Grain producers believe that coordination of all systems of transportation under one authoritative body possesses dangers which will have the effect of destroying water development and the benefits derived therefrom. Inland river navigation is still in its infancy as far as grain producers are concerned. They feel that no progress can be accomplished in developing water transportation if tied to another system of transportation, which, at best, is standing still.

If regulation is deemed advisable, it is recommended that each system of transportation be placed under authority of a separate and distinct commission; each commission to be limited to regulatory matters pertaining to operations within the scope of activities performed by the particular system with which it is identified.

This plan would provide for cooperation between commissions for the purpose of harmonizing features pertaining to the public interest. This plan would give assurance to the public that no restraint would be levied on one system to the advantage of the other. It would give further assurance that each system would be unobstructed in its independent development necessary to fulfill the needed service required in a country with the diversified interests such as prevail in the United States.

If the unemployed of this Nation were put to work harnessing the Missouri River to navigable confines from St. Louis to Fort Peck, Mont., we would, when accomplished, have developed our inland waterway system only partially, as compared to inland waterway development in other countries which have succeeded in taking foreign markets formerly enjoyed by the grain producers of the United States.

Circumstances surrounding the origin and proper functions of rail and water transportation are so disrelated that coordination could not be made for a common result without taking from one and giving to the other.

The CHAIRMAN. Now I will call Mr. Fawcett. I believe, Mr. Fawcett, you want to present a statement from Mr. Newton D. Baker?

STATEMENT OF JOSEPH R. FAWCETT ON BEHALF OF NEWTON D. BAKER

Mr. FAWCETT. Yes, sir. Mr. Baker had hoped to be here but was not able to do so and asked me if I would read his statement. Mr. Baker says [reading]:

I am general counsel of Lake Carriers' Association, operating on the Great Lakes. I am also a director of a railroad, and although this statement is not made in my capacity as a railroad director, the fact that I am general counsel of Lake Carriers' Association and at the same time a railroad director is an indication of the fact that I have never thought there was the slightest inconsistency between those two positions.

My comments are made on behalf of the bulk carriers on the Great Lakes. It is the belief of those engaged in that trade that the definition section of H. R. 5379 ought to exclude bulk carriers dealing in the carriage of ore, coal, stone, and grain from the operation of the act. We want to ask this committee to make that exclusion instead of leaving it to the Commission to do so. Our reason for making this request is that while we think the Commission will be disposed to make the exclusion, we feel that it would produce an unnecessary element of uncertainty in a perfectly distinct and separate industry to include it in this bill. If the bill should be passed, and the question of exclusion were referred to the Commission, which will already be tremendously burdened and occupied with the things necessary to be done by it, the Commission would probably not have the time to give our problem the early consideration which our industry would need.

What we are really asking is that you take note of what Coordinator Eastman himself said in his Report on Transportation Legislation, dated January 21, 1935 (H. Doc. No. 89) at page 17:

"The contract carrier may differ from the common carrier only in the fact that he undertakes to skim the cream of the traffic and leave the portion which lacks the butterfats to his common-carrier competitor. Obviously such operations can have very unfortunate and undesirable results.

"There are, however, private and contract operations which are not open to these objections. An outstanding example is the operation of the cargo boats on the Great Lakes which carry, chiefly, iron ore, coal, and grain. * * *""

The Coordinator did not include stone as one of the commodities carried by the cargo ships on the Great Lakes. This commodity is carried in the same cargo ships or in ships of the same kind as those which transport ore, coal, and grain. There are certain limestone deposits in the Lakes, and the stone is used as a flux in the manufacture of steel and for no other purpose. It is one of the elements of a very highly specialized trade which has grown up on the Great Lakes.

There are three kinds of carriers on the Great Lakes as they are described in the bill under consideration. These are common carriers, which are already regulated as to their joint rail-and-water rates by the Interstate Commerce Commission and they are subject to regulation by the Shipping Board as to their interstate rates. There are also contract carriers and the private carriers.

