Underweights and Overweights

A D'iscussion of the Practice Used in the Quotation and Sale of WEST COAST LUMBER AND SHINGLES

By ROY A. DAILEY, Manager, North Coast District N ational- American W holesale Lumb er Ass o ciation, I nc.

The Origin of the Practice

The practice or custom called "Underwcights and Ovcrweights" uscd in the quotation and salc of Wcst Coast lumber and shingles, grcw out of an idea that solvcd an important problem confronting the lumbcrmen of this section.

The.principal consuming markets for thcir products arc so far distant that transporta- tion costs are often grcatcr than the f. o .b, mill valuc of some grades and sizes. Tho problcm was, 6rst, to decrease this tremendous transportation cost, if possible, in order to compcte with other woods produced in scctions more fortunatcly situated.

Second:'To institute some uniform basis on which to figure delivered prices-a basis on which all West Coast manufacturcrs could competc on an'even footing, and which guarantced the buycr adcquate protcction on all quotations, enabling him to 6gure exactly thc cost of lumber, regardless of its origin or wcight--delivcred at his station

Thc answcr to thc first part of the problcm was obvious. The more thoroughly thc Iumbcr or ehinglee could be scaaoncd-up to certain limitations-tle cheaper thc cost of transportation. The sccond paft ea3 solved whcn thc manufacturcrs agrced atnong themselves, after long inveetigations and tests, on ccrtarn dcfinite cctimated shipping wcights for every size and gladc produccd -a basis on which to fairly and safely egtimatc the transportation cost and on which all manufacturcrs could equitably compctc.

They agreed for instancc, for thc purlrosc of figuring dclivered pricct" that l2"xl2" Rough Douglas Fir Timbcrs should be cg- timatcd at 3300 tba per M; ttrat 1x4" Fir Flooring, Kiln Dried, should wcigh 2000 lbs. pcr f,4 etc., on down the list.

In quoting delivcrcd prices, the estimatcd cost of transportation G calculated by multiplying thc guarantecd weight pcr M by thc correct freight rate. To this, the sellcr adds his f, o. b. mill price and quotes the sum of these two items as a guarantced delivered price at buycr's station. The actual weight of the stock is problematical, but this riEk is assumed entirely by the scllcr.

Where actual frcight charges collectcd by thc railroad are less than estimated freight chargcs bared on guarantced weights, the dlFcrence is called "Underweights," and belongs to the scllcr.

An "Overweight" is the cxcess freight charge collccted ovct and abovc the guaranteed freight. This is absorbed by the seller when contract is bascd on guarantecd weights and delivered priccs.

Pricc Quotation Methods

Two itcms enter into the dclivered price of lumber at a given destination. First, thc agreed price pcr M f. o. b. cars at ttre mill; second, the cost pcr M of transporting the Iumber to destination

A ccrtain amount of West Coast lumbcr is purchased at an agrced price f. o. b. mill, with no guarantcc on thc part of the mill as to the wcight of thc stock, or thc cost of transportation, buyer paytns all freight charges and assuming all risk as to the actual cost of transportation.

This is the unusual method of purchasing West Coast stock for rail shipment, and can be successfully practiced only by trhose cxpcricnced buyers in close touch with ttc conditions undcr which their mill conncctions manufacture thc product, and who are willing to op.ratc on tfie law of avcragcs as to the ehipping weight of the stock that will bc loaded on such orders.

It must be borne in mind that thcre is a wide variancc of wcights on thc same specics, grades and sizcs of West Coast lumber, thc causcs for which start at thc location where thc trccs grow and follow down through thc difrerent etages and mcthods of logging, manufacturing, drying and rhipping.

Thc usual method of purcharing Wert Coast lumbcr for rail shipmcnt, and the safcrt for thc purchaser bccause it cnablcs him to know exactly what the lumbcr will cost at his station, is statcd in paragraph 7 of West Coagt Terms and Condition of Quotation and Salc as follows: (a) "AlI sales of Wcst Coast stock, whcre prices include cost of delivery, arc madc f. o. b. cara mill, freight allowed to dcstination o'r ratc agraed upon; actual freight paid by buyer upon surrender of original freight bill to scllcr being considercd as payment on invoice, (e) The sellcr guaranteee freight charges upon the basis of estimated weights adoDted by the Wcst Coast Lumbermen's Association."

Examplc: Buycr reque6ts a pricc on a carload of,2x4xl6' No. I Common Fir SISIE deliveted at a station taking a ?0c frcight rate from Coast shipping points. Scller figures his f. o. b. Mill price at $18.00 per M. To this he adds the cstimatcd coot of transportation by multiplying the estimatcd weight, 2,600 lbs. 1i'er M, by the freight rate, 70c per cwt., which figurer $18.25 pcr M freight. Adding thcse two items togethcr, he quotes a delivered pricc of $36.25 pcr M at buycr's station.

With this definite delivered price, bqyct can proceed to order the lumbcr, sccure in thc knowlcdge that, regardlcss of what thc lumbcr weighs, the stock will not cost him morc (or liss) than $36.25 pcr M f. o. b. his station. Buycr is not conccrned with thc amount of the freight bill on his shipment. He simply deducts thc actual amount of freight paid from the total amount of invoicc as part paymcnt and mails chcck for balance.

Notc l: The 260O lbs. per M is the cstimatcd weight on this particular itern, adopted by the Wcst Coast Lumbcrmcn's Association,

Notc 2: 26m lbs. multiplied by 70c actually figuree SlE.20 instcad of 118.25 as etatcd abovc. Howevcr, it is customary to make quotations on "cvcn quartcf, dollarg" and in this case 5c war added to makc $18.25. In caac actual computation of freight is llE.lQ for inrtancc, the lOc is ordinarily dcduCcd in order to makc quotation "evcn moncy."

Quotations on 'F. O. 8. Mill Barir"

To Chicago Buycr: 'Will furnirh tbirty thourand fcct Fir Drop Siding your hquiry Junc fiftecnth at thirqy-two dollars pcr thousand f. o. b. mill basir Prompt shiprnent."- Wcst Coact Scller.

Many ouotationr on Weot Coast lurnbcr producis irc madc thie way and frcqucotp thc quection ariscs "what ir rncant by 'f. o. b. rnill basis'?"

By 'f. o. b. mill ba!ii," ttc rcller mceat that he will furnirh thc lumber at a ccrtdn baee price f. o. b. cars mill; agro!8 that if lumber ehippcd rcighr rnore than drc crtimated wcight pcr M publishcd in thc Amociation lirt, rcllcr will alsumc payment of such additional frcight; and expectr that if lumbcr wcighr lcss than crtimated wcrg_ht, rcller will r.occivc thc bencfit of any saving in freight.

To Wcst Coact Seller: "Entcr order pcr your wirc today thirty thourand fcct two and better Fir Drop Siding Ship to ue et Elkhart, fndiana."

Seller' rhipa ordcr and invoicer about al follows: lx6" No 2 Clt. & Btr. No. 106 Fir Drop Siding, 30,000 ft. at 132.00. 'l 960.{10 Eatimated Frcight 30,000 ft at 2,@0 lb* M. 60,dD lba. at 82/2c..... '. {95.00

Total tlelivcrcd price at Elthart,- Indiana....... .ll,{55.00

The Association estimatcd weight 04 lhE itcm is 2dl0 lbr. pcr M. The publi$ed

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