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We understand that the Commission does not sanction such use of its ratemaking power although it may be that there are occasions when the allocation of traffic appears to have been the result of the Commission's action.
But the answer to any such regulatory problem is not, in our opinion, for Congress to eliminate the power of the Commission to set specific rates, where desirable and necessary, to enforce the statutory prohibitions against unjust discrimination but to take steps to see that the power in setting specific rates is exercised properly and as Congress intends.
Likewise, council policy is opposed to any statutory limitation upon the Commission's authority in passing upon minimum and maximum rates which will permit a carrier without review by the Commission to charge on certain traffic, as a compensatory minimum, only the out-of-pocket costs directly attributable to that traffic and on other traffic a maximum which does include a disproportionate share of the carrier's fully allocated costs on all traffic.
There is today much agricultural traffic that is most adaptable to movement by rails. In fact there is some traffic that can be moved only by rail, and some that can be moved only by truck. The theory of "dynamic competition" sounds good and we support the theory as a theory. There is a practical side, however, to the delicate balance and relationships between transportation rates that affects the pocketbook of the shipper as well as the carrier.
The council representing farmer business associations spending millions of dollars for transportation yearly, that comes out of the farmers' returns, knows that if a bare minimum, representing out-of-pocket costs only is charged on the highly competitive traffic to get that business, then the high maximum must be charged on some part of the noncompetitive traffic in order for the net earnings of the carrier to be maintained. We are concerned with the application of the theory where the farmer is caught in the squeeze of the high maximum rate on his noncompetitive traffic.
The matter of cost data is an interesting subject for the economists and technicians to theorize on. However until more complete and accurate cost data on transportation are available so that the shippers would not be at the complete mercy of the carriers in testing the reasonableness and compensatory inerits of proposed rates, we believe it would be very unwise and dangerous from the standpoint of the interests of the shipping public to embark on any such revolutionary ratemaking proposal as would be involved in the proposed new rule of ratemaking.
LONG-AND-SHORT HAUL CLAUSE (4TH SECTION) The Council favors retention of the long-and-short haul clause (fourth section) in part I of the Interstate Commerce Act in its present form.
Section 4 of the Interstate Commerce Act (as amended) makes it unlawful for aby common carrier to charge or receive any greater compensation in the aggregate for the transportation of passengers, or of like kind of property, for a shorter than for a longer distance over the same line or route in the same direction, the shorter being included within the longer distance, or to charge any greater compensation as a through rate than the aggregate of intermediate rates.
However, upon application to the Commission common carriers may in special cases, after investigation, be authorized by the Commission to charge less for longer distances than for shorter distances for the transportation of passengers or property, but in exercising this authority the Commission may not permit the establishment of any charge to or from the more distant point that is not reasonably compensatory.
The proposed tariffs may, in the event the carriers' application is approved, become effective upon 1 day's notice.
The report prepared by the Presidential Advisory Committee on Transport Policy and Organization recommends removal of the requirement that rail or water common carriers obtain prior approval for charging greater than the aggregate of intermediate rates and for charging less for longer than for shorter distances. Although changes in the transportation industry may have removed the need for section 4 in some areas, Council members in other areas still feel that farmers and other shippers in their section would suffer severely if section 4 were removed from the Interstate Commerce Act.
In view of likely injury to those areas, council policy advocates and it seems wise to retain section 4 in its present form particularly when, if necessary, exceptions to its application can be granted by the ICC on as little as 1 day's notice.
The railroads now have recourse by petitioning the Commission for fourth section relief and literally thousands of such applications have been acted upon favorably.
SUSPENSION POWERS The council reaffirms its policy relating to suspension of proposed changes in rates by common carriers (rail, motor, and water) favoring the reduction of the suspension period from 7 to 3 months, plus 3 months extension. The council is opposed to any further statutory amendment of the suspension section of the Interstate Commerce Act and urges that procedures incident to the application for suspension of proposed changes in rates, rules, or regulations of common carriers under parts I, II, and III be prescribed by appropriate rules of the Commission.
