and arguments. This practice will, without justification whatever, disappear if the instant legislation in its present form is approved.

What is the true reason that the freight forwarder is seeking the proposed legislation? In our opinion, it has but one aim: to effect rail charges or to gain additional services not now available to it as a public buyer of rail transportation service. It follows then that existing rail charges applied to freight forwarders are unreasonably high, or the services accorded freight forwarders by railroads are unreasonably restrictive or deficient. Possibly so. But if so, these charges or services are equally unreasonable or restrictive or deficient as to any other buyer of the same services, including shipper associations or consolidators or any shipper whatever. If a remedy is due, it is due the freight, not the buyer of the service, and if given it should be given the freight, not the buyer. The freight forwarder proponents of this bill portray themselves as carriers. Indeed, they stand before the public in all the trappings of a carrier with all a carrier's responsibilities and prerogatives. They are so defined by the Congress for appropriate and abundant reasons. However, as a practical matter we urge that a freight forwarder is no more a carrier than any other carload shipper. A carrier is one who commits substantial capital and resources to the physical carriage of goods for hire. A forwarder-or association or other consolidator-does nothing more, after all, than arrange things before and after such carriage. Special privilege for freight forwarders, then, is illogical. A discriminatory privilege is indefensible.

The discrimination will manifest itself against thousands of businesses who operate through non-profit shippers associations in an attempt to minimize their costs and maximize the use of railroad facilities. If freight forwarders are accorded the unbridled prerogative accorded them under the present language of S. 3714, they will be able and be sure to exercise the right of picking and choosing favorable and advantageous rates on certain commodities or traffic so as to leave the nonprofit shippers associations in an untenable operational position. Freight forwarders will then be in a position to undermine, certainly temporarily and possibly permanently, rate structures that presently exist which, due to the absence of the profit motive on the part of bona fide nonprofit shippers associations, enable these associations to save tremendous amounts in shipping costs for their members. Special secret deals between freight forwarders and railroads can, and unquestionably will, undercut this advantage, destroy the existence of non-profit shippers associations and then enable these forwarders to subsequently make adjustments so as to insure a high rate of compensation to them. So long as a "reasonable rate" is merely a rate within a broad zone which has both a floor and a ceiling, there is no legal means available to the public to insure that all freight forwarders' rates do not come to rest at the ceiling after temporarily being on the floor. On the other hand, association rates perforce must remain always on the floor, absent the profit factor.

In the final analysis, however, if any advantage is accorded the freight forwarder, there is no cogent reason whatever, under the National Transportation Policy, for not according that same advantage to non-profit shippers associations. To discriminate at this time—and any legislation to favor one group over another would be undue discrimination—would be a major and unheralded departure from long-standing congressional policy. It would, in effect, be a congressional dictate that Congress does not favor, indeed opposes, the continual existence of non-profit shippers associations. This broad statement is made not based upon a theory but based upon the day-to-day operations and problems of these and other non-profit shippers associations who constantly must deal on the same terms and under the same conditions of freight forwarders-save only the absence of the profit motive in regard to the former.

Respectfully submitted.

JOHN C. LINCOLN,

General Manager, Los Angeles Wholesale Institute, California Shippers Associates.

HILL, FARRER, & BURRILL,

By STANLEY E. TOBIN, Attorneys for Los Angeles Wholesale Institute, California Shippers Associates and Piggy-Back Shippers Association 445 South Figueroa Street, Los Angeles, Calif. 90017.

Senator LAUSCHE. Mr. Washer, transportation counsel, American Retail Federation.

STATEMENT OF CHARLES WASHER, TRANSPORTATION COUNSEL, AMERICAN RETAIL FEDERATION, 1616 H ST. NW., WASHINGTON, D.C.

Senator LAUSCHE. Mr. Washer, your statement will be fully printed in the record. Having that in mind, you may proceed to read it or you can discuss the highlights of what you would like to tell this committee. Mr. WASHER. Mr. Chairman, I think in view of that, I will just ask that the statement be incorporated in the record.

We are opposed to the legislation. There are certain aspects, of course, that give cause to sympathies with the forwarders' position, but we think the attention of the committee should be directed to curing the ills of any contractual arrangements that now exist with the motor carriers, rather than extending this to the freight forwarders.

I think, essentially, that is our position.

Senator LAUSCHE. Now then, you are representing the American Retail Federation?

Mr. WASHER. Yes, sir.

Senator LAUSCHE. Will you elaborate on what the membership is and how extensive and through what areas it operates?

Mr. WASHER. We have 48 statewide associations. We are a federation of the 48 States. The only two we do not have at present are Alaska and Delaware. And these State groups have retailers of all types, sizes, and all natures. We also have 27 national associations which would be the jewelers and the hardware stores and so forth. And through those we represent the retail industry in the entire country who utilize motor carriers, freight forwarders, all types of transportation services.

Senator LAUSCHE. This is a federation of retail merchants?

Mr. WASHER. Well, it is a federation of associations of retail merchants, yes.

Senator LAUSCHE. Does the membership include the large and the small retail merchants?

