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INTERMODAL TRANSPORTATION Commissioner Laurence Walrath

Question 1. Many shippers, and particularly midwest grain shippers, claim that rates are higher in those areas where intermodal competition is not in existence? It is true that in the midwest plains area rail rates are generally higher than in areas where inland water carriers compete? The proposed rule-making discussed at page 94 is I assume in part an attempt to address this problem. Is that correct? How long has the Comm sion been considering thi rule? Do you think the proceedings could be expedited? Is the consumer's interest being adequately represented in these proceedings?

Answer. As a generalization, it is true that rail rates on commodities which are susceptible to water movement are higher in those areas where the railroads do not compete with water carriers than where they do. With respect to grain, the midwest rail rates are undergoing considerable changes, most of which are re ductions. Some of the changes are due to truck-barge competition; other changes are because the railroads are competing among themselves for volume traffic. In particular, some of them have flagged out or are flagging out of the increases authorized in Ex Parte Nos. 256 and 259.

Under the Interstate Commerce Act as written, discrimination per se is not unlawful, but only if undue. Where there is competition with a water carrier, a railroad can reduce its rates to meet that competition. However, the rail rates must be within the zone of reasonableness and not violative of other provisions of the I.C. Act, including precepts stated as a preamble to the act as the (surface) National Transportation Policy, enacted by the Congress in 1940.

The rule-making proceeding in Docket No. 34013 Sub-No. 1 discussed at page 90 of our report is not addressed to that problem, but rather to development of costing formulae and criteria to be presented in all competitive (intermodal) rate cases as a uniform approach to basic comparisons. It has little relevancy to the question here. The Commission instituted this phase of 34013 on February 5, 1969. It is being expedited as much as possible.

The consumer, as such, does not need to be represented in this type of proceeding which looks toward competitive intermodal reductions in rates. The Commission is only seeking uniform guidelines to determine what inherent cost advantages are entitled to protection in order to preserve competition and what particular costs should be used in comparing the competing modes of transportation in order to protect those advantages. All of these types of cases should result in benefits to the consumer through lower rates.

It should be noted, however, that rates which gravitate to levels which are too low do not benefit the consumer-except on a short term basis. In the long run, service suffers if carriers do not receive adequate revenues.

Question 2. You refer to ex parte 230 as a major example of your approach to establishing guidelines for intermodal coordination. This is a commendable example of what the ICC can do but this relates only to piggyback and container service. Aren't there other areas where this kind of innovative approach could be utilized ?

Answer. The Commission has and does use the same approach as used in Ex Parte 230 in other areas. For example, the Commission prescribed deviation rules which allow a carrier to use a route other than its authorized route under certain circumstances. In Ex Parte MC–65, the Commission prescribed rules for the use of the interstate highway system which will allow the use of that system by motor carriers under a prescribed formula without those carriers having to come to this Commission for additional operating authority. This saves the Commission from handling thousands of cases on an individual case-by-case basis.

Among the numerous areas where we have expanded, and will in the future expand the usefulness of these procedures, I would include the following: the adoption of a schedule of filing fees, designed, among other things, to discourage "me, too” applications by motor carriers without evidence of shipper need for the proposed new service. Ex Parte No. 246; revised rules for consumer protection in dealing with household goods movers, Ex Parte No. MC–19 (Sub-No. 9); new furniture operating rights for household goods carriers, Ex Parte No. MC-72 ; removal of truckload restrictions, Ex Parte MC-68; express company terminal areas, Ex Parte No. 242; our proceedings dealing with phases of rail car per diem charges, Ex Parte Nos. 241 and 251 ; and continuing revision of our General Rules of Practice, Ex Parte 55.

INTERMODAL TRANSPORTATION—Continued Other areas involving innovative approaches include consideration of numerous proposals by the Administrative Conference of the United States; successive reorganization plans to improve our efficiency and productivity under diminishing manpower and increasingly complex problems; revision of annual report forms for Class I and II motor carriers to include affiliate transactions bearing upon their true operating revenues and expenses. In addition, numerous projects are periodically developed through key staff suggestions by the Divisions, by the Policy and Planning Committee, and the Legislative Committee. When you add to these the special studies requested of us by the Congress from time to time, (such as the Investigation of Costs of Intercity Rail Passenger Service), the Commission itself and its key staff experts are spending a substantial portion of their total time and energies in areas which fall within a reasonable definition of “innovative” approaches to broad transport regulatory and policy issues.

