POSITION

The next few years will show that short-haul air transportation throughout the Nation will be most critical unless long-range guidelines and adequate support is given now.

We need stronger support to bring this about and to shorten the period of reliance upon subsidy. Continued lack of support at this time will frustrate growth and deny the public its right to adequate service. We must, therefore, increase the level of service and expand the system's operational base to continue substantial cuts in unit costs.

To the best of my knowledge, every segment of our industry has conformed to the intent of the Federal Aviation Act. The Government's regulatory experts have testified before Congress to the success and minimum need requirements of the helicopter carriers. Also, on three occasions, under due process, we have qualified for Federal certification with this administrative arm of Congress. We concur with and support the request of the Civil Aeronautics Board. The $4.3 million for division by three carriers, as requested by the CAB, actually will necessitate a loss operation and provide no return on investment. In the past 2 fiscal years, when LAA has received $1.8 and $1.6 million, respectively, despite our tremendous decreases in unit operating costs, we sustained losses of $46,854 in 1963, and $12,557 thus far in fiscal 1964.

No return on investment for the last 2 years, which is contrary to provisions of the Federal Aviation Act (sec. 406) results in

(1) Cash deficiency position unable to meet accounts payable currently; (2) Deterioration of credit and difficulties on borrowing commitments; (3) Future plans cannot be made. Planning limited at a day-to-day basis;

(4) Necessary capital invesments to increase efficiency and improve revenue-earning and subsidy-reduction ability cannot be made, including(a) Continuation of developing all-weather instrument flight program;

(b) Expansion of route structure;

(c) Increased level of service-frequency and operational base. This is a critical period for the future of short-haul air transportation. This is the time we need the strongest support for the growth necessary to carry us to self-sufficiency.

STATEMENT OF ASSOCIATION OF AMERICAN RAILROADS

Senator MAGNUSON. Now, we have some people here from the Association of American Railroads: Mr. Wright of the Baltimore & Ohio; Mr. Hays, general counsel of the Association of Western Railways; and Phil Lanier, of the L. & N.

INTERSTATE COMMERCE COMMISSION

STATEMENTS OF E. W. WRIGHT, BALTIMORE & OHIO RAILROAD JOSEPH H. HAYS, ASSOCIATION OF WESTERN RAILWAYS; AND P. M. LANIER, L. & N. RAILROAD

UNLAWFUL TRUCKING

Senator MAGNUSON. You have three statements here you went to put in the record; is that right? We will put those in the record in full and you can highlight them. These are all on ICC.

(The information referred to follows:)

The future of America is being threatened in many ways and many of the primary threats lie with unlawful trucking. We Americans are too prone to take things for granted, satisfying ourselves with day-to-day existence.

We take television for granted. Most of us insist on owning at least one automobile. How we came by the wonders of our age does not matter. We inherited them, we accept them, and most of us demand them.

None of these marvels would exist if it were not for our good public transportation system. Now our transportation system is being threatened; common carriers of all modes are being hurt. The legitimate for-hire carriers are being cheated and "robbed" and the American people are the ones to suffer.

Now, who is the thief? And who is being robbed?

The "thief" is a specialist in illegal transportation. He is a trucker, a shipper association, or a person who illegally transports or arranges for the illegal transportation of freight over our Nation's highways or by any other mode of transport.

You might say, "I'm not in the railroad or trucking business. How does this affect me?" Here are some of the ways it affects you.

The illegal transporter finds he can evade tax laws as well as he can transportation laws. So we pay the difference. Somebody has to pay it and our taxes are higher because this thief will not pay his fair share.

Freight moved by illegal transportation takes revenue away from legally operated carriers. Therefore, freight rates must go up to pay necessary operating costs (labor, maintenance, new equipment, etc.). You pay more for what you buy because this "thief" forces transportation costs to rise on the things you purchase.

The future growth of our economy depends upon a strong, nationwide common carrier system able to move the products of our farms, forests, and mines to market and factory-and the processed and manufactured goods to distribution points and to consumers. The erosion of illegal transportation, if not stopped, could destroy our national transportation system and drastically weaken our economy. This "thief" could cost many Americans their jobs.

Our national defense is dependent upon a healthy, nationwide common carrier transportation system. Without this system, our military could not defend us in time of attack. This "thief" could cost us our lives.

