A-96395, MARCH 7, 1939, 18 COMP. GEN. 691

A-96395: Mar 7, 1939

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- WILL BE FOLLOWED BY THE GENERAL ACCOUNTING OFFICE IN THE AUDIT AND SETTLEMENT OF CLAIMS AND ACCOUNTS. TO EXCEPTIONS WHERE A ROUTE OF LESS THAN THE MAXIMUM LIMITATION OF CIRCUITY TRANSCENDS THE PURPOSE OF THE EQUALIZATION AGREEMENTS OR A ROUTE OF GREATER DEGREE OF CIRCUITY THAN THE MAXIMUM LIMITATION IS PROPERLY WITHIN THE PURPOSE OF THE SAID AGREEMENTS. WHERE ROUTES HAVE BEEN PREVIOUSLY ESTABLISHED AS PROPER FOR EQUALIZATION EVEN THOUGH IN EXCESS OF THE SUGGESTED MAXIMUM CIRCUITY TABLE. CLOSED AND SETTLED TRANSACTIONS WILL NOT BE REOPENED SOLELY BECAUSE OF THE SUGGESTED CHANGE IN PRACTICE. AS FOLLOWS: RECEIPT IS ACKNOWLEDGED OF YOUR LETTER OF SEPTEMBER 7. * * * THE ROUTE WHICH IS SOUGHT TO BE EQUALIZED * * * APPARENTLY IS NOT USED COMMERCIALLY FOR THE MOVEMENT OF GRAVEL FROM WATERS TO WEST POINT AND COULD NOT REASONABLY BE CONSIDERED AS BEING A COMPETING ROUTE AND SINCE THE OBVIOUS PURPOSE OF THE CARRIER'S LAND-GRANT EQUALIZATION AGREEMENT IS TO OBTAIN FOR THE CARRIER TRAFFIC WHICH MIGHT OTHERWISE MOVE OVER COMPETING ROUTES.

A-96395, MARCH 7, 1939, 18 COMP. GEN. 691

TRANSPORTATION - LAND-GRANT DEDUCTIONS - CIRCUITOUS ROUTES - MAXIMUM CIRCUITY TABLE PROCEDURE WHILE NO INVARIABLE RULE MAY BE ADOPTED IN DETERMINING THE AVAILABILITY OF CIRCUITOUS ROUTE NET RATES UNDER RAILROAD CARRIER'S GOVERNMENT LAND- GRANT EQUALIZATION AGREEMENTS BECAUSE OF THE VERY NATURE OF THE MATTER INVOLVED AND THE NECESSITY FOR PROTECTION OF THE GOVERNMENT'S INTERESTS WHERE THERE MIGHT BE AVAILABLE, BUT FOR THE RULE, AN OTHERWISE REASONABLE ACCOUNTING CONSISTENT WITH THE PURPOSE OF THE EQUALIZATION AGREEMENTS, THE ADMINISTRATIVELY SUGGESTED CIRCUITY TABLE PROPOSING THAT LAND-GRANT RATES BE NOT COMPUTED VIA ROUTES IN EXCESS OF THE FOLLOWING PERCENTAGES OF SHORT LINE DISTANCES--- 200 PERCENT WHERE 250 MILES OR LESS; 190 PERCENT WHERE 251 MILES TO 500 MILES; 180 PERCENT WHERE 501 MILES TO 1,000 MILES; 170 PERCENT OVER 1,000 MILES--- WILL BE FOLLOWED BY THE GENERAL ACCOUNTING OFFICE IN THE AUDIT AND SETTLEMENT OF CLAIMS AND ACCOUNTS, SUBJECT, HOWEVER, TO EXCEPTIONS WHERE A ROUTE OF LESS THAN THE MAXIMUM LIMITATION OF CIRCUITY TRANSCENDS THE PURPOSE OF THE EQUALIZATION AGREEMENTS OR A ROUTE OF GREATER DEGREE OF CIRCUITY THAN THE MAXIMUM LIMITATION IS PROPERLY WITHIN THE PURPOSE OF THE SAID AGREEMENTS; WHERE ROUTES HAVE BEEN PREVIOUSLY ESTABLISHED AS PROPER FOR EQUALIZATION EVEN THOUGH IN EXCESS OF THE SUGGESTED MAXIMUM CIRCUITY TABLE; WHERE SPECIFIC TARIFF PROVISIONS AS TO ROUTES, ETC., JUSTIFY ACTION OTHERWISE; AND WHERE REASONABLE DOUBT MAKES NECESSARY ACTION OTHERWISE IN PROTECTION OF THE INTERESTS OF THE UNITED STATES, BUT CLOSED AND SETTLED TRANSACTIONS WILL NOT BE REOPENED SOLELY BECAUSE OF THE SUGGESTED CHANGE IN PRACTICE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, MARCH 7, 1939:

THERE HAS BEEN CONSIDERED YOUR LETTER OF OCTOBER 31, 1938, AS FOLLOWS:

RECEIPT IS ACKNOWLEDGED OF YOUR LETTER OF SEPTEMBER 7, 1938, FILE A 96395, CONCERNING COLUMBUS AND GREENVILLE RAILWAY COMPANY BILL P AND F 551 (5151) 6/37 COVERING CHARGES FOR TRANSPORTING TEN CARLOADS OF GRAVEL FROM WATERS, MISS., TO WEST POINT, MISS., IN MAY 1937, UNDER BILLS OF LADING ER -156366 TO 156375, INCLUSIVE.

