To remove this inequity and to conform the substance of section 4 of the bill with its announced policy, we suggest that the proposed amendment of section 1003 (b) of the Federal Aviation Act of 1958, appearing at the top of page 5 of S. 1062 be changed to read:

"(b) Air carriers subject to the Federal Aviation Act of 1958, including air carriers not directly engaged in the operation of aircraft in air transportation, common carriers subject to parts I, II, III, and IV of the Interstate Commerce Act, as amended, and common carriers by water subject to the Intercoastal Shipping Act, 1933, as amended (including persons who hold themselves out to transport goods by water but who do not own or operate vessels), may establish reasonable through service and joint rates, fares, and charges with any other such common carriers in connection with the transportation of persons or property in interstate or foreign commerce."

The foregoing obviously must be considered as an alternative to the suggestion heretofore made that section 409 be amended to give forwarders the right to make joint rates with other carriers on piggyback movements only.

SECTION 9 (a) OF S. 1062: TRANSPORTATION OF MAIL

Section 9(a) of S. 1062 would amend section 321 of title III, part II, of the Transportation Act of 1940, so as, among other things, to extend the authorization now provided by that section for Government agencies to procure transportation without advertising for bids to "mail transportation services per formed by common carriers by motor vehicles." We think that the authoriza tion to procure mail transportation without advertising for bids should be er tended to freight forwarders as well as motor carriers. The proviso to section 321 which the bill would amend, and which is now limited to the transportation of general commodities, applies to freight forwarders. If the proviso is to be expanded to include the transportation of mail, it should not be limited in that regard to motor carriers, but should include freight forwarders as well.

Conditions in transportation are rapidly changing. If the Post Office De partment is to be given greater flexibility in arranging for the transportation of mail, as the President's report recommends, why should any common carrier be excluded? The proviso to section 321 of the Transportation Act of 1940 which the bill would amend, now applies to "any common carrier" subject to the Interstate Commerce Act. It is not only discriminatory, but illogical to extend the terms of that proviso to the transportation of mail by motor carriers. excluding freight forwarders. The Postmaster General would not be required to use freight forwarders, and he might not choose to use freight forwarders. but that is no reason why the right to do so should be withheld. The freight forwarding industry believes that it could, under certain circumstances, provide valuable service to the Post Office Department in the transportation of mail.

We suggest, therefore, that section 9(a) (1) of the bill be amended by striking out the phrase "by common carriers by motor vehicles." Section 321 of the Transportation Act of 1940, as amended by the bill, would then apply uniformly to all common carriers subject to the Interstate Commerce Act, with regard to the transportation of general commodities and of mail.

The members of the Freight Forwarders Institute either have no interest in or have been unable to formulate a position with regard to the other provisions

of S. 1062.

Senator MORTON. The schedule originally called for Mr. Orrick, the Assistant Attorney General, Antitrust Division, Department of Justice for tomorrow morning.

This, however, has had to be postponed as Mr. Orrick will not be

available tomorrow morning.

The committee will stand in recess until 10 o'clock Monday morning. (Thereupon, at 10:20 a.m. the subcommittee recessed, to reconvene at 10 a.m., Monday, October 7, 1963, in room 5110, New Senate Office Building, Washington, D.C.)

TRANSPORTATION ACT AMENDMENTS-1963

MONDAY, OCTOBER 7, 1963

U.S. SENATE,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON SURFACE TRANSPORTATION,

Washington, D.C. The subcommittee met at 10 a.m. in room 5110, New Senate Office Building, Hon. Strom Thurmond (chairman of the subcommittee) presiding.

Senator THURMOND. The subcommittee will come to order.

At our hearing this morning we will hear first from Mr. D. W. Brosnan, president of the Southern Railway system, and next from the Chairman of the Interstate Commerce Commission, the Honorable Laurence K. Walrath. Each of these gentlemen provided excellent testimony at hearings last year on similar bills and their views will be very helpful to the committee.

Mr. Brosnan, we will be glad to hear from you first.

STATEMENT OF D. W. BROSNAN, PRESIDENT, SOUTHERN RAILWAY

SYSTEM

Mr. BROSNAN. Thank you, sir. My name is D. W. Brosnan. I am president of the Southern Railway system. I appeared before the Senate Commerce Committee last year in support of S. 3243, which had the same purpose as S. 1061, the minimum rates bill which is presently before you.

