carriers, chiefly as to whether or not certain increases in their rates should be made. Some added 2 cents to their rates to offset a New York State tax, for which the application of surcharges was found unlawful in Surcharges, New York State, 62 M. C. C. 117.

These 2 tariffs also contain distance scales of rates on lists 1 and 2 articles which generally are lower than the key-point or specificcommodity rates, and they are applied to distances determined by use of the household-goods carriers' mileage guide. The scale rates are applicable from and to points to and from which no key-point or specific-commodity rate is expressly named or provided for under an intermediate rule. Some of the carriers, however, do not participate in the application of the intermediate rule. The scale rates have broad application from and to various points or areas. For example, from Sparrows Point to destinations in New England the distance scales generally are applicable as the tariffs contain relatively few keypoint or specific-commodity rates from and to these points. Generally speaking, the rates published by Agent Dilla are among the lowest of any rates maintained by motor carriers on iron and steel articles.

In developing facts for use in their protest against the 1954 reduced rail rates, the motor carriers made a survey of all shipments of steel articles in list 2 which were transported by 115 motor carriers at their highest minimum-weight rates in July 1953. These carriers transported over 70 percent of the total tonnage of steel articles moved within eastern territory by all motor carriers in that month. The data obtained in the survey were applied to the previously described railroad tabulation of motor-carrier rates within central territory. There were from 5 to 25 different rates for each mileage block, and there were wide ranges in such rates. In the 5-mile block there were 6 different rates ranging from 4.3 to 6 cents, a difference of 1.7 cents, and in the 270-mile block there were 25 different rates ranging from 28 to 57 cents, a difference of 29 cents. Shipments were transported from and to points for distances falling within each of the 56 mileage blocks between 5 and 735 miles. Origins and destinations varied from 1 or 2 in some mileage blocks to as many as 228 in others. On the average there were 65.8 different origins or destinations and 15.5 different rates for each mileage block, and the average rate between all points was 31.1 cents.

The history of the motor rates in central and middle Atlantic territories discloses that the severe rate-cutting competition which brought about the institution of these investigations has been a comparatively recent development, and that the extensive rate reductions by motor carriers in middle Atlantic territor 1953 and 1954 were

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inducted largely by competition between rival motor carriers and shipper pressure, rather than by rail competition. The reduced rail rates, however, are considered by the Sparrows Point and Pittsburgh motor carriers as presenting a serious problem for them. Their proposals, hereinafter described, are intended to furnish a solution therefor, as well as for other problems with which they are confronted, including private- and water-carrier competition stressed by the Sparrows Point carriers.

Division of traffic. The rail carriers stress the fact that the volume of the iron and steel articles transported by them has not kept pace with the expansion in steel production. In 1953 steel ingot production was 193.3 percent of that in 1928, whereas the tons of steel articles (classes 581, 583, and 587 of the Freight Commodity Statistics) originated by these respondents in 1953 were only 112.4 percent of the tons originated in 1928. The steel articles transported by the rail carriers were 63 percent of the steel ingot production in 1928, 37 percent in 1952, and 34 percent in 1953. The revenue tons of steel articles (classes 581, 583, and 587) transported by 5 major rail lines in the last quarter of 1953 were 5.3 percent less than in the same quarter in 1941, whereas the production of ingots in the 4 major producing districts served by them was 41.2 percent greater. Some of the traffic has been diverted to water and private motor carriage, but most of it, over 88 percent, moves by railroads and regulated motor carriers. The rail respondents requested that the producers of iron and steel articles who account for about 80 percent of the production in eastern territory to furnish information as to all motor-carrier shipments weighing 20,000 pounds or more made by them in the week ended October 24, 1953. Based upon the information obtained from 20 of the largest producers, and upon the railroads' records of rail shipments from the same origins in the same week, the volume moved by motor and rail of the articles in the various groups listed in appendix A was compiled. The compilation indicates that for articles in groups 1 through 8-B the motor carriers transported 370,133 net tons and the rails 364,971 net tons in the test week. When extended on a yearly basis, the figures are 19,246,916 tons or 50.4 percent by motor and 18,978,492 tons or 49.6 percent by rail. The compilation indicates that the motor carriers transported 73.1 percent of the articles in group 1, 51.6 percent of the articles in group 2, and 59.9 percent of the articles in group 6-A, also that the rail carriers transported a majority of the articles in the other groups, ranging from 61.7 percent for group 4 to 91.4 percent for group 7.

Certain motor carriers criticize the results of the rail study on the ground that the data used with respect to motor and rail shipments were not comparable. They undertook to show, by an analysis of the information obtained by the rail lines from the 20 producers and a study of available statistical data for all traffic of all producers, that the rail compilation grossly understates the volume of movement by rail. The result of their computation, which the rail lines consider unreliable, indicates that in 1953, for the articles in groups 1 through 8-B, the motor carriers transported 21,326,000 pounds and the rails 38,683,000 pounds.

