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The original documents are located in Box 27, folder "Panama Canal - Tolls Rules
Changes" of the John Marsh Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
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copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 27 of The John Marsh Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
February 27, 1976
MEMORANDUM TO:
JACK MARSH
FROM:
RUSS ROURKE
Run
Jack, I took your call from Britt Gordon. Britt was concerned
about a current "knotty" problem on the Panama Canal. The
problem has to do with a proposed increase in tolls that would
provide an additional nine percent in revenue. "If the increase
isn't approved, 1976 will show a deficit, and that deficit will have to
be paid by the U. S. taxpayer. 11
Britt tells me that Jim Lynn is in the process of "forwarding an
option paper on this subject to the White House".
He asks that you voice your strong support for the option that
would call for an increase in tolls. Britt added that the shipping
companies are doing a heavy lobbying effort against this proposal.
I shall check with OMB in an effort to obtain the briefing paper
to which Britt refers.
P.A. OMB paper attached.
Ketuin to Mr Schools
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
FEB 28 1976
ACTION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
James T. Lynn 1s/L
SUBJECT:
Panama Canal Tolls Rules Changes
Issue
Should approval be given to the Panama Canal Company to
modify cargo measurement rules which determine toll
assessments for ships transiting the Panama Canal?
Background
You have been requested to approve seven substantive changes
in tonnage measurement rules governing tolls for vessels
transiting the Panama Canal. The proposed changes were
adopted by the Board of Directors of the Panama Canal Company
and have been forwarded by the Secretary of the Army in his
capacity as "stockholder" of the Company (Tab A). Below is
a brief discussion of the issues, along with recommendations.
A more detailed discussion of the issue is attached (Tab B).
The purpose of the changes, according to the Company, is to
redistribute costs more equitably among Canal users. Cost
redistribution would be accomplished by altering the
definitions of space availability on board vessels for
carrying freight and passengers. The last systematic review
of tonnage measurement rules was conducted in 1937. In
addition to redistributing costs, the changes would increase
total revenue from tolls, as shown below:
(dollars in millions)
General
Container
Cargo
All
Ship
Shin
other
Total
All-Flags Tolls
+4.6
+3.1
+4.6
+12.3
FORD & 070830 LIBRARY
% Increase
+28%
+10%
+6%
+9%
U.S.-Flag Tolls
+1.7
+0.4
+0.2
+ 2.3
% Increase
+37%
+12%
+4%
+17%
2
The disproportionately large tolls increase for containerships
(modern vessels which carry pre-boxed cargo) is primarily a
result of one rules change--the "on-deck cargo" amendment.
This amendment would require the measurement, and toll
assessment, of all on-deck cargo. Currently this cargo is
exempt from measurement. Of the total annual $12.3 million
tolls revenue increase, $6.0 million is attributable to the
on-deck cargo amendment, mostly relating to containership
operations.
The financial health of the Panama Canal Company has been weak
in recent years largely as a consequence of rising costs and
declining traffic. If approved, the revenues gained by the
measurement rule amendments would help alleviate, but would
not eliminate, a projected 1976-1977 operating deficit. In
fact, either with or without the proposed amendments, a
general toll increase will be needed in the coming year.
A large toll increase is certain to be strongly opposed by
the maritime industry--as are the proposed amendments.
Without additional revenues, however, the Company will be
forced to request U.S. Government assistance.
Options
#1. Approve all seven amendments in their entirety.
#2. Approve all but the on-deck cargo amendment.
#3. Disapprove all seven amendments.
Discussion of the Proposed Amendments
The existing Panama Canal toll assessments are based on
commonly-accepted, international principles of ship "earning
capacity." Earning capacity is measured by the volume of
below-deck space (gross tonnage), with deductions for space,
such as the engine room, which is not available for
revenue-producing carriage (net tonnage). The actual
utilization of ship space is not considered in determining
tolls charged for a particular transit. A primary reason
for this approach is to avoid the costly delays that would
be involved in measuring the volume, weight or value of
cargo actually carried on each transit. Under the existing
FORD is LIBRARY GERALD
measurement system, a particular ship only needs to be
measured once instead of each transit.
Six of the seven proposed amendments seek to remove minor
anomalies in the existing measurement system. Four of the
changes would increase and two would decrease toll assessments.
3
Generally, the amendments would abolish "double counting"
of space and/or refine measurement standards in accord with
modern ship design. They would change capacity measurement
rules for the following spaces: fuel tanks, hatchways,
water tanks, public rooms on passenger ships, and selected
shop and store rooms. These six changes are all consistent
with the established principle of basing tolls on the
measurement of earning capacity. Few specific objections
have been filed to these proposed amendments.
The seventh amendment constitutes a major change in the
approach to assessing tolls. In addition to the traditional
method of establishing tolls for below-deck carrying capacity,
it would charge tolls for cargo actually carried on the ship
deck during each transit. This means that if a ship were
only partially loaded below deck, and carried on-deck cargo,
it would be charged for its full below-deck capacity as well
as for its actual on-deck cargo. By comparison, a ship
carrying the same tonnage, all below deck, would have to pay
only for its below-deck capacity, even though it may have a
capability of carrying on-deck cargo.
This proposed change would be a departure from the traditional
principle of basing tolls only on carrying capacity. It also
would establish different standards for below-deck and on-deck
cargo carriage.
The effect of this change would be to penalize ships which
carry on-deck cargo but which do not or can not fully utilize
below-deck space. Containerships, in particular, would be
impacted by the change. Containerships are designed to
carry significant on-deck loads, but they are not able to
fully utilize below-deck space because the rectangular
containers cannot use curved hull space on the sides, front
and back, and because space between and around containers
is needed for purposes of loading and unloading. Consequently,
with the current method of establishing tolls, containerships
on the average pay more per cargo ton actually carried than
do other ships. Recent data show that containerships pay
tolls averaging $2.12 per cargo ton, compared with about $1.15
per ton for general cargo ships.
Few would disagree with the Canal Company's position that, in
theory, on-deck cargo carriage should be subject to toll
assessment. The Company's proposal, however, does not seem
to be an equitable means of assessing such tolls, particularly
when applied to containerships. It may be necessary to
establish an entirely new method of assessing tolls for
containerships, rather than simply modifying a measurement
system which did not anticipate containership technology.
FORD & 078839 LIBRARY
4
Recommendation
Option #2 is recommended. We believe that the six relatively
minor amendments are sensible and would not be inequitable.
The on-deck cargo amendment, however, represents E major
departure from traditional measurement practices, and it
appears that it would create greater inequities than it
would remove. It is recommended that the issue of how to
assess tolls for on-deck cargo be studied further.
Positions of Interested Parties
Maritime interests have expressed across-the-board objections
to the proposed amendments. Their concern, however, is
primarily focused on the on-deck cargo amendment. Two major
U.S. shipping company associations--the American Institute
of Merchant Shipping and the American Maritime Association--
have privately indicated that if the on-deck cargo amendment
were dropped (option #2), their opposition to the remaining
amendments would be minimal.
Although the Congress has no statutory role relative to the
establishment of Panama Canal tolls, the maritime interests
have generated strong support in both the House and Senate.
In the House, Mrs. Sullivan (Chairman of the Merchant Marine
and Fisheries Committee) and Mr. Metcalfe (Chairman of the
Panama Canal Subcommittee), as well as 29 other members,
have cosigned a letter to you asking that Presidential action
be delayed until the House has had the opportunity to review
the measurement rules. Senators Magnuson (Chairman of the
Commerce Committee) and Long (Chairman of the Merchant Marine
Subcommittee) have likewise requested that you delay action
(letters at Tab C). Insofar as congressional opposition to
the amendments is generated by the maritime interests, we
expect that rejection of the on-deck cardo amendment would
also minimize congressional concerns.
The following agencies have expressed no objection to the
proposed amendments: Justice, Treasury, Federal Maritime
Commission, National Security Council, and Council of
International Economic Policy. Although both Commerce and
Transportation have recommended that the amendments be
delayed or disapproved pending further analysis, both report
that option #2 largely mitigates their concerns. State
advises that the amendments have no effect on the sensitive
treaty negotiations over the status of the Panama Canal.
Although State indicates that Greece, Norway, Spain, Japan,
Italy and Sweden have made oral representations to the
Department critical of the changes, State does not oppose
their approval.
BERALD FORD VIBRARY
5
The Panama Canal Company and the Secretary of Army stand by
their recommendation, option #1. However, they report that
option #2 is preferable to option #3.
Decision
-- Option #1: Approve all seven amendments
-- Option #2 (Recommended) : Approve all but the
on-deck cargo amendment
-- Option #3: Disapprove all amendments
-- See me
Action
To carry out ontion #2, it is necessary for you to sign the
attached resolution approving all but the on-deck cargo
amendment. Additionally, we recommend that you sign the
attached letters to the chairmen of the House and Senate
authorizing committees explaining vour decision, and to
the Secretary of the Army requesting additional review of
the tonnage measurement system and indicating the necessity
for the Panama Canal Company to take action to restrain
costs. These signature documents are at Tab D.
Attachments
CC: DO Records
Director's Chron.
Director
Deputy Director
Mr. Collier
Mr. Bray (2)
Commerce Official File
Return to Mr. Schwartz
EGD/CB: KSCHWARTZ: VT
2/5/76
REWRITTEN:EGD/CB:KSchwartz:vt 2/17/76
GERALD R. FORD
ATTACHMENT
DISCUSSION OF PANAMA CANAL TOLLS RULES CHANGES
Background
The attached letter from the Secretary of the Army requests
Presidential approval of proposed changes in rules governing
tolls for ships transiting the Panama Canal. The proposal
was adopted by the Board of Directors of the Panama Canal
Company on November 17 and was forwarded to the President
by the Secretary of the Army, in his capacity as "stockholder"
of the Company, on December 12. The rules changes require
Presidential approval and can be put into effect on or after
January 30, 1976, a minimum statutory 6 months after notice
of the proposal was published in the Federal Register.
Since the beginning of Panama Canal operations in 1914, tolls
have been based on ship "earning capacity." The measure of
ship earning capacity has been the space available (net
tonnage) for carrying freight and passengers. The Panama
Canal Company argues that the measurement rules which
determine ship earning capacity should now be altered because:
(a) the last systematic review was conducted in 1937; (b) ship
configuration and technology have dramatically changed in the
past 38 years; and (c) the operating costs of the Canal are no
longer equitably distributed to reflect the earning capacity
of vessels using the Canal. Conscquently, the Company has
proposed seven substantive changes to the measurement rules,
requiring thirty amendments to the Code of Federal Regulations.
The Company has found that the proposed rules "better reflect
the earning capacity of vessels than the present rules, are
nondiscriminatory, just and equitable."
OMB is the coordinating agency for Panama Canal Company toll
proposals. We have solicited the views of the following
agencies on the proposal: State, Commerce, Transportation,
Justice, Treasury, Agriculture, Federal Maritime Commission,
National Security Council, and Council of International
FORD
Economic Policy. We also have received unsolicited comments
from members of Congress and the maritime industry (shipping
HALD
companies, unions and port authorities). These views will be
LIBRARY
discussed below, as well as other issues pertaining to the
proposal.
Panama Canal Company Financial Condition and Canal Toll Issues
The Panama Canal Company is a wholly-owned Government corporation
whose primary purpose is maintaining and operating the inter-
oceanic Canal. From the Canal's tolls and other charges, the
2
Company is expected to be self-sustaining. Additionally, the
Company is expected to reimburse the U.S. Treasury for:
(a) uncovered costs accrued by the Canal Zone Government;
(b) interest payments relating to original Canal construction
costs borne by the U.S. Government; and (c) annuity payments
made by the U.S. to the Republic of Panama pursuant to the
Treaty of 1903, as amended in 1936.
For the past five years, the Panama Canal Company has
experienced rapidly rising costs and declining traffic. For
example, between 1970-1975, the number of transits declined
from 15,500 to 700, while operating costs climbed from
$172 million to $261 million. As a result, the first toll
increase since the Canal's 1914 opening was instituted in
July 1974 (+20% in toll rates). Despite the toll increase,
the Company's financial condition has continued to deteriorate
as a result of: (a) continuing cost-of-doing-business increases;
and (b) traffic downturns in the wake of worldwide economic
recession, the diversionary impact of the opening of the Suez
Canal, and the dampening effect of the 1974 toll increase.
Whereas the Company had planned to handle 40 ships daily in
FY 1976, an average of only 36 daily have been transiting the
Canal to date. The net effect of the financial downturn is
that the Company has sustained losses in the past two years
and is expected to continue to run losses in 1976 and 1977,
as shown below (millions of dollars):
est.
est.
1974 deficit 1975 deficit 1976 deficit 1977 deficit
$-11.8
$-6.4
$-18.0*
$-38.0*
*assumes no toll changes, measurement rules amendments,
or other remedial actions.
If approved, the measurement rules amendments would help
alleviate, but would not eliminate, projected Company deficits
in 1976 and 1977. The amendments would increase the measurements
of vessel net tonnage, leading to higher annual toll assessments
on the order of $12-13 million (further discussed below). The
Company argues, however, that it is incorrect to equate the
proposed amendments with a toll increase -- rather, the purpose
of the amendments is to redistribute the operating costs of the
Panama Canal more equitably. In the Company's framework of
thinking, the processes of establishing tolls and changing
measurement rules, although related, are separate. Any positive
revenue effects resulting from the proposed amendments would be
accounted for in computing the need for future toll rate changes
(i.e., future toll increases would be reduced by the amount of
additional revenues gained by the proposed amendments).
ERALD FORD LIBRARY
3
In fact, either with or without the proposed rules changes,
the Panama Canal Company is now indicating that a substantial
general toll increase will be required in the next 12 months
to meet the anticipated deficits. This would be the second
general toll increase in three years. Required toll rate in-
creases are shown below. The figures presume the imposition
of moderate cost-cutting measures and the continued operation
of the Company on a self-sustaining basis.
($ in millions)
Measurement
Measurement
Rules
Rules Not
Approved
Approved
Additional revenue required
to meet FY 1977 deficit
$26
$38
Future required toll increase
+17%
+28%
Additional revenue required
to meet FY 1977 deficit as
well as recoup FY 1976
deficit over five years
$28
$42
Future required toll increase
+19%
30%
The Company has pointed out that its statutory authorities
provide several alternative means for handling long term
deficits. It can: (a) defer payment to the U.S. Treasury
of interest and/or the net cost of the Canal Zone Government
to the extent the required amounts are not earned; (b) request
Congressional authority to waive entirely payment of the net
cost of the Canal Zone Government; (c) request a separate
appropriation for the Company to meet losses; or (d) use
available borrowing authority up to a maximum of $40 million.
Company officials are increasingly talking about the necessity
of employing these fallback authorities. For example, in a
January meeting, the Company's Board of Directors authorized
Company staff to explore the desirability of using one or
more of the authorities in the context of the future 1978
budget request. Utilization of the above authorities would
be highly undesirable from a budgetary point of view in that
they would entail U.S. Government subsidization of potentially
sizable Company deficits.
Of course, the future required toll increase can be reduced
by the extent to which the Company undertakes reductions in
services, employee benefits, and planned capital construction
projects. The President of the Company cum Governor of the
Canal Zone Government has already taken measures to cut
spending, but has shied away from major reductions which would
lead to strong opposition from Panama Canal employee groups,
(e.g., elimination of a 15% tropical pay differential).
