bank of cooperatives and, therefore, their nonfarmer members must be not greater than 10 percent of their total membership. And they generally adhere to that.

Senator LAUSCHE. You further state in your statement:

Of these 648 cooperative associations, 450 are cooperatives within the meaning of the Agricultural Marketing Act, and of that number, approximately 25 percent are members of the cooperative trucking associations which are exempt under 203(b) (5).

That is, of the 450 cooperatives within the meaning of the Agricultural Marketing Act, 25 percent or about 112.

Mr. ZEDDIES. Yes.

Senator LAUSCHE. Now then let's assume you were in the Interstate Commerce Commission, the Chairman, and you had a complaint that a cooperative was carrying a greater volume of nonfarm products for nonmembers than the law allowed. What procedure would you follow in attempting to stop it?

Mr. ZEDDIES. Well, I am not an expert on the administration of the

act.

Senator LAUSCHE. No. 1, you cited section 204(c).

Mr. ZEDDIES. I think I would proceed under 204 (c), depending on whether there was a complaint issued, or the Commission on its own investigation made the determination, I would proceed under that section to call the cooperative before the Commission, to get the facts, to determine whether or not it was operating within the provisions of that act.

Senator LAUSCHE. Let's assume you asked that the cooperative produce its books to show what its business consisted of, and it refused to do so. Do you feel that there is the power of subpena to bring in the books at the present time?

Mr. ZEDDIES. Yes; I think if there is a formal hearing, I think the Commission has that power. I don't think there is any doubt about it. It has never been questioned, as far as I know. I don't think it has ever been questioned in a proceeding.

Senator LAUSCHE. And you feel the power of subpena and the power of calling in witnesses and subpena duces tecum all exist now?

Mr. ZEDDIES. Yes; I think it is inherent in the power of the Commission.

Senator LAUSCHE. Mr. Sender?

Mr. SENDER. You mentioned an affidavit of exemption under the Internal Revenue Code. Would you elaborate on that?

Mr. ZEDDIES. Well, the Treasury Department prescribed a specific form, called an affidavit of exemption. Upon the filing of that affidavit, if the facts submitted indicate to the Treasury Department that there is compliance, that is it.

Now, the cooperative is not prevented from operating until the Treasury Department makes a determination. It is just that the Treasury Department says, and the courts have said, that if the conditions for exemption exist, the cooperative is exempt as a matter of law. There is no determination to be made other than if the facts are there, and that is it.

Mr. SENDER. The Internal Revenue Service may inspect the books and records?

Mr. ZEDDIES. Oh, certainly.

Mr. SENDER. Do you find this procedure onerous or burdensome upon you?

Mr. ZEDDIES. Filing an affidavit?

Mr. SENDER. Yes.

Mr. ZEDDIES. No. But the practice in all of the cooperatives that I have represented is that when the cooperative wants to engage in exempt transportation, as an exempt cooperative, we notify the Commission for two reasons. First of all, we want the Commission to have the evidence that we believe we have to support the proposition that it is exempt; and second, we need the regulations and we need the Commission to instruct the cooperative that it is subject to the safety requirements of the act.

We always do that. It is just a normal procedure.

Mr. SENDER. Then you would have no objection to a similar procedure being written into the Interstate Commerce Commission Act, I take it?

Mr. ZEDDIES. No; I wouldn't. But I would object if the cooperative would be refused the right to operate until the Commission issues the certificate. I think it has that right as a matter of law. If it is subsequently determined the cooperative doesn't qualify, the Commission has all of the authority it now needs.

Senator LAUSCHE. If you are of the opinion that the Commission has all of these powers which you described a moment ago, under 204 (c), if it is a fact that it doesn't have those powers, would you object to a law being adopted that would give the power?

Mr. ZEDDIES. I would have no objection to the law providing that the Commission has the power-that is, aside from all of this other procedural falderal provided for here to give the Commission the power I think it now has to inspect the books of a cooperative to determine if it is actually entitled to operate as an exempt cooperative. Senator LAUSCHE. That is all. Thank you very much. Mr. ZEDDIES. Thank you, sir.

Senator LAUSCHE. Are there any other out-of-town witnesses here who are scheduled to testify today?

Mr. OLMSTED. Yes. Mr. Olmsted from Kansas City.

Senator LAUSCHE. Mr. Olmsted, National Farm Lines, Iowa Falls, Iowa.

