4

and prevent the possibility of its being used to the detriment of shippers and other carriers.

As previously pointed out, the Commission has always recognized that freight forwarders have a unique legal status under the Interstate Commerce Act in that a forwarder has certain characteristics of both a shipper and a carrier. The effect of this bill would be to place forwarders in the role of preferred rail shippers and would allow a freight forwarder to negotiate with a railroad or railroads on the level of charges for the transportation provided for the freight forwarder's use. Although the resulting contracts would be filed with the Commission and open to public inspection, they would not be published or otherwise subject to the same regulatory oversight that rates and charges published by common carriers subject to Parts I, II, and III of the Act normally are. Viewed in this light, we believe that certain safeguards should be thrown around these arrangements, not only as presently provided in present section 409 (a), as that section relates to contracts between motor common carriers and forwarders, but also under the amendment of that section which is proposed by this bill. These amendments would include the following: (1) A revision of the second proviso of present section 409 (a);

(2) Place the burden of proof on the parties to contracts between freight forwarders and common carriers subject to Parts I and II of the Act for the transportation of freight when such contracts are called into question; and

(3) Provide penalties for the offer, grant, giving, solicitation, acceptance, or receipt of any rebate or discrimination resulting from the transportation of property at compensation less than that specified in such contract. The Commission has made similar legislative proposals of this nature in the past. For example, the Commission recommended, in its 69th Annual Report, to the 84th Congress that these and other amendments be made to section 409. While this recommendation was subsequently introduced in 1957 in the 85th Congress as H.R. 4393 and S. 1382, no hearings were held on this measure. However, the Commission earlier had alluded to these recommendations in commenting on H.R. 9548 at pages 289-91 of the 1956 hearings in a letter to Chairman Priest of the House Interstate and Foreign Commerce Committee. In general, these recommendations reflected our belief that, while a freight forwarder legally is a shipper when dealing with other modes of transportation, its relationships with these other carriers are sufficiently distinct and different as opposed to any other large shipper or exempt shipper association, established under section 402 (c) of the Act, so as to warrant special consideration. With some modifications, our position on this bill is similar to that taken on these earlier proposals. Turning now to the amendments that we are proposing, it should be pointed out that, since these amendments will not only amend section 409 (a) but also present section 409 (b) and, in addition, add several additional paragraphs to that section, line 3 of this bill should be changed by deleting the words "subsection (a) of” in order to reflect the fact that with our amendments all of section 409 would be subject to revision. The first amendment that we are proposing would change the second proviso in present section 409 (a) to read as follows:

"And provided further, That in the case where line-haul transportation by common carriers of motor vehicles is for a total distance of 450 highway miles or more, such contracts shall not permit payment to such carriers of compensation which is lower than would be received under rates and charges established and filed by such common carriers under the provisions of Part II of the Act."

In essence, the purpose of this change is to remove the present language of this proviso in section 409 (a) which is limited in its application to transportation by motor common carriers of truckload lots between concentration points and break-bulk points. The effect of this amendment would be to apply the second proviso in all cases where the line-haul transportation by motor common carriers is for a distance of 450 highway miles or more. This amendment is proposed because (1) it would prevent the circumvention of this prohibition (through the use of contract rates which are not subject to any minimum specified weights) by eliminating the term "truckload lots"; and (2) would eliminate the necessity for the Commission to determine what is meant by "truckload lots" as used in the present law, a term which the Commission has considered almost impossible to define with any sufficient exactness. In this connection, our recent report in Ex Parte MC-68, Removal of Truckload Lot Restrictions, 106 M.C.C. 455, we determined that the removal of "truckload lot" restrictions in all outstanding motor common carrier certificates was required by the public convenience and

necessity, one of the principal reasons for this decision being the fact “[T]hat truckload lot restrictions present problems of interpretation and enforcement", 106 M.C.C. at p. 483.

Our second amendment would add a new paragraph (c) to the present law by providing as follows:

"(c) At any hearing involving an investigation into the terms, conditions, and compensation of any contract, the burden of proof shall be upon the parties thereto to show that the terms, conditions, and compensation thereof are not inconsistent with the provisions and standards set forth in subsection (a) of this section."

