under the present law and, actually, what has been the effect of competitive rail-rate reductions on water carrier traffic?

I will confine myself to two examples here but will detail numerous other examples in my supplemental statement. These two examples will cover the transportation of sulfur to Great Lakes ports from Texas and Louisiana origins and the transportation of pig iron in the Great Lakes region.

In connection with these examples, the railroad complaint as to managerial discretion and the necessity of having the present bill enacted to give them more managerial discretion should be kept in mind.

Both of these commodities are of substantial importance to the water carriers. I might mention in passing that as a direct result of competitive rail-rate reductions permitted in the last several years, the water carriers on the Great Lakes have lost all commodities except sulfur, scrap iron, and iron and steel (finished and rough). Further, each of these items has been subject to railroad-rate attacks.

The normal movement of sulfur 20 years ago was water vio ocean steamer to New York, then movement via barge through the New York State Barge Canal, and then by Great Lakes steamer to the final destination. As a result of World War II, particularly the submarine activity off the gulf and east coasts, the traffic was rerouted and moved up the Mississippi River and then by lake steamer to Great Lakes destinations. To shorten this sulfur story, I will confine this statement to receipts at Cleveland, Ohio.

In the middle of 1936, approximately June, the rail lines applied for and received fourth-section relief reducing the rate to Cleveland from $11.90 to $9. For the balance of the 1936 shipping season, the lake tonnage of sulfur remained practically constant at approximately 95,000 tons, this for the reason that prior bookings for the season were made before the rail rates were reduced.

With the opening of navigation in 1937, this tonnage immediately fell to 50,000 tons, and in 1938 it dropped to 22,000 tons. The water lines then recovered some tonnage in 1939 by readjusting their rates downward. At the end of that year, the rail lines asked for and received another reduction, and practically overnight the water carriers' tonnage again dropped approximately 40 percent, the rail rate being reduced from the previous $9 rate to approximately $7.80.

The rail rate remained reasonably constant through 1945. However, there was very little tonnage, for the simple reason that during the war years sulfur was allocated and had to move as the Government directed.

In 1946 the water carriers established joint through barge-vessel rates and the tonnage came back up again to 65,000 tons. From 1946 to 1950 the rail rates gradually were increased as a result of general increases granted by the ICC, and the water-carrier tonnage returned to its normal 1936 figure of 95,000 tons.

The rail lines at this point made an overall reduction in their rates again, despite the fact that they were at the same moment asking the Commission for about the fifth time in 3 years to give them another horizontal increase. The ICC again permitted reductions by the rail lines in the sulfur rates.

Upon the filing of the new rates, prior to suspension, the water tonnage immediately fell off back to 60,000 tons. When the decision of

the Commission came out, granting only part of the rail reduction, the water lines held their normal tonnage. Then when the rail lines decided to increase their rates again, the water carrier tonnage moved up to its high point of 115,000 tons.

In 1953 the eastern railroads began a rate war among themselves from Ohio River points and there was a continual reduction made by one line against the other. Here again the tonnage fell approximately 40,000 tons. So much for a cursory glance at the sulfur picture.

Another commodity which is most important to the water carriers is pig iron. As a matter of fact, they have only about 5 or 6 commodities that are left for them to carry on the lakes. This pig-iron situation is most peculiar.

The first blow in this picture came when the rail lines reduced the rates from Cleveland and Lorain, Ohio, to Worcester, Mass., to meet "out-of-pocket costs" of a shipper-owned vessel.

Practically all this tonnage had been moving via the New York State Barge Canal, thence rail beyond, or by common carrier by water on the Great Lakes to Oswego and thence rail beyond. The rail lines, however, desirous of long-hauling themselves, reduced the rate from Cleveland direct through to Worcester from $10.30 to $7.54. The Oswego-Worcester rate was held at $6.27.

In other words, to keep the water carriers out of business the railroads were willing to haul this commodity from Cleveland to Oswego, 300 miles, for $1.37, but for the last 300 miles, Oswego to Worcester, where there wasn't any water carrier, they demanded and received $6.27.

It is also interesting to know that the principal rail lines operating out of Cleveland were the same lines that were operating out of Oswego, so they could easily confer with themselves and agree on a

deal like this.

The railroads based their right to make a rate low enough to meet the "out-of-pocket" costs of the shipper operating its own vessel on their so-called freedom of managerial discretion. The vessel here in question transported, as far as can be determined-and it is very accurate but one cargo of approximately 5,000 tons of pig iron from Cleveland to Oswego from 1950 to date.

