in cents per 100 pounds and those referred to as present rates are those in effect at the time of the hearings, except where otherwise indicated.

3

These applications, except No. 13262, and the amendment to No. 11406 hereinafter referred to, relate generally to the present adjustments of export and import rates. When the applications protecting the departures in these adjustments were first assigned for hearing carriers serving the Gulf ports, hereinafter referred to as Gulf lines, and certain of their northern connections which are members of the Gulf Ports Foreign Freight Committee filed application No. 13262 in which they asked for relief to establish and maintain rates between the Gulf ports and the interior territory, hereinafter described, on the bases indicated herein and to maintain higher rates between intermediate points and those ports. On November 23, 1927, after this application was filed, the carriers reaching the south Atlantic ports and certain of their northern and western connections filed an amendment to their application No. 11406 in which they asked for relief to establish and maintain rates between the latter ports and the same interior territory on the bases hereinafter set forth and to maintain higher rates between intermediate points and those ports. While these applications purported to be filed on behalf of carriers operating in the interior territory hereinafter described, officials of the Central Freight Association stated at the hearing that most of the lines members of that association had not only not authorized but objected to the filing of such applications on their behalf and were opposed to the establishment of the rates proposed therein.* With the exceptions hereinafter referred to, applicants are agreeable to the denial of all applications which relate to the present rates on export and import traffic between the points herein considered.

Generally speaking, the purpose of the relief prayed is to enable the applicants to establish an adjustment of rates between points in the interior territory and south Atlantic and Gulf ports which will enable them to participate in the movement of export and import traffic from and to points in the said territory in competition with carriers serving the north Atlantic ports, without reducing rates at intermediate points not affected in the same degree or at all by that competition. It is alleged that the rates at intermediate points not

* At the hearing in this case a list of the carriers parties to this application was introduced which is reproduced in Appendix A hereto.

These carriers are as follows: Akron, Canton & Youngstown Railroad, Northern Ohio Railroad, Ann Arbor Railroad, Baltimore & Ohio Railroad, Bessemer & Lake Erie Railroad, B. C. G. A. Railroad, Central Indiana Railway, Chesapeake & Ohio Railway, C., C., C. & St. L. Railway, Detroit & Mackinac Railway, Detroit, Toledo & Ironton Railroad, D. & T. S. L. R. R., Erie Railroad, E. I. & T. H. Railroad, Grand Trunk Railway, Hocking Valley Railroad, M. & N. E. R. R., Michigan Central Railroad, New York Central Railroad, Nickel Plate system, Norfolk & Western Railway, Pennsylvania system, Pere Marquette Railroad, P. & L. E. R. R., Pittsburgh & West Virginia Railway, Wabash Railway, Wheeling & Lake Erie Railroad, and Youngstown & Ohio Railroad.

affected by competition are on a reasonable and nonprejudicial basis and that to reduce them where reductions are not required by such competition would result in a useless loss of revenue.

TERRITORY INVOLVED

The rates in respect of which relief is sought would apply to and from that section of the United States bounded on the south by the Ohio River, on the east by the eastern boundary of central territory, on the west by a line following the Mississippi River from Cairo, Ill., to St. Louis, Mo., the Missouri River to the western boundary of North Dakota, thence northward to the Canadian border, and on the north by the international boundary. Included in this territory, herein called the interior territory, are the Ohio River points, Cincinnati, Ohio, to Cairo, inclusive, St. Louis, and Missouri River points. For the purposes of this case applicants have divided this. territory into two subterritories. The first includes all points in the territory described east of the line of the Chicago, Indianapolis & Louisville Railway from Chicago, Ill., to Indianapolis, Ind., and the Cleveland, Cincinnati, Chicago & St. Louis Railway from Indianapolis to Cincinnati and is hereinafter referred to as territory A. The second includes all other points in the said territory, including those in the Upper Peninsula of Michigan and is hereinafter referred to as territory B.

The lines serving the Gulf ports also seek relief with respect to rates on traffic to and from territory "west of the Missouri River," which is not clearly defined of record. It will be referred to generally herein as territory C.

The chief reason for the division of the interior territory into the subterritories A and B is that some of the applicants serving the principal Gulf ports reach the Ohio River crossings, Chicago, and most of the important points in territory B with their own rails and are, therefore, able to control the rates to and from these points without the concurrence of the group of carriers whose rails extend from the interior territory to the north Atlantic ports, hereinafter referred to collectively as the eastern carriers. However, except in relatively few instances, applicants serving southern ports do not reach points in territory A over their own rails and can participate in joint through rates to and from such points only with the concurrence of the eastern carriers. Applicants admit that those carriers, who did not join in the applications, can not be required in this proceeding to join in the proposed rates. They contend, however, that we may grant them relief to participate in those rates and that after such relief has been authorized "the way will be open for the publication of the rates when an agreement is reached or other appropriate steps are taken."

The ports.-The ports to and from which the proposed rates will apply may be divided into four groups, according to their geographical location, namely, (1) the south Atlantic group including the ports of Wilmington, N. C., Charleston, S. C., Savannah and Brunswick, Ga., and Jacksonville, Fla.; (2) the ports in southern Florida, including Key West, Tampa, and Port Tampa, hereinafter called the Florida ports; (3) the central Gulf ports, including New Orleans, La., and subports, and Gulfport, Miss., Mobile, Ala., and Pensacola, Fla.; and (4) the western Gulf group, including Beaumont, Galveston, Houston, Orange, Port Arthur, Port Bolivar, and Texas City, Tex., and Lake Charles, La., hereinafter referred to as the Texas ports.