The council policy on this subject speaks for itself and requires no elaboration, It might be stated that in the development of this policy, it was recognized that the reduction of the suspension period from 7 to 3 months might be too short for proper handling unless the Commission is permitted to extend the initial period for an additional 3 months at the request of any party in interest. The agricultural community is handicapped by the limited resources available to it to prepare and present effectively and on short notice the facts to portect its proper interests with respect to proposed rate changes.
FREIGHT FORWARDER ASSOCIATIONS The council is opposed to statutory or administrative changes pertaining to regulation of freight-forwarder associations, to the extent that such changes might be construed to include farmer cooperatives or farmer cooperative associations as regulated freight forwarders under the Interstate Commerce Act.
The recommendation in the Cabinet Committee report on this subject read as follows:
"Provide definite statutory standards for determining which shippers or shipper associations involved in consolidation or distribution of volume freight on a nonprofit basis for securing lower rates are entitled to exempt status."
H. R. 6141, instead of providing definite statutory standards in this area gives the Commission vague, indefinite, and almost limitless authority to consider "among other things which in its opinion are pertinent and relevant, the facts and circumstances surrounding the organization and establishment of such activities; the scope of the activities, geographically and as to commodities handled and persons served; the basis of charges, if any, for the service or services provided; and the extent such activities are in competition with the services of freight forwarders subject to this part."
It would appear that if the result of the bona fide activities of a group or association of shippers in consolidating or distributing freight for themselves or their members on a nonprofit basis, as authorized in section 402 (c) of the Interstate Commerce Act, part IV, should be construed by the Commission as offering competition to freight forwarders, that such activity could be condemned under section 19 of H. R. 6141. The quoted language in H. R. 6141 as to the exemption would permit the Commission to make a searching inquiry into the internal organization and operations of such shippers' associations and require the discontinuance of an efficient and needed service rendered their members in consolidating or distributing freight for them merely because such service was "in competition with the services of freight forwarders." We believe such extension of the authority of the Federal Government over private business in the name of regulation is wholly unjustified.
We do not believe that Congress should grant such sweeping authority to a regulatory agency which would in one paragraph establish a policy and in the next vest the Commission with authority to nullify it. Furthermore, this provision would certainly operate in the direction of creating a monopoly for "freight forwarders" rather than promoting real competition which is one alleged principal objective of the Cabinet Committee report and this legislation.
PRIVATE CARRIAGE Since the Council regards the present definition of private carriers by motor vehicle as adequate to exercise proper control over the operations of such private carriers, the Council is opposed to a statutory redefinition of private carrier by motor vehicle.
The Cabinet Committee report stated :
"Legitimate private carriage is not an issue. The practice of shippers handling their own merchandise is sanctioned legally and is frequently sound economically. The problem is created by those practices of private carriers which undermine the common carrier transportation system which must bear the main burden of the Nation's transportation requirements in peace and war."
The present definition of a private carrier is found in section 203 (a) (17) of the Interstate Commerce Act, part II, as follows:
*The term 'private carrier of property by motor vehicle' means any person not included in the terms 'common carrier by motor vehicle' or 'contract carrier by motor vehicle, who or which transports in interstate or foreign commerce by motor vehicle property of which such person is the owner, lessee, or bailee, when such transportation is for the purpose of sale, lease, rent, or bailment, or in furtherance of any commercial enterprise."
We believe that this definition, as presently interpreted by the courts, is adequate and sound to assure that only legitimate private carriers shall operate as such carriers and to prevent other carriers who are in fact engaging in public transportation from improperly operating under the guise of private carriers.
The rights and scope of private carriers have been clearly established by court decisions and expensive litigation. The adoption of the proposed new definition for private carriers would introduce confusion and invite litigation in an area of motor carriage where a substantial degree of order and understanding has at last been attained.
