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TRANSIT PRIVILEGES

TRANSIT PRIVILEGES.

As the term implies, transit privileges are services accorded in many different ways to a variety of commodities while in transit from point of origin to ultimate destination, and are granted under proper tariffs filed with the Commission.

The first transit privilege in the United States was established in 1870 at Nashville, Tenn., where a practice of rebilling or reshipping grain was inaugurated. This was followed by the granting of transit or reshipping privileges at other points and on other commodities, and when the Act to Regulate Commerce became a law the Interstate Commerce Commission found that transit privileges were in full vigor.

Many important industries owe their very existence to transit privileges accorded by the carriers. In re Transportation of Wool, Hides and Pelts, 23 I. C. C., 151, 171, the Commission said:

"Transit privilege in many cases is beneficial. When it can be applied without discrimination it results in the diffusion of business in giving rival communities the relative advantages to which they are entitled and which can be accorded them in no other way, and, generally speaking, in the application of lower transportation charges. The commercial operations of this country have, in many instances, grown up under the exercise of transit privileges which could have developed in no other

PRINCIPLES
OF TRANSIT
PRIVILEGES.

way.”

In Blodgett Milling Co. vs. C. M. & St. P. Ry. Co., 23 I. C. C. 448, 451, the Commission said: "Transit privileges are of benefit to carriers, dealers and the public.”

The underlying principle is that the same commodity which moves into the transit point shall be reshipped therefrom in a more or less changed form. The transit point is generally on the direct line between point of origin and destination; but occasionally a transit point is located out of that direct line, thereby necessitating the carriers' performing back hauls or circuitous hauls, for which service a nominal charge, in excess of the transit charge, is assessed. By the use of transit privileges shippers are allowed, generally, the use of a through rate plus a transit charge without subjecting the traffic to local rates in and out of the transit point, thereby resulting in lower net transportation charges. The theory under which transit privileges are operated is that the transportation contract has not been completed and that the entire shipment from point of origin, through the transit point, to destination is the same in principle as if the shipment had moved through without being accorded any of the transit privileges.

Transit privileges are granted for different reasons. Usually they are a result of competition, but often they are necessary to permit the free movement of traffic. It should be understood that transit privileges are not extended by the carriers in all instances. There must exist some good reason to justify a transit privilege. There must be competition which may be met in no other way, or there must be actual necessity for some concession from the normal tariff rates. In Schmidt & Sons vs. M. C. R. R., 19 I. C. C. 535, the Commission said:

"* * * Instead of extending such privileges it should be the policy of the Commission to curtail them to as great a degree as may be consistent with the industrial development of the country, for the investigations of the Commission show they are the source and aggravating cause of the most serious complaints brought to notice.”

In Young & Cutsinger vs. L. & N. R. R. Co., 22 I. C. C. 1, 3, the Commission said: "Milling in transit is a privilege which may be granted or withheld by a carrier in its discretion, so long as no unlawful discrimination results therefrom."

REASONS FOR
GRANTING
PRIVILEGES.

TRANSIT PRIVILEGES

REASONS FOR
GRANTING
PRIVILEGES.
- Continued.

In Anadarko Cotton Oil Co. vs. A. T. & S. F. R. R. Co., 20 I. C. C. 43, 47, the Commission said: “The Commission does not endeavor to establish or extend transit privileges in the absence of discrimination.'

CHARGES AND
POLICING.

The charges for transit privileges vary, depending on where the service is rendered and the expense in performing the service. Sometimes the through rate from point of origin to ultimate destination is protected, plus a stop-off charge, whereas in other instances charges are assessed on basis of a special rate to the transit point plus another special rate outbound, the combination of which practically equals the through rate from point of shipment to ultimate destination.

The terms of transit tariffs are very difficult of enforcement, and the Commission has emphasized on numerous occasions the necessity for carefully policing transit privileges permitted by published tariffs. See St. Paul Board of Trade vs. M. St. P. & S. S. M. Ry. Co., 19 I. C. C. 284, 288, and In re Transportation of Wool, Hides and Pelts, 23 I. C. C. 151, 171.

NATURE AND
KIND OF
PRIVILEGES.

The transit privileges accorded commodities are too numerous to mention, as nearly every raw material that is shipped can be stopped at one point or another for further manufacturing, processes, mixing or other handling, but a number of the principal privileges are briefly described below:

Band Sawing.--Shipments of lumber move into the transit point where band saws are located and the lumber is manufactured into veneer, crate or box material, pencil slats, etc., and such commodities are shipped in the outbound movement.

Barreling.–Applies generally to oils. Shipments are moved into the transit point in tank cars and there transferred to barrels and subsequently reshipped.

