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CARGO TONNAGE, DISPLACEMENT, AND DEAD-WEIGHT TONNAGE.
It is theoretically possible to make either the ships that use the canal or the cargo and passengers carried by the vessels the basis of Panama tolls. It is thus necessary first of all to decide whether the dues shall be levied upon the vessels themselves or upon their contents, and whichever decision is reached the problem still remains of selecting the best unit of measurement. For, while both the size of vessels and the amount of cargo they carry are designated in tonnage units, a vessel ton is different from a ton of freight. Moreover, there are three kinds of vessel tonnage and at least three meanings given to the word "ton" as a measure of ocean freight cargoes.
The purpose of this chapter is to explain the several units employed to designate the tonnage of cargo carried by vessels and to consider the merits and disadvantages of each as a basis for Panama tolls. One kind of vessel tonnage-displacement—is also defined and discussed in this chapter; because, as will be explained, one method of expressing cargo tonnage involves the determination of the vessel's displacement tonnage. The other two kinds of vessel tonnage gross and net tonnage will be discussed in turn in the two succeeding chapters.
Cargo tonnage may be of weight or of measurement. “Bulk” freight, like coal, ore, nitrate, grain, and heavy manufactures, is transported as weight cargo, a ton on the ocean being either the English long ton of 2,240 pounds (sometimes the short ton of 2,000 pounds) avoirdupois or the metric ton of 2,204 pounds. Package freight and commodities that are light in proportion to their bulk are often shipped as "measurement" cargo, 40 cubic feet usually being considered a ton. When possible, vessels are loaded partly with heavy bulk freight, which is placed lowest in the hold, and partly with light measurement cargo, which is stowed in available spaces above, as well as below, the main deck. The heavy commodities give the ship the draft necessary for stability, while the light package freight fills up the earning capacity of the ship without causing the vessel to exceed its authorized draft. A vessel loaded only with coal, ore, grain, or heavy steel will be immersed to its deep load line before the space available for cargo has been filled with paying freight. On the other hand, if a ship be laden only with package freight and light cargo, it may ride so high in the water as to be unstable. If heavy cargo is not available, the ship must be given stability by means of ballast. It is a paradoxical fact that a vessel can be loaded with more "tons” of light freight than of heavy bulk commodities, the ideal lading of a ship being the combination of bulk and package freight.
ADVANTAGES AND DISADVANTAGES OF CARGO TONNAGE AS A BASIS FOR CANAL TOLLS.
In selecting a basis for the levy of Panama tolls choice must be made between the ship and its cargo contents. The transfer of a vessel from the Atlantic to the Pacific through the canal is the service rendered to carriers engaged in the transportation of freight and passengers; but, as the revenues of the carrier are derived from the rates paid by shippers and the fares collected of the passengers, it seems to many persons logical that the charges exacted by the Government for the use of the canal should be placed upon passengers and cargo and not upon the ship. The advantages of making cargo the basis of canal dues may be summarized as follows:
1. It is claimed that canal tolls based upon the cargo and passengers carried in vessels will be in direct ratio to the carrier's ability to pay, because the charges will be levied upon the carrier's sources of income for the voyage that causes the carrier to make use of the canal. If the vessel making the trip through the canal is fully occupied by cargo and passengers, the income of the carrier will be large and the tolls he will pay for the use of the canal will be proportional; while if the capacity of the vessel is but partially taken up, the revenues of the owners of the vessel will be small and the tolls required of them will be correspondingly less.
2. By placing canal tolls upon cargo and passengers, the levies will be put upon the same basis as are rail and ocean freight rates and passenger fares. The canal tolls will be a definite addition to the charges payable by the shipper and passenger for transportation from ports of shipment or departure to ports of destination. It should be stated, however, that this argument in favor of basing tolls upon cargo and passengers assumes that ocean rates and fares are controlled by competitive commercial forces and that the canal tolls, whatever they may be, are a burden which shippers and passengers will be required to bear. As a matter of fact, ocean rates and fares, like those charged for railroad transportation, are controlled by forces which are but partially competitive and which are in a large degree monopolistic. In so far as ocean rates and fares are controlled by monopoly forces, they will be made with reference to what the traffic will bear and not with regard primarily to expenses incurred in performing the transportation services. If ocean rates and fares are monopoly charges, they will not be directly affected by canal tolls and the charges paid by carriers for the use of the canal will be an operating expense which the carriers and not the shippers and passengers will have to meet.
3. The third argument in favor of making cargo the basis of canal tolls is that the charges for the use of the canal would be, or could in theory be, graded according to the value of the different kinds of commodities, and that the charges could be made high on valuable articles and low on cheap bulky commodities. Concisely stated, the argument is that the tolls can be made what the different articles or classes of commodities can bear. By making commodities the basis of canal charges, the dues would be based upon the value of the service to the carriers, instead of being determined by the cost to the United States of performing the service of passing vessels through the canal.
This raises the broad and fundamental question whether the value of the service to those who use the canal or the cost of the service to the canal administration, which in this case will be the United States Government, should be the controlling consideration in fixing canal charges. It is generally assumed that the canal tolls, as in the case of other Government charges, are to be, and ought to be, levied for the purpose of meeting, first of all, the expenses incurred by the Government in operating and maintaining the canal. There may possibly be some difference of opinion as to the advisability of fixing the Panama tolls at rates high enough to yield revenues that will cover not only maintenance and operating expenses but also interest and amortization charges; but there has been no serious doubt as to the wisdom of securing from the Panama tolls the revenues necessary to cover the expenses of operating and maintaining the canal, of the sanitation and government of the Canal Zone, and of meeting the $250,000 annuity payable to the Republic of Panama. The tolls ought at least be sufficient to cover current expenses.
Whether the fixed charges required to meet the interest upon, and the amortization of, the funds invested shall be secured from the current revenues from tolls is a question that must be decided in the light of experience obtained in the operation of the canal. The traffic of the canal fortunately promises to be large enough to enable the Government to maintain a schedule of tolls that will neither unwisely restrict the use of the canal nor unduly burden commerce, but which will yield revenues that will make the canal commercially self-supporting. The probable deficit during the early years of the canal's operation will, with the maintenance of reasonable rates of toll, be converted, by the growth of traffic during the first decade, into a slight surplus in excess of current expenses and fixed charges.
The natural and logical basis of charges for Government services is the cost of performing the service, and unless some exceptional conditions make it desirable to fix Panama tolls upon some basis other than the expenses due to construction, operation, and maintenance of the canal, it would seem wise to give main consideration to cost of service, i. e., to outlay for current expenses and fixed charges in levying Panama Canal dues. However, while adhering to the general principle of fixing Panama tolls with reference to operating and fixed charges, care should be taken so to adjust the charges that they shall not be higher than the traffic geographically tributary to the Panama route will bear. The tolls should not be what the naturally tributary traffic will not bear. With this limitation as to the maximum within which the charges must be kept, primary consideration should be given to cost of service in adjusting Panama Canal charges.
1 For fuller consideration of the incidence of canal tolls, see pp. 197–198 of the Report upon Panama Canal Traffic and Tolls, by Emory R. Johnson, Government Printing Office, Washington, 1912.
REASONS FOR NOT BASING PANAMA TOLLS UPON CARGO TONNAGE.
For the following reasons it is believed that cargo tonnage is neither a desirable nor a practicable unit upon which to levy Panama Canal tolls:
1. If tolls are to be fixed primarily with reference to the Government's canal expenses, the logical basis for the charges is the ship that uses the canal. The service performed by the Government is that of furnishing and operating a canal whose channel, locks, lights, buoys, and auxiliary appointments enable vessels to pass from one ocean to another. Each transit of a vessel through the canal represents the performance by the Government of a unit of service, and it is this service for which the Government makes charges. Vessel tonnage rather than the contents of the ship is the natural and logical basis for canal dues.
2. The primary purpose of making cargo the basis of canal tolis is to levy charges which vary according to the ability of different commodities to pay dues. The rates would necessarily vary with articles or classes of articles; for, if all commodities were charged the same rate of toll per ton the discrimination against coal and other minerals, nitrate, grain, lumber, and similar commodities, as compared with high-valued and relatively light package freight, would be so unjust as to be indefensible. The discrimination resulting from charging the same rate of toll upon each ton of all articles carried would be much greater than that resulting from tolls based upon vessel tonnage, i. e., thọ cubical contents of a vessel's earning capacity. In order to avoid unjust discriminations in levying tolls upon cargo it would be necessary carefully to classify ocean freight and to work out a schedule of class rates relatively reasonable as between the several classes of commodities. Doubtless some commodities, as in the case of railway traffic, would be exempted from this classification and would be charged special, or commodity, tolls. The canal tolls would thus include class and commodity rates, and the tolls payable by each vessel would have to be determined by calculating from the ship's detailed manifest of cargo the tonnage of each class of goods contained in its lading.
3. The necessity of classifying ocean freight traffic and of collecting tolls in accordance with a schedule which includes both class and commodity rates suggests the controlling reason why the ship rather than the cargo should be made the basis of Panama tolls. Canal charges based upon cargo would be administratively impracticable:
(a) The classification of ocean freight would be difficult to work out and would constitute a perennial problem. The railroads have found by experience that the classification of freight is second in difficulty only to the adjustment of rates, and this, too, under transportation conditions more stable than prevail upon the ocean. Classification of freight and the making of rates are inseparably connected, and without the stable rates resulting from the Government regulation of railroads and without the adjustment of the interrelations of railway companies made possible by the Government regulation of services and charges, the problems of the classification of railway traffic and of making railroad rates would be far more difficult than they now
While it would not be impossible to classify ocean freight and to adjust canal charges with reference to classes and special commodities, the difficulties encountered would be so great as to overcome any theoretical advantages that might result from making the cargo rather than the vessel the basis of canal charges.
(6) The calculation of the tonnage of the cargo composing the lading of any particular vessel would have to be made from the ship's manifest, which, in the case of a vessel carrying several thousand tons of general freight, may contain many hundred entries, each entry ordinarily representing an individual shipment of some particular commodity. Over many ocean