INVESTIGATION AND SUSPENSION DOCKET No. 4631 1

PULPWOOD FROM NORTH CAROLINA AND VIRGINIA TO CYPRESS, VA.

Submitted August 21, 1939. Decided October 17, 1939

Suspended schedules proposing increased interstate rates on pulpwood, in carloads, from certain North Carolina and Virginia points to Cypress, Va., and on wrapping paper and pulpboard, in carloads, from Cypress to destinations in official-classification territory, found justified. Suspension orders vacated, and proceedings discontinued.

Charles P. Reynolds, L. L. Oliver, Joseph G. Kerr, and C. H. Ware for respondents.

C. J. McSwain for protestant.

REPORT OF THE COMMISSION

DIVISION 3, COMMISSIONERS MAHAFFIE, ALLDREDGE, AND PATTERSON BY DIVISION 3:

In I. and S. Docket No. 4631, by schedules filed to become effective May 25, 1939, respondent Norfolk Southern Railroad Company (Morris S. Hawkins and L. H. Windholz, receivers) proposed to cancel its interstate commodity rates on pulpwood, in carloads, from stations on its lines in North Carolina and Virginia to Cypress, Va., and to apply in lieu thereof its interstate commodity rates on lumber from and to the same points.

In I. and S. Docket No. 4633, by schedules filed to become effective May 29, 1939, respondents, railroads and water carriers operating throughout the United States, proposed the cancelation of their commodity all-rail and rail-water rates on wrapping paper and pulpboard, in carloads, from Cypress to destinations in official-classification territory, and to make applicable instead the eighth-class rates in effect from and to the same points. Upon protest of the Chesapeake-Camp Corporation, of Richmond, Va., with a pulp and paper mill at Franklin, Va., operation of the schedules in I. and S. Dockets Nos. 4631 and 4633 was suspended until December 25 and 29, 1939, respectively. By request of the parties these two proceedings were heard upon a consolidated record, and they will be disposed of in one report.

1 This report also embraces Investigation and Suspension Docket No. 4633, Paper from Cypress, Va., to Official Territory.

Franklin, about 22 miles west of Suffolk, Va., is at the head of navigation on the Blackwater River. Protestant has dock facilities at Franklin. It receives about 35 percent of its pulpwood by water, 20 percent by motortrucks, and 45 percent by railroad. The record fails to show whether or not protestant ships any manufactured articles out-bound by water. Franklin is served by the Seaboard Air Line Railway Company (L. R. Powell, Jr., and Henry W. Anderson, receivers) and the Southern Railway Company. Cypress, about 9 miles south of Suffolk, is a nonagency station on the Suffolk division of the Norfolk Southern. At Cypress a logging railroad operated as a plant facility by the Camp Manufacturing Company, a parent company of protestant, connects with, and crosses, the Norfolk Southern. This facility, referred to by protestant as a tramway, is about 29 miles long and extends from Franklin to Chapel Lake, in Virginia. It can be used for hauling pulpwood from Cypress to Franklin and also in transporting wrapping paper and pulp-board from Franklin to Cypress for movement over the Norfolk Southern and connections beyond. On that out-bound traffic the bills of lading, showing Cypress as the origin, would be mailed by protestant to the Norfolk Southern at Suffolk for signature. In-bound shipments would be received at Cypress by protestant, and the freight bills would show Cypress as the destination. Protestant compares this arrangement to the service at a private siding. The Camp Manufacturing Company owns no standard railroad freight cars, and the movement between Cypress and Franklin by the locomotive of the tramway would be in the cars of the Norfolk Southern and its connections. The cars would be subject to the regular demurrage rules and charges. The tramway performs transportation service only for protestant and the Camp Manufacturing Company, and it does not file schedules of rates with this Commission or with the State Corporation Commission of Virginia. The Norfolk Southern can obtain protestant's out-bound shipments only at Cypress, and on most of the traffic to official territory it would participate only to the extent of the haul from Cypress to Suffolk.

Protestant began to manufacture wrapping paper and pulpboard at Franklin during January 1938 and now has a rated capacity of about 200 tons daily. In the sale of its products it competes with mills in the South and also in official territory. The pulpwood in the area served by the Norfolk Southern is produced from secondgrowth pine timber, and there is a large supply available. There has been no movement of pulpwood to Cypress. Nor have there been any shipments of the manufactured products from Cypress. Prot

estant deems it advisable to withhold development of the pulpwood traffic in this territory until the matter of rates is satisfactorily settled. In this general territory pulpwood is valued at about $4.50 per cord of 180 cubic feet, and it generally moves in open-top equipment. Protestant's average loading is 11.13 cords, or approximately 77,000 pounds. The wrapping paper and pulpboard shipped by protestant are valued at about $65 and $47 per ton, respectively, at destination. The average weights of the shipments from Franklin for the second half of the year 1938 were 41,489 pounds for wrapping paper and 36,984 pounds for the pulpboard. Pulpboard is used to a large extent in making boxes. Wrapping paper is also used to make bags and other articles.

