home | authors | books | about

Home -> Orville Marcellus Powers -> Commerce and Finance -> Chapter XLVIII

Commerce and Finance - Chapter XLVIII

1. Chapter I

2. Chapter II

3. Chapter III

4. Chapter IV

5. Chapter V

6. Chapter VI

7. Chapter VII

8. Chapter VIII

9. Chapter IX

10. Chapter X

11. Chapter XI

12. Chapter XII

13. Chapter XIII

14. Chapter XIV

15. Chapter XV

16. Chapter XVI

17. Chapter XVII

18. Chapter XVIII

19. Chapter XIX

20. Chapter XX

21. Chapter XXI

22. Chapter XXII

23. Chapter XXIII

24. Chapter XXIV

25. Chapter XXV

26. Chapter XXVI

27. Chapter XXVII

28. Chapter XXVIII

29. Chapter XXIX

30. Chapter XXX

31. Chapter XXXI

32. Chapter XXXII

33. Chapter XXXIII

34. Chapter XXXIV

35. Chapter XXXV

36. Chapter XXXVI

37. Chapter XXXVII

38. Chapter XXXVIII

39. Chapter XXXIX

40. Chapter XL

41. Chapter XLI

42. Chapter XLII

43. Chapter XLIII

44. Chapter XLIV

45. Chapter XLV

46. Chapter XLVI

47. Chapter XLVII

48. Chapter XLVIII

49. Chapter XLVIX

50. Chapter L

51. Chapter LI

52. Chapter LII



Almost an infirite variety of commodities is offered to the
railroad companies for transportation. If all articles were
embraced under a single schedule and charged according to bulk
or weight, irrespective of value, those articles having large bulk
with small value would be charged exorbitantly, while articles
having small bulk would escape their just portion of trans-
portation charges. Thus coal, grain and lumber
would be subjected to a charge which would be
prohibitive, and would place them beyond the
ordinary uses for which they are now produced. The problem in
the classification of freight is to so fix the tariff as to produce the
greatest amount of revenue for the railroad and at the same
time not fetter or hinder the transportation of products by ex-
cessive charges. The tariff rates upon transportation lines have
an important bearing upon the prosperity of the communities
through which they run, by stimulating or retarding production
of commodities. The earliest freight tariffs involved a very
imperfect classification, and each railroad had its own system,
but as the through business developed, this multiplicity of
freight rates was found inconvenient and cumbersome, making it
difficult for shippers or buyers to ascertain in advance what the
freight charges upon a long-distance shipment would be.

Kailroads divide their freight into four or more general
classes, according to bulk and value. Goods having great value
and small bulk, such as dry goods and groceries, are placed in



the first class. Lumber., fuel, grain, ore and other bulky but
low priced commodities are placed in the fourth or a lower
object m class. Goods of the first class are charged two or

classification three times as much for" transportation as those
of Freight embraced in the fourth class. It is true that

the greater risk assumed in carrying goods of high value, to-
gether with the extra care and labor in handling or storing them,
will in a measure justify a higher freight charge, but this is
very slight in comparison with the difference between the rates
upon the two classes. The carrying charges upon different
classes of freight are not based upon the cost of the service, but
upon what traffic will bear. If a ton of lumber were sub-
jected to the same freight charge as a ton of dry goods, no
lumber would be shipped. The freight rate would be practically
prohibitive. Thus by means of a wise classification of freight
the cheap traffic is made possible, and the high-class traffic is
not seriously hampered, the railroad revenues are increased by a
large volume of business and the public wants are satisfied. Some-
times a commodity is placed in two or more classes depending
upon the quantity shipped. Thus car load lots receive a lower
rate than is allowed to the same commodities in less quantities.
In former years railroad companies sometimes placed certain
commodities in a lower class temporarily in order to stimulate
new industries or develop traffic in certain direc-

UnjustDis- ,. T , . . -IT

criminations tlons - Lar g e shippers were given special ad-
vantages over small ones in the form of rebates
against their freight bills, and competing points were accorded
lower rates than non-competing points. An extensive system
of favoritism and discrimination thus grew up which abounded
in injustice to the public, and interfered with the natural oper-
ations of trade. To remedy the evil, Congress, in 1887, en-
acted the Interstate Commerce Law, designed to .prevent un-
reasonable rates and unjust discrimination between persons,
places and classes of traffic.


At first impression it would seem that the charge for carrying
freight should depend wholly upon what it costs the company
to perform the service, and include a fair profit for the capital
Factors in employed in the business. But freight rates are

Determining not usually fixed in this way. Three factors must

be taken into account in determining rates. The
first is, what will it cost the company to furnish such service?
Second, what will the shipper be willing to pay, or what can
he afford to pay? Third, what competition among other trans-
portation lines, by eithe.: land or water, must be met or over-
come in order to secure tie business. These three factors in the
problem must be considered in arriving at the freight rate.

