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I offer that exhibit for the record, Mr. Chairman.
Mr. HARRIS. It may be included in the record.
(Exhibit B referred to is as follows:)

EXHIBIT B

QUESTIONS CONSIDERED BY INTERSTATE COMMERCE COMMISSION IN DOCKET 31375, MOVEMENT OF HIGHWAY TRAILERS BY RAIL, WITH SUMMARY OF ANSWERS THERETO (293 I. C. C. 93)

Question 1

May a railroad transport its own freight (i. e., freight tendered it by shippers for movement by railroad, on railroad bills of lading, and at railroad rates) in its own trailers on flatcars, without holding any authority under part II of the Interstate Commerce Act? Otherwise stated, do such operations constitute carriage by railroad subject to part I or carriage by motor vehicle subject to part II?

Answer: "Yes" to first part of question. "As to the latter part, we are of the view, and so find, that the operations referred to constitute carriage by railroad, subject to part I of the act."

Question 2

If a railroad transports its own freight in trailers on flatcars, is the motor operation of the trailers in collection and delivery service at the termini of the rail movement an operation within the partial exemption of section 202 (c) (1) of the act?

Answer: "Yes." The Commission pointed out that in the Peninsula case (292 I. C. C. 157) it had found that motor terminal operations for a water carrier are within the section 202 (c) exemption and said: "***we are of the view, and so find, that motor operation of trailers by a railroad in terminal-area collection-and-delivery service in connection with the railroad's trailer-on-flatcar service is an operation within the partial exemption of section 202 (c) (1) of the act."

Question 3

May a railroad, under provisions of tariffs duly published and filed by it, but without holding any authority under part II, transport freight-laden trailers on flatcars, the trailers having a prior and/or subsequent highway movement(a) by private carrier by motor vehicle;

(b) by contract carrier by motor vehicle?

Answer: (a) "Yes."

(b) "For the reasons stated below as to part (a) of question 10, we are of the view that a contract carrier may not utilize trailer-on-flatcar service to obtain transportation within the scope of its (the contract carrier's) permit." The Commission said that it did not suggest a railroad should police the operations of motor carriers, but that where the railroad has knowledge that the trailers are moving in contract carrier service it should not become a party to a violation of the law. The Commission further modified its answer by saying that a motor contract carrier might act as the agent of a shipper in forwarding trailers beyond the scope of its permit.

Question 4

Under the conditions stated in question 3, may a railroad transport such trailers if the prior and/or subsequent highway movement is by common carrier by motor vehicle? If so, to what extent must the railroad ascertain and be subject to the limitations in the motor common carrier's certificate as to (a) territory and (b) commodities?

Answer: "No" as to the first part of question. The latter part of the question is considered under question 7 (a).

In answering the first part of the question the Commission pointed to its decisions in Substituted Freight Service (232 I. C. C. 683), and Motor-Rail-Motor Traffic in East and Midwest (219 I. C. C. 245), wherein it was held that "for a motor carrier to act as a common carrier by motor vehicle and as a shipper by rail as to the same service is repugnant to the act," and said: "The view so stated is obviously sound." The Commission noted that its answer relates only to traffic moving by rail under open tariff and in the absence of a through-route arrangement.

Question 5

May a railroad engaged in trailer-on-flatcar service and a motor common carrier establish through routes and joint rates covering movement of the motor common carrier's trailers on the railroad's flatcars?

Answer: "Yes" because authorized by section 216 (c) of the act.

Question 6

May a railroad engaged in performing trailer-on-flatcar service under jointrate arrangements with some motor common carriers equally eligible under the law to participate in such arrangements?

Answer:

Question 7

"Yes."

As between a railroad and a motor common carrier whose loaded and empty trailers are moving in the railroad's trailer-on-flatcar service, is the relation that of connecting carriers (a) where the arrangement is for substituted-rail-formotor service; (b) where the arrangement is for other than substituted-rail-formotor service?

Answer: The Commission said it could not answer part (b) of the above question because the factual situation is vague and uncertain.

As to 7 (a) the answer was "Yes". "In consonance with our conclusion as to question 1, above, we are of the opinion that trailer-on-flatcar transportation is in fact transportation by railroad. And this is so whether the trailers are owned or operated by railroads, shippers, or motor common carriers." The Commission referred to its decision in the Substituted Freight Service case, wherein it found that "where the substitution service consists of a combination of line-haul movements by rail and motor, it is in legal effect a joint service, no matter by what other name it may be designated."