THIS DEPARTMENT CONCURS WITH YOU IN THE CONCLUSION STATED IN YOUR LETTER (PAGES 5 AND 6) THAT ,* * * THE ROUTE WHICH IS SOUGHT TO BE EQUALIZED * * * APPARENTLY IS NOT USED COMMERCIALLY FOR THE MOVEMENT OF GRAVEL FROM WATERS TO WEST POINT AND COULD NOT REASONABLY BE CONSIDERED AS BEING A COMPETING ROUTE AND SINCE THE OBVIOUS PURPOSE OF THE CARRIER'S LAND-GRANT EQUALIZATION AGREEMENT IS TO OBTAIN FOR THE CARRIER TRAFFIC WHICH MIGHT OTHERWISE MOVE OVER COMPETING ROUTES, IT IS NOT BELIEVED THAT THE EQUALIZATION AGREEMENT SHOULD BE CONSTRUED SO AS TO REQUIRE EQUALIZATION OF THE LAND-GRANT DISTANCE IN THE EXTREMELY CIRCUITOUS ROUTE WHICH, APPARENTLY, WOULD NOT HAVE BEEN USED FOR THE MOVEMENT OF THE CONSIDERED TRAFFIC * * *.' THIS IS A PRINCIPLE WHICH GOVERNMENT AGENCIES HAVE LONG SOUGHT TO HAVE ESTABLISHED AND IT WILL MATERIALLY AID IN SIMPLIFYING THE COMPUTATION OF LAND-GRANT RATES. FURTHERMORE, IT WILL UNDOUBTEDLY MEET WITH THE UNQUALIFIED APPROVAL OF THE CARRIERS GENERALLY.

WHILE, AS STATED ABOVE, THE RULE THUS ESTABLISHED WILL GREATLY FACILITATE THE COMPUTATION OF LAND-GRANT RATES, IT IS DOUBTFUL THAT IT CAN BE APPLIED WITH ANY DEGREE OF CERTAINTY IN MANY CASES. INEVITABLY THERE WILL BE DIFFERENCES OF OPINION AS TO HOW FAR THE EXECUTIVE ESTABLISHMENTS MAY GO IN REACHING A DETERMINATION WHETHER A PARTICULAR ROUTE SOUGHT TO BE USED AS A LAND-GRANT RATE-MAKING ROUTE IS ONE WHICH MIGHT BE USED COMMERCIALLY FOR THE TRANSPORTATION OF THE CONSIDERED TRAFFIC. IN ONE CASE A ROUTE THREE OR FOUR HUNDRED PERCENT OF THE SHORT-LINE DISTANCE WOULD BE PROPERLY FOR CONSIDERATION YET, ON THE OTHER HAND, ONE WHICH IS BUT FIFTY PERCENT CIRCUITOUS WOULD BE UNREASONABLE. THE ISSUE MIGHT BE DISPOSED OF BY RULING THAT EACH CASE MUST BE CONSIDERED UPON ITS OWN MERITS, BUT THAT WOULD NOT BE SUFFICIENT TO MEET THE NEEDS OF GOVERNMENT ESTABLISHMENTS FOR REASONS HEREAFTER GIVEN. IT APPEARS ESSENTIAL THAT THE PRINCIPLE HERE REFERRED TO BE SUPPLEMENTED BY ESTABLISHING AN ARBITRARY MAXIMUM CIRCUITY RULE FOR APPLICATION OF UNRESTRICTED COMMERCIAL RATES USED IN COMPUTING LAND-GRANT RATES, NOT ONLY IN CONNECTION WITH SETTLEMENT OF CARRIERS' BILLS COVERING SHIPMENTS WHICH MOVED VIA EQUALIZING ROUTES BUT ALSO IN THE EVALUATION OF BIDS AND OTHER PURPOSES.