Mr. WASHER. Oh, Yes. One group, for example, in our national association, we have the mail order associations which is primarily large companies. We also have retail jewelers' associations, which is primarily small companies.

So it would be of all types and sizes.

Senator LAUSCHE. Your position is that rather than expand the right to fix rates by contract as it now exists between railroads and truckers, if anything is to be done, that the right ought to be eliminated rather than an expansion introduced?

Mr. WASHER. Precisely. That is very well stated.

Senator LAUSCHE. Why do you feel that there is an evil in the present right of the truckers and the railroads to contract rates?

Mr. WASHER. Well, essentially, Senator, I think that the point of the forwarders is that the type of arrangement between the motor carriers and the railroads is not really a joint rate. It is almost or substantially the same as a published rate for transporting a vehicle from point A to point B. And if that is a bad practice, we should somehow give the Commission control of that, which they don't have today. But rather than extend that to other carriers, such as forwarders, somehow we should restrict it—and I was glad today to hear the Com

mission say there is a court case testing that. Maybe the solution will be found there.

Senator LAUSCHE. Yes. Thank you very much, Mr. Washer. (Mr. Washer's prepared statement follows:)

STATEMENT BY CHARLES A. WASHER, TRANSPORTATION COUNSEL FOR THE AMERICAN RETAIL FEDERATION

The Transportation Committee of the American Retail Federation has considered the legislative changes proposed in S. 3714 in considerable detail and, in the best interests of the retail industry represented in the Federation's constituent membership of some 48 state-wide and 27 national associations of retailers, opposes the bill and the adoption of any such measure.

The position of the Federation is that the amendment to Section 409, so as to authorize contract rates or charges for services performed by railroads for freight forwarders, is neither necessary nor desirable. It is not necessary as the only method of establishing competitive equality between the forwarders and motor carriers and, in fact, the bill would create inequality. It is not desirable to permit unregulated bargaining on millions of dollars worth of transportation between railroads and forwarders-two industries that have become concentrated in the fewer, and larger, companies in recent years.

The position of the forwarders is that the motor carriers have a competitive advantage in being able to negotiate plan 1 piggyback rates with individual railroads as so-called divisions of joint rates which are not directly subject to ICC regulation and which are substantially below rates published by the same railroads for comparable services available to the forwarders and other shippers as plan 3. The forwarders, in urging that the privilege of negotiating for such depressed rates should be extended to them, state that joint arrangements are due them as true common carriers on an equal basis with the rail, motor, and water carriers. The forwarders are absolutely alone in this claim. Railroads, motor carriers, shippers, and others uniformly adhere to the view perhaps best expressed by the Interstate Commerce Commission as follows:

"Freight forwarders have a distinctly different status under the act than other forms of transportation. To the shipping public, particularly the shipper or consignee of small shipments, they are a common carrier engaged in a muchneeded service while in their dealings with other carriers they are treated as shippers."***"There has always been some overlap between the services offered by freight forwarders and small-shipment LCL rail service or LTL motor carrier service. Yet, the Commission also has recognized that forwarder service is, both functionally and legally, distinctly different from either of these others because of the manner in which a freight forwarder operates and because of its dual status under the act, as both a carrier and a shipper." (Statement of I.C.C., January 23, 1968, on H.R. 10831, by Chairman Tucker.)

If the unregulated Plan I divisional rates are so far below the regulated, published piggy-back rates as to constitute an unreasonable competitive advantage for the motor carriers, as maintained by the forwarders and for which position the forwarders have engendered much support, it seems to us that the correction should be sought in the elimination, not the extension, of the practice. There is no inconsistency in this view and the support of retailers for joint rates between motor carriers and railroads (as under S. 751) because the Plan I rates are on trailerloads and not on individual small shipments and are, in fact, rates or charges per trailer and not true divisions or joint rates. We have also discussed, and suggested, the possibilities of establishing a better competitive position for the forwarders by more acceptable legislative changes such as the operation of motor vehicles over the highway and the elimination of the terminal area restriction. In short, we feel that if unregulated rates such as those under Plan I are a bad competitive practice, the solution should not be sought in proliferation as proposed in S. 3714.

In the event that the Congress, despite these objections, considers any such enlargement of Section 409, we urge, as an absolute minimum, the incorporation of three amendments which the Interstate Commerce Commission has been recommending for many years based on their experience with this Section. Since 1954, the I.C.C. has asked that Section 409 be changed to (1) place the burden of proof on makers of the contracts that such contracts, when subjected to formal investigation, are not inconsistent with the other provisions of Section 409; (2)