So, whether all of us are aware of it or not, the illegal truck operator is a real big "thief." Some say as much as $5 billion or more a year in traffic revenues is being siphoned off in traffic revenues-$5 billion that should be used to improve our country's common carrier system, provide more jobs, assist in economic growth, and provide facilities needed for our national defense.

Conservative estimates say at least 5,000, many say up to 30,000, illegal trucks move along our Nation's highways each day. Each one of them is in violation of Federal law.

Illegal trucking is by simple arithmetic the Nation's No. 1 Federal law violation. The crime is simply that of hauling freight for money without the required authority from the Interstate Commerce Commission or the various State regulatory agencies. These crimes are not shown on the FBI crime clock which records one robbery every 6 minutes. One reason is that most violators are never apprehended; they make their shady deals many times behind the cloak of reputable business operations; and they carry their “hot” cargoes cleverly disguised inside closed trucks or trailer vans. Even a trained law official is hard put to tell at a glance a legal highway shipment from an illegal one.

The average person seeing 100 trucks moving along the highway-except for the clearly marked ICC regulated or State-permitted carrier-cannot possibly tell which ones are, or which ones are not, hauling illegal loads. Yet many authorities believe that up to 27 out of 100 trucks moving in intercity transportation are in violation of either State or Federal regulations.

In 1961, the FBI reported there were 1,926,090 major crimes committed in the United States. Those who know transportation-taking the lowest to the highest estimates-say unlawful highway freight operations vary from 1,825,000 to 10,950.000 violations per year. Even the lowest estimates place illegal trucking far, far above any other major law violation.

Merely accepting the low estimate, illegal trucking operators violate the Federal law once every 17 seconds or seven times every 2 minutes, night and day. This tops the FBI's crime clock which ticks off one robbery of over $50 every 6 minutes.

Why doesn't the Federal Government stop these flagrant violations of the Interstate Commerce Act? Because the Federal Government doesn't have a police force big enough to stop every truck traveling in interstate commerce for just 1 day, much less 365 days. It would require a Federal police force of not less than 2,000 trained enforcement officers to obtain the actual figures on illegal traffic for just 1 single day. In addition, stopping every truck for 1 day would create the greatest traffic jam in the history of the world.

The ICC concedes that its direct enforcement efforts will never be sufficient standing alone to cope effectively with this widespread problem. The Commission simply does not have the staff (124 enforcement officers in 50 States) to do the job.

We need to strengthen the Interstate Commerce Act, but more important, to provide the ICC with a staff large enough to do a better job of enforcement. Legislation is needed to provide for immediate arrest and trial of illegal and managerial personnel engaged in unlawful trucking. Fines should be greatly increased and, when necessary, jail sentences imposed. Registration of operat ing authorities, with the various State regulatory agencies should be required. These cannot be accomplished with the present staff. Florida alone maintains their 39 enforcement officers in the field for the purpose of reducing unlawful transportation practices within its boundaries. The ICC maintains only four and they are responsible for a small portion of Georgia and Alabama. The remedy must fit the crime; unless the needs of the ICC are fulfilled, the horror will continue to grow. Our Federal Government should set the example for its various States. Certainly some States maintain excellent programs and the necessary staff to carry them out, but all do not.

Gentlemen, your transportation industry needs this immediate help if it is to continue as the world's finest.

LOUISVILLE & NASHVILLE RAILROAD CO.

STATEMENT OF PHILIP M. LANIER, GENERAL SOLICITOR

Mr. Chairman, members of the subcommittee, my name is Philip M. Lanier. I am a general solicitor in the law department of the Louisville & Nashville Railroad Co., a railroad operating primarily in the Southeastern United States, but I speak to you today upon behalf of the Association of American Railroads, an organization comprised of 151 railroads in the United States.

I am here to request your action upon the need of the Interstate Commerce Commission for an additional appropriation in its budget for the fiscal year 1965 in the sum of $825,000. This sum would be used to inaugurate enlargement of the field and headquarters staff of the Interstate Commerce Commission in order to enable it to meet its obligation of effective motor carrier regulation and to accomplish more in much needed activities against illegal carriage. My remarks are pertinent to H.R. 11296, the House-passed bill making appropriations for independent Federal agencies.

According to statements1 by Mr. Abe Goff, Chairman of the Interstate Commerce Commission, the Commission hopes to provide, over a 3-year period, 271 additional field positions, believing that it can best implement its program of more effective regulation over a 3-year period. Mr. Goff has said that if the additional staff is provided, "the Commission would be in a position to materially improve its enforcement and provide an adequate staff to aid in a cooperative program to stamp out illegal carriage."

