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(4) An immediate increase in allowable cuts which will make available 150 million board feet on the lands managed by the Department of the Interior.

(5) The establishment of a preference for American products in the purchase of lumber by the Department of Defense, the General Services Administration, and other Federal departments and agencies. This could be particularly significant in connection with the various aspects of the AID program.

(6) Increased attention to loan applications filed with the Small Business Administration and the Area Redevelopment Administration by lumber mills in order to enable them to upgrade their production and better compete with imported lumber products.

In addition, the President indicated that he was directing that there be a continuing review of the problems of the industry by an interagency committee in order that developments and problems might be anticipated and recommendations made to meet and overcome any difficulties or handicaps the industry might face. The Secretary of Agriculture would be specifically instructed to report to him by October 15 on both firm and interim increases in national forest allowable cuts to assure a continuation of timber sales at or beyond the record levels achieved in the most recent quarter of 1962.

The President was informed that west coast lumber interests had already filed a request with the Tariff Commission for an escape clause investigation on softwood lumber and that the Tariff Commission has instituted an investigation. The President indicated he would request the Commission to complete it as expeditiously as possible.

STATEMENT ON THE LUMBER PROBLEM

Forest Products Division, Business and Defense Services Administration,

December 13, 1962
NATIONAL LUMBER MANUFACTURERS ASSOCIATION,

Washington, D.C. December 31, 1962.
Hon. LUTHER H. HODGES,
Secretary of Commerce,
Washington, D.O.

DEAR MR. SECRETARY: I have just seen the statement on the lumber problem prepared in the Business and Defense Services Administration of the Depart. ment of Commerce. It is an extremely well-prepared summary of many of the problems confronting our industry and, more importantly, sets out in very readable form the very specific actions taken by this administration to assist domestic lumber producers to overcome these problems.

Much remains to be done in order to restore full health and vigor to our industry, but it is appropriate, particularly at this time of year, to tender our sincere appreciation for the efforts on the part of many men in your Department to help find solutions to our problems that are in the public interest. Outstanding in this regard have been Mr. Thomas C. Mason, Director of the Forest Products Division of BDSA, Mr. Daniel L. Goldy, Administrator of BDSA, and Mr. Jack N. Behrman, Assistant Secretary for International Affairs. Sincerely,

MORTIMER B. DOYLE, Executive Vice President.

STATEMENT ON THE LUMBER PROBLEM

This statement has been prepared in response to inquiries relating to various aspects of the lumber industry problem, including the impact of softwood lumber imports from Canada, intercoastal shipping regulations, Federal timber sales policies, timber blowdown on the west coast, etc. It reviews some of the factors involved and actions taken by the Government to assist the lumber industry.

The difficulties of the lumber industry are due to a complex of factors related to industry operations, governmental policies and regulations, technological changes, and domestic and international economic developments.

A major factor in this situation is the substantial increase in softwood lumber imports resulting from the competitive advantages of Canadian producers in raw materials, production and shipping costs, and the devaluation of Canadian currency. However, the industry generally suffers from overcapacity. It is char. acterized by a few large mills, a moderate number of medium size mills and a preponderance of small mills. The smaller mills operate seasonally or on an intermittent basis when lumber prices are high and cease operations when prices are low. The number of active mills in the industry therefore varies considerably from time to time. As the original timber is cut in one region, the center of production shifts to new areas. In certain areas some of the remaining mills have become obsolete. Layout and equipment designed to cut large logs is less efficient when used in cutting smaller logs now available to them. Adjustment of mill size and equipment to the available timber resource and modernization of equipment and techniques is correcting this situation, but not fast enough.

Overcutting of private timber in some areas has led to increased demand for public timber, particularly where public holdings are substantial. Adherence to good timber management principles, lack of access roads, and other limitations bave not always permitted an increase in the supply of public timber sufficient to meet the requirements of all installed capacity of the facilities of a given area. This has resulted in bidding-up of log prices. In other areas sawmill capacity is not adequate to utilize available timber.

Shipping laws, designed to preserve our important maritime fleet, have had effects not anticipated at the time of enactment; e.g., the Jones Act, which requires the use of domestic bottoms in intercoastal trade, has put American shippers at a disadvantage, costwise, compared to Canadian shippers, in the movement of lumber from the west coast to the east coast. Competition from other materials also has reduced the lumber market.

The foregoing factors are cited only to illustrate the complexity of the problem which will not be solved overnight. It will not be solved by the Government alone, nor by industry alone, but through a cooperative effort. Such an effort is being made.

The administration has been urged repeatedly to impose restrictions on imports of lumber from Canada. However, legal authority for such action is limited. Such authority exists under the tariff adjustment provision, section 351, or the national security provision, section 232, of the Trade Expansion Act of 1962. The Tariff Commission is now conducting an investigation of the softwood lumber industry pursuant to section 351 of the Trade Expansion Act of 1962 and the President has requested the Tariff Commission to complete the investigation as expeditiously as possible. If the Tariff Commission should find serious injury or threat of serious injury to the industry, the President could restrict imports by increasing the duty, establishing a quota or through orderly marketing agreements with supplying countries.

