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status of a forwarder which will be advanced during these hearings. In Report No. 2489, 81st Congress, the House committee said:
The opponents argue ... that freight forwarders occupy a dual role and that when they deal with other carriers they are shippers only and should be treated as such.
The term "common carrier" was used at common law and has been adopted by statute, to describe the activities of person who assumes certain obligations and responsibilities to the public.
The nature of these obligations and responsibilities rather than methods of dealing between common carriers, is the test normally applied in determining status as a common carrier.
The fact that freight forwarders now tender freight to railroads under the published tariff rates of the rail carriers does not have any bearing on their right to deal with railroads on some other basis if Congress gives them that right.
As I have said, motor carriers now have the right to ship their freight in trailers by rail and to compensate the railroads on the basis of the published rail tariff rates.
No one contends that because motor carriers assume the role of shippers when they operate in that manner they lose their right to make joint rates with railroads.
But if the principle were sound as to freight forwarders it would be valid as to motor carriers, and the joint rate provisions of part II of the act should be repealed.
Certain shippers and shipper groups, called shippers' associations, oppose H.R. 10831. They would not oppose the bill if it were amended so as to authorize shippers' associations as well as freight forwarders to make contracts with railroads.
Of course, the associations cannot carry water on both shoulders. They are unable to argue that the status of the regulated common carrier forwarders is a bar to granting such forwarders the right to make contracts with railroads and at the same time urge that they, as private shippers, be given the right to make such contracts.
Shippers' associations may not logically maintain their right to be exempt from forwarder regulation on the grounds that they are not common carriers, and at the same time assert the right to be included in that part of the act which grants contractual rights to freight forwarders precisely because the forwarders are common carriers.
Shippers' associations do not transport freight "for the general public as common carriers” as the definition of a freight forwarder requires. They do not publish tariffs and hold out to handle the shipments of all persons without discrimination or undue prejudice. They do not issue bills of lading assuming common carrier responsibility. To grant these private shipper groups the right to deal with railroads as though they were one common carrier dealing with another would be contrary to the entire plan of transportation law.
Both the Interstate Commerce Act and the Elkins Act are carefully designed to prohibit private shippers from obtaining transportation service from common carriers at anything less than the published tariff rates of such carriers.
I will not attempt to further anticipate objections to the bill. If questions are presented during the course of the hearings to which your subcommittee would like to have the answers—and I assure you there are good answers to any questions that may be raised—we will
be available either to present further oral testimony or to file a statement.
That concludes my statement but I have here a statement submitted for inclusion in the record by Mr. Harry Baker, of Coast Carloading Co., a small freight forwarder who operates on the west coast.
Mr. Baker planned to come and testify but he could not get here. If I may I would like to submit his statement for inclusion in the record.
Mr. FRIEDEL. His statement will be included in the record. (The statement referred to follows:)
STATEMENT OF HARRY M. BAKER, PRESIDENT, Coast CARLOADING Co. My name is Harry M. Baker. I am the president of Coast Carloading Co., a regulated freight forwarder operating between California on the one hand and Oregon, Washington, parts of Idaho, Western Canada, and Alaska on the other. We are active members of the Freight Forwarders Institute, which provides a common voice for our industry.
Our company began operations in 1939 prior to regulation as a consolidator of less than carload shipments to improve service to the many shippers in the Southern California area. Since regulation we have continued in the same manner, until today we handle in excess of 110 million pounds of 1.c.l. freight per year, representing approximately 75,000 shipments. Revenues have grown to approximately 5 million dolars and we employ 250 people. We are an independently owned corporation with all the stockholders active in the business.
As a forwarder, we purchase all of our transportation services from carriers subject to parts I, II, or III of the Interstate Commerce Act. Because railroads have curtailed substantially all of their 1.c.l. service, were it not for a healthy forwarder service, the shipping public would be at the mercy of a single service without competition. Also, the motor carrier has stated many times that they lose money on handling small shipments. Therefore there is ample need and justification for strengthening the forwarder service.
H.R. 10831 is a very simple piece of legislation, sorely needed as an enabling act to allow a vital segment of the transportation industry to contract with its major transportation supplier in the same manner that they contract with others. It provides ample safeguards against destructive practices, if in fact they were possible. It purely and simply provides for competitive equality between the various modes and removes a former discriminatory practice.
The only kind of opposition to this bill is that of an outside competitor who is not willing to meet on even terms. A review of the comparative sizes and growth trends of the motor carrier industry and the freight forwarding industry alone attests to the past inequities.