The Commission also dealt, in answering question 7 (a), with the question presented in 4, as to whether a railroad must ascertain and be subject to the limitations in the connecting motor carrier's operating certificate. It said that while the railroads are under no obligation to police the motor operations "we believe that, when they enter into joint-rate arrangements with such carriers, they should satisfy themselves that the motor carriers have authority to operate in respect of the commodities concerned between the points where the substituted service is performed."

Question 8

May a railroad, under provisions of tariffs duly published and filed by it, but without any authority under part II, transport freight-laden trailers on flatcars, the trailers having a prior and/or subsequent highway movement in freightforwarder service?

Answer: "Yes." "In its relations with carriers by railroad, a freight forwarder is in many, perhaps, most, respects a shipper."

Question 9

May a railroad engaged in trailer-on-flatcar service and a freight forwarder establish through routes and joint rates covering movement of the freight forwarder's trailers on the railroad's flatcars?

Answer: "No." In answering this question the Commission referred to the legal and legislative history concerning joint rates between freight forwarders and motor carriers, and said that under part IV forwarder-motor joint rates continued to be lawful until September 20, 1951. It added: "Since that date, forwarder joint rates of any kind have been unlawful." Question 10

May a railroad engaged in performing trailer-on-flatcar service under joint-rate arrangements with motor common carriers refuse to publish and file appropriate tariffs and to transport the freight-laden trailers of (a) contract carriers by motor vehicle; (b) private carriers by motor vehicles; (c) freight forwarders? Answer: (a) “Yes” because "the motor contract carrier may not avail itself of such rail service."

Parts (b) and (c) considered together: “It is not feasible to give a definitive answer to these parts of the question except in a concrete case where all the relevant facts are known and disclosed of record. In general, however, it may be said that the answer in each case will depend upon whether the shipper's request for trailer-on-flatcar transportation is a reasonable one in the particular circumstances presented." The Commission cited the proposal of the New York

Central to move solid trains of cars in such service between New York, Chicago, and other points, restricted to motor common-carrier trailers, and added: "it is doubtful that all shipper requests for such service could be regarded as unreasonable."

Question 11

May a railroad, by provisions in its tariff, make its trailer-on-flatcar service available to private carriers but not to freight forwarders? Answer: "No."

Question 12

If a freight forwarder has a contract with a motor common carrier and if a trailer tendered to a railroad carries the identification of the motor common carrier, must the railroad providing trailer-on-flatcar service accept as compensation its division from the motor common carrier under the motor-rail joint rate rather than accept charges based on rates published in the railroad's tariff?

Answer: No answer because the factual situation is vague and uncertain. Mr. MORROW. The Commission's answers to questions 5, 7, 8 and 9 establish the following propositions: That a railroad and motor carrier may establish "through routes and joint rates" covering piggyback 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 piggyback service only on the basis of such rates as the railroads may publish for application to the traffic of the general public.

In analyzing the effect of the foregoing determinations it is important to bear in mind that freight forwarders are exclusively carriers of less-truckload and less-carload freight, and that motor carriers are their primary competitors. The published rates of freight forwarders are substantially the same as the comparable motor carrier rates, and for competitive reasons must remain so. It is axiomatic, then, that if a motor carrier is permitted to operate exactly as a freight forwarder does, but at a much lower underlying cost, he can undercut the forwarder rates to the extent necessary to attract the traffic.

Stated broadly, the combined effect of the Commission's answers is to freeze freight forwarders out of the piggyback field and at the same time to permit motor carriers to operate freight forwarder service under arrangements that are not open to the freight forwarding industry.

Forwarders are frozen out of the piggyback field by reason of the prohibitive prices they would have to pay under published tariffs of the railroads by reason of the competitive disadvantage at which they are placed as against their motor competitors-and because of the unsuitability of the rail piggyback tariffs to move forwarder traffic.

A little while ago I referred to the statement made in the piggyback case that the New Haven's tariff rates were 40 percent higher than its divisional charges to motor carriers. (The reference was to New Haven Local Freight Tariff I. C. C. No. F 4195, and unpublished Division Sheet No. F 517-C). It is reasonable to assume that the socalled divisional arrangements on other lines bear the same relationship to tariff rates.

There is a great deal more to providing transportation service than line haul. The generally recognized elements in transportation include:

1. Solicitation.

2. Gathering and receiving.

3. Rating and billing.

4. Line haul.

5. Distribution to consignees.

6. Collection and accounting.

7. Claim investigation and handling. And a few others I could

name.

On piggyback service offered direct to the general public by the railroads, the rail carrier performs all of the elements of transportation enumerated. When it handles a trailer on a flatcar either for a motor common carrier or a common carrier freight forwarder, all of the elements except line haul are performed by the motor carrier or the freight forwarder. The 40-percent differential between so-called divisions with motor carriers and piggyback tariff rates to the public is justified by the lesser service the railroads are required to provide. Exactly the same justification exists on freight forwarder piggyback traffic.

