# Appendix — Florida Citrus Commission v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1957
- **Citation:** 352 U.S. 1021

## Text

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APPENDIX I

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF FLORIDA,
TALLAHASSE DIVISION

No. 565
FLoripa Cirrus Commission, et al., Plaintiffs,
and

Ezra Tarr Benson, Secretary of Agriculture, et al.,
Intervening Plaintiffs,

Vv.

Unitep States or America, INTERSTATE ComMeRCE ComMis-
sion, et al., Defendants,

and

Atcuison, Topeka AND Santa Fe Rattway Company,
Armour AnD Company, et al., Jntervening Defendants.

Before Jones, Circuit Judge, and Barker and DeVane,
District Judges.

Jones, Cireuit Judge.

The Interstate Commerce Commission entered its order
dated January 9, 1956, on the petition of substantially all~
of the rail carriers of the country, permitting increases in
refrigeration charges to the extent authorized in the Com-
mission’s report of the same date. 297 LC.C. 505. This
action is brought to enjoin, annul and set aside the Com-
mission’s order under the provisions of the Judicial Code
(28 U.S.C.A. $§ 1336, 1337, 1398, 2284, 2321, 2322 and 2325)
and by the Administrative Procedure Act. 5 U.S.C.A.
§ 1009. The action was brought by shippers and repre-
sentatives of shippers of fresh fruits and vegetables in and
from Florida and two agencies of the State of Florida, the
Florida Citrus Commission, a body corporate (Florida

Sa 20 BONS ONE LET POE ANGE OLEATE LO FOL IL O

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Statutes 1955, § 595.01 et seq.) and Florida Railroad and
Publie Utilities Commission, an unincorporated regulatory
agency exercising quasi-judicial powers. Florida Statutes
1955, § 350.01 et seq. By intervention, Western Growers
Association, a trade association of growers and shippers
of melons and vegetables in and from Arizona and Cali-
fornia, California Citrus League, a trade association of
growers and shippers of citrus fruits in and from Arizona
and California, and Ezra Taft Benson, Secretary of Agri-
culture, became parties plaintiff.

The charges made by rail carriers for ref rigeration sery-
ices are separate from the so-called line-haul rates. 49
U.S.C.A. § 6(1). The charges for refrigeration services
are prescribed by the Interstate Commerce Commission or
established by the rail lines. They are set forth in the
published tariffs of W. T. J amison, agent for the railroads.
The refrigeration charges, for the most part, are of two
basic groups, one known as Section 2 charges and the other
being Section 4 charges. The designations come from the
numbering of the sections of Agent Jamison’s tariffs where
the charges are scheduled. Generally speaking, Section 2
charges apply in the transportation by rail of fresh fruits,
vegetables, melons, berries and processed foods. The com.
modities to which Section 4 charges are applicable include
fresh meats and packing house products, fish, dairy prod-
ucts, bananas, coconuts and beer. Section 2 charges are
based, or intended to be based, upon cost of ice in bunkers,
supervision, switching to and from icing stations, damage
to bunkers and cars, ice haulage in bunkers, accounting,
hazard, taxes, and a return on investment. Section 4
charges are intended to include only cost of ice, salt and
switching. Shippers using Section 4 services have urged
that the carriers are compensated for the Section 2 costs
not included in Section 4 charges in the line-haul rates on
Section 4 commodities. A number of types of refrigeration
services are available in order to provide for the different
needs of shippers of various commodities from and to di-
verse points of origin and destination.

ae 5 oe? ws a

——

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During the period of 1946 to 1951, inclusive, the Inter-
state Commerce Commission authorized increases in re-
frigeration charges aggregating 32.25 per cent. Ex Parte
No. 162, Increased Railway Rates, Fares and Charges,
1946, 266 1.C.C. 537; Ex Parte No. 166, Increased Freight
Rates, 1947, 270 L.C.C. 403. During the same period the

Commission, in ‘‘general revenue’’ proceedings, authorized

increases of interstate freight rates to the extent of 78.9
| per cent. Ex Parte No. 162, Increased Railway Rates,
| Fares and Charges, 1946 supra; Ex Parte No. 166, In-
creased Freight Rates, 1947, supra; Ex Parte No. 168,
| Increased Freight Rates, 1948, 276 LCC. 9; Ex Parte No.
175, Increased Freight Rates, 1951, 281 LC.C. 557. A re-
cent order allows a further freight rate increase of 6 per
cent. Ex Parte No. 196, Increased Freight Rates, 1956,
— LC.C. —. In Ex Parte No. 168, and again in Ex Parte
No. 175, the Commission found the evidence inadequate to
show that existing charges did not compensate the carriers
for their costs in furnishing refrigerating services. In 1951
the rail carriers decided to conduct a survey to ascertain
the costs of refrigeration services as a basis for determin-
ing whether an increase in charges could be justified. The
method of making the survey and the results obtained from
it need not be here recited beyond the extent required for
our determination of the questions before us. They are
fully detailed in the report of the Commission. The rail
lines, basing their conclusion on a report of the survey,
estimated that Section 2 refrigeration costs exceeded reve-
nues by 29.8 per cent.

The rail carriers, by their petition filed with the Inter-
state Commerce Commission, sought increases of 30 per
cent., with some exceptions, of the Section 2 charges, and
specific increases for the charges for ice, salt and switching
in the Section 4 charges. In their petition the carriers
asserted that their cost studies showed that on the basis
of 1951 figures, the cost of refrigeration services was more
than $12,000,000 in excess of the revenues from such serv-

©

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ices. All of the interests before the Court were represented
in the proceedings before the Commission. The Commis-
sion held numerous hearings at various places, built up a
large record of testimony and exhibits, a report was pro-
posed by the Examiner, exceptions to the proposed report
were filed, briefs were submitted, and oral argument was
heard by the full Commission on three different days.

In its report the Commission found that the carriers
were sustaining a deficit of 23 per cent. of their refrigera-
tion charge revenue from Section 2 traffic, and an ice cost
of approximately 17 per cent. in excess of revenue on See-
tion 4 shipments. But, finding that a substantial portion
of the affected traffic could not bear increases to the extent
required to fully cover costs of service, the Commission
authorized increases of 15 per cent in the basie refrigera-
tion charges. Petitions for Reconsideration were filed with
the Commission, and while these petitions were pending
this suit was institu‘ed. The Commission denied the Peti-
tions for Reconsideration on April 16, 1956, and, this Court
meanwhile having declined a stay, the increases became
effective April 17, 1956.

At the outset we are met with the contention that no or-
der was issued under Section 15(1) of the Interstate Com-
merece Act, (49 U.S.C.A. § 15(1)), and that no notice was
given under Section 4(a) of the Administrative Procedure
Act, (5 U.S.C.A. § 1003(a)), which relates to rule making
by administrative agencies. More nearly pertinent, we
think, is Section 5(a) of the Administrative Procedure Act,
(5 U.S.C.A. § 1004(a)), providing for notice of agency
hearings. Wherever it appears that the absence of notice
has resulted in prejudice to a complaining party the action
of the administrative agency will be set aside. Pinkett v.
United States, D. C. Md. 1952, 105 F. Supp. 67. But no
prejudice is shown where, as in this case, the party com-
plaining had actual knowledge of and participated in the
administrative proceedings and he will not be heard to com-
plain of the failure to give formal notice. W. J. Dillner

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Transfer Co. v. United States, D.C.W.D. Pa. 1951, 101 F.
Supp. 906; C. E. Hall & Sons, Ine. v. United States, D.C.
Mass. 1950, 88 F. Supp. 596. We think it doubtful that the
hearings of the Commission in the proceeding we here con-
sider were of the kind contemplated by the section of the
Interstate Commerce Act requiring notice, but the absence
of any showing of prejudice relieves us of the necessity to
decide the point.

By the enactment of the Emergency Transportation Act,
1933, 48 Stat. 211; 49 U.S.C.A. § 15(a)(2), the Congress
gave to the Interstate Commerce Commission the power
and imposed the duty to adjust rates so that carriers as a
whole, or in each of such rate groups or territories as the
Commission might designate, will earn an aggregate net
operating income equal to a fair return upon the aggregate
value of the railway property of the carriers used in trans-
portation service. Under the provisions of Section 13 of
the Commerce Act, 49 U.S.C.A. § 13(1), ‘‘any person, firm,
corporation, company, or association, or any mercantile,
agricultural, or manufacturing society or other organiza-
tion, or any body politie or municipal organization’’, with-
in which inclusive descriptions each plaintiff may find a
designation, may petition the Commission and complain of
anything done or omitted by any common carrier subject
to the Act in contravention of the provisions of the Act.
By Section 15, 49 U.S.C.A. § 15(1), the Commission is em-
powered, upon a complaint or on its own initiative, to de-
termine whether any individual or joint rate, fare or charge
is or will be unjust, unreasonable or unjustly discrimina-
tory, and may determine and prescribe just and reasonable
rates, fares and charges. Under Section 15(a) and the im-
plementing provisions of the Act, the Commission has
exercised jurisdiction in a number of proceedings which
have been commonly called ‘‘ general revenue’’ cases, where
revision has been sought as to all or substantially all of the
rates or charges on all traffic or on particular commodities
or groups of commodities, either nation wide or in a large

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territory, in contradistinction to the ‘‘rate’’ cases, so called,
in which the reasonableness of specific rates has been de-
termined. Among the first, and perhaps the earliest of the
court decisions dealing with a general revenue case, is the
leading Algoma case. Algoma Coal & Coke Co. v. United
States, D.C.E.D. Va. 1935, 11 F. 2d 487.

In the Algoma case, producers and shippers of coal
sought the annulment of rate increases on that commodity,
which increases had been made effective pursuant to an
order of the Commission authorizing rate increases on a
selective basis. Emergency Freight Charges, 1935, Ex
Parte No. 115, in the Matter of Increases in Freight Rates
and Charges, 1935, 208 I.C.C. 4. In a frequently cited
and well reasoned opinion by District Judge Chestnut, it
was held that the plaintiffs could not prevail. The suit
was dismissed. The Court said:

‘‘The plaintiffs have mistaken their remedy in the
statutory scheme of railroad rate making. Their con-
tention is that the Commission, without sufficient evi-
dence or proper findings of fact, has determined or
fixed particular rates for the plaintiffs’ particular
traffic. But this misconceives what the Commission
has actually done. It was not dealing finally with par-
ticular rates for particular traffic, but permitting
increased rates for selected commodities, by a general
order affecting all the railroads in the country. If the
increased rates as applied to the plaintiffs’ particular
situation can be shown to be unjust and unreasonable,
their remedy is clearly by proceedings under Sections
13 and 15 of the act (49 USCA §$13, 15) for indi-
vidual relief, and for reparation orders under section
16(1) of the act, 49 USCA $16(1). Brimstone R. &
Canal Co. v. United States, 276 U.S. 104, 122, 48 S. Ct.
282, 72 L. Ed. 487; Alexander Sprunt & Son v. United
States, 281 U.S. 249, 256, 50 S. Ct. 315, 74 L.Ed. 832;
Eagle Cotton Oil Co. v. Southern Ry. Co. (C.C.A. 5)
51 F. (2d) 443, certiorari denied 284 U.S. 675, 52 S. Ct.
130, 76 L. Ed. 571. Nothing in the Commission case
debars them from such relief. Counsel for the rail-
road companies before the Commission and in this

CAE DR TLS OS FS AE LORS EE ELL OM LPS SOT IS tum

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court proceeding concede that the rule of Arizona
Grocery Co. v. Atchison, T. & S. F. Ry. Co., 284 U.S.
370, 52 S. Ct. 183, 76 L. Ed. 348, would not be available
to defeat the plaintiffs’ remedy in this respect before
the Commission, upon a proper showing.

‘It is necessarily inconsistent with the whole
scheme of the Interstate Commerce Act, which re-
quires uniformity and nondiscrimination as to rates,
to permit particular shippers to obtain individual
relief in courts of different jurisdictions, with possible
lack of uniformity in results, in matters committed to
the administrative functions of the Commission, in-
cluding the reasonableness of rates, until after the
Commission has acted on the particular subject. Texas
& Pac. Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426,
27 S. Ct. 350, 51 L. Ed. 553, 9 Ann. Cas. 1075; Balti-
more & O. R. Co. v. United States ex rel. Pitcairn Coal
Co., 215 U.S. 481, 30 S. Ct. 164, 54 L. Ed. 292; Great
Northern Ry. Co. v. Merchants’ Elevator Co., 259
U.S. 285, 291, 42 S. Ct. 447, 66 L. Ed. 943. Consistently
therewith, it has been held by the Supreme Court in
a number of cases, that individual shippers may not
maintain suits to annul orders of the Commission
unless they can show an invasion thereby of some in-
dependent legal right, whereby they particularly are
subjected to injury. Alexander Sprunt & Son v.
United States, 281 U.S. 249, 256, 50 S. Ct. 315, 74 L.
Ed. 832; United States v. Merchants’ & Manufac-
turers’ Traffic Ass’n of Sacramento, 242 U.S. 178, 37
S. Ct. 24, 61 L. Ed. 233; Edward Hines Yellow Pine
Trustees v. United States, 263 U.S. 143, 44 S. Ct. 72,
68 L. Ed. 216.’ Algoma Coal & Coke Co., et al. v.
United States, 11 F. Supp. 487.

