United States of America carrying out the service or function provided for under such treaty or accord.

ANNEX B

Procedures for the cessation or transfer of activities carried out by the Panama Canal Company or the Canal Zone Government

1. The Panama Canal Administration shall not perform governmental or commercial functions as stipulated in paragraph 2 of this Annex, provided, however, that this shall not be deemed to limit in any way the right of the United States of America to perform those functions that may be necessary for the efficient management, operation and maintenance of the Canal.

2. The following activities and operations carried out by the Panama Canal Company and the Canal Zone Government shall not be carried out by the Panama Canal Administration, effective upon the dates indicated herein:

(a) Upon the date of entry into force of this Treaty:

(i) Wholesale and retail sales, including those through commissaries, food stores, department stores, optical shops and pastry shops;

(ii) Installations for the production of food and drink, including milk products and bakery products;

(iii) Public restaurants and cafeterias and the sale of articles through vending machines;

(iv) Movie theaters, bowling alleys, and other recreational and amusement facilities for the use of which a charge is payable;

(v) The operation of laundry and dry cleaning plants other than those operated for official use;

(vi) Installations for the repair and service of privately owned automobiles or the sale of petroleum or lubricants thereto, including the operation of gasoline stations, repair garages and tire repair and recapping facilities, and the repair and service of other privately owned property, including appliances, electronic devices, boats, motors and furniture;

(vii) Cold storage and freezer plants other than those operated for official use; (viii) Freight houses other than those operated for official use;

(ix) Commercial services to and supply of privately owned and operated vessels, including the construction of vessels, the sale of petroleum and lubricants and the provision of water, tug services not related to the Canal or other United States Government operations, and repair of such vessels, except in situations where repairs may be necessary to remove disabled vessels from the Canal;

(x) Printing services other than for official use;

(xi) Maritime transportation for the use of the general public;

(xii) Health and medical services provided to individuals, including hospitals, leprosariums, veterinary, mortuary and cemetery services;

(xiii) Educational services provided to individuals, including schools and libraries; (xiv) Postal services;

(xv) Immigration, customs and quarantine controls, except those measures necessary to ensure the sanitation of the Canal;

(b) Within thirty calendar months from the date of entry into force of this Treaty, (i) Police;

(ii) Courts; and

(iii) Prison system

3. With respect to those activities or functions described in paragraph 2 above, or otherwise agreed upon by the two Parties, which are to be assumed by the Government of the Republic of Panama or by private persons subject to its authority, the two Parties shall consult prior to the discontinuance of such activities of functions by the Panama Canal Administration to develop appropriate arrangements for the orderly transfer and continued efficient operation or conduct thereof. In the event that appropriate arrangements cannot be arrived at to ensure the continued performance of a particular activity or function described in paragraph 2 above which is necessary to the efficient management, operation or maintenance of the Canal, the Panama Canal Administration may, to the extent consistent with the other provisions of this Treaty and related agreements, continue to perform such activity or function until such arrangements can be made.

UNDERSTANDING NO. 1

Mr. HOLLINGS. Mr. President, on behalf of Senator Bellmon and myself, I have submitted an understanding which we propose to

the resolution of ratification of the Panama Canal Treaty. The understanding relates to the matter of the conditional annuity payment provided for in article XIII 4.C.

Article XIII 4.C. provides for an annual payment of up to $10 million to be paid out of canal operating revenues, "to the extent that such revenues exceed expenditures of the Panama Canal Commission *." The article goes on to say:

In the event Canal operating revenues in any year do not produce a surplus sufficient to cover this payment, the unpaid balance shall be paid from operating surpluses in future years in a manner to be mutually agreed.

We are told that the negotiators intentions were clear that at the expiration of the treaty there would be no obligation to pay any unpaid balance from previous years, in the event there was such unpaid balance. And in his February 6, 1978, letter to Senator Culver, Secretary of State Vance stated:

Any balance remaining due in the year 1999 would not be paid since the Commission has only a contingent obligation to make this payment, i.e., an obligation based on available surplus.

I think we need to be crystal clear on this, however, and that is the genesis of the understanding we are proposing. It will make it clear, in the proper form and fashion, that there is no obligation to pay any such amount after the date of the termination of the treaty.

Mr. President, the following is the language of our understanding:

Before the period at the end of the resolution of ratification, insert a comma and the following: "subject to the understanding, which is to be made a part of the instrument of ratification, that nothing in paragraph 4(c) of article XIII may be construed as obligating the United States of America to pay after the date of the termination of the Treaty any unpaid balance under such paragraph 4(c) which shall have accrued before such date."

PANAMA CANAL TREATIES-EX. N, 95-1

AMENDMENT NO. 40

(Ordered to be printed and to lie on the table.)

Mr. Allen submitted an amendment intended to be proposed by him to the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, Ex. N, 95–1.

AMENDMENT NO. 41

(Ordered to be printed and to lie on the table.)

Mr. Bartlett submitted an amendment intended to be proposed by him to the Panama Canal Treaty, Ex. N, 95–1.

Mr. BARTLETT. Mr. President, article XIII, section 4(c) of the proposed Panama Canal Treaty provides that the Panama Canal Commission to be created by the new treaty will pay a sum of $10 million a year out of surplus revenues to the Government of Panama. This so-called "Contingency Payment" is above and beyond other payments to be provided by section 4 to the Government of Panama.

