Combined Truck/Rail Transportation Service: Action Needed To Enhance Effectiveness

Published by the Government Accountability Office on 1977-12-02.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   REPORT TQ THE CONGRESS
   ,\l’ I’ \I ‘/
             - 1

;*i?$ . * 1-       BY THE COMP7’fWLLER                                                   GlYNERA I,
>;,“.y -35         OF THE UNITED STA7‘ES
                                                                                               Ill11             Ill

                   Corn bined Truck/Rail
                   Transportation   Service:
                   Action Needed To Enhance

                   Piggyback,     the transportation        of truck trailers
                   and containers       on rail flatcars,     offer<, in prin-
                   ciple,   increased     efficiency      af a timP when
                   saviig energy      is of increasing        importance     to
                   the ka.tion.

                   Some      shippers        who use trucks          would      use
                   piggyback       more       if there were better           rales,
                   speeaier     service,      and easie: handling         of loss
                   and     damage        claims.     Interstate      Commerce
                   Commission          officials    believe      that railroads
                   generally     do not prom+;c            plggyback     becrluse
                   it ma’{ compete             with  their boxcar        ser.lce--
                   boxcars,     with their 40-,fzar iifespan,          represent
                   a subs qtial capital irdestment.

                   GAO makes a series of recommendations              to
                   reduce these difficulties     and concludes     that
                   the primary  impetus      to iFcreased   piggyback
                   use must come fron: the railroads.

                                                                                      DECEMBER   2, 1977
                                WMWIWTON.   O.C.   aosa8


To the Presiclent of the         Senate and the
Speaker of t.e House of          Representatives
        This is our report        on what the Interstate      Commerce Com-
mission     can do to encourage         the growth  of piggyback      and in-
crease transportation         efficiency.       The report  discusses      the
problems     railroads    have and how the Commission,         within    its
statutory      authority,    can help alleviate       them.

       We made our review  pursuant  to the Budget and Account-
ing   Act, 1921 (31 U.S.C.   53), and the Accounting and Audit-
ing   Act of 1950 (31 U.S.C.    67).
       We are sending      copies  of this    report    to the Director,
Office   of Janagemcnt      and Budset;    the Chairman,       Interstate
Commerce Commission;        and the Secretary        of Transport,ation.

                                             Comptroller   General
                                             of the United   States

               Piggyback,     the         transportation         of   truck  trailers
               and containers             on rail      flatcars,      can increase
               transportation             efficiency        in the    United   States.

               Trucks     offer       cost and service           advantages     for
               short     hauls,       principally         pickup    and delivery:
               railroads        offer      fuel    efficiency       and cost ad-
               vantages       for longer          hauls.      Piggyback,     the com-
               bination       of the twc, offers              the most efficient
               use of both at a time when saving                      rnsrgy    has
               become     increasingly            important      to the Nation.

               During    the last       decade,      pigqyback        has enjoyed
               some   growth.       While piggyback             carloadings         com-
               pared to total         rail    loadings       has increased,
               the--- accounted       for only 5.9 percent                of the
               total   domestic       rail    freight      carloadings          in 1976.
               Various     transportation          interests         believe      that
               piggyback      is still      limited      and is clearly             a
               long way from achieving               its   full      potential.
               Interstate       Commerce Commission            officials      told
               GAO that     railroads          could promote       piggyback     more
               but do not do so because they do not want piggy-
               back    to divert       traffic      from their       boxcars,    which
               have a useful        life       of 40 or more years.
               In order     for the public      to receive   the qreater
               fuel  efficiencies,       environmental     benefits,    and
               cost savings        which can come from greater       pigqy-
               back use:

               --Railrcads    will          have to solve certain             problems
                  which discourage             shippers from using            piggy-

               --The     Interstate        Commerce Commission           should    help
                  promote       piyyyback       by chanqing        some of its
                  regulations          and by examining          the effect     of
                  certain       inequities         in the Interstate        Commerce
                  Act and seeking           legislative       authority,      where
                  needed,       to  Iitdke  neeiied     changes.

m.           Llpan rerroval. tb* report
cover dat* houid be noted hereox
The railroads      must lead in providing         services
that shippers      demand.    Generally,      shippers
using piggyback       are sensitive      to delay8     in
pickup    and delivery;    therefore,      swift   railroad
services    must be maintained.

For example,   shipper8      in the traffic     corridor
between the Twin Cities        of Minneapolis-St.
Paul and Chicago     indicated     that they are dis-
couraged  from making more use of piggyback              be-
cause :
---hverage   trucker       delivery     times were faster
    than pigqyback,        8 hours     compared to over
    17 hours delivery         times.
--The rate structure       offered           for   piqgyback
   often   was less attractive             than    rates   offered
   by truckers.
--There   were losses  and damages by piggyback,
   and shippers   had problems  in recoverinq   dam-
These problems    must be solved before       piggyback
can grow between the Twin Cities         and Chicago,
and there   are indications      that similar    problems
exist  in other   parts    of the country.
The Commission         agreed with GAO that the rail-
roads must improve but noted that                     the problems
railroad     have in providing            service       to meet
shippers’     and carriers’          piggyback        needs are
serious.       It said that,         while    the railroads
are the central         focal     point,     actually        perform-
inq the service,          the improvements            they can ac-
complish     may be 1 imi ted.           The special i zed needs
of the shippers         and the ns:ural           inflexibility
of rail     operations       need to be considered.                 The
Commission       believed     that due to the basic
differences       between rail         and truck        service,
diversion     of traffic        to piggyback          cannot be ex-
pected beyond a crLtain              level.
The Department         of Transportation  recognizes
that railroads         need to improve their   piggy-
back operations.           The Department recently

    announced a demonstration         progrirm   to promote
    piggyback    by showing the railroads          that produc-
    tivity,   profitability,     and energy conservation
    can al1 be achieved      through     improved
    piggyback    operations.      (See p. 14.)
    The Interstate    Commerce Commission        could en-
    couraqe piqgyback     qrowth    by changing     some of
    its regulations.      For example,     it should elim-
    inate or modify    its restrictions       on
    --rail-owned      truck  companies         so they     can peform
        piggyback    more effectively          and
    --trucker’s      use of     piggyback.
    Because it was concerned              about the competitive
    advantages        that truck    companies       owned by rail-
    roads could have over other               truckers       and rail-
    roads,     the Commission       generally       restricted
    their    operations.        This,     in turn,     limited     the
    railr   >ads.’ ability      to perform       pigqyback.
    Modificaticn         of these restrictions           would
    eliminate       the dependence        of some railroads          on
I   truckers      for providing        piggyback      service,     and
    this should be done.              (See p. 16.)
    The Commission       prevents      common carrier          truck-
    ers from using piqgyback             under some circum-
    stances;    for extmple,        a trucker      cannot use
    piggyback     if the mileage         traveled      is less than
    80 percent      of the mileage         the truck       would
    otherwise     travel    on its authorized            highway
    route.     The Commission        says such restrictions
    are needed to protect           existing      carriers       and
    insure    adequate     service.
    However,      the Commission           is currently     studying
    the need for this           limitation.         In respondinq
    to this      study,     the Council        on Wage and Price
    Stability       urged the Commission            to eliminate     all
    restrictions         on truckers'         use OI piggyback.
    GAO concurs         with this.         (See p. 22.)
    ;1so,  truckers        wanting   to specialize      in pigqy-
    back are prevented           in some cases because the
    Commission     will      not grant  operating     authority
    if regulated        truckers    are already    serving      the

           . .               . . -.
                          .. -

area adequately.        Although     truckers    without
authority   can lease their         equipment     with
Commission    approval,     to a regulated        trucker
to provide    piggyback     servfce,      the lease fee
ca? range from 13 to 20 percent              of revenue.
This probably     increases      piggyback     cost.
In July 1975, a Commission          internal      study
panel recommended       that special       Commission
operating     authority    be granted      to truckers
wanting   to specialize       in piggyback,       thus
enabling    shippers    to take    advantage      of long-
distance    railroad    economies.       The? Commission,
holdever,   rejected    the proposal       because it
belfived    existing    regulated     truck    service
wss adequate.           (See p.            24.1
---                           ---   THE

One problem       piggyback        faces is the large
amount’of      empty return         mileage--40        per-
cent    compared to 16 percent               for trucks      on
highways.       In this       regard,      the Interstate
Commerce Act gives           truckers        a competitive         ad-
vantage.       The act allows           truckers     to haul
agricultural        commodities         which are exempt
from truck      regulations          at whatever       rates
they    can negotiate.           Railroads,       however,
can only haul the commodities                   at published
rates.       As a result,        truckers       underbid     rail-                        /
roads,     and this      contributes         to the railroads’              : 1
empty return        problem.
                                                                            : /
                                                                             I :
The Commission   should   study     the inequities       of                 1 !

the act in terms of its      restrictions       on piggy-
back and seek legislative       authority     to make
needed changes.     But tne primary       leadership
needed to increase     the use of piggyback         must
come from the railroads.
The Commission          said GAO’s report      correctly
points      out there      are many interrelated         fec-
tors     inhibiting      the growth   cf piggyback
service.          Commission   task forces     are studying

--key    point     restrictions,

                                      iv                                        1
                                                                                8     I

                                                                         .:!I        ‘t
--unrestricted          motor   carrier   certification,    and

--Interstate          Commerce Act restrictions
    relating     tc    rail-owned truckers.

The Commission         said it also agreed with GAO’s
analysis     of the inequities        involved    in trans-
porting     agricultural       commodities     and said it
had repeatedly         requested   legislotion      to elimi-
nate    the disparity.

