(5) In order to stimulate progress in the industry and build healthier companies, greater managerial freedom and greater managerial responsibilities should be given to the transportation industry. (6) The reduction in Government regulations, as contemplated in H.R. 11583 and H.R. 11584, could make an early and substantial contribution in this direction, resulting in a strengthening of the transportation industry and, in turn, benefiting the shippers of the country. Again, I would like to tell you, gentlemen, that I appreciate this chance to express my views because I feel them very deeply. I think that this legislation has an important opportunity of making a worthwhile contribution to the vigor and vitality of our transportation system.

I am very hopeful that it will be passed because I believe it can be a major turning point in the history of our transportation system. Thank you very much.

Mr. WILLIAMS. Thank you, Mr. Heiner, for an excellent presentation.

The other day I received a letter from a constituent, who told me that he felt that when it became more difficult to reduce freight rates than it did to increase them, he thought something should be done. I take it that is the theme of your statement, too! Mr. HEINER. Essentially; strictly.

Mr. WILLIAMS. Mr. Younger?

Mr. YOUNGER. I have no questions, but I do want to compliment Mr. Heiner for the very fine statement and to say that you, being a large shipper, have made a fine contribution to this hearing by your

statement.

What we are trying to do is see that the service to the shipper is made better and cheaper. And that is the purpose of the legislation, and I am glad to get your views.

Mr. HEINER. Well, I am so appreciative of that, Mr. Younger, because I have been preaching, out in California, that all of the shippers should come back and testify even if they differ with me.

I said, "Please come back and let Congress know how you feel about it."

I wanted to have this opportunity to express my honest convictions. Mr. YOUNGER. That is all.

Mr. WILLIAMS. Mr. Friedel?

Mr. FRIEDEL. I just wanted to say that Mr. Heiner made a very fine statement.

Mr. HEINER. Thank you.

Mr. WILLIAMS. Mr. Ďevine?

Mr. DEVINE. No questions, Mr. Chairman. I share Mr. Younger's views in connection with the testimony of this witness.

Mr. WILLIAMS. Mr. Hemphill indicated that he had some questions, but he had to step out of the room. So I think we might as well proceed with the next witness.

Thank you very much.

Mr. HEINER. Thank you very much.

Mr. WILLIAMS. Mr. John Weller.

STATEMENT OF JOHN L. WELLER, PRESIDENT, SEATRAIN LINES, INC., IN BEHALF OF THE COMMON CARRIER CONFERENCE OF DOMESTIC WATER CARRIERS, EDGEWATER, N.J.

Mr. WILLIAMS. Mr. Weller is president of the Seatrain Lines, Inc., and is speaking in behalf of the Common Carrier Conference of Domestic Water Carriers.

Mr. WELLER. Thank you, Mr. Chairman, and members of the committee.

My name is John L. Weller. I am president of Seatrain Lines, Inc., 595 River Road, Edgewater, N.J., and I appear today in behalf of the Common Carrier Conference of Domestic Water Carriers in connection with H.R. 11583 and H.R. 11584.

The Common Carrier Conference is an association of companies engaged primarily in common carriage of goods by water under certificates issued by the Interstate Commerce Commission. A list of the 30 companies comprising this association is attached; it includes operators of deep water vessels, coastwise and intercoastal; operators on the Great Lakes, and operators of barges and tow boats on the inland rivers all over the United States.

Although I represent the views of all these water carriers in connection with the proposed legislation, my own company is engaged in the coastwise trade, and I shall illustrate my comments primarily with examples from that experience.

I might say at this point, Mr. Chairman, that I have been in the transportation business for some 37 years which has included quite a number of years in the railroad industry, also in the airline industry, and now in the water carrier industry.

So that I feel that I have had some experience in this field.

The President's message on transportation of April 4, 1962, pointed out that, as a matter of equity, either the present agricultural and bulk commodities exemptions should be repealed, or exemption from minimum rate control of these commodities should be extended to all common carriers. The Common Carrier Conference agrees that the present inequity should be eliminated, but the simple and proper way to do this is to repeal or at least reduce the present exemptions.

