B-11281, AUGUST 13, 1940, 20 COMP. GEN. 81

B-11281, AUGUST 13, 1940, 20 COMP. GEN. 81

STATUTORY CONSTRUCTION; PANAMA CANAL - EMPLOYMENT RESTRICTIONS A STATUTE IS TO BE SO CONSTRUED THAT IF POSSIBLE, NO CLAUSE, SENTENCE, OR WORD SHALL BE SUPERFLUOUS, VOID, OR INSIGNIFICANT. WHERE NECESSARY TO THE ASCERTAINMENT OF THE LEGISLATIVE INTENT, REFERENCE TO THE LEGISLATIVE HISTORY OF THE ENACTMENT, AND TO THE MODE BY WHICH IT WAS INTRODUCED, IS JUSTIFIED. THE PANAMA CANAL ZONE CITIZENSHIP EMPLOYMENT RESTRICTIONS OF SECTION 2 OF THE WAR DEPARTMENT CIVIL APPROPRIATION ACT, 1941, ARE APPLICABLE TO EMPLOYEES OF BOTH THE PANAMA CANAL ADMINISTRATIVE AGENCIES AND OF THE PANAMA RAILROAD CO., WHETHER DIRECTLY OR INDIRECTLY EMPLOYED, INCLUDING EMPLOYEES OF CONTRACTORS PERFORMING WORK UNDER DIRECT CONTRACT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE GOVERNOR, THE PANAMA CANAL, AUGUST 13, 1940:

CONSIDERATION HAS BEEN GIVEN THE QUESTIONS SUBMITTED BY YOUR LETTER OF JULY 11, 1940, AS FOLLOWS:

1. SEVERAL QUESTIONS HAVE ARISEN INVOLVING CONSTRUCTION OF THE PROVISIONS OF SECTION 2 OF THE WAR DEPARTMENT CIVIL APPROPRIATION ACT, 1941, APPROVED JUNE 24, 1940.

2. SAID SECTION 2 READS AS FOLLOWS:

"SEC. 2. NO PART OF ANY APPROPRIATION CONTAINED IN THIS ACT SHALL BE USED DIRECTLY OR INDIRECTLY AFTER MAY 1, 1941, EXCEPT FOR TEMPORARY EMPLOYMENT IN CASE OF EMERGENCY, FOR THE PAYMENT OF ANY CIVILIAN FOR SERVICES RENDERED BY HIM ON THE CANAL ZONE WHILE OCCUPYING A SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITION UNLESS SUCH PERSON IS A CITIZEN OF THE UNITED STATES OF AMERICA OR OF THE REPUBLIC OF PANAMA: PROVIDED, HOWEVER, (1) THAT, NOTWITHSTANDING THE PROVISION IN THE ACT APPROVED AUGUST 11, 1939 (53 STAT. 1409), LIMITING EMPLOYMENT IN THE ABOVE-MENTIONED POSITIONS TO CITIZENS OF THE UNITED STATES FROM AND AFTER THE DATE OF THE APPROVAL OF SAID ACT, CITIZENS OF PANAMA MAY BE EMPLOYED IN SUCH POSITIONS; (2) THAT AT NO TIME SHALL THE NUMBER OF PANAMANIAN CITIZENS EMPLOYED IN THE ABOVE MENTIONED POSITIONS EXCEED THE NUMBER OF CITIZENS OF THE UNITED STATES SO EMPLOYED, IF UNITED STATES CITIZENS ARE AVAILABLE IN CONTINENTAL UNITED STATES OR ON THE CANAL ZONE; (3) THAT NOTHING IN THIS ACT SHALL PROHIBIT THE CONTINUED EMPLOYMENT OF ANY PERSON WHO SHALL HAVE RENDERED FIFTEEN OR MORE YEARS OF FAITHFUL AND HONORABLE SERVICE ON THE CANAL ZONE; (4) THAT IN THE SELECTION OF PERSONNEL FOR SKILLED, TECHNICAL, ADMINISTRATIVE, CLERICAL, SUPERVISORY, OR EXECUTIVE POSITIONS, THE CONTROLLING FACTORS IN FILLING THESE POSITIONS SHALL BE EFFICIENCY, EXPERIENCE, TRAINING, AND EDUCATION; (5) THAT ALL CITIZENS OF PANAMA AND THE UNITED STATES RENDERING SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY SERVICE ON THE CANAL ZONE UNDER THE TERMS OF THIS ACT (A) SHALL NORMALLY BE EMPLOYED NOT MORE THAN FORTY HOURS PER WEEK, (B) MAY RECEIVE AS COMPENSATION EQUAL RATES OF PAY BASED UPON RATES PAID FOR SIMILAR EMPLOYMENT IN CONTINENTAL UNITED STATES PLUS 25 PERCENTUM; (6) THIS ENTIRE SECTION SHALL APPLY ONLY TO PERSONS EMPLOYED IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITIONS ON THE CANAL ZONE DIRECTLY OR INDIRECTLY BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT: PROVIDED FURTHER, THAT THE PRESIDENT MAY SUSPEND COMPLIANCE WITH THIS SECTION IN TIME OF WAR OR NATIONAL EMERGENCY IF HE SHOULD DEEM SUCH COURSE TO BE IN THE PUBLIC INTEREST.'

3. THE 1941 APPROPRIATION, INSOFAR AS CONCERNS THE PANAMA CANAL, COVERS THE ORDINARY EXPENSES OF MAINTENANCE AND OPERATION OF THE PANAMA CANAL, AND SANITATION AND CIVIL GOVERNMENT OF THE CANAL ZONE, AND ALSO PROVIDES FUNDS FOR CONSTRUCTION OF SPECIAL DEFENSE INSTALLATIONS, AND FOR CONSTRUCTION OF A THIRD SET OF LOCKS. NO QUESTION IS HERE INVOLVED WITH REGARD TO THE APPLICATION OF SECTION 2 OF THE APPROPRIATION ACT TO EMPLOYEES OF THE REGULAR PANAMA CANAL ORGANIZATION PAID DIRECTLY FROM CANAL APPROPRIATIONS. HOWEVER, VARIOUS SERVICES OF THE PANAMA RAILROAD COMPANY ON THE ISTHMUS ARE UTILIZED BY THE PANAMA CANAL AND WILL CONTINUE TO BE SO UTILIZED, BOTH IN THE ORDINARY OPERATION AND MAINTENANCE OF THE CANAL AND IN THIRD LOCKS CONSTRUCTION; IN FACT, THE THIRD LOCK ACT, AUGUST 11, 1939, PUBLIC--- NO. 391--- 76TH CONGRESS, EXPRESSLY AUTHORIZES THE GOVERNOR OF THE PANAMA CANAL "TO UTILIZE ANY OF THE FACILITIES OR SERVICES OF THE PANAMA RAILROAD COMPANY UPON SUCH TERMS AND CONDITIONS AS MAY BE APPROVED BY THE SECRETARY OF WAR.' ( SEE SUBPARAGRAPH "E" OF THAT ACT.)

4. THE QUESTIONS PRESENTED INVOLVE PARTICULARLY THE MATTER OF THE EFFECT OF PROVISO NUMBERED ,/6)" IN SECTION 2,INSOFAR AS CONCERNS PERSONS EMPLOYED IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITIONS IN THE CANAL ZONE BY THE PANAMA RAILROAD COMPANY, AND THE QUESTIONS MAY BE PHRASED AS FOLLOWS:

(1) DOES THE PROVISO NUMBERED "/6)" HAVE THE EFFECT OF RENDERING SECTION 2 APPLICABLE TO ALL SUCH PERSONS, WITHOUT REGARD TO THE QUESTION WHETHER THEY ARE PAID FROM THE PANAMA CANAL APPROPRIATIONS WHICH ARE MADE BY THE ACT?--- OR

(2) DOES THE PROVISO NUMBERED "/6)" HAVE THE EFFECT MERELY OF RENDERING SECTION 2 APPLICABLE TO THOSE PERSONS WITHIN THE CLASS HEREINBEFORE DEFINED WHO ARE PAID DIRECTLY OR INDIRECTLY FROM THE PANAMA CANAL APPROPRIATIONS MADE BY THE ACT?

(3) ASSUMING THAT QUESTION 1 IS ANSWERED IN THE NEGATIVE, AND QUESTION 2 IN THE AFFIRMATIVE, UNDER WHAT CIRCUMSTANCES CAN SUCH PERSONS, OR ANY OF THEM, PROPERLY BE SAID TO BE PAID INDIRECTLY FROM THE PANAMA CANAL APPROPRIATIONS MADE BY THE ACT?

(4) AGAIN ASSUMING THAT QUESTION 1 IS ANSWERED IN THE NEGATIVE, AND QUESTION 2 IN THE AFFIRMATIVE, AND UNDER THE CIRCUMSTANCES HEREINAFTER STATED WITH REFERENCE TO THE PERFORMANCE OF SERVICES BY THE PANAMA RAILROAD COMPANY FOR THE PANAMA CANAL, CAN ANY OF SUCH PERSONS PROPERLY BE SAID TO BE PAID INDIRECTLY FROM THE PANAMA CANAL APPROPRIATIONS MADE BY THE ACT?

5. THE STOCK OF THE PANAMA RAILROAD COMPANY IS, AS YOU KNOW, WHOLLY OWNED BY THE UNITED STATES GOVERNMENT.

6. THAT THE INTENT OF PROVISO NUMBERED "/6)" IS TO RESTRICT, RATHER THAN TO INCREASE OR EXTEND, THE SCOPE OF APPLICATION OF SECTION 2, SEEMS EVIDENT FROM THE OPENING LANGUAGE OF THE PROVISO, READING,"THIS ENTIRE SECTION SHALL APPLY ONLY TO * * *.'

7. SINCE SECTION 2 AS A WHOLE CONSTITUTES A LIMITATION UPON THE USE OF THE APPROPRIATIONS CONTAINED IN THE ACT, AND NOTHING MORE, AND SINCE PERSONS EMPLOYED BY THE PANAMA RAILROAD COMPANY ARE NOT PAID DIRECTLY FROM APPROPRIATIONS CONTAINED IN THE ACT, IT WOULD APPEAR THAT QUESTION ,/1)" IS ANSWERABLE IN THE NEGATIVE AND QUESTION "/2)" IN THE AFFIRMATIVE. THE FOREGOING VIEWS ARE SOUND, THEN SECTION 2 IS APPLICABLE ONLY TO SUCH PERSONS EMPLOYED BY THE PANAMA RAILROAD COMPANY IN THE CANAL ZONE AS ARE PAID INDIRECTLY (NONE BEING PAID DIRECTLY) FROM APPROPRIATIONS CONTAINED IN THE ACT.

8. THE RELATED QUESTIONS "/3)" AND "/4)" ARE MORE DIFFICULT OF DETERMINATION. UNDER WHAT CIRCUMSTANCES CAN A PERSON EMPLOYED BY THE COMPANY IN THE CANAL ZONE PROPERLY BE SAID TO BE PAID INDIRECTLY FROM THE APPROPRIATIONS CONTAINED IN THE ACT? THIS QUESTION ALSO INVOLVES CONSTRUCTION OF THE PHRASE "DIRECTLY OR INDIRECTLY" APPEARING IN THE FOREPART OF SECTION 2. THE WORD "INDIRECTLY" MUST NECESSARILY HAVE BEEN INTENDED TO HAVE SOME MEANING AND EFFECT, AND THE QUESTION IS AS TO THE EXTENT THEREOF. IT MAY BE THAT THE PHRASE "DIRECTLY OR INDIRECTLY" WAS INSERTED PRIMARILY FOR THE PURPOSE OF RENDERING THE SECTION APPLICABLE TO PERSONS EMPLOYED BY CONTRACTORS WITH THE PANAMA CANAL, THE THEORY BEING THAT THE CONTRACTOR PERFORMS THE CONTRACTUAL SERVICES SOLELY FOR THE PANAMA CANAL AND IS PAID FROM APPROPRIATIONS CONTAINED IN THE ACT AND, IN TURN, PAYS HIS EMPLOYEES WHOLLY FROM THE AMOUNTS RECEIVED AS PAYMENT UNDER THE CONTRACT. IT SEEMS CLEAR THAT SUCH EMPLOYEES OF CONTRACTORS CAN PROPERLY BE SAID TO BE PAID INDIRECTLY FROM THE APPROPRIATIONS. SUCH, HOWEVER, IS NOT THE CASE WITH THE PANAMA RAILROAD COMPANY, WHICH IS A PUBLIC UTILITY, AND THE SERVICES OF WHICH ARE AVAILABLE TO, AND UTILIZED BY, THE BUSINESS COMMUNITIES IN THE REPUBLIC OF PANAMA, SHIPPING INTERESTS USING THE PANAMA CANAL, EMPLOYEES OF THE PANAMA CANAL AND THE PANAMA RAILROAD COMPANY, AND OTHER PRIVATE PERSONS AND INTERESTS.

9. THE VARIOUS SERVICES PERFORMED BY THE PANAMA RAILROAD COMPANY FOR THE PANAMA CANAL ON THE STHMUS MAY BE SUMMARIZED AS FOLLOWS:

(A) THE RAILROAD PROPER FURNISHES FREIGHT, EXPRESS, AND PASSENGER TRANSPORTATION SERVICE. OF THE GROSS REVENUES FROM THIS SERVICE APPROXIMATELY 33 1/3 PERCENT ARE CURRENTLY RECEIVED FROM THE PANAMA CANAL.

