One of the factors which has contributed to the freight car supply problem is that terminating railroads unfairly hold and use foreign cars. I point specifically to that portion of the Department of Commerce comment on page 13 of Senate Report No. 386 which reads: But terminating roads frequently find it advantageous to retain foreign cars and to minimize their ownership. Particularly when the revenue per loaded car-day exceeds the per diem rental and traffic is active. If Congress is really serious about ending the chronic freight car shortage (and I believe we must be to preserve the unprecedented forward thrust of our economy and to provide for our national defense), your committee ought speedily to approve legislation similar to H.R. 4172, without the Senate committee amendment. We have several more of The CHAIRMAN. Thank you, Mr. Karth. our colleagues and sponsors of similar bills to hear from, so we will move right along now and hear the Honorable Al Ullman. STATEMENT OF HON. AL ULLMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON Mr. ULLMAN. Mr. Chairman and members of the committee, first, I wish to thank the distinguished chairman and members of the committee for the opportunity to present my views on a matter of great and continuing concern to many parts of the Nation. I welcome the chance to urge the committee's approval of the measures proposed in my bill, H.R. 6432, and in the Senate-passed S. 1098, to amend the Interstate Commerce Act to insure the adequacy of the national railroad freight car supply. It is a paradox that in these times of growing national productivity, in a period of unprecedented economic expansion, that the wheels of industry and commerce are permitted to slow or grind to a halt-not for lack of markets, not for lack of raw materials, not for a shortage of skilled labor-but simply because freight cars are not available to assure continuous flow of the Nation's commodities to market. This Congress has, in recent years, demonstrated a major concern with elements of our economy that served as a brake on economic expansion. We have reduced income taxes, eliminated excise taxes, revised depreciation schedules, introduced the investment tax credit, and have taken many other constructive steps-many of which originated in this committee to help assure that the elements of a strong freeenterprise economy are able to work to the Nation's benefit. It must be recognized, however, that since 1945-in a period during which national productivity has expanded greatly-the number of railroad freight cars has declined by 15 percent. Some argue that the decline in freight cars since World War II reflects a declining level of carloadings. I am inclined to think that just the opposite might be true. An article in the Wall Street Journal of June 1, 1965, characterizes the rail car shortage as follows: But the shortage, in the main, is a consequence of the biggest peacetime business boom in the Nation's history. The railroads simply have been unable-or in some cases unwilling to add new cars to their fleets at a fast-enough pace to meet rising demand from shippers. This suggests, does it not, that carloadings may be down because a sufficient number of freight cars of the type required by today's businesses and industries have simply not been available. When lumber mills and plywood plants in my State of Oregon have to shut down for several days or a week because they are unable to ship from existing inventories, when grain-terminal employees are laid off at the height of the grain shipping season, when desperate appeals to several railroads for rolling stock to meet immediate shipping needs fail to turn up even a fraction of the requirements, the reality of the Nation's freight-car shortage cannot be denied. The Interstate Commerce Commission has repeatedly recognized this reality, and has issued orders, within the limits of present authority, to encourage more efficient distribution of existing freight-car stocks. The only effective solution, however, is to reverse the steady attrition and deterioration of the Nation's boxcar supply. The primary cause of this deterioration, in my opinion, is the per diem rental structure which governs their use. Because the average daily earning of a freight car greatly exceeds the per diem rental charge, operators particularly those in terminal areas for incoming shipments have found it "good business" to hold and use this equipment at their own discretion. This creates a continual hardship on the railroads that invest in specialized rolling stock particularly suited for originating shipments in their areas of operation. They are not only deprived of the use of this equipment when needed, but often are unable to acquire the use of older or inferior equipment. This happens year in and year out in Oregon's lumber and plywood industry, where special wide-door cars are needed to facilitate loading and unloading of these bulky commodities. These cars, instead, wind up doing general duty throughout the country at the discretion of lines that have no interest in the requirements of other areas. Oregon shippers must have assurances of an adequate freight car supply for marketing the State's lumber, agricultural, and industrial products. The alarming decline in the number of freight