A-97126, SEPTEMBER 20, 1939, 19 COMP. GEN. 380

A-97126, SEPTEMBER 20, 1939, 19 COMP. GEN. 380

TRANSPORTATION - TRANSIT PRIVILEGES, AND LAND-GRANT DEDUCTIONS - TITLE TO SHIPMENTS ACQUIRED BY THE UNITED STATES AT TRANSIT POINTS ON SHIPMENTS OVER THE LINES OF A SINGLE CARRIER, ACCORDED TRANSIT PRIVILEGES AT POINTS INTERMEDIATE TO THE ORIGINAL POINT OF SHIPMENT AND FINAL DESTINATION, WHEN THE GOVERNMENT ACQUIRES OWNERSHIP AT THE TRANSIT STATION AND IS ENTITLED TO LAND-GRANT DEDUCTIONS FROM THE REVENUE WHICH CARRIER DERIVES FROM THE MOVEMENT FROM THE TRANSIT STATION TO FINAL DESTINATION, THE CHARGE OF THE CARRIER FOR THE THROUGH SERVICE IS DETERMINED UPON THE BASIS OF THE THROUGH RATE LESS DEDUCTION FOR LAND GRANT FROM SO MUCH OF SAID CHARGE AS ACCRUES BEYOND THE TRANSIT POINT ON A MILEAGE PRORATE BASIS, AND NOT UPON THE BASIS THAT THE ONLY AMOUNT SUBJECT TO DEDUCTION FOR LAND GRANT IS THE TRANSIT BALANCE OR DIFFERENCE BETWEEN THE THROUGH CHARGE AND AMOUNT PAID INTO TRANSIT STATION FROM ORIGINAL SHIPPING POINT.

ASSISTANT COMPTROLLER GENERAL ELLIOTT TO A. F. CLEVELAND, VICE PRESIDENT, ASSOCIATION OF AMERICAN RAILROADS, SEPTEMBER 20, 1939:

THERE HAS BEEN CONSIDERED YOUR LETTER OF JULY 25, 1939, FILE 1-185 2, RELATING TO THE CHARGES APPLICABLE FROM THE TRANSIT STATION TO THE FINAL DESTINATION ON SHIPMENTS ACCORDED TRANSIT PRIVILEGES AT POINTS INTERMEDIATE TO THE ORIGINAL POINT OF SHIPMENT AND FINAL DESTINATION WHEN THE GOVERNMENT ACQUIRES OWNERSHIP AT THE TRANSIT STATION AND IS ENTITLED TO LAND-GRANT DEDUCTIONS FROM THE REVENUE WHICH THE CARRIER OR CARRIERS DERIVE FROM THE MOVEMENT FROM THE TRANSIT STATION TO THE FINAL DESTINATION. IN CONNECTION WITH YOUR REQUEST FOR A CONFERENCE ON THE MATTER YOU STATE:

FOR THE PURPOSE OF THIS CONFERENCE WE ARE WILLING TO ASSUME THAT THE GOVERNMENT AFTER BECOMING THE OWNER OF THE GRAIN AT THESE TRANSIT POINTS IS ENTITLED TO THE SAME BASIS THAT THE COMMERCIAL SHIPPER WOULD OBTAIN THEREFROM LESS WHATEVER LAND GRANT IS AVAILABLE FROM THE TRANSIT POINT TO THE TRANSIT DESTINATION. THE ONLY DISAGREEMENT IS THAT YOUR DEPARTMENT HAS HERETOFORE CLAIMED YOU ARE ENTITLED FROM THE TRANSIT POINT TO SOMETHING OVER AND ABOVE THAT WHICH THE COMMERCIAL SHIPPER WOULD OBTAIN LESS THE GOVERNMENT LAND-GRANT DEDUCTION. TO STATE MORE EXPLICITLY THE REAL DIFFERENCE, WE CLAIM YOU ARE ENTITLED TO FIGURE YOUR LAND GRANT ONLY ON THE BASIS OF THE TRANSIT BALANCE FROM THE POINT AT WHICH THE GOVERNMENT BECAME THE OWNER, WHEREAS YOUR DEPARTMENT HAS TAKEN THE POSITION THAT YOU WILL DIVIDE THE THROUGH RATE FROM THE COUNTRY STATION TO THE TRANSIT DESTINATION ON A MILEAGE PRORATE OVER THE TRANSIT POINT; FINDING WHAT THE LAND-GRANT DEDUCTION IS ON THIS BASIS OF COMPUTATION, YOU SUBTRACT FROM THE REAL TRANSIT BALANCE THIS FIGURE AND THEREBY YOU OBTAIN A FACTOR FROM THE TRANSIT POINT TO THE TRANSIT DESTINATION LOWER THAN THAT WHICH WOULD BE APPLICABLE TO THE COMMERCIAL SHIPPER LESS THE LAND GRANT.

