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PANAMA CANAL
(Changes in Administration)

TUESDAY, MARCH 20, 1956

UNITED STATES SENATE,
COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,
SUBCOMMITTEE ON MERCHANT MARINE AND FISHERIES,

Washington, D.O. The committee met at 2:30 p. m., in room G-16, United States Capitol, Hon. Warren G. Magnuson (chairman of the committee) presiding

Present: Senator Magnuson (chairman).
The CHAIRMAN. The committee will come to order.

We have before us today S. 2167, a bill to make certain changes in the administration of the Panama Canal Company, and for other purposes.

(The bill is as follows:)

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[S. 2167, 84th Cong., 1st sess.) A BILL To make certain changes in the administration of the Panama Canal Company,

and for other purposes

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the first sentence of section 245 of the Canal Zone Code is amended by inserting after “is hereby created," the following: "in the Department of Commerce,”.

SEC. 2. The last sentence of subsection (a) of section 246 of the Canal Zone Code is amended by striking out “the President of the United States or such officer of the United States as may be designated by him", and inserting in lieu thereof “the Secretary of Commerce".

Sec. 3. Subsection (e) of section 246 of the Canal Zone Code is amended to read as follows:

“(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, and (2) for 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: Provided, That the cost of providing immigration and custom service for the Republic of Panama and 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, and such portion of the cost of operating and maintaining roads, highways, sewers, and other such facilities and services, as is represented by the use of military person

1 Staff member assigned to this hearing: August J. Bourbon.

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nel and their families (such portion to be determined by the ratio of military personnel located in the Canal Zone to civilian United States citizens in the Canal Zone, and citizens of the Republic of Panama employed by the Panama Canal Company and the Canal Zone Government), 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. In the event, however, that such reimbursement is not made as hereinabove set out, or is delayed beyond the end of the fiscal year, then for the purposes defined in section 412 (b) such cost shall not be included in determining the net cost of operating the Canal Zone Government and the revenues of the Panama Canal Company, and the Canal Zone Government shall be credited as if such reimbursement had been made: Provided further, That the Canal Zone Government shall bill the Republic of Panama for the cost of providing schools for its citizens, and to the extent such bills are not paid, the Canal Zone Government shall be credited as if such bills had been paid. 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. 4. Section 247 of the Canal Zone Code is amended to read as follows:

“Sec. 247. MANAGEMENT OF CORPORATION.—(a) The management of the corporation shall be vested in an Administrator who shall be appointed by the President of the United States, by and with the advice and consent of the Senate, and who shall receive compensation at the rate of $22,500 per annum.

“(b) To assist the Administrator of the corporation in the execution of the functions vested in the corporation, there shall be a Deputy Administrator who shall be appointed by the President of the United States, by and with the advice and consent of the Senate, and who shall receive compensation at the rate of $20,000 per annum. The Deputy Administrator shall perform such duties as the Administrator may from time to time designate and shall be acting Administrator and perform the functions of the Administrator during the absence or disability of the Administrator or in the event of a vacancy in the office of the Administrator.

"(c) There is hereby established the Advisory Board of the Panama Canal Company which shall be composed of seven members appointed by the President, by and with the advice and consent of the Senate, not more than four of whom shall belong to the same political party. The Advisory Board shall meet at the call of the Administrator, who shall require it to meet not less often than once each ninety days; shall review the general policies of the corporation including its policies in connection with design and construction of facilities and the estabIshment of rules of measurement for vessels and rates of tolls; and shall advise the Administrator with respect thereto, and shall perform such other functions assigned to it under the provisions of this title. Members of the Advisory Board shall receive for their services as members compensation of not to exceed $50 per diem when actively engaged in the performance of their duties, together with their necessary traveling expenses while going to and from meetings."

SEC. 5. Section 248 of the Canal Zone Code is amended to read as follows:

“SEC. 248. (a) GENERAL PURPOSE OF CORPORATION.—The corporation shall have, as its major objective, the economic and efficient transiting of vessels through the Panama Canal. In effecting such major objective the corporation shall operate the Panama Canal, including the locks, channels, towing facilities, and other facilities used in actual transit and, to the extent found necessary to accomplish such purpose, it shall also operate facilities not used in actual transit; but such additional facilities shall be operated in a manner to be self-supporting. In determining whether or not a facility is self-supporting, the corporation shall allow as cost the items of overhead, maintenance and operation, depreciation, interest on investment, and a proportionate share of the net cost of the Canal Zone Government.

“(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:

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

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

“(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.

“(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 premiums 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.

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

“(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. 6. Section 249 of the Canal Zone Code is amended to read as follows:

"SEO. 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, 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 specifiaclly 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 Panama Canal, with the concurrence of as many of the 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. 7. Section 253 of the Canal Zone Code is amended to read as follows:

“SEC. 253. PAYMENT OF EXCESS FUNDS INTO THE TREASURY.-The Advisory Board 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 fiscal year following such appraisal, and the Administrator of the corporation shall pay into the Treasury as dividends the amount 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 requred under section 246 (c).".

