Mr. EWERS. It has been construed, at least, giving you the right to tax passengers, to charge tolls on passenger accommodations, although you have never charged the $1.50 toll which you have a right to charge. But you propose instead, in effect, to charge tolls on the space that he occupies, and I was wondering if you could give me the tonnage of the average passenger accommodation.

Mr. SILL. That would depend entirely upon whether he took a suite or traveled third class; in other words, the kind of passenger accommodation that was used. If it was accommodation above the first deck

Mr. EWERS. I was just wondering why the Canal authorities found it necessary or desirable to tax the space occupied by passengers when they had never exercised the right they had to charge a toll on passengers.

Mr. SILL. Because the passenger occupies space that is earning space. When you are fixing the value on the earning capacity of the passenger accommodations the space that the passenger occupies is an appropriate charge as earning space. As a matter of fact, the only rules that we have been able to find that allow passengercabin exemption from tolls are under the United States rules of measurement; no other rules allow that.

Mr. PETERSON. Just on that point. If this bill is enacted into law, under the new regulations, if the law were changed, you would be in position then to collect tolls from space above the first deck, above the main deck; that space occupied by passengers would be subjected to a toll, would it not?

Mr. SILL. Under the Panama Canal rules?

Mr. PETERSON. Under the Panama Canal rules you would have an increased area which would be susceptible to separate toll charges under the Panama Canal rules.

Mr. SILL. But we have never collected tolls on passengers.

Mr. LEA. I suppose that, in speaking of the rules, the difference between the two methods for collecting tolls, your major difficulty is determining what is protected or closed space; is that correct? Mr. SILL. Yes.

Mr. LEA. In the final analysis it is fixed by Presidential proclamation, is it not?

Mr. SILL. Yes.

Mr. EWERS. Might I just say this, concerning Governor Schley's testimony, that naturally we have a selfish interest in this matter, and Governor Schley testified at the hearing before the committee that as far as he was concerned he favored the $1 rate. Now, it is true that we have the right to appeal to the President who would probably have recommended to him the dollar rate by the Governor of the Canal, or his superior, the Secretary of War. But I think the Congress can appreciate that when we would go to the President, while there is no doubt about our receiving fair treatment at his hands, that we would go there with 2 strikes and 2 foul balls on us to start with.

Mr. LEA. Let us hope it would not be that bad.

Mr. SILL. Of course, a home run is sometimes made when 2 strikes and 3 balls have been called. Now, it is not clear to me why they should not favor this change in toll basis. I think they would have an opportunity, through their statistics, to exercise an effort to

secure a decrease in rates while having the Panama Canal rules for measuring tonnage. That is the trouble with the whole system at the present time.

Mr. LEA. If there is nothing further, the committee will adjourn until 2 o'clock Tuesday of next week.

(Thereupon, at 5 p.m., an adjournment was taken until 2 p.m., Tuesday, Mar. 13, 1934.)

PANAMA CANAL TOLLS

TUESDAY, MARCH 13, 1934

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON
INTERSTATE AND FOREIGN COMMERCE,

Washington, D.C.

The committee was called to order at 2 p.m., Hon. Clarence F. Lea, presiding.

Mr. LEA. The committee will come to order.

The President has sent a letter in reference to this bill, which I will read. It is dated February 24, 1934, addressed to Hon. Sam Rayburn, Chairman Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D.C., and is as follows:

DEAR MR. RAYBURN: The rules for the measurement of vessels transiting the Panama Canal and the rates of tolls established under the Panama Canal Act were based upon two fundamental principles; first, that tolls should be paid on the earning capacity of a vessel and, second, that the President should have latitude within which to fix the rate of tolls in conformity with the limits established by law.

Shortly after the Canal was opened for use the law was so interpreted by an opinion of the Attorney General that the rules for establishing net registered tonnage under United States statutes were required to be applied to determine the maximum tolls collectible, with the result that each year since then a progressively reducing rate of tolls has been collected. The rules for determining net registered tonnage under United States statutes are administered by the Bureau of Navigation of the Department of Commerce, which has no responsibility for the Canal, and the rules themselves have never been considered suitable for determining Canal tolls.

Bills have been introduced in both the Senate and House of Representatives, enactment of which will remedy these unsatisfactory conditions and return to the President control of the rates of tolls to be charged within the limits prescribed by law and provide that toll charges shall be based on the earning capacity of a vessel.

I recommend the enactment of this legislation.
Very sincerely yours,

FRANKLIN D. ROOSEVELT.

Mr. LUCKENBACH. What is the date of that letter?
Mr. LEA. February 24th.

Mr. LUCKENBACH. Thank you.

Mr. LEA. There is one suggestion I would like to present for the consideration of you gentlemen on both sides. As I see the matter the fundamental rule as to the regulation of tolls is that the ship is subject to the payment of tolls according to its available earning capacity, regardless of its actual earning capacity, so whether a ship has a 20-percent load or a 100-percent load it carries the laden ship toll rate.

Then, the subordinate rule is that a ship in ballast can have the benefit, under this bill, of the 60-percent charge of what the charge would be on the laden ship.