THE EFFECT OF YOUR FORMULA OF DIVIDING THE THROUGH RATE FROM THE COUNTRY STATION TO THE TRANSIT DESTINATION ON MILEAGE OVER THE TRANSIT POINT RESULTS IN THE FINAL ANALYSIS IN THE USE OF A FACTOR FROM THE COUNTRY STATION TO THE TRANSIT POINT LESS THAN THE LOCAL RATE, FOR WHICH THERE IS NO AUTHORITY WHATSOEVER AND, AS STATED ABOVE, YOUR FORMULA GIVES TO THE GOVERNMENT A FACTOR FROM THE TRANSIT POINT LOWER THAN THAT WHICH WOULD BE AVAILABLE TO THE COMMERCIAL SHIPPER LESS THE LAND GRANT. THE GOVERNMENT WAS NOT THE OWNER OF THE SHIPMENT FROM THE COUNTRY STATION; THE TARIFF PROVIDES THE PAYMENT OF THE FULL LOCAL RATE FROM THE COUNTRY STATION TO THE TRANSIT POINT. YOUR METHOD IN EFFECT CHANGES THE INBOUND FACTOR WHEN IT IS ADMITTED IN THE CASE REFERRED TO YOU HAVE NO OWNERSHIP UNTIL AFTER THE COMMODITY REACHED THE TRANSIT POINT. THERE IS NO AUTHORITY THAT WE HAVE EVER SEEN THAT UNDER THIS STATEMENT OF FACTS WOULD PERMIT THE GOVERNMENT TO DO THAT WHICH IN EFFECT CHANGES THE BASIS INBOUND FROM THE COUNTRY STATION TO THE TRANSIT POINT.

WE HAVE NO AUTHORITIES TO SUBMIT FOR THE REASON THAT WE DO NOT KNOW OF THE EXISTENCE OF ANY. WE BELIEVE, HOWEVER, THAT THE MERE STATEMENT OF THE FACTS AS HEREIN SHOWN DEMONSTRATES BEYOND ANY QUESTION OF DOUBT THAT THE RULING OF YOUR DEPARTMENT IN THIS PARTICULAR HAS BEEN ARBITRARY AND UNJUST. IF UNDER THE LAW YOU ARE ENTITLED TO WHAT THE COMMERCIAL SHIPPER WOULD PAY LESS LAND GRANT, THEN THE GOVERNMENT HAVING BECOME THE OWNER AT TOPEKA AND AT WICHITA MUST TAKE WHAT THE COMMERCIAL SHIPPER WOULD PAY AND WHICH IS THE TRANSIT BALANCE AND DEDUCT THEREFROM SUCH LAND GRANT AS MAY BE LEGALLY APPLICABLE FROM THE TRANSIT POINT TO THE TRANSIT DESTINATION.

IN SUBSTANCE YOUR VIEW APPEARS TO BE THAT ON TRANSIT SHIPMENTS HANDLED INTO AND OUT OF THE TRANSIT STATION BY THE SAME CARRIER THE ONLY AMOUNT SUBJECT TO DEDUCTION FOR LAND GRANT OCCURRING BETWEEN THE TRANSIT STATION AND THE FINAL DESTINATION IS THE TRANSIT BALANCE, I.E., THE DIFFERENCE BETWEEN THE CHARGE FROM THE ORIGINAL POINT OF SHIPMENT TO THE FINAL DESTINATION, AND THE AMOUNT PAID INTO THE TRANSIT STATION FROM THE ORIGINAL POINT OF SHIPMENT--- THIS CONTENTION BEING BASED APPARENTLY UPON THE THEORY THAT THE TRANSIT BALANCE IS THE FULL AMOUNT THE CARRIER WOULD RECEIVE FROM THE GENERAL PUBLIC FOR LIKE TRANSPORTATION PERFORMED BETWEEN THE TRANSIT POINT AND THE TRANSIT DESTINATION.

