INDUSTRY SIZE Mr. Chariman, if all I say is true, what is the response? In less than 12 months, we estimate that some 1,000 have entered the field. We believe that the number will swell to 12,000 in three years. The need for fiscal and full carrier responsibility is mounting, and we intend to offer for your consideration, proposed legislation and guidelines that will assure operating standards of highest excellence. In fact, the Transportation Brokers Conference of America, Inc. was formed for just such reasons, the best known largest, and most responsible companies got together two years ago to see what could, and should be done to protect the public interest. Properly identified responsible entrants, hold out a high standard of excellence. At our meeting next March in Atlanta, we shall have ready for presentation to the membership: training manuals, courses of study, and examinations as to know-how and financial stability. At founding meeting a year ago, the Conference had fifty members. At our recent convention in Seattle on October 15, 1982, the membership stood at more than 100. Applications have been streaming in the rate of about 20 a month currently. To those who view this sudden growth with alarm, let me emphasize that big numbers always accompany a new industry reflecting new law and service to the American people. There were more than 1,000 railroads at the turn of the century. There were more than 15,000 regulated truck companies at the height of that industry's expansion. Growth and responsibilities tend to weed out, merge and otherwise distinguish the men from the boys in each of the service industries. We believe the law and regulations are working in the public interest, and that the advents of the large broker does well for better service, lower rates, better equipment utilitzation. Likewise, to those among the established carrier industry, we say that the large, consolidated broker, offering shippers the whole range of multi-carrier intermodal services at competitive rates is a boon to carriers as well as shippers. Trans continental systems are encouraged by rail, and by truck, each finding its own optimum distance haul and rates; truck companies get a chance to keep the pipeline full, cutting out idled time and equipment and excessive warehousing. Many broker companies have been around as long as the motor carrier industry itself. Many of them had departments for some of the worlds largest shippers. Some of them have helped many of the better known carriers. Today, with piggyback and other rates no longer regulated, with no central information industry to tell a shipper where it can ship and by whom, and at what price, the broker of long standing is his only trusted source. And now, that broker can offer him the same reliability and underlying carrier services. For many years, transportation policy experts have talked about: the department store of transport services; or a need for "integration of services by mode" each to his efficient specialty, etc.; or a need for a shipper-oriented forwarder-type carrier or agent-one cared first for the shipper, and one who depicts the optimum route, the best equipment, the quality service at the lowest rate. Well, thanks to the new law and implementing decisions, that day has come. In my judgment, it could have come with changes in regulation, but that is demonstrably past, so that the broker must come to the fore to assure growth performance and information to the American public. It is true that the inefficient, financially irresponsible carrier, whether agent or whether new fly-by-night, will increasingly have a tough time of it. But, vigorous responsive carrier management will find an environment to thrive in. Quite as important, the small shipper and the small town will be back on the mainstream of America. Mr. Chairman, our members stand ready to support any effort to make solid and secure the new public service to the Motor Carrier Act of 1980, in implementing Decision have set out. I and my associates would like to work with you, your colleagues, and your staff, in furthering this effort. We are rather intimately aware of various sorts of proposals looking for the twilight of the nation's oldest regulatory body. Some of us in the past have thought that such efforts might have better taken an alternate course, but the changes already undertaken guarantee that the broker can expand to offer full services whether the ICC goes out of existence or not. Thank you for allowing us to appear before you today. Senator DANFORTH. In other words, on the discount question your view is that we should do nothing now-just let the discounts con tinue to take place and make a judgment on it after we hear from the ICC and after we get a better view of what the economy is going to do? Mr. GALLAGHER. I would hope that the committee would encourage the ICC to get a decision out on discount prices because I think that it is almost unconscionable that after 2 years in which one of the major issues that is before the Commission as to whether discount pricing is predatory and what its effect is, that the industry has a right to have a decision. When that comes out, I think that then we could come back to this committee. Senator DANFORTH. OK. Mr. Henderson, with respect to your