to justify the establishment of a post office a post office was established at that place, largely on the recommendation of the military authorities. They always said where they wanted a post office. (Thereupon the committee went into executive session, after which it adjourned until Oct. 3, 1919, at 10.30 a. m.) COMMITTEE ON EXPENDITURES IN THE POST OFFICE DEPARTMENT, The committee met at 10.50 a. m., Hon. Frederick N. Zihlman (chairman) presiding. STATEMENT OF MR. JOHN C. KOONS, FIRST ASSISTANT POSTMASTER GENERAL. The CHAIRMAN. Mr. Koons, before we go into some of the complaints that have been filed as to the delay in the delivery of parcelpost packages, I would like a little information on just how the parcel post is now conducted. My understanding was that when the law was inaugurated that you had a special parcel-post stamp which enabled you to separate the revenues received from that branch of the service from the general revenues in the Post Office Department, and the law carried out that plan by providing that the cost of the service shall be determined by the Postmaster General. and that he shall be given permission to revise and reclassify the rates and the weights and zones to insure the receipt of revenue from such service adequate to pay the cost thereof. So that before we go into these other matters I wish you would outline to the committee just upon what basis the parcel-post system is being conducted. Mr. KOONS. The Parcel Post Service was inaugurated under the authority granted in the act of August 24, 1912, which was the original parcel-post act. The establishment of such service had been recommended by previous Postmasters General. Postmaster General Hitchcock at that time was under the impression that it would not be feasible to establish a parcel-post service throughout the United States at one time, that the increase in the volume of business would be more than the postal establishment could carry. My recollection is that when the bill passed the House it provided for the parcel post on the rural routes only and for local delivery, but the Senate included a provision for parcel post throughout the country without any limitation other than the maximum weight of 11 pounds. The service was inaugurated January 1, 1913. Prior to the establishment of the service the Post Office Department handled about 230,000,000 packages annually; that is, our weight limit was pounds on what we then called fourth-class matter. As near as can be estimated they were handling 2,500,000,000 or 3,000,000,000 annually. The original act limited the weight of parcels to 11 pounds and the limit of dimension to 72 inches; that is, length and girth combined. The rates fixed in the beginning were such that they would have soon killed the traffic because they were higher than the express rates. For instance, the rate for the first zone was 5 cents for the first pound and 3 cents for each additional pound. That would have been 35 cents for an 11-pound package at the nearest haul. The service also provided for an insurance feature and a C. O. D. feature. The insurance was established in the beginning and the C. O. D. not until the 1st of the following July. The act establishing the parcel post included this paragraph: The classification of articles mailable as well as the weight limit, the rates of postage, zone or zones, and other conditions of mailability under this act, if the Postmaster General shall find on experience that they or any of them are such as to prevent the shipment of articles desirable, or to permanently render the cost of the service greater than the receipts of the revenue therfrom, he is hereby authorized, subject to the consent of the Interstate Commerce Commission after investigation, to reform from time to time such classification, weight limit, rates, zone or zones or conditions, or either, in order to promote the service to the public or to insure the receipt of revenue from such service adequate to pay the cost thereof. The originad act provided for the use of a specially designated stamp, as referred to by the chairman. The stamp served one purpose. It would show the receipts from the sale of such stamps. Other than that it would not serve any purpose. It would not show the cost of the service or anything in connection with the operation of the parcel post. The use of the stamp was objectionable to the public because a patron might have the regular postage stamp and yet not have a parcel-post stamp, and for that reason could not mail a parcel. There was a great deal of objection on the part of the public to their use from the beginning. It was recognized in the Post Office Department that this would be an undesirable feature of the service even before it was established. Based on the paragraph which I have just read, we felt that we could not ask the Interstate Commerce Commission for authority to abandon the use of the stamp until after we had demonstrated by experience that it was undesirable. So, early in June, 1913, I think, or possibly in May, and I can verify this for the record, the Postmaster General took up with the Interstate Commerce Commission the question of the abandonment of the specially designated stamp, and authority was granted for it. Beginning July 1, 1913, the use of the stamp was abolished. The matter was thoroughly gone into at that time as it was at the same time we increased the weight limit in the first and second zones from 11 to 21 pounds, and materially reduced the rates in those zones. The Senate Committee on Post Offices and Post Roads took up the proposed changes. There were some protests filed with the committee, and they went into it very thoroughly to determine whether or not the Postmaster General had acted within his authority. There was no action taken by the committee except in the following year a paragraph repealing this section was incorporated in the Post Office appropriation bill, but it failed in the Senate. The recommendation of the Senate committee failed of adoption. The special stamp served no purpose other than to show the receipts from the sale of such stamps. To determine the cost of service we kept accounts the first 15 days of April and the first 15 days of October of each year, at which time a record is made of each parcel, the zone to which the parcel is mailed, its weight, and the postage it carried. Those two periods of the year are taken because the mail is about at the average at that time. It is not the low period of the year nor is it the high period. We make a very complete statistical account, showing the weight of the parcel, the zone it is addressed to, and the postage that is on it; and if it is insured, the amount of insurance. That gives us all the statistics as to the revenue and to the zone shipped and the weight of parcels by zones. We also keep a record of the cost of clerk hire in handling the parcels at the office of mailing, the cost of the Railway Mail Service, the cost at the office of delivery-that is, the clerk hire, the delivery hire, or delivery by wagon or automobile. Those statistics are collected in great detail and have been published from time to time. During the past two years, on account of the war and the scarcity of employees and the enormous amount of other work thrust upon us, we have not kept those statistics, but a count is now being taken at all offices for the first 15 days of October. We will have it compiled by the 1st of January. We keep the account at all first and second class offices, at 500 representative fourth-class offices, and 500 representative thirdclass offices. So in that way we are able to determine the cost of handling the parcel post and everything connected with the parcel in the most minute detail. We have no statistics further than that. We have gone into greater detail in the parcel-post service than in any other class of mail, because, in the first place, it was a new service, and, second, the law requires that it should pay its own way. On the basis of the last statistics, after making most liberal allowance for all expenses on the basis of available estimates, we were making at least $10,000,000 profit on the parcel post. Now, the volume of business has increased tremendously during the war. Ordinarily the costs do not increase in the same proportion as the volume of business increases, but we have had increases in salaries of employees. Now, my judgment would be that we are just about making the same profit as we did before the war. That is, the increased profit from the business is as much as the increased cost of clerk hire. The CHAIRMAN. The profit, you say, is about $10,000,000 a year? Mr. KOONS. As to some of the cost, we take the statistics made by the congressional commission that investigated second-class matter. We charge up the delivery service where we deliver by automobile; we charge the entire cost of that; if we use it solely for parcel post, we charge the entire cost; but if not, we charge the proportionate cost. We also charge the clerk hire, the rental of buildings, and transportation, and every operation from the time it is deposited with us until its delivery, as near as we can determine. The CHAIRMAN. Is there any system whereby the sender of the package which is not insured can make a claim?" Mr. Koons. If it is not insured, no. He can file what is called a tracer, a Form 1510. We make every effort to locate it, but if we are not able to locate the parcel, we can not reimburse him, because we have a very low insurance feature. I might add to that that we have made some changes from time to time in the rates of postage, until now there is an entirely new classification, with the exception of the eighth zone, which is the same as in the original act; but all the others have been reduced. We have never increased the rates, but have always reduced them. Mr. BYRNES. How have you been able to do that, in view of the increased cost of labor? Mr. KOONS. On acccount of the increased business. In the beginning the rates were such they would have killed the traffic. As our volume of business has increased we have been able to reduce the rates, and they would have been further reduced if it had not been for the war. We have also increased the weight limit, and that has also increased the business. I was on the original committee appointed by Mr. Hitchcock to formulate the regulations for the service, and the service has grown beyond the expectations of those connected with the department at that time, beyond what anybody anticipated at the time it was inaugurated. Mr. BYRNES. Have you any statistics as to the growth, year by year? Mr. Koons. I could give you the statistics except for the last two years. Mr. BYRNES. Well, approximately. Mr. Koons. We have those figures but I could not give them to you from memory. We have counts year by year in a volume almost as thick as that [indicating]. They are, in the hearings taken before the Senate committee. That is a part of them. We should be very glad to furnish you with copies of it. As I say, the rates have not only been decreased, but it is the only transportation service during