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Also it happens that for a number of years I have been counsel for the Southern Pine Association. I grew up in the sawmill country in eastern Texas, and went through all of the stages when the depths of despondency and when the Government came along and offered N. R. A., and I am going to reach an answer to the gentleman's question before I get through, if I may be permitted to do so with respect to that.
There are in the South something like 12,000 sawmills. The great majority of them are very small institutions. A great majority of them in one way or another have been selling materials to the Government or selling their products to concerns that in turn sell to the Government. They are located through the Southern States. They are intimately connected with the agricultural life of those States. In fact, a survey made in the census of 1930 indicated a very large proportion of the logs purchased by the mills in the South were purchased from the farmers. I think that census showed as to the southern pine States that more than $82,000,000 was paid to farmers for forest products, and in four southern States—Arizona, Arkansas, Mississippi, and Virginia—the cash income to the farmers from forest products. ranks second, being exceeded only by cotton.
So that this lumber industry is intimately associated with the agricultural as well as the industrial life of the South.
Senator WALSH. Were they under a code!
Mr. LLOYD. If it will not disturb you, let me suggest that up northwest in the lumber industry we import a great deal from Canada. Approximately 60 percent of all the shingle output of Canada is sold in the United States. We import a great many logs. How can the contractor follow the subcontractor in Canada?
Mr. FULBRIGHT. I don't see how they can. I think we have a tariff on lumber, though, now, have we not? That helps us a little bit.
By the way, I should have said at the outset that I have been requested by the National Lumber Manufacturers Association, which is made up of the various regional associations, to ask to have permission to have a statement filed which they have prepared in behalf of the entire industry, and I shall not repeat what is in that statement, but if I may have the permission I will file it and ask that it be set forth in the record in connection with my remarks.
The CHAIRMAN. That may be done. (The statement referred to follows:)
STATEMENT OF NATIONAL LUMBER MANUFACTURERS ASSOCIATION ON S. 305.5
The National Lumber Manufacturers Association, on behalf of its constituent members, a list of which is attached hereto, desires to express to the Huse Judiciary Committee its opposition to the enactment of Senate bill 3055, to provide conditions for the purchase of supplies and the making of contracts, leans, or grants by the United States and for other reasons.
The title of the bill, thus stated, is descriptive of its provisions, but as stated in the Senate report it is the purpose of the bill to direct Government purchases along lines tending to maintain the advance in wages and purchasing power achieved under the N. R. A. This memorandum is confined to a statement of our opposition, and the reasons therefor, to such legislation which
would attempt to restrict Government purchases of lumber to those who certify that they have been and are observing wage and hour standards substantially the same as or higher than those set forth in the Code of Fair Competition for the Lumber and Timber Products Industries.
The views here expressed may be summarized. As to lumber, at least, there is abundant evidence based on actual and recent experience demonstrating that:
(1) The provisions of the bill cannot be fairly and effectively administered ; (2) If it could be enforced, the administrative cost would be prohibitive; (3) It will serve to penalize the honest and subsidize the unscrupulous ;
(4) The bill if equitably administered will impede the proper functioning of the Government.
In brief, the bill will work contrary to its intended purposes of maintaining reasonable wage and hour schedules in lumber mills. The lumber industry expresses no views concerning its application to other industries but believes that the interests of equity require that if the bill is approved for general application, it should contain specific provision authorizing exceptions or exemptions where, as in the lumber industry, it will, if not uniformly enforced, result in great injustice and in a subversion of the declared purposes.
QUANTITY AND CHARACTER OF GOVERNMENT LUMBER PURCHASES
The lumber industry has a substantial interest in the bill because the Government, particularly in the past 2 years, has been a large purchaser of lumber and lumber products. It is estimated that during 1934 the Government purchased directly or indirectly more than 2 billion feet of lumber, valued at more than $40,000,000. This figure does not include the substantial quantity of lumber and lumber products purchased and used by persons having Government loans and others to which the present bill would apply. Included in the quantity of lumber mentioned are thousands of different products ranging from heavy timbers for construction work on the Panama Canal and in Hawaii, to C. C. C. camps in olated sections to the Rocky Mountains, office furniture for Washington departments, and decks of battleships in the Navy. Purchases are made in thousands of transactions ranging in size from a few dollars to tens of thousands of dollars. There is no central purchasing -agency; purchases are made through the more than 60 different agencies in Washington and several hundred others scattered throughout the United States,
The bulk of all of these purchases is only indirectly from the producers of lumber who employ labor and are thus directly affected by the provisions of the bill. In the case of lumber purchased as lumber, the transaction is ordinarily through a wholesaler or other middleman who employs no labor, but purchases his requirements direct from lumber mills for shipment direct to his customers. In the case of indirect purchases, that is, purchases of fabricated lumber products, the purchase is made from fabricators who may, themselves, have purchased their lumber from middlemen, who in turn buy from producers. The effect of the proposed bill, therefore, is primarily of importance to lumber manufacturers not as principal contractors but as subcontrators or suppliers. Under the terms of the bill these persons are required to file with the principal contractor certificates or representations that they are adhering to labor standards set forth in the principal contract or in the lumber code.
