A difficulty often arises in connection with the interruption of a shipment of goods in order to subject it to some simple process of manufacture. Shall the entire journey from producer to consumer be considered as a unit in determination of the rate; or shall the two parts, before and after the change of form by manufacture, be considered as separate and distinct in this regard? This problem arises in connection with the so-called "milling-in-transit" system for grain.[472] Logs likewise may be stopped at some convenient point en route for cutting into lumber.[473] Cattle or hogs must sometimes be stopped on the way to market in order to fatten or otherwise prepare them for sale;[474] structural iron may be halted for the purpose of fitting, shearing, or punching;[475] transit privileges on wool or concentration points for other commodities may be involved;[476] or other goods may be substituted at an intermediate point.[477] And then, finally, there are the so-called "floating cotton" cases.[478] The principle at bottom is practically the same in all of these sets of cases. It may be worth while briefly to consider two of them.
The "milling in transit" system is simply that of according to grain which is unloaded and milled at an intermediate point, the low through rate from the point of origin to that of consumption. Thus, for instance, wheat grown in North Dakota may be unloaded and ground into flour at Minneapolis and thence shipped to New York at the through rate from its point of origin to New York. Oftentimes a very small charge, as, for instance, one cent per one hundred pounds, is made for the privilege. This system prevails throughout the southern states also. Grain is brought, for instance, from Kansas City to Nashville or Birmingham, milled there, and shipped farther south for consumption. The rate charged is based upon the entire haul from Kansas City to the local point where the flour is consumed. Obviously this system stimulates very greatly the development of the milling industry at intermediate points. It is opposed correspondingly by the large cities which otherwise enjoy special privileges in the matter of low rates.
Precisely the same principle is involved in what are known as "floating cotton" rates. In this case the system has developed of permitting cotton to be unloaded in transit and compressed at an intermediate point, it being thereafter reshipped to the point of destination at a through rate from its point of origin. Thus, for example, cotton may be hauled twenty to thirty miles to one of the larger towns. There it is unloaded, sorted and compressed, reloaded, and sent on as if it had not been interfered with at all. Obviously one rate for the entire shipment is much less than the local rate into the town—which is always very high—plus a second rate from that town on to destination. The system in respect to cotton has developed even further than that of milling in transit of grain; for in the latter case the grain must be unloaded at some point on the line to destination; whereas in the case of cotton it may, under rulings of the Interstate Commerce Commission, be actually hauled away from its ultimate destination a number of miles and then reshipped back over the same line though at a lower rate than it could otherwise have enjoyed. Thus, in a leading case decided in 1899 it was held by the Interstate Commerce Commission that cotton could be hauled from Gattman, Mississippi, forty-one miles northwest to Tupelo, compressed there, and then hauled back again through Gattman and Birmingham to New Orleans.
Important centres, such as Memphis, which formerly enjoyed almost a monopoly of the compressing business, have strenuously opposed the development of this system. On the other hand, it offers a distinct advantage to the grower, because in place of selling the cotton through cotton factors at Memphis or other centres, it may be sorted and compressed at local stations. By this means much expense in the matter of drayage, handling and commissions is saved. This system is particularly advantageous because it tends to break up the pernicious basing point system, which tends to centralize all business at a few important points in the southern states. Almost a complete revolution in the matter of handling cotton has been effected during the last few years by the growth of this practice. Not only has the floating cotton system developed further than that of milling in transit by according the right of shipping even backward, away from the ultimate destination; it has also permitted of liberality in the handling of the product itself. It has been held that it is not even necessary for the same cotton to be reshipped from the point of compression. A carload started from the initial point for Boston, for example, may never reach there, other cotton being substituted for it. The destination of the car may be, and frequently is, changed. A few dozen grades of cotton being on the market, the original shipment into the point of compression may be entirely resorted and distributed to a dozen different points. Even the ownership of the cotton may change while it is in transit. Nevertheless, the system has been held as valid under the law, and its beneficial effects during the last few years have been observable, especially in the southern states. Of late the danger lurking in these systems of gross personal favoritism, have led to their careful examination in a number of cases. What the final policy regarding them is to be, cannot at this writing be affirmed.[479]
