PREPARED STATEMENT OF JOHN H. REURS, CHAIRMAN, NEW YORK COMMITTEE, INTERNATIONAL COMMITTEE OF PASSENGER LINES The International Committee of Passenger Lines (ICPL) is made up of the principal foreign-flag passenger and cruise lines operating in foreign commerce to and from the U.S., both directly and in the cruise trade. A list of the 14 members of ICPL is attached hereto. ICPL respectfully requests that this statement be made part of the record of these hearings by the House Merchant Marine Sub-Committee on Panama Canal. We understand that the purpose of these hearings is to explore all aspects of the operations of the Panama Canal Company in the hope of resolving financial and other problems currently affecting it. It appears that, despite the intervening vicissitudes of wars, economic recessions, etc., the Canal Company's operations were financially stable from 1914 to 1973. Since then the Company has been faced with (1) sharp reduction in vessel traffic due to loss of cargo moving to the Far East, (2) the current economic recession, (3) the re-opening of the Suez Canal and (4) far-reaching changes in the previously existing governmental accounting procedures. While the first three factors were externally imposed, the changes in the accounting system in 1973 is an internal government problem which, on the basis of the figures available, appears to be very largely responsible for the Canal Company's current financial situation. It is perhaps not wholly coincidental that, after the institution of these new accounting procedures in 1973, the Company found it necessary to take the following steps: 1. To increase tolls across the board by 20% in 1974; 2. To embark on a thoroughgoing revision of the measurement rules on which the per-ton tolls are based; and 3. To project a further toll increase of 20-25% before the end of calendar year 1976, with a similar increase anticipated for the following year. Vessels operated by the ICPL member lines pay approximately 70% of all tolls collected by the Canal Company from passenger vessels. It is ICPL's position that, as applied to passenger vessles, the cumulative effect of these changes in hte level of tolls and in the tonnage measurement system can only be counter-productive: They will reduce the number of such vessles transiting the aCnal, with a consequent reduction in toll revenues received by the Canal Company. In ICPL's opinion, these conseqences could be avoided by: 1. Returning to the previous accounting system; and 2. Reinstating the rule governing the measurement of passenger vessels (35 C.F.R. Sec. 135.286), which the PCC revoked with Presidential approval on March 23, 1976 (41 F.R. 13582). Since the accounting problem is extensively discussed in other statements presented at these hearings, ICPL's comments will be directed to Item 2, which has the most immediate and serious impact on passenger vessel operations. Briefly, the revocation of 35 C.F.R. Sec. 135.286 last month effected a farreaching change in the long-standing method of calculating tolls for passenger vessels by now including in the Panama Canal tonnage measurement certain previously exempt public rooms and other interior spaces. This revocation was part of a series of measurement rule changes proposed in 1975, estimated to produce a 7% overall increase in the Canal Company's future revenues. However, the net effect on passenger ships of these changes is to increase transit tolls by some 28-35%, or 4 to 5 times greater than the average increase. Annexed as Exhibit A to this statement is a schedule demonstrating the severe financial impact of the toll increases and the recent measurement rule change on a typical cruise vessel. It will be noted that the cumulative toll increases account for an 87.5% rise over 1973 toll levels, which is compounded by the estimated 28-35% increase caused by the measurement rule changes. ICPL considers that this change in long-standing procedure for assessing Canal tolls for passenger ships is highly unfair and discriminatory. ICPL's members are fully prepared to bear their fair share of any toll increases actually necessary to cover the properly allocable costs in running the Panama Canal. However, if Canal tolls escalate 100% as seems likely under present projections, severely compounded by the measurement rules, the lines will have to give very serious consideration to re-routing their cruises. It should be borne in mind that, with the virtual disappearance of regular port-to-port passenger liner service through the Canal, today's passenger vessels are primarily engaged in cruises. This means that their itineraries are discretionary and can be adjusted to reflect changing conditions so that constantly increasing Panama Canal tolls, coupled with the revised measurement rules, will provide passenger vessel operators with every incentive to curtail or abandon transits through the Canal. In