or criticism to have fair chance to present their views. If you gentlemen will arrange the order of your appearance we will be obliged to you. (The chairman swore the next witness.) STATEMENT OF W. J. PETERSEN, PACIFIC AMERICAN STEAMSHIP OWNERS' ASSOCIATION OF THE PACIFIC COAST, 256 MISSION STREET, SAN FRANCISCO; RESIDENT ADDRESS, 1308 F STREET, WASHINGTON, D. C. Mr. PETERSEN. I represent the three big Pacific coast organizations on the Pacific coast representing about 25 percent of the merchant marine of the United States and the water-front employers' organization of San Francisco. The CHAIRMAN. Are they associations of different shipping companies? Mr. PETERSEN. Yes, sir. The CHAIRMAN. How many companies all together? A difference of opinion between commercial shipowners and operators, the Secretary of War and his predecessors, and the Governor of the Panama Canal, with some of his predecessors, has caused 21 bills to be introduced in the Congress during a term of years, in an endeavor to change existing laws in relation to transit toll collections, a dual system of measurement of vessels and the jurisdiction of Panama Canal authorities. Three times the House has passed bills proposed by the Secretary of War and the Governor of the Canal, but so far the Senate has not acted favorably upon such bills. Let me try, if I may, to explain these differences of opinion in plain language, because I am of the opinion that in most instances the complexity of the problem has been confusing to the Members of the House and Senate committees who were as a general rule not familiar with merchant-marine problems. When the Panama Canal was opened in August 1914 transit rules for the collection of tolls were placed in operation by the proclamation of the President of the United States. These rules had been prepared by Prof. Emory Johnson, a distinguished authority on such matters, and were formulated in an endeavor to fix Canal transit rates on the entire earning capacity of transiting vessels (excluding certain engine and other spaces) based upon 100 cubic feet of carrying capacity in a ship to the ton. These original rules were known as the 66 Panama Canal Rules ", and the rates fixed in the rules were $1.20 per ton for a loaded vessel and 72 cents per ton for vessels in ballast, and have not been changed up to the present time. The CHAIRMAN. What was the high mark? Seventy-five was the low. Mr. PETERSEN. The high mark was $1.20 in the Panama Canal Rules and 72 cents per ton for vessels in ballast. A controversy arose between the Canal authorities and certain Pacific-coast ship operators concerning cargo carried on the open deck and exposed to the sea and the weather. These shippers contended that cargo so carried was not subject to transit tolls. The Panama Canal authorities, however, contended that inasmuch as cargo was carried on the open deck it represented certain earning capacity, and therefore should be included in Panama Canal toll collections. Thereupon an appeal was taken to the Attorney General of the United States, who made a ruling that tolls should not exceed $1.25 per registered ton in laden vessels and 75 cents per ton in vessels in ballast, basing his contention upon the United States registry rules that have been in force in the United States for many years. On June 15, 1914, section 5 of the Panama Canal Act was so amended that in the transit of vessels through the Panama Canal no toll collections should be required in excess of the rates provided in the United States registry system. The regulations and enforcement of United States rules is placed by law in the Department of Commerce and under the immediate jurisdiction at the present time of the Director of the Bureau of Navigation and Steamboat Inspection. The decision of the Attorney General placed a dual system of measurement in operation, so we have two sets of rules, one by the Panama Canal regulations providing $1.20 per ton for a loaded vessel and 72 cents per ton for vessels in ballast, and another, the United States registry system providing $1.25 per ton for a loaded vessel and 75 cents per ton for a vessel in ballast; and, pursuant to the opinion of the Attorney General, that there should be no excess collections beyond that provided in the United States registry rules, the jurisdiction of the United States registry system and the interpretation of the rules in relation thereto comes under the Department of Commerce. Senator FLETCHER. They seem to be nearly the same. Mr. PETERSEN. As you will note, gentlemen, the President has just as much jurisdiction over the Secretary of War as he has over the Secretary of Commerce. This jurisdiction has been unsatisfactory to the Panama Canal authorities, who believe it is their right to have entire control of the transit of vessels and the collection of tolls on vessels transiting the Canal, and they have sought from time to time to change existing law so as to place the jurisdiction in the hands of the Panama Canal authorities, as this bill would do. It is evident from testimony that has been adduced from time to time that the Panama Canal authorities want an increased revenue in transit toll collections, and this bill would give them an increased revenue regardless of the fact they say there is no such intention. The CHAIRMAN. On what do you base the statement that they do want an increase of revenue when they say they don't? If you have some evidence or proof on that point we will be glad to have it. Mr. PETERSEN. Let me show that as I go on. Senator FLETCHER. Does that eliminate deck loads? Mr. PETERSEN. Yes, sir; we never have paid any toll collections on deck loads, because originally when the Panama Canal was passed it was intended to exempt coastwise vessels because the intent of the Panama Canal Act was in the first instance to cause only sufficient collections to pay the operating cost of the Canal and the Canal was never intended to be a money-making institution. The CHAIRMAN. Mr. Petersen, do you mean that the toll should be sufficient to cover operating expenses of the Canal and that it never was the purpose to collect enough to pay a return on the capitalization of the Canal? Mr. PETERSEN. Oh, no; I don't mean that. The CHAIRMAN. I wanted that point clear. Mr. PETERSEN. I don't mean that, as I will show as I go along. What I am trying to do is to show in plain English without any technical language just what we understand the situation to be. Now comes the question, What is the cause of the difference between these two Government authorities and commercial shipowners and operators? The United States rules of measurement provide that to determine the registered tonnage of a vessel the hull shall be the basis for such measurement. The hull includes all the capacity of the vessel from the main, or tonnage, deck down, of course with the exclusion of certain spaces for engines, and so forth, already referred to. This measurement is predicated upon 100 cubic feet of carrying capacity to the ton, just the same as the Panama Canal tolls, but the United States rules, in part, exclude from such registered capacity that part of the vessel that is above the tonnage deck and not a part of the hull proper. In other words, all the part of the ship that may be considered open to the sea and the weather is not measured to determine the registered tonnage of the vessel and, therefore, not included for Panama Canal transit toll collections. On the other hand, the Panama Canal rules include all such open spaces that are exposed to the sea and the weather, as the decks and the passenger-carrying spaces, and they would include these spaces as part of the cargo-earning capacity of the ship and would charge tolls for transit purposes thereon. The CHAIRMAN. Wasn't there an error in your statement prior— didn't you mean the United States rules? Mr. PETERSEN. Under the Panama Canal rules they could collect these, but not under the United States rules. Understand the Panama Canal tolls include all these open spaces but in the United States registry rules many of them are excluded. The CHAIRMAN. Yes. Senator DUFFY. You just mentioned about what was the hull and what was the deck. In these reconditionings that have taken place they have changed that. Mr. PETERSEN. If you will let me go along with this I think I will explain that. Senator DUFFY. That is true, is it not? That you can under these reconditioning processes change what was known as the hull and the deck? Mr. PETERSEN. Certain portions of the hull, certain openings that Mr. Sill spoke of, scuppers, the hatch coamings and other things, have been changed, not illegally, absolutely under the right of law and the interpretations of the Department of Commerce. The shipowner has taken advantage of these things under the law in order to do what? To reduce his operating overhead. The CHAIRMAN. The definition of deck to the hull has been changed also, has it not? Mr. PETERSEN. If you will let me go along with this, I think I can explain it. Senator FLETCHER. Both of these rules are based on net tonnage. Mr. PETERSON. Yes, sir; but there is a different understanding of what net tonnage comprises. Therefore the Governor of the Canal and the Secretary of War desire to revoke the provisions of the United States Registry Rules in order, first, to secure a single system of measurement, and, second, to have exclusive jurisdiction and the right to administer Panama Canal rules for transit purposes, for by so doing they would be able to include all these open spaces on ship board and thereby secure an increase in transit revenue. 