train load of 30 cars is hauled to Philadelphia, 656 miles, for $1,260, while to Chattanooga, 578 miles, the charge would be $4,410.

The freight rates generally through the South, Mr. Bacon declares, are excessive, and this results in material injury to the prosperity of that section. Under reasonable freight rates the South would be the home of the biggest manufacturing plants in the world. There is no manufacture of glass or of soap in the South of any importance, and no market for alkali products. The result is that nothing is done to establish a demand for those products and to favor manufacturing by the establishment of reasonable freight rates. Under low rates factories for the manufacture of these and other articles would start up, and in the long run the railroads would profit by the increase in their business. (73, 75, 79, 80.)

Mr. MCGOVERN says that prior to the organization of the Southern Classification Association the classification feature of rate making was handled by the several traffic associations in that territory. There was a single classification for the southern territory, but it was made piecemeal instead of by one general association as at present. The new committee made a thorough and systematic revision of the entire classification. Under the old plan additions and changes were made from time to time without proper regard for the effect upon other analogous articles, with the result that the classification abounded in conflicting ratings and inconsistencies. The new committee began with the iron and steel list and the changes which it adopted were published in Southern Classification No. 26, which went into effect February 1, 1900. This revision of the iron and steel list contained advances in a good many ratings. One reason why the iron and steel rates were raised was because the railroads in their equipment and otherwise had to use iron and steel, and a higher price made a higher rate. The roads can not afford to reduce alĺ their rates to the basis of the commodity rates; it would make them bankrupt. A revised classification which embraced everything excepting iron and steel, and which made substantial modifications, was promulgated in Classification No. 27, which went into effect June 1, 1900. Classification matters have been given the fullest consideration and the advances made in the classification have not been the result of any attempt on the part of the principal lines to put up the rates to the shipping public. These revisions came at a time of extraordinary trade conditions, which justified substantial advances in many of the ratings. There had been marked increases in the prices of many important commodities, especially those entering most largely into the cost of operation of transportation lines. Some of the lines in the southern territory actually showed a reduced net revenue during certain periods as against an increased gross revenue during the same periods, which is attributable to the increased cost of materials used in operation. The revision of the classification, however, was not for the purpose of increasing rates, but was chiefly to simplify and harmonize matters. Many of the existing ratings had been unreasonably low in themselves, and by comparison with the ratings on the same articles in the other two classifications of the United States. (655, 656.)

Carriers' risk and owner's risk rates.-Mr. McGovern says that the first important change that was made by the committee in classification 26 was the abandonment of what was known as the double-column rating, and substituting therefor the singlecolumn plan. In the old classification up to No. 25 two ratings were shown opposite many of the articles, one in the "carriers'-risk" column, for cases where the carrier assumed the common-law liability, and the other in the "released" column, for cases where goods were carried at the owner's risk or limited liability, the first column rating being higher than the second. There was nothing approaching uniformity in the differences between the two columns. It was found that in some instances the carriers'-risk rate was only 14 per cent higher, and in some instances 280 per cent higher than the owner's-risk rate. Some 1,700 articles had been shown by the previous classification in the carriers'-risk column only-that is, only a single rate was published. As a matter of fact, according to Mr. McGovern, the goods of this character which were actually shipped were in 99 cases out of 100 shipped on the ordinary bill of lading of the railroads, which is a limited-liability bill, so that the shipper did not actually avail himself of the carriers'-risk privilege. By the new classification the rates remained the same, but it was provided that they should be on the limited-liability basis, and that if the shipper insisted on the common-law liability, he should pay a 30 per cent higher rate. This system of uniform bills of lading and single-column classification is in line with the practice of the trunk-line roads and others in the Official territory. Technically it may be said that there was an advance of rates because the shipper would have to pay 30 per cent more if he got the unlimited liability of the carrier which he might have insisted on before, but in practice he did not insist on it before in most cases; and for 99 per cent of the goods the rates and the bills of lading were precisely the same after the change as before.

