Panama Canal under authority of section 51 of title 2 of the Canal Zone Code, as amended by section 2 of the Act of August 12, 1949 (ch. 422, 63 Stat. 601), and all or so much as he may determine to be necessary of the personnel, property, records, related assets, contracts, obligations, and liabilities of or appertaining to the said Canal and the aforesaid facilities or appurtenances, and such transfer shall be deemed to have been accepted and assumed by the corporation without the necessity of any act or acts on the part of the corporation except as otherwise stipulated in the provisions of section 246 of this title."

SEC. [13] 11. Section 411 of title 2 of the Canal Zone Code is amended to read as follows:

"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), subject to the provisions of the section next following, the tolls that shall be levied for the use of the Panama Canal: Provided, however, That the rules of measurement and the rates of tolls, prevailing on the effective date of this amended section shall continue in effect until changed as provided in this section: Provided further, 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 any and all proposed changes in rates of tolls, during which period a public hearing shall be conducted: And provided further, That changes in basic rules of measurement and changes in rates of tolls shall be subject to, and shall take effect upon, the approval of the President of the United States, whose action in such matter shall be final and conclusive."

SEC. [14] 12. Section 412 of title 2 of the Canal Zone Code, as amended by the Act of August 24, 1937 (ch. 752, 50 Stat. 750), is amended to read as follows:

"412. BASES OF TOLLS.-(a) Tolls on merchant vessels, army and navy transports, colliers, tankers, hospital ships, supply ships, and yachts shall be based on net vessel-tons of one hundred cubic feet each of actual earning capacity determined in accordance with the rules for the measurement of vessels for the Panama Canal, and tolls on other floating craft shall be based on displacement tonnage. The rate of tolls on vessels in ballast without passengers or cargo may be less than the rate of tolls for [vessel] vessels with passengers or cargo.

"(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 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 total gross revenues of the said corporation exclusive of the cost of commodities resold, and exclusive of revenues arising from transactions within the said corporation or from transactions with the Canal Zone Government. [The rate of tolls on laden vessels shall not exceed $1 per net vessel ton.]

"(c) Vessels operated by the United States, including warships, naval tenders, colliers, tankers, transports, hospital ships, and other vessels owned or chartered by the United States for transporting troops or supplies, may in the discretion of the President of the United States be required to pay tolls. In the event, however, that such vessels are not required to pay tolls, the tolls thereon shall nevertheless be computed and the amounts thereof shall be treated as revenues of the Panama Canal Company for the purpose of prescribing the rates of tolls, and shall be offset against the obligations of the said corporation under paragraphs (c) and (e) of section 246 of this title, as amended.

"(d) The levy of tolls is subject to the provisions of section 1 of article III of the treaty between the United States of America and Great Britain concluded on November 18, 1901, of articles XVIII and XIX of the convention between the United States of America and the Republic of Panama concluded on November 18, 1903, and of article I of the treaty between the United States of America and the Republic of Colombia proclaimed on March 30, 1922.

"(e) Capital investment for interest purposes shall not include any interest during construction."

[SEC. 15. Sections 982, 987, and 1024 of title 4, and section 833 of title 5, of the Canal Zone Code, are amended by deleting the term "the Panama Canal", appearing in each of said sections, and inserting in lieu thereof the term "the Panama Canal Company"]

[SEC. 16. Section 836 of title 5 of the Canal Zone Code is amended by deleting the term "the Government of the Canal Zone", which appears in paragraph b of said section and inserting in lieu thereof the term "the Panama Canal Company".]

SEC. [17] 13. The following statutes and parts of statutes are repealed:

(1) Canal Zone Code, title 2, sections 32 and 33.

(2) Canal Zone Code, title 2, sections 51 to 54, as amended by section 2 of the Act of August 12, 1949 (ch. 422, 63 Stat. 601);

(3) Canal Zone Code, title 2, section 414;

(4) The paragraph entitled "Housing of officers serving in the Canal Zone" of the Act of July 9, 1918 (ch. 143, 40 Stat. 855; 10 U. S. C., sec. 721);

(5) Subparagraph (g) of section 2680 of title 28, United States Code;

(6) Section 6 of the Act of August 1, 1914 (ch. 223, 38 Stat. 679; 31 U. S. C., sec. 621);

(7) Section 1 of the Act of June 29, 1948 (ch. 706, 62 Stat. 1075; 48 U. S. C., sec. 1361); and

(8) All statutes and parts of statutes inconsistent with this Act, to the extent of such inconsistency.

