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the shipping public into, we will say, three segments, the regulated freight forwarders, the nonprofit shipper associations, the only remaining segment that you have would be the individual shipper.
Now if the freight forwarders and the nonprofit shipper associations are given this authority to negotiate contract rates, the only one left will be the individual shipper.
The entire concept of regulations, published tariffs, the section 5 (a) procedures insofar as rate adjustments and charge adjustments being made and known to the general public, will be out the window.
Mr. FRIEDEL. Mr. Smith, getting back to the remarks regarding the individual shippers, does the individual shipper now use freight forwarders for less-than-carload lots!
Mr. SMITH. Will you repeat that, please? I did not hear you.
Mr. FRIEDEL. The individual shipper, can he use the freight forwarders now for less-than-carload lots?
Mr. SMITH. Yes.
Mr. FRIEDEL. Isn't it harder for them to deal with the railroads, the individual shipper, to get their little consignment to other parts of the United States?
Mr. SMITH. Yes, because to a very great extent the railroads themselves are out of the less-carload business.
Mr. FRIEDEL. The individual shipper could go to the freight forwarder or motor carrier; they would not be hurt?
Mr. SMITH. The point I was trying to make is this: That an individual shipper can consolidate a number of his small lot shipments and make his own carload rate and movement which move under the published rates. This individual shipper would be using the very same rates that the freight forwarder pays today or the shipper association pays.
Mr. FRIEDEL. What is the difference between what the motor carriers do and what the freight forwarders are asking for?
Mr. SMITH. What is the difference between the motor carriers and
Mr. FRIEDEL. And freight forwarders right to deal with the railroads, to contract with the railroads.
Mr. SMITH. As I understand it, under part II of the act there is specific provision for joint rate arrangements between motor carriers and railroads.
There is nothing of that type there in part III. As I understand the proposal it is not even being suggested.
Mr. FRIEDEL. As I understand the freight forwarders are asking for the same thing that the motor carriers have.
Mr. SMITH. I understood they are asking for the authority to enter into contract arrangements with the railroads.
Mr. FRIEDEL. When did the eastern railroads decide-I was under the impression that the railroads were not going to take any stand whatsoever on this bill and that they were keeping their hands off and leaving it up to the Congress.
Your statement today is different from what I have heard. When was this action taken?
Mr. Smith. This position was taken at a meeting with the Traffic Executive Association a week ago yesterday. That consists of the vice presidents of the eastern railroads.
Mr. FRIEDEL. Can you mention some of the eastern railroads included ?
Mr. SMITH. Yes; I can. B. & 0., New York Central, Pennsylvania, N. & W., C. & 0., Erie-Lackawanna, Lehigh Valley, New Haven, Boston & Maine—there are about 30 of them really.
Mr. FRIEDEL. You have mentioned enough. Mr. Kuykendall ?
Mr. KUYKENDALL. Mr. Smith, are you now an official spokesman for these people?
Mr. SMITH. I have been directed by them to present this statement
Nr. KUYKENDALL. You are the official spokesman for these people?
Mr. FRIEDEL. As I said earlier the railroads stated were not going to take a stand.
Mr. Smith. We kind of thought, since it was our money involved, that possibly we had a reason to be here.
Mr. KUYKENDALL. What is the difference and please remember that I am not an attorney, I am a businessman, and I don't know much about sections; these numbers don't mean a thing to me as far as section this and that—what is the difference between a joint rate and contract rate?
Mr. SMITH. A joint rate involves--I will give you some examples you can have a single-line rate published by the Pennsylvania Railroad from New York to Chicago, one rate, and the Pennsylvania will take that car of freight, whatever it is, all the way to Chicago.
Mr. KUYKENDALL. May I ask this also? Will you try the best you can–I know you are not on this side of the desk—but whether
you try to give me this description from the point of view of your being the customer. I used to be your customer. Your traffic manager
and I sat down across the desk from each other.
Mr. SMITH. The railroads publish a rate on commodity X from New York to Chicago. That rate will apply by the railroad as a single carrier handling it all the way from New York to Chicago.
The Lehigh Valley operates out of New York but they only operate as far as Buffalo. For the Lehigh Valley to handle any of that traffic to Chicago they must work in conjunction with another railroad; we will say the C. & O. Therefore, that rate will apply by Lehigh Valley, Buffalo as a junction, and the C. & O. That would be a joint rate between those two railroads.
Mr. KUYKENDALL. Would the customer, the shipper, my plant, know or really care much about whether or not this was a combined rate or would he be charged one rate by the original carrier?
Mr. Smith. He would be charged one rate by the original carrier. Actually, all the shipper is interested in is protecting the lowest rate he can get. He can get that by the joint-line route or the single-line route.
Mr. KUYKENDALL. Let us take again the trucker and use you in the interim.
Mr. Smith. All right. The example I gave you of the Lehigh Valley and C. & 0. would be a type of intramodal service; there are two railroads involved.
What you are asking now, I believe, is a type of intermodal service.
Now one bill of lading is issued by the Lehigh Valley. That guarantees the movement of the car to Chicago via the joint-line route. The C.&O. and Lehigh Valley have arrangements to divide the revenue that they earn on that shipment on a basis that would pay both parties to handle the traffic. Now if you come to an intermodal type of joint arrangement such as a motor carrier and a railroad, the motor carrier will issue a bill of lading to the shipper and he will handle we will say he handles the trailer to Buffalo just as a theoretical example.
He turns it over to a railroad which then handles it on a flatcar to Chicago. As far as the shipper is concerned he pays that motor carrier, the origin, to handle that traffic to Chicago.
Mr. KUYKENDALL. I know you can't be specific, so be general. Does the shipper generally know or care whether or not piggyback is used in the interim? Is there any difference in the way you talk to me as a manufacturer as to whether you will use piggyback? You are a trucker now.
Mr. SMITH. I am a trucker now?
Mr. SMITH. No; I don't think it will make any difference to the shipper. As I understand the truck tariffs they have a provision if the shipper does not want it to move part of the way by rail service he can say so.
Mr. KUYKENDALL. What you are saying is, generally speaking, the use of the railroad by a truckline on a piggyback would probably not create awareness in the original shipper and certainly no difference in the rate to the original shipper?
Mr. SMITH. That is right.
Mr. SMITH. I think the contract in my estimation is more of a misnomer. I would like to go back to this example of the Lehigh Valley and C. & O.
When they divided up the revenue they call that divisions, division of the revenue. The same thing actually applies in the plan 1 piggyback movement.
There is a division of the earnings of the freight charges on that trailer between the railroad and the trucker just the same as in the other example there was a division of revenue between the two railroads.
Mr. FRIEDEL. Now the trucker can enter into an agreement that way, is that right?
Mr. SMITH. Yes, sir; just the same as the railroads.
Mr. FRIEDEL. But the freight forwarders are not permitted to enter in that agreement?
Mr. SMITH. No, sir; they are not because they are not part of the common carrier movement.
Mr. FRIEDEL. Under the present law?
Mr. KUYKENDALL. You said there was a division of earnings. Obviously, in any contract there is addition of earnings. Is this really in a sense a matter of sitting down and negotiating from a point or is it a theoretical percentage division of earnings?
Do you sit down and negotiate a rate from a point that has been arrived at through years of negotiations?
Mr. SMITH. In both cases whether it is between the railroads or between a trucker and a railroad they are talking about a certain movement. The trucker might say I want so much for my share of the transportation that I perform and the railroad says, well, I want so much for my share. They reach agreement as to something that will be equitable to both parties and that becomes an agreement between those two parties.
Mr. KUYKENDALL. I realize this. What I am getting at here is by using this division of earnings you have to a degree elevated this transaction to a little bit of one of these theoretical things. I wanted to see if they really did happen on that plane or if the traffic people did get together and negotiate a deal. There is nothing wrong with a deal.
