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PANAMA CANAL TOLLS

THURSDAY, FEBRUARY 8, 1934

HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE OF THE COMMITTEE
ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C. The subcommittee met, pursuant to call, at 10 a.m., in the committee room. New House Office Building, Hon. Clarence Lea (chairman) presiding.

Mr. LEA. The committee will please come to order.

The hearing this morning is on H.R. 7667, a bill to provide for the measurement of vessels using the Panama Canal, and for other purposes. We will have the bill inserted in the record at this point.

[H.R. 7667, 730 Cong., 2d sess. ]

A BILL To provide for the measurement of vessels using the Panama Canal, and for other

purposes

Be it enacted by the Senate and House of Representatives of the United States of American in Congress assembled, That the first five sentences of the third paragraph of section 5 of the act of August 24, 1912 (37 Stat. 560, 569), as amended by the act of June 15, 1914) 38 Stat. 385), are hereby amended so as to read as follows: “ Tolls on merchant vessels, Army and Navy transport, colliers, hospital ships, supply ships, and yachts shall be based on net vessel tons of actual earning capacity, determined in accordance with the 'Rules for the Measurement of Vessels for the Panama Canal' prescribed by proclamation of the President, November 21, 1913, as amended from time to time by order of the President, and shall not exceed $1 per net vessel-ton so determined, nor be less than 60 cents per net vessel-ton so determined, on laden vessels, and on vessels in ballast without passengers or cargo shall be 40 per centum less than the rate of tolls for vessels with passengers or cargo: Provided, That no charge shall be made for 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'. Tolls on other floating craft shall be levied on displacement tonnage at rates to be prescribed by the President. In addition to the tolls based on measurement or displacement tonnage, tolls may be levied on passengers at rates prescribed by the President, but not to exceed $1.50 for each passenger. The levy of tolls is subject to the provisions of article XIX of the convention between the United States of America and the Republic of Panama, entered into November 18, 1903, and of article I of the treaty between the United States of America and the Republic of Colombia, proclaimed March 30, 1922."

SEC. 2. That this Act shall take effect and be enforced on and after January 1, 1936.

Mr. LEA. Mr. Smith, of the Panama Canal, is here, and I have asked him to present to the committee the law relating to the Panama Canal tolls, so, if you will proceed in your own way, Mr. Smith, first

, giving the reporter your full name and position, if you please.

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STATEMENT OF H. A. A. SMITH, ASSISTANT AUDITOR AND LEGAL

ADVISER, WASHINGTON OFFICE, PANAMA CANAL

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Mr. SMITH. H. A. A. Smith, assistant auditor and legal adviser, Washington office, Panama Canal.

I will first insert in the record two articles from the ClaytonBulwer Treaty, not that it is in effect, but it has some bearing on the questions involved, articles 5 and 8. It is the treaty of April 19, 1850, between the United States and Great Britain, and these provisions guarantee the 'neutrality of the canal across the Isthmus of Panama and provide for its joint protection with the right reserved to either Government to withdraw its protection should unfair discriminations be made in favor of the commerce of the other, and further providing that toll charges shall be just and equitable and that the canal shall be open on equal terms to the commerce of all States granting such protection as the United States and Great Britain engage to afford.

ARTICLE V

The contracting parties further engage that, when the said canal shall have been completed they will protect it from interruption, seizure, or unjust confiscation, and that they will guarantee the neutrality thereof, so that the said canal may forever be open and free, and the capital invested therein, secure. Nevertheless, the Governments of the United States and Great Britain, in according their protection to the construction of the said canal, and guaranteeing its neutrality and security when completed, always understand that, this protection and guarantee are granted conditionally, and may be withdrawn by both Governments, or either Government, if both Governments or either Government, should deem that the persons or company, undertaking or managing the same, adopt or establish such regulations concerning the traffic thereupon, as are contrary to the spirit and intention of this conventiou—either by making unfair discriminations in favor of the commerce of one of the contracting parties over the commerce of the other, or by imposing oppressive exactions or unreasonable tolls upon passengers, vessels, goods, wares, merchandise, or other articles. Neither party, however, shall withdraw the aforesaid protection and guarantee without first giving 6 months' notice to the other.

ARTICLE VIII

The Governments of the United States and Great Britain having not only desired in entering into this convention, to accomplish a particular object, but, also, to establish a general principle, they hereby agree to extend their protection, by treaty stipulations, to any other practicable communications, whether by canal or railway, across the Isthmus which connects North and South America; and, especially to the interoceanic communications—should the same prove to be practicable, whether by canal or railway—which are now proposed to be established by the way of Tehuantepec, of Panama. In granting, however, their joint protection to any such canals or railways, as are by this article specified, it is always understood by the United States and Great Britain, that the parties constructing or owning the same, shall impose no other charges or conditions of traffic thereupon, than the aforesaid Governments shall approve of, as just and equitable; and, that the same canals or railways, being open to the citizens and subjects of the United States and Great Britain on equal terms, shall also, be open on like terms to the citizens and subjects of every other State which is willing to grant thereto, such protection as the United States and Great Britain engage to afford.

