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regulation. The excess earning is administered for the general use of the shipping public, which has produced the excess, and in order to avoid the destruction of competition.
Analogies to this intervention by the Government for the transfer and administration of funds which the holder has no constitutional right to retain are not necessary to the argument, but one may be found in the Massachusetts statute requiring savings banks to pay over unclaimed deposits to the State treasurer for administration by him as trustee. This constitutes no taking from the savings bank. (Prov. Inst. for Savings v. Malone, 221 U. S., 660.)
The difficulty in many cases of determining who should recover and hold the excess over a reasonable rate paid in ordinary cases has resulted in the provision of the present commerce act that the shipper shall recover it, although he may have passed on the loss to the consignee, and the latter may have passed it on to the general public. As said by Justice Holmes in speaking of the present act in Southern Pacific Railroad Co. v. Darnell (245 U. S., 531, 534), “The carrier ought not to be allowed to retain his illegal profit, and the only one who can take it away from him is the one that alone was in relation with him and from whom the carrier took the sum;" but there is, of course, no reason why Congress should not now recognize the fact that the burden and final incidence of the excess earning to be conditionally permitted in order to sustain competition in service and regulate commerce would fall upon the general public, made up of indistinguishable persons and inadmeasureable amounts, and, should, therefore, be recovered and administered by Congress for the general benefit of the public interest in transportation.
This excess earnings reduction involves no unconstitutional recapture of the earnings resulting from intrastate operations. Only about 25 per cent of the traffic of the railroads is intrastate, and about 30 per cent of the revenue is derived from intrastate business. It is common knowledge that intrastate operations are more expensive and the proportion of net earnings less, so, as a clearly established general rule, the net earnings of interstate carriers will rarely ever equal one-third of their total. As it is proposed to permit them to retain all of their net earnings up to 6 per cent (or such greater per cent as the courts in any particular case may find to be necessary to provide a constitutional return) and one-third of the excess, without reckoning permitted reserves, it is clear that as a general rule this one-third will give them more than their total net earnings (not already embraced in the original 6 per cent) from intrastate revenue. If extraordinary cases exist, in which this shall appear not to be true, the railroad has recourse to the courts to permit it to retain a greater percentage of its excess earnings over the standard of 6 per cent.
The CHAIRMAN. Mr. Small wishes to present certain amendments which have been framed with reference to the water transportation features of the bill and desires 15 minutes.
STATEMENT OF HON. JOHN H. SMALL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NORTH CAROLINA.
Mr. SMALL. Mr. Chairman and gentlemen, a number of gentlemen from different sections of the country met in conference here day before yesterday and yesterday to give consideration and study of certain amendments to be proposed to this bill, primarily intended to promote water transportation, but they had in mind at the same time doing no injury or injustice to any other interests. As a result of that conference certain amendments were prepared, and Senator Ransdell and I were directed to report them to this committee, and I will hand them in for the record now, because I shall not read them in detail, but wish to refer to them briefly.
One amendment: That paragraphs a, b, and c of section 6 of the act to regulate commerce, approved August 24, 1912, be amended to read as follows:
“(a) The commission shall cause to be established physical connection between the lines of the rail carrier and the dock of the water carrier at which interchange of passengers or property is to be made by directing the rail carrier to make suitable connection between its line and the dock of the water carrier. Before making this order the commission shall secure satisfactory evidence as to the organization and responsibility of the water carrier. The commission shall have full authority to determine the terms and conditions upon which these connecting tracks, when constructed, shall be operated, and it may, either in the construction or the operation of such tracks, determine what sum shall be paid to or by either carrier. The provisions of this paragraph shall apply to cases where the dock or water terminal is owned by the municipality or other public agency, or by any party other than the water carrier involved.
“ (b) Upon application of any responsible water carrier the commission shall establish through routes and joint rates, or maximum or minimum, or maximum and minimum joint rates between and over such rail and water lines, and deterine all of the terms and conditions under which such lines shall be operate in the handling of the traffic embraced. In the establishment of joint rates the commission shall make such reductions from the local rates as may be consistent with through rates and be just to all the carriers involved.
"(c) Upon application of any responsible water carrier the commission shall establish proportional rates or maximum or minimum, or maximum and minimum proportional rates over such rail and water lines to and from the ports to which traffic is brought, or from which it is taken by either carrier. In establishing such proportional rates on any railroad the commission shall not fix a rate upon any railroad, or railroads, which shall be greater than the proportional rate received by such railroad upon any through traffic carried entirely by rail between the same points of origin and destination.
"All through routes and joint proportional rates, and the rules governing same as established by the United States Railroad Administration between rail carriers and carriers on the inland waterways shall hereafter be considered prima facie reasonable rates and routes and may not be withdrawn or advanced, nor the differentials between such through rates and the competing all-rail rates be changed without prior hearing and order by the Interstate Commerce Commission. In any such proceeding the burden of proof shall be upon the rail carrier or carriers to show that the existence of such rates and routes and differentials is noncompensatory.
