Panama Canal Act: “An Act to provide for the opening,
maintenance, protection, and operation of the Panama Canal, and the
sanitation and government of the Canal Zone” (Signed by the President August 24, 1912.)1
[August 24,
1912]
[Sections 5 and 11.]
Sec. 5. That the President is hereby
authorized to prescribe and from time to time change the tolls that
shall be levied by the Government of the United States for the use of
the Panama Canal: Provided, That no tolls, when
prescribed as above, shall be changed, unless six months’ notice thereof
shall have been given by the President by proclamation. No tolls shall
be levied upon vessels engaged in the coastwise trade of the United
States. That section forty-one hundred and thirty-two of the Revised
Statutes is hereby amended to read as follows:
“Sec. 4132. Vessels built within the United
States and belonging wholly to citizens thereof; and vessels which may
be captured in war by citizens of the United States and lawfully
condemned as prize, or which may be adjudged to be forfeited for a
breach of the laws of the United States; and seagoing vessels, whether
steam or sail, which have been certified by the Steamboat-Inspection
Service as safe to carry dry and perishable cargo, not more than five
years old at the time they apply for registry, wherever built, which are
to engage only in trade with foreign countries or with the Philippine
[Page 472]
Islands and the islands of
Guam and Tutuila, being wholly owned by citizens of the United States or
corporations organized and chartered under the laws of the United States
or of any State thereof, the president and managing directors of which
shall be citizens of the United States or corporations organized and
chartered under the laws of the United States or of any State thereof,
the president and managing directors of which shall be citizens of the
United States, and no others, may be registered as directed in this
title. Foreign-built vessels registered pursuant to this Act shall not
engage in the coastwise trade: Provided, That a
foreign-built yacht, pleasure boat, or vessel not used or intended to be
used for trade admitted to American registry pursuant to this section
shall not be exempt from the collection of ad valorem duty provided in
section thirty-seven of the Act approved August fifth, nineteen hundred
and nine, entitled ‘An Act to provide revenue, equalize duties, and
encourage the industries of the United States, and for other purposes.’
That all materials of foreign production which may be necessary for the
construction or repair of vessels built in the United States and all
such materials necessary for the building or repair of their machinery
and all articles necessary for their outfit and equipment may be
imported into the United States free of duty under such regulations as
the Secretary of the Treasury may prescribe: Provided
further, That such vessels so admitted under the provisions of
this section may contract with the Postmaster General under the Act of
March third, eighteen hundred and ninety-one, entitled ‘An Act to
provide for ocean mail service between the United States and foreign
ports, and to promote commerce,’ so long as such vessels shall in all
respects comply with the provisions and requirements of said Act.”
Tolls may be based upon gross or net registered tonnage, displacement
tonnage, or otherwise, and may be based on one form of tonnage for
warships and another for ships of commerce. The rate of tolls may be
lower upon vessels in ballast than upon vessels carrying passengers or
cargo. When based upon net registered tonnage for ships of commerce the
tolls shall not exceed one dollar and twenty-five cents per net
registered ton, nor be less, other than for vessels of the United States
and its citizens, than the estimated proportionate cost of the actual
maintenance and operation of the canal subject, however, to the
provisions of article nineteen of the convention between the United
States and the Republic of Panama, entered into November eighteenth,
nineteen hundred and three. If the tolls shall not be based upon net
registered tonnage, they shall not exceed the equivalent of one dollar
and twenty-five cents per net registered ton as nearly as the same may
be determined, nor be less than the equivalent of seventy-five cents per
net registered ton. The toll for each passenger shall not be more than
one dollar and fifty cents. The President is authorized to make and from
time to time amend regulations governing the operation of the Panama
Canal, and the passage and control of vessels through the same or any
part thereof, including the locks and approaches thereto, and all rules
and regulations affecting pilots and pilotage in the canal or the
approaches thereto through the adjacent waters.
[The remainder of this section concerns the payment of claims for damages
for injury to vessels, cargo or passengers from passage through the
canal.]
[Page 473]
Sec. 11. That section five of the Act to
regulate commerce, approved February fourth, eighteen hundred and
eighty-seven, as heretofore amended, is hereby amended by adding thereto
a new paragraph at the end thereof, as follows:
“From and after the first day of July, nineteen hundred and fourteen, it
shall be unlawful for any railroad company or other common carrier
subject to the Act to regulate commerce to own, lease, operate, control,
or have any interest whatsoever (by stock ownership or otherwise, either
directly, indirectly, through any holding company or by stockholders or
directors in common, or in any other manner) in any common carrier by
water operated through the Panama Canal or elsewhere with which said
railroad or other carrier aforesaid does or may compete for traffic or
any vessel carrying freight or passengers upon said water route or
elsewhere with which said railroad or other carrier aforesaid does or
may compete for traffic; and in case of the violation of this provision
each day in which such violation continues shall be deemed a separate
offense.”
