.
Mr. DOLLIVER. I note from your statement that you formerly were with what is now the Office of Transportation and Communications.
Mr. Burns. Yes, sir. I was in the same office as Mr. Smith, who is the director of that office today.
Mr. DOLLIVER. So you have had some experience on that side. Mr. BURNS. Yes, sir.
Mr. DOLLIVER. It is your considered opinion then, from what you just said, that if section 22 were repealed it would substantially reduce the administrative work on the paperwork involved in the negotiation of these separate rates?
Mr. Burns. Of the negotiation of the rates now taking place;
Mr. DOLLIVER. Have you taken the same view as expressed by other witnesses here that section 22 is sort of a hangover from the time when there were land-grant rates, which have been repealed, of course?
Mr. BURNS. To answer that question, Mr. Congressman, I have attached to this statement, which I modestly feel is the most comprehensive report on section 22 in existence today. I have gone back through the files as far as 1796 to substantiate my opinion that section 22 was never intended in 1887 to do what it is doing today.
Section 22 in 1887, in my opinion, was nothing more than an extension of the rate concession philosophy that had been in existence for some 50 years prior to 1887 in the form of aid to the States, in the form of land-grant assistance during the period 1850 to 1871.
Section 22 then, in my opinion, was to make lawful in the act of 1887 the provision for reduced rates which had been taking place prior to 1887 and which, through the Land Grant Act, would continue for many years subsequent to 1887, but I don't think seriously that the Congress ever envisaged the situation where, with the Department of Defense and the Government agencies the size they are today, they would be able to receive discriminatory rates as compared with those rates that are available to commercial shippers.
Mr. DOLLIVER. Is there any other shipper other than the Government that is free from the rate restrictions that are in the act ?
Mr. Burns. No, sir; except the State and municipal governments receive the same concessions under section 22 and intrastate move
ment, but aside from the charitable organizations and those other organizations that are mentioned in section 22 today, there is no other organization of comparative size that receives the rate concessions that are received by the Government today.
Mr. DOLLIVER. Would a repeal of section 22 eliminate any possibility of State or municipal organizations from bargaining for their rates?
Mr. BURNS. As I recall the Hinshaw bill, it would repeal those provisions which allow rate concessions to the State and municipal governments.
Mr. DOLLIVER. Thank you, Mr. Chairman. That is all.
Mr. HINSHAW. Yes, I just want to ask one question. Supposing section 22 in respect to these rates is abolished. How do you suppose fast action can be gotten under section 6! How long would it take to establish the rate?
Mr. Burns. To change over from section 22 to tariff rates? That would be difficult. I wouldn't want to be presumptuous to estimate without giving it further thought. It would take some time. It would require considerable thought on the part of the many agencies involved to come up with what I think would be a fair period of time.
Mr. Hinshaw. Reorganizing the rate structure, you mean?
Mr. Hinshaw. I am simply asking about how long it would take to get a new rate established under section 6?
Mr. BURNs. It wouldn't take long at all.
Mr. HINSHAW. It has been guessed around here anywhere from 1 to 3 days.
Mr. BURNS. It could be done in 1 day under section 6 (3) of the Interstate Commerce Act. The rates could be changed in as little as 1 day's notice, provided the rates can be justified.
It wouldn't take long at all to change the section 22 rates to commodity rates if it could be justified.
Mr. HINSHAW. I wouldn't think it would take much longer than it would to establish a section 22, but that is anybody's guess.
That is all, Mr. Chairman.
Mr. Harris. Thank you very much, Mr. Burns. We are very glad to have your statement.
Mr. BURNS. Thank you.
Mr. HARRIS. Mr. Harry R. Brashear. I believe you are the director of the traffic service, Aircraft Industries Association.
STATEMENT OF HARRY R. BRASHEAR, DIRECTOR, TRAFFIC
SERVICE, AIRCRAFT INDUSTRIES ASSOCIATION Mr. BRASHEAR. That is correct, Mr. Chairman.
I have prepared a statement and I would like to have it incorporated into the record without reading it. Mr. Harris. Yes, you may have it incorporated in the record.
(The statement referred to follows:) STATEMENT OF HARRY R. BRASHEAR ON H. R. 6141, H. R. 9548, H. R. 9771, AND
H. R. 9772 8. R. 6141
My name is Harry R. Brashear and I am director of traffic service of the AirTaft Industries Association of America, Inc. This association is a trade organiza