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requirement as to the time of payment of such interest, bearing in mind that the interest charges are properly for payment out of earnings, and may not in a given year be earned (sec. 18 of bill);

(4) the insertion of a provision obligating the corporation to pay into the Treasury amounts sufficient to reimburse the Treasury for (a) the annuity payments made by the United States to the Republic of Panama, and (b) for the net costs of operation of the agency known as the Canal Zone government (sec. 19 of bill);

(5) the insertion of a new section authorizing appropirations to cover losses which may be sustained by the corporation in the conduct of its activities, as a result, for example, of changes in economic conditions; such appropriations being in the nature, in effect, of noninterest-bearing loans in replacement of funds lost (sec. 22 of bill); and

(6) the insertion of a new section authorizing the President to transfer, from the "agency” to the corporation, the Panama Canal (that is the waterway) and any or all of the facilities appertaining to the business operations now conducted by the "agency” (sec. 22 of bill).

FINANCIAL STRUCTURE AND GOAL OF CORPORATION

7. It would seem not inappropriate to call attention briefly to the provisions respecting the financial structure and goal, or burden, of the corporation under the corporate charter, including the amendments thereto accomplished by this bill.

8. The more important parts of the bill relating to the financial structure of the new organization are covered by sections 12, 18, 19, 21, 22, 24, 25, and 28. At the present time the Panama Railroad Company and a number of the Panama Canal activities known as business divisions are self-supporting and produce profits. In the case of the Panama Railroad Company, the excess funds over current requirements are paid into the Treasury in the form of dividends as determined by the Board of Directors. On the other hand, the net profits of the business operations of the Canal, as determined at the close of each fiscal year in accordance with section 52 of title 2, Canal Zone Code, are forthwith deposited in the Treasury. Existing law requires that tolls, taxes, fees, and fines be deposited in the Treasury as received, and since this source of revenue is not now available, it follows that appropriations are required annually to finance the tolls-producing operations, including the expense of government and health functions. Under the proposed bill the tolls will become available to the corporation, which will then be required to defray all its expenses, including the expenses of the Canal Zone government and health functions and, in addition and to the extent earned, pay into the Treasury interest on the Government's net direct investment in the corporation at a rate determined by the Secretary of the Treasury. This is one of the fundamental changes to place the operations on a corporate basis.

9. The financial burden of the corporation would be, in summary

(1) to pay its costs of operation, including depreciation, and including the reimbursement of other agencies for expenditures made on behalf of the corporation;

(2) to pay the prescribed interest on the net direct investment of the United States;

(3) to reimburse the Treasury for the annuity payments made by the United States to the Republic of Panama;

(4) to reimburse the Treasury for the net costs of operation of the Canal Zone Government; and

(5) to utilize its revenues, including tolls, for the above purposes.

10. Appropriations would not, of course, be required for the normal operating expenses of the corporation. In case losses were sustained in the conduct of the corporate activities, appropriations would, as aforesaid, be authorized for working-fund requirements. Until such time as an adequate surplus should be accrued, it would be necessary to secure appropriations for increased capital needs, and such appropriations would constitute additional direct investments on which interest would accrue.

ADAPTATION OF STATUTES OTHER THAN THE CHARTER

11. In the present bill, sections 1 to 16, 23, 26, and 27 are designed to adapt the statutes relative to the Panama Canal and the Panama Railroad Company, other than the corporate charter, to the new distribution of functions which the bill would effect as between the agency and the corporation. These sections appear to require no extended general comment.

12. A section of considerable interest is section 1 of the bill, amending section 5 of title 2, and establishing the new name (Canal Zone Government) and diminished functions of the agency now known as the Panama Canal.

13. A further section of importance is section 7 of the the bill amending section 10 of title 2, Canal Zone Code, respecting claims for damages for injuries to vessels, or to the cargo, crew or passengers of vessels, occasioned by the operation of the Canal. The transfer of Canal operation to the corporation makes imperative some change in said section 10.

AMENDMENT OF TOLLS PROVISIONS

14. Sections 24 and 25 of the bill would amend the existing tolls sections (secs. 411 and 412, respectively, of title 2, Canal Zone Code) in such manner as to vest in the corporation the authority to fix measurement rules and tolls, and to prescribe the bases of tolls. In explanation of these sections I wish to refer to, rather than to repeat, the comment in my letter to the Secretary of the Army of April 24, 1950 (page 9, and following, of that letter).

15. In concluding my general statement on the bill I should like again to refer to the letter of April 24, 1950, in explanation of the provisions of the bill, and, in particular for its detailed discussion of individual sections.

That concludes my general statement, Mr. Chairman.
Mr. O'TOOLE. Are there any questions at this point?

In view of the great knowledge of and great interest shown in this matter by two other members of the Committee on Merchant Marine and Fisheries, the Chair is taking the liberty to invite to the hearing this morning two sons of the Golden West, and distinguished Representatives from that coast, the Honorable John J. Allen, and the Honorable J. F. Shelley, and to invite them to take part in our deliberations.

