That, of course, would have given forwarders across the board joint rate authority. The Senate disagreed and separate legislation was

taken up.

In the legislation which emerged in 1942, Congress sought simply to preserve freight forwarder service as it then existed.

Report 1172 recites that historically forwarders had functioned by consolidating smaller lots of freight and sending them then by the shortest and most economic route to a destination point for breakbulk and distribution; that they used motor carriers primarily for assembly and distribution, under contract rates; and that they paid the railroads whatever published charge applied to the consolidated shipments.

Motor carrier regulation, which came in 1935, made no provision for continuation of the contracts then in effect between forwarders and motor carriers. The central problems was to provide for continuance of such relationships.

Since motor carriers were used predominantly for the unconsolidated portion of the through movement, forwarders simply could not provide a competitively priced service and pay the full local truck

rates.

As everyone knows, a combination of local rates is higher than the through rate, and carriers who are parties to joint through rates always receive less as their share or "division" than they would receive if the shipments moved only locally over their own lines.

Congress met that immediate problem, in 1942, by providing in section 409 for joint rates between forwarders and motor carriers. It put a time limit on those joint rates. It was hoped that motor carriers, in the interim, would establish "assembly and distribution" rates under section 408, and that joint rates would no longer be necessary. But section 408 rates were never established on a satisfactory scale, and finally, in 1950, Congress amended section 409 to read as it now stands.

From the beginning Congress recognized that freight forwarders should not, in all instances, be required to pay the tariff rates of the underlying carriers. There was strong sentiment for full scale joint rates and vigorous opposition by those who wanted forwarders to pay tariff rates to all carriers. Congress adopted a compromise. The 1942 report, No. 1172, stated that:

The decision of the committee not to include permanent authority for joint rates between freight forwarders and carriers subject to parts I, II, and III was was not based on the belief that freight forwarders should be required to pay full published rates to such carriers in all cases.

In the light of history it is unfortunate that Congress did not, in 1942, include permanent authority for joint rates between forwarders and all other carriers. Because while the 1942 act preserved the status quo in the forwarding industry at the time, time does not stand still and conditions have changed.

We are now trying simply to improve and update the law we obtained in 1942, even though we know that we would be justified in asking for complete equality and full scale joint rates.

Indeed the Department of Transportation advocates that forwarders now be given the right to make joint rates with all other carriers. (The Department's letter of October 27, 1967, to Chairman Staggers.)

It is gratifying to know that the arm of Government which has top responsibility in the executive branch for transportation believes that we are entitled to more than we are asking for.

We are practicing realists. We would like to have full equality with all other carriers to make joint rates, but we can get along with that measure of equality provided by H.R. 10831 and we ask no more. Those who oppose our efforts to obtain even that partial measure of equality will bring out their ammunition but we suggest you look carefully at their target.

We think you will discover that their aim is to hamper their cooperation.

Now let me direct attention to the terms of H.R. 10831. Submitted herewith is a copy of section 409 of the act with the changes made by the bill superimposed thereon and italicized. (The document referred to follows:)

APPENDIX A

(Note: Italicized portions represent additions)

UTILIZATION BY FREIGHT FORWARDERS OF SERVICES OF COMMON CARRIERS BY RAILROAD AND BY MOTOR VEHICLE

SEC. 409 (a). Nothing in this Act shall be construed to prevent freight forwarders subject to this part from entering into or operating under contracts with common carriers by railroad subject to Part I 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 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 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.

(b) Contracts entered into or continued pursuant to subsection (a) of this section shall be filed with the Commission in accordance with such reasonable rules and regulations as the Commission shall prescribe. Whenever, after hearing, upon complaint or upon its own initiative, the Commission is of opinion that any such contract, or its terms, conditions, or compensation is or will be inconsistent with the provisions and standards set forth in subsection (a) of this section, the Commission shall by order prescribe the terms, conditions, and compensation of such contract which are consistent therewith.

Mr. MORROW. The bill makes no change in paragraph (b) of section 409, which gives the Commission complete control over the contracts,. so I have copied that paragraph simply to indicate the safeguards which would apply to rail contracts as they now apply to contracts with motor carriers.

If the committee members would look briefly at appendix A you will see that in large part the bill just copies existing law. Those italicized words are the only new words brought into the act by this bill.

The rest of the bill is simply copied from present law. Now to go back to page 7 of my statement, the second proviso to section 409 (a)

which begins on line 5, of page 2 of the printed bill, should be explained. It provides that if a forwarder makes a contract with a motor carrier for the line haul transportation of the forwarder's shipments, in truckload lots, between the forwarder's consolidation and distribution stations for a distance of 450 miles or more, then the equivalent of tariff rates must be paid to the motor carrier.

The bill does not change the 450-mile limitation, but leaves it as it is. Some people have asked why the limitation was not imposed on contracts between forwarders and railroads and others have asked why it was not eliminated altogether.

Obviously such a limitation, if imposed as to contracts with railroads, would destroy the purpose of the bill. The predominant use by forwarders of rail service is for distances of more than 450 miles.

We did not provide in the bill as we drafted it for the elimination of the 450-mile restriction as to motor carriers because we did not want to broaden the simple issue raised by the bill, which is whether forwarders should be permitted to make contracts with railroads.

The 450-mile provision was incorporated in section 409 in 1950. The purpose of the limitation is explained in the report of the House Committee on Interstate and Foreign Commerce, numbered 2489, 81st Congress, as follows:

The proviso imposing the 450-mile limitation with respect to terminal to terminal movements meets certain objections made to the introduced bill, based upon a fear that the forwarders might substantially increase the scope of their terminal to terminal truck movements, but at the same time permits continuance of freight forwarder service of substantially the same character and scope as that engaged in at the present time.

Again the effort was to preserve the status quo and mollify opposition. The Department of Transportation now recommends that the limitation be removed. That would be perfectly agreeable to us, but we leave that to the best judgment of your committee.

Your subcommittee will naturally want to understand why it is that since forwarders have dealt with railroads on the basis of tariff rates in the past they now need the more flexible basis of contracts. The reasons are that the competitive picture has changed and the economic situation has changed. Witnesses who will follow me will tell you about the economic pattern that exists today. I will show how recent developments and statutory interpretations have completely changed the competitive posture of all carriers and placed forwarders at an intolerable disadvantage in competing with the only other carriers who operate in the less-carload, less-truckload field, the motor carriers.

As you know, revolutionary developments of the greatest significance have taken place in the last decade in the area of containerization, common forms of which are "piggyback" and "fishyback" service. Freight forwarders have been pioneers in that field. I will refer briefly to the legal history of this development.

As soon as the railroads began to transport freight in highway trailers or containers certain legal questions arose. In a proceeding decided in 1954, the Commission undertook to answer some of the legal questions that had arisen. In relevant part, the Commission held that motor carriers could make joint rates with railroads in the provision of piggyback service, but that they could not ship at rail published rates.

Conversely, the Commission ruled that forwarders could obtain piggyback service and pay the rail rates, if any were published, but that they could not make any kind of a joint arrangement with the railroads. Our problem then was that there were no published rail rates for piggyback service and the forwarders were completely excluded from the picture.

After that 1954 decision the railroads published some plan II piggyback rates, which were designed to meet truck competition by substituting all rail piggyback service for boxcar service at rates matching the truck rates. But piggybacking really did not amount to much until 1958, when railroads began to publish rates, called plan III and plan IV rates, for the movement of freight in trailers on flatcars at a stated charge of so much per car loaded with a trailer or trailers. Forwarders immediately began to make substantial use of such service. Perhaps because forwarders were successful in their employment of the piggyback technique, a notion gained currency that they had some advantage over motor carriers.

In 1962 the administration sent to Congress bills to "equalize the opportunity" of all carriers to participate in piggyback service, H.R. 4701, S. 3242, 88th Congress.

That legislation did not really make for equality. It proposed to give motor carriers the right to ship their freight in trailers on flatcars at published rail rates, but it did not propose to take away the right of motor carriers to make contracts under what is called plan I or to make joint rates with railroads under what is described as plan V. Nor did it propose to give forwarders the right which motor carriers have to use plans I or V. This compounded inequality instead of bringing about equality.

Hearings were held on the "equal opportunity" legislation and it met strong opposition. The ICC said it needed time to study the matter. The legislation died in committee. Later the Commission instituted a proceeding known as Ex parte 230, Substituted Service-Piggyback. In 1964 the Commission published its decision in that proceeding (322 I.C.C. 301), and much to everyone's surprise the Commission prescribed, by rule, exactly what Congress had refused to authorize by a change in the law.

The Commission found that motor carriers may ship their freight in trailers by rail and pay the open tariff charges of the rail carriers. That part of the decision has now been upheld by the Supreme Court. (American Trucking Associations v. A.T. & S.F. Ry. Co., 387 U.S. 397.)

The Commission also held, in Ex parte 230, that plan I, under which motor carriers ship their trailers by rail and pay an undisclosed contract charge to the railroads, is lawful as a joint rate. That portion of the decision was appealed to Federal court in Texas by certain forwarders and railroads, and the case is still pending. But plan I is in effect.

Thus, the situation that now exists is that motor carriers have the right to and do participate in piggyback service on three bases. Under plan I they ship by rail and pay the railroads on the basis of negotiated contract changes.

Under plan V they make joint rates and divisions with railroads for piggyback service. And under the open tariff plans which are the

only plans open to forwarders, the trucks ship their freight in trailers by rail and pay the published rail rates.

The Interstate Commerce Commission recognizes that the present situation, under which railroads are required to accept truck trailers and on at least as favorable a basis as they handle the trailers of freight forwarders and are permitted to transport truck traffic in TOFC service under still other and more favorable conditions, may cause serious economic harm and to the forwarding industry. (Letter of July 5, 1967, from the Commission to Chairman Staggers.)

We do not see how it can fail to cause not only serious but irreparable harm to the forwarding industry. It would have been a fortunate thing if the Commission had foreseen such a result when it rendered its decision in ex parte 230. If the Commission had felt bound by an inequitable law it would have been commendable if the Commission had recommended a change in the law. The need for change is now obvious and compelling.

In the present state of the law our national transportation policy simply does not mean what it says where freight forwarders are concerned. Transportation law and regulation do not apply fairly and impartially to forwarders in relation to the other carriers. Motor carriers are authorized by law and their certificates to transport freight over the highways, but they now operate also in the same manner as freight forwarders sending their shipments by rail without necessarily ever touching the highways.

Motor carriers not only operate exactly as freight forwarders do but they obtain precisely the same service from railroads as freight forwarders obtain and at drastically reduced charges. In the course of time, unless there is change, motor carriers may exploit this unfair advantage to the point of eliminating the freight forwarder entirely. We do not rest our justification of H.R. 10831 solely on the basis of equality of regulation and integrity of transportation law and policy. The bill can be justified on the basis of economics and the public interest. But equality and the integrity of law and policy are basic considerations. If now one segment of the common carrier transportation system is treated unfairly the system will be enroded and the goals of our policy will become obscure and be lost.

Now let me say that no one can attack this bill strictly on its merits. There can be no valid objection to fair and equal treatment. But opponents of the legislation will mount an oblique attack. I know the objections by heart. They have been raised on every occasion when forwarder legislation has been before Congress and the fact that Congress has flatly and emphatically rejected the arguments does not deter the forwarder's competitors, and those who seek to obtain the advantages of forwarder regulation without assuming the obligations which it entails, from raising them again.

You will be told that the status of the forwarder is such that he may not be given the right to make contracts with railroads. That argument was forcefully advanced and specifically repudiated when Congress provided for contracts between forwarders and motor carriers in 1950.

In reporting the 1950 amendments the House Committee on Interstate and Foreign Commerce rejected the same arguments about the