STATE ASSOCIATIONS Arizona Federation of Retail Associations Florida State Retailers Association Illinois Federation of Retail Associations Maine Merchants Association, Inc. Maryland Council of Retail Merchants, Inc. Michigan Retailers Association Minnesota Retail Federation, Inc. Missouri Retailers Association Nebraska Federation of Retail Associations, Inc. Retail Merchants' Association of New Jersey Pennsylvania Retailers' Assoication, Inc. Retail Merchants Association of South Dakota Utah Council of Retailers Virginia Retail Merchants Association, Inc. West Virginia Retailers Association, Inc. Mr. WLLIAMS. Thank you, Mr. Webber. Mr. DOLLIVER. You refer to action that should be taken without further delay. What do you mean by that? Mr. WEBBER. Sir, this less-than-carload problem is something that we have been seriously considering, as I said, since 1946. The American Retail Federation as such has been considering it for the last 2 years and we now have a committee working on it and are going to handle it further at our next meeting in Denver at which time we hope to bring forth some suggestions at least from the federation of what we think could and should be done on that problem. Mr. DOLLIVER. The thing that prompted my question was the previous part of your statement had been mostly on the negative side in opposition to the proposals now before us. Do you have any affirmative proposals to present at this time? Mr. WEBBER. No, we have not anything at this time. Mr. DOLLIVER. Thank you. Mr. WILLIAMS. Thank you, Mr. Webber. Mr. Hale has a question, Mr. Webber. Mr. HALE. Is it your feeling that a substantial reduction in lessthan-carload rates would bring back a lot of business to the rails and improve their situation? Mr. WEBBER. I might say that we feel that some reduction in lessthan-carload rates should be made to bring the volume back. Along with it and just from my own thinking, the railroads have to bring in volume rates, improve service, modernization, and many other things in general. The big part of the small shipment today is the terrifically terminal cost in each town, the high pickup and deliveries cost, labor and so forth. The handling cost, and what we call our laundry bill of lading, where on small shipments you have bills of lading sometimes 4 and 5 feet long on total charges that might be $3 or $4, where more than that could be saved by the carriers and industry in not having to make out such tremendous bills of lading. We are thinking now of perhaps eliminating the classification as such and getting shipments on the purge of first-class rates based on volume made in one day, something similar to the tests that the Railway Express Agency is making. However, those are just general thoughts that we have at the present time. I may say it is the $64,000 question today and I think the railroads, the trucklines, all transportation agencies, and industry as a whole, will be very thankful when we get the answer to it. Mr. WILLIAMS. Thank you, Mr. Webber. Mr. WEBBER. Thank you, gentlemen. Mr. WILLIAMS. Mr. Joe G. Fender, representing the Houston Shippers Association and Dal-Worth Shippers Association. STATEMENT OF JOE G. FENDER, REPRESENTATIVE OF THE HOUSTON MERCHANT SHIPPERS ASSOCIATION AND DAL-WORTH SHIPPERS ASSOCIATION Mr. FENDER. Mr. Chairman, my name is Joe G. Fender. I am from Houston, Tex., which I trust will turn out to be within someones' district if the legislation proposed here gets serious consideration down the line. I am appearing on behalf of Houston Merchant Shippers Association and Dal-Worth Shippers Association. Houston Merchant Shippers Association is located at Houston and Dal-Worth has its headquarters in Dallas, Tex. Each of these associations is incorporated and the members are associated for the sole purpose of consolidating their freight to obtain the benefit of railroad carload rates. Each association is conducted on a nonprofit basis. If I may be permitted, I would like to submit the entire membership list of each of these associations as an extension of my remarks. The lists show 45 members in the Houston association and over 125 members in the association at Dallas. In that connection, I am sorry but due to a mixup between my office and mimeograph office, I failed to have appended to my statement the membership list to which I make reference, and with the committee's permission, I would like very much to submit those membership lists to be appended to this statement or, in any event, to appear in the record along with my remarks. Mr. WILLIAMS. You will have that permission. These organizations are opposed to section 19 of the House bill 6141 and Senate bill 1920 and any change in the present wording and provisions of section 402, part IV of the Interstate Commerce Act in whatever form such change may be proposed. Section 402 is the present section which reserves to shippers the right to pool or consolidate their own freight and thus obtain the benefit of freight savings on volume rates. Section 19 reads as follows: SEC. 19. Subsection (c) of section 402 of the