The plaintiffs and intervening plaintiffs, other than the
Secretary of Agriculture, assert that there is considerable
doubt as to the correctness of the rulings in Algoma. They
do not support their doubt with either a statement of a
contravening principle or the citation of any authority
superseding it as a precedent. The Secretary of Agricul-
ture, with commendable candor, says that the Algoma case
is ‘*still the law of the land on the subject’’. On a number

BRR eon PENIS TICE PE RR gy SURFS OES SPAR LOPLI TY BNP TE MEUE at

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of grounds it is urged that the case before us is not a
general revenue case, but a rate case, and as such the
charges authorized by it are unjust, unreasonable and
discriminatory. It is further contended that even if it
be decided that this is a general revenue case, there is no
competent evidence of any need of additional revenue by
the carriers. Unless the order is based upon a miscon-
struction of the Act or is unsupported by substantial evi-
dence, it is entitled to a presumption of validity. 5 U.S.C.A.
$1099; Baltimore & Ohio Railroad Co. v. United States,
298 U.S. 349, 56 S. Ct. 797, 80 L. Ed. 1209; Amarillo-Borger
Express, Inc. v. United States, D.C.N.D. Tex., 1956, 138 F.
Supp. 411. It has been said by the Supreme Court,
‘* Judicial review of the findings of fact and the expert
judgments of the Interstate Commerce Commission where
the Commission acts within its statutory authority is ex-
tremely limited.’’ Interstate Commerce Commission v.
Mechling, 330 U.S. 567, 67 S. Ct. 894, 91 L. Ed. 1102. See
also Atchison, Topeka and Santa Fe Railway Co. v. United
States, 232 U.S. 199, 34 S. Ct. 291, 58 L. Ed. 568; United
States v. Chicago Heights Trucking Co., 310 U.S. 344,
60 S. Ct. 931, 84 L. Ed. 1243; Ontario Freight Lines Cor-
poration v. United States, D.C.N.J. 1948, 76 F. Supp. 526.
With these general guides we approach the questions so
ably presented by contending counsel.

In the opinion in the Algoma case, supra, the Court
observed that the order of the Commission there under
review was permissive in character, that it prescribed no
particular rates, that the lawfulness of individual pro-
posals was not passed upon, and that it was open to the
plaintiffs, under Sections 13 and 15 of the Act, 49 U.S.C.A.
$$ 13, 15, to present to the Commission their contentions
that particular rates initiated pursuant to its order were
unreasonable and discriminatory. In Algoma it was also
pointed out that the resulting rates fixed pursuant to the
Commission’s order would be subject to complaint and a

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determination of reasonableness, and that the Commis-
sion’s order would not debar the right to reparations in a
proper case. The plaintiffs contend that the Car Unload-
ing Case, Secretary of Agriculture v. United States, 347
US. 645, 74 S. Ct. 826, 98 L. Ed. 1015, is a controlling
precedent for the position they take. There the Com-
mission had entered an order approving maximum
charges for the unloading by railroads of carload ship-
ments of fruit and vegetables at the rail terminals in New
York and Philadelphia. The Supreme Court, reversing the
District Court of the Southern District of Florida, held
that as a general rule line-haul rates included the making
of the goods accessible to the consignee and that the com-
mission had failed to show a legal basis for departing
from this general rule although a majority of the Court
was of the opinion that the Commission had the power in
a proper case to fix unloading charges separate from the
line-haul rates. We do not have here any such factual
situation as was presented in the Car Unloading Case.
It is not disputed that refrigeration charges may be made
} separately from line-haul rates. In the case before us it
is suggested that the line-haul rates on Section 4 traffic
include some of the elements that are in the refrigeration
charges applicable to Section 2 shipments, but it would not
follow from this that we are dealing with a rate case
rather than a general revenue case.

| As in the Algoma case, the Commission’s order is per-

missive, no particular charges are fixed, and the lawful-

| ness of particular charges was not considered or decided.
In its order the Commission said that:

‘¢ * * * to enable the petitioning carriers, under honest,
economical, and efficient management, to provide ade-
quate refrigeration service and specifically to meet
increased costs of rendering that service, the basic re-
frigeration charges may be increased as_ herein
specified, and that the charges so increased will be just
and reasonable for the future.’’ 297 L.C.C. 554.

“a aan tcucantnney tht IMENT STARE AO LINES ALOT IER AEE SONIA MOLE LY IE I EE ee

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It omitted from its order any provision for modification in
specific situations as was done in the order considered in
King v. United States, 344 U.S. 254, 73 S. Ct. 259, 97 L. Ed.
301. We are urged to say that this inclusion and this
omission make the case one fixing rates rather than
authorizing a general revenue increase. The Commission’s
power, whether to fix specific rates or charges or to author-
ize a general increase of rates or charges, does not, of
course, extend to the fixing or authorizing of an unjust
or unreasonable rate or charge, and putting the quoted
words in their context in a general order, they mean no
more than that the overall general increases as author-
ized will be just and reasonable. Such a finding does not
preclude the making of applications to the Commission on
any claim that a particular charge is unjust or unreason-
able. Nor does the omission of a saving clause, such as
was in the order considered in King v. United States,
supra, preclude the making of such applications or alter
the duty of the Commission to consider and decide such
applications. The right to apply and the duty to decide
have been given by the Congress in Sections 13 and 15
of the Act. The Commission has not, and indeed could not,
foreclose the right or renounce the duty in an order
authorizing general increases in transportation rates or
charges. The Commission has said that its ‘‘sanction of
a general adjustment does not carry with it the approval
of any particular rate.’’ Steel & Tube Co. v. Director
General, 61 I.C.C. 526. This decision has had the approval
of the Supreme Court in Brimstone Railroad & Canal Co.
v. United States, 276 U.S. 104, 48 S. Ct. 282, 72 L. Ed. 487,
and of the Court of Appeals for the Fifth Cirenit in
Eagle Cotton Co. v. Southern Railway Co., 51 F. 2d 443.
In its order the Commission suggested that:

‘After the establishment of the increases herein
authorized, the petitioners (rail carriers) should con-
duct thorough and comprehensive studies that will
permit sound determinations as to the effect of in-

aE ES | ARRIETA AT

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creases upon the movement of traffic, and as to any }
inequities or improper relations that may have de- E
veloped from changed conditions since their original 3
establishment.’’ 297 I.C.C. 554. :
_ This language indicates a recognition by the Commission

_ of its continuing duty to determine and prescribe just and
_ reasonable individual rates and charges notwithstanding 3
the entry by it of a general order authorizing increases.

We see nothing to prevent this case from being governed
by the same rules as are applied in general revenue cases
by the styling of the proceeding before the Commission as
‘‘Proposed Increased Refrigeration Charges’’, rather than
the ‘‘ Ex Parte’’ designation usually given to such proceed-
ings. No different principles are to be applied in this, a
general revenue case where revenues are intended to be no
more than compensatory, than in the general revenue cases
involving line-haul rates where revenues are expected to
include profits.

We come now to the contention of the plaintiffs that if
we should hold this to be a case governed by the doctrines
of the general revenue cases, and we do so hold, neverthe-
less the evidence does not show nor the findings support
the Commission's conclusions or warrant the entry of its
order. The evidence, for the most part, was obtained by
means of the traffic study made on behalf of the carriers.
_ In the making of the study, data were accumulated from

a large number of icing stations under procedures designed ,
to obtain a sample of approximately 10 per cent. of ship-
ments under standard refrigeration moving under Section
2 tariffs. The methods used in the study are recited at
length and in detail in the Report of the Commission. They
need not be set forth here. It is enough that we say that
the evidence submitted was of a kind and quantity suff-
cient to permit a generalization upon which findings could
be based and conclusions drawn. The Supreme Court of

SL FREE RN LM RGEPS INR TE AOI TSE RE RE RELIES MES AE:

3

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the United States has approved basing findings on such
evidence, saying:

‘‘When an investigation involves shipments from
and to many places under varying conditions, typical
instances justify general findings. * * * To require
specifie evidence and separate adjudication in respect
to each would be tantamount to denying the possibility
of granting relief.’’ Georgia Public Service Commis-
sion v. United States, 283 U.S. 765, 51 S. Ct. 619,
75 L. Ed. 1397.

We are unpersuaded that the factors used in the study
were not such as reflected existing conditions and, this
being so, it is not a part of our function to review the
determination based thereon. As said by the Supreme
Court:

‘*Tt is not our province to inquire into the soundness
of the Commission’s reasoning, the wisdom of its de-
cisions or the consistency of its conclusions with those
reached in similar cases.’’ Georgia Public Service
Commission v. United States, supra.

The Commission found a vast multitude of specific facts,
it made an ultimate finding that the rail carriers were
‘‘sustaining a total deficit exceeding 23 per cent. of the
aggregate revenue accruing from the rendition of their
refrigeration services’’. Because of the increasing diver-
sion of this type of traffic from railroads to trucks, because
of instances where increased charges would keep goods
from shipment to markets, and other considerations, the
Commission found ‘‘that an inerease in the specified re-
frigeration charges in excess of 15 per cent. is not justified
by the indicated cireumstances’’, The Commission con-
cluded that to enable the carriers, ‘funder honest, economi-
cal, and efficient management, to provide adequate refrig-
eration service and specifically to meet increased costs of
rendering that service, the basic refrigeration charges may
be increased as herein specified, and that the charges so

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increased will be just and reasonable for the future’’. The
findings are supported by substantial evidence and afford
an adequate basis for the Commission's conclusions.

It is strongly insisted by the plaintiffs that the differ-
ences in the treatment accorded by the Commission's order
with respect to Section 2 charges on the one hand and
Section 4 charges on the other result in unlawful diserimi-
nation against and unjust treatment of the users of Sec-
tion 2 services. It is true that Section 4 charges reflect
only the cost of ice and salt, and the cost of switching,
while Section 2 charges include also ice haulage, bunker
damage, supervision and other ef. If there be any
discrimination between Section 2 aed Seetion 4 traffie, and
this we do not decide, it is a discrimination which existed
prior to the proceedings before the Commission whence
issued the order under attack. Such discrimination, if any
there be, did not result from nor was it substantially
altered by the Commission's order. Whether there be an
unjust discrimination is a question for the Commission.
The Commission has found that the Seetion 2 charges and
the Section 4 charges do not apply to like traffie and that
no showing is made of any disadvantage or injury to See-
tion 2 traffic or the shippers thereof. ‘‘In these cireum-
stances’’, the Commission found, ‘‘any existing deficiency
in the Section 4 charges does not relieve Section 2 traffie
of the responsibility of bearing the full cost of that service
and is not a consideration in the determination of the
lawfulness of the increase proposed in the Section 2
charges’’. The finding is supported by the evidence. Dif-
ferences in rates and charges as affecting different classes
of non-competing shippers or consignees are not per se
unjustly discriminatory. We find ourselves in accord with
the Commission’s position. See Board of Trade v. United
States, 314 U.S. 534, 62 S. Ct. 366, 86 L. Ed. 432, reh. den.
315 U.S. 826, 62 S. Ct. 621, 86 L. Ed. 1222.

On the theory that we have under review a rate case
rather than a revenue ease, the plaintiffs assert they will

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have no opportunity for redress from the discriminatory
effects of the increases in the charges as applied to specific
situations unless we set aside the Commission’s order.
But, it appears, the plaintiffs in this case as in Algoma
Coal & Coke Co. v. United States, supra, and in Koppers
Company v. United States, D.C.W.D. Pa. 1955, 1382 F.
Supp. 159, have mistaken their remedy. The situation in
the latter case is so nearly parallel to that before us and
the opinion of thé Court so expressive of our views, we
quote at some length from it. There it is said:

‘*Plaintiff’s suit before this court seeks to have the
court direct the Commission to grant the relief sought
in plaintiff’s petition for reconsideration initially filed
before the Commission, which is to require the south-
ern carriers to maintain the same rate on transpor-
tation of coal from the southern mines to Hampton
Roads ports for subsequent transshipment by water,
whether the ultimate destination is the plaintiff’s

lant at Seaboard, New Jersey, or its competitors
ocated at New England ports.

‘The crucial issue, therefore, is whether this court
may set aside and annul a permissive order entered
by the Commission when plaintiff has failed to exhaust
his remedy under Sections 13 and 15 of the Interstate
Commerce Act, but has interceded as an intervenor for
reconsideration and modification of the Commission’s
findings.

‘‘In the case of a permissive order, the carrier is
the only necessary party to the proceeding. The Com-
mission represents the public, While it is proper and
customary for shippers interested to participate in
hearings, there exists no provision for notice to them.
They are not bound by the order entered and the
tariffs filed. If the rates made by tariffs filed under
the authority granted seem to them unreasonable, or
unjustly discriminatory, Sections 13 and 15 afford
ample remedy. To permit shippers to seek redress
for such grievances in the courts would invade and

PAP,

lda

often nullify the administrative authority vested in
the Commission. The attempt of the court to remove
some alleged unjust discrimination might result in
creating more. United States v. Merchants’ & Manu-
facturers’ Traffic Association, 1916, 242 U.S. 178,
37 S. Ct. 24, 61 L. Ed. 233.

‘*Sections 13 and 15 of the Act speak with clarity,
and explicitly specify the procedure which complain-
ants must pursue before the Commission in order to
seek redress of grievances.

‘*The plaintiff has mistaken its remedy in the statu-
tory scheme of railroad rate making. Its contention
is that the Commission, without sufficient evidence or
proper findings of fact, has determined or fixed par-
fieular rates for the plaintiff’s particular traffic. But
this miseonceives what the Commission has actually
done. It was not dealing finally with particular
rates for particular traffic, but permitting increased
rates for selected commodities, by a general order
affecting all the railroads in the country.

