SMALL SHIPMENTS-Continued

Answer. There is no dual standard specifically set forth in the Interstate Commerce Act permitting railroads to discontinue less-than-carload service and requiring motor carriers to continue such service. While the Commission can, under the rate provisions of Part I of the Act, consider whether a rail proposal to curtail less-than-carload service is just and reasonable and otherwise lawful, in substantially all of such cases handled by the Commission very few shippers have shown any interest, while the railroads have shown a substantial decline in the amount of less-than-carload traffic tendered to them and that their operations were being conducted at a loss. The certificates issued to motor carriers contain a condition that they are required to render a reasonably continuous and adquate service to the public. In the absence of a restriction, this has been interpreted to mean a complete service on both truckload and less-than-truckload traffic. If a motor carrier attempts to cancel its less-than-truckload rates, under the rate provisions of Part II of the Act, the Commission has jurisdiction to determine whether the proposal is just and reasonable and otherwise lawful. In addition, the Commission, under section 212 (a) of the Act, has the power to suspend or revoke a motor carrier's certificate for wilful failure to comply with any term, condition or limitation contained in its certificate.

In my opinion, it is not a question of a dual standard but rather the evolution of competition between the modes. In this connection, it should be pointed out that throughout the years the railroads have been noted for being able to handle heavy shipments which move in volumes over long distances, and they have been able to provide this service in a very economical manner. With the advent of motor carriers and the entry of freight forwarders into the small shipment field, the railroads experienced considerable competition and lost much of their lessthan-carload traffic as such to these carriers. I believe that this took place, in large part, due to the fact that most small shipments originate at, or are destined to, offrail points. Railway Express, which is owned by the railroads, has found it necessary over the years to convert from rail to motor service for handling of its express shipments. In recent years several motor carriers specializing in the handling of small package shipments have entered the field and have given the railroads greater competition in this area.

The continuing loss of less-than-carload traffic steadily increased the railroads' unit costs of providing this type of service and thus, to a large extent, they have been forced to cease soliciting and handling small shipments. Today many shippers and shipping associations consolidate small shipments or use freight forwarders and a considerable amount of such traffic is moved by the railroads in boxcar or piggyback service.

Question 2. Why do some shippers feel the necessity to turn increasingly to private carriage? Are rates of regulated carriers too high? Is their service too poor? Are operating rights restrictions too cumbersome? Is there a trend away from regulated carriage which could be detrimental to those members of the public who have no choice but to rely on the regulated carriers?

Answer. Some shippers are turning more to private carriage because they have two-way hauls, i.e., raw products moving inbound and manufactured goods moving outbound after the small shipments are consolidated at the factory. Other shippers, such as manufacturers of new furniture, have traditionally engaged in proprietary carriage because of the light and bulky nature of their traffic, its loss and damage incidence, and the need for a multiple delivery type of service en route which increases the rates they would otherwise have to pay for common carriage. In most cases, I would attribute the use of private carriage to a number of factors, rather than to a single factor such as poor service. The use of private carriage is not due, in my opinion, to operating rights restrictions being too cumbersome. Private carriage is attractive to a shipper whose commodities are susceptible to storage in trucks for periods of time, thus eliminating warehousing costs. I know of no marked trend away from regulated carriage in the transportation of freight, except with respect to new furniture, which will greatly affect those members of the public who have no choice but to rely on the regulated carriers. The Commission is attempting to deal with the severe transportation problem confronting the furniture industry in a rulemaking proceeding presently pending before the Commission, Ex Parte No. MC-72, Motor Service on Shipments of New Furniture.

Question 3. In your view does the through routes and joint rates legislation proposed by the ICC address a symptom of the problem or does it get to the root causes? What else do you think could be done?

SMALL SHIPMENTS-Continued

Answer. The legislation proposed by the Commission is designed to alleviate one serious problem in the small shipments area-that of a lack of available interline service over the routes of two or more carriers. Although not to the same degree, this is also a problem for large shipments as well. A considerable number of through routes and joint rates have been voluntarily established under the present law, but these, with certain limited exceptions, can be canceled by the carriers because the law is permissive.

As indicated in our Report of Basic Policy Matters, sent to you on June 16, 1969, the Commission believes that a number of other steps must be taken to alleviate the small shipments problem. These are discussed in detail on pages 66-76 of our report.

Question 4. What is the role of the freight forwarder in this area? Isn't there some way the freight forwarders could contribute more to the solution of this problem?

