2d Session

No. 895

PANAMA CANAL TOLLS

MARCH 13, 1930.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed

Mr. Hoch, from the Committee on Interstate and Foreign Commerce, submitted the following

REPORT.

[To accompany H. R. 10583]

The Committee on Interstate and Foreign Commerce, to whom was referred the bill (H. R. 10583) to provide for the method of measurement of vessels using the Panama Canal, having considered the same, report thereon with a recommendation that it pass.

The purpose of this bill is to remedy a situation relative to the assessment of Panama Canal tolls, which has existed since the canal was opened for use, and which has resulted in loss of revenue to the Government, brought annoyance, discriminations, misunderstandings, and in various ways made administration more expensive and difficult. The bill does not involve the question of free tolls for American shipping. It has to do with the rules under which tolls are assessed.

Under existing law, two sets of rules for measuring ships in order to determine the amount of the toll to be assessed, are in use. One set of rules is known as "Panama Canal rules" and the other as "United States rules." These two sets of rules will be explained more fully later in this report. The effect of this bill would be to eliminate this dual system, in every way unsatisfactory, and establish a single system of measurement under Panama Canal rules.

When a ship now presents itself for passage through the canal the Government admeasurers go aboard and measure it under the Panama Canal rules. If the amount of the toll, figured under these rules and the rates which go with them, amounts to more than would result if figured under the United States rules at $1.25 per net registered ton, then the latter rules must be used. The history of the matter, which explains this anomalous situation, may now be stated. The Panama Canal act, approved August 24, 1912, authorized the President to prescribe, within certain limits, the tolls to be charged, and to change the tolls at any time, by proclamation, upon six

months' notice. This act further provided that tolls might be based upon "gross or net registered tonnage, displacement tonnage, or otherwise," but that if not based upon net registered tonnage, "they shall not exceed the equivalent of $1.25 per net registered ton" nor "be less than the equivalent of 75 cents per net registered ton."

Before the canal was opened for traffic the Panama Canal authorities had engaged Prof. Emory R. Johnson, of Pennsylvania, now dean of the Wharton School of Finance and Commerce, to make a comprehensive study of the whole question of canal tolls and to draw up a set of rules for the measurement of ships, upon which measurements the tolls should be based. This was done, and these rules were promulgated by presidential proclamation, under date of November 21, 1913, and became known as the "Panama Canal rules." The fundamental principle around which these rules were built was that the charges for the use of the canal should be based upon the vessel's cargo-carrying capacity, or, in other words, upon its earning capacity. Under presidential proclamation, tolls had been fixed, on merchant vessels carrying passengers or cargo, at "$1.20 per net vessel ton-each 100 cubic feet-of actual earning capacity," and on vessels in ballast without passengers or cargo at "40 per cent less than the rate of tolls for vessels with passengers. or cargo." The expectation was that these rates would be applied after the vessel's tonnage had been determined under the Panama Canal rules. Had that been the result there would be only one set of rules in use, the fundamental principle of the Panama Canal rules would have been carried out, and there would be no need for this legislation. An interpretation of certain words in the Panama Canal act, however, changed the situation and brought into use the dual system of measurement, already referred to.

As stated above, the Panama Canal act had used the words "net registered tonnage" and had provided that the tolls should not exceed $1.25 "per net registered ton." The question arose as to the meaning of the words "net registered tonnage." If those words. meant tonnage as figured under the new Panama Canal rules, all would be well. But in an opinion rendered November 25, 1914, Attorney General Gregory held that "net registered tonnage meant net tonnage as determined, not under these Panama Canal rules, but under the United States rules, that the United States rules, promulgated by the Bureau of Navigation, Department of Commerce, having long been in existence when Congress passed the Panama Canal act, Congress must be held to have had in mind "net registered tonnage" as determined under those rules. The result of this was that as long as the tolls did not amount to more than would result on "net registered tonnage" under United States rules of measurement at $1.25, then the Panama rules and rates should be used, but that when the amount so figured went above that amount then the excess would be illegal and the tolls would have to be assessed under United States rules at $1.25.

The United States rules of measurement, applied and interpreted by the United States Commissioner of Navigation, do not effectively carry out the principle of cargo-carrying capacity earning capacityand are not intended for that purpose. They follow closely the tonnage rules of Great Britain, which are intended to minimize the burden of British ships in the ports of the world. Nearly all countries

charge port and light dues, wharfage, etc., on the basis of net tonnage, and the leading maritime nations, including the United States, have entered into reciprocal relations whereby they recognize each other's tonnage certificates for levying these dues. The natural result of this is that each nation fixes rules of tonnage measurement, which lessen, in so far as it can properly be done, these various dues upon its ships in foreign ports. And it is particularly true of English ships that in their construction this matter has been given close attention, generally, in order that the tonnage measurement might be as small as possible, regardless of actual cargo-carrying capacity, and the burden of these dues in foreign ports thereby lessened.

