DECLINE OF COASTAL AND INTERCOASTAL SHIPPING INDUSTRY TUESDAY, JUNE 21, 1960 U.S. SENATE, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D.C. The subcommittee was called to order at 10 a.m., in room 5110, New Senate Office Building, Hon. E. L. Bartlett, presiding. Senator BARTLETT. The committee will be in order. Chairman Winchell, please. My apologies, sir, for the same reason as the other day. Mr. Barton will resume questioning. Mr. BARTON. Mr. Chairman, your statement, I think, explains very well that the ICC power to suspend rates is an extraordinary remedy. I am interested to know what standards the ICC has established for the Suspension Board to observe with respect to the suspension of rates. STATEMENT OF HON. JOHN H. WINCHELL, CHAIRMAN, Mr. WINCHELL. I set that forth in my statement. Mr. BARTON. It was set forth in a very general way, Mr. Chairman, and it occurred to me that there might be more specific standards, more specific directions given the Suspension Board by the Commis sion. Mr. WINCHELL. Of course, the Suspension Board knows from observation what Appellate Division 2 and the Commission have done in corresponding cases prior to the case they are considering and they are governed by the attitude of the Commission or of Division 2 toward rates of that type. Mr. BARTON. More specifically, Mr. Chairman, are there any memos, directives, or other written material addressed by the ICC to the Suspension Board which set forth the standards to be used? Mr. WINCHELL. Copies of Commissioner Freas' testimony in 1958 before the Senate Committee on Interstate and Foreign Commerce in which he set forth the criteria which we follow in ratemaking, the principles of ratemaking, copies of that were circulated to members of the Suspension Board and to all the report writers on the Suspension Board. Mr. BARTON. Well, I take it there is no definite standard conveyed in writing to the Suspension Board by the Commission? 601 Mr. WINCHELL. As you will recall in Commissioner Freas' statement, he stated that you can't set forth any mathematical formula which you can use as a yardstick and lay down alongside of any tariff and say this one is just and reasonable and this one is not. You have to take all of the factors in any particular case into consideration and no two are absolutely identical. Mr. BARTON. There are no written directives to the Suspension Board then by the Commission on the standards to be used in suspension, I take it, from what you say? Mr. WINCHELL. Yes, I just told you that the criteria were set forth in Commissioner Freas' statement in 1958. Mr. BARTON. Are those the standards of the Commission? Are those the standards that the Commission would have the Suspension Board follow and see that they follow? Mr. WINCHELL. Yes, they follow those. Commissioner Freas did not cover all of the various factors which must be taken into consideration in examining the tariff. Senator BARTLETT. Well, Mr. Chairman, then you mean his testimony represented the official views of the Commission at that time and those views are still held? Mr. WINCHELL. That is right. As a matter of fact, the 1958 Transportation Act incorporated much of what Commissioner Freas has testified to. Senator BARTLETT. There have been no changes of substance? Senator BARTLETT. Right; since he testified there have been no changes of substance? Mr. WINCHELL. The 1958 Transportation Act which I testified to on Friday changed the emphasis; it laid more emphasis on the effect of the proposed rates upon the mode of transportation which was proposing the rates. Senator BARTLETT. Well, was that before or after Mr. Freas'Mr. WINCHELL. He testified before the enactment of the 1958 Transportation Act. Senator BARTLETT. Well, then has there been any restatement by the Commission itself? I don't make myself clear I guess. You were telling Mr. Barton that Mr. Freas' testimony before the committee can be taken by the committee to represent the official viewpoint of the Commission as I understood it. Mr. WINCHELL. There is no change in those there is a change in emphasis, but no change in any of those elements which should be looked into in considering the rate. Senator BARTLETT. Well, how does the Suspension Board then, Mr. Chairman, know there has been a change in emphasis? Mr. WINCHELL. They would very readily become aware of it by the fact that if they went contrary to the criteria or any change in the emphasis after the enactment of the 1958 Transportation Act by being