We respectfully suggest that the need in this area is not for any change in the statutory definition of private carriers, but rather a more effective administration of the present provisions of the law. Congress has well defined the scope of private carriage and has given the Interstate Commerce Commission administrative authority to deal with practices of any private carriers which are illegal and outside of the scope of their statutory authority.
Shippers generally do not purchase their own trucks to haul their own goods and property through choice but rather through economic necessity. It is largely where shippers can more economically and efficiently deliver the goods they produce and manufacture to their customers in their own trucks that they operate as private carriers. Any artificial restraints by legislation to interfere with the right of shippers or other businessmen to haul their own goods and thus to force this transportation business to regulated carriers is in sharp conflict with the sound competitive concepts that have contributed strength to our overall economy.
CONTRACT CARRIERS The Council is opposed to the proposed redefinition and requirement for filing actual rates, applicable to motor and water contract carriage contained in the Presidential Advisory Committee's Report on Transport Policy and Organization.
As to contract carriers, the Cabinet Committee report recommended : "Redefine motor and water contract carriage as being that transportation providing services for hire but otherwise equivalent to bonafide private carriage and require that actual, rather than minimum, charges be filed."
The council is opposed to the above recommendation and the sections of H. R. 6141 which would implement it. The recommendation is calculated to build up common carriers rather than serve the needs of the shipping public.
Contract carriers, as the name implies, are carriers who contract with shippers to serve a specialized or limited need for transportation service. They perform a type of service, as to type of equipment, routes or other characteristics which the common carrier cannot or will not provide.
We respectfully urge that instead of placing artificial and arbitrary restraints upon the contract carrier to restrict his potential service to the shipping public, he should be encouraged to provide by contract as economically as possible the special motor carrier services needed by shippers, which are not adequately provided by other types of carriers.
The contract carrier is in no sense of the word a common carrier, nor is he intended to be such, and there is no justification in requiring the terms of the contract as to actual rates charged to be filed.
AGRICULTURAL COMMODITY EXEMPTIONS In view of continuing efforts to restrict the agricultural commodities exemption in section 203 (b) (6) of the Motor Carrier Act, the Council reaffirms its policy of opposition to all proposals and efforts by legislation or administrative construction, to restrict or repeal such exemptions.
The Cabinet Committee report made no "bold-type” specific recommendation for statutory change in the agricultural commodities exemption in section 203 (b) (6) of the Interstate Commerce Act, part II. H. R. 6141, the implementing legislation, contains no provision on this subject.
The Cabinet Committee report did suggest, however, that:
"The act should be clarified to indicate what exemptions the Congress now wishes to give without undue interference with the main purposes of the legislation."
In the letter to Chairman J. Percy Priest, of the House Interstate and Foreign Commerce Committee, on December 22, 1955, from Acting Chairman J. M. Johnson, of the Interstate Commerce Commission, commenting on H. R. 6141, it was stated that the Commission believed the Cabinet Committee "might well bave favorably considered certain other measures clearly needed for improving the position of common carriers" (italic supplied) mentioned in recent annual reports of the Commission. One of these subjects specifically mentioned was that of "agricultural commodity exemptions."
In the Commission's 69th Annual Report, dated November 1, 1955, recommendation No. 13 on page 128 reads as follows:
"We recommend that section 203 (b) be amended so as: (1) to limit the exemption of motor vehicles transporting agricultural commodities, fish, and livestock to transportation from point of production to primary market; and (2) to limit such exemption specifically to the transportation of commodities produced in the United States."
This latest recommendation of the ICC is only a continued expression of the opposition on the part of the ICC to the "agricultural commodities exemption" which was expressed at the time of its inclusion in the Motor Carrier Act in 1935 and has been evidenced on many occasions since in the form of legislative recommendations and administrative interpretations. This opposition to the "agricultural commodities exemption" is also shared and has been expressed on a number of occasions by representatives of regulated carriers.
