[S. 1098, 89th Cong., 1st sess.] AN ACT To amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 1(14) (a) of the Interstate Commerce Act is amended by adding at the end thereof a new sentence reading as follows: "In fixing the compensation to be paid for the use of freight cars, the Commission shall give consideration to the level of freight car ownership and to other factors affecting the adequacy of the national freight car supply and shall, on the basis of such consideration, determine whether compensation should be computed on the basis of elements of ownership expense involved in owning and maintaining freight cars, including a fair return on value (which return shall be fixed at such level as in the Commission's judgment will encourage the acquisition and maintenance of an adequate freight car fleet), or should be computed on the basis of elements reflecting the value of use of freight cars, or upon such other basis or combination of bases as in the Commission's judgment will provide just and reasonable compensation to freight car owners, contribute to sound car service practices, and encourage the acquisition and maintenance of a car supply adequate to meet the needs of commerce and the national defense. In the consideration of any element included in determinations pursuant to this paragraph as an incentive to car acquisition and maintenance the Commission is empowered to make such element, or any part thereof, inapplicable: (1) to carriers determined by the Commission as owning an adequate number of freight cars to meet their responsibilities to the needs of commerce and the national defense; (2) to carriers which terminate a substantially higher percentage of interline traffic than they originate; (3) to types of freight cars the supply of which the Commission finds to be adequate; and (4) to such other cases or circumstances as the Commission finds to be in the public interest." Passed the Senate June 30 (legislative day, June 29), 1965. FELTON M. JOHNSTON, Secretary. EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., April 7, 1965. Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: This is in reply to your request for the views of the Bureau of the Budget on H.R. 425, a bill "to amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes." You are advised that the Bureau of the Budget would have no objection to the enactment of H.R. 425. Sincerely yours, Hon. OREN HARRIS, PHILLIP S. HUGHES, Assistant Director for Legislative Reference. GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: Reference is made to your request for the views of the Department of Defense with respect to H.R. 425, 89th Congress, a bill "to amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes.' The purpose of the bill is to insure the adequacy of the national railroad freight car supply through adjustment by the Interstate Commerce Commission of the compensation to be paid for the use of freight cars. The bill prescribes the criteria to be employed by the Commission in considering methods by which compensation may be adjusted so that it will be just and reasonable, contribute to sound car service practices, and encourage the acquisition and maintenance of a car supply adequate to meet the needs of commerce and the national defense. The Department of Defense is vitally interested in an adequate railroad freight car supply in the United States. It appears that enactment of the proposal may contribute in some measure toward improving the freight car supply situation in the United States in the future. Although it is believed that, under the Interstate Commerce Act as presently written, the Commission could utilize the criteria set forth in this bill, it would be advantageous if the Interstate Commerce Act were amended to be more specific and mandatory on this point. Accordingly, the Department of Defense recommends enactment of this legislation. The fiscal effects of this proposal cannot be estimated. The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee. Sincerely, L. NIEDERLEHNER, Hon. OREN HARRIS, INTERSTATE COMMERCE COMMISSION, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, DEAR CHAIRMAN HARRIS: This is in response to your request for the Commission's comments on H. R. 425, H.R. 4165, and H.R. 4172, bills "to amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes." I am authorized to submit the following comments in behalf of the Committee on Legislation: H. R. 425, H.R. 4165, and H. R. 4172 (which are identical to legislative recommendation No. 6 in the Commission's 78th annual report), would grant the Interstate Commerce Commission authority to prescribe per diem charges for the use of railroad freight cars on a basis that will provide an economic incentive to the railroads to acquire and maintain a supply of freight cars adequate to meet the needs of commerce and the national defense. The diminishing supply of railroad freight cars has been a matter of considerable concern to the Commission for many years. Despite the generally expanding economy of the country, the ownership of freight cars is now less than it was during World War II. As a result, critical shortages of increased duration and severity have become almost commonplace on the national transportation scene. Studies made in 1950 indicated that a total of 1,935,500 freight cars would be required by 1956 to meet the anticipated needs of shippers. As of January 1, 1956, however, freight-car ownership and control of class I railroads (including railroad owned or controlled refrigerator cars) totaled only 1,774,614 cars. As of January 1, 1956, this figure had fallen to 1,550,477 cars, a record low. In In addition to inadequate car ownership, one of the greatest contributing factors to recurring freight car shortages has been the failure of some carriers to utilize the existing fleet of equipment more efficiently. During periods of critical shortages the Commission has resorted to every means at its command to cope with the problem. We have issued numerous car service orders to assure equitable distribution and maximum utilization of the freight cars remaining in service. addition, greatly stepped up demurrage charges have helped to insure prompt loading and unloading by shippers and receivers. While such actions have heretofore provided a measure of relief, they are becoming less effective and increasingly controversial as the total supply of freight