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upon their business that wherever a document is unnecessary it should be abolished. The purpose of these two sections can be more effectively attained by imposing a penalty for a violation of any of the conditions of the bond and abolishing the bond. This course would both afford relief to the owners and masters of vessels and at the same time do away with unnecessary clerical work in the custom-houses and prevent the accumulation of worthless bonds. A bill to accomplish these results (S. 588) has passed the Senate, has been reported by the House Committee on Merchant Marine and Fisheries, and is on the calendar of the House of Representatives. The passage of this measure, a copy of which may be found in Appendix A, is recommended.
REMISSION OF PENALTIES.
Recent opinions and the enactment of new laws concerning immigra tion and quarantine have led to questions as to the authority of the Secretary of the Treasury to 1emit or mitigate certain fines provided for in laws relating to vessels, especially in the case of sailing vessels, and in consequence considerable embarrassment has ensued in the administration of certain of those laws. Section 5294 of the Revised Statutes confers authority upon the Secretary to mitigate fines and penalties in the case of steam vessels, and like authority in the case of sailing vessels is desired. It should be borne in mind that our scheme of navigation laws includes many and very heavy fines for numerous violations of or failures to observe even the minor provisions of those laws. In the imposition of fines and penalties, which at times amount virtually to confiscation, only limited discretion, and in some instances no discretion, is allowed to the customs officers. Mitigating circumstances, unintentional or unavoidable violation of the letter of the statute, ignorance of the law, and in some instances the inability of the Government, through the absence, illness, or death of its officers, to perform services for the owners of vessels which the law requires to be performed at a stated time, must be considered by the Secretary of the Treasury in determining the justice or propriety of many of these penalties. The lack of sufficient authority to review penalty and fine cases thus often entails hardship on innocent parties and embarrasses this Bureau, to which is assigned the consideration of these cases preliminary to the action of the Secretary of the Treasury. It has been the policy of Congress in fixing fines and penalties on vessels to bestow upon the Secretary of the Treasury the power to remit or mitigate those fines, and in recent legislation where this power has not been bestowed it may be presumed to be due rather to oversight than to an intentional change in policy. A bill to remedy the situation (H. R. 7796) passed the House of Representatives at the last session and is pending before the Senate Committee on Commerce. Its enactment is earnestly recommended for the relief especially of the owners and masters of sailing vessels.
The amount collected as tonnage tax during the fiscal year ended June 30, 1894, was $539,028.47. Details concerning the method of collecting the tax and of amounts collected may be found in Appendix E. The proceeds of the tax are applied to the support of the Marine Hospital Service.
In effect tonnage taxes are part of the cost of transportation, and thus, to an extent at least, in the ultimate analysis they enter into the 7325 NAV-III
cost of imported goods to the American consumer. The taxes, however, in the first instance, are levied upon and paid by the vessel, and as the bulk of our foreign carrying trade-and all but a small fraction of our transatlantic trade-is by foreign vessels the bulk of these taxes is paid primarily by foreign vessels.
The suggestion that American vessels be exempted from the payment of tonnage taxes is, in another form, the proposition to impose discriminating flag duties on foreign vessels, and in practice would be open to all the objections to that proposition. It would call for a revi sion of our treaties with maritime nations, and even if the discrimination were once established, it would unquestionably be rendered futile as a means of promoting American navigation, through the imposition of retaliatory taxes abroad on American shipping, whenever our vessels. began to appear in foreign ports. Indeed, some commercial nations are already armed with laws imposing double taxation in their ports on vessels of any nation which in its own ports discriminates on account of flag. (See Appendix H.)
This Bureau is not called upon to consider tonnage tax as an indirect tax on consumption. As a tax on navigation there is no method, compatible with international obligations and customs, by which our own vessels can be exempted from the tax without inviting reprisals, nullifying prospective benefits. A reduction of these taxes does not, accordingly, promise any relief to our own merchant marine at all proportionate to the relief which it would afford to foreign carriers. The act of 1886 was the declaration of a most liberal policy on the part of the United States, when it is borne in mind that our merchant marine actually engaged in foreign trade was then and still is relatively so scant in tonnage. By that act the United States invited commercial nations to abolish light-house dues, tonnage taxes or equivalent burdens on commerce, and agreed to abolish tonnage taxes on vessels from the ports of any country which hereafter should impose no such taxes on American vessels in its ports. That policy is worthy of a great and generous maritime power. It is to be regretted that thus far we have not the merchant marine in foreign trade to receive in foreign ports the ben efits of the immunities we have extended under that act to foreign vessels in American ports. The only European nations which thus far have entered into reciprocal relations with the United States in the matter of tonnage dues are Germany and the Netherlands. The fleets of two great German steamship lines alone, plying between the United States, Hamburg, and Bremen, comprised during the last year in round numbers 180,000 net tons, and a tax of 6 cents a ton, five times repeated, would have amounted to $54,000, from which those two lines are relieved. No American steamships and only two American sailing vessels, of possibly 5,000 net tons, entered Hamburg last year, and there are no returns to indicate that any American vessel of any description entered Bremerhaven. The immunity from actual taxation which American vessels have thus obtained in German ports under this reciprocal arrangement has not amounted during the year to $500, because there has been no considerable American tonnage in those ports.
