Appendix — American Trucking Associations, Inc. v. Atchison, Topeka & Santa Fe Railway Co. (No. 57)

Supreme Court brief1966

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APPENDIX A

IN THE UNITED STATES. DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION |

Civil Action No. 64 C 1442 f

THE ATCHISON, TOPEKA AND SAN FE RAILWAY COM-

PANY; CHICAGO & EASTERN ILLINOIS RAILROAD COM- —

PANY; CHICAGO AND NORTH WESTERN RAILWAY COM-

PANY; CHICAGO, BURLINGTON & QUINCY RAILROAD

“COMPANY: CHICAGO GREAT WESTERN RAILWAY COM-

PANY; CHICAGO, MILWAUKEE, ST. PAUL AND: PACIFIC

RAJLROAD COMPANY; CHICAGO, ROCK ISLAND AND PA.

CIFIC’ RAILROAD COMPANY; THE DENVER AND RIO

GRANDE WESTERN RAILROAD COMPANY; GREAT NORTH-

ERN RAILWAY COMPANY; THE KANSAS CITY SOUTHERN

RAILWAY COMPANY; LOUISIANA & ARKANSAS RAILWAY

COMPANY; MISSOURI-KANSAS-TEXAS RAILROAD COM-

PANY; MISSOURI PACIFIC RAILROAD COMPANY; NORTH-

ERN PACIFIC RAILWAY COMPANY; ST. LOUIS-SAN FRAN-|

cisco RAILWAY COMPANY; Sr. ‘LOUIS SOUTH WESTERN

RAILWAY COMPANY; S00 LINE RAILROAD COMPANY;

SOUTHERN PACIFIC COMPANY; UNION PACIFIC RAIL~

ROAD COMPANY; WABASH RAILROAD COMPANY; THE

WESTERN PACIFIC RAILROAD COMPANY;

‘Plaintiffs,

¥.

UNITED STATES OF AMERICA; AND

INTERSTATE COMMERCE COMMISSION;

‘Defendants. .

August 20, 1965

Before Castle, Circuit Judge, —— and Decker, Dis-

trict Judges.

Julius J. Hoffman, District Judge. Piggyback service—

¢ 28

the movement of highway trailers on railroad flatears—

constitutes “probably the most significant recent develop-

ment in transportation’, in the opinion of the Interstate

Commerce Commission. Because of the “explosive

growth” of this service in the past five years, the Commis-

sion in 1962 instituted on its own motion a proceeding to

. investigate the subject generally and “to explore new ap-

proaches” to its regulation. That proceeding culminated

in a Report-and Order of the Commission issued under the

title Substituted Service—Charges and Practices of For-

Hire Carriers and Freight Forwarders (Piggyback Serv-

ice), Ex Parte No. 230, reported at 322 I. C. C. 301-417,

dated March 16, 1964, rehearings dehied June 22, 1964,

and December 21, 1964. By this Report and Order, the

Commission promulgated eight rules intended. to regulate

trailer-on-flatear (TOFC) service. These Rules, herein

referred to simply as Rules 1 through 8, are officially des-

ignated and reported as Sections 500.1 through 500.8 of

title 49, Code of Federal Regulations.

This suit was brought to enjoin and set aside the Com-

mission’s order on the ground that four of the eight rules

issued by the Commission are beyond its authority and un-

’ lawful.' Pursuant to Sections 2284 and 2321. through

2325 of the Judicial Code,? the matter has been tried be-

fore a threéjudge court. We conclude that the Commis-

sion’s order ‘must be set .aside.

—

: I,

’ The plaintiffs and intervening plaintiffs are aligned as

five separate parties in interest, comprising three groups

of railroads, one railroad individually, and a group of

*A motion for a temporary restraining order was withdrawn

. when the Commission,-on its own motion, stayed the effectiveness

of its rules until further order.

*28 U.S.C. §§ 2284, 2321-2325 (1948).

ee i <d stnsaseiehiinaedenia me ualieeanindna eal

= = _ a o + = -_—— - -

freight forwarders. Far the defense, the American

Trucking Associations, Inc., and some of its members, the

Contract Carrier Conference, and the National Auto

Transporters Association all intervened to join as defend-

_ants with the Commission and the United States. Despite

this multiplicity, the several plaintiffs are agreed on the

main point of the railroads’ controversy with their rivals,

_ the truckers, and in their objections to the: Commission’s

new rules.

The primary issue to be decided is the validity of Rules

2 and 3, promulgated by the Commission in its proceeding

by a divided vote. Briefly glossed, they require a railroad

which offers TOFC service on an'open-tariff basis, that is,

to the regular shipping public, to make that service avail-_.

able on the same terms without discrimination to motor

carriers * acting in that capacity in hauling freight, and, -

as a corollary, authorize the motor carriers to substitute

this TOFC service of the railroads for their regular high-

way transportation by truck. In full, these rules provide:

500.2 Availability to all of TOFC service-—TOFC

service, if offered by a rail carrier through its open

tariff publications, shall be made available to any

person at a charge no greater and no less than that

received from any other person or persons for doing

-for him or them a like and contemporaneous service

in the transportation of a like kind of traffic under

substantially similar circumstances and conditions.

500.3 Use of open-tariff TOFC service by motor and

water carriers in the performance of economically

regulated transportation.—

- $8 These Rules apply equally to the use of railroad TOFC service

by common and contract carriers by water, as by motor vehicle. -

Since the issues are largely identical, they will be considered by

reference only to motor carriers extept where different legal prim

ciples apply to water carriers. So-called fishyback service—-the

movement of highway trailers by barge—was severed from this ~

- proceeding for separate treatment, as were the practices of motor

carriers of automobiles. Birdyback service is not involved,

‘

(a) Except as otherwise may be prohibited by these

rules, motor common and contract carriers, water

common and contract carriers, and freight forward-

ers may utilize TOFC service in the performance of

all‘or any portion of their authorized service through

the use of open-tariff TOFC rates published ~ a rail

carrier,

(b) Motor and water common carriers shall utilize

open-tariff TOFC service only if their tariff publica-

tions give notice that.such service may be utilized at

their option, but that the right is reserved to the

user of their services to direct that in any particular

instance TOFC service shal] not be utilized.

open-tariff TOFC service only if their transportati

contracts and schedules make appropriate provision

therefor.

e(d) Tariffs of motor and water common carriers and

contracts and schedules of motor and water contract

carriers providing for the use of open-tariff TOFC

service shall set forth the points between which TOFC

service rhay be performed and the names of the rail

carriers whose TOFC service may be utilized.

-(e) Motor and water,common and contract carriers

utilizing open-tariff TOFC service in the perform-

ance of authorized transportation shall tender traffic

* to and receive traffic from rail carriers only at points

which the motor and water carriers are authorized to

serve.

These Rules break new ground. “To the present time,

‘the available TOFC service has been divided among five

categories or “plans” which have evolved from the car-

riers’ practices and the Commission’s rulings, As cap-

sulized in the Commission’s Report, the five plans involve

the following arrangements:

Pad

PLAN I

Railroad movement of trailers or containers of motor

common carriers, with the shipment moving on one -

bill of lading and billing being done by the trucker.

Traffic moves under rates in regular motor carrier

tariffs. |

PLAN II

Railroad performs its own door-to-door service, mov-

ing its own trailers or containers on flatears under

tariffS, usualky similar to those of truckers.

PLAN III .

Ramp-to-ramp rates based on a flat charge, regard-

less of the contents of trailers or containers, usually

. owned or leased by freight forwarders or shippers.

No pickup or delivery is performed by the railroad.

PLAN. IV

Shipper or forwarder furnishes a trailer or container-

loaded flatear, either owned or leased. The railroad

makes a flat charge for loaded or empty-car move-

ment, furnishing only power and rails.

PLAN V

Traffic moves generally under joint railroad-truck or

‘ other combination of coordinated service rates.

Either mode may solicit traffic for through movement.

It will be seen that these five plans can be classed more

simply into two groups: the open-tariff plans, numbered

II, III, and IV, available equally to regular shippers and

freight forwarders, but not to motor carriers; and the

joint intermodal plans, numbered I and V, available only

. to common carriers, and only through negotiation and vol-

untary agreement between the rail carrier and the motor

carrier. Thus motor carriers and ordinary shippers are

differently served under separate plans. Negativ ely, this

- separation has foreclosed motor common carriers from the

use of the three open-tariff plans. The prohibition im-

plicit in the plans was explicitly declared by the Commis

sion aghort while after motor carriers first were brought .

under federal regulation.* Since 1939, this ruling has

been reaffirmed in subsequent decisions and observed in

practice consistently down to the present time.’ The estab-

lished principle and its supportirig reasons have come to

be summed up in the abbreviated statement that it is re-

" pugnant to the Interstate Commerce Act for a motor car-

rier to act both as a carrier and a shipper as to the same

shipment.

The new Rules promulgated by a majority of the Com-

mission would work an abrupt departure from this estab-

lished principle and from the settled practice. Since joint

intermodal service of the kind provided by plans I and V

would be continued under new Rule 4, (49 C.F.R. 500.4),

the motor common carrier would enjoy the option of both

classes of TOFC service, and could choose either open-

tariff service without the railroad’s consent or cencurrence

if that rate should be more favorable, or the joint inter-.

modal service if the railroad in negotiation should agrée

to offer that at a lower rate. The railroads, presently free

to bargain with their highway comfetitors, would be

bound to accept whatever TOFC freight their rival car-

riers might choose to tender. These basic changes in the”

industry are not, however, inadvertent.“ The Commission

plainly avowed its purpose as “the reexamination of ex-

isting Commission precedents and pronouncéments” and it

specifically overruled those prior decisions which it found

_ * Substituted Freight Service, 232 1.C.C. 683 (1939).

_ *See Movement of Highway Trailers by Rail, 293 1C.C 92

(1954), and cases there cited.

to be indistinguishable and absolutely irreconcilable with

its newer view, The issue of power is thus clearly drawn.

IL,

In reviewing the authority of the Commission to iasue

the Rules in question, we are confronted at the outset by

the duty to measure the administrative action solely

seek its own justification for the Commission's

rationalizations

The Commission bears a correlative duty to disclose dear

ly the grounds on which it acta’

Here we not say that the Commission's Report is «

model of cla ¥, guiding the court unerringly to the state-

tory source of the power The Rules are de

scribed in the Report as partly partly im-

posing billing and tariff requirements, and partly “to im-

. plement the broad provisions of existing legislation”. with.

out specification of which ground supports any

rule. In overruling its earlier decisions which

motor carriers from shipping their customers’

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“We are invested with no roving commission to carry out

” the policy of Congress... .”° _ |

It is unnecessary to decide, however, whither the f power

delegated in Section 12 of the Interstate Commerce Act,

authorizing the Commission “to.execute and enforce the

provisions” of the Act, confers such a general power to

make rules to meet changed conditions; The Rules in

question here must stand or fall. with the interpretation |

of the Act itself, regardless of altered circumstances in

the transportation industry. On one hand, Rules 2 and 3

“are simply declaratory of the command of Congess if the

Commission is correct in construing the Act to forbid rail- -

road discrimination against motor carriers in the services

_afforded,-and in interpreting the Act as imposing no

limits on the power of a motor carrier to avail itself of

_ substituted rail service in its authorized operations. On

the other hand, the Rules are invalid as in conflict with ~

Ahe Act, despite changed conditions, if the congressional

enactment is read to excuse the railroads from a duty-to

serve motor carriers equally with ordinary shippers, or to

. limit the authority of motor carriers to ship. their custo-

mers’ freight by rail. without, the railroads’ cOhcu currence.

. We turn first, then, to the snterpretation of the rélevant

statutes, upon the ich’s assumption that the ques-

' tions are open and may be treated as matters of first im-

pression. We will thereafter consider ‘the ‘effect of the

settled line of decision establishing an interpretation con-

ee ee sg

IIL

The only statute mentioned in‘ the Commission’s report |

which could supply affirmative support for Rules 2 and 3

“Cannes City Southern Ry. Co. v. Kansas City ee Co.

211 TC. C. 291, 804 (1935).

is Section 2 of the Interstate Commerce Act.’ Indeed, in

considerable part the Commission’s Rule 2 is merely a

paraphrase of that Section. We may accept, therefore, the

argument of counsel for the government, despite the ain-

biguity of the Report’s reference and, discussion, that the.

. Commission invoked Section 2 as authority for its Rules.

" Section 2 provides in full: : R

That «? any common carrier subject to the provisions

of this part shall, directly or indirectly, by any spe

ial rate, rebate, drawback, or other device, charge,

“demand, collect, or receive from any person or per-

‘Sons.a greater or less compensation for any service

rendered, or to be rendered, in the transportation of

. passengers or property, subject to the provisiéhis of

* this part, than it charges, demands,’ collects, or re-

.ceives from any other person or persons fox doing for

him or them a like and contémporaneous service in

‘the transportation of a like kind of traffic under sub-

stantially similar circumstances and conditions, such

common carrier shall be deemed guilty of unjust dis- —

crimination, which is hereby prohibited and declared

to be unlawful. | _

By its terms, this Section deals only with discrimination

in rates, and doéS not extend to a discriminatory refusal

_ to provide service at all. This limitation in scope is not a

legislative oversight, however. The next. succeeding Sec-

tion of the Act rounds out the carrier’s duty of equal

treatment, by forbidding discrimination or preferences in .

the service afforded, in the following terms:

Section 3(1). It shall be unlawful for any common

carrier subject to the provisions of this part to:make,

give, or cause any undue or unreasonable preference

or advantage to any particular person,’ company,

firm, corporation, association, locality, port, port dis-

trict, gateway, transit point, region, district, terri-

®49 U.S.C. § 2 (1887).

_ tory, or any particular description of traffic whatso-

ever; or to subject any particular person, company,

firm, corporation, association, locality, port, port dis-

trict, gateway, transit point, region, district, terri-

tory, or any: particular description of traffic to-any

undue or unreasonabie prejudice or disadvantage in

‘any respect whatsoever: Provided, however; That this

paragraph shall not be construed to apply to discrimi-

nation, prejudice, or disadvantage to the traffic of

. any other carrier of whatever Gencription. +"

It appears, then, that the letter of the law singled out -

- bythe Commission as authority for its Rules offers no’

support, since the ostensible object and effect of those

Rules is not to eliminate discrimination in rates under

Section 2, but rather to compel the railroads to afford

TOFC service to motor carriers if it is provided for oth- ~

ers. The provision relevant to this purpose; Section 3, is

nowhere cited in the Commission Report: _ This flaw might

not be fatal if Section 3 provided the necessary founda-.

tion, since the two sections are plainly complementary

and to be read én pari materia. But Section 3, by its pro- |

visg, specifically excludes from its coverage “the traffic of |

any other carrier of whatever description.” -

Endeavoring to avoid the plain meaning of this proviso,

the government relies upon a portion of its complex legis-

lative history. The proviso was enaeted in 1940, when it

was adopted froma parallel provision of part II of the

Interstate Commerce Act, dealing with motor carriers,

which had been enacted in 1935. Tracing to this source,

the government points to a statement of Senator Wheeler, _

made in explanation df the language as used in this ear-

aby bill, tending to show th&t the proviso was intended to

fears that carriers. by competing modes might com-

ed of injury by reason of the low rates of the rival.”

1179 Cor. Rec. 5656. See,

.~ oom ; a

The Senator expresséd his opinion’ that the fears were not

well founded, however, because the basic command of the

section had in turn been borrowed’from Section 3 of part’

I (applicable to railroads) as originally enacted without

the proviso, and because that section had “always been

interpreted as covering unequal and unjust treatment by ~

a carrier of its patrons.” Reading: “pa ” as including

carriers who tender freight for shipment, the govern-

ment’s argument proceeds from this observation through

the tangle of cross-references to the conclusion that Sec-

tion 3 does protect carriers who. seek to use another car-

rier’s services since it is said that the proviso exempts

only discrimination against the traffic of other carriers

‘competing or parallel routes for the same business. The _

plaintiffs point ott in response that Senator Wheeler was

contrasting “patrons” with “carriers” in his remarks, so

the government's major premise—that carriers are “pa-

trons” in thé Senator’s thinking—is faulty.

- At best this legislative history is inconclusive. It : seems

clear that the Senator did not have in contemplation the

Status of the carrier that tenders freight to another; and

that his comments on this different bill provide only

oblique evidence of the meaning of the basic provisions

of Section 3(1), which had beén enacted nearly fifty years

earlier, or ‘of the meaning of its provise, enacted ‘by an-

other Congress five years later. This evidence of con-

- gressional intent is too slendef a reed to support a disre-

gard of the broad sweep of the words excluding from the .«

railroad’s obligation of equal service “the traffic of any

other carrier of whatever description.’

