zone has expanded considerably since 1937 and do not feel that service to that area should be constrained by prior definitions of zone limits. Furthermore, effective administration of these rules will be greatly aided by a uniform interpretation of the authority implied by certificates to serve "New York, N.Y.," "New York City," "the New York exempt zone," "the New York commercial zone as defined in a particular decision," or "the New York, N.Y., commercial zone." In the future each of these service authorizations will be interpreted to mean that service to New York City and all points within 20 miles of its corporate limits is authorized.

The adoption of the proposed population-mileage formula coupled with restoration of the 203(b)(8) exemption will effectively exempt local cartage between shippers and receivers within the business and industrial area about New York City. Furthermore, suburban shippers will benefit from direct service from carriers authorized to serve New York City. No reason appears on the present record, however, to restore the partial exemption with regard to adjacent municipalities in New Jersey and New York. A certificate authorizing service to such a municipality does not contemplate service to New York City with its population of nearly 8 million and its concentrated business activity. Rather the New York-New Jersey area continues to be unique in this respect. Our proposals below will reflect the presentation of the partial removal of the exemption for cities within the newly expanded formula distance, though an attempt will be made to state the extent of exempted service as clearly and simply as possible.

St. Louis, Mo.-East St. Louis, Ill.-In defining the commercial zone of St. Louis, Mo., and East St. Louis, Ill., in St. Louis, Mo.East St. Louis, Ill., Commercial Zone, 1 M.C.C. 656 (1937), the commercial zone exemption was removed with respect to transportation to and from Belleville, Ill., which is contiguous to East St. Louis. We believe that the policy considerations requiring the partial removal of the exemption as to Belleville no longer exists. We believe that Belleville and East St. Louis form a single terminal, that movements between the two points is local in nature and not a line-haul or over-the-road movement, and that the exemption as to Belleville should be restored. This will permit shippers at Belleville the same flexibility of service that their competitors located in adjacent and nearby communities within the zone now enjoy. It also will allow us to dispose of the present complicated zone description and to define the St. Louis-East St.

Louis commercial zone pursuant to the population-mileage formula proposed herein.

LOS ANGELES AND THE LOS ANGELES HARBOR ZONE

In Los Angeles, Calif., Commercial Zone, 3 M.C.C. 248 (1937), this Commission, on its own motion, initiated an investigation into the proper limits of the Los Angeles commercial zone. The Commission noted that on the south side of Los Angeles, there is a narrow strip of annexed land, between one-half and three-quarters of a mile wide and known as the "shoestring" strip, which connects the main area of Los Angeles with the annexed districts of San Pedro, Wilmington, and Terminal Island. The principal point of contention during the proceeding was whether the Los Angeles Harbor districts and Long Beach should be included in the Los Angeles commercial zone. Since the port was separate from the main residential, business, and industrial sections of Los Angeles, it was determined that the exemption of 203(b)(8) should be removed with respect to movements between the Harbor district and Long Beach, on the one hand, and, on the other, the main section of Los Angeles. Los Angeles has been the subject of subsequent proceedings, see 51 M.C.C. 676 and 114 M.C.C. 86.

At present there is an east-west line defined according to specified streets and city limits dividing the Los Angeles Harbor zone and the Los Angeles commercial zone. Freight movements in interstate commerce cannot cross this line without authority from this Commission. The Los Angeles zone and the Los Angeles Harbor zone are also specifically described according to specified streets and city boundaries.

In light of the substantial urban development and commercial integration in this area and for the same reasons underlying the general zone expansion discussed above, we believe that the Los Angeles commercial zone should be redefined so as to correspond to the proposed population-mileage formula. Therefore, a carrier having authority to serve "Los Angeles, Calif." or "the Los Angeles commercial zone" or "the Los Angeles zone" has authority to serve Los Angeles and all points within 20 miles of the Los Angeles corporate limits.

It is proposed that the Los Angeles Harbor zone be redescribed as indicated in the notice attached to this report. The proposed description attempts to use more readily identifiable boundaries. Thus, carriers having authority to serve the "Los Angeles Harbor

zone" or "Los Angeles Harbor" or "Los Angeles Harbor points" will have authority to serve all points within the Los Angeles Harbor zone as described in the attached notice. Furthermore, the east-west line described at 49 CFR 1048.5(a) would be abolished.