IN THE CASE OF THE MOVEMENT OF GRAVEL FROM WATERS, MISS., TO WEST POINT, MISS., AND IN MANY OTHER SIMILAR INSTANCES, INCLUDING SHIPMENTS OF GRAVEL FROM WATERS, MISS., TO MABEN, MISS., COVERED BY COLUMBUS AND GREENVILLE RAILWAY BILL P AND F 5286, AND GRAVEL FROM AMORY, MISS., TO NEW ALBANY, MISS., COVERED BY ST. LOUIS-SAN FRANCISCO RAILWAY BILLS D 7840, D-6830, AND D-7773, THE CONTRACTING OFFICE APPLIED TO THE PROCUREMENT DIVISION OF THIS DEPARTMENT, FOR RATES FOR USE IN EVALUATION OF BIDS AND UPON AWARD OF CONTRACTS, THE SAME RATES WERE USED IN SETTING UP ENCUMBRANCES TO COVER TRANSPORTATION CHARGES. RATES SUPPLIED IN RESPONSE TO REQUESTS WERE COMPUTED VIA ROUTES PERMITTED UNDER THE TERMS OF THE GOVERNING TARIFFS WHICH INCLUDED MAXIMUM LAND-GRANT DISTANCES. SOME OF THE ROUTES THUS EMPLOYED WERE UNREASONABLY CIRCUITOUS AND WOULD NOT ORDINARILY HAVE BEEN USED FOR COMMERCIAL TRAFFIC. THIS ACTION BY THE PROCUREMENT DIVISION WAS NOT PREDICATED UPON TAKING UNDUE ADVANTAGE OF CARRIERS' EQUALIZATION AGREEMENTS, BUT IN ACCORD WITH A LONG LINE OF DECISIONS OF THE FORMER COMPTROLLER GENERAL AND YOURSELF. FOR EXAMPLE, YOUR ATTENTION IS INVITED TO YOUR DECISION NO. A-78545, DECEMBER 2, 1936, ADDRESSED TO THE AUDITOR OF FREIGHT TRAFFIC, PENNSYLVANIA RAILROAD. THE SHIPMENT THERE CONSIDERED MOVED FROM NASHVILLE, TENN., TO COLUMBUS, OHIO, VIA N.C. AND ST. L TO MARTIN, TENN., I.C. TO INDIANAPOLIS, IND., THENCE P.R.R., BUT NET RATE WAS COMPUTED VIA L. AND N. TO BIRMINGHAM, ALA., A.G.S. TO MERIDIAN, MISS., M. AND O. TO CAIRO, ILL., I.C. TO ODIN, ILL., THENCE B AND O. THE SHORT-LINE DISTANCE NASHVILLE TO COLUMBUS IS VIA CINCINNATI, OHIO, 422 MILES; DISTANCE VIA ROUTE OF MOVEMENT IS APPROXIMATELY 677 MILES; DISTANCE VIA LAND-GRANT RATE-MAKING ROUTE IS ABOUT 1,322 MILES. WHILE THE ROUTE VIA BIRMINGHAM, MERIDIAN, CAIRO, AND ODIN WAS PERMITTED UNDER THE GOVERNING TARIFF, NO DIVISIONS WERE PUBLISHED TO SO APPLY AND IT IS NOT CONCEIVABLE IT WOULD EVER BE USED COMMERCIALLY. THERE WAS ALSO FOR CONSIDERATION THE ACTION OF THE GENERAL ACCOUNTING OFFICE IN CONNECTION WITH YAZOO AND MISSISSIPPI VALLEY RAILROAD BILL NO. ER-48646-52. BY CORRECTION DATED AUGUST 6, 1937, FILE T-ABG-SCH-1376, CARRIER'S BILL WAS REDUCED $95.80 BY APPLYING RATE FROM GATESVILLE, MISS., TO SWIFTWATER, MISS., VIA G.M. AND N. TO JACKSON, Y. AND M.V. TO MERIDIAN, M. AND O. TO WEST POINT, C. AND G. TO GREENVILLE, Y. AND M.V. BEYOND. ADDITIONAL EXAMPLES OF THE SAME NATURE COULD BE CITED BUT IT IS BELIEVED THOSE DESCRIBED ARE SUFFICIENT TO JUSTIFY THE ACTION OF THE PROCUREMENT DIVISION IN THE INSTANCES DESCRIBED.

AFTER AWARD OF CONTRACTS BASED, IN PART, UPON RATES COMPUTED UNDER THE PROCEDURE HERETOFORE CONSIDERED NECESSARY AS A RESULT OF FORMAL DECISIONS EMANATING FROM AND THE ACTION OF YOUR OFFICE IN CONNECTION WITH CERTIFICATION OF CARRIER'S BILLS, TRANSPORTATION BILLS COVERING THE RESULTING SHIPMENTS WERE RECEIVED AND TRANSMITTED TO THE CLAIMS DIVISION FOR PREAUDIT. IT WAS DISCOVERED THAT AMOUNTS CERTIFIED FOR PAYMENT WERE BASED UPON RATES IN EXCESS OF THOSE USED IN AWARDING CONTRACTS AND SUFFICIENT FUNDS HAD NOT BEEN ENCUMBERED TO PAY THE AMOUNTS APPROVED. THE BILLS WERE, ACCORDINGLY, RETURNED FOR REVIEW. SOME OF THE BILLS WERE HANDLED BY DIRECT SETTLEMENT AND NO INFORMATION GIVEN THE TREASURY DEPARTMENT AS TO WHAT DECISION WAS REACHED CONCERNING THEM. OTHERS HAVE BEEN RETURNED AND HAVE BEEN HELD IN SUSPENSE PENDING CONCLUSION OF THE INSTANT CASE.

UNDER THE CIRCUMSTANCES RELATED ABOVE IT IS HIGHLY PROBABLE THAT SOME AWARDS HAVE BEEN MADE TO OTHER THAN LOW BIDDERS. IN A LARGE NUMBER OF CASES IT HAS BEEN NECESSARY TO ARRANGE FOR ADDITIONAL FUNDS TO PAY TRANSPORTATION CHARGES, A PROCEDURE WHICH IS SOMETIMES QUITE INVOLVED DUE TO LAPSE OF APPROPRIATIONS AND OTHER CAUSES. EVEN UNDER THE MODIFIED RULE STATED IN YOUR LETTER UNDER ACKNOWLEDGMENT THE SAME DIFFICULTIES MAY BE EXPERIENCED, AS ROUTES CONSIDERED BY THE ADMINISTRATIVE OFFICE TO BE REASONABLE IN COMPUTING LAND-GRANT RATES FOREVALUATION OF THE BIDS MIGHT BE HELD TO BE UNREASONABLE BY THE GENERAL ACCOUNTING OFFICE IN ITS PREAUDIT OF THE COVERING TRANSPORTATION BILLS.

