Appendix — Denver & Rio Grande Western Railroad v. United States

1

Appendix A

“United States Court of Appeals —

TENTH CIRCUIT *.

July Term, 1967

Usirep STaTEs oF AMERICA,

qpeerem,

| ia | No. 8855

WEesTERN Pactiric RatLRoaD

CoMPANY, -

Appellee.

Unitep States or AMERICA,

Appellant, f

vs. : |

No. 8856

Denver & Rio GranpE WESTERN ;

- Rattroap Company,

Appellee.

posaen from the United States District Court

for the District of Utah,

~ Central Division —

Norman Knopf (J. William Doolittle, Acting Assistant

Attorney General; William T, Thurman, United States

Attorney, and Alan S. Rosenthal and Frederick B.

Abramson, Attorneys, Department of Justice, on the

brief) for Appellant.

Grant H. Bagley (Van Cott, Bagley, Cornwall &

McCarthy on the brief) for Appellees.

Before MURRAH, Chief Judge, and PICKETT and

BREITEN STEIN, Circuit Judges. :

BREITENSTEIN, Cireuit Judge.

2

_ The -United States brought separate actions under |

§ 16 (9) of the Interstate Commerce Act, 49 U.S.C. § 16(9),

against the railroads to enforce forfeitures allegedly aris-

‘ing from the extension of credit f6r freight charges in vio-

lation of an order of the Intersta mmerce Commission.

The trial court sustained the railroads’ motions to dismiss

“and the government has appealed.

On this appeal we are concerned with the interrelation-

ship between § 3(2) and § 16(8) of the Interstate Com-

merce Act. Section 3(2) of the Interstate Commeree Act'

provides in material part: |

‘‘No carrier by railroad * * * shall deliver or re-

linquish possession at destination of any freight * * *

transported by ‘it until all tariff rates and charges

thereon have been paid, except under such rules and

regulations as the Commission may from time to time

prescribe to govern the settlement of all such rates

and charges and to prevent unjust discrimina-

tion *#@ @ 99°

Section 16 (8) of the Act reads so far as pertinent :?

sis Any carrier * * * who knowingly fails or neglects”

to obey any order made under the provisions of Sec-

tions 3, 13, or 15 of this title shall forfeit to the United

States the sum of $5,000 for each offense.’’

In 1920, after public hearings, the Commission adopted

Ex Parte Order No. 73 which has been amended twice.°

149 US.C. § 3(2). This subsection was added by. the Trans. .

“portation Act of 1920, Ch. 91, 41 Stat. 456, which terminated fed-

eral control of the. railroads after World War I. During Federal

control, General Order No. 25 (See 57 1.C.C.’ 593) required that’

payment of transportation charges be on a cash basis.

749 U.S.C. § 16(8). The same legislation that added § 3(2) ,

amended § 16 (8) so as to include § 3 within its. terms.

3 See 57 1.C.C. 596A-596B, 171 I.C.C. 268, and 310 L.C.C. 391.

* , P

a MRS tah 7 HAS ae Bn eli tp SE Er Da acetate 3 wee th tha LL

3

This order recites the provisions of § 3(2) and the investi-

gation which the Commission made. It then reads that:

‘‘It is ordered, That the following rules and regulations be,

and then are hereby, prescribed * * *.’’ 57 .C.C. 596A. As

amended, these rules and regulations permit the extension

of credit up to a maximum of 120 hours after the delivery

of the freight. . .

The complaints charge each railroad with three viola-

tions because of the lapse of varying periods from 8 to 33

days between the time of delivery and the time of payment.

In each instance, the railroad billed the shipper promptly

- but payment was not made within the required period.

_ , The issue is one of first impression. There appear to

be no reported decisions applying § 16(8) or.(9). The rail-

roads contend that Ex Parté 73 is not such an order as is

contemplated by § 16(8) because it neither commands nor

_ prohibits any action. Its only function is to ameliorate the

effect of § 3(2) by permitting limited extension of credit.

The trial court agreed with the railroads and held that

‘Ex Parte 73°is not the type of order contemplated by

§ 16(8) because it is ‘legislative in character’’ and because

-it,is ‘‘a general. regulation.’’

On these appeals the validity of Ex Parte 73 is not

.questioned. It is a proper. exercise of the power delegated

by Congress to the Commission to allow ‘‘reasonable varia-

tions, tolerances and exemptions, which, because of their.

variety and need for detailed statement, it was impracti-

cable for Congress to prescribe.’’* Except for Ex Parte 73

the freight could not have been delivered until the charges

were paid.

+ United States v. Shreveport Grain. & Elevator Co., 287 US.

77, 85.

Se ae

Section 16(8) imposes the sanction of forfeiture against

one who ‘‘knowingly fails or neglects to obey any order

made under the provisions of section 3.’’ Section 16(9) says

that the forfeiture shall be recoverable in a suit brought -

by the United-States. An unambiguous statute must be

given effect according to its plain and obvious meaning.°

We find no ambiguity in § 16(8). It applies to any order

made under § 3(2) whether that order be legislative or

adjudicatory in character. To read § 16(8) as applicable

only to adjudicatory orders is to disregard the plain lan-

guage of the statute.

The validity of Ex Parte 73 depends on § 3(2). It is

an. order made under that section. Its purpose is to fill in

‘‘the interstices of the Act * * * through * * * quasi-legis-

lative promulgation of rules.’’® The statute and the rules

are exercises in futility unless some means is provided for

enforcement. Section 16(8) and (9) provide the means.

The statutory method of enforcement may not be avoided

by the assertion that the Commission, before it invokes

‘§ 16(8), must ‘adjudicate specific rights and responsibili-

ties in specific instances. Under the procedure adopted by |

Congress, there is a judicial forfeiture for disobedience of

‘‘any order’’ made under § 3(2) without regard to whether |

' that order is legislative or adjudicatory.

This ounibnsian raises no due process problems. The

railroads have notice of the forfeiture proceedings and a

"8 Christner v. Poudre Valley Cooperative Association, 10 Cir.,

235 F.2d 946, 950. See also Jay v. Boyd, 351 U.S. 345, 357, and Unit-

ed States v. Zions Savings and Loan Association, 10 Cir., 313 F.2d

331, 336. .

6 Securities & Exchange Commission v. Chenery Corporation,

332 US. 1%, 202.

P

- af

~ full opportunity ~ be heard on the question of a violation

of Ex Parte 73. We know of no reason why the fact of such

violation has to be adjudicated by the Commission .in ad-

vance of the court proceedings. ;

¢ he railroads say that the complaints do not allege any

violation of the order because they show that in each in-

stance the billing date was on or before the delivery date

and that no claim is made’ of an agreement for the exten-

sion of credit. Ex Parte 73 forbids the extension of credit

— not an agreement for the extension of credit. The com-

plaints assert that the railroads ‘‘frequently and know-

ingly engaged in the praeticee of extending credit in ex-

cess of 120 hours’’ and ‘‘did extend credit’’ for more than

that period. The allegations are sufficient to state a claim

for the forfeitures. Any defenses which the railroads may

have must be developed at the trials on the-merits.. We ex-

press no opinion whether inability to collect equates with

extension of credit. This may depend on the facts devel-

oped at the trials.

Reversed and remanded for further proceedings con-

sistent with this opinion.

1

Appendix B-1

In the United States District Court

_ FOR THE DISTRICT OF UTAH

CENTRAL DIVISION.

Unitep States or AMERICA,

Plamtiff,

vs. .

| . No. C 223-65

Denver & Rio GranpE WESTERN

_Rattroap Company,

Defendant.

MEMORANDUM DECISION

For the reasons stated in my ruling in C 221-65, Umted

States of America v. Western Pacific Railroad Company,

dated December 27, 1965, and filed December 28, 1965, de-

fendant’s motion to dismiss the complaint in the above en-

titled action is hereby granted.

+ The case cited by the government during the oral argu-

‘ment in the Western Pacific Railroad Company case in sup-

port of its contention that violation of the statute in ques-

_ tion, with or without the change of authorized v-redit terms -

by regulation, would give rise to the penalty, does not seem

to the court to sustain the government’s position. United —

States v. St. Regis Paper Company, 285-P.2d 607 (2d Cir.

- 1960). See also 181 Fed. Supp. 862. On the contrary, this

case suggests to ‘me that there would be serious problems

of due process were I to hold here that without an adminis-

trative order directed specifically to the complained con-

~ y 9

; duct and an opportunity to be heard thereon, the defendant

in this proceeding would be liable for the forfeiture in

question. : ?

The motion to Sasitee the complaint is granted, and

the government is allowed twenty days within” ‘which to

file an amended complaint if it be so advised. 7

Dated this 28th day of December, 1965.

8/ A. SHERMAN Cunisrassex

A. Sherman Christensen |

United States District Judge

bs

oy

‘

1 }

pan B-2

In the United States District Court

FOR THE DISTRICT OF UTAH

CENTRAL DIVISION

Unitep States or AMERICA,

Plaintiff, .

vs. ie |

oe No. C 221-65

THe WestTeERN Paciric Ramroap os )

Company, -

| Defendant.

MEMORANDUM DECISION

The complaint i in this case is in three counts and seeks

to recover penalties of $5,000. 00 with reference to each of

these counts for violation of an alleged order of the Inter-

state Commerce Commission relating to the collection by

the carrier of freight charges. 49 United States Code 16(8).

' It is provided by statute that no carrier by railroad

shall deliver or relinquish possession at destination of any

freight transported by.it until all tariff rates and charges

thereon have been paid, except under such rules and regula-

. tions as the Commission may from time to time prescribe to

govern the settlement of all such rates and charges and to

prevent unjust discrimination. 49 United, States Code § 3.

Regulations adopted by the Commission pursuant to

this statutory authority are designated as Ex Parte No. 73.

They now limit the: credit period to 120 hours computed

from midnight of the day of delivery or date of presen-

2 ‘ v

tation of the freight bill, whichever is later, excluding Sat-

urdays, Sundays and legal holidays. 49 C.F.R. 142.1b, 142.6,

142.7, 142.8, 142.9, 142.10, and 142.11.

Tie 7 complaint alleges that the defendant frequently

and-knowingly engaged in the practice of extendihg credit

in excess of 120 hours oN" tariff charges applicable to inter-

state carload shipments’ of freight to certain interstate ship-

pers at Salt Lake City, Utah; and alleges more particularly

in each count that defendant delivered to and relinquished

possession of a carload shipment and presented its freight

bill within the requisite time, but failed to collect the

charges within the 120 hours, and failed thereafter /to put °

the shipper on a cash*basis or refuse to extend credit to it.

On each count the statutory forfeiture of $5;000.00 is

claimed:

- am of the opinion that Ex Parte Order No. 73 is not

such an order as is contemplated by Section 16 of Title 49,

United States Code, and that the alleged conduct of the de-

fendant does not constitute a knowing failure to obey any

order of the Interstate Commerce Commission. Ex Parte

No. 73 is not the type of ‘‘order’’ contemplated by 49 Unit- | E

ed. States Code 16(8). Ex Parte No. 73 is legislative in

character’ and has the same force and effect as it would

have if enacted by Congress. It is in effect a general modi-

fiication of Section 3 of Title 49 which prohibits the sur- |

render of freight without first collecting the freight charges.

If there had not been such a modification of Section 3

and Section 3 stood simply as an unregulated statute pro-

hibiting the surrender of freight without the prior collec-

tion of freight charges, it seems clear that ‘its violation

would not have been a failure or neglect ‘‘to obey any or- .

Me 7 ~~ - ,7%. —

der made under the provisions of Section 3... .’’ Section 3,

-- ag the cfedit terms are modified from cash to 120 : hour

_ terms by Ex Parte No. 73, continues essentially of the same

character. A violation of that statute, notwithstanding

its changed effect, bears the same consequences as it would

intially. Ex Parte Order No. 73, while authorized by Sec-

tion 3 of the statute, and regularly adopted after notice by

the Commission, is a general regulation and not such an

order as is contemplated by 49 Vanes States Code 8 16(8). ;

Defendant’s motion to dieiee the pee is grant-

ed and the plaintiff is allowed twenty days to amend if it:

be 80 advised.

Dated this 27th day of December, 1965.

s/ A. SHERMAN CHRISTENSEN

° Hy - ° A, Sherman Christensen

United States District Judge

te eerrrrerecnncet :

err at q os te: Cee hes * a v a alitateltik s

1

Appendix C

Interstate Commerce Act

Section 3(2)

§ 3, par. (2). Payment of freight as ssushiiaiiiias to de-

livery. No carrier by railroad and no express company

subject to the provisions of this chapter shall deliver or

relinquish possession at destination of any freight or ex-

press shipment transported by it until all tariff rates and

charges thereon have been paid, except under such rules

_ and regulations as the Commission may from time to time

prescribe to govern the settlement, of all such rates and .

charges and to prevent unjust discrimination: Provided; -

‘That the provisions of this paragraph shall not be con-

strued to prohibit any carrier or express company from -

extending credit in connection with rates. and charges on

freight or express shipments transported for the United

States, for any department, bureau, or agency thereof, or

for any State or Territory or political subdivision thereof,

or for the District of ‘Columbia. Where carriers by railroad

are instructed by a shipper or. consignor to deliver prop-

erty transported by such carriers to a consignee other than

the shipper or consignor, such consignee shall not be legally

liable for transportation charges in respect of the transpor-

tation of such property (beyond those billed against him at

* the time of delivery for which he is otherwise liable) which

may be found to. be due after. the property has been deliv-

ered to him, if the consignee (a) is an agent only and has

no berfeficial title in the property, and (b) prior to delivery

of the property has notified the delivering carrier in writing

of the fact of such agency and absence of beneficial title,

and, in the ¢ase of-a shipment reconsigned or diverted to a

, point other than that specified in the original bill of lading,

2°

has also notified the délivering carrier in writing of the

name and address of the beneficial owner of the property. In

such cases the shipper or consignor, or, in ‘the case. of a

shipment so reconsigned or diverted, the beneficial owner,

shall be liable for such additional charges, irrespective of

any provisions to the contrary in the bill of lading or in the

contract under which the shipment was made. An action for

the enforcement of such liability may be begun within the

period provided in paragraph (3) of section 16 of this title

or before the expiration of six months after final judgment

' against the carrier in an action against the consignee begun

within the period provided in paragraph (3) of section 16

of this title. If the consignee has given to the carrier er-

roneous information as to who the beneficial owner is, such

consignee shall himself be liable for such additional

charges, notwithstanding’ the foregoing provisions of this

paragraph. An action for the enforcement of such liability

may be begun within the period provided in paragraph (3)

of section 16 of this title or before the expiration of six

months after final judgment against the carrier in an action

against the beneficial owner named by the consignee kegun

within the period provided in paragraph (3) of section 16

of this title. On shipments reconsigned or diverted by an

agent who has furnished the carrier in the reconsignment

or diversion order with a notice of agency and the proper

name and address of the beneficial owner, and where such

_ Shipments are refused or abandoned at ultimate destna-

tion, the said beneficial owner shall be liable for all legally

applicable charges in connection therewith. If the recon-

signor or diverter has given to the carrier efroneous infor-

mation as to who the beneficial owner is, such reconsignor ~

or diverter shall himself be liable for all such charges, and

an action for the enforcement of his liability may be begun

MAG ei

3

within the same period provided in the case of an action

against a consignee who has given erroneous information

~ as to the beneficial owner. Feb. 4, 1887,.c. 104, Pt. I, § 3, 24

Stat. 380; Feb. 28, 1920, c. 91, § 405, 41 Stat. 479; Mar. 4

1927, c. 510, § 1, 44 Stat. 1447; Sept. 18, 1940, c. 722, Title L

§ 5(d), 54 Stat. 902; Aug. 2, 1949, c. 379, § 2, 63 Stat. 485.

| Interstate Commerce Act

| Section 10(1)

(1) Any common carrier subject to the provisions of

this chapter, or, whenever such common carrier is a eorpo- —

ration, any director or officer thereof, or any receiver, trust-

ee, lessee, agent, or person acting for or employed by such

corporation, who, alone or with any other corporation, com-

pany, person, or party, shall willfully do or cause to be

done, or shall willingly suffer or permit to be done, any act,

matter, or thing in this chapter prohibited or declared to be

unlawful, or who shall aid or abet therein, or shall willfully

‘omit or fail to do any act, matter, or thing in this chapter

required to be done, or shall cause or willingly suffer or

permit any act, matter, or thing so directed or required by

this chapter to be done not to be so done, or shall aid or abet

any such omission or failure, or shall be guilty of any in-

_ fraction of this chapter for which no penalty is otherwise

provided, or who shall aid or abet therein, shall be deemed

guilty of a misdemeanor, and shall, upon conviction thereof :

in any district court of the United States within the juris-

diction of which such offense was committed, be subject to

a fine of not to exceed $5,000 for each offense: Provided,

That if the offense for which any person shall be convicted

4 pe °

as aforesaid shall be an unlawful discrimination in rates,

_ fares,:or charges for the transportation of passengers or

property or the transmission of intelligence, such person

shall, in addition to the fine hereinbefore provided for, be

liable to imprisonment in the penitentiary for a term of not

: exceeding two years, or both such fine and imprisonment, in

the discretion of the court.