-   c-   l   ---
DIGEST                                                          i

   1      INTRODUCTION                                          1
               Jurisdiction   over    piggyback                 2
               Scope of review                                  5
            PIGGYBACK                                           6
               ICC determination     of pigqybac!:
                  efficiencies                                  6
               DOT's efforts     to determine   piqgyback
                  efficiencies                                  7
            THE USE OF ?IGGYBACK                               10
               Corridor    description                         10
               Need to improve        piggyback   delivery
                  times                                        11
               Piggyback    rates     are not attractive
                  to some shippers                             13
               Need to improve        urocedures   for
                  handling    loss and damage claims           13
               DOT efforts      to improve piggyback
                  growth                                       14
               Conclusions                                     15
            OF PIGGYBACK                                       16
              Restrictions    on railroad-controlled
                trucking   companies     appear to
                hamper piggyback                               16
              Restrictions     which prevent       truckers
                from usinc piggyback                           21
              Tneouities   involving     transports-
                tion of agricultural        commodities        24
              Legislation    recuested     by ICC to
                 improve piggyback      use                    26
              Conclusions                                      27
              Agency comments and our evaluation               28
              Recommendations                                  30

APPENDIX                                                          at
        I   Description  of piggyback             clans taken
              from ICC field   service            manual           31
   II       Letter  dated September      19,        1977, from
               the Chairman,  Interstate            Commnerce
               Commission                                          33

 III        Princiwl       Interstate       Commerce Commission
               officials       responsible      for administer-
               inq acti\*ities        discussed     in this re-
               port                                                38

IJOT        Department      cf   TraPSpOrtataOn

GAO         Sener~l      Qcounting       Office
ICC         Interstate      Co;rlmerce    Cornmission

                                                                             I   ’
                                                CHAPTER 1
        In 1976 the Congress             established         a National
Transportation          Policy    SI-udy Commission           to investigate         tran-
sportation       needs and resources.                The 19-member Commission,
consisting       of 12 congress,onal              members and 7 public           members,
is evaluating         the rc-.lative       merits      of different       transporta-
tion    modes, -nd it clans            to make recommendations                in 1978.
Part of t1         ommiss;on’s         study      relates     to intermodal        service,
which cffe,,       the advantage           . f transportation          carriers      work-
ing tcgether        for increased          efficiency.          Piqgyback--tSe
transportation          of truck     trailers        and containers         on rail
flatcars--     is one such intermodal                service.

        Pigqyback      offers      the inherent       advantages      of both    truck
ab,J rail.       Trucks      usual!.y    possess     cost and service       advantdqes
for short     hauls,       princioally       pickup     and deiivery,     and rail-
roads offer        a cost advantage          for longer      hauls.     Rail road and
trucking     officials        believe     that    the cost advantage        shifts     from
regulated      trucks      to rail     at a distance       of about 400 miles.
       The .nterstate       Commerce Cornmission         (ICC) and DeparLment
of Transportation        (DOT) have said that more use of pigqyblck
would provide      greater     energy  efficiencies.            During     the last
decade,   piggyback      has enjoyed     some growth.           As shown &low,
the psrcentage       of piggyback     carloadings        to total      rail     car-
loadings    has increased       somewhat,     but    in 1976 still         accounted
for only 5.9 percent         of total    domestic      ra:lfreight         carload-
                       1966              i371            1972     19’3
                                                                     .---         1974     1975    1976

   carloadings         29.6              25.3            26.1             27.3    26.4     23.2    23.6

   carloadings            1.2               1.2            1.3             1.5      1.5     1.2     1.4
Percent    of
  to total                3.9%              4.7%           5.7%            5.6%     5.7%    5.3%    5.9%

      ICC officials        told us that there        has been mere growth
in the use of piggyback          to haul containers         for ir:rort-export
movements.      But various      transportation       interests      relieve      that
the ::ailroads'      present    percentage      of piggyback     traffic       is
still   auite   limited      and that piggybac”       is clearly       a long wav
fro;1 achieving       J ts full  potential.
---                 OVER PIGGYBACK
        ICC is a:' independent           agency with broad responsibilities
far insuring        that    the United      States  hss an adequate,      efficient
transportation         system under private         ownership.    ICC's regula-
tory   responsibility          affects     every mode of surface     ttansporta-
tion.       It is composed of 11 members who are appointed                 by the
President      and confirmed          by the Senate.     The Chairman is
designated       by the President        , and the Vice-Chairman       is elected
        The Interstate       Commerce Act provided                the basis for ICC's
policies     and regulations          of transportation             by rail,      motor,
and water.       Although      certain     sections        of the act deal with
intermodal      service    between railroads              and water carriers,
t!.e Conqress      did not give ICC specific                 instructions         about
intermodal      service    between railroads              and truckers.           ICC, by
law, has authority         to require          intramodal       through      route agree-
ments for railroads,           water carriers,            and buses and intermodal
agreements     between     railroads       and water carriers.                A through
routt-   is an agreement        between two or more carriers                    to carry
freight    from an authorized           polilt      on the line of one carrier
to an authorized        point     on the line of another.
        ICC tias developed      specific       piggyback     regulations     which,
among other       things,   provide      (1) standardization          of industry
practices,      (2) tarii’f    and billing        requirements,       and (3)
guidelines      for pigqvback       service.       Other ICC regulations
which apply to motor and rail               transportation       also apply
to piggyback.
Truck    regulations --
          Ovei 15,000 trucking             companies      serving    the public     are
subject       to ICC economic           requlations.         These companies       may
be divide6         into     two classes--common           carrier    and contract
rarriers.          Ccmmon carriers           serv? the general         public   and
publish       rates     for their       services.        Every common carrier        ,
in order        to operate       interstate,         must prov? to ICC that
the proposed           service     is needed.         Once this is done, the
common carrier            receives      an operating       authority     which
specifj: 2s tne locations               it may serve and, generallv,             the
commo~:lties         it may carry.

        Contract       carriers       opetote    under continuing        contracts
with one or more shippers.                    By assiqninq     vehicles      to shippers
and through        other      special     services,     a contract      carrier
serves    the distinct           needs of an individual           customer.        Ccn-
tract    carriers       must also obtain            ICC permission      before
operating       interstate.

        ICC, by law, does not have authority              over (1) intrastate
trgck     movements,    (2) interstate    trucks     carrying      certain
agricultural      products,     (3) local   truck    transportation        in
commercial     zones which are specified          urban districts,         and
(4) truckers      engaged in private      operations,        such as manu-
facturers     and retailers      who may have their        own t:u’,k;;    hut aye
not in the transportation-for-hire             business.
        ICC has approved          seven basic plans which shippers                 use
for piggyback      service.           (See app. I.)        Two of the plans
involve    the cooperation            of common carrier         truckers      and
railroads.       Under those plans,            the shippers        are allowed      to
deal with truckers           in transportinq         their    cargoes.        These
truckers     can provide        the trailers        and pickup       and delivery
stirvices.      The revenue         from these shipments           is divided
between    the trucker         and the railroad.           Although      truckers
are not required          by law to entes into any pigqy5ack                   agree-
mtnts with railroads,             they may do so.          Whe,l such an aqree-
ment i n made, ICC roq;lires              that   the truckers        have the
operating     authorities         to carry     cargo for their          segments
of the piggyback          a,ovements.
gailroad      regulation
          Except    for railroads          which do not serve the general
public,       all   tailrolds        are subject       to ICC regulations.
Whe.1 shippers          deal 3irectly         with the railroFede          for pigqy-
hack service,           the railroads         may provide        all eauipment        and
service       from pickup        to delivery        or only the rsil          porti%
cf the movement.              If the railroads           provide     pick up and
deli;.,,.y      with thei:       own trucks,        ICC requires        that    the
truck.-     have, when necessary,              motor carrier         operating       au-
khorit’es         to provide       service      between     the raiiroad        loading
1 ?II:ip 5 and the shipper’s            loading     and unloading         pcints.       NO
ICZ :: .,thor i ty is neceasirry            with respect         to certain       piqgyback
pla.is when truck            service      is performed        within    the exempt com-
mer,ial       zones.

       ICC does not have the authority             to reauire     throuqh
route     agreements     between    trucks   and railroads,     but both can
voluntarily        enter  into   such agreements.        E<:PK~ tar if f must
be filed      with    ICC showing     the service    to be brovided,      routes,



                                                                          -         -
                                  _ _-.
,   1

    and rates.         When railroads          and truckers          enter    into throuqh
    route arrangements,             chiirqes     for service         must be just and
    reasonable.          Railroads       and truckers         us;lally     aaree to charye
    9 single      rate,    called      a joint       rate,    for carryinq          freight       on
    3 through       route.      Under five piggyback               plans,     railroads         can
    provide     piggyback       service      without       the cooperation            of common
    carrier     truckers.         ICC reTalires         that railroad         piggyback
    service     be available         to ell;       therefore,        common carrier           truck-
    ers can use piggyback              services       without      making special           joint
    rate arrangements           with the railroads.
            We reviewed    the efforts       by the rail      and trucking         indus-
    tries,    ICC, and DOT to increase            the use of piggyback.              We
    did not assess (1) the operations                of other    intermodal        trans-
    portation     systems    such as water and rail           carriers,      airlines
    and truckers,       and railroad      landbridges,       (21 the nature          or
    extent    of potential      piggyback      technoloqical       improvements,
    or (3) the adequacy of rail             equipment     to perform      piggyback.
           Our review         was done at ICC headquarters               in Washington,
    D.C. ; regional         offices        in Chicago     and San Frarcisco;        the
    Minneapolis       field       office:      and railroad     and trucker      head-
    quarters    in Illinois,              Kinnesota,    and California.       We inter-
    viewed ICC personnel               and reviewed       ICC’s statistics       on
    piggyback     traffic,         policies       and procedures,       and applicable
    laws and regulations.
            We Jiscuss;zd         piggyback     usage with shippers        in Minne-
    sota,     Illinois,        and California        and met with DOT officials
    to (1) obtain           their    assessment     of piggyback     growth     and
    potential         and (2) determine         the extent     of their    partici-
    pation       in promoting        piggyback     growth.     We also discussed
    the impact of piggyback               with several     officials     of the
    Teamsters         Union.
          We studied       the traffic    corridor  between Chicago and
    Minneapolis-St.        Paul (Twin Cities).      We selcctcd    this
    corridor       because   a heavy volume of freiqht       moves regularly
    in each direction,         there   are a lsrqe  number of shippers,
    the transpcrtation         modes are highly    competitive,    and the
    cities      are for enough apart      to take adlrantaqe    of pigqyback’s


                                   CHAPTER 2
                           USE OF PIGGYBACK
        The Interstate     Commerce Commission        and the Department       of
Transportation        have evaluated    the merits      of increased    piggy-
back use and concluded         that the public       would benefit.       ICC
in an August 1976 statement          concluded     that    increased  Qiggy-
back use would provide         fuel efficiencies        and environmental
benefits     to the public.
       DOT has funded         'TWO research     projects       in an effort       to
obtain   information        on the feasibility           of a systematic        piggy-
back network.           The researchers      found that a piggyback             network
is feasiblt3      an-I that     it woulcj result       in energy efficiencies
and environmental          benefits     if the railroads           make several
changes,     prirzarily     by providing       better      service    and lower
       In October   1976, ICC modified         a regulation       which co.Jd
increase   the use of piggyback.           (See p. 22.)       ICC stated      in
its environmental     impact statement        on this     regulation     change
that the shift    of additional      traffic     from highways        to rail
would be beneficial      as follows:
       "The .lok?er rolling      :esistance     of steel     wheels on
       steel    rails  as cor,.pared to pneumatic        tires     on
       pavement surfaces,       and the economre;        of scale
       associated     with longer       trains  make railroads        a
       more energy efficient          trsnsport    mode than trucks
       by a factor     of between 2.5 to 1 and 4 to 1 or
       more   for an equivalent         ton mileage   of frei.Jht.
       tc* * * Since piggyback          service    is utilized      pri-
       marily     for intermediate         or long distance       hauls
       and the increased         use of such service         will   re-
       sult   in larger     trains,      the energy efficiencies
       obtainable     from rail      tranqort      will   be realized
       close to their       full    extent."
         ICC also stated      that more piggyback    shipments  would have
a beneficial      effect    upon the eir quality     because total    emnis-
sions per ton-mile         would be reduced by the increased       use of
more efficient        rail  transportation    and higher   rail load

       ICC pointed         out that    increased       grade crossing       accidents
and derailments          may be disadvantages            of additional      use of
piggyback.         According     to ICC, these disadvantages,               as well as
other    safety      hazards   associatr     Z with heightened         rail    activity,
would be offset           by improvements        in highway safety.          Histor i-
tally,     railroads       have had fewer accidents           per vehicle-mile
than intercity          common carrier       truckers.
-------------------- EFFICIENCIES
        DOT was established          in 1966 to develop    coordinated      trans-
portation      service,      provide   general  leadership    in solving
transportation         problems,     and make recommendations       on trans-
portation      to the President        and the Congress.
        DOT’s 1975 Statement         of National   Transportation      Policy
noted that,     for the most nart,         the potential     of intermodal
services     remained    unrealized.      DOT said the problem        had been
a lack of information         for decisionmakers         to measure the po-
tential    of intermodal      services.
        !?.=+rly in 1972,       DOT publicly      posed the question              of whether
a national        piggyback      network     could provide        significant           na-
tional      benefits      and be self-sustaining.             In 1973, DOT ccn-
tracted      with Reebie Associates,             a transportaticn            consulting
firm,     for two research          projects     on piggyback.           These projects
were to consider           the feasibility        and benefits         of a nationwide
piggyback       system     1,’ and piggyback       in a selected           traff 1c cor-
r idor,     2/    H;rpothesizing       the amount of intercity               freight       which
would sfiift        to _ ail if piggyback         servicns      were faster           and
rates were cheaper,             Reebie Associates        projected         the benefits
and problems          that such a system could have cn the transporta-
t ion industry.
       Althoxgh     Reebie Associates      concluded     that more piggy-
back was feasible,        its projection      was based on several     stand-
ards needed for a successful           piggyback     operation.   These
standards     were:


