docks. Mr. Seymour's remarks are just the kind that concern us. We claim that discrimination between the motor carrier and the freight forwarder cannot exist and that the freight forwarder be given the right to make contracts with the railroads. It is our belief that H.R. 10831 must pass and that under the amended regulation the freight forwarder will not only be able to protect the existing services, but be capable of expanding his service into other areas, which at present they are unable to serve.

Section 409 (a) of the Interstate Commerce Act as amended in H.R. 10831 provides that all contractual charges between the railroads and the forwarders be approved by the Interstate Commerce Commission.

We are sure that the public interest will best be served by making these two modes of transportation equal and urge the passage of H.R. 10831.

Again gentlemen, let me thank you for allowing me to appear before you and please be assured my only interest in this matter is the continued success and growth of the California market.

Mr. FRIEDEL. Mr. R. C. Fels, director of the Traffic Department of the Furniture Manufacturers Association of California.

STATEMENT OF R. C. FELS, DIRECTOR, TRAFFIC DEPARTMENT, FURNITURE MANUFACTURERS ASSOCIATION OF CALIFORNIA

Mr. FELS. I have a statement, Mr. Chairman. I wonder if I could read it into the record. I will try to be as fast as possible.

Mr. FRIEDEL. You don't want to submit it? You want to read it? Mr. FELS. There are certain pertinent points of the statement. My name is R. C. Fels, I am the director of the Traffic Department of the Furniture Manufacturers Association of California with offices at 1933 South Broadway, Los Angeles, Calif., and we are appearing in favor of H.R. 10831 which seeks to change the wording of section 409 (a), part IV of the Interstate Commerce Act so as to allow freight forwarders subject to this part of the Interstate Commerce Act to enter into and operate under contracts with common carriers by railroad subject to part I of the act.

The Furniture Manufacturers Association of California, hereinafter referred to as FMAC, is a voluntary nonprofit association of furniture manufacturers organized to expand the production and promote the distribution throughout the world of home furnishings designed and manufactured in California, and whose 155 members constitute the major shippers of furniture from California and who have contributed greatly in making California the second largest furniture producing and shipping State in the Nation.

FMAC member manufacturers are afforded the services of its working traffic department on a day-by-day basis.

Sales of furniture at manufacturers invoice value, in various product classifications for the year 1965 in California totaled $274,615,000 which was 10.8 percent of the national sales. The sales for the 13 Western States totaled $427,100,000 or 16.9 percent of the national sales for the same period.

One final statistic, Los Angeles, Calif., ranks first in a line up of 10 cities located in eight States manufacturing furniture. California produced furniture valued at $235,102,000 which was 7.7 percent of the national total in 1963; number of employees, 23,562. (U.S. Department of Commerce 1963 Census of Manufacturers.)

The furniture manufacturers in California find themselves in a unique position, to wit: Major basic materials such as wood and textiles.

are shipped into California involving considerable distances of transportation. Two other basic materials-namely, cotton and steel-are produced in California. In the movement of inbound materials and outbound finished products all modes of transportation are used—rail, water, motor carrier, freight forwarder, express, air cargo, and parcel post.

In the day by day use of the various modes of transportation, we are large users of the services of freight forwarders operating under part IV of the Interstate Commerce Act.

In a survey made November 16 to December 31, 1965, by the FMAC Traffic Department in connection with the movement of cloth fabrics (textiles) used in the manufacturing of upholstered furniture, we developed that in 32 working days during this period (which is a low shipping period for us) consigned to 44 plants, we moved entirely via freight forwarders 208.52 tons (417.043 pounds) of fabrics and an average of 7.56 tons (15,123 pounds) per day. The freight bill was $30,353.54.

This material was purchased and shipped from 183 mills located in 13 States and originated in 74 towns and cities. A further breakdown indicated these movements were made from seven States and 34 points of origin on the eastern seaboard and from six States in the South from 40 points of origin.

This tonnage constituted 1,368 shipments of which 427 or 31.21 percent were minimum shipments (153 pounds or less) and 941 shipments of 68.79 percent were over the minimum weight required to get away from paying minimum charges.

The intent of the survey was to ascertain the feasibility of consolidating our tonnage to avoid the minimum shipment factor.

