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The Federal Government has appropriated $551,000 for preliminary engineering work on a project that would open up the 3,100-acre Columbia Bottoms north of St. Louis for a proposed industrial district to be operated by the bistate agency, Joint Hlinois-Missouri Authority. Other river cities with ambitious industrial development projects: Pittsburgh, Minneapolis, St. Paul, Baton Rouge, New Orleans, Dubuque, Iowa, and Syracuse, N. Y. (New York State Barge Canal).
Barge line executives point up how all this rising waterway activity is causing an upsurge in their industry.
Capt. A. C. Ingersoll, Jr., president of Federal Barge Lines, Inc., says he expects 1936 volume to exceed the record 3,191,811 tons hauled last year, up 21 percent over 1954 volume. “May was the best month in our history," he reports.
"I would be surprised if the growth of the barge industry is less than 4 percent per year for the next 10 years," he adds, “and it may grow as fast as 15 percent a year." Federal added a new towboat and 25 new barges last year, recently launched a big modern towboat and has 25 barges on order.
WASHINGTON, D. C., May 9, 1956. Hon. OREN HARRIS, Chairman, Transportation and Communications Subcommittee, House Committee on Interstate and Foreign Commerce,
House Ofice Building, Washington, D. C. DEAR MR. CHAIRMAN: I beg leave to transmit herewith an expression of views on behalf of four Midwest meatpackers-Oscar Mayer & Co., the Rath Packing Co., George A. Hormel & Co., and John Morrell & Co.-in opposition to certain phases of H. R. 6141, being legislative expressions of the so-called Weeks report. Yours truly,
WARREN H. WAGNER.
VIEWS OF CERTAIN MIDWEST MEATPACKERS ON H. R. 6141 AND S. 1920
PRELIMINARY H. R. 6141 and S. 1920, bills to amend the Interstate Commerce Act, purport to reduce to legislative form the proposals contemplated by the so-called "Weeks report" or Cabinet Committee report.
The views thereon expressed herein are those of Oscar Mayer & Co., the Rath Packing Co., George A. Hormel & Co., and John Morrell & Co., shippers, operating meatpacking plants at Madison, Wis., Davenport, Waterloo, Ottumwa, Fort Dodge, and Estherville, Iowa, Austin, Minn., Fremont, Nebr., Dallas and Amarillo, Tex., Sioux Falls, Mitchell, and Madison, S. Dak., and Philadelphia, Pa. These packers are not among the so-called Big Four.
At the above points we have slaughtering plants. In addition, certain of us operate large processing plants at the following cities: Atlanta, Ga.; Birmingham, Mobile, and Montgomery, Ala.; Charlotte and Winston-Salem, N. C.; Chattanooga and Memphis, Tenn. ; Chicago and Decatur, Ill. ; Dallas, Houston, and San Antonio, Tex.; Fresno, Los Angeles, Oakland, and San Francisco, Calif.; New Orleans, La.; Philadelphia, Pa.; and Seattle, Wash.
There are a number of phases of this legislation which will undoubtedly be opposed by other shippers, and to avoid reiteration we will not discuss all of them herein.
Of course, changes in the provisions of the present statute will impel litigation to ascertain their validity, meaning, scope, and application-expensive to the small carrier or shipper compared with the availability of extensive staffs of the larger carrier or shipper. Is that necessary?
The consequences of proposed changes should be considered from the legal or practical standpoint, administration or functioning of the Commission, as well as upon the rights of shippers.
If the railroads and the motor carriers are turned loose so that they can reduce their rates with impunity, we would unquestionably revert to the "laws of the jungle," as stated by the Commission in its "comments" to Congress on this question. Throatcutting and rate wars would be worse than prior to 1887, when special rates were published in so small type that powerful microscopes were needed, or when special noncompensatory rates were put in for a day to accommodate a given shipper.
We are at a loss to understand how there can be a saving of a billion dollars to shippers while increases in transportation charges are continually sought by all the various modes of transport, and particularly the railroads, the two latest being Er parte No. 175 and Ex parte 196. Or how so much additional revenue will accrue to the railroads if reductions can run wild.
The high-sounding phrases will not withstand analysis when considered with the legislative proposals alleged to carry them out. "In trying to better, oft we mar what's well.” (Shakespeare.)
Secretary Weeks, in his statement to the press accompanying the release of the Weeks report (April 18, 1955), stated that "After months of intensive study, consultation with experts in and out of the Government and hearing with an open mind all sides of the question, the Presidential Advisory Committee has presented its report to the President."
So far as we know, no consultation was had with the Interstate Commerce Commission. Perhaps the Weeks Committee does not think that there are any "experts" with the Interstate Commerce Commission, notwithstanding the fact that for time immemorial the courts have described it as a body of experts."
