and, at the same time, could take advantage of volume rates through consolidation of our shipments, we would be in a much better competitive position to survive and even to prosper. Logically enough, we studied the precedents in surface transportation and arrived at the conclusion that those of us of like minds should organize a nonprofit cooperative association to arrange for transportation by air of our cut flowers and greens to eastern destinations. The primary objective would be to take advantage of volume rates by consolidating insofar as possible our individual shipments. Accordingly, early in 1949, some 19 of us who grow and ship floral items banded together for our mutual protection and interest and organized what is now known as the Consolidated Flower Shipments, Inc.-Bay Area, a nonprofit, agricultural cooperative incorporated under the agricultural code of the State of California. From our experience, we found that the individual small shipper who ships his product, cut flowers or decorative greens, in small boxes or cartons could hardly afford the additional transportation costs as reflected by minimum charges on small-lot shipments and still insure a competitive price on the landed cost of his merchandise. We found that the larger shippers too could well utilize pickup service geared to industry needs as well as the other facilities that our agricultural cooperative offered to those who qualified for membership. Attesting to the value of our organization to the growers and shippers of floricultural and horticultural products in northern California is the fact that our membership has grown to 38 present day members. Our nonprofit agricultural cooperative was carefully organized to take advantage of the already established precedents in surface transportation, since there are no restrictions as far as we could read them to so doing in the Civil Aeronautics Act of 1938. The Civil Aeronautics Board, however, concluded that nonprofit agricultural cooperatives are not exempt from the Civil Aeronautics Act and from regulation by the Board. The CAB thereupon issued a "cease and desist" order against Bay Area. On appeal, the Ninth Circuit Court of Appeals in San Francisco affirmed the order, although admitting that if Bay Area were operating in the field of motor or rail transportation it would be exempt from regulation by the Interstate Commerce Commission. The court held that in the absence of an express exemption it could rule that an exemption was not intended. At the same time, though, the court invited the Congress to make itself clear on this point. In the meantime, the CAB has concluded its 5-year trial period for freight forwarders. The examiner, after exhaustive investigation and hearings, has found that nonprofit cooperative shipping association should not be eliminated, although conceding that the CAB because of the court decision referred to previously had regulatory powers which ought to be reduced to the minimum, even though such shipping associations may have some functions that are like those of freight forwarders. CAB Bureau counsel too found these cooperative shipping associations in the public interest, though they insist upon greater regulation than recommended by the examiner. Yesterday, the CAB itself heard oral arguments on the subject. Regardless of what the CAB may do, we contend that Congress did not intend that identical commodities and nonprofit agricultural cooperatives be treated differently in one mode of transportation as against another. We urge the Congress to accept the court's invitation and make clear that it never intended that the agricultural exemptions, for example, in surface transportation do not extend to and include all other means of transportation, including air. We believe that enactment of S. 1192 will simply bring into line with historic development and established public policy surface and air transportation. That enactment of S. 1192 is vital to the floral industry of California can be seen in the fact that the California Farm Bureau Federation, representing more than 60,000 farm families; the California State Florists Association, representing more than 600 members; the Northern California Carnation Growers Association; and the California Chrysanthemum Growers Association, among others, have all adopted resolutions urging congressional approval for legislation of this type and for this purpose. Senator MONRONEY. We have Mr. Matt Triggs, assistant legislative director, American Farm Bureau Federation. Mr. Triggs, we are glad to see you again. We appreciate your appearance before our committee. STATEMENT OF MATT TRIGGS, ASSISTANT LEGISLATIVE DIRECTOR, AMERICAN FARM BUREAU FEDERATION Mr. TRIGGS. The American Farm Bureau Federation recommends the enactment of S. 1192. This bill would provide that agricultural cooperatives engaged in shipping the products of their members by air transportation shall not be classified as a common carrier freight forwarder and shall, therefore, not be regulated by the Civil Aeronautics Board. Our interest in this matter stems from what appears to us to be an incomprehensible viewpoint in the Civil Aeronautics Board that such cooperatives should be classified as indirect shippers by air and should therefore be subject to comprehensive CAB regulation. For example, in an investigation into the regulation of indirect air transportation known as docket 5947, et al., the counsel for the Board recommended to the hearing officer that cooperative shipper associations who ship by air the property of the association or the members thereof should be classified as indirect air carriers and that CAB jurisdiction should be exercised with respect to such carriers. Five single spaced mimeographed pages of the counsel's brief are devoted to stating the counsel's views with respect to the character and scope of the regulation which should be imposed. The hearing officer in this case concurred with CAB counsel that cooperative associations should be subject to CAB regulation and outlined his recommendations with respect to such regulation, which were considerably