The operation of the arrangement with the Netherlands is similar. On its net tonnage of 30,000 tons the principal Netherlands line of steamships is saved $9,000 annually at New York, while Rotterdam rarely during the year enters more than two or three American sailing vessels.
The exemption from tonnage tax of vessels from Colon and Panama, on the other hand, relieves the Pacific Mail Steamship Company from
an appreciable burden which would otherwise be imposed, and the exemption of West Indian and Central American ports is clearly to the advantage of a trade essentially coastwise and American, under whatever flag conducted.
These facts are set forth with a view neither to condemn nor approve the present reciprocity law, but to illustrate its actual operations. Part, at least, of the saving in operating expenses of foreign steamship lines which our laws have effected benefits our own people in lower freight charges. But until steps have been taken by the United States to make use of the privileges already obtained, any further application of the reciprocity feature of our tonnage-tax law can be advocated only on the ground that such reduction will reduce cost of transportation, and incidentally the cost of imports to consumers.
With these considerations in mind, I have the honor to suggest that tonnage tax be imposed upon gross instead of net tonnage, and that to offset this increase in the basis of taxation the rates be proportionately reduced. The draft of a bill to carry out this recommendation is printed in Appendix A.
The tendency of the legislation of maritime nations is in the direc tion of lower net tonnage. Tonnage taxes, many port charges, and other expenses of navigation are based to a great extent in the United States, Great Britain, and other foreign nations on net tonnage, and a reduction in a vessel's net tonnage accordingly is equivalent to a reduction in its cost of operation. While Congress has failed to take cognizance by legislation of this fact, and has made no change in our laws since 1882, other maritime governments have enacted laws or issued decrees which have materially reduced the net tonnage of their vessels, and thus reduced the expenses of their merchant marines. During the last fiscal year the Norwegian and Swedish governments have made such changes in their laws. The reason for such changes is so strong, that they may be expected to continue to be made indefinitely. In consequence net tonnage has ceased to have a fixed and uniform meaning. It signifies one thing with the vessels of one nation and another thing with the vessels of another nation, and even with the vessels of a given nation it may mean one thing one year and an entirely different thing another year. In all these changes vessels of the United States suffer, because our laws have not kept pace with changes in foreign laws. Net tonnage is thus no longer a scientific and equitable basis for tonnage tax. It is even in effect a discrimination against our own vessels, in spite of all that this Bureau can accomplish under present laws to prevent such discrimination. Thus it has been found necessary to suspend the acceptance of French certificates of measurement in ports of the United States, and actually to measure French vessels according to our own laws. The changes in French laws which necessitated this step on the part of the United States illustrate the sedulous care which foreign governments bestow upon shipping and the unreliability of net tonnage as a basis of taxation. The French navigation bounty act of 1881 allowed navigation bounties on the basis of net tonnage, and under that law it was clearly to the advantage of French vessels to have a large net tonnage, though it involved heavier port charges. But the new French bounty act of 1893 allows bounties on gross tonnage, and to effect a saving in port charges, etc., the laws were modified so that French net tonnage is very much less than net tonnage under the laws of any other nation. Under the laws of the United States the net tonnage of registered steam vessels averages 31 per cent less than gross tonnage. Under the laws of France the net
tonnage of French steam vessels is 47 per cent on the average less than gross tonnage. Thus the same vessel of 5,000 gross tons under the laws of the United States would on the average measure 3,450 net tons and under the French law only 2,650 net tons; a difference of 800 tons, enabling the French vessel to pay $240 less annual tonnage tax in an American port than an American vessel of the same build and dimensions, besides effecting a proportionate saving on other charges based on net tonnage at any port the two vessels might visit. Facts illustrating the operations of the net-tonnage laws of nations and the laws themselves, as far as obtained and pertinent, are to be found in Appendix D.
The inequality and discrimination against our own vessels in our own ports and in favor of French vessels, was stopped by the issue of a circular on December 30, 1893, from the Bureau of Navigation, which by law is vested with authority in the matter of tonnage and admeasurement. Steps have been taken by the Bureau to insure the equal treatment of Norwegian vessels with our own in the matter of measurement in our own ports, and in the case of other nations, the net-tonnage laws of which require a readjustment of existing arrangements for the reciprocal acceptance of certificates of measurement, the Bureau has action under way at this time to secure for American vessels equal treatment in the matter of tonnage taxes in our own and foreign ports.