Interstate Commerce Act

. Section 16

§ 16. Orders of commission and enforcement thereof

Award of damages

(1) If, after hearing on a complaint made as provided .

in section 13 of this title, the commission shall determine

that any party.complainant is entitled to an award of dam- |

ages under the provisions of this chapter for a violation

thereof, the commission shall make an order directing the

carrier to pay to-the complainant the sum to which he is

entitled om or before a day named.

Proceedings in courts to enforce Seders; costs; attorney’s fee .

_ (2) If a carrier does not comply with an order for the

payment of money within the time limit in such order, the

eomplainant, or any person for whose benefit such order

_ was made, may file in the district court of the United States

for the district in which he resides or in which is located the

principal operating: office of the carrier, or through which

the road of the carrier runs, or in any State court of gen-

eral jurisdiction having jurisdiction of the parties, a com-

plaint setting forth briefly the causes for which he claims

_ damages, and the order of the commission in the premises.

vee ae

Such suit in the district court of the United States shall

proceed in all respects like other civil suits for damages, ,

except that on the trial of such suit the findings and order

of the commission shall be. prima facie evidence of the facts

therein stated, and except that the plaintiff shall not be

~ liable for costs in the district court nor for costs at any

subsequent stage of the proceedings unless they accrue

upon his appeal. If the plaintiff. shall finally prevail he

shall be allowed a reasonabe attorney’s fee, to be taxed ~

- and collected as a part of the costs of the suit.

; =

Limitation of actions

(3) (a) All actions at law by ‘carriers subject to. this

chapter for recovery of their charges, or any part thereof,

- ghall be begun within two years from the time te cause of

action acernes, and not after. |

(b) All qomnplainte against carriers ‘subject’ to this

_ chapter for the recovery of damages not based on. over-

charges shall be filed with the commission within two years

. from the time the cause of action accrues, and not after,

subject to subdivision (d) of this paragraph.

(c) For recovery of overcharges action at _ shall be

begun or complaint filed with the commission against car-

riers subject’ to this chapter within two years from the

time the cause of action accrues, and not after, subject to

subdivision (d) of this paragraph, except that if claim for

the overcharge has been presented in writing to the carrier ~

within the two-year period of limitation said period shall

- be extended to include six months from the time notj

writing is given by the carrier to the claimant of disallow-_

ance of the claim, or any rs or parts thereof, specified i in.

the notice. |

6 ,

(d) If on or before expiration of the two-year period

of limitation in subdivision (b) of this paragraph | or of the

two-year period of limitation in subdivision (c) of this

paragraph a carrier subject to this chapter begins action

under subdivision (a) of this paragraph for recovery of

charges in respect of the same transportation service, or,

without beginning action, collects charges in respect of that

service, said period of\limitation shall be extended to in-

_ elude ninety days from the time such action is begun or such.

- charges are collected by\ the carrier.

(e) The cause of action in respect of a shipment of

property shall, for the purposes of this section, be deemed

_ to accrue upon delivery or tender of delivery thereof by

the carrier, and not after.

~ (f) A-complaint for the enforcement of ‘an order of

the commission for the payment of money shall be filed in

the district court or the State court within one year from -

the date of the order, and not after.

(g) The term ‘‘overcharges’’ as used in this section

shall be deemed to mean charges for transportation serv-

ices in excess of those applicable tiereto under the: tariffs

lawfully on file with the commission.

(h) The provsions of this paragraph shall extend to

‘and embrace cases in which the cause of action accrued

prior to June 7, 1924, as well as cases in which the

cause of action accrues thereafter, except that actions

at law begun.-or complaints filed with the commission

against carriers subject to this chapter for the recovery

of overcharges where the cause of action accrued on or

after March 1, 1920, shall’ not be deemed to be barred under

subdivision (c) of this paragraph if such actions shal] have

7

A ,

been begun or complaints filed prior to June 7, 1924, or

within six months thereafter.

Joinder of parties; process; judgment

(4). In such suits all parties in whose favor the com-

mission may have made an award for damages by a single

order may be joined as plaintiffs, and all of the carriers

parties to such order awarding such damages may be joined

as defendants, and such suit may be maintained by such

joint plaintiffs and against such joint defendants in any

' district where any one of such joint plaintiffs could main- —

tain such suit against any one of such joint defendants; and »

‘service of process against any one of such defendants as

may not be found in the district where the suit is brought

may be made in any district, where such defendant carrier.

has.its principal: operating office. In case of such joint suit

the recovery, if any, may be by judgment in favor of any

one of such plaintiffs, against the defendant found to be

liable to such plaintiff.

A

Service of order of commision and notics of procsdings

, . (5) Every order of the commission shall be forthwith

served upon the designated agent of the carrier in the city

of Washington or in such other manner as may be. provided

by law. In proceedings before the Commission involving

-the lawfulness of rates, fares, charges, classifications, ‘or

practices, service df notice upon an attorney in fact of a

carrier who has filed a tariff or schedule in behalf of such

carrier shall be deemed to be due and sufficient service upon

the ‘carrier, excépt where the carrier has designated an

', agent in the city of Washington, District of Columbia, upon ~

whom service of notices and processes may be made, as

8

provided in section 50 of this title: Provided, That in such

proceedings service of notice ‘of the suspension of a tariff.

or schedule upon an attorney in fact of a carrier who has

filed said tariff or schedule in behalf of such carrier shall

be deemed.to be due and sufficient servi¢e upon the carrier,

and servicé.of notice of the suspension of a joint tariff or

schedule upon a carrier which has filed said joint tariff or

schedule to which another carrier is a party shall be deemed

to be due and sufficient notice upon the several carriers par-

ties thereto. Such. service of notice may be made by mail to

such attorney i in fact or carrier at the address shown in the

toxidt ‘or schedule.

” Saniciten or sietiestien of orders

(6) The commission shall be authorized to uid or

modify .its orders upon such notice and in such manner as

it shall deem proper.

_(7) It shall be the duty of every common carrier, its

agents and employees, to observe and ‘comply with such

orders so long as the same shall remain in effect.

Failure of cattler of Glflear tp chey orders; penalty

(8) Any carrier, any officer, representative, or agent

of a carrier, or any receiver, trustee, lessee, or agent of

either of them, who knowingly fails or neglects to obey any

order made under the provisions of sections 3, 13, or 15

of this title shall forfeit to the United States the sum of

$5,000 for each offense. Every distinct violation shall be a

. separate offense, and in case of a continuing violation tom

day: shall be deemed a separate offense.

q

. 9. 4

| Suit for recovery of forfeiture

(9) The forfeiture provided for in this chapter shall be _

payable into the Treasury of thé United States, and shall be

recoverable’ i ‘in a civil suif in the name of the United States,

brought in ‘the ‘district: where the carrier has. its principal

operating office, or in any district through which the ee

of the carrier runs.

District attorneys to prosecute for forfeitures; costs uli expenses

(10) It shall be the duty of the various district attor-

neys, under the direction of the Attorney General of the

United States, to proseceute for the recovery of forfeitures.

The costs and expenses of such prosecution shall be paid

out of .the appropriation for the expenses of the courts of

‘fhe United States. } "ae

Employment of attorneys by commission

(11) The commission may employ such attorneys as it

finds necessary for proper legal aid and service of the com- -

mission or its members in the conduct of their work, or for

proper. representation of the public interests in investiga-

tions made by it or cases or proceedings pending before it,

whether at the commission’s own instance or upon com-

plaint, or to appear for or represent the commission in any:

_ease-in court; and the expenses of such employment shall

be paid out of the appropriation for the commission.

Proceedings to enforce orders other than for payment of money

(12) If any carrier fails or neglects to obey any order

of the commission other.than for the payment of money,

‘while the same is in effect, the Interstate Commerce Com-

mission or any party injured thereby, or the United States,

by its Attorney General, may apply. to. any district court of

10 “

the United States of competent jurisdiction for the enforce-

ment of such order. If, after hearing, such court determines

that the order was regularly made.and duly served, and

that the carrier is in disobedience of the same, such court

shall enforce obedience to such order by a writ of injunction

-or other proper process, mandatory or otherwise, to re-

strain such carrier, its officers, agerits, or. representatives,

from further disobedience of such order, or to enjoin upon

it or them obedience to the 1 same.

Copies of schedules, tarts, contracts, et, kept a

public records; evidence i

(13) The copies of schedules and classifications and

tariffs of rates, fares, and charges, and of all contracts,

agreements, and arrangements between common carric’s

filed with the commission as herein provided, and the sta-

tistics, tables, and figures contained in the annual or other

reports of carriers made to the, commission as required -

under the provisions of this chapter shall be preserved as -

public records in the custody of the secretary of the com-

mission, and shall be received as prima facie evidence of

what they purport to be for the purpose of investigations by

the commission and in all judicial proceedings; and copies

of and extracts from any of said schedules, classifications,

tariffs, contracts, agreements, arrangements, or reports,

made public records as aforesaid, certified by the secretary, .

- under the commission’s seal, shall be received in evidence’

with like effect as the originals. Feb, 4, 1887, c. 104, Pt. I,

§ 16, 24 Stat. 384; Mar. 2, 1889, c. 382, § 5, 25 Stat; 859; June

29, 1906,-c, 3591, § 5, 34 Stat. 590; June 18, 1910, c. 309,

§ 13, 36 Stat. 554; Mar. 3, 1911, c. 231, $291, 36 Stat. 1167;

Oct. 22,1913, ¢. 32, 38 Stat. 219; Feb. 28, 1920, c. 91, §§ 423-

429, 41 Stat. 491, 492; June 7,.1924, c. 325, 43 Stat. 633;

~~

| : 11

Aug. 9, 1935, c. 498,:§ 1, 49 Stat. 543; Sept. 18, 1940, c. 722,

Title I, § 11(a), (b), 54 Stat, 912, 913; Aug. 2, 1949, ¢. 379,

§ 6, 63 Stat. 486. “ .

Interstate Commerce Act

Section 41(1)

(1): Anything done or omitted to be done by a corpora-

tion common carrier, subject to chapter 1 of this title,

which, if done or omitted to be one by any director or officer

thereof, or any- receiver, trustee, lessee, agent, or person

acting for or employed by such corporation, would consti-

tute a misdemenor under said chapter or under sections ‘41,:

42, or 43 of this title, shall also be held to be a misdemeanor

committed by such corporation, and upon conviction there-

of it shall be subject to. like penalties as are prescribed in

chapter 1 of this title or by sections 41, 42, or 43 of this title,

with reference to such persons, except, as such penalties

are herein changed. The willful failure upon the part of.

any carrier subject to chapter 1 of this title to file and pub-

lish the tariffs or rates and charges as required by said

chapter, or strictly to observe such tariffs until changed

according to law, shall be a misdemeanor, and upon con-

viction thereof the corporation offending shall be subject

to a fine of not less than $1,000 nor more than $20,000 for

each offense; and it shall be unlawful for any person, per-

sons, or corporation to offer, grant, or give, or: to solicit,

accept, or receive any rebate, concession, or discrimination

in respect to the transportation of any property in inter-

state or foreign commerce. by any common carrier subject

to said ckapter whereby any such property shall by any

device whatever be transported at a less rate than that

named in the tariffs published and filed by such carrier, as

12

is required by said chapter, or whereby any other advan-

_. tage is given or discrimination is practiced. Every person

or corporation, whether carrier or shipper, who shall, know- >

ingly, offer, grant, or give, or solicit, accept, or receive any

such rebates, concession, or discrimination shall be deemed

guilty. of a misdemeanor, and on conviction thereof shall ©

. be punished by a fine of not less than $1,000 nor more than

$20,000: Provided, That. any person, or any officer or di-

rector of any ‘Taataee to the provisions of sec-

tions 41, 42, or 43 of this title, or of chapter 1 of this title,

or any receiver, trustee, lessee, agent, or person acting for

- or employed by any such corporation, who shall be con-

victed as aforesaid, shall, in addition to the fine herein pro-

vided ‘for, be liable to imprison in the penitentiary for a

term of not exceeding two years, or both such fine and im-

prisonment, in the discretion of the court. Every violation

of this section shall be prosecuted in any court of the Unit-

ed States having jurisdiction of crimes within the district

_in which such violation was committed, or through which

the transportation may have been conducted; and when-

ever the offense i is begun in one jurisdiction and completed

in another it may be dealt with, inquired of, tried, deter-

- mined, and punished in either jurisdiction in the same man-..

ner as if the offense had been | actually and wholly com-

mitted therein: . |

Administrative Procedure Act

Section 551

(4) ‘‘rule’’? means the whole or a part of an agency

statement of general or particular applicability and-future :

effect designed to implement, interpret, or prescribe law

or policy or describing the organization, procedure, or prac- my

7

13°

tice requirements of an agency and includes the approval

or prescription fot the future of rates, wages, corporate

or ‘financial structures or reorganizations thereof, prices, ia

facilities, appliances, services or allowances therefor or of

valuations, costs, or accounting, or practices bearing on any

of the foregoing;

4

* . *

(6) ‘‘order’’ means the whole or a part of.a final dis-

position; whether affirmative, negative, injunctive, or de-

claratory in form, of an agency in a matter other than rule

making but including licensing ; .

1

Appendix D

Ex Parte No. 73.

In Re Section 3 of the Interstate Commerce Act, as

‘ Amended by Section 405 of the Transportation Act,

1920.

Submitted April 21,1920. Decided June 4, 1920.

Rules and régulations for the prompt payment of

transportation rates and charges prescribed.

Alfred P. Thom for Association of Railway Executives ;

S. M. Adsit for Virginian Railway Company; James F.

Fahnestock for Pennsylvania Railroad Company; Arthur

B. Jones for Chicago & North Western Railway Company;

J. L. Harris for Chicago & Alton Railroad Company; H.W. |

_ Meyers and T. J. Norton for Atchison, Topeka & Santa Fe

Railway Company; Wm. .N. Neff and J. S. Livengood for

_ Southwestern Railroad Executives. Association; Edward L.

Rossiter for New York Central Railroad Company; T. J.

Smith and Francis B. James for Campbells Creek Railway

Company; and Henry Thurtell for Southern Railway.

R. C. Allen, W. W. White, and S. E. Bool for Lake Su-

perior Iron Ore Association; E. 8. Ballard for National

Coal Association and Rubber Association of America; A.-E.

- Beck for Merchants & Manufacturers Association of Balti-

more; Joseph H. Beek for St. Paul Association of Public &

Business Affairs ; Charles S. Belsterling for Carnegie Steel

- Company, National Tube Company, American Sheet & Tin

Plate Company, American Bridge Company, American

_ Steel & Wire Company, Tennessee Coal & Iron Company,

.Lorain Steel Company, Illinois Steel Company, Universal

_ Portland Cement Company, Oliver Iron Mining Company,

2

.

H. C. Frick Coke Company, and others; B. L. Benfer for

Benfer Company, National Macaroni Manufacturers Asso-

ciation, Foundry Supply Manufacturers Association, Cleve-

land Macaroni Company, Bishop & Babcock Company, Gal-

ion Iron ‘Works & Manufacturing Company, and others;

J. 8. Brown for Board of Trade of the City of Chicago;

J. B. Campbell for Spokane Merchants Association and

Spokane Chamber of Commerce; W. H. Chandler for Bos-

ton Chamber of Commerce, Massachusetts Associated In-

dustries, Massachusetts Chamber of Commerce, Arkwright

Club, New England Traffic League, and Boston Wool Trade

Association ; R..Cumming for American Fruit & Vegetable

. Shippers Association; Fayette B. Dow for National. Pe-

troleum Association, Western Petroleum Refiners Asso-

ciation, Rochester Chamber of Commerce, National League

of Commission Merchants of the United. States, Interna-

tional Apple Shippers Association, and Western Fruit Job- -

bers Association of America; G. M. Freer for National In-

dustrial Traffic League; B. L. Glover for Ash Grove Lime &

Portland Cement Company; Mr. Graham for Southern

Traffic League; F. H. Harwood for Illinois Coal Traffic

Bureau; C. B. Heinemann for National Live Stock Ex-

change ; Percwal Johnson for Pulaski Iron Company; War-

ren C. Ki ing for Manufacturers Council of New Jersey;

B. A. Kozicke for National Wholesale Grocers Association

of the United States; George C. Lucas for Shippers Con-

ference Committee of Greater New York and American

Tobacco Company; W. W. Manker for Armour & Company

and subsidiary companies; D, O. Moore for Chamber of "

Commerce of Pittsburgh; Herman Mueller for Milwaukee —

Association of Commerce, Sneboygan Association of Com-

_ merce, Cheese Shippers Traffic Association, Wisconsin Re-

tail Lumbermen’s Association, and othefs; E. H. Porter

3

for Commercial Traffic Managers and Atlantic Refining

Company; R. W. Potect for New England Traffic League

and Stanley Works; J. T. Preston for Association of Com-

merce of Roanoke, Va.; R. D. Rhodehouse for Youngstown

_ Chamber of Commerce and Ohio State Industrial Traffic

League; George A. Schroeder for Milwaukee Chamber of

Commerce; Win. D. Smith for Wm. Wrigley, jr., Company

and Shippers Conference Committee of Greater New York;

Joseph N. Teal for Pacific coast cities; D. W. Thomas for

. Virginia Iron, Coal & Coke Company; Herbert Thompson ;

_for Compressed Gas Manufacturers Association, Union

Carbide Company, and National Carbon Company ; John I.