Interstate Commerce Act, as amended, is amended (1) by inserting after "(c)" the following: "(1) Except as provided in paragraph at the end thereof reading as follows: "(2) After hearing in an investigation instituted on its own motion or upon complaint the Commission, by order, shall make the exemption provided for by paragraph (1) inapplicable to any person if it finds that the activities of such person are not being conducted solely for the purpose, and within the limitations, specified in such paragraph, or that making such exemption inapplicable to such person is necessary to carry out the purposes of this part and the national transportation policy declared in this act. In the administration of this paragraph the Commission shall consider, among other things which in its opinion are pertinent and relevant, the facts and circumstances surrounding the organization and establishment of such activities; the scope of the activities, geographically and as to commodities handled and persons served; the basis of charges, if any, for the service or services provided; and the extent such activities are in competition with the services of freight forwarders subject to this part.'' In complete explanation of the position which I take on behalf of my clients, I believe it necessary to go briefly into the background and history of the original commercial freight forwarder legislation, which now appears in part IV, of the Interstate Commerce Act. It will be recalled that there was no legislation providing for regulation of commercial freight forwarders by the Interstate Commerce Commission until May 15, 1942. Prior to that date freight forwarders were characterized as shippers by a long line of court decisions, and they had been held not entitled to operate under the Motor Carrier Act or to have the benefit of reduced motor-carrier proportional rates. In 1941 the forwarders sought legislation, the original legislation, which would give them common-carrier status in the hope that they might obtain proportional rates by rail and motor carrier to which had theretofore been denied to them as shippers. A report of the legislative hearings on H. R. 3684 in March 1941 shows that only the motor-carrier industry lent support to the forwarders' request for carrier status, although the railroads, the ICC and the shipping public favored a regulation of forwarders for several reasons. Without going into great detail it was established by witnesses before the committee that the forwarders had been discriminating between their large and small customers and engaging in other practices commonly regarded as improper and unlawful, hearings H. R. 3684, pages 93-162. All page references hereinafter appearing are to these hearings unless otherwise indicated. Forwarders were shown not to be operating carriers. Witnesses correctly stated that forwarders simply buy transportation for their shipper patrons, taking a profit from the difference between their own published rates and the volume rates charged by the carriers which perform the actual transportation service. Their operations were described in part by John V. Lawrence for American Trucking Association as follows: The freight forwarding company *** only selects such points as it wishes to serve *** its investment is not sufficiently great but what it could walk right out and then the forwarding service which is spoken of so highly * * * would be no more (p. 254). In the words of another witness: They have an office in Minneapolis and probably $50 worth of furniture, but that is not an asset that we can get anything from, and I think that all of these forwarders ought to be required to put up a reasonable bond * *** and The forwarder's investment is negligible and he turns his invested capital 25 to 30 times a year. According to 1938 records of the Commission the motor carriers turn their capital about 3.2 times a year, and the railroads turn approximately one-fourth of their capital investment each year (John V. Lawrence, p. 254). The ICC summed its views of the problem before the committee insofar as material now, as follows: From the information developed in the investigation conducted by this Commission and your subcommittee, it appears clearly, among other things: (1) That the freight forwarders are regarded by the carriers subject to parts I, II, III of the act as agencies which are important and often troublesome factors in transportation competition. (2) That while the forwarders usually publish schedules of their own rates and charges they do not adhere scrupulously to those schedules and give preference and advantage to particular persons when deemed necessary to attract traffic * * * A majority of the Commissioners believe that whatever useful purpose forwarders perform, could be performed by the carriers themselves through an expansion of their operations. But if forwarding agencies are to be allowed to exist, they should be suitably regulated. The forwarder legislation, when enacted, did not give the forwarders carrier status although they had requested