The iron ore deposits in the Lake Superior region of the Great Lakes were described by Andrew Carnegie as the very basis of America's industrial supremacy. He said that Pittsburgh, Cleveland, and Lake Superior formed a triangle in which in all the world it was easiest to bring iron ore, coal, and stone together for the manufacture of steel. A number of interests have grown up about the transportation of iron ore, which is the backbone of this problem. An integrated steel company, like the United States Steel Corporation, the Bethlehem Steel Corporation, and others of the same sort has boats on the Great Lakes. These companies have enough boats in their fleets to transport very large shipments, but they do not have enough boats to transport their entire maximum cargoes. As a result there have grown up contract carriers who take up the slack. The ore-transporting companies know exactly what it costs to run these contract boats, because they have boats exactly like them, and the amount paid the contract carriers is just enough to keep safely in existence the necessary number of contract fleets to take up the slack and handle the transportation of the principal and controlling commodities upon which the steel industry depends.

The bulk carriers on the Great Lakes furnish the cheapest transportation in the world. It is the best transportation in the world. It pays the highest wages to its labor; it has the best accomodations on its ships for labor anywhere on any seas, inland or exterior. The ships employed are exactly fitted to do the job they have to do, and they do it by a system of interarrangements so nicely adjusted that it has resulted in having the cargo tonnage of the Great Lakes held out everywhere as both an exhibition and an example of the best that can be done in water-borne transportation. The ships are specially built for their job. They are great hollow ships not adapted to the transportation of ordinary cargoes. They are of different tonnage. The ports on the Lakes are of different depths. Some of the steel plants on the Lakes are up narrow and tortuous rivers.

If this bill were passed the private carriers would be restricted to private carriage and the contract carriers would be limited to contract carriage. That would mean that the fleets now on the Great Lakes would have to be broken up and placed in those two categories, and the interchange of service which they are now able to render because of their complete identity of interest, all under the control of the economic determination of what their service is worth by the ownership of these integrated fleets-the entire service which they are able to perform would be destroyed.

For instance, if a cargo of ore is needed in a steel plant situated on a narrow river, up which only a 5,000-ton ship can go, and that plant does not have a ship of that size available for the time being, it asks another company to bring this 5,000-ton ship to its plant and it in return takes 5,000 tons for the other company to some deeper-draft port, making a complete interchange of cargoes possible. The net result of it is that the average rate for carriage on the Great Lakes is 1.1 mills per ton-mile.

Mr. MANSFIELD. That is the average of all types of commerce? Mr. FAWCETT. That is the average of all types of commerce, yes, sir; 1.1 mills per ton-mile. [Reading:

The ships on the Great Lakes are primarily built to transport ore from the upper Lakes and to take back coal cargoes, which are delivered by the railroads to them and are taken away from them by the railroads and transported into the Northwest. The whole Northwest depends upon this avenue for its coal. So far from being in competition with railroads, the railroads have really helped to build up this industry. They have established docks at both ends. They do

the unloading and the loading of the ships. They have a coal and ore exchange, for instance, in the city of Cleveland, where they regulate the quantity of these commodities so that there will not be more at a railroad terminal than can be conveniently handled at one time and so that any excess may be shipped over some other railroad in order that there may be a completely economical use of all of their cooperating facilities.

Grain on the Great Lakes is an exceptional situation due to the fact that as to this commodity we are in direct competition with the Canadians. The Canadians can get grain in the Northwest and take it through Georgian Bay ports to Montreal. In dealing with shipments of any British commodities it must be realized that they are favored by preferential treatment by the Canadian railroads and also have the advantage of the imperial preferences. As the result of these the Northwest grain in the United States has been practically destroyed as an export commodity. This is due to Brazil, Argentina, and the Canadian Northwest. The fact that the Lakes vessels can be used to bring down grain from the Northwest has benefited the grain farmer in the Northwest of the United States by producing for him a mode of transportation at a cost quite unattainable in any other fashion. The private carriers use their boats in this way, as do the contract carriers. There is also this great advantage, that when the grain comes to the Lakes in the fall and the elevators at Buffalo, Chicago, and other places on the Lakes are full, the grain can be kept stored in the ships until the elevators have had an opportunity to either mill or ship the contents, and then the grain boat can be unloaded. It is an addition to the storage capacity of the Lakes. If it were not there it would necessarily mean either that the grain would be congested in the Northwest ports or carried out by the Canadians. The grain traffic from the Northwest of the United States is extremely sensitive. Our grain-grading acts and even local regulations may be enough to send this traffic out of America and through Canada. So it is a trade that really ought not to be interfered with if the American traffic is to be preserved.