Tierney for Manufacturing Chemists Association of the

United States; George II. Tower for Standard Oil Com-.

pany of New Jersey; Jonas Waffle for Indiana Coal Oper-

ators; Luther M. Walter for Jones & Laughlin Steel Com-

pany and Morris & Company; D. T. Warimg for Central

Leather Company and Shippers Conference Committee of

Greater New York; George B. Webster for Associated

Cooperage Industries of America; S. J. Wettrick for Seat-

tle Chamber of Commerce and Commercial Club; J. W.

White for National Fertilizer Association; and Nathan B.

Williams for National Association of Manufacturers.

T. B. Harrison for American Railway Express Com-

pany. . ag”

R. G. Hare for. Prairie Pipe Line Company.

4

REPORT OF oe

By fie CoMMISSION :

. Section 3 of the interstate commerce act provides in

paragraph (2) that:

From and after J uly 1, 1920, no carrier by rail-

road subject to the provisions of this Act shall deliver

or relinquish possession at destination of any freight

transported by it until all tariff rates and charges

thereon have been paid, except under such rules and

regulations as the Commission may from time to time ©

prescribe to assure prompt payment of all such rates

and charges and to prevent unjust discrimination:

Provided, That the provisions of this paragraph shall

not be construed to prohibit any carrier from extend-

ing eredit in connection with rates and charges’ on

_ freight transported for the United States, for any de-

partment, bureau, or agency thereof, or for any State

or. Territory or political subdivision thereof, or for .

the District of Columbia.

On March 30, 1920, we gave notice that we would

hear shippers, carriers, and other parties interested in this

subject. previous to issting the rules and regulations con-

templated by the statute. Ata hearing on April 20 and_21,°

1920, we heard many shippers, certain organizations of

i and the principal carriers, concerning the rules ~

and regulations which should be promulgated.

General Order No. 25, issbed, by the Director General

of Railroads, among other things, provided:

Effective July 1, 1918 [subsequently changed to.

August 1, 1918], the collection of. transportation

charges, by carriers under Federal control, for serv-

ices rendered, shall be on a cash basis, and, effective

as of that date, credit accommodations then. in exis-

tence which may be in conflict with the following regu-—

lations shall be cancelled. , -3

SS eo

_. In cases where the enforcement of this rule, with

respect to freight, will retard prompt forwarding or

delivery of the freight or the prompt release of equip-

‘ment: or station facilities, carriers will be permitted

to extend credit for a period of not exceeding forty-

eight (48) hours after reeeipt for shipment of a con-

signment if it be prepaid, ot\after delivery at desetina-

_ tion if it be a collect consignment, provided the con-

signor if it be a prepaid consignment, or the consignee’

if it be collect, file a surety bond either individual

or corporate, in an amount satisfactory ag the Treas-

urer of the carrier,:

: Circular No. 9, dated June 29, 1918, issued bythe di-

rector of public service and accounting, in the United States

Railroad Administration, provided in part as follows:

While the carrier must protect itself in cases ‘

where such protection is necessary, it should also treat

_ shippers or consignees in a business way. "Ihe ma-_

jority of shippers or consignees in the past have paid

their freight when they received their godds and that

’ practice should be continued for the future. In many

instances with regular customers there is no necessary

. connection between the delivery of freight and the

presemtation and payment of the freight bill; that is,

the freight will be delivered to one person at one time

and the bill presented to and collected fo iient other

person at some other time. It is not the intent of this

order to interrupt reasonable arrangements of that

sort which do oY involve the granting of a period of

credit, but simply to put the transaction upon a cash

basis.

_ Assume, for example, that freight is delivered to

such regular customer on Monday and that the freight -

bill is mailed or delivered on the same day to the ship-

per or consignee being received-by him in due course

upon the morning of the next day. If, now, the shipper -

or cpnsignee remits his check ‘fot the amount during

isday so that it may be received by the carrier the

morning of Wednesday, that is to be treated as a.cash

~~

am +6.

transaction. The’ bill is presented and paid in due

course of business and no period of credit in the ordi- °

| naw acceptation of that term is given.

~This might in fact allow one day for the examina-

. tion and correction .of the freight bill but that would

not be the purpose of the transaction. In such case no

bond will be required. ;

If ina particular case it js in the opinion of the

carrier necessary or in the interest of economy that a

period of two days in addition to the above prescribed

should be allowed, this may be done upon the filing of

the necessary bond. The. check in this case should be

mailed or payment made on Thursday.

The carriers have estimated that the enforcement of ‘

General Order No, 25 provides them with working capital

of approximately $75,000,000 which, if the customs and

practices in the extension of credit to shippers in vogue

prior to the enforcement of that order were restored, would

generally be outstanding as unpaid transportation charges.

~The carriers ask that the rules and regulations to be

promulgated shall follow, as nearly as is practicable, the

provisions of. General Order No. 25 and the circular men-

tioned above. A large number of the shippers have joined

“in a request that the rules and-regulations shall provide —

that in certain cases and upon surety bonds being furnished

by the shippers, the carriers, shall render freight bills daily,

| and-periodical statements. of the bills on, the 7th, 14th, 21st,

-and last day of each month, and that the shippers shall pay -

the bills within three days after receiving the statements.

The shippers and the carriers have acknowledged that a

large proportion of the shippers do not need, and will not

ask for, credit, and that such credit is necessary only in

connection with forwarding or delivery for those whose

Pd

7

shipments are extensive or in connection with shipments

received or delivered by the carriers unler circumstances

hereinaftér described. The maximum period of credit sug-

gested by the carriers as proper and necessary is 96 hours,

and the period asked by many of the shippers is that of

weekly’ settlement as described above. A few of the ship-

pers, including: the Lake Superior Iron Ore Association, |

have asked that the rules and regulations which we promul-

gate shall permit carriers to resume the practices antedat-

ing General Order No. 25—that is, to extend long periods

of credit to shippers—but as that practice is now clearly

prohibited by“the statute further consideration of such re-

quests i ls unnecessary. :

With but few exceptions the shippers have indicated

that they do not expect credit’ for the purpose of financial

accommodation in the amount of the transportation charges.

The shippers ask that the rules and regulations which we -

promulgate shall provide for a short period of time be-

tween the delivery of the shipments or the rendering of the

freight bills and the payment of the transportation charges,

the following reasons being i ics le 4

1. Several shippers have asserted that this brief exten-_

sion of credit is necessary to enable them to audit the

freight bills and correct’ erroneous applications of rates

prior to payment of charges incorrectly computed by the

carriers. .; |

_ 2. Both shippers and carriers requested that a reason-

able time be granted for the computation of transportation

charges, the presentation of freight bills, and the collection

of charges on shipments, which, in accordance with cus-

tom ‘and practice or tariff provisions, are collected upon

8

destination elevator, cotton compress, official, certified, or F

other destination or outturn weights, the weighing being

- customarily done after the delivery of the shipments at

destination. ’

~ 3. Upon certain freight traffic, in accordance with tariff

ce provisions for thé computation of transportation charges

at outturn weights or values ascertained by. consignees, it

is not customary for the carriers to maké or present to

shippers, bills for the: transportation charges until after

the carriers have relinquished pennanen of the shipments

at destination.

4, Many large shipping corporations’are engaged in

the ane of mines, the production of lumber, or pro-

duction f raw materials, and other commodities in sparsely

settled districts far removed from banking facilities, where

the carriers and shipping corporations do not maintain,

a *

_and cah not reasonably be expected to maintain, office forces

entrusted with funds for the settlement of transportation

charges. A large tonnage of freight traffic is customarily

‘shipped to and from the operations in such districts. An

‘undue burden would be placed upon industry if rules and

regulations should require financially responsible shippers,

‘such as mining companies and other corporations, to sta-

tion appropriate employees at each of their several mines

or operations to payatransportation charges on shipments

consigned to such operations. It is not always advisable to

entrust or encumber those engaged in trucking freight for

shippers with funds for the payment of transportation

charges. The foregoing is a sufficient recital of the exi-

gencies described at ra hearing. _¢

a

9 o-

The carriers assert that the number of erroneous

| ffeight bills has not been large, and the rendering of incor-

rect freight bills is a temporary war-time’ condition, ascrib-

_ able to the unusual labor turnover during the past four

years, which will soon be #emedied. Section 6 of the inter-

state commerce act provides that no carrier, subject to the

provisions of that act shall demand, collect, charge, or re-

ceive a greater or less or different compensation than is

provided in the published tariffs. Section 3, paragraph

_ (2), does not authorize carriers to extend credit to shippers

in order that the shippers may have time to audit freight

bills and thereby guard against claims for overcharges or

undercharges subsequent to payment of the freight bills. We

expect the carriers to take action that will substantially

reduce the number of erroneous freight bills rendered. -

The following is quoted from the report of the House

of Representatives of the Committee on Conference upon:

~ the Senate and House bills which became the acta

tion Act, 1920”°:

‘Section 405 er that, after J uly 1, 1920, no

railroad shall relinquish possession of freight at desti-

‘nation until all rates and charges thereon have been

paid, except under such rules as the Commission may

prescribe to assure prompt payment and prevent un-

just discrimination. The latter provision virtually con-

tinues the operation of General Order No. 25 of the

Railroad Administration, as supplemented, relating

to the extension of credits by railroads.

The intention of Congress to require by statute the

enforcement of the provisions of General Order No. 25, as

supplemented, in so far as they may be reasonably applied,

is thus manifest. Thosé provisions have been in force for,

22, months and the business methods of the shippers and

fe

10

carriers have been adjusted to conform thereto.-The rules.

and regulations which we promulgate should contemplate

the collection of transportation charges prior. to, or con-

temporaneous with, the delivery of most shipments, and,

while adhering to the principle of prompt payment of

chirges, should, upon certain freight traffic, give opportu-

nity for the preparation of freight bills at destination,

weights to be ascertained after the carriers ~have relin-

quished possession of freight, and for the presentation of

_. freight bills to the appropriate offices and employees of _

shippers by United States mail, by messenger, or by other

proper means, and for payment of the charges in the regu-

lar course of business by the shippers. An order will be

issued in accordance: with these. conclusions.

In the rules and regulations which we promulgate we

will not undertake to deal with several matters which were

covered by General Order No. 25. We will not prescribe

rules for the collection of prepaid charges on shipments of

freight, or for the collection of passenger fares or baggage

_ charges, or for the form.or-character of surety bonds: We

believe that our order will admit of the application to those

matters of the provisions of General Order No. 25, as sup-

plemented, or other appropriate rules to be formulated

by the carriers, and that we should leave the carriers free

to prescribe these and other details in‘ the instructions

_ which we expect.that the carriers will issue for r the guidance

‘ of their agents. We expect that carriers 3 will 1 refrain from

granting undue extensions of credit that might arise from

the transmission of freight bills, checks, drafts, and money

- orders through the mails’ to or from offices of shippers that

_ are located at a considerable distance from the places where |

_ the carriers relinquish possession of the freight.

An appropriate order will be entered.

Se Se! PO IS Ao OS ee oe

11

_ Order.

‘Ata General Session of the Interstate Commerce Com-

mission, held at its office in Washington, D. C., on

the 4th day of June, A.D. 1920. ‘

Ex Parie No. 73. . :

am re Section 3 of the Interstate Ciinhisiiian Act, as

amended ‘by Section 405 of the re |

Act, 1920.

It appearing, That vaiitans 3, paragraph (2),.of the in-

terstate commerce act, as amended by section, 405 of the

transportation act, 1920, provides:

From and ‘after July 1, 1920, ‘no carrier by rail-

road subject to the provisions of this Act shall deliver .

or relinquish possession at destination, of any freight

transported by it until all tariff-rates and charges

thereon have been paid, except-under sueh rules and -

regulations as the Commission may from time to time

prescribe to assure prompt payment of all such rates

and charges aind to prevent unjust discrimination: -

Provided, That the provision of this paragraph shall

not be construed to prohibit any carrier from extend-

ing credit in connection with rates and charges on >

freight transported for the United States, for any. de-

partment, bureau, or agency thereof, or for any State

or Territory or political subdivision there: of, or for the

District of Columbia. :

It further appearing, That a full investigation of the

matters and things involved has been had, and that the

Commission, on the date hereof, has made and filed a report

containing its finding of fact cae conclusions thereon, which

_ said report is hereby referred to and made a part hereof:

12

: It is ordered, That.the following rules and regulations

be, and they are hereby, prescribed to become. effective on

July 1, 1920, and to remain in force =e the further order,

of the Commission: ae ,

1. Where retention of possession of any freight by

the carrier until the tariff rates and charges thereon have _

been paid will retard prompt delivery or will retard

prompt release of equipment or station facilities, the car-

rier, upon taking precautions deemed by it to be sufficient

to insure payment. of the e tariff charges within ‘the period -

of credit herein specified, may relinquish possession of the

freight i in advance of payment of the tariff charges thereon —

and may extend credit in the ‘amount of such charges to

those who undertake to pay such charges, such persons

- being herein called shippers, for a period of ninety-six.

hours to be computed as follows:

(A) Whe the freight bill j is presented to the ‘ieee |

~ prior to, orat the time of, delivery of the freight the ninety- |

six hours of credit shall run from the first 4:00 p.m., fol- 1

Tewing the delivery of the sal : |

| (B). Where the freight bill is presented to the. ship-

per subsequent to the time the freight is delivered the

ninety-six hours of credit shall run from the first 4:00 p.m.,.

following the presentation of the freight bill.

2. Every such carrier shall present freight bills to

shippers not later than the first 4 p.m. following delivery of

the freight, except that when information sufficient to en-

able the carrier to compute the tariff charges is not then

available to the carrier at the delivery point, the freight

bills shall be presented not later than the first be p-m., fol-

OEE:

lowing the day upon which sufficient information ree

available to the delivering agent of the carrier.

3. Shippers may-elect ie have their freight bills pre-

sented by. means of the United States mails, and when the

mail service-is so used the time. of mailing by” the, carrier .-

‘shall be deemed to be the time of presentation of the bills.

In case of dispute as to the time of mailing the postmark

shall be accepted as showing such time.

4, Sundays and legal holidays, other than Saturday

half holidays, may be excluded from the computation of the ©

period + credit. & ficen al

5. The mailing by the: shipper of valid checks, drafts,

or money orders which are satisfactory to the carrier in

payment of ‘the tariff charges, within the period of credit -

prescribed above, may be deemed to be payment of the

tariff charges within the period of ninety-six hours of »

credit. In case of dispute as to the time of mailing the

postmark shall be accepted as showing such time. *

Ex Parte No. 73

In Re Section 3 of Interstate Commerce Act as.

Amended February 28, 1920, and March 4, 1927

Submitted March 6, 1930. Decided January 20, 1931.

Rules and navihasieda for the. prompt payment ‘of

_ transportation rates and charges prescribed —

in 57 I. c. C. 591, medined,

Alfred P. Thom and Alfred P. Thom, jr., for Associa-

tion of Railway Executives. P

- John S. Burchmore, Luther M. Walter, and Joseph i.

Beek for National Industrial Traffic League; J. M. Belle-

ville for Pittsburgh Plate Glass Company ; Ralph A. Bent- —

ley for National Tea Company; Geo. A..Blair for Institute

_ of American Meat Packers; J. A. Brough for Crane Com-

pany; J. S. Brown for Board of Trade of City of Chicago ;

T. C. Burwell for A. E, Staley Manufacturing Company;

W. H. Chandler for Merchants Association of New York;”

Geo. E. Clinton for Sheffield Farms Company, Incorporat-

ed, New York Milk Conference Board, and, Chamber of

_ Commerce of Borough of. Queens; D. A. Dashiell for Na-

_ tional Fertilizer Association, Incorporated, and F. S. Roy-

~ ster Company; C. 8. Decker for Borden Company ; Fayette

_ B. Dow, Willis Crame, and Harry S. Elkins for American

Petroleum Institute and National Petroleum Association;

_ W. J. Hammond for Inland Steel Company; J. P. Haynes

and C. E. Hochstedler for Chicago Association of Com-

‘merce; Harold R. Hendrick for Cincinnati-Chemical Works,

Incorporated ;-Samuel Herndon for Cincinnati Chamber of.