A problem of considerable difficulty, involving the relative shares of the various seaports in American export business, has occupied the attention of experts for more than a generation; and at this present writing, although before the Interstate Commerce Commission for the third time, seems to be almost as far from a satisfactory solution as ever.[480] It originated at the time of the rate wars in 1876. The first agreement between all the trunk lines concerning it was entered into in the following year. By this an attempt was made to equalize the aggregate cost of ocean and rail transportation between competing points in the West and all foreign and domestic points reached through Baltimore, Philadelphia, New York, and Boston. Under this agreement, Baltimore was allowed a rate of three cents below the rate from Chicago to New York; Philadelphia enjoyed a concession of two cents; while Boston had its rate fixed at a certain percentage of the Chicago-New York figure. There was considerable dissatisfaction expressed at various times with these differentials, and the whole matter was submitted to arbitration in 1882. The commercial interests of New York, as well as of the railroads centering in that city, have complained bitterly that these differences, once adjusted upon a very much higher scale of rates than at present, have become increasingly burdensome now that the Chicago-New York rate is perhaps not more than a third or a quarter of what it formerly was, while the differential has remained at a fixed figure. The recent decline of the export commerce of New York is, in fact, ascribed in a large measure to the operation of these differentials; and a leading case before the Interstate Commerce Commission, instituted by the Produce Exchange of New York, endeavored to secure their abolition. The Commission held, however, that the differentials—recognized by the Joint Traffic Association of 1896—were legitimately based upon competitive relations of the carriers; and that consequently no unlawful preference or advantage had been accorded to the cities competing with New York for export business.
The result of pressure for a larger division of export business, particularly from Boston, led, in 1899, to a reduction by one-half of the differentials. The matter was finally submitted for arbitration to the Interstate Commerce Commission, which very fully examined the question and rendered a decision in 1905.[481] By this decision rates via Philadelphia on traffic for export were to be one cent less than by way of New York, while to Baltimore they were to be two cents less. This arrangement still left Boston subject to its former substantial disability. It was contended that the original purpose of the differentials, namely, equilibration of rates from western centres of production through the various ports to Liverpool, had been practically nullified. For a time the phenomenal development of the Gulf exports diverted attention, forcing all the Atlantic seaports to make common cause against their southern rivals.[482] But the passing of this danger once more revived interest in the struggle between the Atlantic cities. Opportunity for the collection of full data under the strengthened Federal law in 1906, made it possible to reopen the case in 1912 before the Interstate Commerce Commission. But, in the meantime, both in 1909 and 1911, after an interval of twenty years, trunk line rate wars threatened to break out for the protection of Boston against its rivals. The latest decision by the Commission, just handed down,[483] still fails to satisfy Boston. No differential rate on export grain on the ground of distance as against New York is conceded; but those already in effect at Philadelphia and Baltimore are sanctioned. What the effect will be, remains for the future to determine.
The principle involved in the so-called import and export cases[484] is that of the reasonableness of charging lower rates on goods originally shipped from or destined to domestic points, than are charged for similar goods, over the same lines and for the same distances, when brought from or destined to foreign countries. Thus, for instance, in the case of cotton cloth shipped by way of Pacific ports to the Orient, the practice is not uncommon of charging a less rate to San Francisco for the transportation of goods ultimately destined for export, than is charged on similar goods which are to be unloaded for consumption at San Francisco or other California points. Or, reversing the case, this question touches the reasonableness of transporting goods from New York to Chicago at a lower rate, if they have been brought in from Europe, than is charged for similar service in the case of goods that have originated at or near New York. Cases of this description have become increasingly frequent during the last twenty years. The first and most important one, upon which both the Interstate Commerce Commission and the United States Supreme Court have passed, originated in proceedings before the Interstate Commerce Commission, brought by the New York Board of Trade of Transportation against the Pennsylvania and other railroad companies. The case practically raised the general question whether, in the carriage of goods from American seaports, carriers subject to the act could lawfully charge less for the transportation of imported than of domestic traffic of like kind to the same destination. The Commission, after careful examination, held that such differences in rates constituted discrimination as against the domestic shipper. According to its view, the circumstances and conditions pertaining to the carriage of freight from a foreign port to the United States could not be considered as creating the dissimilarity of conditions which alone would justify a different rate for like service in the two cases. The Commission held that: