pension by the Commission and investigation to determine their reasonableness. All rates would be subject to complaints, and the slow, cumbersome, expensive process of hearings and investigation, after which the Commission could establish whatever it regarded as proper. Subsequent changes could be accomplished slowly and with difficulty, if at all-no matter how urgent the need of the carrier, wharfinger, shipper, or the commerce. The average rate investigation takes years before conclusion is reached; then, because of changed conditions or dissatisfaction of the parties, is frequently reopened for a repetition of the process. Under such conditions the private carrier, operating at cost of transportation, and commerce of such carriers would obviously have a great advantage over the carrier for hire and commerce employing for-hire carriers.

THROUGH RATES

Common carriers by water would be compelled to establish such through routes and joint rates, in connection with railroads, motor carriers, and other water carriers, as the Commission may require. Unless divisions were voluntarily agreed upon, the Commission may fix the divisions of the through rates.

CARRIER MUST NOT TRANSPORT ANY COMMODITY WHICH IT OWNS OR CONTROLS

After July 1, 1936, it would be unlawful for any carrier for hire to transport any commodity produced, owned, or controlled by it, or in which it has any interest, except articles necessary for the conduct of its business as a carrier, unless the Commission, after investigation, found that such transportation was in the public interest, and extended the time beyond July 1, 1936.

TARIFFS, ACCOUNTS, REPORTS, CONTRACTS, RECORDS, PAPERS, ETC.

Tariffs must be published, filed, and posted in such manner and form as prescribed by the Commission, covering every rate, charge, rule, regulation, and practice affecting transportation service. No transportation service can be performed except as provided in the tariff. Thirty days' notice is ordinarily required of publication of changes. Carriers must keep their accounts and make reports in such manner and form as the Commission prescribes. All records, papers, correspondence, contracts, etc., must be kept open for the Commission's inspection. Bills of lading, manifests, and other contracts of transportation must be in accordance with rules prescribed by the Commission.

SECURITIES, CONSOLIDATIONS, ETC.

No common carrier shall issue, market, or withdraw securities (except where total capital is under $500,000), enter into any consolidations, mergers, nor acquire or control another common or contract carrier except upon approval of the Commission after hearing.

PENALTIES

Severe penalties are provided for giving or receiving rebates, concessions, disclosing information, or any willful violation of the regulatory law or Commission's rules issued thereunder.

CONTRACT CARRIERS

Contract carriers would not be allowed to operate except after receiving a permit issued by the Commission, authorizing such operation. Except for carriers operating in 1934, the Commission would issue such permits only upon finding that the operator was fit, willing, and properly able to perform the service proposed, and to conform to the rules, regulations, and requirements of the Commission, and that the operation will be consistent with the public interest and the national policy of coordinated transportation. Such carriers would not be allowed to operate except as specified in the permit, which may be amended, suspended, or revoked by the Commission. Contract carriers would be required to file, post, and keep open for public inspection every contract, charter, agreement, or transportation undertaking to which they are parties, and it would be unlawful for the carrier to transport or furnish facilities or services except in strict accordance with the charges, terms, and conditions of such contracts. The Commission would not fix reasonable rates and charges for contract carriers, but would be empowered to prescribe minimum rates or charges, or such rules, regulations, and practices, or provisions of charters, agreements, etc., that would in its judgment promote the national policy of coordinated transportation, with the further requirement of law that the Commission "shall give no advantage or preference to any such contract carriers in competition with any interstate common carrier." Contract carriers would be subject to the requirements and rules of the Commission as to keeping accounts and making reports, consolidations, issuance of securities, etc., and penalties for rebates, concessions, disclosing information, and other violations of the law the same as common carriers. The avowed purpose of the proposed regulation of contract carriers is to restrict their operations. As stated by the Federal Coordinator, "The chief reason for regulating these is to protect the common carriers against cut-throat competition." Manifestly, the contract carrier would find it difficult, if not impossible, to exist under the proposed legislation.

PRIVATE CARRIERS

A private carrier would not be allowed to operate unless it obtained a registration issued by the Commission authorizing such operation. The carrier, after receiving such registration, would be allowed to transport the freight of its owner at cost, but such carrier would not be permitted to transport freight of others for hire unless the Commission should specifically find it to be in the public interest.

DUAL OPERATIONS

A common carrier would not be allowed to operate as a contract carrier, nor a contract carrier as a common carrier, nor a private carrier as a carrier for hire, except in special cases upon receipt of special permission of the Commission, based upon the finding that such dual operation would be in the public interest.

