A bill to provide the congressional authorization required by clause 2, section 3, article IV of the Constitution, for the transfer to Panama of the property of the United States in the Canal Zone; to authorize the appropriations required by clause 7, section 9, article I of the Constitution, to implement that transfer of United States property, including the transfer of military installations and of cemeteries in which United States veterans are interred, the closing of the Canal Zone courts, and the assumption by the United States Postal Service of the functions of the Canal Zone postal service; to otherwise provide legislatively the authorizations not provided pursuant to clause 2, section 2, article II of the Constitution which are necessary to implement the Panama Canal Treaty of 1977 and related agreements; and for other purposes.

Redesignates the Canal Zone Code as the Panama Canal Code. Enacts technical amendments in such Code and laws of the United States to reflect the administration of the Canal by the Panama Canal Commission, and the transfer of the Canal to the Republic of Panama under the Panama Canal Treaty of 1977. Directs the President to submit to Congress proposed legislation to revise laws which are applicable only during the Canal transition period, and to incorporate the remaining provisions of the Panama Canal Code into the United States Code.

Title I: Panamanian Relations and Security Matters - Directs the President to appoint the United States representatives to the Joint Commission on the Environment and to any joint committee with Panama to study a sea level canal in that country. Requires Congressional authorization for the construction of a sea level canal. Directs the President to designate the United States representatives to the Consultative Committee between the United States and Panama.

Repeals security legislation with respect to use of the Canal during a national emergency. Amends the Arms Export Control Act to repeal the applicability of arms export or import licensing requirements to the Panama Canal. Directs the Secretary of State to periodically furnish Panama with a list of persons entitled to the privileges and immunities specified in the Panama Canal Treaty of 1977.

Repeals the designation as the Canal Zone of areas specified in the 1903 treaty with Panama. Repeals the President's authorization: (1) to acquire or exchange land for the operation of the Panama Canal and the Canal Zone; and (2) to designate towns and subdivisions of the Zone. Terminates the Canal Zone Government and the position of Canal Zone Governor. Repeals procedures regulating revocable licenses for lands in the Canal Zone.

Repeals all provisions in the Panama Canal Code with respect to extradition of fugitives in the Canal Zone to Panama. Authorizes the Panama Canal Commission, other agencies and departments, and the United States courts in Panama, to transfer their records to other agencies, departments, or courts of the United States, and (with the approval of the Ambassador) to the Government of Panama.

Title II: Panama Canal Commission - Establishes the Panama Canal Commission as a corporation and agency of the United States to succeed the Panama Canal Company. Repeals provisions of the Panama Canal Code relating to interest payments by the Panama Canal Company on the direct investment of the United States in such Company. Revises procedures by which the Panama Canal Commission shall account for its capital surplus and pay dividends on such investment. Repeals the requirement that the Panama Canal Company reimburse the Treasury for certain annuity payments and for the operational costs of the Canal Zone Government. Requires the Panama Canal Commission to make certain payments from the Canal operating revenues to Panama, as required by the Panama Canal Treaty of 1977. Repeals the authorization of the Secretary of Treasury to make annual payments to Panama under the Treaty of 1955. Defines payments by the Commission to Panama for public services as an operating cost of the Commission.

Sets forth procedures for the appointment of the Commission Board of Directors and administrative officers. Revises the amenability of the Commission to suits.

Makes the powers of the Commission subject to the Panama Canal Treaty of 1977. Repeals the subjection of the Commission to other treaties and laws of the United States. Repeals the "deemed acceptance" by the Panama Canal Company of certain property, facilities, and personnel, transferred to the Company by the President. Directs the transfer of certain assets and liabilities of the Panama Canal Company to the Commission.

Transfers from the President to the Commission the authority to prescribe regulations governing Canal navigation. Repeals the authorization for the consolidation of the funds of the Commission and the Canal Zone Government. Directs the Department of Defense to reimburse the Commission for Commission expenditures for the maintenance of defense facilities.

Authorizes Department of Defense appropriations to be expended for certain education and health services formerly carried out by the Canal Zone Government. Prohibits the funds of the Commission to be expended to furnish free health services to Commission employees.

Requires Panama to continue to pay for water supplied by the Canal Zone Commission. Authorizes the Commission to utilize funds for disaster relief when a disaster poses hazards to health, safety, security, or property in the Canal Zone.

Repeals the authority of the Governor of the Canal Zone to acquire equipment for the Canal Zone. Permits property transfers and cross-servicing agreements between the Commission and the United States departments and agencies.

Permits the Commission to prescribe Canal tolls which shall be calculated to cover the maintenance and operation costs of the Canal, subject to the Panama Canal Treaty of 1977.

Repeals settlement authority with respect to claims against the civil government of the Canal Zone. Revises: (1) the procedures for investigating claims against the Commission; (2) the elements of recognizable claims; and (3) the measure of damages of such claims.

Imposes a two-year statue of limitations on such claims. Establishes a Board of Local Inspectors of the Panama Canal Commission to inspect claims against the Commission. Requires an action on such a claim to be brought in the United States District Court for the Eastern District of Louisiana.

Title III: Employees and Postal Matters - Repeals provisions of the Panama Canal Code relating to the appointment and compensation of Canal Zone Government employees and teachers. Repeals the authorization for deductions from the compensation of Panama Canal Commission employees for amounts due for supplies and services. Repeals restrictions on the hours of work for telegraph operators and train dispatchers of the Commission. Permits the Commission to appoint and compensate its employees. Makes provisions regulating wage and employment practices governing United States employees in the Canal Zone applicable to the Commission. Directs the establishment of a Panama Canal Employment System governing Commission employees and certain United States employees in Panama. Repeals the extension of additional compensation for tax differentials. Permits the payment of overseas recruitment and retention differentials. Permits the transfer of Federal employees to the Commission.

States that conditions of employment, placement, and retirement shall not be affected by the transfer of employees of the Panama Canal Company, or the Canal Zone Government, to the Commission or United States agencies in Panama. Sets forth the rights of such employees with respect to placement, educational travel benefits, insurance, compensation adjustment, and early retirement. Specifies that certain judicial officers shall be treated the same as Commission employees. Redefines "employee" for purposes of title 5 of the United States Code. Directs payment to the Social Security System of Panama funds to purchase retirement equity in that system for non-United States citizens retiring under special Treaty provisions.

Discontinues the postal service established by the Panama Canal Code. Directs the Panama Canal Commission to assume the funds and obligations of the postal service.

Title IV: Courts and Related Functions - Continues the applicability of the Panama Canal Code in conformity to the Treaty. Limits court jurisdiction to that prescribed by the Treaty.

Permits the continued operation of the United States District Court for the District of the Canal Zone within Treaty limitations. Repeals the division of such court. Repeals Canal Zone residency requirements for certain judicial officers. Revises appointment procedures for a special district judge. Revises the operational procedures and continuation contingencies of the magistrates courts established by the Panam Canal Code.

Vests in the Panama Canal Commission the authority necessary to carry out United States rights and responsibilities specified in Article XI of the Treaty.

Redefines "special immigrants" under the Immigration and Nationality Act to include certain employees of the Panama Canal Company or the Canal Zone Government who are Canal Zone residents on the date of the exchange of Treaty ratification instruments.

Title V: Miscellaneous Provisions - Deems references to "hospitals," "Health Bureau," and "health director," in the Panama Canal Code to apply to the hospitals operated by the United States in Panama.