Our position on H.R. 12367 is in opposition to section 3, the weight and size provisions. The reason for our opposition is that the fishing industry has been dependent upon Railway Express service for shipment of small lots of perishable sea food products.

These products, historically, have been shipped from every fishery region of the country into the consuming markets. REA Express today is the only mode of transportation which is available for handling small shipments of perishable fishery products on a nationwide scale. This is the only transportation agency which will re-ice our seafood products in transit.

It is the only way for the small producers of fishery products from the lakes and seacoast towns to reach their small markets, their small consumers of fresh product. We are greatly concerned that a substantial diversion of small package traffic from REA to parcel post, under the proposed increase in weight and size limits, will seriously affect Railway Express Agency's ability to continue rendering us the dependable and speedy service that we need at reasonable costs.

We have experienced substantial rate increases in the past due to REA's continual loss of small package traffic to its competitors. The fisheries industry is very seriously affected by these increases in small shipments, because we have one of the lowest per capita consumptions of any food consumed in this country. The per capita consumption of seafood is about 10 pounds a year, which means that we have a very serious LTL problem. For every truckload of meat sold by the meat industry, we can only sell about 3,000 pounds of fish, so we have a very unusual and great dependence upon Railway Express service.

The entire fishery industry would be very grateful for the subcommittee's consideration of our small businessmen in this particular legislation. Their continued existence can be assured only by the preservation of existing express service at the existing rate levels, and it is respectfully urged that section 3 of this bill be not approved. Thank you, sir.

Mr. DULSKI. If this legislation were to be enacted, wouldn't the post office be able to give you the same kind of service?

Mr. AUGELLO. No. The post office will not handle our perishable commodities. Parcel post service will not accept fishery products with wet ice, or products that need refrigeration in transit. They will only handle dry freight. This is why I say that REA is the only agency operating on a nationwide basis that will handle small shipments of perishables. We have a very peculiar problem. I don't think there is any other product in the United States shipped as our fresh fish are shipped; that is, fresh fish in ice, in crates. As the ice melts, the water leaks from the crate, and Railway Express Agency has historically handled these for us, and re-iced them in transit for us, because it takes more than 2 days to reach a lot of our markets. The ice will melt in 48 hours, and they have to be re-iced.

Mr. DULSKI. What about the railroads?

Mr. AUGELLO. Well, the railroads have been running the express service, and they have been the underlying agency that has been operating the over-the-road service. A lot of that service has been diverted to truck service, but the Railway Express Agency has been continuing the service they have always rendered for us, and every time there is a discontinuance of a station in the United States, the Railway Express shipper has lost the market to its old competitor. There is simply not

another agency that can do this the way REA has done for years and

years.

Mr. DULSKI. What is the furthest distance you ship your merchandise?

Mr. AUGELLO. Coast to coast. There are peculiar varieties of fish that are harvested only in certain areas, such as Pacific coast halibut and salmon.

Mr. DULSKI. What about Lake Erie fish?

Mr. AUGELLO. Well, before the lamprey eel, we had peculiar varieties of fish of the lakes that were consumed in great quantities in the major markets. Historically, the Railway Express Agency was greatly responsible for developing those markets for us, because prior to the advent of express service there was no way to get these fresh fish varieties into the markets.

Now, as soon as the volume was increased so that truckloads could be run into the major markets, the traffic was diverted to trucks, but there still are hundreds and hundreds of small fisherymen that just haven't got the volume to accumulate in truckloads or carload lots. They have to have this express service available so they can send a 200-pound crate of fresh fish to get it to New York City for the next morning market.

Mr. DULSKI. Do you ship fish to Canada?

Mr. AUGELLO. I would say very unlikely. I think the general flow is in the reverse direction. I think the United States is a heavier importer of Canadian fish, but again, you have varieties. For instance, gulf shrimp. There is only one place from which to get those. So Canada would be an importer of shrimp.

Mr. DULSKI. Your statement is very important. The Fulton Market of New York City went by the wayside, and REA played a very important role in that market. Would you agree with me?

Mr. AUGELLO. It certainly did. As I said before, the express service has been largely responsible for developing the markets that we have, and we are doing everything we can to maintain those markets so that the small American fisherman can stay in business. Frozen commodities need large packing plants, so the small fisherman is being pushed out of the way, or out of the markets, in favor of frozen commodities. A possible discontinuance of express service would probably be the last blow to the small fisherman still dealing in fresh fishery products. Mr. DULSKI. How many small distributors would you say are involved in this?

Mr. AUGELLO. Literally thousands. Last year there were 250,000 small fishery product shipments moved in express service.

Mr. DULSKI. And they depend totally upon the income from selling these fish?

Mr. AUGELLO. Yes, sir.

Mr. DULSKI. Do they employ a large number of employees?

Mr. AUGELLO. They certainly do. All of the boatowners and fishermen on the boats rely greatly upon the market in these commodities. Mr. DULSKI. Thank you very much, Mr. Augello.

Mr. AUGELLO. Thank you for hearing us.

Mr. DULSKI. The subcommittee stands adjourned until tomorrow morning.

(Whereupon, the subcommittee adjourned at 11 a.m., to reconvene at 10 a.m., April 26, 1966.)

PARCEL POST

TUESDAY, APRIL 26, 1966

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON POSTAL RATES OF THE

COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

Washington, D.C.

The subcommittee met, pursuant to recess, at 10:30 a.m., in room 346, Cannon Building, Hon. James H. Morrison presiding.

Mr. MORRISON. The committee will come to order.

The committee will be glad to hear from Mr. Sidney Zagri, legislative counsel of the Brotherhood of Teamsters of America. Mr. Zagri.