Commerce; L. G. Hutts for United Engineering -& Foun-

dry Company ; H. Ignatius for Procter & Gamble Company’

tg

16

Bernard A, Koziske for National .Wholesale Grocers A'sso-”

ciation of United States; F..E. Luebbe for Kruger Grocery _

& Baking Company ; G. E. Mace for Trenton Chamber of

Commerce and United Clay. Mines Corporation; W. W.

Manker for Armour & Company and subsidiary compan-

ies; J. J. Martin for. Montgomery Ward & Company; F. H:

Overdorf for Bethlehem Steel Company; H. H. Perry for ‘

e Pillsbury Flour Mills Company; R. G: Phillips, Fayette BO

_ Dow, and Horace Johnes for Joint Council of Interna-.

* tional Apple Shippers Association, National. League of ' @

Commission Merchants of United States, and Western

Fruit J obbers Association of America; R. I. Pierce for

Manufacturers Association; E, H: Porter for Commercial |

Traffic Managers of Philadelphia, Pa,, and Atlantic Refin- Re

ing Company’; Chas. R. Seal for Baltimore Association of |

Commerce ; Clare B. Tefft for Doledo © Chamber of Com-

merce; Warren H. Wagner for John Morrell & Company;

Edward W. Warren for Casket Manufacturers. Association

of America; Wm. E. Whelpley for St. Alworth Company ;

‘L. Z. Whitbeck for Great Atlantic & Pacifie Tea Company;

A, J. Whitman fpr Americar Agricultural Chemical Com-

- pany; R. C. Fulbright and James J. Shaw for Anderson

Clayton & Company and Houston Compress Company; and

_ E.S. Wagner for Millers National Federation.

Ruvcer or THE Commission on FurtHEerR Hearine

Division 3, Ctisieietiaiaeaiadts Atromox, Porter, anp Tate |

AltcHison, Commissioner:

a

Exceptions were filed by various parties to the report

proposed by the examiner and the case was orally argued.

Our conclusions differ somewhat from those reosmamended

by him. “

16

The original report, 57 I. C. C. 591, and the order there-

in entered. June 4, 1920, prescribed rules and regulations; |

hereinafter referred to as rules, for the prompt payment of

transportation charges, and fixed 96 hours as the maximum

time for which carriers should extend credit. No changes ;

_ are sought in the"modified rules prescribed in 59 I. C. C.

456, as applicable to the payment of demurrage charges on

tidewater coal handled by the tidewater coal exchanges at

‘New York, N. Y., Philadelphia, Pa., Baltimore, .Md., and

Hampton Roads, Vas ;,in 63 I. C. C. 375, as applicable on

export traffic loaded in the vessels from velivend piers; or

ir? 69 I. C. C. 351, on traffic from and to Bartle, Calif., origi-

nating at or consigned to certain interior points not served

" . by railroad; and these modified rules will not be further

considered.

Section 3, paragraph 2, of the interstate commerce act

in effect prior to March 4, 1927, provided : :

From and after July 1, 1920, no carrier by railroad:

subject to the provisions of this Act:shall deliver or re-

linquish possession at destination of any freight trans- |

ported by it until all tariff rates and charges thereon _

have been paid, except under such rules and regula-

tions as the Commission may from time to time pre-

scribe to assure prompt payment of all such fates’ and

charges and to prevent. unjust discrimination: Pro-

vided, That the provisions of this paragraph shall not

be construed to prohibit any carrier from extending .

credit in connection with rates and charges.on freight

transported for the United States, for any department,

bureau, or agency thereof, or for any State or Terri-

. tory or political subdivision thevest, or for the District

of Columbia.

On March 4, 1927, section 3, paragraph 2, was amended

by the omission of the words ‘‘assure prompt payment”

17

and the substitution therefor of the weells ‘“vovern the

settlement. *’

It was the clear intendentment of the statute prior to

its amendment that the carriers’ business should be

conducted on a cash basis. To assure this purpose. they

were prohibited from relinquishing their lien on freight

transport until all charges thereon had been paid, except

under such rules as‘ we prescribed to assure prompt pay-

ment of such charges. The statute, as interpreted by us,

did not authofize us to prescribe rules permitting the

carriers to extend credit to shippers in order that shippers

might audit their freight; bills and thereby guard against

claims for overcharges or undercharges.

The only ‘change in the law made by the amendment

is that now we are not restricted to making rules that

assure prompt payment of freight charges. We may permit

carriers to extend credit for a reasonable time to shippers

for the purpose of auditing freight bills or to meet other

- exigencies of ‘business, but we can not make a mandatory

order prescribing a period of credit which carriers must

. allow. It is within the discretion of the carriers to refuse

to extend any credit or to extend credit for a shorter period

than the maximum prescribed by us. :

The proceeding was reopened for further hearing on

a petition filed by the National Industrial Traffic League,

hereinafter referred to as the League, alleging that the

_ present rules are unworkable and that there are numerous.

unavoidable violations thereof by both carriers and ship-

pers. It asks that the rules be modified so as to- alow

shippers a longer period of time within which to. pay freight

charges. The Association of Railway Executives denied

18

the League’s allegations and asks that the request be re-

fused. A number of individual shippers and firms appeared |

_at the hearing in support. of both parties. As a matter of

convenience the parties advocating a change in the present"

rules will hereinafter be referred to collectively as peti-

. tioners.- |

Each carrier has formulated its own rules governing

' the extension of credit to its patrons. Therefore, the prac-.

tices are not uniform. Generally, the carriers appear to

have established two periods for the collection of trans-

portation charges, one of 48 hours and one of 96 hours,

but all carriers do not require that the same conditions

precedent exist before granting credit for such- periods.

Some of the carriers refuse to grant 48 hours’ credit unless

the retention of possession of freight by them will actually

retard prompt delivery or prompt release of equipment or

station facilities, while others grant 48 hours to any re-

sponsible patron on the theory that to refuse to grant

- eredit would seriously interfere with the orderly admin-

istration of the carriers’ business. The second class of

carriers referred to make no distinction between shippers

based.on the volume of movement or condition of facilities.

The occasional shipper is granted the same privileges as

those having .a heavy volume of traffic. The general rule

seems to be that carriers grant 48 hours’ credit to any and

all shippers requesting such accommodation, provided they

are deemed to be financially responsible. Some carriers

require a bond of patrons on the 48-hour list, while others

do not; but the general rule is that a patron whose credit

rating is satisfactory is not ‘required to give a bond..The .

practices of the carriers in granting the 96-hour period

vary more. widely, but the majority adhere more strictly

19

to the rules. ‘Generally, eredit for 96 hours is not allowed —

unless investigation shows that the granting thereof is

necessary to. prevent retardment of prompt delivery or

that it will promote prompt release of equipment or sta-

tion facilities. When investigation does not convince the

earriers that the granting of credit for 96 hours will be

advantageous to them, some of them refuse to grant more _

than 48 hours. Others try to convince the applicant that

credit for 48 hours will serve his purpose, but if the shipper

insists, they grant credit for 96 hours. Other carriers

grant credit for 96 hours on a showing that the applicant’s

methods of conducting business would be interfered with

if his application were denied. The general rule seems

to be that the granting of credit for 96 hours is discouraged, |

and that bond is required, although there are some excep-

tions, some carriers being more liberal than others in both

particulars. ao, :

Reports made by treasurers of 136 Class I railroads

and large terminal and switching roads, which produced

98.4 per cent of the aggregate operating revenues of all

such roads in 1928, show that 10 per cent of the 1928 freight

revenue’ was collected at thé time of delivery of inbound

freight or forwarding of prepaid shipments, 72.9 per cent

from patrons on the 48-hour list, and 16.7 per cent from

patrons on the 96-hour list. The fact that the number of

patrons on the 48-hour list is so greatly in excess of those

on the 96-hour list is due not only to reluctance on the

part of the carriers to grant 96 hours’ credit, but to a large

extent to the.refusal of shippers to give bond. Some of

the large businéss interests, which contend that the present

maximum period of 96 hours is too short, are-among those -

who have failed to avail themselves of the 96-hour period

20

because they refuse to:give bond. Certain of them state

that if a longer pefiod of credit is permitted, they will

continue to operate-under the 48-hour period if a bond is

required to obtain the benefit of the longer period:

Petitioners generally advocate an extension of the

credit period for a maximum period of seven or eight days.

They have not proposed any specific changes in the present

regulations for the purpose of meeting what they say are

the reasonable demands ‘of business, except as, to the pay-

ment of undercharges and certain accessorial charges here-

inafter discussed. The carriers purpose that the hour of

4 p.m. in the present rules be changed so as to allow the

presentation or mailing of freight bills at any. time prior

to midnight.

Petitioners generally say that they do not desire credit

as a matter of financial accommodation.. Three primary

reasons why. they believe they should Jhave an extension of

time within which to pay freight charges are shown below:

1. Sufficient time should be allowed for the checking |

“of the correctness of the bills rendered as to the weights

applied, the rates, extensions, and charges..

2. Reasonable time should be allowed for determination

of the receipt of the goods by the, consignee of whom pay-

ment is demanded, the condition of the goods, and that -

the goods were in fact consigned to or intended for such

consignee. |

3. Sufficient time should be permitted to avoid un- '

reasonable and-extraordinary expense to consignees and

consignors for clerical hire in the matter of auditing, check-

\

2

ing, and vouchering of the bills, including -the avoidance

of unnecessary expeuse of numerous checks in payment

of bills.

The evidence is convincing that when freight bills are

properly rendered and the handling thereof is given pre-

ferred and ‘expedited attention, it is practicable for most

shippers whose offices are located near the point of deliv-

ery to determine whether the goods have been delivered,

whether the freight bill covers traffic belonging to the

consignee, and to check and pay the freight bills within 48

hours. There are few instances under such circumstances

where 96 hours is not ample for the purposes stated.

Many commercial organizations have agencies or

- branches more or less widely scattered over the country

and do not maintain office forces for the auditing a

payment. of freight bills_at—such~ points. Such work is :

performed at ‘branch or central offices. In many instances,

bills for freight delivered at such agencies can not be for-

warded by mail, audited, and paid within the credit period

allowed.such concerns. Payment under the present practice

can be and frequently is made by drafts. drawn on the

shipper by the carrier ’s or shipper’s agent, -

The fact that the handling of freight bills must be

given expedited attention in order to pay them within the

time allowed is one of tle principal causes of complaint.

Petitioners desire time to pass the freight bills through

their traffic, accounting, treasury,-and other departments

in the ordinary course of business. They state that if they

are permitted to handle freight charges in this manner,

and are allowed seven or eight days within which to pay,

_ they can reduce the number of necessary checks now drawn,

22

the amount of bookkeeping and clerical hire, and detect

overcharges and undercharges, before payment of the bills.

They assert that extension of the credit period would

relieve them from the pressure they are now under in ©

attempting to pay bills within the credit period and at the

same time conform to their present operating systems; and .

that it would also reduce the number of failures to comply

with the present regulations, thereby eliminating many

petty annoyances caused by. the carriers’ insistence that :

they comply with the law. Reasons given as justifying an a

extension of tlie credit period other than those tmnentioned |

above are that shippers should de allowed to pay freight

bills at their convenience; that they should be allowed to d

accumulate freight bills and pay them by one or two checks

once or twice a week; and that they should be allowed

sufficient time to check goods against the invoice and con-

tact of sale in order to verify the terms of sale and the

quantity, quality, and weight of the goods, and to examine

the goods to determine. whether any has been lost « or dam-

aged | in transit.

y The ‘eviderioe as to the number of erroneous freight

bills issued is somewhat contradictory. According to some

of the petitioners erreneous freight bills constitute but a

small percentage of all the bills rendered, while others state

_ that there has been but little improvement in the rendering.

of freight bills during the last seven or eight years. One

witness estimated that about 40 per cent of the freight

‘ bills rendered on his traffic are erroneous. This statement

was contradicted by a witness for the carriers who caused

an investigation to be made at three of the principal cities

where a large proportion of the traffic referred to by the

witness is handled. Replies received from 1,746 agents,

ee

representing 151 railroads, show that during November,

1928, they issued 7,526,825 freight bills of which 116,287,

or about 1.5 per cent, contained errors. The treasurer of.

the Erie stated that its experience demonstrates that more

than 96 per cent of the freight bills issued by it are correct.

when rendered; and’ that a recent check for -one month

showed .that 99 per cent were correct when rendered. The

_ eomptroller for the Nerthern Pacific showed that during

1920 and-1928, refunds of overcharges amounted to 0.828

per cent and 0.353 per cent, respectively, of the total freight

revenues, and that the undercharges collected for the same

years were 0.277 and 0.175 per cent, respectively, of such

total revenue. 3 3 :

Although some of the errors in freight bills are directly

chargeable to consignors because of errors in billing, such

as use of erroneous weights and descriptions of traffic, and

the showing on a percentage basis as to particular carriers

is good, the evidence as a whole shows that as to the traffic

of many shippers there is much room for improvement in

the rendition of freight bills, not only as to the amount of

the charges, but as to their legibility and the completeness *

of the information shown thereon. Certain of the carriers ‘

are endeavoring to bring about such improvement. They

are auditing freight bills before presentation at the larger

. Stations; and after delivery of the freight and payment of

the charges at the smaller stations they are forwarding

the bills to the central office for. verification. Where such

practices are in effect good results have been obtained and

overchatges, when discovered, are promptly refunded.

Carriers generally will be ‘expected to extend their efforts

and take the necessary action -to substantially reduce the

number of erroneous freight bills and to determine that the

4

bills when rendered are legible and ‘eontain the data

- specified in In the Matter of Freight Bills, 29 I. C: C. 496.

The prompt presentation of correct freight bills in proper

form will go far towards removing the difficulties many

of the petitioners are now encountering in paying their

freight bills within the allowed credit: period. |

Petitioners contend that the present regulations are —

not being complied with and instance many violations of .

the act. General intimations. unsupported by competent

evidence of deliberate violations of the act by agreement.

between agents of the carriers and shippers were made by

a representative of the League, but, on brief, counsel for

the League states that it does not say that it is a general

practiee of the carriers to violate the statute. Petitioners

contend that the rules-are now so stringent: -that it is im-

possible to enforce. them and that there:are many unavoid-

able violations. They admit that it is entirely feasible for

most shippers to comply with the present rules and that

as to such shippers the rules are being enforced. They say

that violations are confined principally: to concerns with

many country branches and isolated plants, such as milk

and cheege companies and large concerns receiving or ship-

ping traffic in large quantities at or from large plants of

cities, such as steel companies, meat packers, and large

manufacturers. Although violations caused by loss or’

- misplacement of freight bills and other errors due to human

frailties constitute a large proportion of the total viola-

tions, others are clearly due to carriers’. and shippers’ in-

difference to the requirements of the law. The following

are illustrations of such inexcusable delinquencies. One :

cheese manufacturer pays its freight bills at.Green Bay,

Wis., every five days, at Beaver Dam and South Beaver

25

Dam, Wis., to one carrier once every four days and to

another once a week; at Wichita Falls, Tex., it is allowed

time to write to its Chicago office and obtain funds when-

ever a carload of freight. is received ; and at other places °

similar conditions are said to exist. Another company fails _

to pay about 35 per cent of its freight bills within the maxi-

mum credit period because of delay caused by checking

freight bills and passing them through the several divisions

or departments of its organization. A large number of

failures to pay within the allowed ‘period are due also to

the refusal of shippers to pay freight bills until they are

convinced that the amounts of the charges sought to be

collected are ‘correct. An analysis of answers to question-

naires received from 250 agents of 13 carriers shows that

"for the week of March 11 to 16, 1929, 13.1 per cent of the

- total. freight revenues was collected after the expiration

of. the 48-hour period but before the expiration of the

96-hour period, and 4 per cent after the expiration of the

‘ 96-hour period. The reasons assigned by delinquents for

not paying within the 48-hour period were in the order of

the number of replies received giving each reason as fol-

lows, party who signs checks out of town, sick, ete. ; general

busiriess routine, or rush of’ business, delays payment; bills .

mislaid or lost, neglect, or oversight; bills not received,or

delayed in the mail; bills forwarded to out-of-town head-

quarters for payment or approval ; question. | of error in

‘rate, weight, ete. ; sickness\or vacation in office force ;

shortage of funds due to slow collections; and cars not

placed.

There i is a demand by a large NEE of apa for

an extension of the credit period.. The only active opposi-

tion to such an extension is on the part of the railroads

and the growers and shippers of fresh-fruit and vegetables.

