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Mr. HALE. You are what?
Mr. Morrow. Yes, sir. So far, section 5 on page 10 is the only section which we favor.
Coming to section 7 on page 11, it could be retained but it would have to be revised because it now refers both to overcharges and to reparations. The same would be true of section 8 on page 11. It should be retained with modifications to make it relate only to overcharges.
On page 12, section 9 could be retained.
Section 10 should be omitted. Section 11 should be retained, and section 12 should be retained.
Mr. HALE. Thank you.
Mr. HINSHAW. Is it not true, Mr. Morrow, that the freight forwarders operate their business at or under the less-than-carload rates?
Mr. MORROW. I think it would be more correct to say, "at or over.”' They are very generally the same, but in cases they are higher.
Mr. HINSHAW. I misled you.
Mr. Hinshaw. Why would they be operating at a less-than-carload rate?
Mr. Morrow. Simply because their costs would be so high that they would have to operate at a higher rate. Suppose they had, in very short-haul territory, only a short carload movement, but they had some rather long motor-carrier moves at each end where they were not moving the goods in consolidated consignments, and had to pay on an l. c. 1. basis, then forwarders have found that sometimes their costs, their actual out-of-pocket costs, are more than the 1. c. I. rate. In some instances they are 6 percent higher than the rail rates. It applies particularly in the eastern and northern portion of the United States.
Mr. HINSHAW. Would the question of damages arise from that charge above the l. c. 1. rate, or would there be any question of damages arising from an I. c. l. or lesser rate?
Mr. MORROW. In the case of award of reparations against freight forwarders there would be no legal basis for comparing a forwarder rate with the going l. c. I. rate of underlying carriers. It would be a question whether the forwarders' rates, which are all l. c. I. rates, incidentally, were reasonable.
Mr. HINSHAW. As the forwarder does not himself operate any of the underlying carriers by which these goods were shipped, it is presumed, I suppose, in these cases, that the rate of the basic carrier is a reasonable rate. Is that not true?
Mr. Morrow. I do not think there would be any legal presumption that the rate of the underlying carrier, which was his rate, was a reasonable rate for the freight forwarder. There would be a strong reason to measure the forwarder rate by the underlying carrier's rate. Competitive reasons would make it impossible for the forwarder to go much higher, and his costs would make it impossible for him to go much lower, because 80 percent of the cost is the transportation charge of the underlying carrier. But I do not think there is any very compelling reason at law why the forwarder rate should be judged reasonable or unreasonable with respect to whether it is the same as the rail rate or not.
Mr. HINSHAW. As you say, there are no cases of reparations or damages against the forwarder that would be covered by the terms of this bill at the present time.
Mr. MORROW. Yes, sir; they would all be covered. What I said was that the freight forwarders would have no protection under the doctrine of the so-called Arizona Grocery Co. case in the case of reparations claims against their rates, whereas the railroads are largely protected by the doctrine in that case.
In other words, the rail rates have been prescribed by the Commission over a period of many years, and in the Arizona Grocery Co. case the Supreme Court said if the Commission has fixed a rate as reasonable, it cannot at a later date say that the rate was unreasonable, that it had made a mistake, and prescribe a lower rate and permit the shipper to recover the difference between the two.
Since the forwarder rates have not been prescribed by the Commission—they have been filed with the Commission, and they are presumed to be just and reasonable, but they have not been actually fixed by the Commission—that doctrine in the Arizona Grocery Co. case would have no application in the case of forwarder rates.
Mr. HINSHAW. What cases do you have brought against you for reparations and damages?
Mr. MORROW. At the present time there are not any.
Mr. Hinshaw. That is my understanding; that is why I asked the question. Do you not merely fear that there would be a case?
Mr. Morrow. Yes, sir. I think that this would certainly encourage a great many claims. It proved out that way in the case of the railroads. And as I pointed out, it was a very troublesome question for a great many years in the case of railroads. There are many claim agencies throughout the country who solicit paid freight bills of the carriers. If they see an opportunity to attack the forwarder * rates, they have not got very much to lose, and have an application of that doctrine which I referred to, that the mere fixing of a lower rate by the Commission entitles them to damages without proof of injury, they could stand perhaps to gain a great deal.
I think it would encourage that type of suit, whereas we have no trouble today. The shippers complain against our rates, and if the Commission thinks that our rates are unreasonable it prescribes a reasonable rate. But in the complaints that have been filed since part IV was enacted, so far as I know, the Commission has disagreed with the complainants. There have been only a few.
Mr. Hinshaw. Actually, as your rates are based primarily on the underlying carrier rates, plus whatever services you perform, would it not be rather difficult to bring a case against you like that, that would be upheld?
Mr. MORROW. There would be fewer elements to be considered in determining whether our rates were unreasonable, because of the fewer elements of cost that would make up our rates. To that extent it would probably be more difficult.
It is easier for the forwarder to determine what is a reasonable rate, I suppose, than it is in the case of a carrier who has a great many more elements of cost to consider.
But it is not at all impossible that the forwarder rates should be found unreasonable when in a long movement they have utilized the services of a dozen different carriers under different arrangements and have many varying elements of cost in connection with that. The Commission might decide the forwarder had not published a reasonable rate in the first instance, and require it to be changed, and thus lay the basis for awards of reparations.
Mr. HINSHAW. Of course, the shipper has the choice of other methods of transportation?
Mr. Morrow. That is right.
Mr. HINSHAW. He has the choice of selecting other means of transportation?
Mr. MORROW. Yes, sir.
Mr. HINSHAW. The fact then that he has accepted the rate that you have published to him-is that not ample notice to him that that is the rate that he wants to pay for the services you perform?
Mr. MORROW. I think so. I think that is the way it works out today, and I would like to see it continued to work that way.
