Anticipating objections on the part of Government procurement officials, the elimination of section 22 would not mean the end of flexibility in rate adjustments. All movers publish rates which are based on mileage and weight factors, and rates between every point in the country can be computed immediately from tariffs on file with the Interstate Commerce Commission. As to the need for flexible rate adjustments, there are now legal provisions for filing tariff changes on less than 30 days' notice where an actual emergency and a good cause are shown to exist (R. 920).

With respect to the contention that the elimination of section 22 would increase the Government's costs, to the extent that private shippers contribute to the loss sustained on Government traffic, the cost of Government is merely transferred from the general public to private shippers. Furthermore, savings claimed through reduced rates are largely illusory. Not only is there a duplication of regulatory effort by each agency which uses transportation services, but there are additional administrative costs involved in seeking out the cheapest transportation rates, settling claims, and analyzing traffic and rates (R. 920-922).

In a supplemental statement, the witness responded to a request for information regarding the net loss of revenue suffered by conference movers in handling Government traffic at reduced rates. Based on the estimated annual expenditure of $54 million for the transportation of household goods for the military establishments, an estimated median rate reduction of 23 percent, and a figure of 60 percent as the amount of Government traffic moving at reduced rates, the net loss to the carriers amounts to about $7.5 million (R. 924-926).

NATIONAL INDUSTRIAL TRAFFIC LEAGUE

(John R. Staley)

The league does not indorse the proposed changes in section 22 of the Interstate Commerce Act. In lieu of this bill, many members of the league support amendments proposed in H. R. 525 as it stands. Others are of the opinion that it should be subject to certain modifications which would permit military considerations to govern the establishment of reduced rates (or special rates) during times of emergency. Otherwise, the league is generally for repeal of those provisions of section 22 which permit free or reduced rates to Federal, State, and municipal governments, on both freight and passenger traffic because these special rates are not subject to any of the normal standards of reasonableness and to the prohibition against discrimination or preference which are observed in connection with rates used generally by the shipping public. It is a fundamental principle of transportation regulation that all shippers should be treated alike, that rates should be fair and reasonable, and that they should be nondiscriminatory and nonpreferential. These principles should apply to any shipper, including a department of the Government, an individual State, or community (R. 436-443).

Responding to a question concerning reductions under section 22 on military passenger business, the witness submitted a supplementary memorandum, stating, that the country's railroads, as a section 22 quotation, have extended a flat 10 percent reduction on all passenger

fares for the Department of Defense. The agreement, reached after the Land Grant Act was repealed in 1946, was regarded as an exclusive contract for rail service. In 1952, reacting to criticism, the Department of Defense began asking bids and the rail share fell to about 35 percent. Thereafter, the rails actively engaged in the bidding with a view to exceeding out-of-pocket costs, and they are now handling about 65 percent of the Department of Defense passenger traffic (R. 443-445).

The Hoover Commission recommended that the national transportation policy be amended, with the Government made subject thereto; that rates on Government traffic be made public when negotiated, except where national security is involved; and that rules be established regarding the movement of classified military property. The latter two recommendations are useless because, as long as section 22 exists, there is no need for special rules, and the agencies are presently revealing rates after they have been negotiated (R. 445).

In reply to other questions, the witness testified that there was a lack of coordination between the Procurement and Transportation Sections of the GSA; that he could not estimate the increase in Government payments for transportation without section 22, since commercial shippers have no access to Government files; and that by negotiating for rates in the same manner as commercial shippers, it may be that the lower rates can be justified, or even lower rates obtained (R. 446-450).

MUNITIONS CARRIERS CONFERENCE, INC.

