to resolve any specific problems. Therefore, it urges this Commission to give no weight to that portion of the railroads' reply which implies that the Government and its agencies are among those shippers and claimants engaging in unfair claims practices. 7. Institute of Scrap Iron & Steel, Inc., argues that claims other than those of a concealed nature, are a matter of vital importance to it, and that concern with concealed loss and damage claims is excessive and has caused this basic point to be ignored by many. It argues that ferrous scrap is not damaged but that apparent losses occur in transportation; that this is a continuing problem which is not widely appreciated even though it is a major and costly claims problem; and that where the carriers find incredible claims based entirely on differences between origin and destination scale weights, the essential problem is that differences in scale weights constitute sufficient evidence to support a claim and the carriers' attitude demonstrates their contempt for shippers' rights as well as an illegal shifting of the burden of proof. It maintains that such practices are arbitrary and unreasonable, and that this Commission should promulgate equitable rules such as those described in its initial statement.

8. National Retail Merchants Association argues that there is ample precedent to give this Commission overall jurisdiction over carrier practices with respect to the handling and processing of claims. It also believes that we should enforce the reasonable rules we promulgate so that claims will be settled on the basis of their merits. Guidelines to be used in settling claims should include consideration of trade discounts and cash discounts on shipments on which claims are filed.

9. Penn Central Transportation Company indicated that although it joined in the initial statement filed by the Association of American Railroads, it does not join in the brief of that association which replies to some of the contentions made by other parties. Specifically, Penn Central does not concur with the association's position on the principle matters of jurisdiction and arbitration. It argues that any regulation of carriers' rights of subrogation would be unconstitutional; that establishment and enforcement of exoneration rules applicable to shipments moving over the lines of one or more railroads does not constitute a practice contemplated by section 1(6) of the act; and that this interpretation of the act by this Commission has created longstanding reliance upon the fact that the Commission has not been given jurisdiction over loss and damage claims rules and settlements by any provision of the act. Penn Central points out that the effect of the Carmack Amendment was to require an originating carrier to adopt a connecting carrier as its agent and to remain liable to the shipper for damage that might occur throughout the entire transportation of a shipment. It relies on Atlantic Coast Line Railroad Co. v. Riverside Mills, 219 U.S. 186 (1911), in which it was held that a carrier placed in that position has the right to reimbursement from a connecting carrier for a loss not due to its own negligence. Penn Central argues that a carrier made a principal imposed with liability for its compulsory agents has a right to subrogation. It argues that freight claims rules adopted by carriers constitute an agreement of subrogation made pursuant to the rights of the principal and agent to contract with respect to their liability among themselves for defaults in performance of the transportation contract and that there would be serious constitutional questions of due process and the obligation of contracts clause should this Commission attempt to regulate this area. Moreover, assuming that it would be constitutional to do so, Penn Central avers that there is no valid reason to subject such contracts to our administrative regulation. Penn Central also points out in this respect that it has been held that connecting carriers may contract for relief from liability for negligence among themselves even though a

limitation of liability for negligence would have been void as against a shipper. Scott Truck Line, Inc. v. Chicago, R.I. & P. R. Company, 321 F. Supp. 511 (1970).

It argues that further investigation in this proceeding is unjustified, inasmuch as article X of the principles and practices for handling railroad freight claims has been canceled as well as for the reason that the effect of the canceled rule was that no carrier should pay more than 50 percent of a loss on which carriers have a clear record. It points out that the rule also brought about the result that a carrier paying a claim could not obtain subrogation rights under it where there was no legal basis alleged or proved to support the determination of carrier liability. Penn Central argues that since jurisdiction for the determination of liability for loss and damage claims lies with the courts, it necessarily follows that adjustment of liability, subrogation, indemnity, and exoneration rights among railroads cannot adequately be ascertained in arbitration proceedings. It believes this because determining and administering trial principles and applicable rules of common law to transportation involves not only the shipping contract and the applicable tariffs but also the law in force at the time and place the contract is made.

It represents that the carriers' record of claims payments indicates that there is no need for regulating the time within which payments must be made. Finally, it avers that present carrier rules and practices do not violate section 20(11) of the act with respect to bona fide disputes.

APPENDIX C

Set forth below is the substance of carrier rules, as they were announced by them, prescribing their asserted methods of limiting liability and establishing their procedures for disposing of claims filed against them for concealed loss or damage to cargo transported under a clear record:

1. Railroads.-The following press release was issued June 11, 1969, by the Association of American Railroads. The rule announced was to have become effective with shipments on and after August 1, 1969.