Mr. Jervis Langdon of the Baltimore & Ohio Railroad, in his testimony to you, emphasized that H.R. 11583 would not eliminate the present inequity because:

When handling bulk commodities, water carriers would continue to be subject to no regulation at all; they could make secret rates, contract or otherwise; rebate at will; and discriminate without restraint. No publication of their rates is required, and no notice to the public. Motor carriers, when moving agricultural and fishery products, would continue to have the same freedom.

I agree with Mr. Langdon on this. Unfortunately, I do not agree with Mr. Langdon about many things, but I do agree with him on this. And, in addition, I wish to point out that in certain important aspects H.R. 11583 goes far beyond the scope of the bulk exemption presently contained in section 303 (b) of the Interstate Commerce Act. That exemption applies only to the transportation of not more than three exempt commodities in the same vessel or tow, and it is further limited to commodities carried in bulk in accordance with the existing custom of the trade as of June 1, 1939.

When Congress passed the 1940 act it took that specific step to see that the practices approved then did not spread.

H.R. 11583 contains no limitation as to the number of commodities which might be carried together, and it is not limited to the practices of the trade as of any date.

The bill does not say who would have the duty or the right to determine what is a bulk commodity within the meaning of this language, and it seems to me that at a very minimum there would be years of litigation and uncertainty before this is determined.

I understand, for instance, that there are still cases in the Commission with respect to the scope of the exemptions granted in 1940. If you open this door wide now, just think how many years it is going to be before you will find out what this thing means.

A little later in my testimony, I wish to demonstrate that the proposal in H.R. 11583 would foster an expansion of proprietary or private carriage, to the detriment of common carriage.

Certain witnesses before this committee have urged that, while elimination of the exemption would be a logical course, it might generate political opposition in certain quarters, and therefore they recommend the opposite course proposed in H.R. 11583. I must admit to considerable surprise that anyone would have the temerity to appear before this committee of dedicated Congressmen and suggest that they take action not in the best public interest because the correct action might generate some political opposition.

The members of the Common Carrier Conference of Domestic Water Carriers believe that in its regulation of interstate commerce, Congress will continue, as it has in the past, to be guided by the public interest. We believe the public interest clearly indicates the reduction or elimination of present exemptions, and we urge that Congress take that action.

When the water bulk exemptions were established in the Transportation Act of 1940, this was done on the stated premise that the transportation under these exemptions would be noncompetitive with regulated carriers, and it was also stated in the Congressional Record that at such time as this exempt transportation was proved to be competitive with regulated transportation, the exemptions would be repealed. It is generally agreed that that time has long passed, and the simple and straightforward course for Congress is to repeal the exemptions. We oppose strongly the approach in H.R. 11583, which greatly extends the scope of these exemptions both by enlarging their definition and by extending them to rail, highway, and water carriers including ourselves, to which they presently do not apply.

This legislation appears to be based on the premise that the primary problem in transportation today is one of excessive freight rates and of undue profits to the carriers. I respectfully submit that that is not the problem in transportation today. The primary problem is the precarious financial position of major segments of transportation. Despite numerous increases in the maximum allowable level of freight rates, the actual rates for the movement of major commodities have been generally declining for the last several years under the impetus of a cutthroat rate war. This in turn has seriously affected the financial stability of major eastern railroads, of some highway carriers, and—what is most important to me-it has practically eliminated the coast wise and intercoastal shipping industry.

As this committee knows, the coastwise and intercoastal shipping industry has almost disappeared, with serious consequences to our national defense. My own company is one of the last two common carrier coastwise companies remaining in business; we have suffered severe operating losses in each of the past 5 years, during which time the average level of freight rates applicable to our service has declined more than 20 percent. This decrease in freight rates has been forced by selective rate manipulations of the railroads.

I realize, of course, that the shippers would like freight rates as low as possible, and that low transportation costs as well as low production, distribution, and merchandising costs, contribute to the health of

our economy.

But in recent years there has been a tendency for major shippers to make up for increases in their production and merchandising costs by forcing down freight rates, although the costs of the carriers have not been reduced. Generally speaking, they have increased.

The inevitable end result of constantly declining freight rates without reduced transportation costs will be bankruptcy of the carriers, with ultimate harmful effect on the economy as a whole.