SERAL
LIBRARY
4
Impact of the Proposed Measurement Rules Amendments
Of the seven substantive amendments, five will increase total
measurement tons, leading to higher toll assessments, and two
will lower total assessments. The net effects of the amend-
ments on tolls are shown below:
Company Estimates of Annual Tolls Impact of Rules Amendments1/
($ in thousands)
Ship Type
Measurement Rule
General
Container
All
Amendments
Cargo
Ship
Passenger
Other2/Total
Amendments which Increase
Measurement tons:
Deck Cargo
+578
+4,332
+9
+1,038
+5,957
Fuel
+2,290
+356
+117
+2,965
+5,72
Hatch Exemption
+209
+101
+5
+477
+79
Public Rooms
--
:
+423
--
+423
Water tanks
+198
+1
+3
+290
+491
Amendments which Decrease
Measurement tons:
Boatswain's Stores
-118
-213
-7
-641
-97
Engr. Shops
-11
-8
-1
-45
-65
All Flags Tolls Increase
+3,146
+4,569
+550
+4,083
+12,34
% Increase
+10%
+28%
+28%
+4%
+9
U.S. Flag Tolls Increase
+410
+1,708
+59
+156
+2,33
% Increase
+12%
+37%
+16%
+3%
+17
1/ Shipping companies generally believe that the Company's
estimates of tolls impact are understated
Includes dry bulk carriers, tankers, specialized product
carriers.
Maritime Industry Views
Shipping companies, unions, port authorities and selected
industries (e.g., lumber companies) have filed objections with
the Panama Canal Company regarding the proposed amendments. The
most commonly-cited objections to the amendments have been the
following:
--the amendments constitute a "de facto" toll increase, the
impact of which has not been satisfactorily evaluated.
FORD is LIBRAR SERALD
5
the amendments particularly impact containerships and
hence are "discriminatory." Furthermore, because the
U.S.-flag fleet has more containerships than do
foreign-flag fleets, U.S. shipping companies sustain
a proportionally greater financial injury.
the amendments do not improve the accuracy of the
measurement of ship cargo capacity, and hence are not
more equitable.
the amendments' impact on tolls will have negative side
effects; it will:
further reduce Canal traffic and therefore dampen
positive revenue effects of the amendments.
increase ocean freight rates and contribute to
inflation.
lead to the abandonment of some shipping services
and divert cargo passing through North Atlantic
U.S. ports to cross-continental rail or truck
transportation (leading to possible environmental
degradation).
the amendments, and the perceived toll increases they
cause, beg the issue of the Company's ability to cut
costs and thereby obviate the need for additional
revenue.
The Company published the amendments in the Federal Register
in July 1975, received written replies, opened the issue to
hearings, and in November the Company's Board of Directors
approved the original recommendations. The maritime industry
is highly irritated over the fact that the Board approved the
amendments without change, seemingly having ignored the
industry's many objections.
Despite the wide range of objections filed with the Company, the
maritime industry is principally concerned with only one amend-
ment -- the "on-deck cargo" amendment. This amendment would
have the effect of measuring all on-deck cargo transiting the
Canal, and assessing tolls accordingly. Currently on-deck
cargo is excluded from measurement and toll assessment.
Measurement by the Company of deck loads of 102 containerships
transiting the Canal showed that the net tonnage (and therefore
tolls) for these ships as a result of the application of the
deck cargo rule would increase by 28% in the aggregate, although
the net tonnage of U.S.-flag vessels in the group would increase
by 37%. As shown in the table in the previous section, the
FORD
on-deck cargo rule accounts for about half of the annual
estimated rules toll increase of $12 million.
6
Two major U.S. shipping company associations-- the American
Institute of Merchant Shipping (AIMS) and the American
Maritime Association (AMA) have privately indicated to us
that if the on-deck cargo rule were dropped from the package
of amendments, the opposition of their member companies to
the remainder of the amendments would be minimal.
Congressional Views
Although the Congress has no statutory role relative to the
establishment of Panama Canal Company tolls, the maritime
industry has generated strong support for its position in both
the House and Senate. In the House, Mrs. Sullivan (Chairman
of the Merchant Marine and Fisheries Committee) and Mr. Metcalfe
(Chairman of the Panama Canal Subcommittee), as well as 29
other members of the House, have cosigned a letter to the
President asking that no action be taken on the pending measure-
ment rules amendments until the House has had the opportunity
to review the measurement formulas in detail at future hearings
(letter attached). Likewise in the Senate, Senators Magnuson
(Chairman of the Commerce Committee) and Long (Chairman of
the Merchant Marine Subcommittee) have "join[ed] with Members
of the House of Representatives who have expressed their
interests in this to you and request that no action be taken
on these proposed changes until adequate Congressional review
of this important subject has been undertaken."
Mrs. Sullivan and Mr. Metcalfe have also requested a "full
investigation" of the financial situation of the Panama Canal
Company by the GAO, and have sent an extensive list of questions
on the anticipated impact of the proposed measurement rules
to the Company. However, hearings have not yet been scheduled
in either House or Senate. Company staff report that little
congressional action could be expected if the President were
to delay action on the amendments--that the primary purpose
of congressional intervention is to obstruct Company action
which would be injurious to the U.S. merchant marine.
Agency Views
The following agencies have expressed no objection to the proposed
amendments: Justice, Treasury, Federal Maritime Commission,
Agriculture, National Security Council, and Council of Inter-
National Economic Policy. Agencies which have expressed concerns
are as follows:
GEEALD FORD
7
-- Commerce. The Commerce Department opposes the proposed
amendments and recommends that Presidential approval
"be delayed until a thorough assessment of the problems
which are raised by these proposals can be completed,"
Commerce reiterates most of the objections raised
by the maritime industry, along with the following
additional points:
The amendments deviate from the concepts established
in 1937 by a Presidentially-appointed committee. The
amendments should be evaluated by a body of the same
level before approval.
The amendments adversely impact U.S.-flag containerships
the most competitive element of the U.S.-flag fleet.
In the long term, the amendments could result in an
increased need for Federal assistance to the U.S.
merchant fleet.
The on-deck cargo amendment is not precisely defined
and administration may be difficult.
Transportation. DOT recommends that "additional analysis
would be desirable before issuance of the regulations"
based on the following:
If diversion of cargo from ocean carriage to cross-
continential land carriage were to result from the
amendment, there could be benefits to the U.S. railroad
industry but disbenefits to the U.S. shipping industry.
This should be assessed.
The Senate may ratify the 1969 International Convention
on Tonnage Measurement of Ships, which would establish
new parameters for measuring shipping tonnages.
Although the law would not enter into force until at
least two years later, and although the Company would
not be legally required to alter its measurement
system, "it might seem reasonable for the. Company
to consider developing a system employing the same
parameters as those used in the Tonnage Convention."
-- State. The State Department advises that the amendments
have no effect on the sensitive U.S. treaty negotiations
with the Republic of Panama over the status of the Panama
Canal. State further reports that foreign shipping
interests have objected to the amendments and the govern-
ments of Greece, Norway, Spain, Japan, Italy and Sweden
have made representations to the Department of State
critical of the changes. State concludes that the
"complaints should be carefully considered and treated
appropriately in any final decision."
FORD LIBRAR 0751
8
Discussion of the Merits and Demerits of the Proposed Amendments
The rules of measurement currently employed by the Panama
Canal Company are based on the principle that canal tolls are
to be assessed on the "earning capacity" of vessels. Earning
capacity of vessels is defined as space available for
carriage of cargo and passengers. In the most general terms,
this determination is made by measuring the volume of the
space enclosed by the entire vessel (gross tonnage) and
deducting from this total, that space, such as the engine
room, which is not available for the carriage of cargo or
passengers (net tonnage). The assumption is that every net
cubic foot of below-deck space can be potentially used. A
ship's net capacity, therefore, is currently the sole basis
for toll assessments. Net capacity does not consider such
factors as volume, weight, or value of cargoes carried
(utilization of capacity). Because the system entails
measuring the ship instead of the cargo, ships only need
to be measured once, instead of transit-by-transit, and
administration of the system is thereby facilitated.
The Panama Canal vessel measurement system, like almost all
other vessel measurement systems, is derived from principles
originally laid down in nineteenth century England by George
Moorsom. Moorsom established the principle of measuring vessels
net capacities as determined by all enclosed (below-deck)
spaces as measured in cubic feet, divided by 100, so that one
ton represents 100 cubic feet of space. Almost all vessel
measurement systems start with the Moorsom method for
determining gross tonnage. However, differences often result
from the application of differing exemptions and deductions
in arriving at net tonnage figures. Panama Canal and Suez
Canal systems are similar and produce similar net tonnages.
Six Minor Amendments
Of the seven substantive measurement rule amendments proposed
by the Panama Canal Company, six are relatively non-controver-
sial. These six would alter, in a minor way, existing
exemptions and deductions for the following spaces: fuel
tanks, hatchways, water tanks, public rooms on passenger
vessels, boatswain's stores, and engineer's shops. The first
four would have the effect of increasing tonnage measurements.
The last two would have the effect of decreasing tonnage
measurements. These are further described below:
-- Amendments which increase measurement tons:
Fuel. The amendment would substitute actual
measurement of fuel spaces for the existing
rule by which the deduction for fuel is normally
FORD is LIBRARY 070835
computed at 75% of the measured space of the
engine room.
9
Hatch Exemption. The amendment would eliminate
the current exclusion of the cubical contents of
hatchways. In modern ship design, hatch covers
fit over the top of hatchways and the space under
the hatch cover is available for cargo.
Water Tanks. The amendment would eliminate the
current exclusion of the measurement of water
tanks used for fresh water for ship use. This
would achieve consistency with the treatment of
other like spaces that are not allowed as
measurement deductions.
Public Rooms. The amendment would eliminate the
current exclusion of the measurements of public
rooms (e.g., dining rooms, lounges, barber shops,
swimming pools). This is based on the premise
that public rooms are spaces available for the
use of the passengers and hence a consistent
application of the earning capacity concept
precludes deduction of these spaces.
Amendments which decrease measurement tons;
Boatswain's Stores. The amendment would permit
exclusion of measurements for boatswain's stores
on the premise that space used for this purpose
is unavailable for stowage of cargo, passenger
use, or other directly related purposes.
Engineers' Shons. This amendment would allow
deductions of measurements for engineers' shop
space over the current arbitrary deduction
ceiling of 50 tons. Actual measurements of
engineers' shops would determine the applicable
deduction.
The intent of these six amendments is to avoid "double counting"
of selected ship spaces and/or refine measurement standards in
accord with changed ship design. None of the above six
proposed amendments have been strongly opposed by the maritime
industry as a whole. However, passenger vessel operators are
upset over the "public rooms" amendment which would increase
their toll assessments by about $550 thousand annually (+28%).
U.S.-flag vessel operators account for only $59 thousand of
the total.
The On-Deck Cargo Amendment
Currently, on-deck cargo (e.g., containerized cargo, stores,
FORD LIBRERT
livestock) is excluded from measurement and toll assessment.
The seventh amendment proposed by the Panama Canal Company
10
would require the measurement of all on-deck cargo for every
vessel transit. The proposed amendment describes this as
follows:
"The deck space occupied by the goods thus carried
shall be determined at the time of the application
of the vessel for passage through the canal and
shall be deemed to be the space limited by the
area occupied by the goods and by straight lines
enclosing a rectangular space sufficient to
include the goods.
The on-deck cargo amendment has generated a great deal of heat
on the part of the maritime industry (e.g., the amendment is
alleged to be "arbitrary and capricious" and "discriminatory"
against both containership operators and the U.S.-flag fleet).
Containerships are the primary carriers of on-deck cargo.
By this amendment, if a containership operator transited the
Canal with no .on-deck containers on one occasion, 50 on
another, and 100 on another, he would be charged differently
on each occasion. The Panama Canal Company believes the
amendment is desirable because there is "no doubt that the
use of the deck for deckloads adds to the space of the vessel
available for carrying cargo, and hence is a valuable component
of earning capacity of the vessel required to be measured."
Few would disagree with the proposition that, in theory,
on-deck cargo carriage should be subject to toll assessment.
However, the Company's proposal for assessing on-deck cargo
poses serious problems, principally because it is income tent
with other Company cargo measurement rules. The inconsistency
results from the fact that the on-deck cargo amendment requires
measurement and toll assessment for all cargo actually carried
on deck. Utilization of on-deck space, therefore, would be
the basis for toll assessment. However, as previously
explained, the existing Panama Canal ship measurement system
for below-deck space is based on the principle of net ship
capacity, assuming no wasted space resulting from the type of
cargo carried or manner of carriage and irrespective of the
amount of cargo actually carried on a given transit.
The result of the inconsistency is a toll assessment system
which appears to be prejudicial to containership operators.
Much of the below-deck space is lost in containerships
because rectangular container cells cannot fully utilize
the curved spaces against the hull of the vessel and because
spaces must be left between containers. As partial compen-
sation for this lost space, containerships carry containers
on deck. In effect, the containership operator has chosen
GLREAD FORD LIBRARY
11
to offset the somewhat reduced carrying capacity of the vessel
with greater efficiency in cargo handling. In this light,
the proposed amendment does not account for "lost space" on
containerships and thereby constitutes a serious deviation
from the concept of measurement which requires tolls to be
assessed against vessels' actual cargo carrying capacities.
Approval of the on-deck cargo amendment would penalize this
form of cargo carriage. It would require continued toll
assessment for all below-deck space, whether or not utilized,
and would superimpose a tolls burden for on-deck cargo
carriage. In fact, it appears that containership operators
are already relatively "over assessed." FY 1975 data indicate
that, when recomputed on a dollar-per-ton-carried basis,
containership operators were assessed $2.12 per ton compared
with $1.15 for general cargo ship operators.
Based on the above, it may be appropriate for the Panama
Canal Company to reevaluate the tonnage measurement system
to determine if it is prejudicial to certain classes of
carriers, and, if so, to recommend remedial actions.
Options
#1. Approve all seven amendments in their entirety.
#2. Approve all but the on-deck cargo amendment. Request the
Company to reevaluate on-deck cargo measurement rules in
the context of the overall equities/inequities of the
existing measurement system.
#3. Disapprove all seven amendments. Request the Company to
further study alleged prejudicial aspects of the existing
measurement system.
Discussion of Options
Option
Pro
-- The amendments, in the aggregate, improve the tonnage
measurement standards which have been in force for
the past 38 years in terms of accuracy and equity.
-- The amendments add revenues to the Company (until a
toll increase is put into effect) in a period in
which the Company's financial situation is seriously
deteriorated.
FORD is LIBRARY 07V830
12
-- Insofar as the Company is able to collect additional
revenues now, the magnitude of the future general
toll increase could be reduced. The smaller the
general toll increase, the less strenuous will be
the opposition to it.
Con
-- The appropriateness of the on-deck cargo amendment is
not clear. It is inconsistent with the existing
measurement system and appears prejudicial to
containership operators who would suffer a heavy
toll burden (+37%).
-- Approval of the amendments may give the false
impression of curing the Company's financial woes,
whereas only a general toll increase can generate
sufficient revenues to make the Company self-sustaining.
-- Approval of the amendments runs counter to expressed
maritime industry and congressional requests to the
President. This could lead to congressional action
to restrict Administration authority relative to
the Canal (e.g., make all toll proposals subject to
congressional review). This, in turn, could endanger
the more important future general toll increase.
Option #2
Pro
-- It retains most of the amendments, thereby improving
the overall cargo measurement system.
-- Insofar as there are justifiable grievances against
the on-deck cargo amendment and/or the cargo measure-
ment system as a whole, the issues could be further
studied by the Company.
-- Disapproval of the on-deck cargo amendment would
almost entirely diffuse U.S. maritime industry
dissatisfaction with the amendments package.
-- It allows Congress to hold hearings on the on-deck
cargo issue, per congressional requests to the
President. Congressional action to circumscribe
Administration authorities would be unlikely.