EXTENT OF PRESENT AND PAST OBSERVANCE OF CODE PROVISIONS
The code included under its jurisdiction about 25,000 sawmills employing 350,000 workers. Compliance reports of the Lumber Code Authority show that in the initial period of the code, observance of its provisions was good among all classes of operators. Then, as the Government failed to act promptly against code violators, their number increased until in the spring of 1935 it was said as to one southeastern State with more than a thousand sawmills that not one was complying with the wage-and-hour provisions of the code.
The situation with respect to compliance has not changed materially within the past 6 months. Well-established large and mediumsized operations were then observing the code provisions, and they have continued to do so with the exception that in some the hours of labor (and consequently the earnings of labor) have been increased. Their observance of code standards is and has been, since the complete breakdown of code enforcement early in 1935, due to conviction and not to fear of prosecution. It is estimated that this group of mills produces about two-thirds of the total annual lumber production. These comments should not be construed to indicate that the establishments mentioned are observing the code standards strictly and in all technical respects. On the contrary, many are not, and they would not, therefore, qualify for Government business under the pending bill. Indeed, if the terms of the bill are construed strictly, as they must be, it is doubtful whether one-fourth of our annual lumber production can honestly qualify under the bill.
The variations from code standards now observed in these groups are the result of competitive necessity brought about by the competition of the unpunished chiseler; or in the case of minor variations, the result of the modification of somewhat arbitrary code standards to meet practical management and production problems. The bill, of course, declares these two groups of substantial honest producers ineligible for Government business, although in the one case their inability to maintain code standards is due to no fault of their own, and in the other the variations are insignificant.
The third group in the lumber industry, consisting mostly of small establishments, includes some who have never observed code provisions and in large part are directly responsible for the general breakdown of wage and hour standards within the group. An even larger number have, after observing the ease with which code standards could be ignored, either discovered methods of easy evasion or avoidance, or have publicly joined the group of original recalcitrants. Others in this group of noncompliers have merely accepted the practical situation, and have reduced their wages and lengthened their hours to prevailing local standards whatever they may be.
The situation thus presented is not one of the lumber industry's choice or making; but a conscientious and deliberate effort to improve it under the Lumber Code succeeded only in penalizing those who tried, and rewarding those who didn't. The pending bill promises nothing but the same result.
The Lumber Code was approved on August 19, 1933. It remained in effect until June 16, 1935, or nearly 2 years. With the possible exception of codes covering retail trades, which fall in a different category, probably no other N. R. A. code had as much experience with compliance activities, or presented more difficult compliance problems. The lumber industry, as the result of its 2 years' experience, therefore, is particularly competent to testify concerning the practicability, equity, and effectiveness of action such as is proposed by Senate bill 3055. And because of its substantial interest as a large supplier of materials for Government uses, it is naturally concerned that there should not be imposed upon it burdens and requirements which, without accomplishing public good, will create conditions of inequity and injustice among those who desire to compete for Government business.
The lumber industry does not assert that the Federal Government should not prescribe conditions under which it will make purchases of materials and supplies, if such conditions are reasonably related to desirable public policy and give reasonable promise of fair and honest administration. It does assert that the Government should not set up standards and limitations which it cannot equitably administer or uniformly enforce, and which will result in financially rewarding competitors who are the most skillful and ingenious in evasions, or the most willing in deceits. The pending bill, in the lumber industry at least, will retard, not advance, the desirable declared objections of this proposed legislation.
1. The provisions of the bill cannot be fairly, uniformly, and equitably enforced in respect of lumber used by Government agencies and others included within the terms of the bill. There are about 25,000 sawmills in the United States. There are also about 2,000 wholesale lumber distributors and 25,000 retail lumber distributors. The number of transactions affected by the bill during the course of a year would probably be in the tens of thousands. The bulk of these transactions and purchases would be through middlemen and not directly with producers. Many orders would be filled from stocks already accumulated and not from current production. In many cases the suppliers of fabricated materials would use lumber stocks purchased long ago, and it would be unnecessary for them to make new lumber purchases in order to fill Government orders. It is a practical impossibility for any agency to follow back to its producing point the devious course of lumber used directly or indirectly by the Government, to determine whether it has been produced in exact conformity with these code requirements or any other.
In the case of fabricated products in which lumber is used, in most cases the fabricator would be physically unable to conform to the requirements of the bill; to make an exception in his case would be to draw unjust distinctions based on expediency. The same is true in the case of lumber purchased by the Government from stocks at distributing yards and from retail distributors. Each of these establishments purchases from a large number of producers. Their stocks from different producers are intermingled and usually lose their identity. Where identity is not actually lost the fact that it may be lost provides an avenue for evasion which the unscrupulous have not been and will not be slow to use.