Our industry provides cost saving advantages to the railroads in many ways, terminal locations, consolidations, tendering full carloads of rail yards and receiving at yards, multiple car blocks, billing aids, claims processing. and numerous others. We are asking for the right to sit down with our supplier and negotiate a contract in relation to their costs on a carrier to carrier basis.
Our industry is the only common carrier service to provide healthy competition to the motor carriers for the small shipment. We are the small shipment arm of the railroad industry and it is vital that we be allowed to provide the public this service at a rate which reflects all the economies possible.
In our particular area we provide a revenue movement for the railroads of boxcars into a boxcar shortage area, the Pacific Northwest. Were it not for this, they would have to move empty cars at substantially the same cost as loaded cars. In 1967 we loaded approximately 7,000 cars at a much higher per car rerenue to the railroads than their average. The railroads are presently prohibited from using anything except open tariffs in dealing with forwarders. However, if a motor carrier tendered that amount of freight (either in trailers or boxcars), the two carirers are permitted to contract for the movement at negotiated rates. This is an unfair competitive advantage that this bill will eliminate.
Also, important in this bill is that it is not mandatory, only permissive. It allows the parties to meet and discuss the relative economies of a particular situation and then willingly enter into an agreement.
We, as a relatively small company eagerly awaiting the opportunity to meet the population explosion which is taking place on the Pacific coast. We must provide for the need and services these people demand. Transportation is one of their very important needs. We must have this inequitable millstone removed from our business neck in order to prosper and grow so that we will be in a position to provide competition to the motor carrier. The increase in our transportation capacity must be dramatic to meet this challenge. However, the trend within the motor carrier industry is for acquisitions and mergers which tends to eliminate competition and reduce capacity.
Thus H.R. 10831 will enable our industry to better meet the challenge of tomorrow. I strongly urge your favorable support.
Mr. MORROW. That concludes my statement, Mr. Chairman.
Mr. FRIEDEL. Do you wish to proceed, Mr. Moir and then we will ask questions.
STATEMENT OF G. RUSSELL MOIR, CHAIRMAN, BOARD OF
GOVERNORS, FREIGHT FORWARDERS INSTITUTE
Mr. Moir. Mr. Chairman, if I may I would like to read my statement because in essence it supplements what Mr. Morrow has already stated and also is not quite as long.
Mr. FRIEDEL. You may proceed.
Mr. Motr. My name is G. Russell Moir. As chairman of the board of governors of the Freight Forwarders Institute, I am here to urge the passage of H.R. 10831, a bill to permit freight forwarders to enter into contracts with railroads.
The institute, as you know, is the trade association of the common carrier freight forwarding industry. I know how forwarders operate and how they fit into the transportation picture and why this bill is necessary.
I have been in the freight forwarding business all of my life. I started to work for one of the subsidiaries of United States Freight Co. in 1929 and I became chairman of the board and chief executive officer of the parent company in October 1966.
There has been a good deal in the press about United States Freight Co. in recent times and perhaps I should say something in the beginning about our company. We own a number of domestic freight forwarders. We have two short haul certificated motor carriers which we owned when the Freight Forwarder Act, which is part IV of the Interstate Commerce Act, was passed in 1942.
We are also engaged in operations as foreign freight forwarders and as non-vessel-owning common carrier by water. United States Freight subsidiaries are engaged in local trucking operations, warehousing and offshore steamship service. For about a year now we have been providing a through, containerized, single responsibility service, between the United States and Western Europe.
Long ago at United States Freight Co. we recognized the need of shippers for complete transportation service. To fill that need we have diversified. But domestic freight forwarding is the keystone of our transportation plant. Two of our companies, Universal Carloading & Distributing Co., and International Forwarding Co., operate in all 50 States of the Union. Others, including such companies as Western Carloading Co., and Merchant Shippers, are more specialized as to territory or commodities.
The domestic freight forwarder industry is the smallest of the freight carrying transport groups. In 1966 the 61 large freight forwarders—those having more than $100,000 revenue per annum-had gross transportation revenue of $527 million. These carriers provided complete transportation service with respect to about 18 million shipments, having an average weight of just over 500 pounds.
These are ICC figures. Industry studies show that 70 percent of all forwarder shipments weigh less than 300 pounds.
The industry, of course, cannot be judged by size alone. Forwarders are coordinators of transportation and coordination, always important, is the most critical need in the spectrum of transportation today. With the greatest physical transportation plant in the world we are still fumbling around with various notions of how to coordinate. With new containerships being put into service at an increasing rate nobody, except the forwarder, has any very clear idea how the boxes are to be moved from inland points to inland points.