Frankly, we were astounded at the number of mills originating this traffic and the diversified number of points of origin. It was therefore concluded to continue our movements via freight forwarders and take advantage of their improved transit time plus other services such as notification of arrivals prior to arrival of shipments. These features are of considerable value to our industry because in the manufacture of upholstered furniture, with constant change of consumer appeal, we could not alleviate the minimum shipment factor.

On our outbound movements of our finished products, all methods of transportation are used with freight forwarder service playing an important part. Some years ago when it became painfully clear to our members that the buying habits of the consuming public were undergoing a change, to the customer order type of purchase, with the resultant effect on the retailer who had to reduce his inventory and in many instances eliminating inventory altogether thus creating a hand-to-mouth buying pattern. To meet this situation, faster and more frequent methods of shipping were necessary. This was achieved by FMAC phasing out its consolidation of less-than-carload shipments for transcontinental movement of some 1,000 cars per year and this tonnage was diverted to the freight forwarders and who published a special furniture tariff for furniture and offered a daily service. This phasing out was completed in 1960 when the last area of consolidation into the Pacific Northwest was discontinued and this tonnage was diverted to freight forwarders operating into this area from Los Angeles. So after some 30 years of consolidating furniture pool

cars we closed our terminal facilities. Less-than-carload shipments of furniture moving from Los Angeles into Pacific Northwest via freight forwarders in 1967 totaled 13,766,123 pounds with freight charges of $953,630.

We feel any instrumentality that can be created to reduce costs or at least hold the line in the raising cost picture should receive favorable consideration. We feel H.R. 10831 is such an instrument.

We favor passage of H.R. 10831, which would allow the contract conception dealing with underlying rail carriers and our basis of this is the specific movements referred to in the foregoing paragraphs indicating movements from a total of 74 points of origin. These shipments must be handled by the freight forwarders on through bills of lading via underlying motor carriers, with whom they have contracts, from origin point to loading point or consolidating point. Again, at destination, this same shipment is handled by the freight forwarder through the medium of the contract carriers if destination point is beyond the terminal area where the cars are unloaded. In this transportation bridge of three segments, we have two movements under contract arrangement and the longest part of the haul not under con

tract.

Congress defined a freight forwarder as a carrier under section 402 of the act. It says:

The term "freight forwarder" means any person which otherwise than as a carrier subject to part I, II, or III of this Act holds itself out to the general public as a common carrier.

In the eyes of the shipping public, a forwarder is a carrier handling a shipment on a through bill of lading and they look to the forwarder to assume his responsibility as a carrier when a through bill of lading is signed.

The forwarder, under part IV as previously pointed out, does contract for a portion of the transportation services. We therefore favor H.R. 10831 to make the contractual arrangements applicable to the entire transportation performed by underlying carriers.

Contractual arrangements would afford both the rail lines and the forwarders the opportunity to explore cost-saving methods such as trainloads, switching, in most cases forwarder terminals are located adjacent to railyards. Rail carriers would have the opportunity under the contractual arrangement to evaluate forwarder traffic. In the final analysis any cost reduction or holding the line on costs would reflect in the rate paid by the shipping public. Safeguards are written into part IV, section 409 (b), to wit, filing of contracts with the Interstate Commerce Commission, who have the authority to review and suspend and order investigation if found necessary.

Mr. FRIEDEL. Mr. Fels, in other words, you are saying that if it were not for the freight forwarders you would not be able to ship your material, your furniture, because the railroads don't take it or the trucking association does not take it?

Mr. FELS. That is right. In other words, we feel under the contractual arrangement all contracts of any kind are a meeting of minds on cost factors that could be brought out. Costs could be reduced, in some cases held without rise, which would be to our benefit.

Mr. FRIEDEL. Thank you.

Are there any questions?

Mr. Pickle?

Mr. PICKLE. You phased out your 1.c.l. shipments to avoid the minimum charges and went by way of the route of freight forwarder because that is considerably cheaper. You gave us costs and figures showing this was costing a great deal more. Now I assume you want to use the freight forwarder and extend your negotiation further so that this would give the further right to all underlying carriers, rails as well as

motor carriers.

Now, if you did that I assume you would get a reduction of the cost, you would save a lot of money if you could do this. Now, you give cost and figures, how much it would cost. How much cheaper could you ship if this bill is passed?

Mr. FELS. It is an unknown quantity. We don't know whether there will be a cost reduction. But it is an instrument that could explore this. Mr. PICKLE. Surely you have some indication of what you think you would save? You mean you are uncertain whether it will mean a saving at all?