Practical problems which would arise under the Com-

“mission’s interpretation of Section 2 also militate against

~such a reading. Although the Report emphasizes the

value of coordinated, service by motor carriers and rail-

roads, the Rules promulgated would allow the motor car- —

_ Tier to use any open-tariff TOFC plan, including plan II

——,

as : well as plan III. Vaier plan II there is. no coordina-

tion: the railroad provides complete door-to-door service,

with its own tractors and trailers. Thus the motor car-

rier in using it would abandon any pretense of perform- -

ing services as a carrier, and would function merely as

the customer’s agent in calling upon the railroad for its

seryices. Moreover, if the Act required railroads to serve -

mqtor carriers and regular shippers without discrimina-

tion, thére would be no warrant for confining the com-

_ mand to TOFC service. The trucker would be entitled to

compel the ‘railroads to carry notvenly the freight-laden

trailer but bulk cargo and boxcar freight as well. The

Rules announced, limited.as they are to TOFC shipment,

would. fall far short. of the need for guidance were the

’ novel interpretation of the Act to be sustained; the greater

need would be for-rules to govern the problem of. handling

. freight in other forms. And since Sections 2 and 8 of the

_ Act apply to the transportation of passengers as well as

. freight, the ission’s interpretation would open a

host of new problems concerning substituted service for

‘ passengers. Moreover, the Commission’s view of the Act

would appear to require intra-modal substituted service,

as pointed out by Commissioner Webb in his dissent, by

“which one railroad could shunt its unprofitable traffic onto

a competing railroad, or by which one motor carrier could

call upon another forthe, difficult hauls. Pressed to its

logical ultimates, the Act, in the Commission’s reading,

would it-a carrier which had received freight from

another #@ exercise the same right by tendering the same

freight immediately back to the original carrier. Such

examples, while remote, are not too extravagant to cast

doubt on the validity of the Commission’ 8 construction of .

the Act.

An additional _—— lies in the fact that.the Comunale: Jf

sion’s own Rules would appear to offend against its inter-

«pretation of Section 2. While motor carriers could de

mand TOFC ,pervice at the open-tariff rates offered to

39.

regular shippers, they would still bé authorized to enter

into agreements with rail carriers for joint intermodal ..

service under Commission Rule 4, at- rates fixed by pri-

vate negotiation and contract. The choice would seem to

be inconsistent with the Commission’s own justifying prin-

ciple as declared in its Rule 2, that: TOFC service should |

“be made available to any person’at a charge no greater |

and no less than that received from any’ other. per-—

son....” The effort to achieve equality rather produces

‘@ new inequality, since at least ugder the present prac-

_ tices carriers-and shippers are separately served, each

group at its own price. How far the Rules fall short of -

the announced objective of equal charges for all TOFC ©

. Service is emphasized by the Commission’s rejéction of .

two proposed rules which: would have fixed the open-tariff -

rate as. the maximum rate which the railroad ‘might re- _

ceive through private agreements for joint intermodal

service, and ‘which would have required the railroads to

treat all motor carriers equally; ag to services and rates,

. in its agreements for such joint intermodal service? If

the Commission were correct in its view that carriers and

regular shippers are equally “persons” within the mean-

ing of Section-2 of the Act, then that statutory prohibition

against a railroad’s receiving “from any person or persons —

a greater or less compensation for any service rendered”

than from ‘another, “by any special rate . . . or other’ de-

vice,” would ‘seem to require not only that carriers be

treated as well as shippers, but that shippers be treated

. a8 well as carriers, and each carrier as well as any other. -

In still another aspect, the Commission’s Rules counte-

nince an apparent discrimination which’ may be difficult

to reconcile with the interpretation of Sections 2 and, 3

’ Of the Act as fully applicable to motor carriers shipping

their customers’ goods by rail. By its Rule 3, the Com- « |

. @

12 The proposed rules, distributed in ‘the initial stages of the-pro- .

ceeding, are set forth, and rejected, at $22 I.C.C. 328.

_Inission permits motor common carriers to utilize open-

tariff TOFC service only betweén points on their author-

ized routes, and to tender traffic to railroads, or receive it

from them, only at. points which the motor carriers are

- authorized to-serve: Under Rule 5, motor common car-

riers are subjected to still another limitation, prohibiting

the.use of open-tariff TOFC as a means to serve by direct

. route points which the motor carrier is authorized to serve

only indirectly and circniitously, by combining route au-

thorizatiofs for other points. Since ordinary shippers are

subject to_none of these limits, the Rules do not achieve

that equality of service which the Commission would-re-

course, lies in’ the fact that a motor’ carrier which makes

_ use of. ‘open-tariff TOFC service is not merely an ordinary

- shipper, but is still a carrier subject to all limits imposed

_ by law on its authority. The Commiission itself thus rec-

ognizes that carriers and shippers are not equally and

indiscriminately “persons” entitled to the same service at

. the same rates under Sections 2 and 3 of the Act.

a eee ae a

. While we have-concluded that the Rules in question are

‘not authorized in their affirmative commands by Sections"

2 and 3 of the Interstate Commerce Act, properly inter-

preted, there is a related but independent ground under

which these Rules. must fall. Even if the Act specifically

commanded the railroads to serve motor carriers and ordi-

: —_ shippers without discrimination, there would remain

aval the ion whether the motor carriers could lawfully

emselves of that service without violating their

caittiks with customers or exceeding the rights conferred

by the certificate of public convenience and necessity

which authorizes their operations. In other words, we are

- bound to consider the statutes regulating the operations

-of motor carriers as well as. those imposing obligations

upon the railroads. "

quire from its reading of Section 2. The answer, of. —

The internal structure of the Interstate Commerce Act

itself bears evidence of the limited authority. conferred. on

the carrier. Each mode of transportation is the subject

of a separate formal part of the Act: part. I deals with»

rail carriers; part II with carriers by motor vehicle; part

III with carriers by water; and part IV with freight for-

warders, The certificate of public convenience and neces-

sity or license appropriate for each mode of transportation

is, by its terms and by the internal logic of the legislation, |

Confined to transportation by that mode. “Thus the cer-’

tificate issued to a motor carrier constitutes a formal de-

termination of the public need for motor transportation,

regardless of the availability of other modes, and author-

izes the holder ‘to engage in for-hire transportation by

“motor vehicle”, not by rail or other modes, and on the

“public highway”.3*

When operation by another mode is permissible, specific

legislative exceptions have been created. Thus freight

. forwarders under part IV are specifically authorized to.

_' ship goods by means of common carfiers governed by

other parts of the Act. Such special exceptions mirror

the underlying statutory scheme-that limits the carrier in

each mode to transpo ation within and by that ae

absent special exception. = | %

These elementary observations make: plain the legisla-

tive plan that motor carriers shall perform their author-

ized services by motor vehicle unless shipment by. other

‘Modes is permitted by some specific statutory exception.

The only relevant statute which allows such substitution is

Section 216(c) of the Act.™ It provides: Pe

** Secs. 208(a)(1) and (c), 206(a)(1), 209(a)(1); 49 U.S.C.

$§ 808(a) and (c), 806(a)(4), 309(a)(1),

“Sec. 418; 49 U.S.C. § 1018, » ake

549 U.S.C. §816(c) (1935). :

~——.

#“(c) Common carriers of nina by motor vehicle

_ May establish reasonable through routes and joint

_ rates, charges, and classifications with other such

_ carriers or with common carriers by railroad and/or

express and/or water.*. . . ‘In case of such’ joint

. rates, fares, or charges, it shall be the duty of the

carriers parties thereto to ‘establish just and reason-

able regulations and practices in connection there-

with, and just, reasonable,. and equitable divisions

thereof as between the carriers participating therein

which shall not unduly yal or prejudice any of .

, Such participating carriers. .

tt is agreed on all sides that this provision is permis- »

_ sive. In declaring that carriers “may establish” through .

routes and joint rates, Congress left the matter to volun-. |

tary agreement, and did not empower the Commission to .

require such cooperation or coordination. This literal in-

terpretation of Section 216(c) is reinforced: by compari-

son with other provisions of the Act which, as between

other classes of casriers, authorize compulsory through

routes: by Commission order.® |

In the proceedings before Ahe Commission and in this

“court, these, plaintiffs submitted that te require the rail-

roads to offer TOFC service equally to motor carriers

would constitute the compulsory establishment of through

routes in violation of the section. The Commission did

not dispute the two premises of the argument: first, that

the Commission is “without statutory. power indirectly to

require establishment of through motor or motor-rail

routes,” **-and second, that requiring railroads to offer

. open-tariff TOFC service to m carriers*would amount

’ to establishing compulsory de facto through routes. The

- %See Secs. 15(3), 1(4), Interstate Commerce Act, 49 U.S.C. — .

§§ fa 1(4); United States v. Pennsylvania R. Co., 323 U.S. _

17 322 1.C.C. 801, at 334. * Ne |

7. | 43.

' Commission avoided the argument, however, by concluding

that no compulsion was involved in its Rules. The Re-

port states: ji eer

“However, to say that we would be requiring’ the -

- establishment of through routes merely by finding

that it is lawful for a motor carrier to use the open-

tariff TOFC rate of a rail carrier overlooks the fact

that such a finding would involve no compulsion what-

ever—either on rail carriers to hold out a TOFC

‘service or, if they do; on motor carriers to use it.

We find this argument to be without merit.” os.

The Commission’s position is at odds with reality. To

Say that the railroads are subject. to no compulsion so long

as they can avoid such through routes by abandoning all

TOFC service for anyone hardly preserves the free choice

- intended by the congressional direction that such carriers

“may establish” through routes. If the absence of com- —

pulsion is measured by the availability of alternatives,

here compulsion is absolute. Under Section 1(4) of the

Act, the railroad is bound “to provide and furnish trans-.

portation upon reasonable request therefor... ;” ”

With equipment available for TOFC service, the rail-

road is thus compelled by law to’ provide such service to

the general shipping public, and would then be compelled,

under th Commission’s Rule, to provide equal service to

motor carriers, with no alternative.at all. by

With the Commission’s gro ntenable, counsel for

_ the government and the Co ion have resorted -in this

court to new ‘grounds for avoiding the application of See-

tion 216(c) and its implicit prohibition - of compulsory

through routes.. This new position asserts that a through

route exists by definition only when two carriers join in ,

holding out the joint service. Since under the Commis-

"18 322 1.C.C. 301, 335.

7°49 U.S.C. §1(4)- (1887).

sion’s Rule'the railroad would not join in holding out such

service—and indeed would participate only by compulsion

—it is said that no through route is involved. By verbal

legerdemain, the rule against compulsory through routes

thus would be read out of existence, since the logic of the

argument carries the conclusion that whenever there is

compulsion there is no through route.

The want of reason in the position is exemplified by the

Commission’s holding that TOFC service as now pro-

vided under Plan I is authorized as a through route ar-

rangement under Section 216(c). The operative features

of that Plan are identical with the TOFC service contem-

plated by the Commission’s néwly promulgated Rule 3.

In each case the motor carrier has the option, subject to

a the shipper’s veto, to employ substituted rail service or to

haul the trailers over the highway. The shipper pays the

motor carrier’s rates upon motor carrier: bills, and the mo-

tor carrier is subject to limits on circuity and points of

service. The only difference between the two schemes is

the railroad’s consent under existing Plan I. If that Plan

is to be sustained as a voluntary through route under Sec-

tion 216(c),” then the Commission’s new open-tariff

TOFC service must be viewed as involving a compulsory

through route forbidden by the section.”*

2° None of the parties has challenged the validity of Plan I in

the proceedings before this court. The legality of the Plan is under

attack, however, in a separate suit pending in the District Court

for the Northern District of Texas, Civil Action No. 4-355. -:

*1 Carriers by water, otherwise governed by the same principles

as motor carriers, must be differentiated on the matter of through

_ Toutes. By vitue of Section 15(3) of the Act, 49 U.S.C. § 15(3),

“the Commission may, and it shall whenever deemed by it -to be

-necessary or desirable in the public interest, after full hearing

upon complaint or upon its own initiative without complaint, estab-

lish through routes . . , applicable to the transportation of passen-

gers or property by carriers by railroad subject to this chapter and

common carriers by water subject to chapter 12 of this title...” —

The Commission’s Report and Order make no reference to this sec-

45 -

n Moreover, the argument does not avoid the fundamental. — )

tion 216(c) is the exclusive statutory authority for the

use of rail transportation by motor carriers, the Commis-

sion’s Rule must qualify, if it is valid at all, as establish-

ing through routes under that section.

Vv.

Still another obstacle to the Commission’s Rules is posed

by the separate compfaint of the freight forwarders. They

assert that the Commission’s new Rules are invalid in so.

far as they would permit motor carriers to “utilize TOFC

. Sérvice in the performance of all or any portion: of -their

authorized service .... .”** The motor carrier would

thereby be permitted to confine its own service to the as-

sembly and consolidation of the shipment, leaving the ac-

tual transportation to the railroad, and would be acting

not as a carrier but as a freight forwarder. The Rules

thus run counter to the provisions of part-IV of the Act

which forbid any person to ‘act\as a freight forwarder

without a permit issued- by the Commission, and which

prohibit the issuance of such permit tora common car-

rier.“ In response, the Commission appears to haye con-..

cluded that so long as the motor carrier holds the requisite

tion as authority for the Rules promulgated, and its proceedings

~did not in any sense constitute the “full hearing” on the necessity

_ for through rail-water routes which is required by that section: -

Since the section is the exclusive method by which the Commission

may require joint rail-water service, and since its powers were not

exercised or its requirments met, the Rules are no more valid as

applied to TOFC services due water carriers than te motor car-

riers. wind

Rule 5003(a), 322 I.C.C, 413.

23 Sections 410(a)(1), (e), 49 U.S.C. 1010(a) (1), 1010(c).

authority, so that it could act as a carrier ow transport-

ing the shipment itself, it is acting in its capacity “as a

carrier” even though no carrier service is performed in.

fact.* The non-carrying carrier thus would not be sub-

ject to the statute prohibiting any person from perform-

ing the services of a freight forwarder without a license,

but would be excused by the provision exempting a person

who performs such services “as a carrier.” *

No reason is suggested why we should suppose that Con-

gress meant to allow a motor carrier to perform only the

services of,a freight forwarder, not as an incident to

furnishing ‘transportation, merely because ‘the carrier .

holds a bare unexercised authority to furnish transperta- ’

tion,. while at the same time Congress prohibited the li-

censing of motor earriers as freight forwarders.

The principal foundation for the Commission’s new

Rules is apparently summed up in its observation “We

can see no justification either from the standpoint of

legislative limitations or of policy considerations, for hold-

_irig that one carrier may in no circumstances ‘make use

of the services which another carrier holds out to the pub-

lic generally.” * The observation can be sustained only if

the motor carrier is permitted, chameleon-like, to change

its coloration to evade these statutory prohibitions, Thus,

to escape the Congressional denial of power to establish

compulsory through routes under Sec. 216(c), it is.

claimed that the motor carrier in using the railroad’s

open-tariff TOFC service is acting not as a connecting

_ carrier, but merely as a private person belonging to the

general shipping public. At the same time, to escape the

freight forwarder’s claim, ‘it is said that the motor car-

rier does the same thing not as_an aad member oe

% $22 I.C. C. 333, 335

35 Section 402(a) (5), 49 U.S.C. § 1002(a) (5).

26322 I.C.C., at 335.

the general shipping public but as a carrier. To keep

faith ng erm , to give reasonable effect to its com-

mands, we o obliged to eschew word-play and to read

the statutes in the light and spirit of their purpose. The

policy explicit in Sections 216(c) and 402(a) (5), and im-

plicit in the structure of the Interstate Commerce Act as

a whole, does not allow a motor carrier to perform its au-

thorized service simply by tendering the shipment to the

railroad for transportation without the railroad’s ‘concur-

rence. This policy is reflected in the National Transpor-

tation Policy declared by Congress “to provide for fair |

and impartial regulation. of all modes of transportation ©

subject to the provisions of this Act, so administered as

to recognize and preserve the inherent advantages of

each ....”* This underlying purpose militates against

allowing rail carriers to invade the motor carrier field,”*

and its reason extends equally to the converse situation,

where motor carriers seek to exploit the inherent advan-

tages of rail transportation. .

We have thus far approached the issues of statutory

interpretation as a matter of first impression. -Our con-

clusion that the Commission’s Rules exceed its powers un-

der the Interstate Commerce Act does not rest’ alone, how-

ever, upon our construction of that legislation. The

holding is supported and confirmed by the consistent and

repeated decisions of the Commission and the courts. Few.

of these opinions can be regarded as directly holding that

motor carriers cannot.legally avail themselves of the rail- _

roads’ open-tariff TOFC service without railroad concur- ~

7 Act Sept. 18, 1940, 54 Stat. 899, 49 U.S.C. preceding § 1.

*8 American Trucking Associations, Inc. v. United States, 864 U.S.

1, 6 (1959) ; United States v. Rock Island Motor Transit Co., 340

U.S. 419, 481-2 (1961). |

- 48

rence. Nonetheless, they proceed upon premises which re-

affirm the statutory principles previously considered.

The Commission’s course of decision began before the

- enactment of part II of the Act, and before motor carriers

were subjected.to federal regulation. In Trucks on Flat-.

cars Between Chicago and Twin Cities, 216 I.C.C. 435 ©

(1936), the railroad had offered open-tariff service to mo-

tor carriers before the passage of part II; in a decision

handed down after the regulatory act had taken effect,

_ the Commission sanctioned the offering. It should be

noted, however, that the railroad had voluntarily offered

the service to attract the traffic of a motor carrier, and

that some five months later the railroad withdrew its

open-tariff offering and entered into a through-route, joint

rate arrangement with the motor carrier, approved in

Meter-Rail-Motor Tra;ic in East and Midwest, 219 1.C.C. —

248, ' |

‘Whatever implications of approval might be drawn

from the earlier decision were overruled three years later

in Substituted Freight Service, 232 I.C.C. 683 (1939).