STATEMENT OF SIDNEY ZAGRI ON BEHALF OF THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN, & HELPERS OF AMERICA

Mr. ZAGRI. Mr. Chairman and members of the committee, I wish to extend appreciation for the invitation extended me to discuss H.R. 12367 and other related legislative proposals.

As a trade union we have a special interest in protecting the collective bargaining gains in the private sector of the industry and to protect the private sector from unfair competition caused by subsidized below-cost rates and depressed wage scales. We are opposed to unfair and destructive competition, whether it be the public or the private sector. The tender of a transportation service at less than cost is recognized by regulatory officials as unfair and destructive to others in the business-when the tender is by a privately owned competing carrier. It is even more destructive and unfair when the tender is by the Post Office Department, which does not have, or is not charged with, large cost items of a nature which are borne by non-Government enterprises.

Even by its own books, the Post Office Department has performed below-cost, money-losing, subsistence transportation service, in competition with private enterprises for all but 2 of the last 33 years for which data have been published by the Post Office Department.

Congress has always intended, since the establishment of the parcel post system in 1912 that this service should be self-supporting. This is evident from the provisions of the original act and from the committee reports and debates in the Houses at the time of passage. For 35 years, section 247 of title 39, United States Code, has directed the Postmaster General to make parcel post rate proposals to the Interstate Commerce Commission in order to "insure the receipt of revenue from such service adequate to pay the cost thereof."

From 1951 to 1963 the Postmaster General has been prohibited by section 695 of title 31, United States Code, from withdrawing funds

60-226-66- 41

from Treasury until he has certified that he has requested Interstate Commerce Commission's consent (under sec. 247 of title 39, United States Code) to parcel post rate increases in order to make service self-supporting (4-percent tolerance permitted since 1958).

In 1963 Postmaster General Day requested Congress and was granted a moratorium on certifying cost recovery within 4 percent, on the basis that he could not estimate these costs, since an increase in postal rates would result in a decrease in volume. Since then the Postmaster General and the Congress has been faced with the monumental task to devise a formula which would reverse the trend of 35 years of parcel post deficits totaling $1,584,904,726 and establish the ground rules which would place the parcel post on a competitive basis with the private sector, and by the same token eliminate the umbrella of protective legislation from the private sector in competing with parcel post.

H.R. 12367 establishes the ground rules and the machinery for implementing the aforementioned policy.

The proposed legislation raises two basic questions.

(1) Does it provide any effective mechanism not previously tried by the Congress which would require the enforcement of the cost recovery?

(2) Does the modification of Public Law 199 with respect to weights and sizes remove the protective umbrella over private industry and require the private sector to compete on equal terms with parcel post?

With reference to point No. 1, I regret to say that the bill does not provide even as much protection as was afforded under the Bradley amendment of 1951. It imposes no penalty for the failure of the Postmaster General to certify cost recovery within 4 percent; nor does it require that the ICC act upon the request of the Postmaster General within a specified period.

I fear that, as presently written, the bill would simply call for a repetition of costly mistakes of the past 35 years.

From 1945 to 1951 the Post Office Department operated on a continuous deficit ranging from 75 to 80 percent of cost recovery.

From 1951 to 1963 during which period the Bradley amendment was in force, the parcel post operated at a deficit in all but 2 years1955 and 1956, as follows:

As you can see from this table, despite the requirement that no Treasury funds be withdrawn without certification of cost recovery, we had only cost recovery in 2 out of the 12 years which appear in this table, and there is a deficit of about $1 billion during the same years in the parcel post operation.

It is clear from the above that mere directives to the Postmaster General requiring that he certify to the cost recovery in his operation were meaningless, and even after 1951, with direct prohibition on the withdrawal of Treasury funds by the Postmaster General, that the certification took place was more observed in the breach than in the performance, with deficits from 1951 to 1960 aggregating $894,120,832.

The question arises, What more can Congress do that it has not done in the past to avoid a repetition of this performance in the future? An analysis of the administration of the Bradley amendment points to three basic causes for its failure.

(1) Delay by the ICC in approving applications for rate increases. The Postmaster General filed three applications for parcel post rate increases with the ICC between 1950 and 1960.

The first application for rate increase was filed in October 1950 and was not approved by the ICC until October 1, 1951.

Similarly in June 1952, the Postmaster General filed a petition with the ICC and was not decided until November 16, 1953.

On April 18, 1957, the Postmaster General filed a petition with the ICC. The petition was not granted until February 1, 1960, or 2 years and 10 months later. In other words there was a delay of almost 5 years in a 10-year period in effectuating the rate increases certified as being necessary by the Postmaster General.

RECOMMENDATION

The Post Office Department should be able to increase parcel post rates as easily as can regulated but privately owned carriers. To do this, it should be authorized to file with the Commission a proposed schedule to become effective within 90 days unless suspended and hearing is ordered due to the establishment of a prima facie case. against the rate increase by a protestant. In any event, the Commission should be directed to issue final order within 6 months after the application has been filed. Since its sole function is to audit the figures of the Postmaster General, a 6-month period in which such an order must be issued is not unreasonable.

For ratemaking purposes, all costs borne by any department, bureau, or agency of the Federal Government for the benefit or support of parcel post should be charged against parcel post.

(2) The penalty, requiring the withholding of all postal funds for failure to certify annually that costs were recovered, punishes the entire postal system for the failure of parcel post. In short, the remedy does not fit the crime.

It is like going before a jury asking for a murder conviction on a manslaughter charge. You are not going to get a conviction if the penalty is not tailored to the crime, and it seems to me to punish the entire postal system by withholding funds of the system, because it is an extreme application of the principle in this case.