Mr. FELS. That depends on the factors.

Mr. PICKLE. You mean you come here from California to testify and you don't know whether there will be a reduction in rates for you? Mr. FELS. It may not be a reduction in rates but it could hold the line on the rates. It is an instrument that has not been tried yet. This is the only method by which it can be tried. We feel it will hold the line on costs. I go by that in my own personal experience operating a motor carrier. When we made a contractual arrangement it was stipulated on areas of both parties.

Mr. PICKLE. I understand you would not have any concrete figures, you would have to estimate what it would be, but surely there would be some considerable savings; otherwise you would not have any interest other than just one spectator.

Mr. FELS. Another factor, it would keep the people in the business. That is one thing we are fearful of, that if the freight forwarder phases out we are out on the limb.

Mr. PICKLE. Thank you.

Mr. FRIEDEL. Mr. Kuykendall.

Mr. KUYKENDALL. You know, in the free enterprise system as opposed to government, we learn you cannot create something out of nothing. I tend to look at this whole program in one package. I am wondering, with all the savings, who is going to get hooked, because somebody will have to pay for these savings. Somebody will lose and be hurt by it. This is the thing that bothers me about the whole hearings. Some money will be saved, but who will pay for it?

Mr. FELS. You are talking about if the contracts become law? Mr. KUYKENDALL. Any price cutting, lower rates, whose pocket is that money coming out of, who is now getting it?

Mr. FELS. In the first place, with the contract being filed with the Interstate Commerce Commission

Mr. KUYKENDALL. The Interstate Commerce Commission does not collect it or put it in the bank. You are talking about money being saved. Whose treasury will that go in?

Mr. FELS. Who is the money going to?

Mr. KUYKENDALL. Yes.

Mr. FELS. In our own case it would go to the buying public.

Mr. KUYKENDALL. You think the public is paying that much more for goods and you would be able to cut the cost?

Mr. FELS. That is right.

Mr. FRIEDEL. I want to thank you for your statement.

Mr. FELS. Thank you, Mr. Chairman.

Mr. FRIEDEL. I would like to know how many witnesses would like to file their statements for the record.

Mr. Barrie Vreeland, director, Department of Transportation, Commerce & Industry Association of New York.

Mr. VREELAND. Sir, I will file mine for the record if you would allow me to make a few brief comments.

Mr. FRIEDEL. I want to find out who would like to file statements only, for the record.

Mr. John C. Allen.

Mr. ALLEN. No, Mr. Chairman.

Mr. FRIEDEL. Mr. D. R. Macdonald, general traffic manager of the City Products Corp.

Mr. MACDONALD. I prefer to read mine, Mr. Chairman.

Mr. FRIEDEL. Mr. John V. Hoey, Jr., president of the National Textile Traffic Bureau, Inc.

Is he here?

Mr. Harvey A. Burke, manager, physical distribution, Buxton, Inc., Springfield, Mass.

Mr. BURKE. I would like to make a few brief statements, Mr. Chairman.

Mr. FRIEDEL. Mr. Bernard J. Handelsman, president of Textile Association.

Mr. HANDELSMAN. I would like to make a brief statement.

Mr. FRIEDEL. Mr. Anthony George, Georges Carriers, Inc., New York.

Mr. J. R. Evans, traffic manager, National Lock Co. Is he here? Mr. Charles B. Ratliff, Morven Freight Lines, Inc., North Carolina. Mr. Harold H. Stevens, general traffic manager, Carstensen Freight Lines, Inc.

All right, we will proceed until the first bells at 12:15 and then come back this afternoon because we have a lot of witnesses tomorrow and Thursday.

Mr. Morrow, in the statement of the Interstate Commerce Commission they propose three amendments. They are on pages 9, 10, and 11. I would like to have you supply your answers for the record.

Mr. MORROW. I will be glad to file it for the record, Mr. Chairman. (The information requested appears in letter dated February 5, 1968, p. 33.)

Mr. FRIEDEL. Mr. Barrie Vreeland.

STATEMENT OF BARRIE VREELAND, DIRECTOR OF TRANSPORTATION, COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK

Mr. VREELAND. Mr. Friedel, I will file my statement; however, I would like to briefly comment on it in my own words.

This is a statement of the Commerce and Industry Association of New York, with whom I am the director of transportation. Commerce