‘Here the Commission plainly held that a motor carrier:

could not lawfully substitute rail service for its authorized

highway service for a part of the linehaul. Although the

- decision emphasizes the necessity for publication’ of tariffs:

disclosing the manner of carriage, it- also requires that ~

such tariffs be published with the concurrence of the rail- ‘

road. In the absence of such concurrence, which would

establish a through route -at joint rates under Sec. 216

(c),”* the opinion declares that it is “repugnant to the

act” fer a motor carrier “to act as a common.carrier by

motor vehicle and as a shipper by rail as to the same serv-

ice... .”” This interpretation of the Act was followed

and affirmed in an unbroken line of decisions of the Com- |

2 49 U.S.C. §816(c).

- 80232 I.C.C., 690.

49 “

: *» »

mission in the intervening years, Such cases as Ringsby

Truck Lines, Inc. v. Atchison, Topeka & Santa Fe Ry. Co.,

263 1.C.C 139, 141 (1945); Savage Application, 265

I.C.C. 157, 167 (1947) ; and Movement of Highway Trail-

ers by Rail (the so-called New. Haven case) , 293 1.C.C. 93

(1954), are illustrative. For twenty-five years, until the

decision here under review, the Commission had adhered

: to this interpretation of the act directly in conflict with its

newly announced views, ag Et,

In the courts, a similar°principle is established in hold-

ings to the effect that a person who engages in transport-

ing goods for the general public by using open-tariff serv-

ice of common carriérs is not himself engaged as a com-

mon carrier by motor vehicle, so as to be entitled to a cer-

tificate of public convenience and necessity under the -

“grandfather” provisions of the Act, Acme Fast Freight,

Inc. v. United States, 30 F. Supp. 968 (D.C. N.Y. 1940),

aff’d p.e. 309.U.S. 638; Ready Truck Lines, Inc. v. United

States, 42 F. Supp. 970 (N.D. II. 1941), affirmed 314 US.

~ 580. -The relevant premise of the decisions is that the

authorized service of the common carrier by motor vehicle

under the law is transportation over the public highways

.by motor vehicle, not rail transportation by railroad: The

- cases would be distinguishable enly if we were Wiliing to

rule that the unexercised power to provide highway serv-

ice qualifies a person as a motor carrier even though he

provides transportation. solely by rail instead.

In the. Acme cuse, it was also urged that a joint service

arrangement might be valid outside the limits of Section. .

216(c) of the Act, 49 U.S.C. 316(¢), a contention simi-

lar to that presented by counsel for the government here.

The court concluded as we have, that the provisions of

that section are the exclusive means for establishing joint

motor-rail through routes and joint rates, and that any

such. arrangement not in conformity with the section must

™,- .

eer emer

50:

fall." Implicit in that section is the Commission’s lack

of power to compel motor carriers arid rail carriers to pro-

vide coordigated: service, and it was-this lack of power

which justified permitting ilroads to: provide motor car-

rier service. incidental ‘and supplemental to their rail

transportation. Interstate Commerce Commission v. Park-

er, 826 U:S. 60, 7241945). See Fulda, Rail-Motor Com-

. petition: Motor Carrier Operations by Railroads, he Nw.

L. Rev. 156, 201 (1959).

Although it is settled that a common carrier may not _

discriminate against (or in favor of) another carrier ship- -

ping its own property for its own purposés,®? Sections 2

and 3 of the Act have never, so far as appears, been inter-

preted by the Commission or -the courts to require one car-

ried to perform service as a substitute for another car-

rier, gua carrier, as the Commission’s new rules would

command. In the face of this settled interpretation of

the Act. by the Commission itself as well as the courts, the

deference ordinarily due to the construction of the Act by .

the administrative agency responsible for its enforcement

is not called for. See All States Freight, Inc. v. New

York, New Haven ¢ Hartford Railroad, 379 U.S. 343

(1964) ; Atchison; Topeka and Santa Fe "Railway Co. v.

United ‘States, 209 F. Supp. 35; 41-42 (N. D. IIl. 1962) ;.

United States v. Leslie Salt Co., 350-U.S. 383, 396 (1956).

Moreover," this settled interpretation of the Act has ©

been recognized and accepted by both the executive and

legislative branches. . In his Message to Congress Relative

to the Transportation System on April 5, 1962, the Presi-

-dent recommended legislative action to achieve precisely

—

*130 F. Supp. at 973.

a ®

2 1.C.C. v. Baltimore & Ohio R.R., 225 U.S. 326 (1912). Freight

’ forwarders, not entitled to establish ‘through routes and joint rates

«@ With common carriers under the Act, are in the same position as

ordinary shippers and are thus protected from discrimination under

the Act. I.C.C. v. Delaware, L. & W. R.R., 220 U.S. 235 (1911).

~the result of the Commission’s Rules here in issue.” Bills.

to effectuate this proposal were introduced both in the

Senate and in the House in 1962 and again in 1963.°*

Pending at the same time were bills proposed by the

Commission itself to achieve a similar objective by amend-

ing Section 216(c) of the Act to empower the Commission

to compel motor carriers and railroads to establish

through routes. Congress failed to enact any of these

proposals. While courts must take care not td%give undue

. Weight to legislative inaction, the fact that the President

- placed before the Congress a proposal predicated upon a .

specific interpretation of existing law cannot wholly be

ignored in -interfreting that law when Congress has re-

fused to make the suggested change. See Blau v: Lehman,

868 U'S. 408, 412-13 (1962); Maurer v. Hamilton, 309 |

U.S. 598, 618 (1940); Ra

In conclusion, it appears that neither the specific provi-

sions of the Interstate’Commerce Act nor its geperal un-

derlying’ scheme confer authority upon the Commission to

compel railroads to provide open-tariff TOFC service to

motor carriers; on the contrary, the Act both in its spe-

cifies and general policy, forbid such compulsion. With

-the confirmation of this interpretation in an unbroken line

of Commission decisions, in judicial precedent, and in ex-

cutive and legislative understanding, there is no room for

the Commission to alter the settled Meaning. Like the -—

Commission, this court is foreclosed from indulgence in

* 83 H.R. Doc. No. 884, 87th Cong., 2d Sess: | am

**'S. 3242 and H.R. 11584, 87th Cong., 2d Sess. (1962) and S..

' 1062 and H.R. 4701, 88th Cong., Ist Sess. (1963). It Should be noted

that each bill would have amended Section 2 of the Act not to pro-

hibit discrimination against.competing carriers generally and as to

all service, as the Commission’s reading would require, but merely

to prohibit discrimination‘in the transportation.of “loaded or empty

vehicles or shipping containers,” that’ is, TOFC service.

* S. 3510 and H.R. 12862, 87th Cong., 2d Sess. (1962): S. 676

and H.R. 2088, 88th Cong., Ist Sess. (1963). aber |

the: broad. formulation of wise transportation policy. Those

considerations belong to the Congress. We therefore hold

that Rules 2 and as promulgated by the Commission in

this proceeding, and Rule 5 in so far as it amplifies those

-Tules, are invalid and must be set-aside.

VIL

Two collateral matters remain for disposition. While .

the plaintiffs asserted principally the invalidity of Rules 2

and 3, they have also attacked Rules 5 and 7 promulgated

by the Commission in the same proceeding and order:

Rule 5 represents the Commission’s effort to assure that

TOFC service will not be misused by motor carriers as a

means of circumventing the limits of their certificates

- \eoncerning authorized routes. Since a motor carrier might

‘be able to link its separately authorized routes to create a

circuitous route between authorized points of service, and

utilizing TOFC service directly between: those points, Rule

5 permits motor carriers to use TOFC service “in lieu of

their authorized line haul transportation” only’if the rail .

distance is at least 85 per cent of the highway distance by

the authorized route** In so far as this Rule relates to

open-tariff TOFC service, it falls, pro tanto, with Rules 2

8¢ The Rule provides in relevant part:

500.5 Circuity limitations.—

. (a) Motor and water common carriers s shall not participate in

joint intermodal TOFC service which is to be provided in: lieu

of their authorized line-haul transportation, and totor and

water common and contract carriers shall not utilize open-tariff

TOFC service, where the distance from origin to destination

over the route including the TOFC movement is less than 85

per cent of the distance between such points over the motor or

water carrier’s‘authorized service route; provided, however, -

that the Interstate Commerce Commission may grant relief

from the provisions of this’ paragraph upon consideration of an

; secant petition.

53:

and 3.. The railroads have attacked its remaining appli-

cation to joint intermodal service as ambiguous and arbi-

trary, to the extent that it may control joint intermodal

service under existing plan V. We cannot agree that the

Rule is without ratiofial foundation. To the extent that

through routes are established end to end under plan V, -

the Rule by its terms has no application. Where the

TOFC service is used “in lieu of” the motor carrier’s line

haul transportation between points the motor. carrier”

could serve, we cannot conclude that the Commission was

fatally arbitrary in concluding that respect for the limits

of the certificates issued requires the imposition of cir-

cuity safeguards, whether the intermodal arrangement for

the substitution of TOFC service would be classed as plan

Tor plan V. — ee :

Finally, the plaintiffs have attacked the validity of Rule

7, claiming it to be arbitrary, ambiguous, and beyond the

Commission’s power. In substance, the Rule requires

publication in tariff form of the rates and rules governing

the leasing of equipment ( practically, highway trailers)

by a railroad or-its affiliate to any person using the rail-

road’s TOFC service. Literally, the Rule does not require

_ that the lease be for the purpose of TOFC shipment, but

only to a “person using” the railroads’ TOFC service. It

is plain from the objectives of the Commission as elabo-

rated in its Report, however, that ‘the Commission was

concerned with the leasing of trailers by the railroad for

use in its own TOFC service, as part of the total trans-

portation service supplied. This limited interpretation of

the Rule was specifically avowed by counsel for the gov-

ernment on brief and in oral argument. In. this reading,

the Rule would find support in Section 6(1) of the Act; .

requiring full publication of all charges and privileges or

facilities affecting the value of the service rendered to the

shipper, and by Section 1(3) (a), defining rail “transpor-

tation” to include. the instrumentalities of carriage, irre-

spective of ownership.

a \

Since the proceeding must be remanded to the Com-'

- mission in any event, for a general revision of the Rules

as a whole in conformity with these views, we will adopt

and accept this limited interpretation of Rule 7. The

Commission will have ancearly opportunity to clarify its

intent if a broader scope should be thought necessary.

Limited in this way, the Rule appears to be subject to no

invalidating objection.

A decree will be entered for the olaintifts consistent

with the foregoing conclusions.

‘

55 ,

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS .

EASTERN DIVISION

Civil Action No, 64 C 1442.

THE ATCHISON, TOPEKA AND SANTA FE RaILway Com-

PANY; CHICAGO & EASTERN ILLINOIS RAILROAD Com-

PANY; CHICAGO AND NORTH WESTERN RAILWAY Com-

PANY; CHICAGO, BURLINGTON & QUINCY RAILROAD

COMPANY; CHICAGO GREAT WESTERN. RAILWAY Com- .

PANY; CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC

RAILROAD CoMPANy; CHICAGO, Rock ISLAND AND Pa-

. CIFIC RAILROAD COMPANY; THE DENVER AND Rio

GRANDE WESTERN RAILROAD COMPANY; GREAT NoRTH-

ERN RAILWAY COMPANY; THE KANSAS CITY SOUTHERN

RaILway CoMPANY; LOUISIANA & ARKANSAS RAILWAY

COMPANY; MISSOURI-KANSAS-TEXAS RAILROAD Com-

_ PANY; Missouri PaciFic RAILROAD COMPANY; NoRTH-

ERN PACIFIC RAILWAY CoMPANY; ST. Louis-SAN FRAN-

CIscO RAILWAY CoMPANY; ST. LouIS SOUTHWESTERN

RAILWAY COMPANY; Soo LINE RAILROAD COMPANY;.

SOUTHERN PACIFIC COMPANY; UNION PACIFIC Rall-

ROAD COMPANY; WABASH RAILROAD COMPANY; THE

WESTERN PACIFIC RAILROAD COMPANY; ,

. ; Plaintiffs,

Vv. | :

UNITED STATEs OF AMERICA; AND

INTERSTATE COMMERCE COMMISSION :

ae Defendants.

DECREE

This: cause having come on for trial before the Court,

consisting of three judges convened pursuant to law, and -

the Court having heard and considered the evidence and

~ + 66.

the briefs and-arguments of counsel for the parties, and

having rendered and filed-its Opinion herein containing

‘its findings of fact and conclusions of law, and being fully

advised in the premises, itis. °

ORDERED, ADJUDGED, and DECREED:

1. That the Report and Order of the Interstate Com-

merce Commission entered in its proceeding numbered Ex

- Parte 230 and entitled Substituted Service—Charges and

Practices of For-Hire Carriers and Freight: Forwarders

(Piggyback Service), dated March 16, 1964, in so far as

it issues and prescribes Rules 2 and 3 contained therein

and designated as 49 C.F.R. 500.2 and 500.8, be and here-

by is set aside and annulled;

2. That the defendant Interstate Commerce Commission

be and-hereby is permanently enjoined and restrained.

from enforcing said Rules 2 and 3 contained in and issued

‘by the Report and Order aforesaid; and

3. That this proceeding be and hereby is - remanded to

the Interstate Commerce Commission for such further

proceedings, consistent with the Opinion and Decree of

this Court, as may be appropriate.

Dated this 20th day of August, 1965.

ENTER:

/s/ Latham Castle |

er Circuit Judge

/s/ J ulius J. Hoffman

District Judge

/s/ Bernard M. Decker

a | District Judge

APPENDIX B

STATUTES INVOLVED

NATIONAL TRANSPORTATION POLICY ©

September, 18, 1940.] [49 U.SC., preceding §§ 1, 301,

901, and 1001.) It is hereby declared to be the national

transportation policy of the Congress to provide for fair |

and impartial regulation of all modes of transportation

subject: to the provisions of this Act, so administered as

to recognize and preserve the inherent advantages of each ;

to promote safe, adequate, economical; and efficient service

and foster sound economic cohditions in transportation

. and the duly authorized officials thereof ; and to encourage

end of developing, coordinating, and preserving a national

transportation system by water, highway, and rail, as well

SPECIAL RATES AND REBATES PROHIBITED

Sec. 2 [As amended February 28, 1920, June 19, 1934,

and August 9, 1935], [49 U.S.C. § 2.) That if any

common carrier subject. to the provisions of this part

shall, directly oy indirectly, by any special rate, rebate, .

drawback, or other device, charge, demand; collect, or re-

ceive from any person or persons a greater or less com- ©

pensation for any ‘sevice rendered, or to be rendered,.in .

the transportation of passengers or property, subject to —

_the provisions of this part, than it charges, demands, col-

; lects, or receives from any other person or persons for -

( ing for him or them a like and contemporaneous service

in the transportation of a like kind of traffic under sub-

stantially similar circumstances and conditions, such com-

mon carrier shall be deemed guilty of unjust discrimina-

tion, which is hereby prohibited and declared to be un-

lawful.

PREFERENCES; INTERCHANGE OF TRAFFIC;

TERMINAL FACILITIES “

Sec. 3. [As amended February 28, 1920, March 4, 1927, :

August 9, 1935, August 12, 1935, September 18, 1940, Au-

gust 2, 1949.) [49 U.S.C.'§ 3.] , (1) It shall be unlawful

for any common carrier subject to the provisions of this

part to make, give, or cause any undue or unreasonable

preference or advantage to any particular person, com-

pany, firm, corporation, association, locality, port,-port dis-

trict, gateway, transit point, region, district, territory, or.

any particular description of traffic, in any respect what-

soever; ot to subject any particular person, company, firm,

corporation, association, locality, port, port district, gate- —

way, transit point, region, district, territory, or any par-

ticular description of traffic to any undue or unreasonable

prejudice or disadvantage in any respect whatsoever: Pro-

vided, however, That this paragraph shall not be con-

| strued to apply to discrimination, prejudice, or disadvan-

~se

tage to the traffic of any other carrier ‘of whatever descrip-

- tion. ¥ 3

| . ° Pa ‘

RATES, FARES, AND CHARGES OF COMMON

CARRIERS BY MOTOR VEHICLE

Sec. 216 [August 9, 1935, as amended June 29, 1938, and

September 18, 1940.] [49 U.S.C. § 316.]

* * * .

_.(¢) Common carriers of property by motor vehicle may.

establish reasonable through routes and joint rates, charg-

es, and classifications with other such carriers or with

common carriers by railroad and/or express and/or wa-

ter; and common carriers of passengers by motor vehicle.

may establish reasonable through routes and joint rates,

‘fares, or charges with common carriers by railroad and/

or water. In case of such joint rates, fares, or charges it

shall be the duty of the carriers parties thereto to estab-

lish just and reasonable regulations and practices in: con-

nection therewith, and just, reasonable, and equitable di-

visions thereof as between the carriers participating there-

in which shall not unduly prefer or prejudice any of such

participating carriers, i

—t-,

le aa all a al ital a

Served Apr. 3, 1964

30144 = |

INTERSTATE COMMERCE COMMISSION

iar

Ex PARTE No. 230

SUBSTITUTED SERVICE-CHARGES AND PRACTICES

_ OF FOR-HIRE CARRIERS AND FREIGHT FORWARDERS

(PIGGYBACK SERVICE)

Decided March 16, 1964 6

Upon notice of proposed rulemaking, rules and regulaticas:governing the

7 i practices of for-hire carriers of property, operating in imterstate or

foreign commerce and providing or participating in trailer-on-flatcar

sewice, prescribed. :

A table of contents to this report is contained in appendix V.

