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satisfactorily with the question rules and regulations be issued with respect to tolls so that no tolls shall be demanded or collected upon any vessel of commerce which shall aggregate more than $1.25 upon the net registered tonnage as measured under the statutes of the United States." The opinion of the Attorney General and instructions of the President to make it effective resulted in the adoptiton of the dual system of measurement. The procedure for determining the amount of tolls to be collected is as follows: The Panama Canal net tonnage on a laden vessel is determined and multiplied by $1.20 per ton. The net registered tonnage under United States statutes is determined and multiplied by $1.25 per ton. The lesser amount is the amount collectible and in practically every case this is the amount determined by multiplying the net tonnage under United States rules by $1.25 per ton. Occasionally $1.20 times the Panama Canal net tonnage is less than 75 cents times the net registered tonnage, in which case the latter figure is the minimum collectible. In many cases laden ships transit the Canal paying less per Panama Canal net ton than the 72-cent rate fixed for vessels in ballast.

During the month of December 1931, 36 ships making 40 transits, all of which ships were foreign except 2, passed through the Canal paying less than 72 cents per ton.

The CHAIRMAN. They paid less than if they had gone through in ballast?

Mr. SMITH. They went through laden, but they paid less than the ballast rate fixed under the Panama Canal rules.

Difficulties and inequities occur in levying tolls on laden ships under the dual system due to the uncertainty and variability of net tonnage as measured under registry rules. Examples are in the rules concerning shelter deck spaces, passenger cabins, tonnage openings, scuppers, freeing ports, bulkheads, et cetera, in which some change of ruling in connection with United States measurements may arbitrarily affect the inclusion or exemption of spaces without relation to actual value and the use of such spaces for carrying cargo. The following are specific instances mentioned by Governor Schley in an article published in the Marine Review for March 1935.

In one instance where a passenger vessel was scheduled for transit through the Canal the local agents, acting on orders from the home office, disembarked the passengers and their baggage at the port of arrival at the Canal and shipped them across the Isthmus by rail in order that the vessel might transit without passengers or cargo and enjoy the ballast rate. When the tonnage of the vessel was checked by the admeasurers it was found that the tolls charges on this ship would have been the same if the vessel had transited with all passengers and baggage aboard as they were for transiting in ballast, and that therefore the trouble of moving the passengers overland was not offset by any saving but in fact incurred the additional cost of railway transportation.

The CHAIRMAN. That is $700.

Mr. SMITH. One ship converted a linen closet into a berth for a steward and thereby secured exemption of nearly 400 tons of space. Another vessel by installing a bed and temporary washstand in a cloakroom secured exemptions of passenger space of 3,319 tons.

Senator CLARK. How did that vessel in that case secure an exemption of 400 tons?

Mr. SMITH. I am gong to ask Mr. Sill to answer that, because he is the admeasurer and he is fully conversant with it.

The CHAIRMAN. Would it suit you just as well to wait until Mr. Sill comes on?

Yet, could you, in a sentence or so, interpolate this point?

Mr. SILL. Under the United States rules of measurement, space used exclusively by the passengers and situated above the first deck, which is not a deck to the hull, is exempt from measurement. The Commissioner of Navigation, now called the Director of the Bureau of Navigation and Steamboat Inspection, ruled that a cabin was a place where a person slept, but that it could be extended to include other spaces on that tier, such as social halls, smoking rooms, barber shops, gymnasiums, children's play rooms, and so on.

When this particular case that was mentioned arose-
The CHAIRMAN. What was the name of the ship?

Mr. SILL. I do not recall it now. It was sometime ago. When they found out about this ruling they converted a linen locker adjacent to the smoking room and called it a cabin, and therefore the adjoining smoking room, amounting to the tonnage mentioned, was called part of an exempt cabin, and excluded from the tonnage.

We had a peculiar case similar to that where a ship from South America came up, and the captain announced he had increased the size of his ship by adding two staterooms. He was rather surprised when we measured the staterooms and informed him that because these staterooms adjoined a large room that was in the tonnage formerly, under the rules we had to exclude it and the staterooms from the tonnage, and his tonnage was actually reduced by the addition of these two rooms.