Certainly, the answer to the last phase of Question 2 is “Yes.” Currently we have new areas for rulemaking under consideration. We are also receptive to suggestions from responsible sources, such as your Subcommittee.

Question 3. What is your view of the proposal supported primarily by the railroads to approve or allow common ownership? Would it be beneficial or detrimental to transportation in this country?

Answer. I am not opposed to the concept of common ownership, per se, provided that it is ultimately established to be in the public interest. My present personal view, however, is that every reasonable effort should first be made to encourage coordinated service short of common ownership. I say this mainly because no one can foretell at this point whether it would be detrimental to existing system transportation facilities.

The first step in achieving coordination and in avoiding the potential danger which may result from common ownership would seem to me to be passage of the intermodal through-route, joint-rate legislation as recommended by the Commission. At this moment I feel that a truly cooperative coordinated service would best preserve the advantages of competition in the interests of the general public.

In the event that an intermodal coordinated service is not successfully achieved as a result of the enactment of the pending through route, joint rate legislation, then a more dramatic and new approach may be dictated.

Question 4. With respect to water-rail coordination, should the ICC compel joint rates and through routes? If the Commission has the authority, why isn't it used?

Answer. The Commission has the power under the Interstate Commerce Act to require joint rates and through routes via rail and water carriers. The Commission has in the past required and will in the future require such carriers to enter into joint through routes and rates whenever a need is shown for the same, either by carriers or shippers. As a practical matter, the Commission bas had few cases in which our aid in effecting such coordination has been sought, most such public needs being met voluntarily by intermodal carriers when shipper needs are made evident.

Question 5. Sec. 1 of the Act sets forth the National Transportation Policyas you know it declares in part that regulation should be "so administered as to recognize and preserve the inherent advantages of each (mode)."

In the Intermodal Cost Finding Case now before the Commission do you think principles will be developed for recognizing and preserving the inherent advantages of the various modes? Should such principles be developed?

Answer. I believe that in the intermodal cost finding case, Docket No. 34013 Sub-No. 1, principles will be developed for recognizing and preserving the inherent advantages of the various modes of transportation in accordance with the mandate of the National Transportation Policy. Yes, such principles should be developed and this is, among other objectives, one of the clearly announced purposes of this proceeding. Commissioner John W. Bush

1. Intermodal Competition Since the inception of transport regulation, competition has been acknowledged as one of the factors affecting rate reasonableness. Between maximum and minimum rates, there is a zone of reasonableness within which a carrier is ordinarily free to adjust its charges for itself. In many instances, the carriers have reduced their rates to meet intermodal competition. This is not unlawful so long as the resulting rates are compensatory and not destructively comINTERMODAL TRANSPORTATION_Continued petitive, discriminatory, or unduly preferential and prejudicial. At the same time, a higher rate in another area would not necessarily be unlawful since it might be within the zone of reasonableness. Any objecting shipper would of course be free to protest a proposed reduction or file a complaint alleging that the rates charged exceed maximum reasonableness or violate other provisions of the Act.

It is true that in some cases grain rates may be higher in the midwest plains areas than in areas where there is severe water competition. On the other hand, the railroads have recently published numerous reductions in midwest gathering rates because of motor carrier competition. For this reason, and because of the complexity of the grain rate structure, I am unable to give a categorical “yes” or "no" answer to your question concerning the rail rate level in the plains

area.

The rulemaking proceeding discussed at page 94 of our policy report, Docket No. 34013 (Sub-No. 1), involves issues such as the determination of inherent cost advantages which are entitled to protection under section 15a (3) and the national transportation policy. Resolution of these questions will affect the outcome of competitive rate adjustments, but the proceeding is not specifically addressed to the situation you mention concerning possible rate inequalities between landlocked areas and other points where there is water-rail competition.

The cost proceeding was instituted on our own motion on February 5, 1969, as a result of requests by various parties in Docket No. 34013 to submit additional evidence following the Supreme Court's decision in the Ingot Molds proceeding, American Commercial Lines, Inc. v. Louisville and Nashville R. Co., 392 U.S. 571. The due date for this evidence is September 15, 1969, and replies must be filed by December 15, 1969. Expedited handling is being accorded, and I personally intend to make every effort to see that a prompt decision is issued.

