B-15637, MAY 7, 1941, 20 COMP. GEN. 743

B-15637, MAY 7, 1941, 20 COMP. GEN. 743

TRANSPORTATION - LAND-GRANT DEDUCTIONS - MATERIALS FOR USE ON THE PANAMA CANAL THIRD LOCKS PROJECT MATERIAL FOR USE ON THE PANAMA CANAL THIRD LOCKS PROJECT AUTHORIZED BY THE ACT OF AUGUST 11, 1939, IS "MILITARY OR NAVAL PROPERTY * * * MOVING FOR MILITARY OR NAVAL AND NOT FOR CIVIL USE" WITHIN THE MEANING OF SECTION 321 OF THE TRANSPORTATION ACT OF 1940, TO BE SO DESIGNATED ON THE BILLS OF LADING, AND CHARGES FOR ITS TRANSPORTATION ARE SUBJECT TO DEDUCTION FOR LAND GRANT WHERE AVAILABLE.

COMPTROLLER GENERAL WARREN TO THE CHIEF OF OFFICE, THE PANAMA CANAL, MAY 7, 1941:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 19, 1941, AS FOLLOWS:

IN ORDER TO ASCERTAIN THE COSTS OF TRANSPORTATION OR PROPERTY AND SUPPLIES IN ADVANCE OF ACTUAL MOVEMENTS THEREOF, IN CONNECTION WITH AWARD OF PROCUREMENT CONTRACTS, IT IS NECESSARY FOR THE PANAMA CANAL TO HAVE CERTAIN INFORMATION PERTAINING TO THE CONSTRUCTION AND APPLICATION OF THE PROVISIONS OF SECTION 321, PART II, TITLE 3, OF THE TRANSPORTATION ACT OF 1940 ( PUBLIC, NO. 785, APPROVED SEPTEMBER 18, 1940).

THIS SECTION, ENTITLED GOVERNMENT TO PAY FULL RATES, PRESCRIBES NEW MEASURES OF DISTINCTION IN THE APPLICABILITY OF LAND-GRANT DEDUCTIONS; THAT IS, THE CHARACTER AND USE OF PROPERTY AND SUPPLIES, WHETHER MILITARY OR CIVIL. THE PERTINENT PORTIONS OF SECTION (A) READ AS FOLLOWS:

"NOTWITHSTANDING ANY OTHER PROVISION OF LAW, BUT SUBJECT TO THE PROVISION OF SECTION 1 (7) AND (22) OF THE INTERSTATE COMMERCE ACT AS AMENDED, THE FULL APPLICABLE COMMERCIAL RATES, FARES OR CHARGES SHALL BE PAID FOR TRANSPORTATION BY ANY COMMON CARRIER SUBJECT TO SUCH ACT OF ANY PERSONS OR PROPERTY OF THE UNITED STATES, OR ON ITS BEHALF, EXCEPT THAT FOREGOING PROVISION SHALL NOT APPLY TO THE TRANSPORTATION OF MILITARY OR NAVAL PROPERTY OF THE UNITED STATES MOVING FOR MILITARY OR NAVAL AND NOT FOR CIVIL USE * * *.'

SPECIFICALLY, THE QUESTION UNDER CONSIDERATION IS WHETHER OR NOT CEMENT FOR USE IN THE THIRD LOCKS PROJECT OF THE PANAMA CANAL IS MILITARY PROPERTY MOVING FOR MILITARY USE AND CAN MOVE BY RAILROAD UNDER THE BENEFITS, IF ANY, OF THE LAND-GRANT ACT; BUT THE QUESTION IS APPLICABLE TO ANY OTHER MATERIALS FOR USE IN THIS PROJECT. THE ACT APPROVED AUGUST 11, 1939 (53 STAT. 1409), PROVIDES " THAT THE IMPROVEMENT AND ENLARGEMENT OF THE CAPACITY OF THE PANAMA CANAL IN THE INTERESTS OF DEFENSE * * * IS HEREBY AUTHORIZED * * *.'

THE PANAMA CANAL BELIEVES THAT UNDER THE ABOVE STATUTORY AUTHORIZATION MATERIALS PURCHASED BY THE GOVERNMENT FOR USE IN THE CONSTRUCTION OF THE THIRD LOCKS PROJECT SHOULD BE CONSIDERED TO BE MILITARY PROPERTY MOVING FOR MILITARY USE. THIS BELIEF IS SUPPORTED BY THE DECISION OF THE ASSISTANT COMPTROLLER GENERAL, B-13422, DATED NOVEMBER 25, 1940, PERTAINING TO THIS SAME GENERAL QUESTION, WHEREIN THE ASSISTANT COMPTROLLER GENERAL CONCLUDED THAT PROPERTY OWNED BY RESERVE OFFICERS' TRAINING CORPS, CITIZENS' MILITARY TRAINING CAMPS, NATIONAL GUARD, AND SELECTIVE SERVICE SYSTEM COULD OBTAIN THE BENEFITS OF OF THE LAND-GRANT PROVISIONS. THIS DECISION STATES:

"IN ARRIVING AT THE CONCLUSIONS INDICATED ABOVE, CONSIDERATION HAS NECESSARILY BEEN LIMITED TO THE GENERAL PURPOSE OF THE ACTIVITIES MENTIONED AS DISCERNIBLE PRIMARILY FROM THE LANGUAGE OF THE STATUTES CREATING OR PROVIDING FOR SUCH ACTIVITIES.'

YOUR DECISION AT AN EARLY DATE IS REQUESTED SINCE INVITATIONS FOR BIDS ON A LARGE QUANTITY OF MATERIAL ARE NOW BEING PREPARED.

UNDER THE PROVISIONS OF SECTION 321 OF THE TRANSPORTATION ACT OF 1940, PUBLIC, NO. 785, SEVENTY-SIXTH CONGRESS, AND IN THE ABSENCE OF ANY REDUCTION IN CHARGES AS AUTHORIZED BY SECTIONS 1 (7) AND 22 OF THE INTERSTATE COMMERCE ACT, AS AMENDED, FULL APPLICABLE COMMERCIAL RATES AND CHARGES ARE REQUIRED TO BE PAID, FROM AND AFTER THE EFFECTIVE DATES OF RELEASES FILED AND APPROVED AS PROVIDED IN THE TRANSPORTATION ACT OF 1940, FOR THE TRANSPORTATION, BY ANY COMMON CARRIER SUBJECT TO THE INTERSTATE COMMERCE ACT, OF PROPERTY FOR OR ON BEHALF OF THE UNITED STATES, SUBJECT TO THE LIMITATION THAT THIS PROVISION "SHALL NOT APPLY TO THE TRANSPORTATION OF MILITARY OR NAVAL PROPERTY OF THE UNITED STATES MOVING FOR MILITARY OR NAVAL AND NOT FOR CIVIL USE.'

YOUR SUBMISSION PRESENTS THE QUESTION WHETHER TRANSPORTATION SERVICES PROCURED UNDER THE CIRCUMSTANCES AND PURSUANT TO THE AUTHORITY DETAILED IN YOUR LETTER COME WITHIN THE EXCEPTION, OR LIMITATION, QUOTED ABOVE SO AS TO SUBJECT THE CHARGES FOR SUCH TRANSPORTATION TO DEDUCTION FOR LAND GRANT WHERE THE OTHER CONDITIONS ESSENTIAL TO SUCH DEDUCTION EXIST.

THE ACT OF AUGUST 11, 1939, 53 STAT. 1409, TO WHICH YOU MAKE REFERENCE AUTHORIZED---

* * * THE IMPROVEMENT AND ENLARGEMENT OF THE CAPACITY OF THE PANAMA CANAL IN THE INTERESTS OF DEFENSE AND INTEROCEANIC COMMERCE * * * SUBSTANTIALLY IN ACCORDANCE WITH THE PLANS SET FORTH AND RECOMMENDED IN THE REPORT OF THE GOVERNOR OF THE PANAMA CANAL, DATED FEBRUARY 24, 1939, AND PUBLISHED AS HOUSE DOCUMENT NUMBERED 210 AND INCLUDING SUCH APPURTENANT STRUCTURES, WORKS, AND FACILITIES, AND ENLARGEMENTS OR IMPROVEMENTS OF EXISTING CHANNELS, STRUCTURES, WORKS, AND FACILITIES AS MAY BE DEEMED NECESSARY.

THE REPORT OF THE GOVERNOR OF THE PANAMA CANAL, AS SHOWN IN HOUSE DOCUMENT NUMBERED 210, WAS SUBMITTED PURSUANT TO PUBLIC RESOLUTION NO. 85 (74TH CONG.) APPROVED MAY 1, 1936, 49 STAT. 1256, AND IS IN PERTINENT PART AS FOLLOWS:

PRIOR STUDIES

2. THE CANAL ADMINISTRATION HAS LONG FORESEEN THAT IT WOULD BE NECESSARY TO INCREASE THE CAPACITY OF THE CANAL TO MEET THE NEEDS OF INCREASED COMMERCIAL TRAFFIC BY THE CONSTRUCTION OF AN ADDITIONAL SYSTEM OF LOCKS. THE ADMINISTRATION HAS CONTINUOUSLY FELT THE RESPONSIBILITY FOR STUDIES OF TRAFFIC TRENDS WITH A VIEW TO PREDICTING WELL IN ADVANCE THE TIME WHEN THE ADDITIONAL SYSTEM OF LOCKS WOULD BE NEEDED, AND OBSERVATION AND STUDIES ON THIS IMPORTANT SUBJECT HAVE BEEN CARRIED ON THROUGH THE YEARS SINCE THE COMPLETION OF THE CANAL. UNTIL THE YEAR 1931, HOWEVER, THE RESULTS OF THIS WORK WERE NOT CONSOLIDATED OR PUBLISHED IN READILY AVAILABLE FORM.

3. IN ACCORDANCE WITH PUBLIC RESOLUTION NO. 99 (70TH CONG.), APPROVED MARCH 2, 1929, A SURVEY AND INVESTIGATION OF A PROPOSED CANAL IN NICARAGUA WAS MADE * * *. IN CONNECTION WITH THAT REPORT, THERE WAS ALSO SUBMITTED A REPORT BY THE GOVERNOR OF THE PANAMA CANAL ON A PROJECT FOR AN ADDITIONAL SYSTEM OF LOCKS AT THE PANAMA CANAL. * * * IT WILL BE REFERRED TO HEREINAFTER AS "THE 1931 REPORT.' * * * AS FAR AS PRACTICABLE, REPETITION OF THE DISCUSSIONS IN THE 1931 REPORT HAS BEEN AVOIDED HERE. IT DOES, HOWEVER, SEEM DESIRABLE TO QUOTE THE FOLLOWING:

"* * * THE CAPACITY OF THE PANAMA CANAL IS LIMITED BY THE CAPACITY OF THE LOCKS, FOR THE CHANNEL SECTIONS ARE ENTIRELY ADEQUATE NOW TO TRANSIT ANY NUMBER OF SHIPS THAT MAY BE PASSED BY THE LOCKS, AND, WITH IMPROVEMENTS UNDER WAY AND PROJECTED, THIS STATEMENT WILL STILL BE TRUE AFTER THE CONSTRUCTION OF A THIRD SET OF LOCKS.'

4. IN THE 1931 REPORT, THE LOCATIONS OF THE ADDITIONAL LOCKS WERE PROPOSED TO BE IMMEDIATELY ADJACENT TO AND ALONGSIDE THE PRESENT LOCKS, * * *. NO SPECIAL PROVISION WAS MADE FOR PROTECTION FROM AIR ATTACK AND SABOTAGE. THE COST WAS ESTIMATED AT $140,000,000, AND THE TIME REQUIRED FOR CONSTRUCTION AT ABOUT 10 YEARS. THE REPORT CONCLUDED THAT THIS ADDITIONAL SYSTEM OF LOCKS WOULD PROBABLY BE NECESSARY ABOUT 1970, BUT THE INTEROCEANIC CANAL BOARD AND THE CHIEF OF ENGINEERS, UNITED STATES ARMY * * * ARRIVED AT THE CONCLUSION THAT IT WOULD BE NEEDED BY 1960. * * *

NEED FOR ADDITIONAL LOCKS FOR DEFENSE

13. THE CANAL MUST BE KEPT OPEN FOR TRANSIT OF THE FLEET FROM OCEAN TO OCEAN, AND THE LOCKS THEREFORE MUST BE GIVEN THE MAXIMUM POSSIBLE PHYSICAL PROTECTION FROM VITAL DAMAGE. IT IS, OF COURSE, APPARENT TO THE CASUAL OBSERVER THAT STRUCTURES SUCH AS THE LOCKS ARE SUBJECT TO ATTACK BY SABOTAGE OR BY AIR RAIDS AND THAT, IF AN ADDITIONAL SYSTEM OF LOCKS WERE CONSTRUCTED, THE CHANCE OF VITAL DAMAGE BY SUCH ATTACKS RESULTING IN SERIOUS CLOSURE OF THE CANAL TO TRAFFIC WILL BE REDUCED. * * * FURTHERMORE, CLOSING THE NEW LOCKS AND THE BYPASS CHANNELS TO ALL TRAFFIC EXCEPT THE NAVY WOULD GIVE THE HIGHEST PRACTICABLE DEGREE OF ASSURANCE THAT NO ATTACK ON THE LOCKS COULD CLOSE THE CANAL FOR MORE THAN A VERY SHORT PERIOD OF TIME.

14. THUS, THE PROVISIONS OF THE ADDITIONAL LOCKS AND BYPASS CHANNELS WILL INCREASE THE SECURITY OF THE CANAL, AND THESE ADDITIONAL FACILITIES WILL BE NEEDED IN ANY EVENT FOR COMMERCIAL PURPOSES WITHIN A RELATIVELY SHORT PERIOD OF TIME.

SITUATION AFTER COMPLETION OF PROJECT

32. IF THIS PROJECT IS AUTHORIZED NOW IT WILL BE COMPLETED AT A TIME WHEN TRAFFIC WILL STILL BE WELL WITHIN THE CAPACITY OF THE PRESENT LOCKS DURING THE OVERHAUL PERIOD, AND THUS THE NEW LOCKS CAN BE HELD FOR THE EXCLUSIVE USE OF THE NAVY, EXCEPT POSSIBLY FOR OCCASIONAL COMMERCIAL VESSELS TOO LARGE FOR THE PRESENT LOCKS. AFTER A CONSIDERABLE PERIOD OF YEARS, THE TRAFFIC MAY REACH THE CAPACITY OF THE PRESENT LOCKS IN THE OVERHAUL SEASON, AND THEREAFTER, DURING THAT SEASON, IT WILL BE NECESSARY TO USE THE NEW LOCKS FOR COMMERCIAL TRAFFIC. * * *.

CONCLUSIONS

39. IT NOW SEEMS EVIDENT THAT THE CONSTRUCTION OF AN ADDITIONAL SYSTEM OF LOCKS AT THE PANAMA CANAL, AS CONTEMPLATED FOR MANY YEARS, WOULD BE INITIATED WITHIN THE NEXT 10 OR 12 YEARS ON THE BASIS OF COMMERCIAL REQUIREMENTS ALONE. CONSIDERATIONS OF NAVAL USE AND CANAL DEFENSE MAY HAVE AN IMPORTANT BEARING IN FIXING THE TIME FOR BEGINNING CONSTRUCTION. * * * WHEN THE NATIONAL POLICY REQUIRES AN INCREASE IN CANAL FACILITIES EITHER FOR COMMERCIAL USE OR FOR DEFENSE, THE BASIS ON WHICH TO PROCEED SHOULD BE SUBSTANTIALLY IN ACCORDANCE WITH THE BYPASS PROJECT DESCRIBED IN THIS REPORT.

THE REPORT OF THE GOVERNOR OF THE PANAMA CANAL WAS SUBMITTED TO THE SPEAKER OF THE HOUSE OF REPRESENTATIVES BY THE SECRETARY OF WAR UNDER DATE OF MARCH 16, 1939, WITH A RECOMMENDATION FOR IMMEDIATE ADOPTION OF THE PROJECT "IN THE INTERESTS OF DEFENSE AND OF THE FUTURE NEEDS OF INTEROCEANIC SHIPPING.' ON MARCH 20, 1939, A BILL, H.R. 5129, WAS INTRODUCED IN THE HOUSE PROPOSING TO AUTHORIZE AND PROVIDE FOR "THE CONSTRUCTION OF ADDITIONAL FACILITIES ON THE CANAL ZONE FOR THE PURPOSES OF MORE ADEQUATELY PROVIDING FOR THE DEFENSE OF THE PANAMA CANAL AND FOR INCREASING ITS CAPACITY FOR THE FUTURE NEEDS OF INTEROCEANIC COMMERCE," SUBSTANTIALLY IN ACCORDANCE WITH THE PLANS RECOMMENDED BY THE GOVERNOR OF THE PANAMA CANAL, IN THE REPORT DATED FEBRUARY 24, 1939.

THE REPORT OF THE COMMITTEE ON MERCHANT MARINE AND FISHERIES UPON THIS BILL, H.R. REPORT NO. 494, APRIL 26, 1939, CONCLUDED:

BASED UPON THE NEED FOR NATIONAL DEFENSE, THE IMPORTANCE OF AVOIDING DELAY, THE CONTRIBUTION WHICH NEW LOCKS WILL MAKE TO EFFICIENT AND UNINTERRUPTED SERVICE AT THE CANAL, THE ECONOMIES INVOLVED IN CONSTRUCTION, OPERATION, AND MAINTENANCE, THE MINIMUM TIME IN ATTAINING COMPLETION, YOUR COMMITTEE IS CONVINCED THAT THIS WORK SHOULD PROCEED AT ONCE AND URGE ENACTMENT OF H.R. 5129 AND IMMEDIATE APPROPRIATION OF THE INITIAL SUM OF $15,000,000 RECOMMENDED FOR THE FIRST YEAR.

IN THIS REPORT APPEARS ALSO THE FOLLOWING STATEMENT AS HAVING BEEN MADE BY COMMANDER F. L. LOWE, REPRESENTING THE NAVY DEPARTMENT, AT THE HEARINGS:

THE ADDITIONAL FACILITIES, INCLUDING PROTECTION, CAN BE PROVIDED UNDER THOSE PLANS (DEVELOPED BY THE GOVERNOR OF THE PANAMA CANAL) AT SOMETHING LESS THAN ONE-THIRD OF THE COST OF THE NICARAGUA CANAL. THAT IS A VERY CONSIDERABLE ITEM. BUT WHAT IS EVEN MORE IMPORTANT, FROM THE VIEWPOINT OF THE NAVY, IT CAN BE DONE IN ABOUT 6 YEARS, AS AGAINST 12 OR 15 YEARS FOR THE NICARAGUA ROUTE. IT IS VERY IMPORTANT THAT AN ADDITIONAL SAFE PASSAGE BE PROVIDED AS EARLY AS POSSIBLE; IT IS EQUALLY IMPORTANT THAT THE LARGER LOCKS BE PROVIDED, AND QUICKLY.

THE BEAMS OF OUR OLDER BATTLESHIPS THAT HAVE BEEN MODERNIZED APPROACH VERY CLOSELY THE WIDTH OF THE PRESENT CANAL LOCKS. THEY MAKE A VERY TIGHT FIT. OUR SHIPS NOW BUILDING WILL MAKE AN EVEN TIGHTER FIT. THE QUESTION OF WIDER LOCKS IS NOW A PRESSING CONSIDERATION, AND THE TREND OF CONSTRUCTION IN BOTH NAVAL AND MERCHANT SHIPS IS TOWARD LARGER AND LARGER VESSELS. AT THE END OF 6 YEARS, UNLESS THIS TREND IS HALTED OR REVERSED, THE PRESENT LOCKS WILL BE TOO SMALL TO TAKE THE SHIPS THAT ARE BEING COMPLETED AT THAT TIME, UNLESS, OF COURSE, WE ACCEPT SHIPS THAT ARE INFERIOR IN SIZE AND PROTECTION TO FOREIGN SHIPS WHICH THEY MAY BE CALLED UPON TO ENGAGE IN BATTLE.

THIS STATEMENT IS BASED UPON THE NEEDS OF NATIONAL DEFENSE AND ON NO OTHER CONSIDERATION.

THE REPORT OF THE SENATE COMMITTEE ON INTEROCEANIC CANALS ON H.R. 5129 ( SENATE REPT. NO. 1116, AUG. 3, 1939) ADOPTED THE REPORT OF THE HOUSE COMMITTEE WITH A SUGGESTED AMENDMENT WHICH IS NOT PERTINENT HERE. IT WAS FURTHER STATED IN THIS REPORT:

YOUR COMMITTEE ON INTEROCEANIC CANALS HAS ARRIVED AT THE CONCLUSION THAT THE CONSTRUCTION OF A THIRD SET OF LOCKS AT THE PANAMA CANAL IS A PROPOSITION WHICH IS NOT IMMEDIATELY NECESSARY FROM A COMMERCIAL STANDPOINT BUT THAT WHICH EVEN NOW CAN BE WELL JUSTIFIED AS A MATTER OF PRUDENT EXPENDITURE FOR THE CANAL AS A COMMERCIAL ENTERPRISE. FROM THE STANDPOINT OF NATIONAL DEFENSE, IT HAS APPEARED TO THE COMMITTEE THAT THE ARGUMENTS OF THE NAVY DEPARTMENT AND THE WAR DEPARTMENT FOR THE ADDITIONS TO THE PANAMA CANAL ARE OVERWHELMING IRRESPECTIVE OF THE QUESTION OF WHETHER WE SHOULD CONSTRUCT THE NICARAGUA CANAL.

THE IMPROVEMENTS AT PANAMA COULD BE COMPLETED IN TIME TO PERMIT THE PASSAGE OF THE LARGER NAVAL VESSELS NOW BEING AUTHORIZED BY CONGRESS. * *

IN THE OPINION OF THE COMMITTEE THE THIRD SET OF LOCKS OF THE PANAMA CANAL SHOULD BE AUTHORIZED AT THE PRESENT TIME, BOTH FROM THE STANDPOINT OF PRUDENT PROVISION FOR THE FUTURE COMMERCIAL OPERATION OF THE CANAL AND FROM THE STANDPOINT OF NATIONAL DEFENSE WITHOUT REFERENCE TO THE POSSIBLE DESIRABILITY OF ANOTHER ISTHMIAN CANAL.

IT IS APPARENT, THEREFORE, FROM THE HISTORY OF THE SUBJECT LEGISLATION THAT BUT FOR THE NEEDS OF NATIONAL DEFENSE EXISTING AT THE TIME OF THE PASSAGE OF THE ACT OF AUGUST 11, 1939, THE BUILDING OF THE THIRD SET OF LOCKS, IN ALL PROBABILITY, WOULD NOT HAVE BEEN BEGUN UNTIL ABOUT 1950 OR AT A TIME APPROXIMATELY 10 YEARS HENCE, BEFORE WHICH APPARENTLY THERE WOULD HAVE BEEN NO NEED FOR THEM COMMERCIALLY. ALSO, THE FACT THAT THE LEGISLATION WAS DESIGNED TO FURTHER THE ENDS OF NATIONAL DEFENSE, FROM THE POINT OF VIEW OF MILITARY PREPAREDNESS, SEEMS CLEARLY ESTABLISHED.

ON THE QUESTION OF FACT INVOLVED, AS TO THE MILITARY OR NAVAL USE, AS DISTINGUISHED FROM CIVIL USE, OF THE MATERIALS REQUIRED FOR THE PROJECT, THE SECRETARY OF WAR, IN A LETTER DATED APRIL 29, 1941, HAS REPORTED:

* * * THE PROJECT IS UNDERTAKEN AND IS BEING PROSECUTED AT THIS TIME ON ACCOUNT OF NAVAL REQUIREMENTS AS A DEFENSE MEASURE OF FIRST IMPORTANCE AND THEREFORE MATERIALS FOR USE IN THE PROJECT ARE MILITARY PROPERTY MOVING FOR MILITARY OR NAVAL AND NOT FOR CIVIL USE.

ACCORDINGLY, NO REASON APPEARS WHY THE TRANSPORTATION OF MATERIAL FOR USE IN THE CONSTRUCTION OF THE THIRD SET OF LOCKS IS NOT PROPERLY TO BE CONSIDERED "MILITARY OR NAVAL PROPERTY OF THE UNITED STATES MOVING FOR MILITARY OR NAVAL AND NOT FOR CIVIL USE" WITHIN THE MEANING OF THE TRANSPORTATION ACT OF 1940 TO BE SO DESIGNATED ON THE BILLS OF LADING, AND THE CHARGES THEREFOR SUBJECT TO DEDUCTION FOR LAND GRANT IF OTHERWISE AVAILABLE.