January? And in that discussion please do not imitate Prime Minister Winston Churchill by an overoptimistic presentation to be followed by different results.

Mr. KENDALL. But you want me to tell the true situation as I see it? Senator REED. Yes; of course. I think nobody else here is quite so competent to speak on the outlook as you are.

Mr. KENDALL. I hope you will bear in mind that coal production throughout 1942 has been at a comparatively high level. I should like to have Mr. Estes correct my statement if he finds it incorrect, but as I recall coal production is running between 11,000 and 11,400 tons per week. That would be close to 550,000 tons for the year, assuming that that record is maintained throughout 1942. That is substantially what the estimates show will be required for the year. To put it in another way, up to this time we are even with the game, which is unusual. We do not usually have 11,400-ton weeks in June and July. But we have been able to maintain that average, thanks to the program of storage which has been pressed very much by the Fuel Coordinator, the utilities, and others. The railroads at the present time have about 38 days' supply of coal on the ground, ready for any emergency.

Senator REED. Is that a larger supply of coal than usual at this time of year?

Mr. KENDALL. Yes, sir. As of March 1 it was about 30 days' supply. Now it is better than 38 days' supply.

Senator REED. Does that apply to all railroads, the class I railroads as well as the short lines?

Mr. KENDALL. That applies to all class 1 railroads. And I might say for the smaller railroads, the supply on hand is higher than for the class 1 railroads. As a rule they are more remote from the sources of production. There is some thought there may be a little lull in coal production during the next few weeks on account of lack of demand, and therefore I think the matter of storage will be pressed harder by those interested in keeping coal storage up to the present level. To the extent that coal production may drop below 11,300 tons per week it must necessarily be made up before the end of the year. But if the present level can be maintained the railroads have enough in storage, and the utilities have enough in storage, so that the coming October there will be sufficient transportation capacity, I believe, for the coal that will be needed.

Senator REED. Then I take it you are leveling off the usual peak of coal movement beginning in October by moving it into this valley of movement preceding October.

Mr. KENDALL. That is correct. What coal is going into storage now means that much less under normal conditions which will be moving in October. That is, we are that much ahead of the game. Senator REED. The reports of your division do not indicate that the railroads now have any considerable surplus of coal cars.

Mr. KENDALL. That is true.

Senator REED. Let me develop that thought: You have no considerable margin now of surplus cars?

Mr. KENDALL. That is true.

Senator REED. In other words, the surplus cars you have now is rather below what is usual.

Mr. KENDALL. That is true.

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Senator REED. And that surplus is being taken up by storage of coal.

Mr. KENDALL. That is a part of it.

Senator REED. And if you can maintain this movement of coal throughout July and August instead of having it come in October and November, and maintain a reasonable level in the flow of coal, you think you can get by after October without any shortage.

Mr. KENDALL. I do, sir.

Senator REED. Have I stated that correctly?

Mr. KENDALL. You have.

Senator REED. Well, you may go ahead with your statement. Mr. KENDALL. What I wanted to say a moment ago about coal cars, having reference to your statement about surplus or lack of surplus, was to call attention to the fact that coal cars, both hoppers and gondolas, I think you gave a figure yesterday which separated them. The gondola car is so much in demand for the shipment of sand, gravel, and stone at the present time and especially for Government projects, that it is one more reason why at the present time open-top cars are at a low level in the matter of surplus. They are very much in demand for Government work.

Senator REED. As I recall it, on yesterday I did mention gondola and hopper cars separately, but do think I gave them as a total. I realize, as you do, that some of these open-top cars are heavily in use for highway purposes in the summertime, for the hauling of sand, gravel, and stone, but I think highway construction is at a minimum this year, generally speaking.

Mr. KENDALL. I think that is right.

Senator REED. I do want to reiterate this statement: If we do not get complete information here we are going to ask you to give it to us later. Colonel Johnson showed the order in which there was delay in the unloading of cars in the various industries. Did you get a copy of his statement?

Mr. KENDALL. I took a note of it.

Senator REED. He starts out with shipyards as being the worst offenders in the matter of unloading cars.

Mr. KENDALL. Well, he picked out the bad cases.

Senator REED. He puts them in their order. He winds up with coal and put them in a rather favorable position as to unloading. If the chairman has any doubt about that he will try to remove it when the coal men come before us.

Mr. KENDALL. I think I have enough figures on that.

