STATEMENT OF L. W. SCHALLER, VICE PRESIDENT, ACME-EVANS CO., INC., INDIANAPOLIS, IND.

I wish to refer to a bill now pending before the Senate Committee on Interstate Commerce, S. 1197.

I wish to register strong objections to the same.

We operate 34 country elevators, 8 terminal elevators, 8 feed mills, and 2 flour mills.

We are dependent entirely on rail transportation and feel that above all things the rail transportation system must be permitted to exercise its managerial discretion if they are to be able to survive and prosper.

The bill referred to would destroy the competitive ratemaking freedom purportedly established by the Transportation Act of 1958.

The bill has the selfish endorsement of competitive forms of transportation. It would absolutely reverse the 1958 policy of more freedom and responsibility for rail management in competitive ratemaking.

It would again put the regulating authorities in the position of allocating various segments of traffic to different modes of transportation and deprive the shipping public of their right to use the cheapest forms of transportation.

The railroads should have the right to provide transportation at a lower cost of the public commensurate with their ability to handle large volumes, and certainly the rail rates should not be inflated to offset some desire of their competitors. Enactment of this bill would represent a denial of the right of carriers to assert in the public interest their full economic capabilities and advantages. It would undoubtedly destroy the reasonable measure of competitive freedom found in the present law.

This bill would place an umbrella over the heads of the highly subsidized competitors of the rails and would entirely reverse the clear, concise congressional policy to the contrary enacted in 1958 in the Transportation Act.

This bill certainly should not be passed, and I certainly hope that your committee will see fit to recommend against its passage.

STATEMENT OF J. MONROE SULLIVAN, VICE PRESIDENT, PACIFIC AMERICAN STEAMSHIP ASSOCIATION

In 1958, upon the favorable recommendation of the Senate Commerce Committee and the House Interstate and Foreign Commerce Committee, the Congress passed an important amendment to the Transportation Act, which amendment has become known as the competition clause. This competition clause arises in section 15(a) (3) and has caused unending economic burden upon carriers which compete with rail lines all over the United States. It is in order to redress the imbalance created by the Interstate Commerce Commission's misinterpretation of the language of the competition clause that S. 1197 becomes necessary.

Our organization, consisting of major American-flag ship lines serving the Pacific coast among whose members are several significant and long-established intercoastal lines, are in hearty support of S. 1197.

The 1958 amendments to the Transportation Act merely state that the rates of one carrier shall not be held up to a level to protect the traffic of another carrier provided due consideration is given to the national transportation policy preamble. That policy preamble of course requires the preservation of inherent advantage of each mode of transport in administering the act.

It has become increasingly apparent in the 3 years since the passage of the 1958 amendments that the Interstate Commerce Commission has construed and interpreted section 15 (a) (3) to allow rail rates to fall to a level sufficient only to cover out-of-pocket costs. In doing so, ICC has ignored the mandate in the 1958 amendments, as well as the 1940 Transportation Act preamble in preserving the inherent advantage of each mode of transport. The rates that they have permitted the rails to quote have caused the demise in certain instances of competing forms of transport and a serious crippling of profit levels in other carriers.

In this latter regard we cite the case of the Luckenbach Steamship Co. which at the time of the passage of the 1958 amendments had 16 prime quality vessels engaged in the intercoastal trade, carrying the farm and forest products of California to east coast markets and returning with manufactured products

for the growing west coast consumer markets. Each of these vessels carried several hundred carloads of merchandise on each voyage and the loss of these vessels to the trade has been the subject of widespread alarm inside the Government and outside, and everyone is searching for the cause.

May we say without any equivocation that the cause has been the overliberalization of ratecutting arising from the Transportation Act of 1958 and the granting by the ICC of reduced rail rates for the purpose of squeezing out competing forms of transport. The case in point which rang the death knell for Luckenbach was the reduction of canned goods rates on transcontinental rail lines in 1959. Canned goods make up two-thirds of eastbound intercoastal cargoes.

S. 119 would amend section 15a (3) to read as follows (new language italicized):

"(3) In a proceeding involving competition between carriers of different modes of transportation subject to this Act, the Commission, in determining whether a rate is lower than a reasonable minimum rate, shall consider. among other factors, the facts and circumstances attending the movement of the traffic by, and the effect upon the earnings of, the carrier or carriers to which the rate is applicable, the competitive necessity for the rate, its effect upon a lawful rate structure or adjustment, and its tendency, if any, to cast an unjust burden upon other traffic. Rates of a carrier shall not be held up to a particular level solely to protect the traffic of any other mode of transportation, giving due consideration to all the objectives of the National Transportation Policy declared in this Act."

All S. 1197 does is restore to ICC mandatory consideration in rail rate cases the factor of the competitive effect upon the earnings and continuity of competing forms of transport. It is our view that this was the congressional intent in the 1958 amendments.

The inquiry in 1960 into the demise of the intercoastal and coastwise trade conducted by the Senate Commerce Committee shows conclusively that recent ICC ratemaking has caused a sharp reversal of previous rate policy and has allowed rail rates which are destructive in their effect upon competing modes of transport.

If the ICC finds in the language of the competition clause or any other clause an inadequate mandate to deny destructive rate quotations by the rail lines, then indeed it is up to the Congress to take care of the matter. S. 1197 will be a long step forward in the restoration of the imbalance of competitive inequities created by the ICC's interpretation of the 1958 amendments to the Transportation Act. We sincerely urge passage of this bill.

STATEMENT OF STANLEY H. TIPPETT, EASTERN TRAFFIC MANAGER, CONTAINER CORP. OF AMERICA, PHILADELPHIA, PA.

My name is Stanley H. Tippett. I am employed as eastern traffic manager for Container Corp. of America with office located at 5000 Flat Rock Road, Philadelphia, Pa.

I have been in traffic and transportation for 24 years, all with Container Corp. of America with the exception of 4 years in the Armed Forces' Traffic Department (master sergeant, U.S. Air Force, Eglin Field, Fla.)

Container Corp. of America has operations in 50 cities, in 24 States of the United States, as follows:

Container Corp. of America uses all forms of transportation-rail, water, and truck. In trucking we use private, common, and contract carriage. Because of practical application of all forms of transportation, we can readily understand the need for all types of transportation.

In recent years in cooperation with the railroads, we have developed heavy loading programs through the use of mechanical handling equipment, new types of skids and pallets, the use of inflatable dunnage, to mention a few new innovations. These have been designed to insure maximum utilization of the railroads' equipment.

The railroads have a natural advantage in being able to transport heavy loading commodities in suitable equipment, over roadbeds that are designed to carry the weight. We are now loading into one car what formerly required several cars. In doing this we have been able to share the benefits with the carriers. We have obtained reduced freight rates and yet they have increased their car-mile earnings. In doing this they have recaptured freight that they previously lost the past 24 years that I have seen, and aside from the economy reasons, I object to any legislation that would prohibit improvement in freight handling and transportation in this country.

The present rule of ratemaking, section 15-A-3, has resulted in traffic being restored to the railroads. Through the years, I have seen them lose freight because it was more expedient to use other types of transportation. It has been through competition that improvement in their handling and ours has come about.

Bill S. 1197 would destroy the incentive to develop new and better ways of shipping.

The proposed bill would destroy competition by turning over to the Interstate Commerce Commission artificial restraint.

STATEMENT OF ALVIN A. VOGES, SECRETARY-MANAGER, AMERICAN VENEER PACKAGE ASSOCIATION, INC., ORLANDO, FLA.

IDENTIFICATION

My name is Alvin A. Voges, my business address, 12251⁄2 North Orange Avenue, Orlando, Fla. I am employed as secretary-manager of American Veneer Package Association, Inc., a national trade association incorporated in 1938 for the purpose of representing the manufacturers of wood veneer fruit and vegetable containers. As such we represent the majority volume of wood veneer fruit and vegetable baskets and hampers manufactured in the United States. I have been in this position since 1951.

