STATEMENT OF MR. H. A. A. SMITH, ASSISTANT COMPTROLLER AND LEGAL ADVISER, WASHINGTON OFFICE OF THE PANAMA CANAL SUBMITTED IN RESPONSE TO REQUEST OF SUBCOMMITTEE AT HEARING HELD JANUARY 24, 1935, ON BILL (H. R. 1399) "TO PROVIDE FOR THE MEASUREMENT OF VESSELS USING THE PANAMA CANAL AND FOR OTHER PURPOSES Comment appears to be required only upon the following subjects concerning which statements were made to the committee by various representatives of steamship companies and steamship associations. 1. Lack of detailed information in regard to shipping through the Panama Canal which was requested by steamship association representatives. 2. Proposal to postpone any change in measurement rules until an international agreement was reached in regard to the measurement of vessels. 3. Proposal that the Department of Commerce should control the establishment of measurement rules for vessels passing through the Panama Canal. 4. Unconstitutionality of the proposed legislation giving the President authority to fix tolls and prescribe measurement rules. 5. Capital structure of the Panama Canal. 6. The charging of expenses for civil government as an item in the cost of maintenance and operation of the Panama Canal. 7. Panama Railroad Steamship Line. 8. Deck loads. Comment is made on the above in the order in which they are listed. 1. The detailed information desired by steamship association representatives was requested by letter dated January 2, 1935. The information requested has since been compiled by the Governor of the Panama Canal on the Isthmus of Panama, and has been furnished to the steamship association's representatives, a copy of the statement being attached hereto for the information of the committee. It does not appear that the information requested and furnished has any direct bearing upon the enactment of the legislation under consideration. The information will undoubtedly be of great value and would certainly be very desirable, if not necessary, in making the proposed study of and changes in the measurement rules which are contemplated in this legislation if enacted. 2. This proposal to postpone changes until an international agreement is reached does not seem worthy of serious consideration. The following extracts from Prof. Emory R. Johnson's report on "Measurement of Vessels for the Panama Canal", made on October 2, 1913, are pertinent: 66 The desirability of unifying measurements rules was brought to the attention of the commercial powers of Europe as early as 1861 by the European Commission of the Danube-an international body that had been given charge, in 1856, of the improvement of the navigation of the mouth and lower course of the Danube River and had been given authority to collect tolls to meet the expenses of the improvements. * * * * * "It was thought that the opening of the Suez Canal in the latter part of 1869 might lead to international unification of tonnage rules. The International Tonnage Commission which met at Constantinople in September * * drafted rules which it expected would be adopted not only by the Suez Canal Co., but also by the maritime countries represented at Constantinople. 1873 * * "The opening of the Panama Canal might well be made the occasion of another earnest effort to secure the unification of tonnage rules. The Panama Canal rules and those framed for the Suez Canal Co. by the International Tonnage Commission are based upon sound principles common to both sets of rules." It is believed that the passage of this legislation making the Panama Canal rules of measurement the sole rules of measurement at the Panama Canal will do more to harmonize the single measurement code of the world, which was suggested by Professor Johnson than any other action which might be taken at this time. In any event, there is no justification for any conclusion other than that the proponents of the proposition to await an international agreement in regard to measurement of vessels are advancing it for the sole purpose of delaying action. 3. This proposal that the Department of Commerce control Panama Canal measurement rules appears to be rested upon three arguments: (a) That all matters relating to commerce should be vested in the Department of Commerce. (b) That the administration of the Panama Canal would not properly consider the interests of shipping. (c) That the President would probably approve without due consideration of the interests of shipping recommendations of the Governor of the Panama Canal which would not have given proper consideration to shipping interests using the Canal. The answers to the above are submitted as follows: (a) The Commissioner of Navigation in office at the time and sometime subsequent to the opening of the Panama Canal, as well as the then Secretary of Commerce, as indicated in the hearings heretofore held on similar bills, advocated the adoption of separate rules for the Panama Canal. Panama Canal rules are subject to the promulgation by the President of the United States, whereas the Director of Navigation and Steamboat Inspection Service has sole jurisdiction to interpret and decide questions arising under the general statutes of the United States relating to the measurement of vessels. The Panama Canal rules apply, not only to vessels of the United States over the measurement of which the Director of Navigation and Steamboat Inspection has jurisdiction, but have application to vessels of every nation, many of which may never touch at a port of the United States. (b) The suggestion that the Governor of the Panama Canal would be unfair to shipping in reaching his conclusions and making recommendations in regard to measurement rules and tolls rates does not properly consider the attitude which has been assumed by every Governor in reference to this subject. If there is any one guiding principle which has governed the actions and recommendations of the various Governors of the Panama Canal it is that the Panama Canal route shall be made attractive to the shipping of all nations and that no decision shall be made which will drive shipping away from the Canal either by putting it out of business or by forcing it to follow other