Senator REED. Have you Commissioner Johnson's statement?
Mr. KENDALL. No.

Senator REED. But if you think you have a memorandum of his figures you may go ahead.

Mr. KENDALL. I will try to answer any questions you may wish to ask about what Commissioner Johnson said yesterday.

Senator REED. You may go ahead with your statement.

Mr. KENDALL. Naturally there is going to be some repetition because of questions that were asked Mr. Pelley and that were asked Commissioner Johnson of the Interstate Commerce Commission, but I should like to make my statement as complete as I can.

Senator REED. We would like to have the statement in complete form.

Mr. KENDALL. The present demurrage rules are the outgrowth of some 45 years' experience, formulated through the cooperative efforts of the Interstate Commerce Commission, National Association of Railroad and Utility Commissioners, representatives of the shippers, through the National Industrial Traffic League, and representatives of the carriers through the American Railway Association, now the Association of American Railroads.

Commissioner Aitchison, in his testimony, referred to the fact that there is a record of the charging of demurrage by railroads as far back as the Civil War days. Our information, however, indicates that there was no general practice on the part of the railroads to charge demurrage until about 1887. Even then its application was confined to particular stations, mainly the more important terminals. It has now come to be applied uniformly on all railroads, at all stations, and is regarded by all as an important factor in securing the efficient use of freight

cars.

On October 10, 1888, the General Time Convention adopted a resolution that the free time allowed for loading and unloading cars be 48 hours, and the demurrage charge thereafter be $1 per day.

Car service associations were organized in practically all the large industrial centers to prescribe rules and bring about uniformity in practice. In 1890 there were 25 such car-service associations or demurrage bureaus. In 1894 there were 48 bureaus. Practically all the bureaus were subsequently discontinued and their functions assumed by the individual roads.

In an effort to regulate car supply, various State commissions had prescribed demurrage regulations, the effect of which was to create numerous exceptions and there was a great lack of uniformity.

With the passage of the Hepburn bill in 1906, the various demurrage rules and charges were filed as tariffs with the Interstate Commerce Commission, who in 1908 recognized the necessity for uniformity and in cooperation with the State railroad commissions conducted a series of hearings on the subject.

At a meeting in 1908 the National Association of Railway Commissioners appointed a committee to frame a harmonious system of demurrage rules to be applied to both State and interstate business. The committee was made up of a representative from each State having a railroad commission, with Interstate Commerce Commissioner Lane as chairman. This committee, in turn, selected a subcommittee consisting of Chairman Lane and five members. These were from Pennsylvania, Connecticut, Virginia, Mississippi, and Wisconsin. The American Railway Association actively cooperated with the committee.

The rules of all existing demurrage bureaus were brought together by this subcommittee. A public hearing was called, at Washington, June 4 and 5, 1909. Demurrage men, transportation officers and shippers participated in the discussion. Among them was the late Frank B. Montgomery, of the International Harvester Corporation, who stated that he spoke for the National Industrial Traffic League, which, he said, was then representative of some 30,000 shippers. This led to an agreement with the Interstate Commerce Commission that future proposals for changes in the demurrage rules should if possible be agreed upon by representatives of the National Industrial Traffic League and the American Railway Association before publication.

This procedure has continued to the present time, operating very satisfactorily to all concerned.

Uniform rules were approved by the Interstate Commerce Commission in December 1909, and were adopted by the American Railway Association in January 1910.

Purpose of the demurrage rules: Demurrage charges are not solely nor even primarily for the purpose of revenue. The primary purpose of imposing such charges is to promote the prompt movement of cars in the public interest. The railroads' function is to move traffic; not to furnish storage. The shipper has no inherent right to detain a car beyond the free time and thus prevent it from being used for transportation by other shippers. Failure to release cars within a reasonable time is a wrong against other shippers desiring to use them, and against the general public, which can, to a large extent, be avoided by the enforcement of appropriate demurrage rules.

Free time: Originally, varying periods of free time were allowed in different parts of the country. When the subject of developing a uniform code for national application was considered in 1908-9, the National Association of Railway Commissioners (now the National Association of Railway and Utility Commissioners) said the following, with respect to free time allowed:

The carriers' patrons are entitled to a reasonable time for loading and unloading freight, as well as for the enjoyment of any transportation privilege allowed by the carriers' tariffs. What is "a reasonable time?" How are we to fix the period which the carrier should allow before it is justified in imposing an additional charge? It has seemed to your committee that the only rational standard is the time reasonably needed by the average consignor or consignee in order to avail himself of the carriers' service. For instance, the time allowed for unloading should be sufficient to enable a consignee, ordinarily equipped and ordinarily situated with reference to the railroad terminal, to remove the contents of a car to his place of business.