The annual movement was established on the record by the rail carriers as 100,000 tons per year. Obviously, therefore, this ship was used merely as a weapon to beat down rail carrier rates and eliminate the common carriers by water. In this instance, it was 100 percent effective.

In passing, it might be mentioned that this vessel has been used on several occasions to accomplish the same result in different trades on the Great Lakes, and as late as June 8 of this year, that is, last week, the Suspension Board refused to suspend reduced rail rates in ingots where the justification was again this same vessel.

This is typical of the latitude of the "managerial discretion" now exercised by the rail carriers without interference from the Commission. This being so, their complaint against the Commission on this score is incomprehensible.

I want to close this statement by submitting to you the rest of the story on pig iron on the Great Lakes. This commodity is, as I mentioned, one of the most important to the water carriers, really one of

the few 4 or 5 commodities that they can still obtain today, but from the looks of things it will soon be numbered among the missing.

In addition to the loss of the Worcester pig iron, the Great Lakes carriers lost two other substantial movements under the most astounding circumstances.

There is a small foundry making silvery pig iron at Jackson, Ohio, a dry-land point. The pig iron all moves at the same rate, whether it is silvery or otherwise, and the only difference between silvery pig iron and regular pig iron is it has an additional ingredient in it.

In 1954 or the latter part of 1953 the company producing this pig iron found itself a victim of a strike. During all the preceding years they had supplied a substantial amount of pig iron to consumers at Saginaw, Mich., by rail. They were able to do this despite the fact that their all-rail rates plus the f. o. b. price of the iron was higher than the delivered price of similar iron originating at other points. When the strike occurred, the consumer looked to other sources and the commodity began to move from Buffalo to Saginaw by water. The water rate from Buffalo was, of course, lower than the rail rate from Jackson, Ohio. When the strike was over the producer at Jackson appealed to the railroads to reduce their rate so that he could equalize against the water terminal at Buffalo.

The request was turned down by the lines jointly, but subsequently a reduction was made by the C. & O. Railroad and the other lines went along with this reduction.

Substantial protests against the reduction were filed, alleging, among other things, that to accord to a dry-land point an equalization of rail rates with water rates direct from a water point was contrary to the Interstate Commerce Act.

Other allegations of unlawfulness were also made in the protest. Despite this, the Suspension Board refused to suspend and the rate became effective. Subsequently, Buffalo, the water point, requested the railroads to reduce their rate to reinstate the advantage they had had by water. The railroads agreed.

Again protests were filed and for some unknown reason this rate was suspended. At the same time the Suspension Board refused to suspend the Jackson rate, a shipper of silvery pig iron at Keokuk, Iowa, not in actual competition with the Jackson shipper, asked for and received a comparable reduction since he claimed that he was always related to Jackson.

This rate was not suspended. At about the same time the rail carriers reduced the rate on all pig iron from Buffalo, Suspension Bridge, Niagara Falls, and Harriet, N. Y., to Detroit, Mich. This rate was reduced from about $7.14 to $4.30.

The water carrier costs in this instance-and they were established of record-ran as high as $6.425 a ton. In this case, the water-carrier costs would vary depending upon the actual point of origin and the actual method of handling at the destination, Detroit.

Briefly, then, here we see a very graphic instance of where the rail lines have reduced a rate on an important water carrier item, which item was moving in a general territory and, having been successf the one stance, the indignity is spread immediately through entire area.

In the Detroit case, for instance, it was sho

to the reductions specifically mentioned abo

had under consideration reductions in pig-iron rates from Cleveland to Detroit, and Erie, Pa., to Detroit, and since that time several other pig-iron adjustments, all downward, have been before the Commission and several of them have become effective without suspension. It is clear, therefore, that if anything is done by this Congress legislatively to bless a situation of this kind-and this bill, H. R. 6141 will sure do it then water transportation of regulated commodities on the Great Lakes is a thing of the past.

In short the situation is, as we see it, that this bill should not be reported favorably, but that if nothing is to be done legislatively, the present policy should be strengthened so the Commission would have more definite standards in order to build up a pauper transportation system of all forms.

We feel there is room for all of us. However, transportation cannot flourish in this country based on a rate war, all-out economic struggle. The water carriers, the history shows, have disappeared when that happens.

I appreciate your courtesy in permitting me to appear, Mr. ChairThank you. If you have any questions, I will try to answer

man.

them.

