STATEMENT OF FRED M. MELIUS, JR., VICE PRESIDENT AND ASSISTANT GENERAL COUNSEL, UNITED STATES FREIGHT CO.

Mr. MELIUS. That is correct, Mr. Chairman. The weather was quite different.

My name is Fred M. Melius, Jr.; my business address is 345 Hudson Street, New York, N.Y. I am vice president and assistant general counsel of United States Freight Co. and its subsidiaries, one of which, Universal Transcontinental Corp., Ltd., was licensed to do business in Hawaii and has its principal place of business in Honolulu. License No. 01037 was issued by the Territory of Hawaii on July 31, 1935. We have done business in Hawaii continuously since that date. Senator Bartlett, in his introductory remarks, did not refer specifically to bills S. 1509 and H.R. 6244, but he has indicated he invites testimony in respect to any proposed legislation affecting transportation. These bills, in my opinion, are just as important to the common carriers of the State of Hawaii as they are to the carriers of Alaska, to which the bills specifically refer.

Briefly, these bills provide for granting so-called grandfather rights to those common carriers by motor vehicle, freight forwarders, and certain water carriers operating within Alaska, whose operations are interstate in character, and who were in operation prior to May 15, 1958, and who filed applications with the Interstate Commerce Commission prior to December 31, 1959.

I will refer later in my testimony more specifically to these bills. Mr. Giles Morrow, president and general counsel of the Freight Forwarders Institute, testified in behalf of the institute at hearings starting May 5, 1959, before the Senate Committee on Interstate and Foreign Commerce in respect to Senate bills S. 1507, S. 1508, S. 1509, S. 2451, and S. 2452. He also appeared before the House Subcommittee on Transportation and Aeronautics of the Committee on Interstate and Foreign Commerce, and submitted a statement regarding bill H.R. 6244.

I assume that this hearing is merely a continuation of the prior hearings in Washington, and also those recently held in Alaska.

I would like, therefore, to subscribe to the statements made previously by Mr. Morrow. I appeared before this subcommittee in Anchorage, Alaska, on October 26, 1959, and testified in respect to bills S. 1509, S. 2451, and S. 2452.

Insofar as the State of Hawaii is concerned, my testimony regarding the State of Alaska would be the same. However, I would like to add a few adidtional remarks.

I would like first to refer to bill S. 1509, which among other purposes permitted freight forwarders, motor carriers, and certain water carriers to continue service to, from, and within Alaska. This bill with amendments was passed in the Senate but no action has yet been taken in the House of Representatives. That bill, by the way, was introduced in the Senate on March 23, 1959, and was reported out with amendments on June 16, 1959.

As I testified before, the companies I represent are in favor of that bill. However, since S. 1509 was introduced prior to the statehood of Hawaii no reference was made to Hawaii. Since the identical transportation problems exist in respect to Hawaii as to Alaska, I am sure

that this committee should and probably intends to make S. 1509 applicable to Hawaii.

The admission of Alaska and Hawaii as States create two serious problems from the standpoint of freight forwarders. The first concerns the question of the right to continue to serve the new States under their ICC permits. The second has to do with the carriers which freight forwarders lawfully may use in providing service to those States. If S. 1509 had become a law both of these problems would have been solved insofar as Alaska is concerned, since the bill provides for grandfather rights, and also amends section 418 of the Interstate Commerce Act to permit the use of common carriers by water by freight forwarders.

On the question of operating rights to a new State, the Interstate Commerce Commission initiated a rulemaking proceeding on February 16, 1959, identified as Ex parte No. MC-54, entitled "Interpretation of Operating Rights." As a precautionary measure most forwarders which handle shipments consigned to and from points and places in Alaska and points and places included in their present operating permits filed applications with the Interstate Commerce ComInission to have their permits amended to include Alaska. At the same time relying upon a rule proposed by the Interstate Commerce Commission which would have automatically authorized them to operate between Alaska and the other States, filed motions to have the applications dismissed as not being necessary.

On October 13, 1959, MC-54 was decided, and it was held that permits previously issued referring to States only contemplated those States which were States at that time. This order of the Commission will become effective on November 30, 1959.

In Anchorage, Alaska, I was permitted to incorporate by reference a copy of that order, which is in the record before this committee.

As freight forwarders, we are handling a substantial amount of shipments between Hawaii and the mainland. Applications for operating rights have already been filed, or are in the process of being filed, with the Interstate Commerce Commission, but hearings on the applications will probably not be set for some time to come, and then through the regular processes the resulting order will come a long time thereafter.

