Canal. Those defenses, those are for the purpose of national defense, as well as commerce.

Mr. WOLVERTON. Is it your contention that those items of expense are reflected in the charges that are made?

Mr. FARLEY. You see, I am not discussing figures here. I could not, unless I knew just what figures were being used, I could not answer your question.

Mr. WOLVERTON. If you came to a conclusion in the matter, it must have been based upon some figures. I was endeavoring to ascertain whether you thought the cost of maintaining national defense in the Canal Zone was reflected in the charges that are made to shipping.

Mr. FARLEY. Well, that would be reflected in the 2 percent that Mr. Pettengill referred to as being what he calls the return. If you go into the cost of the Canal, and take out the matter of defense, subtract those, then the investment in the Canal would be so much lower than otherwise and the same revenue received from commercial ships applied to that sum would be a larger percentage than that applied to the larger sum.

Mr. WOLVERTON. Do you think that shipping has no particular interest in the maintenance of the Canal from that standpoint? Mr. FARLEY. Every interest in it. It has every interest in it, as Americans.

Mr. WOLVERTON. After all, our Navy is maintained very largely to protect shipping.

Mr. FARLEY. Quite true. What I am here to suggest, and what I would like to do is to read through this and give you the points, tell you the points that I feel are pertinent, and I do not want to on the witness stand here try to give you the kind of evidence that you are asking me about, such as the 100 cubic feet. I quite agree that it should not be left unlimited, but I do not want to be put in the position of a proponent of the exact cure. I think that what should be done is that that should be left to the technical people, who can study it and say just what should be put in the bill. May I just continue with these headings.

Mr. LEA. Yes. At this time I might state that any witnesses will have the privilege of revising their remarks and they can do so tomorrow or next day here at the clerk's office, and so you can revise your statement, if you want to, at that time.

Mr. FARLEY. May I continue with this?

Mr. LEA. Yes.

(5) The determination of toll charges for the Panama Canal is a legislative function which can be delegated by Congress to an administrative agency if Congress definitely limits the area within which administrative discretion may be exercised and prescribes the principles to which that agency must conform in determining such charges. A statute which permits the administrative branch of the Government to assess such toll charges on the basis of unit of measurement to be determined by the administrative branch and which does not lay down definite principles to which the administrative branch must conform in determining that unit of measurement but leave such determination to its uncontrolled and arbitrary discretion, clearly violates this fundamental principle of constitutional

law.

I may say that a lawyer told me that that is so. I am not a lawyer, so I may be wrong about that.

(6) It is admitted by both the Canal adminstration and by the members of the House Committee on Interstate and Foreign Commerce, that the Panama Canal rules of measurement require modification. However, they plan to revise the rules after the legislation is enacted. Clearly, one must know to what extent and in what respects the rules (which under this bill will furnish the sole basis for assessment of tolls) are to be revised before he can pass judgment on their fairness. Unquestionably, the revision of the rules should precede and not follow the enactment of legislation of this character. Moreover, the rules themselves should be incorporated in the statute.

(7) This bill, instead of abolishing the dual system of tolls, permanently establishes two conflicting systems of measurements of American vessels, administered by separate executive departments of our Government-a condition which exists in no other maritime country. Such duplication of effort and overlapping of functions are unwarranted. Moreover, they are inconsistent with sound organization, and violate the principles prescribed by Congress for the reorganization of executive departments.

(8) The measurement of commercial ships is a commercial function and, as such, should be centralized in the Bureau of Navigation of the Department of Commerce. This function involves no questions of national defense and should, therefore, be divorced from the War Department.

(9) Not only should this country have a single set of measurement rules, but there should be a single, uniform set of rules for all nations. Tonnage thus ascertained would be universally understood and accepted, and taxation based thereon would be uniformly applied.

(10) The enactment of legislation perpetuating conflicting systems of measurement by our Government would greatly impede the establishment of uniform rules of measurement for the ships of all nations. It would seem most imprudent, therefore, to jeopardize the success of this undertaking by making changes at this time in a system which has been in effect for 20 years and is admittedly yielding an adequate return to the Government, in conformity with which system the American shipowner has conducted his business and invested h's capital, and against which no American shipowner appears to have protested.

In this connection, I would like to put in the record a reference to a letter from the Director of the Bureau of Navigation of the Department of Commerce, which, if I may, I will read."

