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think it is, some 100,000 or 108,000 bushels at any price it pleases. But there is the limit. There are instances known to me where lines bid for grain at the last minute and take it as ballast at almost nothing in order to get it. But the great mass of the traffic, the package freight, the lines carry according to the rules of the traffic as outlined in the agreement.

Senator BRANDEGEE. Doctor, this is a complicated question, of course; but let me ask you this question: From the result of your study of the whole question of marine rates, whatever you know about railroad rates, have you come to any conclusion regarding whether the capacity of our coastwise ships to compete via the Panama Canal with our transcontinental railroads will be determined by the question of whether or not $1.25 a net ton is collected in the shape of tolls for going through the canal?

Dr. HUEBNER. I look upon it this way, that since in the past the intercoastal boat lines have always charged rates as near to the railroad rates as they could and get a certain amount of traffic, that they will pursue that policy again. In other words, the railroads will make a schedule of rates, and the boat lines quite irrespective of the question of tolls will charge a rate just sufficiently below the rail carriers' charge in order to get a satisfactory amount of traffic.

Senator BRANDEGEE. I assume that the time occupied in going from New York-say, via the canal to San Francisco via water will be longer than it will by the transcontinental railroads. I had assumed that although the trip might be longer by water, still its being cheaper would induce a bulkier character of freight to be transported by water. The reason I am asking this question is this: Under this section 11 of the act approved August 24, 1912, commonly referred to as the Panama Canal act, the ownership of railroad steamboats with which they do or may compete for traffic is to be divorced. Now, these coastwise steamboats are after that period, unless the time is extended as provided in another section of the act by the Interstate Commerce Commission for the railroads to continue to hold their steamboats-when they are freed from railroad control these boats will be operated, I assume, some of them at least, in the coastwise trade. Some of them may likely go through the canal. Do you think it is going to be possible for them to compete with the transcontinental railroads?

Dr. HUEBNER. This much I know, that they will have to make the rate such as to get a satisfactory amount of the traffic.

Senator BRISTOW. As to that, if they are going to carry the product quicker than the road could carry it, why would they have to offer a cheaper rate?

Dr. HUEBNER. I think they will charge that rate, Senator, that they feel they can get.

Senator BRANDEGEE. I have no doubt of that, because every fellow in business wants to make all he can. How can he get the business unless he does? Do you assume that the traffic will seek the water route by preference? If that were so why would not the ships charge more than the railroads?

Dr. HUEBNER. The shipper is the person to make up his mind which way he is going to ship the goods, whether by rail or by water. Senator BRANDEGEE. Certainly.

Dr. HUEBNER. He will take into account many considerations; the element of time that you speak of, for example. The steamship companies must meet the wish of the shipper, and both the railroads as well as the boat lines will follow the practice of charging what the traffic will bear. That means get all you can and have the traffic move your way.

Senator BRANDEGEE. I know, but supposing I am a shipper in New York, and want to send a large quantity of goods through the canal to San Francisco: If the steamboats can get it there quicker, why would not I pay more for that service?

Dr. HUEBNER. Possibly, if your premise is correct you might do

that.

Senator BRANDEGEE. I am asking you now in order to get a premise. Do you think that the ships that go through the canal will charge a higher rate for carrying goods from New York to San Francisco than the railroads?

Dr. HUEBNER. I do not think that will be done.

Senator BRANDEGEE. Do you think they will go quicker?

Dr. HUEBNER. That I do not know. I have not studied the tolls question particularly.

The CHAIRMAN. What is your judgment on that, as to whether it would go quicker or not? Have you any doubt that the freight moved by the railroad will reach the Pacific coast quicker than going in a boat, we will say, from New York or Boston or Baltimore, and traveling through the canal and up the coast again?

Dr. HUEBNER. Freight does not move as fast as passengers, of course, and it may take longer. It would be a mere guess on my part, because I do not know.

Senator THOMAS. I saw a statement the other day, if you will allow me to interject it

The CHAIRMAN. Yes.

Senator THOMAS (continuing). That the average time from coast to coast by rail is over 20 days, and that with a 14-knot vessel, allowing one day through the canal, that route will be quicker than by the railroad lines.

The CHAIRMAN. I did not know that.

Senator BRANDEGEE. If the witness does not know whether the steamship route will be quicker, or whether it will be cheaper, we can not very well, it seems to me, ask him for any opinion as to whether the ships could successfully compete with the railroads. It seems to me those two questions are necessary fundamentals as to an opinion as to what would be the probability of successful competition.