While not actively opposing the extension of the .credit

period a considerable number of shippers find the present

' rules practicable and satisfactory and. docnot advocate

any change therein. The League sent questionnaires to

approximately 960 members inquiring whether they were

‘satisfied with the present rules. A large number of ship-

: pers whose views were solicited by the League failed to

_ answer questionnaires sent to them. It received replies -

from 300 members, 233 of whom desired an extension of

time and 67 of whom are satisfied with the present rules, -

or were indifferent as to whether they are changed. Among

the 67 expressing no desire for a change are some of the

largest shippers in the country and four chambers of com- .

merce. The return from questionnaires sent to the railroad —

- agents shows that out of 910 agents having patrons on the »

96-hour list, 752 reported that they had not received. any

complaints against. the present rules, while 152 reported’

that they had received complaints and: that the reasons.

assigned\by the shippers complaining or desiring an exten-

- gion of fime were in the order of the number of replies

containing each such reason as follows, time too short for

checking rates, weights, etc. or errors in rates, weight, etc. ;

biJl forwarded to out-of-town headquarters for payment

or approval ; general business routine or rush of business;

desire to devote only one day each week to bookkeeping

and paying freight bills; and aiid of funds due to slow

collections.

The law requires that charges for the transportation

_of freight must be paid within the credit period allowed

by the regulations. The desire of shippers to adhere to

convenient and established methods of conducting their -

Cane’

‘7 .

business and to postpone payment pending disputes as to

the legal charges is no excuse for the failure to comply

with the law.. Deviations by shippers from the ‘terms of

the statute and the regulations made pursuant thereto are .

no more to be countenanced deus are such acts on the part

of the, carriers.

' Ten railroad treasurers who are charged with the ad-

ministration of the’carriers’ credit rules testified that they

had received but few complaints in regard to the present’

~ rules and regulations; that there is no widespread demand —

for a change in the rules; that, so far as they have been

able to ascertain, the rules are satisfactory *to the large:

_ majority of shippers; and thatthe rules.are not only work-

‘able but that they are being strictly enforced. They state.

- a check i is kept on the station agents through the traveling

auditors; that from time to time the agents’ attention is

, called to the rules and they are directed to see that they

are enforced; that a check is kept on outstanding bills and

that attention is promptly called to delinquencies ; and that’

if patrons fail to pay after such notice or persist in not -

paying within the: credit period, their names are dropped

from the credit list. ?

The treasurers’ testimony relative to the workability

and.enforcement of the regulations is apparently confined.

.to the transportation charges, exclusive of *accessorial

_ charges, within 96 hours, as they had little knowledge rela- .

tive to the collection of aceessprial charges. The record

shows that at St. Louis, Mo., and. other cities a patron on

the 48-hour list who fails to pay within that time, but pays

within 96 hours, is not denied further credit; and that some

carriers are ignoring’ the fact that the granting of credit

s

under the rules is. contingent on whether the. retention of .

possession will retard prompt delivery or prompt release

of equipment or station facilities.

The treasurers are endeavoring to comply with the

law as interpreted by them, but we are convinced by the

testimony of the traffic witnesses, who instanced specific

violations such as the periodical payments heretofore re-—

ferred to and delays for as much as six days in rendering

freight bills, and by the prosecutions for failure to comply

with the rules and facts disclosed by the investigations by

our employees, of-which we must take judicial notice, that

they are not receiving the necessary cooperation from other

- employees of the earriers. A material and immediate im-

provement in this regard will be expected. |

The carriers contend that the extension of the credit

‘period would be detrimental to them. They fear if they are

clothed with’ the power to grant credit for a period longer

than 96 hours. that such power may be sed by some of the

carriers in an endeavor to obtain psi. i traffic from

other carriers and: that it would result in discrimination

between shippérs. They testify that a Jonger period would

increase the number of the applications for credit, and

because of. the larger amounts involved require the exercise

of more care and precautions in investigating the financial

responsibility of applicants; that more, if not all, shippers

“would be required to give bond; and.that the bonds would |

have to be for larger amounts resulting in dissatisfaction

. among shippers and contention between shippers and car-

riers. They also state that an extension of the credi® period

would cause more work-for the credit officers probably ne-

cessitating an increase in their office forces, and would cause

29

‘more work and additional expense in the accounting depart-

"ments and ‘at the larger stations. They state that their

experience prior to Federal control demonstrates that it

is the general. practice of ’ debtors to take advantage of

' the maximum period of credit allowed, and that the larger

the amount due the harder it is to collect. Under such

circumstances, they assert that they will more frequently

encounter the pleas that funds are short and that because

of the rush of businéss shippers are unable to devote the

time necessary to the handling of freight matters. They

take issue with the petitioners’ contention that an extension

of the credit period would tenddargely to prevent violations

_ of the law, and predict that it would. have thé opposite

tendeney; and contend that their losses ‘due to failure in

business of shippers would be materially increased,

. The carriers estimate that additional working capital .

ranging in amount from $34,000,00 to $87,042,146 would

be required if the maximum credit period were extended

to 192 hours. They estimate that $34,000,000 additional

working capital would: be: required if all patrons now on

the 48-hour list were granted 96 hours’ credit and all’

patrons on the 96-hour list were granted.192 hours’ credit ;

that an additional working éapital of $80,394,170 would.

be required if all patrons now on the 48-hour and 96-hour .

lists were granted 192 hours’ credit; and that additional

_ working capital of $87,042,146 would required if half the

patrons now paying cash on delivery and all patrons on

- the 48-hopr and ees lists were ie carne 192 hours’ credit.

The ¢ carriers point out that they are ‘required to render

freight bills promptly, and that no charge is sought i in this

requirement; but that on’ the contrary most of the peti-

=

tioners are demanding that this requirement be more |

strictly complied with. There is no reason to believe that

the extension of the credit period would reduce the number

tof erroneous freight bills rendered by the carriers.

In addition to the extension of the credit period for

the payment of transportation charges, certain of the —

parties ask us for an expression as to whether the statute

and rules apply to the payment of undercharges. An

_. erroneous freight bill rendered by the carrier does not

change the carrier’s obligation to collect or the shipper’s

.. to pay the legal rate. The rules prescribed by.us provide

* that the credit period shall begin to run from the first

4 p.m. following delivery of the freight or the presentation

of the freight bill. Therefore, the carriers required that

- undercharges be paid within the credit period allowed the

shipper not exceeding 96 hours after the first 4 p.m. fol-

lowing the. presentation of the freight ‘bill for the under-

- charges. Some carriers have erroneously interpreted the

‘rules as not being applicable to undegeharges. The pre- |

‘scription of a credit period of 30 days for the collection of

‘such charges is requested by petitioners and carriers. The

transaction.is past and in many c&ses the facts necessary.

to determine the applicable charges are more difficult to

ascertain than those relative to current transactions. As

the shipper in the first ‘instance paid the charges demanded -

by the carrier, it would appear that when further charges

are demanded he should be allowed a reasonable time to |

ascertain the facts and determine whether the additional

* amount sought is actually due. Thirty Gaye! is a reasonable

period for. these purposes.

«.

The carriers genérally do not appear to be collecting

certain so-called accessorial charges in accordance with the

31

rules and we are asked to provide special rules to meet

the specific conditions surrounding and attending such

services.

In instances where icing charges are to be paid by |

the consignor on prepaid shipments, it has been the practice.

_ of the carriers for a number of years to collect such charges

monthly, and business has adjusted itself to this practice. .

In such instances the icing charges are not known at the

time the freight charges are paid or until the car arrives

at destination as they are usually based on the amount of

. ice placed in the cars not on!y at the origin but also en

route. The quantity of ice required for proper refrigera-

tion varies with the length of the hauls, the time consumed.

. in the movement, and weather conditions. In instances

where the freight charges are collected from the consignee

and where the icing charges are fixed by the tariffs i irre-

spective of the amount ef ice used, they are collected at—

the same time the freight charges are collected. |

The tariffs of the carriers contain rules providing for

the making of so-called average demurrage agreements, .

which usually provide for the set off of credits against

_ debits accruing during a stated period, usually one month.

Credits are allowed for the release of cars prior to, and

debits are charged for the detention of cars beyond, the

free-time. The amounts due under these agreements can

- not be determined until after the period has expired. Their

use has had our approval. The carriers state that they

require considerable additional time after the expiration.

of the demurrage period to enable them to check and pre-

sent the bills. They also state that for various reasons

more than the ordinary number of errors occur in these -

32

bills and that shippers are entitled to a longer period of

credit in order that they may verify them.

- The carriers Sw submitted drafts of rules which have |

the approval of the League. and, two or more shippers, and

ask us to approve such rules goyérning the payment of

_ icing charges and demurrage p able under average agree-

ments. The rules prescribed he ik comply substantially

>with these requests. The League asks that a further spe-

‘cial rule be prescribed permitting bills for all demurrage

charges where no average agreement is in force to be:

rendered within 15 days after the end of the month in

which they accrue and that shippers be allowed 15 days

after presentation of the bills within which to make pay-

ment. Such a rule is not acceptable to the carriers and no

evidence ‘has been introduced tending to justify its ap-

proval.

The carriers, the League, and one or two shippers seek’

to have us approve the following recommended rule for the

payment of charges for switching services not connected

with a line haul:

Bills for switching charges for switching not con-

nected with line haul movement shall: be presented

within fifteen days‘following the month in which the

- charges accrued and shall be paid on or before the last

day of the month in which such bills are presented.

The carriers state that there is no surrender of traffic

which is security for the freight charges; that the number __

of such services is few; and that the amount of money in-.

volved is comparatively small. No facts are shown tending

to support any of these statements: and we question their

correctness. It is a matter of general knowledge that ‘an.

33

enormous tonnage of many kinds of traffic is handled at

the large cities and industrial centers in switching move-

ments which are not parts of line hauls.

Petitioners show that at the large industrial plants

the switching services in some instances ‘are covered by

line-haul rates; that in others they are due to the carrier’s

failure to Whnesiy place cars ; and that in others the switch-

ing movements are separated and- distinct from line hauls

and additional charges are applicable therefor. They say

that it is practically impossible for the carriers to render

bills on other than a monthly basis due to the large-volume

of traffic; and that the bills when rendered are far from

accurate as the traffic is handled by switching crews, pre-

.Sumably on switch tickets necessitating a subsequent check

by the office force to determine on what. cars switching

- charges are applicable. Carriers are now rendering bills .

for these services on a monthly basis to some. of the larger

industries - and apparently also to some of the smaller

shippers. No evidence was introduced showing the extent _

to which this practice is now followed or by what test the

carriers determine when they will follow it. It may be that

difficult conditions encountered at some of the large plants

would make it*more economical and advantageous to both

shippers and carriers to collect the switching charges on

a monthly basis, but there is no justification for exempting

' all traffic which receives a switching movement not con-

nected with a line haul from application of the general

rules. The evidence is not sufficiently comprehensive to

enable us to determine to what. extent, if any, the general .

rules should be modified to meet the situation sought to be

covered by the ass rule.

bs]

34

The question’ presented, in so far as it relates to the

modification of the general rules, is whether, in view of

the strenuous objection by the carriers, and their conten- >.

tions, which are supported by the evidence, that the present

rules are workable and enforceable, just to both shippers

and carriers, that they assist the carriers in avoiding dis-

crimination between shippers and in the collection of —

freight charges and reduce to a minimum losses due to

failures to pay, and the further facts that the extension

of the credit period would require a large additional work-

ing capital and cause the carriers additional work and

expenses without compensating advantages, we should

modify the present rules so as to clothe the carriers with

a permissive authority which they claim would work to

their detriment.

“We have no authority to issue an order requiring

carriers to grant any credit. It is their right and privilege:

not only to demand payment of the freight charges before

relinquishing possession of the freight at destination, but

to demand the payment of such charges before forwarding

the freight from the point of origin. This limitation on

_our power is recognized by petitioners, but they contend

that irrespective of the desires of the carriers it is our

duty to prescribe rules that meet the reasonable desire and .

business practices of shippers. They argue that when the

carriers are requested or pressed to grant credit for longer

periods than are prescribed by the rules they declare they

are unable to do so because of the provisions of the statute.

_ It is sought to deprive them of this defense against the

demands of the shippers.

‘ The statute, as amended, gives us an additional free- ,

dom of action and enables -us to ciate rules permitting

GH i: °

carriers to depart from the cash basis for reasons which,

prior to the amendment, would: not have justified: such

action. We do not interpret the amended statute, however, as

justifying us in giving preference to commercial interests

over the rights and desires of the carriers, and we do not 7

feel justified in prescribing rules clothing the carriers with

a permissive authority they do not desire and which may

subject them to threatened or actual diversion of traffic

and result in unjust discrimination among shippers.

We find that the rules prescribed by us in the original

report, 57 I. C. C. 591, should be modified as follows:

The carrier, upon taking. precautions deemed by it to

.be sufficient to assure payment of the tariff charges within .

the credit periods herein Specified, may relinquish posses-

sion of freight in advance of the payment of the tariff

charges thereon and may extend credit in the amount of

such charges to those who undertake to pay such charges,

such persons herein being called shippers, for a period of

48 hours computed as hereinafter set forth.

_ Where retention of possession of freight by the carrier

until the tariff rates and charges thereon have been paid

will retard*prompt delivery or will retard prompt release of

equipment or station facilities, the earrier, upon taking pre-

cautions deemed by it to be sufficient to assure payment of

the tariff charges within: the credit period herein specified

may relinquish possession of the freight in advance of the

payment of the tariff charges thereon and may extend credit

in the amount of such charges to shippers for a period of

_ 96 hours to be computed as hereinafter set forth.

Where a carrier has relinquished possession of freight

and collected the amount of tariff charges represented in a

‘

36

: freight bill presented by it as the total amount of such

charges, and another freight bill for additional charges is

thereafter presented to the shipper, the carrier may extend

credit in the amount of such additional charges for a period

of 30-days, to be computed ds hereinafter set forth, from

the date of the presentation of the subsequently presented

freight bill. |

, Where icing charges are not published in the tariffs

at ‘fixed amounts determinable at the time the ‘shipment

moves from point of origin, and where freight charges are

prepaid and icing charges are to be paid by the consignor,

the carrier, upon taking precautions deemed by it fo be

sufficient to assure prompt payment of the tariff charges

within the credit. period herein specified, may relinquish

possession of the freight in advance of the payment of the

| icing charges and may delay presentation of bills for such

icing charges for. a-period not exceeding 15 days after the

end of the calendar month during which the charges accrued

and may extend credit in the amount of such charges for

15 days from the presentation of the bill for such charges.

Where the amount of demurrage charges is determin-

able under average agreements made in accordance with

tariff provisions, the carrier, upon taking: precautions

deemed by it to be sufficient to assure prompt payment of

the tariff charges within the credit period, may delay the

* - presentation of bills for such demurrage charges for a

period not to exceed 15 days from. the expiration of the

authorized demurrage period and may extend credit in the

‘amount of the demurrage charges accruing during the

demurrage period for 15 days from the preteen of the

bill for such tent : |

ae

Where the freight bill is presented to the shipper prior

to, or at the time of, delivery of the freight, the 48-hour and

96-hour periods, of credit shall run from the first 12 0 clock

midnight following the delivery of the freight:

' Where the freight bill is presented to the shipper sub-

sequent to the time the freight is: delivered, the 48-hour

and 96Mour periods of credit shall run from the first 12

o’clock midnight following the presentation of the freight

bill. |

Every carrier shall present freight bills for all trans-

portation charges except those herein specifically excepted

to shippers prior to the first 12 o’clock midnight following

delivery.of the freight, except that when information suf-

ficient to enable the carrier to compute the tariff charges is

not then available to the carrier at the delivery point, the

- freight bills shall be presented not later than the first 12

o’clock midnight following the day upon which sufficient

information becomes available to the delivering agent of

' the carrier.

Shippers may elect to sate their freight bills presented.

_ by means of the United States mails, and when the mail

service is so used the time of mailing by the carrier shall

be deemed to be the time of presentation of the bills. In case

of dispute as to the time’ of mailing the post mark shall be

accepted as showing such time. ,

Sundays and legal holidays, other than : Saturday half-—

holidays, may. be excluded from the computation of the

periods of credit. |

The mailing by the pan of valid Checks, drafts, or

money orders, which are satisfactory to the carrier, in pay- |

38

ment of freight charges within the credit periods allowed

such shipper may be deemed to be the collection of the tariff

charges within the credit period for the purposes of these

‘ rules. In case of dispute as to the time of mailing the post

mark. shall be accepted as showing such time.