“If two or more connecting lines of water carriers can not agree upon through routes and joint rates and proportional rates upon traffic to be carried entirely by water, either of such connecting water lines may make application to the Interstate Commerce Commission to establish same, whereupon the commission is hereby authorized and directed to establish such interchange of traffic between such connecting water lines upon the same terms as apply to interchange of traffic between rail lines and water lines in so far as the same may be applicable thereto.
“The absorption by a water carrier of the switching, terminal, lighterage, car rental, trackage, handling, or other charge of a rail carrier for services within the switching, drayage, lighterage, or corporate limits of a port terminal or district out of its port-to-port water rates shall not be held to constitute an arrangement for a continuous carriage or shipmen within the meaning of the act to regulate commerce and shall not subject such water carrier to the provisions of such act."
There is one proposed amendment which we have not reduced to writing. We unanimously recommend that water carriers in the carriage of traffic exclusively by water, sometimes called port-toport traffic, shall not be placed under the juisdiction of the Intestate Commerce Commission for the fixing of rates or otherwise, with two exceptions: That the commission shall have authority to effect interchange of rates between water carriers and rail lines, and where two or more connecting water lines are unable to agree among themselves as to the terms of interchange of traffic, that either one may appeal to the commission with a view to having interchange of traffic between the several water lines properly effected. The second amendment which we offer is an amendment to the pro, visions of the Panama Canal act of 1912 affecting interchange of
traffic between rail lines and water lines, and carried forward as a part of section 6 of the act to regulate commerce, to which we offer the amendment. The amendment seeks to make the provisions of law in this respect more effective and enlarge the powers of the Interstate Commerce Commission to that end.
The next amendment which we propose is new and is intended to affect rail rates competitive with water. I will take the liberty of reading what we offer, as it is very brief:
Where there is an existing line of water transportation, or one is proposed to be immediately established, it shall be unlawful for any railroad which operates between points competitive to said water line to reduce its existing rates with a view to meeting the difference between water rates and the rail rates, or of equalizing the same as between competitive points, unless after full hearing the Interstate Commerce Commission shall find that such reduction of rail rates is justified in the public interest. In deterinining the question of public interest the commission shall consider the rates charged by the water line as presumptively reasonable, and shall also consider the advisability or necessity of maintaining increased facilities of transportation : And provided further, That the commission shall not permit any railroad to reduce its existing rates as between points competitive with the water line or lines, unless such railroad maintains such reduced rates as the maximum at all intermediate points on its lines between the points of origin and destination.
That is a very mild provision upon that point. My own thought upon the subject was another provision which I am going to ask to be incorporated in the record, to be considered at the same time. The conference agreed upon the amendment which I have read. My own thought is that the time has come to readjust and equalize rail rates competitive with water so that they shall be substantially similar or equal to interior rates by rail not competitive with water, and I take that position because, as I believe and with some confidence I so state, there can absolutely be found no economic ground to sustain the present conditions; that these waterways, natural highways, improved at the expense of the Federal Government, if they are a benefit to the contiguous towns or sections, that such benefit should be derived by utilizing them and not by using their existence as a club to compel the lowering of rail rates competitive with such waterways, and upon the further ground that such competitive rail rates are lower than interior rates which are not competitive with water and thereby constitute a flagrant injustice to interior sections. I will ask here to have this amendment put in the record, which is simply my individual view :
That the Interstate Commerce Commission are hereby authorized and directed to initiate and make investigations into all existing rates upon railroads which compete with navigable waterways, and to readjust and equalize such rates so that they shall be substantially equal to the prevailing rail rates between interior points not located upon any navigable waterway. If, in the opinion of the commission in the case of any railroad or railroads, such complete equalization of competitive railroad rates will operate against the public interests and the commission shall so find, stating the particulars thereof, it may make a partial equalization to continue in effect for a stated period, not exceeding one year. On or before the end of such period the commission shall again readjust such competitive rail rates with the purpose of equalizing the same with interior rates. Before making any order herein directed the commission may summon witnesses and give full hearing to any railroad or other carrier or representatives of the public. For the purpose of giving effect to this section the representatives of any community may make application therefor to the commission. In the enforcement of this section and in determining priority of consideration and action the commission shall seek to utilize water transportation, and to coordinate the same with rail transportation by an interchange of traffic and shall endeavor to so enlarge the facilities of transportation as to serve the public interests.
That the last paragraph of section 4 of the act to regulate commerce, approved June 18, 1910, be, and the same is hereby, repealed.
The CHAIRMAN. That is an alternative proposition to the one submitted by the conference.
Mr. SMALL. Yes, Mr. Chairman. Mr. Watson. Mr. Small, in a very few years the Delaware & Chesapeake Canal will be deepened for boats drawing 10 feet of water or more.
Mr. SMALL. Twelve feet, or rather, the depth will be 12 feet.
