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mitted to reflect these economies and efficiencies in their operating arrangements and bases for charging the forwarders for the railroad portion of the overall services performed jointly by the railroads and the forwarders.
The purpose of this bill, therefore, is to accomplish these objectives. This in turn will permit the railroads and the freight forwarders to combine their resources more effectively in competition with the other modes and to permit the most efficient rail forwarder service to the general shipping public at the lowest possible cost.
That is not possible today under the regular ratemaking machinery. When a railroad desires to publish a rate that would be adaptable to forwarder shipments it must consider the effect on all other traffic. If there are differing cost characteristics involved, they must be averaged out. The railroad must deal with its partner, the forwarder, as though that partner were a customer competing with all of the railroad's other customers. That simply is not the case. The law should not so require.
In the present state of the law railroads are required to treat their most formidable competitors, the long-haul trucks, at least as well as they treat their partners and coworkers, the forwarders. And they are permitted to treat those competitors a great deal better than they do forwarders. Many railroads do just that-possibly not because they want to but because they are forced to treat the forwarders as commercial shippers.
The Supreme Court has agreed with the ICC and ordered railroads to transport truck traffic at rail tariff rates, the same as forwarders pay. The rule so far is limited to trailer or flatcar traffic, but in legal principle it applies to the use of boxcars as well. This means that a motor carrier may bring his overflow traffic down to the railroad whenever he has a shortage of equipment on a particular run and obtain rail service at the same price paid by the forwarder who gives the railroad all of his traffic.
In other words, the railroads are forced to assist their competitors by treating them as well as they treat freight forwarders, when the motor carrier obviously will turn over to the railroad only that traffic which can more economically or more conveniently be transported by rail.
Moreover, railroads are permitted to make joint rates with motor carriers, and under so-called plan I piggyback arrangements, railroads transport the trailers of motor carriers at contract charges. Everybody knows that these contract charges are lower than the rail published rates for the same service, and they have built-in features which further widen the gap, such as lower or no charges for empties, discounts for a given number of trailers per month or even per year, and things of that nature.
The contract charges are not published. They are not even filed with the Commission as the pending bill would require in the case of contracts with forwarders. There is no control and there can be no policing.
There has not been much experience as yet under the present situation in which railroads are forced to treat motor carriers the same as they treat forwarders, while also having the right to give the motor carriers more service at lower charges than they assess against forwarders.
But it is a serious and dangerous state of affairs. The lines of distinction betwen forwarders and motor carriers, established by what we thought were fundamental concepts of law and policy, have been erased. Motor carriers are in the freight forwarding business. They need never put a tractor on the highways. They can purchase their transportation from railroads at prices which are closed to forwarders and which unfairly and devastatingly discriminate against forwarders. If we look down the road far enough we can see what the end must be.
What will happen to competition if the forwarder-the only remaining competitor of the motor carriers, unless express is considered competition-is driven out of the picture? What choice will the shipper have then? How will the reasonableness of truck rates and charges be measured when competition is no longer a factor? If the plight of the small shipper is bad now it will then become impossible.
H.R. 10831 provides the absolute minimum of what must be done to keep the forwarder actively and vigorously in the picture and to stop the erosion of forwarder service and permit its expansion.
The forwarder is needed now as never before. He is needed as a coordinator of transportation and as a handler of small shipments. Containerization has made rapid advance in domestic transportation but there is still a long way to go. We are just now on the threshold of worldwide containerization. The forwarder can and should be a key element in the development of the concept of total transportation.
We have a fine tool, ready for use, but we restrict the forwarder by outmoded regulation while people are desperately casting about for some new tool-some "transmodalist" or entrepreneur. When it comes to doing something to help the only carrier in the picture today who has the capacity to do what needs to be done some people get mental indigestion.
We are confident that this subcommittee will evaluate the pending legislation on its merits. Our competitors, the long-haul trucks, are powerful in resources but they cannot say anything against the merits and the justice of this bill, because when they do they condemn themselves. They are doing-with a great deal more latitude than we propose for ourselves exactly what we ask the right to do.