An ‘appropriate order will be entered.

f * | |

Pr ORDER |

‘Ata Session of the Interstate Commerce‘ Commission,

_ Division 3, held at its office in Washington, D.C., on the

20th day of January, A.D. 1931 e

Ex Parte No. 73

In re Section 3 of the Interstate Commerce ia as

Amended by Section 405 of the Transportation

| Act, 1920, and Act of March 4, 1927. |

It appearing, That on November 1, 1928, upon further

consideration of the record and petition of the National

Industrial Traffic League, this proceeding was ‘reopened:

for rehearing and reconsideration :

It further appearing, That said rehearing and full i in-

vestigation of the matters and things involved have been

‘ had and that the- commission on the date hereof. has made

‘and filed a report on further hearing containing its findings |

of fact and conclusions thereon which said report is hereby

referred to and made a part hereof: 7 ie ora

It is ordered, That the rules and regulations pre-:

scribed in the order of J une 4, 1920, in the above-entitled

proceeding be, and they are hereby, modified and that the

Se we f

mat DS Res ot ante Le Lae Ae eee

ee

| following rules and regulations be, and they are hereby,

prescribed to becqme effective: March 10, 1931, and to Te- °

main in force and effect until further order of the com-

- mission.

The carrier, upon taking precautions deemed by it to

be sufficient to assure payment of the tariff charges within

the’ credit periods herein specified, may relinquish pos-

session of freight in adyance of the payment of the tariff

charges thereon and’ may extend credit in the amount of

such charges to those who undertake to pay such charges,

such persons herein being called shippers, for a period of

' 48 hours computed ° as hereinafter. set forth.

Where retention or wunsesceion of freight by the car-

rier until the tariff rates and charges thereon have been

paid will retard prompt delivery or will retard prompt re-

lease of equipment or station facilities, the carrier, upon

taking precautions deemed by it to be sufficient to assure

payment,of the tariff charges within the credit period

‘herein specified, may relinquish possession of the freight

in advance of the payment of the tariff charges thereon |

and may extend credit in the amount of such charges to

_ shippers for a period of 96 hours to be computed as here- '

inafter set forth,

Where a carrier has relinquished possession of freight

and collected the amount of tariff charges represented in a ‘

-freight bill presented by it. as: the total amount of such

charges, and another freight bill for additional charges is

thereafter presented to the shipper, the carrier may extend»

credit in the amount of such additional charges for a period

of 30 days from the date of the presentation of Ge subse-

quent presented freight bill.

40

‘Where icing charges are not published inthe tariffs at

fixed amounts determinable at the time the shipment moves

from point of origin, and where freight charges are prepaid

and icing charges are. to be paid by the consignor, the car-

rier, upon taking precautions deemed by. it tobe sufficient

to assure prompt payment of the tariff charges within the

credit period herein specified, may relinquish possession ©

of the freight i in advance of the payment of the icing charges

‘and may delay presentation of bills for such icing charges.

for a period not exceeding 15 days after the end of the cal-

_ endar month during which the charges accrued and may ex-

tend credit inthe amount of such charges for 15 daye-from .

- the presentation of the bill for such charges.

| Where the amount of deniurrage charges is determi-

> mable under average agreements made.in accordance with

"tariff provisions ‘the carrier, upon taking precautions

deenied by. it to:be sufficient to assure prompt payment of

the tariff: charges’ ‘within the credit périod, may delay the

presentation ‘of ‘bills for such demurrage charges for a

period not to exéeed 15 days from the expiration of the:

~ authorized demurrage ‘period and may extend credit i in the

amount of the demurrage charges. accruing during the de-

*-murrage* period for 15 days from the presentation of the .

bill for. such. charges. ear

| ‘Where the freight bill is anasunal tothe shipper prior

“to, or at the time of, delivery of the freight, the 48 and 96

- hour periods of credit shall run from the first 12 o’clock

midnight following the delivery of the freight.

Where the freight bill is presented ¢o the shipper sub-

sequent to the time the freight is delivered, the 48 and 96

hour periods of credit shall run from the first 12 o’clock

midnight following the presentation of the freight bill.

#

, 41

€ oi

Every carrier shall present freight bills for all trans-

portation charges except those herein specifically excepted

to shippers prior to the first 12'0’clock midnight following:

delivery of the freight, except that when information suffi-

cient to enable the carrier to compute the tariff charges is

not then available to the carrie~ at the delivery point, the

freight bills shall be presented not later than the first 12

o’clock midnight following the day upon which sufficient

information becomes available to the ENG agent of

the carrier.

| Shippers may elect to have their freight bills presented

by means of the United States mails, and when the mail

service is so used the time of mailing by the carrier shall

be deemed to be the time of presentation of the bills. a,

- ease of dispute as to the time of mailing the post mark shall

be accepted as showing such time.

Sundays and legal holidays, other than Saturday half

holidays, may be excluded from the compittation of the pe-

riods’ of credit.

The mailing by the shipper of valid checks, drafts, or

money orders, which are satisfactory to the carrier, in pay-

ment of freight. charges within the credit periods allowed

such shipper may be deemed to be the collection of the tariff

charges. within the credit period for the purposes of these

rules. In case of dispute as to the time of mailing the post

mark shall be accepted as showing such time.

By the commission, division 3.

’

(Seal) i. Gzorce B. MoGinry,

. Secretary.

at

42

Interstate Commerce Commission

Ex Parte No. 73

Regulations for Payment of Rates and Charges

Decided May 19, 1960.

Upon further hearing, prior findings and orders modified

so as to authorize the rail carriers to extend credit for

the payment of charges ‘on carload shipments for 96

hours and 120 hours, in lieu of 48 and 96 hours, ree}

spectively. Appropriate order entered. :

Chas. P. Reynolds, Arthur J. Dixon, Walter C. Scott, E

Jr., Albert B. Russ, Jr., E.R. Leigh, and Donal L. on |

- for pétitioners. +. | Soe i

, Charles B. Myers, Robert N. Burchmore, Jom 8S.

Burchmore, Paul P. Watkins, Sam H. Flint, Samuel W. ‘

Earnshaw, John F. Coyle, and Geo. H. Kinney for interven-

ers in support of petitioners. ry

A. T. Donadio, A. A. Green, K. H. Lundmark, William

F. Zearfaus, and Erle J. Zoll, Jr., for protestants.

Report or THE Commission oN F'urrtHer Hearine

yY

By THE CoMMISSION :

Exceptions to the report proposed by the examiner

were filed by the petitioners and the interveners in support

thereof, and the protestants replied. Our conclusions differ

from those recommended by the examiner. Exceptions and

requested findings not discussed in this report nor reflected

«

4305

in our findings or conclusions have been considered and

found not justified. |

ay, °

he the prior report, 171 I.C.C. 268," dicided January

. 20, 1931, division 3 modified somewhat the credit ,regula-

tions prescribed i in 57 LC.C. 591 for the payment of railroad

freight charges by. shippers and authorized the railroads to

extend the periods for the payment of such charges on car-

load traffic to 48 and 96 hours. By a joint petition, certain.

southern rail carriers request that we extend the presently:

. authorized credit periods on carload traffic to 96 and 120

hours, the same fs those now authorized on less-than-car-

load traffic, in 273 I.C.C. 681: The National Industrial Traf-

fic League, Olin Mathieson Chemical Corporation, Wilson

& Toomer Fertilizer Company, Quaker Oats Company, Ceco

Steel Products Corporation, Armour & Company, Georgia-

Alabama Textile Traffic Association, and The Associated

Industries of New York State, Inc., appeared in support of -

petitioners. The railroads in official territory, other than

the Chesapeake and Ohio Railway Company, aaa in

opposition.

At the further hearing the practitioner for The Asso-

_ ciated Industries of New York State, Inc., offered in evi-

dence as an exhibit a tabulation of the results of a question-

naire circulated to its members. The protestants objected

to the receipt in evidence of this exhibit. The examiner sus-

tained the objection, on’ the ground that the exhibit was

offered in evidence to show that answers were received

from the members in response to the questionnaire and

‘that the information contained therein was true, whereas

the practitioner, who assisted in preparing the exhibit, was

’ Other prior reports, 57 I.C.C. 591, 59 LCC. 456, 63 I.C.C. 375,

LCC. 351, and 278 I.C.C. 681.

3

©

44”

not a regular employee of the: intervener, and could not

know the truth of the matters contained therein. In its

exceptions, this intervener excepts to the examiner’s ruling.

We find that the examiner properly excluded the exhibit,

and that if admitted after the hearing for another purpose,

as urged, its acceptance would deprive the opposing parties

of their right to cross-examine the pee who prepared.

the exhibit.

Section 3(2) of the Interstate Commerce Act provides,

among other things and with certain exceptions, that no .

carrier by railroad shall deliver or relinquish possession

at destination of any freight transported by it until all .

tariff rates and charges thereon have been paid, except

under such rules and regulations as the Commission may

from time to time prescribe to govern the settlement of

all such rates and charges and to prevent unjust discrimi-

nation.

"The order of this Commission of January 20, 1931, pro- —

vides that a rail carrier, upon taking precautions to assure.

payment of the tariff charges within the credit period speci-

fied, may relinquish possession of freight in advance of the

payment of the tariff charges thereon and may extend

credit in the amount of such charges for a period of 48

hours computed in a manner prescribed in that order. The

order further provides that where retention of possession

of freight by the carrier until the tariff rates and charges

. thereon have been paid will retard prompt delivery or will

retard prompt release of equipment or station: facilities,

the carrier, upon taking precautions to assure the payment

of the tariff charges within the credit period specified, may

relinquish possession of the freight in advance of the pay-

45

ment'of the tariff charges thereon and. may extend credit in

the amount of such charges for a petes of 96 hours to be |

computed in a similar manner.

The petitioners’ urge that an extension of the present

credit periods is necessary in order to enable the railroads.

to compete more effectively with their motor-carrier com-

petitors, which have been authorized to extend more liberal

credit privileges than the railroads, and to afford the ship-

pers adequate time for the processing of the freight bills.

Witnesses for the petitioners testified that they would bene-

fit by the extension of the credit period because the policing

of the two proposed credit periods, 96 and 120 hours, would

be easier than the present three periods of 48, 96, and 120

hours, the latter applying only to less-than-carload quan-:

tities. They argue that a uniform period for the collection ..

of both carload and less-than-carload freight charges

would eliminate the necessity for: keeping separate records

on the two types of shipments, and remove the confusion

or errors which now result where a shipper receives both ©

carload and- less-than-carload freight bills at the same

time.

It is claimed that the extension of an additional 24

hours’ credit would lessen the number of followup or credit-

violation letters to consignees where payments are not re-

ceived in the freight agent’s office by the due date, which

would save time and expense. It is argued also that changes

‘in businéss conditions generally and in railroad conditions

specifically, including marked decentralization of industry

and automation in the use of multiple-purpose accounting ;

machines, make it highly desirable and practicable for ship-

pers in general to pay their freight charge on a weekly

basis.

— 46

The shippers urge that the decentralization of industry

has resulted in the maintenance by numerous commercial

organizations of branches located at great distances from

“the office where the freight bills are paid, and there-

fore additional credit time is needed to pay the bills: bed

_ the due date.

‘The oroteslante: oppose the erenting of the" relief ;

sought because (1) they do not believe that the more liberal

‘eredit privileges accorded by the motor-carrier industry

has caused the railroads to lose traffic; (2) there has not

been a sufficient change in conditions since the present

credit periods were authorized to warrant an extension

thereof ; (3) if the petition were granted, competition would

force the protesting carriers to make effective the credit

~ extensions, which would result in an alarming and unneces-

sary reduction in their working cash; and (4) the adverse

effect in the reduction of their working cash would far out-

_ weigh’ any benefits and conveniences 3 which might be af-

forded interested shippers. |

The proposed modification of thé credit regulations

would probably be of some advantage to the shipping pub-

lic. The petitioning railroads urge that an extension of the

credit periods would operate advantageously in their com-

petition with the motor carriers. Under the present motor-

carrier credit regulations, a motor carrier has 7 days in

which to bill a shipper and another 7 days within which

to collect the charges. | |

Both the petitioners and the protestants argue in

great detail on the issue of whether the proposed extens®n~

of the credit periods would deplete the working cash of the

railroads to a serious degree. The petitioners argue: that

any depletion of working cash resulting from ‘the —

47

extensions would not constitute a serious problem, and that

- any resulting temporary inconvenience would be offset by

the benefits derived from the improvement of the competi-

tive situation with the motor carriers, as well as: by prob-

able economies: that could result in the operation of the

railroad credit departments. The protestants argue that |

the resulting depletion of working cash from the extension

of. the credit periods would have such a serious adverse

_ effect upon them that it’ would be necessary to make sub-

stantial reductions in equipment purchases and mainte-

~ nance, and to lay off a considerable number of their em-

ployees. The-petitioners and the protestants are in disa-

greement as to the proper mathematical computations for

use in determining the correct amount of the working-cash

depletion that would result from the proposed credit-period

s extensions, but they agree that working-cash depletions

would occur. In their exceptions, the petitioners indicate

that, based upon their computations, the working cash of

The Pennsylvania Railroad Company and The New York

Central Railroad Company, for example, would be reduced,

if each patron took the full credit time proposed to pay its

‘bill, by $3,698,383 and $2,710,000, respectively. The corres-

ponding amounts as computed by the protestants are

$5,383,484 and $5,000,000. There is no indication on this -

record, however, that all shippers would take full ‘advan-

tage of the credit extension.

The petitioners argue that the proposed extension of

credit periods is voluntary, and that the protestant carriers

would not be required.to establish the same credit periods.

It is reasonable. to assume, however, that other railroads

would desire to accord their shippers credit periods the

same as those offered by the petitioners.

>

48 .

We conclude that the proposed extension of the credit

Periods on carload traffic is desirable to enable petitioners

‘to compete more effectively, i in this respect, with their mo-

tor-carrier competitors; and that any disadvantages result-

ing from a-reduction in petitioners’ working capital would

be offset by the benefits derived from the extension of the

credit periods. Since the grant of authority herein to

broaden the credit regulations is permissive only, and other .

railroads are experiencing similar competition with the

motor carriers, our findings will be amines to include

the railroads generally.

We accordingly, find that the findings in the prior re-

port, 171 I.C.C. 268, and the order issued pursuant thereto,

. as modified, should be further modified to authorize all rail

carriers subject to our jurisdiction to extend credit for 96

and 120 hours with respect to charges on carload traffic, in

: lieu of 48 and 96 hours, respectively, under the present

rules computation of time to be made in the same manner °

as provided in. connection with the 48-hour and’ 96-hour’

periods. An appropriate order will be entered. .

ComMIssION ER: McPuerson, concurring in part:

I would extend the period to 120 hours for all ship-

ments and would reopen Ex Parte No. MC-1 to determine

if the credit periods for motor shipments should be made

the same as the periods here authorized. —

Carman WINcHELL, whom Commissioner Herrine

joins, dissenting:

I fail to see how the 1-day extension of the credit pe-

riod authorized by the majority would afford the railroads

49

an opportunity to meet in this fennans the competition of

the motor carriers, whose credit period is almost three

times as long. I do not believe the resulting reduction in —

the railroads’ working capital, shown by the record to be

inevitable and substantial, is justified by the convenience .

afforded interested shippers.

Commissioner FReas, dissenting:

In my opinion, no substantial justification has been

presented on this record for the requested modification of

the credit provisions. However, I am not aware of any cir-

. cumstances or special principle which warrant a different

period for the extension of credit to shippers for transpor-

tation by one mode of carriage as against another.

Paci

50

Interstate ‘Commerce Commission

. Ex Parte No. 73

Regulations for Payment of Rates and Charges

‘ Decided December 30, 1960.

On reconsideration, findings in report on further hearing,

310 I.C.C. 301,’ modifying prior findings and orders so

* as to authorize rail carriers to. extend credit for the.

payment of charges\on carload shipments for 96 and

120 hours, in lieu of 48 and 96 hours, respectively, affirmed.

Appropriate order entered. hes

Appearances as shown in the prior report on further

hearing,. and, i in addition, A. ¢. Armstrong oad protestants.

Report oF THE Pica ON eo

By THE CoMMISSION :

| In the report. on further hearing herein, 310 I.C.C. 391,

_ we.found that prior findings and orders in this proceeding

should be modified so as.to authorize all rail carriers sub-

ject to our jurisdiction to extend credit for the payment of

charges on carload shipments for 96 and 120 hours, in lieu

of 48 and 96 hours, respectively. The protestants filed a.

