I am also president of the World Trade Association of the San Francisco Chamber of Commerce, which group is composed of representatives of the principal firms involved in foreign trade in the city of San Francisco.

I appear today in the capacity of export manager of the Stauffer Chemical Co. and, I am sure, can express the feelings of the Pacificcoast chemical industry as regards the need for the continuance of Federal maritime subsidies.

The strategic nature of any chemical industry is of course well recognized. This was forcefully brought home during World War II days by the almost immediate placement on allocation of the bulk of our products. Export controls are still in effect on a number of the items manufactured by west-coast chemical industry, in spite of the general easing of economic conditions. It seems quite important to us that should we be faced with another war, that chemicals produced here be safely transported on American vessels to overseas destinations.

As a firm engaged in a most competitive field, working against competition of foreign chemical manufacturers in the world market, we become keenly aware of the need to maintain American shipping facilities for our merchandise. Should we be entirely dependent upon foreign-flag vessels, with foreign competition moving in competition to ours from countries overseas owning the shipping, we undoubtedly would be in a very precarious competitive position. It is our objective to employ American-flag vessels when convenient to do so and to offer our customers the best possible services.

The chemical industries of the Pacific coast have essentially been built on the needs of the area with export being a secondary matter. However, during the postwar years the volume of Government purchasing affected us here to a very great extent and some excellent possibilities for supply of chemical items from this coast were granted in which, of course, we participated. On such a basis when there is more diversion of activities back to the commercial basis we naturally desire to continue our position in the export field. As I mentioned before, we now find it to be more ambitiously entered by the foreign manufacturers.

We consider that the chemical industries of the Pacific coast have earned and should maintain a position in supply of materials to the Far East, the west coast of Central and South America, and to the Australasian area. On the basis of simple economics we should supply these markets with their chemical requirements. We think fertilizers are a good example of this type of competition on our part. To a lesser degree we consider the possibility of the west coast competing with eastern manufacturers in gulf and east coast markets. There are certain chemical items produced exclusively on this coast which have moved constantly eastbound, prior to World War II, by intercoastal vessel and subsequently with the reduction of water service and equality of rates to rail transportation. The decline of intercoastal service has caused more and more transfer to rail transportation with the resulting increase in cost to the ultimate consumer.

Going back to the matter of trade with overseas areas, we, as stated before, like to use American-flag vessels insofar as possible. We have found generally that service as rendered is adequate, a large part of which we contribute to the American-flag vessels operating in these services.

We are very much interested in the potential export of dry chemical products in bulk. To this time we have found ourselves unable to compete owing to several factors, one of which being the lack of proper bulk-carrying vessels. The use of the normal methods of loading and unloading into the holds of a standard freighter renders our cost too high to compete in a number of areas. It seems that consideration should be given to the maintenance of an American fleet of properly equipped bulk carriers.

Senator POTTER. What do you normally ship in bulk-fertilizer! Mr. MELANDER. I am thinking principally of fertilizer in connection with bulk transport.

Another point I didn't cover in there is our interest in the conveyance of crude sulfur and bauxite from the gulf into the Pacific-coast area. We are the principal purchaser of sulfur in this area.

At the present time we are completely tied down to rail transport, to a very great extent, caused by the lack of proper bulk carriers. Senator POTTER. Where do you normally buy your sulfur?

Mr. MELANDER. Texas and Louisiana. Some is coming in from Montana, but the bulk is Texas and Louisiana. Bauxite, of course, is coming from Dutch Guiana, principally, and some originating in Trinidad on a reshipment basis.

Mr. SHELLEY. If there were the proper type of vessel, is it advantageous to your operation to use water transportation rather than rail transportation?

Mr. MELANDER. Our principal difference between transporting one way or the other has been as the result of the cost of unloading the cargo here; in other words, the material can be transported, just fig uring the transportation factor exclusive of handling, at a rate considerably better than the rail rate.

When we come to the matter of having to take the material from ship's hold into conveyance to our plants is when we get to the breaking point, ratewise.

Mr. SHELLEY. Would that cost in handling prevail if you had a more modern and more adapted-to-the-trade bulk carrier, or is it because of the type of vessel which is now being used, some of the Libertys or others, where they are just dumping it down into the hold?

Mr. MELANDER. That is the matter of the insufficiency of equipment.
Mr. SHELLEY. A handling factor as to that type of vessel?
Mr. MELANDER. That is right.

Senator POTTER. Are there any other questions?

Mr. ALLEN. Where do you unload?

Mr. MELANDER. Los Angeles, or we would under a water-shipping program unload at Los Angeles Harbor, the East Bay area, and Portland.

Mr. ALLEN. At those points you have plants very close to the waterside?

Mr. MELANDER. Yes.

Mr. ALLEN. On the other end of the transportation the sulfur production is very close to the seaboard?

Mr. MELANDER. Yes. I think there is a rate of about $1.50 a ton from the minehead to water.

Mr. ALLEN. The difference between rail and water shipment, then, is all in about the last 500 yards of the carriage?

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

I 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.