IN THE INTEREST OF SIMPLIFIED UNIFORM PROCEDURE IN GOVERNMENT ADMINISTRATIVE AND ACCOUNTING OFFICES IN CONNECTION WITH THE COMPUTATION OF LAND-GRANT RATES AND TO PERMIT THE AWARD OF CONTRACTS AND PAYMENT OF TRANSPORTATION BILLS WITH THE MINIMUM OF DELAY, IT IS RECOMMENDED THAT YOUR DECISION OF SEPTEMBER 7, 1938, BE SUPPLEMENTED TO INCLUDE A DEFINITION OF AN UNREASONABLY CIRCUITOUS ROUTE, WHICH WOULD NOT BE USED IN CONNECTION WITH COMMERCIAL TRAFFIC. THERE ARE MANY PRECEDENTS WHICH MIGHT BE USED IN ESTABLISHING A MAXIMUM CIRCUITY RULE TO BE APPLIED IN CONNECTION WITH COMMERCIAL RATES NOT SUBJECT TO SPECIFIC ROUTING. ON THE OTHER HAND, MANY TRANSPORTATION AUTHORITIES HAVE HELD THERE IS NO STANDARD WHEREBY A DETERMINATION MAY BE REACHED AS TO WHETHER A GIVEN ROUTE IS, OR IS NOT, UNREASONABLY CIRCUITOUS. IN NUMEROUS ACTIONS BEFORE THE INTERSTATE COMMERCE COMMISSION CERTAIN ROUTES WERE HELD TO BE UNREASONABLE, BUT UPON FURTHER CONSIDERATION THE ORIGINAL FINDINGS WERE REVERSED. THESE FACTS ARE NOT STATED FOR THE PURPOSE OF CLOUDING THE ISSUE BUT TO ILLUSTRATE THE DIFFICULTY OF APPLYING THE RULE STATED BY YOU IN SAID DECISION, AND TO BRING OUT THAT WHATEVER RULE IS ESTABLISHED FOR ADMINISTRATIVE PURPOSES COULD BE SUPPORTED AND JUSTIFIED BY COMPETENT AUTHORITY. THAT AN ADMINISTRATIVE RULE FOR THE GUIDANCE OF ALL AGENCIES OF THE GOVERNMENT IS ESSENTIAL, IS BELIEVED TO BE OBVIOUS FROM THE FACTS HERE RECITED.

"IT IS SUGGESTED, IF THE PROPOSAL MADE HEREIN IS CONSIDERED FAVORABLY, THAT A GRADUATED MAXIMUM SCALE OF DISTANCES BE SET UP SIMILAR TO THE FOLLOWING TABLE:

LAND-GRANT RATES WILL NOT BE COMPUTED VIA ROUTES IN EXCESS OF THE

FOLLOWING PERCENTAGE OF SHORT LINE DISTANCE

WHEN SHORT LINE DISTANCE IS--- PERCENT

250 MILES OR LESS -------------------------------------- 200

251 MILES TO 500 MILES --------------------------------- 190

501 MILES TO 1,000 MILES ------------------------------- 180

OVER 1,000 MILES --------------------------------------- 170

IT SHOULD BE MADE CLEAR THAT SPECIFIC TARIFF PROVISIONS AS TO ROUTING, MAXIMUM CIRCUITY, OR OTHER RESTRICTIVE OR PERMISSIVE RULES AFFECTING THE APPLICATION OF RATES WOULD TAKE PRECEDENCE OVER SUCH ADMINISTRATIVE MAXIMUM CIRCUITY RULE.

THE LETTER OF SEPTEMBER 7, 1938, FROM THIS OFFICE, WHICH APPEARS TO HAVE BEEN THE IMMEDIATE OCCASION OF THE ABOVE SUGGESTION, RELATED TO THE MATTER OF CHARGES ALLOWABLE FOR THE TRANSPORTATION OF TEN CARLOADS OF GRAVEL FROM WATERS, TO WEST POINT, MISS., IN MAY 1937. APPARENTLY THE SERVICE IN QUESTION WAS PERFORMED OVER THE DIRECT LINE OF THE COLUMBUS AND GREENVILLE RAILWAY CO. INVOLVING A HAUL OF APPROXIMATELY 12 MILES, FOR WHICH THE APPLICABLE TARIFF PRESCRIBED A MILEAGE RATE OF 45 CENTS PER TON OF 2,000 POUNDS. SAID TARIFF CONTAINED A PROVISION THAT, WITH CERTAIN SPECIFIC EXCEPTIONS, WHERE TWO OR MORE FREIGHT RATES WERE PUBLISHED TO APPLY BETWEEN POINTS IN MISSISSIPPI BY THE SAME RAILROADS OR BY DIFFERENT RAILROADS, THE LOWEST RATE SHOULD BE APPLIED "OVER ALL RAILROADS ACCEPTING AND TRANSPORTING FREIGHT BETWEEN SUCH POINTS.' AMONG THE EXCEPTIONS IT WAS SPECIFIED THAT THE ABOVE PROVISION SHOULD NOT APPLY IN CONNECTION WITH THE MILEAGE SCALE OF RATES ON GRAVEL ROUTED VIA MERIDIAN, JACKSON, OR VICKSBURG, MISS., DESTINED TO COLUMBUS AND GREENVILLE STATIONS WHEN FROM WATERS, MISS., VIA THE MOBILE AND OHIO.

