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Now, what has happened in that kind of a case to this thing called the application of joint rates?
Now, if that application was made and if that situation develops, wouldn't it be incumbent upon the Interstate Commerce Commission to require a joint rate to be established there!
Mr. WELLER. Senator, the example I gave you of a car moving from Edgewater to Houston was intended to be an example of a car moving, presently, under a joint through rate with the railroad, and under a division prescribed—of the rate, prescribed by the Commission many years ago.
Senator SCHOEPPEL. On the basis of the establishment and operating under a joint rate.
Mr. WELLER. That is the prescribed division.
Now, many years ago, the Commission did prescribe through joint rates for Seatrain, that is, it did require the railroads to enter into through joint rates with Seatrain, and it prescribed the divisions of those rates, not applying specifically to Seatrain but to coastal water lines, in general.
Senator SCHOEPPEL. Yes.
Mr. WELLER. The Commission's prescription of those—and I might say that the Commission's prescription of those through joint rates in the case I just mentioned, docket 28300, also prescribed a differential of the water line rates under the all-rail rates. It applied, however, only to class-rated traffic.
Now, the railroads in the kind of circumstance I am talking about here, where they cut the through rates, they cut them by putting in specific commodity rates relating only to some specific piece of traffic that they want to take away from us. And on those rates they refused, on commodity rates, they refuse to-generally, into joint through rates with Seatrain—they refuse to do so.
Senator SMATHERS. Do you make these same arguments to the Interstate Commerce Commission?
Mr. WELLER. We do.
Then your complaint is about the administration with respect to the Interstate Commerce Commission ?
Mr. WELLER. Yes. And I don't want, Seantor, to be interpreted as particularly complaining about the intentions of desires of the Commission. The Commission is a very busy agency, and we find that the Commission is sometimes too busy to find a very small outfit like Seatrain.
Senator SCHOEPPEL. Mr. Chairman, the reason I asked that question: That situation looked completely and totally unconscionable to me.
Mr. WELLER. Well, it seems that way to me, but
Senator SCHOEPPEL. And naturally, I thought in terms of a joint rate approach to this thing. That is the reason why I wanted to get into this testimony of yours at this stage—belated though it might have been at the time you were testifying—as to what the situation
Mr. WELLER. Might I give you an example? I am getting on dangerous ground because I am not an attorney, and I do not handle specific rate cases, not being an attorney.
But only a few days ago it was brought to my attention this situation, in which the railroads only about a month ago filed a whole series
a of rates reducing the rates on steel pipe between areas such as Pittsþurgh and Sparrows Point to various points in Texas. They cut them very drastically to points adjacent to the water; they left them much higher to points that were a little distance from the water.
Seatrain, I might say Seatrain carried last year 500 cars of steel pipe, approximately, in our ship.
Senator SMATHERS. When you say cars, you mean railroad cars?
Mr. WELLER. Railroad cars loaded with pipe, this kind of traffic. That would be something like roughly one-fortieth of our total business. This was a substantial matter to us.
We petitioned for suspension of these rates. We also petitioned the Commission to deny the relief from the fourth section, which was required because the railroads were not intending to make this cut generally but only to the specific points and on the specific traffic.
The Commission—we petitioned for this suspension, I believe PanAtlantic also did. I know that some barge lines did. The Commission did not grant the suspension. It did grant out of hand the fourth section relief. Why did it? Seatrain's petition pointed out the very kind—to the Commission the very kind of a situation which was involved here and the fact that the railroads were not making available to us the through joint rates, which would permit us to meet the same level.
The railroad's reply to our petition said this matter of the joint through rates is in negotiation between the parties, and acting upon that, the Commission allowed the fourth section relief, put the rates into effect.
Now, what does this actual negotiation of the rates involve? I can tell you.
Seatrain wrote the railroads a letter and asked them to join in this rate. They have not answered the letter. That is negotiation.
I might add one more thing, at a court in Houston, they enjoined the effectiveness of this order, but the railroads still have the rate in effect, notwithstanding.
Senator SMATHERS. May I say here that the subcommittee recognized that evil. In fact we make reference to it when we say carriers are permitted to meet competition by other carriers or by private carriers at limited points without reference to the rates at other points, and so on.
I think if you will read our report, you will see that we ask both the railroads and we urge the Commission to work out better joint rates— just the point that you are making here. This whole testimony doesn't directly relate to the particular matter we have in front of us, so let's move on back to your-if you don't mind—back to your printed testimony.
Mr. WELLER. Very good, sir.
Mr. WELLER. This one-sided proposal is particularly dangerous, because under section 5 (a) of the Interstate Commerce Act, the railroads are largely removed from the coverage of the antitrust statutes, and this proposed amendment of section 15 (a) would enable them to pursue collusive destructive rate practices, without fear of antitrust
prosecution, so that neither the public nor the coastal waterlines would have the protection of the antitrust laws.
In passing, section 6 of S. 3778 and of H. R. 12488 provides Government-guaranteed loans to the railroads which could be used to finance them in continuing destructive rate wars. I have no objection to financial assistance for the railroads, but I do not think it should be combined with the issuance of a hunting license against their competitors.
Congress has repeatedly affirmed the need of the United States for merchant shipping to be available in time of war. We have spent over $500 million in the past 5 years, subsidizing construction and operation of ships in the offshore trades. The vessels of the coastal shipping lines are built and operated with private funds, and without 1 penny of subsidy, through special tax treatment or otherwise. Moreover, they are specialized vessels, particularly adapted to containerized transport of military materiel, and are always located within a few hours' steaming of a continental United States port.
The Department of Defense, and indeed this Congress, has repeatedly declared that a strong coastal shipping industry is a vital segment of our national defense. Certainly it would be foolish for the United States to continue appropriating millions to subsidize ships in the foreign trade, and simultaneously allow its coastal shipping industry to be demolished in a destructive rate war unhampered by antitrust laws and financed by Government-guaranteed loans.
I should like to point out that the national transportation policy has been and is the cornerstone of transportation regulation in this country. Under it our country has evolved the strongest, most efficient transportation plant in the world and the only large one under private ownership. The development of this transportation plant in all of its ramifications was made possible only as a result of the foresight of Congress in enacting the national transportation policy and requiring the Commission to administer and enforce it. The proposed rule of ratemaking, in my opinion, would tear out the very cornerstone of our national transportation structure by destroying all surface transportation other than the railroads and in turn leading to the eventual destruction of the railroads themselves under private ownership.
Senator SMATHERS. I just want to say right there, that you are entitled to your opinion on that, but you have heard Senator Wheeler.
Mr. WELLER. I did, sir.
Senator SMATHERS. All we are seeking to do—and every reasonable interpretation of what we are trying to do is to put in the statute, and carry out the specific injunction of the transportation policy which you say has made us the greatest ever. Up until 1950 there was no need for the kind of thing we are having to do now. But since 1950, when your problems have started getting greater, and you have lost more money, the Commission has not been consistent, and that is the occasion why now we feel it necessary to reemphasize the importance of the national transportation policy, which you say has made us the greatest ever. That is all we are seeking to do.
Mr. WELLER. I am sorry to disagree with you, Senator, but I don't find anything in the amendment which emphasizes the national transportation policy.
Senator SMATHERS. All right, sir.
Mr. WELLER. In passing, I think I should call attention to the fact that the proposed rule of ratemaking, at least seemingly, vitiates so far as the railroads are concerned, the relief provisions of section 4 of the act, a development which I am sure the proponents of the proposed new rule of ratemaking never contemplated.
The total tonnage of the deep-water coastal shipping lines in 1957 amounted to only about 8/100ths of 1 percent of the tonnage handled by class I railroads. The total revenues of Pan-Atlantic and Seatrain combined last year from regulated freight were about $24 million as compared with $9 billion for the railroads. Surely Congress does not wish to destroy our small and struggling industry, so vital to the national defense, even if that would benefit the railroads. From the figures I have just given you, it obviously would not be the answer to any real solution of the railroad problem.
