But to the west coast, as far as we can determine, apparently the motor carriers are permitted to ship 80,000 pounds on a car at the same price as shippers are only allowed to ship 60,000 pounds. I think there are many inequities in that area. However, the existence of those inequities in my opinion would not warrant aggravating the situation further as would be proposed by this bill. Mr. ADAMS. How about rolling it back in the area of motor carriers and special contract with the freight forwarders? Mr. ALLEN. My position has always been that the law as originally passed in 1942, section 409, is correct. I recall it very well. The original law as passed did not permit contracts. It gave the freight forwarders a period of time in which to eliminate so-called concurrences they had with motor carriers. The time was extended and it was extended again. I think it was extended two or three times. Then in 1950 you had the present law which came into effect which I was not in favor of, and I did not believe was good transportation. Mr. ADAMS. Thank you, Mr. Chairman. Mr. FRIEDEL. The hearing will stand recessed. If we get permission we will come back at 2 o'clock. We will recess until 2 o'clock and try to finish up the other witnesses for today. Thank you, gentlemen. (Whereupon, at 12:20 p.m., the subcommittee recessed, to reconvene at 2 p.m.) AFTER RECESS (The subcommittee reconvened at 2 p.m., Hon. Samuel N. Friedel, chairman, presiding.) Mr. FRIEDEL. The committee will come to order. We have a continuation of the hearings on H.R. 10831, to amend section 409 of part IV of the Interstate Commerce Act, as amended, to authorize contracts between freight forwarders and railroads. Our first witness this afternoon will be Mr. D. R. Macdonald, general traffic manager, City Products Corp., Des Plaines, Ill. STATEMENT OF DOUGLAS R. MACDONALD, PRESIDENT, TERMINAL FREIGHT COOPERATIVE ASSOCIATION, CHICAGO, ILL. Mr. MACDONALD. Thank you, sir. Mr. Chairman, my name is Douglas R. Macdonald. I am general traffic manager of City Products Corp. My company is a member of Terminal Freight Cooperative Association, a nonprofit shippers association comprised of 42 companies, as shown on the list, submitted herewith. This association ships to and from most major cities in the United States and has been in existence for more than 25 years. Our operations are basically similar to a freight forwarder in our use of railroads and motortrucks as the underlying carriers. 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 H.R. 10831 for three major reasons: 1. We do not believe a railroad should charge a lesser amount to a freight forwarder than to a shippers association such as ours 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 point 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 and available to all users. Shippers associations, such as ours, purchase the services of the railroads and motortrucks at rates and charges published in tariffs. We feel that a freight forwarder purchasing the same service under the same conditions should pay the same published rates and charges. 2. If a freight forwarder needs special rates for unusual conditions of tonnage, transit time, or other requirements, he can secure them through present ratemaking procedures. The important point is that these special rates will be published in tariffs and available to any other freight forwarder, shippers' association or shipper who has similar unusual conditions or requirements. The freight forwarders, in using and correlating the services of the railroad and motor trucks 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 shippers' associations do. 3. There are no effective means of assuring that the rates granted to freight forwarders under section 409 (a) will be, as the bill provides, "just, reasonable, and equitable terms, conditions, and compensation which shall not unduly prefer or prejudice any of such participants or any other freight forwarder and shall be consistent with the national transportation policy declared in this act." Nor, might we add, are there any safeguards that such terms, conditions, and compensation are not prejudiced against other users of the carriers. Although the act sets out that contracts should be subject to the above standards and that the ICC can hold hearings and investigate whether the contracts are, in fact, in accordance with these standards, either on its own motion or on any other interested party's motion, this is not possible as a matter of practicality. The burden of proof is on the complaining party, either the aggrieved shipper or the ICC, and these parties certainly would not have access to the facts and figures necessary to determine if the contract is just, reasonable, equitable, and within the National Transportation Policy. The fact that so few contracts have been challenged successfully in the history of this act shows there is no practical way of testing whether the contracts are just, reasonable, and equitable within the national transportation policy. Without an effective way of testing whether a contract, in fact, complies with the standards, the standards themselves are of absolutely no value and leave solely to the judgment of the freight forwarders and carriers whether the contracts are just, reasonable, equitable, and within the national transportation policy. Thank you for your time, and we urge your consideration in voting against H.R. 10831. (The membership list referred to above follows:) MEMBERSHIP LIST OF TERMINAL FREIGHT COOPERATIVE ASSOCIATION Allied Purchasing Corp., New York, General Dynamics Corp., San Diego, American Biltrite Rubber Co., Chelsea, Graham-Brown Shoe Co., Dallas, Tex. lin Park, Ill. Associated Dry Goods Co., New York, May Department Stores Co., St. Louis, N.Y. Austin Shoe Stores, Dallas, Tex. The Boeing Co., Seattle, Wash. Mo. Meier & Frank Co., Inc., Portland, Oreg. El Segundo, Calif. Broadway-Hale Stores, Inc., Los An- Northrop Corporation, El Segundo, Calif geles, Calif. Ceco Corp., Cicero, Ill. City Products Corp., Chicago, Ill. Coast to Coast Stores, Minneapolis, The Coleman Co., Wichita, Kans. Dohrmann Co., San Francisco, Calif. Geigy Chemical, Yonkers, N.Y. Quaker Industries, Inc., Antioch, Ill. Sears, Roebuck and Co., Chicago, Ill. Skagit Corp., Sedro-Woolley, Wash. Harvester Company San Diego, Calif. Warwick Electronics, Inc., Chicago, Ill. Mr. FRIEDEL. I want to thank you, Mr. Macdonald, for a short statement which is to the point. I want to refer to your statement on page 2, where you say: If a freight forwarder needs special rates for unusual conditions of tonnage, transit time, or other requirements, he can secure