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In connection with the growth of trailer-on-rail-flatcar service, motor carriers have established class and commodity rate tariffs in which they reserve the right to substitute trailer-on-flatcar service for highway transportation. Such rates are applicable to the movement of freight under the plan whereby (1) the motor carrier originates and terminates the traffic, substituting trailer-on-flatcar service for motor-carrier highway service between terminals, and (2) the motor carrier issues the bill of lading covering the through movement,

A number of railroads have joined with motor carriers in the substituted-service plan and have entered into arrangements with motor carriers in which participating rail and motor carriers "divide" the applicable so-called joint rate and transportation charges. Under such arrangements the railroads receive for their trailer-on-flatcar services compensation, sometimes called divisions, which is less than their own tariff rates. Under this plan of through transportation the motor carrier has been referred to by the Commission as a connecting carrier. See Movement of Highway Trailers by Rail (293 I. C. C. 93).

Because the concept of freight forwarding is to provide a complete transportation service from point of origin to ultimate destination, the forwarder, although designated by statute as a common carrier, may not enter into the establishment of joint rates with railroads or other common carriers or arrange divisions therewith. Movement of Highway Trailers by Rail, supra. Therefore, unlike motor carriers, in moving their shipments the forwarders have always paid the railroads, and must continue to pay under the present law, their published tariff rates. The railroad-rate structure had been suitable to this method of operation by reason of the publication of all-commodity freight rates or other volume rates applicable to various commodities. However, with the advent of trailer-on-flatcar service it appears that freight forwarders will be unable to serve their patrons in extensive areas surrounding concentration and break-bulk points on a competitive basis with motor common carriers. Thus by economic necessity forwarders may be compelled to confine future service on freight to areas close to concentration and break-bulk points.

In order to utilize trailer-on-flatcar service between concentration and breakbulk points the forwarder must perform the functions of gathering and distributing individual shipments and issue bills of lading covering each shipment handled. These functions, as observed above, are substantially the same as those engaged in by motor carriers which participate in joint rates and divisional arrangements with railroads respecting their trailer-on-flatcar services. In this connection, the Commission, in Substituted Freight Service (232 I. C. C. 683 (690)), early recognized that a motor carrier acts in the capacity of a forwarder or shipper when it assembles the traffic tendered by the individual shippers into carload lots for rail transportation.

Under H. R. 9548, freight forwarders would be able to enter into contracts with railroads for the payment to them of compensation less than the tariff rates of rail carriers. Such contracts would permit utilization by forwarders of traileron-flatcar service which appears peculiarly suited to freight-forwarder operations since the forwarder, like the motor carrier, may operate more efficiently by eliminating the expensive and time-consuming loading and unloading operations at each end of the rail line haul, and thus perform a more expeditious service for the public. A need for such contracts may be necessary to enable the freight forwarders to continue providing a complete transportation service on a nationwide scale of benefit to the shippers in the small towns as well as in the large cities where the forwarders' concentration and break-bulk terminals are situated. As in the case of contracts between forwarders and motor common carriers, contracts between freight forwarders and rail carriers would be required to be filed with the Commission, and be subject to inquiry by the Commission into the justness, reasonableness, and equitableness of the terms, conditions, and compensation of the contracts in the light of the national transportation policy. We can see that the amendment of the act as proposed 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. We recognize that section 409 (a) now authorizes contract arrangements between freight forwarders and motor carriers, and we are not prepared at this time to oppose similar arrangements as to piggy-back traffic between the forwarders and the railroads. We believe, however, that certain safeguards should be thrown around the arrangements not only as presently provided in section 409 (a), but under the proposed amendment of that section.

We, therefore, urge that language similar to our recommendation No. 30 contained in our 69th annual report, and for the same reasons, be incorporated in any amendment of section 409. Recommendation No. 30 and the explanatory comment appearing on page 137 of the report read as follows:

"We recommend that section 409 be amended so as to (1) place the burden of proof on the parties to contracts between freight forwarders and common carriers by motor vehicle subject to part II of the act for the transportation of freight when such contracts are called into question, (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 the offer, grant, giving, solicitation, acceptance, or receipt of any rebate, concession, or discrimination resulting from the transportation of property at compensation less than that specified in such contract.