Mr. McGovern says that this change was misunderstood by many people and was made the basis of a general complaint that the rates on 1,700 articles has been advanced.

The first change in Classification No. 27, as compared with Classification No. 26, was as to Rule 1, which was a little more favorable to the shipper, in that there was a reduction from 30 to 20 per cent additional in the carrier's-risk rate as compared with the owner's-risk rate. For 13 years the lines in the Official classification territory have used a uniform bill of lading, which has been published as a part of the Official classification. This matter of uniformity in the bill of lading was early taken up by the Southern Classification Committee, which after much consideration evolved a bill of lading which was finally adopted and approved by the various individual lines, and went into effect June 1, 1900. (A copy of this bill of lading was furnished the commission.) Practically the only difference between the carrier's risk and the limited liability is that under the carrier's risk, if the goods are lost or destroyed, the owner can recover the loss occurring except from one of the four exemptions established by the common law, viz, an act of God, fraud on the part of the shipper, inherent defect in the article, or inherent vices in an animal. The bill of lading in addition to these limitations releases the carrier from further risk by reason of fire, chafing, leakage, and all those damages incident to ordinary transportation which are not the fault of the carrier and are due to its negligence.

The only consideration that was given the Official and Western classifications in the revisions of the Southern classification was simply to compare them, article for article, as the work of revision proceeded. As to the liability question, however. the revision resulted in making the Southern classification the same as the Official classification.

There have been no cases in court to test the validity of the two forms of contract. Not more than 1 per cent of the freight carried consists of hazardous risks. (656-661.) Changes and advances by last classification revision.—Mr. McGovern says further that the advances in the descriptions and ratings as shown in Southern Classification No. 27 do not exceed 400 or 500 as compared with Classification No. 26, and there were about 100 reductions. Many of the advances were made on unimportant articles of shipment. Consistency and universality were aimed at in the revisions. All druggists' articles in boxes were made first class; small grocery articles in boxes were as a rule made second class, as were also ordinary hardware, iron, and steel articles in boxes. One reason for this was to prevent the underbilling of drugs, groceries, and hardware, which practice has grown up, and is on the increase in the Southern territory. The principal articles used on the farm and many other very important products were not advanced in ratings. It is a general experience that when reductions are made it is believed that it increases the business of the roads. The occasion of the advance in the classification of cotton goods was brought about by the fact that in the early days the classification was arranged so as to be in the nature of a protection to the early cotton manufacturers in the South, and even to-day it is so arranged. When the classification is advanced the rates are always advanced.

Mr. McGovern concludes by saying that the making of a freight tariff or a freight classification is not an exact science. The change of commercial conditions in the increase of local industries, new discoveries in science, competition between carriers and markets, will necessarily effect changes in freight classification and freight rates from time to time. Ever since Classification No. 27 went into effect some modifications have been made, and other modifications will be made from time to time as circumstances may dictate. It is not to the interest of the carriers to make their rates exorbitant or so high as to unduly limit or restrict the free movement of traffic over their various lines. (661-662, 668–672.)

Mr. DUNLAP, an officer of two small Georgia railroads, testified in 1900 that there had recently been a general increase in freight rates on the through Southern lines. He was inclined to justify this increase, despite the fact that the railroads have all the business they can carry and are even short of cars, because of the general prosperity of the country and of the fact that the Southern railroads have only recently been able to make any profits at all. Most of them have just got out of bankruptcy, and until recently their stocks have been of no value. While the Georgia Railroad Commission limits the freight rates, the rates actually existing hitherto were much lower within the limits.

