"It appeared to me that regulation on the Mississippi River would give those people who are seeking regulation a tremendous advantage, in that it would practically run the contract carrier out of business" (p. 709).

"The issuance of certificates of necessity and convenience would tend to give the water carriers in operation now the same amount of monopoly that the railroads used to have" (p. 710).

"The more competition you have the more you can disseminate your farm products all around through the world markets" (p. 710).

3. The exemption was accordingly based upon the determination that there was no substantial competition between bulk transportation on the waterways and package transportation on the waterways or any transportation by rail, and that, therefore, the exemption did not place the regulated carriers under unfair competitive disadvantage.

As stated above under point 2, the Federal Coordinator of Transportation justified regulation of contract carriage by water only to the extent that it was necessary to protect common carriers against unfair and demoralizing competition. In hearings before the Senate committee on S. 1632, 74th Congress, 1st session, the Coordinator stated, in reference to the contract and private carriers who were not to be exempted from regulation

"The regulation of these contract carriers and the private carrier is directed toward that end, namely, the protection of the common carrier against unfair competition practices" (p. 648).

On the other hand, with respect to contract and private bulk carriers, he said— "Take the situation on the Great Lakes. There at the present many boats which are controlled by industries, which are operating on the Great Lakes in the haulage of iron ore, for example. They may carry back coal for others on the return trip. Occasionally they may haul a cargo of grain. These boats are not competitive with the railroad in any substantial sense, because they operate so cheaply over those long water distances that the railroads could not hope to compete. Nor are they competitive in any substantial way with the common carriers operating on the Great Lakes who confine themselves largely to package freight. So long as a situation of that kind exists, where there is no apparen need for public regulation, the Commission should be in a position to relieve such carriers from unnecessary burdens ***" (pp. 648-649).

And again:

"But personally, so far as I know anything about the situation [on the Great Lakes] if those contract vessels confine themselves to bulk cargoes, such as iron ore, grain, and coal, it does not seem to me that they are a demoralizing influence upon any form of common carriers, either the railroads or the commoncarrier boats” (p. 650).

The original recommendation was to extend the regulatory authority of the Interstate Commerce Commission over all contract carriers but to have the Commission use the authority sparingly.

In the course of considering legislation, however, the Senate Committee on Interstate Commerce concluded that regulatory authority over most contract carriage by water was unnecessary and therefore on this basis, unjustified, and it amended the bill of the Coordinator to provide that noncompetitive carriage should be excluded from regulation and that the Commission should proceed to determine what transportation should thus be excluded. (S. Rept. 925. 74th Cong., 1st sess., June 21, 1935, p. 2; see Congressional Record, July 3, 1935, p. 10692, and July 8, 1935, p. 10738.)

The amendment proposed by the committee specifically referred to the factor of shipment in bulk as one of the possible factors in making contract carriage noncompetitive with common carriage.

This reasoning and the language of the Senate committee were followed in several subsequent bills down to the summer of 1939 (S. 1400 and H. R. 5719, 75th Cong., 1st sess.; and H. R. 4862 and S. 2009, 76th Cong., 1st sess.).

At that time, after having listened to testimony of representatives of inland water carriers and shippers, the House committee evolved an exemption for bulk transportation which was automatic and required no finding by the Commission. This was a provision almost identical with section 303 (b) as it stands today.

The House committee, in explaining this provision in its report, said:

"The bulk-carrier exemption in section 303 was given water transportation on the theory that such transportation is not substantially competitive with land transportation *

"The substitute bill gives the unqualified exemption, above referred to, on the theory that the water carriers, given this privilege, can carry such cargo at such low cost that the transportation is not substantially competitive with common carriers by water or with land transportation

"Subsections (b), (c), and (e) [of sec. 303] relate to exemptions in the case of contract carriers. Very painstaking consideration was given to the working out of these exemptions. Every effort was made to avoid imposing unnecessary regulation on carriers of this type which have never before been regulated, and at the same time to insure that the exemptions did not result in regulating carriers being subjected to unfair competitive disadvantages" (House Rept. No. 1217, 76th Cong., 1st sess., July 18, 1939, pp. 4, 8, 20).

In debate in the House, Congressman Halleck said:

"Why were bulk carriers by water exempted? They were exempted because everyone recognizes that their carriage is so cheap that they are not in any substantial competition with any carrier" (Congressional Record, July 22, 1939, p. 9709).

And Congressman Hinshaw said:

"As far as bulk carriers are concerned, those hauling sand and gravel, coal, cil, and similar materials in rough bulk, it was thought that those commodities were of such a nature that the handling of such cargoes was not competitive, consequently they were left out. In this bill we are interested in competition" (Congressional Record, July 22, 1939, p. 9750).

