moving within, or to or from, official territory, some of which rates have had the Commission's approval. The fact that the percentage relationship to first class is higher than that prevailing within the South and Southwest does not suggest impropriety in the assailed rating because, due to the higher level of first-class rates within the South and Southwest, a lower percentage of first class is necessary within those two territories in order to bring about an adjustment of rates on tight cooperage within those territories properly related to those within official territory. The rates on this commodity within official territory are much lower than those within the South and Southwest and also lower than most of those in western trunk-line territory.

The record does not show that defendants' rough-material arrangements and rates on staves and heads to Memphis and Louisville actually have been applied in a manner which would violate section 2 of the act, but the evidence definitely establishes that defendants' tariffs, excepting those of the Nashville, Chattanooga & St. Louis Railway, authorize practices prohibited by section 2 of the Interstate Commerce Act, and section 1 of the Elkins Act. Under the facts and circumstances here disclosed, defendants cannot control the outbound movement of cooperage from the points of manufacture under any proper tariff arrangement. By this we do not mean to imply that defendants may not maintain subnormal rates on staves and heads. This traffic may be made subject to such rates under the same conditions as similar rates may be applied on any other traffic. Coming now to the section 3 issues:

A distinction must be made between St. Louis, on the one hand, and Lawrenceville and Chicago, on the other. The latter points are located in official territory, and the carriers operating within that territory do not maintain subnormal rates on staves and heads. Moreover, Lawrenceville is reached by none of the several carriers which maintain the subnormal rates to Memphis and Louisville, while Chicago is served by only two of them. It follows, therefore, that none of the defendants could be held responsible for undue prejudice as to Lawrenceville and there are only two, namely, the Illinois Central and the Rock Island, which could be held responsible for undue prejudice as to Chicago, and neither of them could remove undue prejudice by canceling their subnormal rates to Memphis and Louisville.

St. Louis is a border-line point and so are Memphis and Louisville. Whatever justification there may be for subnormal rates on rough staves and heads from southern and southwestern points to Memphis and Louisville, applies with equal force to those on the same commodities from southern and southwestern points to St. Louis. There are no transportation conditions to justify (1) rates to St. Louis

from southern origins, mile for mile, higher than those from the same origins to Memphis and Louisville, and (2) rates to St. Louis from southwestern origins, mile for mile, higher than those from the same origins to Memphis. With respect to destinations in official territory, the geographical locations of St. Louis and Louisville are similar, while Memphis is less favorably located than either of the other two. The St. Louis complainants' inability to make use of subnormal roughmaterial rates, like those now in effect to Memphis and Louisville, is attributable solely to the tariff provisions which govern their application and the evidence definitely establishes impropriety of those tariff provisions.

We find that:

1. The rating and rates on new tight cooperage, in carloads, from St. Louis, Lawrenceville, and Chicago, to points in official territory east of the Illinois-Indiana boundary line, are not unreasonable.

2. Defendants' rough-material arrangements and rates on rough staves and heads, in carloads, from points in Arkansas, Missouri, Kentucky, and Tennessee to Memphis, Tenn., and Louisville, Ky., have not been shown to have been applied in an unjustly discriminatory manner, but defendants' tariffs which provide for these arrangements and rates authorize practices prohibited by section 2 of the Interstate Commerce Act (part one). As such tariffs are unlawful per se, defendants should cancel them immediately.

4

3. Defendants' failure to maintain rates on rough staves and heads, in carloads, from points in Arkansas, Missouri, Kentucky, and Tennessee to St. Louis, Lawrenceville, and Chicago, without any requirement with respect to the inbound carrier of the staves and heads receiving the initial outbound haul on the finished product and on a level, mile for mile, the same as that represented by those contemporaneously maintained by the same defendants on the same commodities from the same points to Memphis and Louisville, does not unduly prejudice complainants located at Lawrenceville and Chicago, but does unduly prejudice those located at St. Louis, and unduly prefers such complainants' competitors located at Memphis and Louisville.

4. Defendants should remove the undue prejudice described in finding 3 by (1) canceling the existing subnormal rates on rough staves and heads from the points described in finding 3 to Memphis. Louisville, and St. Louis, applying in lieu thereof the normal rates now in effect, or (2) by establishing subnormal rates to St. Louis on a level no higher, mile for mile, than the lowest of those contemporaneously maintained by the same defendants from the same points to Memphis or Louisville, and without any requirement with respect to

Excluding the Nashville, Chattanooga & St. Louis Railway.

the inbound carrier of the staves and heads receiving the initial outbound haul on the finished product. If any of the defendants elect to remove the undue prejudice in the manner prescribed in clause 2 the subnormal rates may be limited so as to apply only on staves and heads used in manufacturing processes at Memphis, Louisville, and St. Louis.

An appropriate order will be entered.