Dr. HUEBNER. I do know this, that one of the big steamship companies, the American-Hawaiian Line, which does an intercoastal business to-day, seems to be competing quite well, and is carrying a very large traffic, and so I imagine the steamship companies will be able to get a certain amount of traffic.

Senator BRANDEGEE. The whole bearing of my somewhat rambling question was to find out whether it is good economic policy to exempt our coastwise ships from tolls or not, and I thought possibly it might have some bearing upon the wisdom of economic policy as to the effect it would produce, as to the necessity for doing it, because I have seen it stated that we built this canal to get cheaper transcontinental rates, that we could get them by the water competition, and that it

was necessary for these boats to have exemption from tolls in order to reduce railroad rates and benefit the consumer. I know nothing about these things myself, and I am hunting a light on the subject. Dr. HUEBNER. As I have stated, my feeling is that the toll is considered an item in the cost of operation and will not influence the rate. That is my opinion.

Senator BRANDEGEE. Do you think the reason why it will not influence the rate is because the ship owners can compete with the railroads anyway, and will be simply so much richer if they do not have to pay tolls to the Government?

Dr. HUEBNER. Yes; that is my idea.

Senator PERKINS. Mr. Chairman, I suggest you bring out the fact. that shipping by the canal is subject to marine insurance, and by the railroads there is not insurance. They guarantee the freight.

The CHAIRMAN. That is a very pertinent observation.

Mr. HUEBNER. I was asked the question as to how the rates of the American-Hawaiian Line compared with the rates of the other lines. I will read a summary contained in my report which gives a comparison of the rates of the Panama Line with those of the American-Hawaiian Line, and which shows that with reference to about one-third of the articles enumerated the rates via the two isthmian routes are the same:

A comparison of the rates of the Panama Line with those of the American-Hawaiian Line shows that with reference to about one-third of the articles enumerated the rates via the two Isthmian routes are the same, but in many instances the Panama rates slightly exceed the Tehauntepec rates and vice versa. Thus, upon comparison of the rates on the first 60 articles mentioned in the voluminous rate schedules submitted by the lines to the committee, the following results are found: In 23 instances the rates via the Tehauntepec and Panama routes are the same; in 25 instances the rates are nearly alike, the difference being 5 cents more of less per hundred pounds, and in all except 5 of these cases the American-Hawaiian Line's rates are less than the Panama rates; and in 12 instances the difference exceeds 5 cents (usually 10 cents), the Panama rates being in all cases the larger. But in making such a comparison account should be taken of the difference in the services rendered by the lines operating on the two routes, the rates of the American-Hawaiian Line applying to and from coast terminals, while "the Panama Line absorbs railroad rates from interior points to the extent of 20 cents per hundred pounds on westbound shipments, and the entire railroad rates to certain points in California," thus making this line's rates the lowest on shipments to and from the interior.

Senator BRANDEGEE. From what were you reading?

Dr. HUEBNER. I am reading from volume 4 of the proceedings of the Committee on the Merchant Marine and Fisheries of the House of Representatives.

Senator BRISTOW. Did not the Panama Railroad fix the rates-
Dr. HUEBNER. That is my understanding.

Senator BRISTOW. And whatever similarity there is is because the American-Hawaiian Line met the rates in so far as it could, and where it felt it could not it did not meet them?

Dr. HUEBNER. My understanding is that the American-Hawaiian Line could afford to charge considerably lower rates, because it has the best route. It would therefore tend to indicate that the AmericanHawaiian Line is following again the principle of charging all the traffic would bear.

Senator BRISTOw. As a matter of fact, have not the rates been materially reduced by the American-Hawaiian Line during recent years?

Dr. HUEBNER. That might be the case.

Senator BRISTOW. And were not they reduced materially by the order which resulted in the fixing of the schedule of rates which the Panama Railroad Co.'s ships charge, and when that rate was fixed did not the officers of the American-Hawaiian Line protest vigorously against it and refuse to meet it until they finally found they had to? Dr. HUEBNER. Yes. Mr. Schwerin, the vice president of the Pacific Mail Line, made the statement before the Committee on the Merchant Marine and Fisheries, that the Government line virtually compelled the American-Hawaiian Line to maintain its schedule of rates.

Senator BRISTOW. Then that rate was not fixed by a combination or an agreement between the Government

Dr. HUEBNER. No, sir; but it simply goes to show that they consider the matter, and they talked it over, and that the same thing is done in every other trade, and it usually reaches a point where all the lines charge the same rate. There is not open competition in

rates.

