If that be done, the purpose sought to be accomplished by relating rates to distance is necessarily discarded. This situation has been recognized by the Commission in connection with class rates, and commodity rates, which are a percentage of class rates. Such rates are now covered by very general fourthsection relief which the Commission has given. If such a grant of relief be found, and in the public interest, and we think it is, we believe it would be equally sound to remove, as proposed in H. R. 3263, the restrictions of the present fourth section which affect this situation, thus leaving the way clear for the Chesapeake & Ohio, Norfolk & Western, and Virginian to meet the competition of the direct-rate-making lines, with respect to all rates, on traffic moving via their connections through their eastern or western gateways, in the manner which I have described, without being compelled to observe such direct-line rates as maxima to or from intermediate points, and without having to incur the delays and expense incidental to the filing of applications with the Commission for relief, such rates in all instances to meet the requirements of the other sections of the act. As pointed out by those who have preceded me, the shipping public is fully protected by the remaining provisions of the act, in which no change is proposed. Illustration no. 2: For 35 or 40 years or over, joint through freight rates have been maintained between eastern port cities, Boston, New York, Philadelphia, and Baltimore, and between points in the New England States; also points in New Jersey, Delaware, Pennsylvania, and New York, on the one hand, and a large number of destinations in the middle west north of the Ohio River and east of the Mississippi River, on the other, on traffic moving via coastwise steamer lines to the Virginia ports of Hampton Roads and thence via the lines of the Chesapeake & Ohio, Norfolk & Western, and Virginian Railway, and their connections, to destination. These rates have been less than the rates applicable between the same points via the allrail routes, to the extent of certain fixed differences or differentials, these differences being determined as the measure of what can be fairly stated as the disabilities of the water and rail routes, as compared with the all-rail routes. These disabilities may be summarized as less frequent service, the necessity of securing marine insurance of the cargo, transfer between water carrier and rail carrier at Hampton Roads, Va., and longer time in transit. As previously indicated, these routes have been in effect for 35 or 40 years. There are certain kinds of traffic where expedition of handling is not of primary importance, and in such cases the shippers are entitled to such economies as result from the maintenance of these joint water-rail routes, and, I feel confident in saying, will expect to receive the benefit of these economies. In addition to this the maintenance of joint rates via these waterrail routes through Hampton Roads is in complete harmony with the policies of other carriers serving North Atlantic ports who have for as equally long period maintained rail-water rates via the Great Lakes, such rates being also differentially related to the all-rail rates. 635-35-12 The fact that rail carriers have joined with water lines in the establishment of these differential routes indicates that they recognize the importance to the shipping public of a broad choice of routes, even though this joint rail-water service may in some instances have the effect of depriving certain all-rail lines of a longer haul and greater remuneration on the same traffic. The rates in many instances are less than the rates applicable between Hampton Roads ports and origins or destinations in the interior, and because of this fact it has been necessary to secure fourth section relief from the Interstate Commerce Commission to operate these rates through Hampton Roads ports, while at the same time maintaining higher rates between such ports and points in the interior. This relief has customarily been granted, but when changes are made or new commodity rates established, it is necessary to again go before the Commission in an application for such additional relief as may be necessary, thereby causing a delay in publication and loss of traffic during the interim in which the carriers' petitions are being considered by the Commission, and depriving shippers and consignees of the benefits of the cheaper service via the water-rail routes as compared with the all-rail routes. An example of this situation would be the first-class rate at present in effect between Chicago, Ill., and Philadelphia, Pa., of $1.45. The so-called "differential rate" applicable via the water and rail routes through Hampton Roads is $1.37 during the winter season