American-Hawaiian S. S. Co., New York, N. Y.

SIR Referring to the matter of the advisability of having uniform admeasurement rules for vessels passing through the Panama Canal and those enter ing the ports of this and other countries, you doubtless are aware that the

League of Nations appointed a committee which met at Amsterdam October 1520, 1926. At that meeting a subcommittee was appointed, its first meeting being held in London April 6-8, 1927. While we were not a member of the League, we had a formally appointed representative who sat as an observer and took an active part in the proceedings, being in constant communication with this Bureau.

The purpose of the committee of course was to effect a uniform method of finding tonnage to be used by all countries very much along the suggestions. which you have made. They had before them the three systems known as the British, the Suez Canal, and the Panama Canal systems. The British system was the basis for the consideration.

The subcommittee reported back to the full committee on May 31, 1929, and since that time these proposed rules and regulations have been under consideration. I have recommended that inquiry be made through the State Department whether the various maritime nations are in accord with these rules and regulations, and if so it is proposed to supply to our shipping people and others interested a copy of those regulations for study and comment. Should it be found after thorough investigation by those interested that the rules and regulations are satisfactory, I would then suggest that the matter be presented to Congress for enacting such rules and regulations into law, that being the procedure necessary under our form of Government.

Of course the shipping interests in the country will be advised of the progress of any action which may be taken.

Respectfully,

J. B. WEAVER, Director.

Now, I asked the chief surveyor of the American Bureau of Shipping for his opinion on this, Mr. Arnott, on this question, and I would like to give you his letter, which I received yesterday, which reads:

AMERICAN BUREAU OF SHIPPING AND REPRESENTING IN THE UNITED STATES THE BRITISH CORPORATION REGISTER OF SHIPPING AND AIRCRAFT, REGISTRO ITALIANO NAVALEED AERONAUTICO, THE IMPERIAL JAPANESE MARINE CORPORATION,. 24 OLD SLIP, NEW YORK, N. Y.

Mr. EDWARD P. FARLEY,

E. P. Farley & Co., New York, N. Y.

JANUARY 23, 1935.

DEAR MR. FARLEY: Confirming our conversation of today's date with reference to tonnage regulations I would state as follows:

The whole question of tonnage measurement of ships bristles with difficulties, such that it is almost impossible to conceive of any system of measurement for assessing dues being formulated which would be absolutely equitable and fair between ship and ship on a basis of earning capacity or, rather, potential earning capacity. Certainly none of the existing tonnage rules, i. e., the various national rules, Suez Canal rules or Panama Canal rules, can be considered satisfactory, and technical opinion throughout the world is unanimous that the time is more than ripe for endeavoring to obtain international agreement on this important question. As I understand it the various nations all started off about the middle of last century with the same tonnage regulations but that different interpretations by the national administrations in the treatment of new types of ships, etc., has resulted in a condition whereby there would be considerable differences in tonnage for the same ship if measured by the various national authorities. In addition to the various national systems we have the Suez Canal and Panama Canal systems, which make it necessary for a ship trading in world service to have at least three tonnage certificates and under such circumstances the advantages of a uniform system of tonnage measurement are obvious.

An ideal system of tonnage measurement should not only place various types of ships or groups of ships on a fair competitive basis as far as dues are concerned, but would tend to encourage the building of seaworthy and safe ships. In the latter connection you will remember the turret-deck type of ship which was evolved in England as a tax dodger for operation through the Suez Canal. Under the present Suez Canal regulations it is no longer advantageous to operate this type of vessel and the building of turret ships has been discontinued for some years. The turret ship required very careful handling and loading to maintain a proper measure of stability under seagoing conditions.

In any change in the system of assessing Panama Canal dues, some types of vessels must inevitably suffer by comparison with others, the problem being one of existing ships. In both the Safety and Load Line Conventions the new rules were intended to apply in their entirety only to new ships, the problem of their application to existing ships being left to each administration to deal with "insofar as is reasonable and practicable." The United States load line law, making it compulsory for all vessels of over 250 tons in the foreign trade to have load lines, although passed by Congress in March 1929, did not become effective until September 1930. In the interim the International Load Line Convention was held in the summer of 1930, with the result that before our load-line law came into force the Department of Commerce was in a position to issue up-to-date load-line regulations in strict conformity with the regulations recommended by the international convention. It seems to me, therefore, that any contemplated change in the present system of assessing Panama Canal dues should await revision of the existing Panama Canal regulations or, better still, international agreement on the whole question. Very truly yours,

D. ARNOTT. Chief Surveyor.

Now, that is our contention, that the present system has been in existence for 20 years.

