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S. 2167 makes important changes in the management of the Panama Canal Company. It would transfer responsibility for operation of the Company from the Department of the Army to the Department of Commerce. It would substitute for the present Board of Directors appointed by the Secretary of the Army, an Administrator and a Deputy Administrator reporting to the Secretary of Commerce. The Governor of the Canal Zone would no longer be president of the Company and a member of the Board of Directors. In addition, the bill would make certain changes in the basis upon which the Company is required to reimburse the Treasury of the United States from its revenues.

The Civil Service Commission is not administratively concerned with the manner in which the Panama Canal Company shall be organized and administered. We therefore have no comment on these phases of S. 2167. We are concerned with certain of the pay provisions, and with the proposed manner of appointment of the Administrator and Deputy Administrator of the Panama Canal Company.

The bill provides that the Administrator would receive a salary of $22,500 a year and the Deputy Administrator would receive a salary of $20,000 a year. We beliere that these rates are inappropriate in that they are not properly alined with currently authorized salaries for other executives in the Federal Government. The Governor of the Panama Canal now receives $15,000 a year. The Secretary of Commerce, to whom the Administator and Deputy Administrator would report, now receives $22,500 a year.

We recommend that rates not higher than $17,500 for the Administrator and $15,000 for the Deputy Administrator be substituted for those now appearing in the bill. These rates should be reviewed and appropriately adjusted as such time as the Congress considers changes in the salaries established by the Executive Pay Act, Public Law 359, 81st Congress.

S. 2167 also provides that the Administrator and Deputy Administrator of the Panama Canal Company shall be appointed by the President by and with the advice and consent of the Senate.

The Commission believes that operation of the Panama Canal and the enterprises associated with it are not of a political policy nature. We do not believe, therefore, that these positions should be held by politically appointed executives. For this reason, we recommend that the bill be amended to provide that the appointment of the Administrator and Deputy Administrator of the Panama Canal Company shall be made by the Secretary of Commerce.

We also wish to point out that the bill contains a proposed amendment to section 248 (b) (5) of the Canal Zone Code (commencing on line 23, page 6, of the bill) which should be deleted since section 607 of the Federal Employees Pay Act of 1945 referred to in this provision was repealed by section 301 (85) of the Budget and Accounting Act of 1950, Public Law 784, 81st Congress. In addition, the references in the bill to "section 245 of the Canal Zone Code" and to other numbered sections should apparently refer to similarly numbered sections “of title 2 of the Canal Zone Code."

In summary, the Commission has no comment to make on the general purpose of S. 2167. In the event that favorable action is given to this bill, we recommend that changes be made in the salaries proposed and the method of appointment of the Administrator and Deputy Administrator of the Panama Canal Company.

The Bureau of the Budget advises that it believes that the operation of the Panama Canal and the enterprises associated with it are of such a nature that the position of the chief administrative officer should continue to be a Presi. dential appointee, subject to confirmation by the Senate. The Bureau of the Budget further advises that it would have no objection to our recommending that the deputy chief administrative officer be appointed by the Secretary of the Department having jurisdiction over the canal. By direction of the Commission: Sincerely yours,

PHILLIP YOUNG, Chairman.

ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS,

Washington, D. C., March 13, 1956. HON. WARREN G. MAGNUSON, Chairman, Senate Merchant Marine and Fisheries Subcommittee,

United States Senate, Washington, D. C. DEAR SENATOR MAGNUSON: On February 14, 1956, in a letter to Mr. Elmore Whitehurst, Assistant Director of this Office, you courteously informed him of

authorized plant replacement and expansion, for 1 fiscal year. Any amount in excess of the final year need would be paid into the Treasury as dividends. Such proposed amendment is consistent with recommendation No. 12, page 17, of our Report on Audit of the Panama Canal Company and the Canal Zone Government for the year ended June 30, 1954. Also see our 1953 audit report, House Document No. 473, 83d Congress, 2d session, page 30.

Section 8 would amend section 411 of the Canal Zone Code, which pertains to the prescription of measurement rules for vessels and rates of tolls, to provide for public hearings in accordance with the Administrative Procedure Act and to vest exclusive jurisdiction in the Court of Appeals of the Second Circuit to review the acts of the corporation under this section and to compel corporate action unlawfully withheld or unreasonably delayed. Under present legislation the rules of measurement and toll rates prescribed by the corporation, and approved by the President, are final and conclusive. Current toll rates have been in effect since 1938 and the apparent purpose of the proposed amendment is to afford a means whereby the rates may be reviewed. No objection is perceived to the proposed amendment.