conclusion, ICPL requests that this Sub-committee: 1. Make a careful review of present accounting procedures to determine what costs should be properly assessed against vessels transiting the Canal, and 2. Recommend that the Panama Canal Company reconsider the subject of measurement rules as applied to passenger vessels in consultation with all interested parties. ICPL will be pleased to supply any further information which the Sub-committee may require. EXAMPLE OF FINANCIAL IMPACT OF PANAMA CANAL TOLL INCREASES AND MEASUREMENT RULE CHANGES ON TYPICAL CRUISE VESSEL Members of New York Committee of the International Committee of Passenger Lines: Chandris America Lines Inc., Costa Line, Inc., Cunard Line Limited, Epirotiki Lines, Inc., Flagship Cruises Ltd., Holland America Cruises, Home Lines, Inc., Italian Line, Norwegian America Line, P & O Lines Inc., Royal Caribbean Cruise Line, Inc., Royal Viking Line, Sitmar Cruises, and Sun Line. PREPARED STATEMENT BY JOHN J. O'LEARY, CHAIRMAN, ON BEHALF OF THE NASSAU COUNTY COMMITTEE OF THE NEW YORK STATE CONSERVATIVE PARTY Gentlemen: The Conservative Party of Nassau County, in view of pertinent data and in full cognizance of the world wide ramifications, has adopted the position hereinafter outlined, with regard to renegotiating the Panama Canal Treaty. The historical evidence leaves no room for doubt as to our rightful possession of the Canal Zone, to wit: a. In the Treaty of 1903, the Zone was granted to the U.S., not leased. b. We paid an original sum of $10 million for the granting of sovereign control of the Canal Zone, in perpetuity. c. We purchased all privately owned properties (even from squatters) within the Zone, at additional cost. NOTE. As of June 30, 1974, we have paid, according to the Department of the Army, $166,362, 173 in acquiring the Zone. If we include Canal construction and other costs, the total investment approaches $6 billion-not to mention the cost in human life. d. Fees currently being paid to Panama are an annuity which was derived from an original railroad agreement with the Republic of New Granada (now Colombia) and have been adjusted to reflect the current $2,095,000 per year. e. This annuity plus other direct benefits from the Canal amounts to some $236,900,000 to Panama per year. f. In 1907 the U.S. Supreme Court reaffirmed the validity of U.S. ownership of the Canal. Wilson vs Shaw, 204, US 24, at 30-35. In view of this evidence, renegotiation of the Canal Zone Treaty is as senseless as it would be to reopen the Louisiana or Alaskan purchases. Furthermore, the Canal is vital to our economy (70% of all Canal traffic originates and terminates in the U.S.) and balance of payments, not to mention its critical part in National and Hemispheric Defense. We must also point out the inconsistencies regarding the current attitude toward dictatorships. Evidently the anti-Communists (Spain, Chile) are to be ostracized, whereas pro-Communist Cuba and Panama are acceptable. Dictator Omar Torrijos of Panama has purportedly signed an arms agreement with Communist Cuba for the purchase of Russian war materials. He has openly asserted his threat-"If the people of Panama decide to invade the Canal Zone, I can either crush them or lead them-and I am not going to crush them". Do we suppose that appeasement will satisfy the Communist appetite for acquisition and coercion? Are we so naive as to believe that we would receive equitable treatment from Dictator Torrijos if we relinquish the Canal Zone? We are still a sovereign Nation, the Canal Zone is sovereign U.S. territory and only the Congress is empowered to dispose of U.S. property according to Article IV, Section 3 (2) of our Constitution. Any agreements designed to dispose of this property without due process of law are therefore illegal and automatically become null and void. We strongly urge your Committee to reject any and all considerations that would result in diminishment or loss of U.S. Canal Zone sovereignity. HON. RALPH METCALFE, THE SEAFARERS INTERNATIONAL UNION, Chairman, Subcommittee on the Panama Canal, DEAR MR. CHAIRMAN: The Seafarers International Union of North America, AFL-CIO, has a deep interest in the recent oversight hearings held by your subcommittee on the financial practices and operations of the Panama Canal Company and the Canal Zone government. We are particularly concerned over the Company's fiscal policies which have necessitated increase in the Panama Canal's toll structure to the detriment of the domestic U.S.