Mr. MARKHAM. Otherwise it would serve no purpose as far as the contenders are concerned or as far as other shippers are concerned. Mr. FLYNT. I was confident that was your meaning. I wanted to clarify it for the record as well as for my own information.

Mr. MARKHAM. Yes, sir.

Mr. HARRIS. Thank you very much, Mr. Markham.

Mr. MARKHAM. Thank you, sir.

Mr. HARRIS. I have a letter from Mr. Galaspie, director of traffic of the Reynolds Metals Co., that may be included in the record at this point.

(The material referred to follows:)

Subject: H. R. 525.

Hon. OREN HARRIS,

REYNOLDS METALS CO., Richmond, Va., June 12, 1956.

Chairman, Subcommittee on Transportation and Communications,
Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

DEAR CONGRESSMAN HARRIS: The subject bill has for its purpose the amendment of section 22 of the Interstate Commerce Act, so as to remove the provision permitting carriers to "reduce rates on Government shipments." The Reynolds Metals Co. is in favor of this bill, and urge you to do everything possible to obtain its passage at this session of Congress.

One of the prime reasons for our position is the fact that a considerable quantity of aluminum pig and ingot are moving into stockpile. Historically, aluminum is sold on a delivered basis. Nevertheless, the agencies of the Government prevail upon carriers to quote a lower rate than is available for commercial shippers, and then request us to make shipment on Government bills of lading so that they can obtain the advantage of the lower quotation. The shipments move in this manner and the agencies pay to the carriers the amount of freight based on the lower quotation furnished under section 22. We, as the shipper, are required to allow to the agency the commercial freight rate, with the Government becoming the beneficiary of the difference between the commercial freight rate and the lower section 22 rate.

In order to maintain a healthy, economic condition in transportation and industry, there should be a requisite that the Government pay no lower rates than are available to commercial shippers. As you know, we have plants at Gum Springs, Ark.; Jones Mill, Ark.; and Bauxite, Ark. The first two named have made many shipments in the past under the conditions described above, and we request that you use your influence to obtain passage of the subject bill.

Kindest regards.

Yours very truly,

L. E. GALASPIE, Director of Traffic.

Mr. HARRIS. We have a request from the Western Traffic Conference that their statement be included in the record, which will be received, and also a statement has been received from Mr. Harry C. Ames, an attorney, with reference to legislation for insertion in the record, and another statement from Mr. Ames with reference to H. R. 6208, and a statement from Mr. G. C. Taylor, president of the Mississippi Valley Barge Line Co., and a statement from Mr. Guy L. Brown, grand chief engineer, Brotherhood of Locomotive Engineers; a statement from the National Council of Farmer Cooperatives, and we have a number of other statements here in a file all from the American Waterways Operators and from various officers and members of that organization. There is also a statement from the Inland Empire Waterways Association.

They may be included in the record as requested.

(The statements referred to follow :)

This statement of the Western Traffic Conference on H. R. 6141 is limited to comments on section 19 regarding nonprofit shippers associations. The nonprofit shippers associations, and the mass of the public who buy merchandise from retail stores, are vitally affected by the proposed change in section 402 (c) of the Interstate Commerce Act. The proposed legislative change will do irreparable harm to legitimate nonprofit shippers associations and will definitely increase the total freight costs on shipments to retail stores and the public on the west coast.

The Western Traffic Conference, for all of its members, is deeply concerned over section 19 of H. R. 6141. The legislation proposed here has been sought in comparable form several times before. This association in full and open membership meeting has repeatedly and unanimously opposed such discriminatory changes in the law. The Western Traffic Conference urges this committee and the House of Representatives to reject section 19 of H. R. 6141.

The Western Traffic Conference is unalterably opposed to section 19 as written. It could not be more adversely phrased to prejudice legitimate nonprofit shipping associations. The Western Traffic Conference would not be opposed to a legislative change which would set up fair and impartial standards, not subject to ambiguous phraseology nor interpretations based on the whims or prejudices of the person or persons who would interpret them in the years ahead.

The essential right of legitimate nonprofit associations to continue must be preserved. Section 19 of the proposed legislation would be the death knell of all shippers groups.

WHAT IS THE WESTERN TRAFFIC CONFERENCE?

The Western Traffic Conference, Inc., is a nonprofit association of 86 large and small retailers on the Pacific coast, primarily in Washington, Oregon, and California. Those members have a large number of stores in most of the large and small cities on the west coast. The Western Traffic Conference ships no freight. Its members belong to one or more of the several nonprofit shippers associations operating from, to, and within the Far West. Those nonprofit associations operate by railroad, by truck, and by railway express. Those associations consolidate the small shipments of the members into volume shipments and pass the benefits of the consolidation, both cost and service, on to the members. Everything from smallest package freight to volume less-thancarload lots of freight is involved.