Section 9 of the bill would amend subsection (b) of section 412 of the Canal Zone Code by adding the word “directly" after “facilities and appurtenances." We interpret existing legislation as embracing this concept. We are not in agreement, however, with the concept for the reasons set forth herein and in our 1954 audit report. Also, section 9 would amend section 412 (b) to require that the determination of the proportionate share of the net costs of operation of the Canal Zone Government be based upon the ratio of estimated gross revenues from tolls to the estimated total gross revenues of the corporation, exclusive of certain items presently excluded. Under existing legislation rates are calculated on an appropriate share and in determining such share the corporation is required to give substantial weight to the ratio of estimated gross

The term “substantial weight” is subject to various interpretations and the corporation used different formulas in the years 1952 and 1953. See page 24, Report on Audit of the Panama Canal Company and the Canal Zone Government for the year ended June 30, 1953, House Document No. 473. The proposed amendment is apparently intended to eliminate any such deviation in the future and it would appear sufficient to accomplish that purpose. However, see our recommendation No. 7, page 23 of the above audit report, and recommendation No. 2, page 14 of our audit report for the year ended June 30, 1954, which suggest, respectively, that the allocation of the share of the net costs of Canal Zone Government to transiting activities be on the basis of gross investment in fixed properties, and that losses sustained by the Panama Canal Company in the operation of business activities be included in the basis for determining toll rates.

We are of the firm view that losses on business activities should be kept to a minimum and that prices for service functions should be such as to recover costs wherever possible. Any losses still remaining would be for recovery through tolls. With appropriate recovery of costs from other agencies there is nothing to indicate that all costs of operation of the Panama Canal together with recovery of the Government's investment could not be accomplished under the present toll structure.

In addition to the foregoing comments, the committee might wish to consider our recommendations for legislative changes as set forth in our audit report for fiscal year 1952, House Document 207, 83d Congress, 1st session, pages 17-27; audit report for fiscal year 1953, House Document 473, 83d Congress, 2d session, pages 31-32; and audit report for fiscal year 1954, page 14. This report is submitted in triplicate, as requested. Sincerely yours,

JOSEPH CAMPBELL, Comptroller General of the United States.

revenue.

UNITED STATES CIVIL SERVICE COMMISSION,

Washington 25, D. C., March 16, 1956. Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate. DEAR SENATOR MAGNUSON: Your letter of June 8, 1955, asked for our comments on S. 2167, a bill to make certain changes in the administration of the Panama Canal Company, and for other purposes.

S. 2167 makes important changes in the management of the Panama Canal Company. It would transfer responsibility for operation of the Company from the Department of the Army to the Department of Commerce. It would substitute for the present Board of Directors appointed by the Secretary of the Army, an Administrator and a Deputy Administrator reporting to the Secretary of Commerce. The Governor of the Canal Zone would no longer be president of the Company and a member the Board of Directors. In addition, the bill would make certain changes in the basis upon which the Company is required to reimburse the Treasury of the United States from its revenues.

The Civil Service Commission is not administratively concerned with the manner in which the Panama Canal Company shall be organized and administered. We therefore have no comment on these phases of S. 2167. We are concerned with certain of the pay provisions, and with the proposed manner of appointment of the Administrator and Deputy Administrator of the Panama Canal Company.

The bill provides that the Administrator would receive a salary of $22,500 a year and the Deputy Administrator would receive a salary of $20,000 a year. We believe that these rates are inappropriate in that they are not properly alined with currently authorized salaries for other executives in the Federal Government. The Governor of the Panama Canal now receives $15,000 a year. The Secretary of Commerce, to whom the Administator and Deputy Administrator would report, now receives $22,500 a year.

We recommend that rates not higher than $17,500 for the Administrator and $15,000 for the Deputy Administrator be substituted for those now appearing in the bill. These rates should be reviewed and appropriately adjusted as such time as the Congress considers changes in the salaries established by the Executive Pay Act, Public Law 359, 81st Congress.

S. 2167 also provides that the Administrator and Deputy Administrator of the Panama Canal Company shall be appointed by the President by and with the advice and consent of the Senate.