(B) THE HARBOR TERMINALS HANDLE CARGO ON THE PIERS. OF THE GROSS REVENUES FROM THIS SERVICE APPROXIMATELY 5 3/4 PERCENT ARE CURRENTLY RECEIVED FROM THE PANAMA CANAL.

(C) THE COALING PLANTS SUPPLY COAL AND ALSO PERFORM THE SERVICE OF UNLOADING SAND FROM BARGES. OF THE GROSS REVENUES FROM THESE SUPPLIES AND SERVICES APPROXIMATELY 2 1/2 PERCENT ARE CURRENTLY RECEIVED FROM THE PANAMA CANAL.

(D) THE TELEPHONE SECTION RENTS TELEPHONE INSTRUMENTS, ELECTRIC CLOCKS, AND PRINTING-TELEGRAPH TYPEWRITERS. OF THE GROSS REVENUES FROM THESE SERVICES APPROXIMATELY 33 1/3 PERCENT ARE CURRENTLY RECEIVED FROM THE PANAMA CANAL.

(E) THE DAIRY FARM SUPPLIES MILK TO PANAMA CANAL HOSPITALS. THE PERCENTAGE OF REVENUES IS HEREINAFTER INCLUDED IN THE FIGURE FOR THE COMMISSARIES.

(F) THE HOTELS TIVOLI AND WASHINGTON FURNISH LODGING AND SUBSISTENCE FOR CANAL PERSONNEL WHEN ON OFFICIAL BUSINESS. OF THE TOTAL REVENUES OF THESE HOTELS FROM 1 1/2 TO 2 1/2 PERCENT ARE CURRENTLY RECEIVED FROM THE PANAMA CANAL.

(G) THE COMMISSARIES SUPPLY MERCHANDISE AND SERVICES. OF THE GROSS REVENUES FROM THIS SERVICE APPROXIMATELY 9 PERCENT ARE RECEIVED FROM THE PANAMA CANAL.

(H) THE BRIDGE AND BUILDING GANGS, OF WHICH THERE ARE TWO, PERFORM THE WORK OF ROUTINE MAINTENANCE OF PANAMA CANAL DOCKS, PIERS, AND APPURTENANCES, IN ADDITION TO THEIR WORK FOR THE PANAMA RAILROAD COMPANY. THESE GANGS ARE UNDER SUPERVISION OF THE ROADMASTER OF THE COMPANY AND ARE CARRIED ON PANAMA RAILROAD PAY ROLLS. OF THE TOTAL COST OF THIS LABOR BETWEEN JULY 1, 1939, AND APRIL 30, 1940, 50 PERCENT WAS BILLED AGAINST THE PANAMA CANAL.

10. THE REVENUES RECEIVED BY THE PANAMA RAILROAD COMPANY FROM ALL SOURCES, INCLUDING THE PANAMA CANAL AND COMMERCIAL INTERESTS, FORM A PART OF THE GENERAL REVENUES OF THE COMPANY AND A PORTION OF SUCH REVENUES NATURALLY IS EXPENDED FOR PAYMENT OF COMPENSATION TO EMPLOYEES. A PORTION OF SUCH REVENUES REPRESENTS PROFITS WHICH ARE EVENTUALLY COVERED INTO THE UNITED STATES TREASURY AS DIVIDENDS ON THE CAPITAL STOCK, WHILE ANOTHER PORTION OF THE REVENUES IS UTILIZED FOR THE PURPOSE OF PURCHASING SUPPLIES, MATERIAL AND EQUIPMENT, AND STILL ANOTHER PORTION OF THE REVENUES IS SET ASIDE IN THE FORM OF DEPRECIATION RESERVE FOR THE REPLACEMENT OF EXISTING PLANT. OBVIOUSLY IT WOULD BE IMPOSSIBLE TO TRACE THE ULTIMATE APPLICATION TO ANY INDIVIDUAL EMPLOYEE OR GROUP OF EMPLOYEES OF THE PORTION OF THE TOTAL REVENUES RECEIVED FROM THE PANAMA CANAL, AND EVEN IF THIS WERE NOT POSSIBLE THERE WOULD STILL REMAIN THE QUESTION OF APPORTIONING THE PRO RATA SHARE OF THE REVENUES RECEIVED FROM THIS SOURCE AS AGAINST THE PORTION OF THE REVENUES RECEIVED FROM COMMERCIAL AND PRIVATE INTERESTS.

11. YOUR DECISION ON THE QUESTIONS PROPOUNDED HEREIN IS RESPECTFULLY REQUESTED AT AS EARLY A DATE AS IS CONVENIENT.

THE CITED "PROVISO NUMBERED "/6)," READ IN CONJUNCTION WITH THE INTRODUCTORY LANGUAGE OF SECTION 2 OF THE WAR DEPARTMENT CIVIL APPROPRIATION ACT, 1941, PUBLIC, NO. 653, APPROVED JUNE 24, 1940, 54 STAT. 511, IS AS FOLLOWS:

NO PART OF ANY APPROPRIATION CONTAINED IN THIS ACT SHALL BE USED DIRECTLY OR INDIRECTLY AFTER MAY 1, 1941, EXCEPT FOR TEMPORARY EMPLOYMENT IN CASE OF EMERGENCY, FOR THE PAYMENT OF ANY CIVILIAN FOR SERVICES RENDERED BY HIM ON THE CANAL ZONE WHILE OCCUPYING A SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITION UNLESS SUCH PERSON IS A CITIZEN OF THE UNITED STATES OF AMERICA OR OF THE REPUBLIC OF PANAMA: PROVIDED, HOWEVER * * * (6) THIS ENTIRE SECTION SHALL APPLY ONLY TO PERSONS EMPLOYED IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITIONS ON THE CANAL ZONE DIRECTLY OR INDIRECTLY BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT: * * *