WASHINGTON—A new rule placing a standard limit on railroad liability in concealed damage claims has been adopted by its Freight Claim Division, the Association of American Railroads announced today.

The new rule, placed in the Division's Articles of Principles and Practices, sets the maximum payment of claims on rail carriers for concealed damage under a clear record a shipment in which there is no apparent damage to the lading at 50 percent of the proven net monetary loss.

A concealed damage claim is one in which damage responsibility cannot be identified by any of the parties involved in the manufacture, transportation, storage or sale of the product.

"In light of the number of non-railroad handlings many products receive, this new standard is equitable," said W. F. Paden, executive vice chairman of the Freight Claim Division.

"By eliminating confusion over handling of concealed damage claims, a traditional source of dispute, this new rule should go a long way toward preserving harmonious relations among carriers and their customers."

As part of the new rule, the Division also abolished the different time limits on filing concealed damage claims that had been established by individual U.S. and Canadian railroads.

2. Motor carriers.-The rule adopted by the National Freight Claim Council to become effective on all shipments transported by motor vehicle on and after August 1, 1969:

ARTICLE X. (a) Subject to the following paragraphs, net claim loss for concealed loss or damage shall be prorated among motor carriers participating in the movement of freight, after deletion of those portions of the net loss which may be attributed to other than carrier handling.

Portions of the net loss to be eliminated from proration shall be determined by assessing one point of exposure to damage, or probability of damage factor, to each carrier, shipper and consignee (including intermediate warehouses or other storage points, if any) participating in the handling of the freight over the complete movement. (b) Carriers shall not prorate payment for concealed loss or damage when inspection is not requested within fifteen days after delivery to consignee.

(c) Carriers shall not prorate payment for concealed loss or damage when carrier is not afforded an opportunity to make an inspection at the premises to which carrier delivery was made.

(d) Carriers shall not prorate payment for concealed damage when container and packing for damaged articles are not retained by consignee for inspection; provided, inspection is made by carrier within five (5) normal working days after request for inspection.

(e) Carriers shall not prorate payment for concealed loss or damage to merchandise which has been moved from point of carrier's delivery to other premises, prior to discovery and/or reporting of damage.

3. Freight forwarders.-The rule adopted by the Freight Forwarder Institute to become effective on all shipments forwarded on and after August 1, 1969:

These procedures provide for an equal distribution of responsibility for all factors involved in the movement of shipments. They recognize handlings by the shipper, forwarder, warehouse, and consignee.

Effective with shipments originating on and after August 1, 1969, concealed loss or damage claims will be handled as follows:

A. Maximum payment of claims by forwarders for concealed loss or damage to shipments handled under a clear record will be fifty percent of the net monetary loss. B. Forwarders will not honor claims for concealed loss or damage when inspection is not requested within fifteen days after delivery to consignee.

C. Forwarders will not honor claims for concealed loss or damage when forwarder is not given an opportunity to make inspection at the premises to which forwarder made delivery of shipment.

D. Forwarders will not honor claims for concealed loss or damage when containers and packing are not retained by consignee for inspection by forwarder.

E. Forwarders will not honor claims for concealed loss or damage to shipments which have been moved from point of forwarder's delivery to other locations, prior to discovery and reporting of loss or damage.

APPENDIX D

Section 20(11) of the act reads as follows:

(11) That any common carrier, railroad, or transportation company subject to the provisions of this part receiving property for transportation from a point in one State or Territory or the District of Columbia to a point in another State, Territory, District