Another reason why an increase of freight rates seems to the witness justifiable is that the railroads have hitherto helped the establishment of cotton factories in the South by making low rates on machinery and materials and in other ways. The result is that now, the factories being established, railroads have no cotton to haul to the seaports, and the amount of freight which they get in the shape of cotton goods is much less than what they formerly hauled. As an illustration of the unduly low rates which had prevailed on cotton goods, Mr. Dunlap instances a shipment of

1,200 bales of cotton cloth from Monroe, on the Gainesville, Jefferson and Southern Railroad, to Shanghai, China. The rate was only $1 per hundred, 93 cents of which was for rail freight to San Francisco. The rate from Monroe to Atlanta was only 6 cents, and that for the 10 miles over which the goods were hauled on the witness's road only 3 cents. While this local rate of 3 cents was apparently higher for the distance than the other railroads received for their longer hauls, it was yet unduly low, in view of terminal charges, etc. On shipments to New York the witness's road gets 6 cents per hundred for the same distance, while it formerly received 12 cents per hundred for hauling raw cotton the same distance. (2–4.)

Mr. DAVANT, commissioner of the Memphis Freight Bureau and Shippers' Organization, thinks that the increase in freight rates over the Southern roads in 1900 was at least partly justifiable. The Southern railroads have seldom earned any dividends on their stocks, and the witness supposes it to be reasonable to allow them to do so. (6.) 4. Local rates on cotton-Memphis.-Mr. DAVANT says there has been a considerable reduction in the local rates on cotton from neighboring points to Memphis during the past five years. The Tennessee Railroad Commission has had nothing to do with the fixing of rates, but the Memphis Freight Bureau is constantly making efforts to secure more satisfactory local and through rates. Some of the local rates it considers fair, but others are still too high. (7.)

5. Reduction of freight charges-Minnesota.-Mr. TEISBERG, secretary of the State Railroad and Warehouse Commission of Minnesota, gives several instances of the reduction of freight charges on grain within that State. From Alexandria to Minneapolis, 133 miles, the rate was 21 cents per hundred pounds in 1880, 19 cents in 1885, and 12 cents in 1887. Since that date it has not changed. From St. Vincent, 380 miles, the rate was 35 cents in 1880, and 21 cents in 1887, and is now 16 cents. Mr. Teisberg thinks that these reductions have been partly caused by the operation of the railroad law, the rulings of the commission, and the moral effect of those rulings, but that the more economical methods of transportation, such as the increase of the size of cars and engines, are the chief cause. He considers that competition has had very little to do with it. (364.)

6. Western freight rates.—Mr. BACON, of the Michigan Alkali Company, says that Western freight rates on the products of this company are so high that practically none are shipped into that territory. There is a rate of 58 cents per hundred pounds to San Francisco, this low rate being due to the competition of the foreign product with ocean transportation. The witness has no complaint to make regarding discrimination between long and short hauls ordinarily, excepting the low rates where there is water competition. But he believes that it would be to the advantage of the railroads and the West generally to reduce freight rates in that section so as to allow the establishment of industries. (80, 85.)

Mr. STUBBS, of the Southern Pacific Company, asserts that the rates for transportation from the Pacific coast have very considerably decreased since 1891, and he knows of no single instance in which they have increased. (765.)

7. Freight rates on alkali products.-Mr. BACON, freight manager of the Michigan Alkali Company, complains of the excessive freight rates charged upon its products as compared with other articles. The various articles are all shipped in compact form, in large bags or barrels; they are all heavy and they are clean and convenient to handle. There is not so much leakage from the packages as there would be from flour barrels. A barrel of flour weighs 212 pounds, and a 15-ton car would contain 143 barrels. A barrel of dense soda ash weighs 570 pounds; of light ash, 300 pounds; of bicarbonate of soda, 420 pounds; of cement, 400 pounds; that is, a 15-ton car would contain from 52 to 100 barrels of these respective products. Notwithstanding the favorable character of the alkali products for shipment, the railroads charge a rate very much in excess of that on flour and similar barrel products. The following table shows the relative rates from Wyandotte, Mich., to various Eastern and Southern points (1900):

Mr. Bacon recognizes that the fact that flour is a staple article, shipped in large quantities, justifies a lower rate than on alkali products, but he considers the difference shown in this table excessive. The railroads charge $1.09 for taking a barrel of heavy ash from Wyandotte to Boston in car lots, while a barrel of flour is hauled the same distance for 37 cents. (72, 73, 81.)

