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MINORITY VIEWS The members expressing these minority views urge that the present bill to authorize the consolidation of distilled spirits packages in internal revenue bonded warehouses in order to conserve space in such Warehouses as well as to conserve wooden barrels for the storage of beverage spirits be not adopted because the procedure to be authorized by the bill will: (1) Serve no useful purpose because there is an increasingly abundant amount of storage space in the warehouses as well as an ever increasing supply of barrels and no beverage spirits are being produced for deposit in the conserved barrels and space; (2) create hazards to the revenue from distilled spirits; (3) be difficult to carry into effect; and (4) be expensive in manpower and money both to the warehousemen and to the Government.
It has appeared that the proponents of the bill urge its approval here, and ultimate enactment into law, in order to conserve wooden barrels for the storage of distilled spirits and space in internal revenue bonded warehouses in which to store such barrels. As of January 31, 1944, the space in internal revenue bonded warehouses then in use was sufficient to accommodate the storage of 12,680,422 barrels, and space for 336,302 barrels was available in warehouse buildings which had been discontinued; a total available space sufficient to accommodate the storage of 13,016,724 barrels. On January 31, 1944, there were stored a total of 8,255,324 barrels, leaving unused and available for storage space for about 1% million barrels.
Beverage distilled spirits are now being withdrawn upon tax payment at the rate of approximately 2,000,000 barrels per year. As the barrels containing these spirits are dumped they become available for reuse in storing spirits, but cannot be used for such purpose because no beverage spirits are being distilled. The number of barrels, and the warehouse space available for the storage of spirits, is, therefore, steadily increasing.
Since consolidation of packages is not necessary in the interest of conserving either warehouse space or barrels, there being an ample supply of both, it is felt that there is no need for the legislation.
The procurement of materials, and the procurement, installation, and maintenance of the equipment in internal revenue bonded warehouses necessary to accomplish consolidation of the distilled spirits packages presents difficult problems because of: (1) The scarcity of metals, and the priorities established therefor, and (2) the lack of manpower.
Ordinarily only regular distillery employees are admitted into internal revenue bonded warehouses and then only in the presence of internal-revenue officers, but if this bill is enacted any and every authorized employee of each and every contractor engaged by the warehouseman to erect the needed equipment, and to maintain such equipment after installation, will necessarily be entitled to entry into the warehouses. The presence of such personnel in the warehouses
will constitute an extreme hazard to the revenue, because of the confusion incident to their comings and goings and the opportunities thus presented for theft.
Sufficient qualified and trustworthy manpower to serve the warehousemen in accomplishing the consolidations will be increasingly difficult to obtain. The present storekeeper-gager force of the Bureau of Internal Revenue, already strained by its greatly increased duties in connection with the production of alcohol for war needs, and depleted by the entry of its younger and more active men into the armed services, among other factors, will be unable to discharge its functions in respect of the consolidation. Slightly in excess of 500 additional storekeeper-gagers will be needed if the bill is enacted and warehousemen avail themselves of the consolidation privileges. Storekeeper-gagers must be competent, but, in addition they must be trustworthy. It is doubted that such additional number of storekeeper-gagers, plus the number needed from time to time to replace those lost through illness, death, retirement, transfer, and induction into the armed services, can be recruited. In addition to storekeepergagers many additional clerks and stenographers will be needed in the headquarters ånd field offices of the Bureau of Internal Revenue to handle the voluminous paper work made necessary by the consolidation, and more employees will be needed by the warehousemen.
In its form as referred to the Committee on Ways and Means the bill authorized the allowance of up to 1 percent of the losses incurred during the consolidations. This was a limitation upon the allowance of the full amount of accidental losses sustained during the consolidations otherwise than by leakage or evaporation. See section 2901 (b) (3), Internal Revenue Code (U.S. C., 1940 ed., Supp. II, title 26, sec. 2901 (b) (3)). Section 2901 (b) (3) contemplated the allowance of accidental losses otherwise than by leakage or evaporation occurring during the term of ordinary and usual storage of spirits in an internal revenue bonded warehouse, but loss during consolidation is believed to be covered by the section. The minority believes that the Congress ought not to authorize the allowance of losses of spirits occasioned by the handling of the spirits in consolidating the packages thereof.
The minority expressing these views believe that enactment of the bill will serve on useful purpose, wherefore the minority is of opinion that it would be unwise to approve the legislation and thereby risk the revenues of the Government and assume the difficulties and expenses attendant upon the consolidations.
RICHARD M. SIMPSON. o
HOUSE OF REPRESENTATIVES
REPORT No. 1408
DISCONTINUANCE OF LAND GRANT RATES FOR
Mar 2, 1944.—Committed to the Committee of the Whole House on the state of
the Union and ordered to be printed
Mr. BOREN, from the Committee on Interstate and Foreign Commerce,
submitted the following
(To accompany H. R. 41841
The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 4184) to amend section 321, title III, part II, Transportation Act of 1940, with respect to the movement of Government traffic, having considered the same, report favorably thereon with amendments and recommend that the bill as amended do pass. The amendments are as follows: Page 2, after line 20, insert the following new section: SEC. 2. The amendment made by this Act shall take effect 90 days after the date of enactment of this Act.