SEC. 8. Section 411 of the Canal Zone Code is amended to read as follows:

“SEC. 411. AUTHORITY TO PRESCRIBE MEASUREMENT RULES AND TOLLS.-The corporation shall review from time to time and is authorized to prescribe and from time to time change (1) the rules for the measurement of vessels for the Panama Canal, and (2), subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal: Provided, That the said corporation shall give six months' ice, by publication in the Federal Register ,of any basic rule of measurement or any rate of toll proposed to be prescribed, during which period a public hearing shall be conducted with respect to such proposal in accordance with the Administrative Procedure Act: Provided further, That basic rules of measurement and rates of tolls shall be subject to, and shall take effect upon, the approval of the President of the United States : And provided further, That the Court of Appeals of the Second Circuit shall bave exclusive jurisdiction to review the acts of the corporation under this section and to compel corporate action unlawfully withheld or unreasonably delayed."

SEC. 9. Subsection (b) of section 412 of the Canal Zone Code 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 directly related thereto, including interest and depreciation, and a proportionate share of the net costs of operation of the agency known as the Canal Zone Government. The determination of such proportionate share shall be based on the ratio of the estimated gross revenues from tolls to the estimated total gross revenues of the said corporation exclusive of the cost of commodities resold, and exclusive of revenues arising from transactions between divisions of the corporation or from transactions with the Canal Zone Government."

Sec. 10. The amendments made by this act shall be effective after ninety days after the date of enactment of this Act.

The CHAIRMAN. The Chair has a short statement he would like to read for the record. We are considering today S. 2167, which was introduced by myself and has been referred to this committee for appropriate action.

It deals with certain changes in the administration of the Panama Canal.

The Chair wishes to state the reason for introducing this legislation, and what he thinks is the necessity for it. There has been a conviction in the minds of shipping operators for some years that the shipping industry has been required to bear an undue share of the cost of maintenance and operation of the Panama Canal and its adjacent military installations.

In recent years both the General Accounting Office and the Bureau of the Budget have expressed a view that has been in the minds of many shipping people, namely, that the operation of the canal is a commercial activity and should be administered on that basis, rather than as an adjunct to a military facility.

In agreement with that expressed view, and in accord with the belief of the shipping operators and industries who share the costs of maintaining and operating this vital canal that they are entitled to a business rather than a military operation, S. 2167 was introduced.

It was my feeling that the views of all the interested parties might be aired and a decision reached on the basis of fact. Of course, this has been a long-standing argument that this committee had up some years ago, even down to the question of the type of bookkeeping:

As far as the canal was concerned—and I constantly run into it in the Appropriations Committee of which I am a member-oddly enough when I first came to the committee we had a Committee on Interocean Canals which handled nothing but the Panama Canal. So I am quite familiar with the so-called controversey that has been going on for a long time regarding the share in the costs of maintaining the canal.

The list of witnesses scheduled to appear would seem to assure the presentation of all possible divergent views. I understand the commander in chief of the Caribbean area, United States Army, is here, and the Governor of the Canal Zone, to represent the defense and Army viewpoint, and leaders of foremost shipping groups will give their

side of the controversy. Various labor groups operating in the canal will be heard, as well as representatives of the United States Citizens Association of the Canal Zone.

Finally, representatives of the Nation's port authority groups will tell us the effects of the present canal operations on their phase of the industry.

The General Accounting Office will have a witness to offer testimony, and I understand there will also be submitted for the record the views of the Bureau of Labor Statistics.

The Department of Commerce would take over the administration of the canal under certain provisions of the bill.

I hope the hearings will add up to a complete discussion of this matter and a rounded-out study.

We have for the record late reports from all of the departments.

A letter from the Secretary of Commerce, dated March 16, declares that the tolls should be based only on the true cost of the operation of the canal, apart from military considerations, and favoring those provisions of S. 2167 designed to accomplish this separation. The Department states, however, that it is not now prepared to recommend transfer of jurisdiction over the canal to the Department of Commerce.

Letter from the Department of the Army, dated February 15, 1956, over the signature of Wilber M. Brucker, Secretary, which "strongly recommends that the bill not be favorably considered."

Letter from the Comptroller General, dated August 1, 1955, commenting upon the various provisions of the bill.

Letter from United States Civil Service Commission, dated March 16, 1956, offers no comment on the general purpose of the bill, but recommends that changes be made in the salaries proposed, and in the matter of appointment of the Administrator and Deputy Administrator.

Letter from the Administrative Office of the United States Courts, Henry P. Chandler, Director, dated March 13, 1956, calling attention to the fact that the Canal Zone is a part of the fifth circuit and not of the second circuit as in the bill, and objecting that “the so-called jurisdiction given to it” (the court)—that is, to review the acts of

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