railroad and motor carrier may fix "through routes and joint rates" covering piggy-back service, but that a railroad and freight forwarder may not do so; that "substituted rail-for-motor service" is in fact a "joint" service as to which joint rates may be established; and that freight forwarders may utilize piggy-back service only on the basis of such rates as the railroads may publish for application to the traffic of the general public (R. 1160-1163).

Freight forwarders are exclusively carriers of less-truckload and less-carload freight, and motor carriers are their primary competitors. It is obvious that if a motor carrier is permitted to operate exactly as a freight forwarder, but at a much lower underlying cost, he can undercut the forwarder rates to the extent necessary to attract the traffic. The effect of the Commission's position is therefore to freeze freight forwarders out of the piggy-back field and at the same time to permit motor carriers to operate freight-forwarders service under arrangements that are not open to the freight-forwarding industry (R. 1163).

The facts show conclusively that there is a practical need and an economic necessity for this bill, and that it is necessary to remove discrimination among carriers. Despite the clear legal precedent for the bill, those who oppose it revive the old argument that the status of forwarders is inconsistent with giving them rights to make contracts with railroads for piggy-bank service. Each time the argument has been made before committees of Congress, it has been repudiated. The argument that the proposal would cause discrimination against shippers, premised on the erroneous assumptions that forwarders are shippers in their relations with other carriers and that they are competitive with shippers, was answered emphatically by congressional committees in approving legislation to permit contracts with motor carriers (R. 1166-1169).

The Commission has changed its mind and now opposes the bill on the ground that forwarders "may" use their volume of traffic to induce railroads to enter into contracts at rates so low that they "may" cost a burden on other traffic. There is no evidence that this has happened in connection with motor-carrier contracts.

In considering the companion bill, S. 3366, the Commission proposed as a substitute a rewriting of section 409 to convert it into a rate section, instead of authorizing contracts in the nature of divisions. The Commission now has, under section 409, substantially the same powers and duties with regard to contracts between forwarders and motor carriers as it has with respect to divisions between any other types of carriers. Under the bill the Commission would also have those same powers with regard to contracts between forwarders and railroads as to piggy-back service. Since the subject matter is the same (relationships and charges as between common carriers), there is no reason for the Commission's request of additional safeguards and powers where forwarders are concerned. If the Commission, in spite of the terms of the law, continues to regard contracts between forwarders and other carriers as though they were rates applicable between carriers and shippers, the purpose of the law cannot be achieved (R. 1169-1172).

AIRCRAFT INDUSTRIES ASSOCIATION

(Harry R. Brashear)

H. R. 9548 would permit forwarders to negotiate with the railroads for reducer rates to apply on forwarder shipments loaded in or on trailers or other containers. The forwarder's prime objective in this bill is to secure for themselves substantially reduced charges on their rail shipments. Any substantial reduction in charges thus secured must be made up by an increase in the transportation charges imposed on all freight which the association's members must pay directly to the common carriers performing service for them. Also the reductions sought will create unjust discrimination and undue preference. In the accumulation of small shipments into carload consignments, the forwarder performs the same service as do two or more shippers who agree among themselves to consolidate their shipments into carloads. This situation determines the necessity for no lower rates to forwarders than to shippers, and this has been the fundamental objective of Congress in the enactment of part IV of the Interstate Commerce Act (R. 1323-1324).

AMERICAN TRUCKING ASSOCIATIONS, INC.

(F. G. Freund)

Following hearings in 1950, the freight forwarders obtained authority to contract with motor carriers for line-haul rates over the opposition of the association. Those contracts are still regarded as secret rate agreements. The section of the act authorizing them has proven to be weak and completely ineffective, and no section in part IV is subject to so much criticism.

Enactment of H. R. 9548 would place the forwarder in a position to engage in truckload business in complete competition with motor carriers and railroads without the necessity of obtaining operating authority. There is a distinction between forwarders contracting with railroads, and motor carriers doing the same thing. The act permits motor carriers and railroads to enter into joint rates; a forwarder is merely a shipper in relation to an underlying carrier. Motor carriers and railroads have operating authority to perform physical operations, and they have been conducting trailer-on-flat-car service since 1932.

