competition, several ships may sail the same day or the same week for the same port or ports, and, consequently, there may be no other sailing for a considerable period. When lines are working in coöperation they agree not only as to the dates of sailing but also as to the ports, thus avoiding the waste involved in several ships calling at ports which require only one ship and giving an excessive tonnage on one date and a corresponding lack of tonnage at other times.

It should be remembered that a large proportion of the shipments from the United States to foreign countries come from the interior. With regular sailing dates goods arriving late and missing one steamer will be delayed only a short time since they can go forward on the next boat. The loading and delivery of cargoes are also greatly facilitated by coöperation, since in this way accumulation of goods, unnecessary port charges and loss of time are avoided. In a word, the result of an agreement as to sailings is to enable shippers to fill their contracts promptly, to build up new business, and to compete successfully with merchants in Europe.

The general opinion of merchants, steamship owners, and agents seems to be that agreements as to rates are desirable and of advantage to both shipowners and shippers, provided the rates are reasonable and available to all shippers under similar conditions and circumstances. Shipowners operating regular services are entirely dependent on the business of shippers, and it is therefore their aim to establish only reasonable rates, based on the condition of the general world's freight markets and the value of tonnage. Their desire is to maintain rates on a remunerative basis and yet permit their shippers to compete successfully with shippers of similar commodities in other countries.

The fundamental principle of shipping is "supply and demand,” and owners appreciate the fact that the ocean freight rate is frequently an important factor in the transaction, and therefore endeavor to keep rates on a basis to encourage trade. Generally speaking, rates, particularly in the long-voyage trades, are fixed in competition with the rates of lines trading to the same points from foreign countries and are on a parity with those rates as nearly as conditions will permit. Nearly all the important foreign trades in which the merchants of the United States are interested are subject to competition by other regular lines and tramp vessels. The fear of such opposition and the certainty that exaggerated rates would

lead to further competition tends to keep the rates of the lines on a reasonable basis. No steamship line is ever immune from attack, and the history of every coöperative service is that it has grown from a single line or from a small number of lines to its present size and position by the constant aggression and admission of other competing services. Ocean freight rates on merchandise to or from the United States, whether in conference trades or not, are dependent upon the service required and generally rise or fall with the rates to and from other countries. The trade and shipping conditions of the whole world govern ocean rates to and from the United States as well as to and from other countries.

Neither the large nor the small shipper is ever at the mercy of the steamship lines if rates advance to a point which may be thought to be unreasonable. If the rates exceed or even approximate the rates at which tramp steamers can be chartered, large shippers of special commodities immediately protect themselves by the employment of tramps for the transportation of their shipments; and small individual shippers, who cannot accumulate merchandise in quantities sufficient to justify the chartering of tramp steamers, are at such times served by chartering brokers, who are always ready, when rates by the regular lines advance to such a point that a profit can be made by chartering, to lay chartered steamers on the berth, themselves accumulating the shipments of numbers of small merchants, who by this means can always protect themselves against oppression. The protection of the small shipper lies in the liner's dependence upon him, just as the liner's protection is the recognition by the small shipper of his dependence upon the liner. The present large shippers and importers were formerly men of small operations. It is the constant experience of liners that the small shipper of today becomes the large and powerful shipper of tomorrow; and the line which would neglect or oppress him when weak can hardly expect his support when he becomes strong.

Looking at the case of the small exporter we also find a natural condition of trade operating to keep rates reasonable. With exports as with imports, the consumer pays the freight. This freight cannot be more than the consumer is willing to pay. The steamer's freight rate must, therefore, be such as will enable the American exporter to sell his products in competition with the products of other countries. The liner, depending largely on the higher class

freight for its profits and being regulated as to bulk cargo by the rate for tramp tonnage, would find it destructive of its interests to restrict or ruin the trade in those commodities upon which its greatest profit depends.

It is not to the advantage of the steamship owner to make the large shipper still larger, as the more shippers the better. The larger shipper of a single commodity is frequently in a position to charter steamers, in which case the liner would lose some business which might be essential to the maintenance of the regular service. Therefore, the liner must make a rate necessary to secure the traffic, and would then give the same rate to a smaller shipper of the same commodity under similar conditions. The class of merchandise of these large shippers is not, however, commonly handled by the small exporter. The large shippers ship their own product, and, being in entire control of it, they often decline to sell their product to small exporters who might desire to trade in it abroad.