Mr. Goff has further said that if the additional appropriation is provided, then, in the first year, ICC offices will be opened in the States of Delaware, Vermont, and Wyoming, where motor carrier field offices do not exist today.2

In addition, 20 additional employees would be required by the Commission's Bureau of Inquiry and Compliance during the fiscal year 1965.'

In sum, the Commission considers that it needs an additional 103 positions and an additional $825,000 in the fiscal year 1965 in order to begin the establishment of a staff adequate to carry out a satisfactory motor carrier regulatory program. The members of the Association of American Railroads earnestly solicit your support of this appropriation.

The Interstate Commerce Commission is perhaps unique among the agencies of the Government in that since 1940-almost 25 years-its employment has declined. Commission employment was at a high of 2,734 in 1941; for 1964 it has been estimated that it will be 2,419. This tight control over employment has existed at a time when the volume of transportation in the Nation and the number of persons and firms engaging in transportation has substantially increased.

1 Letter from Chairman Goff to Senator Warren G. Magnuson, Mar. 3, 1964. Please see Congressional Record of Mar. 6, 1964, pp. 4504-4505.

2 Ibid.

3 Ibid.

Seventy-seventh annual report of the Interstate Commerce Commission, fiscal year ended June 30, 1963, p. 26.

For example, total U.S. registration of private and for-hire motor vehicles as of January 1, 1957, was 10,162,000, and as of January 1, 1963, the total was 12,157,700. In 1947, intercity ton-miles of freight, excluding coastwise and intercoastal traffic, totaled 1,018,651,000; in 1962 the total intercity ton-miles, excluding coastwise and intercoastal traffic, were 1,393,290,000. In 1957, there were 67,028 private and exempt carriers of record; in 1963, there were 106,409.7

The major facet of ICC activities which prompts the companies for which I speak to be concerned about, and to urge your support of, the Interstate Commerce Commission's appropriation, is illegal trucking. Let me first define that term and then put the subject into some perspective.

Illegal trucking or illegal motor transportation is that highway transportation which, by law, is subject to regulation but which is engaged in without the operator having acquired the proper authority required by statute or regulation.

The Interstate Commerce Commission has estimated that illegal motor transportation may represent between $500 and $600 million annually in lost revenues to regulated carriers.

I recently talked with a fieldman in one of the southeastern States whose duties include enforcement activities againts illegal motor carriers. (I might add that that fieldman, one of the employees of the State regulatory commission, said that in his opinion his efforts would be greatly enhanced if there were available more ICC fieldmen to work in his area.) This fieldman referred to his experience with illegal trucking and estimated that approximately 5 percent of the trucks which he inspected were engaged in some form of illegal transportation.

Now this is a violation of the law, and so, again to get a perspective of the subject, let it be compared with other law violations.

The Interstate Commerce Commission's estimate of between $500 and $600 million annually in lost revenues far exceeds the total value of property stolen in the United States in the year 1961, the most recent year for which figures are available to me. In that year, the value of property stolen in the United States was $309,500,000.❞

Look at it another way: 5 percent of the trucks inspected, said a field inspector, were engaged in a violation of the law. In 1962, assaults against the person in the United States—even assuming each assault was committed by a different person-would have been committed by only fourteen ten-thousandths of 1 percent (0.00139 percent) of the population of the United States." But it may be said, roughly, that 5 percent of the motor carrier population were committing an offense against the regulated carrier population. Also in 1962again assuming each assault to have been by a different person-ninety-six tenthousands of 1 percent (0.00958 percent) of the U.S. population committed asasaults against property." But 5 percent of the motor carrier population were committing assaults against property-that is, the franchises and the certificates and the permits of the regulated, legal surface transportation population. Another way of looking at illegal trucking and placing it against a background of reference is to consider the total tonnage which may move in illegal transportation by motor carriers.

The Association of American Railroads has estimated that the percentage of motor carrier freight moving by regulated carrier has declined from 40.2 percent in 1948 to 33.4 percent in 1962.12 Put in other terms, it is estimated that in the period 1947 to 1962, inclusive, the railroads' share of intercity ton-miles transported by railroads, motor carriers, and water carriers decreased slightly, that the regulated motor carriers' share in 1962 was about 2.9 times the 1947 figure,

5 Hearings before the Subcommittee on Surface Transportation of the Committee on Interstate and Foreign Commerce on problems of the railroads, pt. 2, U.S. Senate, February-March 1958, pp. 747-748 from testimony of Guy Rutland, Jr., president, American Trucking Associations, Inc.