Mr. Watson. Do you propose in your amendment that boats, say, starting from Norfolk to Boston, that the rates should not be regulated by the Interstate Commerce Commission? There is a railroad paralleling the whole distance, and is it your idea that the rates established by the boat lines should not be regulated by the Interstate Commerce Commission?
Mr. SMALL. That is our proposition.
Mr. Watson. Neither between terminal points nor intermediate cities?
Mr. SMALL. That is our proposition, and we understand, while I have not read all the hearings and was not present at all times, that there has been substantial unanimity upon that proposition by all those particularly interested in the promotion of transportation by water.
The next amendment proposes to clothe the Bureau of Foreign and Domestic Commerce in the Department of Commerce with a limited jurisdiction over waterways, which jurisdiction shall be simply recommendatory and supervisory, with no power over rates, but a jurisdiction which shall exist in the Federal Government and be a friend at court for all water carriers and those interested in waterways, with a view to promoting the construction of water terminals, recommending types of boats, gathering data as to waterborne commerce and making annual reports to Congress, and in all other respects aiding and fostering water transportation.
I may say that that amendment, just as all of them, has been drawn with care. We were careful not to create a new bureau because of the existing prejudice against additional bureaus in any of the departments, and of all the bureau it was concluded that this was the most appropriate. I may say that this particular amendment was drafted in collaboration with the solicitor of the Department of Commerce, representing the Department of Justice in that department, and has the approval of the Secretary of Commerce.
(The amendment above referred to is as follows:)
" That section 3 of the commerce act be further amended by adding at the end thereof the following paragraph:
" It shall be the duty of the Department of Commerce, through its Bureau of Foreign and Domestic Commerce and any other bureaus of the department, with the object of promoting, encouraging, and developing water transportation facilities in connection with the commerce of the United States, to investigate the appropriate types of boats suitable for different classes of waterways; to investigate the subject of water terminals both for water traffic and for through traffic by water and rail, including the necessary docks, warehouses, apparatus, equipment, and appliances in connection therewith, and also railroad spurs and switches connecting with such terminals, with a view to devising the types most appropriate for different locations, and for the more expeditious and economical transfer or interchange of passengers or property between carriers by water and carriers by rail; to advise with communities, cities, and towns, regarding the appropriate location of such terminals, and to cooperate witth them in the preparation of plans for suitable terminal facilities; to investigate the existing status of water transportation upon the different waterways of the country, with a view to determining whether such waterways are being utilized to the extent of their capacity and to what extent they are meeting the demands of traffic, and whether the water carriers utilizing such waterways are interchanging traffic with the railroads; to cooperate with communities, cities and towns, and established lines of water transportation in obtaining joint and proportional through rates on traffic carried partly by water and partly by rail, and to investigate any other matter that may tend to promote and encourage water transportation. It shall also be the province and duty of said bureau, under the direction of the Secretary of Commerce, to compile, publish, and supply, from time to time, such useful statistics, data, and information concerning transportation by water, as may be of value to the commercial interests of the country.
“The Secretary of Commerce shall include in his annual report to Congress a statement of the activities of his department in the execution of the duties imposed upon it by this paragraph, together with such recommendations as he may care to make for the regulation and improvement of water transportation facilities. For the performance of the duties herein imposed the Secretary of Commerce is authorized to appoint such number of experts, draftsmen, engineers, special agents, and clerks as may be necessary for service in the District of Columbia and elsewhere."
The last amendment involves the future disposition of the activities of the United States Railroad Administration under section 6, I think it is, of the Federal control act, by which the President out of the revolving fund was authorized to utilize canals and inland waterways and to construct and acquire boats to be operated on them.
When I was last before the committee, the chairman asked me a question bearing on this phase, but I must say that then I had not studied with care that particular provision. After more careful study and as a result of the conference of these gentlemen from different sections of the country, we believe that the rights and property and authorization existing in the President through the United States Railroad Administration should be transferred to the Shipping Board, and I emphasize that because I expressed the opinion a few days ago, when I was before the committee, that probably the War Department would be the best agency to administer them; but I am now quite thoroughly of the opinion that they should be transferred to the Shipping Board.
(The amendment referred to, immediately above, is as follows:) The rights, powers, interests, and property of the United States, acquired by the President under section 6 of the Federal control act, approved March 21, 1918, and heréin repealed, authorizing expenditures for the utilization and operation of canals, or for the purchase, construction, or utilization and operation of boats, barges, tugs, and other transportation facilities, on the inland, canal, and coastwise waterways, which shall include the boats constructed, or authorized to be constructed, for the navigation of the Mississippi River above St. Louis, are hereby transferred to, and vested in, the United States Shipping Board, and shall be dealt with in accordance with the rights and interests so acquired, and under the provisions of the act known as the “ shipping act of 1916.” The said Shipping Board shall assume and carry out all contracts relating to inland waterway transportation entered into by the President through the United States Railroad Administration, or other agency, and the said board is further authorized and directed to continue the operation of the transportation lines upon the inland waterways of the United States heretofore,