‘If the increased rates as applied to the plaintiff’s
particular situation can be shown to be unjust and un-
reasonable, its remedy is clearly by proceedings under
Sections 13 and 15 of the Act for individual relief,
and for reparation orders under the Act of Congress.
49 U.S.C.A. $16(1); Brimstone R. & Canal Co. v.
United States, 1928, 276 U.S. 104, 48 S. Ct. 282,
72 L. Ed. 487; Alexander Sprunt & Son v. United
States, 1930, 281 U.S. 249, 50 S. Ct. 315, 74 L. Ed. 832;
Eagle Cotton Oil Co. v. Southern R. Co., 5 Cir. 51 F.
2d 443, certiorari denied, 1931, 284 U.S. 675, 52 S. Ct.
130, 76 L. Ed. 571; Algoma Coal & Coke Co. v. United
States, D.C, E.D. Va, 1935, 11 F. Supp. 487. The
plaintiff must proceed to exhaust its administrative
remedies by challenging the rates filed by the railroads
pursuant to the authorization granted it by the Com-
mission in the ex parte proceeding.

. ao * . >
‘*It is not for this court to tinker with the delicate

and fragile machinery of rate fixing and tate appor-
tionment until the administrative process has been

l6a

meticulously and stringently followed and exhausted
in accordance with statutory requirement. The Com-
mission must be afforded every available opportunity
to utilize its vast reservoir of knowledge, experience,
and know-how—in a proceeding wherein an un-
equivocal compliance with Sections 13 and 15 has been
made with a complaint filed and defendant or defend-
ants served, and clear-cut adversary contests evalu-
ated and conclusively ruled upon, before the arm of
the court should intercede upon the merits.’’ Koppers
Company v. United States, supra.

It has been settled that the Interstate Commerce Com-
mission is without power to award reparations with respect
to shipments which moved under rates approved or pre-
scribed by it. Arizona Grocery Co. v. Atchison, Topeka &
Santa Fe Railway Co., 284 U.S. 370, 52 S. Ct. 183, 76 L. ld.
348. Cf. Atlantic Coast Line Railroad Co. v. State of
Florida, 295 U.S. 301, 55 S. Ct. 713, 79 L. Ed. 1451. But
this rule has no application under the permissive provi-
sions of an order in a general revenue case such as is this
case. Supported by substantial authority it was held in
the Algoma case, ‘‘If the increased rates as applied to the
plaintiffs’ particular situation can be shown to be unjust
and unreasonable, their remedy is clearly by proceedings
under Sections 13 and 15 of the Act (49 U.S.C.A. $§ 13, 15)
for individual relief and for reparation orders under Sec-
tion 16(1) of the Act, 49 U.S.C.A. § 16(1). (Citing cases)
Nothing in the Commission case debars them from such
relief.’’ This, we think, as expressed by the Secretary of
Agriculture, is the law of the land, and it is applicable to
the instant case.

Other questions are posed by plaintiffs. These have been
considered and found to be without merit or inapplicable
here. Adding to the length of this opinion by a discussion
of them would not serve a useful purpose. For the reasons
herein given the relief sought must be denied and the com-

URIS VARE RAYS OP

Seer.

17a

plaints must be dismissed. An appropriate order will be
entered.

/s/ Warren L. Jones
Warren L. Jones
United States Circuit Judge

/s/ Wiu1aM J. Barker
William J. Barker
United States District Judge

DeVanez, District Judge, concurring specially :

The legal line separating North Carolina v. United States,
325 U.S. 507, and similar cases on the one hand, and King
et al v. United States, 344 U.S. 254, and other like cases on
the other hand is so thin it is sometimes difficult to follow.
This is such a case.

I agree with my associates that this is a revenue case and
not a rate case, and that the Commission had sufficient in-
formation before it to support an appropriate general or-
der applicable in such cases—in fact, the evidence is insuffi-
cient to support any other kind of order.

I also agree with much said by Commissioner Clarke in
his dissenting opinion, particularly with his statement that
flat percentage increases in this case ‘‘ results in increasing
charges which are already equal to or above total costs,
and overcharging certain commodities, or certain move-
ments, or certain typés of service may be moved at a loss.’’
The answer to this criticism, however, is ably made in
Judge Jones’ opinion, in which he points out that the varia-
tions in the rates prescribed for Section 2 commodities as
compared with Section 4 commodities has been in effect
for many years and is not the result of this ease. All this
case does is to increase the discrimination a little more.

The troublesome question to me in the case is the failure
of the Commission’s order to provide, as it has provided
in other similar cases (see King et al v. United States et al,

18a

supra), that if the parties affected are entitled to relief
insofar as any specific rates are concerned, they may take
their cases to the Interstate Commerce Commission and
there secure the relief to which they are entitled. That
provision is to be found in most if not all prior general
revenue orders heretofore entered by the Commission. It
does not appear in this case. However, I agree with Judge
Jones that the failure to incorporate it in the opinion or
order in this ease has no legal effect on the rights of the
parties to be heard. If the Commission holds otherwise,
then the case will have processed under administrative pro-
cedure to a point where the court will be in a position to
deal with the issue. It is clear to me that this case has not
been processed administratively to a point where the court
may rule upon the lawfulness of the rates prescribed in
this general order. Comp. Myers v. Bethlehem Corp., 303
US. 41 Text 50-51.

; /s/ Dozier A. DeVane

Dozier A. DeVane

United States District Judge

19a

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF FLORIDA
TALLAHASSEE DIVISION

No. 565
Fiorina Cirrus Commission, et al., Plaintiffs,
and

Ezra Tarr Benson, Secretary of Agriculture, et al.,
Intervening Plaintiffs,

Vv.

Usirep States or America, Interstate Commerce Commis-
sIon, et al., Defendants,

and

Atcuison, TopeKA AND Santa Fr Rattway Company,
ARMOUR AND Company, et al., Intervening Defendants.

Order

This cause having been considered by the Court consist-
ing of the undersigned Judges convened pursuant to law,
upon the pleadings and evidence and the briefs and argu-
ment of counsel, and the Court being advised, it is

Orpverep that the relief sought by the plaintiffs and the
intervening plaintiffs herein should be and is hereby de-
nied and the complaints herein filed and this cause are
hereby dismissed.

Done anv Orverep this 7th day of September, 1956

/s8/ Warren L. Jones
United States Circuit Judge

/s/ Wiu1aM J. Barker
United States District Judge

/8/ Dozier A. DeVane
United States District Judge

ee Stace : - LA PO LES UE POLLAN ILS SEE EL EE

ss INTERSTATE COMMERCE COMMISSION

No. 31342
PROPOSED INCREASED REFRIGERATION CHARGES

Decided January 9, 1956

Upon petition of rail carriers for authority to increase their refrigeration charges
throughout the United States, just and reasonable increases authorized.

Robert H. Bierma, 1. D. Boynton, John J. Burchell, J. Carter Fort,
Jr, M. L. Cassell, Jr., J.T. Clark, S. 8. Clark, John H. Colgren, A. P.
Donadio, R. B. Elster, F. W. Gwathmey, Alfred S. Knowlton, Roland
J. Lehman, E. R. Leigh, John C. Lyon, W. H. Ploeger, J. C. Smith,
and £. J. Zoll, Jr., for petitioners.

Wilbur C. King, Jerry W. Carter, Richard A. Mack, R. Y. Patter-
son, Jr., Lewis Petteway, and Fred Pettijohn for Florida Railroad
Commission.

Paul E. Blanchard, Charles E. Bowling, Robert L. Farrington,
Walter D. Matson, J. L. Pease, Harry Ross, Jr., and Leon Schilt for
United States Department of Agriculture.

B. M. Angell, Harold H. Angier, Austin F. Anson, William J.
Augello, Jr., W. J. Augello, Nuel D. Belnap, Frank C. Brooks,
A. Robert Cunningham, Willis R. Deines, Lloyd C. Dell, John F.
Donelan, James T. Duncan, William C. Ehalt, Ernest Falk, Samuel
Fraser, Ray V. Harron, Walter Hoffman, J. Perry Jones, R. E.
Kidwell, P. C. King, Jr.. W. A. Knight, Robert L. Knott, Dickson R.
Loos, Karl D. Loos, Christian Leresch, Jr.. E. Alan Mills, John A.
Montgomery, C. B. Moore, Clark Munn, Jr., Robert C. Neill, H. J.
Owens, T. R. Phillips, Durward Seals, George P. Shuler, A. Silver-
man, Gordon Stedman, R. L. Stevenson, Fred II. Tolan, R. 1. Toolin,
Scott Toothaker, Warren H. Wagner, M. W. Wells, Eli Weston, and
Warren Whitham for other parties.

Report oF THE CoMMISSION

By tHe Comission :

Exceptions to the report proposed by the examiner were filed by the
petitioners and the protestants generally, and we have heard the
parties in oral argument. Exceptions and requested findings not dis-
cussed in this report nor reflected in our findings or conclusions have
been considered and found not justified.

By a petition filed on August 31, 1953, as amended at the hearing,
practically all of the railroads of the country, herein collectively
termed petitioners, ask the Commission to authorize increases in their

207 I.C.C,

505
362168—56—No, 200-—1 ,

SNELL EY eT CRG OAM

ae ee

ph ls a i bs ti cD AEE BIE. DADE

506 INTERSTATE COMMERCE COMMISSION REPORTS |

refrigeration charges and modify all outstanding orders so that in.
creases may be made effective. Hearings were held on the petition,
It is opposed by a great majority of the Nation’s shippers? of com-
modities that would be affected by such increases, hereinafter some-
times called protestants.

Appendix A hereto shows, in detail, the increases proposed by the
petitioners. Generally, the proposal is to increase by 30 percent, with
the exceptions indicated in appendix A, the charges published in sec-
tion 2 of Agent Jamison’s perishable protective tariff I. C. C. No. 31,
hereinafter called section 2 charges, and those provided in other sec-
tions thereof that are based thereon, and to increase by specified
amounts the charges published in section 4 of the same tariff, herein-
after called section 4 charges. As indicated in appendix A, no in-
crease is sought in the charges provided in the several rules therein
enumerated.

The section 2 charges apply generally for refrigeration services in
connection with the movement of fresh fruits and vegetables, berries,
melons, and processed foods moving under refrigeration, while those
provided in section 4 embrace all other commodities. Typical of the
commodities ordinarily transported subject to the section 4 charges
are bananas, coconuts, beer, dairy products, fish, fresh meats, and
packinghouse products.

The present charges, exclusive of general increases authorized, in-
clude those prescribed by the Commission in Refrigeration Charges
on Fruits, etc., from the South, 151 1. C. C. 649 (February 12, 1929)
and 172 I. C. C. 3 (February 3, 1931), hereinafter referred to as the
first prior proceeding; Charges for Protective Service to Perishable
Freight, 215 I. C. C. 684 (June 2, 1936), 241 I. C. C. 503 (October 1,
1940), and 253 I. C. C. 351 (September 5, 1942), hereinafter referred
to as the second prior proceeding; Half Stage Refrigeration Service,
256 I. C. C. 213 (August 31, 1943) ; and those voluntarily established
by the carriers. The prescribed charges were predicated on the deter-
mination that they should be sufficient to cover the cost thereof plus

2 Shippers and groups of shippers actively opposing the proposed increase include the
following: Growers and Shippers League of Florida; Florida Citrus Commission ; Florida
Canners Association; Florida Citrus Mutual; Florida Fruit and Vegetable Association;
F. H. Vahlsing, Inc., of Texas; Texas Citrus and Vegetable Growers & Shippers; Cali-
formia Citrus League; Western Growers Association; Northwest Horticultural Council;
Washington Pota.oe and Onion Shippers Association; Idaho Shippers Association, Inc.;
Idaho State Grange; Idaho Horticultural Society ; Idaho Potato Producers Association;
International Apple Association; United Fresh Fruit and Vegetable Association ; National
Association of Fruit Packers; Fairmont Foods Company; General Foods Corp.: The
Great Atlantic & Pacific Tea Company; Stokely Van Camp, Inec.; National Fisheries
‘nstitute, Inc.; Northwest Fish Traffic Committee; Booth Fisheries Company; Armour &
Company; The Cudahy Company; Emmert Packing Company; George A. Hormel &
Company ; Henry Fisher Packing Company ; John Morrell & Company ; Kingan & Company;
Louisville Provision Company ; Oscar Mayer & Company; Kath Packing Company; Swift
& Company ; and Wilson & Company.

297 1.C.C.

ge ie, a a “ “ ahs NOME RAR? ACI RAIL £8) i

PROPOSED INCREASED REFRIGERATION CHARGES 507

a fair return on the investment in facilities required for the perform-
ance of the services. Being accessorial to the basic line-haul service,
these charges were prescribed as exact charges, necessary to cover the
additional cost incurred by the carriers in performing the services.
Also set forth were unit costs of the several elements? that had been
recognized as contributing to the cost of rendering refrigeration serv-
ice, in connection with which it was concluded that the application
of such of those unit costs as might be pertinent to the particular class
of service used would indicate the proper charge. The prescribed
section 2 charges are predicated on those elements, which will be dis-
eussed hereinafter in more detail. The present section 4 charges in-
clude only the elements of ice, salt, and switching. As indicated by
the exceptions enumerated in appendix A hereto, no increase is sought
in the charges for hazard and repairs of damage to the bunkers and
bodies of cars.