trade routes. It is of prime importance to the Panama Canal administration that shipping through the Panama Canal shall increase and that nothing shall be done the result of which will be to retard the development of such traffic. While it is the desire of the Canal administration to efficiently operate the Panama Canal and to demonstrate that a Government-owned enterprise can be operated with a reasonable return to the United States, the administration knows that it is essential that this be accomplished through increasing traffic through the Panama Canal. (c) The mere statement that the President might not seek proper advice prior to the approval of changes in measurement rules and changes in rates of tolls is an indication of the extreme inappropriateness of the argument. It is certainly far better that the establishment of regulations regarding measure. ment of vessels and rates of tolls should be placed in the hands of the President than under the uncontrolled jurisdiction of the Director of Navigation and Steamboat Inspection Service. The continually reducing rate of tolls that has been collected during the last 20 years while the Bureau of Navigation has had supervision of the measurement of vessels is one of the best evidences of the need of discontinuing the present situation. 4. This subject of the unconstitutionality of the proposed legislation was not stressed to any great extent, but appears to have been brought up largely on account of the recent decisions in the hot-oil cases. The essential difference between the facts in this case and the facts in any decided cases is that this legislation relates solely to charges which shall be made for the use of property of the United States. While under the Constitution Congress has control over the property of the United States, there appears nothing which prevents Congress from turning that property over to the management of any organization which may be designated by it. Certainly the same legal principles in regard to setting up a standard for the fixing of rates for the use of private property or for determining either the civil or criminal liability of persons has little, if any, relation to the matter of fixing charges for using property of the United States. In any event the standard fixed by treaty that the charges shall be uniform to the vessels of all nations is believed sufficiently definite for all purposes with the addition of the standards contained in the legislation under consideration. 5. The capitalization of the Panama Canal as of June 30, 1933, on which the interest charge of 3 percent is considered payable by the United States was $539,200,059.23, including interest on construction costs to June 30, 1921, only. The corresponding figure for June 30, 1934, is $543,744,707.09. Captain Petersen especially objected to this increase, which was due primarily to expenditures made on the Madden Dam for the express purpose of providing water supply which would enable the Canal to meet the needs of a shipping during the dry season. A large increase in capitalization which may be made in the future, if increasing traffic requires expenditure therefor, is the construction of a third set of locks so that the Canal may be operated in both directions at all times. The cost in connection with carrying such expenditures will be fully offset by the tolls paid on an increasing volume of traffic without any increase in rates. As a matter of fact, the Canal has practically covered the major part of carrying charges during the last 12 years, even though shipping interests have been able, by taking advantage of the unwarranted situation in reference to toll charges, to reduce toll rates per Panama Canal net ton very materially. Increasing capitalization which may be necessary to enable the Canal to provide for shipping needs is certainly a proper basis to be used in fixing the toll rates. Included in the capital cost are no amounts which have been expended for the defense of the Canal. It is true that at one time, upon the recommendation of a special commission, the sum of $113,000,000 was arbitrarily assumed as a proportion of the cost of the Canal, which might be considered as in some way representing the military value of the Canal. However, none of those who had anything to do with the administration of the Canal believed that any such division was proper or justified and, upon review of the matter by the Bureau of Efficiency, the President of the United States directed that the total cost of the Canal should be again set up as a part of its proper capitalization. The cost of fortifications of all kinds, including the cost of military and naval posts have never at any time been incorporated as a part of the cost of the Panama Canal as a commercial enterprise. 6. As was stated in the hearings last year in reference to a similar objec tion made by Captain Petersen, these expenses for civil government are just as proper charges to Canal operations as is the cost of the electric current which operates the towing locomotives towing vessels through the locks. They are on a parity with the taxes paid by a private corporation, such as the railroad terminal in Washington City toward the expenses of maintaining the municipality of the city of Washington, or the taxes paid or the other levies made upon an American corporation with a large industry operating in any Central or South American country. Civil government is maintained in the Canal Zone solely because of the necessity for schools, police, fire department, and other civil-government activities required by the fact that the Panama Canal is the sole operating organization within the Canal Zone, and the entire expense is incurred for the purpose of maintaining the operating organization required for the passage of vessels through the Canal and for the rendition of proper services to such vessels. Such expenses take the place of the levying of taxes by the Government on its own activities, and supplement the taxes paid by the few business organizations operating in the Canal Zone. 7. The statements made by both Captain Petersen and Mr. Adams of the Grace Line in regard to