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If gross and net tonnage be compared with reference to the above list of nine requirements and conditions that must be met by satisfactory measurement rules, it will be found that, in the case of the first five of the nine conditions, gross and net tonnage are on a par, net tonnage having no marked advantage over gross as a basis of Panama tolls upon vessels of commerce.

1. The first essential of any set of measurement rules—that there shall be one definite set of rules applied at Panama to vessels of all nationalities—would be met equally well by making either gross or net tonnage the basis of the canal charges. Whichever tonnage is selected as the basis, it will be necessary to apply one single set of rules to all ships. It will not be possible to accept either the gross or net tonnage of vessels as stated in their certificates of national registry. Indeed; it will be necessary, for reasons that are set forth in the succeeding chapter, to have a special set of Panama rules differing from any now in force.

2. The Government of the United States could secure such revenues as it may desire to obtain from the vessels using the Panama Canal with equal facility and certainty by adopting either gross or net tonnage as a basis of tolls. The one precaution that would need to be taken would be to adopt measurement rules that would make gross tonnage, if that were the basis, equivalent to the closed-in capacity of vessels, or rules that would make net tonnage, were that the basis, an exact expression of the earning capacity of the ships upon which tolls were levied.

3. Panama tolls may be levied either upon gross or net tonnage without interfering with or burdening the commerce using the canal. Panama certificates of gross or net tonnage would be secured by vessels when constructed or when at their home ports, and the certificates would be prepared for the owners of the vessels by official admeasurers without trouble and probably without expense to the owners of the ships. Gross tonnage as well as net tonnage would need to be checked up by canal officials at the Isthmus of Panama and the work of checking up the certificates would be practically the same whether the tolls were levied upon gross or upon net tonnage.

4. The work of administering the Panama measurement rules would be practically the same if tolls were levied upon gross tonnage as they would be if the charges were based upon net tonnage. In either case the administrative problem would be easy and simple.

5. Gross-tonnage rules so formulated as to include within the tonnage the entire closed-in capacity of vessels might be relatively permanent. They would possibly require less frequent change than would be necessary in the case of rules for the determination of net tonnage. Changes in the design of vessels, however, might require amendments in the rules as to what spaces shall be exempted from measurement and what spaces included within gross tonnage.

When tested by the last four of the nine requirements, enumerated above, that must be met by a satisfactory basis for Panama Canal tolls upon vessels of commerce, it is found that net tonnage is so much preferable to gross tonnage as to make the adoption of net tonnage imperative.

6. It is necessary that the Panama tolls be levied without discrimination against any important type of vessels. The basis of tolls should be such as to treat vessels of different classes equitably. For reasons that have been stated with sufficient detail in other parts of this report, it is clear that tolls based upon net tonnage, or the actual earning capacity, of vessels of commerce is the fairest as between different types of ships. Gross tonnage, like displacement, takes no account of differences in the construction of vessels and the use to which they are put in actual service. Tolls upon earning capacity take as full account of both these factors as it is practicable to take.

7. Tolls based upon net tonnage place no tax upon spaces set aside for the accommodation of the crew and for navigation purposes. It is true that the Suez Canal Co., by limiting deductions for spaces other than those occupied by propelling power to 5 per cent of the gross tonnage of the vessel, may not exempt all crew and navigation spaces. This 5 per cent limit of the Suez Canal Co. is, however, without justification. Rules for the determination of net tonnage should permit the deduction from gross tonnage of spaces actually devoted to the accommodation of the crew and of such spaces, reasonable in extent, as are needed for navigation purposes. Tolls based upon the entire closed-in capacity of the ship are an inducement to builders and owners of ships to restrict crew spaces to a minimum.

8. Panama tolls upon gross tonnage would be so much more favorable to slow steamers with low engine power, as compared with faster and better types of ships, as possibly to dissuade steamship companies from introducing into their services through the canal the best type of ships at as early a date as they would introduce such vessels were the measurement rules such as to treat ships of all classes with equal fairness. It is, of course, desirable that the Panama Canal shall always be used by the most modern types of vessels.