There are numerous types of refrigeration services available to the
shippers of perishable commodities, the maximal being standard re-
frigeration with re-icing to capacity of the bunkers at all regular re-
icing stationsen route. Illustrative of the lesser, or so-called modified.
services are those provided in tariff rules Nos. 239, 240, 242, 243, 245,
247, 248, 249, 251, 252, 254, 255, and 258. The inherent nature of the
commodity, the market to which it is consigned, and the time of move-
ment are the principal factors which influence the choice of the par-
ticular type of service used.

Appendix B hereto lists some of the principal types of the various
refrigeration services provided in the perishable protective tariff. In
addition to the charges for icing or re-icing to capacity of bunkers as
provided in each of the various rules covering bunker icing services.
the tariff also provides charges for corresponding half-stage refriger-
ation service (icing to half capacity of the bunkers), which are about
22 percent lower. Shipments that are accorded top or body icing
service usually require, in addition thereto, the placing of ice in the
bunkers in accordance with one of the various bunker refrigeration
services described in appendix B. Green corn, for example, would
require standard refrigeration service, while one of the lesser bunker
refrigeration services would be used for some other commodities.
When both top icing and bunker refrigeration services are rendered,
the shipment is subject to the charges provided for each service.

*The elements of expense that enter into the cost of furnishing refrigeration services
fall into the following groups: Cost of ice in bunkers ; supervision ; switching to and from
icing stations: bunker repairs, repairs of damage to cars caused by top or body icing;
haulage of ice in bunkers ; station and auditor's accounting cost; hazard; taxes; return
investment in facilities devoted to the performance of refrigeration services; and cost
of precooling.

7 1.C.C,

a ws Rey SER Gg IE MAMED PIELER RES

— eee AM EY UT ot A

508 INTERSTATE COMMERCE COMMISSION REPORTS

The charges for the various refrigeration services differ widely de-
pendent upon the character of the service rendered. For the several
types of modified services they range from about 15 to 55 percent of
the charge for standard refrigeration between the same points, the
lowest being for rule 242 service when 10,000 pounds of ice is used,
and the highest applying in connection with shipments accorded rule
245 service with, for example, precooling, preicing and replenishing
by the carrier, and re-icing three times in transit. For the maximal
service, or standard refrigeration service, there are about six different
sets of charges dependent partly upon the commodity involved, among
the highest being for shipments of melons with icing to capacity of
bunkers and preicing by the carrier.

Among the highest charges maintained by the carriers for refrig-
eration services are those from California group A origins, which in-
clude Los Angeles, to Boston, Mass. The maximum increase per car
proposed for standard refrigeration from and to those points would
amount to about $41 when no salt is used and approximately $62 when

the authorized maximum ratio of salt is used, which is 30 percent of
; the weight of ice in the bunkers of the car. For the various lesser or
5 modified services, the increases proposed from and to the same points
‘ would range from $4.37 to approximately $33. When salt is supplied
by the carrier in icing or re-icing perishable shipments, it is subject
to varying charges in addition to the stated refrigeration charge. The
maximum addition is 50 percent of the stated charge for standard
j refrigeration, and lesser additions apply when less than the stated
2 maximum of salt is used. The table below shows the present and pro-
4 posed charges, per car, for standard refrigeration without salt from
4 representative origins to representative markets; in addition to these
4 charges as they may be affected by the amount of salt used, there is also,
: on shipments of citrus fruit from California, a charge of $6.61 when
4 preicing is performed by the carrier:
: : coer
4 Standard refrigeration charges to—
‘ From— Chicago, Ill. New York, N.Y. Boston, Mass.
4 Point! Proposed | Present Proposed ° Present , Proposed
i ed ee ee ee $117.78 | $43, 48 $82. 42 $48. 77 $9 0
3 Harlingen, Tex... -- -| 96.54] 125.50] 111.09 144.42) 117.70) ISO
; 1.08 Angeles, Call... .cccencccosenscosesece 101, 83 132. 38 125. 04 163. 33 132. 25 | 171.8
‘ The so-called perishable traffic embraces a large number of commodi-
F ties, such as the numerous fresh vegetables; the various kinds of fresh
3 fruits, including bananas and coconuts: berries: melons; fresh meats
3 and packinghouse products; dairy products; eggs; fresh fish, inelud-

297 1...

anal ee ee 34 Aw Sue, Ce NOR we iY te

PROPOSED INCREASED REFRIGERATION CHARGES 509

ing clams, crabs, lobsters, oysters, and shrimp: ale, beer, and bever-
ages. The annual velume, about 1,100,000 carloads, constitutes one
of the most important segments of railroad traflic. Some of it is ac-
corded ventilation or heater service during certain seasons of the year,
but the great bulk of it moves under refrigeration. Illustrative of the
traffic that would be affected by the increase proposed is the movement
during the 1952-53 season of approximately 100,000 carloads of fresh
fruits and vegetables from Florida, 40,000 carloads of fresh fruits and
vegetables from Texas, 265,000 carloads of fresh fruits and vegetables
from California and Arizona, 35,000 carloads of fresh fruits, vege-
tables, and fish from Oregon and Washington, and 351,000 carloads of
fresh meats and packinghouse products between points in the United
States,

In Ex Parte No. 162 /ncreased Railway Rates, Faves, and Charges,
i946, 266 1, C.C. 537, we authorized an increase of 1) percent, effective
January 1, 147, in the rates and charges for protective service. A
like increase was also authorized in the final report in Ex Parte No.
166, decided July 27, 1948, Znereased Freight Rates, 1947, 270 1. C. C.
403. In Ex Parte No. 168, /nereased Fre taht Rates, 1948, 2761. C.C.
9, we declined to authorize an increase in these rates and charges, point-
ing out that the evidence did not enable us to determine that the present
charges, which included substantial increases effective in 1947 and
subsequently, were insufficient to compensate the petitioners fully for
all costs incident to furnishing these services. In that report it was
further pointed out, at page 10s, that the actual cost of ice in the year
1948 of $5.69 per ton was only 1 cent higher than the cost in 1946, and
that the petitioners’ estimated cost for the year 1949 of $6.13 per ton
was 13 cents lower than the estimated cost for 1947 of $6.26, which
the petitioners relied upon in Ex Parte No. 166.

In Ex Parte No. 175, /nereased Freight Rates, 1951, 281 1. C. C. 557,
we again declined to authorize a further increase in the charges for
protective service, indicating that the evidence was not convincing that
an increase in the rates and charges for that service was justified. In
that report it was pointed out that the cost of ice in 1950, to the selected
companies, of $5.84 per ton was only 16 cents higher than the cost
in 1946, and that, since then, increases in the charges for protective
service amounting to 32.25 percent had been authorized. It was fur-
ther stated that the cost was also 29 cents lower than the estimated cost
for the year 1949 of $6.13 upon which the same petitioners relied in
Ex Parte No. 168.

At a joint meeting of the several railroad traffic executive commit-
tees representing practically all of the railroads of the country, held
on October 3, 1951, it was concluded to conduct a comprehensive study

277 1...

EE eee — |

a a va
510 INTERSTATE COMMERCE COMMISSION REPORTS

of the costs of providing refrigeration service for the purpose of deter-
mining whether the revenue therefrom was suflicient to cover the en-
tire cost of performing the service, plus a fair return on the investment
in facilities devoted to the performance thereof. The National Per-
ishable Freight Committee, hereinafter called the freight committee,
Was given the responsibility of conducting the study.

Because of the magnitude of the task, the freight. committee con-
cluded that the study necessarily should be limited to ascertaining the
total costs of ice and salt for all perishable traflic, and the total costs
for the complete refrigeration service rendered for a representative
number of shipments accorded bunker re-icing service subject to the
section 2 charges. It covered the full year of 1951,

A report of the study was submitted to the trafic executive commit-
tees on September 30, 1952, which indicated that the service was being
performed at a deficit in excess of 812,000,000 per annum based on the
test made, which included a total of 13,975 carloads comprising the
sumple used in the study. It was estimated that the cost on shipments
subject to the section 2 charges exceeded the revenue by 29.8 percent,
and that the deficits on section + shipments would vary depending upon
the particular element of expense involved and the territory in which
the service is performed. After due consideration of the situation,
the executive committees decided, on January 21, 1953, to proceed with
the filing of the instant petition with us.

In the development of the data presented herein by the freight
committee, the railroads and the Pacifie Fruit Express Company,
Fruit Growers Express Company, American Refrigerator Transit
Company, Burlington Refrigerator Express Company, Western Fruit
Express Company, and Merchants Dispatch, Inc., hereinafter re-
ferred to collectively as the carlines, were requested to furnish the
freight committee certain information called for in an ice-cost formula
prepared for that purpose. Generally, it provided for taking, at each
station, the sum of the overhead costs, including a return on investment
and working capital rental, and depreciation; the direct costs, which
are the cost of ice purchased, harvested, or manufsctured: and the
indirect costs, which inelude labor on icing platforms, maintenance of
facilities, taxes, insurance, et cetera, and dividing the total of these
costs by the number of tons of ice placed in cars, to arrive at an average
cost per ton of ice at the station. It differed somewhat from the
formula developed by us in the second prior proceeding, in that (1)
the company haul rate for transporting ice to platforms is increased
to 10 mills per ton-mile; (2) interest on working capital is included in
the cost study; (3) provision for Federal payroll and income taxes is
made; and (4) return on investment is computed at 6 percent of

297 1.C.C.

| NESE I PA STINE EAE AS ALCS LEIP BTA EN eo Mic a seats

PROPOSED INCREASED REFRIGERATION CHARGES 511

original cost without deducting accrued depreciation. In addition
to these costs, the petitioners’ study contemplated the development of
data as to the other cost factors, hereinbefore enumerated, which were
considered by us in our determinations in the prior proceedings.

The carlines were organized by the various railroads or groups of
railroads with the object of rendering more eflicient protective service.
For example, the Pacific Fruit Express is owned jointly by the
Southern Pacific Company and the Union Pacific Railroad Company,
and the Fruit Growers Express is owned by 19 eastern and south-
eastern railroads. Those services are performed for the account of
railroads under appropriate contracts. The six carlines and The
Atchison, Topeka and Santa Fe Railway Company, hereinafter called
the Santa Fe, which maintains a refrigerator department, provide
by far the greater number of refrigerator cars in this country.

Every carrier listing 1 or more icing stations on its lines, and the
6 carlines, were requested to report the cost of all ice and salt supplied
for refrigeration of perishable freight. A total of 1,678 locations on
124 railroads were covered by the more than 2,000 reports of the
carriers.

Petitioners’ traffic study.—In the study of the section 2 charges and
costs, a total of 13,975 shipments subject to that section were selected
as representative. ‘They were selected from all shipments originated
on the Santa Fe, the International-Great Northern Railroad Company
(Guy A. Thompson, trustee), The St. Louis, Brownsville and Mexico
Railway Company (Guy A. T hompson, trustee), and the other
railroads that originate the great bulk of the perishable traffic. With
the view of obtaining a sample approximating 10 percent of the ship-
ments accorded bunker re-icing service, the procedure set up by the
freight committee required the inclusion of selected shipments in
efrigerator cars having numbers terminating in the digit 5. The
election of the origin and destination territories was designed to em-
race a major portion of all refrigerated traffic. They are listed
low :

Origin territory Destination territory

|
rizona, Arkansas, California, | Missouri groups 1 (St. Louis) and 2 (Kansas City); Minnesota group 1
Colorado, Idaho, Oregon, Texas. | (St. Paul-Minneapolis); Minois group 2 and Indiana group 4 (Chi-
Utah, and Washington. | cago); Ohio group 3 (Cleveland), Michigan group 4 (Detroit), New
York group 1 (Buffalo) and Pennsylvania group 1 (Pittsburgh),
consolidated into one reporting group; New York group 3 (New
York City), Delaware, the District of Columbia, Maryland group
3 (Baltimore), New Jersey group 1 QWersey City), and Pennsyivania
group 4 (Philadelphia), consolidated as one reporting group; Massa-
chusetts group 1 (Boston).
oo++----------------.-..| Primary markets of Chicago and east, and St. Louis, Kansas City
| and St. Paul-Minneapolis, wherever records disclosed substantial
movement.
jabama, Florida, Georgia, North Same destination territory as from western origins, also Atlanta, Ga.,

ow York.

Carolina, South Carolina, Ten- Birmingham, Ala., and Cincinnati, Ohio, wherever records disclose
hessee, and Virginia. substantial movement.
297 I.C.C.

Basis ; wig SH

512 INTERSTATE COMMERCE COMMISSION REPORTS

The sample was selected in the following manner by the designated
originating carriers:

Number of

shipments

All section 2 shipments from selected producing areas__-_-~--~------- 414, 416
Shipments in cars with numbers ending in digit “5” selected therefrom__ 41, 25s
Shipments other than to major destinations, excluded____- ---.-------- 18, 870
Leaving those to the major destinations___.__-__.-___-_-------_- 22, 388

Rule 240, rule 242, and rule 243 shipments, excluded_______----------- 8, 832

Remaining shipments accorded bunker re-icing services from and to

SION SEN Be CG a nisi ie ere enn eaeiwmgnnnnians 13, 556
Digit 5 shipments ‘on other lines, included____----_-----------------_- 419
Sa IU NE a anise seniercnonirtnshcorciosiosenin annie ecustinosinatiuiniavesbeiadae 13, 975

Of the 13,975 section 2 shipments, 9,442, or 67.56 percent of the total,
were accorded standard refrigeration service. For those shipments,
the reported aggregate cost of ice, total refrigeration cost, total rev-
enue collected, and the resulting deficits were $844,805, $1,348,872,
$1,032,925, and $315,947, respectively. Each of the remaining 4,533
section 2 shipments was accorded one of the so-called modified sery-
ices. For those shipments, the cost of ice, total refrigeration cost, and
the revenue collected were $278,754, $428,275, and $336,043, respec-
tively, indicating a revenue deficit of $92,232. The aggregate deficit
of $408,179 on the selected section 2 shipments amounted to 29.8 per-
cent of the aggregate revenue of $1,368,968. Segregated by origin
territories, the resulting numbers of shipments were 9,443 from the
West, 67 from New York, and 4,465 from the Southeast, anc the per-
centages of the indicated revenue deficits were 31.6, 22.6, and 27.9,
respectively. The cost data presented in this proceeding will be dis-
cussed hereinafter in greater detail.