and $1.30 during the summer season, while the first-class rate between Norfolk and Newport News, Va., and Chicago, Ill., is $1.51. Such fourth-section departures as are at present in the class rates via water-rail routes through Hampton Roads are permitted by general fourth-section relief which has been given by the Commission. Mr. PETTENGILL. Excuse me just a moment there. Do I understand that the all-rail rate from Chicago to Philadelphia, in the illustration which you give, is $1.45, and from Chicago to Hampton Roads, by rail and then by water, is $1.37? Mr. TIERNEY. That is right, Mr. Chairman. Mr. PETTENGILL. All right, go ahead. Mr. TIERNEY. And since the Commission undoubtedly feels it proper that the fourth-section departures reflected in the class rate adjustment are proper, it would seem that no public purpose or need is served by a denial of fourth-section relief, or by delays incident to securing that relief in connection with commodity rates. Under the law as it reads today, the only way in which carriers can be relieved from the provisions of fourth section, in situations where it seems desirable to them to obtain such relief, is to petition the Commission therefor. The filing with and consideration by the Commission of such petitions necessarily is accompanied by delay and, even though the carriers' petition met with a favorable response from the Commission, it may be after such delay that the opportunity of the carriers to secure specific traffic has passed and the business has been lost, either temporarily or permanently. It naturally follows that if the law was amended as proposed this delay would not have to be incurred, and the opportunity of all-rail or rail-water routes to meet this sort of special situation promptly and effectively at the time it arose would be considerably improved. It has been my experience during my service of over 30 years with railroad freight traffic departments that it is a very easy thing to lose business and an exceedingly difficult thing to get it back once. it has been diverted. Illustration no. 3: The main line of the Chesapeake & Ohio Railway to Cincinnati, Ohio, in Kentucky parallels the Ohio River, and the main line of the Norfolk & Western Railway to Cincinnati also, although farther removed from the river, parallels the Ohio River on the north. Large producers of byproduct coke are located on the Chesapeake & Ohio at Ashland, Ky., and on the Norfolk & Western at Ironton and Portsmouth, Ohio. Water competition for coke produced at these plants and sold in the Cincinnati market has been very keen, and it has been necessary for the Chesapeake & Ohio and Norfolk & Western to announce the publication of a rate of $1.50 per net ton on coke from Ashland, Ironton, and Portsmouth to Cincinnati, as compared with the present all-rail rail rate, also fixed by the Interstate Commerce Commission in I. & S. Docket 3511, of $2.05 from Ashland and Ironton and Portsmouth. An application was filed with the Interstate Commerce Commission seeking authority under the fourth section to maintain rates higher than $1.50 at intermediate stations in Kentucky on the Chesapeake & Ohio and intermediate stations in Ohio on the Norfolk & Western. These intermediate points, either on the Chesapeake & Ohio or on the Norfolk & Western, are not subject in any way to the water competition which affects the rates from Ashland, Ironton, and Portsmouth to Cincinnati. While the carriers' petition was pending before the Commission several cargoes of coke, which we are informed by shippers might have moved by rail, have been forwarded from these points to Cincinnati via water. Our information is that 18,000 tons moved in the month of April 1935 and that the movement in the month of May 1935 was approximately 25,000 tons. In concluding, I wish to thank the committee for their courtesy and attention in listening to this statement, and to express the hope that their conclusions and recommendations to the Congress will be favorable to the contentions of the carriers, and others, who have appeared in support of the proposed legislation. Mr. PETTENGILL. Any questions? If not, we will hear from Mr. Craig. Thank you, Mr. Tierney. Mr. TIERNEY. Thank you. STATEMENT OF A. B. CRAIG, GENERAL FREIGHT AGENT CENTRAL RAILROAD OF NEW JERSEY Mr. CRAIG. My name is A. B. Craig. I am general freight agent of the Central Railroad Co. of New Jersey, a class I railroad, operating in eastern trunk-line territory, that is, east of Buffalo. I wish to support the statements which will be made by Mr. H. Wilson, vice chairman of the executive committee of the Trunk Line & New England Association Territories, who has a general statement. for the account of carriers operating in those portions of official classification territory. The statements which will be made