Jurisdiction is hereby conferred on the Interstate Commerce Commission to
determine questions of fact as to the competition or possibility of
competition, after full hearing, on the application of any railroad
company or other carrier. Such application may be filed for the purpose
of determining whether any existing service is in violation of this
section and pray for an order permitting the continuance of any vessel
or vessels already in operation, or for the purpose of asking an order
to install new service not in conflict with the provisions of this
paragraph. The commission may on its own motion or the application of
any shipper institute proceedings to inquire into the operation of any
vessel in use by any railroad or other carrier which has not applied to
the commission and had the question of competition or the possibility of
competition determined as herein provided. In all such cases the order
of said commission shall be final.
If the Interstate Commerce Commission shall be of the opinion that any
such existing specified service by water other than through the Panama
Canal is being operated in the interest of the public and is of
advantage to the convenience and commerce of the people, and that such
extension will neither exclude, prevent, nor reduce competition on the
route by water under consideration, the Interstate Commerce Commission
may, by order, extend the time during which such service by water may
continue to be operated beyond July first, nineteen hundred and
fourteen. In every case of such extension the rates, schedules, and
practices of such water carrier shall be filed with the Interstate
Commerce Commission and shall be subject to the act to regulate commerce
and all amendments thereto in the same manner and to the same extent as
is the railroad or other common carrier controlling such water carrier
or interested in any manner in its operation: Provided, Any application for extension under the terms of
this provision filed with the Interstate Commerce Commission prior to
July first, nineteen hundred and fourteen, but for any reason not heard
and disposed of before said date, may be considered and granted
thereafter.
No vessel permitted to engage in the coastwise or foreign trade of the
United States shall be permitted to enter or pass through said
[Page 474]
canal if such ship is owned,
chartered, operated, or controlled by any person or company which is
doing business in violation of the provisions of the Act of Congress
approved July second; eighteen hundred and ninety, entitled “An Act to
protect trade and commerce against unlawful restraints and monopolies,”
or the provisions of sections seventy-three to seventy-seven, both
inclusive, of an Act approved August twenty-seventh, eighteen hundred
and ninety-four, entitled “An Act to reduce taxation, to provide revenue
for the Government, and for other purposes,” or the provisions of any
other Act of Congress amending or supplementing the said Act of July
second, eighteen hundred and ninety, commonly known as the Sherman
Antitrust Act, and amendments thereto, or said sections of the Act of
August twenty-seventh, eighteen hundred and ninety-four. The question of
fact may be determined by the judgment of any court of the United States
of competent jurisdiction in any cause pending before it to which the
owners or operators of such ship are parties. Suit may be brought by any
shipper or by the Attorney General of the United States.
That section six of said Act to regulate commerce, as heretofore amended,
is hereby amended by adding a new paragraph at the end thereof, as
follows:
“When property may be or is transported from point to point in the United
States by rail and water through the Panama Canal or otherwise, the
transportation being by a common carrier or carriers, and not entirely
within the limits of a single State, the Interstate Commerce Commission
shall have jurisdiction of such transportation and of the carriers, both
by rail and by water, which may or do engage in the same, in the
following particulars, in addition to the jurisdiction given by the Act
to regulate commerce, as amended June eighteenth, nineteen hundred and
ten:
“(a) To establish physical connection between the lines of the rail
carrier and the dock of the water carrier by directing the rail carrier
to make suitable connection between its line and a track or tracks which
have been constructed from the dock to the limits of its right of way,
or by directing either or both the rail and water carrier, individually
or in connection with one another, to construct and connect with the
lines of the rail carrier a spur track or tracks to the dock. This
provision shall only apply where such connection is reasonably
practicable, can be made with safety to the public, and where the amount
of business to be handled is sufficient to justify the outlay.
“The commission shall have full authority to determine the terms and
conditions upon which these connecting tracks, when constructed, shall
be operated, and it may, either in the construction or the operation of
such tracks, determine what sum shall be paid to or by either carrier.
The provisions of this paragraph shall extend to cases where the dock is
owned by other parties than the carrier involved.
“(b) To establish through routes and maximum joint rates between and over
such rail and water lines, and to determine all the terms and conditions
under which such lines shall be operated in the handling of the traffic
embraced.
“(c) To establish maximum proportional rates by rail to and from the
ports to which the traffic is brought, or from which it is taken by the
water carrier, and to determine to what traffic and in connection
[Page 475]
with what vessels and upon
what terms and conditions such rates shall apply. By proportional rates
are meant those which differ from the corresponding local rates to and
from the port and which apply only to traffic which has been brought to
the port or is carried from the port by a common carrier by water.
“(d) If any rail carrier subject to the Act to regulate commerce enters
into arrangements with any water carrier operating from a port in the
United States to a foreign country, through the Panama Canal or
otherwise, for the handling of through business between interior points
of the United States and such foreign country, the Interstate Commerce
Commission may require such railway to enter into similar arrangements
with any or all other lines of steamships operating from said port to
the same foreign country.”
The orders of the Interstate Commerce Commission relating to this section
shall only be made upon formal complaint or in proceedings instituted by
the commission of its own motion and after full hearing. The orders
provided for in the two amendments to the Act to regulate commerce
enacted in this section shall be served in the same manner and enforced
by the same penalties and proceedings as are the orders of the
commission made under the provisions of section fifteen of the Act to
regulate commerce, as amended June eighteenth, nineteen hundred and ten,
and they may be conditioned for the payment of any sum or the giving of
security for the payment of any sum or the discharge of any obligation
which may be required by the terms of said order.
The President to Congress.
[Memorandum to accompany the Panama Canal Act.]
In signing the Panama Canal Bill, I wish to leave this memorandum.
The bill is admirably drawn for the purpose of securing the proper
maintenance, operation and control of the Canal, and the government
of the Canal Zone, and for the furnishing to all the patrons of the
canal, through the Government, of the requisite docking facilities
and the supply of coal and other shipping necessities. It is
absolutely necessary to have the bill passed at this session in
order that the capital of the world engaged in the preparation of
ships to use the canal may know in advance the conditions under
which the traffic is to be carried on through this waterway.
I wish to consider the objections to the bill in the order of their
importance.
1. The bill is objected to because it is said to violate the
Hay-Pauncefote Treaty in discriminating in favor of the coastwise
trade of the United States by providing that no tolls shall be
charged to vessels engaged in that trade passing through the canal.
This is the subject of a protest by the British Government.1
The British protest involves the right of the Congress of the United
States to regulate its domestic and foreign commerce in such manner
as to the Congress may seem wise, and specifically the protest
challenges the right of the Congress to exempt American shipping
from the payment of tolls for the use of the Panama Canal or to
refund to such American ships the tolls which they
[Page 476]
may have paid, and this without regard
to the trade in which such ships are employed, whether coastwise or
foreign. The protest states “the proposal to exempt all American
shipping from the payment of the tolls would, in the opinion of His
Majesty’s Government, involve an infraction of the treaty
(Hay-Pauncefote), nor is there, in their opinion, any difference in
principle between charging tolls only to refund them and remitting
tolls altogether. The result is the same in either case, and the
adoption of the alternative method of refunding tolls in preference
of remitting them, while perhaps complying with the letter of the
treaty, would still controvert1 its spirit.” The provision of
the Hay-Pauncefote Treaty involved is contained in article 3, which
provides:
The United States adopts, as the basis of the neutralisation
of such ship canal, the following rules, substantially as
embodied in the convention of Constantinople, signed the
28th October, 1888, for the free navigation of the Suez
Canal, that is to say:
1. The canal shall be free and open to the vessels of
commerce and of war of all nations observing these
rules, on terms of entire equality, so that there
shall be no discrimination against any such nation,
or its citizens or subjects. In respect of the
conditions or charges of traffic, or otherwise. Such
conditions and charges of traffic shall be just and
equitable.
Then follows five other rules to be observed by other nations to make
neutralisation effective, the observance of which is the condition
for the privilege of using the canal.
In view of the fact that the Panama Canal is being constructed by the
United States wholly at its own cost, upon territory ceded to it by
the Republic of Panama for that purpose, and that unless it has
restricted itself the United States enjoys absolute rights of
ownership and control, including the right to allow its own commerce
the use of the canal upon such terms as it sees fit, the sole
question is, Has the United States in the language above quoted from
the Hay-Pauncefote Treaty deprived itself of the exercise of the
right to pass its own commerce free or to remit tolls collected for
the use of the canal?
It will be observed that the rules specified in Article 3 of the
treaty were adopted by the United States for a specific purpose,
namely, as the basis of the neutralization of the canal and for no
other purpose. The Article is a declaration of the policy by the
United States that the canal shall be neutral, that the attitude of
this Government towards the commerce of the world is that all
nations will be treated alike and no discrimination made by the
United States against any one of them observing the rules adopted by
the United States. The right to the use of the canal and to equality
of treatment in the use depends upon the observance of the
conditions of the use by the nations to whom we extended that
privilege. The privileges of all nations to whom we extended the use
upon the observance of these conditions were to be equal to that
extended to any one of them which observed the conditions. In other
words, it was a conditional favored nation treatment, the measure of
which in the absence of express stipulation to that effect, is not
what the country gives to its own nationals, but the treatment it
exends to other nations.
