APPENDIX Hon. JOHN J. ALLEN, PANAMA CANAL COMPANY, Washington 25, D. C., July 7, 1954. Chairman, Panama Canal Subcommittee, House of Representatives. DEAR MR. ALLEN: Reference is made to your request for a report on H. R. 9583, a bill to repeal section 412 (e) of title 2 of the Canal Zone Code. Section 246 (c) of title 2 of the Canal Zone Code, as amended, provides as follows: "In order to reimburse the Treasury, as nearly as possible, for the interest cost of the funds or other assets directly invested in the corporation, the corporation shall pay interest to the Treasury on the net direct investment of the Government in the corporation as defined in paragraphs (a) and (b) of this section, and shown by the receipt described therein, at a rate or rates determined by the Secretary of the Treasury as required to reimburse the Treasury for its costs. Payments of such interest charges shall be made annually to the extent earned, and if not earned shall be made from subsequent earnings." Section 412 (b) of title 2 of the Canal Zone Code as amended by section 12 of the act of September 26, 1950, 64 Statute 1042, provides in pertinent part that tolls for the use of the Panama Canal: "shall be prescribed at a rate or rates calculated to cover as nearly as practicable all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including interest and depreciation, and an appropriate share of the net costs of operation of the agency known as the Canal Zone Government.' Paragraph (e) of said section 412, as amended, provides that "(e) Capital investment for interest purposes shall not include any interest during construction." In accordance with section 412 (e) the Panama Canal Company has excluded from the Company's interest base an amount of $50,892,311 representing interest during construction. Repeal of section 412 (e) would result in increasing interest payments to the Treasury by $1,237,000 in fiscal year 1955. Retroactive additional interest payable to the Treasury for fiscal years 1952 through 1954 would be $3,228,000. Paragraph (e) of section 412 was inserted in H. R. 8677, which became Public Law 841 of the 81st Congress, by the Committee on Merchant Marine and Fisheries. The committee recommended exclusion of interest during construction on the basis of precedent and "exclusion of interest during construction from the corporation's toll base is a reasonable recognition of the Canal's defense value, and that such exclusion will obviate, argument on this issue in the future." In its report on the civil functions appropriation bill, 1954, the House Committee on Appropriations stated in substance (H. Rept. No. 450, 83d Cong., pp. 12 and 13): (1) That the purpose of the tolls levied on vessels transiting the Panama Canal is not only to assist in providing necessary revenues for the present operation of the canal, but also to amortize the Federal investment therein; (2) That no provision is being made today for complete amortization of the construction cost of the canal, including title and treaty rights and interest during original construction; (3) That steps should be taken at once to insure that all portions of the Federal investment, including the original construction costs and interest during construction, are used in toll rates; (4) That it would be expected that appropriate actions would be taken by the Board of Directors and other responsible officials prior to the submission of the budget estimates for fiscal year 1955. In accordance with this request of the Appropriations Committee the Board of Directors has approved the submission to Congress of the draft legislation to repeal section 412 (e). Proposed legislation regarding amortization or depreciation of assets heretofore classified as nondepreciable has been submitted separately. The Bureau of the Budget has advised that there is no objection to the submission of this legislation to comply with the desire of the Committee on Appropriations. Sincerely yours, W. M. WHITMAN, Secretary. [H. R. 9427, 83d Cong., 2d sess.] A BILL To amend sections 246, 247, and 412 of the Canal Zone Code, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsections (c) and (e) of section 246 entitled "Investment of the United States" of Canal Zone Code are hereby amended to read as follows: "(c) In order to reimburse the Treasury, as nearly as possible, for the interest cost of the funds or other assets directly invested in the corporation after July 1, 1951, the corporation shall pay interest to the Treasury, at least annually, on the net direct investment of the Government in the corporation, as defined in paragraphs (a) and (b) of this section, and shown by the receipt described therein, at a rate or rates determined by the Secretary of the Treasury to reimburse the Treasury for its cost: Provided, however, That with respect to interest payments required to be made by the corporation, only that portion of the definition of net direct investment as refers to investments