gate receipts too much, which would involve an increase in tolls on particular ships that would discourage the use of the Canal and would defeat the very end they attribute to that.

Mr. SMITH. In the very beginning, including Professor Johnson's study, there has been consideration of the fact that the Panama Canal route is in competition with other routes, the Suez route, around the Horn, and other trade routes, and it is necessary to give consideration to that from every point of view in order to make the Panama Canal route attractive for shipping. That term has been used by every governor from the beginning and they are trying to do that. Now to think that they would try to set up some set of rules or fix some rates of toll or recommend the fixing of some rates of toll that would drive traffic away from the Canal is absolutely unthinkable.

The CHAIRMAN. There is no disposition to hire ships not to use the Canal, whatever some of our other policies might be.

Mr. SMITH. No.

Mr. SILL. Might I clear up this matter about the testimony about the tankers? What I intended to convey was

The CHAIRMAN. Mr. Smith, is Dr. Johnson still living?

Mr. SMITH. He is still living; I saw him within the last 3 or 4 weeks in Philadelphia.

The CHAIRMAN. He would be available if the Government desired and he saw fit to do this?

Mr. SMITH. He is still connected with the University of Pennsylvania.

The CHAIRMAN. Go ahead, Mr. Sill.

Mr. SILL. In mentioning the fact that the steamship interests had presented testimony in former hearings to the effect that the tankers would secure benefit from the passage of this law or a similar law, I would like to read from the hearings of the subcommittee of the Committee on Interstate and Foreign Commerce, House of Representatives, Seventy-third Congress, second session, on H. R. 7667, page 86:

Mr. Morrison, of the American-Hawaiian Steamship Co. and the Williams Steamship Corporation, testified that the use of the Panama Canal net ton as the sole basis for assessment of tolls would also have the effect of increasing the tolls paid by the general-cargo ships and effecting a corresponding decrease in the tolls paid by oil tankers, even though the aggregate amount collected remains constant. The cargo vessel cannot afford to assume this increased burden, and I see no justification for the substantial saving to the tanker.

When I said that Mr. Morrison presented testimony yesterday to the effect that the tankers would have a substantial saving in their toll charges I referred to the document that he submitted which set forth in detail the amounts that each of the groups of ships would have to pay at the 90-cent rate if the bill were enacted into law, and that showed a decrease in the tolls to tankers, indicated in red on Mr. Morrison's exhibit.

The CHAIRMAN. I will insert in the record as an appendix the article by Colonel Schley and also the editorial in the Marine Review. Has anybody else anything to submit?

The meeting is adjourned.

(Whereupon the committee adjourned at 12:50 p. m.)

EXHIBIT A

[Editorial in Marine Review of March 1935]

PROPOSE SINGLE SYSTEM FOR PANAMA CANAL TOLLS

Legislation is now pending in Congress providing a single system of admeasurement of vessels, using the Panama Canal rules as a basis for assessing tolls for transmitting the canal. This legislation is generally opposed by American shipowners because it is believed that the amount of tolls so assessed will be materially higher than under the present dual system.

Under the dual system United States registered tonnage is also used as a basis of measurement in accordance with the provision of the existing law, which requires that the tolls paid by a vessel for transit of the canal, based on Panama Canal rules, shall not be greater than the product of the cost per ton and the United States net registered tonnage.

It is a matter of serious concern, especially in the present circumstances, that shipping should not be burdened with extra cost. There can be no reasonable disagreement, however, on any grounds of logic, convenience, and safety as to the wisdom of discarding the existing.pernicious system of dual classification. A single system would be preferable in every way. It would do away with the subterfuges that now must be used to reduce tonnage. It is merely a legal way of evading the real intent of the rules and is vicious, unsatisfactory, and absurd.

As a matter of fact there need be no increase, except in obviously unfair instances, if the rate per ton is sufficiently reduced. There is no reason whatsoever to place the responsible officers of the Government, the Secretary of War, who makes the recommendation of the rate to be fixed per ton and the President of the United States, who approves the rate, in a position inimical to the interests of the merchant marine.

The article in this issue on Panama Canal tolls by the Governor of the Canal Zone makes it perfectly clear that there is no disposition on the part of the Canal authorities to advocate a system of assessing tolls which would be more burdensome financially on American shipping. It is pointed out that a rate of not over 90 cents per ton would be recommended and that an analysis of all the tolls paid on American ships transitting the Canal in the last fiscal year worked out at the rate of 87 cents per ton. Also that a modification of the Panama Canal rules of measurement can be made to remove any existing disparity in certain classes of vessels where found necessary.

