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they make money but they should charge the same rate to the same people.
Thank you very much.
Mr. Adams. If you are a shipper and you have to ship by the published rates, which everyone else does, and your competitors are using a freight forwarder which because of his particular circumstances has a special contract and therefore ships the same distance at a lower rate and can charge less, don't you think this would be injurious to
Mr. BENDER. Well, in the first place the freight forwarder
Mr. ADAMS. The shipment under your theory has to go to the freight forwarder because the shipper as I understand it has to use the published rate now?
Mr. BENDER. The freight forwarder is open to anybody to use his services. He will pick up for you, me, or anyone else. His rates are published. However, a freight forwarder can make commodity rates or point-to-point rates from one section of the country to another, depending on the volume of freight.
Mr. Adams. Under the situation you outline, you as a shipper, cannot compete with a freight forwarder if he has a special contract with the railroad for the carrying of these goods and ship it by yourself; you have to go to him?
Mr. BENDER. No.
Mr. ADAMs. Of course you do. You have to ship under published rates if you are a shipper and if he is lower you have no choice.
Mr. BENDER. How else is a shipper going to get his goods to the market unless he has his own transportation ! He has only three choices. He can have his own trucks or he can load his own rail cars to full capacity. This is the best way to get the lowest rate from one point to another as a shipper. The second way is that he can join an associa. tion with other shippers and he can get a lower rate because of the volume and consolidation among the chosen few who are members.
Many shipper associations have their doors closed. They will only accept certain members. So they have an advantage over the person or the manufacturer who is not a member of the association.
Mr. ADAMS. What you are saying to me then is that there is no more direct shipper-to-carrier relationship unless it be with motor carriers and that you have to either go to a freight forwarder or to a shipper's association?
Is that what you are saying?
Mr. BENDER. It is hard to say where the shipper is, that a shipper can go to a freight forwarder, he can go to a truckline, but he can no longer, especially in l.t.l. shipments, small shipments. This is what we are after primarily.
Mr. Adams. The second point I wanted to ask you about is that you have indicated you think the relationship allowed between the railroads and truckers is unfair.
I understand you are probably referring to plan 1. Don't you think there is a back pressure on the railroads in that case. Under plan 1 : contract can only be used between the two points, the trucker already serves. The trucker must charge the same amount that he has in his
published tariff. So what the railroad is doing when they make a contract with the trucker is to substitute the rail service for the trucker service.
Now isn't there a back pressure on the railroads when they are in effect giving their competitor, which is the trucker that hauls over the same area, a contract ? Isn't this a back pressure to keep them from going too low on the contract otherwise they simply cut off their own freight?
Mr. BENDER. Are you talking about the railroads now that are cutting off their own freight?
Mr. ADAMS. Yes. Mr. BENDER. No. The railroads have prospered with this piggyback. This is a new form of transportation which has only been in service for a few years. They have done very well by it. The railroad in making a rate for a trucker is not going to make a rate below his cost. He is in business to make a profit like anybody else. I think it is only fair that the truckline who is picking up freight, whether it be l.t.l. or full truckload and putting that on the rail, the railroad does not care what is then in that truck, all they are carrying about
Mr. ADAMS. Let us describe a plan of operation. For example, let us take the West. You are going to go from Chicago to Portland and there is a truck rate between Chicago and Portland. There is also a railroad rate between Chicago and Portland.
If you piggyback an operation, a truck, out of Chicago to Portland, the railroad is going to be insane if they cut that contract rate to the point where the trucker can cut his rate below the rail rate that is being published.
They would be out of their mind. They would simply then cut off their own freight. Now there is a back pressure because the trucking industry is a competitive mode of transportation. I have some doubts whether extremely low-cost contracts can exist. Any time you get into the field of making deals, as you pointed out in your earlier statement, then the shipper, in effect, is out of business, he can't compete by using the published rates.
What I am saying to you is that there is a back pressure on the truckers. Is there a back pressure on the freight forwarder in the same way to keep that contract rate from simply going down which puts everybody else out of business?
Mr. BENDER. No; because the railroads have taken themselves out of the small lot businesses. You have heard testimony from other members here. Most will agree that the railroads simply don't want l.t.l. business or 1.c.1. business any more.