made after July 1, 1951, shall be applicable. Payment of such interest charges shall be made annually to the extent earned, and if not earned, shall be made from subsequent earnings. "(e) The corporation is further obligated to pay into the Treasury as miscellaneous receipts amounts sufficient to reimburse the Treasury, as nearly as possible, (1) for the annuity payments under article XIV of the convention of November 18, 1903, between the United States of America and the Republic of Panama, as modified by article VII of the treaty of March 2, 1936, between the said Governments: Provided, however, That the amount of such annuity required to be paid by the corporation shall not exceed the amount agreed to in article VII of the treaty of March 2, 1936, between the United States of America and the Republic of Panama; and (2) for one-half of the annual net costs of operation of the agency known as the Canal Zone Government. The net costs of operation of the Canal Zone Government, which are deemed to form an integral part of the costs of operation of the Panama Canal enterprise as a whole shall not include interest but shall include depreciation and the reimbursement of other Government agencies for expenditures made on behalf of the Canal Zone Government. The payments into the Treasury, referred to in this paragraph, shall be made annually to the extent earned, and if not earned shall be made from subsequent earnings unless the Congress shall otherwise direct." SEC. 2. Section 247 entitled "Board of Directors" of Canal Zone Code is hereby amended to read as follows: "SEC. 247. The management of the corporation shall be vested in a Board of Directors consisting of not less than nine or more than thirteen persons who shall be appointed by and hold office at the pleasure of the stockholder, or if he so elects, consisting of the stockholders and eight to twelve other persons: Provided, That the Governor of the Panama Canal shall be a director and president of the corporation, and that at least two of the directors shall be individuals actively engaged in the operation of privately owned steamships of not less than two thousand gross registered tons, operated under the American flag. Before entering upon his duties, each of the directors so appointed shall take an oath faithfully to discharge the duties of his office. The directors shall receive no salary for their services on the board, but under regulations and in amounts prescribed by the Board of Directors, with the approval of the stockholder, may be paid by the corporation a reasonable per diem allowance in lieu of subsistence expenses in connection with attendance at meetings of the board or in connection with the time spent on special service of the corporation, and their traveling expenses to and from meetings or when upon such special service, without regard to the Subsistence Expense Act of 1926, as amended, or the Standardized Government Travel Regulations. Nothing contained in this article or in any other Act shall be construed to prevent the appointment and service, as a director, officer, or employee of the corporation, of any officer or employee of the United States. The directors, of whom a majority shall constitute a quorum for the transaction of business, shall meet for organization purposes when and where called by the stockholder, and for subsequent meetings as provided by the bylaws.' SEC. 3. Subsections (b) and (e) of section 412 entitled "Bases of Tells" of Canal Zone Code are amended to read as follows: "(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including interest on the net direct investment of the Government made after July 1, 1951; depreciation on the net direct investment of the Government in the corporation, as defined in paragraphs (a) and (b) of section 246 of this Act; and one-half of the annual net costs of operation of the agency known as the Canal Zone Government. The other one-half portion of such costs shall be borne by annual appropriations to the Department of Defense. (e) Capital investment for interest purposes shall not include any interest during construction, nor such portions of the net direct investment of the United States made before July 1, 1951, as defined in paragraphs (a) and (b) of section 246 of this Act." [H. R. 9429, 83d Cong., 2d sess.] A BILL To provide that certain expenses of the Panama Canal Company and the Canal Zone Government shall be paid from tolls, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of American in Congress assembled, That section 412 (b) of title 2 of the Canal Zone Code is hereby amended to read as follows: "(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including "(1) the cost of reimbursing retirement and other funds and Government agencies under section 252 of this title; "(2) interest and depreciation (including interest and depreciation with respect to housing and other facilities provided solely for employees of the Federal Government and their dependents by the corporation or the Canal Zone Government); and "(3) an appropriate share of the net costs of operation of the agency known as the Canal Zone Government. In the determination of such appropriate share, substantial weight shall be given to the ratio of the estimated gross revenues from tolls to the estimated gross revenues from tolls to the estimated total gross revenues of the said corporation exclusive of— "(A) the cost of the commodities resold, "(B) revenues arising from transactions within the said corporation or from transactions with the Canal Zone Government, and "(C) revenues derived from supplying goods and services to employees of the Federal Government and their dependents. Revenues derived from supplying goods and services to employees of the Federal Government and their dependents shall not be used to pay any part of the costs of the Canal Zone Government." SEC. 2. The amendment made by this Act shall take effect on the first day of the second calendar month which begins after the date of its enactment. [H. R. 9433, 83d Cong., 2d sess.] A BILL To provide that certain expenses of the Panama Canal Company and the Canal Zone Government shall be paid from tolls, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 412 (b) of title 2 of the Canal Zone Code is hereby amended to read as follows: "(b) Tolls shall be prescribed at a rate or rates calculated to cover as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including— "(1) the cost of reimbursing retirement and other funds and Government agencies under section 252 of this title, "(2) interest and depreciation (including interest and depreciation with respect to housing and other facilities provided solely for employees of the Federal Government and their dependents by the corporation or the Canal Zone Government), and "(3) an appropriate share of the net costs of operation on the agency known as the Canal Zone Government. In the determination of such appropriate share, substantial weight shall be given to the ratio of the estimated gross revenues from tolls to the estimated total gross revenues of the said corporation exclusive of— "(A) the cost of the commodities resold, "(B) revenues arising from transactions within the said corporation or from transactions with the Canal Zone Government, and "(C) revenues derived from supplying goods and services to employees of the Federal Government and their dependents. Revenues derived from supplying goods and services to employees of the Federal Government and their dependents shall not be used to pay any part of the costs of the Canal Zone Government." SEC. 2. The amendment made by this Act shall take effect on the first day of the second calendar month which begins after the date of its enactment. [H. R. 9583, 83d Cong., 2d sess.] A BILL To repeal section 412 (e) of title 2 of the Canal Zone Code Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That paragraph (e) of section 412 of title 2 of the Canal Zone Code, as amended, is repealed. SEC. 2. This Act shall be deemed effective as of July 1, 1951. [H. R. 9665, 83d Cong., 2d sess.] A BILL To add section 246 (f) and amend section 412 (b) of title 2 of the Canal Zone Code, as amended Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 246 of title 2, Canal Zone Code, as amended by the Act of September 26, 1950 (ch. 1049, 64 Stat. 1041), is further amended by adding at the end thereof a new paragraph lettered (f) and reading as follows: “(f) The entire cost of such of the fixed assets transferred to the corporation under section 256 of this title as, prior to July 1, 1951, were treated as nondepreciable shall be either amortized commencing as of July 1, 1951, or depreciated from the date of placement in service. Such amortization or depreciation shall be at the rate of 1 per centum per annum, and the amounts thereof accruing subsequent to June 30, 1951, shall, to the extent earned, be paid into the Treasury annually, and if not earned shall be paid from subsequent earnings, unless the Congress shall authorize the retention of such funds, or any of them, for capital expenditures or other purposes. Payments into the Treasury under this paragraph shall be treated by the Treasury as miscellaneous receipts but shall be treated on the books of the corporation as dividends and shall be applicable to reduction of past or future direct Government capital contributions (as provided in paragraph (d) of this section, in determining the base for interest payments required under paragraph (c) of this section." SEC. 2. The first sentence of paragraph (b) of section 412 of title 2 of the Canal Zone Code, as amended by section 12 of the Act of September 26, 1950 (ch. 1049, 64 Stat. 1042), is amended to read as follows: "(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including interest and depreciation, amortization of any fixed assets which are classifiable as nondepreciable, and an appropriate share of the net costs of operation of