&/National    Intermodal      Network
   ~~~7a~~~ZT~7ziS-~ay-i~~~~-----------        Feasibility        Study,
                                                                ----v        Report     No.

&‘fiE-&Eproved           Truck/Rail
    CorridorS---------------           Operation:     Evaluation    of a Selected
       --Typically,      more profitable        traffic       demands faster    and
          more reliable      transit     times:     therefore,     high service
          standards     would have to be maintained.
       --Motor      carriers,    with their     greater  flexibility,               will   be
           extremely       cost competitive,      so the unit cost          potential
           inherent      in piggyback     would have to be fully            realized.
       --Because       of service     and cost       requirements,      high stand-
           ards     of equipment     and facility        maintenance     would havs
           to     be met.
       --Operating    within       the context      of such a high standard,
          some or the existing          railroad      lines and plans and
          many terminal      facilities        would be inadequate     and.
          therefore,    would have to be upgraded            or replaced.
       --Because       of the critical     need to maintain      minimum unit
          costs,     the commercial     departnect    in an intermodal         or-
          ganization       would have to adopt,      as one of its primary
          goals,     the achievement     of balanced    traffic     flows,
          brought      about by pricing     action   and selective       sales
        Reporting      in 1976, Reebie Associates               stated   that   a
nationwide       piggyback    system would provide              the following
       --In     general,     piggyback      would have a positive    impact on                  I
           the health      of both the railroads        and the trucking    in-
           dustry.       As traffic      shifts   are made, each mode could
           concentrate      more on that portion        of traffic   for which
           it is most capable          of operating.
       --An improved     system could be expected         to save about
          53.7 million    gallons   of fuel    in 1985 compared to the
          amount that    would be used if transportation            continued
          as it was in 1976.       This shift     in transportation        would
          represent    a g-percent    fuel savings.
       --The     improved    system would provide        an additional       trans-
          portation      operation    which could be highly         competitive
          with the existing        transportation      modes.     The increased
          competition      shoulc’ benefit       the consumer    in terms of
          lower     cost and bet tcr service.

      Reebie        Associates    selected     the    traffic     corridor   between
‘Los Angeles        and Portland,     with    Sacramento        as an intermediate
point,     to   study as a selected       corridor       within   a nationwide
system.       Generally,     the benefits      identified       in this   study
were less than those           in the nationwide         study.    The compar i-
sons between        the transportation       modes were affected          by moun-
tainous     terrain      and the comparative       ages of the rail         and high-
way facilities.

        Although     the corridor      study did not indicate           any fuel
savings,      Reebie Associates        point&     out that an improved
piggyback      system   could     reduce operating      costs.       Using a cost-
ing system which is not generally                used in the transportation
industry,.     Reebie estimated        that   an improved      piggyback    system
could operate        25 to 30 percent        cheaper  than common carrier
         Reebie Associates          stated     that    the major problem           in both
the   nationwide       and selected         corridor      studies     would be the
expected      elimination       of some long-distance              driving     jobs.
This would occur because a significant                       volume of freight
would shift        from the highways           to rail.       Nationally,        Reebie
Associates       estimated      that     about     16,030    lonn-distance         truck
drivers’      jobs--less      than 1 percent           of the Lotal        Teamsters
Union membersnip--could              be lost.         On the other        hand, Iteebie
Associates       stated    the normal        attrition       could take       care    of
the situation.
         In response      to the possible           loss of long-distance      truck
drivers’      jobs,   Teamsters       officials        told   us they didn’t   be1 ieve
the increased       efficiencies          from more use of piggyback         would
justify     the loss of its mc-mbers’               jobs.     They explained   that
long-distance       truck     diiving       is one of the few occupations
where a relatively          unskilled         worker      can earn a decvnt  living.

                                           CHAPTER 3
                             RAILROAD ACTIO_NS NECESSARY
                         TO INCREASE THE USE
                                          -e-- OF PIGGYBACK
            The success        of any transportation             service      is based on its
    ability     to provide        good service         at low rates.          In ordei     to
    determine      the problems         inhibiting       oiqgyback       growth,      we studied
    the traffic        corridor     between       the Twin Cities          and Chicago       and
    interviewed        shipoing,      trucking,        and railroad        persnqnel.        Our
    study    indicates       that    shippers       in this    corridor       ar, exoerienc-
    ing problems        with piggyhack           service     and rates       which rnlr’-,t b:=
    solved     before     piggyback       can grow.        In this      corridor      we found

           --On the average,   pigyyback               delivery      times    we*-e slower
              than those of truckers.

           --The     rate structure         offered     for piggyback    service           was
              often     less suitable         to the    shipoer’s   needs than           that
              cffered      by truckers.
           --Shippers    were       reluctant       to use some of tne pisovback
              plans because         of cargo      loss ana damage and nrob1em.c
              with claims.

           Various      studies     and industry   magazine           articles      indicate
    that   similar      problems     exist  in other  parts           of the     country.

            ICC agreed the railroads              must imorove          but noted that
    the problems        the railroads       will      have i,- meeting           service
    needs of shippers          and carriers         are serious.           ICC said that
    there     are many interrelated           factors        inhibiting        the growth
.   of piggylack,         and while    the railroads             are the proper          focal
    point,     th:re    may be limits       to the improvements                thev can meke.
    These limitations,          according       to ICC, involve            shippers’        spe-
    cialized       needs and the inherent             inflexibility          of rail       opera-
    tions.       ICC said that,       beyond a certain              level    of service,
    diversion       of traffic     to piggyback           cannot      be expected        because
    of basic differences           between       rail     and truck       service.         (See
    p. 33.)

          The shortest    line   haul distance     between Chicano      and the
    Twin Cities    is about 400 miles      by either     highway  or rail.
    An interstate    highway   runs across     Wisconsin.      In addition,


                                                                                    v            -1
the Mississippi         River and Illinois      Waterway provide     a compet-
itive     water    link  for commodities     such as steel    products.
Despite      the presence      of the waterway,     it appears that     the
competition        for freight    suitable   for piggyback    is between
railroads       and truckers.
        There are currently            five   railroads   providing    daily   piggy-
back service         in this    corridor.         Three of the railroads'      mile-
age between         Chicago    and the Twin Cities        are comparable     to the
interstate        highway distance          cf about 400 miles.       The two re-
maining     railroads       have mileages         of 457 and 524 miles.
        A total    of 42 general       commodity , common carrier            truckers
serve     the commercial     points     between   Chicago and the Twin
Cities.       The number of unregulated         truckers       operating       within
the corridor       is unknown,      btt a Wisconsin      traffic       survey     in-
dicated      about one-third      of the motor freight           moves by these
---                                TIMES
        The Reebie study indicated                  that the transportation                 mode
capable     of providing           morning     delivery       in the shortest            time
established         the service         standard      for a particular           traffic
lane.     Truckers         in the Chicago-Twin            Cities      corridor       hhve es-
tablished       an 8-hour         standard     for early        morning     delivery        of
any shfpmt.lt         given to them the previous                 afternoon.          None of
the five      railroads         in this corridor          could meet this            service
standard      consistently.             The transit       times of the corridor's
three dominant           railroads        for piggyback         exceeded that of the
        In addition,           piggyback      reouires     time for terminal        handl-
ing and local          pickup        and delivery.       Railroads      generally    es-
tablish     terminal         cutoff     times which require          the shippers
to deliver       their       trailers      1 to 2 hours before          the train's
scheduled      departure.             Local pickup      and delivery       time averages
about     1 hour.        Therefore,        total    average    service     times for the
three dominant           railroads        were as follows:

                        Average          Piggyback        Service    Time

                                                                      Soilthbourd         from
                        Northbound f corn Chica%                           Twin Cities
   Activity               No. 1 No. 2 -INo. 3                       No.    1   No. 2          No.      3

      Pickup                 1.0           1.0         1.0           1.0            1.0          1.0
      Terminal               2.0           2.0         2.0           2.0
      Line h&u1             11.0          14.5        12.4          12.0
      Terminal                 2.0           2.0                     2.0            2.0          2.0
      Delivery                 1.0        -. 1.0                     1.0            1.0       -- 1.0
               Tc tal17.0
                     --       --20.5      -18.5         18.0     19.8       22.0
                     -                     -
       Service times are estimates            based on optimum operations
and do not allow      for delays      caused by terminal       or local     road
congestion.    As ‘a result,       actual     times may %.r rn2.f not exceed
the estimates.     All the shippers           we interviewed     stated   that,
if piggyback   service    time was improved           to a level    comparable
to truckers,   they would use piggyback             more.

         In an attempt          to improve        piggyback         service       in this     corri-
dor t DC? proposed            in 1976 that          the five        railroads,       through
a joint       effort,      provide      dedicated        piggyback         services:       that
is,     service       where a train        would be composed of only piggyback
shipments.            The railroads        would coooeratively                pool   their
trailers        aid provide        piggyback        trains       between Chicaqo           and the
Twin Cities.            A pooling       agreement        is an arranaement             among
common carriers            to pool or divide             traffic,         service,     or reve-
nue.       Pooling      agreements       are unlawful            unless      approved      by the
Interstate         Commerce Commission.                 As of July         1977, the rail-
roads had not applied                to ICC for aTprova1,                 and at least        one
railroad        had indicated          opposition        to the proposal.
          regard         to    transit      time,       ICC officials      said that
another   raii       system      not  in      the corridor         we studied       found
that picqyback           was    not cost        effective        and, therefore,        mixed
piggyback      trailers          with other         railcars.         ICC said that       with
such service,          the     transit      time is relatively            unattractive,
and piggyback,           on    this    rail     system,       has been second-class

                                                     12                                                              i

                                                                                          y                /   *.i   :
L.   r   .       . .

                 Railroads       generally        use flatcars        for piqgyback        which can
         accommodate         tk’o trailers,         and they have assessed           an additional
         charge to those shippers                 who ship only a single           trailer.          In
         the Chicago-Twin           Cities       corridor,      the difference       between ship-
         ping one and two trailers                  simultaneously        to a common destina-
         tion was about $50 per trailer.                       Most shippers,      even some of
         the larger        shippers,        seldom have two trsilers             to ship and,
         therefore,        cannot realize           this    savings.      As a result,        some
         shippers      have formed an association                  to match the members'
         single     trailers      into pairs,           thus qualifying       the shippers         for
         the lower charge.              While the association             has performed        its
         function      successfully,           it still      charged members up to $29
         per trailer         for the service.
                 Railroads       in the corridor      offer    piggyback     rates     for full
         trailer      loads only.      These rates        are generally     attractive       to
         shippers       with bulky commodities          which meet the minimum weight
         requirements         for full    trucklcsds.        Cn the other      hand, the
         railroad       rates    are unattractive       to shippers      whose commodities
         cannot meet the minimum weights                reouir?d     for truckloads.
                  In addition,       railroads       in the ccrridor           did not offer      at-
         tractive       rates    and services        fov consolidating            shipoers’    less-
         than-trailer         loads.       Implementing        better     service     for con-
         solidating        such shipments,        accordirg         to ICC, would possibly
         bring      about ?n increase          in freighr       rates.       ICC provided      the
         following        data to show that          railroads        have preferred        to oet
         away from handling            such traffic:
                              Carloads                tcss-than-                   Percent
         Year                  total                    carload              less-than-carload
         1946              41,375,782                 6,324,850                       15.29
         1956              37,841,969                 3,035,495                        8.02
         1966              23,167,728                    322,349                       1.11
         1976              23,638,376                     20,125                       0.09
                            ----    FOR
               Shippers rn the corridor    were dissatisfied      with both
         the amount of damages sustained      in the use of piggyback       serv-