This bill could be more properly termed the "reduced rates" bill, rather than the "minimum rates" bill, because its enactment will sharply reduce transportation costs to the American public.

I appear in support of the bill as it is presently drafted. I believe that the bill in its present form will accomplish the intended purpose of lowering transportation costs through providing more opportunity for competition. Amendment of S. 1061 so as to extend rather than curtail regulation of rates would defeat the purpose of the proposed legislation and do more harm than good since transportation prices to the public would obviously go up because of the further decrease in competition.

I have read with interest some of the testimony of the common carrier truck and bargelines in opposition to this legislation. With respect to the opposition of the common carrier bargelines, I point out to this committee that the common carrier bargelines actually handle a very small portion of the total waterway traffic.

The Army Corps of Engineers reports that in 1961, the last year for which statistics are available, the unregulated waterway carriers,

which include private "do it yourself" shippers, usually big industrial concerns with large volumes of business, performed 85.1 percent of the total haulage in the Nation's waterborne commerce. The regulated carriers, i.e., the common carriers, accounted for only 14.9 percent. This same report goes on to say that the traffic handled by unregulated carriers surpassed that of regulated carriers in seven of the commodity classifications. These included petroleum and its products, coal, coke, iron ore, steel, grains, chemicals and their products, and seashells.

Regulated carriers led only in the items of logs and lumber and the "all other commodities" classifications. A good many of these commodities would not be covered by the legislation proposed by S. 1061. For example, steel and lumber and certain chemicals and products would not be affected by the legislation since they are neither bulk nor agricultural commodities.

To the huge tonnage handled by unregulated water carriers should be added that handled by the railroads and the tremendous volume handled by itinerant and unregulated trucks. When this is added up it is plain that the regulated common carriers by water actually handle an insignificant proportion of the total of the products in the categories covered by this bill.

These bargelines do, however, peg their charges so that the overall cost of barge transportation is just under the railroad rates. They bitterly oppose all rate-reducing efforts of the railroads whenever any volume of competitive traffic is involved. They do this so they can keep their own charges high and, therefore, have a more substantial margin of profit at the expense of the public.

In this connection, I have noted that several opposition witnesses have endeavored to show by statistics that only a small proportion of the rates railroads propose are objected to by truck and barge lines. These statistics are misleading. They include all railroad tariff proposals which involve not only rates but other tariff matters as well. In the vast majority of these, no competitive traffic is involved and often only a small volume of traffic. Obviously, the barge and truck people would have no interest in these changes.

The fact is, however, that when competitive traffic in any substantial volume is involved, the trucks or barges almost automatically protest the railroad rates and seek their suspension. It is in these cases that the unrealistic and unsound ICC costing formulas are all too often used and urged by the barge and truck lines to hold the railroad rates up artificially and unnecessarily to protect their higher charges and deny the public the benefit of lower transportation costs. The public interest in the cost of living deserves first consideration rather than the profit position of any mode of transport whether it be highway, rail, or barge.

It is clear that the enactment of S. 1061 will have little or no effect on the common carrier barges, notwithstanding their loud outcries to the contrary. Obviously their chief competition is from unregu lated or private barges-those owned by large industrial firms, grain companies, and the like-whose volume of traffic is some six times larger than theirs.

The common carrier trucks also express opposition to this legisla tion. The fact is that the common carrier trucks handle practically

none of the products of agriculture or bulk commodities, with the possible exception of petroleum products. The reason for this is that these commodities move at such low rates that they are not attractive to the common carrier trucklines and are often rates below the actual costs of these trucklines. Of this business that does move by truck, the overwhelming preponderance is handled by unregulated carriers, many of whom also engage in illegal and "gray area" operations.

The opposition of the common carrier trucks to this legislation is difficult to understand. The only conclusion to be drawn is that they are determined to keep the railroads handcuffed to an artificial and unnecessarily high rate structure because of their expressed fear that deregulation might someday be extended to the commodities which they now haul at such a nice profit. This position of the common carrier truck witnesses involves an assumption not even suggested in the bill before you.