In addition, section 4 provides that, in the event insufficient surplus is generated in one year to make the contingency payment, the obligation to make the payment will carry over into subsequent years, thus increasing the chances that the Government of Panama will get its contingency payment. From testimony received by the Senate Armed Services Committee, it is clear that tremendous ambiguity exists as to how the tolls will be set to generate the revenue and how the debt will be accumulated. Our State Department maintains that, at end of 1999, this unpaid balance would not be an obligation of the Panama Canal Commission or the United States. Testimony during the Armed Services Committee hearing stated that Panamanian leaders may believe the contrary.

At this time, however, I wish to alert my colleagues to the relationship of article XIII, section 4(c) to article XIII, section 1 of the treaty which reads as follows:

Upon termination of this Treaty, the Republic of Panama shall assume total responsibility for the management, operation, and maintenance of the Panama Canal, which shall be turned over in operating condition and free of liens and debts, except as the two Parties may otherwise agree.

Section 1 makes it clear that the canal must be turned over free of debt, unless otherwise agreed, thus implying that the accumulation of contingency payment debts, if considered an obligation of the Panama Canal Commission, would become a just debt of the United States and would be payable by the United States upon termination of the Panama Canal Treaty in 1999. While such an interpretation is consistent with the language of the treaty, and consistent with the expectations of some Panamanians as reported to our committee, it is inconsistent with the notion that the contingency payment is to come only out of toll revenues and is not to involve appropriated funds. The contingency payment is to provide an economic incentive for the Government of Panama to cooperate in achieving an economically viable Panama Canal Commission and is not supposed to affect the taxpayer directly.

For that reason I am sending to the desk an amendment for printing which would provide that any accumulated obligations and debts of the Panama Canal Commission resulting from this contingency payment provision shall not be a just debt of the United States in the year 1999 and after.

The original language of section 4(c) reads as follows:

An annual amount of up to ten million United States dollars ($10,000,000) per year, to be paid out of Canal operating revenues to the extent that such revenues exceed expenditures of the Panama Canal Commission including amounts made pursuant to this Treaty. In the event Canal operating revenues in any year do not produce a surplus sufficient to cover this payment, the unpaid balance shall be paid from operating surpluses in future years in a manner to be mutually agreed. My amendment would make the following changes:

At the end of paragraph 4(c) of article XIII, add the following: "Nothing in this subparagraph may be construed to commit the United States of America to pay any part of such unpaid balance to the Republic of Panama after the date of the termination of this Treaty.".

ADDITIONAL COSPONSORS-EX. N, 95-1

At the request of Mr. Hodges, his name was added as a cosponsor of amendment No. 20 and amendment No. 21, intended to be proposed to the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, Ex. N, 95-1.

[From the Congressional Record-Senate, Feb. 23, 1978]

TREATY CONCERNING THE PERMANENT NEUTRALITY AND OPERATION OF THE PANAMA CANAL

The ACTING PRESIDENT pro tempore. Under the previous order, the Senate will now resume the consideration of Executive N, 95th Congress, 1st session, which the clerk will report.

The second assistant legislative clerk read as follows:

Executive N, 95th Congress, 1st session, treaty concerning the permanent neutrality and operation of the Panama Canal.

The ACTING PRESIDENT pro tempore. Article I is open to amendment.

The Senator from Alabama.

Mr. ALLEN. I do have an amendment to article I. I had not planned to offer it today, although, after discussing the matter with the distinguished majority leader, there are conditions under which I would be willing to offer the amendment. This is amendment No. 40.

What it does is take article I and, by a substitute, knock out all of article I and then, with the substitute, reinstate article I with a proviso. This would be the appropriate place to offer this amendment.

The ACTING PRESIDENT pro tempore. Does the Senator offer the amendment?

Mr. ALLEN. No, sir, the Senator does not offer the amendment. I am discussing article I and the relationship of my anticipated amendment to article I and the need for amendment of article I. Article I, as contained in the Neutrality Treaty, provides as follows:

The Republic of Panama declares that the canal, as an international transit waterway, shall be permanently neutral in accordance with the regime established in this treaty. The same regime of neutrality shall apply to any other international waterway that may be built either partially or wholly in the territory of the Republic of Panama.

Then, the substitute which I would add to that language, which would be reinstated by my substitute, provides that the military presence of the United States in what was the Panama Canal Zone on September 7, 1977-and I chose that date because that was the date on which the President and the dictator, Torrijos, signed the treaty-shall be continued beyond December 31, 1999, if the President of the United States deems it necessary for the defense of the canal or the maintenance of the neutrality thereof and shall, prior to December 21, 1999, so certify to the Government of Panama. That would be filling a need or suppying a provision to rectify the omission in the so-called leadership amendment.

The leadership amendment, which, as I understand it, will be offered to article IV, and then another one to article VI-together, they constitute what I call and what is usually called the leadership amendment. I might mention parenthetically, to show why the Senate should have reverse order of these treaties, and this point was made by the distinguished Senator from Virginia (Mr. Scott) on yesterday, this article I in the Neutrality Treaty says: