Appendix B: Texts of the Panama Canal Treaties with United States Senate Modifications -- Panama

Panama Canal Treaty

 The United States of America and the Republic of Panama,
Acting in the spirit of the Joint Declaration of April 3,
1964, by the Representatives of the Governments of the United
States of America and the Republic of Panama, and of the Joint
Statement of Principles of February 7, 1974, initialed by the
Secretary of State of the United States of America and the Foreign
Minister of the Republic of Panama, and Acknowledging the
Republic of Panama's sovereignty over its territory, Have
decided to terminate the prior Treaties pertaining to the
Panama Canal and to conclude a new Treaty to serve as the basis for
a new relationship between them and, accordingly, have agreed upon
the following:

Article I

Abrogation of Prior Treaties and Establishment of a New
Relationship
 1. Upon its entry into force, this Treaty terminates and
supersedes:
     (a) The Isthmian Canal Convention between the United States of
America and the Republic of Panama, signed at Washington, November
18, 1903;
     (b) The Treaty of Friendship and Cooperation signed at
Washington, March 2, 1936, and the Treaty of Mutual Understanding
and Cooperation and the related Memorandum of Understandings
Reached, signed at Panama, January 25, 1955, between the United
States of America and the Republic of Panama;
     (c) All other treaties, conventions, agreements, and exchanges
of notes between the United States of America and the Republic of
Panama concerning the Panama Canal, which were in force prior to
the entry into force of this Treaty; and
     (d) Provisions concerning the Panama Canal, which appear in
other treaties, conventions, agreements, and exchanges of notes
between the United States of America and the Republic of Panama,
which were in force prior to the entry into force of this Treaty.
 2. In accordance with the terms of this Treaty and related
agreements, the Republic of Panama, as territorial sovereign,
grants to the United States of America, for the duration of this
Treaty, the rights necessary to regulate the transit of ships
through the Panama Canal, and to manage, operate, maintain,
improve, protect and defend the Canal. The Republic of Panama
guarantees to the United States of America the peaceful use of the
land and water areas which it has been granted the rights to use
for such purposes pursuant to this Treaty and related agreements.
 3. The Republic of Panama shall participate increasingly in the
management and protection and defense of the Canal, as provided in
this Treaty.
 4. In view of the special relationship established by this Treaty,
the United States of America and the Republic of Panama shall
cooperate to assure the uninterrupted and efficient operation of
the Panama Canal.

Article II

Ratification, Entry Into Force, and Termination
 1. The Treaty shall be subject to ratification in accordance with
the constitutional procedures of the two Parties. The instruments
of ratification of this Treaty shall be exchanged at Panama at the
same time as the instruments of ratification of the Treaty
Concerning the Permanent Neutrality and Operation of the Panama
Canal, signed this date, are exchanged. This Treaty shall enter
into force, simultaneously with the Treaty Concerning the Permanent
Neutrality and Operation of the Panama Canal, six calendar months
from the date of the exchange of the instruments of ratification.
 2. This Treaty shall terminate at noon, Panama time, December 31,
1999.

Article III

Canal Operation and Management
 1. The Republic of Panama, as territorial sovereign, grants to the
United States of America the rights to manage, operate, and
maintain the Panama Canal, its complementary works, installations,
and equipment and to provide for the orderly transit of vessels
through the Panama Canal. The United States of America accepts the
grant of such rights and undertakes to exercise them in accordance
with this Treaty and related agreements.
 2. In carrying out the foregoing responsibilities, the United
States of America may:
     (a) Use for the aforementioned purposes, without cost except
as provided in this Treaty, the various installations and areas
(including the Panama Canal) and waters, described in the Agreement
in Implementation of this Article, signed this date, as well as
such other areas and installations as are made available to the
United States of America under this Treaty and related agreements,
and take the measures necessary to ensure sanitation of such areas;
     (b) Make such improvements and alterations to the aforesaid
installations and areas as it deems appropriate, consistent with
the terms of this Treaty;
     (c) Make and enforce all rules pertaining the passage of
vessels through the Canal and other rules with respect to
navigation and maritime matters, in accordance with this Treaty and
related agreements. The Republic of Panama will lend its
cooperation, when necessary, in the enforcement of such rules;
     (d) Establish, modify, collect and retain tolls for the use of
the Panama Canal, and other charges, and establish and modify
methods of their assessment;
     (e) Regulate relations with employees of the United States
Government;
     (f) Provide supporting services to facilitate the performance
of its responsibilities under this Article;
     (g) Issue and enforce regulations for the exercise of the
rights and responsibilities of the United States of America under
this Treaty and related agreements. The Republic of Panama will
lend its cooperation, when necessary, in the enforcement of such
rules; and
     (h) Exercise any other right granted under this Treaty, or
otherwise agreed upon between the two Parties.
 3. Pursuant to the foregoing grant of rights, the United States of
America shall, in accordance with the terms of this Treaty and the
provisions of United States law, carry out its responsibilities by
means of a United States Government agency called the Panama Canal
Commission, which shall be constituted by and in conformity with
the laws of the United States of America.
     (a) The Panama Canal Commission shall be supervised by a Board
composed of nine members, five of whom shall be nationals of the
United States of America, and four of whom shall be Panamanian
nationals proposed by the Republic of Panama for appointment to
such positions by the United States of America in a timely manner.
     (b) Should the Republic of Panama request the United States of
America to remove a Panamanian national from membership on the
Board, the United States of America shall agree to such request. In
that event, the Republic of Panama shall propose another Panamanian
national for appointment by the United States of America to such
position in a timely manner. In case of removal of a Panamanian
member of the Board on the initiative of the United States of
America, both Parties will consult in advance in order to reach
agreement concerning such removal, and the Republic of Panama shall
propose another Panamanian national for appointment by the United
States of America in his stead.
     (c) The United States of America shall employ a national of
the United States of America as Administrator of the Panama Canal
Commission, and a Panamanian national as Deputy Administrator,
through December 31, 1989. Beginning January 1, 1990, a Panamanian
national shall be employed as the Administrator and a national of
the United States of America shall occupy the position of Deputy
Administrator. Such Panamanian nationals shall be proposed to the
United States of America by the Republic of Panama for appointment
to such positions by the United States of America.
     (d) Should the United States of America remove the Panamanian
national from his position as Deputy Administrator, or
Administrator, the Republic of Panama shall propose another
Panamanian national for appointment to such position by the United
States of America.
 4. An illustrative description of the activities the Panama Canal
Commission will perform in carrying out the responsibilities and
rights of the United States of America under this Article is set
forth at the Annex. Also set forth in the Annex are procedures for
the discontinuance or transfer of those activities performed prior
to the entry into force of this Treaty by the Panama Canal Company
or the Canal Zone Government which are not to be carried out by the
Panama Canal Commission.
 5. The Panama Canal Commission shall reimburse the Republic of
Panama for the costs incurred by the Republic of Panama in
providing the following public services in the Canal operation
areas and in housing areas set forth in the Agreement in
Implementation of Article III of this Treaty and occupied by both
United States and Panamanian citizen employees of the Panama Canal
Commission: police, fire protection, street maintenance, street
lighting, street cleaning, traffic management and garbage
collection. The Panama Canal Commission shall pay the Republic of
Panama the sum of ten million United States dollars (US$10,000,000)
per annum for the foregoing services. It is agreed that every three
years from the date that this Treaty enters into force, the costs
involved in furnishing said services shall be reexamined to
determine whether adjustment of the annual payment should be made
because of inflation and other relevant factors affecting the cost
of such services.
 6. The Republic of Panama shall be responsible for providing, in
all areas comprising the former Canal Zone, services of a general
jurisdictional nature such as customs and immigration, postal
services, courts and licensing, in accordance with this Treaty and
related agreements.
 7. The United States of America and the Republic of Panama shall
establish a Panama Canal Consultative Committee, composed of an
equal number of high-level representatives of the United States of
America and the Republic of Panama, and which may appoint such
subcommittees as it may deem appropriate. This Committee shall
advise the United States of America and the Republic of Panama on
matters of policy affecting the Canal's operation. In view of both
Parties' special interest in the continuity and efficiency of the
Canal operation in the future, the Committee shall advise on
matters such as general tolls policy, employment and training
policies to increase the participation of Panamanian nationals in
the operation of the Canal, and international policies on matters
concerning the Canal. The Committee's recommendations shall be
transmitted to the two Governments, which shall give such
recommendations full consideration in the formulation of such
policy decisions.
 8. In addition to the participation of Panamanian nationals at
high management levels of the Panama Canal Commission, as provided
for in paragraph 3 of this Article, there shall be growing
participation of Panamanian nationals at all other levels and areas
of employment in the aforesaid commission, with the objective of
preparing, in an orderly and efficient fashion, for the assumption
by the Republic of Panama of full responsibility for the
management, operation and maintenance of the Canal upon the
termination of this Treaty.
 9. The use of the areas, waters and installations with respect to
which the United States of America is granted rights pursuant to
this Article, and the rights and legal status of United States
Government agencies and employees operating in the Republic of
Panama pursuant to this Article, shall be governed by Agreement in
Implementation of this Article, signed this date.
 10. Upon entry into force of this Treaty, the United States
Government agencies known as the Panama Canal Company and the Canal
Zone Government shall cease to operate within the territory of the
Republic of Panama that formerly constituted the Canal Zone.

