Secretary of War) to those in the bill under consideration, S. 2288, in these respects; namely:

(a) S. 162 provides a definite relation between the loaded and ballast tolls.

(b) S. 162 excludes any charges for deck loads.

With reference to a definite relation between the loaded tolls and tolls for vessels transiting in ballast, I wish to point out the obvious unfairness of charging large tolls when a vessel has no ballast-voyage earnings and it is therefore necessary to state such a principle in the bill and provide for the large percentage differential that is fair and reasonable. That has been eliminated in this bill and it just provides for it to be less. It doesn't provide a fixed percentage less.

The CHAIRMAN. That is due to the fact that the original law enacted gave the President power to fix the differential and did not prescribe a differential; he might make it even greater than this first bill that you refer to there, if the second one passed.

Mr. WARLEY. Senator, the general feeling among the shipping people is that we want to have some safeguards in this legislation and we want to know as closely as can be known just what we are going to be called upon to pay. There has been a lot of discussion here about the fact that, while a dollar is stated in the bill, the rate that will be recommended is actually going to be 90 cents. Ninety cents would be satisfactory to us but it wouldn't be satisfactory to some others, but a 90-cent maximum in the bill is far preferable from our viewpoint to a dollar maximum. If that is the intention, if that is what the Canal authorities propose, we think it should be stated in the bill. think that there should be a very definite percentage relation stated between ships transiting the Canal in ballast and ships transiting it loaded, for the reasons that I will deal with briefly later on. Senator FLETCHER. You don't have any deck load.

We

Mr. WARLEY. Yes, sir; we have deck loads in the intercoastal ships of lumber. I have some reference to that, too.

The CHAIRMAN. I think probably the reason for this latitude between the top and bottom maximum and minimum was to allow some freedom of action such as they have exercised with reference to the Suez Canal and the tolls charged there. They have been changed 16 times, I understand, in perhaps as few years as 16, varying with the condition of the traffic.

Mr. WARLEY. I don't know definitely, Senator, but it is my impression that there has never been any change in the ratio of loaded to ballast tolls which is 50 percent in the Suez Canal. Now some of these gentlemen that have studied it can say whether that is correct or not.

Mr. SILL. There haven't been many changes, have there, Mr. Smith? I believe the Suez Canal originally had 40 percent off, the same as we had. In fact, we copied from the Suez. Mr. Emory Johnson made that recommendation to the President and he adopted that recommendation, but the Suez Canal changed that. They also changed the allowance for bunker fuel because they found vessels leaving England and arriving at Suez would not use up enough coal. Mr. WARLEY. I wasn't talking about that phase. I know; I have had a lot of experience running ships through the Suez Canal.

Mr. SILL. To get them to come by way of Suez instead of Panama they made a liberal allowance for fuel.

Mr. WARLEY. All I was referring to was the ratio between loaded and ballast transits. I know that is or has been 50 percent.

The CHAIRMAN. Have you some of the same vessels that have passed through both canals?

Mr. WARLEY. No, sir; none of these vessels have ever passed through the Suez Canal. They are in an entirely different trade. The CHAIRMAN. Do you have some of substantially the same size, corresponding ships, going through the two canals?

Mr. WARLEY. No; I haven't any ships that have gone through the two canals and correspond to these at all.

The CHAIRMAN. No basis by which you could furnish us a statement showing the difference in tolls?

Mr. WARLEY. I think it would be possible to take some typical-typeships that go through and make some comparison, But I haven't such a comparison.

Senator FLETCHER. I think that would be interesting if you could give us that.

Mr. WARLEY. If you would like to have it I would be glad to endeavor to furnish it.

The CHAIRMAN. We wish you would furnish it. (Information referred to is as follows:)

Comparative statement of Suez and Panama Canal tonnages and rates

For additional comparisons of Panama Canal and Suez tonnages, see page 1012 of Merchant Vessels of the United States, 1933 compiled by the Department of Commerce.

Further comparison of Suez rates may be found on page 120.

Mr. WARLEY. The principle of reduced tolls when not loaded with cargo is well established. The practice at the Suez Canal is to charge 50 percent of the full rate and at the Panama at present 40 percent. The CHAIRMAN. Forty percent of the full rate?