by Mr. H. Wilson cover our situation generally, and I will not offer examples or remarks which will tend to encumber the record, but I do wish to briefly state in a general way our objections to the present long-and-short-haul clause and to urge the favorable consideration by the Congress of the Pettengill bill, H. R. 3263. From personal experience I can say my company has lost tonnage to other forms of transportation because of the necessity of complying with the burdensome and unnecessary regulations imposed under the present long-and-short-haul clause, which do not permit that flexibility of action by the railroad enabling it to meet the competition at distant points except by reducing rates to all intermediate noncompetitive points. Reductions at such intermediate noncompetitive points are inadvisable because the loss of revenue on the traffic handled to the intermediate territory often would exceed the gain of revenue on the traffic for the distint terminal point had we elected to handle it. Besides, to reduce the intermediate territory would throw those points of proper relation to other noncompetitive points and thus honeycomb the whole rate structure with preferences and prejudices. In other words, when we have been faced with a situation where tonnage is offered by shippers which is available for either rail or water movement, my company could not quote a competitive rate without relief from the requirements of the long-and-short-haul clause of the fourth section. The shipper, being obliged to make shipping arrangements at once, could not wait the length of time necessary for us to procure such relief. The result has been, and it is becoming constantly more frequent, that the shipper makes arrangements and forwards the traffic by other means of transportation. We therefore urge the passage of the Pettengill bill, and emphasize again, as previous witnesses have done, that its passage will still leave the Interstate Commerce Commission in full control of rail rates under the remaining sections of the act, and will only enable the rail lines to compete for a livelihood on more fair and equitable terms. Mr. PETTENGILL. Are there any questions? If not, thank you. Mr. CRAIG. Thank you. Mr. PETTENGILL. We will adjourn until 10 o'clock Monday morning. (Thereupon, at 11:55 a. m., the committee adjourned to meet Monday, June 10, 1935, at 10 a. m.) AMEND FOURTH SECTION INTERSTATE COMMERCE ACT MONDAY, JUNE 10, 1935 HOUSE OF REPRESENTATIVES, INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The Committee met in room 115, House Office Building, pursuant to adjournment, at 10 a. m., Hon. Samuel B. Pettengill presiding. Mr. PETTENGILL. The committee will come to order. STATEMENT OF J. N. BELL, REPRESENTING THE RAILROADS EAST OF THE MISSISSIPPI RIVER-Resumed Mr. BELL. It is understood that certain opponents of the Pettengill bill are making the contention that if this bill is enacted repealing the long-and-short-haul clause of the fourth section, the burden of proof that such rates are in violation of some provision of the Interstate Commerce Act would be cast upon anyone attacking the rates proposed. It is also understood that this contention is based upon their interpretation of the last provision in paragraph 7 of section 15 of the Act. Whatever may be the correct interpretation of this provision of paragraph 7, section 15, is immaterial as a practical matter. The Commission makes its own rules of practice. Paragraph (b), rule X of the existing Rules of Practice before the Commission in proceedings under the Interstate Commerce Act and related acts provides among other things that at hearings of investigation and suspension proceedings, the respondent shall open and close. Paragraph (g) of rule 11 of the Commission's Rules of Practice provides that in investigation proceedings the carriers designated therein are styled respondents. Those familiar with legal procedure know that the party upon whom the burden of proof rests has the opening and closing. This record already shows that under paragraph 7 of section 15 the Commission can upon its own motion or upon protest of any interested party suspend any rate filed with it and prevent such rate from going into effect. When this is done, the case is given what is known as an "I. & S." docket number. "I." and "S." are the abbreviations for investigation and suspension. As already shown of record, such rates must be filed 30 days in advance of their becoming effective unless the Commission, upon application therefor, grants a special permission authorizing the carriers to provide in their tariffs that such rates become effective sooner than 30 days from date of filing. It is therefore seen that the rules of the Commission specifically provide that in the suspension or investigation and suspension cases |