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FOREIGN COMMERCE

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All common carriers in foreign commerce to and from the United States would be subject to Commission regulation. The act defines as a common carrier "any water carrier which holds itself out to transport passengers or propto or from a foreign country erty provided that a cargo boat, commonly called an ocean tramp, carrying on any one voyage cargo supplied by one shipper only, under a single charter, party, or contract of affreightment, shall not be deemed such common carrier." Such carriers would be required to file a copy of every agreement with other carriers or wharfinger, relating to rates, charges, or working agreements, the giving of any special privileges or advantages, control of competition, character, or volume of traffic, pooling earnings or losses, apportioning ports or restricting sailings. The Commission is empowered to disapprove, cancel, or modify such agreements. Rates of such carriers are required to be just, reasonable, nondiscriminatory as to shippers at ports, and as to United States versus foreign commerce. The Commission is authorized to prescribe reasonable maximum rates, regulations, and practices, to remove discrimination and prejudice. Upon complaint of any conference carrier that the rate of the competitor is unreasonably low, the Commission is authorized to prescribe minimum rates. Deferred rebates, fighting ships, retaliation against shippers are forbidden. Carriers must file and keep accounts, records, and reports as prescribed by the Commission. Transportation at less than regular rates by any unjust or unfair device is forbidden. In the event foreign ships refuse to comply with orders of the Commission, the Secretary of Commerce is directed to refuse them right of entry.

MARCH 1935.

[Prepared by counsel for Mississippi Valley Association, Upper Mississippi Waterway Association, Mississippi and St. Croix River Improvement Commission of Minnesota]

ANALYSIS OF COORDINATOR EASTMAN'S BILL PROVIDING FOR

REGULATION OF WATER CARRIERS

(S. 1632-H. R. 5379)

SECTION 1-DEALING WITH ITS EFFECT ON SHIPPERS

(Sections 2 and 3, published separately, Deal With Its Effect On, (2) Water Carriers,

(3) Wharfingers)

TWO ALTERNATIVES

The Congress and the country are confronted with one of two alternatives: To eliminate the low-cost forms of transportation, raise the rate level to meet the needs of the railroads, placing the entire burden upon the producing and consuming public, thereby destroying the greater part of the vast investment of the people in waterways and highways, or reduce the valuation of railroad properties to a point which their earning power will sustain.

Only by adopting this latter alternative can the producing and consuming public enjoy the benefits of these newer, more modern, and more economical services which they have created at an expense of approximately $20,000,000,000, in an effort to get relief from burdensome and, in many cases, prohibitive rail rates. The Coordinator concedes that these services "are being used because they have met public demands which the railroads did not meet."

Obviously, Congress will not willingly destroy these valuable services and impose this tremendously increased cost of transportation upon the producing and consuming public for the sole purpose of bolstering up an impossible railroad financial structure. We can see no other outcome than this destruction if this bill is enacted into law.

The proposed bill (S. 1632-H. R. 5379) for the limitation and regulation of water transportation is the outgrowth of an investigation of railroad conditions made by the Coordinator of Transportation under the requirements of the Emergency Railroad Transportation Act of 1933.

The principal findings of fact and conclusions upon which this legislation is urged by the Coordinator are contained in his review of the present situation in transportation and his picture of a new situation based upon certain objectives which he regards as most desirable.

We agree that it is necessary to maintain a system of railroad transportation which is capable of giving "adequate and efficient service" in the public interest. We believe, however, that the plan which he has chosen is not responsive to the public need, would prove unduly expensive to the shipping and traveling public and would seriously retard recovery.

The Coordinator's principal study covers the period since 1920. He finds that "the increase in transportation facilities between 1920 and 1932 represented a capital outlay of substantially $25,000,000,000.”

Between five and six billions of this amount represents new investments in railroad property. The railroads place the present book value of their properties at approximately $26,000,000,000. The Coordinator finds that the investment in other kinds of transportation is "substantially equal to the recorded investment in railroad carrier property in 1920."

This means that since 1920 we have built up a new system of transportation in which the Federal and State Governments and millions of individuals have invested approximately $20,000,000,000. Making due allowance for obsolescence and excessive book values of railroad plants it appears that the people of this country have invested in improved highways, motor vehicles, improved waterways, harbor facilities, and in domestic watercraft substantially as much as the present fair value of all the railroads. In our judgment the report of the Coordinator fails to properly emphasize this fact.

DISTRIBUTION OF TONNAGE BETWEEN CARRIERS

In 1920 the railroads carried approximately 80 percent of all the domestic tonnage of the Nation. As a result of the investment of this $20,000,000,000 in these newer and more modern forms of transportation the tonnage of the country, according to report of the Coordinator, was redistributed in 1932,

Not only have these more modern forms of transportation resulted in a redistribution of the handling of freight, they have also resulted in a greatly reduced cost for this service to the traveling and shipping public, for the Coordinator finds:

"The loss in freight revenue from the competition of other forms of transportation has been materially greater than the loss in traffic, owing to the numerous reductions in rates which the railroads have made to meet this competition. Nor do the tables above cover railroad passenger traffic. Undoubtedly highway transport has had a more serious effect upon this traffic than upon freight and the standard passenger fare has been reduced from 3.6 cents per mile to 1.5 cents in the South and 2 cents in the West."

RECOMMENDATIONS CONTRARY TO PUBLIC DEMAND

The Coordinator concedes that "the newer services are being used because they have met public demands which the railroads did not meet."