NO APPROPRIATION IS CONTAINED IN THAT ACT FOR THE PANAMA RAILROAD COMPANY OR FOR ANY OTHER ,CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT.' HENCE, TAKEN LITERALLY, THE PROVISO "/6)" MIGHT BE REGARDED AS NEITHER ADDING TO NOR SUBTRACTING FROM THE EFFECT OF THE PRIOR LANGUAGE. BUT IT IS A CANON OF STATUTORY INTERPRETATION THAT THE LEGISLATURE IS PRESUMED TO HAVE USED NO SUPERFLUOUS WORDS, AND THE RULE IS THAT A STATUTE IS TO BE SO CONSTRUED THAT, IF POSSIBLE, NO CLAUSE, SENTENCE, NOR WORD SHALL BE SUPERFLUOUS, VOID OR INSIGNIFICANT. PLATT V. UNION P.R. CO., 99 U.S. 48; UNITED STATES V. HOWELL, 11 WALL. 432; MONTCLAIR V. RAMSDELL, 107 U.S. 147. IN THESE CIRCUMSTANCES THE MEANING AND EFFECT OF THE SAID PROVISO "/6)" APPEARS SUFFICIENTLY DOUBTFUL TO JUSTIFY REFERENCE TO THE LEGISLATIVE HISTORY OF ITS ENACTMENT, AND TO THE MODE BY WHICH IT WAS INTRODUCED IN THE ACT, IN DETERMINING THE LEGISLATIVE INTENT. SEE BLAKE V. NATIONAL CITY BANK, 23 WALL. 307, UNITED STATES V. DICKERSON, NO. 705, AND UNITED STATES V. AMERICAN TRUCKING ASSOCIATION, NO. 713, DECIDED BY THE SUPREME COURT OF THE UNITED STATES MAY 27, 1940. AS ORIGINALLY PASSED BY THE HOUSE OF REPRESENTATIVES AND SENT TO THE SENATE, THE WAR DEPARTMENT CIVIL APPROPRIATION BILL FOR 1941, H.R. 8668, CONTAINED THE FOLLOWING PROVISION:

SEC. 2. NO PART OF ANY APPROPRIATION CONTAINED IN THIS ACT SHALL BE USED DIRECTLY OR INDIRECTLY AFTER JANUARY 1, 1941, FOR THE PAYMENT OF ANY CIVILIAN FOR SERVICES RENDERED BY THEM ON THE CANAL ZONE WHILE OCCUPYING A SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, OR SUPERVISORY POSITION UNLESS SUCH PERSON IS A CITIZEN OF THE UNITED STATES OF AMERICA.

IN THE HEARINGS ON THE BILL BEFORE THE SUBCOMMITTEE OF THE SENATE COMMITTEE ON APPROPRIATIONS THIS PROVISION WAS OPPOSED BY REPRESENTATIVES OF THE PANAMA CANAL, THE STATE DEPARTMENT, AND THE NAVY DEPARTMENT (IN VIEW OF A SIMILAR PROVISION INCLUDED IN THE PENDING NAVY APPROPRIATION BILL), AND THE SECRETARY OF WAR SUBMITTED A STATEMENT REQUESTING THAT THE SAID SECTION 2 BE STRICKEN FROM THE BILL. AMONG THE REASONS GIVEN FOR OPPOSING THE PROVISION AS PASSED BY THE HOUSE, THE PRINCIPAL ONES APPEAR TO HAVE BEEN THAT IT WOULD BE IN CONFLICT WITH COMMITMENTS RESPECTING EQUAL EMPLOYMENT OPPORTUNITY OF PANAMANIANS ON THE CANAL ZONE MADE IN CONNECTION WITH THE 1936 TREATY WITH THE REPUBLIC OF PANAMA, AND THE ADDITIONAL COST OF REPLACING ALIEN TROPICAL EMPLOYEES OF THE SPECIFIC CLASSES IN THE CANAL ZONE WITH AMERICAN CITIZENS BROUGHT FROM THE UNITED STATES. PROPONENTS OF THE PROVISION URGED THAT IT WOULD PROVIDE NEEDED JOBS FOR UNEMPLOYED AMERICAN CITIZENS AND THAT IN VIEW OF THE GENERAL UNEMPLOYMENT AND RELIEF SITUATION, AMERICAN CITIZENS SHOULD BE GIVEN FIRST CONSIDERATION IN THAT RESPECT.

THE BILL WAS REPORTED BACK TO THE SENATE ON APRIL 9, 1940, WITH SENATE REPORT NO. 1397, SUBMITTED BY SENATOR ELMER THOMAS, CHAIRMAN OF THE SUBCOMMITTEE, RECOMMENDING THAT SECTION 2 OF THE BILL AS PASSED BY THE HOUSE BE AMENDED TO READ SUBSTANTIALLY AS IT WAS FINALLY ENACTED--- AS SET FORTH IN YOUR LETTER, SUPRA--- DOWN TO, BUT NOT INCLUDING, THE LANGUAGE CONTAINED IN THE SO-CALLED PROVISO "/6)," HERE IN QUESTION. THE COMMITTEE AMENDMENT, BY PROVIDING FOR EQUAL EMPLOYMENT OPPORTUNITY FOR CITIZENS OF PANAMA, MET THE OBJECTION OF CONFLICT WITH THE TREATY COMMITMENT AND, ALSO, TO THAT EXTENT, HAD THE EFFECT OF MODERATING ANY INCREASED COSTS FROM THE SUBSTITUTION OF AMERICAN FOR ALIEN EMPLOYEES.

ON THE SAME DAY ( APRIL 9, 1940) THAT THE BILL WAS SO REPORTED BACK TO THE SENATE WITH THE PROPOSED COMMITTEE AMENDMENT, THERE WAS ORDERED TO LIE ON THE TABLE AND TO BE PRINTED AN AMENDMENT INTENDED TO BE PROPOSED BY SENATOR MCCARRAN, TO INCLUDE IN THE SAID SECTION 2 THE LANGUAGE WHICH AFTERWARDS WAS ENACTED AS THE SO-CALLED PROVISO "/6)," AS FOLLOWS:

* * * THIS ENTIRE SECTION SHALL APPLY ONLY TO PERSONS EMPLOYED IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITIONS ON THE CANAL ZONE DIRECTLY OR INDIRECTLY BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT. ( ITALICS SUPPLIED.)

SUBSEQUENTLY, ON APRIL 17, 1940, WHEN THE BILL WAS BEING CONSIDERED BY THE SENATE, THE COMMITTEE AMENDMENT OF SECTION 2 HAVING BEEN STATED, CONGRESSIONAL RECORD OF APRIL 17, 1940, PAGES 7028, ET SEQ., THERE WAS READ TO THE SENATE, AT THE REQUEST OF SENATOR BARKLEY, A LETTER DATED APRIL 12, 1940, FROM THE SECRETARY OF WAR, AS FOLLOWS:

DEAR SENATOR BARKLEY: MY ATTENTION HAS BEEN CALLED TO THE AMENDMENT OF SECTION 2 OF THE WAR DEPARTMENT CIVIL-FUNCTIONS APPROPRIATION BILL FOR THE FISCAL YEAR 1941 ( H.R. 8668) BY THE SENATE COMMITTEE ON APPROPRIATIONS IN REPORT NO. 1397, AND TO THE ADDITIONAL AMENDMENT TO SECTION 2, WHICH SENATOR MCCARRAN INTENDS TO PROPOSE ON THE SENATE FLOOR.

SECTION 2 OF THE BILL AS REPORTED BY THE COMMITTEE WOULD PREVENT THE EMPLOYMENT ON THE CANAL ZONE OF ALL PERSONS OTHER THAN CITIZENS OF THE UNITED STATES OR OF THE REPUBLIC OF PANAMA, IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, AND SUPERVISORY POSITIONS, EXCEPT FOR TEMPORARY EMPLOYMENT IN EMERGENCIES, WITH A PROVISO WHICH WOULD AUTHORIZE THE CONTINUED EMPLOYMENT OF PERSONS WHO SHALL HAVE RENDERED 15 OR MORE YEARS OF FAITHFUL AND HONORABLE SERVICE ON THE CANAL ZONE.

THE PROPOSED LEGISLATION WOULD ADD GREATLY TO THE COSTS OF MAINTAINING, OPERATING, IMPROVING, AND DEFENDING THE CANAL WITHOUT SECURING COMMENSURATE ADVANTAGES. OWING TO THE HIGH COSTS OF RECRUITING, TRANSPORTING, AND MAINTAINING AMERICAN CITIZENS FOR WORK IN THE CANAL ZONE, THE ADDITIONAL COSTS THAT WOULD HAVE TO BE INCURRED UNDER THIS LEGISLATION WOULD BE MORE THAN SUFFICIENT TO EMPLOY AN EQUAL NUMBER AT GOOD WAGES IN OUR OWN COUNTRY, WHERE NONE OF THE UNFAVORABLE CLIMATIC AND OTHER ADVERSE CONDITIONS THAT PREVAIL IN THE CANAL ZONE WOULD BE ENCOUNTERED.

THE ADDITIONAL COSTS OF REPLACING A LARGE NUMBER OF EMPLOYEES ARE WELL SET FORTH IN A DETAILED ANALYSIS MADE IN 1935 BY THE PANAMA CANAL TO DETERMINE THE COST OF REPLACING A SPECIFIED GROUP OF NATIVE TROPICAL WORKERS WITH AMERICANS. THE ANALYSIS DEALT WITH A PROPOSAL TO EMPLOY 3,144 ADDITIONAL AMERICANS. IT SHOWED THAT THE CAPITAL EXPENDITURE NECESSARY TO PROVIDE THE REQUISITE HOUSING, HOSPITAL, SCHOOL, AND MUNICIPAL FACILITIES WOULD AMOUNT TO $26,525,000, OR, IN ROUND FIGURES, $8,400 PER NEW AMERICAN EMPLOYEE, AND THAT THE CONTINUING ANNUAL COST THEREAFTER WOULD BE APPROXIMATELY $5,350,000. THIS ESTIMATE IS CONSERVATIVE.

THE AMOUNTS INCLUDED FOR THE PANAMA CANAL IN THE WAR DEPARTMENT CIVIL- FUNCTIONS APPROPRIATION BILL DO NOT COVER THESE ADDITIONAL COSTS. ORDER TO PROVIDE THE HOUSING AND OTHER NECESSARY FACILITIES BY MAY 1, 1941, THE DATE SECTION 2 OF THE BILL WOULD BECOME EFFECTIVE, IT WOULD BE NECESSARY TO BEGIN THEIR CONSTRUCTION AS SOON AS PRACTICABLE, AND TO PROSECUTE IT VIGOROUSLY. WHILE AN EXPENDITURE OF $25,000,000 OR MORE WOULD BE REQUIRED EVENTUALLY, AT LEAST $10,000,000 SHOULD BE INCLUDED IN THE PENDING APPROPRIATION FOR THE PANAMA CANAL FOR THE CONSTRUCTION OF SUCH PART OF THE NECESSARY QUARTERS AND OTHER FACILITIES AS IT IS REASONABLY PRACTICABLE TO PROVIDE BY MAY 1, 1941. AN INCREASE OF $1,000,000 SHOULD ALSO BE INCLUDED TO COVER THE INCREASED OPERATING COSTS DURING THE LAST 2 MONTHS OF THE FISCAL YEAR 1941. THE FUNDS REQUIRED FOR CARRYING THE CONSTRUCTION OF THE NECESSARY HOUSING AND FACILITIES TO COMPLETION AND FOR MEETING THE INCREASED COSTS OF OPERATION CAN BE SUBMITTED IN THE REGULAR ESTIMATES FOR 1942 AND SUBSEQUENT FISCAL YEARS, BUT THE INITIAL APPROPRIATION FOR BEGINNING THE WORK SHOULD BE PROVIDED IN THE PENDING BILL.

THE AMENDMENT INTENDED TO BE PROPOSED BY SENATOR MCCARRAN, WHICH CONSTITUTES NEW LEGISLATION NOT NECESSARY FOR THE PURPOSES OF THE APPROPRIATION MEASURE, WOULD EXTEND THESE UNECONOMICAL AND UNDESIRABLE EFFECTS TO THE PANAMA RAILROAD AND WOULD JEOPARDIZE THE SOUND ECONOMIC STATUS OF THAT SELF-SUSTAINING CORPORATION.

I BELIEVE IT WOULD BE PREFERABLE TO DEFER THIS LEGISLATION FOR VERY CAREFUL CONSIDERATION OF ALL ITS EFFECTS; BUT IF IT IS TO BE ENACTED NOW, THE APPROPRIATION SHOULD BE INCREASED AS SUGGESTED CONSERVATIVELY ABOVE. ( ITALICS SUPPLIED.)

THERE FOLLOWED A DISCUSSION ON THE FLOOR OF THE SENATE AS TO THE ADVISABILITY OF INCLUDING IN THE BILL AN APPROPRIATION FOR THE ADDITIONAL COSTS, AS REQUESTED BY THE SECRETARY OF WAR, OR WHETHER ANY SUCH APPROPRIATION SHOULD BE DEFERRED FOR INCLUSION IN A SUBSEQUENT DEFICIENCY APPROPRIATION ACT, IF SHOWN BY ACTUAL EXPERIENCE TO BE REQUIRED, SUCH DISCUSSION APPARENTLY PROCEEDING ON THE ASSUMPTION THAT ANY SUCH ADDITIONAL COSTS FOR SALARIES, HOUSING, ETC., RESULTING FROM THE PROPOSED LEGISLATION TO REPLACE ALIEN EMPLOYEES OF THE SPECIFIED CLASSES ON THE CANAL ZONE WITH CITIZENS OF THE UNITED STATES OR OF PANAMA WOULD INCLUDE SUCH COSTS TO BE INCURRED BY OR ON ACCOUNT OF THE PANAMA RAILROAD CO. FOLLOWING THIS DISCUSSION THE COMMITTEE AMENDMENT WAS AGREED TO, AND THEREUPON THE MCCARRAN AMENDMENT WAS STATED AND AGREED TO, AS SHOWN BY THE RECORD, AT PAGE 7033, AS FOLLOWS:

MR. MCCARRAN. AT THIS TIME I ASK TO HAVE STATED AN AMENDMENT WITH RESPECT TO WHICH THERE MUST BE A SUSPENSION OF THE RULE.

THE PRESIDING OFFICER. THE AMENDMENT WILL BE STATED.

THE CHIEF CLERK. AT THE END OF THE COMMITTEE AMENDMENT, ON PAGE 18, AFTER LINE 4, IT IS PROPOSED TO INSERT THE FOLLOWING:

(5) THIS ENTIRE SECTION SHALL APPLY ONLY TO PERSONS EMPLOYED IN SKILLED, TECHNICAL, CLERICAL, ADMINISTRATIVE, EXECUTIVE, OR SUPERVISORY POSITIONS ON THE CANAL ZONE DIRECTLY OR INDIRECTLY BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT.

THE PRESIDING OFFICER. IT SEEMS TO THE CHAIR THAT THE SENATOR'S AMENDMENT CONFLICTS WITH THE COMMITTEE AMENDMENT WHICH HAS JUST BEEN AGREED TO, AND THAT IT WOULD BE NECESSARY TO HAVE THE VOTE BY WHICH THE COMMITTEE AMENDMENT WAS AGREED TO RECONSIDERED.

MR. MCCARRAN. MY AMENDMENT, WHICH WAS JUST READ AT THE DESK, IS A PART OF THE AMENDMENT OFFERED IN THE COMMITTEE, AND I THINK I AM AT LIBERTY TO SAY THAT THE LANGUAGE OF MY AMENDMENT WOULD HAVE BEEN ADOPTED BY THE COMMITTEE TOGETHER WITH THE REMAINDER OF THE AMENDMENT HAD IT NOT BEEN CONSIDERED TO BE LEGISLATION.

MR. THOMAS OF OKLAHOMA. MR. PRESIDENT, WILL THE SENATOR YIELD?

MR. MCCARRAN. I YIELD.

MR. THOMAS OF OKLAHOMA. THE AMENDMENT OFFERED BY THE SENATOR FROM NEVADA WAS AGREED TO BY THE COMMITTEE, AND HE IS AUTHORIZED BY THE COMMITTEE TO OFFER THE AMENDMENT TO THE COMMITTEE AMENDMENT ON BEHALF OF THE COMMITTEE. BUT BECAUSE IT DOES CONTAIN LEGISLATION IT COULD NOT BE REPORTED BY THE COMMITTEE. IT HAD TO BE OFFERED BY THE SENATOR AND VOTED UPON ON THE FLOOR. UNLESS SOME SENATOR MAKES A POINT OF ORDER, THERE IS NO OCCASION FOR SUSPENSION OF THE RULES, BUT IN THE EVENT POINT OF ORDER IS MADE WE MUST ADMIT IT IS LEGISLATION, IN WHICH EVENT PROPER NOTICE HAS BEEN SERVED FOR SUSPENSION OF THE RULE.

THE PRESIDING OFFICER. WITHOUT OBJECTION, THE VOTE BY WHICH THE COMMITTEE AMENDMENT DEALING WITH SECTION 2, BEGINNING WITH LINE 21, PAGE 16, WAS AGREED TO IS RECONSIDERED. WITHOUT OBJECTION, THE AMENDMENT OFFERED BY THE SENATOR FROM NEVADA ( MR. MCCARRAN) TO THE COMMITTEE AMENDMENT IS AGREED TO, AND WITHOUT OBJECTION, THE COMMITTEE AMENDMENT, AS AMENDED, IS AGREED TO.

THE BILL AS AMENDED BY THE SENATE IN THIS AND OTHER PARTICULARS WAS SENT TO CONFERENCE AND, AS FINALLY ENACTED, SECTION 2 WAS RETAINED SUBSTANTIALLY AS AMENDED BY THE SENATE, THERE BEING ADDED A NEW PROVISO "/1)" RESPECTING THE ACT OF AUGUST 11, 1939, NOT HERE INVOLVED, AND THE FURTHER PROVISO, AT THE END OF THE SECTION, AUTHORIZING THE PRESIDENT TO SUSPEND COMPLIANCE WITH THE SECTION IN TIME OF WAR OR NATIONAL EMERGENCY. THE LANGUAGE OF THE MCCARRAN AMENDMENT WAS RETAINED AS ADOPTED IN THE SENATE, EXCEPT THAT IT WAS NUMBERED "/6)" INSTEAD OF "/5)" BY REASON OF THE INCLUSION OF THE NEW PROVISO "/1).'

AGAINST THIS BACKGROUND OF ITS LEGISLATIVE HISTORY IT SEEMS CLEAR THAT THE MCCARRAN AMENDMENT WAS ADOPTED WITH THE VIEW THAT IT WOULD EXTEND THE PROHIBITION AGAINST THE EMPLOYMENT OF ALIENS, EXCEPT ON THE CONDITIONS OTHERWISE STATED IN SECTION 2, TO THE PANAMA RAILROAD CO. THE SENATE WAS ADVISED BY THE SECRETARY OF WAR BEFORE ADOPTION OF THE AMENDMENT THAT SUCH WOULD BE ITS EFFECT. THE FOLLOWING DISCUSSION AS TO PROVIDING FOR ANY INCREASED COSTS WAS APPARENTLY ON THE BASIS THAT THE PANAMA RAILROAD CO. WOULD BE INCLUDED. THE CHAIRMAN OF THE SUBCOMMITTEE STATED TO THE SENATE THAT THE MCCARRAN AMENDMENT WAS AGREED TO BY THE COMMITTEE BUT BECAUSE IT CONTAINED "LEGISLATION" IT COULD NOT BE REPORTED BY THE COMMITTEE, AND THAT "IN THE EVENT A POINT OF ORDER IS MADE WE MUST ADMIT IT IS LEGISLATION.' IT IS NOT APPARENT HOW THE AMENDMENT MIGHT THUS BE VIEWED AS ,LEGISLATION" NOT GERMANE TO THE APPROPRIATION BILL AND SO SUBJECT TO BE STRICKEN OUT ON A POINT OF ORDER, UNLESS IT WAS VIEWED AS EXTENDING THE PROHIBITION TO AGENCIES FOR WHICH NO APPROPRIATIONS WERE BEING MADE. LEAST, IN THE ABSENCE OF ANYTHING TO THE CONTRARY, THESE CONSIDERATIONS APPEAR SUFFICIENT TO WARRANT THE CONCLUSION THAT THIS WAS THE PURPOSE INTENDED BY THE CONGRESS TO BE ACCOMPLISHED AND, THEREFORE, IS THE INTENT OF THE LEGISLATION, UNLESS THE LANGUAGE EMPLOYED CLEARLY REQUIRES A DIFFERENT CONSTRUCTION.

