Mr. PETERSEN. We can't question that-legally honest-but if you were running a ship and your operating losses put you in the red every trip and you weren't making a dollar and the law permitted you to make such changes legally, wouldn't you do it to offset your operating costs?

The CHAIRMAN. I would, but if I were a responsible legislator I would change the law in which such tricks are performed.

Mr. PETERSEN. That is a matter that you gentlemen will have to consider, and we hope you will remember that we are in a position where we can't stand any increases.

The CHAIRMAN. You are assuming that there will be an increase in your rates. That is an assumption. Don't you think that a change ought to be made by somebody, legislative or administrative authority, so that this one ship, harking back to the Empress of Britain, will pay practically the same when she goes through our Canal as through the Suez Canal?

Mr. PETERSEN. I am sure, Senator Gore, that if you can do it you ought to do it, but when you sit down and try to differentiate between one individual ship and another, you are going to be in hot water and over your head.

The CHAIRMAN. Now we come to another ship, the one concerning which we had this rule and regulation read a while ago, where one ship of one concern, by painting or not painting the slits between the planks, went through at a less rate and other ships belonging to the same concern were not allowed to do that, and other ships belonging to other and competing concerns were not allowed to do it. And you say you don't think that is right.

Mr. PETERSEN. I say if you can make a remedy you ought to do it. You should make no discrimination. The law should be general in its scope and operation, and no ship should have an advantage if you can do it, but not matter what law you make you are going to find some ships that travel light in ballast, tankers and so forth, that will have a less Panama Canal toll. No matter what you do, when you are trying to legislate for an entire fleet of ships, you will find that in some instances you are going to have discriminations no matter how you word the law.

The CHAIRMAN. It may be impossible to predict such irregularities as this.

Mr. PETERSEN. They tried in some sort of way by which they could present a bill to meet these differentials. I don't believe the Panama Canal could tell you how to do that in relation to individual ships.

The CHAIRMAN. It may be impossible. If it is impossible to correct this irregularity between the Empress of Britain when she passes through Suez and the Panama Canal, if we pass this bill and it isn't corrected then I will think that somebody is guilty of misfeasance in office and ought to be removed.

Mr. PETERSEN. I have no hesitancy in saying anybody who is guilty of misfeasance in office ought to be removed.

The CHAIRMAN. The burden of your complaint against this bill is that it will subject your ships and American shipping concerns to heavier charges.

Mr. PETERSEN. Yes, sir.

The CHAIRMAN. So far as stating that that would be true in the aggregate, that is mere assumption, isn't it?

Mr. PETERSEN. It is only the figures that are provided by the Panama Canal authority itself, and their testimony is that it would increase them in the aggregate, at least that it would increase indiyidual lines of ships.

The CHAIRMAN. Don't you think that these foreign ships that. go through at a lower toll than ours with the same earning capacity ought to have something done to stop that?

Mr. PETERSEN. If you could do it, sure; I would be glad to see it. The CHAIRMAN. Don't you think that these American ships that have these contrivances and connivances to reduce their tolls ought to have that privilege taken away from them and those ships that have not resorted to those methods ought to be put on as favorable a footing as possible?

Mr. PETERSEN. I don't think there are any honest ships then.

The CHAIRMAN. You are a better judge on that point than I am. Mr. PETERSEN. There isn't a ship that hasn't taken advantage of the law to reduce its operating cost and we do not consider that dishonest. We are availing ourselves of a law and the law is on the statute books.

The CHAIRMAN. Getting back to the Empress of Britain, do you think, it is honest to change that cloakroom and made a cabin out of it? Mr. PETERSEN. If it was done entirely within the law.

The CHAIRMAN. That isn't the point. Do you think it is honest? Mr. PETERSEN. I think it might be bad practice, but what did they do it for just to increase transit collection charges?

The CHAIRMAN. He did it to let the American taxpayer pay for the operating of this Canal, instead of requiring the Empress of Britain that used this public utility to pay for the service it got.

Mr. PETERSEN. I hope you will be able to stop every foreign ship that transits that Canal at a disadvantage to our own ships. I hope you can do it.

The CHAIRMAN. I hope so, too.

Mr. PETERSEN. That will be fine for us; we are glad to have any competition removed.

The CHAIRMAN. That is one point we want to do, to give American shipping as fair a footing as possible with foreign shipping, and to see that different American shipping concerns and different American ships are put on an equal and fair footing; that neither has advantage over the other.

