overhead, maintenance and operation, depreciation, interest on investment, and a proportionate share of the cost of the Canal Zone Government: Provided, however, That all goods and services supplied by the Panama Canal Company and Canal Zone Government to its employees shall be exempt from such self-support requirement. The Administrator shall, at least annually, take whatever action is necessary to establish consumer prices in the Canal Zone on such a level as to establish a cost of goods and services in the Canal Zone equal to the current cost of equivalent goods and services in Washington, D. C., as established by the Bureau of Labor Statistics.

(b) GENERAL POWERS OF CORPORATION.-The Corporation shall have and may exercise the following general powers, in addition to those elsewhere conferred in this article:

66

"(a) (1) Shall have a perpetual succession in its corporate name, unless dissolved by Act of Congress.

“(b) (2) May adopt, alter, and use a corporate seal, which shall be judicially noticed.

"(e) (3) May adopt, amend, and repeal bylaws governing the conduct of its general business, and the performance of the powers and duties granted to or imposed upon it by law.

"( (4) May sue and be sued in its corporate name

"te (5) May appoint such officers, agents, attorneys, and employees as may be necessary for the conduct of the business of the corporation, define their authority and duties, fix their compensation, delegate to them such of the powers of the corporation as may be necessary, require that such of them as it may designate be bonded, and fix the penalties and pay the premium of such bonds. Persons employed by the corporation whose compensation is paid on any basis other than a per annum basis shall not be included in making computations pursuant to the provisions of section 607 of the Federal Employees Pay Act of 1945. The provisions of section 82 of this title, as amended, shall apply to the corporation and to its officers and employees.

"(6) May enter into contracts, leases, agreements, or other transactions.

"(g) (7) Shall have, in the payment of debts out of bankrupt estates, the priority of the United States.

"(h) (8) May determine the character of and necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed, and paid, and may incur, allow, and pay the same, subject to pertinent provisions of law generally applicable to Government corporations.

"(9) May purchase, lease, or otherwise acquire, and hold, own, maintain, work, develop, sell, lease, exchange, convey, mortgage, or otherwise dispose of, and deal in, lands, leaseholds, and any interest, estate, or rights in real property, and any personal or mixed property, and any franchises, concessions, rights, licenses, or privileges necessary or appropriate for any of the purposes expressed in this article."

SEC. 7. Section 249 of Title 2 the Canal Zone Code is amended to read as follows:

"SEC. 249. SPECIFIC POWERS OF CORPORATION.-Subject to the provisions of the Government Corporation Control Act, and insofar as consistent with the provisions of section 248 (a), the corporation shall have and may exercise the following specific powers, in addition to those elsewhere conferred in this article: "(a) May maintain and operate the Panama Canal.

"(b) May construct, maintain, and operate a railroad across the Isthmus of Panama.

"(c) May construct or acquire vessels, and operate the same for transportation of passengers or freight, and for other purposes. "(d) May construct or acquire, establish, maintain, and operate docks, wharves, piers, harbor terminal facilities, shops, yards, marine railways, salvage and towing facilities, fuel-handling facilities, motor-transportation facilities, power systems, water systems, a telephone system, construction facilities, living quarters and other buildings, warehouses, storehouses, hotels, a printing plant,

Applies BLS formula to price services rendered by Company to employees of Company or Zone

for all goods and

Limiting powers to carry out purpose defined in sec. 248 (a)

to those necessary

commissaries and manufacturing, processing, or service facilities in connection therewith, laundries, dairy facilities, restaurants, amusement and recreational facilities, and other business enterprises, facilities, and appurtenances necessary or appropriate for the accomplishment of the purposes of this article.

"(e) May make or furnish sales, services, equipment, supplies, and materials, as contemplated by this article, to vessels, to agencies of the Government of the United States, to employees of the Government of the United States, and to any other governments, agencies, persons, corporations, or associations eligible to make or receive such purchases, services, supplies, or materials under the laws prevailing at the time and the policies heretofore or hereafter adopted consistently with such laws.

"(f) May use the United States mails in the same manner and under the same conditions as the executive departments of the Federal Government.

"(g) May take such actions as may be necessary or appropriate to carry out the powers in this article or hereafter specifically conferred upon it: Provided, That the corporation shall undertake no new types of activities not included in the annual budget program prescribed by section 102 of the Government Corporation Control Act (except those which may be transferred to it under the provisions of section 246 (b) of this title): And provided further, That in the event an emergency is declared to exist by the Advisory Board during a period when the Congress is not in session (or by the Governor of the Canal Zone, acting in his capacity as Administrator with the concurrence of as many of the Advisory Board members as may be consulted without loss of time unreasonable in the circumstances), recommended appropriate action within the scope of this article may be undertaken. A report on such emergency activity shall be presented promptly to the Congress, when it reconvenes, for its approval and such action as it may deem necessary or desirable with respect to reimbursement through supplemental appropriation of funds to cover costs or losses arising from such emergency."