Obviously, the forwarder could never compete for traffic within a 40 percent higher cost than his most formidable competitor. Even a lower differential would suffice to bar the forwarder from the field. The argument advanced by some who oppose the bill that freight forwarders are not now foreclosed from using rail piggyback service, but that they can and should utilize such service on the basis of the published tariff rates of the railroads is thus directly contrary to the facts. It might as well be said that motor carriers could also pay published tariff rates. It is a well known fact that motor carriers have not, with possible rare exceptions, used rail piggyback service in the past at published rates, but have engaged in such operations only where lower divisional arrangements have been made available to them. Published rail tariff rates are no more suitable to the movement of trailers of motor common carriers than they are to the movement of forwarder freight in piggyback service.

It is not altogether surprising that some motor carriers oppose this bill, for it would afford them competition in a new and promising field where none exists today. However, some of the arguments which they have advanced in support of their opposition are little short of astonishing. In this category is the argument that the bill would place freight forwarders in the motor carrier business without a motor carrier certificate the theory of "invasion." A short time ago the motor carrier representatives were pressing this same charge against the railroads in the piggyback case before the Commission. There they argued, unsuccessfully, that to permit railroads to haul their own freight in trailers on flatcars would put the railroads in the motor carrier business wthout a motor carrier certificate. Now that the railroads are beginning to let the motor carriers in on the business the tune has changed and it is the forwarders who are charged with "invasion."

The facts speak for themselves, and the facts show conclusively that it is the motor carriers who are invading another field of carriagefreight forwarding by the manner in which they participate in piggyback service. A person who "assembles and consolidates *** and performs or provides for the performance of break-bulk and distribut ing operations *** and utilizes *** the services of a carrier or carriers subject to part I" is a freight forwarder by statutory definition, no matter what name of convenience is given to the service. More than that, when a carrier certificated by the Commission to operate a

"motor vehicle" *** "upon the highways," takes those vehicles off the highways and puts them on a railroad he ceases to be a motor carrier.

Bill H. R. 9548 is not designed to correct these practices. The most that it would do is to open the door to forwarders and authorizes them to meet these new competitors on their own ground. But it emphasizes the urgency of this bill to understand exactly what is taking place.

Under the plan or method of operations which the Commission has approved as lawful, it is possible for a motor carrier having operating rights between New York and Chicago, for example, over a specified highway, to work out a joint rate arrangement with a railroad for piggyback service; completely abandon its highway route; and move all of its freight by rail between the two points. The motor carrier, in that case, would be nothing more than a gathering and distribution carrier handling shipments within the terminal areas of New York and Chicago. He would possess all of the characteristics of a freight forwarder and none of the characteristics of a motor common

carrier.

To show that the example is not farfetched but reflects actual practice, let me quote from some of the prior decisions cited and relied upon by the Commission in the Piggyback case. In Substituted Rail Service by Red Ball Transfer Co. (52 M. C. C. 75) the Commission said:

Red Ball is authorized to perform service between Chicago and Kansas City and St. Joseph. It has actually performed over-the-road truck service between the points, and it now proposes to substitute rail service for its over-the-road truck service. We are of the view that such substitution would be unlawful.

At another point in that decision the Commission said:

Red Ball anticipates that all of its service between Chicago and Kansas City and St. Joseph would be performed in the proposed substituted freight service. [Emphasis supplied.]

Details of the substituted service plan of operation were spelled out more specifically in Motor-Rail-Motor Traffic in East and Midwest, 219 I. C. C. 256, also cited by the Commission in support of its Piggyback decision. The Commission described the physical operation involved as follows:

At Chicago, for example, it (motor carrier) picks up freight offered for shipment by the use of gathering trucks operating over city streets and in the surrounding areas. These shipments and others moving from other points to Chicago by motortruck are assembled at its Chicago freight station for sorting and loading into the trailers * * After a trailer is loaded, weighed, sealed, and locked it would be taken by the motor tractor of the motor carrier to the railroad yard at the point of interchange, backed up a ramp, and loaded on a flatear of the railroad. *** Shipments loaded in the trailer destined to the Twin Cities and beyond would move by rail to St. Paul, where the motor carrier would unload the trailer from the flat car, take it to its freight station, and unload and distribute the shipments.

The foregoing quotation describes precisely the operation of a freight forwarder. Freight is gathered and consolidated by the motor carrier and tendered to the rail carrier for the consolidated line-haul movement. At destination the consolidated shipment is again received by the motor carrier and is broken up and distributed to individual consignees. That is freight forwarder service by definition

78456-56-pt. 2- 37

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