They have taken themselves out of this business. But they have put themselves into piggyback business. They will haul flatcars from point A to point B. It does not matter to the public if he is shipping by truck or by freight forwarder if it is a published rate. The freight forwarder rates 9 times out of 10 will equal or be the same as the truck rate from point A to point B. But the truck can get that service from the rail for, say, a hundred dollars and the freight forwarders are going to pay $150.
It does not seem fair that the freight forwarders should pay more money. The shipping public, the people who are here supporting this bill, are the ones who need to be able to maintain a competitive
mode of transportation between the trucklines and the freight forwarders because this is the lifeblood of our country.
In the West I can tell you by my business we used to, years ago, have almost 90 percent of our business in rail and out by rail on a storage and transit basis. Today, 90 percent of our business is in by rail or truck or full freight forwarder piggyback and out in l.t.1. mode of transportation.
The small-lot shipment shipper, the store on the street cannot buy a full railcar anymore. They have to work from hand to mouth. This is the way that the public has purchased which has forced businessmen into this pattern.
So it is imperative that the one mode of transportation that is doing its best to protect the same small lot shipper be given the same advantage as its major competitor, the truck lines.
Mr. KUYKENDALL. I am going to have to leave in a couple of minutes to go to a meeting downtown. I would like to get the record straight on something
I think it is in line with what Mr. Adams has said. I know during the time that I have been on these hearings with Mr. Adams both of us have stressed the desire of real equality. Then it disturbs me that the idea of a made up truckload of l.t.l. quantities as small as 50 pounds by a freight forwarder would be any different than that of an association or a truck line for that matter.
I agree with Mr. Adams. So, what I want to get very clear, when I was talking about disparity, we should not correct one inequity by creating a great possibility of another. That is indiscriminate price cutting. When you get into indiscriminate price cutting it is going to happen and some of the freight forwarders are huge operations and they have the power to achieve indiscriminate price cutting from the railroad if the railroad so desires.
As much as I dislike the idea of total regulations I don't think I would ever support opening up this Pandora's box further without the idea that we are going to have piggyback established rates from one point to another for the same amount of merchandise if it is in a trailer. This is a point I want to make at this point in the hearings so far as my views are concerned.
I don't want to be misunderstood and I am afraid you have misunderstood. I don't want to create an inequity by getting rid of one. I am sorry I have to be excused.
Mr. FRIEDEL. I have no questions. Thank you very much.
Mr. FRIEDEL. Mr. Francis A. Berardino, president, Frank's Parcel Service, Inc., Yonkers, N.Y.
Mr. FRIEDEL. Mr. A. W. Cloer, assistant traffic manager, Reeves Bros., Cornelius, N.C. STATEMENT OF A. W. CLOER, ASSISTANT TRAFFIC MANAGER,
REEVES BROS., INC., CORNELIUS, N.C.
Mr. CLOER. Mr. Chairman, I ask that my statement be included in the record. I would like to make a comment. I am in favor of the bill.
Our primary product you may say is a light and bulky article to the west coast. Most of the motor carriers are opposed to hauling this light and bulky merchandise. They do this by route restriction, excessive rates. The only alternative we have is the freight forwarders. That is the point I would like to make for the record.
(Mr. Cloer's prepared statement follows:)
STATEMENT OF A. W. CLOER, ASSISTANT TRAFFIC MANAGER, REEVES BROTHERS, INC.,
CORNELIUS, N.C. My name is A. W. Cloer and I am employed as assistant traffic manager of Reeves Brothers, Inc., P.O. Box 188, Cornelius, N.C. I am appearing today in support of H.R. 10831, which proposes to change the wording of section 409, part IV of the Interstate Commerce Act, as amended. This proposed change would authorize contracts between freight forwarders and railroads, subject to part I of the Act. This change in wording would give all freight forwarders more flexibility in arriving at contracts between the freight forwarders and railroads or motor carriers.
