Mr. WEBB. I think that is about correct, Mr. Chairman. About 98 percent of all box cars are owned by the railroads.

The CHAIRMAN. This 1.5 million are all railroad owned?

Mr. WEBB. Yes; and that constitutes about 98 percent of the total railroad cars in the country.

The CHAIRMAN. I see. When was this per diem in effect today on a sliding scale established.

Mr. WEBB. That sliding scale was established in July of 1964, for the first 6 groups of cars, and then there was a second

this April.

group added

The CHAIRMAN. Was that established on the basis, I assume, of the value of the car?

Mr. WEBB. Yes, sir; it is on the basis of the value.
The CHAIRMAN. That is by the Commission?

Mr. WEBB. No; this sliding scale was established by the railroads. operating under a section 5(a) agreement, but the Commission ultimately will have to pass on the justness and reasonableness of these rates.

The CHAIRMAN. Did the Commission pass on the reasonableness of the rates after they were established by the industry?

Mr. WEBB. No, sir; we have not, but I assume that these rates will be considered in connection with the challenge which has been made against the general level of per diem rates by certain railroads.

The CHAIRMAN. There is a challenge now?

Mr. WEBB. Now pending before the Commission; yes, sir.
The CHAIRMAN. Before the Commission?

Mr. WEBB. Yes, sir.

The CHAIRMAN. Now you say there are two ways to meet this, that it is being undertaken now. One is to increase demurrage charges.

Mr. WEBB. Well, that is helpful insofar as taking care of the time in which cars are in the hands of shippers.

The CHAIRMAN. Prompt loading and return.

Mr. WEBB. And receivers of freight. Yes, sir; but those charges are not applicable to the time when the cars are being handled by other carriers.

The CHAIRMAN. If the cars keep rolling, or if you have prompt loading and unloading, and keep rolling, then it doesn't make any difference what the charge is, you are not going to have any more cars, are you?

Mr. WEBB. Well, we believe that the per diem rate can be set at such a level that carriers will be encouraged to build more freight cars. The CHAIRMAN. And that is what you hope to do with this legislation?

Mr. WEBB. That is right, Mr. Chairman.

Mr. CHAIRMAN. It will get no more cars, though, right away.

Mr. WEBB. No. It would take approximately 1 year for us to complete our proceeding on the legislation, if it were enacted. Now if it produced any immediate benefit before that time, it would be as a result of the psychological impact of the legislation on the railroads. The CHAIRMAN. Now the other procedure to alleviate the impact of car shortages is through the issuance of service orders.

Mr. WEBB. Yes; we are doing that Low, and would continue to do so in the future, even if this legislation were enacted.

The CHAIRMAN. Is that helping any that you can see?

Mr. WEBB. Yes, we think it does help, but it is simply distributing the overall shortage in the way we think most equitable.

The CHAIRMAN. Now in your statement, you state on page 4:

And an increase in the supply of cars owned by railroads which terminate substantially more traffic than they originate would not necessarily improve the car supply situation, since the ability of such carriers to load their own cars and interchange service is limited.

Would you explain that a little bit?

Mr. WEBB. Yes, Mr. Chairman.

Railroads such as the Boston & Maine and New Haven find themselves in a difficult situation. They are terminal or stub-end lines. They terminate more than twice as much traffic as they originate. Therefore, they always have on hand a large number of the cars owned by other lines, which they must get rid of by returning them in the general direction of the owners.

It may well be that railroads in that situation, even though they are large net per diem debtors, actually have an adequate supply of their own cars, because their ability to use their own cars is somewhat limited.

They are required to use the cars of other lines when those cars are available for use.

The CHAIRMAN. Well, you say it would not necessarily improve the car supply, and then you immediately follow with the statement that it is imperative that ownership of such equipment be increased and maintained at a level capable of meeting the needs of the shipping public.

Mr. WEBB. Yes; we think that the total supply of cars must be increased, but we recognize that there are some carriers which are in a very difficult situation; and that was the concern of the Senate when it added its language to its bill, S. 1098.

The CHAIRMAN. What you are trying to do and what is being attempted is, you call it, encouraging.

Mr. WEBB. Yes.

The CHAIRMAN. But it is merely to try to force these railroads who have deficits of cars to meet their needs to build to meet their needs.

Mr. WEBB. Yes; that is correct, and I would only add, also to encourage those which do not have a deficit to build cars, and also to receive increased rentals. I think it may be encouraging to both

groups.

The CHAIRMAN. Well, I think there is something to it, and it ought to be done.