cars must be reversed. Per diem rates must encourage the efficient use of all available equipment. Mr. Chairman and members of the committee, to remedy the inequities that are working at odds with our national goal of increased productivity and efficiency in distribution of the Nation's commodities, I urge your approval of legislation to allow the Interstate Commerce Commission to establish a system of freight car per diem rates which will facilitate the acquisition, maintenance, and efficiency of a freight car fleet to meet the needs of America's commerce. my judgment, the legislation under consideration here today will help to achieve that goal. The CHAIRMAN. Thank you, Mr. Ullman. Mr. ULLMAN. Thank you for the opportunity, Mr. Chairman. In STATEMENT OF HON. WENDELL WYATT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON Mr. WYATT. Mr. Chairman, I wish to express to you and the distinguished members of your committee my deep appreciation to you for conducting these hearings and affording me the opportunity to testify. The subject you are considering today is one of the most important pieces of proposed transportation legislation to come before Congress. Its provisions offer the basis for effective action in decreasing railroad car shortages and alleviation of the repeated paralytic effects of such shortages on the economy of many areas of our country. One such area is Oregon where inadequate car supply again threatens shutdowns of our mills and other industries associated with production and marketing of forest products. Producers of other products in Oregon have also suffered the effects of car shortage. I believe it has been well confirmed, as noted in the Senate committee report of S. 1098 this year and S. 1063 last session, that the per diem rate is so low as to make it cheaper for certain railroads to rent cars of others than to acquire cars of their own. This circumstance, of course, contributes not only to inadequate ownership but delays return of cars to areas such as Oregon, whose serving carriers are attempting to maintain high levels of car ownership. It is the economic element of the deficient per diem charge which S. 1098 deals with as a tool in achieving its objective of insuring the adequacy of a national freight car supply. Oregon feels the effects of shortages early, it feels them long, it feels them hard and recently it has been feeling them continuously. My State is primarily a producer and manufacturer of products much of which must be marketed in areas far removed from Oregon. If its economy is to be unimpaired and competitive it must be able to market those products in accordance with production and order schedules. We have the raw material resources, we have the production plants and personnel, we have developed markets for our products, and we have the orders for eastern delivery, but the one vital link, that of an adequate, reliable supply of rail cars to get our produce to market continually breaks or only half holds, thus retarding our entire economy. One of the effects of freight car shortages which is often overlooked but which constitutes a very real threat to our forest products industry is that of customer diversion from use of these products to substitute materials. Oregon's lumber and plywood industry has worked long and hard to gain increasing acceptance of their materials. Yet when they cannot supply the material as it is wanted they face the prospect of increasing customer diversion to use of substitute materials. Such action will result in severe and long lasting damage to our producers and their labor force. In conclusion, let me point out that every year and every day that goes by in which our shippers receive only a portion of the cars they need not only saps the strength of our economy, but belies the claim of some railroads that they will remedy the situation themselves. They have not done so and we can wait no longer. It is for these reasons that S. 1098 urgently needs to be passed, giving its remedial potential to the Interstate Commerce Commission for effective implementation. The CHAIRMAN. Thank you, Mr. Wyatt. Out next witness will be the Honorable Rolland Redlin. STATEMENT OF HON. ROLLAND REDLIN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH DAKOTA Mr. REDLIN. The fertile plains of North Dakota produce vast tonnages of high-grade wheat which must be marketed in an orderly manner. When normal marketing patterns are disrupted, wheat farms and all those in North Dakota whose livelihood derives from the growing and marketing of wheat are seriously disadvantaged. Over the years, as probably every adult American knows, there have been shortages of boxcars during harvest season. In North Dakota, we feel the pinch of the inadequate boxcar supply every year at harvest season. Not infrequently wheat must be piled up on the ground awaiting boxcars to move the crop to market. During recent years, shortages of boxcars have become more severe and have been experienced at many times of the year. The virtual paralysis to the economy of areas of my State during these severe car shortages cannot be overemphasized. The reason is simple. Since 1945, the Nation's railroads have retired nearly 300,000 more cars than they have built. This year, the number of serviceable boxcars is