         ice and the refusal  of the railroads      to compensate     them for
         these damages.
               Trailers      on rail    flatcars     undergo a constant sideways
         swaying.       Cargo,  therefore,       must be loaded or braced differently

in trailers       being carried        by rail   than in trailers       being
transporttd       by trucks.         Some shippers,     rbfter adopting     proper
loading     techniques,        have eliminated      excessive    damages to
their    piggybs~k      shipments.        Other shippers,      however,    have
decided     to limst     their     piggyback    usage because of the high
rate of damage.
          The carrier        issuing     a receipt         or bill     of lading      for a
shipment        is responsible          ror losses         or damagts while         the
shipment        is in its custody             even if the loss or damage occurs
on the line of another                carrier.         Under the most widely             used
piggyback         plan,     however,      the liability          for damage is cliffi-
cult      to prove.         Shippers      load and seal trailers               at their
shipping        docks,      and local       truckers       deliver     the trailers        to
the rail        terminal.         Without       inspecting       the content      of the
trailers,         the railroads         then place them on the flatcars                    for
movement      .     Unless     the traiiers         2~3 involved         in a t?erailment
or obviously           6amaqed     in transit,         th? railroads         will   generally
deny payment cf shippers'                   damage cialms.           Their denial        is
based on the inability                of the shippers            tc prove that damages
occurred        while     t’? trailers         were in the custody             of the rail-
roads.       Shippers        sre not faced with similar                  denials    when they
use conventional             rail    or motor carriers             and, therefore,         many
shippers        may choose to avoid using piggyb-ck.
          In Febrtlary       1477, ~0, announced          a demonstration           program
 desiGned       to implement       many of the standards            recommended by
 ReeLlie's      studies.        The program's      objective      is to improve
 rail/highway         freight     servic.    , productivi+-y,       profitability,
'and energy conservation.                 Under the tezms of the 3-year,
 $1.3 million         contract,      the Association          of American        Railroads
 will    manage several          demonstrAtions       of new concepts            in piggy-
 back     services      on designated       routes    between     selected         pairs   of
        Operating       techniques        to be tested         include:
        --Piggyback      trains    which provide     direct               origin  to desti-
           nation   cervice     with no classification                    yard handling.
        --Regularly        scheduled         train     operations     with     two or more
           departures       daily.
        --Increased        labor     productivity.
        --Improved       terminal       operations.
        --Specialized          information           and control     system     to   respond
           t0  mark-t      ~~ildilqeS.

        The association            will    subcontract       with    several      railroads
through      competitive         biddinq       and will    provide     project       men-
aqemcnt J monitoring,              and coordination.             In addition,         the
association       will      collect       and analyze      the data;      prcvlde        a
final     report,      including        findings,      conclblsions,      and recom;.>n-
dations:      and assess the probable                contributions        of an improved
rail/highway        intermcdal          service    to the nation?1           transportaticn

        Our study of the traffic            corridor      between      the Twin Cities
and Chicago       indicates     that    before     piggyback        can qrow,      rail-
roads must solve certain             problems.        Specifically,         problems
with piqqyback         service    and rate structure            have discouraged
shippers     from usinq piggyback.              In order      to improve        piqqyback
growth,    railrcsds       must   provide     fsster    deliverv,        better      rates,
and improved        hsndlinq    of loss and damage claims.

        Indications     are that  similar    problems    exist  in other
parts     of the country.      DOT has formulated       a I&W Droqraw       to
foster      the development    of piqqyback,     but the rail     industrv
will    have to do more itself       if piqqyback     is to realize       its

       In requlatinq     the various     modes, ICC has imposed cer-
tain   restrictions     which add to the problem         of imc?ementing
a viable      piqqyback  system.     These restrictions,       their   impact,
and needed improvements          are discussed    in the next chapter.

                                                CHAPTER 4
                                     --v---          CHF?:GES COULD
                                     INCREASE USE OF PIGGYBACK
        As discussed        in the preceding     chapter,     the I-r imary im-
petus      to increased      piggyback    use has to cclme from the rail-
roads.       However,    the Interstate      Commerce Commission          could
help by changing         its rttgulations     which restrict        the growth
of pigq;gback.        Also,     there  are appare-rt     inequities     in the
Interstate       Commerce Act which affect           the increased      use of

         Specif           ic.*lly,        ICC regulations         and the      act

         --impose              stricter      restrictions          on the operations       of
            SOlTIC         railroad-controlled               trucking    companies   thzcl    on
            other            trucking      companies:

         --prevent              truckers,         under     certain       ctrcumstsnces,          from
             using           pigyyback;          and

         --allow      truzkirg    comDanies,   but not the railroads,       to
             competitively      bia on the transportation      of agricul-
             tural    commodities    to reduce    their  empty return   trips.
         ICZ imposes        stricter      restrictions         on railroad-contrclled
trucking         companies      than on other         trucking      companies.       While
SOIL-    railroads       have broad truckiilg            operations      without      re-
str i ,t ions,      others      have restrictions           which hamper their
abit   ity     to perform       piggyback      .ser*rices.
       Although      cooperation     between truckers        and railroads
has   sometimes      worked,     it generally     suffers    Tr9m a major
flaw.     According      to a rail    tiff icial,    each tl ansportaticn
mode has commitments           to its owners and to i.:s OWQ transpor-
tat ion z&e.         :.? said that truckers         want to get freight        on
the   highways    and railroads        want to get it on the rails.
Each mode. he pa id, creeks business              for itself     whether    this
truly    servtls   the customers       and the public’s       best interest
‘31 not.

         ?:e    believe               these restrict     i0r.s    al so    indicate        thti   regu-
latory         changes               are needed,     because:
        -- As the     interstate       highwcy    system developed,         new in-
           dustr ies r .: .rd it convenient,            in terms of market         JC-
           cess and donomy,            to locate     away frcm r,.il      lines.
           Without      trucking      connections     of their    own, rail-
           roads have tc arrange            with truckers      for pickup        and
           delivery       of trailera      and containers.        Because of the                       .
           competitiveness          of the transportation         environment,
           arrangements         with truckers      are sometimes       unrel iable.
        --Generally,         shipments     moved by trailers        or containers
           tend to be lighter           and more costly.        These shipments
           are frequently         time-sensitive         as to pickup     and delivery.
           As discussed         in chapter      3, r-a-I roads   need to improve
           transit      times.      Piggyback     operations,     therefore,      must
           be efficient         to compete with truckers.
        ICC officials         believe      that regulatory             restrictions          do
not impede piggyback             growth.        According        to ICC officials,               the
key to the success and prosperity                      of piggyback            is the commit-
ment which railroads             are willing        to make.           Thay said that
raiiroads      have traditionally              committed       themselves            to boxcar
sr;rv ices.      There are huge amounts                of “sunk”         costs       in boxcaB-s
drtd   other   similar      types of equipment             which have useful               iives
of 40 or more years.               Railroads,        therefore,          want      to use t:?cir
boxcars      to their      best advantage.            Piggyback,           however,      is both
an opportunity          for competing          with motor        car‘riers         and a threat
to boxcar      traffic.        ICC officials           said that          in hand1 ing the
opportunity       and threat        which piggyback           offers,          railroads       have
attempted      to walk the tightrope               by oroviding            piggyback       serv-
ice at prices          which will       entice     shippers        way from trucKs             and
yet not entice          shippers      away from boxcar             traffic.
--a                of restrictions
        Before   the Motor Carrier     Act of 1935 (now part II of
the Interstate      Commerce Act),     many railroad-controlled            truck-
ing compan ic s existed.       The railroads      used these trucks          not
only to complement       their  rail   service    but also      to provide
service     which was independent      from their     railroad     operations.

        Public    concern    abr>ut undesirable            competitive       practices
between trucks          and betweer       truckers      and railroads        led to
the passage of the 1935 act.                   And in a 1936 case, ICC ex-
pressed     disapproval      of competition          between      established
truckers      and railroads       where railroad-owned              trucks     (1) com-
peted with the railroad             itself,       (2) competed        with established
truckers,      or (3) invaded         territory       already     adequately        served
by another       railroad.      In this         and subsequent        cases,     ICC gen-
erally    imposed restrict        ions on rail-owned            truck      companies

              -- limit        trucks       to operating    parallel           and adjacent     to     the
                   railroad        lines     and
              --prevent         trucks       from providing         service      between     larger
                  cities       called       key points.
    --------------------      on ownership         and expansion
                                                 ----a-    e--e--
            The Interstate      Commerce Act requires          that    ICC disapprove
    railroad    ownership      of trucking      companies     except     in special
    circumstances.         According     to the act,      these special       circum-
    stances    are that the purchase          of the trucking         company must
    (1) be consistent        with the public        interest,      (2) enable rail-
    roads to use service          by motor vehicle        to public      advantage,
    and (3) not unduly restrain            competitzion.
            In referring      to this    special              circumstances  test  for
    railroad-qwned       trucking      companies,               ICC in a 1946 case stated
    that the Congress         intended
               “* * * to protect    each mode of transportation               from
               the suppression    or strangulation         thereof    which might
               follow  if control   thereof     were alloved       to fall      into
               the hands of a competing       transpcrtation         agency.”
           In interpreting       congressional    intention,    ICC has ruled
    that   railroads     must show that the purchase         of a truck     com-
    pafly is not only c nsistent           with, but also must promote,         the
    public     interest.     l!he Supreme Court has upheld this         ruling.
            Railroad-ow:led        trucking    companies    that    existed   prior
    to the 193s act were generally                protected     by the “grandfather
    clause”      of the act which allowed            them to continue       operating.
.   Rail-owned       trucking      companies’     requests    for expanded operat-
    inq authority,          however,     have been treated       the same as re-
    quests     to purchase       truck     companies    and must meet the special
    circumstances         test.
            For example,       in 1972 a trucking       company which was a
    subsidiary     of a railroad        company applied      for additional
    operating     authorities.        It sought permanent         authority     to
    haul trailers      between Washington        County,    Georgia,        and vari-
    ous loading      ramps in Georgia       which were limited          to piggy-
    back service.         In denyinq     the application,       ICC stated      that:
               --The trucking   company is owned by a railroad                            and thaL
                  it did not meet the special      circumstances                       test re-
                  quired  for additional  trucking      authority.
               --If         existing     regulated    truckers   can economically     and
                      efficiently        transport    all proposed   shipments,    they
                      should       be given    the right    to do so before    new
                      competitors        are author ized.
               ICC, on the other            hand, has granted          expanded operating         .
      rights      to some railroad-owned                trucking     compa*.ies    without
      restrictions.           Generally,          these    operating     rrgiitj;  were granted
      when ICC found areas that were not being served adequately
      by either        wmmon      carrier       truckers      or the railroads.           Other
      railroads,         however,      have     truck     operating    rights     which are
      eithe:      limited     to rail       lines      or encumbered       by restrictions.
      saii+$ag_piFkup.and                 delivery
      -L------         1s
                    --------- llrnite8---
              Generaily     railroads     are restricted          from owning truck-
      ing companies        unless     the truck    operations        are parallel     and
      adjacent      to the railroads’        rail   lines.        As a result,    rail-
      roads must rely 0:. other           trucking      companies       to pick ul: and
      deliver     trailers      for them.      These truckers          are oftr;n in
      direct    competition        with the railroads         and may nr;: provide
      pickup    oi delivery        for the railroads        until      all their  own
      needs have been met.
              Recent ICC action           could improve the pickup           and delcry
      capability          of some railroads.         Historical!     y trucking     opera-
      tions     within      and immediately       around some cities         were exempt
      from regulatitin           under the 1935 act.           The boundaries      of these
      areas,       called      commercial    zones, however,       remained     unchanged
      while      industrial       centers    and cities      changed.     In April     1977,
      ICC expanded           the commercial      zones    around tne Nation’s        cities.
            Although      in some cases  railroad-owned       trucking      compan-
      ies’ terminal       areas may exceed the commercial          .-ones, the
      expansion      of the commercial   zones     will generally      allow   rail-
      roads to oifer        wider pickup 2nd delivery      services      with their
      own trucks.