9. The fact that light dues, tonnage taxes, and all charges, except for pilotage, now paid by vessels for the entry and use of ports, docks, and wharves, are based upon net tonnage is a strong reason for charging Panama tolls upon net rather than upon gross tonnage. In so far as it is possible without violating the general principle of basing Panama charges upon the earning capacity of vessels, it should be the policy of the United States to conform to the commercial practice of the world as regards charges upon shipping.

CONCLUSION.

Gross tonnage has only one point of superiority over net tonnage as a basis for Panama tolls and other charges, and that is the fact that gross tonnage may be determined somewhat more simply than net tonnage can be calculated. This, however, does not justify basing Panama tolls upon gross tonnage. Net rather than gross tonnage is to be recommended, because (1) tolls based upon gross tonnage would violate the fundamental principle that charges paid by vessels for the use of the canal should be based upon the earning capacity of ships; (2) gross tonnage fulfills none of the requirements and conditions that should be met in formulating rules to determine the tonnage upon which Panama tolls are to be paid more fully than those conditions are met by net tonnage; while (3) gross tonnage fails to meet satisfactorily at least four important tests that are met by net tonnage.

CHAPTER VIII.

THE NECESSITY FOR SPECIAL PANAMA

MEASUREMENT RULES.

CHAPTER VIII.

THE NECESSITY FOR SPECIAL PANAMA MEASUREMENT RULES.

One question to be decided in recommending rules for the measurement of vessels for the Panama Canal is whether to select one of the sets of rules now in force—the American, the British, or the Suez rules or to formulate a special code of rules to determine the tonnage upon which the Panama tolls shall be paid. If it were practicable to select for Panama the American, the British, or the Suez measurement rules, it would be desirable to do so. The shipping of the world is already subject to an unfortunately large number of measurements, and the unification of existing rules rather than an increase in their number is needed. If a special measurement code is adopted for Panama, the reasons should be clear and conclusive, and consideration should also be given to the effect which a special set of Panama rules may have upon the ultimate unification of all measurement and tonnage rules.

GENERAL REASONS FOR HAVING A SPECIAL SET OF PANAMA MEASUREMENT RULES.

In the preceding chapter and elsewhere in this report, attention has been called to the fact that the necessity of treating the vessels of all nations with entire equality requires the appli-. cation of the same measurement and tonnage rules to all merchant vessels using the Panama Canal. It has also been pointed out that the dissimilarity in the measurement and tonnage laws of different countries precludes the levying of Panama Canal tolls upon the tonnage of vessels as stated in their certificates of national registry. The lack of uniformity in the measurement rules and practices of different countries would, if tolls were paid upon the tonnage stated in certificates of registry, cause the United States to violate the provisions of the HayPauncefote treaty, which stipulate that there shall be no discrimination among nations or their citizens or subjects in respect of the conditions of, or charges for, the use of the Panama Canal. There must not only be one set of rules for all vessels, but the rules must be such as to be fair as between countries and as between ships of different types.

It has been decided that Panama tolls shall be levied upon net tonnage and that the net tonnage upon which charges are paid shall accurately express the earning capacity of vessels. If any one of the existing sets of rules is to be adopted, a code must be found that provides for the measurement of vessels and the calculation of net tonnage in such a manner as to make the net tonnage closely approximate, if it does not exactly equal, the earning capacity of the vessel. The British, German, and American rules do not make net tonnage a close equivalent of earning capacity, and it is believed that the Suez rules would not be entirely satisfactory for Panama. The provisions of these various measurement rules have been so fully analyzed in Chapters IV and V that this chapter need only correlate and summarize the facts that make the adoption of any one of the existing measurement rules inadvisable.

The Suez Canal Co. levies tolls solely for the purpose of securing revenues. It has been the policy of the company to keep its tolls low enough to permit the growth of traffic. Moreover, the tolls and other charges are levied upon the earning capacity of vessels, the rates of charges being adjusted from time to time with the growth of traffic and revenue. As far as tolls and tonnage rules are concerned, the same general policy may wisely be followed by the United States Government in the management of the Panama Canal. In the long run a canal owned and operated by the Government may justifiably have lower tolls than a private corporation would charge if it owned the same waterway, but the proper basis for the charge would be the same whether the canal were owned by a Government or by a corporation, i. e., the charges, whatever they are, should be levied upon the earning capacity of the vessels served by the waterway.

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