Comparison showing present rates, mileage, revenue per car-mile, proposed rates-Suggested rates based on 140,000 pounds minimum earn greater per car-mile revenue than present 56,000-pound rates-Continued Comparison showing present rates, mileage, revenue per car-mile, proposed rates-Suggested rates based on 140,000 pounds minimum earn greater per car-mile revenue than present 56,000-pound rates-Continued Table showing development of unit costs for through-train movement of pig iron in gondola cars loaded to tariff minimum weight of 112,000 pounds in eastern district (taken from statement 5-59, table 3, and app. B) Out-of-pocket costs per hundredweight-mile (0.0320) plus constant cost per hundredweight (3.6410-statement 5-59, pp. 68, line 18, col. 9). P. 73, app. A, col. 5, line 19. 7 P. 68, table 3, col. 5, line 18. Out-of-pocket cost per hundredweight-mile (0.01144) plus constant cost per hundredweight-mile (0.0253-statement 5-59, pp. 68, table 3, col. 8, line 18) minus constant cost of interchange per hundredweight-mile (0.00218-statement 5-59, pp. 76, app. B, col. 6, line 2). JOHN H. EISENHART, Jr., CHICAGO, ILL., March 1, 1960 This matter requires expedited handling under the Commission's special rules of practice. Undersigned protestant appeals Board's refused suspension case No. 22484. On basis petitions and replies filed herein following facts stand admitted: (1) Buffalo-Chicago pig iron has always moved via common water carriage at $4.05 rate ($6.27, proposed rail rate; $7.50, total water costs including delivery to consignee from vessel). (2) No portion of 40,000-ton annual movement of pig iron from Buffalo to Chicago has ever moved in private water carriage. (3) Only justification for reduced rate is assertion that private water competition compels it. (4) Alleged private competition assumes boat cost less than half common carrier rate which rate shipper has willingly paid despite ownership of vessels in question since 1957. (5) Reduced rate will divert 100 percent of traffic to rail. (6) Reduced rate less than half present rate and considerably less than fully distributed cost. (7) Pig iron is high-grade commodity normally earning 11⁄2 times fully distributed costs. (8) Railroads do not deny commitment to spread reduced level to other Lake Erie ports if instant reduction approved. (9) Net revenue from pig iron, within official territory in 1957 was $9 million. Against these admitted facts stands only assertion of shipper-supporter that it would not ship pig iron in its own vessels unless rate is reduced. This self-serving statement must be measured against shippers history of continued willingness to pay common carrier rate double the asserted private cost, and candid admission that private experience limited to but one isolated shipment of pig iron to Detroit. Bulk carriers such as shipper's Valley Camp upon which estimated private costs based, once used regularly for pig iron. Since acquisition of self-loading and unloading crane vessels, the common carrier of pig iron now handling Buffalo-Chicago pig iron movement (Columbia) rarely uses bulk carriers because they are poorly adapted for traffic. On basis considerable actual experience with bulk carriers, Columbia asserts 4 days loading, 3 days additional time in transit, and 5 days unloading absolute minimum 40 for 10,000-ton bulk carrier. Thus, 8 days assumed by shipper understates by at least one-third actual cost. Pig iron Columbia's most important traffic. All substantial shippers this commodity ship ore in private bulk carriers. If, as railroads suggest, Columbia unable to compete with such private competition it would have been out of business long ago. Lake lines insist, and will upon hearing prove, that on fully distributed cost basis they are low-cost route for pig iron between Great Lakes ports. They cannot, however, survive if railroads allowed to depress rates to levels justified only by incremental costs. Lake carriers must earn revenues sufficient to meet total cost and revenue requirement from port-toport traffic. If rate structure on pig iron, which represents half their business, is destroyed, destruction of regulated water carriage on Great Lakes will soon follow. Because of crucial importance of this appeal to undersigned protestant, and far-reaching implications of issue presented as to Commission's obligations where depressed through compensatory rates threatened existence of lowcost carrier, request opportunity to present views orally before Division 2, Wednesday, March 2. Undersigned counsel as well as counsel for New York Central and Pennsylvania Railroads will be in attendance at hearing docket 33268 in Washington that date. We suggest, if convenient, a 1:30 assignment; 15 minutes sufficient to state our views. Telegraphic copies this wire sent to Edw. Heimert and R. R. Clark. JOHN EISENHART, Jr., RICHARD J. HARDY, Great Lakes Ship Owners Association. STATEMENT BY ELMER E. METZ, CHIEF, OFFICE OF GOVERNMENT AID, MARITIME ADMINISTRATION, ON BEHALF OF THE Department OF COMMERCE and MARITIME ADMINISTRATION Mr. Chairman, section 506 of the Merchant Marine Act, 1936, as amended (46 U.S.C. 1156), now requires generally that vessels for which a constructiondifferential subsidy has been paid be operated exclusively in the foreign trade of the United States. On such voyages certain specified limited intercoastal or offshore domestic trade may be engaged in; permission may also be granted for transfer of a vessel to operation in domestic commerce for temporary periods. However, in all cases where any domestic trade is allowed, a proportionate amount of construction-differential subsidy must be repaid to the United States. S. 1956 would amend section 506 by inserting at the end thereof the following: "For the purposes of this section if the majority of the miles logged by any vessel during a calendar year are logged in round voyages from Alaska to British Columbia, Canada, such vessel shall be deemed to have been operated exclusively in foreign trade during such year." Under the bill, if a vessel built with construction-differential subsidy logs a majority of its miles during a calendar year between Alaska and British Columbia, it would be free during the rest of the year to engage in domestic trade of any type without repayment of any construction-differential subsidy. Furthermore, since section 905(a) of the Merchant Marine Act, 1936, defines "foreign trade" for the purposes of the act as meaning "trade between the United States, its Territories or possessions, or the District of Columbia, and a foreign country,” the bill would also enable such a vessel to log up to half its mileage in trade between foreign countries. Present law provides that, except upon repayment of subsidy in certain specifically authorized cases, a vessel built with construction-differential subsidy may engage only in foreign commerce of the United States. With this limited exception U.S. domestic trade is reserved exclusively for vessels built without the aid of subsidy. However, under S. 1956 domestic operators who have not received subsidy and who have paid full prices for their ships would be faced with competition from ships which bave been built with the aid of constructiondifferential subsidy and for which their owners have paid substantially less than the full shipyard prices. Section 506 is specifically designed to prevent this type of unfair competition. The bill would constitute a major departure from the basic principles underlying the award of construction-differential subsidy under the Merchant Marine Act, 1936. This Department is not aware of any special circumstances which would justify such a departure. The Department therefore recommends against the enactment of S. 1956. The Bureau of the Budget has advised that there would be no objection to the submission of this statement to your committee. Senator WARREN G. MAGNUSON, FORT WORTH, TEX, April 5, 1960. DEAR SENATOR: This letter is to thank you for your committee's investigation of the railroad selective rate-cutting practices.. We feel that some vital issues are at stake from the standpoint of preservation of free enterprise, as well as development of a sound transportation system to take care of the growing needs of our country. In reviewing my testimony before the committee, March 30, it occurs to me that something more might be said with regard to the role of Interstate Commerce Commission in protecting the carriers as a whole and the shipping public as a whole from undue pressure for lower rates exercised by individual shippers or groups of shippers. Recently, we were approached by a shipper of animal fats to establish a rate between two points substantially below the railroad rate on a particular commodity but equal to the railroad rate on a related commodity. We explained to this shipper that even if we felt that this was a fair rate we would not be inclined to incur the expense of getting such a rate published and instituting service since we could expect the railroads to immediately cut their rate so that we would have gained nothing in return for our efforts. This shipper advised us that they would not shift the business back to the railroads if they equaled our rate. Of course, what this means is that pressure would be put on the railroads if they were to make a rate reduction to regain the business to reduce the rate below the level at which we would have set it. Having accomplished this on the particular commodity in question then the pressure would be put on to lower the rate on the related commodity whose rate we had been asked to meet. The committee may be interested to know of another situation in which a rail rate cut destroyed the competing transportation. In 1958, Ray Smith Transport Co. of Dallas, Tex., was granted final authority from the Interstate Commerce Commission to transport carbon black, in bulk. This commodity requires a specialized hopper-type trailer which can be used on only a very few commodities. The truck transporter was operating about eight of these units when the railroads cut their rate in 1959. Since that time this transporter has received no more of this business. As stated at the hearing, it is our feeling that legislation is needed, and needed promptly to remedy this situation. Due to changes in the composition of the Commission the transport industry cannot run the risk of new Commissioners learning at the expense of the transporters. We believe that the law should specify that the Suspension Board should consider not just out-of-pocket expense, but fully distributed costs pertinent to the actual movements covered by the proposed rates. This does not mean average costs for the region or system but all the actual costs pertinent to the specific commodity and type movement involved based on actual miles traveled and not just short line miles and including all overhead. Secondly, we believe that some criterion needs to be established as to what may be presumed to be a destructive, competitive practice in violation of the goals of the national transportation policy. Whenever it is indicated that according to these criteria a destructive, competitive practice may be involved in a given rate cut there should be an investigation and the rate should be suspended. The worst that can happen is that a situation which has been allowed to develop through natural normal processes will be perpetuated until the investigation can be made and a determination of the facts made. On the other hand if a rate cut were allowed to be made which was in fact destructive by the time a review could be brought through a court the determination of the legality of the cut would be purely academic, as by that time the rate would probably have achieved its purpose of destroying the competition; not only for the moment, but probably for the future as no individual, group, or a company would be likely to attempt to compete again without protection. We believe that action along the line indicated is essential and would be happy to assist the committee in any way possible to bring this matter to a satisfactory conclusion. Again, thanks for your interest in this matter. Very truly yours, COMMERCIAL OIL TRANSPORT, By THOMAS C. PALMER. Mr. JERRY GRINSTEIN, Senate Office Building, Washington, D.C. CITY OF SAVANNAH,GA., March 3, 1960. DEAR MR. GRINSTEIN: I am enclosing a copy of a statement which goes a little beyond your request in that it talks about the general situation, but enclosure 1 lists a cross section of smaller shippers that are being seriously hurt by loss of Seatrain service. These people have not received any rate decrease, therefore, the market for which they are dependent upon this rate to meet competition will simply be lost to them. It takes time to develop new markets. When Seatrain first located here, small manufacturers were reluctant to develop markets in the North because this operation is so marginal. In many instances, the difference in freight is the only profit. The National Rosin Products Co. had just made arrangements 30 days prior to the announcement by Seatrain to ship a new customer via Seatrain. The owner, Mr. William L. Hopkins, Jr., called me stating that it had taken 2 years to develop the business and the minute he gto it all lined up Seatrain discontinued the service. Needless to say he was quite upset. |