SEC. 8. Section 253 of Title 2 of the Canal Zone Code is hereby amended to read as follows:

Limiting reserve

"SEC. 253. PAYMENT OF EXCESS FUNDS INTO THE TREASURY.The Administrator shall have the power and duty to appraise, at least annually, the Corporation's necessary working capital requirements, together with reasonable foreseeable requirements for authorized plant replacement and expansion for not more than one fund fiscal year following such appraisal, and to pay into the Treasury as dividends the amounts of funds in excess thereof. Such dividends shall be treated by the Treasury as miscellaneous receipts, but shall be treated on the books of the corporation as applicable to reduction of past or future direct Government capital contributions (as provided in section 246 (d) of this title) in determining the base for interest payments required under section 246 (c)." SEC. 9. Section 411 of Title 2 of the Canal Code is hereby amended to read as follows:

"SEC. 411. AUTHORITY TO PRESCRIBE MEASUREMENT RULES AND TOLLS.-The Panama Canal Company is authorized to prescribe and from time to time change (1) the rules for the measurement of vessels for the Panama Canal, and (2) in accordance with the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal: Provided, however, that, temporarily and until prescribed and changed as provided in this section, the rates of tolls laufully prevailing on the effective date of this Amended section shall continue in effect: Provided, however, That the said corporation shall give six months' notice, by publication in the Federal Register, of any and all proposed changes in basic rules of measurement and of or any and all proposed changes in rates of tolls; proposed to be prescribed, during which period a public hearing shall be conducted: in accordance with the Administrative Procedure Act, and any adjudication determined on the record. Provided, however, that the Court of Appeals of the Second Circuit shall have exclusive jurisdiction to review the acts of the

Tolls hearing in accord with Administrative

Procedure Act

Court review

corporation under this section and to compel corporate action unlawfully withheld or unreasonably delayed."

SEC. 10. Subsection (b) of Title 2 of section 412 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 interest and depreciation, and an appropriate a proportionate share of the net costs of operation of the agency known as the Canal Zone Government. In The determination of such appropriate proportionate share, substantial Mandatory ratio weight shall be given to based on the ratio of the estimated gross eliminating revenues from tolls to the estimated total gross revenues of the "substantial said corporation exclusive of the cost of commodities resold, and weight" wording exclusive of revenues arising from transactions within the said corporation between divisions of the corporation or from transactions with the Canal Zone Government,

SEC. 11. The amendments made by this Act shall be effective after ninety days after the date of enactment of this Act.

in tolls formula

Mr. MAYER. If agreeable to the committee, I will go ahead with my statement at this time.

The CHAIRMAN. Very well.

STATEMENT OF ROBERT E. MAYER, PRESIDENT, PACIFIC
AMERICAN STEAMSHIP ASSOCIATION

Mr. MAYER. For the purpose of the record, my name is Robert E. Mayer. I am president of the Pacific American Steamship Association, a trade association representing most of the major American flag steamshiplines operating on the Pacific Coast of the United States. I have been authorized to speak not only for the Pacific American Steamship Association, but also for the American Merchant Marine Institute, Inc., and the Association of American Shipowners on this subject.

A substantially greater portion of the waterborne commerce of the Pacific coast must transit the canal than does that of the Atlantic and gulf coasts. The Atlantic and gulf coasts, of course, send larger totals of commerce through the canal. It just happens that of the total of our smaller overall, we have a larger proportion going through the canal.

We offer this as a possible reason for the fact that the fiscal policies of the canal have been the subject of active consideration by port and terminal authorities, chambers of commerce, various commodity groups and maritime labor unions along the Pacific coast for some time.

A brief bit of background on S. 2167. Since the canal was completed in the early nineteen hundreds, there have been many proposals for changes in its operations and policies. The first major changes came about with the enactment of Public Law 841, which became effective on July 1, 1951. The major objective sought in that law was a division of the business and governmental activities at the canal. The law established two entities, a Panama Canal Company to handle the transit and other business activities; and the Canal Zone Government to handle governmental activities. This provided a more clear division of costs and expenditures between the two general types of activities.