of Columbia, or from any point in the United States to a point in an adjacent foreign country shall issue a receipt or bill of lading therefor, and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it or by any common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States or within an adjacent foreign country when transported on a through bill of lading, and no contract, receipt, rule, regulation, or other limiation of any character whatsoever shall exempt such common carrier, railroad, or transportation company from the liability hereby imposed; and any such common carrier, railroad, or transportation company so receiving property for transportation from a point in one State, Territory, or the District of Columbia to a point in another State or Territory, or from a point in a State or Territory to a point in the District of Columbia, or from any point in the United States to a point in an adjacent foreign country, or for transportation wholly within a Territory, or any common carrier, railroad, or transportation company delivering said property so received and transported shall be liable to the lawful holder of said receipt or bill of lading or to any party entitled to recover thereon, whether such receipt or bill of lading has been issued or not, for the full actual loss, damage, or injury to such property caused by it or by any such common carrier, railroad, or transportation company to which such property may be delivered or over whose line or lines such property may pass within the United States or within an adjacent foreign country when transported on a through bill of lading, notwithstanding any limitation of liability or limitation of the amount of recovery or representation or agreement as to value in any such receipt or bill of lading, or in any contract, rule, regulation, or in any tariff filed with the Interstate Commerce Commission; and any such limitation, without respect to the manner or form in which it is sought to be made is hereby declared to be unlawful and void: Provided, That if the loss, damage, or injury occurs while the property is in the custody of a carrier by water the liability of such carrier shall be determined by the bill of lading of the carrier by water and by and under the laws and regulations applicable to transportation by water, and the liability of the initial or delivering carrier shall be the same as that of such carrier by water: Provided, however, That the provisions hereof respecting liability for full actual loss, damage, or injury, notwithstanding any limitation of liability or recovery or representation or agreement or release as to value, and declaring any such limitation to be unlawful and void, shall not apply, first, to baggage carried on passenger trains or boats, or trains or boats carrying passengers; second, to property, except ordinary livestock, received for transportation concerning which the carrier shall have been or shall hereafter be expressly authorized or required by order of the Interstate Commerce Commission to establish and maintain rates dependent upon the value declared in writing by the shipper or agreed upon in writing as the released value of the property, in which case such declaration or agreement shall have no other effect than to limit liability and recovery to an amount not exceeding the value so declared or released, and shall not, so far as relates to values, be held to be a violation of section 10 of this part to, regulate commerce, as amended; and any tariff schedule which may be filed with the Commission pursuant to such order shall contain specific reference thereto and may establish rates varying with the value so declared and agreed upon; and the Commission is hereby empowered to make such order in cases where rates dependent upon and varying with declared or agreed values would, in its opinion, be just and reasonable under the circumstances and conditions surrounding the transportation. The term “ordinary livestock" shall include all cattle, swine, sheep, goats, horses, and mules, except such as are chiefly valuable for breeding, racing, show

purposes, or other special uses: Provided further, That nothing in this section shall deprive any holder of such receipt of bill of lading of any remedy or right of action which he has under the existing law: Provided further, That all actions brought under and by virtue of this paragraph aginst the delivering carrier shall be brought, and may be maintained, if in a district court of the United States, only in a district, and if in a State court, only in a State through or into which the defendant carrier operates a line of railroad: Provided further, That it shall be unlawful for any such receiving or delivering common carrier to provide by rule, contract, regulation, or otherwise a shorter period for the filing of claims than nine months, and for the institution of suits than two years, such period for institution of suits to be computed from the day when notice in writing is given by the carrier to the claimant that the carrier has disallowed the claim or any part or parts thereof specified in the notice: And provided further, That for the purposes of this pargaraph and of paragraph (12) the delivering carrier shall be construed to be the carrier performing the line-haul service nearest to the point of destination and not a carrier performing merely a switching service at the point of destination: And provided further, That the liability imposed by this paragraph shall also apply in the case of property reconsigned or diverted in accordance with the applicable tariffs filed as in this part provided.

APPENDIX E

PART 1005-PRINCIPLES AND PRACTICES FOR THE INVESTIGATION AND VOLUNTARY DISPOSITION OF LOSS AND DAMAGE CLAIMS AND PROCESSING SALVAGE

Section 1005.1 Applicability of regulations.

The regulations set forth in this part shall govern the processing of claims for loss. damage, injury, or delay to property transported or accepted for transportation, in interstate or foreign commerce, by each railroad, express company, motor carrier, water carrier, and freight forwarder (hereinafter called carrier), subject to the Interstate Commerce Act; Provided, however, That with respect to the acknowledgment and disposition of cargo claims filed against motor common carriers of household goods, carrier action shall be in accordance with the provisions of sections 1056.17(a) and (b) of Part 1056 of these regulations.

Section 1005.2 Filing of claims.

(a) Claims in writing required. A claim for loss or damage to baggage or for loss, damage, injury, or delay to cargo shall not be voluntarily paid by a carrier unless filed in writing, as provided in subparagraph (b) below, with the receiving or delivering carrier, or carrier issuing the bill of lading, receipt, ticket, or baggage check, or carrier on whose line the alleged loss, damage, injury, or delay occurred, within the specified time limits applicable thereto and as otherwise may be required by law, the terms of the bill of lading or other contract of carriage, and all tariff provisions applicable thereto.

(b) Minimum filing requirements. A communication in writing from a claimant filed with a proper carrier within the time limits specifed in the bill of lading or contract of carriage or transportation, and (i) containing facts sufficient to identify the