8. Transportation of California fruit.-Mr. STUBBS, of the Southern Pacific Company, does not think that there is any complaint or any basis for complaint on the part of freight shippers in California against excessive charges by the railroad companies for transportation. The fact that the shipments of citrus fruits to the East have grown from nothing to 20,000 carloads a year shows that there can be no basis for complaint. Shippers do complain of the practice of the railroads in determining the routes and in not operating refrigerator cars themselves. They also contend against the demand of the railroads that they should load 13 tons to the car instead of 10 tons, on the ground that this does not leave sufficient room for the circulation of air. The railroads are satisfied that this is not true, because for the most part 40-foot cars are used for 13-ton shipments as against 36-foot cars for the 12-ton shipments. The railroads found that the size and weight of boxes had been increased so that practically 13 tons were being carried for the rate on 12 tons. (767.)

9. Coal rates-Philadelphia and Baltimore.-Mr. GRISWOLD, general freight and passenger agent of the Western Maryland Railroad, says that the rate from the Cumberland and West Virginia coal fields to Baltimore by the Baltimore and Ohio is $1.45, without distinction as to distance. There is a territory beyond that section from which the rates are higher. They are also higher from the gas-coal field. The rates to Philadelphia are the same as to Baltimore. This is doubtless because the rate from the Pennsylvania fields to Philadelphia is the same as the Baltimore and Ohio rate to Baltimore, and if the Baltimore and Ohio charged a higher rate to Philadelphia the Pennsylvania road would haul all the coal there. (619, 620.)

10. Freight rates on paper.-Mr. GRISWOLD, general freight and passenger agent of the Western Maryland Railroad, thinks that the Southern lines make such low rates to Western points on paper in carloads that the New York, Pennsylvania, and Maryland lines have to make low rates to put their shippers on an equal footing with those in New England. (619.)

11. Freight rates to Denver.-Mr. GRIFFITH, representing the Denver Chamber of Commerce, says that there has been no change in the freight rates on first-class commodities from the East to Denver during the past two years, so far as he is aware. (855.)

B. Policy regarding rates-Competition and other influences.— (See also Water transportation, p. CLXXIV.)-1. General effect of competitive forces.—(See also under Consolidation, p. LXVIII.)—Mr. THOMAS, president of the Erie Railroad, declares that the greatest danger to the public is not from high railroad rates but from unrestricted competition resulting in discriminating rates, or in rates which are too low to give a profit to the railroad. At present rates are more stable and uniform than they have been before, and there is a feeling of confidence on the part of the railroads as well as a disposition to maintain fair rates. This country has shown itself able to transport freight more cheaply than any other. The new opportunities and wealth of the country have been stimulated in every possible manner. While competition may have some effect in developing transportation lines and lowering rates, and while some competition is undesirable, the paralleling of railroads results in economic waste. It may be a question whether, if there were no direct competition between railroads, freight rates would be reduced, but, in the opinion of the witness, the competition of different sections of the country and of different countries of the world would keep rates down. America is competing with the world. The price at which grain shall be shipped from Chicago to New York is fixed by the markets of England, and the Continent, where there is competition of the grain from Argentina, India, Russia, and many other countries. The railroad manager who undertakes to keep up rates because he has an apparent monopoly would soon ruin his business, drying up the entire sources of supply, and putting his territory at such a disadvantage, as compared with the rest of the country, that manufacturers and producers could not exist. It does not even pay to put up rates for the purpose of speculation in Wall street; there are easier methods by which to make profits there. In the experience of the witness he has never known an appeal by a majority of manufacturers or of communities, regarding their inability to meet competition of other sections, to be brought to railroad managers without meeting a prompt response. Mr. Thomas also alludes to the competition of Canadian railroads as a factor in checking the charges of American railroads, even as far south as the Gulf. (551, 552, 554.)

Mr. SCHIFF, banker, declares that transportation rates in general will adapt themselves by a natural law to the prevailing rate of interest. If other investments aver

age a return of 4 per cent, railroad capital actually spent can not be made to return more than 4 per cent, no matter what is done. (774.)