Section 22 of the Agricultural Marketing Act of 1937 which, under certain conditions, empowers the President to regulate imports of agricultural commodities which threaten the market for domestic agricultural products, has been suggested as a basis for the imposition of import quotas. The President, therefore, has requested the Department of Justice to advise him with respect to the applicability of this law to lumber imports and other laws which might provide authority for limiting imports of lumber.

Recognizing the impact of imported Canadian lumber on the U.S. market, the President announced on July 26 a six-point program to assist the lumber industry. The first point in this program called for negotiations with Canada concerning the amount of softwood lumber imported into the United States. Pursuant to this directive, two conferences were held in Ottawa at which all aspects of the problem were thoroughy explored. At the last conference on October 16–17, it was agreed that both countries have a mutual interest in a satisfactory resolution of problems facing the North American softwood lumber industry and that an ad hoc joint expert working group of Government officials would be established to examine cooperatively such matters as the results of the storm of October 12, 1962, on the Pacific coast, the longer term North American supply and demand prospects for timber resources, wood utilization generally and market development. Since the Portland Conference on Windthrown Timber in October 30-31, which is discussed later in this statement, negotiations with Canada have been initiated to establish the above ad hoc working group. This working group should contribute significantly to the establishment of a rational basis for resolving the problems of the industry.

The second point called for submission of a request to Congress for additional funds for forest development roads and trails to assure prompt harvest of national forest timber. Such request was made and substantial increases in funds were authorized for the fiscal years 1963, 1964, and 1965.

The third point in the President's program dealt with the amendment of intercoastal shipping laws to permit the use of foreign vessels when conditions exist which indicates severe hardship to American shippers. In response to this point, Congress recently passed Public Law No. 87–877 which permits the use of foreign vessels in the shipment of lumber to Puerto Rico, provided domestic shipping services are not reasonably available. Several applications have been filed with the Maritime Administration requesting permission to use foreign vessels and a hearing on one case resulted in a preliminary finding favorable to the applicant. Hearings on the other cases are pending.

The fourth point called for an increase of 150 million board feet in the allow. able cut of timber on lands managed by the Department of the Interior. This increase was put into effect immediately by that Department. The Department of Agriculture also announced on December 7 an increase of 547 million board feet in the allowable cut on the 42 national forests in the west coast and Inland Empire States where timber demand is critical. In addition, the Forest Service is working closely with the industry on matters concerning timber sales policies and procedures. A 15-member Advisory Committee on Multiple Use of the National Forests met with the Secretary of Agriculture on November 27-28 to consider proposals of the lumber industry with respect to the allowable cut, timber appraisals, appeals procedures, and contract forms. The proposals were made to remove longstanding objections to timber sales procedures and to aid recovery of the industry from economic distress.

The fifth point concerned the establishment of a preference for American lumber by the Department of Defense, the General Services Administration, and other Federal departments and agencies. As a means of implementing this directive, the Department of Commerce is currently working in cooperation with the major lumber procuring agencies to assure maximum prefernce for American lumber in Government procurement programs.

We are informed that all lumber purchased by the General Services Administration, and substantially all of lumber purchased directly by the military, exclusive of local purchases, is obtained from domestic sources. Approximately 85 percent of the military purchases are made through the small business set-aside program which requires that the product be of domestic origin. Information is not readily available on the quantity and origin of lumber purchased locally by military installation, but the quantity is reported to represent a small proportion of total purchases.

The Secretary of Defense has directed that no contracts for construction or repair of public buildings and works be awarded without approval of his office, if the contract provides for the use of foreign construction materials. Also, on purchases for use overseas, the Secretary recently directed that, subject to some exceptions, purchases be made in the United States of supplies of domestic origin. The allowable differential between domestic and foreign prices has been raised from 25 percent to 50 percent.

The Agency for International Development has requested its operations missions abroad to review the lumber procurement programs they finance, with a view toward maximizing procurement from the United States.

The sixth point called for increased attention to loan applications filed with the Small Business Administration and the Area Redevelopment Administration for lumber mills. Loans under these programs will be made to upgrade produc tion of existing facilities and obtain better utilization of raw materials. For example, loans will be considered for the addition of dry kilns, chippers and debarkers, and establishment of hardboard and particleboard plants. Loans will not be granted to create new primary capacity when the timber supply cannot support the existing and new facilities on a sustained yield basis.

On October 30, 31 the Departments of Commerce, Agriculture, and Interior sponsored a Government-industry conference in Portland to assess the extent of damage resulting from the storm of October 12 and to formulate recommendations for minimizing the impact of this disaster.

As a means of further implementing the President's six-point program and the recommendations of the Portland conference the Department of Commerce requested the principal lumber procuring agencies of the Government to give

consideration to increasing or advancing their procurement schedules, if practicable, so as to reduce the effect of the excess lumber which will result from the storm. In specific response to this request the Agency for International Development instructed its operations missions in Korea, Japan, and other Pacific areas to urge maximum substitution of U.S. lumber for that imported from other sources, where technically feasible for domestic purposes and commercially feasible for export products, and to limit AID-financing of lumber and lumber products for use within the recipient countries to U.S. sources.