— Harry C. Ames, S.S. Eisen, James L. Givan, George H. Leonard,

F. N« Melius,’Jr., Giles Morrow, Theo. R. Schneider;. Leonard

te Stelzer, D. Robert Thomas, and Martin Whitten for various freight

forwarders and freight forwarder associations.

Peter T. Beardsley, Albert F. Beasley, James L. Beatty,

Walter N. Bieneman, W. H. Borghesani, Jr., Ferdinand Born,

Robert E. Born, R. Edwin Brady, Le Grand A. Carlston, Homer S.

‘ Carpenter, Eldon R. Clawson, James I. Collier, W. Wilson

Corroum, Ray M. Cream, Paul M. Daniell, Francis P. Desmond,

George S. Diwon, Robert C. Dryden, J. F. Edell, Howell Ellis,

_ Marion M. Emery, W. B. Ewers, John S..Fessenden, F.H. Floyd,

. F. G. Freund, Robert Gawley, Harry L. Grubbs, Marvin Handler,

' James E. Haydon, Richard A. Heilprin, Harold G. Hernly, Thomas

J. Houser, Earl Hummer, Harry J. Jordan, 8S. Harrison > ‘Kahn,

Joseph E. Keller, .James K. Knudson, Houston Lynch, Jr.,

Carney -D. Matheson, Herman Matthei, Francis W: Mclnerny,

George D. Michalson, M. Bruce Morgan, Glenn F.-Morgan, Arlus

-C. Morris, Lloyd Ownbey, Jr., Guy H. Postell, Bryce Rea, Jr.,

G. M. Rebman, Roland Rice, Floyd M. Roach, William R: Rubbert,

- Reagan Sayers, Richard R. Sigmon, Louis E. Smith, R. P. Sohan,

Hugh M. Steinberger, Glenn W. Stephens, C. Austin Sutherland,

Clarence D. Todd, Edward G. Villalon, William M. Watt, Harvey

A. Welty, Gene F. West, James J..Williams, James E. Wilson, °

James W. Wrape, and Chester A. Zyblut for various motor carriers

and motor carrier associations.

Mice. . . . | _ £301

-302. + -\ INTERSTATE COMMERCE COMMISSION RE PORTS

John W. Adams, Jr., Margaret P. Allen, Curtis H. Betg, Harry N.

Babcock, John J. Burchell; James A. Bistline,, R. G. Bleakney,

Jr., Benson T. Buck, CharlesgW. Burkett, Jr., J. T. Clark, J. L.

Connor, Richard E. Costello, Robert W. Cronon, John A. Daily,

John C. es telson, Robert S. Davis, William E. Davis, C. H.

Dickman, per A. Dobbins, John H. Doeringer, Robert H.

esecheeay Paul R. Duke, J. H. Durkin, Urchie B. Ellis, J. D.

Feeney, James A. Gillen, E. D. Grinnell, Jr., Rene J. Gunning,

Carl P. Greeley, John W. Hanifin, “L.W. Hobbs: Bryce Hamilton,

Louis A. Harris, William P. Higgins, James W. Hoeland, Richard

A. Hollander, Eugene E. Hunt, J. H. Jester, Edmund J. Kenivy,

Jess Larson, Harry B. LaTourette, Roland J. Lehman, E. R.

Léigh, George M. Mariner, C. E. Martin, Amas M. Mathews, John

E. McCullough, W. D. McLean, Thormond A. Miller, William M.

Moloney, ‘P. G. Mullen, Robert F. Munsell, Walter J. Myskowski,

James W. Nisbet, Eldon S. Olson,.W. H. Parsons, C. Harold

Peterson, Earnest Porter, Gregory S. Prince, C. C. Rettberg, Jr.,

Wade M. Richards, Albert B. Russ, Jr., John F. Smith, John

MacDonald Smith, Robert H. Stahlheber, William A. Thie, Robert .

A. Thompson, L. E..Torinus, Walter G. Treanor, Ray M. Van

Hook, Harold Vikoren, Archie T.. Walters, Philip F. Welsh,

‘Edward K.Wheeler, Robert J. Williams, D.N. Zirkle, and Erle J. —

Zoll, Jr., for various railroads and railroad associations.

Paul J. Coughlin, John Mason, Andrew A. Normandeau, and.

Hugh H. Shull, Jr., for water carriers.

Theo. F.Behler, Harry Bradt, John M. Cleary, Ronald N. Cobert, .

-Paul Coyle, John F. Donelan, -Lestcr J. Door, Samuel W.

Earnshaw, Donald W. Fisher, Walter R. Frizzell, Benjamin G.

Habberton, Dan,F. Hart, John B. Hedges, Leonard A. Jaskiewicz,

Jess Larson, ‘John C- Lincoln, Dickson R. Loos, Sumner J.

McCollester, Clarence M. Mulholland, Clarke Munn, Jr., A. E.

. Norrbom, James E. O’Boyle, F. S. Partridge, Warren Price, Jr.,

Frederick M. Porter, Philip H. Porter, Aloysius F. Power, Theo.

R. Schneider, William R. Settgas, Louis R. Simpson, Charles W.

Singer, Hérold E.Spencer, James FE. Steffarud,.Warren H. Wagner,

_ Charles A.Washer, M.W>Wells, John C. White, and Sidney Zagri

for shippers or other interested parties.

John M. Agrey for Public Service Commission of North Dakota.

Harold C.Heublein for Public Service Commission of Wisconsin.

Charles W. Bucy, Carl R. Bullock, Joseph E. Quin, George A.

Robertson,and Clarence H.Williams for Department of Agriculture.

e a Me ; 822 1.C.C.

* ,

: ee SERVICE-PIGGYBACK 303

“John EB: Faulk, R. M. Hartsock, ok Clement z. Mayo for Depart-

‘ment of Defense.

William R. Pierce for Geaneal Serviece Ailes

John H. Fallon, Harvey Gobetz, and Asa J. Merrill for Bureau

of Inquiry and Compliance, Interstate Commerce Commission.

- REPORT OF THE COMMISSION ON ORAL ARGUMENT

' BY THE COMMISSION: .

_ This proceeding, instituted on June 29, 1962, on our own motion *

under the. authority of parts I, II, III, and Iv of the Interstate ° -

Commerce Act and section 4 of the Administrfffive Procedure Act, ;

constitutes this Commission’s first general investigation of what is

probably the most significant recent development intransportatiofi— ~

trailer-on-flatcar or piggyback service. The notice of proposed

rulemaking made it known that we intended this investigation to be.

broad in scope, encompassing every aspect of TOFC operations,

and that we intended -to explore new approaches to piggyback

service. Among the matters specifically mentioned in - notice

asa subject, for consideration was:

The extent to which motor carriers, water carriers, express anies and

freight forwarders should be permitted to use Plans II andIV open-tarifi/

rail rates and service in their operations.

It was also made clear that we intended to reexamine existing

precedents and practices, and that consideration would be given

to the adoption of rules and regulations which might be found

necessary to regulate coordinated and substituted service trans-

portation in the public interest.

The order instituting this proceeding. same as respondents all

. railroads, motor carriers, and water carriers of property, freight

forwarders,- and express companies operating im interstate

commerce, and authorized and directed our Bureau of Inquiry and

Compliance to participate: It also assigned- the matter for a

prehearing conference, which was held October 9, 1962, and at

which proposed rules, reproduced as appendix II hereto, were

distributed. Oral hearings have not been held, but representations, .

verified statements, and reply statements have been received

from numerous interested parties. The proceeding was assigned

to two hearing examiners who recommended adoption of the

regulations contained in appendix III hereto. Exceptions. to the

$22 1.C.C. :

304 INTERSTATE COMMERCE COMMISSION REPORTS

~examiners’ recommended order and replies thereto have been

- efiled by the parties listed in appendix I, and we have heard oral

argument. Two‘issues, the practices of for-hire motor carriers

of automobiles and the practices of for-hire water carriers

providing ‘‘fishyback’’ service, were severed from the remainder

of the proceeding by order of November 12, 1963, for oral hearing

and separate handling.

The southern railroads have included in their exceptions motions

to strike certain portions of the verified statements filed by the

Bureau of Inquiry and Compliance and certain other parties.

They argue that the Bureau has overstepped its authorization,

_ contained in the order instituting this proceeding, to participate

in this proceeding ‘‘for the purpose of developing the evidence and

_ the. issues,’’ and that the other matter objectedto is irrelexant.or

incompetent as evidence. Also pending is a motion filed by the

same carriers on April 2, 1963, for cross-examination of the

Director of the Bureau of Inquiry and Compliance. The southern

railroads have obviously misunderstood the position of the Bureau

in this proceeding. It is a party like any other, arfd it was free to

introduce any evidence it saw fit. The Director of the Bureau did

not sponsor a verified statement, and has appeared in this

proceeding cnly as counsel. .There is no more reason to subject

him to cross-examination than any other attorney appearing ina

solely representative capacity. The other verified statements

objected to should, in our opinion, remain in the record. The

motions will be denied.

TRAILER-ON-FLATCAR CPRRA TIONS

If the subsequent discussion is to be enderarendsiite, a word

must be said at the outset about the nomenclature.of TOFC services.

. The varieties of services available are commonly referred to in

terms of five numbered plans. These designations: have attained |

general use in the transportation industry, and for the sake of

convenience we are using them in this report. They will be

discussed in greater detail later, but the following capsule

definitions were contained in the appendix to the order inationting

this ee _—

PLAN I -_

Railroad movement: of trailers or containers of motor common carriers, with —

the shipment moving on one bill of lading and billing being done by the trucker.

Traffic moves under rates in regular motor carrier tariffs.

ae 322 1.C.C.

SUBSTITUTED SERVICE-PIGGY BACK 305

PLAN II

Railroad performs its own door-to-door service, moving its own trailers or

containers on flatcars under tariffs usually similar to those of truckérs.

PLAN III

Ramp-to-ramp rates based on a flat charge, regardless of the contents of

trailers or containers, usually owned or leased by freight forwarders or

shippers. No pickup or delivery is performed by the railroad,

PLAN IV .

Shipper or forwarder furnishes a trailer or container-loaded flatcar, either

owned or leased, The railroad makes a flat charge for loaded or empty-car

= movement, furnishing only power and rails.

ws 3 ee ~

PLAN V

Traffic moves generally under joint railroad-truck or other combination of

coordinated service rates, Either mode may solicit traffic for through

movement, woe

The development and effect of TOFC service.~ Transportation

of loaded highway trailers on railroad flatcars is not a new

development, although ‘its growth has been explosive in the past

5 years. Nearly 40 years ago the Chicago, North Shore and

Milwaukee Railroad Company pioneered a ‘‘ferry truck’’ service

that was essentailly similar to today’s plan II piggybacking by the

railroads. Pressed by increasing independent motor carrier

competition, the North Shore in May 1926 inaugurated a new

service for merchandise traffic between Chicago and Milwaukee:

using carrier-owned 16-foot trailers and specially constructed

flatcars, it would provide a door-to-door delivery of less-than-

carload freight in trailer units requiring no transfer of lading en

route from shipper to consignee. This was a complete railroad

service at rail rates on rail bills of lading. At the outset this

service was performed at the same rates and charges previously

applicable to the various classes of merchandise transported, but

in February 1928 this rate structure was modified and a flat

all-merchandise rate, subject to a minimum weight and excepting

livestock and perishables, was published.

The prototypes of today’s plan I and planIII TOFC service were

developed on an experimental basis by several other railroads in

the early 1930’s. In these years the railroads were competing

$22 I.C.C. :

- < SN A Uy RS RRR The Img PN RR em eee

1) Nag ewepnpragerey xnes

. : } VA

306 INTERSTATE COMMERCE COMMISSION REPORTS

with aggressive, rapidly expanding, if unorganized, independent

motortruck operators who were not subject to route or rate

regulation and who were able to provide extremely flexible

pickup, delivery, and accessorial services. . TOFC service at

this early date was designed to induce trucking companies to ship

their vehicles by rail instead of operating them over the highways:

Private shippers were. free-to use this service, but there is no

indication that they did so in any substantial volume at this stage

of TOFC development. The rail rates that were charged for this

service reflected substantially the average direct line-haul expense

of operating a truck over the shortést available highway routes

between the points served.

By tariff schedules filed to become effective inMarch 1936, the

Chicago Great Western Railway Company offered to transport

highway trailers between Chicago and St. Paul at.a flat charge of

_ $42.50 per loaded trailer, with a maximium lading of 20,000 pounds

per trailer and a minimum charge of $85 if fewer than two trailers

were tendered for shipment in a single day. This was an ‘‘open-

tariff service’’ intended to attract traffic from all highway

carriers, including for- hire motor carriers as well as private

shippers: operating their own trucks, and from freight forwarders.

This service was substantially different from existing less-than-

carload transportation because it did not include pickup, delivery,

loading, or unloading, .and it was essentially a ramp-to-ramp

operation, When part II of the Interstate Commerce Act became

effective_in 1935, thus making for-hire interstate motor carrier

operations subject to route and rate regulation, new tariff

arrangements were proposed to provide for joint rates between

the Great Western and the participating motor common carviers. |

The new schedules named motor-rail-motor rates between certain

authorized ‘‘grandfather” service points of the motor carriers

which were located beyond the Chicago and St. Paul ramp points.

The railroad would act only as an intermediate or “‘bridge”’

carrier; the motor carrier would originate and deliver the traffic.

The railroad would receive as its division of reve sub-

stantially the same per-trailer amount previously baer

the open tariff. These joint rates were allowed to become

effective.

The New York, New Haven and Hartford Railroad Company

instituted TOFC operations in 1937, offering an open-tariff service

to private shippers and motor contract carriers, and a ‘‘sub-.

stituted ‘service’’ to motor common ¢arriers, These TOFC

822 1.C.C.

oe .

SUBSTITUTED SERVICE- PIGGY BACK ' 307

' services were used almost exclusively by motor commoncarriers

under the latter arrangement, which was essentially the same as

present-day plan I service. In 1953 approximately 50,000 trailers

were ‘transported by the New Haven in this type of service.

The experience, however, of most railroads in TOFC operations

was very limited until 1954, the year in which this Commission

gave approval to a_ number of practices that were then slowly

developing. See Movement of Highway Trailers by Rail, 293 1.C.C.

93, the s0-called New.Haven case, Almost immediately.a number

of railroads inaugurated or expanded their planI and plan Il TOFC

operations. The Pennsylvania Railroad Company, for example, |

ica its plan II type of service in 1954 and it handled approxi-

mately 15,000 trailers in plan II during the last 6 months of that

| year. Its estimated total for plan II in 1962 was 55,000 trailers.

In 1955, the Pennsylvania transported about 17,000 trailers in |

plan I service, and that amount has grown to an estimated 80,000

trailers in 1962, Its first full year of plan III was 1959 when

10,500 trailers were handled. By 1961 that total had grown to

43,000 trailers, and its estimate for 1962 was 65,000 trailers.

The Louisville and Nashville Railroad Company started its

plan II service in 1955, and handled 193 trailers for total revenue

of $33,790. In@962 these totals for plan II operations had increased

to 6,712 trailers and $1.3 million in revenue. In 1960 it handled

46 trailers in plan I service for a revenue of $3,468. In 1961

. these totals for play I hadincreased to 1,771 trailers and $150,388

in revenue. Plan III was inaugurated in 1960 when 181 trailers

were, moved for $24,271 revenue. In 2 years its plan III totals

net to 8,618 trailers and approximately $1 million revenue.

re can little doubt that -piggybacking has been a decisive

factor in returningto the railroads a substantial volume of traffic .

that previously had been moving by other nmiodes of transportation,

private afd for-hire. e growth of plan I has meant a direct

growth in railroad participation in motor common carrier highway

traffic. For example, Consolidated Freightways, a motor common

carrier, has plan [ arrangements with 23 railroads providing for

service between 340 pairs of points. During 1961 it paid approxi-

mately $1 million to these railroads for their plan I TOFC

services, In the first 10 months of 1962, Consolidated Freightways

moved 7,878 trailers in plan I operations, and paid more than

$1.8 million to the railroads for thelr piggyback services, nearly

doubling the 1961 payment.

322 I.C.C. ,

NR I LS PEE IU PO Cty OMAR TN

/ )

H /

: ete ; {. :

308° -. INTERSTATE COMMERCE COMMISSION REPORTS

The gréwth of plan III and plan IV TOFC service has also

meant diversion of highway traffic both from the for-hire motor

carrier industry and from individual Companies either engaging

in private carriage or planning to do so, The Eastman Kodak

_ Company markets a large volume of miscellaneous chemicals as

packaged freight from Rochester, N. Y., through seven sales

divisions throughout the country. It an use of plan III from

Rochester to. its midwestern division at Chicago in 1959; to its

South Dakota division and to Chambiee, Ga., in 1960; and then as

a return movement from a Midland, Mich.,. supply: point to

Rochester in 1960. During 1961 its traffic between these cities

totaled 24.5 millon pounds in plan III, and its 1962 tonnage was

expected to reach 40 million pounds. Before its use of plan III,

all of this traffic wad shipped “by motor common carrier. Its .