_ petition for reconsideration. and oral arguments, to which

the’ petitioners and certain interveners replied. Upon.con-

sideration thereof, we reopened the proceeding for recon-

sideration on ‘the record as made,. but denied the request

for oral argument. - The facts stated in the report on fur-

' Other prior reports, 57 LCC. 591, 59 I.C.C. 456, 63 1.C.C. 375,

69 1.C.C. 351; 171 L.C.C. 268, and 273 I.C.C. 681. ©

51

ther hearing will be repeated only to the extent necessary

for a clear understanding of the issues. For convenience,

the railroads seeking modification of the credit regulations

are referred to as petitioners. —_

. Section 3(2) of the Interstate Commerce Act requires -

with certain exceptions, that no carrier by railroad shall

deliver. or relinquish possession at destination of any

freight transported by it until all tariff rates and charges

thereon have been paid, except under such rules and regula-

tions as the Commission may from time to time prescribe

to govern the settlement_of all such rates and charges and

to prevent unjust discrimination. Subject to restrictive

_provisions, we have limited thé extension of credit for

transportation charges on carload traffic to 48 and 96 hours,

the latter time being permitted where the retention of pos-

session of the freight for the payment of charges would re-

tard prompt delivery or the release of equipment or sta-

tion facilities. On less-than-carload freight, the corres-.

ponding limits for the extension. of credit are 96 and 120°

hours, the same as sought by the petitioners on carload

traffic. | :

The petitioners contend that expansion of the present

credit periods is necessary so as to enable them to compete

* more effectively with their motor-carrier “competitors,

which are permitted to extend to shippers the equivalent of

a maximum of 14 days in which to pay tariff charges.

Shipper testimony indicates that the present credit

periods on rail carload traffic are inadequate to allow the

preaudit or inspection of freight bills before payment. The

decentralization of industry, in some instances, has resulted

in the maintenance by numerous commercial organizations

of branches located at great distances from the offices where

the freight bills are paid, and additional credit time is need-

ed to pay such bills. , | one : :

Numerous shippers are now using multiple-purpose

_.’ aeeounting machines to process the payment of accounts.

The efficient use of these accounting machines depends upon

programing of the work to be processed thereon, and the

‘extension of the credit period as sought would permit the

"payment of. freight bills once each week and not require

' the special handling now necessary to: avoid violating the

. eredit regulations. Under the proposal, in many instances,

shippers would pay all the freight bills rendered by a rail- .

road, covering vatious carload shipments on different days

within the same week, on one day each week. ‘Thus, some

of these bills would be paid i in less than the maximum Pe-

| _Tieds sought.

‘A cudiinsilite volume of followup or eredit-violation

letters must be sent to shippers, and contacts by telephone

and personal visits must be made to enforce compliance

with the present credit regulations. » These letters and the

payments. ofteri.cross in the mail, which would not occur

with such frequency if the credit periods: were extended.

~The proposed modification would relieve the carriers of |

considerable paperwork with the attendant time and ex-

- pense involved, and would eliminate shipper irritation

caused by followup letters received after forwarding of the

necessary payment. Uniform credit practices with respect

to the billing for carload and less-than-carload shipments,

including uniform credit periods, would tend to reduce

error, save time in handling, simplify billing, and effect

other economies. Moreover, the extension of the credit

——

SL LL

53

‘periods would satisfy a shipper demand and place the

' railroads in a more favorable competitive position with «.

the motor carriers.

ra)

A Uiveryence appears as to the estimated loss by the

protestant railroads of working cash which would result

from the proposed modification of credit periods. The

protestants assume, that all of their credit customers would

_ use the maximum credit period in all instances, and thus

.¢ the reduction in working cash would be subsantial re-

gardless of the computation used. As pointed out, the .

proposed extension of the credit periods would permit the

_ payment of freight bills once a week, and many of the bills

would be paid before the end of the credit period.

The authorization to extend credit, subject to the pre-

scribed rules and regulations, is permissive rather than

mandatory, and a wide degree of flexibility allows the in-

_ dividual carriers to use their managerial‘ discretion in the

use of approved credit regulations. For example, the rail-

roads in official territory have not extended credit to ship-

pers of less-than-carload freight except on a-very limited

basis, and their refusal-to ‘extend more credit on this type

of carriage apparently has not affected the volume of their-

less-than-carload traffic. Thus, any loss of working capital

under the proposed regulations can be controlled in some

measure by the individual carriers’ use of credit rules to

fit their respective needs. |

The record is clear that the proposed modification of.

credit periods will eliminate a source of annoyance to many

» shippers, will bring the petitioners’ credit practices more

nearly in line with those of their motor-carrier- -competi- .

mm # and will effect economies in their billing and auditing

‘ | 7 54 | ;

operations. Considering all the evidence before us, we are ,

convinced that the proposed modification is in accord with | |

the exercise of sound’ managerial discretion, will not be

unduly harmful if adopted by the ‘protectant, and should

be approved. ;

Upon reconsideration, the findings in the report on

further hearing, 310 1,C.C. 391,-are affirmed. An appro-

wr order will be. entered. ;

* COMMISSIONER Herrine, dissenting:

The railroads in official territory rae not been forced :

by competition to extend their credit period to shippers of

less-than-carload freight because of the small volume of that.

type of freight handled by the carriers. However, carload

freight is the: lifeblood of the railroads. If .a competing —

carrier extends the eredit period on carload freight, the

other éarrier. will have no alternative. but to extend: ite

credit period also. ae

' This record does not contain any evidence of ascertain-

able benefits that will accrue to the petitioning carriers if

the requested authorifly is. granted. Such a grant would

benefit the shippers but to the,detriment of the protesting

_ railroads. No shipper ‘witness considered the eredit provi-

sions material in determining what mode of transportation

he would use. The relief-sought would adversely affect the

working cash reserves of the opposing rallzoney if adopted

by them.

Commissioner F'REAs dissents.

| 55

Ex Parte No. 73' |

Regulations for en of” Rates and Cunticn

Decided April 8, 1966

Upon further hearing, prior orders prescribing rules gov-

erning the extension of credit- by railroad and motor.

common carriers operating in interstate or foreign

commerce modified in certain respects. Appropriate

order entered.

Reginald Ames, Peter T, Beardsley, Curtis H. Berg,

James A, Bistline, W. T. Brunson, James I. Coller, Jr.,

George 8S. Dixon, J. F. Edell, Kenneth H. Lundmark, Carl

V. Lyon, William R. Rubbert, Richard R. Sigmon, Roy L.

Sherman, Donal L. Turkal fond Jeremiah C. Waterman for

respondents.

Alvin Altman, T. J. Ashe, John Douglas Clark, John

M. Cleary, Ronald N. Cobert, M. M. Cooke, C. B. Culpep-

per, Arthur J. Dixon, John F. Donelan, S. 8. Eisen, Howell

Ellis, Harry F. Gillis, J. L. Givan, Jamies C. Hardman,

Glenn A, Hawkins, Stanley Hoffman, Leonard A. Jaskie-

wice, S, Harrison Kahn, B.:W. Latourette, Jr., G. H. Leon-

ard, John CG. Iincoln, Dickson R. Loos, Giles Morrow, Wal-

ter J. Myskowski, Wesley C. Newman, A. E. Norrbom, Theo

' This report also ebraces Ex Parte No. MC-1, Payment of Rates

and Charges of M otor Carriers. ~ :

Nis . 56 |

R. Scheider, Charles W. Singer, William L. Slover, Leonard

Stelzer, Warren H. Wagner, Charles A. Washer, J. P.s

-Welsh, and Samuel B. Zinder for shippers and shippers’ |

associations.

‘Bryce Rea, Jr. and Burton Fuller for Transport Clear-

ings of Los Angeles. -

.. Ellis V. Gregory, William C. Mammarella, Asa J. Mer-

rill, Theodore Polydoroff, and’ Charles F. Riddle for Bu-

reau of Inquiry and Compliance, Interstate Commerce

Commission. | wah

Report oF THE CoMMISSION ON FurTHER HzarIneG

Tierney, Commissioner : we.

These proceedings were handled under special rules

of procedure. Numerous parties filed execptions’ to the ex-

aminer’s recommended report and order; certain of those

who filed exceptions as well as other parties, replied.’ Our

conclusions differ in part from those recommended. Excep-' |

tions and requested findings not specifically discussed in’

- 2 The following parties filed exceptions: C&H ‘Transportation

Co., Inc.; American ' Retail Federation; National Association of |

Freight Forwarders, Inc.; J. L. Cox & Son,:Inc., Dunn: Bros., Inc.,

and J: O. (Red) Willett Pipe Line Stringing Corporation; Trans-

port Clearings of Los Angeles; American Trucking Associations,

Inc.; Bureau of Inquiry and Compliance, Interstate Commerce Com-

mission; and the National Industrial Traffic League. - , *

3 The following parties filed replies: Itofca, Inc.; C&H Trans-

rtation Co., Inc.; Freight Forwarders Institute; Transport Clear-

ings of Los Angeles; The National Industrial Traffic League; Na-

‘ tional Association of Freight Forwarders, Inc.; Association of Amer-

ican Railroads and American Short Line Railroad Assqciation; The —

' Charter Oak Shippers Cooperative Association, Inc:; American Re-

- tail Federation; lente Institute For Shippers’ Associations, Inc.; .

and Afnericai Trucking Associations, Inc. .

a

57

this report nor reflected in our findings or conclusions have

been considered and found not justified. 7

In our prior reports we prescribed, and in certain in-

_ stances modified, rules governing the extension of credit by _

railroads‘ and motor common carriers’ operating in inter- .

state or foreign commerce pursuant to the provisions of

sections 3(2)° and 223’ of the Interstate Comimerce Act.

These rules are published in Title 49, Parts 142 and 188, of .

the Code of Federal Regulations, hereinafter referred to as

the CFR. The sections concerned in these proceedings are

set out in the appendix hereto, part 1.

We reopened these proceedings for further hearing on

July 15, 1963, and consolidated therewith a petition of the:

National Association of Freight Forwarders; Ine., filed

May 24, 1962. Our purpose is to determine whether or not

' . modification of the rules and regulations is necessary. As

indicated in the order of reopening, the issues to be consid-

ered, among others, are:

* 57 1.C.C. 591, 59 I.C.C. 456, 63 1.C.C. 375, 69 1.C.C. 351, 171

I.C.C. 268, 273 1.C.C. 681, 310 L.C.C. 391, 313 1.C.C. 97.

52 M.C.C. 365. .

*“No carrier by railroad and no express company subject to

the provisions of this part shall deliver or relinquish possession at

destination of any freight or express shipment transported by it -

until all tariff nw Me and charges thereon have been paid, except

_ under such rules and _regulations as the Commission may from time

*, to time prescribe to govern the settlement of all such rates and

charges and to prevent unjust.discrimination: * * -*”

”“No common carrier by motor vehicle shall deliver. or relin-

quish possession at destination of any freight transported by it in .

interstate or foreign commerce until all tariff rates and c arges

thereon have been paid, except under such rules and regulations

as the commission may from time to time prescribe to govern. the

settlement of all such rates and charges, including rules and regu-

lations for weekly. or monthly settlement and to. prevent unjust

discrimination or undue preference or prejudice: * * *”

Lh

58

(1) Should section 142.8 of the Code of Federal

Regulations be modified so as require that. sufficient in-

formation to render a freight bill be made available

to the railroad within a reasonable period of time after

delivery or after the shipment leaves the origin? .

- (2) Should, the credit regulations distinguish be-

‘+ween prepaid and collect shipments?

7 (3) Should similar provisions be made applicable

‘to motor common carriers of property? los

(4) Should carriers ‘parties to these proceedings

b* required to obtain a surety bond from shippers be-

- fore extending credit?

Matters to be considered in connection with the fore-

going issues, among others, are: all practices. involved in

the extension of credit to shippers; reexamination of exist-

ing Commission precedents and pronouncements govern-

ing the extension 6f credit; the need for additional rules

and regulations, if any, to control the extension of credit;

and the existence of unjust discrimination or undue pref-

- erence or prejudice in the extension of credit. All railroads

‘and motor common ‘carriers of property, operating in in-

terstate or foreign:commerce subject to the act were made

; respondents, and our Bureau of Enforcement (formerly -

the Bureau of Inquiry and Compliance), hereinafter called

the Bureau, was made a party to the proceeding. Motor

contract carriers are not sujbect to the credit regulations. °

The exceptions are, generally speaking, directed.to one

or more of the examiner’s findings and the replies are simi-

larly restricted. We shall separately discuss: each finding

of the examiner, together with the supporting evidence, the

exceptions thereto, and our conclusions. ) |

Sections 142.1 and 188.1. —-The Bureau proposed that _

sections 142.1 and 188.1 be modified so-as to prohibit a car-

rier from extending credit to a shipper when the carrier’s 7

.

_— ST ND eA BITS SSL ET SS SSR SEN

59

. prior experience with the shipper established that freight

charges were not paid in accordance with the Commission’s

‘regulations. Once the shipper is placed on a cash basis, the

carrier could not extend further credit until all past due

charges are paid, and the shipper. furnishes written assur-

ance that future charges will be paid within the prescribed

credit period, The Bureau considers this action necessary in

view of. the number of. purported violations uncovered

- through investigations conducted by members of the Com-

' mission’s staff. For example, an investigation at 29 freight

stations of 26 class I railroads revealed that of 15,751

freight bills outstanding, 5,169 were overdue, and of that

total over half were more than 10 days overdue. An inves-

tigation of 81 motor common carriers (14 class I, 29 class

IT, and 38 class IIT), revealed that all of the class I, 22 class

_ . TI, and. 28 class TIT carriers violated the credit regulations

in one or more respects. The examiner’s summary of the

railroad’s criticism of the investigation is set out in the

footnote.’ The railroads also circulated a questionnaire to

® “Several witnesses for the railroads have found serious weak-

-hesses in the figures submitted by the Bureau concerning so-called

violations. According to the Bureau’s statement the delinquents

there shown were based upon the assumption that the date of the

freight bill is also the delivery date. Under cthe regulations, the

period for determining a credit violation does not begin to -run

until the date of the freight bill or the delivery date, whichever is

later. Since the delivery date is frequently later than the date of

the freight bill, it is pointed out that at the time of the investiga-

‘tion it would be almost impossible to determine how many of the -

5,169 bills — not have been overdue if the delivery date had

been used where it was-later. Another fact which the respondents

contend affects the Bureau’s figures is that the investigation in-

cluded balance due freight bills, contested freight bills, and bills on ‘

which relief, had been requested ‘but not yet granted. There is no

information as to how many of these situations are included in the

Bureau's statement. A balance due bill is not subject to the 120

hour rule but rather enjoys a period of extension of 30 days com-

uted from the date of presentation of the subsequently presented

reight bill under sections 142.3 of the CFR.”

60

the railroads investigated by the Bureau and 14 responded °

(all of the railroads were unable to respond within the time

allotted). The results show that of a total of 445,984 col-

lectible items accruing during -the periods covered by the

. Bureau’s investigation, 10,202 credit violations resulted, or

2.24 percent. The: examiner found that (1) the Bureau’s

evidence had, to a great extent, been discredited, (2) while’

violations of the credit regulations exist, rigid standards .

‘such as those proposed by‘the Bureau would not be ‘help-

ful, and (3) the evidence of record was too meager to sup-

port the changes suggested. |

The Bureau specifically excepts to those findings. The

exceptions of the American Trucking Associations, Inc.,’

(A.T.A.) are directed to:the general problem of compliance

from a motor carrier standpoint, and will be subsequently.

discussed. The A:T.A. the National Industrial Traffic

League, the railroads, and C&H Transportation Co., me.

replied.

The Bureau in its exceptions contends that the exami-

ner misconstrued the nature of the proceeding, in that he

characterized its evidence as ‘‘meager’’ and ‘‘discredited’”’

because in his judgment the.violations were not shown to

be willful or flagrant, whereas no attempt was made to

show that they were willful or flagrant ; that he gave undue

weight to the evidence of the railroads and failed properly

to evaluate the evidence as a whole; and that its proposal

is supported by substantial evidence of widespread - vio-—

lations.

- We see no basis for concluding that the examiner mis- - _

. construed the nature of the proceeding. Clearly, the un-

contradicted rebuttal evidence of the railroads weakens the

a

61

‘ a

. yaa

Bureau’s statement. But we cannot agree, as maintained

by the railroads, that the 10,202 credit violations disclosed

-" by the questionnaires can properly be characterized as “‘de

minimus,’’ and are not sufficiently numerous to warrant our

concern. However, for reasons that will be discussed here-

inafter, we are not persuaded that the evidenee developed

in this record justifies the adoption of the rules proposed

by the Bureau, - ,

al

The investigation of motor common:carriers conducted

by personnel of the Bureau of Operations. and Compliance °

(formerly the Bureau of Motor Carriers) was summarized

by the examiner and has been referred to herein. An addi- A

tional investigation by: personnel of the Bureau of Accounts

included 50 class I and 33 class II carriers. Of this number,

70 carriers, consisting of 46 class I and 24 class II were

found to be in violation of the credit regulations in 1 or

‘more respects. Thus, 134 of the 164 motor carriers investi-

gated were found to be in violation of the credit regulations

to a greater or lesser degree.

. Motor carrier witnesses testified to the effect that if -

a motor carrier demands payment within the period pres-

scribed by the regulations, it often finds itself threatened

with the loss of the busienss, i.e., if one carrier refuses

to extend credit, the shipper will simply go to another mo-

tor carrier which will do so.