             Although    enlarged             commercial    zones may remove the rail-
      roads’     forced  reliance             on other   truckers      to provide     local
      pickup    and dei ivery,               ICC’S key point      restrictions,       in some
      cases,     still  contribute              to the poor quality         of piggyback
      seed       and reliability
        -----------------                     are hampered
                                           ----w-w-   --
             The speed and reliability     of piggyback     service    is
      hampered by an ICC restriction       as to where railroad-owned
      trucks   can operate.    Such trucks   are prohibited       from


operating      between       “key points”          (key pints        are shippers’
concentration         and distribution             points   and are usually           100 to
150 miles      apart).         For example assume points                A,   B, and C
represent      different        cities      with key point        restrictions          and
piggyback      terminals.           A railroad        has tracks      between A and
B and from B to C but not between A and C.                            Assume a shipper
wants to ship a trailer                from A to points          where the trailer
had to travel         through       C.    The key point        restrictions          prevent
railroad-owned          truck     service       between A and C; therefore,                the
railroad      has to transpor          t the trailer        from A through           B to
reach C.       If If’: permitsed            railroad-owned         truck     service      be-
tween A and C, the speed and reliability                         of piggyback          service
may improve .

        Some      railroad-owned         trucking       and Department      of Trans-
portation         officials      believe      key point      restrictions       cause
operational           problems    and deny flexibility              to piggyback      opera-
tions.      It      appears    that    the problems        of matching      trailer
loads anb         providing      dedicated       trains,     as discussed       in
chapter     -),     are therefore        compounded.

          In addition,    the      problems      of key point         restrictions
were      discussed    in the      National      Productivity         Stua*?.      Y

L/“Improving          Railroad    Productivity,”           final   report of the
    Task Force        on Railroad     Productivity,           November 1973.

    It said the restriction                 has probably         resulted        in the creation
    of too manv piggyback               terminals         and that a more limited                 number
    of terminals          may be desirable            for efficient          train      operations.
    The study pointed             out that the decentralization                      of Piggyback
    terminals       is one reason why trailers                   have tended to move in
    regular     trairl      service,      as opposed to dedicated                  trains,      forc-
    ing shippers          to accept       transit       times higher         than expected.
    The study further             stated     that consolidation              of terminals          will
    facilitate         long-run      through      trains      that will        minimize       the
    greater     labor and capitrl              costs of short,           infrequent         trains,
    intermediate          yards,     and frequent          switchings.
           ICC said that key point           restrictions         are necessary         to
    insure    that  railroad-owned       truck      services      will   supplsillent
    rail   service    rather    than compete directly             with other       truckers.
    ICC has, in some instsnces,            ; emoved key point          restrictions
    from railroad-owned         trucking     operating       rights    when a hard-
    ship was found ap,5 competition             was not restrained.
            In our opinion,     key point    restrictions,       in most cases,
    are no longer      needed.     ICC imposed these restrictions          in
    the forties     when railroads     were the dominant         mode of trans-
    portation.      Since that time,      trucks      have competed effectively
    with railroads.        For example,     between 1939 and 1973, the
    railroads’     share of freiqht      shipping      decreased    from 62 to
    39 percent.
            XCC regulations prevent                truckers       who want       to use piqqv-
    back    from doing so in three                ways:
            --The pigqyback        mileage  (that is, combined hiqhway and
               rail)    cannot    be less than 80 percent   of the trucker’s
               authorized      highway mileage.
            --Txuckt’s    cannot qo to a city                  to use piggyback    unless
               they already    have an operating                 authority   to serve the
            --Truckers    cannot obtain       authority               to specialize          in
               piggyback    if existing     regulated               truckers     are     already
               adequately     serving   the area.
            ICC’s reasoning     for these limitations       is that   its
    statutory     authority   requires     that dxistinq    regulated     truckers
    be protected      and adequate     service  be insured.       In a previous

report     1/ we pointed       out   that  these traditional       requlatory
objectives      sometimes      compl.te   with energy conservation          actions.
Similarly,      they also      comrc?te with the other       ootential      benefits
that    increased    use of     piggvhack     would offer.
------          on mileage       savings
        Originaliy         ICC would not allow        truckers    to use piggyback
if the mileaGe           traveled       was less than 85 percent         of the au-
thorized      hlghwey mileage.             ICC believed     that truckers      who
used a shorter           route could actually         be competing       in a new
market     where other          truckers    might already      be efficiently      and
adequately         serving      the public.
         In response      to a petition       filed     in December 1974, ICC
in October      1976 permitted        truckers        to use piggyback       if mile-
age was at least          80 percent     of the authorized          highway route.
The petition       had been filed        to make the mileage           reduction
criterion      consistent     with another          ICC energy-related         decision.
          When ICC granted        this petition,       it aiso started       on its
own a rulemaking          proceeding       (Ex Parte Ko. 230, Sub-No.          4,
Investisations         to Consider       Further     Kodification      of the Piggv-
back Service         Regulations)      to determine         if there were economic
justifications         for mileage       limitations       on the use of pigay-
back and, if so, what the limitation                   should be in light       of
current       economic    conditions.         As of October       1977, ICC had
not     issued    its report      on Ex Parte No. 230.
         In response        to this proceeding,          the Council       on Wage
and Price         Stability    has urged ICC to eliminate               all restric-
tions      on truckers'       use of piqqyback.            The cotincil     said that
this    would in many cases allow more direct                    shioments      and re-
sult     in fuel savings,          improved     service,     reduced highway con-
gestion,        lower maintenance         costs    and air pollution,          and ulti-
matelv       lower shipping        rates.
Truckers    mcnot        use all
$FgybacE-services           available
        Truckers     may carry    cargo to a city     if they have an
operating      authority     to serve the city.       "hey may not carry
cargo to a city          for which they do not have authority,        even
if they only wsnt to go there             to transfer    their  cargo to
piggyback      service.      For example,    assume   a trucker    is

A/"Energy   Conservation     Competes with Regulatory                   Objectives
   for Truckers,"     CEC-77-79,   July 8, 1977.

    authorized       to ship from Chicago         to Miami but not to any
    points      along the way.        If piqqyback     service was available         in
    Cincinnati,        1CC would not allow the trucker         to transfer       his
    cargo to the piggyback            service    unless he also had an operat-
    ing authority        to transport       cargo from Chicago    to Cincinnati.                  _
            ICC officials          referred      us to a 1963 court        case l/ where              .
    the Federal        court     upheld the ICC’s ruling             that truckers       can-
    not provide        piggyback        service     where they have not obtained
    operating       authority.          The court     agreed with ICC that          substi-
    tuted     piggyback       service      should require      scme reasonable         rela-
    tionship      to the authorized             motor carrier      service    for which
    it is substituted.               It concluded       that such proposed         use of
    piggyback       service      was a destructive          competitive     practice
    and unlavrf ul .
            In 1974, a truckirg             company petitioned       ICC to modify
    this    restriction.            The petitioner    state2    chat the restric-
    tion impedes its use of piggyback                 service    and also unfairly
    discriminates           against    those shippers       who are located         in
    communities          where railroads        have not established         piqsyback
    ramps.       The petitioner          also stated    that   substituting         oigqy-
    back    service       for all or any portion          of the truck       haul,     under
    certain      conditions,         would be in the public        interest       since
    it would conserve            enerqy and prom1t.e efficient            surface      trans-
            In 1975, ICC denied the petitioner’s                    reauest.        ICC oointed
    out that    if pig;jyback      services     are to be         controlled        effec-
    tively,    particuJ    3rly for the purposes        of        the allowable          mile-
    age savings        regulation,     truckers    should         be limited        to
    using piggyback        service    only.- between the          points     they     are
    authorized      to serve.

t   Opportunities       for truckers    to
!   specialize       in plgqyback    are limited
            Truckers       wishing     to specialize      in piggyback      qenerally    can-
    not   get ICC authority            if existing     regulated    truckers     already
    have ICC operating             authorities      to serve the same area and are
    adequately       doing so.         Under these circumstances,           a trucker
    without     authoritlr       can lease his equipment         with ICC approval
    to an existing          ca:rier      to provide    piggyback    service.

    IJStrickland    Transportation            Company     v,   --United   States,     219 F.
       Sup?. 618-rl963).

    One trucker      told   us that,      because he did not have the
    needed operating        authority,       he had paid regulated     truckers
    about   $250,000      annually     for leasing   arrangements.       These
    arrangements       can range from 13 to 20 percent           of the trucker’s
    total   revenue.       Such lease arrangements         may cause higher
    piggyback    charges.
            An ICC internal      study panel,     established        to develap
    guidelines     for regulatory       improvements       and modernization,
    recognized     the need for granting         operatin.       authority     for
    piggyback     use.    In July    1975, the panel recommended             that
    truckers     be given    special   operating     authorities         to move
    general    cargo by piggyback        when

           --the     truck   portion   would be 20 percent    or less of                      the
               mileage     and the rail    portion 80 percent   or more,

           --the    truck    portion     would     not   exceed     400 miles,         and

           --the     railroads      would be willing;        to   enter    into    joint
               routes      and through    rates.

           The panel believed        these special        authorities      would
    enable shippers        to take advantage        of the economies        offered
    by railroads       over long distances.           Several     months later,
    h9wever,     ICC rejected     the recommendation          because    it be-
    lleved    existing     truck  service      was adeguate       and there was
    nr, need for such special          authorities.

    g AGRICULTUR~@??66ITI    ES

             The Interstate        Commerce Act provides               that the transpor-
.   tation      of many agricultural           commodities         is generally       exempt
    from ICC’s regulation.               As a result,        truckers       can bid com-
    petitively       for agricultural          shipments       as a means of reduc-
    ing the amount of their              empty    return     mileaae.        Railroads,      how-
    ever,      can haul agricultural           commodities         only according       to
    published      tariff     rates.      As a result,         railroads       say they
    experience       a larger      empty   return      problem       than trucks.
            ICC officials    believe     railroads,       after     making market-
    ing studies,       could offer    competitive        annual rates       for trans-
    porting    agricultural      commodities.         At least      one railroad     has
    done so.      We believe     improved      marketing      techniques      for
    railroads     are important      but not a complete           answer to the

                                                                                  ‘I                 -i   i    1

                                                                                       ----    .._
                                                                                                              .-       .
        Railroad    officials      told us that piggyback       growth
has been limited          by (1) their     lack of opportunity       tc
bid competitively           for individual     shipments    of agricul-
tural     products    and (2) ICC’s failure         to control    abuses         of
agricultural       cooperatives.

Effect  on amount
S-empty   mileage
        The Interstate        Commerce Act specifically               provides
that the rates         for shipping        unprocessed      agricultural       Froducts
do not need ICC approval               if these products          are hauled by
trucks.       Railroads,      hs;:tver    , cannot negotiate          on any nub-
lished     rate.     As stated       by ICC, they can perform             market
studies      and establish        a rate,    but they usuallv          do not.
Even then truckers           are free to underbid           railroads       on
agricultural        nroducts      to attract      shipments       needed to
achieve      a balanced      operation.
       The Reebie Study showed that nationallv          piqgyback
empty mileage      averaged    over 40 percent   in 1976.    However t
requlated   trucking      empty mileage   is only about 16 percent.
         ICC officials        believe      railroads    exoerience        the high
amount of empty mileage               of piggyback      traffic,      as compared
to regulated        truckers,       because thev oay less attention
to the matchinq          of front       hauls and backhauls         in piggyback
traffic.      Also they said there                is a natural    traffic     im-
balance     which contributed            to piggyback       as well as other
types of empty sileaqe.
I--       by -agricultural
                --I__             cooperatives
                                       I_-     --
        Agricultural        cooperatives       are organizations         of farm
producers       which are controlled           by and provide       services
to their      members.        In 1968, the Interstate          Commerce Act was
amended to allow          these cooperatives          to haul nonmembers'
nonagricultural         products      provided     that such transportation
(1) was incidental           to the cooperatives’         primary      transporta-
tion operation,          (2) was necessary         for the cooperatives