Cleaning, Grading, Sacking, etc.-An arrangement whereby various commodities are shipped into the transit point, where they are unloaded for the purposes of cleaning, drying, grading, inspection, milling, picking, sacking, storing, weighing, etc., and subsequently reshipped as dried beans or bean meal or dried peas, split peas or pea meal, etc.

Compression of Cotton.-As the term implies, cotton, in uncompressed bales, is shipped into the transit point where high-power compresses are located and is there compressed into bales of a greater density per foot. Cotton cannot be properly prepared for shipment by the grower due to the fact that the machinery for compression is extremely costly, hence the necessity for compression-in-transit arrangements.

Concentration.-Concentration privileges permit the shipment of a commodity, such as cotton, eggs, dairy products and packing-house products, from points of production to a concentration point, usually a primary market, and reshipment to points of consumption under rates substantially lower than the full combination of rates into and out of the concentration point.

Cooperage.—This is a service generally performed by the carrier in transit to protect property from loss or damage.

Creosoting.-This also explains itself. Shipments, generally timbers or ties, are stopped at the transit point to be creosoted and subsequently reshipped.

Drenching.–This is an arrangement used in the transportation of shipments of live hogs. When the hogs become overheated they are drenched with water to bring their temperature back to normal. It is a practice generally observed throughout the country.

TRANSIT PRIVILEGES

NATURE AND
KIND OF
PRIVILEGES.
-Continued.

Fabrication.-Applies to carload shipments of iron and steel bars, beams, channels, columns, girdles, masts, plates, etc., which are forwarded to the transit point for bending, bolting, boring, cutting, drilling, painting, punching, riveting, sawing, straightening, threading, welding, etc., and subsequent reshipment.

Feeding.--Under this privilege live stock, for fattening purposes, is brought from the farms and ranges to the transit point and after being properly conditioned is reshipped to ultimate destination. Feeding in transit is also performed by the carriers when it is necessary to stop livestock in transit for resting.

Grain and Grain Products.—Generally the grain moves into the milling point where it is manufactured into a grain product which is subsequently reshipped at a through rate, sometimes the grain rate and at other times the grain product rate, plus the stop-off charge. Grain products move into the transit point where various ingredients are mixed together; this is termed mixing in transit. Corn shipped in is shipped out as manufactured cracked corn, corn flour, corn meal, corn bran, corn screenings, etc. Oats is shipped out as oat clips, oat feed, oat hulls, oat screenings, etc. Wheat inbound moves out as wheat bran, wheat flour, wheat feed, wheat middlings, wheat screenings, etc. Barley as the inbound product can be manufactured into malt. Corn on the cob can be shipped in and after being shelled the corn is shipped out. The milling, mixing, etc., of grain and grain products is almost universal throughout the country and is used more generally than any other transit privilege. The milling of grain places the miller at the transit point on a more equal footing with the miller at the producing point. In addition, grain and grain products can be bleached, blended, cleaned, clipped, dried, graded, inspected, sacked, shelled, stored, weighed, etc., at the transit point.

Grazing. This is a privilege granted in connection with the movement of livestock. Shipments in transit from the range or farm to ultimate destination are stopped at the transit point and the animals, after being fattened, are reshipped.

Finishing.–Under this transit privilege shipments of unfinished articles, such as wooden handles, marble, granite, etc., in the rough, are received at the transit point and the product subsequently shipped outbound consists of the finished or dressed product.

Hay and Straw.—Shipments of hay and straw, in carload lots, are forwarded to the transit points for storage, inspection, assorting, grading, rebaling and compressing. Storage means that the hay or straw is held at the transit point under the storage charges until there is a market for it; inspection means that the hay or straw is held to determine if it is up to the standard bought or sold; compressing means that the hay or straw having been shipped from points where there are no facilities for compression, is compressed by high-power compresses into bales of a greater density.

Icing.—This service explains itself. Perishable freight, in transit, is iced and/or salted to protect shipments from damage from heat.

Loading or Unloading.—This privilege is self-explanatory. Practically every commodity that is shipped can be stopped at some point in transit and loading completed or partial delivery made.

Logs, Lumber, Lath and Shingles.-Shipments of these commodities are shipped in carload lots to the transit point for assorting, dressing, inspection, milling, resawing, storage, kiln drying, etc.

TRANSIT PRIVILEGES

Manufacturing.-Involves the manufacture of products which may be of an entirely different physical character from the crude raw materials brought into the point of manufacture and, therefore, the only form of transit privilege that is practicable is the establishment of low transit rates on the raw materials from points of production to the manufacturing points. The rates, usually, are restricted to apply only when the manufactured product is shipped out from the manufacturing point via the railroad over which the raw material has moved.