-flag intercoastal fleet. In this regard, the Seafarers International Union supports the enactment of H.R. 12641, legislation which provides for the deferment of interest payments by the Canal Company to the U.S. Treasury on the Government's net direct investment in the Canal. Additionally, H.R. 12641 would allow the Company's substantial cash deposits with the Treasury to earn interest. This earned interest could be used by the Company to offset its interest payments due on the Government's net investment. The Seafarers Union is confident that this legislation will help the Panama Canal Company alleviate its present fiscal difficulties without having to impose counter-productive toll increases that have failed to stem its deficits. Following the last two toll increases imposed by the Canal Company there was a decline in the number of vessel transits. A further toll increase cannot but continue this harmful trend, making the burden even greater for the remaining vessels using the Canal. We are certain that it will make it extremely difficult, if not untenable, for our domestic intercoastal fleet to continue viable operations. We also feel that the Canal rate structure is weighted against certain types of vessels, particularly containerships. Compared to other types of vessels, containerships are forced to pay a far higher toll per long ton. Presently containerships are the primary vessel engaged in the U.S.-intercoastal trades. For example, recently adopted measurement rule interpretations now include "the underdeck space not used or useable for carrying cargo and thus not part of the actual earning capacity of the vessel' under section 412 (a) of Title II of the Canal Zone Code." This section requires that rules reflect the "actual earning capacity". In a typical container vessel only 60 percent of the belowdeck hold space can carry cargo. As a result of the new interpretation, an average bulk carrier pays 71 cents per long ton in tolls, a tanker 64 cents, a general cargo vessel $1.14 and containerships $2.13 per long ton. Any further toll increases will exaccerbate the disparity in the rates charged container vessels and will definitely divert much of the waterborne intercoastal container cargoes to the competing land modes. In short, the aPnama Canal Company by seeking further toll increases is adopting a policy of diminishing returns-substantially diminished returns. The end result of this policy would be a disaster for the Canal and the U.S. intercoastal fleet. Parenthetically, in view of the Panama Canal Company's continuously increasing expenses, we fail to understand why the Company continues to operate the "SS Cristobal". This 40-year-old vessel, transporting approximately 100,000 tons of cargo a year at an estimated cost of $65 per ton, is an unjustified and unnecessary expense to the Panama Canal Company. The operations of the "Cristobal" are extremely inefficient. Since it only serves the port of New Orleans, all its cargoes must be sent to New Orleans from points throughout the United States. This wasteful and expensive procedure further increases the operational costs of the “Cristobal”. The Canal Zone is already well served by commercial U.S.-flag shipping, operating from many American ports. These vessels can provide the same service that the "Cristobal" does at lower cost and at greater frequency and thus should be utilized by the Canal Company. The Seafarers Union urges the adoption of these measures so that the Panama Canal Company will have the degree of financial stability needed to insure its continued efficient operation of the Canal to the benefit of world shipping. Sincerely, PAUL HALL, PREPARED STATEMENT OF AMERICAN FEDERATION OF TEACHERS, AFL-CIO Madame Chairman and Members of the Committee: Canal Zone teachers, members of American Federation of Teachers Local 29, have had serious grievances for a number of years, problems that we believe have not been sufficiently aired at Congressional committees such as yours or by other investigative bodies. We appreciate, therefore, this opportunity to mention briefly a few matters of special concern to Canal Zone teachers. One of the major concerns of U.S. teachers regarding the proposed merger of U.S. and Latin-American schools is that it will ultimately open the gates for the Panama Canal Company to place teachers on the Department of Defense pay base. If the merger is implemented, we urge writen assurances by your committee that Canal Zone teachers will remain on the District of Columbia pay base and not convert to the Department of Defense program. A long-standing grievance of Canal Zone teachers is that when our counterparts in the District of Columbia received any benefits other than salary, benefits such as adequate compensation for extra-curricular duties, personal leave, and increased days for sick-leave, Canal Zone teachers did not receive them at the time of implementation in the District of Columbia. For instance, District of Columbia teachers were granted unlimited accumulation of days for sick-leave and were given three (3) days of personal leave per year in 1967. They have, since that date, also received increases for extra-duty pay. But when Canal Zone teachers repeatedly asked for similar benefits, they were not granted at