The CHAIRMAN. Is there any chance for an independent shipowner on any of the waters of the country where railroad-controlled boats are operating?

Dr. HUEBNER. I feel that there is practically no chance unless the independent boat owner has a big pocketbook.

The CHAIRMAN. We know that no independent boat owner, as a rule, has the same resources behind him that a railroad boat has. Dr. HUEBNER. Oh, no.

The CHAIRMAN. You have indicated that 94 per cent of all the coastwise shipping on the Atlantic and the Gulf coasts is controlled either by the railroads or consolidations. What percentage of the coastwise vessels on the Pacific coast is controlled by the railroads?

Dr. HUEBNER. There are, including the Hawaiian trade, and the Alaskan trade, 15 lines operating in the Pacific coast trade. These 15 lines operate 106 steamers of 350,000 gross tons. Two of the 15 lines are owned by railroads and four by shipping consolidations.

The railroads and the shipping consolidations combined represent 68 of the 106 steamers, or 64 per cent, and 172,000 gross tons, or 49 per cent, of the tonnage. In other words, the situation is not quite the same on the Pacific coast as it is on the Atlantic coast, the railroads and the consolidations controlling about one-half of the tonnage and about 64 per cent of the number of steamers.

Senator PERKINS. Do you include in that Japanese steamers? Dr. HUEBNER. No, sir; they engage in the foreign trade; I have reference to the coastwise trade.

Senator BRISTOW. Will you please state the three lines of railroads owned and by what roads owned?

Dr. HUEBNER. I beg pardon, I was wrong in that. There are two lines, the Pacific Mail, owned by the Southern Pacific Railroad Co., and the San Francisco & Portland Steamship Co., controlled also by Union Pacific interests.

The CHAIRMAN. Dr. Huebner, do you know whether the cost of marine insurance represents an appreciable item in the operating

expenses.

Dr. HUEBNER. Yes, sir.

The CHAIRMAN. Approximately, what is it?

Dr. HUEBNER. Naturally it varies tremendously with the given territory you have under consideration and the particular kind of freight carried.

So.

The CHAIRMAN. Is the marine insurance high?

Dr. HUEBNER. Marine insurance is high; it is generally considered

The CHAIRMAN. What is the rate or upon what is it fixed?

Dr. HUEBNER. On the vessel itself the rate will depend upon the classification of the boat and its age; it also depends upon the nature of the traffic the vessel is engaged in and upon the character of the waters traversed. It would be impossible to give any general rule as to what the average cost of marine insurance is.

The CHAIRMAN. On that subject of marine insurance, it centers largely in the Lloyds Co. of London, does it not?

Dr. HUEBNER. Not necessarily. There are a great many marine. insurance companies doing business. The Lloyds underwriters now do a considerable amount of it, but I am unable to tell how much. Some years ago I made an investigation of the subject-in 1903-and found the total amount of marine insurance written in this country to be about $7,000,000,000. That, however, includes all of the interior waterways. It seems that of that amount from one-half to threefourths was written by foreign insurance companies and about onefourth by American companies. Those facts would seem to indicate that Loyds underwriters do not by any means control it all.

Senator BRANDEGEE. Whatever the amount is, it is a part of the regular fixed charges in the operation of the vessel properly?

Dr. HUEBNER. Yes; it is an item in the cost of the operation of the vessel. As a rule, however, shippers, I understand, are obliged to carry their own insurance on cargo.

Senator BRANDEGEE. I suppose Senator O'Gorman is talking about the insurance on the vessels by the owners of the vessels?

The CHAIRMAN. On the vessel and any insurance taken out on the

cargo.

Dr. HUEBNER. The shipper takes out insurance on the cargo. The vessel owner must allow insurance on his vessel as an item in the cost of operation.

Senator BRANDEGEE. Do you know anything about the profit of the coastwise trade? I am aware that is a broad question and different vessels make different sums, but in general is it a profitable or an unprofitable business?

Dr. HUEBNER. I have some data on the subject, but much of it has been given under conditions of confidence, and I would prefer not to mention names.

Senator BRANDEGEE. I do not ask you to violate any confidence. I am asking for your opinion about it.

Dr. HUEBNER. Generally speaking, the lines that pay dividends at all pay good-sized dividends. Of course, there is no uniform system of accounting and dividends alone are not always a proper index. Here, for instance, is one line which in the last five years has paid from 8 to 10 per cent a year, and the net earnings are considerably higher than that.

The CHAIRMAN. Is that a railroad-controlled line?

Dr. HUEBNER. No, sir; that happens to be a nonrailroad-owned line.

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