The class of merchandise shipped by the small exporters is ordinarily of an entirely different nature. It consists of articles of greater value, which can readily pay an increased rate of freight for a regular service. In asking a higher rate for such products, the attitude of the steamship lines is similar to that of railroads, which are permitted to charge a higher rate for less than carload lots than they do for full carload shipments, and to have classifications based upon the nature and value of the goods shipped under which they charge higher rates on goods of higher value. If the large shipments referred to should not be secured, the smaller shippers would have to pay an enhanced rate of freight and would also suffer inconvenience from the necessary curtailment of sailings which would result from decreased shipments.

If rates should be unduly advanced, the foreign buyer, who pays the freight, would decline to purchase our products. The safety valve against the charging of exorbitant freight rates is in reality the lines' own interest to do everything in their power to foster trade, and to do nothing which would have a tendency to restrain it. The fear of any general or large combination is without foundation as there are about 23,500 free tramp steamers operating entirely under the law of supply and demand. If freights from any country should at any time be upon an unreasonably high basis, tramp tonnage would at once be diverted to that trade as tramp steamers are

the great regulators and governors of ocean freight rates, and their existence makes it impossible to maintain unreasonably high rates in any trade for any length of time.

The nature of the steamship business is so different from that of railways that it would be injurious, not only to shipowners but to shippers and consignees, to place any limitation upon the absolute freedom of carriers to change their freight rates as the conditions of the freight market reasonably required. Ocean freight rates vary not merely from month to month, but from day to day and from hour to hour, especially with reference to the great staples which are traded in on the exchanges. The difference of a fraction of a cent in the freight rate may mean the loss of a contract to a merchant or manufacturer at an interior point of the Untited States who is competing with manufacturers and merchants in other countries. Should the lawmakers of the United States decide that ocean transportation must come under the jurisdiction of some authority, or authorities, in Washington, I most strongly urge that this important question should be considered very carefully before any laws are passed, because, barring a certain amount of supervision and possible publicity to assure reasonableness, I am confident that any regulation on the part of the Government which would make the immediate alteration of rates impossible in a situation where we are competing with the world's markets would result in a loss of trade and commerce that would be more harmful to the merchants than to the steamship owners who can always send their steamers into other trades.

After many years of experience in the trans-oceanic freight and passenger trades, with and without agreements, I am convinced that reasonable and proper steamship agreements are advantageous to shippers and consignees alike. If we are to maintain our commanding position as an export country, and to develop our trade still further in new and distant countries, methods substantially similar to those now in existence are essential.

DEFERRED REBATE SYSTEMS

BY HERBERT BARBER,

President of Barber and Company, Inc., New York.

The term "rebate," as generally understood in the United States, refers to a more or less secret and underhand allowance granted by a transportation company to secure traffic. In that sense the term "rebate" as applied to the steamship business is a misnomer.

Rebates as now applied to the steamship business originated in Europe and were used there fully twenty years before their introduction into the United States. According to the present-day plan two or more steamship companies unite to furnish a service at stated intervals, and, to secure sufficient traffic to warrant the venture, issue a circular publicly to all the shippers-offering to allow them a return or commission or discount on the amount of freight they furnish, provided they (the shippers) will confine their shipments during a stated period to the steamers of the signatory lines. The promised return is payable at the end of the period, or at a certain interval after the expiration of the period, provided that during the whole of that time the shippers have found it to their advantage to ship their freight over the stated route by the signatory line or lines of steamers.

When first introduced the allowance was paid at the end of a short interval, just sufficient to enable accounts to be checked up after the expiration of the term. But as time went on and shippers made no complaint steamship owners extended the period when payment of the return became due, so that some rebate circulars called for twelve months continued shipments and made the returns payable six months, thereafter, i.e., the shipper had to continue his shipments for eighteen months before any rebate was collectible. Such a rebate is characterized as a "deferred rebate" to differentiate it from the rebate payable at the end of the "loyalty period."

In the export trade from the United States rebates were first introduced as a system into the steamship business by the lines running between New York and Brazil and New York and the