United States. Inland Waterways Commission.

Preliminary report of the Inland Waterways Commission. Message from the President transmitting a preliminary report online

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points such as Denver had been higher than the through rates to the
coast terminals. The Interstate Commerce Commission held that
rates at Denver to or from the East, or to or from the Pacific Coast,
ought not to be higher than those between San Francisco or other
Pacific Coast terminals and the Missouri River or points east.

On the other hand, in many cases the railways are probably carry-
ing goods at less than cost (at least if the traffic be charged with its
proportion of fixed charges), for the purpose of shutting out water
competition. It is evident that in such cases an increase in the rail
rate would be an advantage to all concerned, for it would restore cer-
tain bulky traffic to the waterways, where it economically belongs, and
leave the railway equipment available for traffic properly moving by
land, at the same time making possible a reduction of other rail rates
by cutting off business done at a loss and by increasing the volume of
profitable business. Nor should the railways fear the restoration of
water traffic to tliis extent, for the history of water transportation
shows that it frequently makes traffic for the railroads more than suffi-
cient to make up for the apparent loss of business.

The development of water transportation, which should be the
cheapest form of transportation for large classes of commodities,
would seem to be a necessary factor in the industrial development of
the country and by no means the least of the factors which should be
relied upon in our commercial competition with foreign countries.


In connection with this consideration of the effect of water com-
petition in certain sections of the United States, as an influence in
determining railroad policies and rates in those sections, the follow-
ing extracts from the testimony taken at the meetings of the Indus-
trial Commission in 1899-1901 is of interest.

Statement of S. R. Callaway, president New York Central and
Hudson River Railroad Company (Oct. 8, 1899) :

The large bulk of the grain, I take it, during the summer months comes to us from
vessels from all ports. Now, that transportation is usually very small. It has been
rather higher this year on account of the activity in the steel trade. The vessels, find-
ing they could get better rates for ore, have gone into the ore-carrying business; but
usually the competition between these boats makes transportation from Chicago to
Buffalo almost nothing. Last year the rates got down, I think, as low as three-fourths
of a cent a bushel, and that, added to our 3 cents, or whatever the rate we made from
Buffalo to New York was, lixes largely the rate you can get for the railroad.

Q. In the winter, when navigation is closed on the Lakes, yom- rates are increased,
I suppose, from Chicago? — A. We can not increase them very much because of the
other condition — of prices in Liverpool. The price in Liverpool really fixes the
prices that you can get for transportation. Wlien I say Liverpool I mean the great
centers of the world.

Q. Has the competition in St. Louis by way of Newport News, and in St. Louis
and Kansas City by way of the Gulf, any effect on that? — A. Yes; a very seri-
ous effect. We now have to make the price practically from the Missouri River —


before, Chicago and St. Louis were the common centers. St. Louis maintained a
higher rate of, we will say, 5 cents. I do not know whether it is 5 cents or not. On
lower classes the rates from St. Louis were 5 cents higher going out than from Chicago.
Of course, competition of the Gulf ports knocked that thing, l^ecause you can get
a rate now from Kansas City to the Gulf about as cheajD as you can get it from

Q. Can you say whether that competition arising from the development of the grain
business at Galveston, the grain business in New Orleans has affected the grain busi-
ness in New York to any appreciable extent? — A. It has affected the earnings of the
railroads. I think that they all make lower rates now than then.

Q. But the quantity of business, has that been affected materially, do you think?—
A. I can not answer that question. It is very difficult because the crops vary so and
conditions vary so. [IV, page 225.]

Statement of Mr. Samuel Spencer, president Southern Railway
(Oct. 11, 1899):

In reply to a question concerning the effect of the development of the grain trade
through Galveston and New Orleans upon the rates from Chicago to the Atlantic
seaboard, which a previous witness testified had had a modifying effect on the rates
from Chicago to the seaboard, Mr. Spencer said:

Well, I have no doubt that it has had some. My own impression is that the effect
of it has been much exaggerated. [IV, page 276.]

Statement of Mr. Z. R. Carter, commission and produce merchant,
Chicago, III. (Nov. 24, 1899) :

Of course I know there have been years diuing the summer season when the rail
rate has been cut very close to the water rate; other years it has not. The average
rail rate for twenty years past, as I have learned during that length of time, has l:)een
much lower during the summer than during the winter. * * * I think it could
])e safely said, taking the average for twenty years, that it would be 25 per cent higher
diuing the season of the closing of navigation than it would be dming the season of
water transportation. * * * The all-water transportation is now accomplished at a
very great disadvantage owing to the fact that the Erie Canal is not improved up to
date. [IV, page 578.]

Statement of Mr. Charles L. Keep, secretary of the Lake Carriers'
Association and of the Buffalo Merchants' Exchange (Feb. 19, 1900) :

The railroads do not make the differences that they formerly did in their rates
between the season of navigation and the winter season. [IV, page 718.]

Statement of Martin A. Knapp, chairman Interstate Commerce
Commission (Oct 5, 1899) :

That railroad [Kansas City, Pittsburg and Gulf], in connection with the Mallory
Steamship Line, Which takes goods from New York to Galveston, after various inter-
mediate reductions, finally put in a rate from New York City to Kansas City at 80
cents as against $1.47 by the all-rail lines, with the result that a very considerable
amount of traffic moved by a circuitous route approximately 2^ times as long as the
direct route, making, of course, higher rates from New York to St. Louis and from
New York to Chicago, than from New York to Kansas City, a condition which, in a
way, is illogical, and so, of course, can not permanently continue. I am not saying
now whether the interested carriers were justified or not; that is not the point, but
the effect, of course, was to bring about discriminating rates between the greatest trade
centers of the country, because anyone can see that the rate from New York to Kansas
City should not be lower than the rate from New York to St. Louis or from New York
to Chicago. And yet during the last three or four months that has been the actual
condition, that a very considerable amount of traffic has gone from New York to Kan-
eas City, by way of Galveston, at a rate only a little more than half the standard rail
rate from New York to that city.

Q. Can you say what conditions brought that about? — A. Well, I only know the
excuse which, I understand, is put forward by the receivers of that road. They
insist that they were entitled to what is known as a differential; that is, by reason of
their circuitous route, the greater length of time which it would require to take traffic
from New York to Kansas City by that route, the cost of marine insurance, and all that
sort of thing, they could not get any of the business at the same rates as the all-rail
lines; and therefore they ought to be allowed to charge somewhat less, with a view of


getting what they claimed was their share of the business. And it was the refusal of
the other lines, the all-rail lines, to concede the differential claimed which led them
to get the differential by force. I may add for your information that by recent action
of Judge Thayer, who appointed these receivers, they have been ordered to restore
the rates which existed at the time this controversy arose. Of course, all that was
complicated, and I mention it to illustrate the intricacies of the whole situation; that
is, the water lines down to Savannah and Charleston and then the rail lines from there
across the country to the same destination. * * *

Referring to the long and short haul clause, Commissioner Knapp said: The Supreme
Court has construed that section or provision of the act in such a way as to make it sub-
stantially nugatory, and as a matter of fact, especially in the territory south of the
Potomac and east of the Mississippi River, the injury to small towns which results
from higher rates to them from the great centers of production than to the larger cities
of the South more distant, has been serious and is still serious. To a great extent simi-
lar conditions exist with reference to the transcontinental traffic, rates all rail to the
Pacific coast terminals being ordinarily much higher [lower] than to many places in the
interior. Of course the justification put forward in all those cases is the competition
ot water carriers and the necessity, often actually a justification fairly satisfactory in
many instances, that they must approximate the rates of the water carrier or else they
can not get any of the business. [IV, page 134.]

As an instance of excusable and practically necessary discriminations, Commissioner
Knapp said: The most typical case is where water competition at the long-distance
point compels the rail carriers to make approximately the same rate as the water
carrier to that long-distance point. [IV, page 144.]

