TO AMEND SECTION 409 OF PART IV OF THE INTERSTATE COMMERCE ACT, AS AMENDED, TO AUTHORIZE CONTRACTS BETWEEN FREIGHT FORWARDERS AND RAILROADS TUESDAY, SEPTEMBER 10, 1968 U.S. SENATE, COMMITTEE ON COMMERCE, SURFACE TRANSPORTATION SUBCOMMITTEE, Washington, D.C. The subcommittee met at 9 a.m. in room 5110, New Senate Office Building, the Honorable Frank J. Lausche, chairman of the subcommittee, presiding. Present: Senators Lausche, Hartke, and Pearson. Senator LAUSCHE. The meeting will come to order. This is a continued hearing on S. 3714. There will be inserted in the record a copy of the comments of the Department of Transportation and three statements that were submitted for the record. Also telegrams received from various shippers and shipper associations opposing the bill unless shipper associations are included in the rights that are sought to be granted to the freight forwarders. (The material referred to follows:) OFFICE OF THE SECRETARY OF TRANSPORTATION, Hon. WARREN G. MAGNUSON, Chairman, Committee on Commerce, Washington, D.C. DEAR MR. CHAIRMAN: This is in reply to your request for the views of this Department concerning S. 3714, a bill to amend section 409 of part IV of the Interstate Commerce Act, as amended, to authorize contracts between freight forwarders and railroads. Since this proposal involves considerations present in S. 751, a bill now before the Committee, dealing with joint rates and through movements between surface transportation common carriers subject to the jurisdiction of the Interstate Commerce Commission, our comments will also make reference to the latter bill. The views expressed in this letter differ only slightly for the position of the Department contained in a letter to Senator Lausche dated September 21, 1967 in which we responded to his request for views on a Freight Forwarders Institute proposal. In the comments of the Department of Transportation of August 25, 1967, supporting S. 751, we noted in passing that "this legislation would at long last bring greater equality of regulation among all of the various surface modes of transportation subject to the Interstate Commerce Act except freight forwarders, an omission from the bill the Department regards as unfortunate." The Department of Transportation continues to be of the opinion that freight forwarders should be included within the scope of S. 751. Forwarders perform a much-needed public service, particularly for shippers and consignees of small shipments. In this regard, it should be emphasized that one of the primary purposes of S. 751 is to aid in the movement of such traffic. Moreover, with the rapid development of traileron-flat car movements by the railroads, we believe that as a matter of competitive equality freight forwarders should be permitted to participate to a greater degree in the different TOFC plans and other types of joint arrangements with railroads since many of these arrangements are now available to motor carriers. For example, with the decision of the Interstate Commerce Commission in Ex Parte 230, Substituted Service-Piggyback, 322 I.C.C. 301, recently affirmed by the Supreme Court, the so-called "open tariff" regulations of the Commission permit motor carriers to share in plan III TOFC operations. Forwarders, however, are excluded from participating in plan I arrangements, a valid coordinated joint intermodel service. S. 3714, however, takes a somewhat different approach. It would amend section 409 (a) of the Interstate Commerce Act so as to permit freight forwarders to enter into contracts with rail common carriers subject to the limitation that the parties to these contracts establish them on just, reasonable, and equitable terms which shall not unduly prefer or prejudice either party to the contract or any other freight forwarder and which shall be consistent with the National Transportation Policy. With this amendment, freight forwarders would be placed in the same position with regard to railroads as they now are under present law with regard to motor carriers, except that as to contracts involving the line-haul transportation of truckload lots of forwarder traffic between concentration points and break-bulk points where the distance is 450 miles or more, contracts with motor carriers cannot provide for lesser compensation to the motor carrier party than that which the motor carrier would receive under its regularly established rates or charges under part II of the Interstate Commerce Act. As noted above, we are of the opinion that joint rate arrangements would be an appropriate arrangement for freight forwarders in dealing with railroads and motor carriers. Nevertheless, we recognize that there is also merit to the approach of extending the scope of section 409 (a) to include the making of contracts between the railroads and the forwarders. As a matter of fair and impartial regulation, it would seem appropriate to accord the forwards the same treatment in dealing with both railroads and motor carriers. The 450-mile limitation, however, which now exists under present law and which would be retained insofar as forwarder contracts with motor carriers are concerned under S. 3714, should be discarded. It would appear that the limitation is largely arbitrary in nature and that with the advent and growth of trailer-on-flat car movements, the rights conferred on forwarders by section 409 (a), without the mileage limitation, need not be feared as according motor carriers the ability to underbid the railroads on profitable forwarder traffic. On balance, the Department would favor the extension of S. 751 to include freight forwarders. As an alternative, the Department would have no objection to S. 3714 amended, however, so as to eliminate the 450-mile limitation of