them through present ratemaking procedures. Mr. MACDONALD. That is right. Mr. FRIEDEL. Is that the law today? Mr. MACDONALD. That is what basically takes place today. The railroads have their ratemaking bureaus, and the freight forwarder is enabled thus to approach the railroad through the bureaus and apply for rates. In other words, say a movement from New York to San Francisco, Transcontinental Freight Bureau, Southern, you can name all of them. Mr. FRIEDEL. They can do that under the present law? Mr. MACDONALD. Yes. Mr. FRIEDEL. They want to enter into contracts, the same as truckers do. Do you claim they can enter into contracts under the present law? Mr. MACDONALD. No, I am saying they have the ability to approach the railroads for lower rates. These rates, if agreed on by the underlying carriers, would be available to all shippers, including the freight forwarders. The level of these rates could be comparable with the truck rates. Mr. FRIEDEL. You are with the shippers association? Mr. MACDONALD. That is right. Mr. FRIEDEL. Could you approach the railroads and try to agree with them, or do you have to go to the ICC? Mr. MACDONALD. No, the application would be made to the railroads, and then it would have to be published in tariff form, and it is possible to have a lower rate suspended at that area. In other words, if for good reason appearing to the Commission, upon protest of other shippers, for example, protest could result in suspension of these rates. Mr. FRIEDEL. Do you know any reason why the freight forwarders are asking for the amendment? Mr. MACDONALD. The board of directors of Terminal Freight can only conclude that they are asking for preferential treatment rather than for equality of treatment. Because the services utilized by the freight forwarders are identical in almost all instances with that of a shipper association such as Terminal Freight. We load the boxcars, as an example, at New York, move them to Chicago, where they break bulk, or Los Angeles, or San Francisco. This is the identical service being performed today by a freight forwarder, the only difference being, of course, that our service is limited to our members rather than being held out to the public in general. Mr. FRIEDEL. Mr. Pickle? Mr. PICKLE. Mr. Macdonald, I had to be out of the room to make a phone call and I did not hear your complete statement. I want to refer, though, to the first page, in which you list one of the reasons for your opposition to the bill. You say, "We do not believe a railroad should charge a lesser amount to a freight forwarder than to a shippers association." Mr. MACDONALD. That is right. Mr. PICKLE. If the bill is passed, are you saying that the railroads would charge a lesser amount to a freight forwarder than to a shippers association? Mr. MACDONALD. The avenue is open for such a preference. Mr. PICKLE. What you are saying is that you are fearful it will lead to that? Mr. MACDONALD. That is right. Mr. PICKLE. Your statement is a positive statement that they would automatically do that? Mr. MACDONALD. I believe this would be the end results. There would be no reason for the legislation if it was not contemplated that it would result in a lower level of contract rates than is available today under the present tariff rates. Mr. PICKLE. Can you help me by saying in your own words in what way would this give a preferential rate to a freight forwarder if they were able to negotiate with the railroads, as outlined by this bill? Mr. MACDONALD. May I use strictly hypothetical examples. We will say the freight, all kinds, rate between New York and Chicago is $2 per hundred pounds. Now, this is a published tariff rate. It is entirely possible, with the tonnage involved, that the railroads would be receptive to a contract with the freight forwarders of, say, $1.75 per hundred pounds, applying only for the freight forwarders. Mr. PICKLE. I beg your pardon. Mr. MACDONALD. Applying only for the freight forwarders. Mr. PICKLE. Let's assume that this is so. Mr. MACDONALD. Right. Mr. PICKLE. You would give the freight forwarder-the railroad would be giving them a little less rate, and you are saying, then, that your association couldn't avail themselves of that rate? Mr. MACDONALD. No. Mr. PICKLE. Suppose you chose to ship your goods, turn it over to a freight forwarder. Would you do that? Mr. MACDONALD. No, sir; because our level of rates would be lower than the freight forwarder's rates applying to the general public. The freight forwarder makes his money on the difference in the amount paid to the underlying carrier and his total expense and the amount charged to the general public. In other words, for that $1.75 underlying cost, applying between New York and Chicago, this rate may be, as an example, $5 per hundred pounds. Now, this includes his pickup or delivery, his loading cost, cost of loading the boxcar or piggyback trailer. Mr. PICKLE. One of the gentlemen testified this morning that if this proposed bill became law, that this would have a beneficial effect to the shipping association. Mr. MACDONALD. I fail to see how it possibly could. I believe it was Mr. Allen who preceded me, prior to the lunch recess, that indicated that, shall I say, the loss of revenue of 25 cents per hundred pounds, that I used in my example from New York to Chicago, would have to come from somewhere. It would have to come out of the coffers of the railroads. Now, carrying this forward, if this was not a good, economical, shall I say, contract, on the part of the railroads, they would have to look elsewhere for additional revenues and we, of course, under those circumstances would be fearful that they would apply another general rate increase, which to me would mitigate against the shippers. I can't see anything in the legislation as proposed that is beneficial to a shippers association. Mr. PICKLE. On the other hand, this right is given to the motor freight carriers; that is, if you want to turn it over to a carrier, he can negotiate, and therefore he can have a reduced rate. Mr. MACDONALD. That is right, under parts I, II, and III of the act, it is possible to file joint rates between various modes of transportation. However, the original intent of the legislation was to hold the freight forwarder in a rather duality of character. To his customer, the shipper, he was a common carrier. To the carrier, he was nothing more than a shipper, and so what I am saying, sir, is that here we have two identical situations, our terminal freight operation and a freight forwarder, and there is a preferential treatment being given to the freight forwarder, which I don't believe is justified. |