Mr. PETERSEN. I hope you can do it.

Senator DUFFY. The House report giving these exact figures says that if the Empress of Britain goes through the Suez and Panama Canals, she pays $11,800 less going through the Panama Canal than through the Suez Canal.

Mr. PETERESN. That is your private management again.

The CHAIRMAN. Which makes Mr. Petersen's concern pay that or else the American taxpayer pays it. We want to stop that.

Mr. PETERSEN. The American taxpayer is not paying it, the private industry is paying for the transit cost and the operation and maintenance of that Canal, not the taxpayer, but private industry is paying for it. I don't think that is fair to put that burden upon the private industry when in every other Government function vou distribute that to the general public in paying for it.

The CHAIRMAN. Do you think that this $11,000 the Empress of Britain escapes ought to be devolved upon your shipping company? Mr. PETERSEN. I certainly don't think so, but it does.

The CHAIRMAN. Then we agree in our efforts to stop that at least. Senator FLETCHER. Mr. Petersen, do I understand that you favor this dual plan of measurement?

Mr. PETERSEN. No, sir; I don't favor it. As a matter of proper handling of Panama Canal regulations, I believe if we could have one system that would not increase the transit cost of our vessels it would be better for us.

Senator FLETCHER. What system would you advocate, the United States system of measurement or the Panama Canal?

Mr. PETERSEN. I wouldn't care which system so long as it was equitable and treated the ships all alike and would make no increase in costs. We can't stand any increased operating costs. That is all we are concerned about.

Senator FLETCHER. You would rather have one agency handle that than to have two.

Mr. PETERSEN. We would rather have the Department of Commerce handle it than the Secretary of War, because we believe the Department of Commerce is ship-minded and knows our problems better than they. In time of peace I think we ought not to be under the Secretary of War anyhow.

The CHAIRMAN. I don't know of any purpose anywhere, Mr. Petersen, and I may not be informed, to increase the aggregate toll collected at the Panama Canal. The point is to distribute those that are paid more equitably as between different countries, different companies, and different ships. That is what we are driving at.

Mr. PETERSEN, I hope you can do it, but this bill wouldn't do it. This bill will increase the tolls. As you will find out when the witnesses come after me on this stand, they will tell you ship after ship and company after company to which it means hundreds of thousands of dollars increase in toll collections if this bill is enacted.

The CHAIRMAN. I think that any ship that has painted its planks and slit the crevice between in order to avoid paying an increase in tolls ought to have its tolls increased.

Mr. PETERSEN. If you can fix it in any law, fix it.

Senator DUFFY. When you gave the list of certain ships and certain amount of percentages

Mr. PETERSEN. That was on a 90-cent rate.

Senator DUFFY. Yes; but I still assume they wouldn't be as high as you paid in the beginning, before these various devices were resorted to, under the law, to get the benefit of a lower transit charge. Mr. PETERSEN. Before they made these changes that don't affect structural capacity or value of a ship, they were paying a higher transit rate. But when they saw there was an opportunity legally to make some changes without impairing the structure of the vessel, they took advantage of it; naturally they took advantage of it because they needed the money and it was perfectly legal, passed upon by the Attorney General of the United States that it was legal, and the authority of the Department of Commerce was legal in interpreting these changes.

The CHAIRMAN. The ships that made these structural changes benefited and got lower rates, and those that did not, did not get the benefit.

Mr. PETERSEN. 'I don't think any didn't make them. Anybody would be foolish that didn't take advantage of that situation.

The CHAIRMAN. I think the record will show some did not make those changes.

We will adjourn until 2 o'clock.

(Thereupon, the hearing adjourned at 1 p. m. until 2 p. m. of the same day.)

AFTER RECESS

The committee resumed its session at the conclusion of the recess at 2:04 p. m., Senator Gore (chairman) presiding.

The CHAIRMAN. What witness will appear next? (The chairman swore Mr. Ewers.)

STATEMENT OF IRA L. EWERS, REPRESENTING THE MCCORMICK
STEAMSHIP CO.,
CO., CHARLES NELSON CO., AND SUDDEN &
CHRISTENSEN, OPERATORS OF AMERICAN-FLAG VESSELS,

1308 F ST., WASHINGTON, D. C.

The CHAIRMAN. State your name and address, your business, and your connection with any of these shipping organizations.