Mr. HARRIS. Thank you, Mr. Eisenhart. I would like to ask how many members there are of the Great Lakes Ship Owners Association? Mr. EISENHART. There are eight members, sir.

Mr. HARRIS. Eight members?

Mr. EISENHART. Yes, sir. To my knowledge, and Mr. Sullivan confirms it, there are no other common carriers operating now on the Great Lakes.

Mr. HARRIS. And to what extent are they regulated by the Interstate Commerce Commission?

Mr. EISENHART. To the full extent as provided in part III of the Interstate Commerce Act.

Mr. HARRIS. They, like the other water carriers, referred to as the small carriers, with reference to the bulk commodities are not regulated?

Mr. EISENHART. No, but I am very glad you brought that up. It is an interesting situation on the Great Lakes and it differs somewhat from your barge situation.

I am familiar with both, sir. On the Great Lakes, in order to carry regulated commodities-and we might briefly specify them as iron and steel, pig iron, scrap, and sulfur is handled as regulated, and maybe one other

Mr. HARRIS. You mean all of these you have named are regulated commodities!

Mr. EISENHART. Yes, sir. The carriers engaged in regulated trade have to equip their vessels with special equipment to handle these types of commodities. Ordinarily, the regulated vessels run from as low as 3,000 tons carrying capacity to as hight as 7,000 or 8,000. They have been converted into a condition where they have very large hatches, probably 40- or 50-foot hatches, and they have special booms on and they have cranes on them, all of which runs in the neighborhood-I think the last figure we put in a Commission case was $400,000 to convert one; or to build a new one, about $212 million. So they are not adapted for what you term "the bulk of trade," which on the lakes is generally coal, grain, and iron ore.

When the carriers cannot get regulated commodities, and 1 company comes to mind immediately that has 4 vessels tied up now doing nothing, they have a choice of tying up the vessels, as this company has done, or operating at a loss.

They have two types of commodities, the regulated ones for which they are fitted, or they can shift them over to the bulk, but they are so small and the cost of operating them, and the type of personnel they have to keep aboard who are capable of operating this machinery and everything, is so expensive that they lose about $600 a day if they should be foolish enough to put them in the bulk trades.

Mr. HARRIS. What are the bulk commodities? Coal, of course, one of them.

is

Mr. EISENHART. Coal, iron ore, grain, phosphate, and limestone. Mr. HARRIS. What distinguishes them from the sulfur and some of the other products you named?

Mr. EISENHART. I believe the point we are driving at can be answered like this: Physically, sulfur can be moved as either a regulated commodity or as a bulk. It so happens that in handling on the Great Lakes, first, the sulfur moves on joint through rates with the barge lines from point of origin-and there are 2 of them, 1 in Galveston and 1 in Port Sulphur, La.-when moving in the barge tow, moving in a so-called mixed tow. Ordinarily a common carrier comes up the river with 10, 12, or 14 barges, 10 or 12 of which might be sulfur and a couple of them steel. Since it is moving on a joint through rate, it stays regulated the whole trip.

The second thing is that in handling sulfur on the Greak Lakes they have the special equipment, clam buckets and shells, and they handle it a little bit differently. But it is capable of being handled either

way.

Mr. HARRIS. It is capable of being handled either way, but, under Commission rules, is it handled both ways?

Mr. EISENHART. Yes. The Commission rules, of course, can go no further than the scope of the act, and that comes into play depending upon the carrier or carriers involved and how they transport them. It is the incidence of the physical handling. In other words, this could happen, and I think it will point up the difference. A full tow of sulfur could originate at Galveston, and by a full tow I mean a towboat with 3 or 4 barges ahead of it, all of which are sulfur, nothing else. That moves to Chicago and is there transshipped into a common carrier by water on the Great Lakes and dumped in the hold of the vessel and taken to its final destination, Cleveland.

That movement can be a bulk or unregulated movement.

If, on the other hand, the sulfur is moving under a joint rate and a joint through-route proposition with a carrier who transports over any part of the journey a regulated commodity with the sulfur, then the sulfur is regulated, becomes regulated.

Mr. HARRIS. May I also follow that with the additional inquiry: How many regulated water carriers are there other than your own association?

Mr. EISENHART. Do you mean on the Great Lakes or in the country generally?

Mr. HARRIS. In the country generally.

Mr. EISENHART. I think the only way you can answer that is to look at the Interstate Commerce Commission reports, and, if my memory