For reasons stated, the United States rules are not adapted for Panama Canal use and result in defeating the cardinal principle of earning capacity as a basis for tolls. In addition to that, they are subject under the law to changes from time to time by the Bureau of Navigation, Department of Commerce at Washington, and changes are quite frequently made. These changes are made for various reasons having no relation to the Panama Canal. Not only do these changes introduce an element of instability which is unsatisfactory for canal purposes but, as they are made at Washington and do not require advance notice, confusion has not infrequently resulted at the canal by reason of them.

It is not the purpose of the legislation either to increase or decrease the tolls. In order to maintain the general receipts as nearly as practicable at their present level it is provided that the tolls shall not exceed the equivalent of $1 per net ton, Panama Canal rules, for ships carrying cargo, nor be less than 75 cents per net ton for ships not in ballast nor less than 60 cents per net ton for ships in ballast, all under Panama Canal rules. These rates are as near as can be figured in order to maintain receipts at practically the present level. There is more or less variation, and will continue to be, in the effect of the rules, and the figures show that for some years there would have been a small increase and for some years a small decrease if Panama Canal rules alone, at the rates named, had been used. It should be mentioned in this connection that the rates named will have to be put into effect by proclamation by the President as required by the law, and the issuance of such a proclamation is contemplated following enactment of this measure. But the rates named in the bill fix the limits of the tolls following the effective date of the act. Since the law provides for six months' notice, under the proclamation, section 2 provides that the act shall take effect on the first day of the eighth month following the month in which it is enacted.

The general effect on receipts may be fairly indicated by applying the terms of this bill and the proposed proclamation to the business of the canal during the fiscal year 1929. For the past fiscal year the adoption of the canal plan would have increased the total tolls a little over 3 per cent; the additional collections would have been $863,057.69 as compared with an actual collection of $27,127,376.91. For all United States vessels together it would have meant an increase of $171,902.30. The following table shows the distribution of increases

or decreases among the vessels of the different nations using the canal during the year:

Statement showing net increases or decreases in Panama Canal tolls that would have been assessed vessels if rates were $1 loaded and $0.60 ballast and Panama Canal rules of measurement only applied

As to the tolls to be paid by individual ships this measure will make comparatively little change, being an increase in some cases and a decrease in others. It may be said that such changes as would result from this measure would in general be more favorable to American ships than to foreign ships. No recent computation on this point is at hand but from a report made by this committee on a similar measure on April 25, 1924, we take the following table. The particular vessels included in the list were selected simply because they were the only ones which had at that time passed through the canal regarding which full data were available in Washington at that time.

Beginning with General Goethals, the various governors of the canal, including Governor Burgess, who is now in charge, have earnestly urged this legislation from the viewpoints both of principle and administration. Successive administrations, both Republican and Democratic alike, have pressed it.

In a recent article Governor Burgess had the following to say on this matter:

Tolls on merchant ships at the Panama Canal are levied now on a dual basis. A proclamation by the President, November 13, 1912, established the rate of $1.20 per net vessel ton-each 100 cubic feet of actual earning capacity-for ships carrying passengers or cargo: and on vessels in ballast 40 per cent less than the rate for vessels with passengers or cargo. This proclamation contemplated the use of what are known as the Panama Canal rules for the measurement of vessels, which rules had been formulated with scientific care to assure equitable determination of net tonnage. However, the Panama Canal act of August 24, 1912, as amended June 15, 1914, contained a proviso that "when based upon net registered tonnage for ships of commerce, the tolls shall not exceed $1.25 per net registered ton nor be less than 75 cents per net registered ton." This was construed by the Attorney General to limit the tolls by the net tonnage, as measured under the rules for the registry of vessels in the United States.

The present situation is, therefore, that tonnage must be determined and tolls reckoned on the two bases.

The canal administration, realizing that the Panama Canal rules afford the more scientific basis for the levy of canal tolls, has advocated their adoption as the sole basis. In order that this change might not alter greatly the amount of tolls now collectible under the dual basis, the administration has recommended that the rates on canal net tonnage be reduced to $1 for laden ships and 60 cents for ships in ballast. This shift would, however, increase slightly the tolls on certain types of general crago carriers, though, as applied to all traffic, it would result in approximately the same collections as at present. In the fiscal year 1928 tolls collected under the present dual system amounted to $26,944,499.77. If the proposed single system had been in effect, the total tolls collected would have been increased by $300,973.23, or a little more than 1 per cent. The increase over the $12,645,880.20 levied on United States vessels would have been $16,498.40, or less than one-seventh of 1 per cent. Because of the increase which would fall on some types of vessels, the American Steamship Owners Association has opposed the adoption of the single basis, except at the price of such a reduction of rates as would greatly reduce the canal revenues. During the same fiscal year the single basis at proposed rates of $1 laden and 60 cents ballast would have increased the collections, from other than United States ships, by $284,474.83 as a whole, though decreasing the revenues from some nationalities.