the time of implementation in Washington. Since 1967. Canal Zone teachers requested a "personal leave policy" similar to that in Washington and repeatedly asked for an increase in the total days allowed for sick-leave, our maximum then of sixty (60) days representing assuredly one of the weakest programs throughout the government service, as well as those applied to the private sectors. Many of these benefits, so long a part of the District of Columbia system, have yet to be implemented in the Canal Zone, whereas others were not granted until 1974, and then only as an apparent attempt to make an increased school year seem more palatable to our teachers. One reason for believing that collective bargaining must be applied in some form in the Canal Zone is that we are presently under a policy of consultation, which has been capriciously administered and which, even at best, is considered unworkable by labor organizations throughout the Canal Zone and U.S. In fact, we in the Canal Zone do not even have the right of binding arbitration. That is. Federal mediators have come to the Canal Zone and, in many of those instances in which the mediators found in favor of labor, the decisions were overruled by the Personnel Director, the Lieutenant Governor, or the Governor. We can remember no instance in which teacher input at the consultative process had any real influence in the directive already announced or intended by the superintendent of schools or his superiors. American Federation of Teachers Local 29 should now like to comment on what Canal Zone teachers regard as the major cause for low morale in our school system, namely a decision made by the Schools Division in 1973 to increase the Canal Zone school year from nine (9) months to nine (9) months and tea (10) days. This decision forced the Canal Zone teacher, probably the only U.S. worker so affected, to accept what amounted to pay reduction, not to mention the additional days of work. Certainly another means by which Canal Zone teachers were adversely affected by this high-handed decision was that it prevented Canal Zone teachers, already isolated from the educational opportunities afforded teachers in the U.S., from taking a complete summer school program. Schools Division, in trumpeting the need for the increased school year, pointed repeatedly to the 1971-74 contract between the District of Columbia Board of Education and the District of Columbia teachers and overstated the true situation. That is, residents of the Canal Zone were led to believe that the Zone school year, to be in line with the District of Columbia school year, must be expanded to 186 days for the Canal Zone teachers. How misleading this really was! First, the District of Columbia contract does not state "186 days," but rather than District of Columbia teachers work "no more than 186 days.' But the main point we wish to make is that, even before the Canal Zone school year was extended, Canal Zone teachers were working approximately 12% more hours per year than their District of Columbia counterparts. Moreover, District of Columbia teachers received five (5) preparation periods per week, and the Canal Zone teachers received only four (4). The District of Columbia teachers were working from 8:45 AM to 3:15 PM for 182 days for a total of 1,183 hours per year. This meant that the Canal Zone teachers were working 144.5 more hours per year, working from 7:15 AM to 2:45 PM for 177 days for a total of 1,327.5 hours per year. Why then the audacious proposal to extend the Canal Zone school year? Yet this is precisely what the Schools Division did in spite of a recommendation to the contrary by the Governor's Ad Hoc Commitee on Education, no members of which were teachers or school administrators. A majority of Canal Zone residents polled by the Ad Hoc Committee opposed the extension of the Canal Zone school year. Latin American teachers were not even consulted! Since the extension of the school year in the Canal Zone, the Canal Zone teachers are currently working approximately 13% more hours per year than their District of Columbia counterparts. The District of Columbia teachers are still working 1,183 hours per year (8:45 AM to 3:15 PM for 182 days per year), but the Canal Zone teachers are now working 1,334 hours per year (7:30 AM to 2:45 PM for 184 days per year), an excess of 151 hours per year. Until this matter of the school year is resolved equitably it will continue to be a friction point with Canal Zone teachers and will continue to add a divisive note in their relationships with school administrators. We urge a Congressional fact-finding investigation be initiated as soon as possible. As one of the largest affiliates, the American Federation of Teachers Local 29 agrees with the Canal Zone Central Labor Union and Metal Trades Council on the following: (1) the necessity for some form of collective bargaining; |