The Committee does not delineate with whom, in or out of the Government, conferences were had, or with whom the consultation was had, or upon whose judgment the Committee most relied. The Committee gives undue weight to cost
The Weeks Committee proposes that the authority of the Commission be restricted to the prescription of minimum rates which shall not be less than compensatory, i. e., when they fail to cover the direct ascertainable cost of producing the service; and maximum rates which do not fall below the full cost of performing the services. In other words, cost is to become a controlling factor, We beg leave to submit an expression of our views on that subject.
We recognize that the subject of cost is receiving more and more consideration in fixing transportation rates, both rail and motor. The Interstate Commerce Commission has established a Bureau of Accounts, Cost Finding, and Valuation. And the Weeks Committee recommends expansion so as "to form a basis for the Commission's judgment of what constitutes compensatory rates."
However, what we here say relates in most part to the disadvantages to which the shipper is put in making out his case before the Interstate Commerce Commission in connection with the rail and motor carrier rates he must pay for the transportation of his products.
The railroads, through their national and territorial associations or bureaus, as well as through their individual staffs of specialists, are able to and do make elaborate presentations of cost studies. What is true as to the railroads is equally true as to the motor carriers. In addition to motor-carrier bureaus or associations, some individual motor carriers are rather elaborately equipped in that respect, as are many of the individual railroads. So, as we say, the carriers are equipped to make out a case as to cost.
However, the shipper is not so fortunate in that respect.
The staff of the Commission prepares and publishes various studies of cost of transportation, but the shipper, if he does not employ a high-priced specialist on cost, is unable to present initially or to rebut elaborate presentations made by the carrier on that subject; or to present initially data on that subject if the carrier, knowing that that cost data would argue against it, fails to present such data.
The Commission often uses data produced by its Cost Section, but the shipper is at a great disadvantage in its use. We will cite some illustrations:
At the May 6, 1955, session of the 26th annual meeting of the Association of Interstate Commerce Commission Practitioners at the Hotel Commodore, New York City, the undersigned asked a member of the Commission's Board of Suspension, who was a member of a panel, and which Board has authority to suspend or not suspend proposed increased or reduced rates, concerning the use of cost figures. Quoting the transcript of that discussion which appears in the
June 1955 issue of the ICC Practitioners' Journal (p. 955):
"Mr. WAGNER. We heard much today about costs, otherwise I wouldn't have brought it up. We heard that cost is a relative figure and you cannot determine the cost between any two points on a given commodity, etc. Has the Suspension
10'Keefe v. United States, 240 U. 8. 294 (1916): Tift v. Southern Ry. 00., 138 Fed. 753 (1905); Board of Trade v. United States, 314 U. š. 534, 546 (1942).
Board, either in mind or on paper, or submissions by the Bureau of Statistics [sic Cost Section], anything bearing on costs which it uses to suspend rates, which are not available to the public or not even put into the protest?
"Wr. Bay. On every protest that is filed, that is one of the first things we do. We ask our Cost Section to give us the estimated costs, both the out-of-pocket and the fully distributed. They do that. We use it. When I say 'we' I am talking for myself, you understand. I use it. That helps me—because I certainly cannot look at a rate and tell you whether it is compensatory or noncompensatory, or whether it covers out-of-pocket or does not—those figures are available to you, and if you ask for them I will be glad to tell you any cost figures that are given to us by our Bureau of Statistics [sic Cost Section).
"Mr. WAGNER. I think I have most of them distributed to the public, right in my office. But when we come before the Commission, I doubt whether we can get into the record any one of those figures which come from the Commission without objection from the carrier himself, and maybe the examiner himself.
"Mr. Bay. That is outside my jurisdiction. I only suspend them."
It will therefore be observed that the Commission uses cost figures in the determination of suspension, but when the proceeding is heard before an examiner the rights of the shipper are curtailed in respect of cost.
In one proceeding in which we were party (No. 30710), the railroads refused to supply us with certain data useful in preparing costs and the Commission declined to require the railroads to furnish that data, even though we offered to reliere the railroads of all expense in connection with furnishing that data and even though the Commission in a prior case a number of years ago required the railroads to furnish data along the very same lines. In No. 30710, Rath Packing Co. v. A. & W. Ry. Co. (296 I, C. C. 693, decided September 19, 1955), the railroads presented no cost data and the examiner in his proposed report, and the Commission, undoubtedly assisted by the Cost Section, pointed to the inadequacy of our showing because of the omission of data along the very lines above referred to.