But I do not think that would be any basis of defense to us if you make a provision for an award of damages. The fact that the shipper decided to use our services as against some other would not necessarily indicate that he had not paid an unreasonable rate.
Mr. HINSHAW. Are there any further questions by the committee? (No response.) Mr. HINSHAW. If not, we thank you very much, Mr. Morrow.
Mr. HINSHAW. I believe Mr. Hiltner desires the privilege of inserting a statement in the record in the next few days. Mr. Hiltner is general traffic manager of the United States Pipe & Foundry Co., of Burlington, N. J., and the statement that he will file is on behalf of the Jersey State Chamber of Commerce, Atlantic States Shippers Advisory Board, and Camden Traffic Club.
The statement will be received.
STATEMENT OF J. J. HILTNER, GENERAL TRAFFIC MANAGER,
UNITED STATES PIPE & FOUNDRY CO., BURLINGTON, N. J. In accordance with permission granted by Mr. Logan I am herewith submitting the following views in support of H. R. 2324. In voicing these supporting views I am representing the Atlantic States Shippers Advisory Board, the New Jersey State Chamber of Commerce, the Camden Traffic Club, and this company.
The Atlantic States Shippers Advisory Board is one of 13 such boards located throughout the United States. This board has a membership of 3,900 representatives of shippers and receivers of freight. The membership represents approximately 90 percent of the shippers and receivers of freight located in the board's territory. The functions of the advisory boards are to study transportation problems and endeavor to work out such problems with the carriers involved without resorting to litigation. I am chairman of the legislative committee of the Atlantic States Shippers Advisory Board.
I am chairman of the industrial traffic committee of the New Jersey State Chamber of Commerce and chairman of the legislative committee of the Camden Traffic Club. Inasmuch as the functions of organizations such as these are so well known I will not attempt to enlarge thereon.
All of the organizations which I represent favor the passage of H. R. 2324. In our opinion there exists no justifiable reason for any inconsistency in the statutory period of various types of carriers for filing claims, collecting over or undercharges, or presenting reparation claims. It is the judgment of these organizations that a uniform statutory period, such as is now provided in section 16, part I, of the act in connection with shipments by rail carriers, should be provided for all carriers. Part II of the act, which deals with motor carriers, contains no statutory period with respect to the matters at issue. Part III of the act, covering water carriers, provides a statutory period of 3 years. Part IV of the act, covering freight forwarders, is similar. to part II of the act.
The reasons why the organizations I represent favor this remedial legislation are:
In the absence of a definite provision in the Interstate Commerce Act for a statutory period it is not uncommon for a shipper to be confronted with a bill for undercharges some 3 or 4 years, or longer, after the shipment was made, depending on the State laws applicable to the shipment. This means that under such conditions a shipper is required, for his own protection, to preserve shipping papers and records for far beyond any reasonable period of time. To further complicate the situation there is widespread difference in the statutory period in the various States.
After long experience we have found that the statutory period provided for in part I of the act has operated exceedingly well for both shippers and carriers.
With these facts before you I respectfully urge that your committee favorably report H. R. 2324.
Mr. HINSHAW. Are there any further witnesses to be heard?
STATEMENT OF E. F. LACEY, EXECUTIVE SECRETARY, THE NA
TIONAL INDUSTRIAL TRAFFIC LEAGUE, THE MUNSEY BUILDING, WASHINGTON, D. C.
Mr. LACEY. May I add a word please, Mr. Chairman?
Mr. LACEY. My name is Edward F. Lacey, and I am executive secretary for the National Industrial Traffic League. Mr. F, F. Estes appeared yesterday as the acting chairman of our legislative committee, and stated the position of the league endorsing this bill, H. R. 2324, in toto.
I want to add one further thought. Mr. Morrow, who always is very fair, and we think a great deal of him, mentioned the decision of the ICC in the Bell Potato Chip Co. case, 43 M. C. C. 337. establish somewhat of a new principle in that the Commission stated that it did have jurisdiction under part II of the act, which applies to motor highway carriers, to make an administrative determination of the lawfulness of the charges on past shipments, and then in its decision it outlined a procedural method whereby the party who was damaged might secure relief through the courts. That, Mr. Chairman and gentlemen, does provide a roundabout way, but this bill, if enacted, would provide a short cut procedure, the same as already provided for in part I of the act applicable to railroads.
I wanted to leave this one thought with you, that that relief, which is somewhat drawn out and involved, could perhaps be taken advantage of by the larger shippers who have well-organized traffic departments and able counsel. They could protect themselves and secure that relief, and would, of course, be controlled by the amount involved, that is, whether the amount was substantial.
But I want to leave this thought with you. It would tend to operate against the little fellow. We are always talking about protecting the little fellow--the small shipper and the small receiver. He would not know his rights, perhaps, and he would not have the means, nor would he want to go out and employ counsel and pay a substantial sum to secure relief, because the amount involved might be perhaps as much as the counsel fees and the court costs.
So I want to leave that one thought with you. Furthermore, this question of reparations involves more than just the question of the reasonableness of the rate itself. There are other factors such as misrouting, which frequently is brought into play. If a shipment is misrouted by a rail carrier the shipper, under part I, has redress through reparation.
That same principle would hold true in connection with an error in the publishing of a rate. These are all factors of which I think the committee might well take cognizance, and I wanted to bring them to your attention while the subject is still before you.
Mr. Hinshaw. Mr. Lacey, if you desire to amplify upon your statement, giving more instances that the committee might consider, we would be glad to have them.
Mr. LACEY. Thank you very much, Mr. Chairman.
Mr. Hinshaw. If there are no further witnesses, the hearing is adjourned.
(Whereupon, at 12:05 p. m. the hearing was adjourned.)