it. Furthermore, it was obvious from the House reports that the forwarder legislation was enacted not for the purpose of protecting forwarders, but solely to regulate them and to protect the actual operating carriers and the shipping public. In connection with that original legislation, one thing I would make entirely plain, and that is this: The forwarder legislation when proposed, as appears from the legislative hearings, was intended to contain, as it did and does now, in section 402, the clearest of exempting provisions in favor of shippers such as those whom I represent, who, by corporate association or otherwise desire by their own efforts to consolidate or pool their freight on a nonprofit basis. Mr. Giles Morrow, when representing the forwarders in other hearings has said that prior to enactment of section 402, as it now stands, there was testimony from several persons representing groups such as paper manufacturers, meat processors, and similar related industries who said they regularly pooled their shipments in order to effectuate a saving in freight rates (p. 1284) — and that exemptions in the law as now written were enacted to quiet their fears. Mr. Morrow's statement, however, does not reveal the extent and implication of the testimony that was before the legislative committee. In this connection, the witnesses who assisted in the drafting of the original forwarder legislation testified that it was intended by the freight-forwarder definition therein to include only freight forwarders operating for profit. As to the scope of operation contemplated by the exemption, witness Charles F. Nielson, on behalf of the Los Angeles Chamber of Commerce, testified as follows-this is in reference to the nonprofit associations and operators: In the belief two or more shippers, or any bona fide nonprofit association or corporation should not be prohibited from consolidating their own property at the prevailing carload rate plus a nominal loading charge and, when operating ing this manner, they should under no circumstances be classified as a freight forwarder or be compelled to file tariffs, and so forth, with the Commission, a resolution was adopted by the Los Angeles Tariffic Managers' Conference in a special meeting held on March 11, 1941, to recommend that the definition of the term "freight forwarder," as outlined on pages 2 and 3 of H. R. 3684 and S. 210 be amended to exclude any bona fide nonprofit association or corporation consolidating the property of its members exclusively and to exclude the individual shipper who has the nucleus of a carload shipment which he consolidates with other shippers of commodities of the same general character (p. 195). Walter S. Franklin, vice president in charge of traffic for the Pennsylvania Railroad, while loosely using the term "pool car" described and recommended exemption for nonprofit shippers association as commonly operated then and now in the following testimony: There is an unknown but nevertheless large number of shipper organizations operating so-called pool cars. The operations are conducted in several ways. Some are through cooperatives, others through hired organizations, and still others through independent concerns in which the shippers have no financial interests but do have control through the traffic which they ship. All of these are predicated on shipping what would otherwise be less-carload shipments at something higher than the carload rate but substantially less than the lesscarload rate (p. 419). The extent of shipper interest which produced the section 402 exemption is further apparent from the testimony of John B. Keeler, who appeared for the National Industrial Traffic League. In the words of this witness the league membership is comprised of "many thousands of shippers and receivers of less-than-carload freight." On behalf of the league, Keeler specifically recommended definition of the freight forwarder to include those only that were transporting for the general public with specific exemption in favor of nonprofit shippers associations, as follows: Nothing in this act is to be construed as limiting the right of a shipper or group of shippers from consolidating freight themselves on a nonprofit basis or by employing an agent to do so, into carloads or into volume tonnages so as to obtain lower rates which are in effect and lawfully on file with the Commission. Such shipper or group of shippers will not be subject to the Freight Forwarder Act (p. 342). Other witnesses spelled out that practices which included associations of shippers on a nonprofit basis for the purpose of consolidating freight and obtaining the benefit of railroad volume rates should be protected and not foreclosed by "change" in the proposed legislation. Charles F. Nielson, page 273; Daniel Bustran for Delaware Shippers Association, page 298; Leonard F. Mongeon, National Retail Dry Goods Association, page 320; Paul C. Kelly, American Retail Federation, G. R. Parone, Miami Valley Shippers Association pages 389-390; A. L. Reed, Texas Industrial Traffic League, page 392; |