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supply, et cetera, as stipulated in the Instrument of Transfer of Water and Sewerage Systems, executed between the Governor of the Panama Canal and the Foreign Minister of Panama on December 28, 1945.

(d) With respect to the railroad passenger station and site in the city of Colón, legislation will be sought to authorize and direct the withdrawal from such site and structure at such time as the withdrawal from the areas known as de Lesseps, Colón Beach and New Cristobal, contemplated by the next preceding subparagraph, shall have been fully completed, and the conveyance to the Republic of Panama free of cost of all the right, title and interest of the United States and of its agency, the Panama Canal Company, in and to such site and structure. However, the railroad tracks and trackage area in Colón, being required for switching purposes serving the Cristobal piers, will be retained for such purposes.

(e) All transfers or conveyances of lands and improvements contemplated by this Item, subject to legislative authorization and direction, will necessarily be made subject to any leases which may be outstanding in the respective areas, and will also contain provisions fully protecting the Government of the United States of America against any claims by lessees for damages or losses which may arise as a result of such transfers or conveyances.

(f) The transfers or conveyances contemplated by this Item, subject to legislative authorization, are in addition to the conveyance of Paitilla Point as specifically covered by Article V of the Treaty signed today, and to the transfer of real property effected by Article VI of said Treaty.

3. Articles, materials, and supplies that are mined, produced or manufactured in the Republic of Panama, when purchased for use in the Canal Zone, will be exempted from the provisions of the Buy American Act.

4. Referring to the exchange of notes dated March 2, 1936, accessory to the General Treaty between the United States of America and the Republic of Panama signed on that date, relative to the sale to ships of goods imported into the Canal Zone by the Government of the United States of America, the United States of America agrees, effective December 31, 1956, and in benefit of Panamanian commerce, to withdraw wholly from, and thereafter to refrain from, any such sales to ships, provided that nothing in this Item shall apply

(a) to sales to ships operated by or for the account of the Government of the United States of America,

(b) to the sale of fuel or lubricants, or

(c) to any sale or furnishing of ships stores which is incidental to the performance of ship repair operations by any agency of

the Government of the United States of America. 5. Legislative authorization and the necessary appropriations will be sought for the construction of a bridge at Balboa referred to in Point 4 of the General Relations Agreement of 1942.

6. The United States of America agrees, effective December 31, 1956, to withdraw from persons employed by agencies of the Government of the United States of America in the Canal Zone who are not citizens of the United States of America and who do not actually reside in said Zone the privilege of availing themselves of services which are offered within said Zone except those which are essential to health or necessary to permit them to perform their duties.

7. It is and will continue to be the policy of the Panama Canal agencies and of the Armed Forces in the Canal Zone in making purchases of supplies, materials and equipment, so far as permitted under United States legislation, to afford to the economy of the Republic of Panama full opportunity to compete for such business.

8. In general connection with the matter of the importation of items of merchandise for resale in the sales stores in the Canal Zone, it will be the practice of the agencies concerned to acquire such items either from United States sources or Panamanian sources unless, in certain instances, it is not feasible to do so.

9. With respect to the manufacture and processing of goods for sale to or consumption by individuals, now carried on by the Panama Canal Company, it will be the policy of the United States of America to terminate such activities whenever and for so long as such goods, or particular classes thereof, are determined by the United States of America to be available in the Republic of Panama on a continuing basis, in satisfactory qualities and quantities, and at reasonable prices. The United States of America will give prompt consideration to a request in writing on the part of the Government of Panama concerning the termination of the manufacture or processing of any goods covered in this Item as to which the Government of Panama may consider the criteria specified in this Item to have been met.

10. Prompt consideration will be given to withdrawing from the handling of commercial cargo for transshipment on Canal Zone piers so soon as Panamanian port facilities are in satisfactory operation in Colón.

11. The United States agrees that the term "auxiliary works” as used in the Treaty includes the Armed Forces of the United States of America.

On the part of the Republic of Panama:

1. The Republic of Panama will lease to the United States of America, free of all cost save for the recited consideration of one Balboa, for a period of 99 years, two parcels of land contiguous to the present United States Embassy residence site, as designated on the sketch (No. SGN-9-54, dated November 19, 1954) and accompanying descriptions prepared by the Comisión Catastral of the Republic of Panama, attached hereto.

2. The Republic of Panama assures the United States of America that the property, shown and described on the attached map (No. SGN-6–54, dated October 1954) and accompanying description prepared by the Comisión Catastral of the Republic of Panama, in front of the United States Embassy office building site and between the Bay of Panama and Avenida Balboa as it may be extended between 37th and 39th Streets, will be preserved permanently as a park and not developed for commercial or residential purposes.