In conclusion, I would merely like to say that unless it is the purpose of this committee and the Congress to make it possible for the railroads to destroy other modes of transportation, and particularly the coastal shipping industry, for which I speak, then for the reasons I have given, it is, I think, fairly obvious that Í am opposed to section 5. If the committee would indulge me, I would like, if you would give me 1 or 2 minutes for Mr. Leighton, who represents a railroad connecting with us, to state the effect this would have on him
Senator SMATHERS. We would be delighted to hear Mr. Leighton after we have these other witnesses. We have published a list of witnesses and we have 21 days of this previously. But we are not going to cut you off. You may come back later. We have a whole room full of witnesses waiting to testify here.
Mr. LEIGHTON. I would be delighted to.
The subcommittee have stated in their report the national transportation policy, that each carrier should have its own inherent advantages protected.
I know, as a member of the full committee, not as a member of the subcommittee, that is what I want, and I assume as a water carrier that is what you want. You want to have the inherent advantages of water transportation protected, so that unfair competition can't move you out of your traffic; is that right?
Mr. WELLER. That is right, Senator. I want no more than what is fair.
As I explained, our kind of operation can only exist with a differential under the railroad rates; that is No. 1. We are not entitled to have such a differential, nor do I urge one, except in the case where cost is lower than the railroad cost. We have no right to ask for anything more than that. But if we are to be exposed to rate-cutting practices by the railroads, for instance, in which the railroads are going to cut their rates on an out-of-pocket cost basis and to subject me at the same time to local rates which put me in a squeeze, obviously we cannot continue in business. And if this amendment were passed, as I read it, I would not be entitled to state my position in any such ratemaking matter. Because it says the Commission can only conwider the railroads' circumstances, not mine.
Senator SMATHERS. Let me just say this:
Of course, that has been put in there so that the railroads can not object to the inherent advantage which you say is yours. You would agree that from New York--from seaport to seaport-you can carry certain articles at a much less rate than can the railroads, isn't that right?
Mr. WELLER. That is right, sir, from seaport to seaport and from areas adjacent to the seaport.
Senator SMATHERS. It looks to me as if you could control the rates inland, when in fact you are supposed to be, as I gather it, a water carrier
Mr. WELLER. Well, the law–Senator, I would have to disagree on that.
Senator SMATHERS. All right.
You agree that you can carry many articles at much less expense than the railroads?
Mr. WELLER. Right.
Senator SMATHERS. And the Commission is supposed to protect you and your right to do that, isn't that right?
Mr. WELLER. That is right.
Senator SMATHERS. And the general public benefits by the very fact you can carry at less expense, isn't that right?
Mr. WELLER. That is right.
Senator SMATHERS. Now, are there not some articles that the railroads carry inland probaby a lot cheaper than you when you run it from Texas City up inland ?
Mr. WELLER. That is right, sir.
Mr. WELLER. I would like to merely explain that because of the fact that our operation port-to-port must have added to it railroad rates or railroad costs, that the area from which we can draw traffic around the ports is circumscribed by that fact. We make no pretense to a right to anything beyond that.
Senator SMATHERS. Is not the public benefitted by the inherent advantage which you have when you are permitted to file a lower rate on a particular item from a port to a port than that which the railroad can get because you can do it and still be compensatory?
Mr. WELLER. That is right. Senator SMATHERS. That is all we are seeking to do. Thank you very much. Senator PURTELL. You feel, do you, that some of the protection afforded you by the law now you will lose by the passage of this proposed legislation ?
Mr. WELLER. I feel that whatever protection the law presently provides for me, Senator, would be completely destroyed.
Senator PURTELL. May I read from section 307:
In the case of a through route where one of the carriers is a common carrier by water, the Commission shall prescribe such reasonable differentials it may find to be justified between all-rail rates and the joint rates in connection with such common carrier by water. Do you feel that that would be denied you!
Mr. WELLER. How would the Commission be able to take that into account if under this amendment it could only listen to the railroad circumstances ?