cars continues to decline each year. Since the earning value of freight cars often substantially exceeds the current scale of per diem charges, some of the carriers have found it cheaper to pay the per diem or car rental charge than to own cars. These carriers, therefore, lack sufficient economic incentive to provide their fair share of an adequate car supply. The assistance that can be expected from the institution of the multilevel per diem system established by the carriers is questionable. This system is based generally on the concept of adequate compensation to owners of cars purchased, on the basis of cost, condition, or age, but compliance with the plan is voluntary and some carriers have not accepted it. Some time ago the Commission attempted to take the profit out of renting equipment by imposing a penalty per diem charge which it believed would furnish 8 pecuniary spur to deficit railroads to acquire a sufficient number of cars to at least take care of their own loading obligations. (Increased Per Diem Charges on Freight Cars, 268 I.C.C. 659 (1957).) However, in Palmer v. United States (73 F. Supp. 63 (1947)), the Commission's order was set aside by a three-judge district court which held that the Commission could not prescribe per diem charges for regulatory purposes. The effect of this decision has been construed as precluding the Commission from prescribing per diem charges which would produce a profit to the carrier-owner, provide an incentive for car ownership, recognize the value of the use of freight cars, and require the acquisition and maintenance of a car supply adequate to meet the needs of commerce and of the national defense. While the Palmer case may not place the stringent limitations upon the Commission which some suggest, we believe that there is sufficient doubt in this respect that it should be made clear in the statute that the Commission has authority to establish per diem charges above the bare cost of ownership and at a level that would make the advantages of owning equipment more attractive. If the advantages of owning equipment could be made more attractive, there should be a greater willingness on the part of every railroad to make its just and equitable contribution to the national freight car fleet. These bills propose to accomplish this objective by amending section 1(14) (a) of the act so as to authorize the Commission in establishing a per diem charge for the use of freight cars to determine whether such charge should be computed upon the basis of the elements of ownership expense involved, including a fair return on value, or on elements reflecting the value of their use, or upon such other basis or combinations of bases as, in the Commission's judgment, will provide reasonable compensation to the owner, contribute to sound car service practices, and encourage the acquisition of an adequate national supply of freight cars. In essence, the proposal would authorize the Commission to fix per diem charges which would motivate every railroad to maintain its ownership of freight cars at a level which will meet the needs of the shipping public during normal times and provide a reasonable supply during periods of emergency. Its enactment would thus overcome the effect of the decision in the Palmer case and would be of substantial assistance to the Commission in its efforts to alleviate the crippling economic effects of freight car shortages. For the above reasons we strongly support enactment of H.R. 425, H.R. 4165, and H.R. 4172. Respectfully submitted. Hon. OREN HARRIS, EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D.C., September 29, 1965. Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: This is in reply to your letter of April 9, 1965, requesting the views of the Bureau of the Budget on H. R. 7165, a bill to amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes. This bill would empower the Interstate Commerce Commission to fix the rate of compensation to be paid for the use of freight cars with a view to encouraging the acquisition and maintenance of cars adequate to meet national commerce and defense requirements. The Commission would be required to consider the cost of freight car ownership and the value of the use of freight cars in establishing per diem car rental rates as well as other factors deemed reasonable by the Commission. It appears that the existing freight car supply is not as efficiently utilized as it might be and that reasonable rental charges effectively enforced might result in substantially greater utilization and possibly in some increase in the freight carrying capability of the railroads. In reports being sent to your committee by the Departments of Commerce and Agriculture the underlying problems are discussed in greater detail. Those agencies favor enactment of this or similar legislation. You are advised that there would be no objection to the enactment of H.R. 7165 from the standpoint of the administration's objectives. Sincerely yours, PHILLIP S. HUGHES, Assistant Director for Legislative Reference. Hon. OREN HARRIS, DEPARTMENT OF THE ARMY, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: Reference is made to your request to the Secretary of Defense for the views of the Department of Defense with respect to H. R. 7165, 89th Congress, a bill to amend section 1(14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply and for other purposes. The Secretary of Defense has delegated to the Department of the Army the responsibility for expressing the views of the Department of Defense thereon. The purpose of H. R. 7165, 89th Congress, which is identical to H. R. 198 and H.R. 2092, 88th Congress, is to insure the adequacy of the national railroad freight car supply through adjustment by the Interstate Commerce Commission of the compensation to be paid for the use of freight cars. The bill prescribes the criteria to be employed by the Commission in considering methods by which compensation may be adjusted so that it will be just and reasonable, contribute to sound car service practices, and encourage the acquisition and maintenance of a car supply adequate to meet the needs of commerce and the national defense. The Department of Defense is vitally interested in there being an adequate railroad freight car supply in the United States. It appears that enactment of H.R. 7165 may contribute in some measure toward improving the freight car supply