Nor can the imitators of the common carrier forwarder-the associations who claim exemption from forwarder regulation but who. refuse to assume the liabilities and obligations to the general public which we assume-say anything to detract from the merits of the bill. If this bill helps us it will help all the shippers as well. If private forwarders obtained the same rights it would help them to further increase their advantages over their competing shippers who are not in a position to consolidate their own freight.
H.R. 10831 is a fair and a just bill. It should have been enacted long ago, but it is not too late to act now. Action should be taken promptly. We urge your favorable consideration.
Mr. FRIEDEL. I have a few questions here. How will the freight forwarder be able to provide a better service to the shipping public if this proposed legislation should be enacted?
Mr. MORROW. I think Mr. Moir will be able to deal with that question, Mr. Chairman.
Mr. MOIR. Basically, in this manner: As costs have increased over the years, costs of pickup and delivery and terminal handling, and the charges that the forwarders pay to the railroads for the line haul service, it has become economically impossible for the forwarders to handle the short haul shipments, shipments that would move in service say, 300, 400, 500, 600 miles.
At one time the forwarder handled a great many such shipments, had regular service operating between these shorter distant points. They cannot do that today. We can pick up and deliver freight as economically as the motor carriers; we can handle it through the terminals, through the terminal areas, as economically and as efficiently, but because of the restricted manner in which we must pay the railroads for the line haul services, the cost of transportation line haul, point to point, as a contributing factor is so great, the sum total of these costs on the short haul movements make it prohibitive indeed, impossible, to protect the through motor carrier rate from door to door and on the short hauls.
If the railroads and the freight forwarders were able to have the benefit of arrangements such as proposed under this bill, the railroad could make pricing and operating arrangements with the freight forwarder which would be on a different basis than the forwarder has to pay under the tariff today and this would enable the freight forwarder to reestablish a great many of these short-haul services that have been discontinued over the years.
Mr. FRIEDEL. I think Mr. Morrow said that the freight forwarders operate in all 50 States. How would this affect them? Don't they have short hauls like from Washington to New York or Philadelphia? Mr. MORROW. Yes.
Mr. MoIR. It means they operate in and out of terminals in all 50 States but it does not mean that they operate, say, between New York City and on the one hand and Buffalo on the other, a haul of approximately 400 miles.
They cannot perform that local service today. The economics just do not permit it. At one time the forwarders handled a great deal of traffic between the New York City area and Buffalo. That service has been removed and the shipping public no longer can use forwarder service between Buffalo and New York City.
Mr. FRIEDEL. You mentioned in your statement that the shipping associations will be opposed to this. What is the difference between the freight forwarder and a shipping association?
Mr. Mor. Basically the shipper association is a pooling of shipments between certain very large corporations who have a great deal of volume freight at their disposal.
They select those shipments moving between certain origins and destinations which lend themselves to the most economical handling and they consolidate these shipments into their own car loads or trailer loads as the case may be, and then these same people generally take their off-line shipments, their light and bulky shipments, small shipments, this sort of traffic, which is more costly to handle and turn them over to the common carriers, meaning the motor carriers or freight forwarders.
They are able to reduce their cost on those shipments that they select and put in their own consolidated cars only because they deal
on a selective basis. They do not have to hold themselves open to serve the shipping public as a common carrier freight forwarder must do. Mr. FRIEDEL. Under the law they cannot.
Mr. MOIR. That is right.
Mr. FRIEDEL. They can only deal with the people they represent? Mr. Mom. That is right, and only on certain traffic. They do not attempt to handle the whole spectrum of traffic that is moving.
Mr. FRIEDEL. We have a lot of manufacturers in Baltimore, and they ship to Chicago and California. These shipper associations do it on a nonprofit basis. They work together. They feel they should be under the same amendment that you are asking for so that they can go in and contract with the railroads.