ERALD R.FORD LIBRARY
13
Con
-- Insofar as approximately $6 million in revenues will
be forfeited if the amendment is not approved, the
deficit situation of the Company will worsen by a
like amount and the amount of the general toll
increase will have to be raised accordingly to
accommodate the loss. The higher the toll increase,
the more likely will be strenuous industry opposition
to it.
Option #3
Pro
-- It would completely negate maritime industry and
congressional criticisms.
-- Insofar as the industry and the Congress will have
been mollified on this issue, it may lessen tensions
relative to the announcement of a future toll increase
(although the magnitude of the increase will certainly
be an issue of contention).
Con
-- The measurement rule anomalies of the current system
will be maintained indefinitely.
-- It may make it more difficult to approve future Canal
toll proposals by leading the industry and Congress
to think that vigorous opposition to such proposals
will lead to their rejection by the President.
-- Insofar as approximately $12 million in revenues will
be forfeited if the amendment is not approved, the
deficit situation of the Company will worsen by a
like amount and the amount of the general toll increase
will have to be raised accordingly to accommodate
the loss.
FORD : LIBRARY 09V325
SECRETARY OF THE ARMY
WASHINGTON
December 12, 1975
The President
The White House
Washington, D. C. 20500
Dear Mr. President:
In my capacity as "stockholder" of the Panama Canal
Company under authority delegated to me by Executive Order
11305 of September 12, 1966, I am forwarding for your
approval a Resolution adopted by the Board of Directors of
the Panama Canal Company on November 17, 1975, amending the
rules of measurement of vessels for the Panama Canal.
The action by the Board of Directors is based on Sections
411 and 412 of Title 2 of the Canal Zone Code under which the
Panama Canal Company is authorized to prescribe rules of
measurement for determining the earning capacity of vessels
using the Canal. Section 412 provides that changes in the
measurement rules shall be subject to and take effect upon
the approval of the President of the United States. Section
411 requires six months' notice of the changes in the measure-
ment rules. This notice was published in the FEDERAL REGISTER
on July 31, 1975, so that the earliest date on which the new
rules could become effective is January 30, 1976.
Following publication of the notice in the FEDERAL
REGISTER, the Panama Canal Company invited written comments
from the public and held a public hearing in accordance with
applicable regulations. After consideration of all relevant
matter presented in the written comments received and presented
at the hearing, the Board of Directors adopted the proposed
amendments of the measurement rules, subject to your approval.
The inclosures to this letter set out in detail the
background of the proposed changes in the rules and the pro-
ceedings by the Board of Directors leading up to the adoption
of the amendments.
Your approval of the proposed changes in the measurement
rules is recommended, effective January 30, 1976.
Respectfully yours,
Inclosures
Martin R. Hoffmann
as
WARREN o. MAGNUSON, WASH. CHAIRMAN
JOHN O. PASTORT. R.I.
JAMES 8. PEARSON, KANS.
VANCE MARTKE, IND.
RCBERT P. GRIFFIN, MICH.
PHILIP A.
HOWARD H. BAKER, JR., TENN,
LOWARD v. CANNON, NEV.
TED STEVENS. ALASKA
RUSSELL B. LONG, LA.
J. CLENN HEALL, JR., MO.
United States Senate
FRANK E. MOSS. UTAH
LOWELL P. WEICKER, JR., CONN.
ERNEST F. HOLLINGS. S.C.
JAMES L BUCKLEY, N.Y.
DANIEL K. INDUYE. HAWAII
COMMITTEE ON COMMERCE
JOHN V. TUNNEY. CALIF.
ADLAI E. STEVENSON, ILL.
WASHINGTON, D.C. 20510
WENCELL H. FORD, KY.
JOHN A. DURKIN, N.H.
MICHAEL PERTSCHUK. CHIEF COUNSEL
S. LYNN SUTCLIFFE. GENERAL COUNSEL
ARTHUR PANKOPF, JR., MINORITY COUNSEL
December 19, 1975
The Honorable Gerald A. Ford
President of the United States
The White House
Washington, D. C. 20500
one
Dear Mr. President:
Great concern has been expressed to us over the anticipated
consequences on U. S.-flag ocean carriers, particularly container-
ship operators and forest product shippers, resulting from the
I
proposed changes in the rules for measuring vessels transiting
the Panama Canal.
The Panama Canal Company's proposal will actually result in
the third increase in Canal toll charges in less than 18 months.
Despite a large number of written and oral statements presented
to the company concerning the proposed changes which were published
in the Federal Register on July 31, 1975, the measurement rules
changes have been submitted for your action without modification.
There appears to be a substantial number of very serious
questions regarding statutory requirements and treaty provisions
as well as significant economic and transportation issues involved
in these proposals.
We join with Members of the House of Representatives who
have expressed their interests in this to you and request that
no action be taken on these proposed changes until adequate
Congressional review of this important subject has been under-
taken.
Sincerely yours,
Wanna
WARREN G. MAGNUSON, U.S.S.
is
FORD
RUSSELL B. LONG, U.S.S.
LIBRARY
P'NETY-POURTH CONGRESS
CHILF COUNSEL
ERNEST J. CORRADO
Everyon K. (MRS. JOHN a.) BULLIVAN, MO., CHAIRMAN
AS L ASHLEY. OHIO
PIIIUP E. RUPPE. MICH,
CHIEF CLERK
n. DINGE MICH.
CHARLES A. MOSHER. OHIO
FRANCES STILL
AS pe. VA.
PAUL H. MC CLOSKEY, jm., CALIF.
o. FLA.
OINE BNYDER. KY.
U.S. Mouse of Representatives
MINORITY COUNSEL
M. MURTHY, MY.
EDWIN B. FORSVINE. N.J.
PM D. JONES. NC.
PIERRE 9. (PETE) DUPONT, DEL
Committee on
RICHARD H. SHAROOD
mr L. LEGGETT. CALIF.
DAVID C. TREIN. LA.
BIAGGI, NY.
JOEL PRITCHARD. WASH.
Merchant flarine and fisheries
NM. ANDERSON, CALIF.
DON YOUNG. At ASKA
«A) DE CANEM. Trx.
ROBERT 1. BAUMAN, MD.
им. ME TCALVE. ILL.
NORMAN F. ENT. N.Y.
Room 1334, Longworth House Office Building
- BREAUK. LA.
MATTHEW 3. RINAL DO. N.J.
- POONEY. PA.
DAVID r. EMERY, MAINE
Washington, D.C. 20515
B. BARBANES, MD.
NN. CA.
Y E. STUDOS. MASS.
. Bowr MISS.
December 8, 1975
DA EILBERG, PA.
DE LUGO. V.I.
OLL HUBBAND. JM., KY.
BONKER, WASH.
MCOIN. OREG.
IAN E. D'AMOUNS. N.H.
M. PATTERSON. CALIF.
=. ZEFENETTI. N.Y.
is L OBERSTAR, MINN.
The President
The White House
Washington, D. C.
Dear Mr. President:
We have been advised that the Board of Directors
and Stockholder of the Panama Canal Company have
transmitted for your approval certain changes to their
Rules for Measurement of Vessels. Since historically
it has been the responsibility of the President of the
United States to gauge the effect of changes in Panama
Canal rules on the national transportation policy of
the United States, we wish to communicate to you some
of our concerns which we feel you should be cognizant
of in making your decision on this matter. The pur-
pose of this letter is to request that you sign the
proposed rules only after a thorough review of the
national economic consequences of these changes and
upon the advice of those agencies in the Executive
Branch who can best speak to the effect of the proposed
rules on this Nation's commerce.
We are increasingly concerned with the financial
well-being of the Canal. In July of 1974, a 19.7 per-
cent toll rate increase was approved, the first since
the opening of the Canal. We should note that no toll
increase was required during these many years since the
constantly escalating number of vessel transits and
increasing vessel size generated sufficient revenue to
keep ahead of constantly rising Canal Company costs.
FORD LIBRARY
The President
Page Two
December 8, 1975
The need for the 1974 general increase in the toll
rate was premised upon certain accounting changes made
by the Company, decreasing vessel transits, and increasing
operating and overhead costs. We were assured it was
necessary if the Company were to continue in a "break-even"
status, as is required by statute. The additional
financial burden placed on America's commerce was estimated
to be many millions of dollars annually. It is noted
that the current proposed rules change would result in an
additional 37 percent assessment for deck cargo on con-
tainerships. Our carriers simply cannot afford these
added operating costs, and the current proposed rules
could be much more detrimental to U. S. commerce than the
1974 increase.
The proposed rules in question represent another
de facto toll rate increase, although the burden would
be largely borne by certain types of vessels, notably
U.S.-flag containerships. While only eight percent of
the annual transits of the Canal are made by yessels of
U.S.-flag registry, approximately 37 percent of the con-
tainerships which transit the Canal are U.S.-flag vessels.
The average containership which transits the Canal today
pays about $19,000 in tolls. Under the proposed measure-
ment rules, it would pay approximately $26,000. Since
the Company has not yet prepared and released its fiscal
year 1975 report, except for traffic statistics, it is
not now possible to assess either the increased revenue
resulting from the 1974 toll increase or the necessity
for these proposed rules. We do know that vessel transits
and cargo tonnage are continuing to decline, and that
Company costs are continuing to rise. We believe that
steps can and must be taken to reverse these trends.
At the time of the tolls increase last year, the
Committee did not take any action since we felt the in-
crease was reasonable inasmuch as it was the first and
only increase since the Canal has been in existence.
The present proposal to change the Canal Company's Rules
for Measurement of Vessels presents a different picture,
however. Among other things, it will affect the competi-
tive balance between the continental railroads and the
water carrier Canal users, and the burden will fall most
heavily on several U.S.-flag container and passenger ship
operators. In addition, if this change is approved, we
FORD
LIBRARY
The President
Page Three
December 8, 1975
note the Canal Company's continuing emphasis on the
alleged need for increased revenues, which suggests that
the Company may propose another tolls increase in the
near future.
We anticipate that the Committee and its Panama
Canal Subcommittee will be reviewing the toll and tonnage
measurement formulas in some detail at future hearings.
We will be particularly interested in evaluating the
adverse impact of the proposed rules on the well-being of
the U. S. merchant marine and American commercial inter-
ests. We will keep you advised of our progress and plans,
and again ask that no action be taken at this time on
the pending measurement rules change.
Sincerely,
Lema TT. Seceiviow
Leonor K. (Mrs. John B.) Sullivan
Chairman
Reeph H. Mitulf
Ralph H. Metcalfe
Chairman
M Subcommittee Juln on m Panama murphy Canal
GIG GL7Digin Degis James L
Jane Puthard
Paul Sarbaner
Mdin
W altrib form n Daving
FORD is OTHER LIBRARY
The President
Page Four
December 8, 1975
Kw &
21 deligarze
Norman samil Bewen
Jar buderon Actin Buanx
Joshua Echeng
B Sin 10
Canoll Husband Mattleen J. Revality
alave Treen Jan ha Gugo
Dail F Emery J.O.B.
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FORD is LIBRARY
DEMOCRATS
DEMOCRATS
Signed
Did not Sign
Leonor K. Sullivan, MO
Thomas L. Ashley, OH
John D. Dingell, MI
Robert L. Leggett, CA
Thomas N. Downing, VA
Gerry E. Studds, MA
Paul G. Rogers, FL
Jerry M. Patterson, CA
John M. Murphy, NY
Walter B. Jones, NC
Mario Biaggi, NY
Glenn M. Anderson, CA
E (Kika) de la Garza, TX
Ralph H. Metcalfe, IL
John B. Breaux, LA
Fred B. Rooney, PA
Paul S. Sarbanes, MD
Bo Ginn, GA
David R. Bowen, MS
Joshua Eilberg, PA
Ron de Lugo,
Carroll Hubbard, Jr., KY
Don Bonker, WA
Les AuCoin, OR
Norman E. D'Amours, NH
Leo C. Zeferetti, NY
James L. Oberstar, MN
REPUBLICANS
REPUBLICANS
Signed
Did not Sign
Paul N. McCloskey, Jr., CA
Philip E. Ruppe, MI
Edwin B. Forsythe, NJ
Charles A. Mosher, OH
David C. Treen, LA
M. G. Snyder, KY
Joel Pritchard, WA
Pierre S. du Pont IV, DE
Don Young, AL
Robert E. Bauman, MD
Norman F. Lent, NY
Matthew J. Rinaldo, NJ
David F. Emery, ME
RESOLUTION
WHEREAS, pursuant to the authority of sections 411 and 412 of
Title 2 of the Canal Zone Code, (76A Stat. 27), at a special meeting
on July 28, 1975, the Board of Directors of the Panama Canal Company
proposed certain amendments to the rules for measurement of vessels
for the Panama Canal for the purpose of more accurately reflecting
the earning capacity of vessels using the Canal; and
WHEREAS, at the special meeting of the Board of Directors on
July 28, 1975, pursuant to the provisions of the applicable regulations
of the Panama Canal Company, five members of the Board of Directors
were designated as a panel to conduct a public hearing on the proposed
changes in the measurement rules; and
WHEREAS, notice of the proposed amendments was published in the
Federal Register on July 31, 1975, (40 FR 32140) and a correction was
published in the Federal Register on August 11, 1975, (40 FR 34619); and
WHEREAS, the notice of the proposed amendments of the measure-
ment rules invited interested parties to participate in the rulemaking pro-
cess through submission of written data, views or arguments, and sub-
mission of supplementary data, views or arguments at a public hearing
to be held in Washington, D. C., on October 6, 1975; and
WHEREAS, in accordance with the notice and the provisions of the
Company's regulations governing procedures for rulemaking, interested
parties did submit written data, views and arguments and, at the public
hearing on October 6, 1975, submitted supplementary data, views and
arguments in reference to the proposed amendments of the measurement
rules; and
WHEREAS, the panel designated by the Board of Directors to con-
duct the hearing has submitted its report, including the written data
submitted by interested parties and a full transcript of the hearing, with
copies of documents submitted at the hearing and thereafter within the
time fixed by the panel, and the recommendations of the panel with
respect to the proposed amendments of the measurement rules; and
WHEREAS, all relevant matters presented have been considered by
the Board of Directors; and
WHEREAS, the Board of Directors, having given careful consideration
to the assessment of the environmental impact of the proposed amendments
of the measurement rules, has determined that such amendments would not
significantly affect the quality of the human environment;
NOW, THEREFORE BE IT RESOLVED, That, in accordance with sections
411 and 412 of Title 2 of the Canal Zone Code, (76A Stat. 27) the rules
of measurement of vessels for the Panama Canal prescribed by the President
by Proclamation 2248 of August 25, 1937, be amended upon approval by the
President, but not earlier than six months from July 31, 1975, the date of
2
publication of notice of the proposed change in the Federal Register,
by amendment of Part 135 of Title 35 of the Code of Federal Regulations
as follows:
PART 135 -- RULES FOR MEASUREMENT
OF VESSELS
$ 135.82 [Amended]
by multiplying together the length.
1. In § 135.83 the references to § 135.86
breadth and depth of said rectangular
are amended to read s 135.85.
space or spaces and dividing the prod-
$ 135.83 [Amended]
uct by 100 or 2.83. according as the meas-
urements are taken in feet or meters.
2. In the last line of § 135.83 the ref-
Nothing in this section shall in any
erence to $ 135.88 is amended to read
manner affect the provisions of §§ 135.-
$ 135.85.
41-42; 135.61-63; or 135.81-88.
3. Section 135.85 is revised to read as.
§ 135.142 [Amended]
follows:
6. In § 135.142 the reference to §§ 135.-
171-135.182 is amended to read §§ 135.-
§ 135.85 Certain spaces between inner
171-135.183.
and outer plating of double bottom.
§ 135.175 [Amended]
Space or spaces between the inner and
outer plating of the double bottom of a
7. In $ 135.175 the last sentence is
vessel shall be exempted from measure-
amended by adding the words "or fuel"
ment, except when used, designated or
between the words "cargo" and "the
intended for carrying cargo or fuel; but
tonnage."
the tonnage of such spaces within the
8. Following $ 135.182 a new s 135.183
double bottom as are or may be used for
is added, reading as follows:
carrying cargo or fuel shall be deter-
§ 135.183 Hatchways.
mined and included in the gross tonnage.
The cubical contents of hatchways
The tonnage of double bottom tanks
shall be obtained by multiplying the
available for cargo or fuel may be
length and breadth together and the
obtained by multiplying the liquid-ca-
product by the mean depth taken from
pacity weight by the proper conversion
the top of beam to the underside of the
factor to get tons of 100 cubic feet.
hatch cover.
§ 135.86 [Revoked]
§ 135.211 [Amended]
4. Section 135.86 is revoked.
9. In § 135.211 the reference in the
5. Following § 135.112 a new § 135.113,
fourth line to $ 135.132 is amended to
preceded by the undesignated center
read $ 135.183.
heading "Deck CARGO," is added, reading
as follows:
§ 135.271 [Amended]
DECK CARGO
10. In $ 135.271 the reference In the
$ 135.113 Deck cargo.
second line to $ 135.286 is amended to
read $ 135.285.
If any ship carries stores, timber,
livestock, containers, or other cargo in
S 135.273 [Amended]
any space upon an open deck not perma-
11. In $ 135.273 the reference in the
nently covered or in spaces exempted
last line to $ 135.286 is amended to read
under paragraphs (a) and (b) of § 135.-
$ 135.285.
82, all tolls and other charges payable
12. In § 135.274, paragraph (c) 13
on the vessel's net tonnage shall be pay-
amended to read as follows:
able upon the vessel's net tonnage (as
defined below in $5 135.271-287 and
$ 135.274 Spaces for stowage of stores
§§ 135.321-327) increased by the ton-
or cargo, not deducted.
nage of the space occupied at the time
at which the tolls or other charges be-
(c) On suppl7 ships, stores, supplies
come payable by the goods carried upon
of all kinds, distilling machinery and
deck and not permanently covered or
distilled water, machines, tools and ma-
closed-in. The deck space- occupied by
terial for repair work, mines and mining
the goods thus curried shall be deter-
materials, torpedoes, arms, and ammuni-
FORD
mined at the time of the application of
tion.
the vessel for passage through the canal
13. Section 135.231 Is revised to read
and shall be deemed to be the space lim-
as follows:
ited by the area occupied by the goods
LIBRAR
and by straight lines enclosing L rectan-
gular space sufficient to include the
goods. The tonnage of the space occu-
pied by the goods shall be ascertained
3
135.281 Spaces used for boatswain's
§ 135.327 Propelling power deductions,
stores, deducted.
how made
Spaces used exclusively for boatswain's
The deductions made for propelling
stores, including paint and lamp rooms.
power provided for in $5 135.323-135.325
shall be deducted. The deduction of
shall be made by adding to the space
spaces under this section shall be rea-
occupied by the engine room as defined
sonable in extent.
in $$ 135.352-135.354 and 135.332, the
14. Section 135.232 L3 revised to read
spaces available for fuel as defined in
as follows:
§§ 135.390 and 135.301.
135.232 Spaces used for engineer's
21. The undesignated center heading
shops, deducted.
preceding § 135.351 is amended to read
as follows:
Spaces used exclusively for engineer's
shops shall be deducted. The deduction
SPACE OCCUPIED BY ENGINE RooM
of spaces under this section shall be rea-
135.351 [Revoked]
sonable in extent.
15. In $ 135.285 the heading of the sec-
22. Section 135.351 is revoked.
tion and paragraph (a) are revised to
23. In $ 135,352 the last four sentences
read as follows:
aTa revised to read as follows:
§ 135.285 Water ballast spaces, de-
§ 135.352 What understood by space
ducted.
occupied by engine rooms.
(a) Water hallast spaces. other than
... When a portion of the space
spaces in the vessel's double bottom, shall
within the boundary of the engine or
be deducted. if they are adapted and used
boiler room is occupied by a tank or
only for water ballast, have for entrance
tanks for the storage of fresh water,
only ordinary circular or oval manholes
lubricating oil, or fuel, including settling
whose greatest diameter does not exceed
tanks, the space considered to be within
30 inches, and are not available for the
the engine room shall be reduced by the
carriage of cargo, stores, or fuel. Spaces
space taken up by such tanks. Installa-
that would otherwise qualify as water
tions rot strictly required for the work-
ballast except that they are also used
ing of the engines or boilers are not to
for fuel for the vessel's own use shall be
be included in the engine room measure-
regarded as part of the vessel's fuel space
ment no matter where situated but given
as defined in $ 135.390.
separate deductions when they qualify
under 135.271-135.285 and are listed
§ 135.286 [Revoked]
under the appropriate item on page 2 of
the Panama Canal Certificate.
16. Section 135.286 is revoked.
24. In 135.353 the last sentence is
17. Section 135.287 is revised to read
revised to read as follows:
as follows:
135.353 Manner of ascertaining cubi-
§ 135.207 Marking and use of deducted
cal content of spaces occupied by en-
spaces.
gine room.
Each of the spaces enumerated in
Add such contents, as well as
135.275-135.285, unless otherwise spe-
those of the space occupied by the shaft
cifically stated. shall be subject to such
trunk and by any donkey engine and
conditions and requirements as to mark-
boiler located within the boundary of the
ing or designation and use or purpose
engine room or of the light and air cas-
as are contained in the navigation or reg-
ing above the engine room and used in
istry laws of the several countries, but
connection with the main machinery for
no space shall be deducted unless the use
propelling the ship, to the cubical con-
to which it is to be exclusively devoted
has been appropriately designated by of-
tents of the space below the crown of the
ficial marking. In no case, however. shall
engine room; divide the sum by 100 or
an artitrary maximum limit be fixed to
by 2.33, according as the measurements
the aggregate deduction made under
are taken in feet or meters. and the re-
135.271-135.235.
sult shall be deemed to be the space
occupied by the engine room for pur-
135.322 [Amended]
poses of calculating the deduction for
18. In $ 135.322 the reference to $ 135.-
propelling power.
286 in the heading and in the second line
25. Section 135.354 is revised to read
of the section is amended to read $ 135.-
as follows:
235.
135.354 Manner of accertaining cubi-
§ 135.324 [Amended]
cal content of spaces occupied by en-
gine room; where engines and boilers
10. In § 135.321 the reference to
are in separate compartments.
§§ 135.331-135.333 1s amended to read
FORD
ss 135.252-135.354, 135.382.
If In any ship in which the space for
20. Section 135.327 is revised to read
propelling power is to be measured the
as follows:
engines and boilers are in separate com-
CERALD
partments, the contents of each com-
LIBRARY
partment shall be measured separately
4
in like manner, according to the above
S 135.412 [Amended]
method; and the sum of the tonnage of
the spaces included in the several com-
20. In s 135.412 the words and figures
partments shall be deemed to be the
in the second. third, and fourth lines
space occupied by the engine room for
"other than fuel spaces deducted under
purposes of calculating the deduction
$3 135.351-135.354" are revoked.
for propelling power.
30. Section 135.511 is revised to read
as follows:
§ 135.381 [Revoked]
§ 135.511 Administration of rules.
26. Section 135.381 and the undesig-
nated center heading preceding that sec-
The rules of measurement provided in
tion reading "PROPELLING POWER DEDUC-
this part shall be administered by the
TION FOR VESSELS WITH FIXED BUNKERS,
President of the Panama Canal Com-
OR HAVING FUEL-On. COMPARTMENTS
pany.
THAT CANNOT BE USED TO STOW CARGO OR
[FR Doc.75-31475 Filed 11-20-75;8:45 ain)
STORES" are revoked.
§ 135.383 [Revoked]
27. Section 135.383 is revoked.
28. Two new sections numbered
§§ 135.390 and 135.391, preceded by an
undesignated center heading "SPACES
AVAILABLE FOR CARRIAGE of FUEL" are
added, reading as follows:
SPACES AVAILABLE FOR CARRIAGE OF FUEL
§ 135.390 Spaces available for the car-
riage of fuel.
The spaces available for the carriage
of fuel will include the actual volume of
tanks or fixed compartments for the
storage of lubricating oil or fuel, includ-
ing settling tanks, which cannot be used
to stow cargo or stores and which have
been certified Ly official marking to be
spaces for the vessel's own fuel Dual
purpose fuel tanks whose only other usa
is for the carriage of water ballast will
be included in the fuel deduction pro-
vided they have been included in the
gross tonnage and qualify in all other
respects for a deduction.
§ 135.391 Manner of ascertaining cubi-
cal contents of spaces available for
the carriage of fuel.
The cubical contents of the above-
named spaces available for the carriage
of fuel shall be ascertained in accordance
with the following provisions: For each
fuel tank or compartment. measure the
mean length. Ascertain the area of three
transverse sections of the ship (as set
forth in §§ 135.141 or 135.143-135.241 for
the calculation of the gross tonnage) to
the deck which covers the tank or com-
partment. One of these three sections
must pass through the middle of the
aforesald length. and the two others
through the two extremeties. Add to the
sum of the two extreme sections four
times the middle one, and multiply the
sum thus obtained by the third of the
distance between the two section. This
product, divided by 100 !! the ineasure-
ments are taken in English feet, or by
2.83 if they are Laken in meters, gives
the tonnage of the spaced measured.
When they cannot be readily measured,
FORD
the tonnage of tanks may also be oir
tained by using liquid capacity times the
conversion factor with one-sixth off for
CERALD
frames in case of peak tanks and one-
LIBRA,
twelfth off tn City: of wings or deep tanks.
5
BE IT FURTHER RESOLVED, That the Secretary of the Panama Canal
Company cause notice of the adoption of the amendments of the mea-
surement rules to be published in the Federal Register in the form pre-
scribed by applicable laws and regulations.
BE IT FURTHER RESOLVED, That upon publication of the said notice
of amendment of the measurement rules in the Federal Register, the
Stockholder of the Panama Canal Company transmit the amendments of
said rules to the President for his approval.
Approved except for Section 135.113 which would provide for
the inclusion in net tonnage of the space occupied
by deck cargo:
Date:
LIBRAST RESALD FORD
6
THE WHITE HOUSE
WASHINGTON
Dear Mr. Chairman:
This is in further reply to your December letter to me regarding the
measurement rule amendments proposed by the Panama Canal Company and
the Secretary of the Army.
I have carefully reviewed the issues. For the reasons cited in my
letter to the Secretary of the Army (copy attached), I have approved
the proposed amendments with the exception of the so-called "on-deck
cargo" amendment. As you know, this is the most important of the
amendments proposed for my approval.
As you will note, I have encouraged the Secretary of the Army and the
Panama Canal Company to review further the tonnage measurement system
to determine if it is prejudicial to certain classes of carriers,
and if so, to recommend remedial action. This action also will
provide your committee the opportunity to review issues pertaining
to the Company's toll structure and financial status, as the
committee finds appropriate.
Respectfully,
Honorable Warren G. Magnuson
Chairman
Committee on Commerce
United States Senate
Washington, D. C. 20510
Attachment
CC: DO Records
CC: Russell B. Long
Director's Chron.
Director
Deputy Director
FORD GREAT LIBRARY LIBRAI
Mr. Collier
Mr. Brav (2)
Commerce Official File
Return to Mr. Schwartz
EGD/CB:KSchwartz:vt
2/18/76
THE WHITE HOUSE
WASHINGTON
Dear Mr. Secretary:
Pursuant to Section 411 of Title 2 of the Canal Zone Code, I have
reviewed the request of yourself and the Panama Canal Company regarding
rules of measurement of vessels transiting the Panama Canal.
I have approved the proposed amendments with the exception of 35 CFR
135.113, the provision for the inclusion in net tonnage of space
occupied by on-deck cargo. .In principle, I concur that on-deck
cargo should be subject to toll assessment, like below-deck cargo.
I am concerned, however, that this proposed amendment may tend to
discriminate against containership operators. I note, for example,
that 1975 data show that toll assessments per ton carried were $2.12
for containerships compared with $1.15 for general cargo ships. The
on-deck cargo amendment would dramatically increase containership
toll assessments and therefore increase this disparity. I encourage
you and the Company to further review the tonnage measurement
system to determine if it is prejudicial to certain classes of
carriers and, if so, to recommend remedial measures.
I am also greatly concerned over the Panama Canal Company's financial
condition, generated by rapidly rising costs and declining vessel
transits. Recognizing that the Panama Canal Company and Canal Zone
Government are actively seeking to restrain cost increases, I
nevertheless request that your office and the Company determine
where further reductions can be taken. These reductions are necessary
to retain the Company's strict self-sustaining financial status and to
minimize any general toll increase which may be needed. Your review
should encompass both capital construction and operating expenses of
the Panama Canal Company and the Canal Zone Government.
Respectfully,
CC: DO Records
Director's Chron.
Director
Honorable Martin R. Hoffmar
Deputy Director
Secretary of the Army
Mr. Collier
GERAL FORD LIBRAS
Washington, D. C. 20310
Mr. Bray (2)
Commerce Official File
Return to Mr. Schwartz
EGD/CB:KSchwartz:vt
2/18/76
THE WHITE HOUSE
WASHINGTON
Dear Mrs. Sullivan:
This is in further reply to your December letter to me regarding the
measurement rule amendments proposed by the Panama Canal Company
and the Secretary of the Army.
I have carefully reviewed the issues. For the reasons cited in my
letter to the Secretary of the Army (copy attached), I have approved
the proposed amendments with the exception of the so-called "on-deck
cargo" amendment. As you know, this is the most important of the
amendments proposed for my approval.
As you will note, I have encouraged the Secretary of the Army and
the Panama Canal Company to review further the tonnage measurement
system to determine if it is prejudicial to certain classes of
carriers, and if so, to recommend remedial action. This action
álso will provide your committee the opportunity to review issues
pertaining to the Company's toll structure and financial status,
as the committee finds appropriate.
Respectfully,
Honorable Leonor K. Sulliva
Chairman
Merchant Marine and Fisheri
House of Representatives
CC: DO Records
Washington, D. C. 20515
Director's Chron.
Director
Deputy Director
Attachment
Mr. Collier
Mr. Bray (2)
CC: Honorable Ralph H. Met
Commerce Official File
FORD
Return to Mr. Schwartz
EGD/CR:KSchwartz:vt
2/18/76
LIBRAR
9:15-10:15
[march 1976?]
THE WHITE HOUSE
WASHINGTON
Panama Cand
OL2-8894 OL2- 8894
GERALD R. FORD
MAY /Mmday
Panama Canal
(Jolls)
March 11, 1976
MEMORANDUM TO:
CHARLIE LEPPERT
FROM:
RUSS ROURKE
Charlie, as per Jack's note, please check with Leaner
Sullivan after reading the option paper itself.
Obviously, there is a tight time frame on this one.
Please advise results.
Many thanks.
RAR;cb
FORD : LIBRARY 0788
THE WHITE HOUSE
WASHINGTON
March 11, 1976
MEMORANDUM FOR:
RUSS ROURKE
FROM:
SUBJECT:
Panama Juck Rules Changes
JACK MARSH
Before sending in the attached, I think someone, like Charlie Leppert,
should read it very carefully. He should go up and see Congress-
woman Sullivan (he should not take the paper with him) and find out
what her problem is in changing the toll structure.