SEC. [18] 14. Except for section 256 of title 2 of the Canal Zone Code, as added by section 22 of this Act, this Act shall take effect upon the effective date of the transfer to the corporation, pursuant to the provisions of said section 256, of the Panama Canal together with the facilities and appurtenances related thereto. Passed the House of Representatives August 24, 1950. Attest:

RALPH R. ROBERTS, Clerk. Senator BYRD. This bill is to reorganize the operation of the Panama Canal.

It is a House bill and was carefully worked over by the House. As a subcommittee of one, I recommend that the one amendment by the House be stricken. That was that the House limited the tolls to $1 a ton.

The purpose of the bill is to make the operation of the Panama Canal self-sustaining. Naturally, there should not be a limitation. The report made by me as the subcommittee has the approval of the armed services and likewise the Budget Bureau and the General Accounting Office, I think.

Mr. CHAMBERS. That is correct, and the Governor of the Panama Canal.

Senator BYRD. Briefly, this bill will make the Panama Canal selfsustaining, except that they will not be required to pay interest for the time that the Panama Canal was under construction..

In other words, the interest that the Government was required to pay until it was completed. It will pay interest on approximately, as I recall the figures-is this right, Mr. Chambers? about three hundred million, paid out of assessment of the tolls.

Mr. CHAMBERS. That is correct.

Senator BYRD. There is a hundred and some million dollars required for interest payments by the Government during the time it was under construction. That is eliminated as charges against the tolls. It will result, the Budget Bureau thinks, in raising the tolls from 90 cents a ton to 95 cents a ton.

Senator KNOWLAND. I wonder if there is any testimony from the Canal authorities or the Budget Bureau relative to that situation. Before voting to take off the dollar limitation, I would like to see some testimony in the record which would indicate the breakdown on these tolls which, of course, are of vital concern particularly to the coastal areas of the Nation as to whether the shipping can economically be operated through the Panama Canal.

If this limitation is taken off and it goes up considerably above that figure, they will dry up what little shipping there is left.

Senator BYRD. I will say to the Senator from California that the hearing was held and no protest was made. Senator Ball was here representing the shipping interests, I think.

Mr. CHAMBERS. Intercoastal.

Senator BYRD. There was no strong protest made that the ceiling should not be taken off. The result is believed to be by the Budget Bureau, and the testimony is in the record, that it will only result in increasing by 5 cents a ton the tonnage that will go through the Panama Canal. Government vessels will have to pay the same amount as a credit. Otherwise, it proposes to collect about 32 million dollars from the civilian operations there by taxation, licenses, and one thing and another.

It was very carefully worked out and seems to have the approval of all the agencies involved and no strong protest, as I say.

Senator KNOWLAND. I am not raising a protest on that. The only thing I did want to incorporate by reference, and if the testimony was not before the subcommittee, then I wanted testimony in this record before we vote as to the breakdown and testimony that it was not expected to go above 95 cents.

If you will indicate on the pages of the subcommittee record where the testimony is shown, so that it can be incorporated by reference as a part of our record before acting on this bill, it may serve the requirement.

Senator BYRD. In the computation of the toll as fixed by the Budget Bureau, they have estimated it, computed it to be 95 cents, and that is in the record.

Mr. Chambers will mark it and give it to the Senator.

Senator GURNEY. You want that marked and incorporated in the report accompanying the bill?

Senator KNOWLAND. Yes.

Senator BYRD. If that should be literally carried out, it would make the tolls about $1.20-that is, the present law.

Mr. CHAMBERS. They estimate it could go as high as $1.20.
Senator BYRD. That is in the present law.

Mr. CHAMBERS. For the first time Government vessels will be credited against the operation of the Canal. That was one of the things advocated by the shipping industry. Second, the commercial enterprises and the governmental costs of the Canal Zone heretofore have been a cost against the tolls. They are, as a part of this reorganization, required to be self-sustaining, at least 50 percent of their cost must be made up out of their own profits. So that in effect what you have is a reduction of the base on which tolls will be charged against all vessels going through.

The present tolls being charged down there are 90 cents. By crediting the Government vessels and by requiring the other commercial interests down there and the governmental costs to be taken away from the toll base, we will have an approximate figure of $1.05.

Then by crediting these national defense features, the interest on construction, you get it down to where the cost, in order to make the Canal self-sustaining under present-going costs, will be 95 cents. However, if you left the law as it is and if we followed it out literally, you could go as high as $1.20.

I might say all the witnesses here were well aware of the proposal to remove the dollar limitation. None of them, including the representatives of the intercoastal people, who had got it in the House, raised any objection to that point.