Mr. ALLEN. Thank you very much, Mr. Chairman.
Mr. O'TOOLE. Are there any questions?
Mr. THOMPSON. No.

I think perhaps, if it would meet with your approval, as the discussion develops we may want to ask the Governor some questions more or less informally.

Mr. O'TOOLE. Will it be possible, Governor, for you to stand by to render assistance, if necessary?

Governor NEWCOMER. Yes, sir.

At this time, may I say, Mr. Chairman, in view of the letter that you read this morning with respect to the possible omission of some sections of this bill, that we have had prepared in mimeograph form the present law with the changes incorporated right in it that would be effected by this bill, and I believe it can be shown fairly readily that the changes proposed by this bill, as drafted, are really essential to the accomplishment of the purposes of the bill and will not add to the difficulty of considering the bilì.

I would be glad when the time comes to distribute those if you care to refer to them, showing in very convenient form what the changes

(The information referred to follows:)

are.

[H. R. 8677--Showing proposed changes in existing law (existing law proposed to be omitted is enclosed in black brackets and new matter is italicized]

CANAL ZONE CODE

TITLE 2-OPERATION AND MAINTENANCE OF THE CANAL AND GOVERNMENT OF THE

CANAL ZONE GENERALLY

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[5. GOVERNMENT AND OPERATION OF CANAL AND GOVERNMENT OF CANAL ZONE.The President is authorized to govern and operate the Panama Canal and govern the Canal Zone, or cause them to be governed and operated, through a Governor of the Panama Canal and such other persons as he may deem competent to discharge the various duties connected with the care, maintenance, sanitation, operation, government, and protection of the Canal and Canal Zone.]

5. Establishment Administration, and Functions of Canal Zone Government.The independent agency of the United States heretofore known as the Panama Canal shall hereafter

(1) be known as the Canal Zone Government;

(2) be administered, under the supervision of the President or such officer of the United States as may be designated by him, a Governor of the Canal Zone; and

(3 be charged, except as otherwise provided by law, with the performance of the various duties connected with the civil government, including health, sani. tation, and protection of the Canal Zone.

CROSS REFERENCE

Appointment of other necessary persons, see section 81 of this title, as amended.

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7. CONTROL AND JURISDICTION OF GOVERNOR OVER CANAL ZONE.-The Governor of the [Panama Canal] Canal Zone shall :

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9. REGULATIONS GOVERNING NAVIGATION AND TRANSITING OF CANAL, INCLUDING LICENSING OF OFFICERS OF VESSELS.--The President, or such officer of the United States as may be designated by him, is authorized to make, and from time to time amend, regulations governing [:]

[a. The operation of the Panama Canal;

b. The passage and control of vessels through the same or any part thereof, including the locks and approaches thereto;

c. Pilots and pilotage in the Canal or the approaches thereto through the adjacent waters; and

d. The navigation of the harbors and other waters of the Canal Zone, including the licensing of officers of vessels navigating such waters.]

(1) the navigation of the harbors and other waters of the Canal Zone;

(2) the passage and control of vessels through the Panama Canal or any part thereof including the locks and approaches thereto;

(3) pilotage in the Canal or the approaches thereto through the adjacent waters; and

(4) the licensing of officers, or other operators, of vessels navigating the waters of the Canal Zone,

Any person violating any of the provisions of the rules and regulations established under this section shall be punished by a fine of not more than $100, or by imprisonment in jail for not more than thirty days, or by both.

10. INJURIES TO_VESSELS, CARGO, CREW, OR PASSENGERS, OCCASIONED BY OPERATION OF CANAL.[The regulations of the President, authorized under section 9 of this title, shall provide for the prompt adjustment and payment by the Governor of the Panama Canal, subject to the limitations hereinafter contained in this section, of damages for injuries to vessels, or to the cargo, crew, or passengers of vessels, which may arise :] (a) Injuries in locks of canal.The Panama Canal Company shall promptly adjust and pay damages for injuries to vessels, or to the cargo, crew, or passengers of vessels, which may arise [By] by reason of the passage of such vessels through the locks of the [Canal] Panama Canal under the control of officers or employees of the [Panama Canal] said corporation : Provided, however, That no such damages shall be paid in any case [wherein the Governor shall find that) where the injury was proximately caused by the negligence or fault of the vessel, master, crew, or passengers: [and] Provided further, That in any case wherein [the Governor shall find that] the negligence or fault of the vessel, master, crew, or passengers proximately contributed to the injury, [he shall diminish] the award of damages shall be diminished in proportion to the negligence or fault [. as determined by him,] attributable to the said vessel, master, crew, or passenger C.] : And provided further, That damages shall not be allowed and paid for injuries to any protrusion beyond the side of a vessel, whether such protrusion is permanent or temporary in character. A vessel shall be considered to be passing through the locks of the Canal, under the control of officers or employees of the corporation, from the time the first towing line is made fast on board before entrance into the locks and until the towing lines are cast off upon, or immediately prior to, departure from the lock chamber.