Chicago plant, for example, whichaccounts for the largest share,

is an off-track facility. Rail service to this branch house

previously was impractical because it involved local cartage and

transfer of lading, but ‘plan III raii service has turned out to be

practical and efficient.

A few years ago the Monsanto Chemical queenee had completed

an exhaustive survey of private carriage for its St. Louis plants,

and it was on the verge of going heavily into private motor

carrier _ operations. Its projected motor operating costs were

expected to be 35 cents a trailer-mile. One eastern.railroad

- Offered its pian III service at 50 cents a flatcar-mile, or 25 cents

per trailer-mile. Consequently Monsanto turned to plan III, and

it has since been shipping approximately 50 million pounds of

' package freight annually in plan III from its three St. Louis plants.

to its eastern rerritory between Philadelphia and Boston. About

15 years ‘ago all of this package freight went by rail, Starting at

that ‘time there was. a gradual shift to motor carriage and

ultimately motor common carriers handled essentially all the

traffic. This trend was reversed. decisively with Monsanto’s use

of plan III which now has become the primary method = movement

of this traffic.

At the present time the available _ statistical data on TOFC

’ operations and services teeny F Nation is not sufficiently

refined or reliable to demonstrate /authoritatively the precise

extent to which railroad successes with piggybacking have meant

actual diversions of traffic from competitive modes of transport.

But the examples of Consolidated Freightways, Monsanto, and

Eastman Kodak are typical of many others around the Nation, and

322 1.C.C.

- SUBSTITUTED SERVICE-PIGGYBACK » 309

the railroads generally are enthusiastically attempting to duplicate

experiences like ‘these, In 1957 a total of 57 cla&s I railroads

were participating in TOFC tariffs; in mid-1963 there ‘were 100

class [ roads doing so. ‘In 1955,;°32 railroads reported a total of

168,150 TOFC:carloadings, for a weekly average of 3,234, In

1959; 50 reporting railroads showed totals of 415,156 annual and

7,984 weekly average carloadings for TOFC. For 1963, 63

reporting railroads indicated continued growth to approximately

797,500 loaded TOFC cars, a weekly rate of enbmaiaCies: 12, 700

- loadings.

It is apparent, however, that substantial investments have been

made by the railroads and others in TOFC equipment. The New:

York Central has invested a total of almost $30 million, not

including its investment in Flexi-v anl terminals. The Seaboard

Air Line Railroad Company has invested $1,147,000 in 55 ramps;

The Chesapeake and Ohio Railway Company shows $2,800,000 .

invested in TOFC equipment:and ramps; The Atchison, -‘Topeka

and Santa Fe Railway Company shows $2.1 million invested in

piggyback facilities at Chicago, Los Angeles, and Oakland; The

- Baltimore and Ohio Railroad Company shows $2.6 mitton invested

in. TOFC trailers and freight cars, $670,000 in ramps, and

$186,559 in cranes; the Pacific Fruit Express ‘Company has .

$6,579,600 invested in TOFC equipment and in addition.its leased

equipment represents an investment of $2.8 million. thas placed .

orders for 200 additional 40-foot refrigerated trailers at a cost

of $2,470,000 making a total nnraaarian of approximately $12

‘million, °\

This record does not show how extensively commercial shippers

have invested in TOFC equipment but the investment of freight

forwarders is set forth. As of January 1, 1963, the freight

forwarders, represented in this proceeding, had an investment-

amounting to $10.5 million in trailers, tractors, and freight cars.

They also have annual obligations: in long-term leases dn freight

cars and trailers amounting to $1.6 million.

The five piggyback plans.— Plan I .TOFC service involves the

movement by railroad of loaded trailers or similar containers «ot

motor carriers, with the contents thereof moving on one bil). of

lading issued by the trucker. This substituted rail service is

l*e*Plexi-van’’ is a specialized type of TOFC equipment, -developed pri<

marily by the New York Central, and used by only a’few railroeds. Its

principal characteristios are a trailer with a demountable body and a specially

built, light-weight rail car which is designed to carry onl¥ Flexi-van trailers

and which may be side-loaded without the use of. the normal circus- -type ramp.

« $22 I.C.C.

. soeenenemne anenetntinaaeeeienadeaainateenarenimesemenaines iin iicansimeabeedmenainaniaeeiananann .

, 310 INTERSTATE COMMERCE COMMISSION REPORTS

available. only between points Where theré is actually available

service by the motor carrier which substitutes rail for motor

service, The traffic moves on rates which are the same as the

trucker applies on its all-highway Service. The motor carriers

solicit the traffic for movement in their own trailers,wyhich, in

the absence of the shipper’s forbidding the use of. substituted rail

service, is tendered to the railroad for line-haul transportation.

The trailer is brought to the railroad ramp by the motor carrier

where it is placed onto the flatcar. The trailer is sealed and the

railroad has no knowledge of the traffic being transported, except

for the total weight of lading in each trailer. The railroad’s

compensation in such a meve is based upon a division of the

charges arrived at through negotiations between the twocarriers.

This division of charges is published as a division sheet but is

“not customarily made available to the shipping public nor is it

filed with the Commission. At destination the trailers are

unloaded from the flatcars ard delivered over-the-road to

destination by the motor carrier. So long as the motor common

carrier meets the financial responsibility and route authority

requirements, the participating railroads are generally willing

to share plan [I arrangements with any such motor carrier.

As previously rioted, the New a provided the frame-"

work of legal principles that has governed the renewed growth-and

interest in piggyback operations which began in 1953. There the

Commission defined the relationships of motor carriers, railroads,

and shippers involved in these trailer-on-flatcar services. , For

several years following the New Haven decision there _wete few

controversies within the industry about the scope of plan I TOFC -

services permissible under the various operating authorities of

the motor carriers. More ‘recently, however, with the vastly

accelerated utilization of TOFC Services, the whole concept of

plan I TOFC has anew been brought ' ‘into question, both on the

' point of its essential legality under the controlling statutes and

on the point of its economic desirability under regulation. At

_ the same time theré havé arisen a number of related questions

concerning the authority of motor carriers to engage in planI -

piggyback in specific ¢ircumstances,. such as the following:

whether motor carriers may interchange plan I piggyback traffic

at the point of origin of the traffic, with the railroad performing

the entire line-haul movement; ,whether a motor carrier needs

specific operating authority to * provide service ioor from the ramp

points at which it will interchange plan I traffic.with the railroad

322 I.C.C.

SUBSTITUTED SERVICE- PIGGY BACK 311

? =. . a

‘performing the piggyback operation; whether the relative circuity

of the authorized service route of a motor carrier should be

considered as a factor in allowing that motor carrier to use

- railroad TOFC service between such points; and whether motor .-

.* contract carriers may participate in plan I TOFC to the same

extent as motor common carriers.

Under plan II, the railroad holds out to provide a complete-door-

to-door service under a single bilf of lading. Neither the shipper

nor the consignee intervenes in any way inthe overall transporta-

tion activities or does anything beyond tendering the shipment to

the railroad at origin or at the shipper’s loading dock. The-

railroad assumes full responsibility in the following respects:

providing the shipper with a-trailer; moving the trailer to, and”

placing it at, the shipper’s door for pickup; loading the freight —

into the trailer; moving the loaded trailer from -the shipper’s

dock to the rail -TOFC ramp, furnishing a tractor and driver;

supplying the rail flatcar; placing and securing the trailer onto

the flatcar; providing the ling-haul transportation from origin

ramp to destination ramp; unloading the trailer from the flatcar —

at ‘destination; moving the loaded trailer from the destination

ramp to consignee’s ‘store door, again furnishing a tractor

and driver; unloading the freight from the trailer; and finally

‘ removing the empty trailer.

The published rate which includes all of the above-mentioned

services to be performed by the railroad generally applies (a)

to a specific commodity or a group of specifit commodities; (0)

in straight or mixed carloads without mixture limitations; (c) in

a single trailer; and (d) subject to a rate per 100 pounds and a

minimum rate tailored to the specific commodity involved.

Under’ plan. III, the railroad furnishes only a transportation

service between its TOFC ramps. The only additionak service

the railroad performs in accordance with its tariff is placing

and securing the trailers onto the flatcars at the origin ramp

and the unloading of the trailers from the flatcars at‘the destina-

tion ramp. This service is offered to private shippers and freight ©

forwarders. The shipper using plan.III must assume the full

responsibility for the following: supplying its own trailer either

by ownership or through a lease arrangement; moving or arrang-

ing to move the trailer to the shipper’s dock for loading the freight

into the trailer; moving the loaded trailer from the shipper’s

dock to the railroad TOFC ramp, which means that the shipper

must arrange for the furnishing of atractor and driver; arranging

322 I.C.C.

312 INTERSTATE COMMERCE COMMISSION REPORTS L

for the issuance of an appropriate bill of lading from the railroad

origin ramp to the railroad destination ramp; receiving the loaded.

trailer at the destination ramp; furnishing or arranging for the

furnishing of the physical facilities for removing the trailer

from the destination TOFC ramp to the consignee’s store door;

untoading the freight from the trailer; and finally returning the

trailer, where leased, to the lessor.

Under plan III the published rate generally applies (a) .to freight,

all kinds; (5) in mixed carloads; (c) subject to specific mixing

rules and regulations; (d) in two-trailer lotsg.and (e) further

subject to a maximum load of 70,000 poundsat the flat charge per

-carload and irrespective of the mixture of freight involved. |

- Trip leasing of trailers from the railroads or their subsidiary

leasing companies has become commonplace with many shippers

and freight forwarders. At the present time the tariffs offering

plan III service do not include, in most instances, the leasing

charges, a statement of the amount of free time allowed for -load-

ing or unloading, detention charges, or protective service charges.

‘ Plan IV is comparable to plan III except that the shipper has

the additional responsibility of furnishing the railroad flatcar,

. including the loading and unloading of the trailers onto and off

the flatcar.

Plan V involves through motor-rail or motor-rail-motor

services at joint rates applicable only over the through route or

routes, Either mode may originate or deliver a plan V shipment,

and the traffic will move on either a rail or motor bill of lading

depending upon which carrier originates the shipment. In particu-

lar contrast to plan I operations, there need not be available

to the shipper an alternative all-highway. motor carrier service

between the points where the plan V joint rate is applicable.

Plan V coordination therefore is used either (1) where the rail

and motor carriers serve different areas and are combining their

services to perform a new service betweenorigin and destination;

or (2) where they are performing service over parallel routings

and are in effect, at least, substituting one mode of transportation

for the other for a portion of the line-haul.

Equipment leasing practices.— Many forms of leasing arrange-

ments have burgeoned forth in the past few years as part of the

accelerated growth of plans III and IV TOFC service. As seen,

these plans contemplate use of trailers or flatcaretrailer com-

binatior's owned.oy_provided by shippers, rather than the railroads,

Although some ghippers own such equipment, most do not; more-

322 1.C.C:

SUBSTITUTED SERVICE-PIGGY BACK 318°

3 °

over, ‘those who do- find it gifficult or impossible to balance

their traffic so as to secure maximum economic use of equip- .

‘ment in TOFC service. Consequently, as TOFC service has

grown there has arisen the practice of trip-leasing trailers and

flatcars by individual shippers wishing to take adydntage of

the available,- minimal-service, ramp-to-ramp rail rates, and

of the fact that their responsibility for the trailer ceases at

_ the end of a one-way trip, thus eliminating the cost of dead-

heading an empty vehicle back home.

But it is not only the shippers who depend on lensed equipment.

Most of the class 1 railroads participating in TOFC supplement

use of théir own flatcars by leasing specially desi signed piggyback

cars from car companies, s@ch as Trailer Train Company, North

American Car Corporation, or General American Transportation

Co. In 1959 railroads. themselves owned two-thirds of the 6,835

railroad flatcars equipped for use in piggyback service. By

June 1963 this figure had dropped to less than 40 percent of the

total of 16,708 FC flatcars then in use. In its first full year

of TOFC_ operations, 1955, the Baltimore & Ohio operated a .

total of 75 piggyback flatcars. At the end of 1962 it has assigned |

approximately 450 flatcars to piggyback operations, about 175

’ of which were leased from the Trailer Train Company.

_ Some railroads lease or sublease their TOFC flatcars to freight

forwarders and private shippers. The Chicago, Milwaukee, St..

Paul and Pacific Railroad Company, for example, leased a Flexi-

van rail far and two trailers to an association of shippers in

Seattle on an experimental basis for 6 months in 1959. The

idannion thereafter used the railroad’s plan IV service between

Seattle and Chicago with ‘such satisfactory results that it has

itself directly purchased, or leased from manufacturers, a total.

of 5-Flexi-van rail.cars and 10 trailers. The Milwaukee also ©

occasionally leases TOFC flatcars to freight forwarders, .on

a round trip lease basis, when the forwarders need to supple-

ment their own equipment during peak periods of traffic. .

The Pacific Fruit Express Company is a carline company,

owned jointly by the Union Pacific Railroad Company and the

Southern Pacific Company, supplying a fleet of refrigerator

cars to certain railroads for movement of perishables. As .

of September 30, 1962, it owned 421 40-foot refrigerated trailers

and 50 85-foot flatcars for use in TOFC operations. It also

was operating an additional 200 85-foot flatcars under lease, and

as previously mentioned, it had ordered 200 more refrigerated ©

322 I1.C.C.

. 314 - INTERSTATE GOMMERCE COMMISSION REPORTS

Ye : :

trailers. This equipment was designed for transportation of.

‘ either perishable.or dry commodities, and was acquired in con-

templation of its being trip leased to shippers and freight forward-

ers on westbound shipments of dry freight as a return movement ~

for perishable traffic eastbound by. piggyback from west coast

origins.

The Pennsylvania Railroad does not directly own the prea

that it uses in its plan II operations, or that it makes available

to its shippers for plan III service, A wholly owned subsidiary

corporation, Excelsior Truck Leasing Company, Inc., supplies

all such automotive equipment in a flexible leasing arrangement.

Trailers, to be used in plan II TOFC service are leased to the

railroad. oh a long-term basis in which poolsof trailers are made

- available at strategic plan II terminals. Because inbound plan —

Il traffic to certain terminals substantially exceeded the out-

bound traffic and in order to make trailers available to indi-

vidual plan III shippers, the original arrangement was modified

in 1958 so, that ‘‘surplus” trailers at plan Il terminals-would .

be returned to the control of Excelsior. In turn, Excelsior would

make these trailers available to plan Ill patrons for one-way

trip leases on a first come, first servedbasis. In these situations

ordinarily the trip-lease forms are executed by employees of the

railroad acting. as agents for Excelsior. The railroad in turn

is given a credit against its monthly. leasing — ‘for the

shipper rentals from Excelsior.

These trailers are trip leased to individual shigpere only on

condition that they be used for specific pman III TOFC shipments

either to destinations on the Pennsylvania or to destinations on

certain other railroads which have agreed with it to specific

interline arrangements. As far as home-line destinations are

concerned, an effort is made to limit plan III trip rentals to

destinations where trailers are needed by the Pennsylvania for

plan II loadings.

'The written lease agreement between Excelsior and an individual

shipper does not specify the per-shipment charge, the free deten-

tion time, or the schedulesf charges applicable at the end of the

free time. These charges and practices are ordinarily explained

to a shipper'on its first inquiry, and are thereafter followed as a

part of a general: understanding governing subsequent shipments.

Excelsior charges a flatrental of $20 for conventional trailers

for plan III shipments to destinations local to the Pennsylvania,

and a graduated scale of rentals to destinations on certain foreign

322 I.C. C.

SUBSTITUTED SERVICE-PIGGYBACK 315

”

(

“lines. For example, a shipment to Atlanta from a Pennsylvania.

) Railroad origin point wouldmean a trailer rental charge of p ry

imately $30. At the foreign line destination, the trip lease would

terminate when the responsible shipper or consignee returned the

empty trailer to the Atlanta rail ramp. With termination of the

trip lease, responsibility for the trailer would revert to the

Pennsylvania, as between it and Excelsior, and the terminating

railroad in turn would be responsible to it for a per diem rental

of ‘the trailer. The terminating railroad, accordingly, would be

~ free to use the trailer in any arrangment it wished, paying the

Pennsylvania the agreed per diem rate.

The Louisville & Nashville operates a fleet of about 775 trailers

in its plan II and plan III piggyback operations. Of the number

about 350 are leased on an 8-year termfrom REA Leasing Corpo-

ration, and another 200 are available in pools assigned by .

REALCO to the L & N at principal points of use. It leases

24 refrigerated trailers from the Fruit Growers Express. L & N

also uses foreign line trailers which are unloaded on its line,

provided that there is a specific understanding with the other

railroad regarding use of the trailers for new loadings. L & N

instituted plan III service in June. 1960, and began its practice

of trip leasing trailers to individual shippers in February 1961.