Mr. MORROW. Mr. Moir pointed out, as you pointed out, Mr. Chairman, the shippers' associations not only do not assume any common carrier responsibility, they may not assume any common carrier responsibility. If they did they would be freight forwarders subject to regulation under part IV.
If they were freight forwarders and had permits then of course they would be entitled to anything that the law affords with regard to the common carriers. But they ask here for this committee to maintain their exemption on the basis that they are not common carriers and at the same time to give them the only benefit that I know of, which is a real benefit, provided under the law for freight forwarders simply because the forwarders are common carriers.
You could not, consistent with the law and policy of this country, grant any private shipper a right to make a deal with a railroad or any other common carrier unless you granted that same right to all shippers.
There are countries in the world where common carriers are permitted to make contracts with shippers. A railroad in some countries can make a contract with a shipper to take all his freight and because he has a large volume over a period of time to give him a better break than the other shippers.
We have not come to that in this country. Our law is based on the theory that common carriers must deal with all shippers alike and must publish tariffs to serve them. These shippers' associations simply want to have their cake and eat it too, to put it simply.
They want to maintain their exempt status as private shippers in competition with other private shippers who are not so fortunately situated as they are to consolidate their freight and at the same time obtain the advanages of the common carrier.
They want to select the part of the common carrier regulation which they think should be applicable to themselves and reject the part that should not apply. I think their position is wholly untenable.
Mr. FRIEDEL. Mr. Pickle.
Mr. PICKLE. Thank you, Mr. Chairman. I am trying to establish in my mind historically why the difference was allowed in the transportation under the section 409, part of the transportation law, why the Congress allowed freight forwarders and motor carriers to negotiate rates on routes less than 450 miles and would not allow the freight forwarders to negotiate with the rails.
Why was that distinction made?
Mr. MORROW. I think you have two parts to your question. One part deals with why the law gives the forwarders the right to contracts and the other deals with why the 450-mile limitation is in there.
Mr. PICKLE. Yes.
Mr. MORROW. Taking the first part of your question, Mr. Congressman, as I tried to explain in my statement there was a historic pattern of freight forwarder operations. Freight forwarders going back to the last century had consolidated shipments and sent them by rail but they could not go very far outside the railhead, they were simply consolidators on the railroads.
But when the motor carriers became important carriers, beginning in the late 1920's, the forwarders and the motor carriers saw a way to coordinate their services and provide a better service for the shipping public. Now these short-haul motor carriers, of which there were and still are a great many, don't have an outlet to send freight from Washington, D.C., to California.
They must use railroads or motor carriers. They had to make some kind of deal with railroads or long-distance motor carriers. They can make joint rates with such carriers now. In those days the freight forwarders and short-haul carriers got together and they made contracts with each other.
The forwarder was a very important outlet. I think he was very helpful to the development of the short-haul motor carrier industry because he was the long-haul outlet for these motor carriers.
At the time motor carrier regulation was passed in 1935 the forwarders had contracts with several thousand motor carriers throughout the country. All the forwarders and most of the short-haul motor carriers had contracts, very similar to the kind of contract I think this law now authorizes.
When motor carrier regulation was passed either the freight forwarder was overlooked or the definition of a motor carrier did not mean what Congress through it meant.
Mr. PICKLE. You say it was overlooked. Do I understand you were discriminated against when the law was put on the books?
Mr. MORROW. When the motor carrier regulation was put on the books I am confident that Congress did not intend the result that legally ensued. The result was that within the law there was no provision for continuation of the historic pattern.
Mr. PICKLE. Now I am wondering under this type of legislation if the Congress said on short hauls that they intended the shipment primarily to go by truck, thinking that would be probably cheaper and more reasonable in price.
Now I assume that it is becoming economical for you to participate in the long haul, that is for the motor carriers, and you want the same thing now that the Congress did not give 15 years ago, or whatever time it was, you want that right now?
Mr. MORROW. I think now you are probably getting into this 450mile limitation. The 450-mile limitation on consolidated lots was put in at the insistence of the railroads. The freight forwarders used motor carriers primarily for assembly and distribution and for distances less than 450 miles.