There is a present concentration of forwarder business in four companies. Passage of H. R. 9548 would be a virtual guaranty that the big will become even bigger and the small, smaller and fewer. Instead, the Commission's suggestion 30, in its 69th Annual Report, should be followed (R. 815-816).

EASTERN RAILROADS

(Fred Carpi)

H. R. 9548, a proposal to amend section 409 to authorize forwarders to contract with railroads for piggy-back service, is sought to be justified on the principal ground that motor common carrier may enter into joint rates with railroads providing piggy-back service, and that unless freight forwarders are given the right to contract with railroads

for such service, the forwarders may be put at a competitive disadvantage. Actually there are only a few railroads which presently have any joint rates with motor carriers covering piggy-back service, and each has only a limited number of these joint-service arrangements. The bulk of the freight which moves under the arrangements with the Pennsylvania Railroad entails line-haul motor service at one or both ends of the rail haul, and consists largely of heavy or volume shipments as distinguished from the smaller shipments of merchandise which move in the less-carload or less-truckload services of railroads and motor carriers or in freight-forwarder service. Of course, forwarders may ship their freight in such joint motor-rail service where maintained (R. 1206).

The history of section 409 shows clearly that the exception granted forwarders to obtain certain motor carrier transportation at agreed rates was merely to legalize, with some safeguards, a situation which had obtained for a considerable period of years in respect of assembling and distribution service, and that there was no intent in enacting the 1950 amendment to allow the extension of such a practice to the transportation which forwarders purchase from railroads.

H. R. 9548 presents the question whether forwarders should be permitted to buy all of their rail transportation at contract rates because, under the proposed amendment, a forwarder could direct into piggyback service freight which it is now shipping in cars. In making its decision on this question the Congress should consider the following matters (R. 1210-1211):

1. Forwarders have not heretofore been permitted to obtain rail transportation at unpublished agreed or contract rates.

2. To permit them to do so would give the forwarders a powerful weapon to force railroads to grant them rates which would not be fully compensatory.

3. Such subnormal rates would divert needed revenues from the actual carriers which serve all shippers large and small, to the advantage of the freight forwarders' selective service, available only to a limited portion of the shipping and receiving public.

4. The measure of Commission control over the contract rates proposed would be wholly inadequate to enable it to prevent the forwarders from taking undue advantage of the railroads. The proposed control is similar to that now provided in the case of contracts with motor carriers, which the Commission in its 69th annual report to Congress has found insufficient.

The principal answers to the freight forwarders' argument for H. R. 9548 may be summarized as follows (R. 1211-1212):

1. Freight forwarders and motor common carriers are not comparable types of transport agencies. Motor carriers, like railroads, provide actual physical carriage and supply the necessary facilities therefor. Moreover their operating routes are fixed as to location. Ownership or control of the facilities for physical carriage by freight forwarders is not essential to their operation, and they customarily provide little physical transportation service. Also they can shift their operations to different routes

as they wish. There is, therefore, no such similarity in their situations as to require an identity or similarity of treatment. This is doubtless the basic reason why Congress authorized joint rates between railroads and motor carriers but not with forwarders.

2. The relation between railroads and motor carriers in the piggyback operation is that of connecting carriers participating in joint rates. A freight forwarder, not being a physical carrier, cannot be said to connect with a physical carrier, and cannot properly be a participant in joint carriage under a joint rate.

3. The law does not authorize joint rates between railroads and forwarders; hence there could not be any improper preference of motor carriers by a railroad in establishing joint rates with a motor carrier but not with a forwarder.