Mrs. Sullivan spoke to me on the plane about the Panama situation.
She is convinced that this toll structure may be a key part in changing
the attitude of the people in Panama. Although I am willing to go
along with Option 2, nevertheless I think a better understanding
of Mrs. Sullivan's position should be had and given to the President
along with this option paper.
If she makes a good case, I will go along with the recommendation
of the Members of Congress.
Many thanks.
WHITE HOUSE
WASHINGTON
March 12, 1976
TO:
JACK MARSH
FROM: RUSSELL A. ROURKE Puss
For Direct Reply
For Draft Response
X
For Your Information
Please advise
RED TAG
THE WHITE HOUSE
WASHINGTON
March 12, 1976
MEMORANDUM FOR:
RUSS ROURKE
FROM:
CHARLES LEPPERT, JR. Cog
SUBJECT:
Panama Canal Tolls Rules Changes
I have arranged a meeting with Rep. Leonor Sullivan on this matter
for Monday, March 15 at 10:00 a.m.
Mrs. Sullivan could not meet with me on Friday, March 12 even in
view of the time constraint of the action memo.
I am returning herewith the action memo and will report the results
of my meeting with Mrs. Sullivan.
cc: Max L. Friedersdorf
THE WHITE HOUSE
WASHINGTON
March 11, 1976
MEMORANDUM TO:
CHARLIE LEPPERT
FROM:
RUSS ROURKE
Pum
Charlie, as per Jack's note, please check with Leanor
Sullivan after reading the option paper itself.
Obviously, there is a tight time frame on this one.
Please advise results.
Many thanks.
"due 3/10/76")
THE WHITE HOUSE
WASHINGTON
March 11, 1976
MEMORANDUM FOR:
RUSS ROURKE
FROM:
SUBJECT:
Panama July Rules Changes
JACK MARSH
Before sending in the attached, I think someone, like Charlie Leppert,
should read it very carefully. He should go up and see Congress-
woman Sullivan (he should not take the paper with him) and find out
what her problem is in changing the toll structure.
Mrs. Sullivan spoke to me on the plane about the Panama situation.
She is convinced that this toll structure may be a key part in changing
the attitude of the people in Panama. Although I am willing to go
along with Option 2, nevertheless I think a better understanding
of Mrs. Sullivan's position should be had and given to the President
along with this option paper.
If she makes a good case, I will go along with the recommendation
of the Members of Congress.
Many thanks.
THE WHITE HOUSE
WASHINGTON
Juch-
1
Recommend option # - 2.
you will recall
that this item was the
subject of my earlier
memo to you re Britt
Gordon comersation. He,
of course, favors option
#1.
Rem
THE WHITE HOUSE
ACTION MEMORANDUM
WASHINGTON
LOG NO.:
MAR 8 1976
Date:
Time:
March 6, 1976
devi3/10
FOR ACTION:
CC (for information):
10:00
Phil Buchen
Jim Cannon
Jack Marsh
Max Friedersdorf
Bill Seidman
Bob Hartmann
FROM THE STAFF SECRETARY
DUE: Date:
Wednesday, March 10
Time: 10 A.M.
SUBJECT:
James T. Lynn memo 2/24/76 re
Panama Canal Tolls Rules Changes
/
ACTION REQUESTED:
For Necessary Action
X For Your Recommendations
Prepare Agenda and Brief
Draft Reply
X
For Your Comments
Draft Remarks
REMARKS:
#2
2
Fin
op
gur
LIBRARY GERALD B. FORD
PLEASE ATTACH THIS COPY TO MATERIAL SUBMITTED.
If you have any questions or if you anticipate a
delay in submitting the required material, please
James E. Connor
telephone the Staff Secretary immediately.
For the President
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
FEB 24 1976
ACTION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
James T. Lynn
SUBJECT:
Panama Canal Tolls Rules Changes
Issue
Should approval be given to the Panama Canal Company to
modify cargo measurement rules which determine toll
assessments for ships transiting the Panama Canal?
Background
You have been requested to approve seven substantive changes
in tonnage measurement rules governing tolls for vessels
transiting the Panama Canal. The proposed changes were
adopted by the Board of Directors of the Panama Canal Company
and have been forwarded by the Secretary of the Army in his
capacity as "stockholder" of the Company (Tab A) Below is
a brief discussion of the issues, along with recommendations.
A more detailed discussion of the issue is attached (Tab B).
The purpose of the changes, according to the Company, is to
redistribute costs more equitably among Canal users. Cost
redistribution would be accomplished by altering the
definitions of space availability on board vessels for
carrying freight and passengers. The last systematic review
of tonnage measurement rules was conducted in 1937. In
addition to redistributing costs, the changes would increase
total revenue from tolls, as shown below:
(dollars in millions)
General
Container
Cargo
All
Ship
Ship
other
Total
All-Flags Tolls
+4.6
+3.1
+4.6
+12.3
% Increase
+28%
+10%
+6%
+9%
U.S.-Flag Tolls
+1.7
+0.4
+0.2
+ 2.3
% Increase
+37%
+12%
+4%
+17%
2
The disproportionately large tolls increase for containerships
(modern vessels which carry pre-boxed cargo) is primarily a
result of one rules change--the "on-deck cargo" amendment.
This amendment would require the measurement, and toll
assessment, of all on-deck cargo. Currently this cargo is
exempt from measurement. Of the total annual $12.3 million
tolls revenue increase, $6.0 million is attributable to the
on-deck cargo amendment, mostly relating to containership
operations.
The financial health of the Panama Canal Company has been weak
in recent years largely as a consequence of rising costs and
declining traffic. If approved, the revenues gained by the
measurement rule amendments would help alleviate, but would
not eliminate, a projected 1976-1977 operating deficit. In
fact, either with or without the proposed amendments, a
general toll increase will be needed in the coming year.
A large toll increase is certain to be strongly opposed by
the maritime industry--as are the proposed amendments.
Without additional revenues, however, the Company will be
forced to request U.S. Government assistance.
Options
#1. Approve all seven amendments in their entirety.
#2. Approve all but the on-deck cargo amendment.
#3. Disapprove all seven amendments.
Discussion of the Proposed Amendments
The existing Panama Canal toll assessments are based on
commonly-accepted, international principles of ship "earning
capacity." Earning capacity is measured by the volume of
below-deck space (gross tonnage), with deductions for space,
such as the engine room, which is not available for
revenue-producing carriage (net tonnage). The actual
utilization of ship space is not considered in determining
tolls charged for a particular transit. A primary reason
for this approach is to avoid the costly delays that would
be involved in measuring the volume, weight or value of
cargo actually carried on each transit. Under the existing
measurement system, a particular ship only needs to be
measured once instead of each transit.
Six of the seven proposed amendments seek to remove minor
anomalies in the existing measurement system. Four of the
changes would increase and two would decrease toll assessments.
3
Generally, the amendments would abolish "double counting"
of space and/or refine measurement standards in accord with
modern ship design. They would change capacity measurement
rules for the following spaces: fuel tanks, hatchways,
water tanks, public rooms on passenger ships, and selected
shop and store rooms. These six changes are all consistent
with the established principle of basing tolls on the
measurement of earning capacity. Few specific objections
have been filed to these proposed amendments.
The seventh amendment constitutes a major change in the
approach to assessing tolls. In addition to the traditional
method of establishing tolls for below-deck carrying capacity,
it would charge tolls for cargo actually carried on the ship
deck during each transit. This means that if a ship were
only partially loaded below deck, and carried on-deck cargo,
it would be charged for its full below-deck capacity as well
as for its actual on-deck cargo. By comparison, a ship
carrying the same tonnage, all below deck, would have to pay
only for its below-deck capacity, even though it may have a
capability of carrying on-deck cargo.
This proposed change would be a departure from the traditional
principle of basing tolls only on carrying capacity. It also
would establish different standards for below-deck and on-deck
cargo carriage.
The effect of this change would be to penalize ships which
carry on-deck cargo but which do not or can not fully utilize
below-deck space. Containerships, in particular, would be
impacted by the change. Containerships are designed to
carry significant on-deck loads, but they are not able to
fully utilize below-deck space because the rectangular
containers cannot use curved hull space on the sides, front
and back, and because space between and around containers
is needed for purposes of loading and unloading. Consequently,
with the current method of establishing tolls, containerships
on the average pay more per cargo ton actually carried than
do other ships. Recent data show that containerships pay
tolls averaging $2.12 per cargo ton, compared with about $1.15
per ton for general cargo ships.
Few would disagree with the Canal Company's position that, in
theory, on-deck cargo carriage should be subject to toll
assessment. The Company's proposal, however, does not seem
to be an equitable means of assessing such tolls, particularly
when applied to containerships. It may be necessary to
establish an entirely new method of assessing tolls for
containerships, rather than simply modifying a measurement
system which did not anticipate containership technology.
4
Recommendation
Option #2 is recommended. We believe that the six relatively
minor amendments are sensible and would not be inequitable.
The on-deck cargo amendment, however, represents a major
departure from traditional measurement practices, and it
appears that it would create greater inequities than it
would remove. It is recommended that the issue of how to
assess tolls for on-deck cargo be studied further.
Positions of Interested Parties
Maritime interests have expressed across-the-board objections
to the proposed amendments. Their concern, however, is
primarily focused on the on-deck cargo amendment. Two major
U.S. shipping company associations--the American Institute
of Merchant Shipping and the American Maritime Association--
have privately indicated that if the on-deck cargo amendment
were dropped (option #2), their opposition to the remaining
amendments would be minimal.
Although the Congress has no statutory role relative to the
establishment of Panama Canal tolls, the maritime interests
have generated strong support in both the House and Senate.
In the House, Mrs. Sullivan (Chairman of the Merchant Marine
and Fisheries Committee) and Mr. Metcalfe (Chairman of the
Panama Canal Subcommittee), as well as 29 other members,
have cosigned a letter to you asking that Presidential action
be delayed until the House has had the opportunity to review
the measurement rules. Senators Magnuson (Chairman of the
Commerce Committee) and Long (Chairman of the Merchant Marine
Subcommittee) have likewise requested that you delay action
(letters at Tab C). Insofar as congressional opposition to
the amendments is generated by the maritime interests, we
expect that rejection of the on-deck cargo amendment would
also minimize congressional concerns.
The following agencies have expressed no objection to the
proposed amendments: Justice, Treasury, Federal Maritime
Commission, National Security Council, and Council of
International Economic Policy. Although both Commerce and
Transportation have recommended. that the amendments be
delayed or disapproved pending further analysis, both report
that option #2 largely mitigates their concerns. State
advises that the amendments have no effect on the sensitive
treaty negotiations over the status of the Panama Canal.
Although State indicates that Greece, Norway, Spain, Japan,
Italy and Sweden have made oral representations to the
Department critical of the changes, State does not oppose
their approval.
5
The Panama Canal Company and the Secretary of Army stand by
their recommendation, option #1. However, they report that
option #2 is preferable to option #3.
Decision
-- Option #1: Approve all seven amendments
--- Option #2 (Recommended) : Approve all but the
on-deck cargo amendment
-- Option #3: Disapprove all amendments
--- See me
Action
To carry out option #2, it is necessary for you to sign the
attached resolution approving all but the on-deck cargo
amendment. Additionally, we recommend that you sign the
attached letters to the chairmen of the House and Senate
authorizing committees explaining your decision, and to
the Secretary of the Army requesting additional review of
the tonnage measurement system and indicating the necessity
for the Panama Canal Company to take action to restrain
costs. These signature documents are at Tab D.
Attachments
SECRETARY OF THE ARMY
WASHINGTON
December 12, 1975
The President
The White House
Washington, D. C. 20500
Dear Mr. President:
In my capacity as "stockholder" of the Panama Canal
Company under authority delegated to me by Executive Order
11305 of September 12, 1966, I am forwarding for your
approval a Resolution adopted by the Board of Directors of
the Panama Canal Company on November 17, 1975, amending the
rules of measurement of vessels for the Panama Canal.
The action by the Board of Directors is based on Sections
411 and 412 of Title 2 of the Canal Zone Code under which the
Panama Canal Company is authorized to prescribe rules of
measurement for determining the earning capacity of vessels
using the Canal. Section 412 provides that changes in the
measurement rules shall be subject to and take effect upon
the approval of the President of the United States. Section
411 requires six months' notice of the changes in the measure-
ment rules. This notice was published in the FEDERAL REGISTER
on July 31, 1975, so that the earliest date on which the new
rules could become effective is January 30, 1976.
Following publication of the notice in the FEDERAL
REGISTER, the Panama Canal Company invited written comments
from the public and held a public hearing in accordance with
applicable regulations. After consideration of all relevant
matter presented in the written comments received and presented
at the hearing, the Board of Directors adopted the proposed
amendments of the measurement rules, subject to your approval.
The inclosures to this letter set out in detail the
background of the proposed changes in the rules and the pro-
ceedings by the Board of Directors leading up to the adoption
of the amendments
Your approval of the proposed changes in the measurement
rules is recommended, effective January 30, 1976.
Respectfully yours,
Inclosures
Martin R. Hoffmann
as
ATTACHMENT
DISCUSSION OF PANAMA CANAL TOLLS RULES CHANGES
Background
The attached letter from the Secretary of the Army requests
Presidential approval of proposed changes in rules governing
tolls for ships transiting the Panama Canal. The proposal
was adopted by the Board of Directors of the Panama Canal
Company on November 17 and was forwarded to the President
by the Secretary of the Army, in his capacity as "stockholder"
of the Company, on December 12. The rules changes require
Presidential approval and can be put into effect on or after
January 30, 1976, a minimum statutory 6 months after notice
of the proposal was published in the Federal Register.
Since the beginning of Panama Canal operations in 1914, tolls
have been based on ship "earning capacity." The measure of
ship earning capacity has been the space available (net
tonnage) for carrying freight and passengers. The Panama
Canal Company argues that the measurement rules which
determine ship earning capacity should now be altered because:
(a) the last systematic review was conducted in 1937; (b) ship
configuration and technology have dramatically changed in the
past 38 years; and (c) the operating costs of the Canal are no
longer equitably distributed to reflect the earning capacity
of vessels using the Canal. Consequently, the Company has
proposed seven substantive changes to the measurement rules,
requiring thirty amendments to the Code of Federal Regulations.
The Company has found that the proposed rules "better reflect
the earning capacity of vessels than the present rules, are
nondiscriminatory, just and equitable."
OMB is the coordinating agency for Panama Canal Company toll
proposals. We have solicited the views of the following
agencies on the proposal: State, Commerce, Transportation,
Justice, Treasury, Agriculture, Federal Maritime Commission,
National Security Council, and Council of International
Economic Policy We also have received unsolicited comments
from members of Congress and the maritime industry (shipping
companies, unions and port thorities) These views will be
discussed below, as well as other issues pertaining to the
proposal.
Panama Canal Company Financial Condition and Canal Toll Issues
The Panama Canal Company is a wholly-owned Government corporation
whose primary purpose is maintaining and operating the inter-
oceanic Canal. From the Canal's tolls and other charges, the
2
Company is expected to be self-sustaining. Additionally, the
Company is expected to reimburse the U.S. Treasury for:
(a) uncovered costs accrued by the Canal Zone Government;
(b) interest payments relating to original Canal construction
costs borne by the U.S. Government; and (c) annuity payments
made by the U.S. to the Republic of Panama pursuant to the
Treaty of 1903, as amended in 1936.
For the past five years, the Panama Canal Company has
experienced rapidly rising costs and declining traffic. For
example, between 1970-1975, the number of transits declined
from 15,500 to 700, while operating costs climbed from
$172 million to $261 million. As a result, the first toll
increase since the Canal's 1914 opening was instituted in
July 1974 (+20% in toll rates). Despite the toll increase,
the Company's financial condition has continued to deteriorate
as a result of: (a) continuing cost-of-doing-husiness increases;
and (b) traffic downturns in the wake of worldwide economic
recession, the diversionary impact of the opening of the Suez
Canal, and the dampening effect of the 1974 toll increase.
Whereas the Company had planned to handle 40 ships daily in
FY 1976, an average of only 36 daily have been transiting the
Canal to date. The net effect of the financial downturn is
that the Company has sustained losses in the past two years
and is expected to continue to run losses in 1976 and 1977,
as shown below (millions of dollars):
est.
est.
1974 deficit
1975 deficit
1976 deficit
1977 deficit
$-11.8
$-6.4
$-18.0*
$-38.0*
*assumes no toll changes, measurement rules amendments,
or other remedial actions.
If approved, the measurement rules amendments would help
alleviate, but would not eliminate, projected Company deficits
in 1976 and 1977. The amendments would increase the measurements
of vessel net tonnage, leading to higher annual toll assessments
on the order of $12-13 million (further discussed below) The
Company argues, however, that it is incorrect to equate the
proposed amendments with a toll increase rather, the purpose
of the amendments is to redistribute the operating costs of the
Panama Canal more equitably In the Company framework of
thinking, the processes of establishing tolls and changing
measurement rules, although related, are separate. Any positive
revenue effects resulting from the proposed amendments would be
accounted for in computing the need for future toll rate changes
(i.e., future toll increases would be reduced by the amount of
additional revenues gained by the proposed amendments).
3
In fact, either with or without the proposed rules changes,
the Panama Canal Company is now indicating that a substantial
general toll increase will be required in the next 12 months
to meet the anticipated deficits. This would be the second
general toll increase in three years. Required toll rate in-
creases are shown below. The figures presume the imposition
of moderate cost-cutting measures and the continued operation
of the Company on a self-sustaining basis.
($ in millions)
Measurement
Measurement
Rules
Rules Not
Approved
Approved
Additional revenue required
to meet FY 1977 deficit
$26
$38
Future required toll increase
+17%
+28%
Additional revenue required
to meet FY 1977 deficit as
well as recoup FY 1976
deficit over five years
$28
$42
Future required toll increase
+19%
30%
The Company has pointed out that its statutory authorities
provide several alternative means for handling long term
deficits. It can: (a) defer payment to the U.S. Treasury
of interest and/or the net cost of the Canal Zone Government
to the extent the required amounts are not earned; (b) request
Congressional authority to waive entirely payment of the net
cost of the Canal Zone Government; (c) request a separate
appropriation for the Company to meet losses; or (d) use
available borrowing authority up to a maximum of $40 million.
Company officials are increasingly talking about the necessity
of employing these fallback authorities. For example, in a
January meeting, the Company's Board of Directors authorized
Company staff to explore the desirability of using one or
more of the authorities in the context of the future 1978
budget request. Utilization of the above authorities would
be highly undesirable from a budgetary point of view in that
they would entail U.S. Government subsidization of potentially
sizable Company deficits.
Of course, the future required toll increase can be reduced
by the extent to which the Company undertakes reductions in
services, employee benefits, and planned capital construction
projects. The President of the Company cum Governor of the
Canal Zone Government has already taken measures to cut
spending, but has shied away from major reductions which would
lead to strong opposition from Panama Canal employee groups,
(e.g., elimination of a 15% tropical pay differential).
4
Impact of the Proposed Measurement Rules Amendments
Of the seven substantive amendments, five will increase total
measurement tons, leading to higher toll assessments, and two
will lower total assessments. The net effects of the amend-
ments on tolls are shown below:
Company Estimates of Annual Tolls Impact of Rules Amendments1/
($ in thousands)
Ship Type
Measurement Rule
General
Container
All
Amendments
Cargo
Ship
Passenger
Other2/Total
Amendments which Increase
Measurement tons:
Deck Cargo
+578
+4,332
+9
+1,038
+5,957
Fuel
+2,290
+356
+117
+2,965
+5,728
Hatch Exemption
+209
+101
+5
+477
+792
Public Rooms
--
:
+423
--
+423
Water tanks
+198
+1
+3
+290
+492
Amendments which Decrease
Measurement tons:
Boatswain's Stores
-118
-213
-7
-641
-979
Engr. Shops
-11
-8
-1
-45
-65
All Flags Tolls Increase
+3,146
+4,569
+550
+4,083 +12,348
% Increase
+10%
+28%
+28%
+4%
+9%
U.S. Flag Tolls Increase
+410
+1,708
+59
+156
+2,333
% Increase
+12%
+37%
+16%
+3%
+17%
1/ Shipping companies generally believe that the Company's
estimates of tolls impact are understated
Includes dry bulk carriers, tankers, specialized product
carriers.
Maritime Industry Views
Shipping companies, unions, port authorities and selected
industries (e.g., lumber companies) have filed objections with
the Panama Canal Company regarding the proposed amendments. The
most commonly-cited objections to the amendments have been the
following:
--the amendments constitute a "de facto" toll increase, the
impact of which has not been satisfactorily evaluated.
BERMLO FORD LIDRERY
5
the amendments particularly impact containerships and
hence are "discriminatory. Furthermore, because the
U.S.-flag fleet has more containerships than do
foreign-flag fleets, U.S. shipping companies sustain
a proportionally greater financial injury.
the amendments do not improve the accuracy of the
measurement of ship cargo capacity, and hence are not
more equitable.
the amendments' impact on tolls will have negative side
effects; it will:
further reduce Canal traffic and therefore dampen
positive revenue effects of the amendments.
increase ocean freight rates and contribute to
inflation.
lead to the abandonment of some shipping services
and divert cargo passing through North Atlantic
U.S. ports to cross-continental rail or truck
transportation (leading to possible environmental
degradation).
the amendments, and the perceived toll increases they
cause, beg the issue of the Company's ability to cut
costs and thereby obviate the need for additional
revenue.
The Company published the amendments in the Federal Register
in July 1975, received written replies, opened the issue to
hearings, and in November the Company's Board of Directors
approved the original recommendations. The maritime industry
is highly irritated over the fact that the Board approved the
amendments without change, seemingly having ignored the
industry's many objections.
Despite the wide range of objections filed with the Company, the
maritime industry is principally concerned with only one amend-
ment -- the "on-deck cargo" amendment. This amendment would
have the effect of measuring all on-deck cargo transiting the
Canal, and assessing tolls accordingly. Currently on-deck
cargo is excluded from measurement and toll assessment.
Measurement by the Company of deck loads of 102 containerships
transiting the Canal showed that the net tonnage (and therefore
tolls) for these ships as a result of the application of the
deck cargo rule would increase by 28% in the aggregate, although
the net tonnage of U.S.-flag vessels in the group would increase
by 37%. As shown in the table in the previous section, the
on-deck cargo rule accounts for about half of the annual
estimated rules toll increase of $12 million.
6
Two major U.S. shipping company associations-- the American
Institute of Merchant Shipping (AIMS) and the American
Maritime Association (AMA) have privately indicated to us
that if the on-deck cargo rule were dropped from the package
of amendments, the opposition of their member companies to
the remainder of the amendments would be minimal.
Congressional Views
Although the Congress has no statutory role relative to the
establishment of Panama Canal Company tolls, the maritime
industry has generated strong support for its position in both
the House and Senate. In the House, Mrs. Sullivan (Chairman
of the Merchant Marine and Fisheries Committee) and Mr. Metcalfe
(Chairman of the Panama Canal Subcommittee), as well as 29
other members of the House, have cosigned a letter to the
President asking that no action be taken on the pending measure-
ment rules amendments until the House has had the opportunity
to review the measurement formulas in detail at future hearings
(letter attached). Likewise in the Senate, Senators Magnuson
(Chairman of the Commerce Committee) and Long (Chairman of
the Merchant Marine Subcommittee) have "join[ed] with Members
of the House of Representatives who have expressed their
interests in this to you and request that no action be taken
on these proposed changes until adequate Congressional review
of this important subject has been undertaken."
Mrs. Sullivan and Mr. Metcalfe have also requested a "full
investigation" of the financial situation of the Panama Canal
Company by the GAO, and have sent an extensive list of questions
on the anticipated impact of the proposed measurement rules
to the Company. However, hearings have not yet been scheduled
in either House or Senate. Company staff report that little
congressional action could be expected if the President were
to delay action on the amendments--that the primary purpose
of congressional intervention is to obstruct Company action
which would he injurious to the U.S. merchant marine.
Agency Views
The following agencies have expressed no objection to the proposed
amendments: Justice, Treasury, Federal Maritime Commission,
Agriculture, National Security Council, and Council of Inter
National Economic Policy. Agencies which have expressed concerns
are as follows:
7
Commerce. The Commerce Department opposes the proposed
amendments and recommends that Presidential approval
"be delayed until a thorough assessment of the problems
which are raised by these proposals can be completed."
Commerce reiterates most of the objections raised
by the maritime industry, along with the following
additional points:
The amendments deviate from the concepts established
in 1937 by a Presidentially-appointed committee. The
amendments should be evaluated by a body of the same
level before approval.
The amendments adversely impact U.S.-flag containerships,
the most competitive element of the U.S.-flag fleet.
In the long term, the amendments could result in an
increased need for Federal assistance to the U.S.
merchant fleet.
The on-deck cargo amendment is not precisely defined
and administration may be difficult.
Transportation. DOT recommends that "additional analysis
would be desirable before
issuance of the regulations"
based on the following:
If diversion of cargo from ocean carriage to cross-
continential land carriage were to result from the
amendment, there could be benefits to the U.S. railroad
industry but disbenefits to the U.S. shipping industry.
This should be assessed.
The Senate may ratify the 1969 International Convention
on Tonnage Measurement of Ships, which would establish
new parameters for measuring shipping tonnages.
Although the law would not enter into force until at
least two years later, and although the Company would
not be legally required to alter its measurement
system, "it might seem reasonable for the
Company
to consider developing a system employing the same
parameters as those used in the Tonnage Convention.
"
State. The State Department advises that the amendments
have no effect on the sensitive U.S. treaty negotiations
with the Republic of Panama over the status of the Panama
Canal. State further reports that foreign shipping
interests have objected to the amendments and the govern-
ments of Greece, Norway, Spain, Japan, Italy and Sweden
have made representations to the Department of State
critical of the changes. State concludes that the
"complaints should be carefully considered and treated
appropriately in any final decision."
8
Discussion of the Merits and Demerits of the Proposed Amendments
The rules of measurement currently employed by the Panama
Canal Company are based on the principle that canal tolls are
to be assessed on the "earning capacity" of vessels. Earning
capacity of vessels is defined as space available for
carriage of cargo and passengers. In the most general terms,
this determination is made by measuring the volume of the
space enclosed by the entire vessel (gross tonnage) and
deducting from this total, that space, such as the engine
room, which is not available for the carriage of cargo or
passengers (net tonnage). The assumption is that every net
cubic foot of below-deck space can be potentially used. A
ship's net capacity, therefore, is currently the sole basis
for toll assessments. Net capacity does not consider such
factors as volume, weight, or value of cargoes carried
(utilization of capacity). Because the system entails
measuring the ship instead of the cargo, ships only need
to be measured once, instead of transit-by-transit, and
administration of the system is thereby facilitated.
The Panama Canal vessel measurement system, like almost all
other vessel measurement systems, is derived from principles
originally laid down in nineteenth century England by George
Moorsom. Moorsom established the principle of measuring vessels
net capacities as determined by all enclosed (below-deck)
spaces as measured in cubic feet, divided by 100, so that one
ton represents 100 cubic feet of space. Almost all vessel
measurement systems start with the Moorsom method for
determining gross tonnage. However, differences often result
from the application of differing exemptions and deductions
in arriving at net tonnage figures. Panama Canal and Suez
Canal systems are similar and produce similar net tonnages.
Six Minor Amendments
Of the seven substantive measurement rule amendments proposed
by the Panama Canal Company, six are relatively non-controver-
sial. These six would alter, in a minor way, existing
exemptions and deductions for the following spaces: fuel
tanks, hatchways, water tanks, public rooms on passenger
vessels, boatswain's stores, and engineer's shops. The first
four would have the effect of increasing tonnage measurements.
The last two would have the effect of decreasing tonnage
measurements. These are further described below:
Amendments which increase measurement tons:
Fuel. The amendment would substitute actual
measurement of fuel spaces for the existing
rule by which the deduction for fuel is normally
computed at 75% of the measured space of the
engine room.
9
Hatch Exemption. The amendment would eliminate
the current exclusion of the cubical contents of
hatchways. In modern shin design, hatch covers
fit over the top of hatchways and the space under
the hatch cover is available for cargo.
Water Tanks. The amendment would eliminate the
current exclusion of the measurement of water
tanks used for fresh water for ship use. This
would achieve consistency with the treatment of
other like spaces that are not allowed as
measurement deductions.
Public Rooms. The amendment would eliminate the
current exclusion of the measurements of public
rooms (e.g., dining rooms, lounges, barber shops,
swimming pools). This is based on the premise
that public rooms are spaces available for the
use of the passengers and hence a consistent
application of the earning capacity concept
precludes deduction of these spaces.
Amendments which decrease measurement tons;
Boatswain's Stores. The amendment would permit
exclusion of measurements for boatswain's stores
on the premise that space used for this purpose
is unavailable for stowage of cargo, passenger
use, or other directly related purposes.
Engineers' Shops. This amendment would allow
deductions of measurements for engineers' shop
space over the current arbitrary deduction
ceiling of 50 tons. Actual measurements of
engineers' shops would determine the applicable
deduction.
The intent of these six amendments is to avoid "double counting"
of selected ship spaces and/or refine measurement standards in
accord with changed ship design. None of the above six
proposed amendments have been strongly opposed by the maritime
industry as a whole. However, passenger vessel operators are
unset over the public rooms" amendment which would increase
their toll assessments, by about $550 thousand annually (+28%)
U.S. -flag vessel operators account for only $59 thousand of
the total.
The On-Deck Cargo Amendment
Currently, on-deck cargo (e.g., containerized cargo, stores,
livestock) is excluded from measurement and toll assessment.
The seventh amendment proposed by the Panama Canal Company
10
would require the measurement of all on-deck cargo for every
vessel transit. The proposed amendment describes this as
follows:
"The deck space occupied by the goods thus carried
shall be determined at the time of the application
of the vessel for passage through the canal and
shall be deemed to be the space limited by the
area occupied by the goods and by straight lines
enclosing a rectangular space sufficient to
include the goods.
The on-deck cargo amendment has generated a great deal of heat
on the part of the maritime industry (e.g., the amendment is
alleged to be "arbitrary and capricious" and "discriminatory"
against both containership operators and the U.S.-flag fleet).
Containerships are the primary carriers of on-deck cargo.
By this amendment, if a containership operator transited the
Canal with no Lon-deck containers on one occasion, 50 on
another, and 100 on another, he would be charged differently
on each occasion. The Panama Canal Company believes the
amendment is desirable because there is "no doubt that the
use of the deck for deckloads adds to the space of the vessel
available for carrying cargo, and hence is a valuable component
of earning capacity of the vessel required to be measured."
Few would disagree with the proposition that, in theory,
on-deck cargo carriage should be subject to toll assessment.
However, the Company's proposal for assessing on-deck cargo
poses serious problems, principally because it is inconsistent
with other Company cargo measurement rules. The inconsistency
results from the fact that the on-deck cargo amendment requires
measurement and toll assessment for all cargo actually carried
on deck. Utilization of on-deck space, therefore, would be
the basis for toll assessment. However, as previously
explained, the existing Panama Canal ship measurement system
for below-deck space is based on the principle of net ship
capacity, assuming no wasted space resulting from the type of
cargo carried or manner of carriage and irrespective of the
amount of cargo actually carried on a given transit.