It attributes to the development of trip leasing a great increase

in its plan III traffic volume. . ,

In practice, a shipper desiring to use L & N trailers in plan

III service approaches the road’s traffic department or one of its

freight agents with a request to lease two trailers. A trip lease

is prepared when the trailers are picked upat the rail ramp either

by the shipper with his own tractor or with that of a local cartage

company employed by him. The L & N does not use any affiNiated

trucking companies to perform this operation, but it will recom-

‘mend independent local operators to any shipper. Pa on

.- The L &.N.has been charging a minimum $20 rental for plan

III shipments to destinations local to its lines, with either)a first

morning or. sécond morning delivery. The time and date of start

and termination of the trip-lease are shown on the lease form, .

The lease itself Goes not specify the detention privileges and limi-

tations, but they are. verbally described to shippers. When.a

shipper picks up the trailers prior to 10 a.m. he must return

the loadéd trailers to the L & N ramp prior to 6 p.m. the same

day or else be subject toa $9 per day charge for ordinary’trailers

- or $12 per day for refrigerated trailers. At the destination

822 1.C:C. e .

316 - INTERSTATE COMMERCE COMMISSION REPORTS

, ; é

point the shipper is allowed free detention also until 6 p.m. on

the date of delivery, at which time the daily detention charges

begin to run. An individual shipper wishing to transport its own

trailers in L & N’s plan III service is free to do so, but then is

faced with the necessity of either paying for an empty return ship- .

ment of his trailers or acquiring a returnload of owned commod- .

ities.

One practice. ~engaged in by the L & N provides an interesting )

example of how a TOFC movement can change in midcourse ‘from .

one plan to another. At East St. Louis the L & N receives some

piggyback traffic — usually fresh meats and packinghouse products

— which has originated in plan II service on the lines of western

trunkline railroads. At East St. Louis, the trailers come under

the control of the L & N which becomes responsible to the con-

necting western railroad for per diem charges for the foreign

trailers, trip leases the foreign trailersto the shipper, and moves |

the trailers in plan III service generally to Atlanta or to Florida

destinations.

Perhaps. the ultimate in advantages to be gained from short-

term equipment leasing: is. to be found in the ‘‘return’’ trip

lease. The ordinary trailer trip lease involves a railroad, rail-

‘road affiliate, or independent company renting a vehicle toa

shipper for a one-way movement. It has already been pointed

out ‘that this arrangement carries with ‘it the understanding that

the shipper’s responsibility for the vehicle terminates atthe desti-

nation point so that it need not bear the cost of an unproductive

empty return movement. Under the return trip-lease arrange-

ment, however, the. railroad provides transportation under a

published plan III TOFC rate-of a loaded shipper-owned trailer

at the published rate from a given origin to destination; then

leases the trailer from the shipper after it has been unloaded at

destination; and then assumes responsibility for the return of

the trailer to the shipper at the origin point. The railroad, of

course, is free to use the empty trailer which it has leased for

any ‘legitimate purpose, but in normal practice it does not do so,

simply returning it empty to the shipper. The shipper, then,

has in effect had his trailer shipped back to him at something

better than no cost at all, for he has also received from the

railroad some nominal sum’ as ‘“‘lessor.’’ Although this provi-

- sion of. free transportation does not seem to be widespread, it

does occur in connection with certain types of TOFC operations.

322 I. C. C.

SUBSTITUTED SERVICE-~PIGGYBACK 317

Accessorial services.—A fundamental concept of plan III service

and plan III pricing is that a shipper receives only basic ramp-to-

ramp rail transportation and must provide for himself all other

required facilities and services. Many railroads, however, supply

-a labor force to load or unload plan III trailers, either at no cost

to the shipper or at a negotiated price.. Some TOFC tariffs’

provide for the railroad’s performance of such accessorial serv-

ices, but others do not. As pertinent here, the Elkins Act (49 °

U.S.C, 41) requires regulated common carriers tofile and publish

all rates and charges and strictly to observe them until changed

according to law. It accordingly is unlawful for any person to.

' give or receive any rebate or concession as a result of which

any property — by any device whatever — will be transported at

a lesser rate or will provide any other special advantage than

that named in the published tariff.

During 1961 criminal proceedings were instituted under the —

Elkins Act against a number of railroads performing questionable

loading services. Essentially, in each case the defendant rail-

road was performing the loading of freight for particular ship-

pers into those shippers’ trailers, with the apparent understand-

ing that these trailers were: to be shipped under plan III-type |

tariff arrangements. The applicable plan III tariffs provided that

the loading of. freight into and the unloading of freight from the

trailers had to be, performed by the shipper, consignee, or their

agents, at the shipper’s expense. In fact, the railroads were

performing the loading or unloading functions, purportedly as the

agents for the shippers. The railroads’ tariffs did not provi->

for performance of the loading. or unloading functions or the

agency relationship.

In December 1961, the Baltimore and Ohio Railroad and the

Erie-Lackawanna Railroad Company were each fined $1,000 on

_ pleas of nolo contendere to criminal informations alleging that

they loaded trailers for plan III shippers in circumstances such

as those just described. However, in a. similar, stipulated

factual situation the Pennsylvania Railroad Company, on June 8,

1962, was found not guilty of the- Elkins Act violations charged.

Subsequently, similar criminal charges against the Santa Fe and --

the Burlington railroads were dismissed at the request of the .

United States attorney. The extent to which a railroad may con-

tract privately with a TOFC shipper for these and similar services

incidental to TOFC transportation has thus remained unsettled.

322 I.C.C.

318 INTERSTATE COMMERCE ( MMISSION RE PORTS

. Billing and assessment of charges.—Although all-rail TOF(

services held out by. the railroads throughout the country hav

been formed into relatively standardized tariff descriptions, ther:

is evidence of tonsiderable confusion and disagreement withii

the transportation industry 2s to ihe precise application of tarif

rules, as well as evidence that published charges are not alway:

collected. For example, as the applicable plan III rate is ofte:

_ based on a weight factor, it ‘would seem that the participatin;

railroad would assume responsibility for ascertaining the weight:

of the shipments tendered, either by actual weighing or throug}

some system of certification by the shippers. In fact the clas:

I railroads in the western district have: devised procedures fo

certification of weights of TOFC loadings, as part of their lon,

established bureau system of weighing and inspection. But i

has become clear in this proceeding that a number of majo

railroads participating in TOFC operations have not been deter-

mining TOFC shipment weights by any reasonably reliable methoc

or procedure, and therefore cannot know whether proper charges

are being assessed.

Many plan III tariffs provide a rate applicable to the tota

weight of two trailers moving from one shipper to one consignes

on one day on one bill of lading. This rule is often loosely applied

with the result that it has no consistent’ meaning which can be

relied upon as a certainty by all potential shippers. In some

instances the railroads will consider that the ‘‘tender’’ of twc

trailers in a given 24-hour period by a plan III shipper satisfies

the tariff requirement. In any event it isa frequent practice for

the railroads to dispatch loaded plan III trailers whenever receivec

at the rail ramp, with the result that trailers which are pairec

for billing and rate purposes as single-day shipments actually

are shipped on separate days for arrival at destination on dif-

ferent days. We have also been informed of the practice in certair

types of TOFC movements (particularly in those where there has

been a conversion from plan II to plan III en route from origina!

_consignor to ultimate consignee) for the railroad which is taking

up the plan III segment of the shipment to neglect to issue a re-

ceipt or bill of lading until the day or so after it has forwarded

the shipment. This type of delayed issuance ofa required shipping

document may constitute a violation of section 20(11) of the act,

and can open the door to improper preferences to favored shippers,

in violation of the Elkins Act.

aan 1.C.S.

sat saan

Te RN HAR HS Dee SO O OD C2

0 —

a ie ee ee) ee ee i ¢ ? on © ee, ©? De @? ee

SUBSTITUTED SERVICE-PIGGYBACK 319

A similar, perplexing problem for shippers and carriers has '

been interpretation of the ‘‘mixture’’ tariff rule applicable to

plan III transportation of ‘‘all-commodity”’ traffic. Ordinarily

this type of rule will provide that not more than 60 percent of

the weight of a total, two-trailer shipment may consist of,any

one commodity or article. One frequent variation of this tariff, rule

provides the alternative test; not more than 60 percent of the

total shipment or not more ‘than 60 percent of 70,000 pounds,

_. The. carriers do not seem to be applying any consistent approach

in determining whether commodities being shipped are the * ‘same’”’

commodity or article. In general, neither commodity classifica-

tions nor other. published listings are used to determine whether

the articles includéd in a single shipment are sufficiently dis-

similar to constitute different commodities for the purposes of

mixture rules, This state of affairs leaves a railroad free to

haul straight truckloads of high-rated commodities at hidden.

bargain rates should it choose to’ do so for a favored shipper. ©

- Bearing in mind the historic&al development of piggyback trans-

portation and its present-day problems—as well as its appealing

advantages—we shall now proceed to an examination of the

issues raised directly by the instant investigation.

THE PROPOSED RULES.

At the prehearing conference held in this proceedingon October

9, 1962, a series of proposed rules, reproduced as appendix II

hereto, was distributed. As noted atthattime, they were designed

to serve as aframework upon which rulesultimately to be adopted,

if any, could be developed. The proposed rulesrepresented some-

thing of a new approach to TOFC terminology as they attempted to

separate TOKC service, without regard to the five numbered plans

now in common use, into two more basic classes; ‘‘joint inter-

modal’? TOFC service which would include any piggyback service

performed jointly by a rail carrier and amotor or water common

- carrier; and ‘‘all-rail’’ TOFC service which would include any

piggyback service in which traffic moves exclusively at rail rates

and on rail billing.

The proposed rules were predicated upon the basic premise that

all persons desiring to use TOFC service shouldbe able to do so,

with the charges for the same services being equal to all users,

whether they be motor or water carriers, freight forwarders, or

privaté shippers. The proposed rules B-4, B-5, C-1, and C-2 in

322 I.C.C. .

o s

320 INTERSTATE COMMERCE COMMISSION REPORTS ~

particular were designed to implement this concept. Other impor-

tant aspects of the proposed rules included a requirement that a

-rail carrier providing all-rail TOFC service make specific

provision in its tariffs for all incidental and accessorial services

offered by it in connection therewith (rules C-1 and C-2); a pro- -

hibition against the publication of joint intermodal TOFC tariffs

covefing commodities the transportation of which is not subject

to economic regulation for their entire movement (rules B-2 and

C-7); a requirement that rail carriers providing joint intermodal

TOFC service ascertain whether their connecting motor or water

carriers hold appropriate operating authority (rule B-5); a require-

ment that where joint intermodal service is provided, the distance

over an intermodal route used by a railroad and a motor carrier

be not less than 90 percent -of the distance over the authorized

motor carrier route from origin to destination (rule B-3); a pro-

vision permitting joint intermodal TOFC service for the entire

line-haul movement (rule B-7); and a prohibition against the

leasing, directly or indirectly, by railroads or persons under

common control with railroads of highway trucks, trailers, or

semitrailers and rail cars to and from shippers or freight

forwarders (rule C-3). |

Section D of the proposed rules contained certain billing and

notification requirements. These would have included a require-

ment that TOFC service be provided only when the movement was

covered by a bill of lading and manifest with appropriate certifica-

tion of weights and contents of trailers (rules D-1 and D-2); a

regulation providing that two trailers would have to be tendered on

the~game day in order to qualify for a rate covering the trans-

portation of multiple vehicles (rule D-3); and a rule which in

effect permitted rail carriers to restrict the application of all-

commodity rates to shipments containing no more thana designated

percentage of a single commodity (rule D-5). ;

THE EXAMINE RS* RECOMMENDATIONS

The examiners, in their report and recommended order, find

a general need for the promulgation of rules and regulations

which would have the effect of fostering the orderly development

of TOFC service. The rules which they recommend be adopted

are set forth in appendix III tothisreport. The examiners recog-

nize the same general divisions of TOFC service into its ‘‘joint

intermodal”’ and ‘‘all-rail’’ aspects as do the proposed rules, but

322 1.C.c. °

SUBSTITUTED SERVICE-PIGGYBACK — 321

they find the plan-numiber terminology useful and retain it. Plans

l and. V are defined specifically, and are grouped together as

**joint intermodal’’ service.

The examiners recommend that railroads performing all- rail

“TOFC service be required to publish in their tariffs all the rates,

charges, and rules connected with such service, including charges

for leasing of equipment, detention of trailers; accessorial

services, and pickup and delivery service if any such services are

offered. The ban on leasing of equipment by rail carriers and

their subsidiaries to or from shippers contained in the rules as

originally proposed would not be retained by the examiners.

They would, however, require that all charges for the leasing and

return of equipment be included.in the rail carrier’s tariff

publications. Also recommended for adoption were a number of

rules consisting largely of modifications of and improvements on

those originally proposed, all of which will be discussed later in

more ‘detail. te

Exceptions to the examiners’ recommended order and replies

to these exceptions have been filed by representative groups or

associations of, or by individual, rail, motor, andwater carriers,

freight forwarders, and shippers, and by our Bureau of Inquiry

and Compliance. In large part, the positions taken by the parties .

in. their exceptions, or in replying to the exceptions of others,

reflect those expressed in their representations and considered

at length by the examiners. Like the examiners’ recommendations,

their arguments can best be discussed in relation to the specific

topics treated below.

THE NEED FOR TOFC REGULATIONS

If there is one predominant theme that has run through the vast

majority of the many representations and pleadings filed in this

proceeding, and stressed by those participating in the oral argu-

ment, it is the desire for flexibility. Carriers and shippers alike

_ agree that TOFC hasalready established itself as an extraordinar-_

ily significant and valuable innovation on the transportation scene

and that it has an almost unlimited future ahead of it. Many of the

parties have arged that we take no action here which might have —

the effect of restricting the growth of piggyback, of forcing it into

any fixed mold, or of limiting in any way the inauguration and

development by the transportation industry—and particularly the

railroads—of new types of TOFC services and of new variations

on or applications of present services.

322 1.C.C.

wae as

322 INTERSTATE COMMERCE COMMISSION REPORTS

There can be no doubt of the benefit which TOFC service has

already rendered the railroads in allowing them to recapture

traffic lost to competing modes of transportation, and especially

to private motor carriage. Also benefiting have been the motor

carriers, which have been provided with an opportunity, through

the use of plan I TOFC service, to obtain efficient line-haul trans-

portation and thus to help themselves even while their business —

helps their raih competitors; the freight forwarders, which have

been afforded an economical’ means for transporting the small

shipments | which they . consolidate; and—most important—the

shippers and the general public which ultimately reap the, benefits

of the increased efficiency and €conomy: that are invariably the

result of the combination of competing forces so that each operates

in the area where it functions best.

‘It is our purpose and our hope‘to encourage the growth of this

transportation phenomenon. Large-scale piggyback has had a

short history, but it is obviously no longer an infant. Perhaps we

might characterize it as a fast-developing teenager, healthy but

not without some growing pains. Looking back on some of our past

decisions—decisions which must necessarily affect the future of

TOFC service because they contain definitions or restriction$

which could hamper its logical deve'opment—it is apparent that

most of them were rendered during the infancy of this transporta-

tion prodigy, and some, like Motor-Rail-Motor Traffic in East and

Midwest, 219 I.C.C. 245, might almost be said to. have predated its

birth. The fact that these decisions were handed down before

anyone could have realized the important. place TOFC service was

destined to attain does not mean that ‘they reached erroneous

results, but it does mean that their pronouncements need to be

reexamined in the light of modern developments.

The assembling of the information necessary for sucha reevalu-

ation was one of the principal ‘reasons for our embarking on a

general investigation of piggyback operations, and the factual

material which has been introduced into this record, and which,

will be of great value to us inthe future administration of the act,

_ alone amply justifies this proceeding. The need for information

relating to TOFC service will, of course, be a continuing one if

‘ we are to remain propérly informed for the future, and-to keep it

flowing we have recently revised certain of our reporting require-

ments in docket No. 34364, Piggy back Traffic Statistics, to call for

_ the quarterly rons of TOFC traffic data by railroads, motor

322 I.C. C.

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pretreat ceca tet

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= "399 1.C.C.

SUBSTITUTED SERVICE-—PIG6Y BACK . 323

and water carriers, freight forwarders, and the Railway Express

Agency. , -

‘In addition to ouf§desire to fill the gaps in available knowl-

_ edge about TOFC operations, there had arisen, shortly before this

proceeding was begun, certain immediate and pressing problems

which required solutions. For example, National Auto. Trans-

porters Assn.—Declaratory Order, 91 M.C.C 395 (the NATA case),

had presented anew the questions whether contract carriers should

be allowed to use TOFC service—a question answered in. the neg-

ative in the New Haven case, supra; whether interchange of TOFC

traffic between rail and motor carriers should be allowed at

other than common poinf&S of service—an issue which had been

treated earlier in Gilbert Carrier Corp. Extension—Kearny, N. J.,

72 M.C.C. 204; and how the certificates,. peculiarto carriers of

motor vehicles, limiting service to initial or secondary movements

should be interpreted vis-a-vis piggyback operations. Gordons

Transports, Inc., V. Strickland Transp. Co., 318 I.C.C, 395, had

raised again the problem, firstconsideredin Substituted Rail Serv-

ice by Red Ball Transfer. Co., 52 M.C.C, 75 and 303 I.C.C, 421, of

the use by a circuitous motor carrier ofa more direct rail TOFC

' service between authorized points. The propriety of the extensive

practice of leasing trailers for use in TOFC service between rail

carriers or their affiliates and shippers, and the apparent oppor-

tunities for rebates and discrimination afforded by this practice,

had been called to our attention by our field employees. The need

to deal consistently with the problems presented in each of these

Situations was instrumental in persuading us that a proceeding —

‘Such as the instant one was necessary.