INTERNATIONAL BOUNDARY MUNICIPALITIES

The population-mileage formula was revised so as to no longer confine the zones to areas in the United States, thus including in the zones of United States municipalities on or near international borders such foreign municipalities and areas as fall within the zones under the formula. See Rio Grande Border-Comm. Zones & Term. Areas, 110 M.C.C. 51 (1969), and Verbeem v. United States, 154 F. Supp. 431 (1957), affirmed per curiam 356 U.S. 676 (which dealt with the Detroit, Mich.,-Windsor, Ont., Canada, situation). The Commission recognizes the apparent disparity this policy can create. Foreign carriers can operate within the exempt zone in the United States, but United States Carriers cannot operate in foreign countries without a license because those countries have no 'rule comparable to our commercial zones. In view of the judicial interpretation of this policy, there is little that the Commission can do to protect aggrieved carriers. One alternative is the filing of a petition seeking a finding that the adjacent foreign territory is not a part of the commercial zone of the U.S. municipality. The other alternative is to seek a legislative resolution of the problem. 24

EXPANSION OF COMMERCIAL ZONES AND THE PUBLIC INTEREST

As previously noted in this report, the size of a commercial zone is a matter of economic fact determined without regard to public transportation needs or competitive impact on existing carriers. These issues are relevant, however, when considering whether the National Transportation Policy requires that the exemption be withheld. That policy is stated in the Act as follows:

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 conditions in transportation and among the several carriers; to encourage the establishment and maintenance of reasonable charges for transportation services, without unjust discriminations, undue preferences or "We expressly do not take a position regarding such legislation, as it may seriously impact on the free flow of foreign commerce.

advantages, or unfair or destructive competitive practices; to cooperate with the several States and the duly authorized officials thereof; and to encourage fair wages and equitable working conditions;-all to the end of developing, coordinating, and preserving 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 enactment of the 203(b)(8) exemption reflects a policy judgment by Congress that motor carriers should not be subjected to the certification process when conducting local operations. Nor should these carriers be restricted to particular service routes or points in urban areas. An inherent advantage of motor carriage is that its operations are marked by geographic and functional flexibility. The local carriage exemption permits motor carriers to utilize this flexibility to meet the changing needs of urban area shippers. We believe that commercial zone expansion will foster this advantage of truck transport by allowing motor carriers to adjust more quickly to shipper migration to outlying areas and the emergence of new suburban markets.

We are also convinced of the advisability of commercial zone expansion by the overwhelming shipper support generated by our proposal. Suburban shippers constantly reiterated the service problems they encounter due to the unavailability of prompt and dependable motor service. Zone expansion should substantially increase their service options. The problem of adequate availability of service is especially acute for small shippers at outlying locations. It is asserted, by certain regulated carriers, however, that these small shippers will not benefit by zone expansion since exempt carriers will confine their operations to lucrative high volume accounts. We do not find this argument persuasive. By updating the presently narrow commercial zone limits, local cartage operators should be able to more efficiently allocate their metropolitan area operations so as to serve all revenue producing shippers. Furthermore, the expansion of freight forwarder terminal areas should ameliorate the service woes of small shippers. Forwarders specialize in the movement of less-than-truckload and less-thancarload traffic, and increasing their terminal areas can only improve small shipments service. Forwarder operations also reduce the disparity in leverage exercised by large and small shippers. While large shippers can demand quality service by virtue of their attractive tonnage, small shippers are handicapped in this respect. The forwarder in its capacity as "agent" for the collective interests of these shippers can obtain superior line-haul service.

A prime objective of the scheme of economic regulation of interstate motor carriage is to assure that shippers will be provided with a healthy system of motor carriage to which they may resort to get their goods to market. See United States v. Drum, 368 U.S. 370, 374 (1961), and Keller Industries, Inc.-Declaratory Order, 107 M.C.C. 75, 76 (1968). The extensive shipper testimony indicates that existing motor carriers are not satisfying this objective. Nor does it appear that commercial zone expansion will severely hamper the overall economic health of the motor carrier industry. The studies of previous zone expansions, though admittedly on a much smaller scale, do not indicate any long-lasting serious economic consequences for regulated carriers. No doubt certain dislocations will occur in carrier operations, but it is not readily apparent that reliable and efficient carriers will suffer a serious diversion of traffic. Local cartage should remain dependable, since many shippers testified that carriers operating in present exempt zones offer service of acceptable quality.

Zone expansion should decrease the trend toward private carriage to the benefit of for-hire motor carriers. Shippers invest in private carriage primarily to be assured of transportation service. Shippers generally testify that increasing the supply of availalbe motor service through zone expansion will reduce the need for private carriage. Of course, small shippers rarely have the financial ability to exercise the private carriage option, so the proposed expansion should help place them on an equal footing with large shippers in this respect.

Long-haul carriers should benefit from the enhanced ability to make direct deliveries to points included within their expanded terminal areas. Short-haul regulated carriers will probably suffer some diversion of truckload traffic moving to outlying points. The efficiencies that should be attained from increased single-line service, however, more than outweigh the adverse effect on shorthaul carriers. It is anticipated that adjustments will be necessary in short-haul operations. Nevertheless, they too should receive some benefit from expanded service areas. Some long-haul carriers state that expanded zones will make it practical to establish terminals near the perimeter of these zones. Short-haul carriers could then be utilized for service between these terminals and shipper locations beyond the expanded zones. It should be noted that inasmuch as local operations within commercial zones are totally exempt from our economic regulation, short-haul carriers will not be forced to adhere to published tariff schedules when operating within the exempt area.