The items of expense, as computed in the carriers’ study, and the
percentage relation of each to the total cost are shown in the table

below:

| |

Cost factor | Amount ———-

tivahuacedeuthamewcsedseawiies Jue taaniaeebsien oe awanhcumaasue rpinwneniedins | $1, 124, 301. 35 63.3
Se OR be. Sa aE FR — ne ee Se Saniemgisithnaiaencods 53, S77 4,075 200 4.91
EE ee ene 6, 396 | 6, 396 | 299 | 4.67
_ ES he aes 6 eee | 247,851, 122, 785 | 6,597 5.37
24, 501 18, 347 | 876 4.77
11, 242 10, 977 | Si6 5. 14
3, 333 3, 230 192 | 5.
none | none | 7 ee
5, 733 5, 718 | 343 6.00
9, 432 | 2 | Og,
15, 107 | 13, 345 414 3.10
556 a9 9 | 2.74
8,383 — 516 21 4.97
1,341 | 1,341 6 4.18
79, 628 53, 805 — 2. 477 4. 60
|
9, 40 | a | 7" j 7.67
19) i . 67
25, 110 21,056 1, 34 7.29
z | 38 | 2/ 5.26
_, ESS areal ees | 24 | 4 a df Ce ee eee
Frozen commodities... ___ ETRE TA ERE SEL LUIS eo PS Ses | 1,879 1,864 | 163 | 8.74
EE ee aE j 35 35) 1 2.865
aS, ECS E EG Saiki 2,7 | 853 | 10. 08
kat is ARC Ta eae 5, 745 2, 296) 156 6.79
2 RE Se egies eT 6, 306 | 3,378 | 270 7.99
RE NN gp gk Se Sag } 35, 111 19,711 | 1,520 , 7.71
RES RR I RR Sh eh ar oa 12 | 3) Sd SR
Sead pen DETTE IIN EET ae Se AN | 424 200 | 17 | 5. 86
M fruits and vegetables... .......... 2... 2... 2-28. | 13 6 WN Te
5 ee aE ess Re! 86, 937 59, 223 4,482 7. 57
297 1.C.C.

362168—56—No. 200-——2

RE GA ERT EREIOTNE, “RE

BEL LIAS hE EN

LAL EEL RW Ns PVCS SLI CLE NS IM NEA IRAN RTE REI 2 OR me 2 La PAA Bs Dib EIEN 5 Han N AO RTET Me Al eT CARAT Lt Se AC,

514 INTERSTATE COMMERCE COMMISSION REPORTS

The protestants generally contend that the sample obtained by the
carriers does not meet the basic requirements of probability-sampling
of the affected traffic, and is deficient and unreliable in various re-
spects for the purpose intended in that, for example, it contains a
disproportionately large number of shipments accorded standard
refrigeration service, which amounted to approximately 67 percent
of the total sample; that it does not include any shipments moved
under any of the various modified services, such as rule 240, where
no bunker re-icing service was performed; that it is overloaded with
long-haul shipments; that it is not proportionate as to the numerous
commodities affected; that it excludes many origin and destination
areas; and that the year selected was not representative.

Evidence presented by the protestants in support of their position
concerning the inadequacy of the carriers’ sample tratlic study includes,
among other things, various comparisons of the results thereof with
those taken from a 1-percent waybill analysis covering the same period,
made for general use by the Commission’s Bureau of Transport
Economics and Statistics, hereinafter referred to as the waybill study.
The sample in the waybill study was initially selected on the basis of
waybills numbered “1” and those with the terminating digits “01.”

The difficulties encountered in the use of these two samples are ap-
parent when their basic methods of selection are considered. Al-
though fully aware of the requirements in probability sampling of
covering all the affected traffic, all the carriers, and all origin and
destination areas, the petitioners found it expedient to limit their
actual study to selected carriers and for selected traflic between a
limited number of areas. This initial selection of carriers and areas
was based upon judgment and so must be considered as a judgment
sample from the total traffic of all carriers in all areas. The protes-
tants argue that there is no method of proving the representativeness
of a judgment sample since it is necessarily based upon opinion. After
selecting the traflic, carriers, and areas to be covered, the petitioners
then took a probability sample of that traffic by the described means
of the terminating digit in the car number. They rely upon it as
being representative of the total body of traffic. It should, and ap-
parently did, produce a valid sample of the traffic thus selected.
Further consideration will be hereinafter given to its representative-
ness of the total traffic.

In some-of the protestants’ comparisons, the annual volume of ship-
ments of fresh fruits and vegetables and frozen food products origi-
nated or terminated on class I railroads in the United States is stated
and segregated by commodities, and the relative proportions of the

297 1.C.C.

> Soe ae

eT wT VW = ove

saad . ie Oe PS Re IM I 8 Nd a Hh BALA Ta NRE NI eer AO MO nS es PE Ded

PROPOSED INCREASED REFRIGERATION CHARGES 515

total reflected by the samples in the carriers’ traflic study and in the
waybill study are given. Of the total shipments of apples originated,
the respective relative proportions included in the carriers’ traffic
sample and in the waybill study are 0.42 and 0.91 percent, and of the
shipments of potatoes they are 0.60 and 0.90 percent. With respect
to other fruits and vegetables, the relative proportions reflected by
the carriers’ sample exceed those embraced in the waybill study in all
instances, being most pronounced as to melons, fresh fruits, and frozen
food products. The greatest disparity shown is in connection with
fresh fruits n. o. s.,* not frozen, for which the respective proportions
are 8.48 and 0.78 percent.

The protestants contend that the carriers’ sample is overweighted
as to fruits, melons, and frozen food products, which constitute ap-
proximately 66 percent of the total sample as compared with 32 per-
cent of the total sample in the waybill study. They point out that,
although vegetables comprise approximately 60 percent of the total
volume of fruits and vegetable shipments, the proportion of vegetables
reflected by the carriers’ sample is only about 29 percent. They show,
for example, that as to shipments of potatoes, which amount to about
31 percent of the total volume of fruits and vegetables terminated in
the United States, the proportion of those shipments in the carriers’
sample is only about 9 percent, as compared with 31 percent in the
waybill study. The protestants argue that the disparities between
the carriers’ sample and that in the waybill study, which was obtained
through the accepted method of probability-sampling over the whole
body of traftic, indicated by the foregoing comparisons, support their
contention that the carrier’s sample is deficient and unreliable. Re-
garding this comparison, however, the samples gathered in the way-
bill study were not confined to shipments of fruits and vegetables
accorded refrigeration service, but included many shipments moved
under other types of services, and are not directly comparable as to
the affected traffic, a notable example being potatoes which move also
under ventilation or heater service.

Concerning the claim that the carriers’ sample contains a greater
portion of high revenue-deficit commodities than normally would be
found in the section 2 traffic as a whole, there is shown in the table
below a comparison of the distribution, by commodities, of the carriers’
sample and the computed revenue losses thereon, and similar data as
to shipments embraced in the waybill study, the latter being expanded
5.65 times to make them comparable as to volume.

ee

* Not otherwise specified by name.
27 1.C.C.

AE

516 INTERSTATE COMMERCE COMMISSION REPORTS
Shipments in carriers’ sample Shipments in waybill study
| | bbe dag | Loss on
. a , | study ex- | shipments
Commodity Number of; Loss by Loss per | Catloads | panded to | distributed
carloads in commodi- | “SS Pe | in waybill | number of among com-
eg | ties car study cars in peti- moditiesas
sampie tioners’ | in waybill
| | sample study
Apples____ octen ean 131 $1,946.80 $14.86 93 | 525 7, 802
) ee rs aareere 1,831 50, 926. 35 27.81 283 1, 599 44, 468
Total fruit 3,618 93, 206. 38 25. 76 51S 2,927 | 75, 400
en, EO Ee a 3,731 | 87,605.55 | 23.48 611 3, 453 | 81, 076
Vegetables__ Sh ape 2.521 39,905.08} 15.83 | 2565 1, 447 |
ND critic tatsinnascomemocaest 1,294 64,046.12 | 49.49, 447 2, 526 125, 012
Tomatoes. __- ; Le ana 240 6,804.45) = 28.35 78 | 441 502
Frozen foods__ 5 568 | (62,902.58 > 110.74 | 186 1,051 115, 388
Miscellaneous... _...-_- : 41 835.95 | 20. 39 | 1} 6. 12
Total. ee 13, 975 | 408, 179. 26 |....-... -| 2,473 | 13, 975 | 485, 676
l ! i
d ey me Fee nS ee ee oe eee
d Amount of uriderstatement of loss by petitioners based on this comparison
It will be observed from the foregoing table that the volume of
frozen food shipments in the waybill study, said to be high-deficit
; traffic, is almost double that contained in the carriers’ sample. The
; comparison also indicates that the cost data developed by the peti-
: tioners understates the costs as to those commodities.
q It is stated that, although 29 percent of the melon shipments origi-
3 nate in the southern district, none of them is included in the carriers’
4 sample. It appears that practically all shipments of melons from that
4 district consist of watermelons, which do not ordinarily move under

refrigeration. Cantaloups, which do normally require refrigeration,
originate, for the most part, in the western district, and principally
in the central western district where about 62 percent of the total
volume of shipments originate. About 99 percent of the total ship-
ments of melons included in the carriers’ sample originated in the
central western district, which the protestants suggest is dispro-
portionately large for that district. It is not shown that a better
proportioned sample would have produced materially different results
as to unit costs from those indicated by the sample taken.

The protestants further observe that, although 20 percent of the
total volume of grapes, peaches, and pears originates in the territory
east of the Mississippi River, none of those shipments is included in
the carriers’ sample, but as to fruits n. o. s., not frozen, of which only
about 10 percent originated in the southern district, the proportion
from that district reflected by the carriers’ sample is approximately
72 percent of the total volume. In another example they show that
of the total volume of fresh vegetables, of which 76 percent originated
in the western district and 21 percent in the southern district, the
proportion from the southern district, picked up by the carriers’
sample, is 80 percent, and only about 18 percent from the western
297 I.C.C.

3
&
zg
%
:
$

ee are rents WiaweaL oy Vara a

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5 Ph hee
7

I Aa Ba ae AT IS i Le Sa ei SN ester

PROPOSED INCREASED REFRIGERATION CHARGES 517

district. In summarizing their analysis, the protestants indicate
that the carriers’ traffic study is shown to be underweighted from the
western district, extremely underweighted from the eastern district,
and overweighted from the southern district.

In regard to the alleged overloading of the carriers’ sample with
long-haul shipments, the protestants show, for example, that 54.36
percent of the shipments in that sample originated in Florida or Cali-
fornia and moved to destinations in New York or Ohio. Those from
California to destinations in New York alone. amounting to 3.383 out
of the total sample of 13,975 shipments, constituted 24.21 percent
thereof, as compared with 353 carloads out of a total of 6.381 carloads
in the waybill study, or 5.53 percent thereof. Of the total number of
shipments in the carriers’ sample, 43.46 percent terminated at points
inthe New York group, as compared with only 12.65 percent of those
in the waybill study. As pointed out by the protestants, more than
#0 percent of the shipments in the carriers’ sample terminated in the
eastern district.

In connection with the allegation that the carriers’ sample is over-
loaded with long-haul shipments accorded standard refrigeration,
there is the contention that such traffic shows la rge deficits in revenue,
and that the inclusion of a disproportionately large sample of those
shipments tends to produce an inflated factor for use in computing an
average cost for national application to the whole body of section 2
traffic. Some of the protestants point out that the petitioners’ cost
study itself shows numerous instances where the revenue from some
of the modified services yields profits. Pursuant thereto. the peti-
tioners presented data depicting the revenue situation as to the various
services rendered in the movement of 2.319 shipments referred to by
the protestants. They show for the services rendered the distribu-
tion of shipments, and the computed deficits in percentages for full-
bunker refrigeration, respectively, as follows: Standard refrigera-
tion, 1,599 and 30.6; rule 239, 66 and 24.1: rule 245, 63 and 12.2: rule
247, 273 and 33.7; rule 249, 54 and 7.2: rule 251. 193 and 12.3; rule 252,
Zand 6.7; rule 254, 54 and 22.1; and rule 258, 7 and 23.6: or an average
of 27.9 percent. For 54 additional shipments the deficits for half-
stage refrigeration service averaged 42.9 percent, and for the composite
of the 2,473 shipments the deficits averaged 28.9 percent. The deficits
by commodities included in those shipments ranged from a minimum
of 12.75 percent for apples to a maximum of 76.77 percent for frozen
foods. In the establishment of a structure of charges of national
scope, it is impracticable to accomplish uniformity in the relation to
costs. The table below shows the distribution of those shipments, by
services, and their percentage relations to the stated total compared
with similar data compiled from the waybill study. It will be seen

297 I.C.C.

‘ 5A REST AP ONG ENP EGON SAL Ne EE
PRE esac mise. “* Leen

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:
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PW REG:

a
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WAR Mes DRT OWA S| 1 TN Ra TR ARNE oy IO KN A DOA 1S AE ea RE NR ri Sl sa enc NRT REA

518 INTERSTATE COMMERCE COMMISSION REPORTS

from these comparisons that the relative distribution, among services,
reflected by the carrier’s sample approximates that in the waybill
study.

|
| Number of shipments | Percent of total
Type of service

| Waybill Carriers’ Waybill Carriers’

| study sample study | sample

| ]

| Percent Percent
I PIE (on Sb i cSSii cn rexsastsaininescnate | 1, 738 10, 417 70.3 74.6
I oo ened edn odtwnbe Srsentkawcackrser Riverenssas] 71 461 29 | 3.3
Rule 305... ..-------.---- eo swenecewes ence seatswseue 66 546 2.6 | 3.9
OO ey ee | 279 953 11.3) 6.8
> RAEN ones sie Eee REE es WaT 54 311 22} 22
Rules 251 and 252____--- SEE GS EA ere | 195 823 | 7.9 | 5.9
(aaa in bare-tuiinbnrdenieanieal 55 325 22) 23
PR Cais Gin yaadanny een chend neh canaknekeaweseuses 15 139 6] 1.0

Uc peckcenvukbamindns daddies. Opn cehtina cha eiesing 2,473 13, 975 100.0 | 100.0

In regard to the alleged disproportions in the carriers’ sample as
between the various refrigeration services performed, the protestants
compare the proportions in that sample with those in the waybill study.
The 9,442 shipments in the carriers’ sample that moved under standard
refrigeration, as hereinbefore noted, were 67.56 percent of the total
sample, as compared with the 1,599 carloads out of the total of 6,381
in the waybill study, or only 25.06 percent thereof. As to other
services, comparisons of the carriers’ sample and the waybill study do
not disclose substantial differences, percentagewise, between the result
of the two studies, except as to rule 240 and services other than re-
frigeration. Included in the total number of shipments in the way-
bill study are 984 that moved under rule 240 service and 2,905 which
were not accorded any refrigeration service, representing 15.42 and
45.43 percent, respectively, of the total, with no similar shipments in
the carriers’ sample. The inclusion of shipments not moving under
refrigeration distorts the percentage relations of the various types
of refrigeration under consideration.

Some of the protestants object to the exclusion of rule 240, 242, and
243 shipments from the carriers’ sample, laying particular emphasis
on the large number of such shipments, as indicated by the table on
page 512 hereof, which approximated 43 percent of the total. Such
shipments are iced initially by the shipper and are not re-iced in
transit. Therefore, the amount of service given them and the revenue
therefrom are minor compared with bunker re-iced shipments. Al-
though the number of excluded shipments appears large, the revenues
and costs are relatively small, indicated by the petitioners to be less
than 2 percent of the total.

The 4 elements of cost of providing rule 240 service, for example,
are hazard, station and auditors accounting, and bunker repairs,

297 I.C.C.

mann “ a TAA MA AP SEATED A OA oe tee i ear

PROPOSED INCREASED REFRIGERATION CHARGES 519

whereas there are 9 elements of cost in bunker re-iced service. It is
not apparent that the unit costs of providing the individual elements
of service are different for the various services or that the exclusion
of those shipments has any material effect upon the overall results
under the carriers’ sample. The percentages in the waybill study
recomputed for each of the various services embraced therein, exclu-
sive of rule 240 shipments and those not accorded refrigeration, are
comparable with those shown in the carriers’ sample as illustrated by
the foregoing table.

With the advent of vacuum precooling and the described changes in
packaging since 1951, there has been, as herein noted, an important
shift from the use of modified services to standard refrigeration from
origins in Texas, Arizona, and California, tending to minimize any
deficiency of the traffic sample resulting from the exclusion of ship-
ments not accorded re-icing in transit. A notable example is the shift
from rule 242 service to standard refrigeration in the movement of
lettuce and carrots from Arizona and California. There has been a
sharp increase also in the use of half-stage refrigeration service, from
a total of 13,008 shipments originated on the lines of contract carriers
of the Pacific Fruit Express in i951 to 26,811 in 1953 and 34,420 in
1954. The revenue deficit estimated by petitioners, in the rendition
of that service, 44.8 percent, is represented as being relatively greater
than that incurred in connection with any of the other services. With
the increased volume of traffic accorded that service since 1951, they
argue that the deficits must have increased.

Also concerning the distribution of shipments embraced in the
carriers’ sample, the table below shows recapitulations (segregated by
lengths of hauls graduated by 500-nile blocks) of the volume of ship-
ments, cost of performing the refrigeration services accorded, the
revenue therefrom, the indicated loss in revenue, and its percentage
relation to the total revenue for the respective mileage groups:

Number of | Relati "aie

. Number 0! elation — Of 108s

Distance shipments | to total Cost Revenue Loss to total
revenue

E Percent Percent
Under 500 miles__.--.._. 69 0.49 $6, 372. 24 $5, 356.7 $1, 015. 53 19.0
500 to 999 miles_____..__ 1, 028 7.35 111, 413. 37 87, 482. 11 23, 931. 26 4
3, 482 24.92 342, 712. 46 286,188.49 | 76, 524.06 Ly
594 4.25 | 72, 904.15 | 51,512.09 | 21, 392. 06 5
1, 945 13. 92 | 244, 323.17 185, 464. 20 58, 858. 97 7
1

.t

4, 227 | 30. 25 626, SIS. 35 | 493, 544. 93 133, 272. 42
295 | 2.11 | 51, 335. 04 | 39,822.93! = 11,512.11 |

27.
28
41
ay , 4 | | . 31,
a 2, 335 16.71) 321, 268.03 | 239, 594. 20 $1, 673. 83 34.
i ”
-| 27
2s.
2

ow |

13, 975 100. 00 1, 777, 146. 81 1, 368, 966. 57 408, 108. 24 |

520 INTERSTATE COMMERCE COMMISSION REPORTS

Except for hauls under 500 miles and those within the 1,500 to 1,999
mileage group, the ratios of losses shown in the above table do not
rary substantielly. The results of the sample are relatively unaffected
by short-haul traflic because the percentage of loss does not progress
according to length of haul, as indicated by the foregoing table, and
because there is relatively little section 2 traffic accorded bunker re-
icing service for hauls of less than 500 miles.

A tabulation for 1,000-mile groups shows the following results:

Number Relation of loss

Distance of ship- spent
ments to total revenue
| | Percent
Under 1,000 miles... 2... spat Piel : ipa | 1,007 | G
1,000 to 1,909 miles... . : ' ; 4,076 41
2,000 to 2,000 miles... .... noe 4, 280 M4
3,000 miles and over................... : oat 4, 522 | a
Total.... SOY See F : a actdeaneoul 13,975 | Average........ %

The above figures indicate that, if a greater part of the sample had
Ps consisted of shorter movements, the percentage of loss would have
changed very little. Considering its nationwide scope and the overall

; results of the traffic test, together with the variations in costs prevail-
3 ing in the several groups through which the sample shipments moved,

it does not appear that these variations exceed reasonable tolerances
or that the costs for the longer hauls are improperly related to those
for the shorter hauls.

In support of their position that the carriers’ sample is not repre-
sentative, the protestants presented data concerning the volume of
deliveries of certain vegetables originated at points in Florida, Ari-
zona, and California, and terminated at 100 specified cities (in 39
States, the District of Columbia, and inclusive of 5 cities in Canada).
2 for each of the years 1931 through 1952, except vegetables from Ari-

zona and California for the years 1937 through 1949. These cities
4 embrace the 29 from Florida and 19 from California, used in the
, carriers’ sample. From the Florida origins, the total of such de-

liveries to these 29 cities was 86.8 percent of the total to the 100 cities

during the 16-year period covered, and from the Arizona and Cali-

fornia origins to the 19 cities the total thereof during the 9-year

period was 65.06 percent of the total to the 100 cities. These per-

centages indicate that a great preponderance of the movement of the
: commodities considered is to the destinations used by the carriers in
their study.

Because of the freezing weather in Texas and the Kansas-Missouri
flood conditions that occurred in 1951, together «ith subsequent
: changes in packaging and the advent of vacuum precooling, discussed
207 I.C.C.

PROPOSED INCREASED REFRIGERATION CHARGES 521

elsewhere herein in greater detail, it is claimed that the study period
selected was not representative. The freeze caused some shrinkage in
the volume of refrigerated traffic from Texas. Although there is
some indication that the unit costs at certain stations are affected
slightly by fluctuations in the volume of refrigeration operations, it is
not indicated that the aforementioned shrinkage in traffic caused any
appreciable change in the unit costs thereof.

The flood conditions caused delays to 61 shipments originated by
the Santa Fe and 126 originated by the carriers served by the Pacitie
Fruit Express, which resulted in additional refrigeration expense.
They represented about 2 percent of the study traffic of those carriers,
If distributed over all that traffic, the additional ice consumed, as a
result of the delays, would amount to only about 130 pounds per car.
Any inflationary effect upon the overall costs caused by that addi-
tional expense would be extremely small. The petitioners maintain
that operations in the railroad industry are such that no year is free
from disruptions of some kind, and they cite typical examples of dis-
ruptions in other years from various causes, such as strikes and earth-
quakes, It does not appear that 1951 was an abnormal vear for the
purpose of the study.

Since 1951, as noted, there has been a substantial shift to the use
of standard refrigeration as a result of the described changes in
packaging and precooling, tending to enhance the representativeness
of the sample as to that service, which the protestants contend was
disproportionately large.

The petitioners’ study afforded no mathematical chance for all of
the railroads, all origin and destination areas, and all of the affected
traffic to be included, and may have rendered it unrepresentative as to
the whole body of traffic. The sample, however, was used principally
to weigh unit costs for the purpose of determining an average per-
centage increase in refrigeration charges for section 2 traffic. The
origin and destination areas selected produce and consume, respec-
tively, a majority of all fruits and vegetables shipped, and a great
preponderance of the movement of that traffic is over a relatively few
routes. This concentration of movement and the resulting heavier
volume of icing operations tend to produce lower unit costs than pre-
vail in connection with the traftic to, from, or between the excluded
areas where the volume of movement is much less. Thus, the con-
clusion is warranted that the computed costs of performing the
refrigeration service required in the movement of the selected ship-
ments do not overstate the average costs for the traffic as a whole.

Position of the protestants.—Of the numerous parties appearing in
Opposition to the proposed increased charges, evidence was presented

“97 1.0.6,

362168—56—No. 200-—3

"7

Td Sars

Tene Sek sed

tae

522 INTERSTATE COMMERCE COMMISSION REPORTS

by the Growers and Shippers League of Florida, Florida Fruit and
Vegetable Association, Stokely Van Camp, Inc., National Association
of Fruit Packers, Texas Citrus and Vegetable Growers and Shippers,
F. H. Vahlsing, Inc., of Texas, the Western Growers Association,
California Citrus League, California Grape and Tree Fruit League,
Northwest Horticultural Council, Washington Potato and Onion
Shippers Association, Northwest Fish Traflic Committee, the princi-
pal meat packers, and the United States Department of Agriculture.
This representation embraces practically all the growers, shippers,
and processors of fruits, fruit juices and concentrates, vegetables, and
frozen foods in Florida, Texas, Arizona, California, Oregon, and
Washington, and fresh meats and packinghouse products throughout
the country.

It is the position of these protestants that, considering the overall
result of the present charges, there is no warrant for any increase
therein, and that the charges proposed would affect adversely both the
carriers and the shippers, it being their contention that the perishable
traflic affected cannot bear an additional burden. In support of their
position, they presented evidence concerning, among other things, the
deteriorating economic condition of the producers, the shrinking per
‘apita consumption of certain fruits and vegetables over a long period
of years, attributed to the rising costs thereof, and the rapidly increas-
ing volume of perishable traflic diverted to motor vehicles.

The Northwest Fish Traffic Committee and the Washington Potato
and Onion Shippers Association would not oppose a reasonable in-
crease shown to be justified upon substantial evidence. They do,
however, request the elimination of certain alleged inequities in the
refrigeration charges so that they may be on a competitive basis with
other shippers in the same general area. For example, they claim
that fresh fish from Prince Rupert, British Columbia, Canada, is
given an advantage over that from the Puget Sound region, amount-
ing to $30 or $40 per car, which would be $100 with the increase pro-
posed. It is claimed that the Washington potato shippers are in a
disadvantageous competitive position in relation to those in Oregon
and Idaho because of the lower switching charge per icing in Oregon
and the more favorable refrigeration charges from Idaho.

The Western Growers Association requests that the Arizona and
California vegetable shippers be given the privilege of initially icing
all cars in which their shipments are loaded, regardless of the type of
service used, instead of being limited to those moving under certain
of the modified services as at present. Somewhat similar requests
were made by Texas and Florida shippers. The Texas shippers also
urged that the carriers be required to make available to them rule 247

207 1.C.C.

8A, ATVI POON KAO NA DUETS Hebe RANTS hr IE 1 tl Be he RRIF

PROPOSED INCREASED REFRIGERATION CHARGES 523

service maintained from other producing districts, which has subse-
quently been established. Consideration of such requests would
unduly broaden the issues presented i in this proceeding.

The Arizona and California shippers of vegetables and deciduous
fruits also request that, if an increase is authorized, a holddown be
prescribed sufficient to maintain their present competitive relation to
other producing districts, Such treatment would be contrary to our
indicated purpose in the determination of charges, as nearly as
practicable, sufficient to cover the cost of providing refrigeration serv-
ives. An adjustment of that nature, if appropriate, should be accom-
plished by modification of the line-haul rates,

An objection by the petitioners to the presentation of evidence on
behalf of the Western Growers Association concerning car-mileage
revenue received by the carlines or railroads for the use of their
refrigerator cars Was sustained by the examiner, and thereafter, upon
request, counsel for those shippers was permitted to present proof for
our consideration. It consisted merely of a statement as to the car-
mileage revenue which the carlines would receive, for example, for a
2,000-mile round-trip movement of a refrigerator car at 4 cents a mile.
Revenue received for car service is not a factor in the determination of
reasonable charges for refrigeration service.

An overruled objection to the receipt in evidence of the petitioners’
exhibits Nos. 4, 5, 6. 7, 8, 9, 19, 20, and 21, as amended, interposed by
counsel for the Western Growers Association, on the grounds that he
was not afforded a “reasonable opportunity to examine both the docu-
ments and the abstract.” as contemplated by the provisions of rule 83
of our General Rules of Practice, is renewed on brief. Those
exhibits were compiled from voluminous detailed cost data and are
basic to the entire cost study. They were introduced at the initial
hearing on December 9, 1933, but were not received in evidence until
after the completion of cross-exaimination thereon during the follow-
ing hearing more than 2 months later, and after the underlying data
had been made available for examination. This procedure afforded
all parties a reasonable opportunity to examine both the documents
and the abstract. The ruling is sustained.

The section 2 charges, as noted, cover the several enumerated ele-
ments of expense, while the section 4 charges cover only the elements
of ice, salt, and switching. The elements of expense for supervision,
station and auditors accounting, and ice haulage, which are covered
by the section 2 charges, but not included in the section 4 charges,
amount to about 19 percent thereof. The section 2 shippers, generally,
allege that the subjection of their traffic to charges for those elements
without subjecting section 4 traffic to like treatment, causes unjust

27 1.0. C,

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524 INTERSTATE COMMERCE COMMISSION REPORTS

discrimination against their traffic and gives undue preference of
section + traffic.

After extensive investigations in the prior proceedings, we made
definite determinations as to the costs of the several elemens of eXpense
and required the establishment of charges accessorial to the line-laul
rates to compensate those costs on both section 2 and section 4 tratlic.
The section 2 charges became effective and have been applied for many
years, but because our orde® as to the section 4 charges for the elements
stated was stayed temporarily by the United States District Court for
the Northern District of [linois, and was subsequently vacated, those
charges never became effective.

Concerning the allegation of discrimination, it is noted that the
section 2 and section 4 charges do not apply on like traffic, and that.
us to the alleged undue prejudice, there is no showing that any failure
of the section 4 charges to cover the above-mentioned elements |yas
caused, or is likely to cause, any disadvantage or injury to the section 2
trafic or any shippers thereof. Thus, the claim of unjust diserimina-
tion or undue preference is not soundly based. In these circumstance=.
uny existing deficiency in the section 4 charges does not relieve section 2
traflic of the responsibility of bearing the full cost of that service and
is not a consideration in the determination of the lawfulness of the
increase proposed in the section? charges.

Cost of ice.—The cost to the carriers of supplying ice in the per-
formance of refrigeration service is much the largest of the several
elements of expense enumerated. It amounted, for example, to 65.5
percent of the total cost of the refrigeration service rendered in con-
nection with the sample section 2 shipments, herein described. for
which only “bunker ice” was supplied. So-called “body ice,” and ice
placed ‘n bunkers by shippers is not included in this computation.
The increases proposed are intended to cover the cost of both body
and bunker ice supplied by the carriers.

Ice used by the carriers in rendering refrigeration service is either
placed in the bunkers or bodies of refrigerator cars by themselves from
supplies which they have manufactured, harvested, or purchased and
stored in icehouses adjacent to icing platforms, or by contractors at a
price per ton as agreed upon. The carriers manufacture ice at only
a few points, the great bulk of their requirements being supplied by
contractors who, in most instances, also place it in the bunkers, The
harvesting of natural ice became uneconomical and has practically
ceased.

The Santa Fe maintains its own refrigeration department. Other
railroads’ responsibilities as to refrigeration are discharged for their
account, under contract, by carlines directly, or through them by inde-

207 1.0.6.

PROPOSED INCREASED REFRIGERATION CHARGES 525

pendent contractors. A sv)stantial portion of the Santa Fe’s service
is performed also by independent contractors. Those contractors are
generally commercial concerns deing a general ice business but, in a
number of instances, under long-term contracts with the carriers, they
have built plants within railroad yards. These plants are usually
not so situated as to be suitable for serving the general public.

Sc.ne of the protestants introduced evidence purporting to show
that, in many instances, the contract prices of ice were excessive.
These prices per ton, which may vary widely as between individual
stations, are represented by the carriers as being influenced by the
conditions existing at each station, such as the volume of ice used, the
investment in facilities, labor and other costs, ice shrinkage, and the
required purchase of minimum quantities of ice at certain stations
in order to insure the maintenance of supplies sufficient to meet all
requirements. The failure to use the contract quantity may result
from unforecastable conditions, such as crop failures and variations
in the volume of consumption, or because of the necessity of providing
compensation sufficient to induce contractors to invest in the plants
and equipment necessary to meet the contemplated requirements where
no other ice is available. Owing to inadequate supplies or variations
in requirements at a station, there are instances when it must obtain
ice from some other point. The evidence does not warrant a conclu-
sion that the carriers have not exercised due diligence in negotiating
the contracts.

Some of the shippers of fruits and vegetables contend that the com-
putation of section 2 costs should be based upon the cost of ice on a
statewide rather than a territorial group average used by the carriers.
They computed costs for either all or representative shipments in-
cluded in the carriers’ sample from Florida, Texas, Arizona, and Cali-
fornia using, in some instances, the same basis as was employed by the
carriers and, in others, the actual cost of ice at each icing station. The
computed deficit in revenue on 1,371 carloads of fruits and vegetables
moved from Florida under standard refrigeration, including both
those with salt and those without salt, using the group-average costs
of ice, amounted to 21.3 percent. Similar computations for repre-
sentative shipments given standard refrigeration service, or a modified
service under rule 240, rule 251, or rule 252, showed revenue results
ranging from a maximum profit of 9.12 percent to a maximum deficit
of 28.91 percent.

Computations were made by Texas shippers as to 97 carloads of
fruits and vegetables from that State, based on the cost of ice at indi-
vidual icing stations, which indicate a revenue deficit of 29.7 percent
as compared with a deficit of 40 percent indicated by the carriers’

297 1.C.C.

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526 INTERSTATE COMMERCE COMMISSION REPORTS

computations. They also show computations, on the same basis, for
a few shipments accorded standard refrigeration service, or rule 247
service, indicating deficits ranging from 6.79 to 7.57 percent.

The Arizona and California shippers presented recapitulations of
the carriers’ claimed costs of rendering the various refrigeration sery-
ices for 2,197 carloads of citrus fruit from those States embraced in the
carriers’ sample, the revenue thereon, and the resulting deficits as
shown in the carriers’ computations. The respective deficits on ship-
ments accorded standard refrigeration service, the various modified
services, and on all the services used are indicated as 41.79, 15.34, and
28.07 percent.

In prescribing charges for ice on a group or zone basis, rather than
by individual stations, we gave consideration to proposals of shippers
similar to the contentions advanced herein. The cost data developed
in the prior proceedings, like that herein, disclosed that, in numerous
instances, the cost of ice varied substantially as between individual
icing stations, but that the practical necessity of publishing charges
on the group basis was recognized. The shippers’ proposals as to the
method of arriving at charges were regarded as being based upon an
inadequate conception of the scope of the present-day refrigeration
service. We then observed that the handling of refrigerated trattic
should be considered as an integrated national service, and, when so
considered, it was clear that charges should be fitted to its support by
the use of the group basis, and that the shippers’ proposals were in-
compatible with that view. No modification of that determination is
warranted by the evidence in this proceeding.

The ice-cost formula is designed to develop at each icing station
the cost of (1) ice per ton to the carrier, whether purchased, manu-
factured, or harvested, (2) moving ice to the icing platform, (3) opera-
tion of the icing platforms, and (4) placement of the ice in the refrig-
erator cars. It includes such elements as return on investment,
depreciation, interest on working capital, cost of transporting ice to
platforms, labor of icing cars, indirect costs, and taxes. The data
reported by the carriers for the section 2 traffic sample were developed
in accordance with that objective, and the procedures and resulting
computations will be discussed in sufficient detail below.

The table below shows a summary of the reported aggregate ton-
nage and the computed cost of ice supplied in bunkers of cars, seg-
regated by territorial groups, the average cost thereof per ton, the
section 4 charge per ton, and the amount of the deficiency of such
charge in each group. As to ice supplied in bodies of cars, it shows
the total tonnage for all territories, total cost thereof, average cost
per ton, the section 4 charge and the deficiency of the charge. The

207 I.C.C.

1

PROPOSED INCREASED REFRIGERATION CHARGES 527

areas embraced in the groups listed below are the same as those in
the corresponding groups defined in the perishable protective tariff.

Amount + Average Section 14 Silas
Territory supplied Cost cost charge Deficiency
Punker ice Tons Perton Perton Per ton

Group 1 $5. 07 M4 $1.08
Group 2 | &. 70 4% 3.74
} ee 21s S 4 5. 43 2 91
Group 4...... 33 0 5.71 5.49 22
Group 5 506 6. 93 62 1.31
Group 6__.. - 2 | 6.73 5. 69 1.4
Group 7... y 7. 06 5. 75 1.31
Group 8. BS, 368, 7.03 601 1.02
Ey SERGEY TRESS eae PS eee 285,616 , 2,217, 761 7. 76 6 2s 1. 48
Group 10... .... nkGt egawae uae ethincatarh idk 438, 977 3, 142, 765 | 7. 16 oS 4s
Pody ice | } |
All territories... See ee 126, 953 | 1, 066, 738 | 8.39 6.61 | 1,78
i iccocatiidae sath alt handeisiod dae rcaasescie Mme 8 ae 8: 8 eo —e-

The cost of ice, computed by the carriers, includes an item represent-
ing 6 percent of original cost without deducting related depreciation
reserves. In lieu of conducting valuation studies at each station, which
they claim would have been too expensive, the petitioners presented
data to show that reproduction cost less depreciation, computed on
the basis of studies of the condition percent made by the Commission’s
engineering section, is greater than the original cost, which they used.
The protestants generally used a rate of 4+ percent for return, point-
ing out that, over a long period of years, the carriers’ average net
return for all their operations has not exceeded that amount. In the
restatement by one group, the base for return was original cost less
accrued depreciation on the base of an engineering condition percent
(56). The base used by the other group was original cost reduced by
a depreciation reserve computed on the basis of a 4-percent deprecia-
tion accrual each year since acquisition of the property. The protes-
tants contend that the 4-percent rate should be applied to a base which
is the original cost of all property, other than land, less the cost of
any of such property over 25 years old.

After careful consideration of all facts herein contained, including
appreciation, depreciation, going-concern value, but excluding work-
ing capital, which is considered separately hereinafter, and all other
matters which appear to have a bearing upon the valuation, the value
as of December 31, 1951, for the purpose of this proceeding, of the
property owned or used by petitioners for furnishing refrigeration
services is found to be $22,484,000, and this amount will be used in the
restatement of ice costs.

The return on facilities devoted to the performance of refrigeration
service should not be expected to exceed the average rate for all opera-
297 1.C.C,

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528 INTERSTATE COMMERCE COMMISSION REPORTS

tions of the class I railroads as a whole. The allowance for return in
the restatement, hereinafter, will be computed at a rate of 4 percent
after Federal income taxes. In computing the allowance for Federal
income taxes, fixed charges were taken into consideration.

The primary purpose of any system of depreciation is to recover
(or charge to cost of operation) the full original cost of property
through periodic charges to operating expenses during the service life
of the property. The rate of 4 percent used in the ice-cost formula
contemplated the group plan of depreciation based on a weighted-
average service life of 25 years, which is based on varying service lives,
Under the group plan, property which is destroyed, retired, or other-
wise withdrawn from service is taken out of the base on which the
depreciation charge is computed, but all property which remains in
service continues to be subject to depreciation regardless of the amount
reflected in the depreciation reserve.

The protestants propose to modify the group plan used in the ice-cost
formula by discontinuing depreciation on property older than 25 years,
Under this modification the full original cost would be charged off on
property which reaches 25 years of age, but on property with a shorter
life which is retired before 25 years, the full original cost is never
recovered through charges to operating expenses and the cost is under-
stated. For this reason, under the group plan of depreciation, all
property in service regardless of its age should continue subject to
depreciation.

Included in the carriers’ computations is an item of return. at the
annual rate of 6 percent for one-sixth of a year, on the working capital
said to be required in the performance of icing operations at each of
the numerous icing stations maintained. The determination of the
period used in the computations was based upon the representation
that there is a time lag of approximately 2 months from the time an
icing service is retidered until payment therefor is received from the
connecting carriers. The amount of the working capital allocated to
each icing station, reflecting one-sixth of the annual expense of operat-
ing the station, is designed to provide funds sufficient to cover operating
expenses during those periods.

Under the established procedure of effecting payment to the par-
ticipating carriers for icing service performed by them, the total
refrigeration charge collected at the destination, less the amount
accruing for ice haulage, station and auditors accounting, and hazard,
which is retained by the delivering carrier, is credited by it to the
originating carrier and paid to the latter in the next interline settle-
ment. Thereafter, upon receipt of bills, distribution of portions of
that residue is then made by the originating carrier to other partici-
pating carriers on the basis of the amounts published in the governing

297 I.C.C.

ao PTL AEE LR ESA LEGIT ENE SED 5 ON el A te aaeeeeeteien eee a ae PA CNS Ee ee

PROPOSED INCREASED REFRIGERATION CHARGES 529

division sheet. The amount deducted and retained by the delivering
carrier is divided between the participating carriers in the same manner
and upon the same percentage basis as are observed in dividing freight
charges. Under these procedures, there is generally a lag of more than
amonth after delivery of a shipment before the participating carriers
receive their respective proportions of the revenue.

Icing operations, including the furnishing of ice and salt, are per-
formed largely by independent contractors under a contract with &
either the carlines or directly with the railroad, which names the a
unit prices for the service involved. The contractor is usually paid Fs
about the middle or latter part of the month following the month in &
which the service is rendered. There are longer lags in instances %
where any question is raised as to the accuracy of the bill rendered £
by the contractor and an investigation is required. It is not uncom- 4
mon for Pacific Fruit Express to withhold payment to its contractors :
for as much as 2 or 3 months during such investigations. e

The time in transit for a transcontinental movement from Lodi, =

Calif., to New York, for example, is usually about 10 days. The
protestants point out that the maximum time elapsing from the time
of shipment until the charge is paid at the destination is only about 14
days, and for shorter nauls, such as from Florida to New York, it may
be only about 5 or 6 days. They urge that there is no justification for
the imposition of any interest charge on working capital after the
collection of the refrigeration charge at the destination. Of the
numerous carlines and railroads reporting ice costs, only the Fruit
(ivowers Express maintains a definite working capital figure for
refrigeration expense in its accounting. The protestants generally
contend that the period during which interest is imposed should not
exceed one twenty-fourth of a year, which is the same as that used by
he Fruit Growers Express in its accounting. The use of a longer
period does not appear reasonable. A rate of 4 percent for a 2-week
period will be used in the restatement, which is equivalent to adding
he sum of $1,145,316 to the property value as a base for a return on
vorking capital.

In computing the transportation cost for ice shipped to platforms,
he petitioners used the pub’ vaed tariff charges when the movement
vas over the lines of a carrier other than the one using the ice, and 10
nills per ton-mile when it moved over the lines of the carrier using
he ice, except that for those served by the Fruit Growers Express, a
ate of 8.75 mills was used. For switching movements the tariff
harge was used.

Some of the protestants maintain that, in many cases, such trans-
ortation of ice was in refrigerator cars which would otherwise have
297 1.C.C.

362168—56—No. 200-—4

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NRA ANAT ITS ND NRE ROE Ss ey te = - .

530 INTERSTATE COMMERCE COMMISSION REPORTS

been returned empty, and that 1 mill per ton-mile would be a proper
cost. They refer specifically to 9,836 tons of ice shipped from Chicago
and Silvis, Il., over the lines of the Chicago, Rock Island and Pacific
Railroad Company to Dalhart, Tex., a distance of more than 1,000
miles.

The volume of shipped ice transported over the lines of the carrier
using it is of appreciable importance at only a few points. Much of |
the shipped ice moves relatively short distances. In cases where the
ice is shipped in refrigerator cars which would otherwise be returned
empty, the cars receive the following services: (1) Selection of the
car, (2) cutting the car out of the train if it is a return-empty move-
ment, (3) switching the car to the iceplant for side-door loading, (4)
holding it for loading of block ice, (5) switching it back to the yard,
(6) classifying it as dead freight, (7) switching it to the train for line-
haul movement, (8) clerical work to see that the car is properly cut
out at destination, (9) classification and separation from other cars,
(10) switching out of the train if necessa ry, (11) holding the car unti|
it is unloaded, (12) switching it back to classification, (13) classifica-
tion and restoration into a train, and ( 1+) additional clerical account-
ing; also such items as damage caused by the transportation of block
ice in the body of the car. It does not appear that the unit costs used
overstate the average cost. and they will be used in the restatement.

The cost of labor includes the labor, on the icing platform, of putt ing
the ice into the cars, but should not include any supervisory expense,
Gang foremen who work along with their men properly are includible,
but supervisors who do not physically handle the ice should be ex-
cluded, because their compensation is included in the item of super-
vision, a separate expense element. ‘The contract price of ice gener-
ally includes delivery into the cars, in which case no separate labor
cost Is allowable.

An exhaustive investigation of this item, by certain of the protes-
tants, developed numerous instances where supervisory salaries were
originally included in the petitioners’ computed cost of labor, such as
at all Northern Pacific and Pacific Fruit Express icing stations. Pur-
suant thereto, corrected data were subsequently submitted by the
petitioners, which eliminated practically all of the duplications by
those carriers, and some of the errors appearing in the reports of other
carriers, Other assailed items, which the petitioners considered cor-
rect, however, were not changed. For example, these protestants take
the position that no separate item of labor for placing ice in cars was
allowable at stations where all of the ice was purchased under contract,
because it was included in the price of the ice. The petitioners point
out that, in many instances, the contract price of the ice covers only
delivery to the platform, and that there is, in addition thereto, the

297 1...

ANY EEE DIES CREAT ates ALAA La? PS MT IN prem AAAI A SAEED ce ci aaa

—e—_—_

PROPOSED INCREASED REFRIGERATION CHARGES 531

labor cost of placing it in the car. There are several stations, men-
tioned by these protestants, where items of supervisory expense still
remain in the corrected labor cost.

The corrected cost of labor eliminated practically all items of a
supervisory nature, but failed to eliminate those at the following
stations:

E
2

Station Railroad Type of work | om of
| j

ae Log. SR ew ee eee Northern Pacific._...___. | Supervisory __- $828. 95
Spokane, Wash___ 5 eee | do 3 | ene 1, 264. 35
OST D2 COS a ae capi | Rock Island 2770-27272 bcad MMO) ites coon 1,010. 25
ee A See eee a ET nae EE RE ERA Inspection. __ 5, 743. 09
ON MND ois Sota ae Indiana Harbor Belt__.____- Supervisory ___ 9, 587, 38
oe ERE SSIES ee aN ASU Powe sce cewareeveusscuswunelworscecenaececce 18, 434. 02

It is concluded that, after the elimination of the amount shown above,
the remaining expense will be approximately correct.

Indirect costs include maintenance of icing facilities, injuries to per-
sons, insurance, telephone, heat, light, power, water, tools and supplies,
taxes, and other expenses. Many of these items are relatively small
and had minor effect upon the final results. Some carriers averaged
their maintenance over a 3-year period. The protestants questioned
this procedure as a means of obtaining normal maintenance expenses.
This average may produce more normal current maintenance expenses
than would be obtained by use of such expenses for a single year, In
a study involving a large number of icing stations, the averaging
process will have negligible effect upon final results.

Objection is made by the protestants also to the consideration of
costs representing the ice department of the Santa Fe. which they con-
sider improper. Expenses of the Santa Fe’s ice department are allo-
cated among manufacture, storage, and ice delivery. The icing facili-
ties are operated by that department, whose employees consist of the
superintendent and those in his Los Angeles oflice, plant superintend-
ents, and those in local plant offices, none of whom physically place
iee in cars, The petitioners contend that this expense is properly in-
cludible in the cost of ice because it relates to the management of ice
plants and the physical handling of ice at platforms rather than super-
vision of refrigeration service. As already noted, the cost of labor
includible in the cost of ice may properly include only the salaries of
those who do the physical labor, and all others Who are in a supervisory
capacity are charged to the separate element of supervision. It is
concluded that the Santa Fe’s ice department expenses are a part of
Supervision, and the amount of such expenses, namely, $81,938, will be
excluded from the restated ice cost.

297 1.0. C.

PELL EL II NE FONT PAN

DE ASE A RoI CD AERC 6b eS wrx ” ee _ BARE A tT PW OR en IE ae
532 INTERSTATE COMMERCE COMMISSION REPORTS

The amount of income tax is computed to be that which will allow
the payment of such income taxes and still leave the carriers with a net
return of 6 percent on the investment in icing facilities. In their re-
statement of costs, the protestants used the same formula, but point
out that a reduction in the return on investment and working capital
will substantially reduce the amount of income tax. The inclusion of
an amount for Federal income tax required for a net return of 4 percent
is proper and will be allowed in the restatement.

The table below summarizes, by territorial groups, the cost of ice

delivered in bunkers and bodies of cars, restated to reflect the adjust-
; ments contemplated by the above conclusions, together with the
7
; petitioners’ computed costs :
a ees Cost
x . = Restated
Territory — — hy of | cost oi
2 ‘Petitioners’ Restated ton
3 os Area: wi fee |
Runker ice
| $7,042, 866 | $6, 385, O66, 1, 388, O2u | ) a crate to break even. They claim that if the present structure of

297 ILC.C,

me...

TIN AR WT BeMN aD

a er

FIT IE OPTI IO EF RS PVE si i al

550 INTERSTATE COMMERCE COMMISSION REPORTS

prices continues for any appreciable length of time, the tonnage will
diminish to such an extent that it will be limited to quantities sufficient
to maintain them only as so-called luxury commodities. Any increase
in the cost of transportation, they assert, would force further diversion
to the trucks, or discontinuance of shipments entirely. Shipments of
vegetables and melons by truck, in carlot equivalent from Arizona and
California, increased from 7,590 in 1946 to 40,945 in 1953.

More than 73 percent of the fresh deciduous tree fruits, grapes, and
berries that move by rail to interstate markets, move to the heavy con-
suming areas east of the Mississippi River. Over 61 percent move to
markets east of Chicago, and more than 20 percent move to points in
the greater New York area alone. The annual rail movement of these
commodities, in carloads, from California increased from 89.178 in
1925 to 117,723 in 1928, declining steadily thereafter to 41,748 in 194,
increasing to 52,102 in 1947, and declining subsequently to 40,152 in
1953, or about 65 percent from the 1928 volume. During that period
the population of the United States increased €pproximately 43 per-
cent. This decline in movement by rail is attributed not only to
diversion to trucks, but principally to declining per capita consump-
tion, competition of producers closer to the principal markets, and to
increased costs of marketing these products. It appears that where
there has been a constant increase in the number of carloads shipped
each year, as occurred in 1951 and 1952 over 1950, there has been a
steady decline in the percentage of distribution of shipments in groups
A and B involving the longest hauls and the highest transportation
costs. New York is embraced in group A.

Because trees and vines are permanently planted to produce peren-
nial horticultural crops, which take several years to bring into bearing
ata relatively high cost of original capital investment, an adjustment
in production cannot be accomplished without severe capital losses to
the producer. Owing to the extreme perishability of the commodities
and the long haul to the principal consuming markets, a substantial
proportion of these crops move to markets on consignment for account
of the shipper. and for that reason he is frequently forced to accept dis-
tress prices forthem. The volume of movement by truck is increasing
substantially, having increased from 1,431 in 1946 to 6.966 carlot
equivalents in 1953. Movements by truck to destinations east of
Chicago are small, but the length of haul is becoming longer each
year.

The quantities of citrus fruit grown usually exceed the demands,
giving rise to marketing problems. The citrus industry in Arizona
and California is being operated under a marketing agreement pro-
gram which has been in operation during most of the time since it was
instituted under the Agricultural Act of 1933. For the 7 seasons

297 I.C.C.

PROPOSED INCREASED REFRIGERATION CHARGES 551

16-47 through 1952-53 the percentage ratios of the “on-tree” prices
to the parity prices, fixed by the United States Department of Agri-
culture, were 47, 42, 54, 51, 54, 57, and 39. Data were submitted on
behalf of the citrus fruit growers, showing the “on-tree” farm value
per acre of their products before depreciation of the t es, but after
deduction of the cultural cost thereof and an allowance for interest on
the investment. On navel and miscellaneous oranges, for example, the
income account for the 7 seasons showed losses per acre to the grower
of $6, $129, $154, S49, $5, $24, and S67, respectively. On Valencia
oranges, the respective losses were $173, $147, $216. $121, $88, $126, and
$153. On lemons, the results during the respective seasons were losses
of 891, $138, $46, and 346, and profits of $10, $120, and $138.

The canning of single strength orange juice and blended orange-
grapefruit juice began about 1935 and became a part of the utiliza-
tion pattern in the citrus-fruit industry. In 1947-48. a third product,
frozen concentrated orange juice, was developed, and its production
has increased very rapidly in the past 6 years. It takes substantial
quantities of oranges from the available supplies, particularly, in
Florida. The utilization of citrus fruits in the production of juices is
much greater in Florida than it is in Arizona and California. For
example, in 1952-53 only about 38 percent of Florida oranges and
tangerines were shipped in the fresh state as compared with a volume
from Arizona and California amounting to about 68 percent of the
Valencia oranges and 88 percent of other kinds including navel
oranges. The shipping weights of citrus-fruit products from

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385610_0895%3A1. Public record. Not legal advice.