APPENDIX XIV

KEEP IT LEGAL 1

FOREWORD

One of the major problems besetting the transportation industry is the loss of traffic to motor carriers operating beyond the law. Not only do they rob the forhire carriers of traffic, but these transportation outlaws, operating as they often do as pseudoprivate carriers, have cast an undeserved stigma of doubt on the good reputation of the private carrier industry as a whole.

The Interstate Commerce Act provides for the regulation of common and contract carriers in interstate commerce but does not provide for regulation of private carriers other than for the Commission's safety regulations.

At the heart of the problem are the shippers and suppliers, for they furnish the freight that keeps unlawful trucking on the road. Whether or not you transport your own goods as a private carrier, you and the rest of us are dependent to a great extent upon a strong and healthy transportation industry and we must maintain a vital interest in its preservation.

The Private Carrier Conference, in a continuation of its educational program, has produced this brochure to point out telltale signs of illegal for-hire trucking. It is my hope that the suggestions and warnings in this readable brochure will gain wide circulation and as wide acceptance and observance. It is my further hope that the elimination of unlawful carriage will enable bona fide private carriers and regulated for-hire carriers to attain the stature they deserve in our overall transportation complex.

JULY 1, 1963.

LAURENCE K. WALRATH, Chairman, Interstate Commerce Commission.

THE ILLEGAL FOR-HIRE PROBLEM

Estimates of the extent of illegal for-hire trucking vary greatly. In the absence of hard and meaningful statistics, no accurate assessment can be made. Nonetheless, it is in the best interest of all to do everything possible to eliminate the problem-however great or small. Illegal for-hire carriers are:

(1) those who perform for-hire trucking operations without any serious pretense that their operations are lawful,

(2) those certified carriers who indulge in unlawful interpretations of their operating authority, and

(3) the operators who employ classic disguises for their operations, such as illegal leasing devices and buy and sell devices, to conduct for-hire transportation unlawfully.

In sum, illegal transportation is any which the law requires to be regulated but is not. Information as to how to recognize the operations which fall into any of these categories has been requested by you, Mr. Businessman. This booklet is the response of the Private Carrier Conference and is dedicated to the sole end that it may help to make you more alert to the telltale signs of illegal for-hire carriage.

As a representative of a company engaged in a business other than transportation, you, Mr. Businessman, bear a critical relationship to the illegal for-hire transportation problem as a private carrier, as a seller, and as a shipper. In your operations, you may daily be performing each of these three functions with respect to the same or different customers.

It is in your company's interest to do all possible to avoid being engaged in or knowingly cooperating in such illegal transportation. By doing so, you will be obeying the law. Federal law provides strict penalties for anyone operating without an appropriate authority from the Interstate Commerce Commission or

1 Compiled, printed, and distributed by the Private Carrier Conference, Inc., of the American Trucking Associations, Inc., Washington, D.C.

for anyone who knowingly participates in, aids or abets a party performing illegal for-hire carriage.

Over and above your own personal interest in seeing to it that as a private carrier, as a seller and as a shipper, you obey the law, it is even more important that you appreciate the significant public interest involved in eliminating illegal for-hire carriage. It is only by the elimination of illegal for-hire carriage that the attacks on legitimate private carriage will end. By wiping out illegal forhire trucking, the legal for-hire trucking industry will improve its economic position in the United States. This will better the type of service which it may render to you and to your customers.

The unlawful trucker has no responsibility to the shippers generally. The legitimate common carrier does. The unlawful operator usually pays lower wages and if possible avoids payroll and social security taxes; he may pay no attention to the State and Federal safety regulations on hours of driving time or standards of equipment; he may carry no cargo insurance or have inadequate coverage; he may not maintain an office or fixed place of business, or may have a fictitious office. Moreover, the illegal operator selects only that traffic which is highly profitable, generally truckload traffic. By this device, he offers to haul the lcad at a cost well below the regulated carrier rate. Competitively, the businessman who uses lawful carriers is put at a serious disadvantage by any competitor who "saves" money by utilizing an illegal for-hire carrier.