This grouping of the various ports was followed roughly by the applicants in the presentation of their testimony in support of the relief prayed herein. Generally, this testimony applied to the proposed rates to and from all of the ports. However, the conditions at some of the ports are different from those at others and for the purposes of this report, the above grouping will be used in the discussion of these situations.

RATE HISTORY AND PROPOSED REVISION IN GENERAL

Prior to the latter part of the year 1919, with few exceptions, among which were rates on traffic to Cuba, there were no joint through export rates from the interior territory to the Gulf and south Atlantic ports. Effective March 1, 1916, proportional class rates were established from certain Ohio River crossings to New Orleans and Mobile, Ala., to apply on traffic originating in central territory, for export, except to Cuba, Europe, Asia, Africa, Australia, New Zealand, and the Philippine Islands. The object of those rates was to bring about an equalization of rates from points of origin in the interior territory to New Orleans with the joint through rates from the same points to New York. On February 1, 1917, the southern lines established proportional commodity rates from the Ohio River crossings to Gulf ports to apply on traffic originating in central territory, for export, except to the territories described.

The first joint through export rates to apply generally on classes and commodities from the interior territory to south Atlantic ports were established December 1, 1919, and to Gulf ports, December 31, 1919. The railroads at that time were under Federal control and the rates established were authorized by rate authorities 16656 and 16657 of the director of the division of traffic, United States Railroad Administration. It is unnecessary to relate here the events leading up to the establishment of these rates. In Appendix B hereto there are included a copy of an announcement made by the administration

prior to the establishment of the rates in question, and correspondence between the Director General of Railroads and the chairman of the committee of presidents of the railroad corporations in official territory, subsequent thereto. These documents show the reasons for the establishment of the above rates, and that the eastern carriers were then, as they are now, opposed to the establishment of export rates to south Atlantic and Gulf ports that would have a tendency to deflect traffic from their lines to the southern ports.

From points in central territory taking 100 per cent of the New York-Chicago scale of rates referred to as "100 per cent territory" and points east thereof, the rates established by the director general, generally speaking, were the same as the rates on like traffic to New York. This relationship, however, has been destroyed by the general rate changes made since 1920 and the present export rates are relatively more favorable to the southern ports than those originally established.

Import rates. Speaking generally, import rates at present are published from Gulf ports to points in territory B only. For many years these rates on traffic from Europe, Asia, and Africa have been made differentials under the rates on like traffic from New York to the same destinations. This differential basis had its inception in 1908 and was the culmination of a controversy which had existed for many years between the Gulf lines, on the one hand, and the eastern carriers, on the other concerning the relationship which should exist between the ports with respect to the rates to apply on import traffic. In 1907 the two groups of carriers agreed to submit their differences to arbitration. The award of the arbitrators, known as the Todd-Knott award, applied only to import traffic from Europe, Asia, and Africa to points in central territory taking 100 per cent or more of the New York-Chicago scale and Cincinnati, Indianapolis, and points on the Illinois Central Railroad between Effingham, Ill., and Indianapolis. On this traffic the arbitrators recommended that class rates from the Gulf ports governed by official classification, should be made differentials under the standard all-rail domestic rates from New York as follows:

Classes...

Cents per 100 pounds.

1 2 3 4 5 6 18 18 12 8 6 6

In the case of commodity rates it was recommended that where the rate on a commodity exceeded the sixth-class rate, the differentials under the rate from New York should be the same as the differential on the class on which the rate was nearest such commodity rate; that where the commodity rate was exactly intermediate between two class rates, the differential on the lower class rate should be used, and that on commodities taking rates the same as sixth class

or lower the sixth-class differential should apply. These recommendations were adopted by the carriers and rates were established on that basis.

The relationship between the Gulf and north Atlantic ports resulting from the establishment of import rates on the above basis continued until June 25, 1918, when the Director General of Railroads canceled all import rates from north Atlantic ports and allowed the corresponding rates from the Gulf to remain in effect in modified form. This relationship was further disturbed in 1920 by the general increases authorized in Ex parte 74, Increased Rates, 1920, 58 I. C. C. 220, as a result of which the rates from north Atlantic ports were increased 40 per cent, whereas the rates from the southern ports were increased only 33% per cent. This produced differentials more favorable to the Gulf lines than those fixed in the Todd-Knott award. Changes from time to time in rates from one port without corresponding changes in the rates from others have also affected the differentials.

The eastern carriers have never conceded that the Todd-Knott differentials were, or are justified. They admit that following the decision in Ex parte 74, Increased Rates, 1920, supra, at which time the Todd-Knott differential relationship between the import rates from the Gulf and the north Atlantic ports was destroyed, they sought to have that relationship restored but contend that they did this to correct a situation more unfavorable to them than that which prevailed prior to the establishment of the increased rates authorized in the above-mentioned proceeding. In 1920 they began negotiations with the southern carriers with a view to securing a readjustment of the entire port relations on foreign traffic, and continued their efforts in that direction until just prior to the commencement of the hearings in this proceeding. They were unable, however, to reach an agreement with carriers serving the southern ports and the negotiations were discontinued when the notice of the hearing in this proceeding was issued.

Specific import rates from south Atlantic ports to territory B were not established generally prior to the year 1922. Such rates from Savannah to points in central territory reached by the Illinois Central Railroad and to certain points in western trunk-line territory were established by the Central of Georgia Railway, September 15, 1909. Import rates were published from Charleston and Jacksonville by the Southern Railway in 1920, and subsequently other lines serving the latter ports published rates to destinations in central territory and the Middle West on the same basis as those maintained by the Central of Georgia from Savannah.