The Bureau is reluctant to require the measurement of foreign vessels in our own ports for several reasons. The comity of nations suggests that the certificates of measurement of vessels of one nation be accepted in the ports of another so far as possible. But there is no comity in an arrangement by which, for example, British or French certificates, giving a much lower net tonnage than that of American vessels of the same build and dimensions are accepted in American ports, while in British and French ports American certificates are accepted giving a much higher net tonnage than British or French vessels of the same build and dimensions. If it were possible to secure the adoption of a uniform international system for determining net tonnage the difficulties of the situation, which are understood by every maritime nation, could easily be overcome. A proposition for an international conference to devise an international scheme of uniform measurement has been submitted by the Belgian Government, but the project has not been considered practical. More rapid progress toward the establishment of uniform measurement laws can undoubtedly be made through correspondence and the concentration of efforts in the lawmaking branches of the governments of the commercial nations interested than through the convocation of an international conference. Several such international conferences have considered the subject of tonnage laws, and the present diversity and fluctuations in those laws are plain evidence of the failure of such conferences to attain the desired end.
The convenience of commerce offers an even stronger reason why remeasurement should not be resorted to, if it can be avoided in fairness to all interests. In order to measure a vessel, it is virtually necessary that she shall be free from cargo. It takes over a day-nearly two days in some instances-to measure a large steamship, and a proportionate time in the case of smaller vessels. Under the present press of commerce and keenness of competition time is of cash value to every vessel in active trade, and none is allowed to elapse between the ending of the discharge of the cargo and the beginning of the lading of a new one. At this juncture, to intervene with the necessarily slow process of measurement is both to retard commerce and add to its expen
ses beyond even the admeasurers' fees, and if it can be avoided, without permitting discriminations to be made under the laws against our own vessels, the effort should be made.
Still further, any condition of affairs calling for the measurement of the gross and net tonnage of a considerable number of steamships entering ports of the United States would require a considerable addition to the force of men at the principal custom-houses, and would overtax the ability of custom-houses at smaller ports. The force of the New York custom-house engaged in measuring vessels now consists of only 5 men, and from personal examination I am convinced that it would take at least 20 men at that port to enforce an order requiring the measurement, for example, of the gross and net tonnage of British vessels. The proper execution of such an order at all the ports of the United States would require additions to the roll of employés at the custom-houses of the country, amounting, doubtless, to $50,000 or $75,000 per annum. While the measurers' fees would probably equal this sum, they constitute an additional objection to any general remeasurement of foreign vessels according to the laws of this country.
None of the objections to the imposition of tonnage taxes on net tonnage holds against gross tonnage as a basis of taxation. Gross tonnage, as determined by the Moorsom system in force among the principal commercial nations, offers a stable, simple, and uniform basis for computation of tonnage dues. It is used for that purpose in Holland, and various charges both in the United States and abroad are determined by it. Some nations, it is true, do not include in gross tonnage certain spaces which are included by the laws of the United States, but such spaces, as a rule certainly, and, so far as ascertained, without exception, are above deck. Such spaces can be measured readily, quickly, and inexpensively, and without interfering with the loading and discharge of cargo. By adding the measurement of such spaces, where they have not been measured by the laws of the nation under whose flag the vessel sails, to the gross tonnage expressed in her national certificate of registry, it will be possible to continue to recognize such certificates without prejudice to American vessels.
The gross tonnage of sailing vessels is seldom more than 5 per cent greater than their net tonnage. The gross tonnage of registered steam. ers under the laws of the United States averages 31 per cent more than their net tonnage, while for over 12,000 steamers of various nationalities classed in Lloyd's Register, gross tonnage exceeds net tonnage by 37 per cent. Taking together both domestic and foreign steamers entering American ports, gross tonnage exceeds net tonnage by about 35 per cent. A change from net to gross tonnage as a basis for tonnage dues would accordingly add 5 per cent to the tonnage taxes on sailing vessels and upward of 30 per cent to the tonnage taxes on steam vessels, unless with the increase in basis there be a reduction in rate.
The rate now paid by vessels coming from ports in North America, Central America, the West Indies, South American coast of the Caribbean Sea, the Bermudas, the Bahamas, Hawaiian Islands, and Newfoundland is 3 cents per net ton, and from all other places is 6 cents per net ton. These rates are paid at five successive entries, after which the vessel is exempt from further tonnage taxes for the balance of the year which began with the first payment. Under the reciprocity arrangement already referred to, vessels from countries and ports enumerated in Appendix E pay no tonnage taxes.