EXAMINING THE LANGUAGE EMPLOYED IN THE LIGHT OF THESE INDICATIONS OF THE LEGISLATIVE WILL, IT MAY REASONABLY BE VIEWED AS DESIGNED AND INTENDED TO EFFECT AN EXTENSION OF THE PROHIBITON TO THE PANAMA RAILROAD CO. THE SO CALLED PROVISO "/6)"--- A PROVISO IN FORM BUT NOT NECESSARILY SO IN SUBSTANCE--- DIRECTS THAT "THIS ENTIRE SECTION" SHALL APPLY ONLY TO PERSONS "EMPLOYED" IN THE SPECIFIED POSITIONS ON THE CANAL ZONE DIRECTLY OR INDIRECTLY "BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT.' AS THE SECTION IS TO APPLY "ONLY" TO SUCH PERSONS, IT IS TO BE REGARDED AS INTENDED TO APPLY TO SUCH PERSONS; THAT IS, AMONG OTHERS, TO PERSONS EMPLOYED "DIRECTLY OR INDIRECTLY" BY THE PANAMA RAILROAD CO. THE "ENTIRE SECTION" WHICH IS THUS TO APPLY TO PERSONS EMPLOYED DIRECTLY OR INDIRECTLY BY THE PANAMA RAILROAD CO., AMONG OTHERS, IS LIMITED IN SCOPE AT THE VERY BEGINNING, HOWEVER, BY THE LANGUAGE THAT NO PART OF ANY APPROPRIATION "CONTAINED IN THIS ACT" SHALL BE USED DIRECTLY OR INDIRECTLY AFTER MAY 1, 1941, FOR THE PAYMENT OF ANY CIVILIAN WHILE OCCUPYING ANY OF THE SPECIFIED POSITIONS, UNLESS SUCH PERSON IS A CITIZEN OF THE UNITED STATES OR OF THE REPUBLIC OF PANAMA. AS THE ENTIRE SECTION IS THUS LIMITED TO A PROHIBITION AGAINST THE USE OF APPROPRIATIONS CONTAINED "IN THIS ACT," AND AS NO APPROPRIATIONS FOR THE PANAMA RAILROAD CO. ARE CONTAINED IN THE ACT, THE EXTENSION OF THE "ENTIRE SECTION" TO THE PANAMA RAILROAD CO. WOULD NOT APPEAR DIRECTLY TO PROHIBIT THE USE OF PANAMA RAILROAD CO. FUNDS, NOT APPROPRIATED BY THAT ACT, FOR THE EMPLOYMENT OF ALIENS. BUT THE SAME RESULT IS ACCOMPLISHED IF IT BE CONSIDERED THAT PERSONS DIRECTLY OR INDIRECTLY EMPLOYED BY THE PANAMA RAILROAD CO. ARE "INDIRECTLY" PAID FROM APPROPRIATIONS CONTAINED IN THE ACT, WITHIN THE INTENT OF SECTION 2. IN VIEW OF THE EVIDENT LEGISLATIVE PURPOSE, AS BEST IT CAN BE GLEANED FROM THE LEGISLATIVE HISTORY OF THE ENACTMENT, TAKEN IN CONJUNCTION WITH THE SURROUNDING CIRCUMSTANCES AND THE LANGUAGE USED, I AM OF THE OPINION THAT THE WORD "INDIRECTLY" SHOULD BE BROADLY SO CONSTRUED. FROM YOUR LETTER IT APPEARS THAT A MOST SUBSTANTIAL PART, IF NOT THE GREATER PART, OF THE RAILROAD REVENUES ARE DERIVED FROM THE PANAMA CANAL APPROPRIATIONS. MOREOVER, PROVISIONS IDENTICAL WITH THOSE OF SAID SECTION 2 WERE INCLUDED IN THE NAVY APPROPRIATION ACT, 1941, APPROVED JUNE 11, 1940, AND IN THE MILITARY APPROPRIATION ACT, 1941, APPROVED JUNE 13, 1940; THAT IS, CONCURRENTLY WITH THE PRESENT ACT, AND AS ALL ARE INTENDED TO CARRY INTO EFFECT THE SAME PURPOSE, THE THREE PROVISIONS ARE TO BE READ TOGETHER IN THIS RESPECT. THE RAILROAD REVENUES FROM APPROPRIATIONS MADE BY THESE THREE ACTS, IDENTICALLY RESTRICTED IN THIS REGARD, DOUBTLESS WILL CONSTITUTE THE GREATER PART OF ALL THE REVENUES FROM WHICH PERSONS DIRECTLY OR INDIRECTLY EMPLOYED BY THE RAILROAD MAY BE PAID. IN N.Y. EX REL ROGERS V. GRAVES, 299 U.S. 401, THE SUPREME COURT OF THE UNITED STATES, IN DISCUSSING THE RELATIONSHIP BETWEEN THE PANAMA RAILROAD CO. AND PANAMA CANAL ACTIVITIES, SAID:

THE CORPORATION WAS PRIVATELY OWNED AND OPERATED FOR MANY YEARS; BUT IN 1904, THE UNITED STATES ACQUIRED THE ENTIRE CAPITAL STOCK OF THE CORPORATION, AND EVER SINCE HAS BEEN, AND NOW IS, THE SOLE OWNER THEREOF. THE COMPANY OPERATES A RAILROAD ACROSS THE ISTHMUS, CONDUCTS A COMMISSARY ESTABLISHMENT FOR THE BENEFIT OF THE PERSONNEL OF THE PANAMA CANAL, THE RAILROAD COMPANY, AND THE ARMED FORCES OF THE UNITED STATES UPON THE ISTHMUS, AND OPERATES A DAIRY AND TWO HOTELS IN CONNECTION THEREWITH. ALSO OPERATES A LINE OF STEAMSHIPS BETWEEN NEW YORK AND THE CANAL ZONE, WHICH SHIPS AFFORD THE PERSONNEL OF THE CANAL AND OF THE RAILROAD COMPANY TRANSPORTATION AT A NOMINAL RATE, AND CARRY FREIGHT FOR THE GOVERNMENT OF THE UNITED STATES TO THE CANAL ZONE AT 25 PERCENT LESS THAN THE CUSTOMARY TARIFF RATES.

THE ACQUISITION BY THE UNITED STATES OF THE PANAMA RAIL ROAD COMPANY WAS COINCIDENT WITH ITS ACQUISITION OF THE CONTROL OF THE PANAMA CANAL ZONE AND THE RIGHT TO CONSTRUCT AND MAINTAIN A SHIP CANAL ACROSS IT. SINCE THE ACQUISITION OF THE RAILROAD COMPANY BY THE GOVERNMENT, THE DIRECTORS, THIRTEEN IN NUMBER, HAVE BEEN ELECTED BY THE SECRETARY OF WAR, AS SOLE STOCKHOLDER OF RECORD OF THE CORPORATE STOCK WITH THE EXCEPTION OF THIRTEEN QUALIFYING SHARES HELD BY THE DIRECTORS.