Yet, despite the admitted public value of these extensive services on public waterways and highways, the Coordinator recommends that Congress delegate to the Interstate Commerce Commission power to restrict their services and raise their rates. The Coordinator concedes that this will result in increased cost of service to the shipping and traveling public.

The facts clearly show that, with increased cost of labor and materials the railroads, with the present structure of capital and debts, must have annually a net operating revenue $500,000,000 greater than that produced by the traffic they carried in 1932 in order to meet their fixed charges.

WOULD DIVERT ALL TRAFFIC TO RAILROADS

The Coordinator's principal job is to reinvigorate the railroads. In some 90 pages of general discussion there is little attempt to disguise the obvious purpose of this legislation for the limitation and regulation of water carriers. The purpose is, first, to limit the service and elevate the rates on the 15 percent of domestic traffic handled by water to a point which will return this traffic to the railroads: second, having wiped out water traffic, and truck traffic as well, the Commission will be able to raise the whole rate structure of the country to any basis necessary to make the railroads not only solvent but profitable provided the domestic traffic can stand the load.

This process of fixing reasonable maximum mileage scales to make the railroads profitable was tried by the Commission only a few years ago. This effort was in large measure responsible for the great increase in highway and waterway traffic. This competition of trucks and water craft defeated the scheme. Obviously, the competition of these growing services must be eliminated before it can again be undertaken.

It must not be forgotten that this proposed reinvigoration of the railroads will impose a corresponding burden upon the shipping and traveling public.

REPLIES TO QUESTIONNAIRES MISLEADING

The Coordinator in his report says that shippers favor regulating water traffic as shown by answers to questionnaires. In the general language in which these questionnaires were shaped, it is probable that many shippers felt that they agreed with the Coordinator in principle. We believe that when they realize the character of this legislation and its effect upon the movement of traffic and the lower net returns from their products which will result, they will not be in favor of the regulation and limitations proposed in the bill. For these reasons, we set down below some of the most important provisions of the bill and undertake to give shippers an idea as to how it will affect them.

WATER CARRIERS AND VESSELS DEFINED

Section 203 (c) of the bill defines water carriers as follows:

“Water Carrier' means any person who or which, whether as a common carrier, a contract carrier, or otherwise, transports passenges or property by water in interstate or foreign commerce."

Section 203 (i) of the bill defines vessels as follows:

"The term 'Vessel' means any water craft or other artificial contrivance of whatever description which is used, or is capable of being, or is intended to be used, as a means of transportation by water."

This shows that it is the purpose of the bill to bring under the control of the Interstate Commerce Commission every conceivable form of transport, on the inland waterways, on the lakes, bays, and sounds (including the Great Lakes), on the high seas, in the coastwise, intercoastal, and foreign trades. It is intended that no form of water transportation service which is essential to the public shall escape.

CLASSIFICATION OF WATER CARRIERS

For purposes of regulation, water carriers are divided into three classes, viz, common carriers, contract carriers, and private carriers. This, in itself, attempts an arbitrary segregation of present water traffic which is impracticable and will result in a tremendous increase in cost of the service which must necesarily be borne by the shipper and the public in general.

CONTRACT CARRIERS MAY BE ELIMINATED

At present, any well-organized common carrier acts as a contract carrier, as a tower for hire, as a charter of barges, and in every practicable way uses its motive power and equipment to augment its general revenues and maintain a low basis of rates. The proposed segregation would narrow the opportunity of a common carrier to do business on business principles and maintain a low basis of cost.

The continuation of contract carrier service is left entirely to the discretion of the Interstate Commerce Commission under the proposed bill. These valuable services are clearly regarded by the Coordinator as inimical to the success of common carriers and they can be completely snuffed out by the refusal of the Interstate Commerce Commission to permit their operation. The Commission, furthermore, would have the power to eliminate contract carrier service by increasing their rates, thereby depriving the public of this valuable low-cost transportation.

PRIVATE CARRIERS

In the Coordinator's original bill presented to the last Congress, private carriers were to be denied the privilege of carrying any freight except that owned by the carrier itself or an affiliate. In the bill now before the Congress the Interstate Commerce Commission, in its discretion, may grant the private carrier permission to do business as a common or contract carrier as well. However, under the commodities clause, section 214, a common or contract carrier is prohibited unless especially authorized by the Commission from carrying his own goods or those of an affiliate.

It follows therefore that when a private carrier procures a permit as a common or contract carrier and begins operation as such, he becomes subject to the provisions of the commodities clause and forfeits his right to carry his own goods, unless the Commission specifically relieves the carrier from this prohibition. It must be conceded that the principal objective of the private carrier is to carry his own goods and because, if he asked for a permit to become a common or contract carrier, he would abrogate his right to carry his own goods unless the Commission waived the prohibition; the probability of any such application is remote. Therefore, the private carrier in our judgment will have to remain a private carrier.

With the inevitable hoisting of common and contract carrier rates to the rail rate basis the private carrier will remain the regulating medium in water traffic without himself being regulated. Private carrier services, today the greatest of all measured in tonnage carried, will be extended to the detriment of contract and common carriers, and the general public which these carriers serve.