This new paragraph would correct what the Commission has considered to be a major defect in the present law by making it clear that the burden of proof shall be upon both the carrier and the forwarder parties to any contract to show that the terms, conditions, and compensation are not inconsistent with the substantive standards of section 409 (a) when such contracts are called into question. Although section 406 (e) provides, as do similar provisions in Parts I, II, and III of the Act, that the burden of proof shall be upon the proponent of a changed rate, this provision, like its counterparts, relates to the investigation and suspension of the forwarder's own rates that are published for the use of the public. In this regard, we would point out that the Commission in its 1956 comments on H.R. 9548 suggested that it be given the power to suspend and investigate these contracts, similar to the power it has over ordinary commercial rates and charges. At this time, however, we know of no need to recommend such a fundamental change in the present law.

Our third amendment is made up of two additional new paragraphs designated as "(d)" and "(e)", respectively. They are as follows:

"(d) No common carrier by motor vehicle or railroad which has entered into a contract with a freight forwarder for the transportation of property as authorized in this section shall charge, demand, collect, or receive less compensation for such transportation of property between the points named in such contract than that which is specified in the contract filed with the Commission; nor shall any such motor carrier or railroad refund or remit in any manner or by any device any portion of the compensation so specified, nor extend to any freight forwarder or person any privileges or facilities in the transportation of property except such as are specified in such contract.

"(e) It shall be unlawful for any person, persons, or corporation to offer, grant, or give, or to solicit, accept, or receive any rebate, concession, or discrimination in respect of the transportation of any property by any common carrier by motor vehicle or railroad under the provisions of this section whereby such property shall by any device whatever be transported at less compensation than that specified in the contract of such carrier and filed with the Commission, or whereby any other advantage is given or discrimination is practiced. Every person or corporation, whether common carrier by motor vehicle, railroad or freight forwarder, who shall, knowingly, offer, grant, or give, or solicit, accept, or receive any such rebate, concession, or discrimination shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be punished by a fine of not less than $200 nor more than $2,000 for each offense."

We suggest that these new paragraphs be added to section 409 in order to insure better observance of the terms, conditions, and compensation of such contracts and to provide specific penalties for any rebate, concession, or discrimination resulting from the transportation of property at compensation less than that specified in such contracts. The purpose of these provisions is to prevent the possibility of abuse which could operate to the detriment of both the common carriers utilized by forwarders, other forwarders, and members of the shipping public. Although other sections of Part IV of the Act, specifically section 421, provide for penalties for violating the provisions of Part IV, there appears to be some question as to whether or not the enforcement provisions of this part and/ or Parts I and II would be applicable to these contracts. It is for this reason that we are recommending specific language to adequately cover this situation. In summary, it is our basic position that the decision to permit forwarders to negotiate special contracts for the purchase of underlying transportation from the railroads is essentially one that will necessarily have to be determined on the basis of all of the economic and other factors presented to the Committee in the course of its consideration of this bill. We believe, however, if the principles expressed in this bill warrant favorable action, that the amendments we have proposed should be included. In our opinion, these amendments would not

detract from the basic purposes of S. 3714 and their inclusion, in our judgment, would render this bill more consistent with the public interest.

DEAR MR. CHAIRMAN: This refers to your request of July 3, 1968, for the Commission's comments on S. 3714 which would enable freight forwarders under Part IV of the Interstate Commerce Act to enter into contracts with railroads to utilize the services of railroads and to pay agreed compensation therefor. The compensation to be paid by the Part IV freight forwarders to the railroads may be lower than such railroads would receive under published rates or charges established under Part I of the Interstate Commerce Act.