It is not possible to reconcile the differences in the figures obtained in these respective studies, but each shows that articles in groups 1, 2, and 6-A comprise a very substantial part of the motor-carrier tonnage. More reliable information as to tonnage and shipments was presented by a witness for producers operating plants with 89 percent of the total ingot capacity in eastern territory. Sixteen of the largest steel companies with an annual ingot capacity of 99,960,720 tons as of January 1, 1955, reported the shipments made by them of articles in groups 1, 2, 3-A, 4, 5, 6—A, and 8-A for stated periods between October 1, 1954, and January 22, 1955. These are the articles on which the 1954 reduced rail rates apply. The total tonnage of the articles reported by these companies, converted to an annual basis, indicates that the traffic was divided as follows:

Disabilities of rail service.-The shippers and receivers of steel articles generally load and unload both rail cars and motor trailers, and various articles, such as wire, nails, and spikes, move in boxcars and closed vans. However, a considerable portion of the traffic, including sheets, strips, and coils, are loaded in open-top rail cars and in

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trailers in strapped bundles weighing several thousand pounds each. Since World War II, the receivers of the latter articles have required that when rail service is used the bundles be wrapped in heavy waterproof paper, and that, after loading and bracing in the cars, the bundles be shrouded with similar paper. The producing mills charge 5 cents for wrapping and 5 cents for shrouding on bundles weighing 10,000 pounds or more, which charges are borne by the receivers. This service is required to protect the articles from foreign matter, marking or scratching of the surface, rust, and corrosion. The average cost of necessary blocking and bracing of rail shipments is estimated to be 4 cents for loading and 3 cents for unloading an 80,000-pound load. When these shipments are moved by motor carriers the bundles are fastened to the trailer floor by means of chain binders or other devices furnished by the carrier, and are covered by a tarpaulin or other protective material also furnished by the carrier. Some receivers require that truck shipments be wrapped, but in most instances such shipments require no wrapping, shrouding, blocking, or bracing. The rail carriers have experimented with cars equipped with removable sectional tops, and with tarpaulins and plastic covers, in an effort to eliminate the need for wrapping and shrouding, but so far they have not been successful in these efforts. The use of removable tops is not practicable in the plants of some shippers and receivers, and when tarpaulins or plastic covers are used they must be fastened by the shippers and removed by the receivers at extra labor cost to them. Experience has indicated that when such coverings are used they generally are soon lost or torn so as to be unserviceable.

Motor-carrier service is faster and more regular than rail service. Shipments ordinarily can be transported in a matter of hours by motor, as compared with days by rail. The lower minimum weights to which the motor rates are subject are also of importance to many receivers in that they permit them to maintain smaller inventories, with resulting substantial reductions in capital investment. In many instances the flexibility of motor service has enabled receivers to reduce plant. handling costs, as the motor shipments can be and are unloaded at the point of use, whereas rail shipments must be unloaded at fixed locations. Damage to steel while in transit by rail is not uncommon, but it rarely occurs when motor service is used.

In 1953 the rail carriers conducted a survey among various receivers of iron and steel articles in an attempt to learn why they used motor and water service. Replies to questionnaires from 703 receivers whose shipments total about 1,200,000 tons a month, indicate that between 52 and 56 percent of the tonnage moved by motor carriers, and that the

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principal factors which influenced the use of motor service were lower rates, faster service, reductions in plant handling costs, inventory costs, and damage claims, and the lack of a requirement for wrapping and shrouding. About 25 percent of the motor tonnage and about 7 percent of the rail tonnage consisted of articles which require wrapping and shrouding when moved by rail.

Carrier costs.-The rail carriers made a study to determine their costs of transporting iron and steel articles within eastern territory. The costs were developed by the use of a formula designated as Rail Form A and applied to their 1952 operating statistics, with an adjustment to reflect increases in wages, materials, and supplies as of January 1, 1954. The unit costs developed by the use of that formula were weighted 25 percent for boxcars and 75 percent for open-top cars to obtain a composite unit cost which reflects the relative amounts of traffic moving in each type of car. The results of the study are shown in the table below. The costs in column A are based on 61,670 pounds and those in column B on 99,357 pounds, the average weights of the iron and steel articles moved by 3 large eastern railroads at rates subject to minimum weights of 40,000 and 80,000 pounds, respectively:

The fully distributed costs shown above are lower than the costs for the same distances for 30- and 50-ton loads shown in our Cost Finding Section's rail carload cost scales for box and gondola or hopper cars in the eastern district as of January 1, 1954, and it is not possible to reconcile these differences. However, the underlying

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