DURING THE CONSTRUCTION OF THE CANAL, THE RAILROAD WAS ALMOST EXCLUSIVELY EMPLOYED AS AN ADJUNCT OF SUCH CONSTRUCTION, ALTHOUGH IT WAS INCIDENTALLY USED ALSO FOR COMMERCIAL TRANSPORTATION ACROSS THE ISTHMUS. IN UNITED STATES EX REL. SKINNER AND EDDY CORP. V. MCCARL, 275 U.S. 1, 6, WE SAID," FOR MANY YEARS BEFORE THE WAR, THE GOVERNMENT HAD EMPLOYED THE PANAMA RAILROAD COMPANY AS ITS INSTRUMENTALITY IN CONNECTION WITH THE CANAL.' A FOOTNOTE FOLLOWING THAT STATEMENT, WE POINTED OUT THAT THE STOCK IN THE RAILROAD COMPANY WAS ACQUIRED IN ORDER THAT THE RAILROAD MIGHT BE USED IN THE MANNER MOST HELPFUL TO THE GOVERNMENT IN CONSTRUCTING THE CANAL, AND CITED PUBLIC DOCUMENTS WHICH SUSTAINED THAT VIEW.

IN ORDER TO REACH A CORRECT DETERMINATION OF THE QUESTION WHETHER THE RAILROAD COMPANY IS EXERCISING FUNCTIONS OF A GOVERNMENTAL CHARACTER, THE RAILROAD AND SHIPS ARE TO BE CONSIDERED NOT AS THINGS APART, BUT IN THEIR RELATION TO THE PANAMA CANAL; AND IT IS CLEAR THAT THE RAILROAD AND SHIPS AFTER THE COMPLETION OF THE CANAL, CONTINUED TO BE USED CHIEFLY AS ADJUNCTS TO ITS MANAGEMENT AND OPERATION. * * *

SUCH BEING THE STATUS OF THE CANAL, IT REQUIRES NO ARGUMENT TO DEMONSTRATE THAT ALL AUXILIARIES PRIMARILY DESIGNED AND USED TO AID IN ITS MANAGEMENT AND OPERATION, AND WHICH HAVE THAT EFFECT, PARTAKE OF ITS NATURE AND ARE THEMSELVES COOPERATING REGULATORS--- OR, PERHAPS MORE ACCURATELY SPEAKING, CONSTITUTE, WITH THE CANAL, A SINGLE GREAT REGULATOR- -- OF NATIONAL AND INTERNATIONAL COMMERCE. AND THIS, WE THINK, IS THE EFFECT OF THE INTERRELATION OF THE RAILROAD COMPANY'S ACTIVITIES WITH THE MANAGEMENT AND OPERATION OF THE CANAL.

WE ATTACH NO IMPORTANCE TO THE FACT THAT THE RAILROAD COMPANY HAS UTILIZED BOTH ITS SHIPS AND RAILROAD TO CARRY PRIVATE FREIGHT AND PASSENGERS. THE RECORD SHOWS THAT THIS IS DONE TO A LIMITED EXTENT COMPARED WITH THE GOVERNMENT BUSINESS; AND THAT IT IS ONLY INCIDENTAL TO THE GOVERNMENTAL OPERATIONS. THE PRIMARY PURPOSE OF THE ENTERPRISE BEING LEGITIMATELY GOVERNMENTAL, ITS INCIDENTAL USE FOR PRIVATE PURPOSES AFFORDS NO GROUND FOR OBJECTION. * * *

THIS BEING THE RECOGNIZED STATUS OF THE PANAMA RAILROAD CO. IN RELATION TO PANAMA CANAL ACTIVITIES, I THINK THE CONCLUSION IS REQUIRED THAT THE CONGRESS USED THE TERM "INDIRECTLY," READ IN CONJUNCTION WITH THE SO- CALLED PROVISO "/6)," IN A BROAD SENSE AS INTENDED TO BRING WITHIN THE PROHIBITION EMPLOYEES OF THE RAILROAD COMPANY PAID FROM GENERAL REVENUES OF THE COMPANY DERIVED IN PRINCIPAL PART FROM THE RESTRICTED APPROPRIATIONS. NO OTHER CONSTRUCTION IS APPARENT WHICH WOULD GIVE EFFECT TO THE WHOLE OF THE SECTION, INCLUDING THE MCCARRAN AMENDMENT, AND TO THE EVIDENT LEGISLATIVE PURPOSE IN THAT RESPECT. THE LANGUAGE OF THE MCCARRAN AMENDMENT, OR THE SO-CALLED PROVISO "/6)," APPLYING THE SECTION TO PERSONS "EMPLOYED * * * DIRECTLY OR INDIRECTLY BY ANY BRANCH OF THE UNITED STATES GOVERNMENT OR BY ANY CORPORATION OR COMPANY WHOSE STOCK IS OWNED WHOLLY OR IN PART BY THE UNITED STATES GOVERNMENT" ( ITALICS SUPPLIED) HAS THE EFFECT OF FURTHER EXTENDING THE PROHIBITION TO PERSONS EMPLOYED INDIRECTLY BY THE PANAMA RAILROAD CO., AS WELL AS TO THOSE EMPLOYED INDIRECTLY BY THE REGULAR ADMINISTRATIVE AGENCIES, WHICH, AS SUGGESTED IN YOUR LETTER, WOULD INCLUDE EMPLOYEES OF CONTRACTORS PERFORMING WORK UNDER DIRECT CONTRACT FOR THE PANAMA CANAL, AND, HENCE, WOULD INCLUDE EMPLOYEES OF CONTRACTORS PERFORMING WORK UNDER DIRECT CONTRACT FOR THE PANAMA RAILROAD CO.

ACCORDINGLY, I HAVE TO ADVISE THAT, UNLESS MODIFYING LEGISLATION IS PREVIOUSLY ENACTED, OR UNLESS THE PRESIDENT SUSPENDS COMPLIANCE WITH THE SECTION PURSUANT TO THE LAST PROVISO THEREOF, THE APPROPRIATIONS MADE BY THE ACT WILL NOT BE AVAILABLE FOR PAYMENT TO THE PANAMA RAILROAD CO. WITH RESPECT TO SERVICES AFTER MAY 1, 1941, EXCEPT UPON COMPLIANCE BY THE RAILROAD, AND BY CONTRACTORS PERFORMING WORK UNDER DIRECT CONTRACT FOR THE RAILROAD, WITH THE RESTRICTIONS ON EMPLOYMENT PRESCRIBED BY SECTION 2 OF THE ACT.