The Federal Maritime Commission has responsibility for the regulation of ocean transportation in our foreign commerce under the Shipping Act, 1916, as amended, and in our domestic offshore ocean transportation under the Intercoastal Shipping Act of 1933, as amended. The persons whom we regulate are common carriers by water and other persons who carry on the business of forwarding or furnishing wharfage, dock, warehouse or other terminal facilities in connection with a common carrier by water. Among the persons regulated by the Federal Maritime Commission are common carriers by water who do not operate their own vessels but utilize the services of underlying regulated ocean common carriers. These are commonly referred to as "non-vessel operating common carriers". Actually, most non-vessel operating common carriers in our foreign commerce are the counterparts of domestic freight forwarders who_are certificated and regulated by the Interstate Commerce Commission under Part IV of the Interstate Commerce Act.

The Interstate Commerce Commission has exclusive jurisdiction over the activities of freight forwarders under Part IV of the Interstate Commerce Act, and is the agency which would be charged with the implementation of this proposed legislation. However, the Federal Maritime Commission is concerned with any improvements in our domestic land transportation because of the import and impact it will have upon the development of through intermodal containerized cargo movement which necessarily requires efficient coordination between domestic carriers and ocean common carriers in our foreign commerce.

As the Federal Maritime Commission has noted in a recent annual report to the Congress, containerization is probably the most significant technological development that has taken place in ocean transportation since the advent of the steamship. The benefits to shippers which flow from containerized transportation are several and have been demonstrated effectively in our domestic offshore transportation. These benefits cannot, however, be fully achieved unless the regulatory climate is favorable and unless shippers can eventually be afforded through single factor rates and single through bills of lading between interior points in the United States and interior points in foreign countries.

The so-called "Container Revolution" is now in its incipient and most explosive stage in the important North Atlantic trade and in the trans-Pacific trade. These trades, in terms of volume and value of shipments, are the most important trades in our foreign commerce. Realistically, we must recognize that Part IV freight forwarders are common carriers. In this respect, freight forwarders hold themselves out to handle the shipments of all shippers offering cargo under their tariffs. They issue through bills of lading and they accept common carrier liability to the shipper. Freight forwarders, as common carriers, handle small or medium size shipments and their vital role in the overall scheme of our national transportation system is fulfilled in the assembling and consolidation of such shipments.

From the point of view of regulatory authority, Part IV freight forwarders are in a position to offer containerized transportation in our foreign oceanborne commerce for small or medium size shipments. To the extent the services of Part IV freight forwarders in our domestic inland transportation can be im

proved, this will expedite and improve the development of through containerized cargo movement in our foreign trades.

I shall not be so presumptuous as to attempt to analyze this amendment to Section 409 of the Interstate Commerce Act, the administrative precedents thereunder or the prior legislative history. We favor improvement and expansion of all modes of transportation and their increased cooperation in the expansion of through intermodal foreign trade. If in the judgment of this Committee the legislation here under consideration, introduced by Senator Smathers, is considered desirable for the purpose of enabling those common carriers to provide an improved service to the shipping public and is not inconsistent with our overall transportation policies, then such legislation should be favorably acted upon in the public interest.

The Bureau of the Budget has advised that there would be no objection to the submission of this letter from the standpoint of the Administration's program.

Sincerely yours,

JOHN HARLLEE, Rear Admiral, U.S. Navy (Retired), Chairman.

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., July 23, 1968.

Hon. WARREN G. MAGNUSON,

Chairman, Committee on Commerce,
U.S. Senate.

DEAR MR. CHAIRMAN: We have your letter of July 3, 1968, in which you ask for our comments on S. 3714.

S. 3714 proposes to amend Section 409, Part IV, of the Interstate Commerce Act, 49 U.S.C. 1009, to permit contracts between freight forwarders and railroads. An identical bill, H.R. 10831, is pending in the House of Representatives; hearings on H.R. 10831 were held in January 1968 before the Transportation and Aeronautics Subcommittee of the Committee on Interstate and Foreign Commerce. As the law now stands, Section 409 authorizes contracts between freight forwarders and motor carriers; nowhere in the act are contracts permitted between railroads and freight forwarders.