The Commission believes that operation of the Panama Canal and the enterprises associated with it are not of a political policy nature. We do not believe, therefore, that these positions should be held by politically appointed executives. For this reason, we recommend that the bill be amended to provide that the appointment of the Administrator and Deputy Administrator of the Panama Canal Company shall be made by the Secretary of Commerce.

We also wish to point out that the bill contains a proposed amendment to section 248 (b) (5) of the Canal Zone Code (commencing on line 23, page 6, of the bill) which should be deleted since section 607 of the Federal Employees Pay Act of 1945 referred to in this provision was repealed by section 301 (85) of the Budget and Accounting Act of 1950, Public Law 784, 81st Congress. In addition, the references in the bill to "section 245 of the Canal Zone Code” and to other numbered sections should apparently refer to similarly numbered sections “of title 2 of the Canal Zone Code."

In summary, the Commission has no comment to make on the general purpose of S. 2167. In the event that favorable action is given to this bill, we recommend that changes be made in the salaries proposed and the method of appointment of the Administrator and Deputy Administrator of the Panama Canal Company.

The Bureau of the Budget advises that it believes that the operation of the Panama Canal and the enterprises associated with it are of such a nature that the position of the chief administrative officer should continue to be a Presi. dential appointee, subject to confirmation by the Senate. The Bureau of the Budget further advises that it would have no objection to our recommending that the deputy chief administrative officer be appointed by the Secretary of the Department having jurisdiction over the canal. By direction of the Commission: Sincerely yours,

PHILLIP YOUNG, Chairman.

ADMINISTRATIVE OFFICE OF THE UNITED STATES COURTS,

Washington, D. C., March 13, 1956. Hon. WARREN G. MAGNUSON, Chairman, Senate Merchant Marine and Fisheries Subcommittee,

United States Senate, Washington, D. C. DEAR SENATOR MAGNUSON: On February 14, 1956, in a letter to Mr. Elmore Whitehurst, Assistant Director of this Office, you courteously informed him of hearings on a number of bills relating to maritime matters to be held this week, including a hearing on Friday, March 16, on a bill in reference to the administration of the Panama Canal (S. 2167). The latter is the only one which seems in any way to concern the Federal courts. I have two comments to make on that bill which I am putting into a written statement and with this letter I send the requisite 36 copies called for in your letter. I shall be obliged if the statement may be incorporated in the record of the hearing because the matters explaine are rather important for the courts concerned. Incorporation of the statement in the record will be sufficient without oral testimony and I therefore will not ask to be heard orally. Thanking you for your consideration, I am, Sincerely yours,

HENRY P. CHANDLER.

STATEMENT BY HENRY P. CHANDLER, DIRECTOR OF THE ADMINISTRATIVE OFFICE OF

THE UNITED STATES COURTS, FOR THE RECORD IN THE MATTER OF THE PENDING BILL RELATING TO THE ADMINISTRATION OF THE PANAMA CANAL, S. 2167

Mr. Chairman and gentlemen of the Senate Merchant Marine and Fisheries Subcommittee, I thank the chairman for giving notice to Mr. Elmore Whitehurst, Assistant Director for the Administrative Office of the United States Courts, of the hearing to be held on Friday, March 16, 1956, on a bill to make certain changes in the administration of the Panama Canal Company, and for other purposes (S. 2167), and for giving the Administrative Office an opportunity to appear at the hearing. We have concluded that it will be sufficient for us to file this statement for the record and that it will not be necessary for us to be heard orally,

Section 246 of the Canal Zone Code as it would be amended by the bill would contain a proviso that “The cost of rendering goods and services which would otherwise normally be borne by other departments of the United States Government in its overseas trust territories and Government reservations, * * * shall be borne by the respective Government agencies that would normally provide such services, and such agencies shall reimburse the Canal Zone Government annually for the services rendered on their behalf” (pp. 2–3 of the bill).

We have considered this provision in reference to the effect upon the United States District Court for the District of the Canal Zone. In the past there have been efforts on the part of the Canal Zone Government to impose upon the courts the cost of maintaining the court building at Ancon and to require the payment of rent for the quarters of the court in the Administrative Building at Cristobal. Our understanaing is, however, that the reference in the pending bill to the cost of services which would “normally be borne by other departments of the United States Government” would not place upon the courts any obligation for the maintenance of the court building at Ancon or for the payment of rent for the quarters used by the court in the Administrative Building at Cristobal because in no instance are such costs borne out of the appropriations for the courts either outside of the continental United States in areas like the Canal Zone or within the continental United States. For instance quarters are provided for United States district courts free of charge against the appropriations for the courts in Puerto Rico, the Virgin Islands, Hawaii, Alaska, and Guam. So interpreting the language of the pending bill we do not object to the provision referred to. Otherwise we should object and desire to be heard.

