B-146404, APR. 26, 1963

B-146404, APR. 26, 1963

TO MR. GILES MORROW, GENERAL COUNSEL, FREIGHT FORWARDERS INSTITUTE:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 20, 1963, IN WHICH YOU TAKE EXCEPTION TO A STATEMENT MADE IN OUR REPORT ENTITLED, "STATISTICAL STUDY OF THE USE OF RATES AUTHORIZED UNDER SECTION 22 OF THE INTERSTATE COMMERCE ACT AND THE EFFECT ON GOVERNMENT FREIGHT TRANSPORTATION COSTS," WHICH WE SUBMITTED TO CHAIRMAN WARREN G. MAGNUSON OF THE SENATE COMMERCE COMMITTEE ON AUGUST 15, 1961, IN RESPONSE TO A REQUEST OF THE STAFF OR THAT COMMITTEE.

THE STATEMENT, MADE ON PAGE 21 OF THE REPORT, IS AS FOLLOWS:

"3. FREIGHT FORWARDERS. ALTHOUGH FREIGHT FORWARDERS DO OFFER THE GOVERNMENT REDUCED RATES FROM THEIR PUBLISHED TARIFFS BY AGREEING TO MEET THE PUBLISHED RAIL OR MOTOR RATES FOR LESS THAN CARLOAD OR LESS THAN TRUCKLOAD SHIPMENTS, SUCH REDUCED RATES ARE GENERALLY NO LESS THAN THE TARIFF RATES THE GOVERNMENT COULD OBTAIN BY DEALING DIRECTLY WITH THE RAIL OR MOTOR CARRIERS AND APPLYING THEIR TARIFFS WITHOUT SECTION 22 QUOTATIONS. SINCE THIS REDUCTION, IN OUR OPINION, DOES NOT REPRESENT TRUE SAVINGS TO THE GOVERNMENT THROUGH THE USE OF SECTION 22 QUOTATIONS, WE DID NOT MAKE ANALYSES OF THESE SHIPMENTS.'

YOU URGE THAT THIS STATEMENT IS CONTRARY TO FACT. YOU INDICATE THAT WHILE IT IS TRUE THAT FREIGHT FORWARDERS FILE BLANKET TENDERS GUARANTEEING THEIR CHARGES WILL NOT EXCEED THE LOWEST STANDARD ALL RAIL CHARGES, THESE BLANKET TENDERS MERELY FIX THE MAXIMUM ASSESSABLE CHARGES; AND, THAT THE FORWARDERS FOLLOW THE PRACTICE OF FILING INDIVIDUAL TENDERS WITH RESPECT TO SPECIFIC GOVERNMENT TRAFFIC AND THESE SPECIFIC REDUCTIONS REPRESENT TRUE SAVINGS TO THE GOVERNMENT JUST AS COMPARABLE REDUCTIONS BY OTHER CARRIERS.

THE PURPOSE OF OUR REPORT AS SHOWN BY PAGE 1 WAS:

"TO DEVELOP FACTUAL DATA CONCERNING THE USE OF REDUCED RATES TENDERED BY CARRIERS TO THE GOVERNMENT UNDER AUTHORITY OF SECTION 22 OF THE INTERSTATE COMMERCE ACT (49 U.S.C. 22) AND THE EFFECT ON COSTS PAID BY THE GOVERNMENT FOR TRANSPORTATION SERVICES.'

ON PAGE 5 OF THAT REPORT WE STATED:

"OUR STUDY INDICATED THAT, FOR OTHER THAN RAIL CARLOAD, MOTOR TRUCKLOAD, AND HOUSEHOLD GOODS CARRIER (VANLOAD) CATEGORIES, THE USE OF SECTION 22 WAS SO SLIGHT AS TO HAVE NO APPRECIABLE EFFECT. ACCORDINGLY, THROUGHOUT THIS REPORT OUR ANALYSIS OF THE EFFECTS OF SECTION 22 USAGE IS RELATED TO THESE THREE CATEGORIES, RECOGNIZING THAT SECTION 22 QUOTATIONS ARE AUTHORIZED AND IN RARE INSTANCES MAY BE USED FOR LESS THAN CARLOAD, LESS THAN TRUCKLOAD * * * SHIPMENTS UNDER THE INTERSTATE COMMERCE ACT.'

THUS IT IS CLEAR OUR REPORT WAS DIRECTED PRINCIPALLY TO CATEGORIES THAT ACCOUNT FOR MOST OF THE SHIPMENTS, TONNAGE AND CHARGES WHICH IN PRACTICE MOVE UNDER SECTION 22 QUOTATIONS, NAMELY CARLOAD, TRUCKLOAD AND VANLOAD SHIPMENTS, SAVINGS CONNECTED WITH SUCH MOVEMENTS, AND NOT TO SHIPMENTS IN LESS-THAN-CARLOAD OR LESS-THAN-TRUCKLOAD QUANTITIES, REGARDLESS OF WHETHER THEIR MOVEMENT WAS ARRANGED FOR DIRECTLY WITH CARRIERS BY RAIL AND MOTOR OR THROUGH FREIGHT FORWARDERS. ALSO, SEE NOTE "E," ON PAGE 29 OF THE REPORT, INDICATING SECTION 22 QUOTATIONS BY FREIGHT FORWARDERS WERE NOT ANALYZED FOR PURPOSES OF THIS STUDY.