On the other hand, if you have a lot of cars that are constructed, that 9 months out of the year are not in use, then it seems to me a matter of trying to force somebody to build cars when they can't possibly get their return out of them.

Mr. WEBB. I think that would be true, Mr. Chairman, but for the fact that we have had an average daily shortage of cars consistently throughout these years, and throughout most recent years, so that it is not a matter simply of utilizing an adequate supply of freight cars to meet certain seasonal requirements.

We have a fairly persistent shortage throughout the entire year.

54-899-65

The CHAIRMAN. How long has this study been underway that you have reference to?

Mr. WEBB. Our investigation in Ex parte No. 241 was instituted December 1963.

The CHAIRMAN. When are you going to have a report?

Mr. WEBB. We expect to have a report next year. I would hope, around the middle of next year.

The CHAIRMAN. If this additional authority that is given to you should be approved, would it permit you to start a program of at least providing an incentive, or encouragement for these cars to be constructed?

Mr. WEBB. Yes, Mr. Chairman. I assure you that we would begin immediately with our investigation, with hearings, with a view toward finding what level of rates would be best designed to encourage car ownership.

The CHAIRMAN. Well, actually, heretofore, you have permitted the railroad industry to virtually write its own ticket, haven't you?

Mr. WEBB. Yes, I think that is correct. And that has been subject to our judgment only when the rates have been challenged as to whether or not they provide just compensation to owners. But you are quite correct that the railroads in the first instance have initiated. these rates.

The CHAIRMAN. And the American Association of Railroads has an organization set up for the purpose of establishing these rates, and so forth? Is that not true?

Mr. WEBB. Yes, that is right.

The CHAIRMAN. And all you have done is to issue service orders and make statements on occasion about the needs, in the hope that something will be done, and this cup will pass, and it hasn't, and then to have this investigation which you have underway, of course, when they are challenged, to have the proceedings before you for consideration, but you really have not come to grips with it heretofore.

Mr. WEBB. Yes, you have indicated about the extent of our authority in this matter.

The CHAIRMAN. You think your authority is limited in view of the Palmer case?

Mr. WEBB. Yes, sir; we do. We would be most reluctant to undertake an investigation of the type that would be authorized by this legislation when we are confronted with that decision, and when over the years we have asked the Congress for legislation which the Congress to date has not yet approved.

The CHAIRMAN. Mr. Chairman, thank you very much for your appearance here.

I have held you a little beyond the noon hour, but I wanted to get you off the witness stand, because I know you have other things to do. We appreciate your appearance here and your testimony on this problem.

Mr. WEBB. Thank you, Mr. Chairman.

The CHAIRMAN. And you may supply the additional information. The committee will be in recess until 2 o'clock this afternoon. We will come back to hear these other witnesses who are here for today. (Whereupon, at 12:17 p.m., the hearing was recessed to reconvene at 2 o'clock the same day.)

AFTERNOON SESSION

The CHAIRMAN. The committee will come to order.

I think under the circumstances we should proceed because we do have several witnesses scheduled for today that we should hear; at least we can make the record on this matter.

Tomorrow there will be an interruption and probably we will not get started until a little later than 10 o'clock. I had hoped to hear all witnesses today and tomorrow.

In view of the circumstances, I think we should go ahead with the making of this record and the next witness will be Mr. Edmund W. Hilton, Jr.

STATEMENTS OF EDMUND W. HILTON, JR., TRAFFIC MANAGER, AMERICAN PLYWOOD ASSOCIATION, TACOMA, WASH.; AND EMMET J. SMITH, MEMBER, TRAFFIC ADVISORY COMMITTEE, AMERICAN PLYWOOD ASSOCIATION, AND GENERAL TRAFFIC MANAGER, EDWARD HINES LUMBER CO., CHICAGO, ILL.

Mr. HILTON. Yes, sir; my name is Edmund W. Hilton, Jr., and I am traffic manager of the American Plywood Association. I have with me today Mr. Emmet J. Smith, who is general traffic manager of the Edward Hines Lumber Co., of Chicago, Ill., whose firm is a member of the American Plywood Association, and Mr. Smith is also a member of the Traffic Advisory Committee of the American Plywood Association.

Mr. Gus R. Hubbard is general traffic manager of the Simpson Timber Co., Seattle, Wash., and chairman of the American Plywood Association.

Unfortunately, Mr. Harris, Mr. Hubbard is ill and was unable to make the trip. You have been supplied with a copy of Mr. Hubbard's statement, as has Mr. Williamson.