The result of the inconsistency is a toll assessment system
which appears to be prejudicial to containership operators.
Much of the below-deck space is lost in containerships
because rectangular container cells cannot fully utilize
the curved spaces against the hull of the vessel and because
spaces must be left between containers. As partial compen-
sation for this lost space, containerships carry containers
on deck. In effect, the containership operator has chosen
11
to offset the somewhat reduced carrying capacity of the vessel
with greater efficiency in cargo handling. In this light,
the proposed amendment does not account for "lost space" on
containerships and thereby constitutes a serious deviation
from the concept of measurement which requires tolls to be
assessed against vessels' actual cargo carrying capacities.
Approval of the on-deck cargo amendment would penalize this
form of cargo carriage. It would require continued toll
assessment for all below-deck space, whether or not utilized,
and would superimpose a tolls burden for on-deck cargo
carriage. In fact, it appears that containership operators
are already relatively "over assessed. FY 1975 data indicate
that, when recomputed on a dollar-per-ton-carried basis,
containership operators were assessed $2.12 per ton compared
with $1.15 for general cargo ship operators.
Based on the above, it may be appropriate for the Panama
Canal Company to reevaluate the tonnage measurement system
to determine if it is prejudicial to certain classes of
carriers, and, if so, to recommend remedial actions.
Options
#1. Approve all seven amendments in their entirety.
#2. Approve all but the on-deck cargo amendment. Request the
Company to reevaluate on-deck cargo measurement rules in
the context of the overall equities/inequities of the
existing measurement system.
#3. Disapprove all seven amendments. Request the Company to
further study alleged prejudicial aspects of the existing
measurement system.
Discussion of Options
Option #1
Pro
The amendments, in the aggregate, improve the tonnage
measurement standards which have been in force for
the past 38 years in terms of accuracy and equity.
-- The amendments add revenues to the Company (until a
toll increase is put into effect) in a period in
which the Company's financial situation is seriously
deteriorated.
12
Insofar as the Company is able to collect additional
revenues now, the magnitude of the future general
toll increase could be reduced. The smaller the
general toll increase, the less strenuous will be
the opposition to it.
Con
-- The appropriateness of the on-deck cargo amendment is
not clear. It is inconsistent with the existing
measurement system and appears prejudicial to
containership operators who would suffer a heavy
toll burden (+37%).
Approval of the amendments may give the false
impression of curing the Company's financial woes,
whereas only a general toll increase can generate
sufficient revenues to make the Company self-sustaining.
-- Approval of the amendments runs counter to expressed
maritime industry and congressional requests to the
President. This could lead to congressional action
to restrict Administration authority relative to
the Canal (e.g., make all toll proposals subject to
congressional review). This, in turn, could endanger
the more important future general toll increase.
Option #2
Pro
-- It retains most of the amendments, thereby improving
the overall cargo measurement system.
-- Insofar as there are justifiable grievances against
the on-deck cargo amendment and/or the cargo measure-
ment system as a whole, the issues could be further
studied by the Company.
--- Disapproval of the on-deck cargo amendment would
almost entirely diffuse U.S. maritime industry
dissatisfaction with the amendments package.
It allows Congress to hold hearings on the on-deck
cargo issue, Der congressional requests to the
President. Congressional action to circumscribe
Administration authorities would be unlikely.
13
Con
Insofar as approximately $6 million in revenues will
be forfeited if the amendment is not approved, the
deficit situation of the Company will worsen by a
like amount and the amount of the general toll
increase will have to be raised accordingly to
accommodate the loss. The higher the toll increase,
the more likely will be strenuous industry opposition
to it.
Option #3
Pro
-- It would completely negate maritime industry and
congressional criticisms.
--- Insofar as the industry and the Congress will have
been mollified on this issue, it may lessen tensions
relative to the announcement of a future toll increase
(although the magnitude of the increase will certainly
be an issue of contention).
Con
-- The measurement rule anomalies of the current system
will be maintained indefinitely.
-- It may make it more difficult to approve future Canal
toll proposals by leading the industry and Congress
to think that vigorous opposition to such proposals
will lead to their rejection by the President.
-- Insofar as approximately $12 million in revenues will
be forfeited if the amendment is not approved, the
deficit situation of the Company will worsen by a
like amount and the amount of the general toll increase
will have to be raised accordingly to accommodate
the loss.
WARREN O. MAGNUSON, WASH CHAIRMAN
JOHN o. PASTORE, R.I.
JAMES D. PEARSON, KANS.
VANCE MARTHE, IND.
RCBERT P. GRIFFIN, MICH.
PHILIP A. HART, MICH.
HOWARD H. BAKER, JR., TENN.
LOWARD V". CANNON, NEV.
TED STEVENS. ALASKA
RUSSELL B. LONG. LA.
J. CLENN BEALL, JR., MD.
United States Senate
FRANK E. MOSS. UTAH
LOWELL P. WEICKER, JR., CONN.
ERNEST F. HOLLINGS, S.C.
JAMES L. BUCKLEY, N.Y.
DANIEL K. INOUYE, HAWAII
COMMITTEE ON COMMERCE
JOHN V. TUNNEY. CALIF.
ADLAI E. STEVENSON, ILL.
WASHINGTON, D.C. 20510
WENDELL H. FORD, KY.
JOHN A. DURKIN, N.H.
MICHAEL PERTSCHUK, CHIEF COUNSEL
S. LYNN SUTCLIFFE, GENERAL COUNSEL
ARTHUR PANKOPF, JR., MINORITY COUNSEL
December 19, 1975
The Honorable Gerald A. Ford
President of the United States
The White House
Washington, D. C. 20500
Dear Mr. President:
Great concern has been expressed to us over the anticipated
consequences on U. S.-flag ocean carriers, particularly container-
ship operators and forest product shippers, resulting from the
I
proposed changes in the rules for measuring vessels transiting
the Panama Canal.
The Panama Canal Company's proposal will actually result in
the third increase in Canal toll charges in less than 18 months.
Despite a large number of written and oral statements presented
to the company concerning the proposed changes which were published
in the Federal Register on July 31, 1975, the measurement rules
changes have been submitted for your action without modification.
There appears to be a substantial number of very serious
questions regarding statutory requirements and treaty provisions
as well as significant economic and transportation issues involved
in these proposals.
We join with Members of the House of Representatives who
have expressed their interests in this to you and request that
no action be taken on these proposed changes until adequate
Congressional review of this important subject has been under-
taken.
Sincerely yours,
Warren Insurancen
WARREN G. MAGNUSON, U.S.S.
Ne
RUSSELL B. LONG, Ping U.S.S.
K. (ws. JOHN a.) RULLIVAN, MO., CHAIRMAN
HOMAN L. ASPLY. or o
PHILIP E. RUPPE, MICH.
CHIEF CLERK
JHN D. DINGELL., MICH
CHAMLES A. MOSHER, own
FRANCES STILL
HOMAS N. DOWNING VA.
PAUL H. CLOSKEY, , CALIF.
AUL a. ROGERT. FLA.
DENE SNYDER. KY.
U.S. Douse of Representatives
MINORITY COUNSEL
OHN M. MUMPHY, N.Y.
[DWIN #, FORSYTHE N.J.
(ALTER R. JONES. N.C.
FITNAE #. (METE) DUPONT, DEL.
Committee ON
RICHARD N. SHAROOD
DATAT L. LEGGETT. CALIF.
DAVID c. TREEN. LA.
ANIO BIAGGI, N.Y.
JOEL PRITCHARD, WASH.
Merchant Marine and isheries
LINN M. AND asou. CALIF.
DON YOUNG. ALASKA
(KIKA) DE GAMER, TEX.
MODERT r. BAUMAN, MD.
ALPH H. METCALFE, ILL.
NORMAN F. LENT, N.Y.
Room 1334, Mongluorth Douse Office Building
OHN 15. BREAUX, LA.
MATTHEW 1. MINALDO, N.J.
RED b. ROONEY. PA.
DAVID F. EMERY, MAINE
AUL n. BARBANES, MD.
Washington, D.C. 20515
o GINN. GA.
ENRY E. STUDDS, MASS,
AVID R. BOWEN, MISS.
December 8, 1975
OSHUA EILBERS, PA.
ON DE LUGO. V.I.
ARROLL HUBBAND. JH., KY.
ON BONKER, WASH.
ES AUCOIN, OREG.
KORMAN E. D'AMOURS, N.H.
ERRY M. PATTERSON, CALIF.
EOC. ZEFERETTI, N.Y.
AMES L OBERSTAR, MINN.
The President
The White House
Washington, D. C.
Dear Mr. President:
We have been advised that the Board of Directors
and Stockholder of the Panama Canal Company have
transmitted for your approval certain changes to their
Rules for Measurement of Vessels. Since historically
it has been the responsibility of the President of the
United States to gauge the effect of changes in Panama
Canal rules on the national transportation policy of
the United States, we wish to communicate to you some
of our concerns which we feel you should be cognizant
of in making your decision on this matter. The pur-
pose of this letter is to request that you sign the
proposed rules only after a thorough review of the
national economic consequences of these changes and
upon the advice of those agencies in the Executive
Branch who can best speak to the effect of the proposed
rules on this Nation's commerce.
We are increasingly concerned with the financial
well-being of the Canal. In July of 1974, a 19.7 per-
cent toll rate increase was approved, the first since
the opening of the Canal. We should note that no toll
increase was required during these many years since the
constantly escalating number of vessel transits and
increasing vessel size generated sufficient revenue to
keep ahead of constantly rising Canal Company costs.
The President
Page Two
December 8, 1975
The need for the 1974 general increase in the toll
rate was premised upon certain accounting changes made
by the Company, decreasing vessel transits, and increasing
operating and overhead costs. We were assured it was
necessary if the Company were to continue in a "break-even"
status, as is required by statute. The additional
financial burden placed on America's commerce was estimated
to be many millions of dollars annually. It is noted
that the current proposed rules change would result in an
additional 37 percent assessment for deck cargo on con-
tainerships. Our carriers simply cannot afford these
added operating costs, and the current proposed rules
could be much more detrimental to U. S. commerce than the
1974 increase.
The proposed rules in question represent another
de facto toll rate increase, although the burden would
be largely borne by certain types of vessels, notably
U.S.-flag containerships. While only eight percent of
the annual transits of the Canal are made by yessels of
U.S.-flag registry, approximately 37 percent of the con-
tainerships which transit the Canal are S.-flag vessels.
The average containership which transits the Canal today
pays about $19,000 in tolls. Under the proposed measure-
ment rules, it would pay approximately $26,000. Since
the Company has not yet prepared and released its fiscal
year 1975 report, except for traffic statistics, it is
not now possible to assess either the increased revenue
resulting from the 1974 toll increase or the necessity
for these proposed rules. We do know that vessel transits
and cargo tonnage are continuing to decline, and that
Company costs are continuing to rise. We believe that
steps can and must be taken to reverse these trends.
At the time of the tolls increase last year, the
Committee did not take any action since we felt the in-
crease was reasonable inasmuch as it was the first and
only increase since the Canal has been in existence.
The present proposal to change the Canal Company's Rules
for Measurement of Vessels presents a different picture,
however Among other things, it will affect the competi-
tive balance between the continental railroads and the
water carrier Canal users, and the burden will fall most
heavily on several U.S.-flag container and passenger ship
operators. In addition, if this change is approved, we
The President
Page Three
December 8, 1975
note the Canal Company's continuing emphasis on the
alleged need for increased revenues, which suggests that
the Company may propose another tolls increase in the
near future.
We anticipate that the Committee and its Panama
Canal Subcommittee will be reviewing the toll and tonnage
measurement formulas in some detail at future hearings.
We will be particularly interested in evaluating the
adverse impact of the proposed rules on the well-being of
the U. S. merchant marine and American commercial inter-
ests. We will keep you advised of our progress and plans,
and again ask that no action be taken at this time on
the pending measurement rules change.
Lemor Sincerely, TS. Sullivan
Leonor K. (Mrs. John B.) Sullivan
Chairman
Reeph H.Mitacles
Ralph H. Metcalfe
M Biazi Chairman Subcommittee Juln on m Panama murphy Canal
Jard Purthard
Paul Sarbaner Idin
Waltin Josen Fours n Dawing
The President
Page Four
Decemb Per 8, 1975
Kw a Sefutte & de
Norman Daman
DavidR. Bowen
John Buanx
Joshua Echerg
Br Sin
Canoll Husbard Matthew J. Revalis
alone Treen Jan hr Lugo
Dard E.Enery
ton Bonked
Dear now
Forman F. Lent
DEMOCRATS
DEMOCRATS
Signed
Did not Sign
Leonor K. Sullivan, MO
Thomas L. Ashley, OH
John D. Dingell, MI
Robert L. Leggett, CA
Thomas N, Downing, VA
Gerry E. Studds, MA
Paul G. Rogers, FL
Jerry M. Patterson, CA
John M. Murphy, NY
Walter B. Jones, NC
Mario Biaggi, NY
Glenn M. Anderson, CA
E (Kika) de la Garza, TX
Ralph H. Metcalfe, IL
John B. Breaux, LA
Fred B. Rooney, PA
Paul S. Sarbanes, MD
Bo Ginn, GA
David R. Bowen, MS
Joshua Eilberg, PA
Ron de Lugo,
Carroll Hubbard, Jr., KY
Don Bonker, WA
Les AuCoin, OR
Norman E. D'Amours, NH
Leo C. Zeferetti, NY
James L. Oberstar, MN
REPUBLICANS
REPUBLICANS
Signed
Did not Sign
Paul N. McCloskey, Jr., CA
Philip E. Ruppe, MI
Edwin B. Forsythe, NJ
Charles A. Mosher, OH
David C. Treen, LA
M.G. Snyder, KY
Joel Pritchard, WA
Pierre S. du Pont IV, DE
Don Young, AL
Robert E. Bauman, MD
Norman F. Lent, NY
Matthew J. Rinaldo, NJ
David F. Emery, ME
RESOLUTION
WHEREAS, pursuant to the authority of sections 411 and 412 of
Title 2 of the Canal Zone Code, (76A Stat. 27), at a special meeting
on July 28, 1975, the Board of Directors of the Panama Canal Company
proposed certain amendments to the rules for measurement of vessels
for the Panama Canal for the purpose of more accurately reflecting
the earning capacity of vessels using the Canal; and
WHEREAS, at the special meeting of the Board of Directors on
July 28, 1975, pursuant to the provisions of the applicable regulations
of the Panama Canal Company, five members of the Board of Directors
were designated as a panel to conduct a public hearing on the proposed
changes in the measurement rules; and
WHEREAS, notice of the proposed amendments was published in the
Federal Register on July 31, 1975, (40 FR 32140) and a correction was
published in the Federal Register on August 11, 1975, (40 FR 34619); and
WHEREAS, the notice of the proposed amendments of the measure-
ment rules invited interested parties to participate in the rulemaking pro-
cess through submission of written data, views or arguments, and sub-
mission of supplementary data, views or arguments at a public hearing
to be held in Washington, D. C., on October 6, 1975; and
WHEREAS, in accordance with the notice and the provisions of the
Company's regulations governing procedures for rulemaking, interested
parties did submit written data, views and arguments and, at the public
hearing on October 6, 1975, submitted supplementary data, views and
arguments in reference to the proposed amendments of the measurement
rules; and
WHEREAS, the panel designated by the Board of Directors to con-
duct the hearing has submitted its report, including the written data
submitted by interested parties and a full transcript of the hearing, with
copies of documents submitted at the hearing and thereafter within the
time fixed by the panel, and the recommendations of the panel with
respect to the proposed amendments of the measurement rules; and
WHEREAS, all relevant matters presented have been considered by
the Board of Directors; and
WHEREAS, the Board of Directors, having given careful consideration
to the assessment of the environmental impact of the proposed amendments
of the measurement rules, has determined that such amendments would not
significantly affect the quality of the human environment;
NOW, THEREFORE BE IT RESOLVED, That, in accordance with sections
411 and 412 of Title 2 of the Canal Zone Code, (76A Stat. 27) the rules
of measurement of vessels for the Panama Canal prescribed by the President
by Proclamation 2248 of August 25, 1937, be amended upon approval by the
President, but not earlier than six months from July 31, 1975, the date of
2
publication of notice of the proposed change in the Federal Register,
by amendment of Part 135 of Title 35 of the Code of Federal Regulations
as follows:
PART 135 -- RULES FOR MEASUREMENT
OF VESSELS
$ 135.82 [Amended]
by multiplying together the length,
1. In § 135.82 the references to § 135.86
breadth and depth of said rectangular
are amended to read $ 135.85.
space or spaces and dividing the prod-
uct by 100 or 2.83, according as the meas-
§ 135.83 [Amended]
urements are taken in feet or meters.