3. So long as the United States of America maintains in effect those provisions of Executive Order No. 6997 of March 25, 1935 governing the importation of alcoholic beverages into the Canal Zone, the Republic of Panama will grant a reduction of 75 percent in the import duty on alcoholic beverages which are sold in Panama for importation into the Canal Zone pursuant to such Executive Order. 4. In connection with the authorization granted to the United States of America in Article VIII of the Treaty, the United States shall have free access to the beach areas contiguous to the maneuver area described in said Article VIII for purposes connected with training and maneuvers, subject to the public use of said beach as provided under the Constitution of Panama.

The provisions of this Memorandum of Understandings Reached shall enter into force upon the exchange of instruments of ratification of the Treaty signed this day by the United States of America and the Republic of Panama.

APPENDIX D

COMPARISON OF THE RIGHTS AND OBLIGATIONS OF THE UNITED STATES UNDER THE TERMS

OF THE THREE BASIC TREATIES WITH PANAMA

HAY-BUNAU-VARILLA TREATY, 1903

RIGHTS RECEIVED

CONCESSIONS

(1) In perpetuity, to a zone of land and land under (1) Guaranteed the independence of the Republic of
water 10 miles in width and extending 3 miles into the Panama.
Caribbean sea and 3 miles into the Pacific ocean, plus (2) Granted the right to have official dispatches of the
certain small islands in the Bay of Panama, for the Government of Panama transmitted over any telegraph
maintenance, operation, sanitation, and protection of a and telephone lines established for canal purposes and
canal across the Isthmus of Panama.

used for public and private business at rates not higher
(2) In perpetuity, the use, occupation, and control of than those required from officials in the service of the
any other lands and waters outside of the zone which may United States.
be necessary and convenient for the construction, mainte- (3) $10 million in gold coin of the United States and an
nance, operation, sanitation, and protection of the canal. annual payment of $250,000, beginning 9 years after the

(3) All the power and authority within the zone and date of the exchange of ratifications.
within the limits of all auxiliary lands and waters which (4) Granted the Republic of Panama the right to trans-
the United States would possess and exercise if it were port over the canal its vessels and its troops and munitions
sovereign, to the entire exclusion of the exercise by the of war at all times without paying charges of any kind.
Republic of Panama of any such sovereign rights, power, The exemption is extended to the auxiliary railway for
or authority.

the transportation of persons in the service of the Republic
(4) All the rights of the New Panama Canal Company of Panama, or of the police force charged with the preser-
and the Panama Railroad upon purchase of the Com- vation of public order outside of the zone, as well as to
pany's rights, privileges, properties, and concessions. their baggage, munitions of war, and supplies.

(5) At all times and at its discretion to use its police (5) United States assumes the costs of damages caused
and its land and naval forces or to establish fortifications to owners of private property of any kind by reason of the
for the safety or protection of the canal, or of the ships grants contained in the treaty or by reason of the opera-
that transit it, or the railways and auxiliary works. tions of the United States, its agents or employees, or by
(6) To use the rivers, streams, lakes, and other bodies reason of the construction, maintenance, operation,
of water in the Republic of Panama for navigation, the sanitation, and protection of the canal or of the works of
supply of water, or water power or other purposes as may sanitation and protection provided for in the treaty.
be necessary and convenient for the construction, mainte- (6) After 50 years, the system of sewers and waterworks
nance, operation, sanitation, and protection of the canal. constructed and maintained by the United States shall

(7) A monopoly in perpetuity for the construction, revert to and become the properties of the cities of Panama
maintenance, and operation of any system of communi- and Colon.
cation by means of canal or railroad connecting the
Caribbean Sea and the Pacific Ocean across Panamanian
territory.

(8) To acquire in the cities of Panama and Colon, by
purchase or by the exercise of the right of eminent domain,
any lands, buildings, water rights, or other properties
necessary and convenient for the construction, mainte-
nance, operation, and protection of the canal and of any
works of sanitation, such as the collection and disposition
of sewage and the distribution of water in the said cities
of Panama and Colon, at the discretion of the United
States.

(9) To impose and collect water rates and sewerage rates
which shall be sufficient to provide for the payment of
interest and the amortization of the principal of the cost
of such works within a period of fifty years, upon which
time the system of sewers and water works shall revert to
and become the properties of the cities of Panama and
Colon.

(10) To enforce in perpetuity sanitary ordinances pre-
scribed by the United States in the cities of Panama and
Colon and the territories and harbors adjacent thereto in
case the Republic of Panama should not be, in the judg-
ment of the United States, able to maintain such order.

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