THE BILL OF THE COLUMBUS AND GREENVILLE RAILWAY CO. AS PRESENTED FOR SAID SERVICE, CLAIMED CHARGES ON THE BASIS OF THE COMMERCIAL RATE OF 45 CENTS PER 2,000 POUNDS APPLICABLE FOR THE DISTANCE OF APPROXIMATELY 12 MILES VIA ITS LINE FROM WATERS TO WEST POINT, MISS. THE BILL WAS CERTIFIED BY THIS OFFICE FOR PAYMENT ON THE BASIS OF SAID COMMERCIAL RATE BUT WITH DEDUCTION FOR LAND GRANT OCCURRING IN THE ROUTE VIA THE COLUMBUS AND GREENVILLE RAILWAY FROM WATERS TO COLUMBUS AND THE MOBILE AND OHIO RAILROAD THENCE TO WEST POINT, EMBRACING A TOTAL OF 33 MILES. BY LETTERS OF FEBRUARY 11, MARCH 19, AND JUNE 22, 1938, THE PROCUREMENT DIVISION, BRANCH OF SUPPLY, REQUESTED RECONSIDERATION OF THE ACTION SO TAKEN SUGGESTING AS A BASIS THEREFOR THAT THERE APPEARED NO RESTRICTION IN THE TARIFF TO PREVENT THE APPLICATION OF THE 45-CENT RATE TO WEST POINT, MISS., VIA THE ROUTE COLUMBUS AND GREENVILLE RAILWAY TO COLUMBUS, MISS., THE MOBILE AND OHIO RAILROAD TO MERIDIAN, MISS., THE YAZOO AND MISSISSIPPI VALLEY RAILROAD TO JACKSON, MISS., AND THE ILLINOIS CENTRAL RAILROAD TO WEST POINT, WITH CONSEQUENT GREATER DEDUCTION BECAUSE OF LAND-GRANT MILEAGE OCCURRING IN SAID ROUTE. THE DISTANCE VIA SAID ROUTE WAS 342 MILES, WHEREAS THE DISTANCE FROM ORIGIN TO DESTINATION VIA THE ROUTE EMPLOYED IN THE SHIPMENT WAS ONLY 12 MILES. IN VIEW OF THE PROVISIONS OF THE TARIFF AGAINST THE APPLICATION OF THE LOWEST RATE VIA THE ROUTE FROM WATERS THROUGH MERIDIAN AND JACKSON TO STATIONS ON THE COLUMBUS AND GREENVILLE RAILWAY IT DID NOT APPEAR TO BE AN AUTHORIZED CONSTRUCTION OF THE TARIFF TO CONSIDER THAT SAID RATE COULD BE REQUIRED TO BE ACCEPTED FOR TRANSPORTATION VIA THE ROUTE THROUGH MERIDIAN AND JACKSON EVEN TO WEST POINT AS A STATION ON THE ILLINOIS CENTRAL RAILROAD. ON THE OTHER HAND, NO SUCH RESTRICTION APPEARED AGAINST THE ROUTE THROUGH COLUMBUS AND VIA THE MOBILE AND OHIO TO WEST POINT AND THE NATURAL IMPLICATION ARISING FROM THAT FACT WOULD SEEM TO BE THAT THE LOWEST RATE WOULD BE APPLICABLE ON SHIPMENTS ACCEPTED AND TRANSPORTED VIA SAID ROUTE. IT WAS THE VIEW OF THIS OFFICE, THEREFORE, THAT THE TARIFF COULD NOT REASONABLY BE CONSTRUED AS REQUIRING ACCEPTANCE OF THE LOWEST RATE FOR SHIPMENTS TRANSPORTED VIA THE ROUTE THROUGH MERIDIAN AND JACKSON AS SUGGESTED IN YOUR LETTER AND THE CERTIFICATION ON THE BASIS OF THE NET RATE COMPUTED FROM THE APPLICATION OF THE 45-CENTS- PER TON RATE VIA SAID ROUTE WAS NOT CONSIDERED JUSTIFIED.

BUT EVEN IN THE ABSENCE OF THE FACT THAT THE APPLICABILITY OF THE SHORT- LINE DISTANCE RATE TO THE ROUTE THROUGH MERIDIAN AND JACKSON WOULD REQUIRE SUCH A STRAINED AND UNNATURAL CONSTRUCTION OF THE TARIFF THAT APPARENTLY IT WOULD NOT BE JUSTIFIED, THERE REMAINED THE FACT THAT THE WIDE DISPARITY BETWEEN THE TWO ROUTES, THE ONE INVOLVING A DIRECT ONE-LINE HAUL OF APPROXIMATELY 12 MILES AND THE OTHER A FOUR LINE HAUL OF 342 MILES, WAS SUCH AS TO APPEAR CLEARLY NOT WITHIN THE OBVIOUS PURPOSE OF THE EQUALIZATION AGREEMENT, NAMELY, TO OBTAIN FOR THE AGREEMENT CARRIERS TRAFFIC WHICH OTHERWISE MIGHT BE TRANSPORTED OVER A LAND-GRANT ROUTE. THE ABSENCE OF ANY SHOWING OF ACTUAL FACTS OR CIRCUMSTANCES THAT MIGHT JUSTIFY THE GOVERNMENT IN DEMANDING TRANSPORTATION VIA SUCH A ROUTE, CERTAINLY IT CANNOT REASONABLY BE ASSUMED THAT ANY SUCH ROUTING AS VIA THE LONGER LINE COULD BE IN THE GOVERNMENT'S INTERESTS, AND THE APPLICATION OF THE AGREEMENT AS REQUIRING ACCEPTANCE OF A NET RATE AS VIA SAID ROUTE WOULD SO FAR TRANSCEND AND BENEFITS REASONABLY AVAILABLE WITHOUT THE AGREEMENT AS NOT TO BE JUSTIFIED IN ANY REASONABLE VIEW OF ITS PURPOSE AND THE EFFECT TO BE GIVEN IT.