The Western Traffic Conference, Inc., has but one purpose, and that is to improve the transportation of merchandise for its members by reducing cost, and improving transportation time and efficiency, so that its members can better serve the public who patronize their business.

SECTION 19 OF H. R. 6141 WILL LEGISLATE HIGHER FREIGHT COST

The protested legislation is essentially an attempt to increase freight charges. Two reasons have brought about the creation of shippers associations-the first is total cost, and the second is shipping time. The shippers associations have done a tremendous job in reducing freight costs. I will cite a current example showing what one Pacific Northwest shippers association is doing for members of the Western Traffic Conference from New York City to Seattle, Wash. The costs quoted below for the nonprofit association already include consolidation, all railroad charges, truck drayage charges at destination, insurance, billing, and the 3 percent transportation tax. The cost by the freight forwarders, such as Acme Fast Freight and Universal Carloading, is their published charges on the same merchandise inclusive of the 3 percent transportation tax.

In addition to the actual savings per 100 pounds shown above, there is an even greater percentage saving because the shippers association charges on actual weight with no minimum while the freight forwarder charges shipments weighing less than 100 pounds as 100 pounds, or at much higher package charges. To retail stores in Seattle, the nonprofit shippers association total saving per 100 pounds averages from $1.75 to $2 per 100 pounds below that of Acme Fast Freight, Universal Carloading, and other forwarding companies when all the saving on large and small shipments is considered.

In addition to the freight savings, numerous reductions in transit time have been effected by arranging direct spotting of cars for members and by making direct release from consolidating point without rehandling freight over Chicago or other transfer cities enroute to the west coast.

The nonprofit shippers associations are designed to meet the needs of limited areas and limited membership. These associations have gone a long ways in diminishing the use of the old national phrase "prices slightly higher west of the Rocky Mountains."

The proposed amendments to section 402 (c) of the act would put such impossible conditions as standards for determining what are legitimate associations that no association could long exist. For that reason the Western Traffic Conference strongly opposes the legisation here proposed.

It is submitted that the proper way to control the expansion of nonprofit shippers associations is for the certificated forwarders and others to bring their rates closer into line with their costs than to legislate the low-cost shippers associations out of business.

WHY WE OBJECT TO SECTION 19 OF H. R. 6141

The Western Traffic Conference believes that part IV of the Interstate Commerce Act does give proper protection to the certificated freight forwarders if existing law is enforced. The Western Traffic Conference does not object, however, to a change in the law provided Congress sets fixed and unalterable standards, not subject to interpretation, to preserve the basic right of shippers to join together and consolidate their shipments without harassment. Here is why we oppose section 19 of the proposed bill before us today.

(1) The bill states the Interstate Commerce Commission can, on its own motion or complaint, consider any association as to its lawfulness. The Interstate Commerce Commission and the freight forwarders have that power today. Any forwarder can complain under the Interstate Commerce Act of unlawful operations. It is used in the freight forwarder section. It is more often used in the motor carrier section. It is commonplace for one truckline to challenge the authority of a trucker to operate. The Interstate Commerce Commission has the power to investigate and has investigated. There is no need for that part of section 19 here proposed.

(2) Section 19 second condition would require the Interstate Commerce Commission to determine if the activities are not being conducted solely for the purpose and in the limitations of section 402 (c). The Commission can and does investigate nonprofit associations under existing law. They are doing it all the time and are making suggestions for change when any question arises. The present law requires the association to be nonprofit. It requires the association activities to be limited to its members. The Internal Revenue Bureau of the Treasury Department checks the associations. The State laws, for example, of the State of Washington, set rigid limits for nonprofit cooperative associations. There are many, many existing tools to bring any improper shipper association into line or eliminate it. No change in existing law is necessary to do that. The way to kill any fleas that may exist on the dog is not to kill the dog. Section 19 here would do that.

(3) The third test in section 19 is whether the challenged association would violate the national transportation policy. Nobody knows what is the national transportation policy. The railroads and trucklines are before the Commission today to spell it out. It means anything 6 out of 11 members of the Interstate Commerce Commission say it means on any day, providing the courts will sustain them. The wording of the national transportation policy could hardly be more ambiguous. It means anything to anybody.

The wording of the national transportation policy cannot be adopted as a test of a nonprofit shippers association. Does the policy even contemplate nonprofit shippers associations? What is meant by "inherent advantages"? What is meant by "safe" freight forwarder service? What is meant by the use of the words "adequate," "economic," and "efficient" forwarding service? What are "sound economic conditions"? What are "reasonable charges for transportation service"? Would a reasonable charge be one nearly $2 per 100 pounds higher on the average than a shipper association total charge? What does unjust discrimination," "undue preference," or "advantage" mean? What are "unfair or destructive competitive practices"? What does "coordinating" and "preserving a national transportation "system" mean? What does "adequate to meet the needs of commerce" mean?