situation in the United States in the future. Although it is believed that under the Interstate Commerce Act as presently written, the Commission could utilize the criteria set forth in this bill, it would be advantageous if the Interstate Commerce Act were amended to be more specific and mandatory on this point. Accordingly, the Department of the Army on behalf of the Department of Defense recommends enactment of H.R. 7165. The fiscal effects of this bill cannot be estimated. This report has been coordinated among the Departments in the Department of Defense in accordance with procedures prescribed by the Secretary of Defense. The Bureau of the Budget advises that, from the standpoint of the administration's program, there is no objection to the presentation of this report for the consideration of the committee. Sincerely yours, STANLEY R. RESOR, GENERAL COUNSEL OF THE DEPARTMENT OF COMMERCE, Hon. OREN HARRIS, Chairman, Committee on Interstate and Foreign Commerce, DEAR MR. CHAIRMAN: This is in further reply to your requests for the views of this Department on H.R. 425 and H.R. 7165, identical bills to amend section 1 (14) (a) of the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply, and for other purposes. These bills would add a new sentence to section 1(14) (a) requiring the Interstate Commerce Commission, in fixing the compensation to be paid for the use of freight cars, to give consideration to the level of freight car ownership and to other factors affecting the adequacy of the national freight car supply. On the basis of such consideration, the Commission would be required to determine whether compensation should be computed on the basis of elements of ownership expense, the value of use, or upon a combination of bases as in its judgment would provide just and reasonable compensation to freight car owners, contribute to sound car service practices, and encourage the acquisition and maintenance of a car supply adequate to meet the needs of commerce and the national defense. This legislation has been recommended by the Commission annually since 1955. This proposal stemmed from the decision of the U.S. District Court for the District of Columbia in the Palmer case, a suit against an order of the Commission increasing per diem from $1.15 to $2 for 6 months, October 1, 1947 to March 31, 1948, to "*** promote greater efficiency in the use and increase the supply of cars * * *" The court in holding the order invalid said "the specific power to fix compensation for the use of cars is not coextensive with the general power to regulate the use of cars." Palmer v. United States, 75 F. Supp. 63, 67 (D.C.D.C. 1947). The current bills have been introduced to overcome the effect of the Palmer case by legislation which would give the Commission authority to fix the compensation paid for use of freight cars in relation to the national freight car supply, since the Court ruled it could not do this under the existing provisions of section 1(14)(a). The purpose of these bills is purportedly to alleviate the freight car shortage, especially the seasonal shortage for boxcars. There are sometimes proclaimed shortages of other type cars, such as refrigerator cars. The Interstate Commerce Commission has made investigations from time to time and increased the per diem rate on boxcars from 20 cents to $2.75 over a period of years, but the problem has not been solved by that method. The first extensive car shortage investigation by the Commission was in 1907, Car Shortage-Insufficient Transportation Facilities, 12 I.C.C. 561 (1907). The next was in 1917, Car Supply Investigation, 42 I.C.C. 657 (1917). In 1930 the Commission, in Rules for Car-Hire Settlement, 160 I.C.C. 369, 378 (1930), noted that, under the "per diem agreement" then in force among the common carriers by railroad, "The per diem rate is supposed to reflect the average cost, to the owner, cost of taxes, cost of replacements, miscellaneous expenses, and 6-percent interest on the investment." Testimony at the hearings on "Freight car supply" in earlier Congresses, indicated that the per diem rate included, in addition, participation by the nonowner user in the idle time of the car and replacement cost based equally on cost of reproduction and on depreciation ledger value. Many specialists have counseled that the base figures used may be subject to question because the railroads follow Interstate Commerce Commission's bookkeeping classifications which do not require the segregation of car ownership costs from car use costs and other costs. It would appear appropriate to initiate changes in accounting procedures so that the cost of ownership can be segregated from the other costs which are lumped together. The railroads are not uniform in their approach to the problem of freight car supply, the present system of car ownership, per diem car rentals, or the car service rules governing the distribution of freight cars. This divergence occurs generally between originating and terminating roads. Since originating roads must own enough cars to protect their traffic, they desire the prompt return of owned cars (especially during seasonal shortages) even if they must be moved empty. But terminating roads frequently find it advantageous to retain foreign ears and to minimize their own ownership, particularly when the revenue per loaded car-day exceeds the per diem rental and traffic is active. Even though the per diem charge may cover the overall cost of ownership and car repair, the method used in assessing the charge-a flat per diem rate regardless of type of car, season of the year, or length of usage does not provide a rental revenue system which takes varying cost and value situations into account. Alternative bases of charges should be considered, and put into effect, which apportion the cost of car ownership more equitably among the various classes of users, particularly those requiring premium service or service exclusively during the peak demand periods. Insofar as the railroad industry cannot agree on any suitable system of charges which takes into account an equitable apportionment of the cost of car ownership and repair, it is logical that the regulatory agency should have the authority to assist the industry develop a more suitable system in the public interest. To this end, the present legal restrictions need to be modified through amendment to the Interstate Commerce Act. |