effective       performance,       and (3) did not exceed 15 cercent
of the cocperatives'            total    annual interstate        tonnsqe.
        A railroad    official      complained      that msny.agricultural           co-
operatives       are merely     facades     of for-hire     transportation         and
many exceed the 15-percent             limitation.       ICC's field       person-
nel told us that        they are well aware of the problem                 and that
the railroads’       complaints      are justified.

        In a news conference           held on May 23, 1977, the ICC
Chairman stated         that sham agriculture              cooperatives          siphon
off some $350 million           a year in business               from legitimate
carriers.      He said that on May 20, 1977, the ICC Bureau
of Investigation          and Enforcement         had mailed letters               to
250 officers        and directors        of sham cooperatives               statirg     that
ICC intends       to take legal        actions       against       them.      ICC esti-
mates     that the total       potential       civil     liability        of the co-
operatives      involved     amounts to some $150 million,                     with
the liability        for already-documented              counts       running      to almost
$10 million.
         In addition,      ICC is considering         changes in regulations
governing     agricultural       cooperatives.         In N&ember        1976, ICC
instituted       a proceeding      on cgricultural         cooperative      transpor-
tation.      Among other      things,      ;CC is examining         (1) the defini-
tion of a cooperative           association,       (2) the definition          of
member transportation,            (3) computation        of tonnage allowable
in nonfarm-nonmember          transportation,         and (4) recordkeeping.
As of October         1977, ICC %as still        obtaining      informatzon       on
which to make a.decision.
      In the 94th Congress,          ICC proposed    legislation       designed
to facilitate      the use of piggyback.         No action       was taken on
this proposed      legislation      and, as of October        1977, it had not
been submitted       to the 95tn Congress.        ICC believed        that pro-
posed legislitior,       on through     routes  and freight       forwarders
would promote      a nore energy efficient        transportation         system.

Through      routes
       As early    as 1949 ICC proposed     legislation       that would
give it the authority        to order truckers       to establish   throu,:h
routes   and joint    rates.    Similar  proposals      have been intro-
duced 10 times since then.
         TCC’s latest        propJsa1        would have given it the authority
to establish         through          routes   and joint     rates    between trucks
and between trucks              and rail,        water,   and express      comnanies.
ICC believed          this authority           would increase       use of piggyback
service.        For example,             the authority     would allow        ICC, absent
carrier     initiatives,              to establish      an integrated       transcontin-
ental     motor-rail-motor-route                 which combines       the advantages          of
movement by truck            with        the long-haul     economies      of rail      trans-


                                     - --.- 7^ _
                                     J<        ’                                   T         -
                                 .             i                                                   i   ./   !
        In commenting      oii a previous    G&O reoort          l/ one ICC com-
missioner     pointed     out, that while    joint      rates-and       rccte     ar-
rangements      are common among truckers,            thr same is not true
between railroads         and truckers.      He stated         that,    while pigqy-
back has expanded since 1964 (the year ICC issued                         regulations
governing     piggyback),      the predominant        expansion        has occurred
in plans where the railroads            can provide        piggybacK        service
without    the cooperation        of common carrier          truckers.         He
also stated       that the percentage      of trailers           or containers
moved under plans which require            joint      rate provisions           be-
tween railroads        and common carrier        truckers        has either
remained     static    or has actually     decreased.

--Freight   forwarders
        Several      times since        1950 proposed      legislation      was intto-
duced to permit          treight      forwarders     and railroads        tc arrange
special     rates.       Although       ICC’s latest     proposal      was designed
to deal witr: the small             shipment     problem     hv permitting      for-
warders     to offer       lower    rates    and expanded service,          the
legislation        could also       help railroads       to provide      more .
piggyback       service.
        As mentioned       earlier,     piggyback      has a hiqh rate of
empty mileage.          Freight     forwarders      assemble     and consolidate
small shipments         but cannot r>erform any long-haul              services:
instead,    they turn over full             load or volume shipments           to
long-haul     carriers.         Under special       contractual     arrangements,
the forwarder        could enable the railcoads              to avoid empty
car movements by loading              special    purpose     cars in the empty
        The growth of piggyback       has been and continues                 to be
inhibited    by a variatv     of factors.      As discussed             in chapter
3, the primary     impetus    Co increase    piggyback    use           mJst   come
from the railroads.        Although     ICC has recognized              the merits
of more piggyback      and has made some adjustments,                   more needs
to be done.
       Becacs? it was concerned          about the competitive        ad--
vantages    that railroad-owned        truck   companies     would ha*Te
over other     truckers    and railroads,      ICC restricted      these

z/“Energy    Conservation      Competes with Fegulatory                Objectives
    for Truckers,”     CED-77-79,   July 1377.
truck    companies        to make them auxiliary             to rail        operations.
These restrictions            have limited        railroads’        utility       to
perform      piggyback       services.
                                     .                are in direct          competition
        Truckers,       in most instances,
with    railroads       fqr lonq distance           shipments       and do not use
piggyback       extensively.           We believe      modification          of restric-
tions     on rail-owned         companies      would remove the dependence                 of
some railroads          on truckers       to provide       piggyback         service.

        ICC prevents         common carrier          truckers       from usinq
piggyback       under certain           circumstances.           Since ICC imposed
these limitations             in 1964, the percentage               of trailers        and
containers       moving under plans which reuuire                      joint     rate
provisions       between        railroads       and common carrier            truckers
has decreased.            Although        other   reasons,       includinq       Foor
rail    service,      have contributed            to truckers’         usinq     less piggy-
back,     the Council        on WasE and Price            Stability        urged that
ICC eliminate         all    restrictions         on truckers’         use of piaqv-
back.       We agree.
        In addition,         ICC has rejected       a proposal       which would
allow     truckers       to transport     piqayback      trailers      under special
operating       authorities.          We believe    that     these   special
operating       authorities       would provide       greater      opoortunities
to increase        the growth      of piggyback.
      In view of the competitive                  nature     of the tran!;porta-
tion  industry,          regulations       concerning     agricultural       commod-
ities   for railroads            should    be the same as those          for truckers.
We believe      ‘that      mociification     of the Interstate          Commerce
Act to allow         railroads         to bid competitivel-j        for agricultural
commodities        wouid     h?lp the growth         of r>igqyback.

         Each situation      mentioned        above could,     if cLanged,      con-
tribute     tcr wider     use of piggyback         and greater     efficiency      in
the Nation’s       transportation          system.    However t the increased
efficiency      may mean that         fewer t:uck     drivers     would be needed
and some trucking          companies      may have a more difficult           time
sustaining      long-haul       operations.

        ICC said    that    this   chapter    provided     both a challenqe
and an opportunity.             The challenge     is the reexamination
of its piggyback         policies     to see if they can withstand
present-day      scrutiny.        The opportunity      lies    in areas where
a change migI.t       be warranted.

         ICC said its past Folicies         in the areas of kev point
restrictions       and unrestricted      certification       for railroad-
affiliated      truckino   ccmpanies     are rioe      for reexamination.                     ICC
has referred       these issues     to its ‘r’zsk Force on Imnrovina
Yotor Carrier        Entry Reaulation.

        ICC further      aqreed that       certain       sections       of the Inter-
state     Commerce Act which impose tiohte:                   restrictions          on
railroad-controlled            truck   comoanios       than on other           trucking
companies       may warrant       chanqeo.       ICC explained           that    restric-
tions     on railroad-controlled           trl.ck    companies         were imposed
when the railroads           were strong       and the motor carrier                in-
dustry     was in its      infancy.       Today,     ICC said some railroads
are strugqlinq,         and the motor        carrier      industrv         is able to
provide     service     and price      competition        undreamed          of five
decades     dqo.

       ICC said it is time for it to reevaluate             its policies
in this   area,  but,    ultimately,      legislation    may be needed
to make any significant          changes.      To see if new leqisl    ation
is warranted,    ICC is directinq         its Staff   Task Force LJ re-
examine this    subject.
       In      addition,     ICC    subs,antiallv      aqreed     that    reoulation
of the       transportation         CL agricultural       commodities         Is in-
equitable.            TCC stated      it has rectztz.*ly       reauected        leoisla-
tion   to      alleviate     the    disparity     caused by complete            requla-
tion of        the railroads,         regardless    of the comncdities             handled,
and the        exemption     of    motor carriers      haulinq      agricultural         com-

         ICC said that       truckers  can aptly   tc use niqayback     fa-
cilities        at poipts    they are not authorizei     to serve.     Under
normal      licensing     procedures,    ICC said a trucker    wanting
authority         to use niqqyback    facilities   can request     it.
         We recoqr’z?      that    such nrocedures          are available,         but
past ICC policr        has limited         the authorities         oranted.        In
response       to a 1974 Fetition          ihvclvins      this   issue,       ICC said
restrictions       were needed to control              9iqgyback      effectiveiv.
In 1975 ICC rejected            its own study panel’s            recommendations
that     special   operating       authorities        be granted      to truckers
wanting      to USC piggyback         because      it believed       existing      truck
service      was adequate.

       We believe    ICC should   help              promote     eneroy    efficient
r?iawback,     and granting   special               operstinq     authorities         would
be one way of doing so.

    We recommend          that        ICC:
    --Eliminate   or modify    restrictions on rail-owned      truck-
       ing companies  so that these railroads      car, perform
       piggyback  more effectively.
     --Eliminate        or modify            restrictions    on truclcers'           use of
     --Approve        special  cperatir.g      authorities          for      truckers     who
        want to       use piggyback      service.
     --Review        the adverse          impact on piggyback    from provisions
        of the       Interstzte         Commerce Act and seek legislative
       authority,         where        needed,   to make changes.



                                              __-              -.
APPENDIX I                                                                   APPENDIX       I

                                   --       CF PICCYRACK
                                                 ---     PLANS

                    TAKEN FROM ICC -_I
                    7--e           FIELD              SERVICF     MANUAL

         Plan I is the movement
         --                                of motor common carrier              freiqht
in the motor carrier’s             own trailers.           The motor carrier           is
responsible        for drayinq      the trailers         to and from the rail-                    .
road ramp.         The motcf carrier          issues     a bill    of ladinq        to the
shipper      and pays the railroad           an aqreed charqe           based on con-
tractual      arrangement       for the movement of its trailer.                      Plan I
is actually        a substituted       rail     service.        Under PIan I the
motor carrier         must have un3erlyinq            operatinq      authority.

         Plan     II is a comnlete           transportation          service      performed
by therailroad.                 The railroad,        in addition        to providino        the
underlyinq          rail     transportation        on flatcars,         furnishes       the
trailer       and provides          drsyaqe     of the trailer          between      rams and
facility        of shipper         or consignee        located    within      the rail-
road’s      tei,>inal        area.      The shipments        move on rates         published
in the rail          tariff.        Scme plan IT rates           provide       for the load-
ino and/or          unloading       of trailers        by the railroad:           however,
aenerally         the lozdina         and unloedinq         of trailers        is the re-
sponsibility           of the shipper          and/or     consignee.

       Plan II l/2 is a ramp-to-ramp
       --                                   service     usinq eouipment
of the railroad.         Plan IT i.-l/2 is similar      to plan IT with
the exception       that  under plan II l/2 drsyaqe        of the trailer
to and from the rail         ramp is the responsibility       of the shipper
and/or    consiqnee.      4s a result,  plan II l/2 rates        are lower
than   plan 11.

         Plan 11 l/4 Railroads            auite    often      have    variations   of
plan ?-i/2,
         I          calling      them If i/4 or II            3/4,    wherebv the
railroad       by tariff     states     that    it will       prCVide      trailer
drayage      at either      origin   -or dest.i.;stif-n.
        Plan ITT is very similar         to plan II l/2       in that    the
rail road nrovides       a ramo-to-ramp       service.     The difference
in the two plans       is that     under plan ITT rates,        the shipper
furnishes    the trailer.        The railroad       may lease trailers       to
shippers;    however,      the railroad     must have a tariff        provi-
sion with respect        to the leases      specifyina     the chsrqes.

          Plan -IV is the underlyins
          ---                                      transportaticn      by rail   of
shipper-owned            flatcars      and trailers.          The predominant    users
of this        plan are freight           forwarders      and associations     of
shipoers.           The railroads        may lease flatcars          as well as
trailers;          however,       to do so thev must have appropriate
tariff        publication         with  specific      charges.


                                                                     --_     ---     _                -L   .
APPENDIX     I                                                        APPENDIX     I