I ask that at this time that Mr. Hubbard's statement be made a part of the record.

The CHAIRMAN. We regret Mr. Hubbard is ill and unable to be with us. We are exceedingly glad to have the benefit of his presentation or statement. His statement will be included in the record together with such other material as he wishes to provide.

Mr. HILTON. Thank you, Mr. Chairman.

Mr. Hubbard's statement, the last paragraph on page 1, most eloquently describes the position not only of Simpson Timber Co. but also the plywood industry, and I would like to quote that.

Our industry depends in large measure on rail transportation to market our products. Consequently, our marketing success rests on the availability of a boxcar supply of a quality and quantity sufficient to serve our needs on a timely basis. Today this condition does not exist.

That will complete the reference to Mr. Hubbard's testimony

The CHAIRMAN. His entire statement will be included in the record at this point.

(Statement referred to follows:)

STATEMENT BY GUS R. HUBBARD, GENERAL TRAFFIC MANAGER, SIMPSON TIMBER CO., SEATTLE, WASH.

Mr. Chairman and members of the committee, my name is Gus R. Hubbard. I am chairman of the Traffic Advisory Committee of the American Plywood Association, a member of the Traffic Committee of the California Redwood Association, and general traffic manager of the Simpson Timber Co., headquartered in Seattle, Wash.

The

I appear here today in these capacities in full support of bill H. R. 7165. American Plywood Association has submitted a written statement in support of this legislation, to which I fully subscribe.

Our industry is comprised of over 160 plywood plants operating currently in 7 States and employing in excess of 109,000 people, including related veneer and logging operations. Many of our plants are located in small communities which rely almost entirely on the operation of these mills for their econimic existence. This applies not only to plywood but to the entire forest products industry. The Simpson Timber Co., for example, operates 21 plants at communities in California, Oregon, and Washington, plus a recent acquisition in South Carolina. Each of these communities depends largely on forest products plants for employment. At least five of our plants have suffered recent curtailment and increased costs as a result of car shortages.

To date our industry depends in large measure on rail transportation to market our products. Consequently, our marketing success rests on the availability of a boxcar supply of a quality and quantity sufficient to serve our needs on a timely basis. Today this condition does not exist.

Annually, since the end of World War II, the number of boxcars in the national pool has declined. As a matter of fact, latest figures indicate a decline of 14,000 serviceable owned boxcars for the 12-month period ending August 31, 1965. As a result, today we not only suffer severe shortages of wide and double-door boxcars so vital to us but are faced with periods when even single-door cars are not available. Our plywood plant at Lyons, Oreg., as an example, has not been able to meet shipping schedules for the last 2 months due entirely to an inadequate supply of rail equipment. These shortages are increasing in frequency, severity, and duration in spite of our increased efficiency of car utilization. Since 1961 our industry has increased the average weight of our carload shipments by 30 percent. These shortages result in curtailment of production and even plant closures with, of course, related loss of employment for our people.

Ironically, we cannot blame the railroads serving our section of the country for these shortages. Conversely, figures indicate we would have no shortages if rail carriers serving us had on their respective lines a supply of boxcars equal to their ownership. For example, at the close of 1946 the Southern Pacific owned 32,200 boxcars and at the end of last year, 50,100. The Northern Pacific owned 19,100 in 1946 and 20,100 in 1964. We were advised by an officer of the Southern Pacific Co. only last week that if they could load their own boxcars, or the equivalent thereof, once every 20 days there would actually be a surplus of this type of equipment on their railroad.

This proposed legislation will result in the only solution-more boxcars in the national pool.

One final comment. Our company is one of seven, including Arcata Redwood Co., Arcata, Calif., Georgia-Pacific Corp., Portland, Oreg., Miller Redwood Co., Crescent City, Calif., Pacific Lumber Co., Scotia, Calif., Union Lumber Co., Fort Bragg, Calif., and Willits Redwood Products Co., Willits, Calif., comprising the California Redwood Association. These companies operate a total of 13 redwood plants employing several thousand people. The economy of the northern coastal area of California is substantially dependent on the redwood industry. This industry is still recovering from losses, totaling millions, from a flood in December of 1964, the most devastating in California's history. This recovery is currently being seriously hampered by car shortages. I have, therefore, been authorized by the California Redwood Association to appear here as a member of their traffic committee to add their support to bill H.R. 7165.

Mr. Chairman, this completes our statement. Thank you very much.

Mr. HILTON. Thank you, sir.

At this time, I will present my own statement in behalf of the American Plywood Association. This is the one labeled "oral statement," sir.