However, we feel that we should comment upon certain opposition which has been expressed to the proposal.

The provision was opposed by the Brotherhood of Railroad Trainmen, the Order of Railway Conductors and Brakemen, the Order of Railroad Telegraphers, the Railway Labor Executives Association, and the Public Service Commission of Wisconsin, on the ground that the problem was one which was local in character, and should be solved in the light of local conditions and local needs.

The following testimony of the representative of the Public Service Commission of Wisconsin is typical of the opposition expressed in this respect:

The needs of the public immediately involved in a proposed discontinuance of passenger train service are usually local in character. Those needs, it seems, can be better evaluated by State agencies than a Federal agency. It is the position of the Wisconsin commission that the proposed changes as outlined in section 6 of bill H. R. 6141 would not be in the public interest."

The provision was supported by, among others, the National Coal Association, United Fresh Fruit & Vegetable Association, the Chamber of Commerce of the United States, the Transportation Associa tion of America, and the American Short Line Railroad Association, for the reason that the burden placed on interstate commerce by the operation of unprofitable intrastate service should be corrected."

The following testimony of the representative of the National Coal Association is typical of the views expressed in support of the pro

vision.

In explanation of our position, and our qualified endorsement of section 6 of the bill, let me say first that the coal industry is a strong believer in State rights. We are opposed to any undue usurpation of the powers of the respective States by the Federal or centralized Government. However, the present act already gives the Interstate Commerce Commission power to prescribe intrastate rates where it finds the level of such rates discriminatory or prejudicial to the movement of interstate commerce. With this precedent now in the act, it would seem desirable to give the Commission similar authority over service matters for the following, among other, reasons:

The railroads incur an annual deficit of over $700 million from their passenger, mail, baggage, diner, pullman and head-end operations. All of this deficit must be offset by higher rates on freight before the railroads can break even. So long as the users of freight service must pay for these unprofitable services through higher freight rates, prescribed or approved by the ICC, then, in our opinion, that same Commission should have authority to approve abandonment of unprofitable rail service. There would then be hope at least that the users of freight service might obtain some semblance of relief from high freight ratesrelief they have long sought but failed to receive.

We are unable to agree that the problem is local in nature where the continued operation of unprofitable service casts a burden on interstate commerce. Also, the inability or unwillingness of State authorities to handle the problem satisfactorily appears to have removed it from the local category.

In submitting a report to your committee on H. R. 6141 on October 31, 1955, this Department pointed out certain technical and clerical changes which should be made in the bill.

We also proposed several amendments in our testimony on April 24, 1956. We have suggested further changes today.

P. 4, statement of A. Wilford Larson.

P. 3. statement of F. F. Estes.

For your convenience, we have indicated all of these changes and amendments in a memorandum entitled "Amendments Proposed by Department of Commerce to H. R. 6141, 84th Congress, 1st session," which I would like to have incorporated in the record immediately after my testimony of today.

May I parenthetically say this, as I conclude my statement:

The Interstate Commerce Commission Act, as originally enacted in 1887, made discrimination between shippers unlawful and no power was given to prescribe rates for the future.

Then in 1910 there was added the suspension clause because the courtinjunction remedy was too slow and burdensome for shippers.

Now, suspension is used mainly by carriers against each other. Subsequent amendments of the statute, including the existing policy and the rule of ratemaking, have made the Interstate Commerce Commission the adjudicator of carrier competition, and the Supreme Court has so held in the Eastern Central case. This concept is strikingly in contrast to the original purpose, which was to protect shippers and make discrimination between them unlawful.

In conclusion, let me sum up as follows:

The various testimony and other evidence submitted to this committee, which we have discussed in part today, in my judgment impels continued support of the recommendations of the Advisory Committee. In fact, the deliberations have strengthened our initial conviction on the necessity for improvement in policy and practice.

By far the overwhelming majority of witnesses have been representatives of types of transportation experienced, sincere, able men whose first concern is in the particular industry they are championing. But absent from your hearings has been another group whose physical presence, of course, cannot ever be manifest at hearings. That absentee is the general public-the millions whose welfare waxes or wanes in pace with spirit and the scope of regulatory power.

The public interest must be paramount in all of our ultimate decisions. This committee already has shown its concern for the public interest by the conscientious manner in which the whole problem has been explored.

I am confident that its final judgment and eventual recommendations will be in the best interests of all the people of the United States.

Secretary WEEKS. Mr. Chairman, that concludes my prepared statement. Mr. Earl Smith of the Defense Department is here. Does the committee wish to hear him on section 22 now or later on, or what is your pleasure with respect to questioning?

We are at your service now or on any other day.

Mr. HARRIS. Mr. Secretary, it appears that you have just concluded your testimony at a very appropriate time because I am sure you heard the bells just now for a call of the House. I observe that you have, along with your statement, a memorandum of the Department of Commerce. Did you want that included with your statement? Secretary WEEKS. Yes.

(The information referred to follows:)

AMENDMENT PROPOSED BY DEPARTMENT OF COMMERCE TO H. R. 6141, 84TH CONGRESS, 1ST SESSION

I. Page 2, line 6, insert the words "as well as among carriers of each mode" immediately after the word "modes."

The purpose of this amendment is to encourage and promote full competition between carriers of each mode of transportation as well as between the various modes of transportation.

II. Page 6, line 3, insert the words "or to charge any greater compensation as a through rate than the aggregate of the intermediate rates subject to the provisions of this part or part III except in cases where any or all of the single factor rates used to make up the aggregate-of-intermediate rate has been established by the carrier to meet competition," immediately after the word "distance." The purpose of this amendment is to continue the existing prohibition against rail and water common carriers charging more as a through rate than the aggregate of the intermediate rates except in those instances where any or all of the single-factor rates used to make up the aggregate of intermediate rates were established by the carrier to meet competition.

III. Page 6, line 16, delete the words "proportional rates, or".

The purpose of this amendment is to remove an ambiguity concerning the objective of the section to limit the authority of the Commission to the establishment of just and reasonable minimum or maximum proportional rates.

IV. Page 7, line 16, delete. "interstate" and substitute "intrastate"therefor.
This is a clerical amendment.

V. Page 9, line 23, delete "wherever" and substitute "whenever" therefor.
This is a clerical amendment.

VI. Page 10, line 19, insert the words "over which joint through rates or a combination of proportional rates are applicable" immediately after the word "route".

The purpose of this amendment is to make it clear that through rates which rail and water common carriers would be prohibited from canceling without the consent of all carriers participating therein, unless the Commission authorizes such cancellation, are limited to those over which joint or a combination of proportional rates are applicable.

VII. Page 13, line 19, insert the words "carriers of the same mode or" immediately after the word "of" where it first appears.

Page 13, line 20, insert the words "to the charges of carriers of the same mode or" immediately after the word "charge" where it first appears.

Page 13, line 22, insert the words "carriers of the same mode or" immediately after the word "of" where it first appears.

The purpose of these amendments is to make it clear that the three “shall nots" to be imposed on the Commission in its ratemaking shall be applicable to intramode as well as intermode transportation.

VIII. Page 14, line 15, delete the phrase "on traffic which is noncompetitive,”. The purpose of this amendment is to meet the objections of certain shippers that competitive traffic might be required to bear unreasonably high or excessive charges if the Commission considered, in determining whether a charge was more than a just and reasonable maximum charge, the effect of competition only for the purpose of preventing carriers from imposing excessive or unreasonable charges on noncompetitive traffic.

IX. Page 18, line 3, insert the words ", in a commercial operation," immediately after the word "who".

The purpose of this amendment is to make certain that the definition of a "private carrier of property by motor vehicle" will be applicable only to commercial hauling.

X. Page 18, line 21, delete the words "thereto and".

Page 18, line 22, delete "personnel" and substitute "personal" therefor.

These are clerical amendments.

XI. Page 19, line 15, delete "thereto".

Page 19, line 16, delete "and" as it first appears therein. These are clerical amendments.

XII. Page 26, line 3, commencing with the word "Such" strike out all through the word "carriers" in line 11.

The purpose of this amendment is to relieve the Commission of the obligation of taking into consideration the effect of a minimum rate proposed by a contract

carrier by motor vehicle on the rate of any common carrier in determining the lawfulness of such minimum rate.

XIII. Page 29, line 16, delete the words "thereto, and".
This is a clerical amendment.

XIV. Page 33, line 11, insert the words "over which joint through rates or a combination of proportional rates are applicable" immediately after the word "route".

The purpose of this amendment is to make it clear that through rates which common carriers by water and rail carriers would be prohibited from canceling without the consent of all carriers participating therein, unless the Commission authorizes such cancellation, are limited to those over which joint or a combination of proportional rates are applicable.

XV. Page 36, line 12, commencing with the word "Such" strike out all through the word "carriers" in line 20.

The purpose of this amendment is to relieve the Commission of the obligation of taking into consideration the effect of a minimum rate proposed by a contract carrier by water on the rate of any common carrier in determining the lawfulness of such minimum rate.

XVI. Page 43, line 17, delete the words "thereto, and". This is a clerical amendment.

XVII. Page 47, line 18, delete the word "fare". This s a clerical amendment. Mr. HARRIS. The committee will have to adjourn now.

We were going to surprise you, Mr. Secretary, I am sure, by not asking you any questions.

The members of the committee present, having heard you before and having questioned you at great length on the subject, and having listened again to your very fine presentation in which you condensed and brought into focus some of the issues that have been presented here pro and con about many of these matters, felt that the subject had been adequately covered at the moment and that we did not have any further questions.