(W. J. Burns)

Favorable consideration of H. R. 525 is urged. The provisions of section 22 allow discrimination as between commercial and military shipments of the same commodity, between the same two points, and over the same route. It provokes distrust between carriers in different modes of transportation, as well as carriers within the same mode of transportation. It has an upsetting effect on the financial stability of carriers, since the Government can and does seek overcharges from carriers many years after the movement took place. It permits rates to spiral downward unchecked. It promotes the substitution of the judgment of Government traffic managers, in matters relating to the reasonableness of rates, for that of the Commission. It imposes a burden on commercial shippers who must necessarily pay higher rates to offset the effects of unrestrained rate reductions to the Government. It promotes discrepancies in matters relating to the handling of rates on the part of Government agencies. It places an enormous administrative burden on the Government transportation agencies (R. 1299).

A detailed statement concerning the origin, evolution, and intent of section 22 and related discussions, appears at R. 1293 et seq., and in appendixes (R. 1302-1311).

Generally speaking, over the years the rate on ammunition and explosives has been approximately 65 percent of the first-class rate. In October 1955, just after the Interstate Commerce Commission had completed its findings in the war materials reparations cases and found that the 65-percent rate was a just and reasonable rate, the rail

roads slashed the rate from 65 to 40 percent of the first-class rate, ostensibly to remove motor carriers from competition. At the same time the railroads petitioned the Interstate Commerce Commission for a 7-percent increase on commercial rates of general commodities.

The lack of suspension in the case of section 22 rates is more of a disadvantage to the Government shipping agencies than an advantage, for it requires the Government traffic management agencies to substitute their judgment for that of the Commission, a task for which the Government traffic management agencies are neither qualified nor authorized to perform (R. 1312–1315).

An important consideration here is that the Government as a shipper must pay the freight charges incurred on its shipments and is not in a position, therefore, to decide without bias what the rate should be. Experience has shown that the Government does not give full cognizance to the factors considered by the Commission in determining the reasonableness of a rate. The Government, for example, does not consider the effects of drastic rate reductions on other modes of transportation, it does not consider the effects of rate reductions on the traffic of commercial shippers, and it does not consider whether reduced rates are lower than necessary to meet competition.

If section 22 were repealed, during the period of transition there would undoubtedly be some additional expense on the part of the Government agencies, but there is no way of estimating what the expense would be. In view of the resulting more efficient traffic management, there is good reason to believe that the Government may be able to reduce its expenses (R. 1315-1317).

SUPPLEMENTAL STATEMENT

The total domestic freight transportation bill of the Department of Defense for the fiscal year of 1955 amounted to $537 million. Only a small percentage of this Department's traffic moves under section 22 rates. If this section is repealed, the traffic now moving under it would be moved under commodity rates in traiff form where justified. The Government would have little difficulty in securing commodity rates on the same basis as commerical shippers where these rates could be justified. If it is assumed that the percentage of military traffic, moving on section 22 rates, is 20 percent of the total freight charges paid by the Department of Defense, the percentage would amount to approximately $197 million. Assuming further that section 22 rates are approximately 20 percent below going commercial rates on like commodities, the repeal of section 22 would result in an additional cost of only $21 million. Much, if not all of this figure could be decreased by the savings in the enormous administrative burden the Department of Defense must now incur in handling section 22 rates. Since the Department of Defense admittedly is the largest single Government shipper of transportation, it is not understood how the Government can suggest that the taxpayers would incur additional costs of anywhere from a half to three-quarters of a billion dollars, especially since witnesses for the Department of Defense and General Services Administration have stated that the preponderance of their traffic today moves under established tariff rates (R. 1317-1318).

85548-57- -14

OFFICE OF THE POSTMASTER GENERAL

(Maurice H. Stans)

Limited use is made by this Department of authority to ship mail at freight rates. This bill does not affect the existing authority for free transportation of postal agents and officers traveling on official business, or the authority of the Postmaster General to enter into contracts with railway common carriers for the transportation of mails. The Interstate Commerce Commission does not exercise control over rates for the transportation of mail by motor carriers or water carriers, and this bill does not affect the Postmaster General's authority to contract with such carriers.

