of the principal purposes of the Budget Bureau's report. The vesting of such power in the corporation will, under the corporate charter (the Panama Railroad Company Act of June 29, 1948), automatically contemplate and authorize the retention and utilization of tolls revenues by the corporation, as contemplated in the President's letter and in the Budget Bureau's report.

SECTION 22, ADDING 2 CANAL ZONE CODE, (NEW) SECTION 255

37. The President, in his letter of January 31, 1950, to the Speaker of the House of Representatives (H. Doc. No. 460 p. 2), has pointed out the necessity for legislation to authorize appropriations to the corporation to cover losses which might result from changes in economic conditions. Section 22 of the bill, after renumbering present section 255 of title 2 as added by the Panama Railroad Company Act (charter) of June 29, 1948, would insert a new section 255 in order to fulfill the aforesaid requirement. New section 255 would authorize appropriations for payment to the corporation in amounts shown by the budget program as necessary to cover losses sustained in the conduct of the corporate activities. Amounts appropriated to cover losses would not be added to the net direct investment in the corporation, and would not require payment of interest, but repayments by the corporation to the Treasury would in no case be treated as dividends, usable as offsets against the net direct investment, until all amounts appropriated to cover losses should have been repaid to the Treasury. In net effect the section may be said to provide for non-interest-bearing loans to the corporation in replacement of funds lost from changes in economic conditions.

SECTION 22, ALSO ADDING 2 CANAL ZONE CODE, (NEW) SECTION 256

38. The report of the Bureau of the Budget contemplates the transfer from the Panama Canal to the corporation (1) of the waterway and its related facilities and appurtenances, and (2) of the facilities and appurtenances (business operations) heretofore operated by the Panama Canal under authority of section 51 of title 2, as amended by section 2 of the act of August 12, 1949 (ch. 422, 63 Stat. 601), leaving in the Canal Zone Government only the functions of civil government, health, and sanitation. New section 256 of title 2 (present section 256 being renumbered) would provide the authority for the aforesaid transfers. The authority to transfer the waterway and its related facilities and appurtenances is new, i. e., not contained in any existing legislation. On the other hand, the authority to transfer the facilities and appurtenances heretofore operated by the Panama Canal under authority of section 51 of title 2 is now present in said section 51, and is merely being transferred to new section 256 of title 2 in order to permit the repeal of section 51 by section 28 of the bill. The language of the new section is patterned to a considerable extent after that in present section 51.

SECTION 23, AMENDING 2 CANAL ZONE CODE, SECTION 341

39. At present section 341 of title 2, Canal Zone Code, authorizes the Governor of the Panama Canal, under the supervision of "the Secretary of War," to maintain and operate, free of toll, a ferry across the canal near the Pacific entrance, and to maintain a highway extending from the western terminal of such ferry to a point on the Canal Zone-Republic of Panama boundary near the town of Arraijan, Republic of Panama. The amendment would place the function of ferry maintenance and operation in the corporation, and would delete the references to the highway which, as a part of the general highway system would continue to be maintained and operated by the Canal Zone Government.

SECTION 24, AMENDING 2 CANAL ZONE CODE, SECTION 411

40. At present, section 411 of title 2, Canal Zone Code, authorizes the President to prescribe and from time to time change the tolls for the use of the Panama Canal, with the proviso that no tolls shall be changed without six months' notice by Presidential proclamation. The amendment to section 411 follows the recommendations contained in House Document No. 460 in vesting the prescription of measurement rules and of tolls in the corporation subject to the approval of the President.

41. The amended section would require six months' notice, by publication, in the Federal Register, of proposed changes in basic rules of measurement and of proposed changes in rates of tolls, during which period a public hearing would be conducted. In providing for such notice and hearing consideration was given

to the 1937 amendments to companion sections 412 of title 2 (50 Stat. 750), requiring such notice and hearing as prerequisites to changes in the basic rules of measurement.