Reeves Brothers, Inc., is primarily a manufacturer of textile products. However, in addition to textiles, Reeves manufactures household items such as pillows, back rests, and cellular or expanded foam plastic articles. In a number cases, these plastic articles are light and bulky, having a density of 1.2–7.25 lbs. per cubic foot. Since a large number of motor common carriers are opposed to hauling these light and bulky commodities, our only way of moving some of these shipments is by freight forwarders or on our fleet of private trucks. Our various plants use freight forwarders to a great number of west coast points. These shipments consist of plastic articles, household items, and various textile products and will weigh from 100 pounds to as high as 15,000 pounds per shipment.
Reeves Brothers, Inc. has plants located in the States of New Jersey, Maryland, Virginia, North Carolina, South Carolina, Mississippi, Georgia, Florida, and California. We use all modes of transportation in securing our raw materials and shipping our finished products, We feel that any change in the Interstate Commerce Act, which will assist the regulated common carriers, is a step in the right direction.
In closing let me again state that Reeves Brothers, Inc. is in favor of this change in wording which we feel will be of great assistance to the freight forwarders and expand the opportunity for improved freight forwarder service. We feel that no precedent will be set since forwarders already have the right to contract with motor common carriers. We also feel that changes of this nature will be in furtherance of the present national transportation policy.
I would like to thank this committee for granting me time to appear and invite any questions that any of you might have.
Mr. FRIEDEL. In other words, you are in favor of this bill?
Mr. FRIEDEL. Mr. H. R. Steffen, traffic manager, Coats & Clark, Inc., Atlanta, Ga.
STATEMENT OF HOWARD R. STEFFEN, TRAFFIC MANAGER,
COATS & CLARK, INC., ATLANTA, GA.
Mr. STEFFEN. Mr. Chairman, I would like to read my statement please.
Coats & Clark, Inc., and its divisions are manufacturers principally of cotton yarns and threads; wool and synthetic yarns, zippers, wood spools and novelties; cotton tapes and narrow fabrics; die cast zinc products; nylon textile machine parts, and stainless steel dye springs. The majority of its products are distributed by Coats & Clark's Sales Corp. in small shipment lots to retailers, chainstores, jobbers, supermarkets, and garment manufacturers. Coats & Clark and its predecessor companies have been in business for over 150 years.
Our company is vitally interested in H.R. 10831 which as to do with revision of section 409 of part IV of the act. We are strongly of the belief that freight forwarders should have equal status with other carriers in entering into contracts with basic carriers. We are aware that freight forwarders may enter into contracts to a certain degree with motor common carriers and that motor common carriers and railroads may enter into contracts as evidenced by the so-called plan 1 for piggyback operations.
We firmly believe that it would be beneficial and in conformance with the national transportation policy to enable freight forwarders to achieve equal status with other common carriers. It is felt that if this bill is passed, the public will benefit by better service and that costs of service might be held stable, or reduced to a small degree, by allowing coordination with other types of service carriers.
The American consumer is the one who eventually bears the burden of rising prices in which transportation expenses are a substantial factor. Government itself is a huge purchaser of transportation. Therefore, Government costs could be benefited in part by approval of the bill.
Freight forwarders have the inclination and tendency to handle all commodities and do not restrict themselves as other carriers have done or are doing. It is known that less-than-carload service by rail has dwindled to the smallest degree. Many motor common carriers are penalizing small shipments and are refusing in many instances to handle connecting-line traffic. The Interstate Commerce Commission has set up a special committee to study this problem as you are no doubt aware.
We are and have been substantial users of freight forwarders, among other types of carriers. Presently, we are shipping about 500,000 pounds per year in freight forwarder service. We have generally found their services dependable, useful, and adequate. This is particularly so in long-haul small-shipment service where we have to deal with only one carrier, origin to destination, and do not have to pay combination of rates or minimum charges as assessed by other carriers. In fact, the ICC is considering asking Congress for additional powers to eventually enable shippers to request and obtain such through service by other common carriers.
We therefore reiterate our desire that this bill be approved and passed. We thank the committee for this opportunity to appear before it.
I would like to emphasize the remarks made by the gentleman from Revell. The people we sell to are generally small businesses, demand a steady flow of merchandise. We cannot use the consolidation service because these people are located all over the United States, in every small hamlet you can think of, chainstores, dry goods stores, supermarkets, and what have you.
They demand a steady flow and we cannot wait for the consolidation. Counter to the position of the gentleman from the TEA (Traffic