(b) Injuries other than in locks.-The Panama Canal Company shall promptly adjust and pay damages for injuries to vessels, or to the cargo, crew, or passengers of vessels which may arise (By] by reason of the presence of such vessels in the waters of the Canal Zone, other than the locks, when the [Governor shall find that the] injury was proximately caused by negligence or fault on the part of any officer or employee of the [Panama Canal] corporation acting within the scope of his employment and in the line of his duties in connection with the operation of the canal: Provided, however, That [when the Governor shall further find that] in any case wherein the negligence or fault of the vessel, master, crew, or passengers proximately contributed to the injury, [he shall diminish] the award of damages shall be diminished in proportion to the negligence or fault [, as determined by him, 7 attributable to the said vessel, master, crew, or passengers: And provided further, That in the case of any vessel which is required by or pursuant to regulations prescribed under section 9 of this title, as amended, to have a Panama Canal pilot on duty aboard, no damages shall be adjusted and paid for injuries to any vessel, or to the cargo, crew, or passengers of any such vessel, incurred while the vessel was under way and in motion, unless at the time such injuries were incurred the navigation or movement of the vessel [is] was under the control of a Panama Canal pilot.

(c) Measure of damages generally.-In determining the amount of the award of damages for injuries to a vessel for which the Panama Canal Company is found

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or determined to be liable, there may be included (1) actual or estimated cost of repairs; (2) charter hire actually lost by the owners, or charter hire actually paid, depending upon the terms of the charter party, for the time the vessel is undergoing repairs ; (3) maintenance of the vessels and wages of the crew, if such are found to be actual additional expenses or losses incurred outside of the charter hire; (4) other expenses which are definitely and accurately shown to have been incurred necessarily and by reason of the accident or injuries: Provided, however, that there shall not be allowed agent's fees or commissions or other incidental erpenses of similar character, or any items which are indefinite, indeterminable, speculative, or conjectural. The corporation shall be furnished such vouchers, receipts, or other evidence as may be necessary in support of any item of a claim. If a vessel is not operated under charter but by the owner directly, evidence shall be secured if available as to the sum for which vessels of the same size and class can be chartered in the market. If such charter value cannot be determined, the value of the use of such vessel to its owners in the business in which it w118 engaged at the time of the injuries shall be used as a basis for estimating the damages for the vessel's detention; and the books of the owners showing the vessel's earnings about the time of the accident or injuries shall be considered as eridence of probable earnings during the time of detention. If the books are unavailable, such other evidence shall be furnished as may be necessary.

(d) Delays for which no responsibility assumed.The Panama Canal Company shall not be responsible, nor consider any claim, for demurrage or delays occasioned by landslides or other natural causes, by necessary construction or maintenance work on Canal locks, terminals, or equipment, by obstructions urising from accidents, by time necessary for admeasurement, by congestion of traffic, or by any other cause except as specially set forth in this section.

(e) Settlement of claims.-The amounts of the respective awards of damages under this section (and the regulations authorized herein) may be adjusted, fixed, and determined by the [Governor] corporation by mutual agreement, compromise, or otherwise ; [and such amounts shall be payable promptly out of any moneys appropriated or allotted for the maintenance and operation of the Panama Canal,) and acceptance by any claimant of the amount awarded to him shall be deemed to be in full settlement of such [claim against the Government of the United States: Provided, however, That the Governor shall not adjust and pay any claim for damages for injuries arising by reason of the presence of a vessel in the waters of the Canal Zone, other than the locks, where the amount of the claim exceeds $60,000, but shall submit the same to the Congress by a special report containing the material facts and his recommendations thereon.] claims.

(f) Actions on claims.-[With respect to any claim for damages for injuries arising by reason of the passage of any vessel through the locks of the canal, as hereinbefore provided, any] Any claimant for damages under this section who considers himself aggrieved by the findings, determination, or award of the [Governor,] Panama Canal Company in reference to his claim [] may bring an action on such claim against the [Panama Canal] said corporation in the United States District Court for the District of the Canal Zone; and in any such action the provisions of this section (and of the regulations of the President authorized under section 9 of this title, applicable] relative to the determination, adjustment, and payment of such claims [for damages by the Governor], and the provisions of the regulations established under section 9 of this title, as amended, relative to navigation of Canal Zone uaters and to transiting of the Panama Canal, shall be applicable .[, and any judgment obtained against the Panama Canal shall be paid promptly out of any moneys appropriated or allotted for the maintenance and operation of the Panama Canal. Except as otherwise provided in the next preceding paragraph of this section, no] No action for damages (for injuries arising in connection with the operation of the Canal and by reason of the presence of a vessel in the waters of the Canal Zone] which is cognizable under this section shall lie against the said corporation otherwise, or in any other court, (against the United States or the Panama Canal] than as provided in this paragraph, or shall lie against any officer or employee of the [Panama Canal] corporation : Provided, however, That nothing in this Tsection] paragraph shall be construed to prevent or prohibit actions against officers or employees of the [Panama Canal] said corporation for damages for injuries resulting from acts of such officers or employees outside the scope of their employment or [and] not in the line [with] of their duties, or from acts of such

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