1 It may be confusing to the members of the committee as to how it would be possible to secure an increased revenue by the operation of Panama Canal rules that, in this bill, provide for $1 a ton for a loaded vessel and 60 cents per ton for a vessel in ballast, when the United States rules provide for $1.25 for a loaded vessel and 75 cents for a vessel in ballast. An understanding of this difference will greatly clarify any consideration of the whole subject matter. To illustrate: One of the companies transiting the Panama Canal has three large, new, modern ships. These three vessels now pay $625,000 a year in Panama Canal tolls. If this bill were enacted into law and the Panama Canal rules were in operation, these same ships would have an increased transit cost of $297,000, or something like a 50-percent increase. Senator FLETCHER. How many trips? Mr. PETERSEN. Every trip. This is for an annual proposition, an annual turnover. Senator FLETCHER. How many trips does that cover? Mr. MCCARTHY. Fifty-two transits a year. 52 transits a year. Senator FLETCHER. Both ways? Mr. PETERSON. Yes; both ways. Those 3 ships make The CHAIRMAN. Mr. Petersen, that assumes that under this act the Panama Canal authorities would include lounges and social halls as earning capacity and also where the crew sleep, the crew that serves the passengers sleep. Mr. PETERSEN. I don't think the crew comes into it. The CHAIRMAN. The crew that serves the passengers. Mr. PETERSEN. I think the general crew quarters are exempt. The reason for this is that each of these ships under the United States registry system is 9,800 registered tons, while under the Panama Canal rules they would be registered at 18,000 tons for Panama Canal transit charges. Many other illustrations could be made in relation to the increased transit costs by reason of the passage of this bill, which I will not attempt at this time to enumerate. I would not have the committee understand that all commercial vessels would be subject to a 50 percent toll increase, as each type of ship has its own structural differences. In an endeavor to make these so-called open spaces " clear to you, I would state that a flush-deck vessel, like a submarine, or some of the old-type oil tankers-that is, a vessel whose main deck is practically the highest point of the vessel's hull, has but little superstructure above the main or tonnage deck-and on such a vessel the Panama Canal rules and the United States rules, so far as the collection of tolls is concerned, would be about the same, as such vessels would have no cargo space above the main deck. But in a modern steamship or 66 such vessels as were constructed during the war, structures have been erected above the main deck on cargo vessels, such as the poop, the bridge deck, the forecastle, and shelter decks, and on passenger vessels, staterooms, promenade decks, boat decks, and shelter decks. The United States rules do not include all these structures above the main deck for Panama Canal collections, but the Panama Canal rules would include some of them for toll-transit purposes. It hapthat these so-called " " at times are used for carrypens open spaces ing cargo, and this capacity for cargo ranges between 20 and 1,000 tons of cargo space, depending upon the class of vessel considered. It is the contention of the Governor of the Canal and the Secretary of War that these structures above the main or tonnage deck are capable of change so as to make them practically safe from the weather and the sea and by manipulation, under the rulings made by the Assistant Director of Navigation, Department of Commerce, cargo is carried in these spaces that escapes Canal tolls under United States registry rules. So this bill is presented to correct that condition and place the control under the Panama Canal rules, as provided by this bill. SENATOR FLETCHER. That cargo would remain in the toll. Mr. PETERSEN. It would under this bill. Cargo in the hold would be included and cargo on deck would be included. If the vessel carried more than 20-percent cargo capacity on deck, anything above that would be included in the toll. Senator FLETCHER. They do now carry on-deck cargo? Mr. PETERSEN. Yes; without cost. The CHAIRMAN. And they could construct these vessels so as to carry lumber and carry 75 or 80 percent of it on deck. Mr. PETERSEN. Yes; but if you take into consideration that there hasn't been a single cargo-carrying vessel in the intercoastal trade constructed for many years and nobody has any money to build any ship for the intercoastal trade, it is very unlikely that any new ships will be constructed for the purpose of carrying lumber cargoes alone. The CHAIRMAN. So they at least are not in any terror of these changes. Mr. PETERSEN. But some of the present ships carry a little more than 20 percent. One ship I know of carries 25 percent more than its cargo capacity on deck. The CHAIRMAN. And it would pay on the excess 5 percent. Mr. PETERSEN. Yes. While the Panama Canal authorities criticize this practice that reduces toll collections, they do not charge that the Department of Commerce in its interpretations violates any marine law provided by the navigation laws of the United States. While the Panama Canal rules endeavor to exact tolls upon a ship's total earning capacity, it should be remembered that no matter whether the ship is completely loaded or has only a small amount of cargo, tolls are charged for the entire carrying capacity of the ship for each transit, and there are no deviations from this rule except when a ship transits the Canal in ballast with absolutely no cargo aboard-in other words, if she had a hundred tons on board and the registered capacity was 3,000, she would pay on 3,000-and in such case the 72-cent or the 75-cent rate applies. So the committee should take notice that while the entire cargo capacity of a vessel is |