In another case (No. 31342, Proposed Increased Refrigeration Charges, decided January 9, 1956) the shippers endeavored to get a representative of the Cost Section assigned to follow the proceeding as it progressed, but because of inadequacy of appropriation the Commission did not do that. (A request by a representative of the Cost Section, or at his suggestion a request by the examiner hearing the case, addressed to the carriers, is usually productive of results and more effective than a request of a shipper to the Commission to require the carriers to supply data or later after the issuance of a proposed or final report in which deficiencies on the subject are reported by the examiner or the Commission.) In that proceeding it was necessary for us with 5 other meatpackers to employ an expert cost accountant and we expended in excess of $22,000 for his services, and the proceeding is not through and we may need more of his services. In addition, in that same proceeding, other groups of shippers were impelled to employ cost accountants, one group we understand paid more than we did, and another group not far from what we paid.
Transportation costs are in a state of flux, especially where economies in seryiee are accomplished. To illustrate: With dieselization, the railroads often consolidate as many as 3 or 4 trains into 1, with a resultant large saving in cost. Example, Illinois Central western lines and Chicago Great Western. On occasion they even go so far as not to run a train until they have a maximum of tonnage, rather than a minimum. On the reverse side, we have no compensating decrease in freight rates on our particular products.
As stated, the shipper is at a disadvantage in the use even of data issued by the Commission's Cost Section. That data is often used by the Commission itself, but the shipper without employing an expert cost accountant is deprived of the use of those studies. To illustrate: While it carries on its face the statement appearing on all similar documents that "this study, issued as information, has not been considered or adopted by the Interstate Commerce Commission," in statement No. 5–54, issued in December 1954 by the Commission's Bureau of Accounts, Cost Finding, and Valuation, entitled "Cost Study of Class I Motor Carriers of General Freight in the Middle West Territory, Year 1953," the second paragraph of the introductory statement reads :
"The purpose of the study is to provide the Commission with costs to assist in judging what the level of rates should be, to furnish costs for use in judging rate proposals before the Suspension and Fourth Section Boards, and to permit comparisons of rates and costs in cases before the Commission."
Unquestionably any use of that study by a shipper witness not an expert cost accountant would be objected to by the carriers and the objection would be sustained by the Commission.
Mr. Commissioner Tuggle, at the 26th Annual Meeting of the Association of Interstate Commerce Practitioners, May 5, 1955, expressed serious doubt as to the wisdom of using cost factors alone.
Mr. James F. Pinkney, general counsel, American Trucking Associations, Inc., before the House subcommittee, stated :
** * * A motor carrier confronted by a railroad rate reduction on competing traffic would be unable to have the rate declared unlawful unless he could prove that the rate does not cover the railroad's out-of-pocket costs for performing the service. Clearly the difficulties of a motor carrier in attempting to establish that a particular rate of the railroad is below its out-of-pocket costs are wellnigh insurmountable."
Of course, to the same extent, or even more so, would the shipper be confronted with insurmountable difficulties in attempting to establish cost, because the basic data for the determination of those costs are in the hands of the carrier, and even when the shipper attempts to use Commission-issued cost statistics the carriers promptly oppose the use of those statistics, and when the shipper asks the carriers to furnish requisite data the carriers decline to do so, and the Commission itself declines to require the carriers to furnish that requisite data.
In this connection, observe the statement made by Mr. Commissioner Freas on July 26, 1955, at Palm Springs, Calif., speaking of "problems in ratemaking," when he said, “Basic data as to the cost of the service are frequently totally missing or wholly inadequate" (Daily Traffic World, January 26, 1956). The Committee improperly eliminates consideration of "value of service”
What becomes of "value of service," if the Commission can only prescribe maximum rates not less than full cost of performing the service, and minimum rates which shall not be less than compensatory, leaving to the carrier only to determine where in between? · What becomes of the host of rates in excess of or below maximum cost? Are we drifting to a common rate on all commodities which move, say, in boxcars? (The cost tables distributed by the Commission are based on equipment and load.)
As we understand it, so much of section 15 (a), paragraph 2 of the act, which says that the effect of rates on movement of traffic, and hence on the carrier's revenue, must be taken into consideration by the Interstate Commerce Commission in fixing freight rates, would be entirely eliminated under the bills here considered. Consequently, value of service, or what the traffic could bear, would no longer be required as a yardstick for ratemaking.
Historically, value of service has been one of the important factors used by the Commission in making railroad freight rates. If costs alone are to control maximum reasonable rates, without a mandate to require the Commission to consider the effect of rates on movement of traffic, we can expect to have nothing but unrealistic decisions.