Hon. Jiidson C. Clements, member Interstate Commerce Commis-
sion, referring to local discrimination in the southeastern territory,
said (Oct. 5, 1899) :

Well, I have generally heard it assigned, when that system has been criticised by
the commission — as it has been in numerous cases — I have generally heard it said that
that territory was peculiarly situated with reference to water; that the Mississippi
River and the other rivers to the Gulf and the Atlantic Ocean so surround that ter-
ritory that there were so many points that could be reached 1)y water, or partly by
water, largely by water, that it necessitated a reduction, the making of low rates to
these points. But that I do not think is bome out to any great degree, because the
territory north, that of which I have spoken, is surrounded by a system of great lakes
on the north and by the Mississippi River and Ohio River and Atlantic Ocean, the
canals, and is subject to quite as many water influences, I think, as the south, except,
perhaps, in winter time, when the lakes are closed.

Q. Have you had occasion to compare the local rates which prevail in that, south-
eastern section with the local rates which prevail in the other sections which you re-
ferred to, east of the Mississippi, north of the Ohio? — A. Well, the rates are usually
lower in the north than they are in the south, both local and thi'ough. That is usually
true. [IV, page 155.]

Statement of JVIr. George J. Kindel, manufacturer, Denver, Colo.
(Oct. 10, 1899):

The result of the Colorado Fuel and Iron Company hearing was a iiiling by the
Interstate Commerce Commission that the railroads be made to carry their products
from Pueblo to San Francisco for 75 per cent of the Chicago rate. Previous to the
hearing rails were carried from Chicago through Pueblo, or even via New Orleans, to
San Francisco for 60 cents per hundredweight, while they were charging the Colorado
Fuel and Iron Company $1.60 per hundredweight, notwithstanding the 1,000 miles
shorter haul.

In my case, in behalf of Denver City, I was never given a ruling by the Commission.
On my product — comforters — I was obliged to pay $3 per hundredweight — Denver
to San Francisco — while my competitors at Missouri River points — Chicago, St. Louis,
and New York — were paying only $1 per hundredweight. At the hearing in Denver
the traffic managers of the transcontinental lines wished to appease me and gave me
the $1 on comforters to San Francisco and southern California points without any order
or ruling from the Interstate Commerce Commission. [IV, page 252.]

Q. Do you mean to say that, after consultation with thesQ, three lines to the coast,
they refused to take your business at a rate less than this same classification is carried
from Chicago to the Pacific coast? — A. Until I made complaint to the Interstate
Commerce Commission and had them there at the hearing. Then they offered to
make me a |1 rate on comforters. I was paying $3.


Q. (By Senator Kyle). On that one article alone? — A. Yes.

Q. How did they explain their extortionate charges before'^ — A. They do not try
to make any explanations.

Q. (By Representative Livingston.) Do they not offer this explanation, that their
train is made up at Chicago for the Pacific coast, and that they can haul through loads
from Chicago on a much less tariff than they could stop at your place and take on addi-
tional cars and an additional amount? — A. Their chief explanation has always been
water competition, but I have exploded that theory. They allege that water com-
petition is the controlling factor. I recognize water competition as a controlling factor,
but I deny that if the rate is 75 cents from New York, all rail overland to the Pacific
coast, that Missouri River points should be given a 50-cent rate. The only argument
I can see that they might advance is because of its proximity to the Pacific coast.
But they also alleged that the ships did actually absorb the inland freights to the Atlantic
coast and carried them around by the Horn. I then assumed that the railroads should
raise their rates, add the 30 cents, if you please, that the ships absorbed, to the Missouri
River rate of 75 cents and the New York rate, and that would make it $1.05 instead of
50 cents. And we proved at the hearing that they actually had 75 cents from New
York and 50 cents at Omaha, but when you struck Denver it was $1.60 to Pacific coast
points on the same articles. So your train making would apply to Missouri River
points. It ought to affect them more seriously there than at Denver. There you
understand they make it less.

Q. You can not ship by water at Denver? — A. No; not unless down the Platte
River, and that is not very big.

Q. (By Mr. Conger.) You are on water competition on the Missouri River prac-
tically? — A. They have had three steamboats. One burned up, and another sold out,
and I do not know what became of the other. [IV, page 255.]