Thus it is seen that the rules are but a basis of neutralization,
intended to effect the neutrality which the United States was
willing should be the character of the canal and not intended to
limit or hamper the United States in the exercise of its sovereign
power to
[Page 477]
deal with its own
commerce using its own canal in whatsoever manner it saw fit.
If there is no “difference in principle between the United States
charging tolls to its own shipping only to refund them and remitting
tolls altogether,” as the British protest declares, then the
irresistible conclusion is that the United States, although it owns,
controls and has paid for the canal is restricted by treaty from
aiding its own commerce in the way that all the other nations of the
world may freely do. It would scarcely be claimed that the setting
out in a treaty between the United States and Great Britain of
certain rules adopted by the United States as the basis of the
neutralization of the canal would bind any government to do or
refrain from doing anything other than the things required by the
rules to insure the privilege of use and freedom from
discrimination. Since the rules do not provide as a condition for
the privilege of use upon equal terms with other nations that other
nations desiring to build up a particular trade involving the use of
the canal shall not either directly agree to pay the tolls or to
refund to its ships the tolls collected for the use of the canal, it
is evident that the treaty does not affect that inherent, sovereign
right, unless, which is not likely, it be claimed that the
promulgation by the United States of these rules insuring all
nations against its discrimination, would authorize the United
States to pass upon the action of other nations and require that no
one of them should grant to its shipping larger subsidies or more
liberal inducement for the use of the canal than were granted by
others. In other words, that the United States has the power to
equalize the practice of other nations in this regard.
If it is correct then to assume that there is nothing in the
Hay-Pauncefote Treaty preventing Great Britain and the other nations
from extending such favors as they may see fit to their shipping
using the canal, and doing it in the way they see fit, and if it is
also right to assume that there is nothing in the treaty that gives
the United States any supervision over, or right to complain of such
action, then the British protest leads to the absurd conclusion that
this Government in constructing the canal, maintaining the canal,
and defending the canal, finds itself shorn of its right to deal
with its own commerce in its own way, while all other nations using
the canal in competition with American commerce enjoys that right
and power unimpaired.
The British protest, therefore, is a proposal to read into the treaty
a surrender by the United States of its right to regulate its own
commerce in its own way and by its own methods, a right which
neither Great Britain herself, nor any other nation that may use the
canal, has surrendered or proposes to surrender. The surrender of
this right is not claimed to be in terms. It is only to be inferred
from the fact that the United States has conditionally granted to
all the nations the use of the canal without discrimination by the
United States between the grantees; but as the treaty leaves all
nations desiring to use the canal with full right to deal with their
own vessels as they see fit, the United States would only be
discriminating against itself if it were to recognize the soundness
of the British contention.
The bill here in question does not positively do more than to
discriminate in favor of the coastwise trade, and the British
protest seems to recognize a distinction between such exemption and
the
[Page 478]
exemption of American
vessels engaged in foreign trade. In effect, of course, there is a
substantial and practical difference. The American vessels in
foreign trade come into competition with vessels of other nations in
that same trade, while foreign vessels are forbidden to engage in
the American coastwise trade. While the bill here in question seems
to vest the President with discretion to discriminate in fixing
tolls in favor of American ships and against foreign ships engaged
in foreign trade, within the limitation of the range from 50 cents a
ton to $1.25 a net ton, there is nothing in the act to compel the
President to make such a discrimination. It is not, therefore,
necessary to discuss the policy of such discrimination until the
question may arise in the exercise of the President’s
discretion.
The policy of exempting the coastwise trade from all tolls really
involves the question of granting a Government subsidy for the
purpose of encouraging that trade in competition with the trade of
the transcontinental railroads. I approve this policy. It is in
accord with the historical course of the Government in giving
Government aid to the construction of the transcontinental roads. It
is now merely giving Government aid to a means of transportation
that competes with those transcontinental roads.