Senator DUFFY. Then it is based upon the interpretation of the Director, primarily?

Mr. SILL. Yes.

The CHAIRMAN. And his decision is final on these points.

Senator FLETCHER. It is not a matter of law; it is a matter of interpretation and construction by him. We might correct that in some way. We gave him a wide-open.field to exempt everybody.

Senator CLARK. That is another one of those cases where it is apparently necessary to go to Congress to pass a law to correct a very silly interpretation.

Mr. SILL. Might I explain that that is only under the United States rules of measurement? The Panama Canal rules of measurement are still the basis of tolls charges, but are nullified by the limitation in the law. If this bill were passed the Panama Canal rules would be the basis for charges and there would be no possible way that such conditions could exist, because the Panama Canal rules for measurement do not have such provisions as exempting spaces of this kind, and it is only because the United States rules of measurement are brought in as the limiting factor that such conditions can exist.

The CHAIRMAN. And if the Commissioner of Navigation should change the rules it would increase the charges our vessels would have to pay in every port in the world, which is not necessary or desirable. Mr. SILL. The present bill would eliminate the United States rules from consideration at the Canal and we would have, then, only the

Panama Canal rules as the basis for toll charges. Then any reduction in the tolls would be on the price per ton, rather than in decreasing the tonnage of the vessel.

Senator FLETCHER. Under the Panama Canal rules, have you a provision that would prevent evasions and avoidance of this kind? Mr. SILL. Mr. Emory Johnson made a study of the vagaries of other rules and eliminated the bad features, and prepared a set of rules which we think are ideal for the purpose.

The CHAIRMAN. They would make earning capacity of the ship the test under all circumstances.

Senator FLETCHER. Increase the earning capacity by changing a smoking room into a cabin? It seems to me that still leaves leeway to evade the law.

The CHAIRMAN. That is under the United States rules.

Mr. SMITH. There is no such possibility under the Panama Canal rules.

Frequently vessels arrive in conditions involving some infraction of United States registry measurement rules with respect to method of closure or for some other reason are not allowed, for that transit, the exemptions for spaces which might ordinarily be allowed. In such cases the tonnage is determined in accordance with the conditions found and is increased over that used on former transits. This is resented by the owners when brought to their attention and in many cases has resulted in the discharge of the master or mate of the vessel or whoever is deemed responsible.

The CHAIRMAN. Do you mean that the same vessel passing through the Canal at different times pays different tolls on account of the variation under the United States rules? That couldn't happen under the Panama Canal rules.

Mr. SMITH. Slight variations in closing hatchways which really don't affect the cargo-carrying capacity have a very direct effect upon the amount of measurement when the vessel passes through the Canal.

The CHAIRMAN. Under United States rules.

Mr. SMITH. Certain vessels go through the Canal one way with their hatches closed a certain way, which relieves them of the payment of tolls on certain spaces. They come back the other way for some reason and they are closed so that they pay tolls on it. They do it deliberately, apparently. It just shows what can be done. The CHAIRMAN. That wouldn't happen under the Panama Canal rules.

Mr. SMITH. It could not happen under Panama Canal rules.

The Governor stated that these variations in conditions may cause wide variations in the actual toll charges on the same vessels for different trips. Whenever the tonnage is increased it is looked on as a penalty, which creates feelings of resentment because of action based on arbitrary rules. This causes useless friction among owners, agents, masters, and Canal officials, which might well be avoided by the adoption of plain and dependable rules.

That the practice followed under present rules is not conducive to safety, but has potential dangers, has been pointed out by the Governor, as follows:

As happened in England under the " 'builders' old measurement rule", the safety of vessels has been affected by efforts to take advantage of provisions in the present registry measurement rules. Rear Admiral J. Q. Tawresey, United

States Navy, retired, who has represented the United States as delegate to the International Conference on Safety of Life at Sea as well as to the International Load-Line Conference, has invited attention to potential dangers. Vessels built to use the Panama Canal are constructed so as to secure the lowest tonnage possible under registry rules and minimize the toll charges. Admiral Tawresey pointed out that the openings required in order to take advantage of shelterdeck exemption do not make the vessel safer but makes her less safe.