"The Commission's experience under section 409 (b) of the act in attempting to subject certain contracts between freight forwarders and motor common carriers for the transportation of freight to investigation has disclosed some major defects in the law, the most important of which is the failure to place the burden of proof on the makers thereof when such contracts are subjected to formal investigation.

"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 'truckload lots' and making the prohibition applicable to all cases where such line-haul distance is 450 miles or more. Such an amendment would also eliminate the necessity for the Commission to determine what Congress meant by 'truckload lots,' a term considered almost impossible to define with exactness sufficient to stand up in court in a criminal proceeding.

"The penalty provisions would be added to insure observance of the terms, conditions, and compensation of the contracts, for without them freight forwarders and motor carriers could violate their contracts with impunity since there appears to be some question as to whether or not the enforcement provisions of parts II and IV of the act cover this situation."

We also recommend that the bill be amended so as to include a requirement that the contracts, not only with the railroads but with the motor carriers as well, be filed with the Commission on not less than 30 days' notice, the same as is now required of tariffs filed with the Commission, and, further, that the Commission be given power to suspend and investigate these contracts similar to the authority now contained in sections 15 (7), 216 (g), 307 (g), and 406 (e) of the act with respect to new or changed rates that are filed in tariffs.

We also wish to point out that the first proviso of section 409 (a) provides that the terms, conditions, and compensation under contracts between forwarders and motor carriers shall not unduly prefer or prejudice "*** any other freight forwarder." We believe that a similar phrase should be inserted in the corresponding provision of the bill since it is doubtful whether the provisions of section 404 (c) of the act, relating to prohibitions against undue preference or advantage by any common carrier subject to part I, II, or III of the act to any freight forwarder, would apply to the terms, conditions or compensation set forth in contracts between freight forwarders and railroads. It is therefore suggested that the words "or any other freight forwarder" be inserted after "thereto" in line 9, page 2, of the bill.

It is further noted that while the title of the bill refers to the movement of trailers on flatcars only, the text of the proposed measure would include the movement of freight loaded in "other containers" without any limitation as to the type of railroad cars to be used. Since the phrase "other containers" could be construed under the language of the bill as meaning containers of any size or description, including those loaded in boxcars or any other type of car, this provision would appear to go beyond the principal purpose of the bill according to its title. We therefore suggest that if it is intended that the application of the proposed measure shall be confined to the movement of freight in trailers, or other similar containers, on flatcars that the bill be amended so as to clearly so indicate.

Respectfully submitted.

ANTHONY ARPAIA,

Chairman, Committee on Legislation.

J. M. JOHNSON.

OWEN CLARKE.

Hon. J. PERCY PRIEST,

INTERSTATE COMMERCE COMMISSION,
Washington, April 19, 1956.

Chairman, Committee on Interstate and Foreign Commerce,

House of Representatives, Washington, D. C.

DEAR CHAIRMAN PRIEST: Your letter of March 9, 1956, addressed to the Chairman of the Commission and requesting a report and comments on a bill, H. R. 9771, introduced by Congressman Harris, to amend section 411 of the Interstate Commerce Act, as amended, with respect to relationships between freight forwarders and other common carriers, has been referred to our Committee on Legislation. After careful consideration by that committee, I am authorized to submit the following comments in its behalf:

Section 411 (a) of the Interstate Commerce Act, which H. R. 9771 would amend, now makes it unlawful for a freight forwarder, or any person controlling, controlled by, or under common control with a freight forwarder, to acquire control of a carrier subject to part I, II, or III of the act. The proposed measure would remove this prohibition by rewriting section 411 (a) so as to permit a freight forwarder to acquire control of one or more such common carriers, through stock ownership or otherwise, if approved by this Commission after reasonable opportunity for interested parties to be heard. Before approving any such proposed transaction, the Commission would be required to find, subject to such terms and conditions and such modifications as it shall find just and reasonable, that it would be within the scope of amended paragraph 411 (a) (1) and would be consistent with the public interest. In passing upon such transactions, the Commission would also be required to give consideration to the effect thereof upon adequate transportation service to the public and, where appropriate, to the interest of carrier employees affected. As a prerequisite to its approval, the Commission may require a fair and equitable arrangement for the protection of such employees.

