STATEMENT OF CHARLES A. WASHER, TRANSPORTATION COUNSEL, AMERICAN RETAIL FEDERATION

Mr. WASHER. Thank you, Mr. Chairman, I would like to introduce the statement in the record and I will paraphrase it in the interest of time.

Mr. FRIEDEL. Your whole statement will be included in the record. Mr. WASHER. There are 50 State associations that are members of the American Retail Federation, approximately 28 national associations in the transportation council. They are in opposition to the bill as it is now written and have suggested precisely what later the Interstate Commerce Commission has come out with subsequent to our statement.

In other words, we believe that the safeguards should be added to section 409 as presented by the Interstate Commerce Commission in the letter yesterday.

I think it is important because Mr. Morrow, for example, indicated that the Commission had complete control over the contract rates that were established under section 409. On page 2 of my statement I indicate what the unfortunate results were when the Commission attempted to exercise control.

That is why they have urged the Commission, as we do, to first make the amendment to section 409 to give more effective control over any contract rates.

I think this is in the interest of preserving free competition. Secondly, in the statement we point out the reasons why we do not feel that the legislation is needed. The freight forwarders are in a healthy condition and the situation in regard to rate published under the Reed-Bullwinkle Act are satisfactory.

I might indicate for the record, for the staff to note, the Commission report on the status of the freight forwarder industry, quite complete, issued in September 1967 in Transport Economics published by the Interstate Commerce Commission.

For those reasons we urge that you consider those amendments before you consider adopting this proposal.

(Mr. Washer's prepared statement follows:)

STATEMENT OF AMERICAN RETAIL FEDERATION BY CHARLES A. WASHER,
TRANSPORTATION COUNSEL

The Transportation Committee of the American Retail Federation is opposed to the proposed amendment to Sec. 409 without the incorporation of an additional amendment that will make Sec. 409 (b) effectively represent the intent of Congress. When the existing Sec. 409 was adopted in 1950, it was thought that the contracts between forwarders and motor carriers (which were to have "just, reasonable, and equitable terms, conditions, and compensation . . . consistent with the national transportation policy"), were subject to Commission regulation under Sec. (b) which provides that the Commission may, after hearing, prescribe the terms, conditions, and compensation of such contracts.

The Commission, in 1953, did undertake such an investigation in MC-C-1394 with unfortunate results and, in 1954, recommended corrective legislation stating:

"We referred in our last annual report to our requiring forwarders and motor carriers to furnish detailed information as to traffic tendered to or handled by motor carriers under contracts filed under the terms of amended section 409. This step was taken in a proceeding looking to the determination of the reasonableness or lawfulness in other respects of some of the contracts so filed. Our attempts during the current year to subject certain of these to investigation have

disclosed some defects in section 409. Thousands of such contracts have already been filed and others are being filed daily. Without some strengthening and implementing of our power to investigate and to correct abuses after they are discovered, the regulation of freight forwarders in the public interest will be seriously hampered. Accordingly, we are recommending amendment of section 409 so as (1) to place the burden of proof on makers of the contracts that such contracts, when subjected to formal investigation, are not inconsistent with the provisions of this section; (2) to prohibit contracts at compensation which is lower than the motor carriers' tariff rates in all cases where the line-haul transportation is for a total distance of 450 miles or more; and (3) to provide penalties for any rebate, concession, or discrimination resulting from the transportation of property at compensation less than that specified in the contracts." Interstate Commerce Commission 68th Annual Report, Page 23.

The Commission, in ensuing years, continued to urge the enactment of remedial legislation. In 1956, as to a comparable bill in the 84th Congress, H.R. 9548, the Commission again expressed the need for regulatory powers. We urge it today as an absolute necessity and request that H.R. 10831 be so amended.

That is not to say that we believe that the legislation of H.R. 10831 is needed. The rate-making procedures established by the Congress under the Reed-Bulwinkel bill provide a sound method of establishing just and reasonable rates, subject to I.C.C. regulation, for all users of railroad services alike. The current need for I.C.C. authority to prescribe joint rates and through rates, after hearing, should not be confused with this issue since its objective is the efficient and economic combination of the nation's basic transportation facilities by the operating carriers themselves. A freight forwarder, by the nature of his operation, can and does utilize these basic carrier services today.

Further, there is nothing in the freight forwarder industry today that indicates any necessity for special consideration in view of increasing profits, increasing revenues, and a healthy operating ratio, unless it is found in the areas which the forwarders, although authorized to do so by the Commission, refuse to give service or do so only with the imposition of extra arbitrary charges.