Molasses and Syrup.-Shipments of these commodities move in carload lots into the transit point and various grades of molasses or syrups are mixed together and subsequently reshipped from the transit point.

Packing-house Products.Shipments of these commodities are often unloaded at several points en route between points of origin and destination, plus charge for stopping off. This service is generally referred to as "peddler car service.

Refining.- Applies generally to oils, such as cotton-seed, peanut, cocoanut, copra, palm, palm kernel and petroleum. The term explains itself. Shipments of these oils are transported to the transit point in a crude state and after being put through a process of purification or refining are reshipped.

NATURE AND
KIND OF
PRIVILEGES.
- Continued.

Storage.—This privilege is self-explanatory. Shipments are stored in transit and subsequently reshipped to ultimate destination. Practically every commodity that is shipped can be stored in transit at some point.

Watering.- This is a service generally performed by carriers when shipments of live stock are stopped in transit to permit the stock to rest.

ILLUSTRATION.

ILLUSTRATION

As a typical transit arrangement the following illustration is given:

Logs originating at Point "A,” shipped to a lumber mill at Point "B,at which station they are sawed into lumber which is shipped to Point “C.” The normal local rate on the logs from “A” to “B” is ten (10) cents per 100 pounds, but the transit rate is only five (5) cents per 100 pounds. This lower rate is restricted to apply only on logs from “A” to “B” when the lumber sawed therefrom is reshipped via the line over which the logs moved into the milling point. The shipper must, as a rule, pay the full rate of ten (10) cents per 100 pounds on the logs at time of movement and can obtain a refund based on the five (5) cents per hundred pounds transit rate only upon the surrender of the paid freight bill, evidencing the forwarding of an equivalent weight in lumber from milling point "B" to ultimate destination, Point "C."

PAYMENT OF TRANSPORTATION CHARGES.

PAYMENT OF TRANSPORTATION CHARGES.

The Elkins Act, which made the published tariff rate the standard of lawfulness, and declared any departure therefrom a misdemeanor, made no provision as to the time when the lawful transportation charges should be paid. The failure of shippers to pay the charges promptly caused the carriers to be without working capital of many millions of dollars, while the shippers were making use of capital that should have been turned over to the carriers in payment of transportation charges. Many shippers obtained long-time credit while others were required to make prompt payment. This had the tendency of creating discrimination, since prompt payment was required in one case and long-time credit extended in another. This practice was given consideration with the view of establishing a uniform period under which transportation charges should be paid, but nothing of a decisive nature occurred until the railroads were under Federal control. The Director General of Railroads, under General Order No. 25, provided that, effective August 1, 1918, the collection of transportation charges by all carriers under Federal control was to be on a cash basis. The Director General further ordered the cancellation of credit accommodations that were in conflict with General Order No. 25. However, an exception was provided wherein credit not exceeding 48 hours could be granted provided the shipper filed a surety bond that was satisfactory to the carriers.

The effect of General Order No. 25 in providing the carriers with immediate working capital of many millions of dollars and in many cases assuring collection of charges, as well as providing a uniform practice for the payment of charges, was

considered by Congress in drafting the “Transportation Act of 1920.” The ConTION CHARGES ference Committee of the Senate and House of Representatives stated:

PAYMENT OF
TRANSPORTA-

Section 405 provides that, after July 1, 1920, no railroad shall relinquish possession of freight at destination until all rates and charges therein have been paid, except under such rules as the Commission may prescribe to assure prompt payment and prevent unjust discrimination. The latter provision virtually continues the operation of Gene:al Order No. 25 of the Railroad Administration as supplemented, relating to the extension of credits by railroads.

Appreciating the soundness of the Congressional reports, Congress incorporated, effective February 28, 1920, in paragraph 2, section 3, of the Interstate Commerce Act, the following:

From and after July 1, 1920, no carrier by railroad subject to the provisions of this Act shall deliver or relinquish possession at destination of any freight transported by it until all tariff and charges thereon have been paid, except under such rules and regulations as the Commission may from time to time prescribe to assure prompt payment of all such rates and charges and to prevent unjust discrimination.

The law as enacted required the Interstate Commerce Commission to provide formal regulations as to payment of freight charges, which were promulgated in Ex Parte 73, entitled, “In re Section 3 of the Interstate Commerce Act, as amended by Section 405 of the Transportation Act of 1920."

The original report of the Commission, 57, I. C. C. 591, which provided for prompt payment of charges except where payment is insured by shipper, in which case a credit extension of 96 hours was provided, has been modified as to demurrage charges on tidewater coal, collection of charges on export traffic when loaded into vessels, and as to freight consigned or originating at interior points not served by railroads.

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