While section 411 (a) (1) prohibits a freight forwarder, or any person controlling, controlled by, or under common control with a freight forwarder, from acquiring control of a carrier subject to part I, II, or III of the act, it should be noted that section 411 (g) permits such carriers to control or acquire control of a freight forwarder or freight forwarders.

When S. 210 (77th Cong.) which, as finally enacted, became part IV of the act, was under consideration by the Congress, the question arose as to whether or not carriers subject to part I, II, or III should be prohibited from having or acquir ing control of freight forwarders, and, conversely, as to whether freight forwarders should be prohibited from acquiring control of such carriers. In commenting on this question, former Chairman Joseph B. Eastman stated in a letter dated March 12, 1941, to Senator Burton K. Wheeler, chairman of the Senate Committee on Interstate and Foreign Commerce, as follows:

"The conclusion that the public interest requires that the forwarder be an agency independent of carrier control is reinforced by the finding made in the Freight Forwarder Investigation mentioned earlier in this report (229 I. C. C. 201) that the control and domination of certain large forwarders by railroad companies resulted in violations of the act. The same considerations which preclude carrier control of forwarders also preclude forwarder control of carriers."

Congress failed to adopt Chairman Eastman's suggestion that carriers subject to part I, II, or III be prohibited from having or acquiring control of freight forwarders. This apparently resulted from the practical realization that forwarders had become necessary adjuncts to carrier operations and that among the former were wholly owned subsidiaries, affiliated corporations, or forwarders directly controlled by the carriers. An analysis of the statements and remarks of the committees and various Members of Congress concerning the provisions of the bill which ultimately became section 411 of the act (H. R. Rept. 1172 (p. 14), 77th Cong., 1st sess., Aug. 13, 1941; 77 Congressional Record 8218 and 8220, October 23, 1941; and 77 Congressional Record 4067, May 11, 1942), indicates that Congress was impressed with three considerations in permitting carrier control of freight forwarders. These considerations, as reiterated by Congressman Wolverton in reporting the bill approved by the conference committee back to the House, were as follows:

"First. The two largest forwarding operations in the country were developed under railroad affiliation and no complaint of their service appears to have been made by the shipping public.

"Second. Because of the universality of the service which railroads are required to perform, as among persons, localities, and as to different kinds of freight, their control of forwarding operations would tend to be more universal and less discriminatory than forwarder service conducted by individual operators having narrower rights and obligations.

"Third. The investments made by rail, motor, and water carriers in transportation properties, facilities, and equipment furnish a substantial incentive on their part to provide and maintain for the public a permanent and stable service, and as a result their control of forwarding operations should insure to the public a greater permanency of service than if forwarding operations were only in the hands of those who have no real substantial investment in the properties and facilities which make such forwarding operations possible (77 Congressional Record 4067, May 11, 1942)."

This reasoning obviously would not apply to forwarder control of carriers. Several of the larger forwarders continue to be subsidiaries or affiliates of major railroad systems, and they apparently continue to so operate under the permissive provisions of section 411 (g) without complaint. The restriction has prevented abuses from arising which might be the source of a disruptive effect on rates and service to the public.

The basic considerations which governed Congress in the enactment of section 411 (a) have not changed in any material respect. In its relations with the carriers which it utilizes for underlying transportation services, the freight forwarder is a shipper, and as such it routes or controls the movement of large amounts of freight. To permit forwarders to acquire control of carriers subject to the act would, in our opinion, open the way to opportunities for discrimination not only with respect to rates and charges, but also in respect of practices which would be difficult to control.

Editorially, it appears that the word “subjection” in line 8, page 2, of the bill should be "subsection." It also appears that the letter "(a)" in line 2, page 3, of the bill should be changed to "(1)."

For the reasons hereinabove stated, we believe that enactment of H. R. 9771 would be contrary to the public interest and therefore recommend against its adoption. If, however, the bill should receive favorable consideration by your committee, we suggest that in view of the broad language of the bill which would permit the acquisition of control "through stock ownership or otherwise" [italic supplied], consideration be given to amending the bill so as to incorporate therein the pertinent provisions of section 5 (2) of the Interstate Commerce Act, entitled "Combinations and Mergers of Carriers." Respectfully submitted.