STATEMENT OF F. R. OLMSTED, GENERAL COUNSEL OF THE CONSUMERS COOPERATIVE ASSOCIATION, KANSAS CITY, MO., REPRESENTING NATIONAL FARM LINES, IOWA FALLS, IOWA Mr. OLMSTED. My name is F. R. Olmsted, general counsel of the Consumers Cooperative Association in Kansas City, Mo. The Consumers Cooperative Association, like Midland, is a manufacturing and wholesale federated cooperative. It serves approximately 2,000 local cooperative associations in about 14 Midwest States.

I am here today to present a statement on behalf of National Farm Lines.

National Farm Lines is a federated agricultural cooperative under the provisions of the Cooperative Marketing Association Act of the State of Oklahoma (title 2, secs. 361a to 361y, Oklahoma statutes). In 1964 it moved its headquarters from Oklahoma City to Iowa Falls, Iowa.

Its members consist of 33 bona fide agricultural cooperative associations engaged in either marketing the products of their farmer

members or furnishing farm supplies to such members and other patrons, or both. A current list of such members is attached. (See p. 215.)

National Farm Lines is engaged in furnishing transportation services only and operates for the sole purpose of transporting farm products and supplies for its member cooperatives. Practically all backhauls are limited to exempt agricultural commodities. Only in rare instances will a backhaul involve any other nonmember property.

During its fiscal year ended November 30, 1965, it transported to market for its member cooperatives approximately 67,314,300 pounds of pork, 27,392,375 pounds of canned fruits and vegetables, 1,212,060 pounds of dairy products, and 3,258,000 pounds of frozen juices. This transportation accounted for 73 percent of its operating revenues, or $1,877,925. The remaining 27 percent, or $694,575, came from the transportation of 40,318,000 pounds of exempt agricultural commodities.

During the first 6 months of the current fiscal year, its transportation revenues from member cooperatives were $778,968, or 71 percent of the total. The amount of $294,311, or 27 percent, came from the transportation of exempt agricultural products; and $21,704, or 2 percent, came from other backhauls. During such period it transported to market for its member cooperatives approximately 27,940,650 pounds of pork, 8,480,750 pounds of canned fruits and vegetables, 2,417,455 pounds of dairy products, 1,956,000 pounds of frozen juices, and 1,102,000 pounds of other products. In addition, it moved to market 17,176,000 pounds of exempt agricultural products. The cooperatives making the greatest use of its services, in the order of their freight volume, are:

1. Farmbest, Inc., Denison and Iowa Falls, Iowa, a cooperative hog marketing association;

2. California Canners & Growers, San Francisco, Calif., a cooperative fruit and vegetable marketing association;

3. Lindsay Ripe Olive Co., Lindsay, Calif., a cooperative olive marketing association;

4. Tri-Valley Growers, San Francisco, Calif., also a cooperative fruit and vegetable marketing association;

5. Sunkist Growers, Inc., Los Angeles, Calif., a cooperative citrus marketing association;

7. North Star Dairies, St. Paul, Minn., a cooperative dairy products marketing association; and

7. Land O' Lakes Creamery, Minneapolis, Minn., also a cooperative dairy products marketing association.

While its operating revenues are not insignificant, they are not a true measure of the relative importance or value of National Farm Lines. Actually, its operating revenues have exceeded its operating expenses in only one year of its existence, which indicates rather strongly that it does not operate principally, if at all, for the purpose of producing net savings for its members. Its true purpose is to provide for its members a type of economical transportation service not available from any other source. In addition to the fact that their rates are prohibitive, in many instances, especially in the movement of farm products from the central part of the United States to the west coast, regulated common carriers are wholly unable to provide the fast and readily available standby service required by some of the members of National Farm Lines.

National Farm Lines opposes S. 1729 for the following reasons: First, because we sincerely believe that its enactment is wholly unnecessary. In our opinion, the Commission has available to it all of the power and authority necessary for it to remove from the scene any carrier wrongfully claiming the right to exemption from economic regulation under section 203(b) (5). This has been amply demonstrated by its successful actions or proceedings against Agricultural Commodity Service (86 M.C.C. 5); Nelson Cooperative Marketing Association (209 F. Supp. 697); Iowa Cooperative Association (236 F. Supp. 873); and Chatsworth Cooperative Marketing Association (347 F.2d 821). And these are only a few of the cases in which they have been successful. In each of these cases, the carrier was adjudged to be not exempt under such section and was required to and did discontinue its motor carrier operations. The long arm of the law is readily available to the Commission without any additional legislation. It may initiate inquiry proceedings or join in complaint proceedings, or it may seek an injunction in a district court, ot ir may initiate criminal proceedings, all of which it has done so effectively in the past.