Forwarders also are essentially carriers of small shipments, and that too is a troubled area of transportation. Indeed, there is a crisis in small shipment transportation. The Interstate Commerce Commission said, in its 80th annual report to Congress for fiscal 1966:
Because of the reduction or total abandonment of less than carload traffic by some railroads and the trend to discontinue handling of short haul and off line shipments by freight forwarders, some shippers of small, fragile, light weight, and low rated commodities are unable to obtain adequate and necessary transportation service. While some short haul or feeder line service carriers do attempt to service the excepted traffic, they may encounter difficulty in obtaining a connecting line carrier to accept such shipments.
The Commission was traditionally conservative in that statement. The railroads have almost completely abandoned less than carload traffic. The only way in which a shipper of small lots of freight can obtain rail service today is through the freight forwarder. In that sense, the freight forwarder is today the less-than-carload lot arm of the railroads.
But as the Commission said there is a trend for forwarders to abandon short haul and off-line shipments. And long haul motor carriers, in many cases, refuse to take less-than-carload lot shipments from their feeder lines. The Commission has proposed a remedy but it is an inadequate remedy because, for one important reason, it overlooks the forwarder.
The Commission has proposed that it be given the power to order the establishment of joint through rates between all regulated carriers except freight forwarders. H.R. 6533 was introduced for that purpose. The freight forwarder already is providing coordinated transportation and he is essentially in the less than carload field. It makes sense to us that whatever may need to be done to bring about coordinated transportation of small shipments in other fields of transport, something should be done to encourage the growth and expansion-and above all to avert further restriction of forwarder service. That is why we are here with our own proposal as to what should be done.
It is true, as the Commission said, that forwarders have discontinued handling some short-haul and off-line shipments. There is a very simple reason. They can't make money on that business. The major elements of a forwarder's cost of doing business are what he pays to the underlying motor and rail carriers.
The law realistically provides that forwarders may deal with motor carriers on a contractual basis. To the short-haul motor carrier a forwarder is a connecting line, enabling the feeder and distribution motor carrier to participate in transportation of shipments beyond his own lines. The cost of handling characteristics of such traffic are not the same as those applicable to purely local traffic and mutually beneficial contract charges are established.
For the rail portion of the haul the forwarder is required to pay the published rail rate, the same as commercial shippers. But the characteristics of forwarder traffic are, again, not the same as those of private shippers' traffic.
For one thing, forwarders are, as I have said, the l.c.l. arms of the railroad. They solicit traffic which it would be uneconomic for the railroads to handle if it came to them as individual shipments, and forwarders turn such traffic over to the railroads to be moved in economic carload service. Further, the forwarder has the basic legal responsibility for loss and damage to the shipments moving in his service and for the prompt carriage of the goods.
The forwarder deals with the actual shippers and consignees. He performs the actual work of billing, accounting, classifying, receiving, sorting, consolidating, and of deconsolidating, distribution and collection of charges. The forwarder traces the shipments, reconsigns them when necessary, and he has the responsibility of keeping a vast number of shippers as contented customers.
The forwarders and railroads are, in a realistic sense, partners, but they must deal with each other as carrier and customer. Forwarder facilities are located on rail property frequently within the operating yards of the railroad.
The volume and flow of forwarder traffic is predictable, enabling the railroads to allocate their equipment and plan their operations. There is economy in volume, and there is even more economy in predictable volume, day-in and day-out volume.
Many of the most successful fast-freight-train schedules operating today were developed jointly by the railroads and the freight forwarding industry. The daily repetitive blocks of freight forwarder cars are frequently the main support of these fast freight schedules. The forwarders also help the railroads to keep their equipment in balance by using refrigerated trailers and cars which would otherwise return to their loading point empty.
As already pointed out, the forwarders assume directly the very considerable overhead cost that the railroads would otherwise be confronted with if they were handling the less than carload traffic directly. The forwarders assist the railroads in maintaining the economical, efficient line haul service. Because forwarder traffic basically moves in large blocks to and from terminals within railroad operating yards, the average cost of handling forwarder cars within terminal areas is substantially lower than experienced in the switching, placement, and handling of cars for individual shippers at scattered locations.
Therefore, since the cost characteristics incidental to the handling of forwarder traffic basically differ from the cost of handling miscellaneous shipper traffic, it follows that the railroads should be per