A CONSIDERATION OF THE TARIFF PROVISIONS RELATING TO TRANSIT ARRANGEMENTS, SUCH AS CONTEMPLATED IN THE ABOVE QUOTATION FROM YOUR LETTER, WOULD SEEM SUFFICIENT TO ESTABLISH THAT THE TRANSIT BALANCE IS NOT THE MEASURE OF THE EARNINGS BEYOND THE TRANSIT POINT. UNDER THE TRANSIT ARRANGEMENTS IN QUESTION, WHEN THE RAW MATERIAL MOVES FROM THE POINT OF SHIPMENT TO THE TRANSIT STATION THE LOCAL RATE IS ASSESSED AND COLLECTED, APPARENTLY FOR THE PROTECTION, BY THE CARRIERS, OF THE RATE TO THE TRANSIT POINT TO WHICH THEY WOULD BE ENTITLED IN EVENT THE MATERIAL SHOULD BE DISPOSED OF LOCALLY AT THE TRANSIT POINT AND NOT SHIPPED THEREFROM UNDER THE AVAILABLE TRANSIT PRIVILEGE AS AUTHORIZED BY TARIFF. WHEN, HOWEVER, THE RAW MATERIAL HAS BEEN FINISHED AND IS SHIPPED FROM THE TRANSIT STATION TO THE FINAL DESTINATION THE TRANSIT TARIFFS REQUIRE, IN GENERAL, THAT THE RATE BE ASCERTAINED ON THE FINISHED PRODUCT FROM THE POINT OF ORIGIN OF THE RAW MATERIAL TO THE FINAL DESTINATION, AND THAT THE AMOUNT PAID INTO THE TRANSIT POINT ON A LIKE WEIGHT OF THE RAW MATERIAL BE DEDUCTED FROM THE CHARGES SO ASCERTAINED TO DETERMINE THE AMOUNT REMAINING TO BE PAID FOR THE COMPLETED SERVICE OF TRANSPORTATION. IT IS THUS APPARENT THAT UPON THE EXERCISE OF THE TRANSIT PRIVILEGE THE INBOUND SHIPMENT OF RAW MATERIAL LOSES ITS IDENTITY AND THE AMOUNT PAID THEREON BECOMES BUT A MEASURE OF PARTIAL PAYMENT UPON THE CHARGE APPLICABLE FOR THE TRANSPORTATION SERVICE RENDERED FROM THE POINT OF SHIPMENT OF THE RAW MATERIAL TO THE TRANSIT DESTINATION OF THE FINISHED PRODUCT.

IN WHEELOCK AND BIERD, RECEIVERS, V. AKRON, CANTON AND YOUNGSTOWN RAILWAY COMPANY ET AL., 179 I.C.C. 517, IT WAS SAID:

* * * TO TREAT THE INBOUND AND OUTBOUND SHIPMENTS AS SEPARATE AND DISTINCT IS HOPELESSLY REPUGNANT TO THE PRINCIPLE OF TRANSIT, WHICH IS THAT THE SAME COMMODITY, ALTHOUGH GENERALLY IN CHANGED FORM, WHICH MOVES TO THE TRANSIT POINT SHALL MOVE THEREFROM TO A NEW DESTINATION, AND THAT THE SHIPMENT FROM THE POINT OF ORIGIN THROUGH THE TRANSIT POINT TO DESTINATION IS THE SAME IN PRINCIPLE AS IF THE SHIPMENT HAD MOVED WITHOUT TRANSIT. * * * THE UNDERLYING THEORY OF TRANSIT IS THAT OF A CONTINUOUS TRANSPORTATION FROM THE POINT OF ORIGIN TO THE ULTIMATE DESTINATION. * *