less comprehensive than the regulations recommended by CAB counsel. CAB counsel excepted vigorously to the hearing officer's recommendations, pointing out that because cooperative shipper associations are common carriers, it is necessary and reasonable to protect present and potential users of their service from discrimination by requiring that such associations keep their membership open and make their services available and equitable to other members of the public. The CAB counsel further insisted that it is in the public interest to require cooperative shipper associations to adhere to reasonable charges without unjust discriminations, undue preferences or advantages or unfair or destructive practices. We respectfully submit that the position of the Bureau counsel represents an unnecessary and harmful extension of regulatory authority. If the same principle were applied to cooperatives engaged in the shipment of the products of their members by truck or rail common carrier, the Interstate Commerce Commission would have authority to regulate the admission of membership in cooperatives and the con tractual relationship between cooperatives and its members. Farmers enter a cooperative voluntarily, and voluntarily agree t accept charges and procedures the cooperative may have adopted They may voluntarily terminate membership in the cooperative a their pleasure, whenever they are dissatisfied with the manner i which the cooperative has handled their commodities and the charge made for such service. A cooperative is controlled by its members. The members are able to protect themselves adequately against discriminatory practices and unreasonable charges. They do not need the supervision or regulation by any agency of Government with respect to the internal affairs of the cooperative or the relationship between the cooperative and the members. We therefore earnestly recommend to the committee that it establish, by the enactment of S. 1192, the principle that it is not the function nor the responsibility of CAB to engage in the regulation of cooperatives. We therefore respectfully urge upon the committee the approval of the bill. Senator MONRONEY. The Farm Bureau Federation does not engage in shipping, does it, in pooling of shipments? Mr. TRIGGS. No, sir. Senator MONRONEY. So your interest is more or less only in the interest of the growers or the farmers? Mr. TRIGGS. That is right. Senator MONRONEY. I notice this opens it up to livestock and agriculture. Actually under this bill you can pool any kind of agricultural shipment, eggs, and dairy products? Mr. TRIGGS. That is right. We expect flowers for a long time to continue to be the major commodity shipped by air. But there is a growing business in baby chicks, hatching eggs, and in fishery products, and in some specialty fruits out of season. Senator MONRONEY. The Farm Bureau Federation would be not only in the flowers but other specialty agricultural products? Mr. TRIGGS. Yes, sir. Senator MONRONEY. Do you believe that something should be required in this bill to at least provide for responsibility for whoever engages in this pooling of shipments? Mr. TRIGGS. That is a common carrier freight forwarder other than a cooperative? Senator MONRONEY. Yes. A cooperative of course would have to be a responsibile organization chartered under State law. Mr. TRIGGS. Responsible within its own framework. Senator MONRONEY. Yes. Mr. TRIGGS. On this particular point we have policy. I appreciate that the bill goes a little bit beyond straight cooperatives. While I would think that there might be reason for some protection of the interests of shippers under those circumstances it is not reflectel in our policy, so I just cannot make a recommendation. Senator MONRONEY. Senator Payne? Senator PAYNE. The only thing as I gather is that your recommendation on this measure is based on your interest in agriculture generally receiving the same consideration under this as they receive under other methods of transportation? Mr. TRIGGS. Yes, sir, and general philosophy against unnecessary regulation and the fear that the precedent established here with respect to air transportation might eventually slough over into surface transportation which we do not think is necessary. 61017-55- 4 Senator MONRONEY. Thank you very much, Mr. Triggs, for the benefit of your testimony. Mr. TRIGGS. Thank you. (The following letter was submitted by Matt Triggs, assistant legislative director, American Farm Bureau, following the close of the hearing.) Hon. A. S. MIKE MONRONEY, AMERICAN FARM BUREAU FEDERATION, Chairman, Air Transportation Subcommittee, DEAR SENATOR MONRONEY: In his testimony before the subcommittee with respect to S. 1192 this morning, Joseph H. Fitzgerald, Director of the Bureau of Air Operations of the Civil Aeronautics Board, testified that "the staff of the Board believes that the agricultural cooperative should be subjected to the very minimum of regulatory action." Let us examine what the staff of the Bureau conceives to be the "very minimum of regulatory action." In the brief filed by the Bureau Counsel to the examiner in Docket No. 5947 relating to this matter, it was recommended (beginning on p. 17 of the brief) the following regulatory requirements for agricultural cooperative associations (the italics are mine): "(1) An application for a letter of registration as a cooperative shippers' association. This application would contain the following, in addition to the information required of air-freight forwarder applicants: "(a) The facts and circumstances surrounding the organization and establishment of the association; "(b) Articles and bylaws of the association; "(c) Copies of contracts with its traffic manager, executive secretary, consolidator, trucking agents, and similar persons; "(d) Membership roster; "(e) A schedule and/or formula of all charges made (see '(6)' below). "(2) Suspension and revocation of letters of registration. "(3) Regulation of acquisitions of control, interlocking and agreement relationships (sec. 408, 409, and 412 of the act). "(4) In addition to the financial and statistical