We are convinced that opposition to a single system of measurement is not the logical or reasonable approach to the solution of this problem. Additional expense to shipping must be avoided and the present returns in tolls are sufficient to provide for operation, upkeep, and depreciation, with due consideration to the military uses of this waterway which cannot rightly be charged to the mercantile marine. Consequently the charges per ton and amendment of the rules, where necessary, are the real factors in any reasonable difference of opinion and these are subject to adjustment in such a way that there can be no unjustifiable increase in the cost of transitting the Canal. Such a method will be fair to all.

The Panama Canal rules are the logical standards for assessing the tolls. They represent a thorough survey and study of vessel management. They embody the experience of the past. By adopting a single system, using these rules, endless controversy and continual inconvenience are forever eliminated. Keeping these rules as the basis, with whatever amendments may be necessary to suit present day standards and types of ships, and an agreed upon fair charge per ton, will bring about a solution once for all of this controversial subject which will be satisfactory to all fair-minded men.

EXHIBIT B

[Article in Marine Review of March 1935]

CANAL TOLLS, BASED ON A SINGLE SYSTEM OF MEASUREMENT

(By Col. J. L. Schley)

The method of measuring merchant ships at the Panama Canal and levying of tolls on them for passage through the waterway has been a matter of argument between the Canal administration and organizations of American steamship owners for over 20 years, practically since the opening of the Canal in 1914. The matter seems now about to reach a solution by compromise. Congressional action is necessary because the basis for the levying of tolls was fixed by an act of Congress.

The Canal administration has proposed repeatedly a revision of the law so as to base the tolls on tons of 100 cubic feet of all interior spaces usable for the carriage of cargo and passengers. The determination of such space is provided for by the Panama Canal rules for the admeasurement of vessels. The present law, however, provides that the amount of tolls collectible shall be limited on the basis of the net tonnage as determined by the United States rules of measurement for the registry of vessels. The United States registry rules, like registry rules of practically all nations, allow considerable exemptions of useable space from inclusion in the net tonnage. The United States registry rules of measurement are made and interpreted by an official of the government who is not connected with the Panama Canal.

The general result has been that the amount of tolls levied on vessels bears no exact relation to their useful capacity and has diminished as further usable spaces have been exempted from time to time by rulings of officials in charge of registry measurement. The Panama Canal desires to change this method to the single basis of levy on net tonnage as determined by the Canal rules, at rates to be fixed by the President within limits established by Congress.

OBJECTIONS OF STEAMSHIP OWNERS

Steamship owners have objected that the rates proposed in connection with the canal measurement would increase the charges on the majority of their vessels. This is something to which they are naturally opposed. The efforts at compromise involve possible modification of the Panama Canal rules of measurement, primarily with respect to public spaces on passenger vessels, and the rate of tolls which the Secretary of War will recommend to the President in case the levy is based solely on Panama Canal measurement.

Gross tonnage includes, theoretically, all of the covered and closed-in spaces on the vessel but under the rules of measurement for registry exemptions are sometimes secured of spaces used for passenger cabins and even cargo. Net tonnage is that which remains after deducting from the gross tonnage crew spaces, spaces used for propelling power and bunkers, and other spaces used in the navigation of the vessel. It does not include certain spaces which may be exempted under the national rules of measurement, even though such spaces are actually used for passengers and cargo.

Because harbor dues of various sorts are often levied on net tonnage there is a tendency to diminish the net tonnage by more or less irregular technical methods, sanctioned by law. By such methods charges on the vessel may be diminished while her ability to use the space is not diminished. It is the extent and conditions of these exemptions or deductions which make all differences in the various national registry measurements of net tonnage and have been causing the trouble at the Panama Canal with respect to the levying of tolls.

EXTENT OF EXEMPTIONS

With traffic at the level of the past few years the exemptions of cargocarrying space in shelter decks and superstructures amount to approximately 2,816,000 net tons per year. Of these, about 999,000 tons are on the United States vessels and approximately double the quantity, or about 1,826,000 tons, are on foreign vessels. United States vessels form over 45 percent of the total

transits but their exemptions are about 32 percent of the total for these types of vessels.

66

United States vessels have predominated in the passenger trade through the Canal and form by far the greater part of the traffic of passenger craft. Under a liberal interpretation of the term "cabin" and a change in the definition of the term "deck to the hull ", exemption of large blocks of space used for the accommodation of passengers has been secured under the United States rules. This amounts to approximately 848,000 tons per year, of which 630,000 tons are on United States vessels and 218,000 tons on foreign ships. The figures for the traffic in the fiscal year 1934 have just been computed and are indicated in the accompanying sketches, figures 1, 2, 3, and 4, numbered 1 to 4, inclusive.

The history of exemption of useful space from inclusion within net tonnage under registry measurement makes it obvious that a form of net tonnage which embraces actual cargo and passenger space, as is the case with the Panama Canal rules of measurement, will show materially greater tonnage than the registry tonnage. A comparison of the aggregate United States registry tonnage measurement of commercial vessels using the Panama Canal during the entire year 1917 showed that the registry tonnage was 81.09 percent of the net tonnage as determined under Panama Canal rules. By extension of exemptions and adjustments of vessels to take advantage of them the tonnage under the United States rules has decreased relatively year by year. In the fiscal year 1934, the last for which we have complete figures, the aggregate United States equivalent net tonnage was 71.21 percent of the aggregate Panama Canal net tonnage. The drop from 81 to 71 percent from the earlier year to the later indicates a large decrease in the relative measurement under the United States rules. It will continue to decrease. During the past year 38 vessels which were reconditioned in order to take advantage of technicalities in the rules secured a reduction in their net tonnage under United States rules from an aggregate of 215,241 tons to 163,507 tons, or 24.4 percent.

This continued whittling down on the measurement of revenue-earning spaces decreases unwarrantedly the amount of tolls which can be levied on the ships and it may also be inequitable as between vessels otherwise comparable, because certain features of construction which have no bearing otherwise on the capacity of the ship for handling cargo or passengers may make one eligible for reduced tolls while the tolls on the other are relatively higher.

Under the principle of lower charges on a vessel when it is not earning revenue, i. e., when it is without passengers or cargo, it was the intent of Congress and the President that tolls should be lower on vessels in ballast than when laden. The President's proclamation set the relation at 40 percent less. However, in the use of the dual measurement system it has been found that frequently the tonnage under the United States rules has been so greatly reduced that the tolls charges levied at the ballast rate, times the Panama Canal net, are in excess of $1.25 times the United States net. The excess is not collectible. Such vessels then pay the same rate when in ballast as when laden. A check of traffic showed that during 1 month 40 such vessels, of which 2 were American and 38 foreign, paid tolls which were less than 72 cents per net ton, Canal measurement, and would therefore pay the same tolls whether laden or in ballast.

ABNORMAL VARIATIONS; OWNERS' RESENTMENTS

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 transitted with all passengers and baggage aboard as they were for transitting 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.

Among the various instances of adjustment aboard vessels to take advantage of technicalities in the rules was that of a ship which converted a linen locker 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 cloak room, secured exemptions of passenger space totalling 3,319 tons.

The regulations covering measurement of vessels under United States registry rules are promulgated in Washington by the Bureau of Navigation, and interpreted by that office, whose decision is final. At the Canal the net tonnage is derived under the regulations in force at the time and the conditions existing on board the vessel when it applies for transit. Frequently vessels arrive in conditions involving some infraction of the regulations 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 derived 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 dişcharge of the master or mate of the vessel or whoever is deemed responsible. These variations in conditions may cause wide variations in the actual tolls 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.

WITH RELATION TO SAFETY

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. G. Tawresey, U. S. N., 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 shelter-deck exemption do not make the vessel safer but make 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.

There is general agreement that except for the virtue of allowing lower toll charges to those ships which can secure exemption of space the present dual system is unsatisfactory. The Canal administration has consistently recommended congressional action making possible the adoption of a better method, and a former head of the Bureau of Navigation has on several occasions recommended such action in his reports to the Secretary of Commerce. David Arnott, chief surveyor of the American Bureau of Shipping, has pointed out that the present situation cannot be considered satisfactory either to Canal authorities or to shipowners, as a dual system of measurement is frankly a nuisance as well as being unsound in principle. Representatives of the steamship interests recognize that the dual system is unsatisfactory and have stated that they favor a single system of measurement but they object to any measurement system that would result in increased charges to any of their members.

This attitude on the part of the vessel operators would seem logical from their point of view. On the other hand the present system produces such wide variations in the collections per ton of actual earning capacity, as measured under Panama Canal rules, which are admittedly just, that the present charges cannot be accepted as equitable.

During the fiscal year 1934 the average of tolls collected on lade: French vessels was 79.7 cents per Panama Canal net ton. On the Norwegian vessels in the same year the tolls average 80 cents per ton; on the German, 82.8 cents; Dutch, 83.3 cents; United States, 87 cents; British, 87.6 cents; and on Japanese 99.7 cents. On all laden ships taken together the average was 86.9 cents. It is seen that the French vessels average 20 cents less per ton than the Japanese and 7.3 cents less than the United States.