70
SUMMARY
Based on the facts and circumstances as I note them, the Commission's account-
ing for ship accident costs is sound and establishes an appropriate basis for the set-
ting of tolls. It also is consistent with the Congressional mandate that the Commis-
sion be self-sustaining and maintain operations at no cost to the U.S. taxpayer. Ac-
cordingly, unless the Congress directs a different policy in terms of the assumption
of the liability, I urge that no change be made or directed in the manner in which
the Commission accounts for ship accident costs.
Mr. HUBBARD. Thank you. About two-thirds of the questions I
have here I will submit for the record. I would ask over a period, a
reasonable period of time, that you try to answer those that are
submitted for the record. Our staff will be in contact with you.
For today, and for this hearing, in your statement, of course, you
have noted you are long associated with the Panama Canal. You
indicate that you and your company were involved in helping the
Panama Canal Company establish a marine accident recovery back
in 1973. Prior to this, how was the accounting for vessel accident
claims done?
Was there no marine accident reserve?
Mr. KUJAWA. There was no reserve at that time. The accounting
was to recognize the costs when the claim, in effect, was known,
both in terms of the entitlement to the ship owner and the meas-
urement of damages.
Mr. HUBBARD. In setting up the reserve in 1972, what base period
was used to determine how much should be set aside annually for
claims and how was that period chosen?
Mr. KUJAWA. I forget the exact number of years, but it was at
least the previous 3-year period, as I recall.
Mr. HUBBARD. Were all different types of claims during the base
period considered?
Mr. KUJAWA. Yes.
Mr. HUBBARD. Lastly, how was the amount to be set aside under
the marine accident reserve calculated?
Mr. KUJAWA. There were two factors taken into account. Basical-
ly, the actual experience for the prior periods and the establish-
ment of some type of balance in the reserve, a judgment call, to
take care of the possibility for uncertainty in terms of the severity
of future accidents.
Mr. HUBBARD. Thank you very much. Again, I will submit other
questions for the record.
Mr. Lent?
Mr. LENT. Thank you very much, Mr. Chairman.
I understand, Mr. Kujawa, that you deal with these liability
issues from the perspective of an accountant. However, assuming
the Panama Canal currently has no legal authority to settle vessel
damage claims in excess of $120,000 that occur outside the locks, is
it a proper practice to set aside reserves for that type of accident?
In other words, if the Commission cannot settle a claim for an acci-
dent that occurs outside the lock having an amount in excess of
$120,000, why does the Commission set aside a reserve to cover
that?
Mr. KUJAWA. The absence of authority for the Commission to ac-
tually settle would not be of concern to me as an accountant. The
question I would address would be, Would ultimately the cost of