I would like to give you copies of this. I will not read the rest of of it. It is developed. If you would like it developed further, I can. We have some illustrations here.

Mr. LEA. Do you have copies of that?

Mr. FARLEY. Yes. But, there is one thing that I might like to show and that is that these regulations do not take into consideration the carrying capacity of the ship. You have a ship going through the Canal, with a Panama Canal net tonnage of 4,297 tons, Panama Canal measurement, with a Suez Canal net tonnage of 11,661 tons, and with a deadweight-carrying capacity of 21,206 tons. On that basis the tolls would be about 20 cents per ton of deadweight capacity, while our shelter-deck type of vessel with a Panama Canal net tonnage of 7,601 tons, and a deadweight-carrying capacity of 11,207 tons, or slightly more than half of the other, pays at the rate of 67 cents.

Now, you are proposing to reduce the fellow who is below 20 under those rules and increase the other up to 67 cents, because that is on the Canal measurement. In other words, you increase us and reduce him, although today he is carrying cargo and only paying on a basis of 20 cents.

I give other types, tankers and other types, here.

There is one thing that I would like to refer to and that is what Professor Johnson, who devised the Panama rules, in his book published either before or about the time, had to say about uniform rules of ship measurements.

(The matter above referred to is as follows:)

The existence of dissimilar rules in different countries and at different canals for the measurement of vessels is illogical and results in unnecessary burdens upon shipping. Many vessels are now obliged to provide themselves with several tonnage certificates. A vessel launched in an American shipyard, for instance, will need to have, in addition to its tonnage certificate made out in accordance with the requirements of the statutes of the United States, a Panama tonnage certificate, a Suez certificate, and probably British and German certificates. The argument in favor of a uniform system of tonnage measurement was admirably stated by the British Board of Trade in a memorandum prepared as early as 1862. The memorandum contained the following statement:

"If one system could be adopted by all maritime nations, so that the capacity of any given ship, when once officially ascertained and denoted on her

official papers, could be everywhere understood and recognized as valid, the advantages gained would be very great. The statistics of navigation would be rendered more simple, intelligible, and accurate. The merchant or shipowner would at once understand the size and capacity of the ships he employs or purchases; he would also escape the annoyance and expense of remeasurement; and, lastly, taxation, when imposed, would be rendered more simple and more just. Under these circumstances, there can be but one opinion as to the utility, if not the necessity, of some general system of measuring merchant shipping.'

Mr. LEA. You may leave with us a sufficient number so that each member may have a copy of that, if you will.

Mr. FARLEY. How many?

Mr. LEA. There are six on this subcommittee.

Mr. FARLEY. I will be very pleased to. If there is nothing further, Mr. Morrison, who is associated with me, has some statistics, on just one or two points, that he would like to put in evidence. Mr. LEA. Very well.

(The document referred to is as follows:)

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

Mr. LEA. Will you give your name and address, and whom you represent, to the reporter.

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

Just to show our interest in this, Mr. Chairman, I would like to just state very briefly that we are probably the largest user of the Panama Canal. At the present time our annual tolls run about $1,100,000 a year.

Under the proposed bill, should the maximum rates apply, they would be increased in the neighborhood of $276,000 a year; if the 90-cent rate applies, as the Secretary of War recommended this last year, that would increase our tolls approximately $140,000 a year. Now, Mr. Farley has stressed the advisability and the desirability of uniform rules. I want to try to elaborate a little on the discriminations that would be imposed on the general cargo and passenger ship if this bill were enacted, particularly those in the American intercoastal trade.

The whole design and purpose of this legislation is to put the tolls on the basis of actual earning capacity. As a matter of fact, as we construe these bills, nothing is made mandatory except two rather vital departures from that principle.

The President is given discretion with respect to everything else, but with respect to the assessment of tolls on deck loads his hands are completely tied and he is prevented from doing that. We feel that that is a vital departure from the principle you are trying to establish here.

The other departure from that principle that is made mandatory is the requirement that ballast vessels shall pay a lesser rate of tolls than laden ships.

Now, the question of deck loads has been thoroughly covered by Professor Johnson in his report and by representatives from the