the agency known as the Canal Zone Government." SEC. 3. This Act shall be deemed effective as of July 1, 1951. [H. R. 9681, 83d Cong., 2d sess.] A BILL To amend sections 246, 247, and 412 of the Canal Zone Code, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That subsections (c) and (e) of section 246 entitled "INVESTMENT OF THE UNITED STATES" of Canal Zone Code are hereby amended to read as follows: "(c) In order to reimburse the Treasury, as nearly as possible, for the interest cost of the funds or other assets directly invested in the Corporation after July 1, 1951, the corporation shall pay interest to the Treasury, at least annually, on the net direct investment of the Government in the corporation, as defined in paragraphs (a) and (b) of this section, and shown by the receipt described therein, at a rate or rates determined by the Secretary of the Treasury to reimburse the Treasury for its cost: Provided, however, That with respect to interest payments required to be made by the corporation, only that portion of the definition of net direct investment as refers to investments made after July 1, 1951, shall be applicable. Payment of such interest charges shall be made annually to the extent earned, and if not earned, shall be made from subsequent earnings. "(e) The Corporation is further obligated to pay into the Treasury as miscellaneous receipts amounts sufficient to reimburse the Treasury, as nearly as possible, (1) for the annuity payment under article XIV of the Convention of November 18, 1903, between the United States of America and the Republic of Panama, as modified by article VII of the treaty of March 2, 1936, between the said Governments: Provided, however, That the amount of such annuity required to be paid by the Corporation shall not exceed the amount agreed to in article VII of the treaty of March 2, 1936, between the United States of America and the Republic of Panama; and (2) for one-half of the annual net costs of operation of the agency known as the Canal Zone Government. The other one-half of such annual net costs shall be borne by annual appropriations to the Department of Defense. The net costs of operation of the Canal Zone Government, which are deemed to form an integral part of the costs of operation of the Panama Canal enterprise as a whole shall not include interest but shall include depreciation and the reimbursement of other Government agencies for expenditures made on behalf of the Canal Zone Government. The payment into the Treasury, referred to in this paragraph, shall be made annually to the extent earned, and if not earned shall be made from subsequent earnings unless the Congress shall otherwise direct." SEC. 2. Section 247 entitled "BOARD OF DIRECTORS" of the Canal Zone is hereby amended to read as follows: "SEC. 247. The management of the Corporation shall be vested in a Board of Directors consisting of not less than nine nor more than thirteen persons who shall be appointed by and hold office at the pleasure of the stockholder, or if he so elects, consisting of the stockholders and eight to twelve other persons: Provided, That the Governor of the Panama Canal shall be a director and president of the Corporation, and that at least two of the directors shall be individuals actively engaged in the operation of privately owned steamships of not less than two thousand gross registered tons, operated under the American flag. Before entering upon his duties, each of the directors so appointed shall take an oath faithfully to discharge the duties of his office. The directors shall receive no salary for their services on the Board, but under regulations and in amounts prescribed by the Board of Directors, with the approval of the stockholder, may be paid by the Corporation a reasonable per diem allowance in lieu of subsistence expenses in connection with attendance at meetings of the Board or in connection with the time spent on special service of the Corporation, and their traveling expenses to and from meetings or when upon such special service without regard to the Subsistence Expense Act of 1926, as amended, or the Standardized Government Travel Regulations. Nothing contained in this article or in any other Act shall be construed to prevent the appointment and service, as a director, officer, or employee of the Corporation, of any officer or employee of the United States. The directors, of whom a majority shall constitute a quorum for the transaction of business, shall meet for organization purposes when and where called by the stockholder, and for subsequent meetings as provided by the bylaws." SEC. 3. Subsections (b) and (e) of section 412 entitled "BASES OF TOLLS" of Canal Zone Code are amended to read as follows: "(b) Tolls shall be prescribed at a rate or rates calculated to cover, as nearly as practicable, all costs of maintaining and operating the Panama Canal, together with the facilities and appurtenances related thereto, including interest on the |