2. In the last line of $ 135.83 the ref-
Nothing in this section shall in any
erence to § 135.88 is amended to read
manner affect the provisions of §§ 135.-
§ 135.85.
41-42; 135.61-63; or 135.81-88.
§ 135.142 [Amended]
3. Section 135.85 is revised to read as.
follows:
6. In $ 135.142 the reference to $$ 135.-
171-135.182 is amended to read §§ 135.-
§ 135.85 Certain spaces between inner
171-135.183.
and outer plating of double bottom.
§ 135.175 [Amended]
Space or spaces between the inner and
7. In $ 135.175 the last sentence is
outer plating of the double bottom of a
amended by adding the words "or fuel"
vessel shall be exempted from measure-
between the words "cargo" and "the
ment, except when used, designated or
intended for carrying cargo or fuel; but
tonnage."
8. Following $ 135.182 a new § 135.183
the tonnage of such spaces within the
double bottom as are or may be used for
is added, reading as follows:
carrying cargo or fuel shall be deter-
§ 135.183 Hatchways.
mined and included in the gross tonnage.
The cubical contents of hatchways
The tonnage of double bottom tanks
shall be obtained by multiplying the
available for cargo or fuel may be
length and breadth together and the
obtained by multiplying the liquid-ca-
product by the mean depth taken from
pacity weight by the proper conversion
the top of beam to the underside of the
factor to get tons of 100 cubic feet.
hatch cover.
§ 135.86 [Revoked]
§ 135.211 [Amended]
4. Section 135.86 is revoked.
9. In $ 135.211 the reference in the
5. Following § 135.112 a new § 135.113,
fourth line to $ 135.132 is amended to
preceded by the undesignated center
read $ 135.183.
heading "DECK CARGO," is added, reading
as follows:
$ 135.271 [Amended]
DECK CARGO
10. In § 135.271 the reference in the
$ 135.113 Deck cargo.
second line to $ 135.286 is amended to
read $ 135.285.
If any ship carries stores, timber,
livestock, containers, or other cargo in
§ 135.273 [Amended]
any space upon an open deck not perma-
11. In § 135.273 the reference in the
nently covered or in spaces exempted
last line to § 135.286 is amended to read
under paragraphs (a) and (b) of § 135.-
$ 135.285.
82, all tolls and other charges payable
12. In $ 135.274. paragraph (c) 13
on the vessel's net tonnage shall be pay-
amended to read as follows:
able upon the vessel's net tonnage (as
defined below in $$ 135.271-287 and
§ 135.274 Spaces for stowage of stores
§§ 135.321-327) increased by the ton-
or cargo, not deducted.
page of the space occupied at the time
at which the tolls or other charges be-
(c) On supply ships, stores, supplies
come payable by the goods carried upon
of all kinds, distilling machinery and
deck and not permanently covered or
distilled water, machines, tools and ma-
closed-in. The deck space- occupied by
terial for repair work, mines and mining
the goods thus carried shall be deter-
materials, torpedoes, arms, and ammuni-
mined at the time of the application of
tion.
the vessel for passage through the canal
13. Section 135.281 is revised to read
and shall be deemed to be the space lim-
as follows:
ited by the area occupied by the goods
and by straight lines enclosing a rectan-
gular space sufficient to include the
goods. The tonnage of the space occu-
pied by the goods shall be ascertained
3
$ 135.281 Spaces used for boatswain's
$ 135.327 Propelling power deductions,
stores, deducted.
how made.
Spaces used exclusively for boatswain's
The deductions made for propelling
stores, including paint and lamp rooms,
power provided for in $5 135.323-135.325
shall be deducted. The deduction of
shall be made by adding to the space
spaces under this section shall be rea-
occupied by the engine room as defined
sonable in extent.
in §§ 135.352-135.354 and 135.332, the
14. Section 135.282 is revised to read
spaces available for fuel as defined in
as follows:
§§ 135.390 and 135.391.
§ 135.232 Spaces used for ongineer's
21. The undesignated center heading
shops, deducted.
preceding § 135.351 is amended to read
as follows:
Spaces used exclusively for engineer's
shops shall be deducted. The deduction
SPACE OCCUPIED BY ENGINE ROOM
of spaces under this section shall be rea-
§ 135.351 [Revoked]
sonable in extent.
15. In $ 135.285 the heading of the sec-
22. Section 135.351 is revoked.
tion and paragraph (a) are revised to
23. In $ 135,352 the last four sentences
read as follows:
are revised to read as follows:
§ 135.285 Water ballast spaces, de-
§ 135.352 What understood by space
ducted.
occupied by engine rooms.
(a) Water hallast spaces. other than
When a portion of the space
spaces in the vessel's double bottom, shall
within the boundary of the engine or
be deducted if they are adapted and used
boiler room is occupied by a tank or
only for water ballast, have for entrance
tanks for the storage of fresh water,
only ordinary circular or oval manholes
lubricating oll, or fuel, including settling
whose greatest diameter does not exceed
tanks, the space considered to be within
30 inches, and are not available for the
the engine room shall be reduced by the
carriage of cargo, stores, or fuel. Spaces
space taken up by such tanks. Installa-
that would otherwise qualify as water
tions not strictly required for the work-
ballast except that they are also used
ing of the engines or boilers are not to
for fuel for the vessel's own use shall be
be included in the engine room measure-
regarded as part of the vessel's fuel space
ment no matter where situated but given
as defined in § 135.390.
separate deductions when they qualify
under §§ 135.271-135.285 and are listed
$ 135.286 [Revoked]
under the appropriate item on page 2 of
the Panama Canal Certificate.
16. Section 135.286 is revoked.
24. In $ 135.353 the last sentence is
17. Section 135.287 is revised to read
revised to read as follows:
as follows:
§ 135.353 Manner of ascertaining cubi-
$ 135.207 Marking and use of deducted
cal content of spaces occupied by en-
spaces.
gine room.
Each of the spaces enumerated in
Add such contents, as well as
$$ 135.275-135.285, unless otherwise spe-
those of the space occupied by the shaft
cifically stated, shall be subject to such
trunk and by any donkey engine and
conditions and requirements as to mark-
boiler located within the boundary of the
ing or designation and use or purpose
engine room or of the light and air cas-
as are contained in the navigation or reg-
ing above the engine room and used in
istry laws of the several countries, but
connection with the main machinery for
no space shall be deducted unless the use
propelling the ship, to the cubical con-
to which it is to be exclusively devoted
has been appropriately designated by of-
tents of the space below the crown of the
ficial marking. In no case, however, shall
engine room; divide the sum by 100 or
an arbitrary maximum limit be fixed to
by 2.33, according as the measurements
the aggregate deduction made under
are taken in feet or meters, and the re-
$5 135.271-135.285.
sult shall be deemed to be the space
occupied by the engine room for pur-
§ 135.322 [Amended]
poses of calculating the deduction for
18. In $ 135.322 the reference to $ 135.-
propelling power.
286 in the heading and in the second line
25. Section 135.354 is revised to read
of the section is amended to read § 135.-
as follows:
235.
§ 135.354 Manner of ascertaining cubi-
§ 135.324 [Amended]
cal content of spaces occupied by en-
gine room; where engines and boilers
19. In § 135.324 the reference to
$$ 135.381-135.333 is amended to read
are in separate compartments.
$$ 135.252-135.354, 135.382.
If in any ship in which the space for
20. Section 135.327 is revised to read
propelling power is to be measured the
as follows:
engines and boilers are in separate com-
partments, the contents of each com-
partment shall be measured separately
4
in like manner, according to the above
S 135.412 [Amended]
method: and the sum of the tonnage of
the spaces included in the several com-
29. In $ 135.412 the words and figures
partments shall be deemed to be the
in the second, third, and fourth lines
space occupied by the engine room for
"other than fuel spaces deducted under
purposes of calculating the deduction
$$ 135.351-135.354" are revoked.
for propelling power.
30. Section 135.511 is revised to read
as follows:
§ 135.381 [Revoked]
$ 135.511 Administration of rules.
26. Section 135.381 and the undesig-
nated center heading preceding that sec-
The rules of measurement provided in
tion reading "PROPELLING POWER DEDUC-
this part shall be administered by the
TION FOR VESSELS WITH FIXED BUNKERS,
President of the Panama Canal Com-
OR HAVING FUEL-OIL COMPARTMENTS
pany.
THAT CANNOT BE USED TO STOW CARGO OR
[FR Doc.75-31475 Filed 11-20-75;8:45 ain]
STORES" are revoked.
$ 135.383 [Revoked]
27. Section 135.383 is revoked.
28. Two new sections numbered
§§ 135.390 and 135.391, preceded by an
undesignated center heading "SPACES
AVAILABLE FOR CARRIAGE OF FUEL" are
added, reading as follows:
SPACES AVAILABLE FOR CARRIAGE OF FUEL
$ 135.390 Spaces available for the car-
riage of fuel.
The spaces available for the carriage
of fuel will include the actual volume of
tanks or fixed compartments for the
storage of lubricating oil or fuel, includ-
ing settling tanks, which cannot be used
to stow cargo or stores and which have
been certified by official marking to be.
spaces for the vessel's own fuel. Dual
purpose fuel tanks whose only other use
is for the carriage of water ballast will
be included in the fuel deduction pro-
vided they have been included in the
gross tonnage and qualify in all other
respects for a deduction.
$ 135.391 Manner of ascertaining cubi-
cal contents of spaces available for
the carriage of fuel.
The cubical contents of the above-
named spaces available for the carriage
of fuel shall be ascertained in accordance
with the following provisions: For each
fuel tank or compartment, measure the
mean length. Ascertain the area of three
transverse sections of the ship (as set
forth in §§ 135.141 or 135.142-135.241 for
the calculation of the gross tonnage) to
the deck which covers the tank or com-
partment. One of these three sections
must pass through the middle of the
aforesaid length, and the two others
through the two extremeties. Add to the
sum of the two extreme sections four
times the middle one, and multiply the
sum thus obtained by the third of the
distance between the two section. This
product, divided by 100 if the measure-
ments are taken in English feet, or by
2.83 if they are taken in meters, gives
the tonnage of the spaced measured.
When they cannot be readily measured,
the tonnage of tanks may also be ob-
tained by using liquid capacity times the
conversion factor with one-sixth off for
frames in case of peak tanks and one-
twelfth off in case of wings or deep tanks.
5
BE IT FURTHER RESOLVED, That the Secretary of the Panama Canal
Company cause notice of the adoption of the amendments of the mea-
surement rules to be published in the Federal Register in the form pre-
scribed by applicable laws and regulations.
BE IT FURTHER RESOLVED, That upon publication of the said notice
of amendment of the measurement rules in the Federal Register, the
Stockholder of the Panama Canal Company transmit the amendments of
said rules to the President for his approval.
Approved except for Section 135.113 which would provide for
the inclusion in net tonnage of the space occupied
by deck cargo:
Date:
6
THE WHITE HOUSE
WASHINGTON
Dear Mr. Secretary:
Pursuant to Section 411 of Title 2 of the Canal Zone Code, I have
reviewed the request of yourself and the Panama Canal Company regarding
rules of measurement of vessels transiting the Panama Canal.
I have approved the proposed amendments with the exception of 35 CFR
135.113, the provision for the inclusion in net tonnage of space
occupied by on-deck cargo. In principle, I concur that on-deck
cargo should be subject to toll assessment, like below-deck cargo.
I am concerned, however, that this proposed amendment may tend to
discriminate against containership operators. I note, for example,
that 1975 data show that toll assessments per ton carried were $2.12
for containerships compared with $1.15 for general cargo ships. The
on-deck cargo amendment would dramatically increase containership
toll assessments and therefore increase this disparity. I encourage
you and the Company to further review the tonnage measurement
system to determine if it is prejudicial to certain classes of
carriers and, if so, to recommend remedial measures.
I am also greatly concerned over the Panama Canal Company's financial
condition, generated by rapidly rising costs and declining vessel
transits. Recognizing that the Panama Canal Company and Canal Zone
Government are actively seeking to restrain cost increases, I
nevertheless request that your office and the Company determine
where further reductions can be taken. These reductions are necessary
to retain the Company's strict self-sustaining financial status and to
minimize any general toll increase which may be needed. Your review
should encompass both capital construction and operating expenses of
the Panama Canal Company and the Canal Zone Government.
Respectfully,
Honorable Martin R. Hoffman
Secretary of the Army
Washington, D. C. 20310
THE WHITE HOUSE
WASHINGTON
Dear Mrs. Sullivan:
This is in further reply to your December letter to me regarding the
measurement rule amendments proposed by the Panama Canal Company
and the Secretary of the Army.
I have carefully reviewed the issues. For the reasons cited in my
letter to the Secretary of the Army (copy attached), I have approved
the proposed amendments with the exception of the so-called "on-deck
cargo" amendment. As you know, this is the most important of the
amendments proposed for my approval.
As you will note, I have encouraged the Secretary of the Army and
the Panama Canal Company to review further the tonnage measurement
system to determine if it is prejudicial to certain classes of
carriers, and if so, to recommend remedial action. This action
also will provide your committee the opportunity to review issues
pertaining to the Company's toll structure and financial status,
as the committee finds appropriate.
Respectfully,
Honorable Leonor K. Sullivan
Chairman
Merchant Marine and Fisheries
House of Representatives
Washington, D. C. 20515
Attachment
CC: Honorable Ralph H. Metcalfe
THE WHITE HOUSE
WASHINGTON
Dear Mr. Chairman:
This is in further reply. to your December letter to me regarding the
measurement rule amendments proposed by the Panama Canal Company and
the Secretary of the Army.
I have carefully reviewed the issues. For the reasons cited in my
letter to the Secretary of the Army (copy attached), I have approved
the proposed amendments with the exception of the so-called "on-deck
cargo" amendment. As you know, this is the most important of the
amendments proposed for my approval.
As you will note, I have encouraged the Secretary of the Army and the
Panama Canal Company to review further the tonnage measurement system
to determine if it is prejudicial to certain classes of carriers,
and if so, to recommend remedial action. This action also will
provide your committee the opportunity to review issues pertaining
to the Company's toll structure and financial status, as the
committee finds appropriate.
Respectfully,
Honorable Warren G. Magnuson
Chairman
Committee on Commerce
United States Senate
Washington, D. C. 20510
Attachment
CC: Russell B. Long