Freight rate

“ If the freight on such a carload be $300 the rate per pound would be only one cent, and there is scarcely a commodity upon which a freight rate of one cent per pound makes any difference in the retail price. ”

“ There are thousands of varieties of freight offered to the railroads for transportation. If each class of commodities were charged the same freight rate per ton per mile, the charges upon many articles of prime necessity, such as coal, lumber, and grain, would be so high as to prevent their being moved, while the rates on goods of high value per bulk would be much lower than they could readily pay. ”

“ The average freight haul in the United States is 120 miles, or about five times as long as the average journey per passenger. How can such a difference be accounted for except by the dissimilarity in the principles which govern the computation of passenger and freight charges? The same rule should be adopted in fixing passenger rates that is recognized by railroad men in fixing freight rates: the rate per mile should decrease with the increase of the number of miles traveled. ”

“ Proportioning transportation charges to the value of the service must always be clearly distinguished from basing them upon the mere value of the goods. Nothing is more certain than that no direct causal relation between freight rates and the intrinsic value of commodities is traceable. On wire the freight rate between two given points may be about one-fourth of the commercial value ”

“ This study of the freight rate structure is so comprehensive and thorough as not only to be exceedingly valuable to anyone having to do with railroad freight traffic either as a railroad official or as a shipper, but it is also a most fascinating exposition for the general reader of a subject which has not hitherto received a popularly intelligible presentation. It offers to younger men the only means of knowing how the present freight rate system has been evolved. ”

“ The popular war cry in this agitation was lower freight rates. This demand is voiced in the President's message of 1872, calling for "more certain and cheaper transportation, of the rapidly increasing western and southern products, to the Atlantic seaboard." The proposals of the Senate to attain these objects are contained in the above-mentioned Windom Committee Report of 1874. Competition is to be stimulated by the development of waterways and new trunk lines. A bureau of [Pg 444] commerce is proposed. The long and short haul principle in rate making is to be enforced. ”

“ The first was that the freight rates from all eastern territory to these localities were from one-quarter to over one hundred per cent higher than to the Pacific coast, although the goods in transit passed their very doors and might be hauled a distance greater by one-fourth. A carload of glassware from Pittsburg to Spokane, Washington, paid a freight rate of $649.44; while the charge to Seattle, four hundred miles farther west, was only $393.60. A first-class commodity (carload) rate from Omaha to Reno, Nevada, was $858. ”

“ In the second place, the shipper is guaranteed a stability of rate schedules which is deemed necessary for settled business conditions. The merchant, for example, includes transportation charges in the cost price of the goods in which he deals. But if the transportation charges on the same class of goods are subject to frequent change, the merchant can never tell when his competitor is to be given the advantage of a sudden lowering in freight rates. ”

“ The railroads found that a reduction brought such an increase of traffic that the lower rates were not only an advantage to the shippers, but also a benefit to themselves; and rates have fallen almost constantly in the course of the period. In 1914 the average freight rate was only three quarters of a cent per ton-mile, and some of the lines between Chicago and the Atlantic coast had reduced their charges very close to half a cent. ”

“ Grain, lumber, coal, iron, shoes, dry goods, groceries, drugs and chemicals, would all have to pay near about the same rate per 100 pounds per mile, and that rate would have to be something like an average of the present rates charged upon the different classes of freight. The higher classes of freight would be a good deal lowered, and the lower classes would be materially raised. ”

“ The freight rate book, therefore, not only enables the manufacturer to calculate a delivered price on the basis of his own mill price, which he determines, to points in the territory nearest in point of freight rate to his own mill, but it enables him also to determine at once the freight differential which he must offset in his mill price in order to compete with other manufacturers serving any other given territory. ”

“ The cost of service should invariably be an important factor of a rate. Railroads should not be compelled to carry any commodity for less than the actual cost of moving it, nor should rates be fixed greatly in excess of such cost of service. The carload should be the unit of wholesale shipments. Since it costs the railroad company as much to move ten carloads of freight which belong to one shipper as it costs to move ten carloads belonging to ten shippers, no advantage beyond the general carload rate should be given to the large shipper. ”

“ Both problems are very difficult, however, and the unintelligent adjustment of rates has frequently resulted in injustice both to the roads and their patrons.
A rate per ton-mile for each class of freight is out of question, because a large part of the cost to the company consists in loading, handling, and storing the goods. Once aboard the car, it costs but little more to carry a ton of freight one hundred miles than to move it one mile. The rates per mile, therefore, are necessarily greater for short distances than for long runs. ”

“ He can afford neither to move nor to abandon his works. In order to continue in business he must meet the prices made by competitors. This price may be made elsewhere under more favored circumstances. To a manufacturer an increase of freight rates instead of curtailing output, may lead to attempts to lessen the costs of production per unit by an enlarged output sold at cut prices. Under such conditions an enhanced freight rate is a positive deduction from profits without any gain to the consumer. ”

“ A reduction of cost of operation per unit, attending a growth in volume, has already been fully described in connection with the theory of rates. And it is but natural that a reduction in the rate should follow any lessening of cost. Moreover, a large volume of business usually implies a relatively greater amount of low-grade tonnage. In order to bring out this relationship the second column in the table on page 415 has been added. This permits a correlation between freight density—that is to say, ton miles per mile of line and revenue per unit of service. ”