problem in Georgia, do you have some sort of litigation going on that, or is there an administrative proceeding or a case in court on that question? Mr. HENDERSON. No; not at the present time, Mr. Chairman. I would like to have counsel comment I did not identify him; this is John DeVierno, our general counsel. Mr. DEVIERNO. Mr. Chairman, I think that, you ask a good question-whether litigation is possible-but I think that what we want to point out today, and perhaps the order of the statement does not reflect it, is that in addition to the legal questions that have to be addressed before any case would be brought, we would have to consider several things. One is that a national organization filing a suit in one State still might have to convince other States by numerous other suits, and one question is whether we can achieve our goals in one case. Legislation would be a nationwide solution. The other point, which we really wanted to emphasize today, are the policy factors. Particularly since under the CIH rules the notice of the ICC's involvement in the carriage is carried in the cab, and given the special congressional sanction for CIH, we do not see the need for further State registration. The State has all the information it needs. Senator DANFORTH. I understand your position. I frankly have not focused on it at all one way or another. It is a matter of very specific concern. But your view, as I understand it—and I do not comment on this one way or the other; I want to make that clearbut your view is that it is contrary to the intent of Congress and also that it is a burden on commerce. It seems to me that those are matters that are ripe for litigation, if that is your view. I do not know of anything that is coming through Congress which would clarify it one way or another. Gentlemen, thank you very much. [Whereupon, at 12:03 p.m., the committee adjourned.] ADDITIONAL ARTICLES, LETTERS, AND STATEMENTS STATEMENT OF INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, Almost three years ago, this Committee recognized that the Interstate Commerce Commission was causing broadscale disruption and uncertainty in the trucking industry by improvising wholesale changes in the regulatory environment. After months of hearings Congress determined that there was a need for an update in the regulatory framework. You also recognized the compelling necessity for explicit direction to guide the ICC in carrying out its assigned responsibilities. The Motor Carrier Act of 1980 spells out the full measure of change and the implementing instructions approved by Congress. The Act directs the ICC to minimize disruption in the industry and specifically admonishes the Commission not to attempt to go beyond its statutory authority. Our expectations of responsible implementation of the law were not long lived. The Commission's leadership has paid no more than lip service to carrying out the Act as it is written. Heedless of entry standards adopted by Congress, the Commission adopted policies requiring carriers to seek authority beyond their means and interest and has rubber stamped thousands of applications regardless of demonstrable need. Time and again, our Union has been to the courts in an attempt to bring the Commission back to the reality of its obligation to abide by the Act. Time and again, the appellate courts have agreed that the Commission has exceeded its authority and have directed that it must bring its policies and actions into accord with its statutory mandate. Nevertheless, the Commission continues to press its own version of deregulation. We have appeared before the Congress to document the unprecedented layoffs and job losses that have impacted on our members who have served the public for many years as employees in the freight industry. Our most recent survey indicates that more than 28% of our members working in general freight are on layoff. This is almost three times the level of unemployment reported in the general economy. In many areas of the nation, the situation is much worse. Congress made it clear that the 1980 Act in no way was to be construed as altering the common carrier service obligation. Yet the Commission has insisted on granting carriers authority they do not request and which they cannot hope to serve. Nevertheless, the public is entitled to expect certificated carriers to provide responsive service to the full extent of their operating authorities. In an effort to assure itself of responsive service, the Department of Defense recently resorted to its own self-help enforcement program. During the ten month period August 1981 to May 1982, the Department imposed 98 disqualifications and 13 probations on regulated freight carriers. Unfortunately, very few shippers have the economic clout of the Department of Defense. Since July of 1980, the trucking industry has experienced widespread rate slashing which has been spurred by desperate attempts to survive in the midst of overcapacity, serious recession and aggressive efforts to increase market share regardless of cost. Although responsible managers have directly attributed to below cost rate wars to the demise of their companies, the Commission has thus far declined to intervene. The devastating results of irresponsible rate cutting are readily observable