There is a later provision of the bill, the last proviso in section 411 of the Canal Zone Code, as it would be amended to which we object because it would purport to cast upon a court a duty to decide issues which are essentially nonjudicial. The section as amended would require the Corporation to prescribe from time to time the rules for the measurement of vessels for the Panama Canal Zone and the tolls to be levied for the use of the Panama Canal subject to requirements of notice and of the approval of the President. Then follows the objectionable proviso which reads, “That the Court of Appeals of the Second Circuit shall have exclusive jurisdiction to review the acts of the Corporation under this section and to compel corporate action unlawfully withheld or unreasonably delayed” (p. 11 of the bill).

Under section 41 of title 28 of the United States Code the Canal Zone is a part of the Fifth Circuit and not of the Second. Obviously it would seem that if duties in reference to the subject matter of section 411 of the bill as it would be amended are to be given to any court of appeals, the Court of Appeals of the Fifth Circuit of which the District of the Canal Zone is a part, would be the right court.

But the more fundamental objection to the proviso is that the so-called jurisdiction given to it is not judicial in nature and not appropriate for a court. Courts are constituted to decide issues for which there are definite standards either of law or regulations. No criteria are prescribed for the exercise by a court of appeals of the jurisdiction purported to be conferred upon it in the proviso beyond the vague terms "unlawfully withheld" and "unreasonably delayed,” and those are altogether too uncertain to form a basis for court action.

Besides a court of appeals acts only upon a record either of a proceeding in a district court or in an administrative agency. The proviso lacks any provision for an appropriate record for the consideration of a court of appeals. The provision is anomalous and unworkable. It undertakes to give to a court functions which do not belong to it and which by its nature it is not adapted to perform effectively. Consequently I trust that the proviso in lines 16-20 of page 11 will be stricken from the bill.

TREASURY DEPARTMENT,

March 8, 1956. Hon. WARREN G. MAGNUSON, Chairman, Committee on Interstate and Foreign Commerce,

United States Senate, Washington, D. C. MY DEAR MR. CHAIRMAN : Reference is made to your request for the views of this Department on S. 2167, to make certain changes in the administration of the Panama Canal Company, and for other purposes.

The only provision of the bill of particular concern to the Department is the proposed proviso to section 246 (e) of the Canal Zone Code that would be added by section 3 of the bill. The proposed proviso would require Government agencies to reimburse the Canal Zone Government for the cost of providing immigration and customs services for the Republic of Panama and the cost of rendering goods and services which would otherwise be normally borne by other departments of the United States Government in its trust territories and Government reservations.

While the meaning of the proposed proviso is not entirely clear, the Department would be opposed to its enactment if it is intended, for example, to require the Bureau of Customs and the Bureau of Narcotics of the Treasury Department to reimburse the Canal Zone Government for the enforcement of customs or narcotic laws in the Canal Zone or for the enforcement of such laws by the Canal Zone Government for the Republic of Panama.

The Canal Zone is not within the customs territory of the United States and no customs services are provided in the Canal Zone by the Bureau of Customs. Such services are apparently performed by officers and employees of the Canal Zone Government under chapter 5, title 2, Canal Zone Code. Also, the Bureau of Customs provides no customs services in either the Republic of Panama or the Trust Territory of the Pacific Islands. Similarly, the Bureau of Narcotics does not enforce the narcotic laws in the Canal Zone, since under section 2 of the so-called Harrison Narcotic Act, approved December 17, 1914 (38 Stat. 785 ; 26 U. S. C. 4735 (b)), and Executive Order No. 2142, dated March 1, 1915, the enforcement of the act is a function of local officials. Likewise, the Bureau of Narcotics does not enforce the narcotic laws in the Republic of Panama and under section 4735(a) of the Internal Revnue Code the administration of the narcotic laws in the Trust Territory of the Pacific Islands is a function of local internal revenue officers.

In view of the foregoing, the Department perceives no justification for making reimbursement for customs and narcotic law enforcement functions performed by officers and employees of the Canal Zone Government.

The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this report to your Committee. Very truly yours,

DAVID W. KENDALL,

Acting Secretary of the Treasury 75182-56

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