This means that a consignee cannot rightfully demand all the time he desires in order to haul freight from the car directly to his customers; it means that the use of cars as storehouses or places of business should not be permitted; it means that no effort should be made to equalize the disadvantages under which shippers may labor by reason of their distance from the carriers' tracks; it means that the mere custom or convenience of the trade should not be given controlling weight. In brief, when dealing with a transportation problem, we should have regard only for transportation requirements.

This may be a strict view of the demurrage question, but we are persuaded that it is the only proper one. A desire to serve the real interests of the public, as well as a disposition to be fair to the carrier, impels us to the conclusion that a demurrage code should not be unnecessarily liberal in the matter of free time.

Rules which interfere with the fullest practical use of railroad equipment may operate in the first instance to the disadvantage of the carrier alone; in the last analysis the burden falls most heavily upon the public. Not only do such rules involve an economic loss per se, but they make directly for terminal congestion and car shortage.

We think it will be generally conceded that 2 days' free time for loading or unloading carload freight is amply sufficient to meet the ordinary needs of commerce. The 48-hour rule prevails throughout the greater part of the country at the present time, and we have no hesitation in adopting it as the standard of the proposed uniform code.

Charges: Following the adoption of the national code in 1909 for a number of years the demurrage rate remained at $1 per car per day, as it had been prior thereto (except for some intrastate applications).

In February 1915 the rate on refrigerator cars was made $1 for each of the first 3 days after free time, $3 for each of the next 3 days, and $5 for each succeeding day.

In April 1916 the progressive system of demurrage rates was extended to other classes of equipment by making the charge $1 for each of the first 3 days after free time and $2 per day thereafter.

In November 1916 there was a serious car shortage aggravated by the demands of war traffic, and the demurrage rates were increased and made for all freight equipment: $1 for the first day after expiration of free time, $2 for the second day, $3 for the third day, and $5 for each day thereafter.

In May 1917 the rates were changed to provide $2 for each of the first 5 days and $5 per day thereafter.

On February 10, 1918, the Director General, United States Railroad Administration, fixed the rates at $3 for each of the first 4 days, after free time, $6 for each of the next 3 days, and $10 per day thereafter.

In July 1919 the emergency wartime rates were withdrawn and the previous rate of $2 for each of the first 4 days after the expiration of free time and $5 per day thereafter reestablished.

In April 1938 these rates were increased 10 percent in accordance with the decision of the Interstate Commerce Commission in Ex parte 123.

Effective July 5, 1942, Sundays and holidays will be counted the same as any other day after the expiration of free time.

Effective August 1, 1942, the rate of $2.20 will apply to the first 2 days after the expiration of free time, instead of the first 4 days, the rate of $5.50 thereafter applicable.

Effective July 10, 1942, private tank-car owners are voluntarily placing such cars "on demurrage" when standing loaded on private tracks.

The rules provide for the waiving of demurrage charges under certain conditions, in the creation of which neither the shipper nor the carrier is responsible, such as weather interference, high water, snowdrifts, and so forth, which make it impossible to load or unload

cars.

The average rule was devised to protect the consignees in cases of bunching, and irregular deliveries at destination. It provides in substance that for each car unloaded within the first 24 hours of free time, one credit is given, while a debit is charged for each day's detention, up to 4 days, beyond the free time. Credits accrued in any one month may be used to offset debits accrued in that month, $2.20 being paid for each excess debit over credits. Effective June 15, 1942, the value of the credit has been reduced so that it now requires two credits to offset one debit.

The reason for that change is that under the average agreement as heretofore in effect, car detention has been somewhat greater than under the regular straight demurrage rules. The record of the New England Demurrage Commission in this respect for the years 1934 through 1941 shows progressive percents under the regular rule from 91.34 to 89.16 percent, and under the average rule from 86.39 to 83.55 percent.

We have added the record for January, February, and March 1942 under the regular rule and the average rule to show that under the average rule, with respect to detention, the cars released in free time are 86 percent, as against 89 percent in March, for instance. It is 89.57.