4. In making joint rates with motor carriers and in accepting divisions thereof, railroads do not influence the routing of traffic by the persons entitled to specify the routing, in this case the patrons of the motor carriers. Competition as between the railroads and the motor carriers for the traffic of such patrons remains on the basis of the published tariff rates of the two types of carriers, and this is true whether motor carriers use piggyback service or not. But if contract rates were to be authorized between railroads and forwarders such contract rates would immediately influence the routing of the traffic because accorded to an agency bearing a shipper relation to the railroad. The patron of a freight forwarder has no right to specify routing. It is of the essence of the operations of freight forwarders that they shall have the right to determine the routing of the traffic entrusted to them. As a result, such contract rates become an unpublished cost element to the real shipper-the freight forwarder-and directly affect the competition between the railroads and the freight forwarder for the business of the patron.

The contention that since freight forwarders were denominated common carriers by the amendment of 1950 they should be entitled to make joint rates or contract rates with rail, motor, or water common carriers, overlooks important facts (R. 1212-1213):

1. In describing a freight forwarder as a person which "holds itself out to the general public as a common carrier," the act merely confirmed the fact that such forwarders have always borne a common-carrier relationship to their own shippers; it did not make freight forwarders common carriers in their relation to the railroads.

2. There is no sound basis for joint rates between forwarders and the other carriers because joint rates contemplate participation of physical carriers in rendering joint service to shippers.

3. Even if forwarders were regarded as common carriers in their relation to carriers furnishing physical transportation service, this would not support their request for the right to contract with railroads for such service. For example, a railroad is not entitled to make contracts with another railroad or a motor carrier to reach a destination beyond its line to accomplish transportation in its own sole name.

INTERSTATE COMMERCE COMMISSION

(Anthony F. Arpaia)

H. R. 9548 would amend section 409 to authorize contracts between freight forwarders and railroads for the movement of trailers on flatcars at less than rail tariff rates. Freight forwarder operations initially were confined almost exclusively to service between concentration and break-bulk points, and consolidated shipments were moved in full carloads by rail carriers, with the profit from such operations determined by the margin between the established less-than-carload rate and the carload rate. About 30 years ago, forwarders began employing motor common carriers to gather and distribute shipments in wider areas surrounding their concentration and break-bulk points. The forwarder made contracts with motor carriers for such services at less than the general charges, and under present section 409 they are authorized to continue such arrangements, except that for line hauls of 450 highway miles or more, the contracts may not be for less than the established rates (R. 289).

Some railroads have joined with motor carriers in the substitutedservice plan and have entered into arrangements with motor carriers, whereby the railroads receive for their trailer-on-flatcar services compensation sometimes called divisions, which is less than their own tariff rates. As a result of this competition forwarders may be compelled to confine future service to areas close to concentration and break-bulk points. Motor carriers act in the capacity of forwarders or shippers when they assemble the traffic tendered by individual shippers into carload lots for rail transportation.

Forwarders would be able to operate more efficiently under such proposed contracts, and thus compete with motor carriers on a national scale. The amendment may not be in the best interest of transportation as a whole. The tremendous volume of traffic controlled by the freight forwarders may be used by them to induce railroads to enter into contracts with freight forwarders at rates so low that they may cast a burden on other traffic. The Commission is not prepared at this time, however, to oppose the objective of the proposal, but believes that certain safeguards should be included. It is recommended that language similar to recommendation No. 30 contained in our 69th annual report, page 137, and for the same reasons, be incorporated in any amendment of section 409. This would (1) place the burden of proof on the parties to the contract, (2) prohibit such contracts at compensation lower than the motor carrier's tariff rates in all cases where the line-haul transportation is for a total distance of 450 miles or more, and (3) provide penalties for acceptance or receipt of any rebate, etc., from the transportation of property at compensation less than that specified in such contract. Our experience with 409 (b) of the act has disclosed some defects, the most important of which is the failure to place the burden of proof on the makers of such contracts. Section 409 (a) now prohibits such contracts at compensation lower than the motor carrier's tariff rates where the line-haul transportation "in truckload lots" is for a total distance of 450 miles or more. The recommended amendment would prevent circumvention of such prohibition (by use of contract rates not subject to specified minimum weights), by eliminating the term