The rest of these pages will be divided into three basic sections reflective of your triple role as a private carrier, as a seller, and and as a shipper. The questions and answer format which has been adopted is designed to allow you to categorize yourself in regard to a specfic situation under any one of the three headings.

MR. BUSINESSMAN AS A PRIVATE CARRIER

Question: Must I have a primary business other than truck transportation in order to be a private carrier?

Answer: Yes. The transportation which you conduct must be incidental to your primary business, within the scope of it, and in furtherance of it. Private carriage is involved in thousands of different businesses. Some examples are: (1) A manufacturer of bicycles who tansports them to his own customers whether they be wholesale distributors or retail merchants.

(2) A textile manufacturer which purchases raw or semifinished materials for further development or manufacture. The unfinished product may be picked up in the company's own vehicles and the finished, processed, or improved product may be delivered to the company's own customers.

(3) A petroleum products distributor who purchases and delivers such products to his customers. He may use his own trucks to pick up the products from the seller and in turn deliver the product to his customer.

(4) A drycleaner who picks up and delivers clothing in his own trucks. Even though he does not own the clothing, he has possession under bailment for the purpose of cleaning them.

Question: I have my own primary business. How may I be sure that my own private carriage operation is legal?

Answer: As you probably know, there is a basic test to which your private carriage operation should be put to determine its legality. It is the primary business test. Simply stated, it means that the carriage you conduct for yourself must be within the scope of and in the furtherance of your primary business. Such a primary business must not be the transportation business. The goods you carry may be your own or they may be in your possession to process or develop them in any way related to your primary business.

Question: Is the primary business test sufficient to ascertain the legality of a private carriage operation?

Answer: The primary business test is the sole test to determine the legality of a private carrier operation. However, within the concept of the primary business test, there are many different facets to be checked. For example, in determining whether or not a carriage operation is in furtherance of a primary business, it is important to know who has the responsibility for the carriage, who controls the carriage, and who bears the substantial risk of conducting the operation. This is a way of asking whether you are the carrier or whether an outside party is really the carrier.

Question: What situations commonly arise to demonstrate the responsibility, control, and the substantiality test?

Answer: Such situations commonly are as follows:

1. Parent-subsidiary hauling.-Your primary business is conducted through a parent corporation which has one or more wholly owned subsidiaries. It makes good practical business sense for the parent corporation to haul goods belonging to the subsidiaries or vice versa. This, however, may not be done for compensation. As far as the law is concerned, such corporations are separate and distinct. Carriage performed by one for the other for compensation is for-hire carriage just as it would be if the corporations were in no way related.

2. Buy and sell devices.-Your primary business is making refrigerators. Your trucks deliver these refrigerators to your customers. At the point of destination, you purchase and take title to a truckload of soap (not an exempt commodity) and transport it back in your trucks and immediately resell and deliver it to a purchaser. Your are not in the soap business. This is not legal. Because the soap (a) is not an exempt commodity, (b) bears no relationship to your primary business, (c) is purchased for resale, and (d) is transported solely to reduce the cost of an otherwise empty back haul, such transportation is for-hire transportation. You may not, as a private carrier, engage in it. This device is commonly known as the buy and sell arrangement.

3. Exempt commodities.-However, there are certain specified exempt commodities which may lawfully be carried on a for-hire basis by any truck operator. Such commodities relate to agricultural products, fish, and livestock, generally. A complete list of these exempt commodities is contained in the Decisions Section of the Compendium on pages 31-43.1

4. Bare truck leasing.-In connection with your primary business, you lease trucks from a truck leasing organization. Your own employees drive these trucks. Bare truck leasing is permissible provided that your employees are in no way responsible to the leasing company. You must have full control over the leased vehicles and bear the responsibility to the public for their use.

5. Leasing trucks with drivers.-As an operator of a primary business, you lease trucks with drivers from a common source. In such a situation, there is a presumption that such carriage is for hire and not private carriage. This presumption is nearly impossible to overcome because of the difficulty of showing control, responsibility, and the bearing of a burden of such a transportation service on the part of the businessman. Under no circumstances, therefore, should you ever lease trucks and obtain drivers from the same source. This is equally applicable when the drivers own their own trucks and purport to become your employees and lease the trucks to you.