SECTION 25, AMENDING 2 CANAL ZONE CODE, SECTION 412

42. Section 412 of title 2, Canal Zone Code, as amended by the act of August 24, 1937 (ch. 752, 50 Stat. 750) reads as follows:

"SEC. 412. Bases of tolls; maximum and minimum rates.-Tolls on merchant vessels, army and navy transports, colliers, hospital ships, supply ships, and yachts shall be based on net vessel-tons of one hundred cubic feet each of actual earning capacity determined in accordance with the Rules for the Measurement of Vessels for the Panama Canal prescribed by the President and as may be modified by him from time to time by proclamation, and tolls on other floating craft shall be based on displacement tonnage: Provided, That the basic rules of measurement shall not be changed except after public hearing and six months' the public notice of such change. The rate of tolls on laden vessels shall not exceed $1, nor be less than $0.75 per net vessel-ton as determined under the aforesaid rules, and on vessels in ballast without passengers or cargo the rate may be less than the rate of tolls for vessels with passengers or cargo. In addition to the tolls based on measurement or displacement tonnage, tolls may be levied on passengers at rates not to exceed $1.50 for each passenger. The levy of tolls is subject to the provisions of article XIX of the convention between the United States of America and the Republic of Panama, entered into November 18, 1903, and of article I of the treaty between the United States of America, and the Republic of Colombia proclaimed March 30, 1922."

Amended section 412, which is in four lettered paragraphs, is here discussed by paragraphs.

43. Paragraph (a), providing that tolls on merchant vessels, transports, colliers, tankers, hospital ships, supply ships, and yachts shall be based on net vessel-tons of actual earning capacity determined under Panama Canal measurement rules, and that tolls on other floating craft shall be based on displacement tonnage, and further providing that the rate of tolls on vessels in ballast without passengers or cargo may be less than the rate for vessels with passengers or cargo, is derived without substantial change from present section 412.

44. Paragraph (b), prepared in general pursuance of the report and recommendations of the Bureau of the Budget, would require tolls to be prescribed at rates calculated to cover all costs of maintaining and operating the Panama Canal and its related facilities and appurtenances, including interest and depreciation, and an appropriate share of the net costs of operation of the Canal Zone Government; and would provide that in the determination of such appropriate share, substantial consideration should be given to the ratio of the estimated gross revenues from tolls to the estimated total gross revenues of the corporation exclusive of the cost of commodities resold, and exclusive of revenues arising from transactions within the corporation or from transactions with the Canal Zone Government. The method of distributing the costs of the Canal Zone Government, i. e., on the basis of gross revenues, was recommended in the Budget Bureau's report (H. Doc. No. 460, p. 14), and is considered to be as sound and satisfactory a method as is available. The costs of maintaining and operating the Panama Canal would include the reimbursement of the Treasury, as provided in section 246 (e) of title 2 (section 19 of bill), for the annuity payments under article XIV of the Canal Convention of 1903.

45. Paragraph (c) of section 412 would, in effect, eliminate free transits of United States Government vessels by providing that such vessels may in the discretion of the President be required to pay tolls and that, in the event such vessels are not required to pay tolls, the tolls shall nevertheless be computed and the amounts thereof treated as revenues of the corporation for the purpose of prescribing tolls and shall be offset against the obligations of the corporation under paragraphs (c) and (e) of section 246 of title 2, as amended by sections 18 and 19 of the bill, respectively.

46. Paragraph (d) of section 412, enumerating the treaty provisions affecting the levy of tolls, is based upon the concluding sentence of section 412 as last amended by the act of August 24, 1937 (50 Stat. 750), but, whereas such concluding sentence referred only to treaty provisions providing free tolls for Colombian and Panamanian vessels in certain cases, paragraph (d) includes references to the other provisions affecting the levy of tolls; namely, article XIII of the

Canal Convention of 1903 and article I of the Hay-Pauncefote Treaty with Great Britain.

SECTION 26, AMENDING 4 CANAL ZONE CODE, SECTIONS 982, 987, AND 1024, AND 5 CANAL ZONE CODE, SECTION 833

47. Sections 982, 987, and 1024 of title 4, Canal Zone Code, have the effect in part of exempting the Panama Canal from docket and certain other court fees, from fees for service of or attempts to service process, and from the requirement of posting security for costs. The United States Government (including the Canal Zone Government) is also exempted. The amendment would have the effect of translating "the Panama Canal" to read "the Panama Canal Company" thereby conferring such exemptions upon the corporation. Section 833 of title 5, Canal Zone Code, makes it a criminal offense to injure or remove boundary or survey monuments erected or used by the United States Government or by the Panama Canal, and the amendment would merely translate "the Panama Canal" to read "Panama Canal Company."