It is not practicable to fix rates on a basis of cost of service,
because it is not possible to determine in any particular case
what the actual cost of the service has been. Thousands of

items must be taken into consideration in arriving
Cost of Service at the total expenses of running the road, and no

official can say just what proportion of these ex-
penses should be chargeable against any particular shipment.
Again, as previously stated, it is only by charging certain com-
modities of high value a large profit over the cost of service, that
commodities of low value can be carried at a very low rate.*

Fixing rates according to the value of the service to the
shipper, or what he can afford to pay, is called "charging what
the traffic will bear." This method aims to make the charges
such as to produce the most revenue to the railroads without at

the same time reducing the volume of traffic. If
wm sear '" tke ser e * s f great value to the shipper, and

enables him to reap -a large profit on the goods
shipped, he can well afford to pay a liberal freight charge, and
this will enable the railroad company to carry other and less

"Commodities of low value are carried at low rates also on account of the
large volume of that traffic and the slow speed of the trains. Thus coal
trains run at low speed, while trains loaded with perishable goods must be
run at a much higher speed, and at an increased cost.


profitable merchandise at a low rate. Expensive articles of
small bulk will bear a high charge without adding much to the
percentage of increase in cost caused by the carrying charges,
while farm products and other bulky freight must have a low
rate, or they will not be produced and shipped.

Competition must always be taken into account in fixing
rates. Charges must be fixed and modified according to the
varying conditions under which railway traffic is conducted.
There is not only the competition of rival lines of railways, but

also that of waterways. In a very large portion of
competition the United States shippers have a choice of trans-

portation by rail or by water upon the great lakes,
rivers and canals. There is also the competition of cities and
markets to be taken into account. Thus the Atlantic cities are
in sharp competition with gulf ports or outlets for the products
of the Northwest. A more favorable market in one city than
another will influence the stream of traffic in a corresponding
direction. Competition then is an important factor in determin-
ing freight rates.

Attempts have been made in various states to prescribe that
freight charges shall be in proportion to distance. Such rates
are termed "equal mileage rates." But these are obviously un-
fair since it costs a railroad company more than half as much
to carry a shipment fifty miles as to carry it one hundred miles.
Goods must be stored, handled and billed, the same for a short

distance as for a long one. Once loaded upon the
M cars > tlie y re q uil% e very little care until they reach

their destination. An equal mileage rate there-
fore is an injustice to either the railroad company or to the

Owing to competition and other causes it was thought neces-
sary in some cases, in order to secure business, to take freight
for a through shipment at a lower rate than was charged for a
local shipment to charge less for the entire distance than for


a part. This is called the "long and short haul/' and would
seem to be discrimination of the most unfair and objectionable
kind. It was quite common in railroad manage-
ment P rior t the P assa ge of the Interstate
Commerce Act, by which it was made illegal
in all cases when both charges were made under "sub-
stantially similar circumstances and conditions." Such dis-
criminations have now become infrequent, and yet there are
instances when the long and short haul discrimination is justi-
fiable. To illustrate, the steamship lines doing business be-
tween New York, other North Atlantic ports and New Orleans
offer such competition to the railroads that they must either
make a discrimination in favor of the long and short haul or fail
to secure the business. Intermediate points are not affected
by the water competition. The railroads can afford to take
their through business at a slight advance over actual cost
of service rather than not have it. They could not reduce their
local rates to the same basis without destroying their profits.
Again, were railroads in the United States parallel those in
Canada, a discrimination is justifiable, for if our railroads were
compelled to maintain their through rates on the same basis as
their local traffic, it would have the effect of sending through
shipments of grain via Canada where the railroads are not under
such restrictions, and would merely put profits in the pockets of
foreign railroad owners. The Interstate Commerce Commission
has held that competition against foreign railroads is sufficient
grounds for lower rates from terminal points.

For the purpose of facilitating the shipment of freight, and
especially where the property is to be shipped a long distance,
over several lines of railroad, fast freight lines have been
formed. Nearly all of the business from the West to the
Atlantic seaboard and territory east of Buffalo and Pittsburgh
is handled over fast freight lines. A few of these fast freight
lines own their own cars, do their own billing and conduct
their business distinct from that of the railroad companies, pay-


ing the different roads a mileage for hauling their cars. Most
of the fast freight lines, however, are combinations of the rail-
road lines merely for the purpose of facilitating
Fast Freight |] ie interchange of freight, and to expedite the
shipment. The railroad companies do their own
billing and send a tissue copy to the fast freight office.

The cash receipts are apportioned among the different roads
in proportion to the mileage of each or on other agreed bases,
and in case of a claim of damages, the matter is taken up and
adjusted between the roads. The fast freight line in this in-
stance becomes a sort of clearing house for carrying out a
mutual arrangement between two or more lines of railroad.

The methods of handling freight for through shipment have
been so perfected that the railroads now receive goods con-
signed to all stations on any road, and even to many foreign
cities. Upon delivery of the goods to the railroad agent the
shipper or "consignor" is furnished with a receipt in the form
of "Bill of Lading." Freight is shipped in two
wa y s > "straight consignment" or "order." When
a straight consignment bill is issued, the goods
must be delivered to the consignee or to the person to whom he
may order them delivered as his agent. Most shipments are of
this class. An order bill is one that may be transferred by en-
dorsement. Such bills are usually for the purpose of securing
the payment at destination of a draft drawn for the value of
the property. The draft is usually pinned to the bill of lad-
ing, and both are sent through a bank for collection. When the
draft is paid the bill of lading passes to the payer. The bill
of lading is also endorsed to him and he may then claim the
property. A way-bill containing the number and initials of
the car, names of consignor, name and address of consignee,
place of shipment, place of destination, description, weight or
number of articles, class and rate of freight, and total freight,
is made out for each shipment, and accompanies the goods
through to destination.

© Art Branch Inc. | English Dictionary