IRA L. EWERS. I am an attorney. My residence is Washington, D. C., 1308 F Street. I appear in behalf of the McCormick Steamship Co., Charles Nelson Co., and Sudden & Christensen, operators of American-flag vessels that would be affected by this legislation.

I would like, at the outset, to try to clear up several points that were raised this morning as to the effect in general of this legislation. The CHAIRMAN. Take your own course, Mr. Ewers.

Mr. EWERS. Studies prepared incident to the consideration of similar legislation a few years ago demonstrated that, while the aggregate of toll collections might remain the same, the distribution of the toll burden would be materially affected. That study, which was made and based upon the $1 rate then proposed, showed, in effect, that approximately 53 companies would have their tolls reduced $1,000,000 a year.

The CHAIRMAN. That is American companies, Mr. Ewers?

Mr. EWERS. American companies formed the basis for that study, and 51 companies would have their tolls increased $2,000,000 covering the same period, which I think was for 13 months rather than a year. That ratio of readjustment would probably remain constant at the 90-cent rate, although instead of the Canal revenues being increased $1,000,000 a year, as was then proposed, if they remain the same the savings and the increased costs would vary in proportion.

I think it might also be helpful to the committee to appreciate that that readjustment is more with respect to classes of vessels than as to individual vessels. The studies conducted at that time established that the so-called "general cargo" type of vessel, and the combination passenger and cargo type will have to bear practically the entire burden of the increases under the readjustment, whereas other types of vessels, as classes, would enjoy the benefits of the reduction. The CHAIRMAN. What would those classes be?

Mr. EWERS. Those classes, in general, would consist of what are known as "tank steamers."

The CHAIRMAN. You mean they would get the benefit of the reduced rates.

Mr. EWERS. They would get the benefit according to the studies at that time. Passenger vessels would have their toll burden considerably increased, as later witnesses will testify in detail.

The CHAIRMAN. At the present time they do not pay on passengers? Mr. EwERS. They do not pay a toll tax on passengers, although the statutes authorized $1.50 a head on passengers transiting the Canal. No such collection has ever been made.

The CHAIRMAN. What about passenger space-cabins and staterooms?

Mr. EwERS. The technical rules relating to passenger space I would prefer be developed through other witnesses. The three companies for whom I appear today do not carry passengers.

The CHAIRMAN. Passenger space and passengers go toll free now? Mr. EWERS. I believe part of the passenger space today is a subject of tolls.

Senator DUFFY. Whom do you represent?

Mr. EWERS. The McCormick Steamship Co., Charles Nelson Co., and Sudden & Christensen.

Much of the detail as to the operation of the dual system was dealt with at considerable length this morning, and to save time I will not repeat other than to summarize that it is not desired, apparently, by the Canal officials, to increase in the aggregate their tolls. We suspected, from studies in the past, that such an intention existed, because actual increases in the gross would have resulted, but with a 90-cent rate it is estimated that the Canal authorities will not get any additional revenue in the aggregate.

The CHAIRMAN. Mr. Ewers, just a minute. Where can the studies you referred to a moment ago be obtained? Who made them? Mr. EWERS. This legislation, Senator, has been the subject of rather intensive consideration somewhere in the neighborhood of 20 different times before the House Committee on Interstate and Foreign Commerce, and the Senate Committee on Commerce, and I believe on one previous occasion by this committee when Senator Deneen was connected with it. The various studies to which I refer are available in the printed hearings on these various proposals. So we assume, at the outset, that this legislation is not going to produce any additional revenue to the Canal officials, and so long as they-the present Governor of the Canal and other witnesses who have testified-admit that the cost of the dual system is not great (I am quoting, now, from Governor Schley's recent testimony), we feel there is not a justification for a change:

It is merely a complication and requires the employment of one or two, and perhaps more, expert men and measures. It is merely a complication, and does cost much to measure the ship both ways.

The annual reports of the Governor of the Canal show that the Canal is earning, upon its capitalization, a fair return, so that additional revenues are not needed, apparently. We think that the revenues they have earned is a very commendable showing in these times, when a large portion of the shipping of the world is tied up due to lack of cargo.

During the 20 years, gentlemen, that this legislation has been considered, research fails to disclose any instance wherein this legislation has been advocated by others than the officials of the Panama Canal or others at their instance. Not a single shipping company or shipper