Mr. WARLEY. Forty percent less than the full rate. That has been recommended by the Canal authorities to be further increased, the percentage spread.

As operators of American bulk-cargo vessels we object to changing this provision from the definite requirements of S. 162 to the indefinite requirements of S. 2288. Attention is called to the report of the Governor of the Panama Canal for the year 1934, page 88, reading as follows:

The heavier charges on ballast ships caused by the existing rules are one element in the interference with levying equitable charges. Assuming that they should not pay over 60 percent of the amount paid when laden, which was accepted as proper when the Canal rules were made, they are now being rather heavily overcharged as compared with laden vessels.

Attention is also called to the annual report of the Governor of the Canal for 1934, page 28. The third paragraph states:

The Secretary of War indicated in 1934 that he would recommend a rate of 90 cents on laden ships, ballast vessels 60 percent less.

Reasons for these recommendations of the Canal authorities are not hard to find.

Senator FLETCHER. Were they carried into effect?

Mr. WARLEY. No; they were just recommendations. They have not been carried into effect.

NOTE. The Governor of The Panama Canal advises by radio dated Apr. 6, 1935, that the "statement on p. 28 of annual report that Secretary of War would recommend a rate on 'ballast vessels 60 percent less' is an error. The Secretary of War in letter to Mr. Lea dated May 26, 1934, stated: 'I will recommend to the President after the enactment of the legislation with the proposed maximum rate of $1 per ton as now provided in the bill adoption of a tolls rate on laden vessels of not more than 90 cents.'

Examination of figures recently furnished to the American Steamship Owners Association by the Governor of the Panama Canal shows that United States tankers actually paid in the fiscal years 1933 and 1934, tolls of $3,389,831 on a Panama net tonnage of 3,830,700 tons, equivalent to 88.6 cents per Panama net ton, whereas with the ore carriers the tolls paid per Panama net ton combined-loaded and ballast was 94.6 cents. Our bulk ore carriers are in the same category with tankers with respect to ballast passages, tolls, etc.

In other words, the ore carriers and the oil tankers going one way in ballast without any cargo paid tolls equivalent to these figures I have just read on the basis of the net Panama Canal tonnage.

The CHAIRMAN. That was combined, wasn't it; ballast and laden ships?

Mr. WARLEY. Yes.

The CHAIRMAN. Is there any way to segregate it?

Mr. WARLEY. Yes; I have that segregated. So there will be no confusion, the equivalent rate for loaded transit per Panama net ton on the passenger lines was $0.6926; on the shelter-deck freighters, $0.7619; other types of freighters, $0.9511; oil tankers, $1.0312; ore carriers, $1.162.

The CHAIRMAN. That is on the laden vessels?

Mr. WARLEY. That is the tolls paid laden reduced to the basis of the Panama net tons.

The Governor's figures show that United States ships with openshelter decks actually paid tolls of $1,560,696 on a Panama net tonnage of 1,982,010 tons, equivalent to 78.74 cents per Panama net ton. If the Secretary of War's proposal of a 60 percent reduction for ballast passages was now in effect with the present loaded toll rate, instead of the present 40-percent difference, the tolls paid by United States tankers would have been reduced $423,608, and the tolls per Panama net ton for tankers would be 77.43 cents and for ore carriers 81.3 cents, which are in closer agreement with the 78.74 cents tolls paid on the United States shelter-deck ships.

In other words, even though the ore carriers go through without any cargo one way and pay tolls loaded, if the total tolls they pay are reduced to the Panama net they are paying 81.3 cents compared with 78.74 cents that the cargo boats pay which are loaded both ways. There has been testimony before the committees of Congress in connection with Panama Canal tolls in which the term "earning capacity" has been used without a clear definition of what the term means. Some people, including the Canal authorities, have taken it to mean the space within the vessels in which cargo-earning freight can be stowed. Others have taken it to mean the weight of the cargo stowed within the vessel. Based on such viewpoints and figures, various deductions have been made. If Panama Ĉanal tolls are to be based on earning capacity by weight, it is obvious that the ability to pay tolls should take into consideration the revenue per ton of cargo. It is obviously unfair to attempt to base canal tolls on a deadweightper-ton basis when, for example, the revenue on a bulk carrier is $3 per ton and averages on a shelter-deck freighter for a year's period $16.33 per ton. Obviously a vessel with one-fifth the cargo in tons, paying $16.33, is earning more freight than a vessel with five times the tons paying $3 per ton, but on a deadweight-per-ton basis for tolls, the vessel with the smaller earnings would pay more than five times the tolls the vessel with the larger earnings would pay.