Statement of Mr. A. J. Vanlandingham, commissioner, St. Louis
Traffic Bureau, on classifications (October 7, 1899):

One of the causes which has given the most trouble in my office for the past six months
has been the desire of the railroads to secure business that did not legitimately belong
to them. I had a condition on the Missouri River that will expire on the 15th of Octo-
ber, whereby rates from all points in the East, beginning with Portland, Me., on the
north, and Norfolk on the south, extending as far west as Pittsburg and Buffalo to the
Missouri River, by way of Galveston, and worked from Galveston on to Missouri
River points, as low as rates from Chicago to the same pointsj as low as the rates from
the same territory to St. Louis, when you count the bridge toll, added to our East St.
Louis rate. That is in a way to be remedied now by order of the judge of the United
States circuit court. The line that was making the rate being in the hands of a receiver,
he decided the rate in effect from the eastern seaboard would be too low and ordered it
advanced. If there had been no receiver, or if the receivers had not applied to the
court for relief, I do not think we would have had any. [IV, page 202.]

The Southern is very largely an any-quantity classification, for the reason that I
just gave — on account of water competition. * * * In the Pacific coast traffic
there are nearly 1,500 exceptions to the classification, brought about by water classifica-
tion [competition] around by the Pacific Mail and Cape Horn and other competition.
[IV, page 203.]

Q. Does any of your traffic destined to Pacific seaboard points go to the Gulf and
thence by water? — A. No; we have at times shipped from St. Louis to New York and
thence by water. There is no direct transportation from the Gulf to the Pacific coast .

Q. How recent, as far as you know, have there been shipments from St. Louis to
the Atlantic seaboard and thence around by water? — A. Within the last two years,
up to the time of the rate war between what is known as the Clipper Line of steamers
and the Pacific Mail, and the direct rail lines, went out of existence — that is, about a
year and a half ago — we shipped lard and oleo oil and a number of commodities of
that nature from Kansas City to the seaboard and thence by water to San Francisco.

Q. (By Mr. Clarke.) Is it not true that the Southern Pacific Railroad has a line of
steamers plying between Atlantic and Gulf ports and their eastern railroad termini at
New Orleans and Galveston? — A. Yes; they own the Morgan Line. The Southern
Pacific, on eastern seaboard business — I think it was shown in testimony some time
ago — handled 65 per cent of all the eastern business by way of New Orleans to the
Pacific coast points; that is, as far north as San Francisco.

Q. By reason of having that line of steamers? — A. Yes.

Q. They are able to make lower rates than the all-rail lines to the Pacific, aren't
they? — A. The Southern Pacific so far have been able to dictate all the rates to the
Pacific coast south of Portland, and up to May 1 last making, you might say, all the
rates to the Pacific coast. [IV, page 207.]


Statement of James S. Davant, commissioner of the Memphis
Freight Bureau (March 23, 1900):

The present rail rates [to New York and Boston] are fixed by that water transporta-
tion [byway of New Orleans]. The water rate from here [Memphis] to the East, via
Cincinnati, is 5 cents lower than the railroad rate, which is supposed to cover the
difference of insurance and make provision for slow time. * * * I think they
accept the railroads' bills of lading as sufficient insurance. [IX, 6, 7.]

Statement of B. H. Griswold, general freight and passenger agent,
Western Maryland Railroad (April 5, 1901):

Q. Is there a rail and water line from Chicago to Baltimore and one from St. Louis? —
A. Yes; there is a rail and lake line during the lake season.

Q. To Baltimore? — A. Yes; there is the Anchor Line, that operates out over the
Pennsylvania Raihoad, and the Fairport Line, that works out over the Baltimore
and Ohio to the Lakes, and others.

Q. To what point? — A. Chicago and northwestern points during the lake season.

Q. Those routes would certainly be more circuitous than the trunk lines? — A. Yes.

Q. And yet they are allowed by these general agreements with the roads to charge
somewhat less? — A. That is right. Yes. * * * All of these differentials apply-
ing to the seaboard are absolute differences, not percentage differences. [IX, 614.]