From this review, it appears that Congress considered regulation of water carriers justified only to the extent that it would protect common carriers against demoralizing competition, and it also is clear that Congress considered bulk transportation to be so entirely different in its range of costs from package transportation by common carriers by water or any transportation by rail as to be an entirely different field of competition. Thus, protection of common carriers, by water or by rail, could not itself justify regulation of bulk transportation by water.

4. The reasons for the bulk exemption extend as much to the inland waterways as to the Great Lakes and coastwise traffic.

While the most striking example of cheap bulk transportation may be found in the Great Lakes carriers of iron, oil, limestone, coal, and grain, the same reasons for exemption apply to bulk transportation on the Mississippi River system. Bulk transportation normally involves special equipment, mechanical handling, more or less continuous operation, a limited number of stops on a voyage, all of which contrast with package transportation, making for far cheaper operation. As contrasted with rail transportation, water carriage, in general, is inherently cheaper.

These considerations apply on the inland waterways as well as on the Great Lakes. That Congress recognized this fact is shown by the unlimited scope of the bulk exemption in section 303 (b), as contrasted with the exemption limited to international waterways such as the Great Lakes in section 303 (c).

That these were intended to be two separate exemptions is indicated, not only by the form of the statute, but by statements of Congressmen responsible for the legislation.

Thus, Representative Halleck discussed these two exemptions as separate provisions in the following statement in the House:

"Why were bulk carriers by water exempted? They were exempted because everyone recognized that their carriage is so cheap that they were not in any substantial competition with any carrier. Why did we exempt the bulk carriers on the Great Lakes, and incidentally their exemption goes no further than the general exemption for all bulk carriers? Because we recognized that the lake carriers carry traffic 70 percent of the miles in many cases in joint operations with the railroads for 30 percent of the revenue. They are not in direct competition with the railroads. However, they are in direct competition with the Canadian carriers that have grown in importance to almost 50 percent of the traffic on the Great Lakes-Canadian carriers, who by their own Canadian shipping act are exempted from regulation * * *" (Congressional Record, July 22, 1939, p. 9709). So also did Representative Hinshow in the following passage:

"Mr. HINSHAW. *** As far as the bulk carriers are concerned, those hauling sand and gravel, coal, oil, and similar materials in rough bulk, it was thought that those commodities were of such a nature that the handling of such cargoes was not competitive, consequently they were left out. In this bill we are interested in competition."

"Mr. DONDERO. As it relates to the Great Lakes, is it not also true that the Canadian commerce is unregulated and that we could not compete with them unless our own Great Lakes traffic were also left unregulated?

"Mr. HINSHAW. I may say to the gentleman from Michigan that the Canadian commerce is regulated except for bulk carriers. Bulk carriers are excluded from Canadian regulation, and we have excluded American bulk carriers on the Great Lakes from this regulation * * *" (Congressional Record, July 22, 1939, p. 9750).

Senator Wheeler also recognized that section 303 (b) had a wider application than the Great Lakes exemption of section 303 (c). He said:

"These amendments are as follows: Section 303 (b) exempts transportation by a water carrier of commodities in bulk when the cargo space of the vessel is being used for the carrying of not more than three such commodities. Section 303 (c) exempts contract carriers by water of commodities in bulk in a nonoceangoing vessel on a normal voyage during which not more than three such commodities are transported and the vessel passes through waters made international for navigation purposes by any treaty. This is the exemption which covers the Great Lakes contract carriers. These contract carriers are in competition with Canadian or other foreign ships" (Congressional Record, Sept. 9, 1940, p. 11768). Senator Reed, in discussing section 303 (b), indicated specifically its application to river traffic, saying:

"We went further. On the Great Lakes there is what is known as bulk transportation. Such transportation in the main consists of coal which goes up the lakes, and steel, iron ore, grain, and limestone, which comes down. With relation to that transportation, we said:

"Nothing in this part shall apply to the transportation by a water carrier of commodties in bulk when the cargo space of the vessel in which such commodities are transported is being used for the carrying of not more than three such commodities. This subsection shall apply only in the case of commodities in bulk which are (in accordance with the existing custom of the trade in the handling and transportation of such commodities as of June 1, 1939) loaded and carried without wrappers or containers and received and delivered by the carrier without transportation mark or count.'

"To help the river carriers, which use barges, we put in this sentence:

"For the purpose of this subsection, two or more vessels while navigating as a unit shall be considered to be a single vessel.'

"I do not know what more we could do" (Congressional Record, Sept. 6, 1940, p. 11615).

As will be seen, several of these statements refer to the consideration that American bulk carriers on the Great Lakes are in competition with Canadian bulk carriers, and that the latter are unregulated. By some Congressmen this fact was evidently regarded as a separate reason for exempting the Great Lakes bulk carriers. And this consideration probably explains the presence in the statute of the unnecessary section 303 (c), which, though limited to the Great Lakes, actually gives an exemption no broader than section 303 (b).

The existence of this unregulated Canadian competition, however, should on any logical basis be recognized as justifying the exemption of bulk transportation on large parts of the Mississippi River system. As various witnesses testified before the House committee, the shipment of grain and coal in bulk on the Great Lakes is competitive with such shipments on the Mississippi River system. Changes in rates on the Great Lakes affect the flow of grain down, and coal up. the Mississippi. Thus, if Mississippi carriers were to be regulated, they would be at a competitive disadvantage with unregulated carriers on the Great Lakes, whether of American or Canadian nationality.

The testimony referred to follows:

C. E. Childe, chairman, traffic committee of Mississippi Valley Association: "Section 2 dealing with scope and application.

"Paragraph (5) in this section, which provides that the act shall not apply to interstate contract carriers by water, which by reason of the inherent nature of the commodities transported, requirement of special equipment, shipment in bulk, is not actually and substantially competitive with transportation of interstate commerce, we believe that is intended to carry out the railroad's suggestion that bulk freight carried on the Great Lakes shall not be regulated.

"Bulk freight carried on the Great Lakes is as much competitive with the common carriers on the rivers, and common carriers by rail, as bulk commerce on the rivers is competitive.

"On the Ohio River, on the Mississippi, the Missouri, and the Illinois, the great part of the tonnage today consists of transportation of such bulk commodities as coal, grain, and steel.

"The railroads propose to regulate all that and leave similar commerce on the Great Lakes free of regulation, which would, of course, destroy the movement of bulk freight on the rivers" (hearings before the Committee on Interstate and Foreign Commerce of the House of Representatives on H. R. 2531 and H. R. 4862, 76th Cong., 1st sess., p. 1015).

Mr. Bayless, counsel for the Mississippi River System Carriers' Association, Cincinnati, Ohio:

"Congressman MAPES. Is there any reason for controlling or regulating the contract carriers or private carriers on the Mississippi River system which does not apply to like carriers on the Great Lakes?

"Mr. BAYLESS. None that I know of, sir; none whatever. I do not see any. I do not know why all this distinction is made between the contract carriers on the Great Lakes and the contract carriers on the rivers * * (id., p. 1098). Herman Mueller, secretary and general manager of the Port Authority of the City of St. Paul, Minn. :

"Part 3 of title I of H. R. 2531, would amend section 1 of the act so as to place the port-to-port rates of water carriers under the control of the ICC. However, there are important exemptions. The common carriers upon the high seas, the Great Lakes, and those engaged in intercoastal commerce through the Panama Caual are exempt. We, in the Mississippi Valley, have a very direct interest in transportation on the Great Lakes and via the Panama Canal. To a large extent the former is either directly or indirectly in competition with transportation via the Mississippi River system and to subject our river transportation to regulation, while permitting our competitors on the Great Lakes to enjoy unregulated transportation, could create a discriminatory situation that would require prompt correction" (id., p. 1127).

See also Ex parte 165, Interstate Commerce Commission staff report, page 29, for recognition of the fact that the movement on inland waterways, as well as Great Lakes, was of concern to sponsors of the exemption and that the clear legislative intent was to exempt bulk movements in both areas.

APPENDIX TO LEGISLATIVE HISTORY OF SECTION 303 (b) OF THE TRANSPORTATION ACT OF 1940

The Office of the Federal Coordinator of Transportation was created by section 2 of the Emergency Railroad Transportation Act (act of June 16, 1933, Public Law 68, 73d Cong., 1st sess., ch. 91, 48 Stat. 211). The Coordinator was to be appointed by the President subject to Senate confirmation or designated by the President from among the members of the Interstate Commerce Commission. Section 13 of the same act imposed on the Coordinator the duty to investigate and to submit recommendations for further legislation to improve transportation conditions.

The President appointed Commissioner Joseph B. Eastman as Coordinator. On March 10, 1934, the Coordinator submitted his first report entitled "Regulation of Transportation Agencies" (S. Doc. 152, 73d Cong., 2d sess.). This report recommended the extension of regulation to all forms of transportation. In making this recommendation the report stated:

"It is clear that no regulation or restrictions should be imposed upon any form of transportation merely for the purpose of benefiting some other form of transportation. The test must be the public interest" (p. 5).

"The question is whether regulation is needed in the public interest. Neither the fact that competing railroads may wish it for their protection nor the fact that many water carriers may desire it for similar reasons is in itself controlling" (p. 10).

The report recognized the special problem of contract carriers by water. It made the following statement:

"In transportation by water a distinction is recognized between large shipments in cargo or part cargo lots on contract or tramp ships, and the general run of common-carrier traffic. This distinction is without counterpart in the railroad field. A flexible type of rate quoting or bargaining, often conducted informally on short notice, has always characterized these cargo or volume shipments by water. The regulation proposed will somewhat restrict this freedom of bargaining, but only to the extent that the contract carriers encroach upon the traffic for which the maintenance of common-carrier service is essential.

There is much bulk traffic, such as coal, iron ore, phosphate, rock, crude oil, and the like, which the ocean or Great Lakes common carriers do not undertake to handle. As to such traffic, present practices of the contract carriers need not be seriously disturbed. The regulation of contract carriers of full and/or part cargo lots, to the end that their rates shall not be depressed to levels which threaten the common-carrier service which the general public interest requires, violates no constitutional limitation so long as it is confined to that end" (p. 12). Appendix F attached to the report contained a proposed bill for the extension of regulation to water carriers. Section 204 (c) of this proposed bill read as follows:

"Whenever it shall appear from complaint made to the Commission or otherwise that the rates, fares, regulations, and practices of water carriers engaged in transportation to or from a port or ports of any foreign country in competition with carriers subject to this part, cause undue disadvantage to the latter carriers by reason of such competition, the Commission may relieve the latter carriers from the provisions of this part to such extent, and for such time, and in such manner as in its judgment may be necessary to avoid such undue disadvantage.” The Coordinator's proposed bill was introduced in the 73d Congress as S. 3172. The next year, the proposed bill not having been adopted, the Federal Coordinator repeated his recommendation in a report on transportation legislation, January 30, 1935 (H. Doc. No. 89, 74th Cong., 1st sess.). This report also specifically recommended the regulation of motor carriers. Again the report commented on the special problem of contract carriers, stating:

"When it comes to the regulation of trucking and shipping, special problems of very considerable difficulty are encountered which are not found in the railroad industry. ✶ ✶✶

"These private and contract carriers might be ignored if they did not have a tendency to demoralize or impair the system of common carriage which undertakes to serve all alike and is of prime importance to the country * * *

"The contract carrier may differ from the common carrier only in the fact that he undertakes to skim the cream of the traffic and leave the portion which lacks the butterfats to his common-carrier competitor. Obviously such operations can have very unfortunate and undesirable results.

"There are, however, private and contract operations which are not open to these objections. An outstanding example is the operation of the cargo boats on the Great Lakes which carry, chiefly, iron ore, coal, and grain. So long as they confine themselves to such forms of traffic, they apparently are, as a practical matter, not competitive either with railroads or with common-carrier steamship lines. There are similar instances in the coastwise, intercoastal, and inland waterway trades. So far as regulation is directed against private and contract operators, it should be for the chief purpose of protecting the common carriers against unfair and demoralizing competition. In the legislation which is here proposed, the effort has been to follow this principle."

Again the report was accompanied by a proposed bill for the extension of regulation to water carriers. This appeared in appendix VI to the report. Section 204 (h) was almost exactly the same provision as section 204 (c) of the bill proposed in the previous report. It read as follows:

"Whenever it shall appear from complaint made to the Commission or otherwise that the rates, fares, regulations, or practices of water carriers engaged in transportation to or from a port or ports of any foreign country in competition with interstate common carriers by water or interstate contract carriers by water, cause undue disadvantage to the latter carriers by reason of such competition, the Commission may relieve the latter carriers from the provisions of this part to such extent, and for such time, and in such manner as in its judgment may be necessary to avoid or lessen such undue disadvantage."

This bill was introduced as S. 1632 and H. R. 5379 into the 74th Congress, 1st session. In a message to Congress, on June 7, 1935 (printed at p. 885, Congressional Record, June 7, 1935; H. Doc. No. 221, 74th Cong., 1st sess.), the President urged the passage of the bill for the regulation of "intercoastal waterways trade and of some of the inland waterways carriers" prepared by the Coordinator.

Extensive hearings were held in the Senate on the bill before the Senate Committee on Interstate Commerce, but it was not enacted. The transcript of the hearings appears in a document entitled "To Amend the Interstate Commerce Act," part 2, pages 609-1344. The Senate committee made a report on this bill (S. Rept. No. 925, 74th Cong., 1st sess., June 21, 1935). On page 2 it