tion on forwarder-motor carrier contracts. We anticipate that question will be raised as to why the 450-mile limitation is not made applicable by the bill to contracts with railroads. Let me explain briefly.

Forwarders, as coordinators of transportation, assemble small lots of freight; consolidate such lots at a central point for movement as part of a volume shipment; and break-bulk and distribute the individual shipments. Motor carriers are naturally better suited to provide the assembly and distribution service, and rail carriers afford the best medium for the mass movement of the consolidated shipments. However, motor carriers are used to transport freight in truckloads between some forwarded terminals in the shorter distances.

The 450-mile limitation was included in section 409, as the history of that section will show, at the request of certain railroads, who feared that if forwarders could contact with trucklines for volume shipments, for long distances, they might favor motor over rail service. The forwarders raised no objections, because they had no intention to use motor carriers for truckload-lot transportation for distance over 450 miles. Indeed most forwarder movements by rail are for greater distances than 450 miles, ranging up to transcontinental hauls of 3,000 miles. Therefore, the 450-mile limitation not only would not fit the pattern of forwarder-rail operations, but it would completely nullify the effect of the bill if applied to contracts between forwarders and railroads.

As companion bill H.R. 10831 was reported by the House subcommittee, it contained an amendment which, in substance, would require railroads to treat motor carriers, water carriers and freight forwarders exactly alike in the manner of divisions or contractual charges. That is, if a railroad entered into a joint rate and division without a motor carrier, it would be required to enter into a contractual arrangement with a forwarder on the same basis if the forwarder so requested Conversely, railroads would be required to enter into divisional ar rangements with motor carriers to the same extent and on the same basis as any contractual arrangements which the railroads might make with the forwarders.

The House subcommittee amendment clearly would require complete equality of treatment, and we, of course, cannot oppose equality. However, we drafted the bill as it is, and we do not advocate any changes in its terms. The law has worked satisfactorily insofar as motor carriers are concerned, and we see no reason why it would not work equally well in respect of contracts between forwarders and railroads. The Interstate Commerce Commission advocates three amendments to S. 3714. The Commission offered the same three amendments to H.R. 10831, and we advised the House subcommittee that we objected to one of them. We do not think any of the amendments are necessary and we think the one that would place the burden of proof on the parties to contracts under section 409 would be onerous and burdensome. Nevertheless, if your subcommittee feels that the Commission's proposed amendments are justified, we will raise no objections to their inclusion in the bill. Again, I point out that section 409 has been in the act in its present form for 18 years, and no serious problems have arisen so far as we can determine. We see no reason why the simple change proposed by the bill would not be sufficient.

Certain persons operating as shippers' associations as referred to in section 402 (c) (1) of the act, will no doubt ask here, as they did on the House side, that the bill be amended so as to apply to exempt shippers' associations. These associations are excluded from forwarder regulation because they do not hold themselves out to the public as common carriers. They are simply private shippers who put their freight together rather than shipping it individually. If they should be given the right to make contracts with railroads, it would discriminate against all other shippers who do not have that right.

The strange argument is made by shippers' associations that the bill will put them out of business. How could that be? The bill would put associations out of business only if it should enable regulated forwarders to provide service and rates which the associations cannot match, so that the members would find it to their advantage to ship by common carrier rather than by private forwarder. Members of associations should be happy if freight forwarders could handle all of their freight, instead of only that portion which the associations won't take today. We oppose that amendment.

Basic to all of the arguments of those who oppose the bill is the thoroughly discredited contention that freight forwarders have, and ought to be held to, a dual status. Admitting that forwarders are full common carriers insofar as the shipping public is concerned, the opponents say forwarders are and must remain shippers in their relations with the carriers with whom they deal.

It is incredible that anyone, at this point in time, would seriously make that argument. It has been discredited by precedent, by case law and by statutory enactment. Under common law, for years prior to the enactment of forwarder regulations in 1942, forwarders dealt with motor carriers not as shippers but as connecting common carriers. Under part IV, by statutory authority, forwarders have always dealt with motor carriers not as shipper to carrier but as connecting carriers. Under recent decisions of the Commission and the Supreme Court, common carriers by motor vehicle, water, and express may ship the freight of their customers by railroad and pay the rail published rate, the same as a forwarder, and yet those carriers continue to enter into contracts or divisional arrangements with railroads.

Senator HARTKE. Is it your contention then that the freight forwarder now, in relation to a carrier, is a carrier?

Mr. MORROW. Yes. It is my contention that he always has been. The law has simply not authorized a different arrangement than a tariff arrangement in some cases.

Senator HARTKE. That is your contention. I see what you are saying now. What you are saying is that is your contention. But isn't it also your admission that the law, as it has been interpreted today by the courts, is that you are a shipper and not a carrier in relation to the actual dealing with the carrier?

Mr. MORROW. A shipper for the purpose of paying in tariff rate, yes. Senator HARTKE. I understand that. That is the law as interpreted by the courts today and that is what you want changed.

Mr. MORROW. That is exactly right.

Senator HARTKE. It is your contention, in other words, that you are a common carrier in effect.

Mr. MORROW. In fact and in law. We simply have not been given all of the rights that go with that status.

For 75 years freight forwarders were held to be common carriers, though they frequently, back in the 1800's, sought to have themselves declared to be only agents. But they were consistently held to be common carriers. And in those days they did make any kind of arrangement they could with the railroads.

Senator HARTKE. This comes to the basic question I referred to before and that is this question of rates. If you are characterized as a shipper, as distinguished from a carrier, then-I think you would admit this—then you would be entitled to no more rights than any of the other shippers.

Mr. MORROW. Correct.

Senator HARTKE. But if you are a carrier, it is your contention you have a right to make special arrangements as any other carrier? Mr. MORROW. Yes, sir, subject to controls.

Senator HARTKE. And this is the great point of difficulty, right? Mr. MORROW. That is correct, yes; that is the nub of it.

Senator LAUSCHE. Does the Commission have the right to fix the rates which you charge to your shippers?

Mr. MORROW. Precisely, as it does with all other carriers; yes, sir.

Finally, this bill does not give forwarders a new right to contract— it only extends the right they already have so as to include the railroad portion as well as the motor carrier portion of the through forwarder operation. The Senate Commerce Committee and the Congress disposed of the dual status argument 18 years ago by adding the words "as common carrier" to the definition of the freight forwarder over the same objections of the same interests who now oppose the pending bill. Senate Report No. 1285, filed by the Commerce Committee to accompany S. 2113, dealt specifically with the dual status argument. The report states:

Those who oppose the bill maintain that forwarders and shippers in relation to the carriers which they use, and should not, by statute, be given any different status. There is no basis for this contention.

That is what this Senate Commerce Committee said 18 years ago. And the report continued:

To the committee it seems anomalous to say that a person who is a carrier and is subject to regulation as such, and who is subject to all of the responsibilities, limitations, and restrictions which are imposed by law upon common carriers, is not to be treated as a common carrier for all purposes which are otherwise lawful under the act. (P. 7).

It is unfortunate that the committees of Congress must listen to a reiteration of the same old misconceptions about the status of freight forwarders every time any legislation amending forwarder regulation is before the Congress. But those whose purpose it serves to suppress forwarder competition never give up.

Freight forwarders are common carriers who provide a vital transportation service. They assume every obligation and perform every duty applicable to any common carrier. We submit that it is time freight forwarders were treated as common carriers in their relationships with railroads, as this bill provides.

Mr. SENDER. Mr. Morrow, a question as to ICC law: If railroads can handle freight forwarder traffic at lower operating costs than general shipper traffic as is asserted, what provision of the Interstate Com

merce Commission Act prohibits the railroads from publishing lower rates, taking into account such lower operating costs?

Mr. MORROW. The sections that control rates, govern the fixing of rates. The rates must be nondiscriminatory. You can't go behind a rate on a mixed shipment of shoes and dry goods to find out what it costs the railroad. The rate is fixed on that particular carload of freight.

Now, I don't suggest this as a solution, but I think what your question may be pointed toward is whether the railroads could publish some special type of rates which would have such limitations around them that in practical effect they could be used only by freight forwarders. The possibility exists that the railroads could publish trainload rates, for example. They have published trainload rates in certain instances in the past and there has been a tendency to experiment in that area. If the railroads should publish trainload rates there would be a few limited places where freight forwarders could probably use them to the exclusion of everybody else.

Whether there are areas where the railroads could establish rates that would reflect the cost of forwarder traffic as opposed to the miscellaneous shipper traffic is something that possibly needs to be explored further.

There has been one case of record where a railroad published a rate limited to freight forwarder traffic. It was protested and suspended by the Commission and withdrawn by the railroad and we never had a test of whether that could be done.

Senator LAUSCHE. All right. Thank you very much.

Mr. MORROW. Thank you, Mr. Chairman, very much.

Mr. MOIR. Thank you.

The CHAIRMAN. Mr. Jerry Chambers, president of the Clipper Carloading Co., Chicago, Ill.

STATEMENT OF JERRY CHAMBERS, PRESIDENT, CLIPPER CARLOADING CO., CHICAGO, ILL.

Mr. CHAMBERS. Mr. Chairman, my name is Jerry Chambers, and I am the president of Clipper Carloading Co., a common carrier freight forwarder operating under Permit No. FF-128 issued by the Interstate Commerce Commission. Our general offices are located at 3401 West Pershing Road, Chicago, Ill.

Clipper Carloading Co. was established by me in 1938, and I have been its president since that time.

The bill before you, if passed and enacted into law, will have beneficial and lasting effects upon not only the freight forwarding industry, but the shipping public as well. If it is not passed, gentlemen, I seriously question the ability of the freight forwarding industry to survive and continue to serve the public.

This bill provides that the freight forwarder may take the same agreed rates with the railroads that motor carriers now make. It does not give us any advantage not presently enjoyed by motor carriers. Let us examine the record.

In exhibit A, I have shown a comparison of the tonnage handled by rail LCL, freight forwarders and motor carriers, using 1943 as a base year.

The railroads have lost 95 percent of the less-carload tonnage that they handled. The freight forwarders have lost 8 percent. The motor carriers have gained 280 percent.

The motor carriers have increased their less-carload tonnage at the expense of the railroads and freight forwarders.

The disadvantages under which freight forwarders operate are too great for us to successfully continue.

Compared to the motor carriers, these disadvantages are:

(a) The motor carriers may and do make agreed rates with the railroads which are as much as 40 percent under the rates that freight forwarders must pay. (Recently the railroads have expanded the use of agreed rates with motor carriers considerably.)

This is too much of a price differential. We cannot stand this.

(b) In addition, when agreed rates are not available, they may ship trailers by rail at exactly the same rate the freight forwarders must pay. (A recent Supreme Court decision made this available to the motor carriers.)

(c) They have the alternative choice of shipping a trailer over the highway or by rail piggyback, depending upon which is cheaper.

(d) They may distribute over a much wider territory than freight forwarders because their operating rights permit them to do so. They may also and do purchase short-haul carriers for the purpose of assembly and distribution. Freight forwarders may distribute with their own equipment only in a terminal area. To move beyond that area, we must employ short-haul carriers and we may not purchase these carriers, which are used for assembly and distribution purposes.

Less-carload business is extremely difficult to handle. Proof of this is the fact that the railroads are almost entirely out of the LCL business because their losses in handling it were so great. Motor carriers are becoming more and more selective in handling less-carload traffic and shippers and the Commission are very concerned about this. (See exhibit B, page 33, which shows a few articles that have recently been published.)

Freight forwarders are handling this most difficult type of freight. Our average shipment is 500 pounds very considerably less than the average shipment handled by trucking companies.

The strongest opposition that we have to the passage of the bill comes from various nonprofit shipper associations who pool their freight to accrue lower transportation costs.

These associations in total represent several hundred members, but what members they are! ITOFCA, Inc., has 120 members who do a total of more than $80 billion per year in business. (Exhibit C.) This one cooperative nonprofit group has such members as General Electric Co., General Foods Corp., General Motors Corp., Du Pont, and Montgomery Ward. Pity the small manufacturer and the small retailer who is not a member and, of course, could not possibly join. Then let us review another one Terminal Freight Association (exhibit C-1). They have a total of 42 members. They do over $29 billion in business per year. Sears, Roebuck is the largest member with over $7 billion a year. Pity the poor retail merchant trying to compete with Sears, Roebuck when they are combining their tonnage with 41 other powerful companies, many of them among the largest in the United States. Small manufacturers and small retailers are not wel