We and other carriers are possibly the innocent victims of this great national accomplishment, the creation of two new States. However, I urge that steps be taken as soon as possible to rectify a situation which frankly can very well result in a serious disruption of transportation services between the mainland and Hawaii. Frankly, we don't know what our legal liabilities are, or will be, if we continue our present operations. Maybe we are operating without a proper permit. Maybe we are using unauthorized carriers, but all of this would be resolved with the enactment of S. 1509, and with its amendment to include Hawaii.

Possibly Congress should separate the issues involved in the several bills and pass legislation immediately in the next session concerning grandfather rights and use of common carriers by water in section 418 of the Interstate Commerce Act. We hope that we won't be required to cease our operations to and from Hawaii, but we feel that we are in a desperate situation, and that the only expedient solution is through proper legislation.

I would like to make a brief statement regarding bills S. 2451 and S. 2452, and identical bills H.R. 8564 and H.R. 8565.

I have already testified regarding these bills, and have stated that I do not take a position for or against S. 2451, which requires mandatory joint rates between and among carriers subject to parts I, II, and III of the Interstate Commerce Act, and carriers subject to the shipping acts and the Federal Aviation Act of 1958.

However, if favorable action is taken on this bill we feel that carriers subject to part IV of the Interstate Commerce Act should be included in the mandatory rate provisions. Since carriers subject to the other three parts of the act are included, the freight forwarders should not be excluded and placed in a noncompetitive position.

H.R. 8565 and S. 2452 provide for permissive joint rates and through routes between the continental United States and Alaska and Hawaii, between and among all common carriers subject to the Interstate Commerce Act, the shipping acts, and the Federal Aviation Act. These permissive joint rate bills include surface forwarders, and we therefore favor their passage.

To the extent that forwarders could work out joint rates with the underlying carriers and establish divisions of the forwarder through rate it would be desirable. To the extent that such through joint rates could not be worked out there is, of course, nothing to prevent continued forwarder operations on the basis of contracts with motor carriers and payment of published rates of the rail and the water carriers. We think, however, we should have freedom to work out through joint rates and be on an equal basis with our competition. If we cannot be competitive we can no longer adequately serve the public. That concludes my statement.

Senator BARTLETT. Thank you, Mr. Melius.

Mr. Barton, do you have any questions?

Mr. BARTON. Yes, Senator.

Mr. Melius, is the crux of your position that the legal position of the forwarders should be clarified at once so they can operate legally? Is that correct?

Mr. MELIUS. Well, since this interpretive order of the Commission it is my opinion that we do require operating rights which apparently we do not have at the present moment.

Mr. BARTON. I believe that dealt with motor carriers, did it not, and you feel it would also apply to forwarders if the matter came before the Commission?

Mr. MELIUS. That is correct. S. 1509 covers freight forwarders as well as motor carriers and water carriers.

Mr. BARTON. In regard to joint rates, I believe under the present terms of the Interstate Commerce Act, freight forwarders are not allowed to make joint rates with other carriers; is that correct? Mr. MELIUS. That is correct, we don't have joint rates.

Mr. BARTON. You think as far as Hawaii is concerned, though, you think they should be allowed to make such joint rates? Mr. MELIUS. We would like them very much.

Mr. BARTON. Thank you. That is all I have.
Senator BARTLETT. Mr. Hoff?

Mr. Lordan?

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Mr. LORDAN. Mr. Melius, do you not envision some difficulty exists in this joint rate and through tariff concept as proposed by this Joint Board with relation to Hawaiian motor carriers if this indifference or disavowal by the ICC of regulations in Hawaii of motor carriers engaged in interstate commerce is continued or maintained?

Mr. MELIUS. Well, most certainly. However, it is my opinion that since they have rendered a decision in MC-54 which indicates that they now feel that motor carriers as well as freight forwarders who do not at the present time have operating authorities which specifically refer to Hawaii and Alaska, that they have no authorized certificates or permits from the Interstate Commerce Commission. So it seems to me that the Interstate Commerce Commission, being an administrative body, they have got the statute before them, and if the statute applies to motor carriers handling interstate shipments in the State of Hawaii, and in the State of Alaska, they have no choice but to administer the statute and they can very well just wash their hands of the whole thing and say "We are not going to do anything about it." I think the statute requires them to do something about it.