Statement of George H. Anderson, secretary Chamber of Com-
merce, Pittsburg, Pa. (April 19, 1901):

In Europe, where improvement of waterways for transportation is carried on to an
extent not dreamed of in this country, it has been found that where navigable water-
ways have been established, new railroads have been found necessary and older and
unprofitable ones paralleling these streams have been made prosperous.

The London Chamber of Commerce, the best authority on industrial ethics, says
in its Journal of March, editorially, that the enormous sums expended in France,
Germany, Austria, and other countries on the Continent in construction of canals
and other waterway improvements is, from an enlightened commercial policy, giving
the easiest and most economical transportation of products to markets. [IX, 639.]

I think that no railway transportation can be profitably carried on at much less than
2 a cent a ton a mile. * * * That rate would make the cost, at the minimum rate,
to New York, which is 450 miles, $2.25 per ton. Hence, it recjuires no argument to
prove that if the United States Government keeps these waterways open, by such
improvements as are common to navigable waterways of the whole world, that this
countiy can maintain its supremacy over all other peoples of the world in the matter
of supplying cheap transportation, and particularly of coal. Coal is becoming the
great staple of the world. You can't manufacture anything without coal. Fuel is
of more importance than ore, or anything else. If there is no fuel, you can not make
anything out of the other elements. [IX, 642.]

Statement of J. M. Langley, representing the Merchants' Associa-
tion of New York (April 3, 1901) :


If there is any advantage in the scale of rates itself, New York has it against St.
Louis and Chicago, * * * due to another agreement between railway lines that
dates back perhaps thirty years. It was an unwritten agreement among all railroads
that merchandise should enter the South from the East — that is, from her seaboard.
I don't know what brought about that agreement. I only know that agreement in a
general way; I can make that specific, too — I have a record. The idea was to exclude
the western lines from any participation in business that moved into the South from
the West. That was the general effect of the agreement. Why that was done, I don't
know. * * * It was a sort of general agreement.

Mr. Ripley. Does that condition prevail at the present time? — A. Yes.

Q. How far would it be due to the effect of cheap water rates which New York
enjoys through to southern ports? — A. Well, if there are any cheap water rates from
New York to southern points I am not familiar with them — I mean that I do not think
that they do exist. There is no competition between the coastwise water lines and
the railroads. In fact, this very classification that we were discussing this morning,
although It ia designed to fit railroad conditions, applies via the steamship lines
as well.


Mr. Kennedy. Does the community of interest between the railroads and steam-
ship lines bring that about? — A. It is entirely community of interest; I can say
"yes" to that, that competition between the coastwise lines and the railroad lines is
more apparent than real.

Q. The community of interest, then, is likely to deprive the people of the advantage
of the cheaper shipment by water? — A. Yes, it will certainly do that; has done it in
fact. For instance, you would naturally suppose that the influence of the Lakes was
of some significance, but every merchandise line on the Lakes is owned by the rail-
roads. The same way with tlie Erie Canal, which runs from Buffalo to the Hudson
River; there are merchandise freight lines owned bv the railroads operating on t]ie
canal. [IX, 874, 875.]


Q. Is it possible for a New York merchant to do business in California territory in
competition with San Francisco? — A. Yes. I was going to refer to the fact that on
business destined for California and the Pacific coast there is another classification in
effect which is peculiar to that traffic. It is made in a different way from the official
or the western or southern. It is made by making groups, and naming rates to cover
groups rather than items — that is, rather than separate items. There has-been a con-
tention by commercial bodies of the central West, particularly Chicago and St. Louis,
that the scale of rates, and also the classification, in effect from Chicago and St. Louis
was detrimental to their interests. Chicago and St. Louis claim that the transconti-
nental lines are using this same difference between the carload and less [lots] to
exclude them from the Pacific coast territory'. On the other hand, the Pacific coast
jobbers maintain that Chicago and St. Louis have no right to do business out in their
territory, and there is a case now before the Interstate Commerce Commission in which
that whole question is involved. It is of a rather complicated nature. For instance,
a rate from New York to San Francisco, and from Chicago to San Francisco, is the

Online LibraryUnited States. Inland Waterways CommissionPreliminary report of the Inland Waterways Commission. Message from the President transmitting a preliminary report → online text (page 35 of 83)