I will then insert provisions from the Hay-Pauncefote Treaty of November 18, 1901, between the United States and Great Britain, authorizing the United States, by itself, to construct and provide for its management, a canal across the Isthmus of Panama (which had been prohibited by the Clayton-Bulwer Treaty), and in section 1 of

article III providing that said canal shall be open on equal terms to the commerce of all nations observing the established rules, and prohibiting the making of discriminations in charges of traffic or otherwise.

The purpose of this treaty was stated to be to remove any objection which may arise out of the convention of the 19th of April 1850, commonly called the “Clayton-Bulwer Treaty ", to the construction of such canal under the auspices of the Government of the United States, without impairing the “general principle” of neutralization established in article VIII of that convention.

ARTICLE II

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It is agreed that the Canal may be constructed under the auspices of the Government of the United States, either directly at its own cost, or by gift or loan of money to individuals or corporations, or through subscription to or purchase of stocks or shares, and that, subject to the provisions of the present treaty, the said Government shall have and enjoy all the rights incident to such construction, as well as the exclusive right of providing for the regulation and management of the canal.

ARTICLE III

The United States adopts, as the basis of the neutralization of such ship canal, the following rules, substantially as embodied in the Convention of Constantinople, signed the 28th October, 1888, for the free navigation of the Suez Canal, that is to say:

The Canal shall be free and open to the vessels of commerce and of war of all nations observing these rules, on terms of entire equality, so that there shall be no discrimination against any such nation, or its citizens or subjects, in respect of the conditions or charges of traffic, or otherwise. Such conditions and charges of traffic shall be just and equitable.

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Then, certain provisions of the treaty between the United States and the Republic of Panama of November 18, 1903, providing for the neutrality of the Canal, that said Canal shall be opened upon terms of equality to the commerce of all nations as provided in section 1 of article III of the Hay-Pauncefote Treaty of November 18, 1901, and in article XIX, that vessels of the Government of Panama passing through the Canal shall be exempt from toll charges.

ARTICLE XVIII

The Canal, when constructed, and the entrances thereto, shall be neutral in perpetuity, and shall be opened upon the terms provided for by section 1 of article III of, and in conformity with all the stipulations of, the treaty entered into by the Governments of the United States and Great Britain on November 18, 1901.

ARTICLE XIX

The Government of the Republic of Panama shall have the right to transport over the Canal its vessels and its troops and munitions of war in such vessels at all times without paying charges of any kind. The exemption is to be extended to the auxiliary railway for the transportation of persons in th service of the Republic of Panama, or of the police force charged with the preservation of public order outside of said zone, as well as to their baggage, munitions of war, and supplies.

I will insert provisions from the treaty between the United States and the Republic of Colombia of March 20, 1922, exempting from tolls charges vessels of the Government of Colombia passing through the ship canal across the isthmus.

These last two treaties are referred to in this particular bill.

ARTICLE I

The Republic of Colombia shall enjoy the following rights in respect to the interoceanic canal and the Panama Railway, the title to which is now vested entirely and absolutely in the United States of America, without any encumbrances or indemnities whatever :

1. The Republic of Colombia shall be at liberty at all times to transport through the interoceanic canal its troops, materials of war, and ships of war, without paying any charges to the United States."

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I will insert certain provisions from the Canal Construction Act of 1902, authorizing the President to acquire the strip of land on which the canal was constructed and to guarantee the use of said canal and its harbors to the State from which such land was acquired, upon terms to be agreed upon for all vessels owned by said State and its citizens.

This is section 2, in part, and section 6 of the act of June 28, 1902 (32 Stat. 481):

SEC. 2. That the President is hereby authorized to acquire from the Republic of Colombia, for and on behalf of the United States, upon such terms as he may deem reasonable, perpetual control of a strip of land, the territory of the Republic of Colombia, not less than six miles in width, extending from the Caribbean Sea to the Pacific Ocean, and the right to use and dispose of the waters thereon, and to excavate, construct, and to perpetually maintain, operate, and protect thereon a canal, of such depth and capacity as will afford convenient passage of ships of the greatest tonnage and draft now in use, from the Caribbean Sea to the Pacific Ocean,

SEC. 6. That in any agreement with the Republic of Colombia, or with the States of Nicaragua and Costa Rica, the President is authorized to guarantee to said Republic or to said States the use of said canal and harbors, upon such terms as may be agreed upon for all vessels owned by said States or by the citizens thereof (act of June 28, 1902, 32 Stat. 481).