SECTION 27, AMENDING 5 CANAL ZONE CODE, SECTION 836

48. Section 836 of title 5, Canal Zone Code, makes it a criminal offense to misuse or waste water supplied from the water mains owned and operated by the Government of the Canal Zone. The amendment would substitute "the Panama Canal Company" for "the Government of the Canal Zone," as the owner and operator of water mains under the new organizational arrangement.

SECTION 28

49. Section 28 would repeal various statutes and parts of statutes as discussed below.

50. Sections 32 and 33 of title 2, Canal Zone Code, deal respectively with accounting by collecting officers of the Panama Canal, and with the examination of the accounts of the Panama Canal by persons detailed from the General Accounting Office. If retained the sections would need formal amendment; however, the subject matter of the sections is fully covered by the Budget and Accounting Act, and since the sections serve no useful purpose they are listed for repeal. On the other hand, section 31 of title 2, the remaining section of the chapter entitled "Accounting For Funds," is retained and would be amended by section 12 of the bill.

51. Sections 51 to 54 of title 2, Canal Zone Code, as amended and added by section 2 of the act of August 12, 1949 (ch. 422, 63 Stat. 601), comprise the chapter entitled "Business Operations: Sales and Services." The sections deal with the establishment of the various facilities, their operation either through the Panama Canal or the Panama Railroad Company, the authority for their conduct by the Panama Canal as "business operations," and the use by the Panama Canal of receipts from such operations. Two provisions have, in general substance, been extracted from said sections 51 to 54, and incorporated in the present bill. I refer to new section 19 of title 2 (section 11 of the bill) relative to sale of obsolete materials and equipment, and new section 256 of title 2 (section 22 of the bill) authorizing the transfer to the corporation of facilities heretofore operated by the Panama Canal under authority of section 51 of title 2. The remainder of sections 51 to 54 will be wholly obsolete and unnecessary under the new organization arrangement, and these sections are accordingly listed for repeal.

52. Sections 411 and 412 of title (2, Canal Zone Code, relative to tolls for the use of the Panama Canal, would be amended by sections 24 and 25 of the bill. Section 414 of title 2, a further tolls section, is listed for repeal. That section appropriates out of tolls receipts, before their coverage into the Treasury, amounts necessary to refund amounts erroneously received as tolls covered into the Treasury. Since under the new organizational arrangement, the corporation would operate the canal, and would retain and utilize tolls receipts in the same manner as other revenues, section 414 is inappropriate and unnecessary, and it is accordingly listed for repeal.

53. The paragraph entitled "Housing of officers serving in the Canal Zone" of the act of July 9, 1918 (ch. 143, 40 Stat. 855), appears in the United States Code as section 721 of title 10. It provides that officers of the Army pertaining to the troops serving in the Canal Zone shall not be required to pay rent for the occu

pancy of houses of the Panama Canal to which they may be assigned; and was construed by the Comptroller General in 15 C. G. 136. The reason for, and basis of, the section no longer obtain, and the section should properly be repealed. In 1918, when the section was enacted, quarters of the Panama Canal were assigned to employees on a rent-free basis. That condition ceased to prevail many years ago. The present executive order respecting Panama Canal quarters (order of the Secretary of War, Canal Zone Order No. 4 of January 24, 1947), authorizes the Governor to fix the rental for quarters so as, in brief summary, to pay the costs of the quarters operation, including depreciation and costs of incidental services. Under the new alignment of functions, the quarters operation will be conducted by the corporation, and 10 United States Code, section 721 is inconsistent with that arrangement.

54. Subparagraph (g) of section 2680 of title 28 of the United States Code, as recently enacted into positive law, excepts from the Federal Tort Claims Procedure any claim arising from injuries to vessels, or to the cargo, crew or passengers of vessels in the locks of the canal or in Canal Zone waters. The claims referred to are those cognizable under section 10 of title 2, Canal Zone Code which is amended by section 7 of the bill. This subparagraph is being listed for repeal because, with the transfer of canal operation to the corporation, these claims will run against the corporation; and all claims against the corporation are excepted from the Federal Tort Claims Procedure by subparagraph (m) of section 2680, as added by the Act of July 16, 1949 (Public Law 172, 81st Cong.), which excepts any claim arising from the activities of the Panama Railroad Company (Panama Canal Company).

