freight forwarders and important less carload shippers, the General Schedule Committee, composed of Chief Operating Officers of Western Lines, adopted the recommendation that second morning delivery be afforded merchandise traffic from St. Louis and Kansas City to north and south Texas points. The MissouriKansas-Texas stated they could not limit this service to less carload traffic, and extended it to include all carload freight, which resulted in protests from other lines and notices to inaugurate comparable expedited service via other routes as well as extending it in other directions and between other points.

At meeting of the Chief Executives on January 18, matter was referred back to the General Schedule Committee for the purpose of composing this situation, and the matter was finally disposed of by approving the recommendation of the General Schedule Committee; that is, providing the 24-hour earlier service to Texas points for merchandise traffic, and extending this service also to San Antonio and Austin which were not included in their original proposal.

2. Proposal of Four North Pacific Coast Origin Lines to Reduce Carload Rates on Apples from Oregon and Washington to Colorado and Points East thereof to and including the Pittsburgh-Buffalo Line.-At our last meeting I reported on proposal of the Great Northern, Northern Pacific, Milwaukee, and Union Pacific to reduce carload rates on apples from Washington and Oregon to Colorado and points east, to and including the Pittsburgh-Buffalo Line. It was my judgment that these low rates, if placed in effect, could not be confined to apples but would spread to pears and other deciduous fruits, and finally hazard our present level of rates on all West Coast perishables. I therefore recommend that the proposed rates not be given effect. I have been advised, however, that the proponent lines have taken individual action and effective February 28 reduced the rates 15 cents per 100 lbs. to Colorado and Missouri River points, and effective April 10 reduced the rates 10 cents per 100 lbs. to St. Louis, Chicago, and points east to Buffalo, both reductions being less than originally proposed.

3. Protest Against Proposal of the Missouri-Kansas-Texas Railroad to Establish Fourth Class Rates on All Less Carload Freight Within the State of Texas.-This case was mentioned at our last meeting, and you have since been furnished a copy of my report and conclusions.

The Missouri-Kansas-Texas proposed putting into effect these low merchandise rates to recover from highway carriers some of the losses sustained in less car load tonnage and revenue within the State of Texas; and, while unable to give any definite estimate of increased tonnage that would result from establishment of these fourth-class rates, expressed the opinion the proposal would return a substantial volume of the tonnage to the rails and would be a step in the direction of effectively meeting the truck competitive situation in Texas.

The protestants, however, were of the firm conviction that such action would result in heavy revenue losses to the rail carriers with little, if any, compensating gains in increased traffic. They believe it is impracticable to confine the aplication of such rates to the State of Texas and that the motor carriers can and would meet the rates, would hold the business they now have; and the net result would be a reduction in the rates on merchandise now moving at higher than fourth class, with a corresponding reduction in the revenues accruing to all carriers, both rail and highway, with no material increase in the traffic, or change in its distribution among these carriers.

In view of the substantial decrease in revenue to the lines as a whole under the proposed reduction, and the extremely doubtful prospect of securing additional traffic sufficient to offset the loss in revenue, I recommended that the proposal not be given effect.

As you have already been advised, the Katy has agreed to accept the recommendation.

4. Protest Against Proposal of Missouri-Kansas-Texas Railroad To Reduce Rates 5¢ per 100 lbs. on Sugar From Houston, Texas, to Destinations in Oklahoma; and Proposal of the Kansas City Southern-Louisiana & Arkansas Lines To Reduce Rates on Sugar, Carloads, From New Orleans, Louisiana, to Texarkana, Arkansas-Texas, and Ashdown, Arkansas.-While this case was briefly discussed at our last meeting, the information necessary for me to render report and conclusion was not available until hearing held on March 14, 1940.

The proponents state these rates are necessary to meet truck and barge-truck competition, the request for reduction from Houston, Texas, to Oklahoma destinations being predicated on a similar Texas intrastate reduction which the Katy claimed accentuated the trucking of sugar into Oklahoma.

There is no more sensitive rate adjustment according to statements made by the traffic men than that covering the sugar movement. Experience has demon

strated conclusively that reductions in sugar rates cannot be restricted to a limited number of origin or destination points. For example, the reduction in the Texas state rates made some months ago immediately forced reduction of 5 cents per 100 lbs., or $1.00 per ton, to Texas destinations from all interstate origins; and a majority of the representatives at the meeting felt that a reduction from Texas to Oklahoma would definitely involve a reduction from other producing points to Oklahoma, to Kansas, and perhaps points in other adjacent States.

A statement presented at the meeting reflected, with respect to Oklahoma, that during the year 1938, 2,041 cars, totaling 63,926 tons of sugar, were handled under present rates. In addition, it was shown that much of the trucking of sugar is by wholesale grocers from their main distributing or storage points to their branch houses or stores, which traffic, it is thought, could not possibly be recovered by the rails.

