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Certainly they don't appear to be in any dire need for profits in 1966. Now, very simply, I would like to point out practically what could happen to shippers associations if this legislation is passed in its present form. Let us take the situation on a plan 4 piggyback movement from Chicago to the west coast. Today the plan 4 movement, two trailers on a flatcar between these two points is approximately $950. The predominant users of plan 4 between Chicago and Los Angeles are shippers associations and freight forwarders. Let us assume that this legislation is passed and the freight forwarders are able to negotiate a lower rate. So he comes in and he is able to negotiate a $750 rate from Chicago to the west coast.
Now the only other really predominant movers over that line are shippers associations. We assume the railroads are reasonable businessmen and they have to maintain their profits on each individual operation.
Therefore it is conceivable that the railroads will increase their plan 4 piggyback rates from Chicago to Los Angeles on a plan 4 movement and they might increase it by the same increment, namely, $200.
This would mean that the shippers associations could be paying conceivably $1,100 where the freight forwarders are paying $750.
Now what does this do? It simply means that the members of the shippers associations, some small and some large manufacturers, will have to bear the difference or they will have to be the ones that are bearing the brunt of the lower negotiated rate by the freight forwarder.
There have also been some statements made on this record that perhaps shipper associations are very limited in operation and, therefore, it would not be in the public interest to include them in this legislation.
I simply wish to point to my statement which shows the fact that in certain studies made by the American Institute shippers associations handle every conceivable classification of property.
I would like to also point out that shippers associations operate throughout the United States and they operate, they handle many commodities for many shippers, and they have been growing basically since the advent of the piggyback plans in 1958 at a substantial increase.
Shippers associations are not quite as limited as the freight for. warders would have this subcommittee believe. We have certain problems. We have to worry about the antitrust laws quite frankly. We can't just willy-nilly refuse membership to anybody because somebody on the board of directors may have a quarrel and does not particularly like a potential member. So we have to be fair. We can set up certain guidelines but they have to be reasonable guidelines and we have to apply those guidelines reasonably.
I would ask then that if the subcommittee believes that this is good legislation, and we do not believe it is good legislation primarily, I would ask that the subcommittee, in order to remove any discrimination that may fall on shippers' associations, include shipper associations within the scope of this bill.
At the end of my prepared statement I have set forth our proposed amendment in two pages. The italicizing sets forth what we propose the amendment language to be. We ask that the subcommittee accept that amendment.
Mr. FRIEDEL. Your amendment will be included in the record.
AMERICAN INSTITUTE FOR SHIPPERS' ASSOCIATIONS' PROPOSED AMENDMENTS TO
SECTION 409 OF PART IV OF THE INTERSTATE COMMERCE ACT
A BILL To amend section 409 of part IV of the Interstate Commerce Act, as amended, to
authorize contracts between freight forwarders and railroads and between shippers' associations and railroads
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsection (a) of section 409 of the Interstate Commerce Act (49 U.S.C. 1009(a)), as amended, is amended to read as follows:
"SEO. 409. (a) Nothing in this Act shall be construed to prevent freight for. warders subject to this part and shippers' associations excluded from regulation under 402 (C) of this part from entering into or operating under contracts with common carriers by railroad subject to part 1 of this Act, or from entering into or continuing to operate under contracts with common carriers by motor vehicle subject to part II of this Act, governing the utilization by such freight forwarders and shippers' associations of the services and instrumentalities of such common carriers by railroad or motor vehicle and the compensation to be paid therefor: Provided, That in the case of such contracts it shall be the duty of the parties thereto to establish just, reasonable, and equitable terms, conditions, and compensation which shall not unduly prefer or prejudice any of such participants or any other freight forwarder or shippers' association and shall be consistent with the national transportation policy declared in this Act: And provided further, That in the case of line-haul transportation by common carriers by motor vehicle between concentration points and break-bulk points in truckload lots where such line-haul transportation is for a total distance of four hundred and fifty highway miles or more, such contracts shall not permit payment to such common carriers by motor vehicle of compensation which is lower than would be received under rates or charges established under part II of this Act."
SEC. 2. The heading of section 409 is changed to read as follows: "UTILIZATION BY FREIGHT FORWARDERS AND SHIPPERS' ASSOCIATIONS OF SERVICES OF COMMON CARRIERS BY RAILROAD AND BY MOTOR VEHICLE.”
Mr. COBERT. Thank you. In conclusion our contention is that shippers' associations are essential today to the national transportation policy and the national transportation picture. Perhaps shippers' associations today represent the last frontier of savings for many small manufacturers.
