Mr. CROTHERS. Yes, sir; merely meant to facilitate local shipping. Mr. PETTENGILL. And to encourage local industry, which is entirely commendable.

Mr. CROTHERS. That is right.

Mr. LEA. What are your dock charges per ton?

Mr. CROTHERS. Our dock charges on inbound vessels are 2 cents per net registered ton per day or fraction thereof; on the outbound regular ships, we have dock charges of 1 cent per net registered ton per day or fraction thereof; but, in addition to that, we also have a charge on the actual amount of cargo that is loaded to the vessel. Mr. LEA. How is that determined; on the actual amount of cargo? Mr. CROTHERS. On a tonnage basis. We make a charge of 20 cents per ton on the cargo.

Mr. LEA. That is actual weight?

Mr. CROTHERS. Actual weight; yes, sir.

Mr. LEA. Thank you.

Mr. CROTHERS. Thank you.

STATEMENT OF JOSHUA S. BARTLEY, REPRESENTING THE CAMPBELL SOUP CO., CAMDEN, N. J.

Mr. LEA. Will you give your full name and representation to the reporter, please?

Mr. BARTLEY. My name is Joshua S. Bartley, representing the Campbell Soup Co., Camden, N. J., manufacturers of canned food products.

Mr. LEA. You may proceed in your own way, Mr. Bartley.

Mr. BARTLEY. My only interest in this proposed legislation, Mr. Lea, is the possible effect it may have on our intercoastal transportation freight costs. We ship to the Pacific coast and from the Pacific coast in large volumes, approximating probably 45,000 tons annually, and in order to maintain our present low prices, naturally we must watch the freight costs very cautiously, and while we do not know what effect this proposed legislation may have in our transportation costs, we are interested in following it up and merely suggest to you gentlemen that the transportation cost is quite a determining factor.

We are not qualified to discuss the merits of a proposition pertaining to toll costs, but our business has been built up during the last 20 years to the Pacific coast and the freight rates, we think, at the present time are all that the traffic can bear, and we would just like to leave that thought with you gentlemen.

Mr. LEA. I am at the other end of your business.

Mr. BARTLEY. Yes.

Mr. LEA. From the standpoint of production.

Mr. BARTLEY. Yes.

Mr. WOLVERTON. From California.

Mr. BARTLEY. Yes.

Mr. LEA. I am from California.

Mr. BARTLEY. Well, probably you can well appreciate our problems.

Mr. LEA. I think we have a pretty good idea of what it is, and we appreciate it.

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Is that all?

Mr. BARTLEY. Yes.

Mr. LEA. Thank you.

Mr. BARTLEY. Thank you.

Mr. LEA. We will hear you, Mr. Farley.

STATEMENT OF EDWARD P. FARLEY, NEW YORK, N. Y., REPRESENTING GENERAL CARGO CARRIER SHIPS IN THE INTERCOASTAL TRADE

Will you give your full name and representation to the reporter? Mr. FARLEY. Edward P. Farley, 90 Broadway. I am speaking for a number of the general cargo carrier ships in the intercoastal trade.

We believe that this bill making the Panama rules mandatory on shipping passing through the Canal is undesirable legislation and I personally feel that it has not been enacted into law in the past because it is undesirable legislation from any angles, and not merely from the purely selfish angle.

The bill as it was first drawn, or rather the rules when they were first drawn, purported to tax the ships on the basis of earnings capacity. However, the Canal was not completed when the rules were drawn, and I am sure that the orginal proponents had little idea of the type and amount of the tonnage that would pass through the Canal, particularly American, coastwise.

Therefore, we undertook a study of this bill which I have prepared and which I would like to submit to the members of the committee, if I may-I would like to read the headings. If you would like further development, I would be very glad to read them.

Bills have again been introduced in Congress (H. R. 1399 and S. 162) designed to make important changes in the method of assessing tolls on vessels transiting the Panama Canal. These bills are similar to those which were considered by the 73d Congress, and provide, in substance, that tolls should be based upon the net vessel tonnage as determined under the Panama Canal rules for the measurement of ships. Under the provisions of these bills deck loads are exempted from payment of tolls, and lower rates (40 percent less under the S. 162) are prescribed for vessels in ballast.

The War Department is sponsoring this legislation, not with the intention of increasing the Canal revenues, but for the sole purpose of bringing about a redistribution of the toll burden, under which general cargo and passengers ships will be required to pay a much larger share of the Canal revenues than at present. Notwithstanding this, we find no record of an American shipowner advocating enactment of these bills to obtain relief from allegedly excessive tolls, nor is this legislation endorsed by the Department of Commerce, which under the law, is charged with the responsibility for measurement of commercial ships.

For sake of clarity, it may be preferable to summarize immediately, before proceeding with a general discussion of the proposed changes, the objections to the bills from point of view of the owners of American general cargo and passenger vessels. These objections

are:

(1) The proposed legislation clearly violates the principle that tolls should be based on earning capacity in two vital respects: (a) By the exemption of deck loads; (b) by granting substantial discounts to vessels transiting the Canal in ballast.