the present law. The Bureau of the Budget advises that from the standpoint of the Administration's program, there is no objection to the submission of this report for the consideration of the Committee. Sincerely, Re Senate bill S. 3714. Hon. FRANK J. LAUSCHE, JOHN L. SWEENEY, Assistant Secretary for Public Affairs. KAYSER-ROTH HOSIERY CO., INC., Burlington, N.C. 27215, September 3, 1968. Chairman, Surface Transportation Subcommittee of the Senate Committee on Commerce, Washington, D.C. DEAR SIR: We are a leading hosiery manufacturing company with twelve plants located primarily in the Southern States. In shipping to all 50 states, we are very interested in Senate Bill S-3714 which calls for an amendment to Section 409, Part IV of the Interstate Commerce Act, to authorize the freight forwarder industry to contract with the railroads. Historically, hosiery is a very competitive business and we are vitally concerned with the cost of transportation. If this bill is allowed to pass, we see a more healthy, competitive situation between various modes of transportation. Where such competitive forces exist, the shipper does receive the advantages of better service, a factor that does interest us. Also, we are vitally concerned with the so-called small shipments. At the present time with motor carrier routing restrictions becoming more evident daily, it appears that the freight forwarder industry may be the only ultimate answer to our needs in obtaining service to many "out of the way" points. If allowed to become enacted, we feel that this Senate Bill will be beneficial to the shipping public and be in line with the National Transportation Policy. Sincerely, R. L. DRAKE, STATEMENT BY MILTON STRICKLAND, JR., OFFICE MANAGER, DEERING-MILLIKEN, INC., CALLAWAY DIVISION, KEX PLANT, LA GRANGE, GA. My purpose for this testimony is to seek your favorable support and consideration of Senate Bill S. 3714, which, if passed, will enable the Freight Forwarders to make contracts with the railroads. I am employed by a manufacturer of Industrial Wiping Cloths. These cloths are shipped from LaGrange, Georgia to Industrial Laundries and Linen Suppliers located in major cities of the United States, Canada, Hawaii and Puerto Rico. It has been our policy to use Freight Forwarders for our shipments to the West Coast. During the past several years we have received excellent service on these shipments. I am most interested in the passage of this bill in order to maintain this service and enable the Freight Forwarders to hold the line on increasing costs and rates. This bill will authorize the Freight Forwarders to enjoy the same privileges motor carriers have been enjoying for some time. Passage of this bill will insure us a continued good service for our small shipments. Most of the major railroads have discontinued accepting small LCL shipments. Our customers receiving small shipments must have transportation service available to them as well as our customers who are in a position to purchase in large lots. We feel passage of this bill will allow the Freight Forwarders to maintain their service on small shipments and enhance coordination of Freight Forwarders' service with their underlying transportation. Our experience with the Freight Forwarders has been satisfactory. Their rates are in line, and we plan to continue to use them. I feel this bill passage will be in the interest of the shipping public and our national transportation policy. I very deeply appreciate your acceptance of this testimony, making it a part of the record, and trust Senate Bill S. 3714 will be acted upon favorably by all concerned. Thank you. STATEMENT OF HOWARD R. STEFFEN, TRAFFIC MANAGER OF COATS & CLARK, INC., AND COATS & CLARK'S SALES CORP., HEADQUARTERS ADDRESS: 430 PARK AVENUE, NEW YORK CITY 10022 Coats & Clark, Inc., and its Divisions are manufacturers principally of cotton yarns and threads; wool and synthetic zippers; wood spools and novelties; cotton tapes and narrow fabrics; die-cast zinc products; nylon textile machine parts, and stainless steel dye springs. The majority of its products are distributed by Coats & Clark's Sales Corp. in small-shipment lots to retailers, chain stores, jobbers, supermarkets and garment manufacturers. Coats & Clark and its predecessor companies have been in business for over 150 years. Our Company is vitally interested in Bill S. 3714, which has to do with revision of Section 409 of Part IV of the Act. We are strongly of the belief that freight forwarders should have equal status with other carriers in entering into contracts with basic carriers. We are aware that freight forwarders may enter into contracts to a certain degree with motor common carriers and that motor common carriers and railroads may enter into contracts as evidenced by the so-called Plan I for piggyback operations. We firmly believe that it would be beneficial and in conformance with the National Transportation Policy to enable freight forwarders to achieve equal status with other common carriers. It is felt that if this bill is passed, the public will benefit by better service and that costs of service might be held stable, or reduced a small degree, by allowing coordination with other types of carriers. The American consumer is the one who evenutally bears the burden of rising prices in which transportation expenses are a substantial factor. Government 20-161-68-5 itself is a huge purchaser of transportation; therefore, government costs could be benefitted in part by approval of the bill. Freight forwarders have the inclination and tendency to handle all commodities and do not restrict themselves as other carriers have done or are doing. It is known that less-than-carload service by rail has dwindled to the smallest