The information that we have received from the parties and the

arguments which we have read and heard: make it apparent that

there are many differences of opinion as to the wisdom and the

correct application of some of our past decisions. This proceed-

ing affords the opportunity to explore the areas in which the dif-

ferences exist. Also, there have been revealed some abuses in the’

performance of piggyback service: To cite a single example, it is

clear that some railroads, in spite of the fact that their rates for

transporting loaded trailers in TOFC service are based on maxi-

mum weights, make no. attempt to ascertain the actual weight

of the shipments tendered to them and are failing to collect

their published charges. .

We think that the record clearly supports the conclusign that it

would be in the public interest to lay down, through formal rules,

SN ee bE SNORE Anes reery sonal iene Seeaisinted aoe

a“ 324 INTERSTATE COMMERCE COMMISSION REPORTS

‘

‘ certain guidelines for TOFC service and practices. .We visualize

these. rules as an aid in furthering, not restricting, the. growth of .

_ piggyback, as providing some standardization of industry practices,

and as a means of insuring that this recent and valuable trans-

pottation development is made available to all persons who are

able to make effective use of it. .Some of the rules to be adopted

here are simply interpretive, but we think itwelI to have summar-

ized and assembled in convenient form the various requirements

of thé Interstate Commerce Act as they relate to piggyback

operations.. Other rules take the form of tariff and billing require-

ments. Still others may be said to implement the broad provisions

of existing legislation. A few of the ‘parties challenge the legality

of our prescribing rules—particularly of the last-mentioned kind—

but we think we have ample authority to take such action. Under

parts II, III, and IV of the act, we are given a general rulemaking

power by: sections 204(a)(6), 304(a), and 403(a), respectively; and

. _in section 12. we are ‘‘authorized and directed to exécute and

~~ enforce’’ the provisions of partI. The Courts have recognized our

rule-making authority. See, for example, Assigned Car Cases, 274

U.S. 564, 575. et seq. (1927), which arose under what is now part

I of the act; American Trucking Assns. V. United States, 344 U,S,

298,-308-13 (1953), which/arose under part II; and United States Vv.

Pennsylvania R. Co., 323 U.S, 612, 616 (1945) in which the ante

Court pointed out that the act, since its inception— ;

has contained broad language to indicate the scope of the law. The very com-

' plexities of the subjéct have necessarily causedCongress to cast its regulatory

provisions in general terms. Congress has, in general, left the contents of

these terms to be spelled out in particular cases by administrative and judicial

action, and in ‘the light of the Congressional purpose to foster an efficient and

fair national transportation system. ,

The proposed rules distributed to the parties at the prehearing

conference contained several ideas which appeared to,many to be

both radical in approach and stultifying inneteffect. Particularly

criticized have been rule C-3 which would have flatly prohibited |

the leasing of trailers for use in TOFC service; rule B-4 which |

would have required that the charges received by a rail carrier |

under a division of. revenues for performing part of a joint

intermodal TOFC movement could be no greater than its.com-

pensation for performing all-rail service between the same points; _

and the statement in the material accompanying the draft df the

proposed rules to the effect that they did not contemplate the use —

322 I.C.C.

SOE ER PN CS RHO FH MERE Ba NES SNOT 78 he 1g a ee me te ANNE NPAT CIS KRDO PY eee a pan . =

SUBSTITUTED SERVICE-—PIGGY BACK * 325

of TOFC service by motor .contract carriers. Proposed rules

- such as these were largely designed to drawas much comment as

possible from various components of the transportation industry

to the end that we might obtain as much assistance as. possible

from every faction in making our final determinations. The

response has demonstrated that they have served this purpose well.

We cannot help but be aware thay‘ the development of TOFC

transportation is not at a standstill, and that whatever we do here

will not be the final and definitive wordon all the ramifications of

piggyback service. KH any of the regulations to be adopted here

should prove in practice to have the unwanted effect of in any way

hampering the flexible development and free use of TOFC sérvice,

we feel sure that this fact will promptly be called to our attention

- by the affected carriers o~ shippers so that appropriate remedial

erage can be taken.

° ; DEFINITIONS

; Z

_ Part A of the proposed rules contains suggested definitions for.

three terms: ‘‘Trailer-on-flatcar (TOFC).service,’’ ‘‘Joint

intermodal TOFC service,”’ and ‘‘All-rail TOFC service.” The

plan-number terminology is not used at all in the proposed rules,

but it is immediately apparent to those accustomed to thinking of

- piggyback services. in this way that ‘‘joint intermodal’’: TOFC

service includes what has come ‘to be called in the industry plans

I and V, while all-rail TOFC service includes plans II, III, and IV

and variations thereof. The-examipers used the plan- number

terminology throughout their report, and in their recommended

rules they provided definitions for plans I and V.

We agree with the examiners, and with virtually all the parties,

that~the five numbered plans have become firmly ensconced in

transportation language, and we are certain thatthe various TOFC

services will continue to be referred to in such terms regardless

of what we do here. At the same time, we think that the grouping

of these different services into two major classifications—inter-

modal service, in which traffic moves pursuant to a negotiated .

agreement for the division of revenue between carriers of dif-

ferent modes, and all-rail, or open-tariff, TOFC service, in which

only a rail rate is involved—represents a genuine and useful dis-

tinction. In the rules which we are adopting here, this distinction

is retained, but we see it as,one which simply exists as a neces-

Sary element of TOFC service, not as one which has to be, or

should be, imposed by definition.

' 322 1.C.C. , : ee ae

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326 INTERSTATE COMMERCE COMMISSION REPORTS:

Moreover, we do not ‘think it advisable to attempt a formal

definition of plan I or plan V TOFC service. Again the distinction

between them is a real one; and it is convenient to refer ‘to the

different types of intermodal service by these handy and well-

recognized terms. We are, obviously, using them inthis report.

But while they represent-a convenient form of shorthand, their

, use is not essential to the explication of TOFC regulations, One

' of the few parties commenting on the proposed definitions in

its exceptions, the Southern Railway System, takes the position

‘that the definitions contained in the examiners’ recommended

rules 2 through 5 are unnecessary and could lead to confugion.-

We are inclined to agree. The attempt specifically.to define cer-

tain types of TOFC operations could well prove futile, as well as

‘unnecessarily restrictive, in view of the industry’s demonstrated

capacity to develop new services and variations on old ones. The

ryles to be adopted, then, will contain a formal definition only of

TOFC service itself.

TOFC service would have been defined in proposed rule A-1 as

follows:.

. “Trailer-on-flatcar (TOFC) service’? means the transportation, in interstate

‘ or foreign commerce, of any freight-laden highway truck, trailer, or semitrailer

(or the container portion of any highway truck, trailer, or semitrailer having.

a demountable chassis) on a rail car, and/or the return transportation, in

interstate or foreign commerce, of any empty highway truck, trailer, or semi-

trailer (or the demountable container portion thereof) of a rail car.

° . 2) “

The examiners pointed out.that the meaning of ‘‘return transporta-

tion’”” might be subject to more than one interpretation, and they

recommended the following modification of the definition, in their

rule 1; ;:

“Trailer-on-flatcar (TOFC) service’? means the transportation, in interstate

or foreign commerce, of any freight-laden or empty highway truck, trailer, or

semitrailer (or the container portion of any highway truck, trailer, or semi-

trailer having a demountable. chassis) on a rail car.

On exceptions, the Western Railroads contend that this form of the

_ definition might also create interpretive problems as it could be

construed to include the transportation of new trucks and trailers

shipped by a manufacturer and not actually being used in perform-

ing piggyback service. They propose an alternative form of the

definition which, we believe, meets this objection and clearly and

adequately defines TOFC setvice. We shall, therefore, adopt it,

with minor modifications, as our rule 1:

322 I.C.C.

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? * SUBSTITUTED SERVICE-PIGGYBACK - 327

1 Definition of TOFC service.— Trailer-on-flatcar (TOFC) service means

the transportation on a rail car, in interstate or foreign commerce, of (@) any

freight-laden highway truck, trailer, or semitrailer (or the container portion

of any highway truck, trailer, or semitrailer having a demountable chassis); or

(b) any empty highway truck, trailer, or semitrailer (or the container portion

of any highway truck, trailer, or. semitrailer having a demountable chassis)

when such empty equipment is being transported incidental to its prior or sub-

sequent use in TOFC service ,as defined in subparagraph (a) of this section.

Several of the parties object that the examiners’ recommended -

rules as a whole, and particularly the definitions contained in

rules 2, 3, and 4, fail to provide for the use of TOFC service by

water carriers subject to part ill of the act. There,is now some

use by such carriers of TOFG service in lieu of authorized water

service between certain Florida ports. It was certainly not our

intention in instituting this proceeding to preclude the continuance

of such operations, and the rules to be adopted will make provision

for the use by water carriers of piggyback service. Operations of

_this kind should not be confused with those in which water carriers

transport their own or other carriers’ or shippers’ trailers or

containers by water in so-called fishyback service. That. portion

of the instant proceeding involving the latter type of service has

_been separated from the other issues involved herein for individual

treatment and oral hearing by order entered November 12, 1963.

OPEN-TARIFF TOFC SERVICE

Every TOFC service necessarily involves the participation ofa

railroad which performs certain line-haul transportation. This ~

fact, so obvious that it may seem banal to draw attention to it,

is of fundamental importance in any consideration of either the

practical or legal aspects of piggyback operations. So too is the

further proposition that because TOFC operations involve the

rendering of a rail service, they also involve the earning of some

compensation by a rail carrier and the provision, through some

form of tariff publication, for transportation charges, at least a.

portion of which will ultimately be received by a rail carrier.

There are only two ways in which a rail carrier can provide

for receiving compensation for its transportation services. Itcan

through tariff publication establish charges, which must be just

and reasonable, for a particular service to be rendered, or it can —

enter into joint-rate arrangements with other carriers and estab-

$22 1.C.C. -

328 INTERSTATE COMMERCE COMMISSION REPORTS

lish divisions, which must. also be just and reasonable, of the

charge established jointly for the through service. The proposed

rules, in attempting to achieve the endthat TOFC service be made

available to all at equal charges, took an approach which would

have required that the divisions received by a rail carrier pro-

viding joint intermodal service could not exceed any all-rail TOFC

rate maintained by the rail carrier for like services. Proposed

‘rule B-4 would provide: . | :

The railroad or railroads providing TOFC service jointly with motor or

water common carriers shall receive no greater compensation or charge for

its or their portion of the total intermodal movement than it or they would

receive under any all-rail TOFC terminal-to-terminal rates or charges

maintained for like service between the same points.

Also, proposed rule B-5 would have required any rail carrier pro-

viding joint intermodal TOFC service with any motor or water -

carrier to do so indiscriminately with other such carriers. This

rule reads as follows:

Any ~sailroad which provides TOFC service jointly with any motor or water

- common carrier shall not refuse to enter into a like arrangement with other

motor or water common carriers under similar circumstances and conditions,

except that such railroad shall have the duty of ascertaining whether the con-

necting motor or water carriers hold appropriate authority to transport the

involved commoditiés, If the connecting motor or water carriers do not hold

such authority, no ‘joint intermodal TOFC service shall be performed with

respect thereto.

The. hearing examiners rejected both these proposed rules, 2

and we think that they were correct indoing so. We do not believe

that it would be practical to attempt to control by a rule of general

applicability the level of compensation to be received under divi-

sion agreements which are, by nature, private contracts negotiated

by individual carriers. We are, nevertheless, still concerned with

the concept of equal TOFC charges for all underlying the proposed

_rules. For this reason, in the notice setting this proceeding for

oral argument, another approach was suggested, andthe parties

were asked to discuss ‘‘Whether, and under what circumsgances or

requirements, TOFC service provided under an ‘open tariff’ can

- and should be made available to everyone (including freight for-

2¥hey did, howevez, recommend adéption, in their rule 9, of the substance

of the second portion of proposed rule B-5 requiring rail carriers to ascertain’

whether connecting motor carriers hold appropriate authority to join in TOFC

service. This matter will be discussed subsequently.

322 I.C.C.

SUBSTITUTED SERVICE-PIGGYBACK 329

warders, express companies, ‘and common and contract motor and

water carriers, exempt or regulated). ys

‘It is the concern of the rail carriers that should motor carriers:

be given the: opportunity to utilize TOFC service at the open-

tariff rate for their line-haul movements, they will be in a posi-

tion to divert traffic from all-rail TOFC service.. Those support-

_ ing the extension of open-tariff TOFC service to other carriers

point, on the other hand, to the obvious fact that whenever such

service is used, whether by private shipper, freight forwarder,

or competing carrier, the immediate result is revenue for the.

railroad. Why, they ask, should a railroad object to receiving

additional business? The only concrete, practical answer to this

query by any railroad party to this proceeding is that there may

be situations in which a TOFC open-tariff rate between two given

points is established, for competitive reasons, at a particularly

low level, and that by using TOFC service between two such points

a motor carrier could take advantage of the favorable rate in

the performance of part of its line-haul transportation and thus

‘provide service at points beyond those named in the TOFC ¢oriff

at a lower rate than, and thus to the ultimate detriment of, the

railroad.

It is argued by some that the use of open-tariff TOFC peeriee-

by carriers would be in contravention of the st&ted national

transportation policy ‘‘to provide for fair and impartial regulation

Of all modes of transportation subject to the provisions of this

Act, so administered as to recognize and preserve the inherent

| advantages of each * * *.’”* The Western Railroads, for example, in

their reply to exceptions argue that meter carriers would thus

be able to ‘“‘exploit’’ the railroads’ ‘‘acknowledged ‘inherent

advantage as the nation’s low-cost line-haul carrier of goods for

great distances,’’ and that this ‘‘inherent advantage would be sub-

, Merged, to be used’as a means by which motor carriers could

_ establish their primacy in surface transportation.’’ What they

overlook is that all TOFC service is inherently bimodal in that its

basic characteristic is the combination of the inherent advantages

of rail and motor transportation: the railroad’s ability to provide

efficient line-haul transportation of huge volumes of freight for

great distdnces at high speed; and the motor carrier’ s ability to

provide door-to-door, and if necessary job- or farm-site, pickup

and delivery. TOFC could even be said to be trimodal, because

added to the two factors already mentioned is its ability to com-

bine in a type of container service many smiall shipments—a

322 I.C.C.

: 4

330 | INTERSTATE COMMERCE COMMISSION REPORTS

type of service which has become associated with the business of

the freight forwarder. :

‘It should not be forgotten in considering the arguments advanced

here ‘that all three—rail carrier, motor: carrier, and freight

forwarder—are even today providing, through the use of piggy-

back, services which in physical characteristics are substantially -

similar. Any one of the three can offer a transportation service

which includes door-to-door pickup and delivery, movement -of

loaded trailers between a shipper’s premises and a rail yard,

and line-haul transportation of the loaded trailers by rail. The

railroad does this under its plan II TOFC tariff; the trucker does

it under plan I, in which it is encouraged by the railroads (all

railroads participating in this proceeding except the Southern

Railway System favor continuation of plan I); and the freight

forwarder does it through use of plans III and IV rail tariffs.

We think that the rail carriers’ fear that the free use of open-

tariff piggyback service by motor carriers would end in the

elimination of the inherent advantage of rail transportation is mis-

placed. On the contrary, it seems obvious to us that the inherent

advantages of each mode of transportation can be given freest play

through the highest degree of coordination, and that encourage-

ment’ of such coordination is in the public interest. We might

also note that the presidential transportation message of 1962

asked that all carriers be assured the “‘right to ship vehicles

or containers on the carriers of other branches of the transporta-

tion industry at the same rates avai! .oletonon-carrier shippers,”’

so that the various carriers would be placed ‘‘in a position of

- equality with freight forwarders and other, shippers ‘in the use of

the promising and fast-growing piggyback and related techniques.”

Those protesting against the legality df the use by a carrier

of open-tariff TOFC service point to a line of our decisions in

which we concluded that it was ‘‘repugnant to the act’’ for a per-

same service. That such was stated in a number of cases can-

not be disputed, but it should also be noted that when this pro-

ceeding was instituted, one of its stated goals was the ‘‘reexami-

nation of existing Commission precedents and pronouncements

governing coordinated and substituted Service transportation.”

It is. argued, however, that this longstanding and consistent

administrative interpretation of the act must be deemed to have

received the effect of law and that we are precluded from

changing it. Cited as supporting this general rule are United

322 1.C.C.