2. The bill permits the registry of foreign-built vessels as vessels
of the United States for foreign trade, and it also permits the
admission without duty of materials for the construction and repair
of vessels in the United States. This is objected to on the ground
that it will interfere with the shipbuilding interests of the United
States. I cannot concur in this view. The number of vessels of the
United States engaged in foreign trade is so small that the work
done by the present shipyards is almost wholly that of constructing
vessels for the coastwise trade or Government vessels. In other
words, there is substantially no business for building ships in the
foreign trade in the shipyards of the United States which will be
injured by this new provision. It is hoped that this registry of
foreign-built ships in American foreign trades will prove to be a
method of increasing our foreign shipping. The experiment will hurt
no interest of ours, and we can observe its operation. If it proves
to extend our commercial flag to the high seas, it will supply a
long-felt want.
3. Section 5 of the Interstate Commerce Act is amended by forbidding
railroad companies to own, lease, operate, control, or have any
interest in any common carrier by water operated through the Panama
Canal with which such railroad or other carrier does or may compete
for traffic. I have twice recommended such restriction as to the
Panama Canal. It was urged upon me that the Interstate Commerce
Commission might control the trade so as to prevent an abuse from
the joint ownership of railroads and of Panama steamships competing
with each other, and therefore that this radical provision was not
necessary. Conference with the Interstate Commerce Commission,
however, satisfied me that such control would not be as effective as
this restriction. The difficulty is that the interest of the
railroad company is so much larger in its railroad and in the
maintenance of its railroad rates than in making a profit out of the
steamship line that it can afford temporarily to run its vessels for
nearly nothing in order to drive out of the business independent
steamship lines, and thus obtain complete control of the shipping in
[Page 479]
the trade through the
canal and regulate the rates according to the interest of the
railroad company. Jurisdiction is conferred on the Interstate
Commerce Commission finally to determine the question of fact as to
the competition or possibility of competition of the water carrier
with the railroad, and this may be done in advance of any investment
of capital.
4. The effect of the amendment of section 5 of the Interstate
Commerce Act also is extended so as to make it unlawful for railroad
companies owning or controlling lines of steamships in any other
part of the jurisdiction of the United States to continue to do so,
and as to such railroad companies and such water carriers the
Interstate Commerce Commission is given the duty and power not only
finally to determine the question of competition or possibility of
competition, but also to determine “that the specified service by
water is being operated in the interest of the public and is of
advantage to the convenience and commerce of the people, and that
such extension will neither exclude, prevent, nor reduce competition
on the route by water under consideration”; and, if it finds this to
be the case, to extend the time during which such service by water
may continue beyond the date fixed in the act for its first
operation—to wit, July 1, 1914. Whenever the time is extended, then
the water carrier, its rates and schedules and practices are brought
within the control of the Interstate Commerce Commission. How far it
is within the power of Congress to delegate to the Interstate
Commerce Commission such wide discretion it is unnecessary now to
discuss. There is ample time between now and the time of this
provision of the act’s going into effect to have the matter examined
by the Supreme Court, or to change the form of the legislation,
should it be deemed necessary. Certainly the suggested invalidity of
this section, if true, would not invalidate the entire act, the
remainder of which may well stand without regard to this
provision.
5. The final objection is to a provision which prevents the owner of
any steamship who is guilty of violating the anti-trust law from
using the canal. It is quite evident that this section applies only
to those vessels engaged in the trade in which there is a monopoly
contrary to our Federal statute, and it is a mere injunctive process
against the continuance of such monopolistic trade. It adds the
penalty of denying the use of the canal to a person or corporation
violating the anti-trust law. It may have some practical operation
where the business monopolized is transportation by ships, but it
does not become operative to prevent the use of the canal until the
decree of the court shall have established the fact of the guilt of
the owner of the vessel. While the penalties of the anti-trust law
seem to me to be quite sufficient already, I do not know that this
new remedy against a particular kind of a trust may not sometimes
prove useful.
In a message1 sent to Congress after this bill had passed both
Houses I ventured to suggest a possible amendment by which all
persons, and especially all British subjects who felt aggrieved by
the provisions of the bill on the ground that they are in violation
of the Hay-Pauncefote Treaty, might try that question in the Supreme
Court of the United States. I think this would have satisfied those
who oppose the view which Congress evidently entertains of the
[Page 480]
treaty and might avoid the
necessity for either diplomatic negotiation or further decision by
an arbitral tribunal. Congress, however, has not thought it wise to
accept the suggestion, and therefore I must proceed in the view
which I have expressed, and am convinced is the correct one, as to
the proper construction of the treaty and the limitations which it
imposes upon the United States. I do not find that the bill here in
question violates those limitations.
On the whole, I believe the bill to be one of the most beneficial
that has passed this or any other Congress, and I find no reason in
the objections made to the bill which would lead me to delay, until
another session of Congress, provisions that are imperatively needed
now in order that due preparation by the world may be made for the
opening of the canal.
Wm. H. Taft.
The White House
, August 24, 1912.