I have no argument to make in favor of excluding the common carriers on the Great Lakes and the connecting canals from the operation of this act. I do not profess to know whether that ought to be done in the interest of the railroads or not. I am quite sure that the carriage of sugar and sulphur, which are the two things carried on the barge canal, and then on the Lakes in competition apparently with the railroads, are so negligible an item that they really amount to nothing. But the great thing is the tonnage of coal, iron ore, stone, and grain. Nobody realizes the size of this traffic until he is told the tons of freight which are carried on the Great Lakes every year, a tonnage greater than the aggregate tonnage on the Atlantic, Gulf, and Pacific ports of the United States; in mere tonnage it is the biggest single transportation unit in the world.

This traffic has been built up in response to a perfectly definite need, a need which has elements of its own in it which extremely complicate it. For instance, there is a variation in the amount of iron ore brought down in a single season. Taking the lowest of the figures I have for 12 or 15 years, in 1932 it was 3,500,000 tons; and the highest I have in any year is 1929, when it was 65,000,000 tons. In coal the variation is almost negligible. It runs from about 20,000,000 to 35,000,000, and the variation does not seem to be dependent on depression conditions. Grain of various kinds runs from about 8,000,000 to about 15,000,000 tons at a maximum. The net tons of stone vary from about 4,000,000 to about 14,000,000. There you have in those four basic commodities the keystone of the great industry of the United States upon which the subsidiary steel-finishing industries depend. This transportation has been so built up as to be adapted to that particular service. It has interchanges; it has interrelations. It is controlled by nature and economic law. No shipper complains of it; no railroad complains of it. The railroads are the beneficiaries of it. They bring the traffic to us; they take it away from us. They have created facilities to enable them to do that with the utmost rapidity. They have built great yards to receive our product or to store it until we are ready for it. They have helped us to build up this great thing and it is not in competition with them in any particular. Therefore we ask that the definition in the present bill be made to exclude bulk carriers on the Great Lakes, limiting their transportation to the four commodities, coal, iron ore, stone, and grain.

The CHAIRMAN. That is just a statement, gentlemen, that was sent down by Mr. Newton D. Baker. The next witness will be Mr. Cook.

STATEMENT OF T. L. COOK, ON BEHALF OF THE OCEAN STEAMSHIP CO. OF SAVANNAH, GA.

Mr. Cook. The Ocean Steamship of Savannah maintains a regular freight and passenger service between Boston, Mass.; New York, N. Y.; and Savannah, Ga. It is owned by the Central of Georgia Railway, and under section 5 of the Interstate Commerce Act is required to file all of its rates, rules, and regulations with the Interstate Commerce Commission and is, therefore, subject to the act to regulate commerce and all amendments thereto in the same manner and to the same extent as is its parent company, and this means that its all-water port-to-port rates must be, and are, filed with the Interstate Commerce Commission. The through water-and-rail and rail-water-rail rates in which it participates or publishes are also subject to the jurisdiction of the Interstate Commerce Commission.

Independent of nonrailroad-owned steamship lines maintaining regular service between specified ports are only required to file their maximum rates with the United States Shipping Board and they are free to charge less than these maximum rates without any tariff publication or without any notice to the Shipping Board whereas the Ocean Steamship Co. of Savannah, and other railroad-owned steamship lines can only apply the rates that are on file with the Interstate Commerce Commission.