Article IV

Protection and Defense
 1. The United States of America and the Republic of Panama commit
themselves to protect and defend the Panama Canal. Each Party shall
act, in accordance with its constitutional processes, to meet the
danger resulting from an armed attack or other actions which
threaten the security of the Panama Canal or of ships transiting
it.
 2. For the duration of this Treaty, the United States of America
shall have primary responsibility to protect and defend the Canal.
The rights of the United States of America to station, train, and
move military forces within the Republic of Panama are described in
the Agreement in Implementation of this Article, signed this date.
The use of areas and installations and the legal status of the
armed forces of the United States of America in the Republic of
Panama shall be governed by the aforesaid Agreement.
 3. In order to facilitate the participation and cooperation of the
armed forces of both Parties in the protection and defense of the
Canal, the United States of America and the Republic of Panama
shall establish a Combined Board comprised of an equal number of
senior military representatives of each Party. These
representatives shall be charged by their respective governments
with consulting and cooperating on all matters pertaining to the
protection and defense of the Canal, and with planning for actions
to be taken in concert for that purpose. Such combined protection
and defense arrangements shall not inhibit the identity or lines of
authority of the armed forces of the United States of America or
the Republic of Panama. The Combined Board shall provide for
coordination and cooperation concerning such matters as:
     (a) The preparation of contingency plans for the protection
and defense of the Canal based upon the cooperative efforts of the
armed forces of both Parties;
     (b) The planning and conduct of combined military exercises;
and
     (c) The conduct of United States and Panamanian military
operations with respect to the protection and defense of the Canal.
 4. The Combined Board shall, at five-year intervals throughout the
duration of this Treaty, review the resources being made available
by the two Parties for the protection and defense of the Canal.
Also, the Combined Board shall make appropriate recommendations to
the two Governments respecting projected requirements, the
efficient utilization of available resources of the two Parties,
and other matters of mutual interest with respect to the protection
and defense of the Canal.
 5. To the extent possible consistent with its primary
responsibility for the protection and defense of the Panama Canal,
the United States of America will endeavor to maintain its armed
forces in the Republic of Panama in normal times at a level not in
excess of that of the armed forces of the United States of America
in the territory of the former Canal Zone immediately prior to the
entry into force of this Treaty.

Article V

Principle of Non-Intervention
 Employees of the Panama Canal Commission, their dependents and
designated contractors of the Panama Canal Commission, who are
nationals of the United States of America, shall respect the laws
of the Republic of Panama and shall abstain from any activity
incompatible with the spirit of this Treaty. Accordingly, they
shall abstain from any political activity in the Republic of Panama
as well as from any intervention in the internal affairs of the
Republic of Panama. The United States of America shall take all
measures within its authority to ensure that the provisions of this
Article are fulfilled.

Article VI

Protection of the Environment
 1. The United States of America and the Republic of Panama commit
themselves to implement this Treaty in a manner consistent with the
protection of the natural environment of the Republic of Panama. To
this end, they shall consult and cooperate with each other in all
appropriate ways to ensure that they shall give due regard to the
protection and conservation of the environment.
 2. A Joint Commission on the Environment shall be established with
equal representation from the United States and the Republic of
Panama, which shall periodically review the implementation of this
Treaty and shall recommend as appropriate to the two Governments
ways to avoid or, should this not be possible, to mitigate the
adverse environmental impacts which might result from their
respective actions pursuant to the Treaty.
 3. The United States of America and the Republic of Panama shall
furnish the Joint Commission on the Environment complete
information on any action taken in accordance with this Treaty
which, in the judgment of both, might have a significant effect on
the environment. Such information shall be made available to the
Commission as far in advance of the contemplated action as possible
to facilitate the study by the Commission of any potential
environmental problems and to allow for consideration of the
recommendation of the Commission before the contemplated action is
carried out.

Article VII

Flags
 1. The entire territory of the Republic of Panama, including the
areas the use of which the Republic of Panama makes available to
the United States of America pursuant to this Treaty and related
agreements, shall be under the flag of the Republic of Panama, and
consequently such flag always shall occupy the position of honor.
 2. The flag of the United States of America may be displayed,
together with the flag of the Republic of Panama, at the
headquarters of the Panama Canal Commission, at the site of the
Combined Board, and as provided in the Agreement in Implementation
of Article IV of this Treaty.
 3. The flag of the United States of America also may be displayed
at other places and on some occasions, as agreed by both Parties.

Article VIII

Privileges and Immunities
 1. The installations owned or used by the agencies or
instrumentalities of the United States of America operating in the
Republic of Panama pursuant to this Treaty and related agreements,
and their official archives and documents, shall be inviolable. The
two Parties shall agree on procedures to be followed in the conduct
of any criminal investigation at such locations by the Republic of
Panama.
 2. Agencies and instrumentalities of the Government of the United
States of America operating in the Republic of Panama pursuant to
this Treaty and related agreements shall be immune from the
jurisdiction of the Republic of Panama.
 3. In addition to such other privileges and immunities as are
afforded to employees of the United States Government and their
dependents pursuant to this Treaty, the United States of America
may designate up to twenty officials of the Panama Canal Commission
who, along with their dependents, shall enjoy the privileges and
immunities accorded to diplomatic agents and their dependents under
international law and practice. The United States of America shall
furnish to the Republic of Panama a list of the names of said
officials and their dependents, identifying the positions they
occupy in the Government of the United States of America, and shall
keep such list current at all times.

Article IX

Applicable Laws and Law Enforcement
 1. In accordance with the provisions of this Treaty and related
agreements, the law of the Republic of Panama shall apply in the
areas made available for the use of the United States of America
pursuant to this Treaty. The law of the Republic of Panama shall be
applied to matters or events which occurred in the former Canal
Zone prior to the entry into force of this Treaty only to the
extent specifically provided in prior treaties and agreements.
 2. Natural or juridical persons who, on the date of entry into
force of this Treaty, are engaged in business or non-profit
activities at locations in the former Canal Zone may continue such
business or activities at those locations under the same terms and
conditions prevailing prior to the entry into force of this Treaty
for a thirty-month transition period from its entry into force. The
Republic of Panama shall maintain the same operating conditions as
those applicable to the aforementioned enterprises prior to the
entry into force of this Treaty in order that they may receive
licenses to do business in the Republic of Panama subject to their
compliance with the requirements of its law. Thereafter, such
persons shall receive the same treatment under the law of the
Republic of Panama as similar enterprises already established in
the rest of the territory of the Republic of Panama without
discrimination.
 3. The rights of ownership, as recognized by the United States of
America, enjoyed by natural or juridical private persons in
buildings and other improvements to real property located in the
former Canal Zone shall be recognized by the Republic of Panama in
conformity with its laws.
 4. With respect to buildings and other improvements to real
property located in the Canal operating areas, housing areas or
other areas subject to the licensing procedure established in
Article IV of the Agreement in Implementation of Article III of
this Treaty, the owners shall be authorized to continue using the
land upon which their property is located in accordance with the
procedures established in that Article.
 5. With respect to buildings and other improvements to real
property located in areas of the former Canal Zone to which the
aforesaid licensing procedure is not applicable, or may cease to be
applicable during the lifetime or upon termination of this Treaty,
the owners may continue to use the land upon which their property
is located, subject to the payment of a reasonable charge to the
Republic of Panama. Should the Republic of Panama decide to sell
such land, the owners of the buildings or other improvements
located thereon shall be offered a first option to purchase such
land at a reasonable cost. In the case of non-profit enterprises,
such as churches and fraternal organizations, the cost of purchase
will be nominal in accordance with the prevailing practice in the
rest of the territory of the Republic of Panama.
 6. If any of the aforementioned persons are required by the
Republic of Panama to discontinue their activities or vacate their
property for public purposes, they shall be compensated at fair
market value by the Republic of Panama.
 7. The provisions of paragraphs 2-6 above shall apply to natural
or juridical persons who have been engaged in business or non-
profit activities at locations in the former Canal Zone for at
least six months prior to the date of signature of this Treaty.
 8. The Republic of Panama shall not issue, adopt or enforce any
law, decree, regulation, or international agreement or take any
other action which purports to regulate or would otherwise
interfere with the exercise on the part of the United States of
America of any right granted under this Treaty or related
agreements.
 9. Vessels transiting the Canal, and cargo, passengers and crews
carried on such vessels shall be exempt from any taxes, fees, or
other charges by the Republic of Panama. However, in the event such
vessels call at a Panamanian port, they may be assessed charges
thereto, such as charges for services provided to the vessel. The
Republic of Panama may also require the passengers and crew
disembarking from such vessels to pay such taxes, fees and charges
as are established under Panamanian law for persons entering its
territory. Such taxes, fees and charges shall be assessed on a
nondiscriminatory basis.
 10. The United States of America and the Republic of Panama will
cooperate in taking such steps as may from time to time be
necessary to guarantee the security of the Panama Canal Commission,
its property, its employees and their dependents, and their
property, the Forces of the United States of America and the
members thereof, the civilian component of the United States
Forces, the dependents of members of the Forces and civilian
component, and their property, and the contractors of the Panama
Canal Commission and of the United States Forces, their dependents,
and their property. The Republic of Panama will seek from its
Legislative Branch such legislation as may be needed to carry out
the foregoing purposes and to punish any offenders.
 11. The Parties shall conclude an agreement whereby nationals of
either State, who are sentenced by the courts of the other State,
and who are not domiciled therein, may elect to serve their
sentences in their State of nationality.

Article X

Employment With the Panama Canal Commission
 1. In exercising its rights and fulfilling its responsibilities as
the employer, the United States of America shall establish
employment and labor regulations which shall contain the terms,
conditions and prerequisites for all categories of employees of the
Panama Canal Commission. These regulations shall be provided to the
Republic of Panama prior to their entry into force.
 2. (a) The regulations shall establish a system of preference when
hiring employees, for Panamanian applicants possessing the skills
and qualifications required for employment by the Panama Canal
Commission. The United States of America shall endeavor to ensure
that the number of Panamanian nationals employed by the Panama
Canal Commission in relation to the total number of its employees
will conform to the proportion established for foreign enterprises
under the law of the Republic of Panama.
     (b) The terms and conditions of employment to be established
will in general be no less favorable to persons already employed by
the Panama Canal Company or Canal Zone Government prior to the
entry into force of this Treaty, than those in effect immediately
prior to that date.
 3. (a) The United States of America shall establish an employment
policy for the Panama Canal Commission that shall generally limit
the recruitment of personnel outside the Republic of Panama to
persons possessing requisite skills and qualifications which are
not available in the Republic of Panama.
     (b) The United States of America will establish training
programs for Panamanian employees and apprentices in order to
increase the number of Panamanian nationals qualified to assume
positions with the Panama Canal Commission, as positions become
available.
     (c) Within five years from the entry into force of this
Treaty, the number of United States nationals employed by the
Panama Canal Commission who were previously employed by the Panama
Canal Company shall be at least twenty percent less than the total
number of United States nationals working for the Panama Canal
Company immediately prior to the entry into force of this Treaty.
     (d) The United States of America shall periodically inform the
Republic of Panama, through the Coordinating Committee, established
pursuant to the Agreement in Implementation of Article III of this
Treaty, of available positions within the Panama Canal Commission.
The Republic of Panama shall similarly provide the United States of
America any information it may have as to the availability of
Panamanian nationals claiming to have skills and qualifications
that might be required by the Panama Canal Commission, in order
that the United States of America may take this information into
account.
 4. The United States of America will establish qualification
standards for skills, training, and experience required by the
Panama Canal Commission. In establishing such standards, to the
extent they include a requirement for a professional license, the
United States of America, without prejudice to its right to require
additional professional skills and qualifications, shall recognize
the professional licenses issued by the Republic of Panama.
 5. The United States of America shall establish a policy for the
periodic rotation, at a maximum of every five years, of United
States citizen employees and other non-Panamanian employees, hired
after the entry into force of this Treaty. It is recognized that
certain exceptions to the said policy of rotation may be made for
sound administrative reasons, such as in the case of employees
holding positions requiring certain non-transferable or non-
recruitable skills.
 6. With regard to wages and fringe benefits, there shall be no
discrimination on the basis of nationality, sex, or race. Payments
by the Panama Canal Commission of additional remuneration, or the
provision of other benefits, such as home leave benefits, to United
States nationals employed prior to entry into force of this Treaty,
or to persons of any nationality, including Panamanian nationals
who are thereafter recruited outside of the Republic of Panama and
who change their place of residence, shall not be considered to be
discrimination for the purpose of this paragraph.
 7. Persons employed by the Panama Canal Commission or Canal Zone
Government prior to the entry into force of this Treaty, who are
displaced from their employment as a result of the discontinuance
by the United States of America of certain activities pursuant to
this Treaty, will be placed by the United States of America, to the
maximum extent feasible, in other appropriate jobs with the
Government of the United States in accordance with United States
Civil Service regulations. For such persons who are not United
States nationals, placement efforts will be confined to United
States Government activities located within the Republic of Panama.
Likewise, persons previously employed in activities for which the
Republic of Panama assumes responsibility as a result of this
Treaty will be continued in their employment to the maximum extent
feasible by the Republic of Panama. The Republic of Panama shall,
to the maximum extent feasible, ensure that the terms and
conditions of employment applicable to personnel employed in the
activities for which it assumed responsibility are not less
favorable than those in effect immediately prior to the entry into
force of this Treaty. Non-United States nationals employed by the
Panama Canal Company or Canal Zone Government prior to the entry
into force of this Treaty who are involuntarily separated from
their positions because of the discontinuance of an activity by
reason of this Treaty, who are not entitled to an immediate annuity
under the United States Civil Service Retirement System, and for
whom continued employment in the Republic of Panama by the
Government of the United States of America is not practicable, will
be provided special job placement assistance by the Republic of
Panama for employment in positions for which they may be qualified
by experience and training.
 8. The Parties agree to establish a system whereby the Panama
Canal Commission may, if deemed mutually convenient or desirable by
the two Parties, assign certain employees of the Panama Canal
Commission, for a limited period of time, to assist in the
operation of activities transferred to the responsibility of the
Republic of Panama as a result of this Treaty or related
agreements. The salaries and other costs of employment of any such
persons assigned to provide such assistance shall be reimbursed to
the United States of America by the Republic of Panama.
 9. (a) The right of employees to negotiate collective contracts
with the Panama Canal Commission is recognized. Labor relations
with employees of the Panama Canal Commission shall be conducted in
accordance with forms of collective bargaining established by the
United States of America after consultation with employee unions.
     (b) Employee unions shall have the right to affiliate with
international labor organizations.
 10. The United States of America will provide an appropriate early
optional retirement program for all persons employed by the Panama
Canal Company or Canal Zone Government immediately prior to the
entry into force of this Treaty. In this regard, taking into
account the unique circumstances created by the provisions of this
Treaty, including its duration, and their effect upon such
employees, the United States of America shall, with respect to
them:
     (a) determine that conditions exist which invoke applicable
United States law permitting early retirement annuities and apply
such law for a substantial period of the duration of the treaty;
     (b) seek special legislation to provide more liberal
entitlement to, and calculation of, retirement annuities than is
currently provided for by law.

Article XI

Provisions for the Transition Period
 1. The Republic of Panama shall reassume plenary jurisdiction over
the former Canal Zone upon entry into force of this Treaty and in
accordance with its terms. In order to provide for an orderly
transition to the full application of the jurisdictional
arrangements established by this Treaty and related agreements, the
provisions of this Article shall become applicable upon the date
this Treaty enters into force, and shall remain in effect for
thirty calendar months. The authority granted in this Article to
the United States of America for this transition period shall
supplement, and is not intended to limit, the full application and
effect of the rights and authority granted to the United States of
America elsewhere in this Treaty and in related agreements.
 2. During this transition period, the criminal and civil laws of
the United States of America shall apply concurrently with those of
the Republic of Panama in certain of the areas and installations
made available for the use of the United States of America pursuant
to this Treaty, in accordance with the following provisions:
     (a) The Republic Panama permits the authorities of the United
States of America to have the primary right to exercise criminal
jurisdiction over United States citizen employees of the Panama
Canal Commission and their dependents, and members of the United
States Forces and civilian component and their dependents, in the
following cases:
          (i) for any offense committed during the transition
period within such areas and installations, and
          (ii) for any offense committed prior to that period in
the former Canal Zone.
 The Republic of Panama shall have the primary right to exercise
jurisdiction over all other offenses committed by such persons,
except as otherwise agreed.
     (b) Either Party may waive its primary right to exercise
jurisdiction in a specific case or category of cases.

 3. The United States of America shall retain the right to exercise
jurisdiction in criminal cases relating to offenses committed prior
to the entry into force of this Treaty in violation of the laws
applicable in the former Canal Zone.
 4. For the transition period, the United States of America shall
retain police authority and maintain a police force in the
aforementioned areas and installations. In such areas, the police
authorities of the United States of America may take into custody
any person not subject to their primary jurisdiction if such person
is believed to have committed or to be committing an offense
against applicable laws or regulations, and shall promptly transfer
custody to the police authorities of the Republic of Panama. The
United States of America and the Republic of Panama shall establish
joint police patrols in agreed areas. Any arrests conducted by a
joint patrol shall be the responsibility of the patrol member or
members representing the Party having primary jurisdiction over the
person or persons arrested.
 5. The courts of the United States of America and related
personnel, functioning in the former Canal Zone immediately prior
to the entry into force of this Treaty, may continue to function
during the transition period for the judicial enforcement of the
jurisdiction to be exercised by the United States of America in
accordance with this Article.
 6. In civil cases, the civilian courts of the United States of
America in the Republic of Panama shall have no jurisdiction over
new cases of a private civil nature, but shall retain full
jurisdiction during the transition period to dispose of any civil
cases, including admiralty cases, already instituted and pending
before the courts prior to the entry into force of this Treaty.
 7. The laws, regulations, and administrative authority of the
United States of America applicable in the former Canal Zone
immediately prior to the entry into force of this Treaty shall, to
the extent not inconsistent with this Treaty and related
agreements, continue in force for the purpose of the exercise by
the United States of America of law enforcement and judicial
jurisdiction only during the transition period. The United States
of America may amend, repeal or otherwise change such laws,
regulations and administrative authority. The two Parties shall
consult concerning procedural and substantive matters relative to
the implementation of this Article, including the disposition of
cases pending at the end of the transition period and, in this
respect, may enter into appropriate agreements by an exchange of
notes or other instrument.
 8. During this transition period, the United States of America may
continue to incarcerate individuals in the areas and installations
made available for the use of the United States of America by the
Republic of Panama pursuant to this Treaty and related agreements,
or to transfer them to penal facilities in the United States of
America to serve their sentences.

Article XII

A Sea-Level Canal or a Third Lane of Locks
 1. The United States of America and the Republic of Panama
recognize that a sea-level canal may be important for international
navigation in the future. Consequently, during the duration of this
Treaty, both Parties commit themselves to study jointly the
feasibility of a sea-level canal in the Republic of Panama, and in
the event they determine that such a waterway is necessary, they
shall negotiate terms, agreeable to both Parties, for its
construction.
 2. The United States of America and the Republic of Panama agree
on the following:
     a) No new interoceanic canal shall be constructed in the
territory of the Republic of Panama during the duration of this
Treaty, except in accordance with the provisions of this Treaty, or
as the two Parties may otherwise agree; and
     (b) During the duration of this Treaty, the United States of
America shall not negotiate with third States for the right to
construct an interoceanic canal on any other route in the Western
Hemisphere, except as the two Parties may otherwise agree.
 3. The Republic of Panama grants to the United States of America
the right to add a third lane of locks to the existing Panama
Canal. This right may be exercised at any time during the duration
of this Treaty, provided that the United States of America has
delivered to the Republic of Panama copies of the plans for such
construction.
 4. In the event the United States of America exercises the right
granted in paragraph 3 above, it may use for that purpose, in
addition to the areas otherwise made available to the United States
of America pursuant to this Treaty, such other areas as the two
Parties may agree upon. The terms and conditions applicable to
Canal operating areas made available by the Republic of Panama for
the use of the United States of America pursuant to Article III of
this Treaty shall apply in a similar manner to such additional
areas.
 5. In the construction of the aforesaid works, the United States
of America shall not use nuclear excavation techniques without the
previous consent of the Republic of Panama.