Now, if the committee will pardon me I would like to show you a cartoon which I think is somewhat to this point.

This cartoon appeared in the Scripps-Howard newspapers about 2 months ago, and since I am in the transportation business, it caught

my eye.

You will note the two witches who are agreeing that they have to economize, but they wind up riding on one broomstick, and one suggests that there must be some better way to save money.

I think that enactment of this bill, for instance, is going to wind us up, all of us, riding on a broomstick, and I think we ought to think about it.

Mr. HEMPHILL. Would it make everybody witches?

Mr. WELLER. Well, I think this is a witches' brew, Congressman. I believe, after careful study, that enactment of H.R. 11583 would mean the end of the coastwise and intercoastal shipping industry, as well as serious financial distress to other forms of transportation. I shall proceed to develop my reasons for this as briefly as possible.

All of the common water carriers are small companies, relatively small. The largest member of the Common Carrier Conference of Domestic Water Carriers had gross revenues last year of $20 millions. In 1960, the last year for which figures are available, the combined. gross revenues of all the coastwise and intercoastal common water carriers, which are my particular concern, were $57 millions-and I might point out that that is about two-thirds of the net income after taxes of a single railroad, the Santa Fe-and their net income was a red figure of $6 millions. This compares with railroad gross revenues of nearly $10 billions.

The water carriers typically are able to serve only limited areas adjacent to ports, and are dependent for their sustenance on a limited number of basic commodities. For example, in my own company's service from the gulf to New York, 10 commodities account for 87 percent of the freight revenues. Further, my company is dependent upon railroads for the rates which move traffic to and from the ports it serves.

It is a simple matter for the railroads, by joint action in their rate bureaus, to select these specific major movements of traffic, reduce the all-rail rates even below cost if necessary, while holding up to high levels the rates for movement to and from the ports, and thus drive the water carrier out of business. The railroads have many other sources of revenues and a 1,700-to-1 ratio of financial resources, so that if unhindered in this activity, they can survive while the small water carrier expires.

I know it has been said to you by certain railroad witnesses that the railroads never do this, that they never discriminate, but the fact is that they do Mr. Childe's testimony yesterday was full of examples of this-and the record is replete with examples of their attempts to do it.

The only present recourse of the water carriers for protection against these discriminatory actions is an appeal to the Interstate Commerce Commission. My company presently has pending in the Interstate Commerce Commission 18 separate and distinct cases in which actions of this type by the railroads are involved, and the outcome of these cases affects practically every pound of our traffic.

Our counsel advised me that enactment of H.R. 11583 would seriously impair the ability of the Commission to deal with these cases, or others like them.

It has been testified to you that the effect of H.R. 11583 would be to leave with the Interstate Commerce Commission the regulation of maximum rates and of discriminatory rates, but to turn over to the Justice Department and the courts responsibility for preventing monopolistic and predatory trade practices in transportation.

The water carriers do not believe that the powers remaining with the Interstate Commerce Commission upon passage of this legislation would permit it to deal adequately with discrimination, and they also do not believe that the provisions against monopolistic and predatory trade practices are adequate, but the point I wish to make at this time is that turning two elements of regulation over to different agencies can lead only to confusion, uncertainty, and endless litigation.

Mr. Jervis Langdon testified to you that his objection to regulation by the Interstate Commerce Commission did not arise from any "special ICC inability or incapacity.

"That must be comforting to the Commission.

"It is simply too tough a job for any regulatory body to do."

In my view, it is naive to believe that, if regulation is imperfect under one agency, it will be improved by dividing the responsibility between two agencies.

For many years, the favorite aim of railroad propaganda was the necessity for a "single regulatory agency" to regulate all transportation. Now they have completely switched objectives and ask for regulation of themselves-and us-by two agencies. If I am confused by this, I think that the passage of H.R. 11583 would leave the courts, the regulatory agency, and the carriers in confusion for a number of years as to the rules under which they are supposed to operate.

I sometimes think, gentlemen, that the current dance craze, the twist, arises out of the efforts of the younger generation to keep up with the gyrations of railroad propaganda.