The Department also alerted the American Embassies in Europe, Japan, and Australia to the availability of excess lumber for export which will result from the storm and urged that importers in those countries be encouraged to consider the west coast as a source of supply. As a further measure to expand export markets the Department of Commerce has given special attention to oversea business trips by lumber executives and to specialized industry-financed trade missions. Representatives of the lumber industry, headed by executives of the National Lumber Manufacturers Association have recently returned from a successful trip to explore the potential market in several European countries. A specialized trade mission to be financed by the West Coast Lumbermen's Association is scheduled to visit lumber markets in Europe, Japan, and Australia in 1963.

The CHAIRMAN. Without objection I will insert in the record a letter from States Marine Lines, dated June 24, 1963, a letter from the Imerican Merchant Marine Institute, dated June 27, 1963, and a wire from the National Industrial Traffic League, all addressed to me as chairman of the Merchant Marine and Fisheries Committee, and all favoring enactment of this legislation. (The material referred to follows:)

STATES MARINE LINES,

New York, N.Y., June 24, 1963. Re H.R. 1157, H.R. 2593 and H.R. 3691. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, House of Representatives, Washington, D.C.

DEAR MR. BONNER: We regret our inability to appear before your committee on June 27, 1963, and ask that this letter be accepted and included in the record of the hearing on the subject bills.

States Marine Lines, Inc., is an American-owned company operating American Tessels in worldwide trade, including regular liner service to the Far East and to Europe from the lumber producing areas of the U.S. Pacific coast.

The Congress very wisely recognized in the 1961 amendment to section 18 of the Shipping Act of 1916, as amended, that no system of tariff filing could be applied effectively to "cargo loaded and carried in bulk without mark or count." The reason for this is, primarily, that bulk commodities often move in full shiploads and that rates on such ships are established by open market negotiation and can fluctuate very rapidly in response to changes in the total tonnage offerings of ships and/or cargo. In order for liner vessels to compete with full cargo vessels they must have the power to “meet the market.”

Beyond question the inability of liner vessels to respond quickly to fluctuations in lumber rates has resulted in loss of sales of American lumber.

We believe the correction offered in the subject bills is in the interest of the carriers as well as the lumber industry; that it will end the inequity of treating lumber (which in its economic aspects is a "bulk" commodity) as general cargo and hence subject to the tariff filing requirements; and that establishment of lumber rates by free market action will enable American industry to increase its export trade.

We strongly urge that your committee take favorable action to insure passage of these important bills. Respectfully yours,

Josiah K. ADAMS, Jr., Vice President.

AMERICAN MERCHANT MARINE INSTITUTE, INC.,

Washington, D.C., June 27, 1963. Hon. HERBERT C. BONNER, Chairman, Committee on Merchant Marine and Fisheries, U.S. House of Representatives, Washington, D.C.

DEAR MR. BONNER: The American Merchant Marine Institute, Inc., a national trade association composed of U.S. steamship companies operating a substantial majority of U.S.-flag vessels in the foreign and domestic trades of the United States, endorses enactment of H.R. 1157, H.R. 2593, and H.R. 3691, which your committee is considering.

The effect of this proposed legislation would be to exclude lumber from cer. tain tariff filing requirements under the Shipping Act of 1916, as amended by Public Law 87–346. Since January 1, 1962, common carriers in the foreign commerce and every conference of such carriers have been required by section 18(b)

(1) to file with the Federal Maritime Commission tariffs showing their rates and charges.

Section 18 also provides that decreases in rates are effective upon filing but that increases may be made only upon 30-day advance filing, unless permission is granted by the Commission to file on shorter notice.

Compliance with the tariff filing requirement has placed west coast lumber shippers and the conference carriers used by them at a competitive disadvantage resulting primarily from the inflexibility in ratemaking under existing law, rules, and regulations. This legislation is intended to overcome that encumbrance.

We urge favorable consideration of this proposed legislation because it is our belief that the best interests of the producers and shippers of lumber, as well as the ocean carriers, will be served by its enactment. We ask that this letter be made a part of the written record of the bills. Yours very truly,

ALVIN SHAPIRO.

WASHINGTON, D.C., June 26, 1963. HERBERT C. BONNER, Chairman, Merchant Marine and Fisheries Committee, House of Representatives, Washington, D.C.

The National Industrial Traffic League supports enactment of H.R. 1157, and companion bills, to exclude cargo which is lumber from certain tariff filing re quirements under the Shipping Act, 1916.

L. J. DORR, Executive Secretary, the National Industrial Traffic League. The CHAIRMAN. Is there anybody here opposed to this bill? If not, that concludes the hearing on this bill.

(Whereupon, at 11:34 a.m., the committee proceeded to the consideration of other business.)

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