Since that reorganization, the canal has been subject to annual audits by the General Accounting Office. There have been three such audits by GAO, which have resulted in numerous recommendations for changes at the canal. Some of those, administrative in character, have been accomplished. Those that have been legislative in character have not yet been acted upon by the Congress. On December 31, 1954, the Senate Committee on Government Operations released its Staff Memorandum No. 83-2-34 entitled "Major Deficiencies in the Organization and Operation of the Panama Canal Company and Canal Zone Government, as Disclosed by Audit Reports of the Comptroller General of the United States." While it carries only GAO recommendations in its title, it also comments on recommendations by the Bureau of the Budget.

The bill we have before us is related to the GAO and Government recommendations in that the bill follows those recommendations in part. Where the bill does not follow them, it is not in conflict with the policies of the GAO.

I would like to state also that S. 2167 is the result of numerous conferences with representatives of the GAO. The "clean bill" suggesting but a few changes over S. 2167 is the result of additional conferences with GAO, with representatives of the Company, with representatives of the canal employees, and with representatives of the Bureau of Labor Statistics.

Outside of the "clean bill," there are areas wherein the steamship industry, canal labor, and GAO may differ, but within the framework of the bill now before you, we believe that these hearings will show that these three interests are in basic agreement. The bill we think represents the widest possible area of agreement of toll payers, employees, and the General Accounting Office, all of whom have contributed to bringing before your committee a bill which we believe has some reasonable amount of support.

The proposed bill, the effect of which is probably most plainly shown to you in the comparative print before you, proposes these things: (1) placing Panama Canal Company and Canal Zone Government under the supervision of the Secretary of Commerce; (2) reimbursement of Canal Zone Government by other Government agencies for work performed by that Government which would otherwise normally be performed by other Government agencies; for certain work performed for the Republic of Panama and for services provided to individuals not employed by the Company or the Government; (3) requiring that business activities at the canal (other than transit function) be self-supporting according to a regular business formula; (4) exempting the sale of goods and services to employees from the self-support requirement, and establishing a pricing formula at the canal on the basis of the BLS Consumer Price Index in Washington, D. C.; (5) limiting retention of canal profits to an amount equal to capital and expansion and replacement needs for 1 year; (6) establishing a form of management at the canal identical with that established in 1954 by the Congress for the St. Lawrence Seaway; and (7) providing for a court review of tolls rate decisions.

SUPERVISION BY SECRETARY OF COMMERCE

This subject has been covered by testimony of Mr. James Sinclair, president, Luckenbach Steamship Co. and I do not propose to add to that other than to comment on a Defense Department report recently filed with your committee opposing this transfer on the ground of the military importance of the canal.

The Defense Department report is significant in the light of the long effort of our industry to have same national defense value of the canal recognized in the tolls formula.

In 1951, the industry proposed that one-half the capital base be written off to national defense. The Congress compromised on forgiving interest during construction.

In 1954, we suggested that in recognition partly of national defense value, and partly in conformity with Government policy, the interest on construction costs up to the 1951 reorganization date be forgiven. Congress declined to act.

This comment by the Defense Department is an endorsement of the fact that the canal is an important defense weapon. Its savings to the military in World War II alone have been estimated at several times the total construction cost.

The industry's proposal in S. 2167 for transfer to the Secretary of Commerce does not ignore the military importance of the canal, nor would such a transfer be inconsistent with that aspect of the canal. It suggests closest liaison with military in peacetime, and complete military control in emergency or war period, the latter fully within the power of the President under already existing law, according to the staff memorandum of the Senate Committee on Government Operations.

The Defense Department report on S. 2167 offers no compelling reason for maintaining military control in peacetime. The operation of the Canal Company and Zone Government have no direct bearing on the military in peacetime. The Military Establishments at the canal are entirely separate and apart from the Company and Government. Except for its locality outside of the United States boundaries, the canal is no different from other major utilities. Its locality of course requires added continuous defense efforts. But as to the actual operation of the canal, there is no apparent necessary function of the military there in peacetime, outside of close liaison for security purposes.

The second item sought to be accomplished

The CHAIRMAN. I think we can put that in the record and skip it, because that is common practice in all Government agencies. That is what you point out.

Mr. MAYER. Reimbursement?

The CHAIRMAN. Reimbursement.

Mr. MAYER. We think it is. We think that in main the analogy is in Guam where the income tax in Guam is collected from the people and then remitted back to run the Guam Government. No such thing happens in the Canal Zone. We therefore propose that each of these Federal agencies whose job we do down there, because we pay for 80 percent of the government, simply reimburse the Canal Zone Government.