7. It is and will continue to be the policy of the Panama Canal agencies and of the Armed Forces in the Canal Zone in making purchases of supplies, materials and equipment, so far as permitted under Umted States legislation, to afford to the economy of the Republic of Panama full opportunity to compete for such business.

S. In general connection with the matter of the importation of tions of merchandise for resale in the sales stores in the Canal Zone, 16 will be the practice of the agencies concerned to acquire such items either from United States sources or Panamanian sources unless, in Certain instances, it is not feasible to do so.

g. With respect to the manufacture and processing of goods for sale 60 or consumption by individuals, now carried on by the Panama Canal Company, it will be the policy of the United States of America so comutató such activities whenever and for so long as such goods, Arcuar classes thereof, are determined by the United States of And to be available in the Republic of Panama on a continuing decessory qualities and quantities, and at reasonable prices. Pet mot States of Americs will give prompt consideration to a vyne, it wong on the part of the Government of Panama concern10 got as en of the manufacture or processing of any goods Novase it ths Tom as to which the Government of Panama may de arteria specified in this Item to have been met.

SAA (97xPerson will be given to withdrawing from the heilig o commecetal cargo for transshipment on Canal Zone navian port facilities are in satisfactory opera

14

Po ted States agrees that the term "auxiliary works" as cat de bow arctides the Armed Forces of the United States of

Are Nopublic of Panama:

pindle or Pears will lease to the United States of aal one save for the recited consideration of one Aviod of 99 years, two parcels of land contiguous to wood States Fbassy residence site, as designated on Cal No 4, dated November 19, 1954) and accompa prepared by the Comisión Catastral of the arama, attached hereto.

Republie of Panama assures the United States of America peres, shown and described on the attached map (No. 34iod October 1954) and accompanying description d by the Coon Catastral of the Republic of Panama, in tuned States Embassy office building site and between Why of Drama and Avenida Balboa as it may be extended Ach and 9th Streets, will be preserved permanently as a pok pod not developed for commercial or residential purposes.

hog 44 the United States of America maintains in effect those mal xocutive Order No. 6997 of March 25, 1935 governing worst of alcoholic beverages into the Canal Zone, the to pulda of Panama will grant a reduction of 75 percent in the joy duby on alcoholic beverages which are sold in Panama for

xxcom muito the Canal Zone pursuant to such Executive Order.

4. In connection with the authorization granted to the United States of America in Article VIII of the Treaty, the United States shall have free access to the beach areas contiguous to the maneuver area described in said Article VIII for purposes connected with training and maneuvers, subject to the public use of said beach as provided under the Constitution of Panama.

The provisions of this Memorandum of Understandings Reached shall enter into force upon the exchange of instruments of ratification of the Treaty signed this day by the United States of America and the Republic of Panama.

APPENDIX D

SOT OF THE LIGHTS AND OBLIGATIONS OF THE UNITED STATES UNDER THE TERMS OF THE THREE BASIC TREATIES WITH PANAMA

RIGHTS RECEIVED

HAY-BUNAU-VARILLA TREATY, 1903

At perpetuity, to a zone of land and land under
main way and extending 3 miles into the
Canbbean sea and 3 miles into the Pacific ocean, plus
certain small islands in the Bay of Panama, for the
maintenance, operation, sanitation, and protection of a
canal across the Isthmus of Panama.

(2) In perpetuity, the use, occupation, and control of
any other lands and waters outside of the zone which may
be necessary and convenient for the construction, mainte-
nance, operation, sanitation, and protection of the canal.

(3) All the power and authority within the zone and
within the limits of all auxiliary lands and waters which
the United States would possess and exercise if it were
sovereign, to the entire exclusion of the exercise by the
Republic of Panama of any such sovereign rights, power,
or authority.

(4) All the rights of the New Panama Canal Company
and the Panama Railroad upon purchase of the Com-
pany's rights, privileges, properties, and concessions.