Answer. A freight forwarder in general assembles and consolidates small shipments, provides for the line-haul transportation, and performs the breakbulk and distribution operations on such shipments at the destination area. Freight forwarders conduct operations and generate large amounts of traffic primarily between large cities and industrial areas where the small shipments problem is not serious. Additionally, since forwarders use the services of motor carriers to off-rail points and the most crucial area of this problem is related to the motor carrier industry, I do not believe that the forwarders can contribute a great deal to the solution of this problem.

Question 5. Why do you indicate that rule-making procedures have been instituted to deal with the serious transportation problems encountered by the furniture industry. At whose motion was this proceeding initiated?

In this connection at whose motion was the proposed rule-making procedure concerning the prohibition of filing of tariffs restricting the scope of carrier's opeating authority instituted.

Does the Commission have a regular policy for deciding when it should intervene on its own motion? If not, should there be such a policy?

Answer. The rule-making proceeding dealing with the serious transportation problems encountered by the furniture industry, Ex Parte No. MC-72, Motor Service on Shipments of New Furniture, was instituted by the Commission on its own initiative.

The rule-making proceeding concerning the prohibition of filing of restrictive tariffs, is Ex Parte No. MC-77, Restrictions on Service by Motor Common Carriers. It was instituted by the Commission on its own motion.

The Commission, as I see it, has a general policy but no regular set policy as to when it should intervene in proceedings on its own motion. In the area of small shipments we began with the recommended actions of the Ad Hoc Committee, set forth in our report of November 30, 1967, pertaining to increased participation by the Bureau of Enforcement in cases where there is evidence concerning service fitness. The Commission's field staff conducts investigations involving service complaints and failures and, in conjunction with the Bureau of Enforcement, makes a determination on a case-by-case basis whether it should recommend that the Commission intervene in a particular proceeding. Therefore, there is a judgment factor involved in each case of this type. In other types of cases, such as those where the Commission institutes an investigation on its own motion or requires specific evidence of some nature submitted, such as a carrier's costs of operation, the Commission's general policy is to intervene because it has the burden of proof or because it believes that it is necessary in the public interest for the Commission to further develop the record.

I do not feel that we should have a regular set policy, except in cases where the Commission has the burden of proof. If the exercise of judgment by the Commission and its staff is eliminated as to intervention in cases, it could develop into a costly proposition.

Question 6. When the Commission allows a motor carrier general increase to go into effect and subsequently finds it unlawful can a shipper get a refund on past shipments? How?

Answer. If a motor carrier general increase is permitted to go into effect and is subsequently found unlawful, a shipper cannot get an automatic refund on past shipments in the absence of a condition imposed by the Commission requiring the respondent carriers to make refunds on such shipments. A proceeding in which the Commission imposed such a refund provision (wherein a shipper would necessarily have to apply to the carrier for the amount of the refund involved), In

SMALL SHIPMENTS-Continued

creased Rates and Charges, Middlewest Terr., 335 I.C.C. 142, is presently pending before the Commission, and I do not believe that it would be advisable for me to comment further on this matter.

In the absence of such a refund provision, it is possible for a shipper to file an action at law under the provisions of section 204 (a) of the Interstate Commerce Act.

Commissioner Paul J. Tierney

1. The law does not contain a dual standard which allows rail carriers to cease handling small shipments but forces motor carriers to continue transporting this traffic. The Interstate Commerce Act requires both modes to furnish service to the public at just and reasonable rates and to give the public at least 30 days' notice on any changes in their rates or services. Tariff publications are open to public inspection and are subject to suspension by the Commission at the request of any party or on the Commission's own motion.

It is true that the motor carrier industry is handling the bulk of the small shipment traffic. This, in effect, is a reflection of the evolution in our surface transportation industry over the past several decades. When the railroads published tariff changes which eliminated traffic below 6,000 to 10,000 pounds, the Commission received very few protests from the shipping public. In short, the shipper has found the motor carrier, because of its greater flexibility both as to equipment size and geographic coverage, to be the most efficient and economic mode for the transportation of small shipments.

It should be noted that the railroads are not completely out of the small shipment traffic for the reason that an undetermined amount of traffic which formerly traveled in less than carload shipments is now traveling via piggyback or containers and utilizing the facilities of rail and more. In my opinion, requiring the railroads to handle small shipments except in the above fashion which exploits their inherent advantage, would serve to aggravate rather than assist in the resolution of the small shipment problem.

2. Regulated common carriers are under a duty to serve the public generally on all types of traffic. Because of private carriage and certain exemptions in the Act, regulated carriers are not used to transport certain profitable traffic, with the result that regulated carriers use their equipment less efficiently than they would if pivate carriage and exemptions from regulation did not exist. The obvious impact of a lower volume of profitable traffic and the resulting less efficient equipment utilization is that regulated carriers charge higher rates than they would otherwise.

Shippers resort to private carriage for various reasons. In some cases it could be that they believe the rates on their traffic are too high or service too poor. A system of blanket regulation which requires those regulated to furnish service to all shippers without preference or prejudice but which excludes certain traffic will result in a situation where particular shippers can transport their own traffic more economically than can regulated carriers who must accept both the desirable and undesirable traffic.

While the fact of cumbersome certificates has been mentioned by some people as a reason for a carrier's entering into private carriage, such decisions, in my opinion, are based more on economic considerations. If a carrier could not perform a needed service because of a limitation in its certificate, either it or another carrier seriously interested in the traffic can simply file for an unrestricted certificate showing a public need for the service.

Members of the public who rely on regulated carriers are, of course, going to suffer if common carriers are forced to charge more because profitable traffic is exempt from regulation or traveling via private carriers. In my opinion, however, there is no trend which is discernible from data available to the Commission. In fact, Commission data on intercity ton miles show that between 1957 and 1967 regulated carriers, it would appear that the nonregulated carriers (private and and private. Since the data for all motor carriers include both regulated and nonregulated carriers, it would appear that the nonregulated carriers (private and exempt) have grown at a rate somewhere below that of all motor carriers, public and private.

3. The 1967 report of the Commission's Ad Hoc Committee on Small Shipments characterized the carrier's refusal to interline traffic as one of the most troublesome aspects of the problem of service on small shipments and the Commission's proposal for through route joint rate legislation as the most effective tool for long range relief. The report also cites

SMALL SHIPMENTS-Continued

1. carrier's practice of selecting traffic;

2. carrier's view that small shipment traffic is underpriced;

3. greater cost of transporting small shipments;

4. disputes among carriers as to the proper division of rates;

5. inadequate packing and handling methods;

6. classification standards that have not kept pace with changes in commodities;

7. adjustments following mergers;

8. use of the Interstate Highway System which will bypass small off-route communities;

9. restricted operating authority; and

10. cost based rates.

The Commission's legislative proposal is an attempt to deal with one of a number of causes of this multifaceted problem. Affirmative action being taken by the Commission in attacking other aspects of the problem listed above is set forth in our report to you of June 16, 1969, in the section on "Small Shipments," beginning on page 66.

4. The function of a freight forwarder is to consolidate small shipments into carload or truckload lots so that they can be shipped at cheaper volume rates. Because the emphasis is on volume, forwarders are helpful to shippers of small shipments who tender a great deal of traffic or who are located in an area where there are other shippers who have traffic to be consolidated. Forwarders, generally, do not, however, assist the shipper in an isolated geographic area or one who does not tender much traffic.

Commission figures indicate a drop in 1967 on both tons of freight and number of shipments carried by freight forwarders. Among the reasons for this decrease are more extensive services offered by other modes of regulated carriage and the increased activities of exempt shipper associations which consolidate member shipments.

The Commission should allow carrier attempts at innovation whenever possible within the terms of the Act. Recently in FF-96 (Sub-No. 2), New England Forwarding Company, Inc., Extension-Import-Export, we authorized a new freight forwarder service which will ship containerized traffic directly from the interior points in the United States to points in Puerto Rico and Europe.

5. These two rulemaking proceedings, Ex Parte No. MC-72. Motor Service on Shipments of New Furniture and Ex Parte No. MC-77, Restrictions on Service by Motor Common Carriers, were both instituted by the Commission on its own motion. The Commission does have a policy in the sense that while administering the Act, the Commission and the staff become aware of certain subjects or multiproblem areas that are best suited to handling by rulemaking rather than a case by case disposition. After reviewing the considerable drain on staff resources that this type of proceeding entails, the issue of instituting a rulemaking proceeding is voted on by the Commission. I believe this arrangement has worked well, however, it is true that resource limitations prevent the Commission from realizing maximum benefits from this approach.

6. Part II of the Act does not give the Commission the power to order "refunds" to shippers in the event motor carrier proponents fail to show the increases to be just and reasonable. In a recent general increase proposal the Commission sought an agreement from the carriers to a provision which would give refunds to shippers without resort to the Commission or to courts. After finding that the rates were not shown to be just and reasonable, the Commission ordered carriers of one rate conference which appeared to accept the agreement to make refunds. That order as to refunds is being challenged in court.

In those cases in which the Commission allows a motor carrier general increase to go into effect and subsequently finds it not shown to be just and reasonable or unlawful, the shipper in order to obtain "reparation" normally must first bring an action at law as provided by section 204a (2) of the Interstate Commerce Act. In such cases, the shipper would ordinarily be required to prove damages resulting from the exaction of unreasonable or discriminatory charges.

Commissioner Rupert L. Murphy

1. You ask how it is that railroads can be permitted to discontinue less-thancarload and other small shipment service yet motor carriers are required to continue such service.

SMALL SHIPMENTS-Continued

As you know, railroads are subject to regulation under part I of the Interstate Commerce Act, while motor carriers are subject to regulation under part II. Possibly because almost all of part II was enacted as a single bill, the provisions of that part establish the duties and obligations of motor carriers much more clearly than do the provisions of part I relative to railroads. Nevertheless, the Commission, under the National Transportation Policy, seeks to take an evenhanded approach to the regulation of rail carriers and motor carriers. Unlike the case of motor carriers, rail carriers operated under State charters, not regulated as to entry by the Interstate Commerce Commission until 1920. Since that year, carriers by railroad proposing to enter the field or to extend their lines, are required to be certificated by this Commission. Under section 1(4) of the act applicable to rail carriers, it is “. . . the duty of every common carrier subject to this part to provide and furnish transportation upon reasonable request therefor."

All motor common carriers operate under certificates of public convenience and necessity issued by the Commission which contain the following paragraph: "It is further ordered, and is made a condition of this certificate that the holder thereof shall render reasonably continuous and adequate service to the public in pursuance of the authority therein granted, and that failure to do so shall constitute sufficient grounds for suspension, change, or revocation of this certificate."

Also, section 216(b) of the Interstate Commerce Act imposes a duty upon all motor common carriers to transport shipments in whatever volume offered. As you can see, the two quoted obligations upon rail and motor carriers are similar. Still there are other factors which must be considered.

From its inception, the motor carrier industry sought out and obtained lessthan-truckload traffic (including small shipments) on the basis of their ability to provide more expeditious and flexible service from the docks of the consignor to those of the consignee. As time went on, more and more of this traffic shifted from rail to motor carrier service because of this inherent advantage. At the same time many of the railroads sought and received motor carrier authority to handle less-than-carload shipments in substituted motor-for-rail service. Nevertheless, the shift of the traffic to the motor carriers continued, and today the motor carriers have become the dominant industry in the transportation of small shipments. Indeed, motor carrier officials engaged in general freight operations, tell me that small shipments-by this I mean shipments ranging between 100 pounds and 1,000 pounds-constitute so to speak their "bread and butter." Although the figures vary, the regular-route general commodity carrier while gaining not more than about 30 percent of its revenues from the transportation of shipments falling within the above indicated weight category, insists that such shipments numerically account for as much as 80 percent of all shipments tendered for transportation. The first point to be noted, therefore, is that moor carriers, as a practical matter, are not comparable to rail carriers in relation to the transportation of small shipments. Also, I wish to point out that rail carriers do continue to transport small shipments tendered by freight forwarders, REA Express and other freight consolidators such as shippers' associations and shippers' agents.

Additionally, it should be noted that rail carriers have long urged that they be given more or less complete freedom to conduct motor carrier operations. Presently rail carriers may be authorized to conduct motor carrier operations unrelated to rail operations only in "special circumstances" where independent motor carriers are either unable to or unwilling to provide service. Motor carriers have, of course, consistently opposed railroad entry into the motor carrier field.

It is proper, I think, that the primary providers of small shipment service should be the subject of greatest attention and to the extent that railroads may have been subjected to lesser small shipments scrutiny, motor carriers have scant reason to complain of this treatment in the light of the provisions of the Interstate Commerce Act protecting them from railroad entry into the area of motor service.

I have also attached for your information copy of a letter dated May 1, 1964, sent by then Chairman of the Commission, Abe McGregor Goff to the Honorable Joe L. Evins, Chairman, Select Committee on Small Business, House of Representatives, concerning the difficulties confronting small businessmen in obtaining freight service on small shipments. The letter points out a number of