RELATIVE TO THE SHIPMENTS FROM GATESVILLE, MISS., TO SWIFTWATER, MISS., MENTIONED IN YOUR LETTER, IT WILL NE NOTED THAT THE ROUTE EMPLOYED FOR EQUALIZATION PURPOSES IN THE PREAUDIT OF THE BILL FOR SAID SERVICE IS NOT NEARLY SO EXTREME AS THE ROUTE INVOLVED IN CONNECTION WITH THE SHIPMENT FROM WATERS TO WEST POINT AND IS EASILY COMPARABLE WITH THE ROUTES EMPLOYED FOR EQUALIZATION PURPOSES BY THE COLUMBUS AND GREENVILLE RAILWAY AND THE ST. LOUIS-SAN FRANCISCO RAILWAY IN THE STATEMENT OF THEIR BILLS FOR THE SERVICE FROM WATERS TO MABEN, MISS., AND FROM AMORY, MISS., TO NEW ALBANY, MISS., (BILL D-7840), ALSO MENTIONED IN YOUR LETTER. HOWEVER, IT WOULD APPEAR QUESTIONABLE WHETHER THE LAND-GRANT ROUTE FROM GATESVILLE TO SWIFTWATER, DESIGNATED IN THE PREAUDIT, WOULD BE CONSIDERED AS FOR USE BY THE GOVERNMENT IN THE ABSENCE OF THE EQUALIZATION AGREEMENT AND IT WOULD APPEAR THAT THE USE OF SAID ROUTE FOR EQUALIZATION PURPOSES WOULD NOT ORDINARILY BE REQUIRED UNDER THE ADOPTION AND APPLICATION OF THE PROPOSED CIRCUITY LIMITATIONS AS HEREINAFTER CONSIDERED.

LOOKING NOW TO THE REMAINING SPECIFIC INSTANCE, INVOLVING QUESTIONED CIRCUITY, MENTIONED IN YOUR LETTER, NAMELY THE SHIPMENT CONSIDERED IN A- 78545, DECEMBER 2, 1936, IT MAY BE HELPFUL AS TENDING TO A BETTER UNDERSTANDING OF THE NECESSITY FOR THE CONCLUSION THERE REACHED TO REVIEW BRIEFLY THE PERTINENT FACTS INVOLVED. THE SHIPMENT IN QUESTION WAS ROUTED FOR TRANSPORTATION FROM NASHVILLE, TENN., TO COLUMBUS, OHIO, VIA THE NASHVILLE, CHATTANOOGA AND ST. LOUIS RAILWAY TO MARTIN, TENN., THE ILLINOIS CENTRAL RAILROAD TO INDIANAPOLIS, IND., AND THE PENNSYLVANIA RAILROAD TO DESTINATION, THE DISTANCE VIA THE ROUTE OF MOVEMENT BEING 677 MILES. THE SHORT-LINE DISTANCE WAS APPROXIMATELY 422 MILES. THE TARIFF CONTAINED THE EXPRESS PROVISION THAT THE RATES THEREIN SHOULD "APPLY VIA ALL ROUTES MADE BY USE OF THE LINES OF ANY OF THE CARRIERS PARTIES TO THIS TARIFF, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN TARIFF, OR AS SPECIFICALLY PROVIDED IN INDIVIDUAL RATE ITEMS, OR IN CONNECTION WITH INDIVIDUAL RATES.' WHEN THE CARRIER'S BILL WAS PRESENTED TO THE WAR DEPARTMENT FOR PAYMENT ON THE BASIS OF THE GROSS RATE WITHOUT ANY DEDUCTION FOR LAND GRANT, IT WAS RETURNED TO THE CARRIER BY THE FINANCE OFFICER, WAR DEPARTMENT, REQUESTING THAT THE BILL BE RESTATED ON THE BASIS OF MAKING DEDUCTION FROM THE GROSS CHARGES FOR LAND GRANT AS VIA A ROUTE THROUGH BIRMINGHAM, ALA., MERIDIAN, MISS., CAIRO, ILL., AND ODIN, ILL. THE CARRIER DECLINED TO RESTATE ITS CHARGES AS REQUESTED URGING THAT THE ROUTE DESIGNATED BY THE FINANCE OFFICER WAS "UNREASONABLY CIRCUITOUS.' THE REPLY OF THE FINANCE OFFICER IN THAT CONNECTION STATED:

INSOFAR AS CIRCUITY IS CONCERNED THERE ARE NO DEFINITE PROVISIONS PUBLISHED IN THE TARIFF NAMING THE RATE COVERING THIS FEATURE ALTHOUGH ITEM 3173, SUP. 67, EFFECTIVE SEPTEMBER 25, 1935, CARRIES A MAXIMUM CIRCUITY TABLE, BROUGHT UP IN SUP. 69 AND POSTPONED IN INVESTIGATION AND SUSPENSION SUP. 70 UNTIL JANUARY 25, 1936. THE PURPOSE OF WHICH ITEM IS APPARENTLY TO PROVIDE A DEFINITE BASIS UPON WHICH TO FIGURE MILEAGE CIRCUITY.