down 3,600 from 1964. The major cause of the shortage is that railroads can rent cars more cheaply than they can build them. As we all know, railroads are required to permit other railroad lines to transport their cars, in order to allow a free flow of commerce from coast to coast. Mr. Chairman, North Dakotans are in agreement on the need for relief to this growing problem of freight car shortages. H.R. 7165 is one of some 19 bills now before Congress that provide a logical solution to the problem. This bill would appoint the Interstate Commerce Commission an impartial arbiter of the question of daily freight car rentals. This is the heart of the problem. If the car rental rate is high enough to produce a profit to its owner, more cars will be built, because it will be good business for the roads to own cars. When car rentals are too low to produce a profit to the owner, fewer cars will be built because it will be attractive for many railroads to rent the cars of others at less cost than building new ones. Basically, this is a difference of opinion between railroads which load far more cars than they unload, and railroads which unload far more cars than they load. Those railroads which unload more cars than they load have at their disposal all the cars they can use, even in times of great shortage in other parts of the country-and North Dakota is invariably one of these car-short areas. Naturally, with all the cars they can use always on their lines, these terminating railroads want to be able to rent these cars for as little as possible. More specifically, they want to rent cars owned by other railroads as cheaply as possible. It is even cheaper for them, when car rental rates are low, to allow their own cars that need repairs to rust on sidings while renting the better cars of other lines. This fact has contributed greatly to the car shortage crisis. The time is here to end this unreal and unfair situation. Since the railroads cannot agree on a scale of daily car rentals that will provide enough freight cars, let us give this job to the Interstate Commerce Commission, which has no ax to grind other than the interests of most Americans in obtaining sufficient freight cars. I strongly support H.R. 7166 or any other identical bill. The CHAIRMAN. Now our next witness is the Honorable Charles A. Webb, Chairman of the Interstate Commerce Commission. Mr. Chairman, it is nice to have you before the committee again. STATEMENT OF HON. CHARLES A. WEBB, CHAIRMAN, INTERSTATE COMMERCE COMMISSION; ACCOMPANIED BY ROBERT P. PFAHLER, DIRECTOR, BUREAU OF SAFETY AND SERVICE, INTERSTATE COMMERCE COMMISSION Mr. WEBB. Thank you, Mr. Chairman, members of the committee. I would like to ask Mr. Robert P. Pfahler, who is the Director of our Bureau of Safety and Service, to sit at the table with me, and also I would like to announce for the record that Commissioner Goff, Commissioner Brown, and Commissioner Deason are attending the hearing this morning. I appreciate this opportunity to testify on H.R. 7165, which, as has been indicated, would implement the legislative recommendation that we have made to the Congress, extending back over the past 10 years. The purpose of this bill is to grant the Interstate Commerce Commission authority to prescribe per diem charges for the use of railroad freight cars on a basis that will encourage railroads to acquire and maintain their fair share of freight cars required to meet the needs of commerce and the national defense. Although many factors contribute to freight car shortages, the two principal causes are inadequate car ownership and the failure to utilize existing equipment efficiently. The diminishing supply of railroad freight cars and the efficient utilization of the remaining fleet have been of major concern to the Commission for many years. To cope with the problem, railroad management voluntarily established car service rules to promote prompt handling, movement, and return of freight cars. For many years those rules and their accompanying per diem schedules have provided the best plan that railroad management has been able to devise for efficient car utilization. But, an inherent weakness in the car service rules is the lack of sanctions for their enforcement. At times there has been widespread disregard of the rules. As was indicated in Congressman Younger's question to Senator Magnuson, there has been an increase in the average capacity per car. However, this increase in average capacity has not offset the total loss in capacity resulting from the reduction in the number of cars. As of January 1, 1956, the total carrying capacity of all cars owned by class I railroads was 91 million tons. By January 1, 1965, this total had been reduced to 87 million tons. Between January 1956 and January 1965, the number of freight cars declined from 1,774,614 to 1,550,447, a decrease of over 200,000 cars. As a result, critical shortages of varying duration and severity have occurred in every producing area of the country, and, as has been indicated by previous witnesses, this is no longer a regional or a sectional problem. During these periods when critical shortages have occurred, the Commission has resorted to every means it has at its command to cope with the problem. Increased demurrage charges have helped |