Agriculture has not sought any statutory broadening of the exemption. It has only insisted that the scope of the statutory exemption not be narrowed by administrative interpretation in a manner clearly inconsistent with the expressed intent of Congress.
We respectfully submit that the Commission itself has helped to bring about the recent court decisions about which the Cabinet Committee report complains by the unrealistic classification as manufactured products, of such commodities as fresh dressed poultry, raw-shelled nuts, redried tobacco, and cotton linters, which for the purposes of section 203 (b) (6) are commodities of a character which we are confident Congress intended should be regarded as agricultural commodities and exempt from economic regulation.
This question has been reviewed by the Congress on numerous occasions since 1935 and on each occasion when a change has been made by the Congress in the agricultural commodities exemption such change has had the effect of preserring its intended scope in the light of current conditions and needs of agriculture and the public generally. At least one of the changes made has been for the purpose of making clear to the Commission that its restrictive interpretations have been contrary to the intent of Congress.
BULK COMMODITIES EXEMPTIONS The Cabinet Committee report on Transport Policy and Organization now under consideration by the Congress recommends the repeal of the bulk commodities exemption applicable to water carriers. In view of such recommendation, the Council reaffirms its opposition to legislation to either repeal or restrict the bulk commodities exemption applicable to transportation on inland waterways.
The bulk commodities exemption, applicable to water carriers of commodities 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, has been of great benefit to agricultural shippers both from the standpoint of cost of transportation and flexibility of service.
The only possible motive for the repeal of the bulk commodities exemption is to channel traffic to regulated modes of transportation to the detriment of the users of the service. Congress in its wisdom has determined that the forces of supply and demand, as the cornerstone of a system of free enterprise, should be preserved and regulation should be imposed only to preserve the benefits
of the competitive system. The bulk commodities exemption preserves competition and gives to the public the inherent advantage of the low cost form of transportation available on the waterways. Repeal of this exemption would in effect deny to the shipping public which has occasion to use such service the full inherent advantages of this form of transportation.
SPECIAL GOVERNMENTAL RATES 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 public inspection (waiver of provisions where emergency or national security is involved).
The council's position on special governmental rates, generally referred to as section 22 rates, is short, clear, and specific. It is self-explanatory and generally parallels a number of the legislative proposals on this subject which have been referred to your subcommittee.
If and to the extent that preferential treatment is given the Government on its traffic, to that extent the nongovernmental portion of shipping public is having to bear the burden of the loss of revenue to the carriers as a result of such preferential treatment as to the Government. The council's policy contemplates that, except where emergency or national security is involved, the Government should be given the same treatment as any other shipper and under such equitable treatment all taxpayers would be bearing the financial costs of the transportation of Government property and the nongovernmental shippers would not be required to pay higher rates on account of preferential rates on Government traffic.
SERVICE DEFICITS The policy position of the council on this subject was established by the council board of directors, on recommendation of the council's transportation committee in January 1953 in the following action:
"(a) The Interstate Commerce Commission shall permit the abandonment of railroad lines which cannot be operated without a financial loss, if consistent with the public interest.
"(b) The Commission shall have power, on appeal from adverse orders of State authorities to authorize the discontinuance of railroad services which are a burden on interstate commerce because they are being carried on by interstate carriers at a financial loss."
The members of the council recognized long before the issuance of the Cabinet Committee report the serious adverse effect that continuing deficits incurred by the railroads on passenger service were having on the mounting level of freight rates. It was clear that the users of rail freight service were having to pay millions of dollars in higher freight rates to make up for the losses incurred by the railroads on the passenger service.
The Monthly Comment (p. 1, May 1956) by the Bureau of Transport Economics and Statistics of the Interstate Commerce Commission reflects the extent to which the freight shippers have been paying and are continuing to pay higher rates to offset the losses sustained by the railroads on the passenger service, as follows:
Net railway operating income
Includes relatively small amounts not related to freight or passenger service.