At the same time while the association provides substantial tonnage to the carriers they pass back whatever savings they can obtain in their operations to their members by the very nature of the operations of the shippers' association.
We would not want to see the shippers' associations' movement in this country hurt in any way. We believe that H.R. 10831 in its present form is detrimental to the association movement and, therefore, we
oppose this bill.
But should the bill have merit in your eyes we ask that you include shippers' associations within its scope.
Mr. COBERT. Include the shippers' associations within the scope of the proposed legislation.
Mr. FRIEDEL. Include the amendment?
Mr. COBERT. Include the amendment; yes, sir.
Mr. FRIEDEL. First could you outline the difference between a shippers' association and a freight forwarder?
Mr. COBERT. The Supreme Court probably summarized it very succinctly in 1911 in the Delaware Lackawanna case referred to in Mr. Beardsley's statement when they simply said that associations are organizations of shippers and there are no middleman profits involved such as when a freight forwarder is utilized.
So what we have basically in a shippers association is a nonprofit membership organization in which the savings are passed back to the members.
Mr. FRIEDEL. Thank you.
Mr. DEVINE. Mr. Cobert, I take it that you are in opposition to the legislation and yet you offer an amended bill which includes the association. Now which route would your association prefer, that there be no legislation or you want to have the same privilege extended to the freight forwarders?
Mr. COBERT. We propose that there be no legislation initially because we feel with the proposed bill in its present form the ones that will be substantially hurt will be the shippers associations.
However, in order to prevent being hurt if the bill is passed we ask for the amendment. Our basic position is that we oppose the legislation.
I would say we would be acceptable to the bill passed with the shippers association included.
Mr. HARRELL. My position would be that I would support it with the amendment. With the amendment I would support the bill.
Mr. FRIEDEL. I want to thank you very much, Mr. Harrell and Mr. Cobert. Our next witness is Mr. John Oliva, attorney, Charter Oak Shippers Cooperative Association, Fairfield, Conn.
Could you enter your statement in full in the record ?
STATEMENT OF JOHN A. OLIVA, COUNSEL, CHARTER OAK
SHIPPERS COOPERATIVE, INC., OF CONNECTICUT
Mr. Oliva. I will submit my statement for the record. Basically, Mr. Cobert has set forth the position of our association. The Charter Oak Shippers Cooperative Association has approximately 150 members, primarily Connecticut manufacturers.
They include large manufacturers but in number the number are greater in quantity in small manufacturers. We feel that the legislation as proposed is not in the public interest, is not in the interest of shipper associations.
We also feel that if you find that the legislation is in the public interest that shippers associations should be included within the ambit as the amendment proposes.
Basically the association feels that no shipper should be treated differently from another shipper by allowing them contract rates. Our position is that we would much rather see no legislation than legislation with us included in it.
We would much rather see no legislation come out and no contract rates be permited to freight forwarders.
(Mr. Oliva's prepared statement follows:) STATEMENT OF JOHN A. OLIVA, COUNSEL, CHARTER OAK SHIPPERS COOPERATIVE
Mr. Chairman and members of the committee, my name is John A. Oliva. I am a member of the firm Sachs, Sachs & Sachs, New Haven, Connecticut. Our firm acts as counsel for Charter Oak Shipper Cooperative Association, Inc. I have been requested by the association to speak on its behalf regarding House bill H.R. 10831. I am honored and pleased to appear before you on behalf of the association.
Charter Oak Shippers Cooperative Association, Inc. is a non-profit, non-stock corporation organized and existing pursuant to the laws of the State of Connecticut. It has approximately 150 members, most of whom are manufacturing concerns closely related to Connecticut's industrial economy. The association was formed for the purpose of securing the benefits of car load, truck load or other volume rates by consolidating and distributing freight for its members on a nonprofit basis. The association is of the opinion that the enactment of H.R. 10831 would not be in the public interest. It is our understanding that this bill would enable freight forwarders to negotiate rates with individual railroads on a contract basis as contrasted to the present situation which requires freight forwarders to pay the rail carriers in accordance with published tariffs. Our objection to the Bill is predicated on a very basic premise. We do not believe that any class of shipper should be allowed to negotiate contract rates with a noncontract carrier operating in interstate commerce. We are reminded that the original Act to regulate commerce throughout the States was in part an outgrowth of abuses which arose by reason of the ability of certain individual shippers to withhold shipments from the railroads unless they received favored treatment.
