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to the shipping and consuming public, particularly along the Atlantic Coast, because the low-cost transportation presently available by water no longer would be there, and the economy of these regions would suffer.
Even under the administration of the present law, the railroads have been able to accomplish a great deal of their aim, insofar as Seatrain is concerned, by putting in reduced all-rail commodity rates between the points we serve; simultaneously increasing the local rates to and from the ports; and refusing to join with Seatrain in through joint rates that preserve the differentials prescribed or approved by the Commission. Thus, Seatrain is subjected to a double squeeze; the through rates with which it must compete are depressed, and the local rates to and from the ports are increased, so that Seatrain's port-to-port rates must take a double shrink to stay in the competitive picture.
Now, what I just said, Senators, might sound a little complicated, and I wonder if you would let me take one minute to show you on piece of paper an example of that.
Senator SMATHERS. Yes, sir.
Mr. WELLER. Let me give you the example of a rate situation applying between New York area and Texas City, Tex. Seatrain operates between Edgewater, N. J., and Texas City. We connect with railroads up here, we connect with railroads down here [indicating).
Now let's take a situation which maybe 10 years ago we had a rail rate from Hartford through the St. Louis gateway, down to Dallas, we will say. We will say that rate was $1.50. Let's suppose there was a railroad rate from Hartford to New York, a local rate, of 30 cents. Any suppose there was a rate from Dallas to Texas City, a local rate, of 40 cents. Seatrain has to have a rate between here and here [indicting], which, after adding these two rates, is competitive with that rate. In fact, it has to be lower than that rate or we wouldn't get any business at all.
So let's say that the differential has to be 10 cents. That means that the combination of these has to be $1.40, no more—40, 30, are 70; we have got 70 cents left that our rate can be. All right. So the railroads come along with a general rate increase case, and they increase the rates we will say 10 percent. This rate becomes 33 cents, this rate becomes 44 cents. But they put a hold-down on this rate and don't increase it at all. The result is that in order to maintain that differential, Seatrain's port-to-port rate has got to come down to 63 cents.
Now, in the last 10 or 12 years there have been something like 15 or 16 of these general rate increases, and as they go along, here is what the result, you will find, has happened. Those general rate increases have amounted to about 80 percent on the total. So we have a let's just take the example of a 50 percent increase. This rate has now become 45 cents, this rate which was 40 has now become 60 cents, and maybe, while they are at it, over the years, they increased this one to $1.60, ten cents. So we have to have a combination of $1.50 to come under that and still maintain the 10-cent differential.
How do we get that? We have got 45 cents here, 60 cents there, that is $1.05, if you subtract that from $1.35, and we have got 45 cents left.
Now, in this same period that the railroad costs have been going up and they have had to have all these general rate increases, although our costs are much lower than theirs, our costs also are going up, and we can't afford to be constantly reducing these port-to-port rates in order to stay in the picture, while they hold down this rate over here.
Is it clear to the committee what I am talking about?
Senator SMATHERS. Counsel Barton would like to ask you a question.
Mr. BARTON. Mr. Weller, I am somewhat puzzled about the proximity of these rates, especially when you state that your costs were found by the Commission to be just one-third of the cost for operation of the railroads. How do you account for that?
Mr. WELLER. How do I account for what?
Mr. BARTON. If your costs are just about one-third what it costs the railroads to operate, why are your rates so close ?
Mr. WELLER. I might explain that. The Commission found, in the case that I mentioned, that our costs for moving a ton of freight from here to here, or vice versa, was one-third of the railroad cost for moving that ton from here to here; but, in fact, very little traffic does originate right at the piers. It has to be brought to the piers by truck, rail, or something. In our case, it has to be by rail. So that we have to include in-you are asking why is our rate from here to here so close to theirs? It is because of this combination of having to add in the railroad locals, at the end.
Mr. BARTON. It is your port-to-port rates that are one-third, then, not your entire rate cost?
Mr. WELLER. Not necessarily the rate. We are talking about costs. Mr. BARTON. Yes.