Now, with reference to Mr. Smith, I observe his statement here in further reference to section 22. Mr. Smith could file his statement if he desires; otherwise, we could try to get the members of the committee to come back at a later time.

Secretary WEEKS. I think Mr. Smith would be very glad to file it for the record.

Mr. SMITH. It is optional whether it be read or accepted for the record, Mr. Chairman.

Mr. HARRIS. I have had occasion to go through it very hurriedly and, as we mentioned a moment ago, it is pretty much along the lines of the discussion that we have had before, is it not, or is it new inaterial?

Secretary WEEKS. We have some new material but you may use your judgment, Mr. Chairman.

Mr. HARRIS. Obviously we cannot hear it now and I was trying to determine the further proceedings of the committee.

If it is satisfactory for you to file it, we will be glad to have it go in the record and all the members of the committee will have an opportunity to study it, and that will conclude the hearings on this matter. Secretary WEEKS. Mr. Chairman, I am sure that Mr. Smith will be glad to file it for the record. I do not want to silence my colleague but you have been very patient with me and I think we will do it that way. (The statement referred to follows:)

SUPPLEMENTARY STATEMENT OF EARL B. SMITH, DIRECTOR OF TRANSPORTATION AND COMMUNICATIONS, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE (SUPPLY AND LOGISTICS)

Mr. Chairman and members of the subcommittee, on April 24, 1956, I gave the views of the Department of Defense on those portions of H. R. 6141 and 6142 which proposed to modify the Government rate provisions in the Interstate Commerce Act and on H. R. 525 which would repeal entirely the Government ratemaking provisions of section 22 of that act.

In that testimony it was pointed out that in view of the fact that the Secretary of Defense supported the recommendations of the report of the President's Advisory Committee on Transport Policy and Organization, my remarks would be confined to the proposed repeal or modification, as the case may be, incorporated in H. R. 6141 and 6142, also H. R. 525. The Government rate provisions incorporated in section 22 of the act were given extensive and painstaking study by a subcommittee of the Presidential Advisory Committee and that Committee recommended the modification incorporated in H. R. 6141 and 6142. The proposed modification reflects a well-considered and reasonable solution to any changes needed in the Government rate provisions.

Since my prior testimony many witnesses have appeared before this subeommittee submitting testimony pro and con with respect to these bills. Generally speaking, certain segments of the transportation industry and practically all elements of the shipping industry have supported repeal of section 22 of the Interstate Commerce Act as exemplified by H. R. 525. Representatives of those groups have urged immediate passage of H. R. 525 in preference to action on the Government rate provisions proposed in H. R. 6141 and 6142.

At the outset let me say that it is certainly conceivable that some of the criticism directed against the use of section 22 of the act has a valid basis. We know that it has. In fact, in my previous testimony, the abuses inherent in section 22 were delineated. We also pointed out to you the advantages implicit in section 22-flexibility in ratemaking to meet the changing military requirements-and protecting security implicit in military operations. What we are urging is that Government rate provisions be amended to preserve the good and destroy the undesirable features of section 22.

Additionally, it is no doubt true that some personnel of the military depart ments engaged in transportation procurement use methods and practices contrary to our policies and regulations in securing rates from the transportation industry. But I do want to direct your attention to the fact that the Department of Defense is a large organization with a vast employment of personnel engaged in buying transportation. To ascertain that all personnel follow all the rules all the time is a difficult task. There are infractions but they are the exception rather than the rule. When such departures from policy and regulations are disclosed, action is taken immediately to correct them.

Much of the testimony presented represents honest differences with respect to the need for Government rate provisions-some represents misunderstandings— some is designed to mislead-a portion is just frivolous-there appears to have been more heat than light placed on this subject.

Since my previous testimony dealt, among other things, with the need for Gov. ernment rate provisions, my supplementaly testimony will treat only the testi mony on which there has been misunderstanding. Additionally, this testimony will give you an informed estimate of what the complete repeal of the Government rate provisions of section 22 of the act will cost the military departments in terms of dollars.

Contention that: (a) Rates established on Government traffic are in many cases below standard levels of reasonableness, and (b) reduced rates for the Govern ment result in increased rates to other shippers.

The advertising men work on the thesis that if a statement is continuously drummed into the ears of prospective purchasers, what is fiction will eventually become accepted as fact. The above statements actually fall in this categoryfor over the past 10 years these statements have been repeated often and long. These two phrases are generally discussed independently of each other, but they are inextricably related. One proposition is that if the rates established on Government traffic are in many cases below the standard levels of reasonable. ness, then the rates on Government traffic would result in relatively-higher-thanreasonable rates for other shippers. Conversely, if rates on Government traffic are not below standard levels of reasonableness, then the Government rates would not have such an effect on the other shippers.