¢.

The Bureau investigations indicate that with few ex-

ceptions the 7-day billing requirement following delivery is

being complied with. The principal violations discovered

involve excessive. extension of credit to shippers.

e

_ Evidence presented by the Bureau, A.T.A., and Trans-

port Clearings supports the conclusion that shippers’ are .

the major cause of violations and we so find. .

A rflatea question concerns Pc Commission’s author-

ity to impose sanctions against shippers as well as motor

-earriers. Transport Clearings of Los Angeles and the

A.T.A. filed exceptions to the examiner’s finding that the

Commission lacks. authority to promulgate rules which

would, in effect, regulate shippers, and the railroads and

the N.I.T. League: replied. Transport Clearing proposes a

complete revision of the motor carrier credit regulations

based on the assumption that the Commission can promul-

‘gate rules which would regulate shippers as well as car- —

riers. It cites American Trucking Assns., Inc. v. Umted .

States, 344 U.S. 298, wherein the Supreme Court discussed

the power of the Commission to enact rules regulating the

leasing of equipment. It contends that the specific grant of

authority to regulate credit in section 223, coupled with

the duty to ‘‘enforce-all provisions of this part’’ in sec-

tion 204(a) (6), when read in conjunction with the foregoing

court opinion, which looks to substance rather than form,

compels the conclusion that the motor carrier credit regu-—

lations apply to shippers. The cited case is not in point.

Although the American Trucking case does stand for the

proposition that the Commission has broad general regu- —

‘latory powers, it must be distinguished from the instant

procéeding on the basis that the court specifically referred

to statutory language approving regulation, that: the valid- .

ity of the entire Motor Carrier Act was threatened by a |

contrary result, and that the persons being regulated were

carriers generally under the jurisdiction of the Commission. |

63°

Transport Clearings’ second argument i is premised on

the following language in United States v. City of Jackson,

318 Fed, 2d 1: ‘‘The power in the United States and in the

Commission to enforce the substantive provisions of the

Act must carry with it the power to make such enforcement .

| effective. Here enforcement can be made effective only

if relief is granted against the noncarrier defendants who

are causing the carriers to violatéthe act.’’ The gist of this

argument is that section 222(c) an section 1 of the Elkins

Act, which contain punitive provisions for violations of the

act, apply to shippers as well as carriers; therefore, appli-

cation of the principle in the above-cited case requires the

finding that a shipper who procures transportation on

credit in violation of the credit regulations not only vio-

lates the law, but the Commission is authorized to promul- ©

gate a regulation so stating under its authority to issue

declaratory orders and interpretive rules.. United States v.

City of Jackson, supra, is not in point. There, the issue was

whether this Commission could enjoin the city and it®police i

officials from maintaining signs on sidewalks adjacent to

~ bus and rail terminals designating particular waiting rooms

as ‘‘for Whites only”’ or ‘‘for Colored only.’? In 12 sepa- ~

rate instances the J ackson police had arrested Negroes for

refusing to leave a ‘‘white’? waiting room. The eity was

_ attempting to continue practices which the wi te had

found to be discriminatory by what amounted to s erfuge.

That situation is far removed from the i issue before us.

* a

The A.T. A.-directs attention to a notice issued by the

Commission on August 3, 1936, entitled ‘‘Collection: of

Rates and Charges — Credit Period Not to Be Extended,”’

base stated in part as follows: — ,

pe

64

a

Shippers. pare receivers. of freight who deliberately

withhold, beyond the credit ‘period, authorized by the

Commission’ s regulations payment of tariff rates and

charges due for the transportation of property in in-

terstate or foreign commerce, should be reminded that

section 222(c). of the Motor Carrier Act provides in

part that any shipper or consignee who shall accept or °

receive any concession or discrimination in violation

of any provision of the Motor Carrier Act,-or who

shall knowingly .or willfully by any such means or

otherwise fraudulently seek to evade or defeat: regula-

tion as in this part provided for motor carriers, shall .

be deemed guilty of a misdemeanor and upon tonvic-

tion be subject to the penalties provided by the act.

It relies on sections 292,(e) and 204(a)(6) to support

its contention that section 223 should be construed to in-

elude ‘shippers as well as carriers. We do not agree. The ©

A.T.A. has failed to distinguish between violations of credit

regulations by shippers which constitute a rebate, conces-

sion, or discrimination, and the question of whether ship-

pers are subject to the credit regulations in their entirety.

In other words, as we previously indicated, section 222(c)

is punitive in nature; it follows, as stated in the 1936 notice,

that violations of the credit regulations-by a shipper which

constitute a rebate, concession, discrimination, et cetera, in

violation of any provision of the Motor Carrier Act’ are

misdemeanors. It does not follow, however, that shippers

are subject to the credit regulations. Sections 3(2) and

223 are clear and unambiguous; there can be no doubt but **

. that Congress would have specified that shippers were to

_ be included in those sections, had this been its intention.

We -believe that the evidence’ establishes many and

_ . eontinued violations of the credit regulations. However,

we are unable to conclude on this record that rigid rules as

65

proposed by the Bureau would provide a practical or desir- |

_able solution. :

_ As the examiner pointéd out, there are many reasons

. for credit violatiozf& which are beyond correction by rules,

e.g., where shippers have unexpected peak workloads, where —

there are controversies over amounts due, where additional

‘information is needed such as weights of evaluations, where

standard office procedures are in the ‘process of change,

where temporary cash flow problems occur, and where it be-

comes necessary to check the validity of charges with third

persons. Stringent credit’ rules as proposed by the Bureau

_would destroy. the flexibility needed: to meet problems of

_ this nature. Moreover, we have found that violations of

motor carrier credit regulations are attributable, in the-

main, to shippers, the carriers generally being in compli- -

ance with the 7-day billing requirement.

; Particularly disturbing is the evidence in this proceed-

ing revealing that motor carriers who refuse to extend

“credit are threatened by shippers with the loss of business. .

This practice, of course, is to be condemned. Where, be-

_ cause of such threats, credit beyond the period prescribed

by the regulations is granted, the shipper is guilty of solici-

tation and acceptance of an unlawful concession, and there-

- fore in violation of section 222(c) of the act. Our staff is

being instructed: to follow this situation closely and to

‘initiate prosecutive action where warranted. _

While we have no authority under the act directly to

regulate shippers, we do have the power to prohibit car-

riers from extending credit, to shippers who owe past due

charges, and if violations of our rules continue, we will re-

open this proceeding to promulgate additional regulations.

We will also consider the possibility of requeseting Con-

red, Sm A RO NEB 5 Oe ee a -

este: action ea ie A POEL ONE NE BOF ECR ALLELE RIOD EB IIE AS oO NCD 7

66

. gregs to amend sections 3(2) and eo so as to make shippers

subject thereto.

Extension of credit pertods.—The anes found that

the present credit periods for railroads and motor carriers

should be left undisturbed. His summary of the evidence |

and conclusions are set out in the appendix, part II. The

'N.LT.. League’ excepted to the finding ‘‘with some reluc-

tance,’’ and the railroads replied. The League’s position is

that any credit regulations established by us should be

uniform ‘‘with a minimum period of seven (7) days.’’ It

characterizes the extension of credit for transportation:

service as involving the most restrictive time limits of any

large-scale corporate commercial transaction in the Na-

tion. Attention is also called ta the fact that since spokes-

men for the railroad industry are ‘‘constantly and earnest-

ly’? asserting that there should be no difference in treat-

ment'as between railroads and other modes of transporta-

tion, including motor carriers, under the Interstate Com-

merce Act, this principle should be ae to credit “ee

lation.- °

Issue is also taken with the evidence purporting to

show the effect of an extension of. the credit period on rail-

roads currently operating on a marginal baSi® The League

emphasizes that generally speaking the industry ‘is in ex-

cellent financial health. It contends that the evidence of

‘the New York Central witness regarding depletion of work-

ing capital which would result from the extension of the.

_ eredit period, overlooks the fact that freight bills will, in

many instances, be paid in less than 7 days, and it fails to

take into account the effect on the railroad’s liquidity of

various bank freight payment plans (those plans will be

discussed in the following section of this report).

| > 67 .

We ‘acknowledge that uniformity is desirable in. this

field, and that extension of the credit period for railroads

_ May be in the public interest. One of our purposes in insti- -

tuting this proceeding was to consider all practices involved .

in thé extension of credit to shippers. The examiner found

that shippers did not ‘contend that problems encountered in

connection with existing credit periods were insurmount-

‘able. The N.LT. League excepted to his finding. While

it criticizes the present credit periods it does not present

suggested improvements supported by substantive evi-

dence. We, of course, are bound by the record as made. In

. these circumstances, we find that this record -would not

support an extension of the Gredit periods.

_ Freight payment plans. — The examiner ’s description

of various freight payment plans is set out in the appendix,

* part IIT. He placed considerable emphasis on these plans,

stating at page 20 of the recommended Yeport as follows:

'* © © Never lias there been such emphasis placed upon

freight payment plans as have been presented in this |

proceeding. This carries a great déal of weight with the

examiner and it is recommended that the Commission -

encourage the use of these plans which present such a

promise of success in the future. They are designed

not only to accommodate shippers but to insure com-

pliance with the credit rules * * *,

We agree with the examiner that use of these credit

plans seems to have.been beneficial. There is no indication

on this record that they are unlawful. They appear to offer

a solution to the problems encountered under the present

credit regulations, and their operations are ideally suited

to the use of data processing equipment. As the volume .

increases, future unit costs should decline. Assuming that

the savings will be passed on to the shipping public, they

__ should win even wider. acceptance:

te

68

t

Section. 142.8, — The question presented on exception

is whether this section should be modified so as to require

shippers to furnish carriéts with information sufficient to

compute the tariff charges within a stated period of time.”

Reference to the appendix, part 1, indicates that the present:

‘section does not-mention this matter. There is no compar-

able section in the motor carrier regulations.

| | * |

- An investigation by the Bureau revealed that it was a

common practice among freight forwarders, shippers’ asso-

-ciations, and shippers’ agents, operating under the exemp-

tion of section 402(c) of the act, as well as various ship- .

pers of carloads of mixed merchandise,:to delay tendering

‘ _ sufficient information to enable the carriers to compute the

tariff charges. In some cases there were delays of 102 days

from the time the shipment moved until the time freight

charges were ultimately collected, and it was not uncommon

for the carriers to wait it 30 days for ‘sufficient information

to render a freight bill. The grain and ore industries pre«

sented specific evidence as ‘to how they would be. adversely

affected by the proposed modification. ‘Numerous other

parties either favored or opposed the proposal. The exami-. *

ner found that the Commission lacked authority to promul-

gate rulés which would regulate noncarriers, and that in

effect, no need had been shown for amending the section, 7

om as hereinafter indicated.

After concluding that a certain degree of flexibility is

necessary in this area, he adopted certain changes suggest-

ed by the railroads ‘which were not excepted to, and added

two new sentences to-the rule, as follows:

A carrier may not extend further credit to any

shipper which fails to promptly furnish sufficierit in-

formation to allow a carrier to render a freight bill

69

within a reasonable time after the shipment: is ten- —

dered to the origin carrier. As used in this section the

term ‘‘shipper’’ includes freight forwarders as well

as shippers’ associations and shippers’ agents within

the meaning of section 402(c) of part IV of the Inter-

state Commerce Act.

On exception, the Bureau expresses surprise that the

‘examiner would incorporate ‘‘reasonable time’’.in his pro-

posed amendment. It considers that term to be’ vague, in-

definite, and unenforceable, and suggests that the second

sentence of the proposed rule be modified as follows: -

A carrier may not’ extend further credit to any

shipper which fails to furnish the carrier with the’

necessary billing information within 24 hours after

the shipper obtains such information; and the carrier

must then forward such information to its billing point

within 24 hours after receiving it.

- The National Association of Freight Forwarders, Inc.

(N.A.F.F.), one of the principal parties to the title proceed- -

ing (its petition filed May 24,1962, was consolidated with

the instant proceedings for further hearing), would accept

the first sentence of the examiner’s proposal, and word the

_ remainder of the section as follows: —— — .

______Sueh sufficient information must be made available

' to'the origin carrier, at the forwarding point, no later

than 10 days after it? has tendered its shipments to the

origin carrier. If such information is not made avail-

able within this specified time, further credit must not:

be extended to the shipper. As used in this section the

-term ‘‘shipper’’ includes, but is not limited to, freight

forwarders, as well as shippers’ associations and ship-

pers’ agents within the meaning of section 402(c) of

part IV of the Interstate Commerce Act. _ Permission

to waive the above 10 day period may be obtained by

application to the Interstate Commerce Commission.

* We assume that the reference is to shippers.

s ‘ 70

The following results are to be achieved by these miodi-

fications. First, the shipper would furnish sufficient billing _

information to the carrier within the specified time period,

, thereby eliminating the indefiniteness created by the exaln- -

_ iner’s use of ‘‘promptly.”’ Second, further credit would not |

be given if a shipper failed to furnish sufficient informa-

tion within the specified period, thus eliminating tl the exami-

ner’s use of ‘may’? which is permissive. Lastly, i industries

‘such as grain could except themselves from the provisions

upon- Propér application to the Commission.

. The Freight Forwarders Institute considers the last

sentence of the examiner’s proposal to be unnecessary since

all parties are shippers insofar as the carrier is concerned.-

In the event this sentence is included in section 142.8 it

also suggests that “but i is not limited to’’ be inserted after

‘‘includes.’’? The railroads and the Freight Forwarders

‘Institute are opposed fo any change in the examiner’s pro-

posal. The former emphasize that ‘‘reasonable’’ appears

_ frequently in the Interstate Commerce Act, and has served

as a flexible ‘standard in the regulatory field for many

. years. The N.A.F.F. opposes the Bureau’s proposal.

..As noted, section 142.8 does not refer to this question.

While it is true that the Bureau investigation indicated

that there ‘are instances of excessive delay by shippers in

furnishing carriers with sufficient information to render

* freight bills, the examiner’s proposed wording was designed

to prevent a carrier from extending further credit, to ship-

pers responsible for such delays. In view of the lack of

evidence of record upon which to determine what particular |

period to require, we are unable to adopt the time periods |

suggested by the Bureau or the N.A.F.F, at this time. If

71

the rule, as here adopted, does not result-in sufficient cor-*

rection of existing conditions, we will reopen the proceed-

ing for the purpose of setting specific periods. Moregver, -_

contrary to the allegations of the N -A.F.F., there is no

probative evidence of discrimination resulting from delay

. on the part of shipper in furnishing carriers with sufficient

information to. render freight bills. We agrée with the

_* N.ALFVF) that the word ‘“‘promptly’’ should be eliminated

' from the examiner’s proposal, and that ‘‘may’’ which is

permissive should be striken and ‘‘shali’’ inserted. Those

changes, together with the suggestion, of ‘the. Freight

Forwarders Institute, will be incorporated in section 142.8,

as revised by the examiner. fa, |

_ Surety bond issue—The exanfiner found that the ev}.

dence of record would not support a finding that nonprofit

* shipper organizations should be required to post a surety

‘ bond before being extended credit for freight charges. His

_ Summary of the evidence and conclusions are set outinthe .

appendix, part IV. The Bareau and the N .A.F.F. excepted —

to this finding. Relies were filed by Itofea, Inc., the N.LT. -

League, the railroads, Charter Oak Shippers Cooperative

Association, Inc., American Retail Federation, and the

. American Institute For Shippers’ Associations, Inc.

The Bureau argues that although the posting of ‘a

surety bond by nonprofit shipper organizations might be

discriminatory, such discrimination would not be undue or

unreasonable, citing Koppers Company, Inc. v. Umited-

States, 166 F. Supp. 96. And it cites Sample v. Atchison,

' T.& 8. F. Ry. Co., 139 1.0.0. 324, where a requirement by

-. the carrier that grape shippers be required to furnish a

surety bond was found not to ‘result in undue prejudice.

a

* There the record justified the aurety wend requirement ;

such isnot the case here. Imposition of such a requirement

on one class of shippers in these circumstances would

clearly constitute undue discrimination. The Bureau, on

. being confronted with the problems presented, particularly

the enormous cost involved, suggests on: exception that

these organizations be required to furnish a single bond

. of $10,000 in the aggregate, covering the charges of any

‘and all-common carriers in interstate commerce used by

the association... Although this represents an improvement .

over the Bureau’s initial. suggestion, such a requirement _

would place an undue burden on nonprofit shipper organi- - .

- gations whichsis not warranted on this record. Moreover, :

as the Bureau admits, a surety bond aggregating $10,000

would not be sufficient to cover-the large losses suffered by

‘the carriers in the majority of instances cited by the ex-

_aminer.

‘The N.A.F.F. is concerned by. the large losses witli

by the railroads when nonprofit shipper organizations be-

~ come bankrupt. As the

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