It is not believed that the enactment of this legislation would have any appreciable effect upon the revenues or expenditures of this Department. No objection is interposed to the enactment of this legislation (R. 26-27).

TRANSPORTATION ASSOCIATION OF AMERICA

(George P. Baker)

The association recommends repeal of those provisions of section 22 and related provisions in parts II, III, and IV of the Interstate Commerce Act permitting carriage of Government passengers and property free or at reduced rates. It is not believed that there is any reason why the Government as a shipper should have special treatment over private shippers. Nor is it believed that as a matter of public policy the Government and carriers should be permitted to cause instability of the rate structure by negotiating with carriers unpublished rates which can adversely affect private enterprise.

There appears little doubt that in many instances low Government rates require higher rates to private industry than would otherwise be necessary (R. 361).

It would be preferable to adopt legislation such as H. R. 525, calling for outright repeal of special reduced-rate privileges to the Government, with a proviso for exemptions from rate publishing rules and regulations for security reasons. As to the addition to section 15a, the association takes no position on exempting special Government rates from the suspension and section 4 provisions, or on allowing such rates to be made retroactive. It is agreed that Government rates can be exempted from tariff requirements for security reasons (R. 352). Additional comments

H. R. 6141:

American National Cattlemen's Association, Lee J. Quasey (R. 1816).

Burlington (Iowa) Shippers' Association, Inc., F. L. Partridge (R. 783).

National Live Stock Producers Association, and National Wool Growers' Association, Lee J. Quasey (R. 1816).

Sears, Roebuck & Co., John C. Allen (R. 1454).

H. R. 525:

A. E. Staley Manufacturing Co., T. C. Burwell (R. 1272). Air Transport Association of America, D. W. Markham (R. 1669-1673).

American Merchant Marine Institute, Inc., Alvin Shapiro (R. 1620).

American Trucking Associations, Inc., James F. Pinkney (R. 834-835).

Grand Rapids (Mich.), Chamber of Commerce, C. E. Elerick (R. 1718).

National Council of Farmer Cooperatives (R. 1691).

Pacific American Steamship Association, Ralph B. Dewy (R. 1001).

Property Owners Committee, William N. Maddox (R. 10731074).

Reynolds Metals Co., L. E. Galaspie (R. 1673).

XIV. OUTSTANDING RATE ORDERS

Provisions of Interstate Commerce Act

Sections 15 (2), 221 (b), 315 (d), and 416 (c) of the Interstate Commerce Act provide that, except as otherwise provided in parts I, II, III, or IV of the act, all orders of the Commission, other than orders for the payment of money with respect to rail and water carriers, shall take effect within such reasonable time as the Commission may prescribe and shall continue in force until its further order, unless such orders are suspended or modified or set aside by the Commission, or suspended or set aside by a court of competent jurisdiction.

Amendments proposed by H. R. 6141 and H. R. 6142

Section 25 of H. R. 6141 and H. R. 6142 provides that outstanding effective orders shall not have any force and effect with respect to rates, fares, or charges filed 180 days after enactment of such bill. Purpose of amendments

The purpose of the provisions is to make certain outstanding orders of the Commission inapplicable to rates, fares, or charges filed 180 days after enactment of the bills.

Testimony

DEPARTMENT OF COMMERCE

(Sinclair Weeks, Secretary)

The proposed section 25 is intended to permit the proposed new ratemaking policies and provisions to become operative without the necessity of first obtaining a modification of existing rate orders outmoded by the proposed new policy.

The proposed section would not automatically wipe out any existing rate orders. It would only mean that, in the ordinary course of things, a newly published rate would be tested, if challenged, by the new provisions of the act, rather than by the terms and provisions of a rate order pronounced under earlier statutory policies.

Orders and findings of the Commission relating to section 2 or 3 or other unchanged sections of the act, and orders and findings with respect to relationships of rates maintained in one territory in comparison with another, are not to be affected.

Any existing order would be admissible in evidence in any complaint or suspension proceeding and given appropriate weight.