Openings are cut in the deck and bulkheads, and also freeing ports and scuppers are placed in the side walls of the vessel, which are not allowed to be permanently and efficiently closed, but are permitted to be closed temporarily and inefficiently. These openings serve no purpose of safety or any other purpose than a technical compliance with the rules to secure exemption of space from measurement. The freeing ports and scuppers are a potential danger, for instead of caring for leakage they may admit water and be at least a potential cause for the loss of a vessel.

The situation described above results in uncertainty on the part of both the Canal and its users as to the important matter of toll charges, and such charges are determined to a large extent by the orders and interpretations of an unrelated agency which is concerned with other matters than the justice of Canal tolls. The reduction of revenue from tolls on laden vessels occurs because it is possible to reduce the United States registry measurement without reducing correspondingly the earning capacity of a ship.

In the fiscal year 1917, the first for which a record has been kept of the aggregate United States equivalent net tonnage of vessels transiting the Canal, such tonnages for the 1,803 commercial transits totaled 4,702,063 tons. The net tonnage for the same vessels as measured under the Panama Canal rules totaled 5,798,557 tons. The United States equivalent net tonnage was accordingly 81.09 percent of the Panama Canal measurement. Since 1917 the net tonnage as measured under United States registry rules has been reduced by virtue of various rulings of the Commissioner of Navigation and by changes in ships' structures to take advantage of the rulings, but the Panama Canal net measurement which determines interior carrying capacity has not decreased. The percentage which the aggregate_United States registry measurement net tonnage has formed of the Panama net tonnage of transiting vessels in the fiscal years from 1917 to 1934, inclusive, has been reduced to 71.21 percent. The following table shows how consistently reducing the percentage has been since the year 1919, during which year it had increased to 84.80 percent.

Without any change whatever.

The CHAIRMAN. Without any change in the earning capacity of the ships.

Mr. SMITH. Without any change whatever, or practically no change. There is a claim that there is a slight reduction in earning capacity.

The CHAIRMAN. But by changing these openings that you mentioned a few moments ago they were enabled to cut down their assessable tonnage.

Mr. SMITH. Changes in the rules beginning in 1915, when the Bureau of Navigation varied materially rules in effect at the time the Panama Canal Act was passed, and then changes in the structure of vessels following since that date.

Senator FLETCHER. Just at that point, may I ask, in the first place the law authorized the President to fix these Panama rules, and he did so in 1913.

Mr. SMITH. In 1913.

Senator FLETCHER. Why doesn't that act empowering the President authorized by the law supersede any regulations or rules of the Bureau of Navigation?

The CHAIRMAN. That is just the point.

Senator FLETCHER. If he had the right to do it then, why hasn't he got the right to change the rules now?

Mr. SMITH. That was the position that the Panama Canal authorities took, that when these rules were adopted, when the Panama Canal Act was enacted and the rules adopted under it, those were the final and only rules for the Panama Canal, but due to this interpretation, which was not expected by the Panama Canal authorities, it threw a different limitation for consideration.

The CHAIRMAN. The Attorney General interpreted the use of the words "net registered tonnage " in the act.

Senator FLETCHER. Broadening the Bureau of Navigation.

The CHAIRMAN. Broadening the Bureau of Navigation and in the case of conflict that tonnage controlled.

Senator CLARK. You mean the United States tonnage.

The CHAIRMAN. Yes. The legislative history of the act shows that the use of that was really an inadvertence, but it threw the thing out of alinement and we have never been able to get the legislation required to enable the President to do what was intended in the first instance.

Senator CLARK. This act is designed to correct that interpretation and put the Bureau of Navigation out of the picture.

The CHAIRMAN. That is the point.

Mr. SMITH. The reductions in rates of tolls paid per Panama Canal net ton obtained by the various nationalities the vessels of which have transited the Canal in large numbers from 1925 to 1934 are given in the following table. I have here seven different countries, and for the years 1925, 1930, 1931, 1932, 1933, and 1934. I would just like to show for these different nationalities for those years just what has happened to the rates paid per Panama Canal ton for those vessels.