COMMISSIONER MAHAFFIE Concurs in the results.

MILLER, Commissioner, dissenting in part:

With the conclusion that the rates on new tight cooperage, in carloads, in official territory as here in issue have not been shown to be unreasonable, I concur. With the remainder of the report and findings, particularly the discussion of so-called "cut-back” rates, I am in complete disagreement. Based upon what appears to be a misapplication of certain cited court decisions the report in effect holds that because there is no provision for applying a joint through rate from origin of the raw material to destination of the product, there is and can be no transit. From this erroneous premise the report deduces that the application of any rate into the "transit" point less than the full local is unlawful per se and in violation of sections 2 and 6. I agree that in form the tariffs are technically in violation of those sections, but instead of a sweeping condemnation of all "cut-back" rates the report should do no more than to point out the details in which these particular rates fail to accord with the true principles of transit. They are the failure directly to connect particular inbound shipments of rough material with particular outbound shipments of the manufactured product through the surrender of expense bills; the fact that the percentage of "wastage" is in excess of the actual amount of loss incurred in the process of manufacture; the fact that the weight of steel hoops is allowed to be used in determining the tonnage of inbound wooden material on which the "cut-back" rates are allowed; and the fact that the rules governing the bonds given to insure payment of the correct charges are not sufficiently definite, leaving the possibility of discriminatory practices as between one transit operator and another. However, the evidence does not show that any such discrimination has been practiced.

There is no undertaking here, as there was in Thomas Keery Co., Inc. v. New York, O. & W. Ry. Co., 211 I. C. C. 451, to deny, by administrative action, the right of the carriers to maintain and charge reasonable rates for each separate transportation transaction in and out of the so-called transit point, or, as there, to enforce the transfor

mation of intrastate transportation into interstate transportation, by artificial means, solely for the purposes of reaching it with Federal regulation. Here we are dealing only with a voluntary adjustment which the carriers are at liberty to maintain so long as they observe the statutory inhibitions against unlawful prejudice and preference. Except to the extent that some of the defendants may fail to maintain, to St. Louis, Chicago, or Lawrenceville, cut-back rates subject to the same terms that they maintain to Memphis and Louisville, such disadvantage as is suffered by complainants is one of location, is therefore not undue, and consequently there is no undue prejudice and preference.

So-called "cut-back" rates are common throughout the South, Southwest, and portions of western trunk-line territory, particularly Wisconsin and Michigan. Thousands of dollars are invested in industries which have been located because of the maintenance of "cut-back" rates. To require general cancelation of such rates (as the majority report apparently would do) would not only cause serious loss, and perhaps ruination, to these industries, but would constitute an unwarranted reversal by us of a position taken for many years as we have in numerous cases in the past 20 years considered rates of this kind and have never declared them to be unlawful per se.

226 L. C. C.

No. 27569

MISSISSIPPI COTTON SEED CRUSHERS ASSOCIATION v. ALTON RAILROAD COMPANY ET AL.

Submitted December 21, 1937. Decided March 28, 1938

Rates on soya-bean cake and meal, in carloads, from points in Illinois freight territory and Ohio and Missisippi River crossings to Gulf ports for coastwise, intercoastal, and export movement found not unduly prejudicial to shippers of cottonseed cake and meal from points in southern territory to the same ports for coastwise, intercoastal, and export movement. Complaint dismissed.

D. C. Callon for complainant.

C. E. McDaniel and E. B. McKinney for interveners supporting complainant.

J. T. Quisenberry, Lawrence Chaffee, and Erle J. Zoll, Jr., for defendants.

A. E. Hanson and T. C. Burwell for interveners supporting defendants.

REPORT OF THE COMMISSION

DIVISION 2, COMMISSIONERS AITCHISON, SPLAWN, AND CASKIE BY DIVISION 2:

No exceptions were filed to the report proposed by the examiner. Complainant is an association of shippers of cottonseed and its products, with principal office at Meridian, Miss. It alleges that the rates on soya-bean cake and meal, in carloads, from points in Illinois freight territory and Ohio and Mississippi River crossings to Gulf ports for coastwise, intercoastal, and export movement are unduly preferential of shippers of soya-bean cake and meal and unjustly discriminatory of and unduly prejudicial to shippers of cottonseed cake and meal from southern producing points to the same Gulf ports for coastwise, intercoastal, and export movement, in violation of sections 2 and 3 of the Interstate Commerce Act. No evidence of unjust discrimination within the meaning of section 2 of the act was submitted and that allegation will not be considered further. Complainant asks us to prescribe nonprejudicial rates for the future. Rates will be stated in cents per 100 pounds.

The New Orleans Joint Traffic Bureau and the Valley Division, National Cottonseed Products Association, intervened in support of complainant and the National Soyabean Processors Association and