Page 2, after line 20, and after the section inserted by the foregoing amendment, insert the following new section:
SEC. 3. The Interstate Commerce Commission, in the exercise of its power to prescribe just and reasonable rates, fares, and charges, shall give due consideration to the increased revenues which carriers will receive as a result of the enactment of this Act.
OBJECT OF THE BILL
Certain of our railroads, because of lands granted by the Government many years ago to aid in the construction of lines of road now owned by them, are under statutory obligation to transport certain specified classes of Government traffic over such land-grant lines at 50 percent of their established tariff charges for such transportation, While that statutory requirement applies to only 14,411 miles of railroad, the reduced charges for which it provides have been extended to many times that mileage as the result of so-called equalization agreements entered into with the Government by other railroads to enable them to handle Government traffic. The object of this bill is to
remove that compulsion so as to permit all railroads to collect their regular tariff charges on all Government traffic except as negotiations may result in lower charges under section 22 of the Interstate Commerce Act.
PRESENT LAW AND PROPOSED CHANGE
Section 321 (a) of the Transportation Act of 1940 embodies the general rule that the transportation of persons or property by a common carrier for the United States, or on its behalf, shall be at the full applicable commercial rates. This general rule is subject to the following exceptions:
(1) It is provided "that the foregoing provision shall not apply to the transportation of military or naval property of the United States moving for military or naval and not for civil use, or to the transportation of members of the military or naval forces of the United States (or for property of such members) when such members are traveling on official duty"; and
(2) It is provided that any carrier by railroad and the United States may enter into contracts for the transportation of the United States mail for less than the rates determned by the Interstate Commerce Commission as reasonable therefor.
(3) Under Section 1 (7) of part I of the Interstate Commerce Act free transportation is permitted to certain persons, including representatives of charitable institutions, destitute and homeless persons, disabled veterans, and others; and
(4) Under Section 22 of the Interstate Commerce Act, part I, transportation of property free or at reduced rates is permitted for the “United States, State, and municipal governments,” and also “th= transportation of persons for the United States Government free or at reduced rates."
The effect of the amendment proposed by the bill would be to eliminate only the first of the four exceptions enumerated above. In other words, it would remove the only compulsory exception to the general rule requiring the Government to pay "the full applicable commercial rates." It would not disturb the other exceptions, including that provided in section 22, which, among other things, permits the railroads voluntarily to grant free or reduced rate transportation to the United States, State, and municipal governments.
HISTORY OF LAND GRANT LEGISLATION
The report of this committee, No. 1910, Seventy-seventh Congress, second session, accompanying H. R. 6156, a bill similar in purpose to this bill, contains a statement of the history of land-grant legislation. As there shown, Congress, during the period 1850 to 1871, made grants of lands totaling about 130,000,000 acres in aid of the construction of about 21,500 miles of railroad located largely in the western part of the United States, but also to a limited extent in the South All of this mileage, however, is not now subject to land-grant deductions.
Most of the Land Grant Acts contained provisions requiring certain specified concessions to the Government for transportation services performed for it. In some cases they required Government traffic to be transported without charge. More usually they followed
language used in earlier statutes granting lands for the construction of wagon roads and canals and required that the railroads, in whose aid the lands were granted, should be open at all times to the use of the Government for the transportation of its troops or property free of any toll or charge. That provision was construed by the Supreme Court in 1877 as contemplating merely the free use of the railroad tracks by the Government for the movement thereover of engines and cars operated by it or at its expense. In giving effect to that decision, the Court of Claims determined that the right of the Government to the free use of the tracks was worth 50 percent of the full transportation charge made by the railroad against ordinary shippers. As the result of subsequent legislation, that 50 percent basis of charge is the one now applicable on all railroads that are subject to land-grant deductions.
For the transportation of the mail the land-grant deductions, where applicable, were finally fixed by statute at 20 percent of the rates determined by the Interstate Commerce Commission as reasonable for such transportation.
In the Transportation Act of 1940, because of the enormous increase in recent years, and particularly during the years of depression, in the nonmilitary activities and traffic of the Government, Congress deemed it proper to make the land-grant reductions inapplicable, so far as concerns the transportation of property, to anything except "military or naval property of the United States moving for military or naval and not for civil use.' At the same time, it eliminated the deductions entirely so far as concerns the transportation of mail, but made no change with respect to the transportation of “troops of the United States."
THE EQUITIES OF THE SITUATION While, as bas been stated, most of the Land Grant Acts contained requirements in one form or another for reduced charges on Government traffic, such requirements by no means represented either the primary obligation which they imposed upon the land-grant railroads or the major consideration moving the Government to make the grants. The primary obligation assumed by the railroads was to construct the proposed lines at a cost many times the value of the granted lands. The usual grant was of 6,400 acres per mile of line (each alternate section in a strip extending back for 10 miles on each side of the railroad), but the acreage actually patented to the railroads averaged considerably less than that. According to the report made by Joseph B. Eastman, as Federal Coordinator of Transportation, the average value of all granted lands at the time of the grants was about 97 cents per acre. Even back in those days it took considerably more than $6,200 or $6,500 to build a mile of railroad.
The Government, on the other hand, while granting much land, retained very much more. The lands retained by it were enhanced in value many times over as the result of the building of the railroads. However, it was from the settlement of the territory, the general increase in wealth, and the strengthening of the Nation that the Government expected, and actually realized, its major reward for these grants of land.
At the time the requirements for reduced charges for the transportation of troops and property of the United States were written