Article XIII

Property Transfer and Economic Participation by the Republic of
Panama
 1. Upon termination of this Treaty, the Republic of Panama shall
assume total responsibility for the management, operation, and
maintenance of the Panama Canal, which shall be turned over in
operating condition and free of liens and debts, except as the two
Parties may otherwise agree.
 2. The United States of America transfers, without charge, to the
Republic of Panama all right, title and interest the United States
of America may have with respect to all real property, including
non-removable improvements thereon, as set forth below:
     (a) Upon the entry into force of this Treaty, the Panama
Railroad and such property that was located in the former Canal
Zone but that is not within the land and water areas the use of
which is made available to the United States of America pursuant to
this Treaty. However, it is agreed that the transfer on such date
shall not include buildings and other facilities, except housing,
the use of which is retained by the United States of America
pursuant to this Treaty and related agreements, outside such areas;
     (b) Such property located in an area or a portion thereof at
such time as the use by the United States of America of such area
or portion thereof ceases pursuant to agreement between the two
Parties.
     (c) Housing units made available for occupancy by members of
the Armed Forces of the Republic of Panama in accordance with
paragraph 5(b) of Annex B to the Agreement in Implementation of
Article IV of this Treaty at such time as such units are made
available to the Republic of Panama.
     (d) Upon termination of this Treaty, all real property and
non-removable improvements that were used by the United States of
America for the purposes of this Treaty and related agreements and
equipment related to the management, operation and maintenance of
the Canal remaining in the Republic of Panama.
 3. The Republic of Panama agrees to hold the United States of
America harmless with respect to any claims which may be made by
third parties relating to rights, title and interest in such
property.
 4. The Republic of Panama shall receive, in addition, from the
Panama Canal Commission a just and equitable return on the national
resources which it has dedicated to the efficient management,
operation, maintenance, protection and defense of the Panama Canal,
in accordance with the following:
     (a) An annual amount to be paid out of Canal operating
revenues computed at a rate of thirty hundredths of a United States
dollar (US$0.30) per Panama Canal net ton, or its equivalency, for
each vessel transiting the Canal after the entry into force of this
Treaty, for which tolls are charged. The rate of thirty hundredths
of a United States dollar (US$0.30) per Panama Canal net ton, or
its equivalency, will be adjusted to reflect changes in the United
States wholesale price index for total manufactured goods during
biennial periods. The first adjustment shall take place five years
after entry into force of this Treaty, taking into account the
changes that occurred in such price index during the preceding two
years. Thereafter, successive adjustments shall take place at the
end of each biennial period. If the United States of America should
decide that another indexing method is preferable, such method
shall be proposed to the Republic of Panama and applied if mutually
agreed.
     (b) A fixed annuity of ten million United States dollars
(US$10,000,000) to be paid out of Canal operating revenues. This
amount shall constitute a fixed expense of the Panama Canal
Commission.
     (c) An annual amount of up to ten million United States
dollars (US$10,000,000) per year, to be paid out of Canal operating
revenues to the extent that such revenues exceed expenditures of
the Panama Canal Commission including amounts paid pursuant to this
Treaty. In the event Canal operating revenues in any year do not
produce a surplus sufficient to cover this payment, the unpaid
balance shall be paid from operating surpluses in future years in
a manner to be mutually agreed.

Article XIV

Settlement of Disputes
 In the event that any question should arise between the Parties
concerning the interpretation of this Treaty or related agreements,
they shall make every effort to resolve the matter through
consultation in the appropriate committees established pursuant to
this Treaty and related agreements, or, if appropriate, through
diplomatic channels. In the event the Parties are unable to resolve
a particular matter through such means, they may, in appropriate
cases, agree to submit the matter to conciliation, mediation,
arbitration, or such other procedure for the peaceful settlement of
the dispute as they may mutually deem appropriate.
 DONE at Washington, this 7th day of September, 1977 in duplicate,
in the English and Spanish languages, both texts being equally
authentic.

Annex

Procedures for the Cessation or Transfer of Activities Carried Out
by the Panama Canal Company and the Canal Zone Government and
Illustrative List of the Functions That May Be Performed by the
Panama Canal Commission
 1. The laws of the Republic of Panama shall regulate the exercise
of private economic activities within the areas made available by
the Republic of Panama for the use of the United States of America
pursuant to this Treaty. Natural or juridical persons who, at least
six months prior to the date of signature of this Treaty, were
legally established and engaged in the exercise of economic
activities in accordance with the provisions of paragraphs 2-7 of
Article IX of this Treaty.
 2. The Panama Canal Commission shall not perform governmental or
commercial functions as stipulated in paragraph 4 of this Annex,
provided, however, that this shall not be deemed to limit in any
way the right of the United States of America to perform those
functions that may be necessary for the efficient management,
operation and maintenance of the Canal.
 3. It is understood that the Panama Canal Commission, in the
exercise of the rights of the United States of America with respect
to the management, operation and maintenance of the Canal, may
perform functions such as are set forth below by way of
illustration:
  a. Management of the Canal enterprise.
  b. Aids to navigation in Canal waters and in proximity thereto.
  c. Control of vessel movement.
  d. Operation and maintenance of the locks.
  e. Tug service for the transit of vessels and dredging for the
piers and docks of the Panama Canal Commission.
  f. Control of the water levels in Gatun, Alajuela (Madden), and
Miraflores Lakes.
  g. Non-commercial transportation services in Canal waters.
  h. Meteorological and hydrographic services.
  i. Admeasurement.
  j. Non-commercial motor transport and maintenance.
  k. Industrial security through the use of watchmen.
  l. Procurement and warehousing.
  m. Telecommunications.
  n. Protection of the environment by preventing and controlling
the spillage of oil and substances harmful to human or animal life
and of the ecological equilibrium in areas used in operation of the
Canal and the anchorages.
  o. Non-commercial vessel repair.
  p. Air conditioning services in Canal installations.
  q. Industrial sanitation and health services.
  r. Engineering design, construction and maintenance of Panama
Canal Commission installations.
  s. Dredging of the Canal channel, terminal ports and adjacent
waters.
  t. Control of the banks and stabilizing of the slopes of the
Canal.
  u. Non-commercial handling of cargo on the piers and docks of the
Panama Canal Commission.
     v. Maintenance of public areas of the Panama Canal Commission,
such as parks and gardens.
  w. Generation of electric power.
  x. Purification and supply of water.
  y. Marine salvage in Canal waters.
  z. Such other functions as may be necessary or appropriate to
carry out, in conformity with this Treaty and related agreements,
the rights and responsibilities of the United States of America
with respect to the management, operation and maintenance of the
Panama Canal.
 4. The following activities and operations carried out by the
Panama Canal Company and the Canal Zone Government shall not be
carried out by the Panama Canal Commission, effective upon the
dates indicated herein:
     (a) Upon the date of entry into force of this Treaty:
          (i) Wholesale and retail sales, including those through
commissaries, food stores, department stores, optical shops and
pastry shops;
          (ii) The production of food and drink, including milk
products and bakery products;
          (iii) The operation of public restaurants and cafeterias
and the sale of articles through vending machines;
          (iv) The operation of movie theaters, bowling alleys,
pool rooms and other recreational and amusement facilities for the
use of which a charge is payable;
          (v) The operation of laundry and dry cleaning plants
other than those operated for official use;
          (vi) The repair and service of privately owned
automobiles or the sale of petroleum or lubricants thereto,
including the operation of gasoline stations, repair garages and
tire repair and recapping facilities, and the repair and service of
other privately owned property, including appliances, electronic
devices, boats, motors, and furniture;
          (vii) The operation of cold storage and freezer plants
other than those operated for official use;
          (viii) The operation of freight houses other than those
operated for official use;
          (ix) The operation of commercial services to and supply
of privately owned and operated vessels, including the constitution
of vessels, the sale of petroleum and lubricants and the provision
of water, tug services not related to the Canal or other United
States Government operations, and repair of such vessels, except in
situations where repairs may be necessary to remove disabled
vessels from the Canal;
          (x) Printing services other than for official use;
          (xi) Maritime transportation for the use of the general
public;
          (xii) Health and medical services provided to
individuals, including hospitals, leprosariums, veterinary,
mortuary and cemetery services;
          (xiii) Educational services not for professional
training, including schools and libraries;
          (xiv) Postal services;
          (xv) Immigration, customs and quarantine controls, except
those measures necessary to ensure the sanitation of the Canal;
          (xvi) Commercial pier and dock services, such as the
handling of cargo and passengers; and
          (xvii) Any other commercial activity of a similar nature,
not related to the management, operation or maintenance of the
Canal.
     (b) Within thirty calendar months from the date of entry into
force of this Treaty, governmental services such as:
          (i) Police;
          (ii) Courts; and
          (iii) Prison system.
 5. (a) With respect to those activities or functions described in
paragraph 4 above, or otherwise agreed upon by the two Parties,
which are to be assumed by the Government of the Republic of Panama
or by private persons subject to its authority, the two Parties
shall consult prior to the discontinuance of such activities or
functions by the Panama Canal Commission to develop appropriate
arrangements for the orderly transfer and continued efficient
operation or conduct thereof.
     (b) In the event that appropriate arrangements cannot be
arrived at to ensure the continued performance of a particular
activity or function described in paragraph 4 above which is
necessary to the efficient management, operation or maintenance of
the Canal, the Panama Canal Commission may, to the extent
consistent with the other provisions of this Treaty and related
agreements, continue to perform such activity or function until
such arrangements can be made.

United States Senate Modifications (Incorporated Into the
June 1978 Instruments of Ratification)

     (a) RESERVATIONS:
          (1) Pursuant to its adherence to the principle of
nonintervention, any action taken by the United States of America
in the exercise of its rights to assure that the Panama Canal shall
remain open, neutral, secure, and accessible, pursuant to the
provisions of the Panama Canal Treaty, the Treaty Concerning the
Permanent Neutrality and Operation of the Panama Canal, and the
resolutions of ratification thereto, shall be only for the purpose
of assuring that the Canal shall remain open, neutral, secure, and
accessible, and shall not have as its purpose or be interpreted as
a right of intervention in the internal affairs of the Republic of
Panama or interference with its political independence or sovereign
integrity.
          (2) The instruments of ratification of the Panama Canal
Treaty to be exchanged by the United States of America and the
Republic of Panama shall each include provisions whereby each Party
agrees to waive its rights and release the other Party from its
obligations under paragraph 2 of Article XII of the Treaty.
          (3) Notwithstanding any provision of the Treaty, no funds
may be drawn from the Treasury of the United States of America for
payments under paragraph 4 of Article XIII without statutory
authorization.
          (4) Any accumulated unpaid balance under paragraph 4(c)
of Article XIII of the Treaty at the date of termination of the
Treaty shall be payable only to the extent of any operating surplus
in the last year of the duration of the Treaty, and nothing in such
paragraph may be constructed as obligating the United States of
America to pay, after the date of the termination of the Treaty,
any such unpaid balance which shall have accrued before such date.
          (5) Exchange of the instruments of ratification of the
Panama Canal Treaty and of the Treaty Concerning the Permanent
Neutrality and Operation of the Panama Canal shall not be effective
earlier than March 31, 1979, and such Treaties shall not enter into
force prior to October 1, 1979, unless legislation necessary to
implement the provisions of the Panama Canal Treaty shall have been
enacted by the Congress of the United States of America before
March 31, 1979.
          (6) After the date of entry into force of the Treaty, the
Panama Canal Commission shall, unless otherwise provided by
legislation enacted by the Congress of the United States of
America, be obligated to reimburse the Treasury of the United
States of America, as nearly as possible, for the interest cost of
the funds or other assets directly invested in the Commission by
the Government of the United States of America and for the interest
cost of the funds or other assets directly invested in the
predecessor Panama Canal Company by the Government of the United
States of America and not reimbursed before the date of entry into
force of the Treaty. Such reimbursement for such interest costs
shall be made at a rate determined by the Secretary of the Treasury
of the United States of America and at annual intervals to the
extent earned, and if not earned, shall be made from subsequent
earnings. For purposes of this reservation, the phrase "funds or
other assets directly invested" shall have the same meaning as the
phrase  "net direct investment" has under section 62 of title 2 of
the Canal Zone Code.

     (b) UNDERSTANDINGS:
               (1) Before the first day of the three-year period
beginning on the date of entry into force of the Treaty and before
each three-year period following thereafter, the two Parties shall
agree upon the specific levels and quality of services, as are
referred to in paragraph 5 of Article III of the Treaty, to be
provided during the following three-year period and, except for the
first three-year period, on the reimbursement to be made for the
costs of such services, such services to be limited to such as are
essential to the effective functioning of the Canal operating areas
and the housing areas referred to in paragraph 5 of Article III. If
payments made under paragraph 5 of Article III for the preceding
three-year period, including the initial three-year period, exceed
or are less than the actual costs to the Republic of Panama for
supplying, during such period, the specific levels and quality of
services agreed upon, then the Panama Canal Commission shall deduct
from or add to the payment required to be made to the Republic of
Panama for each of the following three years one-third of such
excess or deficit, as the case may be. There shall be an
independent and binding audit, conducted by an auditor mutually
selected by both Parties, of any costs of services disputed by the
two Parties pursuant to the reexamination of such costs provided
for in this understanding.
          (2) Nothing in paragraph 3, 4, or 5 of Article IV of the
Treaty may be construed to limit either the provisions of the first
paragraph of Article IV providing that each Party shall act, in
accordance with its constitutional processes, to meet danger
threatening the security of the Panama Canal, or the provisions of
paragraph 2 of Article IV providing that the United States of
America shall have primary responsibility to protect and defend the
Canal for the duration of the Treaty.
          (3) Nothing in paragraph 4(c) of Article XIII of the
Treaty shall be construed to limit the authority of the United
States of America, through the United States Government agency
called the Panama Canal Commission, to make such financial
decisions and incur such expenses as are reasonable and necessary
for the management, operation, and maintenance of the Panama Canal.
In addition, toll rates established pursuant to paragraph 2(d) of
Article III need not be set at levels designed to produce revenues
to cover the payment to the Republic of Panama described in
paragraph 4(c) of Article XIII.
          (4) Any agreement concluded pursuant to paragraph II of
Article IX of the Treaty with respect to the transfer of prisoners
shall be concluded in accordance with the constitutional processes
of both Parties.
          (5) Nothing in the Treaty, in the Annex or Agreed Minute
relating to the Treaty, or in any other agreement relating to the
Treaty obligates the United States of America to provide any
economic assistance, military grant assistance, security supporting
assistance, foreign military sales credits, or international
military education and training to the Republic of Panama.
          (6) The President shall include all reservations and
understandings incorporated by the Senate in this resolution of
ratification in the instrument of ratification to be exchanged with
the Government of the Republic of Panama.

Treaty Concerning the Permanent Neutrality and Operation of
the Panama Canal

 The United States of America and the Republic of Panama have
agreed upon the following:

Article I

 The Republic of Panama declares that the Canal, as an
international transit waterway, shall be permanently neutral in
accordance with the regime established in this Treaty. The same
regime of neutrality shall apply to any other international
waterway that may be built either partially or wholly in the
territory of the Republic of Panama.

Article II

 The Republic of Panama declares the neutrality of the Canal in
order that both in time of peace and in time of war it shall remain
secure and open to peaceful transit by the vessels of all nations
on terms of entire equality, so that there will be no
discrimination against any nation, or its citizens or subjects,
concerning the conditions or charges of transit, or for any other
reason, and so that the Canal, and therefore the Isthmus of Panama,
shall not be the target of reprisals in any armed conflict between
other nations of the world. The foregoing shall be subject to the
following requirements:
     (a) Payment of tolls and other charges for transit and
ancillary services, provided they have been fixed in conformity
with the provisions of Article III (c);
     (b) Compliance with applicable rules and regulations, provided
such rules and regulations are applied in conformity with the
provisions of Article III;
     (c) The requirement that transiting vessels commit no acts of
hostility while in the Canal; and
     (d) Such other conditions and restrictions as are established
by this Treaty.

Article III

 1. For purposes of the security, efficiency and proper maintenance
of the Canal the following rules shall apply:
     (a) The Canal shall be operated efficiently in accordance with
conditions of transit through the Canal, and rules and regulations
that shall be just, equitable and reasonable, and limited to those
necessary for safe navigation and efficient, sanitary operation of
the Canal;
     (b) Ancillary services necessary for transit through the Canal
shall be provided;
     (c) Tolls and other charges for transit and ancillary services
shall be just, reasonable, equitable and consistent with the
principles of international law;
     (d) As a pre-condition of transit, vessels may be required to
establish clearly the financial responsibility and guarantees for
payment of reasonable and adequate indemnification, consistent with
international practice and standards, for damages resulting from
acts or omissions of such vessels when passing through the Canal.
In the case of vessels owned or operated by a State or for which it
has acknowledged responsibility, a certification by that State that
it shall observe its obligations under international law to pay for
damages resulting from the act or omission of such vessels when
passing through the Canal shall be deemed sufficient to establish
such financial responsibility;
     (e) Vessels of war and auxiliary vessels of all nations shall
at all times be entitled to transit the Canal, irrespective of
their internal operation, means of propulsion, origin, destination
or armament, without being subjected, as a condition of transit, to
inspection, search for surveillance. However, such vessels may be
required to certify that they have complied with all applicable
health, sanitation and quarantine regulations. In addition, such
vessels shall be entitled to refuse to disclose their internal
operation, origin, armament, cargo or destination. However,
auxiliary vessels may be required to present written assurances,
certified by an official at a high level of the government of the
State requesting the exemption, that they are owned or operated by
that government and in this case are being used only on government
non-commercial service.
 2. For the purposes of this Treaty, the terms "Canal," "vessel of
war," "auxiliary vessel," "internal operation," "armament" and
"inspection" shall have the meanings assigned them in Annex A to
this Treaty.

Article IV

 The United States of America and the Republic of Panama agree to
maintain the regime of neutrality established in this Treaty, which
shall be maintained in order that the Canal shall remain
permanently neutral, notwithstanding the termination of any other
treaties entered into by the two Contracting Parties.

Article V

 After the termination of the Panama Canal Treaty, only the
Republic of Panama shall operate the Canal and maintain military
forces, defense sites and military installations within its
national territory.

Article VI

 1. In recognition of the important contributions of the United
States of America and of the Republic of Panama to the
construction, operation, maintenance, and protection and defense of
the Canal, vessels of war and auxiliary vessels of those nations
shall, notwithstanding any other provisions of this Treaty, be
entitled to transit the Canal irrespective of their internal
operation, means of propulsion, origin, destination, armament or
cargo carried. Such vessels of war and auxiliary vessels will be
entitled to transit the Canal expeditiously.
 2. The United States of America, so long as it has responsibility
for the operation of the Canal, may continue to provide the
Republic of Colombia toll-free transit through the Canal for its
troops, vessels and materials of war. Thereafter, the Republic of
Panama may provide the Republic of Colombia and the Republic of
Costa Rica with the right of toll-free transit.

Article VII

 1. The United States of America and the Republic of Panama shall
jointly sponsor a resolution in the Organization of American States
opening to accession by all nations of the world the Protocol to
this Treaty whereby all the signatories will adhere to the
objective of this Treaty, agreeing to respect the regime of
neutrality set forth herein.
 2. The Organization of American States shall act as the depositary
for this Treaty and related instruments.

Article VIII

 This Treaty shall be subject to ratification in accordance with
the constitutional procedures of the two Parties. The instruments
of ratification of this Treaty shall be exchanged at Panama at the
same time as the instruments of ratification of the Panama Canal
Treaty, signed this date, are exchanged. This Treaty shall enter
into force, simultaneously with the Panama Canal Treaty, six
calendar months from the date of the exchange of the instruments of
ratification.

 DONE at Washington, this 7th day of September, 1977, in the
English and Spanish languages, both texts being equally authentic.

Annex A

 1. "Canal" includes the existing Panama Canal, the entrances
thereto and the territorial seas of the Republic of Panama adjacent
thereto, as defined on the map annexed hereto (Annex B), and any
other interoceanic waterway in which the United States of America
is a participant or in which the United States of America has
participated in connection with the construction or financing, that
may be operated
wholly or partially within the territory of the Republic of Panama,
the
entrances thereto and the territorial seas adjacent thereto.
 2. "Vessel of war" means a ship belonging to the naval forces of
a State, and bearing the external marks distinguishing warships of
its nationality, under the command of an officer duly commissioned
by the government and whose name appears in the Navy List, and
manned by a crew which is under regular naval discipline.
 3. "Auxiliary vessel" means any ship, not a vessel of war, that is
owned or operated by a State and used, for the time being,
exclusively on government non-commercial service.
 4. "Internal operation" encompasses all machinery and propulsion
systems, as well as the management and control of the vessel,
including its crew. It does not include the measures necessary to
transit vessels under the control of pilots while such vessels are
in the Canal.
 5. "Armament" means arms, ammunition, implements of war and other
equipment of a vessel which possesses characteristics appropriate
for use for warlike purposes.
 6. "Inspection" includes on-board examination of vessel structure,
cargo, armament and internal operation. It does not include those
measures strictly necessary for admeasurement, nor those measures
strictly necessary to assure safe, sanitary transit and navigation,
including examination of deck and visual navigation equipment, nor
in the case of live cargoes, such as cattle or other livestock,
that may carry communicable diseases, those measures necessary to
assure that health and sanitation requirements are satisfied.
United States Senate Modifications (Incorporated Into the June 1978
Instruments of Ratification)

