A-74037, AUGUST 22, 1936, 16 COMP. GEN. 174

A-74037: Aug 22, 1936

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ITS ADOPTION WAS MADE NECESSARY BECAUSE OF THE NUMEROUS COMPLAINTS FROM SHIPPERS RELATIVE TO ABUSES OF THE TRANSIT PRIVILEGE. IS FORWARDED FROM THE TRANSIT POINT UNDER THE APPLICATION OF THE THROUGH RATE FROM ORIGINAL POINT OF SHIPMENT. IT IS. 295: * * * SUCH SITUATIONS SHOW THE RECKLESSNESS WITH WHICH BOTH CARRIERS AND SHIPPERS HAVE MISUSED THE TRANSIT ARRANGEMENT AND THE URGENT NECESSITY FOR RADICAL REFORMS. IT WAS STATED IN THE TRANSIT CASE. 350: * * * THE THEORY UNDER WHICH A TRANSIT PRIVILEGE IS GRANTED IS THAT THE INBOUND COMMODITY WILL BE SUBJECTED TO CERTAIN TREATMENT AND AFTERWARDS MOVED OUT UNDER THE BALANCE OF THE THROUGH RATE. SHOULD MOVE FROM THE TRANSIT POINT. * * * IT IS INCUMBENT ALIKE UPON SHIPPERS AND CARRIERS TO SEE THAT THERE IS ACTUALLY ON HAND AT THE TRANSIT POINT SUFFICIENT AND PROPER INBOUND TONNAGE TO JUSTIFY THE OUTBOUND MOVEMENT.

A-74037, AUGUST 22, 1936, 16 COMP. GEN. 174

TRANSPORTATION - THROUGH RATES - ARTICLES FABRICATED AT INTERMEDIATE POINT CONTRACTS FOR SHEET METAL CULVERT PIPE FOR THE FOREST SERVICE, DEPARTMENT OF AGRICULTURE, MAY NOT BE AWARDED ON THE BASIS OF FABRICATION FROM MATERIAL AT FABRICATING POINT WITH SIMULTANEOUS SHIPMENT OF RAW MATERIAL FROM ANOTHER POINT FOR REPLACEMENT OF MATERIAL SO USED, WHERE THE ARRANGEMENT CONTEMPLATES THE FURNISHING OF A GOVERNMENT BILL OF LADING, ON A THROUGH RATE BASIS, FOR THE SHIPMENT OF THE RAW MATERIAL TO THE PLACE OF FABRICATION, AND FINISHED CULVERTS FROM PLACE OF FABRICATION TO DESTINATION AS THOUGH FABRICATION OF THE RAW MATERIAL HAD BEEN MADE EN ROUTE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, AUGUST 22, 1936:

YOUR LETTER OF JUNE 24, 1936, REQUESTS RECONSIDERATION OF DECISION OF MAY 20, 1936, RELATIVE TO A PROPOSED PLAN OF AWARDING CONTRACTS FOR SHEET METAL CULVERT PIPE FOR USE OF THE FOREST SERVICE, DEPARTMENT OF AGRICULTURE.

THE PLAN ORIGINALLY PROPOSED BY YOUR LETTER OF APRIL 13, 1936, CONTEMPLATED THAT UPON RECEIPT OF ORDER UNDER THE CONTRACT FOR FINISHED CULVERTS THE CONTRACTOR WOULD COMMENCE FABRICATION AT ONE OF ITS FABRICATING POINTS, LOCATED AT SIDNEY AND MISSOULA, MONT., AND PUEBLO, COLO., FROM NONTRANSIT SHEET STEEL CARRIED IN STOCK BY SAID CONTRACTOR AT POINT OF FABRICATION. SIMULTANEOUSLY WITH THE COMMENCEMENT OF FABRICATION, SHIPMENT WOULD BE MADE BY THE CONTRACTOR OF RAW MATERIAL FROM ITS PLANT IN ASHLAND, KY., TO REPLACE THE MATERIAL USED IN FABRICATION AT THE TRANSIT POINT; THE REPLACEMENT MATERIAL TO MOVE ON A GOVERNMENT BILL OF LADING READING FROM ASHLAND, KY., TO ULTIMATE DESTINATION OF THE FABRICATED CULVERTS AND SHOWING FABRICATION IN TRANSIT. THE ORIGINAL BILL OF LADING WOULD BE SENT TO THE CONSIGNEE WHO WOULD ACCOMPLISH AND SURRENDER IT TO THE DELIVERING CARRIER WHO WOULD THEN BILL THE GOVERNMENT FOR THE ENTIRE TRANSPORTATION--- RAW MATERIAL TO PLACE OF FABRICATION AND FINISHED CULVERTS FROM PLACE OF FABRICATION TO DESTINATION.

ON JUNE 29, 1909, THE INTERSTATE COMMERCE COMMISSION PROMULGATED CONFERENCE RULE NO. 76-A. ITS ADOPTION WAS MADE NECESSARY BECAUSE OF THE NUMEROUS COMPLAINTS FROM SHIPPERS RELATIVE TO ABUSES OF THE TRANSIT PRIVILEGE. THE RULE PROVIDES IN PART:

A MILLING, STORAGE, OR CLEANING IN TRANSIT PRIVILEGE CAN NOT BE JUSTIFIED ON ANY THEORY EXCEPT THAT THE IDENTICAL COMMODITY OR ITS EXACT EQUIVALENT, OR ITS PRODUCT, IS FORWARDED FROM THE TRANSIT POINT UNDER THE APPLICATION OF THE THROUGH RATE FROM ORIGINAL POINT OF SHIPMENT. IT IS, THEREFORE, NOT PERMISSIBLE TO FORWARD FROM TRANSIT POINT ON TRANSIT RATE COMMODITY THAT DID NOT MOVE INTO THAT TRANSIT POINT ON TRANSIT RATE. * * *