6. Trucks and drivers from apparent separate sources.-In your operation, you lease trucks from one source and obtain drivers from another source, but one phone call will suffice to make the entire arrangement relative to both trucks and drivers. In such a situation, for-hire carriage will probably be found because of an apparent partnership or coordinated arrangement or concerted action between the truck lessor and the driver supply source. In effect, the Interstate Commerce Commission would probably consider this situation the same as it would if trucks and drivers came from an identical source.

7. Trucks and drivers from distinct sources.-If your trucks and drivers come from truly unconnected or unrelated sources, private carriage may exist as long as the truck lease is a bare truck lease and as long as the drivers, other than for bare payroll purposes, are under your day to day control, direction, and supervision. Great caution should be exercised under these circumstances to be completely certain that the operation is consistent with the private carrier concept. The utilization of such drivers must be the same as any other employee except that instead of paying these drivers directly, you pay the driver supply source which functions as a bare paymaster. There must be no relationship between the drivers and the truck lessor. Where drivers are furnished, there arises a presumption of for-hire carriage which will yield to a showing that the carrier fully manages the operation. You, and not the vehicle lessor or the driver supply source, must check each day to be certain that the vehicles are in safe condition, that the drivers are properly rested, that they are observing the law and the regu

1 See "Compendium of Federal Laws and Regulations Governing Private Carriers of Property by Motor Vehicle" published by the Private Carrier Conference, Inc.

lations, and it is you who must make the operating decisions and handle the daily problems as they arise.

Question: Assuming that I am conducting a genuine private carrier operation, what is my obligation to the Interstate Commerce Commission?

Answer: As a private carrier in interstate commerce, your operations as such are not regulated by the Commission except for the requirement of adherence to the Commission's hours of service and safety regulations. As they apply to private carriers, they are contained in parts 190 through 197 of the "Regulations of the Interstate Commerce Commission." A fully detailed exposition of the applicability of these parts of the ICC rules and regulations is contained in the General Discussion, section E, of the "Compendium of Federal Laws and Regulations Governing Private Carriers."

Question: As a private carrier, what else can I do to keep abreast of all legal developments and ICC requirements affecting private carriage?

Answer: Your membership in the Private Carrier Conference Inc. of ATA provides you with an effective means of obtaining all current information on this subject. The "Compendium of Federal Laws and Regulations Governing Private Carriers of Property by Motor Vehicle" published by the Private Carrier Conference is a fully developed and detailed source of such information. Constant supplements are issued to subscribers so that they may be kept abreast of all developments. Furthermore, a continuing program of education should be instituted in your company so that such information becomes widely disseminated.

MR. BUSINESSMAN AS A SELLER

Question: Quite a part from my role as a private carrier, am ofttimes a seller of goods to customers who have ordered them and who purport to provide legal private transportation to take these goods from my dock. Do I have a responsibility to see to it that my customers' purchase is transported legally?

Answer: Yes you do. If your customer purchases your products and directs that his own trucks pick them up, you are acting as a seller and should make a responsible inquiry to determine whether such carriage is legally private. The Commission has indicated that it appreciates the fact that it is at times difficult for the seller of goods, who is called upon to load vehicles under questionable circumstances, to make a determination as to whether or not lawful carriage is being performed. The Commission has also stated that while it would not imply that sellers of goods act at their own peril, if they honestly misjudge the status of a private carrier operator, it urges upon sellers of goods to make inquiry and demand assurances from the trucker. Where there is doubt, a decision should be carefully weighed as to whether or not to turn over the goods to that person for transportation.

Question: As a seller, am I not at some disadvantage in obtaining this information?