In fact, Congress might hesitate to grant unregulated bargaining on millions of dollars worth of transportation between railroads and forwarders-two industries that have become increasingly concentrated in fewer companies.

We trust that the Congress, before any consideration is given to the section 409 amendment proposed by H.R. 10831, will add the amendment giving the Interstate Commerce Commission the authority to regulate the contract provisions in the public interest as was the intent of the Congress in creating the present section 409.

Thank you for the privilege of presenting these views.

Mr. FRIEDEL. Thank you, Mr. Washer. Are there any questions? Our next witness will be Mr. Stanley Foster, executive vice president, Ratner Manufacturing Co., San Diego, Calif.

I would like to mention that Congressman Van Deerlin is away on official business. He wanted me to extend every courtesy I can. I will say that Congressman Van Deerlin is a very good friend of mine.

STATEMENT OF STANLEY FOSTER, EXECUTIVE VICE PRESIDENT, RATNER MANUFACTURING CO., SAN DIEGO, CALIF.

Mr. FOSTER. Thank you, sir.

Mr. FRIEDEL. Would you like to file your full statement for the record, or do you wish to read it into the record?

Mr. FOSTER. Yes: I would like to read it, if I may.

As the chairman mentioned, my name is Stanley Foster. I am executive vice president of the Ratner Manufacturing Co., with offices in San Diego, and president of the Vista Slack Corp., of Chula Vista, Calif.

Ratner Manufacturing Co. and Vista Slack Corp. are engaged in the manufacturing of men's apparel, including men's suits, sportswear, and slacks. I believe that our manufacturing plants in the San Diego and

the Chula Vista area, the largest nondefense, nongovernment employers in San Diego County, are second only to the aircraft industry in the number of people employed.

A considerable cost of our business is the cost of transportation and most of these transportation costs are attributed to the movement of raw materials from the textile producing centers in the East and Southeast of the United States.

While we use all modes of transportation in satisfying our logistics problems, we are somewhat limited in our access to as many carriers as the manufacturers in the Los Angeles and San Francisco areas. For this reason we specify carriers or modes of transportation that have made a special effort to service the San Diego and Chula Vista areas. During the year 1967, Ratner Manufacturing Co. will have purchased and transported into their manufacturing plants in the San Diego and Chula Vista area in excess of one and a half million pounds of raw materials. This freight has moved transcontinentally at our cost. While this is a sizable figure in terms of freight tonnage, it is most significant that this total tonnage is made up of many daily less-thancarload lots of small shipments.

In other words, on a given day our manufacturing plants may receive upward of 25,000 pounds, total of woolen piece goods, made up of 25 individual shipments from 25 sources, each the equivalent of 1,000 pounds.

Of course this is only an example; however, it is a most real problem characteristic of our business. It therefore becomes most important that we have available to us modes of transportation that are equipped to handle small quantities of freight from shippers located throughout the eastern portion of the United States and that this mode of transportation can transport this freight expeditiously to San Diego and the Chula Vista area.

I emphasize San Diego and Chula Vista in contrast to a major terminal area, such as Los Angeles or San Francisco. This method of transportation also must make available to us competitive freight rates, again in terms of our competition in the major terminal areas. Ratner Manufacturing Co. has found the freight forwarder to be best equipped of all types of transportation to handle our freight problems. It is for this reason that we are much concerned about the inequity that exists in the interstate commerce regulations favoring the motor carrier and putting the freight forwarder at a disadvantage. This hearing today and the outcome of it is most important to our companies in terms of remaining competitive with other areas of the country. We strongly favor H.R. 10831 because it gives the freight forwarder equal rights with other forms of transportation.

The amendment to the Interstate Commerce Act, section 409 (a) will allow the freight forwarder, as a common carrier, to make contracts with the railroads, a privilege the motor carrier presently enjoys. In stating my case before this committee, I would be remiss were I to speak exclusively of the importance of this amendment and its passage to my company.

The passage of H.R. 10831 has extreme importance and significance. to the entire San Diego and Chula Vista area. The general shipping and receiving community consists of multitudes of small businesses

dependent on supply of all types of products and materials from again major supply areas in the East and Southeast.

These small businesses by their very nature, receive small shipments. The geographical location of San Diego and Chula Vista is such that it is off the main line of transportation and thus becomes what is known in the parlance of transportation people, as an off-line area. As a matter of fact, gentlemen, we have often been considered a stepchild by the transportation industry since their major attention has been turned toward the large industrial centers.