        .e--- V is a truly       intermoday;     service    involving      a joint
motor-rail-motor,        rail-motor,       motor-rail,     or any combination
thereof,      movenent.      Rates charged       the underlying       patron     may
be rail      or motor:   however,      they are generally         motor.     The
railroads       and motor carriers        involved     have an interchange
agreement       for movement     of the trailer        and, in addition,         an
agreement      as to the division         of revenue.

            APPENDIX              11                                                                                 APPENDIX     I I

                     Mr. ?denry Eschwege
                     Community      and Economic
                        Development      Division
                     United States General Accounting
                     Washington,      D.C.      26548

                     Dear Mr.     Eschwege:

                              The Commission    oppreciotes   the opportunity             to comment on the proposed
                     report entitled “Combined     Truck/Roil    Transportation             Service--Action Needed
                     to Enhance Effectiveness”.

                                The report correctly points out that there are many interreloted           factors
                     inhibiting   the growth of piggybock         service.   Because the draft report and present
                     Commission     thinking    ore consistent    on most major issues, our comments will
                     concentrate     on points where o different        emphasis may make it eosier for the public
                     to understand     the controversies      and economic    trade-offs involved.     In several
                     places specific     changes in the droft report ore suggested.         Updates of pending
                     Commission     proceedings     involving    piggyback    olso have twsn Included.

                                initially,   I’d like to point out       that I have referred     the difficult       issues of
                     key paint restrictions       and unrestricted       motor carrier certification        fcr :;;irood-
                     affiliated     carriers ro the Commission’s         Task Force on Improving       Motor-Corrier
                     Entry Regulation.         As you indicate     in   your report,   the Commission’s         post policies
                     in these oreos are ripe for rzexomination.

                                        RAILROAD       ACTIONS          NECESSARY TO fNCREASE               THE USE
                                                                        OF PIGGYBACK

                                The draft cites three areos in which railroods       need to improve perfononce.
                     While the railroads      are the proper focal point,    since they actually       perform the
                     service,    there may be limits to the improvements        they con effectuate.         Shippers’
                     speciofized      needs and the inherent   inflexibility  of rail operations     also need to be
                     considered. Beyond a certain level of service, diversion of traffic to piggyback
                     cannot be expected       because of the basic differences      Detween    roil and truck service.
                     These ore some examples:


- -_   .   . .--
              -. _
APPENDIX           II                                                                                    APPENDIX           II

           (1) Piggybock        is not a good choice for short haJl movements,               partially
  because of delays in irrminal          operations.       Unfortunately,    as o generol rule the
  more efficient     the terminal,     the costlier    the service becomes.         Short r&l Gave-
  ments hove high operotionol          costs and are not price competitive           with trucks.
  Perhaps use of a corridor        with a longer line-haul          would portioily   neutralize       terminal
  delays ood narrow the differences            in delivery     times and rates assessed.        Of course,
  use of a different     corridor   might hove little impact on the problems concerning                    loss
  ond danoge     claims.

              (2) Piggyb?:k      is not a particularly       suitable   mode     for all commodities.

            (3) Piggyback        requires a stazody, heavy,    two-way    traffic flow to support
  the expense of pig yards,            This lotter problem  is more troublesome     than in the motor
  carrier   field,   since many ,ypes of rail cars handle spcciol commodities            and ore of a
  specio!ized      construction.

             (4) Rail service is less flexible            geographically.        This is crucial      because of
  the demographic            changes toking place in our society.              Factories     and the markets
  for manufcctured            wds    ore increusingiy      concentrated      in large metropolitan          areas.
  The distribution         of manufacturers      to o dispersed rumi and small-town                population,
  for which much of the rail network               was built,     has diminished         in imtxJrtonce.
  Metropolitan        oreos have become more self-sufficient.                  Products that continue          to mOve
  in long intercity          shipments ore typically        highly styled products of light manufacturing
  that move in rrnati lots ond require levels of service that roilroods                        are not designed to
  provide.       The rail network         has not been extended         to cover the mony situc&*,s             where
  cities hove grown and decentralized.                   The suburbanizotion        of residences and industries
  hos taken consumers ond shippers to oreas without                     immediate      access to rail lines.         The
  physical     inflexibility      of rcliirccds stolds in great contrast          to the flexibility       of motor
  carrier operqticns.            A trucker    can :orve ail parts of a town,           and the interstote        high-
  woy system enables trucks to enter,                leave, or bypass congested nretropolr:on                 oreas
  with ease.

              T’    raiiroods   must improve,     but the problems   they will hove in conforming     their
  service    offerings     to shippers’ and carriers’    piggyback    needs are serious.  More errphasis
  should    be pioctd       on this in this report,   and then realistic   policies can be developed.

           Finoily,   the draft should be expanded       to include    some historical   perspective.
  it should  examine    railroad   responses to complaints    about poor service in areas like
  breakage;    should look at efforts to improve t%-i- operations         (e.g.,   improved   loading
  devi-cs  a;ld car constructicn);      ond post the quesrron of whether these efforts hove been
  moximul.     Any promised technological        developments     also should be evaluated.


                                            ..I n :-.,
                                                                                                           v               -/    _:
                                         ) d’.,‘.
                                           ._c      -’ 1
                                                                                                                                 / 4:
      APPENDIX          II                                                                               APPENDIX I I

                                                REGULATORY            CHANGE

                Chapter 4 of the draft provides the Commissron with both a challenge              and
       an opportunity.     The challenge    is in the reexamination    of our piggyback    Folicies
       to see if they withstand   present-day     scrutiny.   The opportunity   lies in areas where
       a change might be warranted.                                                                                            .

                  It is true that the Interstate      Commerce       Act imposes tighter restrictions            on
       railroad-controlled        trucking    companies     than on unaffiliated         ones, both in acqui-
       sition and certification         proceedings.      The general policies behind section 5(2)(b)
       of the Act, which restricts the services of motor carrier subsidiaries                    of railwads,
       arose when the motor carrier industry was in its infancy.                      In 1935 the Nation’s
       railroads     were strong.      Domination     of the trucking       industry by the railroads         was a
       realistic    fear.   Today, some railroads are struggling,              and the motor carrier indurtry
       is able to provide service and price competition                 undreuned        of five deccdes ago.
        It is time for the Commission          to reevaluate     its policies     toward railroad    affiliations
       with motor carriers.                                                                                    :

                 Ultimately,       legislation    may be needed to effectuate          any significant change
       in this f‘olicy.       Many court decisions,       including     those of the U.S. Supreme Court,
       have examined         the legislative     history and past policies       of the Commission.    These
       decisions have concluded             that allowing   the railroad     parent to invade the field of
       trucking    would offend section 5(2)(b) of the Interstate              Commerce    Act and the National
       Transportation      Polrcy.

                To see if new legislation     is warranted.     I am directing   our Staff Task Force
       to rezxenine   this subject.     Views from the rail and motor carrier industries,        as well
       as the shipping public,      will be helpful    in determining    iiut Qosition on this matter.

                  Your report notes that in a Commission                proceeding,        Ex Porte No. 230
       (Sub-No.        4), Invest:gation       to Consider Further Modification             of the Piggyback       Service
       Reg:llations,        &?&stion        of circuity   restriction-     in substituted     service is being further
       examined.          In a previous report we relaxed the restriction                for motor carriers from a
        15 to a 20 percent standard.             The Commission’s        report on the matter should be issued
        in the near future,         sa I will not discuss the merits of the issue at this time.               But I
       should note that the response to that proceeding                   was very disappointing.           While two
       major motor carrier associations             and several government           agencies responded,        only
       one water carrier and two motor carriers presented                     views,      No railroads offered evi-
       dence.       This is perhaps because many circuity              limitation     problems ;rose where irregular
       route motor carrier authorities            were tacked,       and most circuitous         routing by tacking of
        irregular    route authorities       has been ended by our gateway              regulations     at 49 CFR 1065.
        But the lock of interest might indicate             that economic,         rather than regulatory        forces play
        a more significant         role in the non-use of TOFC services.

                                           ( See GAO note                1, p.        37.)


_--           ._--- _

    APPENDIX          II                                                                                     APPENDIX            I I

                Another      suggestion       in the draft is that the Commission          authorize     trucklines
     to use TCFC facilities            at points the trucklines         are not authorized      to serve.       A notor
     carrier wishing        to perform such cn operation             is not forbid&n     to request such authority
     under our nonn~l licensing               standards.    As far bock as 1965, in Mcrskeiyne               Transfer &
     Storage,      Inc.,    Extension,       6G M.C.C.       581, the Commission         rded that this type of
     coordinated        service    is “distincly      in the public interest”.        There was no shipper support
     in that proceeding,           but the Commission         felt that a substituted      operation     would result
      in operating       economics.         The Commrssion       receives    thousands of applications           for motor
     carrier authority         annually.        Mcny are based, and ganted,            on theories such as balanced
     operations,       operating      economies,       and fuel conservation.         While the type of case
     represented       by Moskelyne          is not enccuntered       often,   the Commission        has not placed any
     constraints     on these types of applications.               If a trucker wants to specialize            in piggy-
     back,    there is no regulatory            ohstacie.    Also, the trucker may specialize              in theie opera-
     tions using the existing            Plans I and V.

                We agree substantially            with the analysis of inequities           involved      in the trans-
      portation     of r2griculturol       commodities.       The Commission        Cos repeatedly        reque:??d     legir-
     lation from Congress to alleviate                the disparity     caused by complete          regulation     of the
     raiftoads,      regardTess of the commodities             handled,     and the exemption         of rotor     carriers
     hauling      agricultural       .emmodities.       It st;ould be noted,       however,      thot the traditional
     heavy rail movement              is from agricultural      producing      areas to consuming         areas, und
     consequently,          the predominating        empty movement          is from consuming        areas to the farm
     regions.      Also,      increasing     the quantity     of service available       fur a limited       amouqt of
     agricultural       production       could result in an increase          in empty mileage         for trucks.

                The drait report recognizes     our efforts against shorn agricultural           cooperatives.
     Ex Parte No. MC-75          (Sub-No.   l), Agricultural      Cooperative      Transportation      Exemption
     (Modification      of Regulations),   a rulem&irg       proceeding     which will try to define more
     clearly     the exemption    accorded  agricultural     cooperatives,     will be decided       shortly.

                  An appendix   to this letter        details   some minor       points   in the draft     which    you
     may find       helpful in your review.

                  The dialogue        on this subject has already proven valuable         to the Commission,
     since it has carsed          us to commence      a reevoiuation     of long-standing    policies on motor
     carrier-railroad       affiliations      ond key point restrictions.      I will keep you informed     of the
     Commission’s       progress in these matters.
APPENDIX II                                                                                       APPENDIX   II        .

               If I can be of fvrther        assistance,   please   da not hesitate     to call   upon


  Attachment      (   See        GAO note          2. )

           Commlssioner          Christian   was absent    and did not participate.

  GAO notes            : 1.           TOFC refers  to "Trailer                        on Flatcar,"       another
                                      term for piggyback.
                            2.        Attachment    consisted    of miscellaneous     editor-
                                      ial suggestions      which have   been incorporated
                                      in the report.

APPENDIX III                                                   APPENDIX III

                     DISCUSSED IN THIS,REPORT

                                       ---      Ten -:e   of    office
                                                From                     To
     A. Daniel O'Neal                   Apr.       1977         Present
     George M. Stafford                 Jan.       1970         Apr.    1977
     Robert  J. Brooks                  Mar.       1974         Present
     Vacant                             Dec.       1973         Mar.    1974
     Sheldon Silverman                  Mar.       1970         Dec.    1973
     Joel E. Burns                      Sept.      1976         Present
     Lewis P. Teeple                    Dec.       1975         Sept.         1976
     Robert D. Pfahler                  May        1967         Dec.          1975