Mr. LORDAN. There has been a marked difference between the attitude or position of the Commission with relation to jurisdiction in fields adhered to by it in aconnection with Alaska, on the one hand, and contrasted with Hawaiian statehood, on the other, in your opinion?

Mr. MELIUS. There has been, and it is completely baffling to me because, as I see it, the problems are exactly the same that exist in transportation involving Hawaii as in the State of Alaska.

Mr. LORDAN. In other words, when Alaska became a State as was indicated in Chairman Clark's letter, the Commission took the position that instantly part II of the Interstate Commerce Act, the Motor Carrier Act, applied to carriers operating to, from, and within the State of Alaska engaged in interstate commerce; is that not correct? Mr. MELIUS. That is correct.

Mr. LORDAN. And sent a supervisor to that particular territory and issued temporary authorities and required the motor carriers to file rates and be governed by the safety provisions of the Motor Carrier Act, and so on?

Mr. MELIUS. That is correct.

Mr. LORDAN. That is your understanding. But with relation to the new State of Hawaii they have not attempted to follow a similar position, or attitude?

Mr. MELIUS. They have done nothing, as far as I know, and it would seem to me that as we all know the Interstate Commerce Commission on the mainland regulates motor carriers doing business solely within a State, if they handle interstate shipments. So how they could possibly merely find in some fashion or other that the statute does not apply to similar carriers in the State of Hawaii is beyond me.

Mr. LORDAN. One other question. The exemption that is possible for the Commission to exempt motor carriers from regulation who transport property within a municipality or within an area commerically adjacent to that municipality might possibly given under some strained interpretation the intention that they might exempt the island of Oahu, if you can call the area adjacent to Honolulu,

but it would certainly not exempt barge operations between here and any of the other islands.

Mr. MELIUS. It would not in my opinion. I think you are referring to section 202 (c), part II, of the act.

Mr. LORDAN. I am.

Mr. MELIUS. And the Commission in an administrative proceeding has established a formula for the exemption of motor carriers operating within commercial zones, and that formula has established a mileage limitation beyond the corporate limits of a city, dependent upon its population and the greatest extension of a commercial zone based on population is 5 miles beyond the corporate limits. It varies from 1 to 5 miles dependent upon the population of any particular city, and then in a few instances they have specifically described a commercial zone which has in some instances gone beyond that 5 miles, but not to a very great extent.

Mr. LORDAN. But at the present time this reluctance or disavoal of jurisdiction would raise some serious points, legal situations, with respect to motor carriers engaged in interstate commerce over whom the Interstate Commerce Commission has not so far attempted to exercise any jurisdiction, whether or not they would be entitled under the terms of Joint Board 52 to engage in joint rates and through routes under the provisions of that bill.

Mr. MELIUS. Yes. Of course I am speaking here principally as a freight forwarder, and not as a motor carrier. However, some of our subsidiaries are certificated motor carriers and have operations similar to those of motor carriers here in the State of Hawaii, and we have been granted certificates by the Interstate Commerce Commission and we comply, of course, with all of their regulations.

Mr. LORDAN. Thank you.

Senator BARTLETT. Mr. Melius, what is a freight forwarder?

Mr. MELIUS. A freight forwarder is a common carrier and one who assembles smaller shipments into larger lots and consolidates them and transports them by means of common carriers regulated under the Interstate Commerce Act, and who breaks bulk at an intermediate point, or a final destination point, and distributes to the ultimate consignee.

Senaor BARTLETT. And transportation may be by any means?

Mr. MELIUS. By any means except common carriers by water not subject to part IV of the act. That is why we feel that section 418 should be amended and S. 1509 does contain such an amendment. Senator BARTLETT. You said, I believe, that the outer limit of this municipal rule intended to be on the order of 5 miles.

Mr. MELIUS. That is correct.

Senator BARTLETT. Do you believe it might be sufficiently elastic to include this whole island?

Mr. MELIUS. There has been no precedent on the mainland.

Senator BARTLETT. Then let me ask you this: If a piano is transported from Rochester, N.Y., to San Francisco by truck, or by railroad, thence to Honolulu by water, thence by motor carrier to some small community of this island, would you consider that to be a shipment made in interstate commerce?

Mr. MELIUS. Yes, I would, if the original consignment was made to the ultimate consignee.

Senator BARTLETT. My assumption is that that is the case.