prohibit contracts at compensation which is lower than tariff rates in all cases where the line-haul transportation is for a total distance of 450 miles or more; and (3) provide penalties for any rebate, concession, or discrimination resulting from the transportation of property at compensation less than that specified in the contracts. The forwarders have stated that they do not object to the adoption of amendments (2) and (3) but that approval of (1) would frustrate the purpose of Section 409 and is unacceptable. Past experience has shown that the burden of proof requirement is important and necessary if any regulatory supervision by the Commission is to be effective. Section 409 today is deficient in providing the I.C.C. with enforceable authority and the contract charges between freight forwarders and motor carriers are not subject to effective regulation by the Commission. We support the I.C.C. in urging the adoption of all three amendments if any consideration is given to the extension of Section 409 under S. 3714. It should be noted that the result of S. 3714, even with the three amendments to Section 409, would be to create an inequitable advantage for the forwarders. The motor carrier privilege under Plan I is as to piggy-back, trailerload service only whereas the contract rates sought by the forwarders would extend to piggy-back, boxcar, and other services. The terminology covers all "services and instrumentalities of such common carriers by railroad." This broad language, we submit, could cover the leasing of rolling stock for use in Plan IV piggyback, leasing of freight house space, supplying freight handling equipment, or the rental of office facilities. Apparently in an effort to provide some sort of restraint on this potentially enlarged inequity, the counterpart subcommittee on the other side, amended a companion bill (H.R. 10831) to extend the rate negotiation privilege with railroads to water carriers and motor carriers and making it the duty of the railroads to extend comparable charges, upon request, for like and contemporaneous services between the same points. We suggest that the amendment is inadequate for the purpose but, if there is merit in permitting the railroads to contract for piggy-back rates and charges it should be extended, as in Section 408, to all who employ or utilize the instrumentalities or services of such common carriers under like conditions. A far greater measure of equality would thus be obtained if equal treatment is to be the keystone of the bill.

The American Retail Federation believes that the bill should not be approved. We believe that other measures should be considered for achieving what we consider a desirable objective-competition between freight forwarders and motor carriers. If, despite these objections, favorable consideration is given to the proposed amendment to Section 409, further amendment in the form of the three I.C.C. recommendations is a necessity. Lastly, if extension of the contractual privilege of the railroads is to be made, it might well be for all users of the service under like conditions.

Thank you for the privilege of presenting the views of the Federation to you. Senator LAUSCHE. Mr. D. R. Macdonald, general traffic manager, City Products Corp. of Chicago, Ill.

STATEMENT OF DOUGLAS R. MACDONALD, GENERAL TRAFFIC MANAGER OF CITY PRODUCTS CORP., PRESIDENT, TERMINAL FREIGHT COOPERATIVE ASSOCIATION, CHICAGO, ILL.

Senator LAUSCHE. Your statement will be fully printed in the record, Mr. Macdonald. You may proceed to read it or discuss what you feel are the important aspects of this problem that you have views on and want to acquaint the committee with.

Mr. MACDONALD. I think, Senator, if I read it I will cover the main points and just as quickly, really, as if I tried to expound on them verbally.

Senator LAUSCHE. All right. Proceed.

Mr. MACDONALD. M name is D. R. Macdonald. I am general traffic manager of City Products Corp. My company is a member of Terminal Freight Cooperative Association, a nonprofit shippers associa

tion comprised of 42 companies which are shown on the attached list.

This association consolidates the shipments of its members for the purpose of obtaining volume rates, and ships to and from most major cities in the United States. Our operations are basically similar to a freight forwarder in our use of railroads and motor trucks as the underlying carriers. We have been in existence for more than 25

years.

I am president of the Terminal Freight Cooperative Association and a member of the executive committee which controls its affairs. I am authorized to speak for the Terminal Freight Cooperative Association and for the companies who belong to the association.

We are opposed to the provisions of S. 3714 for three major reasons: 1. We do not believe a railroad should charge a lesser amount to a freight forwarder than to a shipper or shippers association for identical services under identical conditions.

Section 1(5) of part I of the Interstate Commerce Act reads in part as follows:

"All charges made for any service *** shall be just and reasonable***"

We believe that to be just and reasonable, rates must be identical for identical service.

We are not opposed to the principle of joint rates or contract arrangements between basic transportation carriers such as railroads, motortrucks, or steamship lines. These companies own equipment, and perform their basic transportation service for the general public_at rates and charges published in tariffs. We feel that a freight forwarder purchasing the same service under the same conditions, as other shippers, should pay the same published rates and charges.

2. If a freight forwarder can justify a reduced rate for unusual conditions of tonnage, transit time, or other factors producing lower carrier costs, he can secure a reduction through present rate-making procedures. The important point is that such reduced rates will be published in tariffs and available to any other freight forwarder, shippers association, or shipper who can meet the same conditions. If the reduced rates are just and reasonable, there should be no objection to extending them to any shipper who can meet the same conditions. It is important to note that many shippers perform the same function as a freight forwarder in consolidating their shipments, independently, or through shippers associations, and should be entitled to the same rates from the underlying carrier who transports the consolidated shipments.

The freight forwarders, in using and correlating the service of the railroad and motortrucks as underlying carriers, are performing a valuable service to the public. All the members of Terminal Freight Cooperative Association use freight forwarder services. It is important that the freight forwarders remain in a strong, healthy financial position and continue their valuable services to the public. However, we believe they can continue to operate effectively within the present framework of rates and services published in tariffs by the underlying carriers, just as do shippers associations. The 81st Annual Report of the Interstate Commerce Commission indicates a high return on stock