The result was that in many instances others were required to pay charges and rates sufficient to make up the difference. We cannot supply you with statistical computations or join in the so-called battle of statistics because of a limited staff. The railroad industry was recently granted a nationwide increase in rates. At the time of this increase the railroad industry clearly indicated that the increase was not sufficient to produce the revenue necessary to keep the industry functioning efficiently. We are of the opinion that if the freight forwarding industry is allowed to negotiate contract rates with rail carriers the only result that could transpire would be a demand for the rest of the shipping public to make up any loss of revenues. We are further of the opinion that savings which might be achieved by the ability of the freight forwarding industry to negotiate favorable contract rates will not be passed on to the customers of the freight forwarder. In the 1942 Transportation Act the freight forwarding industry was allowed to make contracts with carriers up to a distance of 450 miles and at that time many forwarders provided services within a 450 mile radius. This is no longer true today. The so-called short haul service is practically non-existent within the forwarding industry. In addition to the many instances where the forwarding industry has curtailed its areas of operation, the average weight of shipments handled by the freight forwarding industry has increased in the last 10 years. Thus, in 1955 the average weight of a shipment handled by a freight forwarder was 362 lbs. Ten years later in 1965 it was approximately 495 lbs.
It is respectfully submited that the forwarding industry could, by the utilization of modern railroad services such as the plan 21/2, 3, and 4 piggyback services, achieve a goal of providing a solution to the small shipment problems which face today's individual shipper. Our association has utilized and will continue to utilize piggyback services to effectuate solutions to the small shipment problem of its members.
We realize that the work of this committee requires you to weigh many statements, findings, and data which will be presented to you concerning the bill in question. We also realize that your committee may determine that it would be in the public interest to enact the proposed legislation. If your committee feels that the public interest would be best served by the enactment of the proposed legislation we would submit that the legislation should be amended so that nonprotit shippers' associations would be in the same position as the freight forwarders. We would point out that in many instances shippers' associations such as Charter Oak have provided answers to their individual member's small shipment problems, in addition to providing services to areas which the freight forwarding industry does not provide. We are of the opinion that unless the ship
pers' association, indeed, any shipper, is also given the right to negotiate contract rates, the incentive to achieve just, reasonable and equitable terms, conditions and compensations may not exist.
I wish to thank you very much for the opportunity of appearing before your committee.
Mr. FRIEDEL. Thank you. Mr. DEVINE. That position is slightly different from the preceding witness.
Mr. Oliva. We say we would much rather see no legislation whatsoever, but if you are going to have legislation, and you find it is in the public interest, we would like to be included within the ambit.
Mr. FRIEDEL. Mr. Adams.
Mr. Adams. In your opinion do we at the present time have some contract rates that are discriminatory either so far as motor carriers are concerned or freight forwarders? Do we have any of these contract rates, in your opinion, at the present time that are unfair?
Mr. Oliva. I can see the distinction that the motor carriers make with regard to through joint rates providing service
Mr. Adams. I am not talking about joint rates. I can understand the joint rate situation because you need that between carriers of different modes than can go all the way.
There has been some confusion, at least in my mind, as to whether at the present time the situation is equal in terms of published rates being applied to everybody or are there some special contract rates that you believe are unfair
Mr. Oliva. It is my opinion that I do not like the plan 1 rates because, it would be my opinion, they are not true joint rates.
However, I think the Commission has indicated that they are in essence joint rates. The matter on the freight forwarders and the 450-mile situation, I don't see where it is being utilized.
As I pointed out in my statement, when the bill was originally enacted regulating freight forwarders there were many freight forwarders that provided freight forwarding services within a 150-mile
Today that service is almost nonexistent. I don't see where the 450-mile section at the present time is creating discrimination between freight forwarders and shippers associations because of its nonutilization.
Mr. Adams. In other words, the provision does not discriminate because it is not being used ?
Mr. OLIVA. That is right.
Mr. FRIEDEL. Mr. Philip Kraemer, director of transportation, Maryland Port Authority. STATEMENT OF PHILIP G. KRAEMER, DIRECTOR OF TRANSPORTA
TION, MARYLAND PORT AUTHORITY Mr. KRAEMER. My name is Philip G. Kraemer. As director of transportation of the Maryland Port Authority, I am here to urge the passage of H.R. 10831, a bill to permit freight forwarders to enter into contracts with railroads.
The Maryland Port Authority, as you know, is an instrumentality of the State of Maryland charged with the duty, among others, of