UNTIL SUCH TIME AS THE INTERSTATE COMMERCE COMMISSION VACATES THIS SUSPENSION AND THE TABLE BECOMES EFFECTIVE IT IS INCUMBENT UPON BOTH THIS OFFICE AND THE GENERAL ACCOUNTING OFFICE TO REQUIRE THE LOWEST NET RATE AS MADE AVAILABLE VIA THE ROUTE REQUESTED IN LETTER FROM THIS OFFICE DATED JULY 12, 1935.

THE REQUEST OF THE CARRIER FOR CONSIDERATION OF THE MATTER BY THIS OFFICE DID NOT DENY THAT UNDER THE TERMS OF THE TARIFF THE RATE WAS APPLICABLE VIA THE ROUTE DESIGNATED BY THE WAR DEPARTMENT BUT RESTED MAINLY UPON THE CONTENTION THAT SAID ROUTE WAS EXCESSIVELY CIRCUITOUS AND UNNATURAL, AND THAT THE INTERSTATE COMMERCE COMMISSION FREQUENTLY HAD HELD THAT SHIPPERS COULD NOT REASONABLY OBTAIN TRANSPORTATION VIA SUCH EXCESSIVELY CIRCUITOUS OR UNNATURAL ROUTES. EXAMINATION OF THE DECISIONS OF THE INTERSTATE COMMERCE COMMISSION SHOWED THAT WHILE WITH RESPECT TO OPEN ROUTING TARIFFS IT HAD HELD IN SPECIFIC INSTANCES THAT THE PARTICULAR ROUTES IN QUESTION WERE SO CIRCUITOUS AND UNNATURAL THAT THROUGH RATES PUBLISHED WITHOUT RESTRICTION WERE NOT APPLICABLE, IT HAD PRESCRIBED NO GENERAL DEFINITION OF WHAT SHOULD OR WHAT SHOULD NOT CONSTITUTE A NATURAL AND LOGICAL ROUTE BUT HAD EXPRESSLY STATED THAT EACH CASE MUST BE DECIDED ON ITS OWN MERITS. WHERE, THEREFORE, THE QUESTION OF WHETHER A GIVEN RATE IS APPLICABLE VIA A GIVEN ROUTE IS PROPERLY FOR DETERMINATION ON CONSIDERATIONS OF WHETHER SAID ROUTE IS A NATURAL AND LOGICAL ROUTE OR WHETHER CONVERSELY IT IS EXCESSIVELY CIRCUITOUS, UNNATURAL, OR ILLOGICAL, THE CONCLUSION NECESSARILY MUST DEPEND IN LARGE MEASURE UPON INDIVIDUAL JUDGMENT AND DISCRETION. IN THE CASE OF THE SHIPMENT FROM NASHVILLE TO COLUMBUS, THE RECORD SHOWED THAT THE FINANCE OFFICER, IN THE PERFORMANCE OF HIS LAWFUL DUTIES, HAD HAD OCCASION TO CONSIDER THE APPLICABILITY OF THE RATE THERE CONCERNED VIA THE ROUTE THROUGH BIRMINGHAM, MERIDIAN, CAIRO, AND ODIN AND HAD REACHED THE CONCLUSION THAT THE RATE WAS APPLICABLE VIA SAID ROUTE. ALSO, THERE WAS FOR CONSIDERATION THE USUAL RULE THAT IN EVENT OF DOUBTA TARIFF IS PROPERLY TO BE CONSTRUED AGAINST THE CARRIER. IN VIEW OF THESE CIRCUMSTANCES, THEREFORE, THERE DID NOT APPEAR ANY SUFFICIENT BASIS TO WARRANT THIS OFFICE IN CONCLUDING, CONTRARY TO THE GOVERNMENT'S INTERESTS AND THE ADMINISTRATIVE DETERMINATION IN THE MATTER, THAT THE ROUTE IN QUESTION WAS SO CLEARLY UNNATURAL OR ILLOGICAL AS TO RENDER THE RATE INAPPLICABLE. A CAREFUL EXAMINATION OF A-78545, DECEMBER 2, 1936, WILL DISCLOSE THAT SUCH WAS THE BASIS OF THE ACTION BY THIS OFFICE IN THAT CASE. THAT THE ACTION SO TAKEN CANNOT BE SAID TO HAVE BEEN ENTIRELY WITHOUT REASONABLE BASIS SEE THE CASE OF THE GREAT ATLANTIC AND PACIFIC TEA CO. V. ALTON RAILROAD CO. ET AL., 226 I.C.C. 398, DECIDED MARCH 2, 1938. THE RATE BEING APPLICABLE UNDER THE SPECIFIC TERMS OF THE TARIFF, PRESUMABLY IT COULD HAVE BEEN SPECIFIED FOR THE SHIPMENT, AND THE CIRCUMSTANCES OTHERWISE WERE NOT SUCH AS TO JUSTIFY THE ASSUMPTION THAT BUT FOR THE EQUALIZATION AGREEMENT SAID ROUTE WOULD NOT HAVE BEEN SPECIFIED.