Answer: Yes, you are. The extent of the information you can obtain as a seller relative to the means of transportation is less than you can obtain as a shipper where you would be selecting the means of transportation yourself or far less than you would have as in the case where you were conducting your own private carriage. However, this does not absolve you of all responsibility in this connection. In the preceding pages, you noted how your own private carriage operation should be examined. Such knowledge is useful in examining what purports to be someone else's private carrier operation although it is conceded that you will have less information available.

Question: Why should I make such an inquiry?

Answer: For the same reasons basically as you would in ascertaining whether your own operation was a legitimate private carrier operation. The law prescribes penalties for knowingly aiding or abetting illegal for-hire carriage. Moreover, it is your public duty as a responsible citizen not to further illegal for-hire carriage. This, beyond argument, is certainly in the public interest. In your own private interest you should realize that any savings effected by illegal transportation could be wiped out by an enforcement action of the Interstate Commerce Commission and are therefore illusory.

Question: How then as a seller may I look for the telltale signs of illegal for-hire carriage?

Answer: Naturally, the amount of information you can reasonably be expected to obtain from a carrier at your own dock who was sent there by one of your

customers will not be as in depth as your knowledge of your own private carrier operation, but there are certain signs indicating possible illegal for-hire carriage: 1. If the truck sent to pick up the purchased goods has no permanent markings indicating the name of the buyer, this is a possible indication that legitimate private carriage is not being conducted.

2. If the truck is not owned by the purchaser of the goods, it is another indication.

3. If the driver of the truck is unable to demonstrate that he is an employee of the purchaser of the goods, you should check further. Remember, however, that if the driver is supplied to the purchaser from a driver supply agency, private carriage may still be conducted but such a situation would warrant further investigation by you.

4. If the driver of the vehicle appears at different times and claims to be the employee of different purchasers, it is likely that for-hire carriage is being conducted.

5. If the driver carries a driver's license bearing an address far removed from the known address of his purported employer, it is likely that for-hire carriage is being conducted.

6. If the driver shows no knowledge of his "employer's" primary business, it is likely that for-hire carriage is being conducted.

7. If the driver refuses to show you his certificate of physical examination or a photocopy thereof, you are alerted to possible for-hire carriage.

8. If the driver declines to show you his daily operating log, you are likewise alerted.

9. If the driver does not possess a copy of the lease showing the customer as the lessee of the truck on a bare truck rental basis, for-hire carriage may exist. 10. If explosives or other dangerous articles are being carried, you have a serious obligation to determine whether there is compliance with the Commission's part 197 regulations.2

Question: If I notice any of these indications listed previously, what should I do?

Answer: This poses ofttimes a very difficult problem because it involves frequently the delicacy and good will of the relationship with a valued customer. However, you should never value a customer relationship above obedience to the law. In such a situation, you should take the problem to your top management. Transportation transcends any one departmental function and the responsibilities of assuring legal transportation is a rightful function of top management. Under the circumstances, discreet inquiries could be made of a responsible official of the customer. In addition, if all else fails, you should contact the district supervisor of the Interstate Commerce Commission. He will make his own investigation and will keep his sources of information confidential.

MR. BUSINESSMAN AS A SHIPPER

Question: How is my role as a shipper to be distinguished from that of my role of a seller:

Answer: As a shipper, you select the means of transportation, private, common, or contract carriage. As a seller, your purchaser selects the means of transportation. In the latter situation, you merely turn over the goods for transportation to someone else selected by the buyer.

Question: What should I be on the watch for as a shipper?

Answer: Apart from determining whether your own trucking operation is a genuine private carrier operation, you should take reasonable steps to ascertain the validity of the transportation to be conducted by an alleged for-hire carrier that you select.

Question: If I ship by contract carrier, how can I determine the carrier's rights to transport my goods?

Answer: Contract carriers may transport for you only under a written contract covering a series of shipments. The commodities they may transport, and the points of territory they may serve are specified in their permits. Under some of these permits, the carrier may serve only the shippers named in the permit, and under others only certain classes of shippers. A careful examination of the permit should be made in any doubtful situation.

2 See "Guide To ICC Explosives and Dangerous Articles Regulations," published by Private Carrier Conference, Inc.