GENERAL STATEMENT

The executive committee of American Veneer Package Association, in regular meeting adopted the following:

"RESOLUTION

"It appearing that through legislative bills now before Congress, namely, S. 1089 and S. 1197 and H.R. 5937, effort is being made to emasculate the Transportation Act as amended in 1958 and,

"It appearing that by such bills the Government, the public, this industry, and all shippers would suffer a lessened competitive condition in the field of national transportation;

"And it appearing that enactment of named bills or bills of similar purpose would weaken segments of transportation by containing them within strict limits in ratemaking and would materially lessen initiative, technical advancement. and improvement factors: Therefore be it

“Resolved, That this association for the industry it represents is opposed to enactment of said or similar legislation."

The secretary-manager was instructed to make the association's position known to the Congress.

It is the position of this association that all forms of transportation, particularly the essential common carriers, should be afforded equal competitive opportunity, given freedom to exploit the advantages each has to offer, regulated only to the degree clearly required by the public interest to maintain a strong national transportation system.

It is our considered opinion the proposed legislation here at interest is designed to stifle progress, to minimize competition at the expense of the public, to give advantage and preference to one or more types of carrier at the disadvantage and prejudice of other type or types of carriers.

It is true each type carrier has traffic which it is best equipped to serve and in which competition is not a major factor. In that traffic which is commonly available to competing types of carriers, the decisive factors of selection by the shipping public are service, convenience, the element of time and last, but not least, the cost of transportation.

Any type carrier which by reason of inherent disadvantages cannot meet the compensatory rates of its competitors must of necessity hasten technological advancement that it may again be an equal competitively.

And when such technological advances have been achieved it is only proper that the savings resulting therefrom be passed on to the public. To do otherwise, to build a fence for the protection of any mode of transportation because it is shackled to conditions or methods that restrain it from full and progressive development, would aid and abet indolence and ingrown faults that could be calculated to weaken and destroy the very subject for which the protective fence was originally designed.

We think it elementary that—

(1) No mode of transportation should be required to maintain rates at a higher than necessary level for the purpose of permitting another type carrier to obtain traffic.

(2) Every form of transportation should be permitted to enjoy the benefits accruing to it by reason of technical, mechanical, and operational developments and improvements.

(3) The shipping public and the Nation will be best served within a competitive atmosphere not stifled by artificial rules.

We consider the proposed subject legislation contrary to the long established and many times tested basic principles of the Transportation Act and an undisguised effort to destroy the purpose and effect of the 1958 amendment. We pray that you will reject S. 1197 and S. 1089 (and House companion bill H.R. 5937).

(The following comments were received from the Government's agencies:)

COMPTROLLER GENERAL OF THE UNITED STATES,
Washington, D.C., March 23, 1961.

Hon. WARREN G. MAGNUSON,
Chairman, Committee on Interstate and Foreign Commerce,
U.S. Senate.

DEAR MR. CHAIRMAN: We refer again to your letter of March 3, 1961, in which you asked for our comments on S. 1197, which would amend section 15a (3) of the Interstate Commerce Act, 49 U.S.C. 15a (3). S. 1197 would amend paragraph 3 by (1) spelling out the main factors which the Interstate Commerce Commission is required to consider in a rate proceeding which involves competition between carriers of different modes of transportation, and (2) adding emphasis to the prohibition against forced maintenance of higher than compensatory rates by one mode for the protection of another and to the requirement for considering, in the proceeding, all the objectives of the national transportation policy.

This legislative proposal is not one which would directly affect the functions of our Office, nor would it have a direct effect on the interests of the United States as a purchaser of transportation. It is, primarily, a matter of policy to be determined by the Congress, although it may be appropriate to note that the language proposed to be added to section 15a (3) serves to more fully define the factors required to be considered by the Commission in giving effect to the congressional intent. For this reason, S. 1197 would seem to be in the public interest and we have no objection to its being given favorable consideration.

Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.