The CHAIRMAN. I can see why that couldn't be adopted as a basis. Mr. WARLEY. Furthermore, it is self-evident that if in order to earn the $3 freight the bulk carrier has to pay ballast tolls as well as loaded tolls, then the total of such ballast and loaded tolls must be figured against the freight earnings in one direction, and the unfairness of such a dead-weight per ton basis would be further increased by any lessening of the present spread between the rates for loaded. and ballast tolls, the present being 40 percent.

Any substantial increase in the Panama Canal tolls on the ore carriers through modification of the provisions for transiting ballast at substantially reduced rates or through increased measurement or tolls would present a most serious handicap to their successful competition with foreign vessels bringing ore to the United States.

I most strongly urge the provisions of the definite reduction of 60 percent for ballast tolls under the loaded tolls recommended by the Secretary of War be definitely set forth in the bill.

Senate bill 162, introduced by Senator Gore, January 3, 1935, provides that no charge shall be made for deck load which is defined for the purpose of this act as cargo situated in the space which is at all times exposed to the weather and the sea and which space is not

included in the net tonnage determined under the rules for the measurement of vessels for the Panama Canal hereinbefore referred to. Senate bill 2288 reads:

Provided, That tolls shall not be levied on a deck load which is defined, for the purposes of this act, as cargo situated in a space which is at all times exposed to the weather and the sea and which space is not included in the net tonnage determined under the said Rules for the Measurement of Vessels for the Panama Canal, except on tonnage of such deck loads which is in excess of 20 per centum of the net tonnage of a vessel so determined.

Nowhere else in the world has it been proposed to impose a tax on deck loads. The Suez Canal does not assess tolls on deck loads and deck loads are exempt from payment of tonnage and port dues throughout the world. We are opposed to tolls on deck loads.

The CHAIRMAN. Do you think if that limitation of 20 percent were left out there would be any tendency to contrive these ships so as to have an excessive deck load in order to escape the payment of tolls? Mr. WARLEY. I don't think I understood your question.

The CHAIRMAN. Without that limitation of 20 percent as it was in the original bill introduced January 3, would there be any temptation to a vessel, to a shipping concern to construct its vessel so the deck load would be practically all the load they have, other than to keep it in balance?

Mr. WARLEY. No; I can't imagine any practical consideration such as that. You have a definite limitation to deck loads today by statute. Under the international load-line convention you are definitely limited to the amount of deck loads you can carry; you can't get away from it; you can't get beyond it. I don't believe there should be any limitation on your deck loads beyond that statutory limitation as defined in the load line bill.

The CHAIRMAN. State that a little more clearly. I didn't get the point.

Mr. WARLEY. The international load-line convention provides limitations on the amount of deck load you can carry; it provides the character of tonnage openings. You have heard a lot about these holes. They are all very clearly defined as to what is a class 1 opening, what is a class 2 opening, and so forth. They are defined in the international convention rules which were adopted by this country and are now in effect on all ships in foreign trade, and I can't believe, I can't visualize, any commercial ship using the Panama Canal that would have such a large percentage of its cargo as deck load as you have indicated.

The CHAIRMAN. This 20 percent.

Mr. WARLEY. Twenty percent is not equal to the deck loads that have been carried in the intercoastal trade in the past.

The CHAIRMAN. It would then cut them down.

Mr. WARLEY. It would cut them down, yes; but those same deck loads of lumber under the international load-line convention with a larger deck load the ship is more seaworthy and safer than with a smaller deck load.

The CHAIRMAN. Well now, you state that this convention or arrangement with regard to the load line does prescribe pretty definite limitations as to the deck load?

Mr. WARLEY. Yes, sir.

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