Further, with such diverse type businesses there is no concentration of any single type freight commodity coming to the area. It is for this reason that the majority of small shipments, and as for that matter most less-than-carload shipments moving transcontinentally, are transported in the service of the freight forwarder.

The freight forwarder, under Interstate Commerce Act, part IV, is now in the primary business of handling less-than-carload shipments. He is concerned with the small shipper and the small consignee in contrast to any group of shippers or consignees who might gather together developing freight from a single terminal area, such as New York City and shipping to a single terminal area, such as Los Angeles using the facilities of straight rail or motor carrier. So again, it is for this reason that our companies are vitally interested in the freight forwarder being able to compete with all modes of tansportation.

I urge passage of H.R. 10831 not only because it will assure competition between the modes of transportation serving our companies, but also because it will offer the same assurance to the community of businesses in the San Diego and Chula Vista area. I believe, and have been told by the freight forwarders who serve us, that their ability to make more flexible arrangements with the railroads will make it possible to improve and possibly expand their service to the San Diego and Chula Vista area.

Because this amendment of section 409 (a) of the ICC Act clearly spells out that all conditions and compensations arrived at between the freight forwarder and the railroad be filed and approved by the Interstate Commerce Commission, the best interests of the public will always be served.

With such a safeguard I can see no reason why any other mode of transportation or any large business interests such as oil companies, steel companies, automobile manufacturers, foodstuff suppliers, etc. will object to the passage of H.R. 10831 if they are now anxious to serve the entire public to its best interests.

The passage of the bill does nothing more nor less than give the freight forwarder equality with other modes of transportation. And insofar as the large business interests are concerned, they are rarely users of freight forwarders, being mostly users of railroads, shipping in full carlots at extremely favorable rates.

One can only conclude that those voices saying nay to this amendment wish to stifle competition in interstate commerce, where long ago the Congress of the United States took measures to protect against. such action to the public's detriment through the creation of the act to regulate interstate commerce.

Mr. FRIEDEL. Thank you very much, Mr. Foster for a fine statement. Are there any questions?

Mr. ADAMS. Yes. On page 2, what is this inequity?

Mr. FOSTER. It is my understanding that the motor carriers have the right to negotiate rates directly with the railroads. Our concern in this matter is that our freight originates from off-line points and is delivered to an off-line point.

We are concerned that if they can negotiate directly that the major transportation markets will be far better served than we are. We are concerned that if the freight forwarder is at a disadvantage that all service through the freight forwarder may suffer.

Mr. ADAMS. Are you not aware that the freight forwarder has the right to make contracts with the railroads for piggybacking?

Mr. FOSTER. I am aware of that situation. Our problem in our particular industry is that we develop so many small shipments that have to be picked up in small lots that I am not sure whether the bulk of that goes by piggyback or by rail car.

I would assume that piggyback would require also a substantial pickup of shipments from one point. Our original points are the small mill communities in the South and in the Northeast, particularly in the Southeast area of the country.

Mr. ADAMS. Thank you.

Mr. FRIEDEL. Mr. Devine?

Mr. Kuykendall?

Mr. KUYKENDALL. May I ask one quick question? Do you expect this advantage that you suggest would come about by H.R. 10831 would automatically result in lower rates for you?

Mr. FOSTER. My particular concern at the moment is to the service rather than the rate itself.

Mr. KUYKENDALL. Are you not getting good service now?

Mr. FOSTER. We are getting fine freight forwarding service. It is the only method of transportation we have found that gives us good service.

Mr. KUYKENDALL. Are you happy with their service now?

Mr. FOSTER. Extremely.

Mr. FRIEDEL. Our next witness is Mr. Sam Hall Flint, chairman of the legislative committee, the National Industrial Traffic League, vice president of the Quaker Oats Co.

STATEMENT OF SAM HALL FLINT, CHAIRMAN, LEGISLATIVE COMMITTEE, THE NATIONAL INDUSTRIAL TRAFFIC LEAGUE; ACCOMPANIED BY LESTER J. DORR, EXECUTIVE SECRETARY

Mr. FLINT. With your consent I would like to ask Mr. Lester J. Dorr, executive secretary of the National Industrial Traffic League, to sit at the table with me.

Mr. Chairman and members of the subcommittee, my name is Sam Hall Flint. I appear in opposition to this bill on behalf of the National Industrial Traffic League in my capacity as chairman of its legislative committee. I am also a member of the league's executive committee. I am regularly employed as vice president of distribution of the Quaker Oats Co., of Chicago, Ill.