THE PLAN PROPOSED CONTEMPLATES MAKING OUTBOUND SHIPMENTS FROM TRANSIT POINTS AT BALANCES OF THROUGH RATES BEFORE THE RECEIPT OF THE INBOUND SHIPMENTS DEPENDED UPON FOR THE TRANSIT PRIVILEGE. IN CONDEMNING SUCH PRACTICES THE INTERSTATE COMMERCE COMMISSION STATED IN THE MATTER OF THE SUBSTITUTION OF TONNAGE AT TRANSIT POINTS, 18 I.C.C. 280, 295:

* * * SUCH SITUATIONS SHOW THE RECKLESSNESS WITH WHICH BOTH CARRIERS AND SHIPPERS HAVE MISUSED THE TRANSIT ARRANGEMENT AND THE URGENT NECESSITY FOR RADICAL REFORMS.

AGAIN IN COMMENTING ON THE LEGITIMATE USE OF THE TRANSIT PRIVILEGES DEFINED IN THE ABOVE RULE, IT WAS STATED IN THE TRANSIT CASE, 24 I.C.C. 340, 350:

* * * THE THEORY UNDER WHICH A TRANSIT PRIVILEGE IS GRANTED IS THAT THE INBOUND COMMODITY WILL BE SUBJECTED TO CERTAIN TREATMENT AND AFTERWARDS MOVED OUT UNDER THE BALANCE OF THE THROUGH RATE. TO EXPRESS THE IDEAL--- THE IDENTICAL COMMODITY, IN ITS ORIGINAL OR OTHER COMMERCIAL FORM, SHOULD MOVE FROM THE TRANSIT POINT.

* * * IT IS INCUMBENT ALIKE UPON SHIPPERS AND CARRIERS TO SEE THAT THERE IS ACTUALLY ON HAND AT THE TRANSIT POINT SUFFICIENT AND PROPER INBOUND TONNAGE TO JUSTIFY THE OUTBOUND MOVEMENT.

ORDINARILY TRANSIT CONTEMPLATES COMPLETE UNLOADING OF THE SHIPMENT AND REFORWARDING OF THE SAME SHIPMENT OR ITS EQUIVALENT AT SOME LATER DATE. D. E. RYAN COMPANY V. NEW YORK, CHICAGO AND ST. LOUIS RAILROAD COMPANY ET AL., 181 I.C.C. 574. THE PROPER LINKING UP OF INBOUND AND OUTBOUND SHIPMENTS, AS CONTEMPLATED BY LEGITIMATE TRANSIT, DOES NOT PERMIT THE MAKING OF OUTBOUND SHIPMENTS UPON DEFERRED SURRENDER OF INBOUND BILLING. GRAIN AND GRAIN PRODUCTS, 164 I.C.C. 619, 657.

UNDER THE PLAN AS PROPOSED THE CONTRACTOR'S MATERIAL MOVING UNDER THE INBOUND SHIPMENT WOULD BE USED TO REPLACE NONTRANSIT MATERIAL PURCHASED BY THE GOVERNMENT AND USED BY THE CONTRACTOR IN THE FABRICATION OF PRODUCTS COMPRISING THE OUTBOUND SHIPMENTS. UNDER SUCH CIRCUMSTANCES THE BASIS FOR USE OF GOVERNMENT BILLS OF LADING IN CONNECTION WITH THE INBOUND SHIPMENT IS SUBJECT TO QUESTION BY THE CARRIERS, SINCE THE PROPERTY COVERED BY SUCH SHIPMENTS DOES NOT BELONG TO THE GOVERNMENT. IN THE LIGHT OF THE AUTHORITIES QUOTED, SUPRA, IT IS APPARENT THAT THE PROPOSED PLAN WOULD CONSTITUTE A "GROSS MISUSE OF THE TRANSIT ARRANGEMENT," AND ANY ATTEMPT TO APPLY TRANSIT RATES TO SUCH TRANSACTIONS WOULD NECESSARILY REST UPON CONCESSIONS GRANTED THE GOVERNMENT BY THE CARRIERS PURSUANT TO SECTION 22 OF THE INTERSTATE COMMERCE ACT. A PROVISION IN THE CONTRACT BETWEEN THE GOVERNMENT AND THE CONTRACTOR RELATIVE TO THE MATTER WOULD BE WITHOUT BINDING EFFECT UPON THE CARRIERS, AND SINCE THE RECORD CONTAINS NO EVIDENCE OF AN AGREEMENT BETWEEN THE GOVERNMENT AND THE CARRIERS, NO ASSURANCE EXISTS THAT THE GOVERNMENT WOULD RECEIVE ANY BENEFITS WHICH MIGHT BE EXPECTED TO ACCRUE FROM THE PROPOSED PLAN. IN THIS CONNECTION THERE HAS BEEN SUBMITTED NO DATA INDICATING THE APPROXIMATE QUANTITY, SIZE, WEIGHT, AND DENSITY OF LOADING OF THE CULVERTS TO BE SHIPPED TO EACH OF THE VARIOUS DESIGNATION POINTS INVOLVED, AND IN THE ABSENCE OF SUCH EVIDENCE THERE EXISTS NO BASIS FOR DETERMINING WHETHER THE PLAN PROPOSED WOULD IN FACT RESULT IN A SAVING TO THE GOVERNMENT.

ACCORDINGLY, UPON THE PRESENT RECORD THERE APPEARS NO AUTHORITY OF LAW FOR THE PROPOSED ARRANGEMENT.