reversed by Appellate Division 2. Senator BARTLETT. There has been no statement of the Commission itself though in interpretation of the Transportation Act of 1958 to guide the Suspension Board, has there? Mr. WINCHELL. No. Mr. BARTON. Mr. Winchell, as you know, in the course of the hearing it has been alleged that the Suspension Board depends too much on cost data in considering suspension requests. I think the statement was even stronger than that. I recall that one or two witnesses stated that such information seemed to be the sole data that the Board considered in granting or denying suspension. What would be your comment on such an allegation? Mr. WINCHELL. I think I testified Friday that greater weight is now given to the cost of rendering the service in comparison with the value of the service that was true in years ago, but that has been a gradual change over the years. Mr. BARTON. The Commission does rely a great deal on cost data, doesn't it? Mr. WINCHELL. Yes, that is one of the very important factors but it is only one of those to be considered. Mr. BARTON. They consider other data as well? Mr. WINCHELL. Yes, they do. Mr. BARTON. In your current annual report, the 73d annual report, at page 139, this statement appears: Cost data were prepared for the Board of Suspension in connection with 2,888 suspension requests involving proposed changes in 13,018 rates. Now, this does, I take it, as you say, indicate heavy reliance on cost data. You say though that there are other data considered. Mr. WINCHELL. Oh, yes. Mr. BARTON. What other kinds of information are furnished the Board of Suspension on a comparable basis as these 2,888 items? Mr. WINCHELL. By the proponents or by the protestants? Mr. BARTON. I am talking about within the Commission. What other bureaus furnish memorandums on a comparable basis? Mr. WINCHELL. The Bureau of Traffic may furnish information as to whether or not it is a violation of an outstanding or a division order. Mr. BARTON. Do you know how many memoranda were furnished on that subject in the course of the year? Mr. WINCHELL. Offhand I do not. Mr. BARTON. Does the annual report show it? Are you aware of whether it shows it or not? Mr. WINCHELL. I do not recall that the annual report shows it. Mr. BARTON. In relation to the cost data used by the Suspension. Board, Mr. Chairman, is that available for public inspection? Mr. WINCHELL. The sources that they use are available for public inspection. Mr. BARTON. Is the cost data used by the Board in denying or granting suspension available for public inspection? Mr. WINCHELL. The internal memorandum from the Cost Section to the Suspension Board? Mr. BARTON. Well, in whatever form it is offered; I, of course, don't know that. Mr. WINCHELL. No, that is not available to the public. They may rework the figures that are presented by the proponents or the pro testants. Mr. BARTON. There is no chance for the parties to comment on how it has been reworked? 60470-60- -39 Mr. WINCHELL. There is no restriction on their putting into the file suspension in a case in which tariff has been protested. They can put any cost figures they want to in. Mr. BARTON. Apropos of this claim that there has been in the words of the witnesses too much reliance by the Suspension Board on cost data in making competitive rates, I have a decision here by Division 5; it is docket No. 32958, bakery goods, Omaha and Sioux City to Chicago. I read this rather carefully and it seems to me aside from some comparative rates on unpopped corn, lumber, scrap aluminum, scrap rags and so on and Mr. WINCHELL. What was that docket number again, Mr. Barton? Mr. BARTON. 32958, decided May 18, 1960. Mr. WINCHELL. Was that cited by any of the Mr. BARTON. No, sir, I believe not. You have some specific examples we will get to in a moment. Mr. WINCHELL. Well, I do not have the digest of the file on that case. Mr. BARTON. It goes on to cite these comparative rates on the items I have mentioned and gives some car-mile earnings which were something like 35 cents a car-mile or 28 cents a car mile. Finally the Division ends up with stating the cost as worked up by the costfinding section of the Commission. They finally state this: It appears that the average out-of-pocket cost for moving 20,000-pound shipments on flatcars from Sioux City and Omaha to Chicago would approximate the 87-cent rate sought. Such a rate would be no lower than compared rates and earnings thereunder are comparable with other rates on bakery goods. We are satisfied that a rate of 87 cents would be compensatory and would not constitute a destructive competitive practice. Would this in your opinion lend any credence to the claim that there was too much reliance on costs by the Commission in making such a decision? Mr. WINCHELL. I don't have the file in front of me so I wouldn't be able to answer. Mr. BARTON. In respect to suspension, you do have a number of specific items. I believe these items were furnished to you by your staff, were they not? One group was contained in a letter written by the American Trucking Associations dated April 22. The first is shown on page 8 of the letter from Mr. Fred Freund. They are Nos. 14932, 15655, 15874, 15875, and 16139. The letter states all of these cases involve rates published between the eastern cities lying generally between Boston, Mass., and Washington, D.C., on the one hand and, on the other, midwestern cities, Chicago and East St. Louis. All of the foregoing rates were under so-called plan 3, trailer on flatcar charges, under which the railroads offered to transport freight in shipper-provided trailers. The railroads defended these charges on the grounds that they constitute a new and unique type of service and are compensatory. All of the proposals came before the Suspension Board during the period the middle of April to the end of July 1958. In each case the Board declined to suspend. These rates, Mr. Chairman, were something between 12 and 16 percent of first class. The Suspension Board refused to suspend. The truckers, according to this statement, proposed motor carrier all-freight rates slight ly over 35 percent of first class and in 308 ICC 517 these rates were condemned. What is the rationalization of refusing to suspend allfreight rates of the railroads between 12 and 16 percent of first class, letting them go into effect and condemning the motor carrier rates all freight freights on 35 percent of first class? Mr. WINCHELL. The case that you mentioned, 14932, was not suspended by the Board and was not appealed. Case 15655, the Board voted not to suspend. It was appealed to Appellate Division 2 and they voted not to suspend. Case No. 15874, the Board voted not to suspend; it was appealed and the Appellate Division 2 voted not to suspend. Case No. 15875, the Board voted not to suspend. It was appealed to Appellate Division 2 and they voted not to suspend. Case 16139, the Board voted not to suspend and Appellate Division voted-it was not appealed on that one, 16292, no, that isn't one of the same series. Mr. BARTON. My question, Mr. Chairman, is why do they condemn the motor carrier rates, all freight rates of about 35 percent of first class, and refuse to suspend the railroad rates 12 to 16 percent of first class? Mr. WINCHELL. You have to take them a case at a time because that isn't the only consideration; the percentage of first class. Mr. BARTON. What are the considerations? Mr. WINCHELL. Well, on 14932 the Board was of the opinion that the railroads were merely taking advantage of, were merely using their inherent advantage by transporting two trailers on a car with little more expense than one trailer which, of course, cut their cost of operation, the cost of rendering the service. In 15655, the Board was of the opinion that the proposal was remunerative to the railroads since they got more revenue for less service than they would if they performed under the conventional plan 2 TOFC? I mentioned Friday that where a carrier can show that with the reduced rate but with the increased volume their gross revenue and hence their net revenue position is improved, that is taken into consideration. Mr. BARTON. It seems that because of the great difference in rates, 12 and 16 percent of first class, and 35 percent of first class, that the truckers have raised this question. I can't myself understand why rates twice as high Mr. WINCHELL. I think you are mistaken as to some of those figures. In 15874 between East St. Louis and eastern points, that reflected 45 percent of the applicable 28300 first-class rate. Mr. BARTON. Generally, don't they range between 12 and 16 percent of first class? Mr. WINCHELL. No, they run up to 45 percent. Mr. BARTON. But generally don't they constitute Mr. WINCHELL. No, 15874 is 45 percent of first class, the 28300 first-class rate. NOTE. The witness is incorrect. Checking the applicable rate tariffs discloses that the rates referred to range from about 12 percent to about 16 percent of first class. |