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The rates make no distinction as to the actual earning capacity of the cargo carried. Now it seems to me that it might be worth considering whether or not there should not be a line of demarcation based on a distinction between the difference in amount of pay. So I have an amendment for your consideration. The committee can consider it, if it seems to be worthy of consideration, before the bill is reported. Following the main portions of the bill this amendment would read as follows:

In addition to the power above granted the President is hereby authorized by proper rules and regulations to provide for determining the amount of unoccupied cargo space in any laden vessel, or part thereof, subject to the payment of tolls as hereinafter provided, and in cases where more than 20 percent of such cargo space so determined is unoccupied grant such reduction of tolls, not to exceed 20 percent of the amount thus determined as the public interest may require.

Now we would be glad to hear from any of you on that before the subcommittee reports this measure to the full committee.

You may proceed with your first witness, and you may take this up at any time you suggest.

Mr. EWERS. As attorney representing the American Steamship Owners' Association, may I inquire in that connection if the Chair would like to hear from the different interests concerning this amendment, which is of interest to different companies?

Mr. LEA. Yes.

Mr. EWERS. Of course we have not had opportunity to discuss it and I could not say whether there would be opposition to it without some consideration.

Mr. LEA. I am just presenting it now so that you might make any suggestion you see fit. I thought an amendment of that kind might make it more easy to arrive at some practical rule.

Mr. EWERS. Would the Chair care to indicate the time limit within which comments may be received on that?

Mr. LEA. Of course we would like to have it just as soon as we could so that the committee may consider your comments in making any report it may desire to make to the main committee, so that I would suggest they be submitted promptly.

Mr. EWERS. I understand, but of course we have not had opportunity to give it consideration.

Mr. LEA. I realize that. I also want the committee to get the benefit of your best judgment as to whether it is practical. I do not know that either side will want to approve the amendment, but I feel that something along that line ought to be considered. Mr. EWERS. Mr. Morrison will be the first witness.

STATEMENT OF D. S. MORRISON, NEW YORK, REPRESENTING THE AMERICAN-HAWAIIAN STEAMSHIP CO. AND THE WILLIAMS

STEAMSHIP CORPORATION

Mr. LEA. Please give us your name, address, and for whom you appear?

Mr. MORRISON. D. S. Morrison, 90 Broad Street, New York, representing the American-Hawaiian Steamship Co. and the Williams Steamship Corporation.

The American-Hawaiian Steamship Co., as one of the largest, if not the largest user of the Panama Canal, is directly concerned in

any changes proposed in the method of assessing tolls. During the past 10 years this company and its subsidiary, the Williams Steamship Corporation, have paid tolls to the Panama Canal of approximately $9,500,000. This amount represents between 9 and 10 percent of the gross operating revenues of these companies during this period. During the same period of 10 years this company and its subsidiary have suffered a net loss from the operations of these ships of $1,663,000. During the past 3 years the Panama Canal tolls have amounted to more than 11 percent of our gross revenues. We know of no other industry that pays so large a portion of its gross receipts to the United States for the use of publicly developed facilities.

Under existing law the tolls may not exceed $1.25 per United States net registered ton. The legislation under consideration, H.R. 7667, would change this maximum to $1 per Panama Canal ton, and the Canal administration has recommended that the tolls for laden vessels be set at approximately this latter figure. Should this recommendation be adopted the increased tolls assessed against our ships would be about $270,000 per year, or nearly 3 percent of our gross revenues. The effect of such an increase would be particularly damaging, coming at a time when the industry has had to assume large increases in its operating costs and is now faced with still further rises in costs without the aid of increased rates. The maximum increase in tolls under this bill has been referred to so as to emphasize the necessity for considerate action, before imposing additional burdens on American cargo ships in the intercoastal trade which pays a very large part of the Panama tolls.

As to the justification for greater revenues for the Canal, I feel that the testimony already given this committee is convincing as to the adequacy of the return on the commercial investment in the Canal from existing rates.

However, I wish to emphasize the large increase in tolls during recent months, which, for the last 2 months reported, it is more than 23 percent over the corresponding months of the previous year. I also want to add the thought that increased rates do not necessarily result in greater revenues. The Suez Canal and the Strait of Magellan both compete with the Panama route for certain traffic. Any increase in the Panama tolls will divert some traffic to these routes. The reduction in the Suez rates, announced last week, to go into effect next April, emphasizes this condition. The loss of revenue from a relatively few ships will go a long way to offset increased rates on the larger number.

During the early part of 1933 our company made certain structural changes in 18 of its ships, which resulted in reducing the United States net registered tonnage of these ships by about 17,500 tons. The statement has been made to this committee by the Canal administration that these changes did not affect the cargo-carrying capacity of our ships. I wish to definitely correct this impression. As a result of these alterations the draft of the ships has been reduced on the average by more than 2 feet, and the deadweight carrying capacity was decreased by a total of 22,526 tons, or an average of 1,250 deadweight tons per ship.

Exemptions of similar space are in effect on the great majority of the general cargo vessels of both American and foreign registry