Mr. WELLER. May I mention one other thing that might interest the committee! Houston, Tex., this is 41 miles from Houston, Tex., to Texas City. There has to be a rail haul in a Houston movement. An average sort of a situation, such as he mentioned, where the car of freight, we will say, originated right up here at New York, there wasn't any rail haul at all; it originated right at the pier, so it will simplify that. The car of freight is going to Houston. Let's say that the rate for the whole movement on that is $800. Seatrain hauls that car 2,180 miles around here [indicating]. The railroad carries it 40 miles from Texas City to Houston. Out of the $800 the railroad will take $200, Seatrain gets $600.
Now, you divide that $200 by the 40 miles.
You have a rate of $5 a mile. But the railroad will come along and propose to put in a through rate here that matches the $800, which means they will be hauling it for 50 cents a mile. Yet they tell us they can't afford to haul it for anything less than $5 a mile for that 40 miles. What is compensatory ?
Senator SMATHERS. All right, sir. You may proceed.
Mr. WELLER. The report of your subcommittee, sir, on April 30, apparently recognized the existence of these destructive rate practices, as I have been talking about, because—I quote from page 7 of
As has been confirmed by the statements made in the recent hearings, the Commission appears to be losing control over rate relationships. When carriers are permitted to meet competition by other carriers or by private carriage at limited points without reference to the rates at other points, it legalizes the disturbance of rate relationships to the detriment of shippers.
I certainly concur that better administration of the existing law by the Commission is required.
However, the amendment of section 15 (a) of the Interstate Commerce Act proposed in section 5 of S. 3778Senator SMATHERS. May I say right there that we don't propose to
Ι argue with our witnesses, we are delighted to have them here. But when they say we “intend” to do something which, of course, nobody intended to do, I think for the record that I should say that it was certainly no intention of the subcommittee. And, as a matter of fact, I make reference to this matter so that the record can be straight.
In the National Transportation Policy it says—and that is still a part of the law-we intend for it to be a part of the law. When we put our language in here it is only in relationship to these other parts of the law which say to encourage the establishment and maintenance of reasonable charges for transportation without unjust discriminations, undue preferences or advantages or unfair or destructive competitive practices. Of course, you are entitled to any conclusion you might want to arrive at. We like that. But I don't think we just ought to let that stand when it was not the subcommittee's intention, and certainly is not our belief that this would be the result at all.
You go right ahead.
Mr. WELLER. I am sure, sir, it is not the intention of the subcommittee. I do know that it is the intention of the railroads. And having been exposed to the practices I have been exposed to, and my company has been exposed to, I am quite well aware what use the railroads would want to make of this provision.
The proposed change in the ratemaking section appears to me to be completely inconsistent with other provisions of the Interstate Commerce Act, and impossible of administration. The National Transportation Policy, as you said, provides for fair and impartial regulation of all modes of transportation—to recognize and preserve the inherent advantages of each; to develop, coordinate, and preserve a National Transportation System, by water, highway and rail, as well as other means; and it lays upon the Commission—an impartial factfinding body--the duty of administering all of the provisions of the act with a view to carrying out that policy. Yet, section 5 of S. 3778 and of H. R. 12488 proposes that the Interstate Commerce Commission put on blinders and ignore any facts but those presented by the railroads in a proceeding involving competitive ratemaking.
Senator LAUSCHE. Mr. Chairman.
Senator LAUSCHE. How do you reconcile the import of this last sentence with the specific provisions of the law as have been read by the Chairman, Senator Smathers?
Mr. WELLER. How do I reconcile my statement with that?
theSenator LAUSCHE. That is, when you say that section 5 will put blinders on the Interstate Commerce Commission and will compel it to ignore facts except those presented by the railroads in a proceeding involving competitive ratemaking. How do you make that statement in view of the language which was just read by the Chairman?
Mr. WELLER. Are you speaking of the language of that act?
Senator SMATHERS. It says here-to encourage the establishment and maintenance of reasonable charges for transportation service without unjust discriminations, undue preferences, or unfair or destructive competitive practices.
In other words, in all of these matters, the Commission does have to consider: "Is it an unfair or destructive practice?"
Mr. WELLER. How would the Commission consider that, sir, if the Commission were not entitled, in a case involving a railroad rate, to receive any evidence surrounding the circumstances of the railroads competitors ? It could only listen to the railroads.