(a) AMENDMENTS
     (1) At the end of Article IV, insert the following:
     "A correct and authoritative statement of certain rights and
duties of the Parties under the foregoing is contained in the
Statement of Understanding issued by the Government of the United
States of America on October 14, 1977, and by the Government of the
Republic of Panama on October 18, 1977, which is hereby
incorporated as an integral part of this Treaty, as follows:
      ```Under the Treaty Concerning the Permanent Neutrality and
Operation of the Panama Canal (the Neutrality Treaty), Panama and
the United States have the responsibility to assure that the Panama
Canal will remain open and secure to ships of all nations. The
correct interpretation of this principle is that each of the two
countries shall, in accordance with their respective constitutional
processes, defend the Canal against any threat to the regime of
neutrality, and consequently shall have the right to act against
any aggression or threat directed against the Canal or against the
peaceful transit of vessels through the Canal.
     ```This does not mean, nor shall it be interpreted as, a right
of intervention of the United States in the internal affairs of
Panama. Any United States action will be directed at insuring that
the Canal will remain open, secure, and accessible, and it shall
never be directed against the territorial integrity or political
independence of Panama.'''
     (2) At the end of the first paragraph of Article VI, insert
the following:
     ``In accordance with the Statement of Understanding mentioned
in Article IV above: `The Neutrality Treaty provides that the
vessels of war and auxiliary vessels of the United States and
Panama will be entitled to transit the Canal expeditiously. This is
intended, and it shall so be interpreted, to assure the transit of
such vessels through the Canal as quickly as possible, without any
impediment, with expedited treatment, and in case of need or
emergency, to go to the head of the line of vessels in order to
transit the Canal rapidly.'''

(b) CONDITIONS:
     (1) Notwithstanding the provisions of Article V or any other
provision of the Treaty, if the Canal is closed, or its operations
are interfered
with, the United States of America and the Republic of Panama shall
each independently have the right to take such steps as each deems
necessary, in accordance with its constitutional processes,
including the
use of military force in the Republic of Panama, to reopen the
Canal or restore the operations of the Canal, as the case may be.
     (2) The instruments of ratification of the Treaty shall be
exchanged only upon the conclusion of a Protocol of Exchange, to be
signed by authorized representatives of both Governments, which
shall constitute an integral part of the Treaty documents and which
shall include the following:
     ``Nothing in the Treaty shall preclude the Republic of Panama
and the United States of America from making, in accordance with
their respective constitutional processes, any agreement or
arrangement between the two countries to facilitate performance at
any time after December 31, 1999, of their responsibilities to
maintain the regime of neutrality established in the Treaty,
including agreements or arrangements for the stationing of any
United States military forces or the maintenance of defense sites
after that date in the Republic of Panama that the Republic of
Panama and the United States of America may deem necessary or
appropriate.''

(c) RESERVATIONS:
     1) Before the date of entry into force of the Treaty, the two
Parties shall begin to negotiate for an agreement under which the
American Battle Monuments Commission would, upon the date of entry
into force of such agreement and thereafter, administer, free of
all taxes and other charges and without compensation to the
Republic of Panama and in accordance with the practices,
privileges, and immunities associated with the administration of
cemeteries outside the United States of America by the American
Battle Monuments Commission, including the display of the flag of
the United States of America, such part of Corozal Cemetery in the
former Canal Zone as encompasses the remains of citizens of the
United States of America.
     (2) The flag of the United States of America may be displayed,
pursuant to the provisions of paragraph 3 of Article VII of the
Panama Canal Treaty, at such part of Corozal Cemetery in the former
Canal Zone as encompasses the remains of citizens of the United
States of America.
     (3) The President--
          (A) shall have announced, before the date of entry into
force of the Treaty, his intention to transfer, consistent with an
agreement with the Republic of Panama, and before the date of
termination of the Panama Canal Treaty, to the American Battle
Monuments Commission the administration of such part of Corozal
Cemetery as encompasses the remains of citizens of the United
States of America; and
          (B) shall have announced, immediately after the date of
exchange of instruments of ratification, plans, to be carried out
at the expense of the Government of the United States of America,
for--
               (i) removing, before the date of entry into force of
the Treaty, the remains of citizens of the United States of America
from Mount Hope Cemetery to such part of Corozal Cemetery as
encompasses such remains, except that the remains of any citizen
whose next of kin objects in writing to the Secretary of the Army
not later than three months after the date of exchange of the
instruments of ratification of the Treaty shall not be removed; and
               (ii) transporting to the United States of America
for reinterment, if the next of kin so requests, not later than
thirty months after the date of entry into force of the Treaty, any
such remains encompassed by Corozal Cemetery and, before the date
of entry into force of the Treaty, any remains removed from Mount
Hope Cemetery pursuant to subclause (i); and
          (C) shall have fully advised, before the date of entry
into force of the Treaty, the next of kin objecting under clause
(B) (i) of all available options and their implications.
     (4) To carry out the purposes of Article III of the Treaty of
assuring the security, efficiency, and proper maintenance of the
Panama Canal, the United States of America and the Republic of
Panama, during their respective periods of responsibility for Canal
operation and maintenance, shall, unless the amount of the
operating revenues of the Canal exceeds the amount needed to carry
out the purposes of such Article, use such revenues of the Canal
only for purposes consistent with the purposes of Article III.

(d) UNDERSTANDING:
     (1) Paragraph 1 (c) of Article III of the Treaty shall be
construed as requiring, before any adjustment in tolls for use of
the Canal, that the effects of any such toll adjustment on the
trade patterns of the two Parties shall be given full
consideration, including consideration of the following factors in
a manner consistent with the regime of neutrality:
          (A) the costs of operating and maintaining the Panama
Canal;
          (B) the competitive position of the use of the Canal in
relation to other means of transportation;
          (C) the interests of both Parties in maintaining their
domestic fleets;
          (D) the impact of such an adjustment on the various
geographic areas of each of the two Parties; and
          (E) the interests of both Parties in maximizing their
international commerce. The United States of America and the
Republic of Panama shall cooperate in exchanging information
necessary for the consideration of such factors.
     (2) The agreement `to maintain the regime of neutrality
established in this Treaty' in Article IV of the Treaty means that
either of the two Parties to the Treaty may, in accordance with its
constitutional processes, take unilateral action to defend the
Panama Canal against any threat, as determined by the Party taking
such action.
     (3) The determination of `need or emergency' for the purpose
of any vessel of war or auxiliary vessel of the United States of
America or the Republic of Panama going to the head of the line of
vessels in order to transit the Panama Canal rapidly shall be made
by the nation operating such vessel.
     (4) Nothing in the Treaty, in Annex A or B thereto, in the
Protocol relating to the Treaty, or in any other agreement relating
to the Treaty, obligates the United States of America to provide
any economic assistance, military grant assistance, security
supporting assistance, foreign military sales credits, or
international military education and training to the Republic of
Panama.
     (5) The President shall include all amendments, conditions,
reservations, and understandings incorporated by the Senate in this
resolution of ratification in the instrument of ratification to be
exchanged with the Government of the Republic of Panama.

From the Library of Congress Archives

Presented by CZBrats
November 1977
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