The bill itself facilitates the opportunities for evasion by requiring only that the principal contractor secure certificates or representations from a subcontractor. It does not empower him to question their validity or honestry nor impose upon him the duty of so doing. In fact, to do so would be to impose the impossible burden of making him a Government policeman which he neither could be nor would he wish to be. It would moreover run contrary to his interests. By receiving a certificate he has fully met the requirements of the bill. No further obligation rests on him. His interest lies in making his purchases as cheaply as possible. In the lumber industry, at least, the cheapest purchase can usually be made from those who pay the lowest wages. The natural result of the situation will be apparent.
The fact should not be overlooked that while the bill contemplates that the administration of the act will be centered in one agency, purchases of lumber running into thousands of transactions yearly will be made by as many as 500 different agencies. Presumably, these agencies will be required to check the contracts to determine whether the certificate required by the bill from the principal contractor has been filed. But these purchasing agencies neither have the staff, the obligation, the facilities, nor the technical knowledge to do more than determine that the certificate is in order, i. e., in proper form. The only means by which actual observance of the bill's requirements may be determined is by complaint of interested parties, or through a detailed expensive and lengthy examination by the agency charged with the administration of the act, of all transactions involving the purchase of lumber, both directly by the Government and indirectly by contractors in filling their contracts.
To illustrate the practical operation of the bill, the following three examples are cited :
(a) A furniture manufacturer receives an order from a Government department for walnut desks. Under the bill he is required to file a representation that he is observing the required labor provisions in his plant.
He is also require' to secure similar representations from persons from whom he buys material useil in the fi.brication of the walnut de: ks. These materials include walnut veneer. walnut lumber, plywood panels, and iniscellane us types of hardwood lumber used for drawer bottoms, and other unexposed parts. But in making these desks he takes his materials from stocks which have been purchased over a long period of time from as many as 40 or 50 different establishments. The particular pieces which he uses are not identified and there is no way for him to determine their origin or whether at the time they were produced the producer was observing code requirements. An exemption would cure this administrative difficulty. It would also sanction lower wiges and longer hours in lumber establishments fortunate enough to do business with fabricators, and deny this privilege to others whose product could be identified at the time of purchase by the Government.
(0) A second example: Early in 1935 it was well known in the lumber industry that a certain firm in the South enjoying a substantial amount of Government business was supplying on its contract lumber produced in violation of the labor provisions of the lumber code. Early in 1935 the compliance section of the Lumber Code Authority, after considerable investigation, was able to advise the Government in advance of the opening of certain bids that this company would likely be the successful bidder, that they had been chronic anel consistent code violators, and that the code authority would be glad to supply the Government with all necessary details in order to secure cancelation out the contract in accordance with the President's Executive order.
The bids were opened and the contract was secured by the company in question. The contract involved called for a number of portable camp buildings for C. C. C. camps. The Government was advised that the contractor liimself performed no work, but let the entire job to a subcontractor. The subcontractor in turn purchased his lumber requirements from a lumber wholesaler, who was an employee of the subcontractor. The wholesaler purchased the lumber from a company in the South which made no secret of the faci that it was paying an hourly wage of 171/2 cents.
This information, including specific names, dates, and places, was given to the National Recovery Administration well in advance of deliveries under the contract and prior to the purchase by the lumber wholesaler for delivery to the subcontractor, of the lumber to be used in the construction of the camps. Agents of the code authority, with considerable trouble, also furnisher the Government with affidavits of employees, proving the fact that the lumber supplier was a code violator. The remedy asked was cancelation of the contract. The contract was not canceled and the company in quest'on has continued to secure Government business.
This case proved the complete inability of the Government to secure compliance, even when armed in advance with facts establishing beyond doubt it vjolation of the President's order. The case is exceptional only in that it was possible to get advance information. It was usual in that it illustrates the
ractical difficulty of attempting to follow through to original sources the suppliers of material entering into fabricated products bought for Government use.
(C) A third example: A wholesaler secures a contract to supply the Government with several carloads of lumber items, including boards, dimension, anl flooring. He then purchases the lumber from five different concentration yards in the South. In accordance with the requirements of the bill, he files his certificate as principal contractor and asks the fire yards to send him their certificates. They may do so, because they are in any case reasonably safe. They thímselves have purchased lumber from as many as 50 small mills. Their purchases have been intermingled, stored for drying, and then surfaced. At Trast one of the mills from which they bought is likely to have been a family aiterjirise which could give an honest certification. Or another mill may have adopted the easy evasion of paying the prescribed wage, making deductions for board, lodging, medical attendance, and transportation, until the actual wage was at the desired low level. In competition with the mill seeking in good faith to maintain labor standards this wholesaler can always get the business because he can quote a lower price.