the present eastbound domestic grain and grain products rate structure, thus permitting equal opportunity for all to compete for the available business on an equitable basis." The association said any deviation from present methods of rate publications to and within eastern territory could only result in decentralization of the feed milling industry at a tremendous cost to the feed manufacturers. Should the proposed rate basis become effective, the association said numerous requests for similar adjustments to other points in the territory would follow.

TOLEDO BOARD

The Toledo Board of Trade said the rate and minimum proposed discriminated between shippers and receivers who could not purchase such an amount of grain as against those who could, in violation of sections 2 and 3 of the Interstate Commerce Act. It said many of the country elevators in the origin territory did not have the facilities or the train service to take advantage of the rates, while many of their nearby competitors did. The board said the rate would also discriminate against processors at points competitive to Augusta and Portland. John W. Eshelman & Sons, described as a feed manufacturer at Lancaster, and York, Pa., and Circleville, Ohio, contended that the proposed rate would result in violations of the Interstate Commerce Act.

Beacon Feeds, Beacon Division of Textron, Inc., of Cayuga, N.Y., said that shippers, manufacturers, and receivers in the Northeast asked the railroads about 4 years ago for relief in freight rates to combat competition from southern territory. It asked how the railroads could grant relief to manufacturers at Portland and Augusta without granting relief to all manufacturers including transit operators in trunkline territory.

The Eastern States Farmers' Exchange, Inc., operating facilities at Buffalo, N.Y., and Huron, Ohio, said the fact that the proposed rate had a specific destination restriction preferred feed processors at the two locations; that the proposed rate was restricted as to milling in transit, and therefore prejudiced interests of feed processors with facilities within intermediate territory; that the adjustment would go far toward breaking down the grain and grain products rate structure, and that market relationships would be both financially affected and adversely influenced by the proposal.

CARGILL, INC.

Cargill, Inc., with headquarters at Minneapolis, said the present grain rate structure within the East had been in effect since 1907 and was developed to facilitate the orderly marketing of grain from the territory to eastern destination territory. It said that under the present system, all grain firms and processors in all areas were allowed to compete with one another, but that such competition under the proposed rates would be eliminated. Also, it said the restrictions applying on the proposed rate would lead to confusion.

The Corn Exchange of Buffalo said that if the proposal were permitted to become effective, feed manufacturers at Augusta and Portland would be able to purchase corn in the origin areas at a price based on transportation costs of 92 to 122 cents per 100 pounds less than manufacturers at Buffalo. It said that for the rail carrier to single out a specific processor or area for relief was unfair and discriminatory.

The Trunk Line Grain and Grain Products Traffic Council, located at Buffalo, also referred to a request made of the eastern rail carriers for an overall downward adjustment in grain rates applying within official and New England territories. It said it was still patiently awaiting a decision by the carrier. It said the justification set forth by the railroads that the reduced rates were to meet water competition was unrealistic and purely a guise to benefit one destination area. It added that if it were agreed that the protested rate level was reasonable, then it followed that the present rate level in the rest of official and New England territories was unreasonable.

CHICAGO BOARD

The Board of Trade of the City of Chicago said the proposed rate would result in destructive competition defeating established all-rail rates. It said the proposed rate would have the effect of transferring the movement of Illinois corn from rail to truck for a substantial portion of the movement to New England in order for shippers to utilize the proposed rate. The board asserted that the

injury to the Chicago market would be twofold, affecting those engaged in the receiving and forwarding of corn in its natural state, and affecting those engaged in the business of processing or manufacturing corn products for sale in New England. The board also said it had been unable to perceive the existence of water competition referred to by the respondents, and also asserted that the navigation limitation was meaningless.

In its reply, the railroads said the proposed rate was designed to return to rail movement traffic that had been directed to an unregulated water carrier, that it had been set at a level no lower than necessary to meet the water cost, that it would not introduce any new competitive factor into the grain rate structure, and that the rate was fully compensatory.

A Comparison of Present Railway
Traffic in Exempt Agricultural
and Bulk Commodities

With Potential Traffic Under

a 10% Reduction in Rates

Analysis based on data available for rail, water, and class I
motor carrier commodity statistics.

STATEMENT OF FREDERICK E. BATRUS, ACTING ASSISTANT POSTMASTER GENERAL, BUREAU OF TRANSPORTATION, POST OFFICE DEPARTMENT

Mr. Chairman, my name in Frederick E. Batrus. I am Acting Assistant Postmaster General, Bureau of Transportation, Post Office Department, and am accompanied by Adam G. Wenchel, Associate General Counsel, Post Office Department. I appreciate the opportunity to appear before your committee to discuss one of the provisions of H.R. 11584.

H.R. 11584 is one of the two bills designed to effectuate the recommendation of the President's message on transportation. The bill as a whole, if enacted, should do much to strengthen the national transportation system.

The Post Office Department's primary interest, however, is in section 9(a) which is the provision to which I will direct my comments.

Section 65 of title 49 (sec. 321(a) of the Transportation Act of 1940), dealing with rates on U.S. Government transportation, provides: "That sec

tion 5 of title 41 shall not after September 18, 1940, be construed as requiring advertising for bids in connection with the procurement of transportation services when the services required can be procured from any common carrier lawfully operating in the territory where such services are to be performed." While the literal language of the existing law does not exclude mail transportation, the Comptroller General has held (B-141203, dated Dec. 30, 1959) mail transportation to be excluded from this provision of law. Section 9(a) of H.R. 11584 rearranges the language of the second proviso and adds explicit references to accessorial services. In addition, it would expand the meaning of the word "transportation" by adding the phrase "including mail transportation services performed by common carriers by motor vehicles." The purpose of this latter addition is to give the Postmaster General the same authority to negotiate with highway common carriers for mail transportation that other Government agencies have with respect to transportation of persons and property. This amendment would place the postal service in the same position as other Government agencies in its traffic management insofar as dealings with highway common carriers are concerned.

By way of background, I would like to describe briefly the postal transportation service. As you know, we are a major user of all forms of transportation, both domestic and international. This includes rail, motor, air, and steamship operations. Our payments to all carriers for the transportation of mail in the current fiscal year will approach $600 million.

Every type of transportation service must be used for mail, including local cartage-type operations between postal installations and transportation terminals within cities and metropolitan areas, and short, intermediate, and long-haul services. Predominantly, mail transportation is provided by common carriers. A substantial number of contract or star routes are used, however, in services established exclusively for mail.

The vehicles used include almost every available kind. In motor carrier services, they range from the ordinary passenger automobile to the largest tractor-trailer motor truck and passenger buses. In railroad transportation, local and through passenger trains, fast freight trains, and piggyback operations are used. Mail moves in railway storage cars, as well as in Railway Post Office cars specially equipped to permit the sorting of mail by postal clerks while the train is moving. All types of aircraft are used in transportation of mail, ranging from the helicopter to the largest passenger and cargo aircraft. Small powerboats, freight and passenger steamships of all sizes move mail in water transportation. The President's transportation message stressed the need for greater flexibility for the Post Office Department in obtaining highway mail transportation services. Section 9(a) of H.R. 11584 would give the Department somewhat broader authority in obtaining the kind of over-the-highway service it needs under certain circumstances. It would enable the Department to take advantage of already existing highway common carrier operations which would be beneficial to the postal service.

Presently, the Department obtains most of its over-the-highway mail transportation by formal term contracts entered into after advertising. It is also permitted to and does make temporary contracts without formal advertising pending the letting of a regular contract. These contracts usually outline rather specifically the service which is expected for the term. Changes in the service during the term are sometimes necessary because of altered postal needs, but the extent of changes which can be made is limited by statute.

However, situations do arise where it is impracticable to advertise for the services desired.

For example, we may find a common carrier operating on a regular and desirable schedule between two points with excess capacity which we could use. Even if we should advertise for this service, we have found in the past that the common carrier often does not wish to bind itself for a substantial period to a particular schedule for mail traffic alone because of a possible shift in the pattern of its commercial business. The obvious solution is an arrangement with the carrier to carry the mail so long as the conditions remain mutually agreeable. Section 9(a) of H.R. 11584 would free the Department from restrictions which preclude our negotiating for such an arrangement.

A recent development is the contracting with buslines in a way which makes their systemwide schedules available for mail transportation. This involves use of a portion of the baggage compartments of buses for transportation of mail between the various points in the system, and is most useful for letter mail where volume does not justify the cost for vehicles dedicated exclusively to mail