In my judgment, information developed at the hearing indicated quite clearly that, should these reduced rates be placed into effect, the revenue loss to the carriers, as a whole, on tonnage moving under present rates would be greater than any potential increase which might result from restoring to the rails sugar traffic now moving by water or truck. I therefore recommended that these proposed reductions not be given effect.

Statement was made at the hearing that if the Texas destinations reductions now in effect could be restricted at least to destinations to which there was substantial truck movement, it would go a long way toward removing complaint of Oklahoma receivers, particularly if reductions to the northern part of Texas were graded sharply upward. In my report I urged that further consideration be given this feature, and I have been advised the Traffic Officers are proceeding on that basis.

The Kansas City Southern-Louisiana & Arkansas Lines have advised that they reserve the right to proceed with definite notice.

5. Protest Against Proposal of the Southern Pacific Lines To Adjust Existing Schedules on Their Eagle Pass Branch Between Spofford and Eagle Pass, Texas.On November 29, 1939, the Southern Pacific served notice of intention to rearrange train schedules on its Eagle Pass Branch, between Spofford and Eagle Pass, Texas, to connect with main line perishable specials and reinstate 24-hour better service from Eagle Pass district to St. Louis, which was in effect for a long period prior to November 1932.

This proposed service involves no additional expense, and satisfies strong demands of shippers of perishables who enjoyed this service when it was previously in effect.

The Missouri Pacific Lines protested the proposed change on the ground that it would be necessary for them to meet the service from the Winter Garden District (between Laredo and San Antonio) which is highly competitive with the Eagle Pass District, at a cost of approximately $143,000 annually. Additionally, it is their thought this change will create a strong demand to extend comparable schedule to the Rio Grande Valley and Corpus Christi territory at further increased expense.

In my report I pointed out that the Eagle Pass District, the Winter Garden District and the Laredo District have, in my judgment, a relationship which justifies the maintenance of comparable service insofar as deliveries at the St. Louis gateway are concerned. Further, that it is not unreasonable to say that the shippers in the Eagle Pass section are entitled to the benefit of fast service available via the Southern Pacific; that the Missouri Pacific may find it necessary to provide comparable service from Laredo and the Winter Garden District to St. Louis, and under the circumstances, there would be justification therefor.

With respect to the situation in the Corpus Christi and Rio Grande Valley Districts-both the proponent and protestant are interested, and it seems clear that whatever is done in the handling of production from the Eagle Pass, Winter Garden and Laredo territories should not require or carry with it changes bringing about uneconomical operations from Corpus Christi and Rio Grande Valley.

I therefore recommended that the Southern Pacific proceed with rearrangement of its schedules on the Eagle Pass Branch to connect with its present main line service and that the Missouri Pacific, if it finds it necessary, establish comparable service from Laredo and Winter Garden Districts insofar as arrivals at St. Louis are concerned.

I have a letter from Mr. Baldwin of the Missouri Pacific advising that, effective February 21, they inaugurated comparable service from the Winter Garden District and Laredo.

6. Proposal of Missouri-Kansas-Texas Railroad of Texas to Establish Reduced Rates on Petroleum Products Between All Points in Texas and Between Shreveport, Louisiana, and Texas Points for Distances up to 400 miles.-On December 30, 1939, the Katy filed notice of individual action to establish these reduced rates to meet truck competition, pointing out that the proposed schedule of rates is the same as that now in effect in Oklahoma and between Kansas and Oklahoma, southwest Missouri and northwest Arkansas.

This action was protested on the grounds that there is relatively little trucking of refined petroleum products in Texas, and the reductions would result in severe revenue loss on traffic presently moving by rail. There is in effect in Texas a statute limiting the load that can be carried by any truck to 7,000 lbs., and protestants expressed the view that so long as this load limit exists there would be no danger of any material diversion of gasoline traffic to trucks; and, further, that conditions in other States in this respect being so much more favorable to the trucking of gasoline should not control or influence action in Texas.

In my report I pointed out that present rates are already entirely too low and below that which is necessary to adequately compete with truck transportation in view of the 7,000 lb. load limit. While testimony at the hearing indicated there were sections in Texas where trucking competition was severe, it was my thought that any local situation should be handled on its merits under the usual procedure of establishing point to point rates, rather than by a general reduction throughout the State.

After careful study of the entire situation, I recommended that the proposed rates not be given effect and have since received letter from Mr. Sloan of the Katy, stating that his company, while not in agreement wtih my conclusion, will not further progress the proposal.