“ The only course then left to the railroad is to take the freight at whatever rate the shipper can send it with profit to himself and hope the whole of its traffic will amount to a greater sum than the cost of the service. The railroad may thus for years continue carrying freight at rates which do not cover the cost of the service, while the shipper will immediately stop his freight as soon as its transportation ceases to be remunerative to him. The rates can in no case be more than the value of the service, but they may be less than its cost. ”

“ It is always considered desirable to have a long haul, and the rates on a long haul should be much less, in proportion to distance, than on a short haul. This is a principle of rate-making which has grown up as one of the factors in the evolution of the railroad business in this country, and it has greatly stimulated the movement of freight for long distances, has brought the great manufacturing centres in closer touch with the consumer at a distance and the producer in closer touch with centres of trade. ”

“ Now, for instance, how do common boats rank, as first or third class freight?" "Third class, I should think," slowly responded the agent. "Ease your conscience, my friend," continued the clerk, "by weighing the boat, and charging the usual tariff rate for third class freight."
The boat, with its cargo still locked up inside, was put upon the scales, and the total weight was three hundred and ten pounds, for which a charge of seventy-two cents per one hundred pounds was made, and the boat placed on some barrels in a car. ”

“ The making of a tariff of this character includes necessarily agreements for the classification of freight, as the freight classification is the essential element in the making up of a rate. That the interstate commerce rates, all of which are controlled by the provisions as to reasonableness, were not intended to fluctuate hourly and daily as competition might ebb and flow, results from the fact that the published rates could not either be increased or reduced, except after a specified time. ”

“ It is probable that with a reduction of freight per fast train to the uniform rate of 10s. per ton, a considerable proportion of existing goods train traffic would be transferred to fast trains, so that the same figure might be arrived at with much less increase in tonnage. ”

“ But the fact that competition has been substantially eliminated in consequence of widespread consolidation since 1900, has rendered the movement of local and through freight rates more nearly alike all over the country than they were prior to that time.
The third consideration which must always be kept in mind in the interpretation of revenue per ton mile is the volume of the traffic handled. Any comparison of freight rates which is not made in the light of increase in the business transacted, is bound to be misleading. ”

“ Comparative Statement of Freight Earnings, Expenses, and Traffic for the Year 1880.
The most conspicuous difference here shown is that between the tonnage of the Central Pacific and the Eastern roads. This must be considered in noticing the rates charged; for the revenue depends not so much upon what rate is charged as what it is charged upon. The average rate of these Eastern roads is 88100 of a cent, while the Central Pacific charge is 2 34100 cents. But, on the other hand, the Eastern lines hauled upon an average, to each mile of road, 1,989,851 tons ”

“ The vital point, differentiating this case from that of the Savannah Freight Bureau, previously stated, was the actual damage to the intermediate point due to the existence of commercial competition between it and the place more distant.
An important feature in commercial competition is its entire dissociation from all considerations of cost of service by long or short routes. Neither strong nor weak lines make the rate. The business is there. Market conditions are fixed. The carriers are free to take traffic or leave it. Single-handed, at least they cannot rule the price of transportation. ”

“ The third form of competition in transportation is dependent upon the competition of markets; and is not in reality direct competition between carriers at all. This is the most difficult of all forms to understand. [82] It is certainly in many cases more than a "euphemism for railway policy." [83] Yet although indirect and often obscure, it is of fundamental and conclusive importance in the determination of freight rates. ”

“ In general the railroads have taken on the duty of wharfage and handling for freight consigned for overseas shipment. [5] In some instances railroads have charged for the use of the piers ('wharfage') and the necessary 'handling' separately from their charge for line-haul transportation. In other cases there has been only a single factor export rate (one inclusive charge) providing for limited shipside delivery with the railroad furnishing these accessorial services pursuant to their tariffs at no extra charge to the shipper. ”

“ But on the subject of cross-continent freight, by which many people may want to ship their cars home, the Transcontinental Freight Company’s offices in Chicago, New York, San Francisco, etc., have a special rate for through shipment of automobiles that is a very good thing to know about. They ship three automobiles in one freight car, and for cars weighing 4,500 pounds and over, they charge a maximum rate of $225.00, or $5.50 a hundred pounds, from New York to San Francisco or vice versa. A car weighing 3,000 pounds would cost $165.00. ”

“ When a big shipper gets ready to send a large amount of freight the railroads will suddenly make lower rates, publish them just in time to fulfil the law, and the moment the shipment is made the lower rates are withdrawn. For example a miller contracted for 17,000 bags of flour. At 400 to the car, 17,000 bags will make quite a string of freight. He went to the railroad folks and got a cut rate of 5 cents a hundred on that amount. ”

“ It may not lower the rates in a territory beyond the level which gives the carriers an income sufficient to enable them to operate effectively as part of the nation's transportation system. And the Commission may not raise rates to a leval which would exact freight charges from shippers beyond a rate structure that is reasonable. The small proportion of freight that moves on class rates is no measure of the importance of those rates to the total earnings of carriers. ”