in their impact on owner-operators. The Department of Agriculture reports that owner-operators costs have risen 15% during the period November 1980 through November 1982. Yet 75% to 85% of the burden of rate cuts comes directly out of the pocket of owner-operators. As a result, the USDA reports that almost 40% of owneroperators are on the highway 15 hours or more per day. In addition, a recent truck stop survey found that owner-operators are substantially increasing driving time between rest and meal stops in an effort to stave off financial ruin. Several months ago, our Union filed a petition urging the Commission to determine owner-operator costs and to assure that carrier rates would at least cover (85) those costs. Despite the fact that such action would relieve the unconscionable burden on owner-operators, the Commission has yet to act on our petition. Just recently, the Commission has agreed to take a look at the impact of pricing practices on the motor carrier industry. Thus far, it has requested only written statements and has not committed to hearings on the scene where the real impact of rate slashing activity is more evident. We urge the Committee to join in insisting that each of the Commissioners commit to preside at one or more hearings in key cities across the nation to develop an adequate record that will fully disclose what has happened to the trucking industry over the past 22 years. We believe that such a record will be invaluable to Congress and to all of the parties that are genuinely interested in the longterm health and survival of our transportation system. Our Union has not come here to find fault with the new laws. The truth is that the 1980 Act never has been tested because it never has been responsibly implemented by the Commission. We believe it is about time the Commission be directed to do just that. The Commission's leadership should be expected to carry out its assigned responsibilities. To that end, we urge that the ten actions set forth below are required to bring implementation of the act into full conformance with your intent. The first eight concern the Commission; the ninth action must be taken by the Secretary of Transportation, and we urge that the tenth action be taken by Congress. 1. Before issuing a certificate authorizing motor carrier service, the Commission should be certain that the applicant is physically and financially able to provide service coextensive with the certificate of authority and has not violated the Commission's rules or DOT's safety and insurance regulations. The Commission should also require evidence that the proposed service will serve a useful public service responsive to a public demand or need. In all of its actions, the Commission should comply with the National Transportation Policy (Section 10101), including its requirements to encourage fair wages and working conditions; to enable carriers to earn adequate profits, attract capital and maintain fair wages and working conditions. 2. The Commission should adopt a policy that carriers shall be required to provide service on demand, coextensive with their certificate. As a corollary, the Commission should not issue a certificate to a carrier which exceeds the scope of that applied for or which exceeds the applicant's ability to serve within 90 days after issuance of the certificate. 3. The Commission should commence and continue to monitor the operations of carriers to make certain they are fulfilling their common carrier obligation and are providing service to small shippers and small communities in their service area. Enforcement proceedings are needed as sanctions. 4. The Commission should adopt a policy statement requiring that rates published by carriers (a) must be at or above fully distributed costs; and (b) shall not discriminate against any shipper within the scope of the carrier's certificate by affording shippers in one area lower rates than those available to shippers in another area. 5. Every decision of the Commission implementing the Motor Carrier Act of 1980 explicitly shall consider and comply with the admonition in Section 3(a) that the Act is to be implemented with the least amount of disruption to the transportation system. 6. The Commission should promptly ascertain and maintain on a current basis the total costs of owner-operators whose services are used by regulated carriers in providing service to shippers. These costs are required by Section 10701 to be included by the Commission in determining adequate revenue levels and by the National Transportation Policy (Section 10101). The Department of Agriculture publishes such costs on a monthly basis for owner-operators engaged in hauling agricultural commodities. 7. The Commission should implement Section 10527 by requiring written contracts for the movement of exempt commodities. The Commission has declined to require such contracts even though it has recognized in its fuel reimbursement program that owner-operators "are in a weak financial position and lack the bargaining power to improve this position." It was Congressional recognition of owner-operators' "weak bargaining position" that led to the enactment of Section 10527. 