With regard to your question concerning the consumer's interest, it is my view that it is adequately represented through the participation of numerous shipper organizations, GSA, State agencies and the Commission's Bureau of Enforcement.

2. Intermodal Coordination

New types of service require the establishment of new guidelines. A number of problems arose in connection with the development of piggyback service, and the Commission instituted Ex Parte No. 230 in an attempt to resolve these problems.

The same approach could and will be utilized in other areas as the need appears. Several examples were cited at the hearings before your subcommittee; development of the land-bridge concept is another innovation which may require the type of guidelines set forth in Ex Parte No. 230. I personally favor a broad approach whenever feasible.

3. Common Ounership At this time, I am not convinced that adequate information is available to make a firm determination that common ownership would be beneficial or detrimental to transportation in this country. Proponents of common ownership insist that present restrictions are obsolete; that intermodal service under a single management would produce increased efficiency, lower costs, and greater convenience to shippers. Those in opposition argue that common ownership would destroy the advantages of competition and result in monopoly of the transportation industry with all its attendant evils. Since the arguments pro and con are usually advanced by those who are deeply involved in the outcome, objective appraisal is extremely difficult.

Many of the objectives of common ownership can be achieved through greater intermodal cooperation among independent carriers. Accordingly, I am not willing to accept common ownership as the panacea for transportation ills without more objective evidence that it is in fact necessary to achieve coordinated service.

A finally and frankly, from a practical, political standpoint I think the question will be fought to a standstill for a good many years by the powerful proponents and opponents.

4. Water-Rail Coordination, Joint Rates and Through Routes It has been held in a number of proceedings that the Commission has the power to require the establishment of rail-water through routes and joint rates when such rates or routes are deemed necessary or desirable in the public interest. See, for example, Through Routes and Joint Rates, 153 I.C.C. 129, 133.

INTERMODAL TRANSPORTATION_Continued While many of the cases involving this issue arose under the Denison Act? which was repealed by the Transportation Act of 1940, the Commission's authority seems clear under section 15 (3) of the Interstate Commerce Act. Under section 1(4), railroads have a duty to establish "reasonable through routes with common carriers by water subject to part III, and just and reasonable rates, fares, charges, and classifications applicable thereto.” A similar duty is imposed on water carriers to establish through routes with common carriers by railroad under section 305 (b).

In connection with our through route authority, the Commission has also required the railroads to interchange cars with water carriers. This action was sustained by the Supreme Court in U.S. v. Pennsylvania R. CO., 323 U.S. 612.

Since rates and through route arrangements are established by the carriers themselves in the first instance, the question of whether to compel rail-water joint rates and through routes does not normally arise unless a complaint is filed. However, I have frequently expressed the opinion that improved "through route and joint rate” operations are necessary.

If the carriers are unwilling to cooperate and integrate their transportation, I believe the Commission should prescribe joint rates and through routes in appropriate proceedings whenever it appears that such action will improve service, reduce shipping costs or further the objectives of the national transportation policy. I think the Great Lakes area is one of the best examples of where the Commission should strive more actively to develop more realistic efforts and results in the matter of “through route and joint rate” operations—water and rail.

5. National Transportation PolicyInherent Advantages As indicated in my answer to question No. 1 of this section, the record is not yet closed in the intermodal cost finding case, Docket No. 34013 (Sub-No. 1). I cannot state therefore whether that case will develop principles for recognizing and preserving the inherent advantages of the various modes, but such principles and methods for determining inherent cost advantages are among the matters under consideration in that rulemaking proceeding. The case is not addressed to problems concerning inherent advantages other than costs.

The National Transportation Policy requires recognition and preservation of the inherent advantages of each mode. Since standards for accomplishing these objectives are presently at issue in Docket No. 34013, I am not at liberty to state whether such principles should be developed in that proceeding or on a case-bycase basis. Commissioner Willard Deason

1. Intermodal competition, without doubt, is a significant factor affecting rate levels and quite frequently, rates are higher in those areas where no competition exists. The absence of competition from inland water carriers in the midwestern plains area has, in some instances, resulted in highe grain rates. Yet, it cannot be unequivocally stated as a general proposition that rail rates are higher in the midwest for that area is not wholly without intermodal competition. For example, and as a result of intense competition from motor carriers, railroads only recently have published numerous grain rate reductions.