WITH REGARD TO YOUR COMMENTS AS TO SAVINGS THROUGH SECTION 22 QUOTATIONS OF FREIGHT FORWARDERS, YOU SEEM TO CONCEDE THAT NO REAL SAVINGS ACCRUE TO THE GOVERNMENT THROUGH BLANKET TENDERS MERELY GUARANTEEING THAT FREIGHT FORWARDERS' CHARGES WILL NOT EXCEED ALL-RAIL RATES OR CHARGES. BUT YOU CONTEND INDIVIDUAL TENDERS OF FREIGHT FORWARDERS WITH RESPECT TO SPECIFIC MOVEMENTS OF GOVERNMENT TRAFFIC PRODUCE REAL SAVINGS TO THE GOVERNMENT. THIS CONTENTION, IN THOSE INSTANCES WHERE SUCH TENDERS RESULT IN LOWER FREIGHT COSTS THAN THOSE AVAILABLE THROUGH TARIFFS OF RAIL OR MOTOR TARIFFS, IS TRUE. WHERE SUCH TENDERS MERELY MEET SUCH RATES, NO REAL SAVINGS ACCRUE.

A RE-EXAMINATION OF THE 3,067 FREIGHT FORWARDER SHIPMENTS IN THE ONE PERCENT STATISTICAL SAMPLE, FROM WHICH THE INFORMATION AND DATA CONTAINED IN THE REPORT WERE OBTAINED, HOWEVER, AFFIRMS OUR STATEMENT THAT THE SECTION 22 QUOTATIONS OFFERED BY FREIGHT FORWARDERS ARE PREDOMINANTLY AGREEMENTS TO MEET THE PUBLISHED RAIL OR MOTOR TARIFF RATES AND, THEREFORE, ARE GENERALLY NO LESS THAN THE TARIFF RATES THE GOVERNMENT COULD OBTAIN BY DEALING DIRECTLY WITH THE RAIL OR MOTOR CARRIERS AND APPLYING THEIR TARIFFS WITHOUT SECTION 22 QUOTATIONS.

THE RE-EXAMINATION OF THE PAYMENTS ON FREIGHT FORWARDER SHIPMENTS, WHICH REPRESENTED APPROXIMATELY 04.3 PERCENT OF THE FREIGHT CHARGES PAID BY THE GOVERNMENT DURING THE PERIOD OF THE STUDY, SHOWS THAT 95 PERCENT OF THE FREIGHT FORWARDER SHIPMENTS, 93 PERCENT OF THE TONNAGE, AND 89 PERCENT OF THE CHARGES PAID RELATED TO MOVEMENTS SETTLED EITHER UNDER SECTION 22 QUOTATIONS WHICH MERELY AGREE TO MEET THE PUBLISHED RAIL OR MOTOR RATES, OR UNDER FREIGHT FORWARDER TARIFF RATES. ONLY 5 PERCENT OF THE SHIPMENTS, 7 PERCENT OF THE TONNAGE, AND 11 PERCENT OF THE CHARGES PAID TO THE FREIGHT FORWARDERS RELATED TO MOVEMENTS SETTLED UNDER INDIVIDUAL SECTION 22 QUOTATIONS WHICH OFFERED RATES LOWER THAN THE PUBLISHED RAIL OR MOTOR RATES. BY APPLYING THESE PERCENTAGES TO THE TOTAL FREIGHT FORWARDER MOVEMENTS, AS SHOWN IN EXHIBIT A ON PAGE 29 OF THE REPORT, WE FIND THAT APPROXIMATELY 15,335 SHIPMENTS, 14,602 TONS, AND $2,959,506 IN CHARGES PAID WERE SUBJECT TO SECTION 22 RATES LOWER THAN PUBLISHED RAIL OR MOTOR RATES. THESE AMOUNTS, SO DERIVED, WHEN COMPARED TO THE 612,400 SHIPMENTS, 8,006,000 TONS, AND $183,752,400 IN CHARGES PAID FOR RAIL CARLOAD, MOTOR TRUCKLOAD, AND HOUSEHOLD GOODS CARRIER (VANLOAD) MOVEMENTS SETTLED UNDER SECTION 22, ARE SO SMALL THEY WOULD NOT ADD MATERIALLY TO THE INFORMATION OR DATA FOR THE PURPOSE OF THE REPORT.

THUS, TAKING INTO CONSIDERATION THE SCOPE AND PURPOSE OF THE REPORT AS EXPLAINED THEREIN, AND THE ABOVE FACTS AS TO WHAT SECTION 22 FREIGHT FORWARDER RATES GENERALLY PROVIDE, WE FEEL THE STATEMENT TO WHICH YOU OBJECT IS SUBSTANTIALLY CORRECT. WE TRUST THAT THE INFORMATION HEREIN WILL CLARIFY THE BASIS FOR THE STATEMENT AND ASSURE YOU THAT THERE WAS NO INTENTION ON OUR PART IN MAKING SUCH STATEMENT TO DEPRECATE THE USE OF FREIGHT FORWARDERS, NOR TO DENY THAT CERTAIN REAL SAVINGS TO THE GOVERNMENT ACCRUE UNDER SECTION 22 QUOTATIONS TENDERED BY THEM WHICH OFFER RATES LOWER THAN FREIGHT RATES IN TARIFFS OF RAIL OR MOTOR CARRIERS.