2. Competition between railroads-Rate wars.-Professor RIPLEY says that where there is not competition there is not that incentive, which becomes a matter of selfpreservation, to add the very latest and very best improvements, which must prevail where competitive conditions exist. Roads which are subject to competition know perfectly well that if they do not give quick trains and good service traffic will go by the other lines.

At competitive points on roads there is frequently a secret rate in force which is much lower than the published rate. (294, 295, 296.)

Mr. TEISBERG, Secretary of the State Railroad and Warehouse Commission of Minnesota, thinks that so far as community of interest in ownership may prevent rate wars it is a good thing. His observation is that rate wars help only large shippers who do not need the help of the railroads. The small shipper is generally not prepared to take advantage of the reduced rates. (365.)

Mr. TALCOTT, assistant to the president of the Seaboard Air Line, says that rate wars have been less frequent in the southern territory than in the northern. (627.) 3. Distance as an element in freight rates.-Mr. TALCOTT, assistant to the president of the Seaboard Air Line, says that there is a concensus of opinion among railroads that charges per ton per mile should be higher for short hauls than for long. He has had occasion to endeavor to establish a definite rule, as an engineer and a mathematician, by which charges may be proportioned to distance. He has found that the scale which seems to fit best the actual conditions of tariffs makes rates increase as the square root of the distance; that is, the charge is double for four times the haul. Mr. Talcott has made use of this rule, not only for the fixing of rates, but for the division of charges, and the rule has been approved for both purposes, both by practical railroad men, by courts, and by State authorities. (630, 631.)

4. Competition of Canadian railways.-Mr. THOMAS, president of the Erie Railroad, says that the Canadian railroads are important factors in making rates on all American roads even as far south as New Orleans. The exporter of grain or other commodities does not care whether his shipments go by way of Montreal, New York, Newport News, or Galveston. If the rate made by Montreal is lowered, it must be met by the roads to all these other points or they must forego the business. The shipment of goods by water is also a great factor in keeping down rates. (552.)

Professor RIPLEY says that the suspension of the privilege to ship goods in bond over Canadian roads would be of great damage to New England shippers. (299.) Professor Ripley says that Canadian roads are allowed by the American roads a differential, in order, so far as he can see, not to bring to an issue the question whether those roads are subject to the interstate-commerce law, i. e., rather than fight the matter out, the American roads have allowed and do allow the Canadian roads to charge less for the same haul than the roads allow themselves in United States territory. (298.)

5. Advantages of Boston by reason of Canadian railway connections.-Mr. Howes testifies that Boston's railroad connection with the West by the Canadian Pacific road and its branches has been quite an advantage. The financial and commercial interests of the American trunk lines terminated at the Hudson River, and their influences were detrimental to Boston shipping. The Canadian roads were interested in having shipments sent to Boston, and by reason of this competition the American trunk lines gave Boston a consideration which they otherwise would not have had.

In the summer time grain that arrives at Montreal can be shipped thence to Liverpool by steamer just as cheaply as from Boston. The freezing of the St. Lawrence in the winter causes a great deal of the Canadian shipments to be sent through Boston. The tendency for the last year or two has been somewhat against this Canadian trade. A spirit of antagonism has grown up in Canada to a certain extent, due partly to the belief that trade relations between the two countries are not what they ought to be, and out of this belief has grown a political feeling which has necessarily had considerable influence on the Canadian Pacific road. The effect has been to lead Canadian shippers to use the Canadian Pacific to St. Johns, New Brunswick. The Grand Trunk Railway has also developed its terminal facilities at Portland, Me., and this has injured Boston trade to a certain extent. In going to Portland, the Grand Trunk carries its freight entirely over its own line. (701-702.)

6. Canadian Pacific differentials.-Mr. STUBBS, of the Southern Pacific Company, says that the American transcontinental roads have fought the demand of the Canadian Pacific that it be allowed differential rates on account of the longer time of transportation and other disabilities of the road, and that this differential, which was

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