Mr. Smith. In railroad parlance they call it division sheets. Whenever a car moves between New York and Chicago by two carriers they refer to the division sheet.
Mr. KUYKENDALL. Then it is on a plane of division of total revenue. Mr. SMITH. Yes.
Mr. KUYKENDALL. I think it is important here to find out whether two guys meet across the desk and decide to take it or leave it or whether it is a scientific division of revenue on a sensible basis.
Mr. Smith. If either party does not think it is equitable they will not join in the arrangement.
Mr. KUYKENDALL. I think it is important to understand this. Why do you feel—and put it on the basis of justice and not quoting the
law-that you should give the right to haul a trailer which has been prepacked by somebody else, between two points—you roll two of them up the ramp on the car and you take them off the ramp at another point—why should you be able to treat one person differently,
— mainly a trucker, than you treat either a nonprofit freight forwarder, a nonprofit association, or a freight forwarder?
Mr. SMITH. On the one hand the motor carrier and the railroad are dealing with one piece of revenue. In contrast to that the freight forwarder goes around and picks up maybe 10, 15, 20 small shipments from individual shippers.
Mr. KUYKENDALL. The truckline does this, too.
Mr. KUYKENDALL. Our trucklines in Memphis do it. If I want them to pick up a hundred pounds of books at my house they pick it up.
Mr. SMITH. Yes; I agree with that.
Mr. Smith. In the case of the motor carrier you will participate in the revenue and charges that he assesses to the shipper. Insofar as the freight forwarders are concerned the railroads do not participate in the revenue the freight forwarders collect from their clients.
Mr. KUYKENDALL. Would you have objection to putting them on that basis of a division of shares?
Mr. Smith. I am not authorized at this time by my members to make a statement. If something like that is brought up I will be glad to bring it back to them and let them decide it and discuss their position.
Mr. KCYKENDALL. What you are saying is that the freight forwarders are not asking for equality, they are asking for the pendulum to swing a little bit the other way?
Mr. Smith. It is the judgment of the eastern railroads; that is true.
Mr. KUYKENDALL. You might look at eastern inequality in other light?
Mr. SMITH. Any other proposed legislation we will give just as careful study as we have this one.
Mr. KUYKENDALL. Thank you.
The simple answer is that the rail carrier, the motor carrier, and the water carrier provide all of the facilities required and all of the services required for intercity transportation whereas the freight forwarder has been given the unique right to solicit and to consolidate freight for transportation.
Isn't that true of all the others? Don't they all solicit?
Mr. SMITH. It is unique because the freight forwarder, while they have the same right to solicit and consolidate freight, they do not : provide any of the underlying intercity transportation, be it a truck going down the road, a boat going down the river, or a railroad car running along a track.
Mr. FRIEDEL. Don't they have to make a contract with the motor carrier ?
Mr. SMITH. They buy transportation but they do not furnish transportation, themselves, as a transportation agency. Without one of these other modes of transportation a freight forwarder could not get his shipment from New York to Chicago.
Mr. FRIEDEL. Does not the public benefit by the lower rates that they can provide if they can get a cheaper rate from the railroad ?
Mr. SMITH. Along that point I just brought a few rates to show what has happened. In my statement I mentioned that there has been substantial reductions in rates for freight forwarder traffic. It applies not only to the freight forwarders but it applies to shipping associations and to the individual shippers who might want to use them.
Mr. FRIEDEL. And the motor carriers, too?
Mr. SMITH. That is for the motor carrier rate. Back in 1959 between New York and Chicago here the railroads offered a rate of $2.02, minimum 30,000 pounds per shipment, for all commodity rate. That was back in 1959. Today under plan 3, piggyback, they can handle 73,500 pounds in two trailers at a cost of 66 cents a hundredweight. So, the cost to the freight forwarders has dropped from $2.02 in 1959 to 66 cents today.
Mr. FRIEDEL. Has it also dropped for the motor carriers, too?
Mr. Smith. The motor carriers up until the decision in Ex parte 230 were not allowed to use plan 3 rates.