reports required of air-freight forwarders every 6 months (see VI J(5)), an annual report showing for the year the number of applications for membership received, number rejected, the reasons for each rejection, the number pending, the number suspended or expelled, and the reasons therefor; also a summary analysis for the year of (a) all revenues received and payments made by the association; (b) all changes in the organization's articles of association and bylaws, and membership roster; (c) all contracts, and changes in contracts with consolidator, traffic manager, executive secretary and trucking agents. "(5) The requirement of reasonable charges, without unjust discriminations. undue preferences or advantages of unfair or destructive competitive practices. "(6) In lieu of a tariff, the association should be required to file with the Board a schedule of all fees, charges, and assessments to be made, and the formula for assessing charges not fixed in nature. This schedule should accompany the application for authority and should also be filed whenever changes are made in the charges or formula." The Bureau Counsel then goes on to summarize the conditions which should be attached to the grant of an exemption by an agricultural association in the following terms: "(1) Qualifications for membership or retention thereof may not discriminate against any shipper of commodities handled by the association in areas which it serves, and in accordance with its available facilities, and said qualificatons may not be changed wthout prior approval of the Board; "(2) No applicant for membership may be refused admission nor any member suspended or expelled by the board of directors or membership of the association if it otherwise meets the qualifications for membership or retention thereof set forth in the articles of association and bylaws of the association, provided that if the association establishes a qualification based upon financial credit, it shall provide for the filing of a reasonable surety bond or deposit as a means for satisfying the qualification. "(3) The association must continuously retain its status in this classification as a bona fide, nonprofit cooperative, as set forth in the definition of the classification; "(4) Billings shall show unit rates, and volume, dimensional weight, and any other basis for determining the charges applicable to that shipment; (1660) "(5) The association shall preserve records of shipments, manifests, airbills and other transportation documents, records of membership and applications for membership for a period of 2 years, which shall be available for inspection by any member, or other properly interested person therein." This may, in the minds of the staff of the Civil Aeronautics Board, be conceived to be "the very minimum of regulatory action." We submit to the contrary, however, that this represents an imposing and costly burden of regulation and involves detailed scrutiny and supervision of the internal affairs of an agricultural marketing cooperative that no Federal agency should exercise. Certainly, in a rapidly expanding field such as air transportation where there may and should be a great deal of experiment by agricultural cooperatives with respect to most efficient marketing procedures, cooperatives should be left free to engage in such activity without assuming the regulatory burdens involved in the recommendations of CAB counsel. In fact, we are certain that the imposition of such regulatory burdens upon a cooperative that is deciding whether or not it wishes to undertake shipment by air would be a deciding factor in many instances against such undertaking. It may be that the Civil Aeronautics Board should have authority to determine in particular instances whether or not a particular setup represents a legitimate agricultural cooperative. When the facts support such conclusion, no continuing regulatory activity should be required. Some of the testimony before the subcommittee urged delay until the civil Aeronautics Board has disposed of Docket No. 5947. While this is a persuasive argument it would not appear to us to have weight, if in the opinion of the Congress existing legislation grants to the Board authority that the Congress now concludes they should not have. Regardless of what the present Board may decide with respect to the regulation or nonregulation of agricultural cooperatives, the law apparently gives them full authority to regulate such cooperatives to as comprehensive extent as the Board may determine to be desirable now or in the future. It would appear then that failure to approve S. 1192 because it is possible that the Board may not impose unreasonably burdensome regulations, is to say in effect that the Board should be free in the future to impose such regulations on agricultural marketing associations as it may determine to be desirable. A cooperative is a particular kind of corporation. Many cooperatives are actually organized under general corporation law rather than under specific statutes governing the organization of cooperatives. The testimony before the subcommittee does not, in our opinion, indicate any more reason why the Board should regulate the internal affairs of cooperatives than any other corporation, assuming that the cooperative is a legitimate agricultural marketing association. So long as this is so and unless it is demonstrated to be not so, the cooperative should be considered to be a shipper rather than a common carrier freight forwarder and should be completely exempt from CAB regulation. I would like to add my personal commendation of the manner in which the hearing on this subject was conducted and the manner in which you and Senator Payne successfully narrowed consideration of the matter to the specific issues involved. With best personal regards, I remain Very sincerely, MATT TRIGGS, Assistant Legislative Director. Senator MONRONEY. Mr. Lloyd C. Halvorson, economist, National Grange. Mr. Halvorson, we appreciate your coming before the committee to give us the benefit of your testimony on this. It is always helpful to have you. |