the war that declared no embargo. It was open at all times to the shipper in any quantity he desired to ship. When the express companies were unable to take parcels between here and New York, we took them without limit. In some cities. I understand, the express companies even turned over to us their local deliveries when they came within the weight limit. We never declared any embargo of any kind and have taken parcels in any quantity. It was the only transportation service that was open to the public during the war, that did not do so and accepted parcel shipments without limit and handled them properly. Mr. BYRNES. Has there been a corresponding decrease in the business of the express companies, or has it had any effect upon them? Mr. KOONS. I will answer that in this way. When our business increased there was a corresponding decrease in the express business. Of course then the war came on and lots of material that had formerly been shipped by freight was shipped by express. Mr. HUMPHREYS. Do you pay the railroads a fair compensation for carrying that stuff? Mr. KOONS. In my judgment we do, but that is a question with the Interstate Commerce Commission. Mr. HUMPHREYS. Well, what is your opinion? Mr. Koons. It is the maximum rate fixed by Congress under the last act, the act of July 28, 1916, relating to the space basis. It is to-day before the Interstate Commerce Commission and the commission will determine whether it is a just rate. Mr. HUMPHREYS. That matter is to be determined by the Interstate Commerce Commission? Mr. KooNs. Yes, sir. Now, to show you the extent of the parcel post I would like to bring up this one case. In the poultry business there are very few eggs shipped any more for hatching, compared with the eggs shipped years ago. They ship now what they call day-old chicks. In 1918 the express service had become so poor that 50 per cent of the chicks were dead when they reached their destination. In January, 1918, Mr. Hoover, the Food Administrator, stated that unless we took over the shipment of these day-old chicks that the industry would be ruined, and in the ruination of the industry the production of the food from the raising of these chickens would be lost to the country. This is a memorandum prepared for him by one of the hatcheries, January 26, 1918: I wish briefly to call your attention to the possibilities and conditions of the day-old chick industry, especially of Ohio which I believe ranks first in the Union in this food product. The day-old chick men of this State have responded instantly to the demands of the departments of agriculture and food administration and have increased their producing capacity so that Ohio alone will be able to send out 5,000,000 baby chicks within the next 6 or 8 months. This will go a long way toward doubling the meat production and supply if proper transportation can be had so that these chicks can be delivered in good condition to those now ordering them by the thousands daily. The first shipments should begin March 5, and the hatcheries are ready if proper transportation can be assured. At present the day-old chicks must be shipped by express. Chicks are good for a 72-hour ride and will arrive safely and live after such a journey if properly handled en route. Under normal conditions I have shipped baby chicks safely to Florida, Texas, Maine, Montana, Colorado, and to all points between and they have lived and matured. Under normal conditions hatcheries will guarantee live arrival for 2,000 miles. Under present conditions of the express all this possibility of increased meat supply will be lost, for it is impossible to make shipments for a distance of two or three hundred miles with any guarantee that chicks will arrive within 72 hours. I make many shipments of mature birds over many lines, and these average five days in going 300 to 500 miles, and they come by the same express that must carry the day-old chicks. I would suggest in order to conserve and save this great source of meat supply: First. That express companies be required to give day-old chick shipments priority from shipping point to delivery. This to cover not only consignor and consignee stations, but also all transfer points and actual delivery to consignee. Second. That day-old chicks be admitted to the parcel post. Mr. Hoover took it up with the Postmaster General, because other transportation facilities at that time could not handle the business. That was right in the height of the war, and there was some question in our minds whether we could safely handle the proposition, but as the industry would be no doubt crippled if we did not take it, we said we would handle it until after the war. I asked the poultry people to keep me advised as to what the results were, so that we would know whether to continue the practice. The first letter received was on March 23, 1918, from Reisterstown, Md., saying: On March 20 we received our first shipment of baby chicks by parcel post. They were mailed at Tiro, Ohio, and at this writing every one of the original number are doing fine. Here is one from Riverdale, N. J.: As large shippers of day-old chicks, we take pleasure in informing you that since your permission to ship chicks went into effect we have sent large quantities, and are getting reports from all over of the quickest and best service we ever received, and service that the express company never even approached. Shipments to points in New England and south of Philadelphia, leaving here at 8.30 p. m. the same day have all been reported before 8 p. m. 145233-19-PT 1- -S |