(2) These two important departures from the principle of earning capacity are made mandatory, although discretionary power is vested in the President with respect to every other factor affecting the assessment of tolls.

(3) Tonnage determined under the present Panama Canal rules does not fairly represent the "earning capacity" of cargo ships in that due consideration is not given to the weight with which a ship may be safely loaded. Failure to do so has resulted in a much lower assessment per ton of carrying capacity on certain types of ships, particularly bulk ore carriers and tankers.

(4) The proposed legislation takes away the only statutory protection which the shipowner now has against the levying of excessive tolls, and substitutes therefor a system under which tolls may be increased without limit. The rate of tolls has no practical significance unless applied to a unit defined by statute. Under the proposed bills, administrative discretion in modifying the rules of measurement is, in most respects, unrestricted and as a result, the possibility of manipulation of the rules, and consequently of the amount of tolls, is unlimited.

Mr. LEA. Would it interfere with your presentation if I should ask you a question?

Mr. FARLEY. No.

Mr. LEA. You refer to the 100 cubic feet as representing a ton. Mr. FARLEY. That is right.

Mr. LEA. Do you see any objection to definitely defining that in this bill?

Mr. FARLEY. Well, Mr. Lea, if I might, I would like to develop that.

Mr. LEA. I do not want to interfere with your chain of thought. Mr. FARLEY. It will not interfere with my chain of thought, but I can answer by saying under the proper systems and after proper study by the proper people and by that I mean technical experts, and there are a number of such employed in the Department of Commerce and those charged with the handling of Canal matters— it would be necessary in connection with any rules that are proposed to define the unit of measurement. In other words, you cannot expect

Mr. LEA. Would there be any advantage to anybody gained by very definitely including a provision as to what the measurement is to be.

Mr. FARLEY. No; I agree with that.

Mr. MONAGHAN. Mr. Farley, who do you consider are experts who would be unbiased?

Mr. FARLEY. In the Department of Commerce you may obtain such. Congress could determine it itself when the rules are propounded. I do not ask for shipowners to be the ones to do it. I am not asking that the shipowners have anything to do with this. This is a Governmental activity and not a shipowner's activity. I would answer that you should do just exactly like you would in working out taxes. These are taxes. This is taxation.

Mr. MONAGHAN. Why do you think that the War Department would be any more biased or unfair?

Mr. FARLEY. I did not say that the War Department would be any more unbiased. I merely say that they have one point of view. Their point of view is to assess tolls.

Mr. LEA. Are you not in error in saying that this is a tax? It is a service charge, is it not?

Mr. FARLEY. Well, if it is a service charge, then it should be based upon

Mr. LEA (continuing). It has been paid just the same.

Mr. FARLEY. Yes. It should be based upon the services rendered and that involves a great many things that are not involved in the earning power of a ship; the draft, the size of the ship, the weight, are all involved on everything that goes through the Canal and the opening of the docks and locks and everything. And you have to approach it from an entirely different angle.

Mr. PETTENGILL. You have spoken of the cost of service rendered. The revenues of the Panama Canal have never equaled the cost of the service rendered. There has been absolutely no amortization of the expense of digging the Canal and in recent years, my recollection is that the earnings have never been over 2 percent on the investment, or something like that.

Mr. FARLEY. Well, of course, Mr. Pettengill, Congress has appropriated a lot of money in building the American Merchant Marine, and it has encouraged its development.

Mr. PETTENGILL. Well, the point I am making about it is this: We ought to be perfecetly fair to American shippers, but if the tolls charged are not commensurate with the costs of the service given to shipping by the Canal, then it must follow that we are letting foreign shipping go through the Canal at less than the cost to render the service, and to that extent we are subsidizing foreign shipping. Is that not correct?

Mr. FARLEY. This bill will handicap American shipping, in my estimation, more than it handicaps foreign shipping.

Mr. PETTENGILL. Well, I will be glad to have you explain that. Mr. FARLEY. Well, that is the result of my study. This was not intended to be a statistical study. I think that there are others here who could point that out distinctly. And, my whole impression, from all I have seen, is that the tolls in the Canal are very adequate and fair and there is no complaint with anything that could be rightfully charged as a commercial charge against the Canal. There are many millions of dollars invested in the Canal having no value to us as a matter of commerce. You could build a canal, for commercial purposes, at very much less than it has cost to build it, and it could be maintained for very much less than it is being maintained by the present War Department administration of it.

Mr. WOLVERTON. Do you mean because of inefficiency of management?

Mr. FARLEY. No, no; not at all. I think that probably it is very efficiently managed. Defense measures

Mr. WOLVERTON. What do you mean?

Mr. FARLEY. The defense measures; defense measures are meant for the military department, for the Army, et cetera, patrolling the

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.