I am sure every member of this committee will recognize the complete ambiguity as a standard or test insofar as shippers associations are concerned. For that reason we strongly object to the national transportation policy as any standard or test under section 402 (c) of the act.

(4) We object to the condition that the Commission should "consider facts of organization and establishment" of the non-profit association. Unless Congress spells out what consideration should be given it is no standard at all. Anyone can consider anything. If Congress means this as a test, it should tie the test down to some determinable fact, and point out what should be right and what is wrong.

(5) We object to the test that the Interstate Commerce Commission should consider the scope of activities geographically, as to commodity handled, and persons served. That test could not be more objectionable. Department stores are members of Western Traffic Conference. They carry thousands of items that run the gamut from A to Z. Why should an association who has a department store member be condemned because it handles many items of freight while an association with no department store members handles a lesser number of items. Boeing Airplane Co. uses over 50,000 items in their one operation. Most stores and plans and jobbers handle a widely diversified line of goods today. Items handled is no test of the legitimacy of an organization.

Equally true, the geographical area served is no test, for many, many national concerns have branches all over the country. If an association serves all their branches, to say that is wrong because of that fact makes an impossibly unfair legal restriction. The test should properly be the legitimacy of the operation and not the area served. Equally true, if the members of an association can substantially improve their transportation cost and service by serving more than one limited area, they should be allowed to reduce their costs without artificial limits.

The test of the number of people served is wholly unfair to small shippers. There are several large national merchandising concerns in almost every retailing field, from 10-cent store merchandise to women's clothing, with many ranges in between. One or two such national shippers together could create an efficient

pool. It may and does take 50 to 100 small merchants and retailers in the sparsely settled West to operate an efficient pool without terrible holding delays in their shipping schedule to develop a carload of freight. The test of the number of members would be grossly unfair to small businesses who need the benefits of the pool fully as much as the larger organizations who could do the same job with less members.

(6) The test that the Interstate Commerce Commission should consider the hasis of charges, if any, for the service is not of itself unreasonable. Congress should, though, carefully spell out the consideration the Commission should give. The essential point is only this-that the ultimate savings and benefits to the association of the consolidation be passed on to the members. Any nonprofit association, be it a shipper group or a medical or education or research nonprofit association, has certain administrative and overhead expenses as well as direct out-of-pocket costs. The final, net overall saving to the association should be considered. If those net savings are not going to the members then something is wrong under both present and proposed law.

(7) The test that the Commission should consider the extent to which a shippers association competes with a freight forwarder is wholly objectionable. In effect, Congress is asking to legislate out anyone that competes with the freight forwarders. We believe that to be a wholly un-American approach. Practically all freight moving is theoretically competitive with a freight forwarder. If the nonprofit association did not exist, shipper association freight could move by any of 4 or 5 services, including the freight forwarder. It might move by railroad less-than-carload lot; it might move by truck; by express; by airfreight; by freight forwarder; or by water. If low-cost shippers association service dried up, the movements might well dry up. To make the existence of a paralleling freight forwarder service a test of the right to exist for a shippers association is wholly unrealistic and unfair.

THERE IS NO ECONOMIC NEED FOR LEGISLATION TO PRESERVE THE CERTIFICATED FREIGHT

FORWARDERS

The last report of the Interstate Commerce Commission showed the certificated freight forwarders handled approximately 5 million tons of forwarder freight. The amount of shippers association freight forwarded is a very small percentage of that total. The best estimate is substantially less than 10 percent based on a comparison of total freight forwarder tonnage originated by rail in 1954 versus the freight forwarder rail tonnage for the same year as shown in ICC official reports.

In 1955 certificated freight forwarder shipments and tonnage were up over 10 percent that of 1954. Their net income before taxes was up approximately 17 percent and up nearly 13 percent after Federal income tax. On the basis of money invested in freight forwarder operations, the certificated freight forwarders have an unbelievably high rate of return.

CONCLUSION

The Western Traffic Conference is unalterably opposed to section 19 of the Freight Forwarder Act as proposed here. It is fatally deficient in law in that it does not set up clear-cut standards for the determination of the right of nonprofit shippers associations to exist. As drafted, section 19 would do irreparable harm to all shippers associations, good or bad.

The Western Traffic Conference believes existing laws, if properly enforced, can cull out any improper associations without change in the law.

The Western Traffic Conference would not oppose changes in section 402 (c) of the act provided the basic right of shippers to consolidate their freight was not impaired. The standards Congress should establish must be clear-cut and not subject to interpretation. The essential features of any legal change should require only that the members effectively control the association and that the ultimate savings resulting from the consolidation be passed on by the association to the members.

Section 19 of H. R. 6141 falls far, far short of meeting the requirement of good law. It should be rejected.