U.S. Department of Commerce, Bureau of Public Roads, preliminary table MV-9, 1962, issued May 1963, for totals of Government and non-Government owned vehicles.

6 Collection of Certain Transportation Statistics, March 1964, Association of American Railroads, p. 3.

ICC report of additional manpower requirements, Bureau of Motor Carriers field staff (an attachment to letter mentioned in footnote 1). Seventy-seventh Annual Report of the Interstate Commerce Commission, fiscal year ended June 30, 1963, p. 112. Statistical Abstract of the United States, 1963, p. 157.

10 "Crime in the United States," Uniform Crime Report-1962, Federal Bureau of Investigation.

11 Ibid.

12 Collection of Certain Transportation Statistics, March 1964, Association of American Railroads, p. 3.

but that the unregulated motor carriers' share of traffic in 1962 was almost 3/21⁄2 times that of 1947.13 (I emphasize that not all of this traffic is illegal, though it may be unregulated, but it certainly may be inferred from those figures that illegal motor carriage has increased at least proportionately to, and perhaps in greater proportion than, the increase of nonregulated but legal carriage, such as that by a bona fide private carrier.)

Action against this illegal trucking which so saps the strength of the regulated and legitimate carriers is threefold.

The States have their own responsibilities, and I am pleased to report that in large part the legislatures of the States have met that responsibility through enactment of laws which assist the State regulatory commissions in identifying and combating illegal motor transportation. The staffs of the States perhaps still need some enlargement.

The legitimate and regulated carrier industries, and shippers, too, have a responsibility in combating illegal transportation. Again, I am pleased to report that these segments have undertaken to carry the responsibility. Through the Association of American Railroads, the American Trucking Association, and some shipper organizations, educational and enforcement activities have been undertaken. A group of motor carrier organizations have formed an action organization which has done much in combating illegal transportation. The third entity in which lies responsibility for combating illegal trucking is the Federal Government.

Congress has undertaken, through the Interstate Commerce Act, to regulate transportation to the end that, in the words of the national transportation policy, there maybe promoted "safe, adequate, economical, and efficient service"; that there may be fostered "sound economic conditions in transportation and among the several carriers" and that there may be developed and preserved "a national transportation system by water, highway, and rail, as well as other means, adequate to meet the needs of the commerce of the United States, of the postal service, and of the national defense."

The Congress having placed under regulation the three forms of surface transportation, it is incumbent upon Congress to provide means—where they can only come through congressional action-for preserving to the regulated carriers the opportunity to fulfill the task which Congress has set for them. Specifically, Congress should provide whatever means are necessary to enforce the act which it has adopted.

The statistics I have earlier quoted indicate to you the extent to which the regulated and legitimate carriers may be weakened by illegal trucking. From the standpoint of the railroad industry, this responsibility of Congress to provide adequate and effective means of combating illegal motor transportation is doubly great, for the Federal Government contributes heavily toward creating conditions making it easier and more economical for the illegal motor carrier to operate. This comes about through the substantial expenditures authorized by Congress for highway construction and related matters.

The U.S. Department of Commerce forecasts that 1964 public capital expenditures on streets and highways by all units of government will be $13.5 billion. It is estimated by the same Department that the Federal Government alone will spend $3,989 billion on highways in 1964.15

14

It is apparent to the most casual observer that such expenditures from the public purse operate to the disadvantage of the rail carrier in several ways, but for the purpose of this statement, I wish simply to emphasize that through the provision of the very fine highways that are constructed as a result of these expenditures the movement of freight by motor carriers operating illegally is made more feasible in time and more profitable in finance than before.

To illustrate specifically the degree to which the illegal motor carrier can benefit through these expenditures (and, of course, any motor carrier benefits in the same amount, but my concern now is with the illegal ones) it has been estimated by the Bureau of Public Roads that the benefits to be derived in 1964 by a four-axle tractor semitrailer, diesel fueled, having a gross weight of 55,000 pounds and traveling 60,000 miles in 1964, from the Federal-aid highway pro

13 Collection of Certain Transportation Statistics, March 1964, Association of American Railroads, p. 18. 14 I S. Department of Commerce, Bureau of Public Roads, release of Jan. 30, 1964. 15 U.S. Department of Commerce, Bureau of Public Roads, release of Jan. 30, 1964. table HF-1