7. Proposal of the Chicago & North Western and Union Pacific and the Chicago, Burlington & Quincy, Great Northern, and Northern Pacific Railroads to Pay Commissions to Railroad Ticket Agents on Sale of All-Expense Tours.-On December 29, 1939, the Southern Pacific protested notice of independent action of these lines to make effective the proposition that railroads may set up allexpense tours, for sale by ticket agents, which include an overhead that can be deducted by ticket agent at time of sale or paid by check by the individual railroad or railroad-operated tour bureau to the ticket agent, but no portion of which comes out of the railroad's revenue. The Southern Pacific also requested a review of the entire commission situation, taking into consideration all payments now being made by the Tourist Travel Clearing Agency and otherwise.

It is clearly evident that railroad-operated tour bureaus in Western territory at present are not able to compete with independent tourist agents on the basis of equality due to the fact that the latter are paying commissions to railroad ticket agents. However, if the proposal in this case were given effect, the competitive inequality would be transferred to the lines which do not have such bureaus.

In my opinion, the practice of paying commissions should not be expanded. and I therefore recommended that effective May 1, 1940, the Western Lines adopt a rule prohibiting the acceptance by railroad ticket agents of commissions in any form, paid or offered by tour bureaus, tour operators, national park companies, or concessionaires, sight-seeing companies, hotels, resorts, or any other similar organization. I further suggested that the Passenger Traffic Officers of Western Lines discuss this subject freely with Passenger Traffic Officers of Eastern Lines and endeavor to bring about adoption of a similar rule in Eastern territory. With respect to other ticket commissions paid by Western Lines, I recommended that Passenger Traffic Officers keep the matter constantly before them and at every opportunity discontinue the practice of paying commissions on ticket sales to the end that ultimately the practice may be discontinued entirely. Letters from Messrs. Jeffers of the Union Pacific and Williams of the North Western state they are in accord with my conclusions, except that national park companies, concessionaires, sight-seeing companies, hotels, resorts, or similar organization, should be eliminated from the list of those from whom railroad ticket agents will not be permitted to accept commissions, for the reason that many of them now pay such commissions and the railroads feel since they have no control over such agencies they are not in position to police the practice.

8. Protest Against Proposal of the Missouri-Kansas-Texas Railroad Company of Texas and Wichita Falls & Southern Railroad Company To Establish Rate of 11 Cents per 100 Lbs. on Petroleum Fuel Oil for Bunkerage Purposes from Wichita

Falls, Lueders, Electra, Mankins, and Hawley, Texas to Houston, Galveston, and Texas City.-Protest was filed against the establishment of the Katy and the Wichita Falls & Southern of a rate of 11 cents per 100 lbs. from certain interior Texas points to Texas Gulf ports on petroleum fuel oil for bunkerage purposes, on the grounds that such a rate would not be profitable, and further that the railroads would be confronted with demands for similar treatment from other refinery origins.

In my report I pointed out that one of the major problems, especially of the smaller refineries, is the disposition of surplus stocks of fuel oil. There is a more or less regular demand for bunkerage fuel oil at the ports, and with a relatively low rate these refineries would be better able to dispose of their surplus and thus strengthen their position in the operation of their plants.

In my judgment, the economic conditions in an industry may not be a justifiable reason for rail rate reductions; however, in this instance the lines principally concerned seem willing to reduce the rates and inasmuch as it appears this might be done without adversely affecting the revenues of the lines as a whole, I stated I saw no objection to proposals being made effective provided the reductions were restricted to fuel oil for bunkerage purposes and to the area described in the proposal.

9. Covered Top Hopper Bottom Cars.-As you have previously been advised, Western lines in the past have consistently maintained it was not to their best interests to furnish, at their own expense, covered top hopper bottom cars for cement or other bulk loading.

Because of insistent demands by shippers for this class of equipment, the question of ownership by Western lines has been receiving considerable attention, first by the Western Traffic Executive Committee, and later by a committee authorized by the Chief Executives for this purpose. Based upon studies made by these two committees, the Chief Executives unanimously agreed, at meeting of the Western Association of Railway Executives on January 19, that the Western railroads recognize the necessity for covered top hopper bottom cars and the desirability of providing a standard car. A Mechanical Committee and a Purchasing Committee were appointed to go into the matter of standard design and uniform price.

A number of the lines interested in the purchase of some of these cars, however, indicated dissatisfaction with the price quoted by car builders and expressed a desire to build their own cars or make separate arrangements with the builders. Therefore, I discontinued efforts to bring about pool action.

The Western roads are now free to acquire, own, and furnish equipment of this type insofar as the Association is concerned.

10. Applications to Become Members of Western Association of Railway Executives and Parties to Agreement for Commissioner Plan, Western District. Since my report at our last meeting, three additional Western lines made application and have been accepted for membership in the Western Association of Railway Executives, namely: Texas-Mexican Railway, Nevada Northern Railway, Green Bay & Western Railway.