IT WOULD SEEM TO BE EVIDENT, THEREFORE, THAT UPON SHIPMENT FROM THE TRANSIT POINT PURSUANT TO THE EXERCISE OF THE AUTHORIZED TRANSIT PRIVILEGE THE TRANSACTION IS TREATED AS BUT A STEP IN THE COMPLETION OF A THROUGH SERVICE, AND THAT THE CHARGE FOR SUCH THROUGH SERVICE IS TO BE COMPUTED ON THE BASIS OF THE APPLICABLE THROUGH RATE. AGAINST THE THROUGH CHARGE SO COMPUTED THE AMOUNT PAID AT THE TRANSIT POINT, UPON THE INBOUND SHIPMENT, IS AUTHORIZED TO BE CREDITED LEAVING FOR COLLECTION THE REMAINING PART OF THE THROUGH CHARGE, CALLED THE TRANSIT BALANCE. THAT THE TRANSIT BALANCE IS NOT THE CHARGE FOR THAT PART OF THE THROUGH SERVICE PERFORMED BETWEEN THE TRANSIT POINT AND THE DESTINATION WOULD SEEM TO BE SELF-EVIDENT. MOREOVER, THIS VIEW OF THE SITUATION WAS GIVEN FORMAL EXPRESSION BY THE INTERSTATE COMMERCE COMMISSION IN EX-RIVER GRAIN FROM ST. LOUIS TO THE SOUTH, 203 I.C.C. 385, 388, WHERE IT WAS SAID,"TRANSIT BALANCES ARE REMAINING PORTIONS OF THROUGH RATES VIA TRANSIT POINTS THAT ARE PAID WHEN THE TRAFFIC MOVES FROM THOSE POINTS. THEY ARE NOT THE CHARGES FOR SUCH MOVEMENTS.'

IN THE SITUATION CONTEMPLATED IN YOUR LETTER THE TRANSPORTATION BEYOND THE TRANSIT POINT IS THAT OF A SHIPMENT OF GOVERNMENT PROPERTY. CONCERNING THE MATTER OF CHARGES FOR THE TRANSPORTATION OF GOVERNMENT PROPERTY OVER LAND-GRANT ROADS, THE ACT OF JUNE 7, 1924, 43 STAT. 477, 486, PROVIDES:

* * * THAT HEREAFTER PAYMENT * * * SHALL NOT EXCEED 50 PERCENTUM OF THE FULL AMOUNT OF COMPENSATION, COMPUTED ON THE BASIS OF THE TARIFF OR LOWER SPECIAL RATES FOR LIKE TRANSPORTATION PERFORMED FOR THE PUBLIC AT LARGE, FOR THE TRANSPORTATION OF PROPERTY OR TROOPS OF THE UNITED STATES OVER ANY RAILROAD WHICH UNDER LAND-GRANT ACTS WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT SAID RAILROAD SHALL BE AND REMAIN A PUBLIC HIGHWAY FOR THE USE OF THE UNITED STATES, AND FOR WHICH ADJUSTMENT OF COMPENSATION IS REQUIRED IN ACCORDANCE WITH DECISION OF THE SUPREME COURT CONSTRUING SUCH LAND-GRANT ACTS, OR OVER ANY RAILROAD WHICH WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT SUCH RAILROAD SHOULD BE A POST ROUTE AND MILITARY ROAD, SUBJECT TO SUCH REGULATIONS AS CONGRESS MAY IMPOSE RESTRICTING THE CHARGE FOR SUCH GOVERNMENT TRANSPORTATION, AND SUCH PAYMENT SHALL BE ACCEPTED AS IN FULL FOR ALL DEMANDS FOR SUCH SERVICE. IN ARRIVING AT THE DEDUCTION TO BE MADE, UNDER THE ABOVE PROVISION, FOR LAND-GRANT MILEAGE OCCURRING BEYOND THE TRANSIT POINT, THE FIRST ESSENTIAL IS TO DETERMINE "THE FULL AMOUNT OF COMPENSATION" RECEIVED BY THE CARRIER BEYOND THE TRANSIT POINT FOR LIKE TRANSPORTATION PERFORMED FOR THE PUBLIC AT LARGE. AS NOTED ABOVE, THE TRANSIT BALANCE IS NOT THE MEASURE OF SUCH COMPENSATION. ON THE CONTRARY THE CHARGE FOR THE SERVICE FROM ORIGIN THROUGH TRANSIT POINT TO DESTINATION IS COMPUTED ON THE BASIS OF A THROUGH RATE, AND WHERE SUCH THROUGH RATE APPLIES OVER THE LINES OF A SINGLE CARRIER IT HAS BEEN THE UNIFORM PRACTICE OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT TO MAKE DEDUCTION FOR LAND GRANT ON THE BASIS THAT SAID RATE APPLIES EQUALLY OVER THE WHOLE DISTANCE INVOLVED. THUS IN 18 COMP. DEC. 950, IT WAS SAID:

IT IS A WELL-RECOGNIZED PRINCIPLE THAT A THROUGH SERVICE IS DIFFERENT FROM A LOCAL SERVICE OR THE COMBINATION OF LOCAL SERVICES; AND WHEN A THROUGH RATE IS LEGALLY AUTHORIZED FOR A SERVICE, IT IS TO BE APPLIED THEREFOR REGARDLESS OF LOCAL OR COMBINATION OF LOCAL RATES. THE SAID THROUGH RATE, WHEN THERE IS NO COMMERCIAL DIVISION THEREOF, APPLIES FOR THE ENTIRE DISTANCE, AND EQUALLY FOR EVERY PART THEREOF. * * * SEE, ALSO, IN THIS CONNECTION SOUTHERN PACIFIC COMPANY V. UNITED STATES, 237 U.S. 202.

SINCE, THEREFORE, ON A TRANSITED SHIPMENT, MOVING THROUGHOUT OVER THE LINES OF A SINGLE CARRIER, THE CHARGES ARE FOR COMPUTATION ON THE BASIS OF A THROUGH RATE WITH NO COMMERCIAL DIVISION THEREOF, THE EARNINGS BEYOND THE TRANSIT POINT APPEAR PROPERLY FOR DETERMINATION ON THE BASIS OF APPORTIONING THE THROUGH RATE ON A MILEAGE PRORATE OVER THE TRANSIT POINT, AND THE EARNINGS SO DETERMINED WOULD APPEAR PROPERLY TO BE REGARDED AS THE FULL AMOUNT OF COMPENSATION THAT WOULD ACCRUE BEYOND THE TRANSIT POINT ON A LIKE SHIPMENT FOR THE PUBLIC AT LARGE. IN SUCH SITUATIONS THE CHARGE OF THE CARRIER FOR THE THROUGH SERVICE IS DETERMINED UPON THE BASIS OF THE THROUGH RATE LESS DEDUCTION FOR LAND GRANT FROM SO MUCH OF SAID CHARGE AS ACCRUES BEYOND THE TRANSIT POINT ON A MILEAGE PRORATE BASIS. FROM THE NET TOTAL CHARGE SO DETERMINED FOR THE THROUGH SERVICE THE AMOUNT PAID IN AT THE TRANSIT POINT IS DEDUCTED, AND THE BALANCE SO INDICATED AS UNPAID IS ALLOWED THE CARRIER. IT WILL BE OBSERVED THAT THIS BASIS RESULTS IN THE CARRIER'S RECEIVING FOR THE SERVICE OVER THE LAND-GRANT MILEAGE BEYOND THE TRANSIT POINT 50 PERCENTUM OF THE FULL AMOUNT OF COMPENSATION THAT WOULD ACCRUE OVER SAID LAND-GRANT MILEAGE FOR LIKE TRANSPORTATION PERFORMED FOR THE PUBLIC AT LARGE, AND THE ACT OF JUNE 7, 1924, SUPRA, PROVIDES THAT PAYMENT OF NOT TO EXCEED SUCH SUM SHALL BE ACCEPTED AS IN FULL FOR ALL DEMANDS FOR THE SERVICE.

ACCORDINGLY, IT DOES NOT APPEAR THAT A CONFERENCE ON THE QUESTION WOULD SERVE ANY USEFUL PURPOSE. HOWEVER, IF THERE ARE ANY MATTERS NOT CONSIDERED ABOVE WHICH YOU MAY WISH TO PRESENT, THEY WILL BE CONSIDERED, AND IF DEEMED NECESSARY A CONFERENCE TO THAT END MAY BE ARRANGED.