Then, the provisions of section 5 of the Panama Canal Act of August 24, 1912, authorizing the President to prescribe and change upon 6 months' notice the rates of tolls for the use of the Panama Canal; exempting from toll charges vessels engaged in the coastwise trade of the United States; and providing that tolls may be based upon gross or net registered tonnage, displacement tonnage, or otherwise, and if based on net registered tonnage for ships of commerce, a maximum rate of $1.25 per ton and a minimum rate proportionate to the cost of operation and maintenance, and if not based on net registered tonnage, then a maximum equivalent as near as may be to $1.25 and a minimum equivalent to $0.75 per net registered ton. The toll for passengers was limited to $1.50 each.

SEC. 5. That the President is hereby authorized to prescribe and from time to time change the tolls that shall be levied by the Government of the United States for the use of the Panama Canal: Provided, That no tolls, when prescribed as above, shall be changed unless 6 months' notice thereof shall have been given by the President by proclamation. No tolls shall be levied upon vessels engaged in the coastwise trade of the United States.

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Tolls may be based upon gross or net registered tonnage, displacement tonnage, or otherwise, and may be based on one form of tonnage for warships and another for ships of commerce. The rate of tolls may be lower upon vessels in ballast than upon vessels carrying passengers or cargo. When based upon net registered tonnage for ships of commerce the tolls shall not exceed $1.25 per net registered ton, nor be less, other than for vessels of the United States and its citizens, than the estimated proportionate cost of the actual maintenance and operation of the Canal, subject, however, to the provisions of article 19 of the convention between the United States and the Republic of Panama, entered into November eighteenth, nineteen hundred and three. If the tolls shall not be based upon net registered tonnage, they shall not exceed the equivalent of $1.25 per net registered ton as nearly as the same may be determined, nor be less than the equivalent of 75 cents per net registered ton. The toll for each passenger shall not be more than $1.50 (act of Aug. 24, 1912, 37 Stat. 560, 562).

Then the provisions of the act of June 15, 1914, amending section 5 of the Panama Canal Act of August 24, 1912. This amendment repealed the exemptions from tolls for vessels of United States engaged in the coastwise trade and fixed toll rates at a maximum of $1.25 per net registered ton and a minimum of $0.75 per net registered ton in case tolls were based on net registered tonnage, eliminating the element of cost. It also contains a reservation of right to discriminate in favor of vessels of the United States by exempting its vessels and vessels of its citizens from the payment of tolls.

That the second sentence in section 5 of the Act entitled "An Act to provide for the opening, maintenance, protection, and operation of the Panama Canal, and the sanitation and government of the Canal Zone”, approved August 24, 1912, which reads as follows: “No tolls shall be levied upon vessels engaged in the coastwise trade os the United States ", be, and the same is hereby, repealed.

SEC. 2. That the third sentence of the third paragraph of said section of said Act be so amended as to read as follows: “When based upon net registered tonnage for ships of commerce the tolls shall not exceed $1.25 per net registered ton nor be less than 75 cents per net registered ton, subject, however, to the provisions of article 19 of the convention between the United States and the Republic of Panama, entered into November 18, 1903": Provided, That the passage of this Act shall not be construed or held as a waiver or relinquishment of any right the United States may have under the treaty with Great Britain, ratified the 21st of February 1902, or the treaty with the Republic of Panama, ratified February 26, 1904, or otherwise, to discriminate in favor of its vessels by exempting the vessels of the United States or its citizens from the payment of tolls for passage through said Canal, or as in any way waiving, impairing, or affecting any right of the United States under said treaties, or otherwise, with respect to the sovereignty over or the ownership, control, and management of said Canal and the regulation of the conditions or charges of traffic through the

(Act of June 15, 1914, 38 Stat. 385.) Then, I will insert in the record provisions of existing law relating to rates of tolls and the measurement of vessels.

The President is authorized to prescribe tolls and change the rates on 6 months' notice. Tolls may be based upon registered tonnage, gross or net, or on displacement tonnage or otherwise, but the tolls on ships of commerce may not exceed $1.25 per net registered ton or its equivalent or to be less than $0.75 per net registered ton or its equivalent. The passenger toll is limited to $1.50.

Existing law also retains the right to discriminate in favor of American vessels passing through the Canal.

SEC. 1315, Tolls generally.The President is authorized to prescribe and from time to time change the tolls that shall be levied by the Government of the United States for the use of the Panama Canal: Provided, That no tolls, when prescribed as above, shall be changed, unless 6 months' notice thereof shall have been given by the President by proclamation.

Tolls may be based upon gross or net registered tonnage, displacement tonnage, or otherwise, and may be based on one form of tonnage for warships and another for ships of commerce. The rate of tolls may be lower upon vessels in ballast than upon vessels carrying passengers or cargo.

When based upon net registered tonnage for ships of commerce the tolls shall not exceed $1.25 per net registered ton, nor to be less than 75 cents per net registered ton, subject, however, to the provisions of article 19 of the convention between the United States and the Republic of Panama, entered into November 18, 1903. If the tolls shall not be based upon net registered tonnage, they shall not exceed the equivalent of $1.25 per net registered ton as nearly as the same

same.

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