quired by law that 6 months' notice shall be given of any change in toll rates; second, it is considered necessary that ample time be given for modifying the rules of measurement; and, third, it is desired that shipping interests should have a considerable period in which to prepare themselves for the changes which would necessarily take place, following the passage of the act.

The proposition is not to increase the aggregate amount of tolls collections. The purpose is to remedy defects in the law and to remove an unjustifiable situation. In House Report No. 91 to accompany H. R. 5292 is quoted a letter from the Secretary of War, dated March 26, 1934, stating that he will recommend to the President "the adoption of a tolls rate on laden vessels of not more than 90 cents." The Secretary stated that this rate on the 1933 tonnage would have produced approximately the same aggregate total as was collected in 1933 under the existing system.

The conclusions of the House committee in reporting on this bill (Rept. No. 91) are as follows:

The hearings and consideration of this subject have led the members of this committee to reach these conclusions:

(1) That the dual system controlling measurements and toll charges of vessels using the canal should be abolished;

(2) That a single system of measurement and toll charges should be established under rules and regulations to be prescribed by the President, based primarily, as to commercial vessels, on the principle that tolls should be charged according to earning capacity;

(3) That developments in ship construction and operations since the Panama Canal rules were adopted, as well as experience in the administration of the canal, have made it desirable that the rules of measurement and tolls under that system should be revised with a view of modernization and practical application to existing ship construction and operation for the proper equalization of the toll burden as between vessels using the Canal;

(4) The initiation of new rates should harmonize with the economic conditions under which they are imposed and should be subject to revision as economic conditions and the traffic at the canal may warrant; and

(5) That an equitable distribution of the toll burden rather than an increase of the aggregate tolls collected is the justification for this legislation. Senator BARBOUR. Could I ask the witness one question? The witness spoke of the section of the present law and the anxiety to remove so-called "inequalities ", and that the total aggregate tolls would not be increased. I would like to ask if these inequalities exist between United States registered ships, one with another, or between American ships and foreign ships.

Mr. SMITH. It exists between United States registered ships, and it exists especially between United States ships and foreign ships. Senator BARBOUR. What I am particularly interested in knowing is whether this inequality, if ironed out, is going to be adverse to ships of United States registry.

Mr. SMITH. Absolutely no.

The CHAIRMAN. We have statistical data on that very point, showing how the present rules operate against American vessels in favor of foreign vessels.

Senator FLETCHER. The increase may not amount to very much, but in respect to different lines and different ships it may amount to a great deal of difference. That word " aggregate " is somewhat like the word "average." A man was traveling on a train and he arrived at his destination. He wasn't quite sure what tip he should give the porter and he asked the porter what was the average tip

for that trip. The porter scratched his head a little and said, "Well, boss, I think the average would be about a dollar."

So the passenger handed him a dollar bill and he said, "I am much obliged to you, boss, that is fine, you are the first man who has come up to the average on this trip.". [Laughter.]

This word "aggregate" is a little disturbing to me.

Senator BARBOUR. I simply meant, Mr. Chairman, that I should be much less interested in ironing out inequalities if the result was going to help the ships of foreign registry than I would inequalities between ships of United States registry.

The CHAIRMAN. A table was submitted a few minutes ago showing that this really operates in favor of foreign vessels at present. There is only one foreign country that pays a higher rate of tolls than the United States and that is Japan. A number pay less, but not only that, it discriminates between vessels of our own registry, American registry, and not only that (this was stated before your arrival), the same vessel under the existing system pays more in one transit than another; by closing up a hole it will get a larger tonnage, by opening a hole on the deck it gets a reduced tonnage. It leaves it to the manipulation of the ship owner to control the amount of tolls he pays instead of its being based, as this bill undertakes to base it, on the earning capacity of the ships, which would treat all vessels alike.

Senator BARBOUR. I thank the chairman. I, of course, will study the tables and the rest of the record.

Mr. SMITH. That completes the general statement and the general presentation on our behalf.

Senator DUFFY. I notice the first article in this same Marine Review (not the article that was referred to), the second sentence says:

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.

As I understand your testimony you think there isn't much basis for that apprehension.

Mr. SMITH. No basis.

The CHAIRMAN. Read the next sentence, Senator. Doesn't that explain it?

Senator DUFFY (reading):

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.

The CHAIRMAN. This will raise the tolls paid by some vessels which have taken advantage of this dual system to cut down their tonnage by making changes.

Senator DUFFY. I have no doubt of that, but they made a bald statement as though it applied generally, and I understood your testimony to be to the contrary.

The CHAIRMAN. If any vessel enjoys a privilege under the present system, due to manipulating its structure, that privilege will be taken away and put on a standard that will be applicable to all ships.

Mr. SILL. May I say a word in connection with that? The rate the President sets will determine the amount of tolls that will be collected. Heretofore the Canal has always asked for $1 a ton because at the time the legislation was first proposed that would have returned to the Canal approximately the same amount as they were then receiving. Since this continual decrease in the tonnage of vessels of all nations has caused a loss to the Canal, as we call it, of considerable amount, we figure that 90 cents at the present time would return to the Canal the same amount of money that we are now receiving. It will be redistributed, however, over all the ships of all nations.

I worked up a table for my own information to see what the effect would have been had this 90-cent rate been put in effect in 1930 when the bill was then before Congress, and I found that the American shipowners would have saved two million and some dollars; they would have paid that much less than they actually did pay. Foreign shipowners would have paid something over a million dollars less than they actually did pay.

Senator BARBOUR. That $2,000,000 saving that you refer to, was that in the case of any particular line or lines, or would that have been pretty well distributed as a saving over all American ships?

Mr. SILL. Practically over all American ships. During 1933 a number of the lines which are the best customers of the Canal reduced the tonnages of their ships. There were some 38 ships reduced an average of 24 and a fraction percent, and those were divided between the cargo carriers and the passenger ships. The passenger ships secured reduction by exempting cabins, the cargo vessels by exempting cargo space.

Senator FLETCHER. Under that rule you mentioned, there would have been a reduction of something like $3,000,000 in your tolls. Mr. SILL. Yes, sir.

Senator FLETCHER. You couldn't stand that very well.

Mr. SILL. We got it anyway. That is a comparison of what they actually paid and what they would have paid at the 90-cent rate. The Canal has always contended that it isn't a question of getting more revenue, it is to stop this continual decrease, something over which we have no control. They can continue to reduce the tonnage of the vessels.

Senator FLETCHER. May I ask, Mr. Smith, how foreign tonnage compares with domestic tonnage in the use of the Canal?

Mr. SMITH. It is something like 55 percent foreign and 45 American as I remember the figures.

Senator FLETCHER. Can you give us the figures on the collections in the Canal now?

Mr. SMITH. This last year the total tolls collections were $24,000,000, this year they will probably run between 23 and 232 million dollars. The highest years were 1928, '29, and '30, when they went up to about $27,000,000. For the year 1933 they were $19,000,000.

The CHAIRMAN. The cost of operating the Canal, Senator, is about $10,000,000 a year. The carrying charge on the cost is about $15,000,000 a year, making the required earnings about $24,000,000 or $25,000,000 in order to cover both expenses and service on the capitalization of the Canal.

There is just one point I would like to get in. Mr. Sill here was telling me yesterday that certain coverings of these openings under the rulings of the Commissioner of Navigation where they paint the boards that they cover with and the paint covers the cracks, then they have to pay on the tonnage within. If you take a knife and slit the paint between the boards then the space within is exempt from the payment of tolls.

Senator DUFFY. It is a good thing they can't put holes in the bottom of the ship. [Laughter.]

Senator FLETCHER. The controlling authority ought to disregard things of that kind.

The CHAIRMAN. But we have some rulings here, Senator, that I will insert--one or two-by the Commissioner of Navigation showing how extremely technical the rulings are upon which technical rulings turn the assessment or nonassessment of the space for tolls. I will insert that in the record.

(Ruling referred to is printed on p. -.)

Now, gentlemen, those who are here to appear, we want every point of view to be fully represented, and every school of thought