Merchant Marine Studies

Mr. MELANDER. Practically that. It is from the time the vessel comes alongside until we finally have the material into trucks or rail for conveyance to our plants. We formerly used water exclusively up to around 1934, but with the increasing cost of handling we were forced to go into rail transport.

Senator POTTER. Actually, when you speak of "bulk carrier," you could use a regular ore-type ship?

Mr. MELANDER. Yes, that would be excellent for that type of handling. We should have something with facilities to mechanically unload instead of being concerned with the matter of using ship's tackle to drop a bucket into the hold and pick up a ton or a fraction of a ton at a time.

Senator POTTER. There is a great need of that today.

Mr. MELANDER. That is right.

Mr. ALLEN. Do you acquire raw materials for chemical production from many of the States of the Union?

Mr. MELANDER. Well, I would say we would be involved in 8 or 9 States west of the Mississippi, not east. We would work Louisiana, Texas, possibly some of Arkansas, Montana, Idaho, Nevada, and California, and small quantities out of Washington and Oregon. But the bulk of ours is in that range. Our principal interest is in the matter of the gulf to the Pacific coast.

Mr. ALLEN. Do you think the people from whom you purchase in those States have a similar appreciation of the desirability of an American-flag merchant marine such as you have?

Mr. MELANDER. I know the sulfur producers in the gulf area, the two major producers, were always a waterline shipping arrangement up to about 1934 on their intercoastal service. I don't know what policy they form as regards their overseas shipping. But I would have no doubt at all that they would lean strongly toward American shipping on bulk sulfur for overseas.

Senator POTTER. Are there any other questions?

Senator MAGNUSON. I would like to ask this question: Wouldn't it be true in such an organization as yours that if your plants were at the tide flats, with adequate water transportation, your whole operation would be much more economical and it would be much better for the whole country in relation to the need; isn't that correct?

Mr. MELANDER. Very definitely. Transportation of sulfur, for example-it is public information-is costing us by rail something in excess of $14 a ton; so we have just about two-thirds of our value in material and one-third for transportation of same.

Senator POTTER. How would it be by ship?

Mr. MELANDER. The tariff is $8.50 a ton currently on a free in-andout basis. With decent handling facilities we can see where we would have a saving of say $1.50 or $2 a ton on the outside. It wouldn't be a tremendous saving but, on the other hand, it would amount to a sizable enough one so that we would be willing to put in the additional development to take 10,000 tons at a clip rather than buying in 50-ton rail cars.

Senator POTTER. I wish to thank you for your statement, Mr. Melander.

Mr. Batchelder, we are happy to have you as our next witness. You may proceed.

STATEMENT OF K. C. BATCHELDER, TRAFFIC MANAGER, WEST COAST LUMBERMEN'S ASSOCIATION

Mr. BATCHELDER. I am glad to be here. I am glad you are investigating this matter.

My name is K. C. Batchelder. I am traffic manager of the West Coast Lumbermen's Association, Portland, Oreg. The West Coast Lumbermen's Association is a trade association for 250 sawmills representing approximately 70 percent of production in the Douglas fir region of Washington, Oregon, and northern California. The Douglas fir region generally is that portion of the States mentioned west of the Cascade Range. In 1952, the region produced 11 billion feet of lumber. There is not sufficient demand at the points where lumber is produced to consume the lumber, and hence, the industry has had to find markets elsewhere in the United States and in the world to consume its production.

At the present time, approximately 20 percent of the lumber production moves by water. Our principal domestic water markets are California, reached by coastwise vessels and the Atlantic coast and gulf ports reached by intercoastal ships. Foreign markets include United Kingdom and the Continent, South Africa, Australia, South America, China, and Japan.

The Atlantic coast is our most important domestic water market. Over the years, 10 to 15 percent of the cut moves to this market. In 1952, total production was 11 billion feet board measure. We depend for its transportation on American-flag ships. The Intercoastal Steamship Freight Association is the conference for the Atlanticcoast trade. The rates on the intercoastal trade are under the jurisdiction of the Interstate Commerce Commission.