The truck common carriers belabor the size of the railroads. The president of the American Trucking Associations, Mr. Clinton Sanders, said in Atlanta, on May 15 of this year, that last year the common carrier trucks for the first time in their history received more revenue than class I railroads. In the light of this statement, the position of the common carrier truckers that the rails are so much stronger than the trucklines that they will force them out of business, if this bill is passed, is ridiculous on its face and is nothing but self-serving propaganda.

It is abundantly clear that the common carrier trucks do not stand to lose business are the itinerant truckers, the private carrier truckers and the private and exempt unregulated barge operators.

These people are unregulated. Their service is sporadic and unreliable, and they are under no duty to serve the public. Yet under present conditions they haul far and away a greater volume of the commodities covered by this legislation than either the common carrier trucks or the common carrier bargelines. Certainly the public welfare does not demand that they be protected at the expense of the public itself.

In transportation, as in other public service businesses in this country, the welfare of the public should come first. The public welfare of the public should come first. The public welfare has not been protected under current regulation of railroad minimum rates, which stems from legislation that is now more than 40 years old.

Regulation based on such old and outmoded legislation cannot take into account the great improvements in transportation technology during the intervening years. The barge and truck operators have been free to express this technology in their prices, but the railroads have been denied this opportunity.

The legislation enacted in 1920 empowering the Interstate Commerce Commission to set minimum rates on the traffic handled by railroads was designed, among other things, to permit and to insure the growth of other modes of transportation. It has certainly accomplished that purpose because the railroads are now hauling considerably less than half of the total traffic.

In his testimony last year on S. 3243, Commissioner Murphy, then Chairman of the Interstate Commerce Commission, advocated an arbi

trary rule for determining whether truck movements of agricultural products should be exempt. In order to continue the exemption of bona fide farm-to-market movements over the highways, he suggested that movements of agricultural commodities in trucks having not more than three axles enjoy continued exemption from rate regulation. Chairman Walrath made the same recommendation in testifying before the House committee this year on H.R. 4700.

Over the years, the allowable weights on truck axles have trended upward appreciably and this is likely to continue. The effect is that no real limit would be placed on the ability to haul these agricultural products without rate regulation.

S. 1061 is a much better way to handle this problem than to attempt to dictate to the farmer the size of his truck. The farm interests are on record as being unalterably opposed to any change in the agricultural exemption. If one were seeking a sure way to kill this bill, no better approach could be taken.

The ICC's proposal creates an artificial barrier, and, as long as it is profitable to do so, people will find ways to circumvent such regulation. This would serve to enlarge the scope of present illegal or "gray area" operations which are now of such enormous size.

The ICC's recommendation would also create a hopelessly enlarged problem in enforcing compliance with regulation. The Commission today is unable to police the present regulations and this recommendation would create a situation which would be as impossible to police as was the sale of whisky during the days of prohibition.

The ICC's position that the preferred basis for curing the existing difficulties lies in extending regulation to the exempt carriers is in serious error. The effect of the extension of the regulation proposed by the ICC would be to increase private carriage at the expense of a". common carriers. The greatest threat to all common carriage-rail. truck, and water-comes from the continuing and leaping growth of private carriage. The ICC offers no proposal to meet this competition or to stem its growth.

The competition which is inherent in S. 1061 will provide the best possible solution, and that lies in taking the profit out of private carriage through competition.

Another serious defect in the ICC's proposal is that it completely ignores the effect of the growth of private carriage or the ability of small businesses to compete with larger businesses. Large business concerns are able to own fleets of barges and trucks and have sufficien volume of traffic to fill them. Small owners do not have the financial resources to own these fleets, nor do they have the volume of business to fill a barge, for example.

These small business concerns will find themselves increasingly dis advantaged in competing with larger firms which not only take a profit from the manufacture and sale of their products, but who also take a second profit from the transportation of those products. This second profit is made possible by artificially and unnecessarily he common carrier rates which, incidentally, are kept high because they are pegged to rail rates, which the barge and truck operators have had such good luck in keeping at high levels. The best interests of the small businesses of America lie in the adoption of S. 1061-to allow common carriers to provide them services at prices that will enable