Second, because, in our judgment, its enactment would create a far greater evil than the one sought to be eliminated. The Commission's record indicates quite clearly that it is opposed to this exemption. All doubt, if any, about this was completely dispelled when Commission Chairman John W. Bush and his colleagues testified before you on July 14 in support of S. 1729 and stated that the Commission was not seeking registration, merely, but wanted, also, to further limit permissible transportation under this exemption.

If, by the enactment of such proposed legislation, the Commission were made prosecutor, judge, and jury, it would be only natural for it to seriously limit the exemption by placing upon it the exceedingly narrow interpretations which in the past it has unsuccessfully sought to obtain by means of legislation and court action. As far back as 1943, it sought by court action in ICC v. Jamestown Farmers Union Federated Cooperative Transportation Association (C.C.A. 8, 1945, 151 Fed. 403), to disqualify Jamestown because it did not provide transportation for farmers direct, but only for cooperative associations of farmers. More recently, in the Northwest case it attempted to disqualify a cooperative which was admittedly a bona fide "cooperative association" as that term is defined in the Agricultural Marketing Act, and by reference included in section 203(b)(5), merely because the association, of necessity and in furtherance of its primary purpose of cooperatively transporting to market the farm products of its member producers, handled a small percentage of backhauls for nonmembers which were wholly unrelated to the cooperative services provided for its members. In that case the court made the following statements with reference to the Commission's interpretation of the exemption:

Subsequent to the enactment of Section 203(b)(5), bills were introduced in Congress at the request of the Commission to condition the Section 203(b)(5) exemption upon the nature of the transportation activities involved. Congress took no action on these proposals.

The Commission argues that unless the transportation of non-farm products and supplies is absolutely prohibited, it cannot be limited at all ***. The argument rests on a faulty premise.

More recently, in Edgerton Cooperative Oil Association, Investigation of Operations, M.C.C. 4570, mentioned by Mr. Zeddies, the

Commission challenged the right of a cooperative to the exemption on the ground that since the cooperative has as members and provides service to both individual farmers and cooperative associations of farmers, it is neither a "cooperative association" nor a "federation of such associations."

Also, in Cache Valley Dairy Association, Investigation of Operations, 96 M.C.C. 616, the Commission contended that the cooperative in question could not provide any services for nonmembers which have no interest in farming or in a farm business; in other words, that a cooperative cannot transport commodities not related to or an actual part of an agricultural or farm business.

In addition, its testimony before you makes it clear that it now wants specific legislation to very materially limit the existing exemption provision.

On the record it is apparent that the Commission is an opponent of the exemption and should not be given the power to limit or destroy such exemption by the very practical but deadly expedience of refusing to grant registration to an applicant or delaying the granting of such registration long enough to force the waiting applicant out of business. If registration has any merit, and we do not think that it has, then such power of life and death over cooperatives should be vested in an office or agency less biased or prejudiced than the Commission, which naturally is concerned only with transportation problems and cannot reasonably be expected to know the damaging effects its transportation judgments might have upon the far more important marketing and purchasing operations of agricultural cooperatives. The USDA, for example, would be in much better position to handle the task because it could more easily and clearly see the whole picture, and not merely the transportation segment of the picture.

We do not believe, however, that registration could or would serve any important purpose. Having determined that an applicant was a "cooperative association" and that the motor vehicles controlled by it were, therefore, within the exemption, the Commission would still be confronted with the problem, as it is under existing law, of determining whether such association was in fact operating within the exemption. This it would then have to do in exactly the same manner as it now is required to do, and as it would have to do next year even though it might presently determine that such association is now duly qualified under the exemption.

The very same problem exists with respect to any private carrier or other exempt carrier. Any exempt carrier which fails to comply with the requirements of its exemption may thereby forfeit its exemption. The Commission must then avail itself of the enforcement proceedings authorized by the act. This may not be entirely to the liking of the Commission, but it enables the exempt carrier to have his day in court and to offer such defenses as are available to him.

In the case of cooperatives, as in the case of other exempt carriers, the Commission is not lacking in enforcement powers and should not be granted a shortcut, which, as a practical matter, could effectively prevent a qualified claimant from availing itself of the right to a statutory exemption, and from performing those functions which Congress has encouraged it to perform for agricultural producers by adoption of the Agricultural Marketing Act and the section 203 (b) (5) exemption.