Senator SMATHERS. No. They say they would not have to consider what effect it would have on the other mode of transportation, unless it was considered an unfair or destructive competitive practice. It has to be compensatory.
Mr. WELLER. I don't find that, sir, in the amendment.
Senator SMATHERS. We are trying to amend the law, Mr. Weller. You can read into it what you want. We are trying to make legislative history. We are trying to make the legislative history—so far as we can understand it, that is what it intends to say.
Mr. WELLER. I would be interested in knowing, Senator, before we finish, what the purpose of the amendment is, if it is not to accomplish the thing that the railroads are already doing under present law.
Senator SMATHERS. Then if it does it already under present law, why are you objecting to it!
Mr. WELLER. That which I have demonstrated; we at least under the present law have the right to speak to the Commission about these matters. As the amendment reads, I don't think we would have the right to do that.
Senator SMATHERS. We intend that any time you can show any violation of the national transportation policy you should have the right, and it would certainly be intended—and it has always been the intention—that the general purposes of the national transportation policy should be carried out. The only thing we are trying to do is to do the very thing that you people asked for.
Mr. WELLER. I didn't ask for this.
Senator SMATHERS. I know. You were too young. But your predecessors did.
Mr. WELLER. I am not as young as you think.
Senator SMATHERS. Nor am I. But in any event, you just heard Senator Wheeler, and the testimony is indisputable, this is what you people asked for at one time.
We are trying to do just that. And this act must be taken altogether.
Mr. WELLER. I might say, Senator, if I am not interrupting too long, that I did hear the testimony of Senator Wheeler, and I heard the questions which were asked, and I found myself at the end of those questions considerably confused as to what was intended. Because there was a considerable discussion about what would be a compensatory rate for a railroad in such a circumstance as is here proposed. And I did not hear a clear response to that.
If the committee wanted to clarify that question by adding to the language which it now has in the amendment, a proviso something like this: If that proviso saidprovided that the rail rate involved covers the fully distributed costs of the rail carriers, and a return, I would have no further desire to argue with that amendment.
Senator POTTER. What was that, again?
Mr. WELLER. If there were added a proviso to the present language in the amendment, and if that proviso said: Provided that the rail rate concerned covers the fully distributed costs of the rail carriers and a return on investment, I would have no quarrel with the amendment.
Senator SMATHERS. Well, we will discuss that when the time comes, and we would welcome, as we have right along through the recommendations that you people have made.
Now we are interested in the general public. We are greatly concerned, of course, about Seatrain. They are a big operation in my city of Tampa, and so on. Not your Seatrain, but your competitor.
Mr. WELLER. Yes, unfortunately.
Senator SMATHERS. We are well aware of it. And we understand your personal desire to make as much money as you can.
But our particular job is to serve the general public, and that is what we are out here trying to do.
You go ahead with your statement.
The proposal which you made, if adopted, would completely negative the purposes and intent of the Congress in 1940 and in 1935 when it declared that the inherent advantages of each mode of transportation shall be preserved in the interest of the public.
Mr. WELLER. I don't quite see, Senator, how that would happen.
Senator LAUSCHE. That is, you are asking that there be ordered a complete distribution of all costs and a return on the capital investment.
Mr. WELLER. I am suggesting-
Mr. WELLER. I am suggesting that if this proposed amendment is not intended to prevent destructive—to permit destructive rate-cutting by the railroads, a proviso which said the amendment only applied when the rate covered fully distributed costs, would satisfy my concern about it. Senator LAUSCHE. And a return on the investment. Mr. WELLER. And a return on the investment.
Senator SMATHERS. Of course, that would have the effect of raising the rates for the shippers and the general public throughout the whole transportation system tremendously.
Mr. WELLER. I don't see why it would, sir. Senator SMATHERS. Well, I think that it would. Senator SCHOEPPEL. I am still wondering about the illustration which you used there, when you put a loaded railroad car on your Seatrain from New York, deliver it to Texas City, and then it goes by rail up to Houston, 40 some miles, and someone extracts $200 from you on that movement.