Freight forwarders are any persons who arrange for and assume responsibility as common carriers for the transportation of goods via common carriers subject to Parts I, II, or III of the act; in relation to the common carriers whose services they utilize, freight forwarders are viewed as occupying the status of shippers. Generally, forwarders assemble small lots of freight and consolidate them into truckloads or carloads; from the assembly point the truckload or carload is transported in line-haul service to a break bulk point from which the several small lots are distributed to their respective consignees. The forwarder charges his shippers his published less truckload or less carload rates; in turn he pays the line-haul carrier its carload or truckload rates and the difference is his profit. Under section 409, freight forwarders may, within certain limitations, contract with motor carriers for services and rates different from the motor carriers' published tariff services and rates. But forwarders may not make such arrangements with rail carriers. They may utilize only services offered in the applicable rail tariffs and must pay the applicable tariff rates. The purpose of S. 3714, then, is to promote uniformity in treatment of carriers by authorizing a somewhat similar (but broader) right of contract between forwarders and rail carriers to that allowed between forwarders and motor carriers. This kind of legislative proposal has been stimulated by increased containerization of both domestic and export traffic; it seems to be a step in the direction of improved service to the general public, including particularly containerized transportation of medium or small shipments in foreign commerce at single factor through rates on single through bills of lading.

S. 3714 rates to matters primarily within the area of Congressional policy making. If enacted, it would not affect the functions and operations of our Office to any appreciable extent. Since it apparently would contribute to fair and impartial treatment of carriers and improved service to shippers, we would not object to its favorable consideration by your committee.

Sincerely yours,

FRANK H. WEITZEL,

Assistant Comptroller General of the United States.

Senator LAUSCHE. The first witnesses this morning are Mr. G. Russell Moir, chairman, board of governors and Giles Morrow, general counsel, Freight Forwarders Institute.

Mr. Russell Moir.

STATEMENT OF G. RUSSELL MOIR, CHAIRMAN, BOARD OF GOVERNORS; AND GILES MORROW, GENERAL COUNSEL, FREIGHT FORWARDERS INSTITUTE

Mr. MORROW. Mr. Chairman, my name is Giles Morrow, and if it is satisfactory to you I will make a few brief comments and then Mr. Moir will testify and then I will have a few comments following his testimony.

Senator LAUSCHE. All right, proceed.

Mr. MORROW. I am appearing for the Freight Forwarders Institute as its general counsel in support of S. 3714. The institute, national trade association of the freight forwarding industry, has its headquarters at 1819 H Street NW., Washington, D.C.

The principal witness for the institute will be Mr. G. Russell Moir, who is here with me. I will have some brief comments after Mr. Moir concludes. Preliminarily, it should be pointed out that on June 9, 1967, during the hearings before your subcommittee on S. 751, I presented a draft of the pending bill, S. 3714, and my comments respecting the draft appear at pages 158-166 of the printed transcript of hearings on S. 751. Hearings have been held on companion bill H.R. 10831 by the Subcommittee on Transportation and Aeronautics of the House Committee on Interstate and Foreign Commerce and that bill, with an amendment, has been reported to the full house committee.

Mr. Chairman, with your permission, I now introduce Mr. G. Russell Moir, chairman of the board of governors of the Freight Forwarders Institute.

Senator LAUSCHE, Mr. Moir.

Mr. MOIR. Mr. Chairman, I deeply appreciate this opportunity to explain why the freight forwarding industry considers it urgently necessary that S. 3714 be passed at this session of Congress.

I speak for the industry as chairman of the board of its natural trade association, the Foreign Forwarders Institute. For another and more personal reason I am also here. The U.S. Freight Co., of which I am chairman and chief exectuive officer, owns and operates a number of freight forwarders, large and small, and domestic freight forwarding forms the nucleus of our transportation activity.

Perhaps I should explain that through its subsidiaries U.S. Freight Co. provides transportation on a world-wide basis. We try, to the best of our ability to furnish complete transportation. We pioneered long distance piggybacking in this country and we now are providing through, single-bill-of-lading container service to an increasing number of foreign countries. We provide fishyback service, using our own roll-on-roll-off trailerships, between the United States and Central America as well as the Grand Bahama Islands. On the strength and vitality of our domestic operations depend the growth and future of our widespread transportation services, and this legislation is a key to the progress of freight forwarding in the United States.