8. The ICC and the Supreme Court held for more than 20 years that single source leasing of an owner-operator and his equipment constituted for-hire transportation requiring ICC authorization. By a policy statement in February of this year, the Commission overturned these decisions, stating that single source leasing is now private carriage. It assigned the Motor Carrier Act of 1980 as the reason for this radical departure from historic practice, despite the fact that the 1980 Act did not change the definition of private and for-hire carriage. The Act thus provides no au thority for single source leasing. The Commission action transforming for-hire carriage to private carriage is contrary to the Congressional Findings (Section 3(a) of the 1980 Act), which direct the ICC not to exceed the power vested in it by the Interstate Commerce Act and to implement the Act with the least amount of disruption to the industry. At a minimum, consistent with its findings regarding the lack of bargaining power of owner-operators, the Commission should have required that single source leasing contracts should be in writing so that shippers' ability to exploit the "weak financial position" of owner-operators would be thereby reduced. 9. The Secretary of Transportation should increase the amount of insurance required for any vehicle to $750,000 and coordinate with the ICC to see that there is strict compliance with this requirement prior to the issuance of a certificate or permit. The Department of Agriculture reported recently_that_owner-operators are driving on an average between 15 and 16 hours per day. The Secretary is thus not adequately enforcing his regulation limiting driving to 10 hours without rest. Excessive driving hours and accompanying fatigue are recognized as a primary cause of highway accidents. Adequate insurance coverage and effective enforcement of existing safety regulations, including checking of logs which drivers must maintain, are minimum protections the Secretary can afford the driving public. 10. The Teamsters Union requested inclusion in the 1980 Act of an employee protection program. The program was rejected with the assurance that the Act would be so implemented that no dislocation of employees would result. The Chairman of the House Committee pointed out that oversight hearings are required each year. He added: "If there is a lot of trouble, this Subcommittee will respond as it has in the past." Our studies show that approximately 28 percent of our members engaged in general freight are on layoff. In the light of these layoffs, Congress should accord displaced employees income protection and priority reemployment status. Layoffs and bankruptcies continue to mount at an alarming rate. The American Trucking Association reports that the entire trucking industry reported a deficit for the first half of this year and industry income was down 78 percent in the third quarter. The situation is extremely serious and threatens to get much worse if the Interstate Commerce Commission is allowed to continue its own brand of deregulation. Your immediate intervention and firm redirection is sorely needed to avert a very real disaster. STATEMENT OF THE NATIONAL ASSOCIATION OF MANUFACTURERS The National Association of Manufacturers (NAM) appreciates this opportunity to submit its views for the record on implementation of the Motor Carrier Act. The NAM is a voluntary business organization of approximately 12,000 members and has affiliations through its Associations Department and the National Industrial Council with an additional 158,000 businesses. NAM members account in the aggregate for nearly 80 percent of the nation's industrial output and 85 percent of the nation's industrial workforce. As the nation's major manufacturing business trade association, NAM is vitally concerned with promoting competition within the motor carrier industry. Passage of the Motor Carrier Act of 1980 was generated by the widespread belief in Congress that the statutes governing federal regulation of the motor carrier industry had become outdated and that the existing regulatory structure inhibited motor carrier growth and utilization. In the second year of implementation, there is considerable evidence that the significant reforms of the Act-eased entry, rate flexibility, and reduced antitrust_immunity-have promoted competition in the trucking industry. The Interstate Commerce Commission has granted almost 50,000 new certificates for operating authority since the effective date of the Act, and new applications are being filed at the rate of nearly 1,000 each month. In the area of pricing, an influx of independent ratemaking actions has resulted in a general reduction of rates. Nevertheless, the NAM believes that the overall rate level for motor carrier service is higher today than it would be without collective ratemaking. The Motor Carrier Act of 1980 targeted ratemaking as an area for reform and stated that a freely competitive pricing system would enhance productivity in the motor carrier industry. In order to properly evaluate the collective ratemaking process and determine the impact of eliminating antitrust immunity from collective ratemaking, Congress established the Motor Carrier Ratemaking Study Commission to make these evaluations. The Commission has a mandate to report its findings to the President and the Congress by January 1, 1983. |