A good example of unrealistic ratemaking is before the Commission in connection with the petition of the western and southwestern railroads to reopen Docket No. 28300, Class Rate Investigation. In that well-known proceeding the Commission gave great weight to the cost of service in establishing a uniform class rate scale in the territory east of the Rocky Mountains. It was found that a uniform scale, predicated largely on cost of service considerations, should supersede both lower and higher class, exception, and commodity rates already in existence. After spending many years trying to reconcile the irreconcilables created by the 28300 decision, the carriers have found that they are confronted with an unrealistic and unworkable situation. Accordingly, they now seek to have the case reopened for the purpose of showing that commercial and competitive conditions, in addition to cost of service, need to be taken into account in fixing freight rates on important heavy-moving commodities. It is particularly significant that the petition includes in an appendix a comprehensive statement, by Chairman Hill of the railroads' Eastern Traffic Executives Association, relative to the difficulties encountered by the eastern lines in their attempt to conform rates to the docket No. 28300 pattern. It will be recalled that throughout the 28300 proceeding the eastern lines seemed to favor the program generally and made an all-out effort to conform their rates to it. Finally they, along with the western roads and many shippers, have concluded that the decision is unworkable and unrealistic as related to commodity and exception rates on important commodities.
Unless the Congress continues the present requirements that both cost and value of service are to be yardsticks for use by the Commission, we foresee nothing but unrealistic ratemaking in the future. The Committee unnecessarily eliminates the prescription of precise rates
In most instances, in a given case the Commission prescribes maximum rates, or in another case prescribes inipimum rates. But why is it necessary to eliminate a precise rate from section 15?
Let us look at I. & S. 2595, Meats and Packing-House Products (136 I. C. C. 651, 156 I. C. C. 299). There the Commission fixed maximum reasonable and nonprejudicial rates. However, later, before the railroads reduced certain of the rates they petitioned the Commission for authority and further hearings were had. (Nee 251 I. C. C. 533 and cases cited therein.)
Then let us look at another proceeding-1. & S. 4367, Fresh Meats from Iowa and Minnesota to the East (227 I. C. C. 765). Therein the Commission prescribed rates which are designed to remove undue prejudice, are relatively reasonable, and have been justified as reasonable rates. The finding specifically states that the rates prescribed will be reasonable and that they will remove the prejudice. We do not believe the railroads could increase those rates or reduce those rates without petitioning for authority and after appropriate hearing.
If the prescription of precise rates has seldom been done, and if no one has been hurt by them, why change the law, and invite further litigation? On what ground is it necessary that the provision be eliminated?
Question arises as to what rate may be used as a reparation base, if authority to award reparation is not repealed.
Under the bills the Commission cannot hold that a rate would be unlawful (unreasonable) if it would be under cost plus burden, or over out-of-pocket cost. Let us assume a rate of $1.10, and the railroads publish tariffs carrying $1.45. The Suspension Board learns that the out-of-pocket cost would be $1 and the cost plus burden would be $1.50. If the Commission may only fix maximum or minimum, the Suspension Board can scarcely find a prospect of unlawfulness because the $1.45 rate is within the zone of reasonableness, i. e., between $1 and $1.50, Being unable to find a prospect of unlawfulness (unreasonableness), the Suspension Board could not suspend. But if the Commission may fix a precise rate, the Suspension Board could suspend because of the prospect of unlawfulness.
Even assuming that the Commission has seldom fixed "precise rates," who is hurt by not removing it? All we can see is opening the door for greater confusion and additional litigation to find out what the change is all about. Under the proposed amendments to the act where the Commission has sections 1
and 3 issues before it in the same proceeding, how could it resolve the section 3 issue without considering rates, traffic, or service of other modes of
transportation! In this connection, observe I. & S. 5269, Iron and steel to Iowa, etc., decided November 21, 1955. In that proceeding the Commission refused to modify certain prejudicial findings previously entered because the modification sought by the railroads to meet truck competition would prejudice other producing points where truck competition did not exist. If we were operating under amendments to the act proposed by the Weeks Committee, how could the points having no truck competition be protected?
Often a given decision will embrace both a suspension case and complaint cases. Assume that the railroad publishes a reduced rate from point A to X of $1 to meet truck competition, which rate is suspended. The shipper at point B bas a complaint attacking its rate and alleging prejudice and preference of point A. B's rate is $1.50 and its distance is the same as A's. Under the proposed statute the railroad may not present evidence of truck competition as to rates, or traffic or service, in justifying the reduced $1 rate. Must the Commission close its eyes in determining that rate, but open its eyes and consider the truck competition in determining the extent to which it will remove or not remove prejudice for B? Or under the restriction in the bills must it imore the truck competition in both instances? So the preservation of section 3 does not mean what the proponents of the bills claim it means in meeting a situation such as the above described, no matter whether there is equal, different, or no truck competition from B.
If a carrier may reduce given rates with impunity and as a corollary thereto reduce for a given shipper with "incentive" traffic, where will the allegedly