Some of the independent lines participate in through water-andrail and rail-water, rail rates to and from points beyond their ports and these rates are subject to the jurisdiction of the Interstate Commerce Commission to the same extent as are the through rates of the Ocean Steamship Co. of Savannah, or other rail-owned steamship companies. Such lines, therefore, have an interest in the stability of these through rates and it is not their policy to reduce their port-toport rates for the express purpose of defeating these through rates. Such independent lines, however, that do not participate in through rates and consequently have no interest therein, apply such port-toport rates that will control the business, regardless of the effect their rates may have on the through rates or the port-to-port rates of the other steamship lines. The rates of such lines not only force the other lines operating to the same ports to meet them, but have the effect of disturbing rates to other ports and often result in reductions in the rates to the interior points, especially the points not far distant from the ports that can be reached via inland waterways, and that can also be served advantageously by motor trucks operating from the ports. These independent lines can also publish through rates from their ports to interior points in connection with motor trucks, and in connection with boat lines that are not under the jurisdiction of the Interstate Commerce Commission whereas the railroad-owned lines cannot do so.

The tramp ship or contract carrier that does not operate a regular service between any ports is not required to file any rates or charges with any governmental body and this class of carriers are free to enter any port at any time for full or part cargoes on special rates that are lower than those of the steamship lines maintaining regular service. This competition also forces the other lines to reduce their

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rates and to maintain a lower level of rates on those commodities that are susceptible to this class of competition.

The effect of this unregulated competition is far reaching. It is not, nor can it be, confined only to the ports served by these unregulated carriers. The steamship companies maintaining a regular service between ports naturally have an interest in the welfare of their ports and endeavor to adjust and maintain their rates on a relative basis with competing ports, so it follows when a reduction is made to any one port, whether warranted or not, a revision of the rates to other ports must, for competitive reasons, follow.

In many instances these reductions are not necessary, and are not made in the interest of the public, but result from competition between the water carriers themselves; one carrier trying to take the traffic from another, and the result is a general demoralization of the rate structure, not only to the ports themselves but also in the through published rates to the interior points, over which the Commission has control. These rates have to be reduced if the carriers participating in them expect to continue to compete for the traffic, and when they are reduced the reductions cannot always be confied to the points directly affected but must also be made to competing points in the same general territory with a consequent loss of revenue not only to the water carriers but to the rail carriers as well.

While many commodities could be mentioned that have been affected by this unregulated competition, the principal ones moving from Savannah, on what may be termed "depressed rates" are cotton, cottonseed meal, rosin, lumber, and crossties. Our cotton and cottonseed meal rates had to be reduced to meet reductions forced by unregulated lines operating from the Gulf ports, which was necessary in order to enable the Savannah shipper to continue to compete with the Gulf shippers.

Our rosin rate from Savannah to New York has forced down from $1.25 per barrel to 70 cents per barrel on shipments of 3,000 barrels or more in order to compete with ships from the Gulf stopping at Savannah, Ga., on northbound trips having available space to sell and at a price in which there was only involved the cost of running up the river to the port of Savannah, Ga., and back to the ocean, a distance of 18 miles in each direction, plus the cost of loading the rosin. No overhead or organization expenses had to be considered. These ships would go direct to the naval stores yards, thus eliminating the lighterage cost, which we were forced to absorb, thereby making our rate actually 631⁄2 cents per barrel instead of 70 cents per barrel or a reduction of 612 cents per barrel.

Our forest-product rates are also depressed on account of tramp competition and are abnormally low.

This unregulated or tramp competition has also been felt very keenly by the Ocean Steamship Co. of Savannah in the movement of potatoes from the State of Maine to southern points. In the fall of 1931 one large shipper was successful in getting an unregulated steamship company to handle potatoes solely for his account from Searsport, Maine-terminus of the Bangor & Aroostook Railroads-to eastern port cities-New York, N. Y.; Port Newark, N. J.; Baltimore, Md.; and Philadelphia, Pa., at rates that were considerably less than the through all-rail rates. This forced other shipping organizations to make similar arrangements in order to compete in the