degree. Many motor common carriers are penalizing small shipments and are refusing in many instances to handle connecting-line traffic. The Interstate Commerce Commission has set up a special committee to study this problem, as you are no doubt aware. We are and have been substantial users of freight forwarders, among other types of carriers; presently, we are shipping about 500,000 pounds per year in freight forwarder service. We have generally found their services dependable, useful and adequate. This is particularly so in long-haul, small-shipment service where we have to deal with only one carrier, origin to destination, and do not have to pay combination of rates or minimum charges as assessed by other carriers. In fact, the ICC is considering asking Congress for additional powers to eventually enable shippers to request and obtain such through service by other common carriers. We wish to thank the Committee and its Chairman, Senator Frank J. Lausche, for the opportunity of presenting this statement. Senator FRANK J. LAUSCHE, THE CARBORUNDUM Co., Niagara Falls, N.Y., September 9, 1968. Chairman, Senate Subcommittee on Surface Transportation, Senate Office Building, Washington, D.C.: The Carborundum Company a major manufacturer of abrasives and allied products with executive offices located at Niagara Falls, New York, and a member of a shippers association opposes S. 3714 unless it is amended to include within its terms nonprofit shippers associations operating under section 402 (c) of the Interstate Commerce Act passage of S. 3714 in its present form will severely prejudice the operations of shippers associations. H. A. HARRINGTON. THE L. C. DOANE CO., Essex Conn., September 9, 1968. Senator FRANK J. LAUSCHE, We oppose S. 3714 unless amended to include within its terms nonprofit shippers associations operating under section 402 (c) of the Interstate Commerce Act passage of S. 3714 will severely prejudice the operations of shippers associations. L. C. DOANE, Jr., Vice President. THE VERPLEX CO., Essex Conn., September 9, 1968. Senator FRANK J. LAUSCHE, We oppose S. 3714 unless it is amended to include within its terms nonprofit shippers associations operating under section 402 (c) of the Interstate Commerce Act. Passage of S. 3714 will severely prejudice the operations of shippers associations. R. F. SCHNELLER, President. Senator LAUSCHE. The first witness this morning will be Mr. Charles Baxter, chairman of the Traffic Executive Association, Eastern Railroads, New York. STATEMENT OF CHARLES S. BAXTER, CHAIRMAN, TRAFFIC EXECUTIVE ASSOCIATION, EASTERN RAILROADS, 2 PENNSYLVANIA PLAZA, SUITE 500, NEW YORK, N.Y., 10001, ACCOMPANIED BY JOHN A. DAILY, ASSISTANT GENERAL SOLICITOR, PENN CENTRAL CO., 466 LEXINGTON AVE., NEW YORK, N.Y. 10017 Mr. BAXTER. Good morning, Mr. Chairman. On behalf of the Eastern Railroads, I want to express our appreciation for this opportunity. My name is Charles S. Baxter. I am chairman of the Traffic Executive Association, Eastern Railroads, with offices at 2 Pennsylvania Plaza, suite 500, New York, N.Y. I appear before this subcommittee at the direction and on behalf of the Traffic Executive Association, Eastern Railroads, to express that organization's opposition to S. 3714 which would amend section 409 of part IV of the Interstate Commerce Act so as to authorize freight forwarders to enter into contracts with common carriers by railroad for transportation at other than the published rates then and there on file with the Interstate Commerce Commission. The Traffic Executive Association, Eastern Railroads, is an organization made up of the principal railroads operating in the territory east of the Mississippi River and north of the Ohio River. The member railroads on whose behalf this statement is made are listed in appendix A hereto. The association, hereinafter referred to as the "TEA," is generally charged with the responsibility of reviewing all rates, fares, classifications and charges established by or which may in any event affect its member carriers. Its members are authorized to enter into joint consideration and determination of such matters pursuant to permission of the Interstate Commerce Commission under section 5 (a) of the Interstate Commerce Act. S. 3714 is identical to H.R. 10831 which was introduced during the first session of the 90th Congress. At the hearings on H.R. 10831 held earlier this year before the Subcommittee on Transportation and Aeronautics of the House Committee on Interstate and Foreign Commerce, Mr. C. L. Smith, a member of my staff, appeared and testified in opposition to H.R. 10831 on behalf of the TEA. The TEA's position has not changed in the interim and the members of this organization, TEA, are no less opposed to S. 3714. Under the scheme of legislation governing interstate commerce by rail, highway, and water, a freight forwarder occupies the same position as any other shipper, although it is itself certificated to handle and arrange for the transportation of the goods of others. Beyond the occasional service of local pickup and delivery between railroad stations and the platforms of its clientele, a freight forwarder does not provide the underlying transportation for the intercity movement of freight. By definition in part IV of the act, a freight forwarder is one who "utilizes, for the whole or any part of the transportation of such shipments, the services of a carrier or carriers subject to chapters 1, 8, or 12 of this title." The charges assessed by any railroad for the transportation of freight forwarder traffic are those appearing in the published tariffs. These charges are accordingly available, as a matter of information, to competing railroads, all forwarders, and the shipping public generally. |