11. Reduction of Westbound Schedule.-To meet the demands of important shippers, the Western roads agreed to provide, effective April 7, fifth day delivery from St. Louis switching district and sixth day delivery from Chicago switching district at California Pacific Coast cities, and sixth day delivery at Pacific Northwest terminals from both St. Louis and Chicago switching districts. This is one day earlier delivery than was formerly in effect.

12. St. Lawrence Waterway Project.-I presume you are all more or less familiar with the St. Lawrence Waterway project, designed to make the St. Lawrence River navigable for ocean steamers from Lake Ontario to the Atlantic Ocean. The cost of this improvement has been variously estimated at amounts ranging from $243,000,000 to $1,350.000,000, and in apportioning the expense between United States and Canada, the cost of the Welland Canal, between Lake Erie and Lake Ontario, constructed by Canada at a cost of $120,000,000, is also to be taken into consideration.

The project has been held in abeyance for about six years, and now seems to be coming up again for consideration. How far it progresses remains to be seen, but the railroads are planning to give their opposition national prominence. Committees have been appointed in the East, the Southeast, and the West to meet with a Committee from the Association of American Railroads. Meeting

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is to be held at Chicago in the immediate future, at which time the whole subject will be discussed from a national railroad standpoint, giving particular consideration to the adverse effect of this project upon their traffic, as well as the increased burden of taxes it will involve, and endeavoring to arrange some plan for coordinating railroad opposition throughout the entire country.

There being no further business, the meeting was duly adjourned at 4:20 P. M. F. M. WILSON,

Secretary.

EXHIBIT No. 318

REGULAR MEETING OF THE COMMITTEE OF DIRECTORS

Regular meeting of the Committee of Directors was held at 3:00 P. M., (E. D. S. T.) Wednesday, September 10, 1941, in the Board Room of the Bank of the Manhattan Company, 40 Wall Street, New York City.

The following were in attendance: Messrs. E. N. Brown, F. W. Doolittle, Allen P. Green, Gen. James G. Harbord, E. W. Stetson, C. Jared Ingersoll, B. F. Kauffman, Wm. DeForest Manice, Francis F. Randolph, Philip J. Roosevelt, C. E. Johnston, Commissioner, O. E. Sobota, Secretary to Commissioner.

At the January 8, 1941 meeting of the Committee of Directors, the following telegram from Chairman W. A. Harriman was read:

"Am working on full time job for Mr. Knudsen in Washington. Under circumstances think I should resign as Chairman of the Directors' Committee as it will be difficult for me to attend meetings and follow through on Committee matters. Please express my regrets to members that I cannot be with them today."

Mr. Harriman's resignation was not accepted at that meeting, but by unanimous vote of those present the matter was ordered laid on the table.

At the outset of today's meeting, Mr. Stetson, alternate for Mr. Harriman, stated that he had been asked by Mr. Harriman to again bring the subject before the Board with the request that his telegraphic resignation of January 8 be accepted, not as to membership on the Committee, but merely as its Chairman. After some discussion, it was moved, seconded, and unanimously agreed that in deference to Mr. Harriman's wishes the Board would accept his resignation as its Chairman.

By unanimous vote of those present, the Committee thereupon elected Mr. E. N. Brown as its permanent Chairman to fill the vacancy created by the resignation of Mr. Harriman.

Mr. Sobota acted as Secretary of the meeting.

Upon motion duly made and seconded, minutes of the previous meeting were approved as written.

Commissioner Johnston then submitted the following report:

PROPOSAL OF CERTAIN LINES IN WESTERN TERRITORY TO PROVIDE FOR ABSORPTION OF CROSS-TOWN SWITCHING CHARGES ON GRAIN AND GRAIN PRODUCTS; ALSO CORN SUGAR, CORN SYRUP, HYDROL, ETC., AT STATIONS IN OKLAHOMA, COLORADO, MISSOURI (EXCEPT ST. LOUIS), KANSAS, AND MISSOURI RIVER CITIES

Early this year certain Western and Southwestern lines filed notices of independent action to absorb cross-town switching charges on grain and allied products in certain Southwestern territory, which action was appealed to the Commissioner. The proposal provided that such absorption would be counted as a transit stop and that the amount to be absorbed was not to exceed 1 cent per 100 pounds.

The practice of absorbing cross-town switching charges was generally discontinued on July 1, 1935, following a statement by the Interstate Commerce Commission that such movements "could not be considered in the light of transit arrangements nor as so-called reciprocal switching," but that "they constitute distinct services and justify distinct charges when rendered."

Commissioner Johnston, in his report, recommended that the proposal be not made effective, stating it was apparent there are no more reasons now to absorb these charges than existed in 1936, when the practice was discontinued; and also, the carriers continue to feel the loss of revenue and cannot reasonably afford to establish practices which will further decrease their income.

No dissent from the Commissioner's conclusion was received, and no action has been taken contrary to his recommendation.