Effective January 16, 1939, the Norfolk Southern established the present commodity rates on pulpwood to Cypress on basis of the so-called Roanoke Rapids scale, it being understood that it would receive at Cypress the out-bound manufactured products. At about the same time it also established, on wrapping paper and pulpboard from Cypress to official territory, rates made 110 percent of the rates in effect on those commodities in official territory. The Seaboard Air Line and the Southern maintain the Roanoke Rapids scale on pulpwood to Franklin from points on their lines. They also maintain, on wrapping paper and pulpboard from Franklin to official territory, rates made 110 percent of the official-territory rates, which basis applies generally from southern producing points to official territory. The Roanoke Rapids scale, established by the Seaboard Air Line into Roanoke Rapids, N. C., in 1909, is a depressed basis and is maintained by the southern carriers for single-line application on pulpwood from origins on their lines to southern consuming points. It is essentially a transit scale, put into effect on the tacit understanding that a carrier transporting pulpwood to a mill shall be given the out-bound products manufactured therefrom for transportation to the markets. The 110-percent basis, made to enable the southern mills to compete with those in the North, was the result of a compromise between the railroads and southern manufacturers, and was generally satisfactory to all producers except protestant and a mill at Roanoke Rapids. The only southern producing point from which that basis does not apply is Kingsport, Tenn. The rates from Kingsport, which closely approximate the 110-percent basis, have been made in relation to the rates from Bristol, Va.-Tenn.

Instances of record show the present and proposed rates. For example, the present rate on pulpwood to Cypress from Sun Oil, N. C., 10 miles, is 108 cents per cord of 180 cubic feet, and the pro

posed rate is 420 cents. From Hobbsville, N. C., 20 miles, the present and proposed rates are 131 and 455 cents, and from Edenton, N. C., 42 miles, the respective rates are 174 and 595 cents. Protestant competes with a pulpmill on the Norfolk Southern at Plymouth, N. C., to which point the Roanoke Rapids scale applies. Pulpwood is rated twelfth class (17.5 percent of first class) in the South, but if the suspended schedules are found justified the applicable rates will be the commodity rates on lumber and related articles, including pulpwood, in effect from and to the same points. The range of these lumber rates is between the present rates and twelfth class. To Cypress from Sun Oil, Hobbsville, and Edenton, as illustrative, the twelfth-class rates, converted to a per cord basis of 180 cubic feet, are 560, 560, and 700 cents, respectively.

Wrapping paper and pulpboard are rated eighth class (30 percent of first class) in the southern classification and fifth class (35 percent of first class) in the official classification. If the suspended schedules become effective the rates on these two commodities will be made 30 percent of the corresponding first-class rates established pursuant to North Carolina Corp. Comm. v. Akron, C. & Y. Ry. Co., 213 I. C. C. 259; Commonwealth of Kentucky v. Ahnapee & W. Ry. Co., 229 I. C. C. 20. The present rates on wrapping paper from Cypress to Baltimore, Md., New York, N. Y., Pittsburgh, Pa., Cleveland, Ohio, Detroit, Mich., and Chicago, Ill., for example, are 28, 33, 37, 43, 50, and 53 cents per 100 pounds, respectively, whereas the proposed rates are 31, 35, 40, 46, 52, and 56 cents. The rates on pulpboard are from 3 to 5 cents less than those on wrapping paper. Protestant made shipments from Franklin to those points during 1938.

The present rates to and from Franklin and to and from Cypress are satisfactory to protestant, and it wants respondents to continue treating Cypress as a consuming point for pulpwood and a producing point for wrapping paper and pulpboard. However, protestant has not received at, or shipped from, Cypress any of this traffic since the inauguration there of the same bases as applied and apply to and from Franklin and other consuming and producing points.

Witness for respondents testified that maintenance of the present rates from Cypress creates departures from the long-and-short-haul provision of section 4 of the Interstate Commerce Act, and that if the proposed rates are not permitted to go into effect fourth-section relief should be granted.

Respondents cite Milliken Bros. Mfg. Co., v. Pennsylvania R. Co., 152 I. C. C. 767, wherein division 3 pointed out that the fact that commodity rates from producing points are lower than the class

basis from nonproducing points does not prove that the class rates are too high for application from the nonproducing points, and particularly where the commodity rates have been established for competitive reasons.

We find that respondents have justified the suspended schedules. An order will be entered vacating the orders of suspension and discontinuing these proceedings.

COMMISSIONER MAHAFFIE dissents.

235 I. C. C.