The rates, accordingly, are filed with them. The present rate is $31 per thousand feet board measure. The history of the rates is attached from January 1, 1933, when the intercoastal rates were first brought under regulation by the United States Maritime Commission. A statement of the movement of lumber from Oregon, Washington, and from British Columbia from the year 1920 through 1952 is attached by months for the year 1953 to date.

The biggest problem that the lumber industry has in marketing its lumber in the intercoastal trade is meeting competition from British Columbia. The British Columbia mills have the privilege of chartering foreign ships. The estimate of the latest rate that they have paid is $23.50 per thousand feet board measure. This is to be compared with the rate of $31 per thousand paid to Conference Americanflag ships, the Conference being restricted to United States flag ships. British Columbia lumber finds its way to the Atlantic-coast market whenever they desire to send a supply to that market. During the war period, and up until 1947, other markets were more attractive to them. When the demand for lumber in foreign markets fell off, they immediately entered the United States Atlantic-coast market. In 1950, they shipped in some 730 million feet. At the present time, they are shipping in at the rate of about 45 million feet a month. The total for 1953 will be next to highest volume shipped.

Another factor that is of great advantage to the Canadian shippers is that they do not have to pay tax on the transportation charge which is assessed on shipments moving under the American-flag

ships. This 3-percent Federal tax on transportation amounts to about 75 cents per thousand board-feet on lumber and aggravates the opportunity to market to a very substantial degree.

We urge that your committee make strong representations in the Congress to eliminate this unfair tax. Not only do the ships which come into the United States avoid payment of tax, but the lumber which comes into the United States by rail in competition with the water shipments pays the tax only on the portion of the movement within the United States. Most of the shipments move long haul via Canadian railroads, which leaves a very small share of tax to be paid.

Senator POTTER. There is no restriction by Canada to have foreign ships on intercoastal trade?

Mr. BATCHELDER. None whatever, not from British Columbia to the Atlantic coast. They cannot take lumber from the United States.

Mr. SHELLEY. Can, for instance, a Danish or Norwegian vessel pick up a cargo in Vancouver to a Canadian port on the east coast? Mr. BATCHELDER. Yes, sir.

Mr. SHELLEY. There is no restriction whatsoever?

Mr. BATCHELDER. I believe I am right in that, and do so.

Senator MAGNUSON. One thing we ought to clear up is that even on rail shipments, they only pay the portion of the tax as they come in here.

Mr. BATCHELDER. Exactly. They haul it all the way to New England and bring it down into the Atlantic seaboard.

Senator MAGNUSON. They divide it up when they hit the border and just keep on going clear across.

Senator POTTER. What is the purpose of the tax?

Mr. BATCHELDER. It was a war tax to raise funds for the war. Senator MAGNUSON. It is the whole problem. Congress this session, I think there is no question about it, is going to go into the question of the whole matter of excise taxes.

But I do think we can correct this business of cutting the tax in half when it hits the border, which never was intended by the tax to begin with.

Mr. BATCHELDER. That is right.

With the advantage that the Canadian mills have from the standpoint of lower freight cost, labor and stumpage costs cause great difficulty in marketing United States manufactured lumber carried in the American-flag ships.

In the coastwise trade, a statement is attached which shows the history of the freight costs. When the water rates coastwise first came under regulatory supervision, the rate to San Francisco from Oregon and Washington was $6 per thousand, and the same applied to Los Angeles. Today, these rates have increased to $13 and $13.50, respectively, and all the way up to $14 and $15 for random-length lumber, which was the way it was shipped in 1938, so the freight charge has increased all the way from 116 to 150 percent during the 13-year span. This accounts for the decline in volume. Incidental charges have likewise increased, which accounts, in the large measure, for the decline in the movement of coastwise lumber by boat.

The lumber industry is anxious to serve foreign markets and wants to see trade routes maintained that will permit them to ship their lumber, and being patriotic, naturally want to see a good share of the lumber move in bottoms manned by American crews flying the American flag. We are pleased that the subcommittee is devoting its time and energy to studying the problem. We wish to cooperate with them in any way at our command to keep the American flag flying on the high seas.

Mr. Chairman, I would like to offer these exhibits for the record. Senator POTTER. They will be made a part of the record. (The documents referred to are as follows:)

Lumber shipments by water to United States Atlantic coast, in feet board