Involving as it does a determination of inherent cost advantages of the respective modes of transportation, the Commission's pending rulemaking proceeding is addressed, in part, to intermodal competition and resulting rate adjustments.

While the proceeding was commenced in 1962, the Commission is endeavoring to expedite its decision. The present delay, of course, is occasioned by the Supreme Court's decision in the Ingot Molds case, 392 U.S. 571 and the submission, in light of that decision, of additional evidence by the parties.

Vigorous participation in the proceeding by shippers, shipper organizations, this Commission's Bureau of Enforcement, and Federal and State governmental groups convinces me that the consumer's interest is being adequately represented.

2. Ex Parte No. 230 was instituted as the result of the widespread development of a new type of service. Problems are revealed through practical experience as an innovation grows; many cannot be foreseen. With the growth of containerization, such a proceeding will probabaly be necessary in the future. The INTERMODAL TRANSPORTATION—Continued land-bridge concept, when it becomes a reality, might also lead to practical problems which require resolution.

145 Stat. 978.

3. It is my view that common ownership should be allowed if first it is clearly established that (1) substantial greater economies of operation will be achieved and reflected in lower rates and (2) a more efficient service will be rendered to the public, than will be achieved or rendered under intermodal cooperation, coordination, and competition among independent carriers.

It is difficult, if not impossible, to state with certainty whether common ownership would be beneficial or detrimental to transportation on the basis of information presently at hand. Statements advanced for and against common ownership are usually self-serving opinions by vested interests or are opinions lacking factual support. I know of no objective appraisal showing that the economies, or lack of economies, of operation are such as to warrant a judgment that common ownership would be either beneficial or detrimental. Also, from a service standpoint, because the transportation problems of shippers differ greatly, common ownership would benefit some shippers substantially, be of little or no benefit to some, and be detrimental to others. There are abvious and undeniable advantages in being able to deal with one carrier capable of affording flexible routing and scheduling on one bill of lading, and responsible for prompt service and settlement of loss and damage claims. Conversely, the lessening of competition in certain areas would work to the disadvantage of some shippers.

4. Our authority to compel rail-water joint rates and through routes can only be exercised “whenever deemed * * * to be necessary or desirable in the public interest, after full hearing upon complaint or upon Cour] own initiative without complaint * * *,” as provided in section 15(3) of the act. When such action has been sought, and the necessary showing has been made, we have prescribed joint rates. But commencing a proceeding on our own initiative, we could not lawfully compel such rates without a record containing the necessary evidence submitted by parties who have sufficient interest to incur the time and expense involved.

5. Among the numerous matters under consideration in the Commission's intermodal cost find case are principles for determining and preserving inherent cost advantages of the various modes. That case, however, is still pending before the Commission and, accordingly, I cannot be certain at this time whether or not such principles ultimately will be promulgated in that proceeding.

Commissioner George M. Stafford

1. I have heard the charge made before but up to this point have seen nothing to support it. However, competition has always been an important factor in ratemaking, and I would agree that freight rates of whatever mode have a tendency to be lower at whatever point there is competition for the traffic.

Docket No. 34013 (Sub-No. 1) mentioned on page 94 of our report was insti. tuted by order of February 5, 1969, and in it we are seeking to provide cost criteria for use in intermodal rate controversies to ascertain the inherent advan tage of the respective modes as called for in the Act and the National Trans portation Policy.

This proceeding was instituted approximately five months ago and the record is not yet developed. It is assigned to a Commissioner for administrative handling and I know steps are being taken to expedite it. The consumer's interest in this proceeding is remote at best, but that interest will be protected here as it is in other proceedings before the Commission.

2. Other areas where we have talken a so-called "innovative approach” were spelled out by Commissioner Walrath at the hearing. I think you should keep in mind that transportation is private enterprise. Regulation is far different from ownership or even management. In view of this, it is my opinion that innovations are normally the prerogative of the industry. As I said in a speech last year, “Transportation is not static because the needs of the public must be met. As these needs change, so must the carriers and the Commission for that matter. The Commission cannot seek innovations or propose changes, but it could discourage such actions. In my view, that is not its proper role, nor one that has been followed. If anything, the opposite is true.”

3. I have not as yet taken a position on this topic and intend to give the matter much more consideration before I do.

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