55. Section 6 of the act of August 1, 1914 (ch. 223, 38 Stat. 679; 31 U. S. C., sec. 621), deals with estimates for the Panama Canal. The section is clearly covered and superseded by the Budget and Accounting Act, and is obsolete and unnecessary.

56. Section 1 of the act of June 29, 1948 (ch. 706, 62 Stat. 1075), appearing as 48 United States Code, section 1361, is the declaration of policy introducing that act incorporating the Panama Railroad Company. At present the section is difficult to read because of faulty punctuation, and serves no discernible purpose. With the passage of this bill, and the transfer of canal operation to the corporation, the section will become wholly inappropriate and meaningless.

57. Section 28 would also repeal all statutes and parts of statutes inconsistent with the bill, to the extent of such inconsistency.

SECTION 29

58. Section 29 provides the effective date for the bill. Under its terms, only section 256 of title 2, as added by section 22 of the bill, would take effect immediately; said section 256 being the one authorizing the transfer of the canal, et cetera, to the corporation. All other sections of the bill would take effect upon the effective date of the transfer to the corporation of the canal and its related facilities and appurtenances.

CONCLUSION

59. It is recommended that the proposed legislation be submitted in compliance with the President's letter of January 31, 1950.

Respectfully,

F. K. NEWCOMER, Governor.

ATTACHMENT A. LIST OF STATUTORY SECTIONS WHEREIN SECTION 2 OF DRAFT BILL WOULD OPERATE TO TRANSLATE "THE PANAMA CANAL" TO READ "THE CANAL ZONE GOVERNMENT"

CANAL ZONE CODE SECTIONS

2:13, disposition of useless papers of the Panama Canal.

2:44, as added; administering oaths.

2: 81, as amended; conditions of employment; reference to employees of the Panama Canal.

2: 83, deduction from salaries of amounts due for supplies or services. 2: 84, payment for accumulated or accrued leave upon death.

2: 85, as added; special training of employees.

3: 242, securities sales law reference to the executive secretary of the Panama Canal.

3: 1291, general laws respecting employment relations.

4: 398, payment by clerk of court to "collector of the Panama Canal" of unclaimed funds.

4: 981, payment of court fees to the collector of the Panama Canal.

4: 1182, custody of escheated property by the collector of the Panama Canal. 4:1184, payment of claims to escheated property by collector of the Panama Canal.

4:1494, claims against estate; payment to collector of the Panama Canal in certain circumstances.

4:1705, payment of claims due deceased or insane persons.

4: 1715, commissions of public administrator paid to collector of the Panama Canal.

4:1747, guardianship of estates of certain persons employed by the Panama Canal.

5:91, crimes by and against executive power.

5:97, officer acting for Panama Canal where pecuniarily interested.

5: 621, crimes republic moneys.

5: 623, same.

5: 830, regulation of riding on labor train.

6:604, turning over to collector of Panama Canal certain money deposits in lieu of bail.

6:625, same.

6: 825, payment to collector of Panama Canal of proceeds of stolen property. 7:34, jurors employed by Panama Canal.

7:35, same.

UNITED STATES CODE SECTIONS

5:30a, annual leave of Panama Canal employees.

5:30f, sick leave of Panama Canal employees.

5: 61e, commuting leave of P. C. employees.

-5: 715, retirement; automatic separation of P. C. employees.

(5:736c, retirement; reference to Panama Canal employees in nonprospective.) 5: 710, retirement, coverage of P. C. employees.

5: 793, employees (injury) compensation, administration by Governor.

10: 1257b, transfers of property from Army.

31: 82e, reference to disbursing functions under the jurisdiction of the Panama Canal.

34: 557b, transfers of property from Navy. 48: 1372, cash relief to certain employees.

ACTS OF CONGRESS

October 25, 1949, ch. 705, compensation of teachers, policemen, and firemen employed by the Panama Canal.

There are a number of cases wherein the statutes already refer to "the Government of the Canal Zone," and wherein no translation is needed, as follows: Canal Zone Code sections 5: 92, 93, 95: 6:5, 6, 75, 143, 182, 226, 490, 542, 562, 637, 654, 661, 761, 767, 882, 884, 891, 892; 7: 41.

In at least one case the term "authorities of the Canal Zone" is used, and requires no translation, namely Canal Zone Code 6: 890.