(5) At all times and at its discretion to use its police and its land and naval forces or to establish fortifications for the safety or protection of the canal, or of the ships that transit it, or the railways and auxiliary works.

CONCESSIONS

(1) Guaranteed the independence of the Republic of
Panama.

(2) Granted the right to have official dispatches of the
Government of Panama transmitted over any telegraph
and telephone lines established for canal purposes and
used for public and private business at rates not higher
than those required from officials in the service of the
United States.

(3) $10 million in gold coin of the United States and an
annual payment of $250,000, beginning 9 years after the
date of the exchange of ratifications.

(4) Granted the Republic of Panama the right to trans-
port over the canal its vessels and its troops and munitions
of war at all times without paying charges of any kind,
The exemption is extended to the auxiliary railway for
the transportation of persons in the service of the Republic
of Panama, or of the police force charged with the preser-
vation of public order outside of the zone, as well as to
their baggage, munitions of war, and supplies.

(5) United States assumes the costs of damages caused
to owners of private property of any kind by reason of the
grants contained in the treaty or by reason of the opera-
tions of the United States, its agents or employees, or by

(6) To use the rivers, streams, lakes, and other bodies
of water in the Republic of Panama for navigation, the
supply of water, or water power or other purposes as may
be necessary and convenient for the construction, mainte-
nance, operation, sanitation, and protection of the canal.
(7) A monopoly in perpetuity for the construction,
maintenance, and operation of any system of communi-
cation by means of canal or railroad connecting the
Caribbean Sea and the Pacific Ocean across Panamanian
territory.

(8) To acquire in the cities of Panama and Colon, by
purchase or by the exercise of the right of eminent domain,
any lands, buildings, water rights, or other properties
necessary and convenient for the construction, mainte-
nance, operation, and protection of the canal and of any
works of sanitation, such as the collection and disposition
of sewage and the distribution of water in the said cities
of Panama and Colon, at the discretion of the United
States.

(9) To impose and collect water rates and sewerage rates
which shall be sufficient to provide for the payment of
interest and the amortization of the principal of the cost
of such works within a period of fifty years, upon which
time the system of sewers and water works shall revert to
and become the properties of the cities of Panama and
Colon.

(10) To enforce in perpetuity sanitary ordinances pre-
scribed by the United States in the cities of Panama and
Colon and the territories and harbors adjacent thereto in
case the Republic of Panama should not be, in the judg-
ment of the United States, able to maintain such order.

reason of the construction, maintenance, operation, sanitation, and protection of the canal or of the works of sanitation and protection provided for in the treaty. (6) After 50 years, the system of sewers and waterworks constructed and maintained by the United States shall revert to and become the properties of the cities of Panama and Colon.

EAT-FIXAT-TARILLA TREATY, 1903-Continued

(11) In perpetuity, to maintain public order in the
cities of Panama and Colon and the territories and harbors
adjacent thereto in case the Republic of Panama should
not be, in the judgment of the United States, able to
maintain such order.

(12) To make use of the towns and harbors of Panama
and Colon as places of anchorage, and for making repairs,
for loading, unloading, deposition, or transshipping cargoes
either in transit or destined for the service of the canal
and for other works pertaining to the canal.

(13) Freedom from taxation upon the canal, the rail-
ways and auxiliary works, tugs, and other vessels em-
ployed in the service of the canal, storehouses, workshops,
offices, quarters for laborers, factories of all kinds, ware-
houses, wharves, machinery and other works, property,
and effects appertaining to the canal or railroad and
auxiliary works, or their officers or employees, situated
within the cities of Panama and Colon, and freedom from
taxation upon officers, employees, laborers, and other
individuals in the service of the canal and railroad and
auxiliary works.

(14) To import at any time into the zone and auxiliary
lands, free of customs duties, imposts, taxes, or other
charges, and without any restrictions, all materials neces-
sary and convenient in the construction, maintenance,
operation, sanitation, and protection of the canal and all