the Panama Railroad Steamship Line were inaccurate and misleading. * * * Captain Petersen said the Panama Railroad Steamship Line carried 118,606 tons of freight at less than the rates charged by commercial steamship lines, and further that the company went out into the open market to compete for this commerical steamship business, while Mr. Adams, after confirming this statement, went on to say that the Panama Railroad Co. turned this business over at Cristobal for reshipment by foreign lines to the west coast of Central and South America. Captain Petersen also stated that the reduction amounted to $151,020.50. The report of the Panama Railroad Co. for the fiscal year 1934 shows that the total freight carried was the figure of 118.606 tons mentioned by Captain Petersen. Within that tonnage are included 22,000 tons of the Panama Railroad Co.'s own commissary supplies, 13,500 tons of shipments for the Panama Canal and the Army and Navy in the Canal Zone, and 22,000 tons of cargo carried to and from Haiti. As stated in the same annual report on page 7, and as is well known to shipping interests, the freight traffic of the Panama Canal and other departments of the United States Government is carried at a reduction of 25 percent from established tariff rates, which rates are also quoted by other steamship lines. After mentioning the reduction in passenger tariff rates for Panama Canal employees and their families, which were referred to by the committee, the report states: "Had the steamship line been credited with its tariff rates on this freight and passenger traffic carried for the account of the Government its operation would have resulted in a profit of $151,029.50." It does not appear necessary at this time to discuss the justification for the Panama Railroad Co., which is operated as an adjunct of the Panama Canal, to quote to the Government and its employees reduced rates as a result of this is merely to reduce the charges made into the expenses of the Panama Canal to be offset by tolls and other receipts collected. The commercial cargo carried by the Panama Railroad Co. is carried at the same rates as are charged by the other lines operated to Cristobal. The statement of Mr. Adams was inaccurate and misleading in that, while some of the cargo transferred at Cristobal is undoubtedly turned over to a foreign line, it is done solely because the bills of lading by which shipments are made require that the cargo shall be delivered to "first connecting carrier from Cristobal, or that such cargo shall be reshipped by a specified foreign line. I attach hereto a statement by Mr. Rossbottom of January 31, 1935, which fully covers the methods of business of the Panama Railroad Steamship Line so far as these particular questions are concerned. 8. The following information is submitted in reference to deck loads carried on vessels through the Panama Canal during the fiscal year 1934: Number of vessels with deck loads___ Panama Canal tonnage of above deck loads_- Number of vessels with deck loads whose main cargo was general Panama Canal tonnage of deck loads of above 757 vessels__. Panama Canal net tonnage of vessel with maximum deck load__ Percentage of deck load____ Panama Canal net tonnage of 103 vessels carrying over 800 tons lumber on deck_____ Panama Canal tonnage of deck loads of above- Panama Canal net tonnage of 32 of these 103 vesels with largest Average percentage of deck loads of above_-. deck cargo- Panama Canal tonnage of deck loads of above 32 vessels. Average percentage of deck loads of above 32 vessels__ Panama Canal tonnage of deck load of above special vessel. 1, 213 307, 583 757 58, 511 77 456 2, 191, 660 249, 072 11.4 6, 491 1, 333 20.5 511, 563 94, 524 18.5 143, 602 32, 487 22.6 2,950 1.042 35. 3 (This vessel frequently passes through the canal with deck load over 25 percent of her Panama Canal net tonnage.) Panama Canal particulars for fiscal year ended June 30, 1934 (includes all traffic of 300 net tons, Panama Canal measurement and over) A. For passenger vessels of United States registry: 1. Number of transits laden_. 2. Number of transits in ballast. 3. Tolls paid laden___ 4. Tolls paid in ballast__ 5. Panama Canal tonnage (exclusive of deck loads) 7. Deck loads as measured under Panama Canal 8. Measurement, under Panama Canal rules, of cargo 13. Tons of cargo carried___ 339 5 $2, 110, 002. 50 $8,471. 52 2,882 706 1,699, 581 7,006 62, 342 668, 466 300, 810 1,045, 447 B. For passenger vessels of all other nationalities : 1. Number of transits laden_-_ 2. Number of transits in ballast. 3. Tolls paid laden__. 4. Tolls paid in ballast-- 5. Panama Canal net tonnage (exclusive of deck 6. United States equivalent tonnage.. 7. Deck loads as measured under Panama Canal rules_ 13. Tons of cargo carried____ 66 C. General cargo ships (not shelterdeckers") of United States registry: 1. Number of transits laden.. 2. Number of transits in ballast. 3. Tolls paid laden 4. Tolls paid in ballast. 5. Panama Canal net tonnage (exclusive of deck 6. United States equivalent tonnage_ 7. Deck loads as measured under Panama Canal rules_ 13. Tons of cargo.. D. General cargo ships (not shelterdeckers") of all other nationalities: 1. Number of transits laden 2. Number of transits in ballast.. 3. Tolls paid laden. 4. Tolls paid in ballast__. 5. Panama Canal net tonnage (exclusive of deck 6. United States equivalent tonnage. 7. Deck loads as measured under Panama Canal rules_ 13. Tons of cargo_ E. General cargo ships of United States registry with closed shelter-deck spaces: 1. Number of transits laden_. 2. Number of transits in ballast. 3. Tolls paid laden. 4. Tolls paid in ballast. 5. Panama Canal net tonnage (exclusive of deck loads) 6. Un ted States equivalent tonnage. 7. Deck loads measured under Panama Canal rules- 13. Tons of cargo-. 790 7 $3,589, 662. 50 $24, 554. 84 4, 446, 456 2,892, 708 10, 734 636, 397 232, 847 104, 708 2,938, 932 795 58 $3, 447, 092. 70 $192, 587.87 4, 044, 941 2,985, 497 181, 675 393, 391 4, 639, 303 572 214 $2, 413, 641. 70 $644, 119. 17 3, 437, 620 2,629, 593 40, 439 306, 021 3, 623, 181 80 6 $443, 902. 50 $27, 339. 84 475, 657 384, 823 9, 510 270 455, 654 |