SUBSTITUTED SERVICE-—PIGGY BACK , 331

tates v. Leslie Salt Co., 350U.S. 383 (1956); Helvering v. Winmill,

05 U.S, 79 (1938); and Atchison, T. & S. F. Ry, Co.v.United States,

09 F, Supp. 35 (1962). Certainly, were we summarily to reject

ast Commission holdings and attempt somehow to penalize some

ndividual party subject to our jurisdiction for engaging in-a

ourse of conduct in which he had followed those holdings,-the

rinciple enunciated in the cited cases would be applicable. We

o not, however, understand the courts to have taken the inflexible

osition that an administrative agency, even if it-has followed a

onsistent ,line .for some time, cannot, ‘when faced with new

evelopments or an appreciably changed factual picture in the

egment of the national life which it is charged with regulating,

lter its past interpretation in a formal proceeding such as this

here rules having future effect are to be issued. When cogent

easons and thé public interest compel it, even a consistent and

enerally unchallenged administrative practice may be overturned.

ompare Norwegian Nitrogen Co. v. United States, 288 U.S. 294, ,

15 (1933)..

So far as we have been able to danetine: ‘the first time the

ommission made the definite statement that a person could not

-t_ as both carrier and shipper as to the same service was in

@ 1939 decision in Substituted Freight Service, 232 I. C.C, 683.

hat proceeding’ arose soon after the beginning. of Federal

-gulation of interstate motor carriage andewas directed toward

stermining whether certain special permissions granted as atem-

rary measure to permit continuance of substituted service

‘rangements of a type prevalent prior’ to the effective date of

irt Il of the act should be renewed. The special permissions

lowed publication of tariff rules which in turn provided for the

ibstitution of motor for rail, water\ for rail, and rail for

ater service. They did not require motor common carrier

erating authority as a prerequisite for the substitutionof motor

rvice for rail or water service; they permitted Substitation

the carrier’s option, without giving the shipper a negative

tion; and they did not call for the identification of the parties

rticipating in the substituted service or of the routes to be used

erein. The Commission concluded that the special permissions

ould not be renewed, and in doing so made three specific findings:

) that the service substituted for common carrier service is it-

lf common carriage and cannot be performed by- motor vehicle

the absence of appropriate motor common carrier authority, (2)

at the substitution of one form of transportation for another ~

322 I.C.C. mines -

332 INTERSTATE COMMER COMMISSION REPORTS

where the ‘ shipper ptherwise directs would be a breach of the

_ contract of_ carriage, and (3) that the routes over which sub-

stituted service is performed and the parties performing it

_ must be fully set forth in lawfully filed. tariffs. Certainly, we

would not dispute any of these findings; in fact, we shall incorpo-

rate them in the.rules to be adopted.

“The statement that a person may not act as both carrier anc

shipper as. to the same service appears first at page 688 of the

- report in Substituted Freight Service, supra. The Commissior

there noted that the substituted . service practices of the easterr

rail carriers differed from most others in that these railroads

utilized ‘‘so-called contract carriers’* in such service, and that

they “‘argue that neither they nor such tontract carriers are or

should be required to act as common carriers. by motor vehicle

. in their relation to the public.’” The report then states, withou'

explanation or supporting precedent; ‘‘But they cannot act as

‘common carriers by rail and shippers by motor -vehicle as tc

identically the same service.’’ Later, on page 690, in discussing

‘an arrangement whereby Consolidated ,Freight Lines, Incorpo-

rated, substituted rail service for its authorized motor service

between Minneapolis, Minn., and asian ol Mont., the Commissior

said; :

It appears that between these points it acts asa semanade or shipper ani

assembles the traffic tendered by the individual shippers isto carload lots

paying the railroad the carload rate between Minneapolis and Terry and assess

ing the individual shipper or consignee its less-than-truckload rate betwed

primary origin and destination. But for itfo act as a common carrier by moto:

vehicle and as*a shipper by rail as to the same service is just as repugian

to’ the act as the reverse situation of the eastern rail carriers, although i

this instance it appears that it actually has common-carrier rights betwee!

Minneapolis and Terry. :

Considering the limited nature of the ultimate findings ir

Substituted Freight Service, supra—that is, that service substitutec

for common carriage must itself be common carriage and that the

tariff publications alowed under the special permissions were

legally insufficient—it is not clear to us why the underlying con-

clusion that.a person may not be both shipper and carrier wit

a, respect to the same service was necessary to the determinatior

of the case. A. contrary result had previously been reached ir

1936 “in Trucks) on Flat Cars between. Chicagd and Twin Cities

216 [.C.C, 435. There the es Great Western Railroad hac

322 I C. Cc.

’ SUBSTITUTED SERVICE-PIGGYBACK = 333

;' wiht. prior to the passage of part II: of the-act, an open-

tariff TOFC rate Which was primarily: designed to attract the

traffic of a motor common carrier, Keeshin Motor Express

Company. The rate was approved, and the Commission commented,

“at page 444, ‘“‘We have here a published tariff, and a motor

carrier would have the same right to make shipments thereunder .

as any other member of the body politit.’’ -Later, when motor

transportation was made subject to our regulation, th»> making

possible the filing of joint motor-rail rates, the Great Western

“and Keeshin joined in publishing such rates, which wer approved

in Motor-Rail-Motor Traffic in East and Midwest, 219 I.C.C, 245.

The Great Western stated at that time that its intention was to

-withdraw the open-tariff. rates previously approved, but the

Commission in no way indicated that such a tariff gould not be

used as originally. proposed; that is; by.motor gommon carriers.

Nor did it inSubstituted Freight Service, supra,either specifically:

overrule or attempt to: distinguish Trucks on)Flat Cars between

Chicago and Twin Cities, supra.

These considerations lead us to the conclusion that the Com-

mission in Substituted Freight Service, in saying that a person

could not ‘be shipper and carrier as to the same service, did not

intend to proscribe the kind of substituted service originally in-

tended by thet

carrier service is-.substituted for another through the use of an

open-tariff rate of the carrier performing the substituted service—

provided that proper notice is given in the tariff publication of the

carrier using the substituted service. What this language was

directed‘ at, as we understand it, was the use of open-tariff

Servite by a carrier not acting in its proper role of carrier,

but acting instead as a shipper or forwarder. Such a-situation

might occur were a carrier to tender a shipment to. another

carrier for transportation to a: point ft cannot serve or over'a

route it cannot use, or without providing in its tariffs for the

substitution. Consistent with this interpretation is the fact. that

the report characterizes Consolidated’s operation between Minne-

apolis and Terry as that ofa forwarderor shipper. Presumably, had

Consoligated, through an appropriate tariff publication of the kind

)

reat Western and Keeshin in which one common. .

prescribed in. Substituted Freight Service, held out ‘its Service

as a motor cayrier, through the use of substituted service, the

arrangement would have received the same approval as did the

original Great Western-Keeshin proposal. rye \.

$22 1.C.C. | , ibtic ;

‘

page 688 it is said:

¢.

INTERSTATE COMMERCE COMMISSION REPORTS

. r)

.We think that certain other language in the report in Su bstituted

Freight Service, supra, also tends to support this conclusion. At

_In either event, where the substitution service consists of a combination cf line-

haul movements. by’ rail and motor, it is in legal effect a joint service, nc

matter by “what other name it may be designated. Under the act and our regu-

lations theréunder, it is fundamental that the service covered by publishec

rates, the routes over which it is performed, and the names of the carrier:

performing the service must be set forth definitely in the governing tariffs

for the information of the shipping public, interested carriers, and the

regulatory body, in order to insure the effective and fair administration re)

the act.

Again it should. be noted that the emphasis is placed upon the

proper publication and notice to the shipping puntic, and age

there is ho rgquirement that what*is called a ‘‘joint service”

can only be performed under joint rates and not pursuant to a

properly published substitution arrangement using the open-tarift

rates of the underlying carrier. Admittedly, certain. of our

decisions, including Ringsby Truck, Lines, Inc.V. Atchison, T.&S

F. Ry. Co.,263 L.C.C, 139, 141, Savage Application, 265 I.C.C, 157,

167, and the New Haven case, supr@, have followed a contrary

interpretation of the Substituted Freight Service case. Weare now

‘of the opinion, however, that these decisions, although'we do not

doubt that when made they represented sound conclusions, are

incorrect in the light of this. record and current conditions. Twe

other decisions cited by tise opposing the use of open-tarift

TOFC service by motor carriers, . Greer Broker Application

23 M.C.C, 417, and Stone’s Erp, Inc., Common Carrier Application

32 M.C.C. 525, are consistent with our present interpretation of!

Substituted Freight Service, supra.

Another argument which is advanced by a number of the parties

is that.any intermodal operation in whjch transportation services

are performed by two or more carriers will necessarily result

in the creation of a de facto through route. Because we. are

without statutory power directly to require the establishment re)

through motor or motor-rail routes, this argument continues,

we are also without power indirectly to require their establish-

.ment by compelling rail. carrier's to. provide open-tariff TOFC

service to other carriers. It is, of course, well estabjished that

what isa through route is a matter of fact, and that a througt

’ route may be found. to exist in the absence of a joint rate or any

other express arrangement between the carriers involved. Den-

322 1.C. CL

o ee i ath: bea

SUBSTITUTED SERVICE-PIGGYBACK 335

ver & R. G. W. R--Co., V. Union Pac. R. Co., 351 U.S, 321 (1956);

Thompson v. United States, 343 U.S, 549 (1952); and Hausman

Stéel Co. v. Séaboard Freight Lines, Inc.,*32 M.C.C, 31, 37, and °

cases cited ‘therein. However, to say that'we would be requiring:

4 the establishment of through routes merely by finding that it is

lawful for a motor: carrier to use the open-tariff TOFC rate of

a rail carrier overlooks the fact that such a finding would involve

no complision whatever—either on rail. carriers to hold out a

TOFC service or, if they do, on motor carriers to'use it. We

find this argument to be without merit. °

We can see no justification, either . from the standpoint of

| legislative limitations or of policy considerations, for. .holding

| that.one carrier may in no circumstances make use of the services

which another carrier holds-out to the public generally. So long

as the first carrier.is operating qua carrier and gives the public

proper notice through its. tariffs, it can substitute anether’s

service for its own in this way. Of course, should the first

carrier hold out to perform what may amount only to assembly

and distribution services at points, and should it use the under-

lying tranSportation of the second carrier between points, which

it cannot itself serve in a practicable manner, it weuld no doubt

be found to be operating not as a carrier but as a freight for-_

warder as defined in section 402(a)(5) of the act. Where it does*

have the requisite authority, it may perform such service not as

a forwarder but as a carrier because section 402(a)(5) defines

freight forwarder as any person performing forwarding services

other than as a carrier su dject to pgrts I, ll, or Ill of the act. We

are aware of no other legal impediment to the use of an open-

tariff service by any carrier, whether common or contract, anu

whether or not subject to our regulatory jurisdiction. ;

Section 2 of the act requires rail carriers subject to part I

to make ‘“‘like and contemporaneous -seryice in the transportation

of a like kind of traffic under substantially similar cir@umstances

and conditions’’ available to any person at a charge no greater

and no less than that received from any other. person. It might be

stances and conditions’’ as that provided for private shippers.

Whether two or more transportation services were performed

“under substantially .‘similar circumstances and conditions’’

would be a matter of fact to-be determined in each individual

case as it arose, but we see no reason why the fact that the user

322 I.C.C.

not be said to.be performed “under substantially similar circum;: —

336 INTERSTATE COMMERCE COMMISSION REPORTS ~

e : .

of a service was another carrier rather than a private shipper

would compel the conclusion that dissimilar circumstances and

conditions were present. In Louisville &N.R.Co. v. United States,

282 U.-S, 740, 753 (1931) the Supreme-Court, in upholding a finding |

of the Commission that transportation by railroads of private

passenger cars owned by other Pailroads. at other than published

tariff rates was unlawful, refused to recognize any distinction

between the transportation of cars owned by railroads-and pri-

vate shipper s. The Court ‘noted: that all such cars are hauled

between the same points, on the same line, in the same or like

trains, and in the same manner. This is equally.true of the

transportation of loaded highway trailers in TOFE service. “See

also Wagehouse Co. V. United States, 283U.S. 501; 511-12 (1931).

_Some...rail. carriers..are. apprehensive lest they be fotced.to

offer TOFC service to possibly financially irresponsible motor

carriers, thus running the risk that they i not, be paid for

‘ their services gy, that. they would be required! to handle unsafe:

motor vehicles. dbviously, a railroad would be free to deal with

a motor carrier wishing to use open-tariff TOFC service just

as it deals with any private shipper. Thus, .the rail carrier,

through a ‘tariff rule such. as Rule 9 of the Uniform Freight

Classification, can require that an insolvent or financially un-

reliable motor carrier prepay freight charges, or it can provide

that shipments not be surrendered until such charges afe paid.

-Also, it is clear that it would not be in the public interest to

ment. Rule 6(b), adopted subsequently’ in?this report, will deal

with this matter.

We conclude that when TOFC service is offered by a rail

carrier to the public generally, there’ is nothing to preclude its

use by motor or water common or contract carriers, in liéu of

their all-highway operations in the performance of authorized

allow, much less to require, any carrier a oe unsafe equip-

transportation between authorized service points, or by for-hire

carriers engaged in transportation whichis exempt from economic

regulation. To the extent that this conclusion differs from ‘that

expressed in any of our previgtis decisions, including the New

Haven case, supra, such decisions are heréby a@verruled. The

following rules.will be adopted to reflect this: conclusion;

2 Availability toall of TOFC service.~TOFC service, if offeredby a rail carrier

through its open-tariff publications, shall be made available to any.person at a

-charge no greater and no less than that received from any other person or

persons. for — for him or them a like and Cipletperenstas service in the

: 7 322 a C.

Lt . > REAR: SQ ES ere Bony ves

‘ SUBSTITUTED SERVICE-PIGGYBACK i. 337

. : ae

wae ww wewTaime Sw aS =

: ‘ emanated of a like kindof traffic under substantially similar circumstances .

and conditions, ‘

3 Use of open-tariff TOFC service ie motor and water carriers in the per-

formance of economically regulated trans portation.

(a) Eggert as otherwise may be prohibited by these rules, motor common and

contract carriérs, water common and contract carriers, and freight forwarders

may utilize TOFC service in the performance ‘of all or any portion of their

authorized service through the use of open-tariff TOFC rates ence bya

il carrier. ; 4

b) Motor and water.common carriers shall u utilize open-tariff ‘TOFC services

pis if their tariff publications give notice such service may be utilized

at their option, but that the right is reserved to the’ r of their services to

direct’ that in any particular instance TOFC service utilized,

only if their - -transportation contracts and schedules make appropriate pro-

vision theréfor.

4 _ “@y Tatiffs of motor and Water’ céinimon cafriers and contracts and schedules

of motor and water contract carriers providing for the use of open-tariff~

TOFC service shall set forth the points between which TOFC service may .

be performed and = names of the rail carriers whose TOFC service may .

} be utilized,

JOINT INTERMODAL SERVICE

Having concluded. that there is neither legal nor policy bar to

the use by motor and water carriers of open-tariff TOFC service

proffered by rail carriers generally, and that: such use should be

allowed in the public interest, we come next to a consideration of °

“the proper status and scope which joint intermodal TOFC service

should possess in the broad pattern of piggyback regulation and

service. Initiallys it must be noted that no one questions that

voluntary coordination between the several modes 0 transport

should be encouraged and promoted to the fullest extent possible

in the interests of both the carriers \and the shipping public. Nor

does anyone assert that there is anything improper or unlawful |

} with respect to properly published, through-route and joint-rate

] arrangements among the various modes of carriage. Rather, what

is challenged\by certain of the parties herein is whether certain

Operations and services, and the tariffs embracing: rates and

charges therefor, properly fall: within that class of coordinated“

intermodal service which is allowable under the act. In order to

examine this issue in its proper perspective, it is necessary to”

review hriefly the legal growth and development of that kind of

Piggyback service which embraces_the participation of both sana

and motor common carriers.

$22 1.C.C. ‘

Fe nes PERRI NI EIY F . , “ : — : : —

-and points on the route of such railroad. This protestant claims * * * that joint

* ‘the one hand, and a poigt on a rail line,.an the other, We have frequently

reasonable, * * *

As many considerations bear ieee the feasibility and practicability of such |

338 °. 7 INTERSTATE COMMERCE COMMISSION REPORTS .

hte,

Prior to August 1935, when part II of the Interstate Commerce

Act became law, the motor carrier industry, was not subject to» ‘i

Federal regulation and such carriers, therefore, could utilize the

services of railroads as could any shipper. Trucks on Flat Cars

Between Chicago and Twin Cities 216 1.C.C. 435. Part Il of the | .

act, however, subjected” motor carriers to economic regulation

_ by this Commission, and section 216(c) thereof provided in specific

terms that, motor common carriers may establish reasonable

through routes and joint rates with*rail carriers. Shortly there-

after, the Chicago Great Western Railroad Company and certain

motor common Carriers proposed motor-rail-motor rates between

Chicago and various points east thereof, on thd one hand, ang, on

the other, Mingeapolis-St. Paul, Minn., and certain points in con-

tiguous territory. The ‘proposed rates were of the same amount

as the corresponding all-highway rates published by the partici-

_ pating motor ‘carriers, and the rail service of the Great Western

was to be performed (substituted) between Chicago and St. Paul.

These rates were approved by the Commission in November 1936,

in Motor-Rail-Motor Traffic in East and Midwest, 219 1.C.C, 245,

_the first reported Commission decision dealing with the subject

of. coordinated service by rail and regulated motor common car-

riers. The Commission stated, at pages 272-73:

One. of the protestants tontends that the ‘proposed routes are inconsistent

with the provisions éf section 217(a), w

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