RELATIVE, HOWEVER, TO THE MAXIMUM CIRCUITY TABLE SUGGESTED IN YOUR LETTER, I AM PERSUADED THAT IN THE GREAT MAJORITY OF INSTANCES, AT LEAST, EQUALIZATION WITHIN THE LIMITS MENTIONED WILL ADEQUATELY PROTECT THE GOVERNMENT'S INTERESTS; AND WHILE THE ADOPTION OF SUCH A BASIS AS AN INVARIABLE RULE WOULD NOT APPEAR TO BE JUSTIFIED, IT IS BELIEVED THAT AS A GENERAL RULE, IN THE ABSENCE OF COGENT AND COMPELLING FACTS OR CIRCUMSTANCES JUSTIFYING A DIFFERENT RESULT IN INDIVIDUAL INSTANCES,THIS OFFICE WOULD NOT BE REQUIRED TO CONSIDER THAT THE EQUALIZATION AGREEMENT MUST BE REGARDED AS EXACTING EQUALIZATION OF NET RATES DERIVED VIA ROUTES EXCEEDING THOSE CIRCUITY LIMITS. IT WILL BE APPRECIATED, OF COURSE, THAT THERE MAY BE INSTANCES IN WHICH A ROUTE EVEN WITHIN THE LIMITS SPECIFIED MAY, BY REASON OF THE SPECIAL CIRCUMSTANCES INVOLVED, SO FAR TRANSCEND THE PURPOSES OF THE EQUALIZATION AGREEMENT AS NOT TO NECESSITATE EQUALIZATION OF A NET RATE DERIVED THEREFROM, WHILE, ON THE OTHER HAND, A ROUTE WHICH INVOLVES A DEGREE OF CIRCUITY IN EXCESS OF THE MENTIONED LIMITS MAY BE SUCH THAT TRANSPORTATION VIA IT WOULD BE PRACTICAL AND, THEREFORE, TO BE REGARDED AS PROPERLY WITHIN THE PURPOSE OF THE EQUALIZATION AGREEMENTS. ALSO, IN GIVING EFFECT TO THE PROPOSED CIRCUIT TABLE, IT DOES NOT APPEAR NECESSARY OR PROPER THAT ROUTES WHICH HAVE BECOME WELL ESTABLISHED IN THE AUDITING PROCEDURE AS PROPER FOR EQUALIZATION, AND WITH WHICH THE RAILROADS AND THE ADMINISTRATIVE OFFICES OF THE GOVERNMENT ARE FAMILIAR, BE EXCLUDED AS NOT WITHIN THE REQUIREMENTS OF EQUALIZATION MERELY BECAUSE THEY MAY EXCEED THE LIMITS OF THE SUGGESTED TABLE, AND IT IS, OF COURSE, FURTHER TO BE UNDERSTOOD, AS SUGGESTED IN YOUR LETTER, THAT SPECIFIC TARIFF PROVISIONS AS TO ROUTING, MAXIMUM CIRCUITY, OR OTHER RESTRICTIVE OR PERMISSIVE RULES AFFECTING THE APPLICATION OF RATES, WILL TAKE PRECEDENCE OVER THE LIMITS YOU MENTION. SUBJECT TO THESE QUALIFICATIONS AND WITH THE UNDERSTANDING THAT REASONABLE DOUBTS, WHERE THEY EXIST, ARE REQUIRED TO BE RESOLVED AGAINST THE CARRIERS, IT WOULD APPEAR THAT THE APPLICATION OF THE SUGGESTED CIRCUITY LIMITS WILL PROPERLY PROTECT THE INTERESTS OF THE GOVERNMENT AND TEND TO FACILITATE THE SETTLEMENT OF CLAIMS AND ACCOUNTS. ACCORDINGLY, I HAVE TO ADVISE THAT THE ACTION OF THIS OFFICE IN THE AUDIT AND SETTLEMENT OF CLAIMS AND ACCOUNTS WILL BE IN CONFORMITY THEREWITH, WITH SUCH EXCEPTIONS, ONLY, AS MAY BE NECESSARY BY REASON OF THE MATTERS NOTED ABOVE, IT BEING UNDERSTOOD THAT CLOSED AND SETTLED TRANSACTIONS WILL NOT BE REOPENED SOLELY BECAUSE OF THIS CHANGE IN PRACTICE IN THE MATTER OF THE APPLICATION OF CIRCUITOUS ROUTE RATES.

IT IS REALIZED THAT THE BASIS THUS TO BE EMPLOYED MAY NOT AFFORD IN EVERY INSTANCE THAT DEGREE OF DEFINITENESS AND FINALITY IN THE APPLICATION OF THE EQUALIZATION AGREEMENT WHICH IT WOULD SEEM YOU CONSIDER AS DESIRABLE, BUT SINCE THE AGREEMENT ITSELF DOES NOT IMPOSE ANY SUCH INFLEXIBLE STANDARD OR REQUIREMENT IN DETERMINING THE AVAILABILITY OF NET RATES IT WOULD NOT APPEAR THAT ANY INVARIABLE RULE SHOULD BE ADOPTED AS AN ACCOUNTING PROCEDURE WHICH BY REASON OF ITS ARBITRARY APPLICATION MIGHT OPERATE TO DEPRIVE THE GOVERNMENT OF BENEFITS IN SOME INSTANCES OTHERWISE AVAILABLE AND REASONABLY CONSISTENT WITH THE PURPOSE OF THE EQUALIZATION AGREEMENT.