Senator BYRD. I would like to call attention to the fact that the bill specifically provides that interest shall not be charged on the interest paid during time of construction. That makes a difference of 10 cents a ton. In other words, that will reduce the computation under the formula by 10 cents a ton and would make it, so the Budget Bureau testified, 95 cents.

It appears to be a very well worked out and well-considered bill. The present law, as I understand it, is not being followed. If they charged $1.20, it would be very disruptive.

Mr. CHAMBERS. I find my memory was incorrect. They said if the Canal were to be made self-sustaining under the present law, tolls would have to be increased to at least $1.40. What we are doing is giving a 95-cent toll instead of that.

Senator KNOWLAND. What you would do is completely dry up any coastwise traffic through the Canal.

Mr. CHAMBERS. That is correct, sir.

Senator SALTONSTALL. What you are doing then, Mr. Chairman, if you credit the Government boats going through to the debit of the Canal, if you eliminate the interest on cost of construction, you are putting the debit back, you are putting the weight of the carrying of the Canal back on, one, the Government, in paying the interest on the uncompleted debt of construction, and, two, by raising taxes from the people who live down there and from licenses, and so on. Is that correct?

Senator BYRD. That is correct. I may say also that the TVA, for example, in their computations do not charge interest during the period of construction. Neither does the Grand Coulee Dam, as I understand it.

Senator SALTONSTALL. How much does that increase the cost to the Government?

Senator BYRD. It makes a difference of 10 cents a ton by not charging. In other words, the interest paid during time of construction, as I recall it, was $130,000,000. Is that right? That is excluded as one of the charges that must be made up. Total cost was five hundred and some million, but a part of that went into the civilian end of it.

I think it reduces the part on which interest must be paid at current rates, which is 2.7, or something like that, reduces it to an item. of $300,000,000 which is arrived at after taking off the interest paid during the time of construction and the cost of the civilian operations, arrived at on a very fair basis.

But more important really than that is it puts all on a budgetary basis under the new budgetary act, which I think is vitally important. Senator SALTONSTALL. Does it increase the cost to the Government of the United States?

Senator BYRD. It is going to give us 5 cents a ton more, as a matter of fact, on 28,000,000 tons going through the Canal.

Mr. CHAMBERS. That is correct. There is another point there, Mr. Chairman. Under the present law, while interest is supposed to be paid into the Treasury on this indebtedness of the Canal, actually it has not been required.

Senator BYRD. This will require interest on $300,000,000 to be paid into the Treasury for the first time.

Mr. CHAMBERS. That has to be an actual payment into the Treasury. Senator BYRD. How much will it add to revenue of the Government on 5 cents a ton?

Mr. CHAMBERS. That 28 million, sir, is commercial tonnage and not Government tonnage.

Senator BYRD. We would collect 5 cents more than we have heretofore on 28,000,000 tons.

Senator SALTONSTALL. You are putting an additional amount of taxes on the land and operations down there?

Senator BYRD. We will collect 32 million dollars from licenses and taxes.

Senator SALTONSTALL. New taxes?

Senator BYRD. Mr. Chambers?

Mr. CHAMBERS. The costs of the operation of such businesses as commissaries and things of that kind down there heretofore have been charged against tolls and, of course, that has resulted in the sale of materials down there at a much lower rate than they will get in the future.

So while they are not putting a direct tax on there, the fact remains that they will be increasing the cost of materials in the commissaries, et cetera, by the amount they will have to contribute to the support of those institutions.

Senator BYRD. Actually we will derive a 32-million-dollar-a-year cash revenue.

Mr. CHAMBERS. That is right; which will be applied against the cost of sanitation, Government, et cetera.

Senator BYRD. I suggest that the budget recommendation of 95 cents be embodied in the report. What is the pleasure of the committee?

Senator KNOWLAND. I move the bill be reported favorably.

Senator BYRD. All those in favor of the motion signify by saying "aye."

(There was a chorus of ayes.)

Senator BYRD. Opposed "no."

(No response.)

Senator SALTONSTALL. Might I, at the risk of reiteration and unnecessary theoretical remarks, continue on this Panama Canal bill? Senator BYRD. Yes.

Senator SALTONSTALL. If I understand the bookkeeping at all, the theory of this bill would be that the construction cost of the Panama Canal-that there will be no interest charged on the construction part of the Canal.

Senator BYRD. That is not correct, Senator. The theory of the bill is that the interest on construction cost of the Panama Canal shall be charged as a charge against the tolls, except the interest during the period of construction.

Senator SALTONSTALL. That is what I said.

Senator BYRD. The rest of it is to be charged. In other words, there will be interest charged on about $300,000,000, at the rate at which the Government borrows the money. That will be paid to the Treasury under this bill out of the tolls.