ANTHONY ARPAIA,

Chairman, Committee on Legislation.

ANTHONY ARPAIA.

J. M. JOHNSON.
OWEN CLARKE,

INTERSTATE COMMERCE COMMISSION,
Washington, April 19, 1956.

Hon. J. PERCY PRIEST,

Chairman, Committee on Interstate and Foreign Commerce,
House of Representatives, Washington, D. C.

DEAR CHAIRMAN PRIEST: Your letter of March 9, 1956, addressed to the Chairman of the Commission and requesting a report and comments on a bill, H. R. 9772, introduced by Congressman Harris, to amend section 410 of the Interstate Commerce Act, as amended, to change the requirements for obtaining a freight-forwarder permit, has been referred to our committee on legislation. After careful consideration by that committee, I am authorized to submit the following comments in its behalf :

H. R. 9772 would amend section 410 of the Interstate Commerce Act by eliminating subsection (d), and by appropriately redesignating the remaining subsections. The subsection which would be eliminated reads as follows:

"(d) The Commission shall not deny authority to engage in the whole or any part of the proposed service covered by any application made under this section solely on the ground that such service will be in competition with the service subject to this part performed by any other freight forwarder or freight forwarders."

The effect to be given to section 410 (d) has been considered in a number of Commission proceedings, and, in this connection, one of the requirements necessary to issuance of a freight-forwarder permit under section 410 (c) is a finding, "that the proposed service, to the extent authorized by the permit, is or will be consistent with the public interest and the national transportation policy." In the administration of part IV of the act by the Commission, applications for forwarder rights have been granted where the evidence showed, among other things, that shippers desired and would utilize a proposed service. In those cases where it appeared that substantial impairment to the services of existing forwarders might result, the Commission has taken the position that such result would be contrary to the public interest and, upon so finding, has denied applications for new rights. However, due to the difficulty which interested parties in forwarder proceedings have had in adducing evidence to show the probable effects of a proposed service, very few applications for freight-forwarder permits have been denied upon evidence that the granting of such applications might lead to situations resulting in substantial impairment to the services of existing forwarders.

The act of December 20, 1950 (Public Law 881, 81st Cong.), amended the Interstate Commerce Act by designating freight forwarders as common carriers. The Commission, in its 69th annual report to Congress, recommended (recommendation No. 31) that, since freight forwarders are now classified as common carriers, they be required to secure certificates of public convenience and necessity as prerequisite to engaging in service as a freight forwarder, the same type of authority required to be obtained by other types of common carriers. As stated in the annual report, the ease with which permits may be obtained, under section 410 (d), could result in general impairment of efficiency of forwarder service and harm to the general public. While it appears that the elimination of section 410 (d) is desirable so as to remove the restriction on the Commission's authority to deny applications, we believe that the act should be further amended so as to give effect to the aforementioned annual report recommendation.

While we are of the opinion that it would be more desirable to amend section 410 as suggested above, we have no objection to the enactment of H. R. 9772 as introduced.

Respectfully submitted.

ANTHONY ARPAIA,

Chairman,

J. M. JOHNSON,
OWEN CLARKE,
Committee on Legislation.

Mr. ARPAIA. The views expressed in the letter of December 22, 1955, commenting on H. R. 6141 are equally applicable to H. R. 6142, which, I understand, is an identical bill, although it has not been printed to my knowledge.

The Commission was unanimous in the adoption of its report commenting on H. R. 6141. While Commissioner Mitchell and former Commissioner Elliott approved the report in general, their views differed with respect to section 7 (c), and parts of section 8. Neither Commissioner Mitchell nor former Commissioner Elliott wished to include their separate views in the report. Except to the extent mentioned above, the comments contained in the report represent the unanimous views of the Commission as presently constituted.

H. R. 6141, which is designed to implement various recommendations made in the report of the President's Advisory Committee on Transport Policy and Organization, would make far-reaching changes in the Interstate Commerce Act. I would like to say at the outset that while we favor some of the provisions of the bill, we do not recommend the enactment of other features.

I believe that the Commission's comment on H. R. 6141 is substantially complete, but I will add a short explanation in order to make more clear the reasons for the Commission's position.

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