Skip to main content

A-58721, OCTOBER 24, 1935, 15 COMP. GEN. 327

A-58721 Oct 24, 1935
Jump To:
Skip to Highlights

Highlights

FURTHER OBJECTION IS NOT REQUIRED TO THE REIMBURSEMENT OF PURCHASES IN THE ADDITIONAL AMOUNT OF ONE CENT PER BUSHEL IN THOSE INSTANCES WHERE PAYMENT THEREOF HAS NOT HERETOFORE BEEN MADE. THAT THERE WAS NOT ALLOWABLE A 1 CENT PER BUSHEL "BUYING CHARGE" CLAIMED BY THEM AS THE . THE ASSOCIATION WAS ORGANIZED AS A NONPROFIT CORPORATION UNDER THE LAWS OF THE STATE OF OREGON. THE ASSOCIATION WAS COMPOSED OF APPROXIMATELY 25 MEMBERS WHO WERE MILLERS. " WHICH CONTRACT WAS APPROVED BY THE SECRETARY OCTOBER 10. THE PURPOSE OF THE AGREEMENT WAS TO RELIEVE THE DEPRESSED DOMESTIC MARKET BY EXPORTING SURPLUS WITH A VIEW TO MAINTAINING THE PRICE OF WHEAT AT AN AMOUNT CONSIDERED FAIR BY THE SECRETARY OF AGRICULTURE.

View Decision

A-58721, OCTOBER 24, 1935, 15 COMP. GEN. 327

AGRICULTURAL ADJUSTMENT ACT - MARKETING AGREEMENTS - COMMODITY BENEFIT PAYMENTS IN VIEW OF THE BROAD PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED; THE TERMS OF THE MARKETING AGREEMENT BETWEEN THE SECRETARY OF AGRICULTURE AND THE NORTH PACIFIC EXPORT ASSOCIATION; AND THE EXPLANATION NOW MADE AS TO THE PROCEDURE FOLLOWED IN THE PURCHASING AND SELLING OF SURPLUS WHEAT UNDER SAID AGREEMENT, FURTHER OBJECTION IS NOT REQUIRED TO THE REIMBURSEMENT OF PURCHASES IN THE ADDITIONAL AMOUNT OF ONE CENT PER BUSHEL IN THOSE INSTANCES WHERE PAYMENT THEREOF HAS NOT HERETOFORE BEEN MADE, THE ONE CENT PER BUSHEL REPRESENTING A "BUYING CHARGE" UNDERSTOOD AND AGREED TO BY ALL CONCERNED, INCLUDING THE SECRETARY OF AGRICULTURE, TO COVER THOSE UNCERTAIN BUT NECESSARY COSTS IN CONNECTION WITH SAID PURCHASES. 14 COMP. GEN. 437 MODIFIED.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, OCTOBER 24, 1935:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF MAY 4, 1935, SUPPLYING ADDITIONAL INFORMATION YOU REPORT HAVING RECEIVED FROM VARIOUS MEMBERS OF THE NORTH PACIFIC EMERGENCY EXPORT ASSOCIATION, IN VIEW OF WHICH YOU ASK "RECONSIDERATION DE NOVO" OF DECISION OF DECEMBER 7, 1934, 14 COMP. GEN. 437, THAT THERE WAS NOT ALLOWABLE A 1 CENT PER BUSHEL "BUYING CHARGE" CLAIMED BY THEM AS THE ,ESTABLISHED TRADE CHARGE" FOR CONVERTING WHEAT FROM COUNTRY BASIS TO BASIS NO. 1, SACKED TRACK, TIDEWATER TERMINAL.

THE ASSOCIATION WAS ORGANIZED AS A NONPROFIT CORPORATION UNDER THE LAWS OF THE STATE OF OREGON, HAVING ITS PRINCIPAL OFFICE IN PORTLAND, OREG. THE ASSOCIATION WAS COMPOSED OF APPROXIMATELY 25 MEMBERS WHO WERE MILLERS, EXPORTERS, GROWERS, AND/OR DEALERS IN WHEAT, FLOUR, OR OTHER WHEAT PRODUCTS. UNDER AUTHORITY OF SECTION 8 (2) AND 12 (B) OF THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933, 48 STAT. 34, 38, THE SECRETARY OF AGRICULTURE EXECUTED A CONTRACT WITH THE ASSOCIATION AND THE MEMBERS THEREOF ENTITLED "MARKETING AGREEMENT FOR DISPOSAL OF NORTH PACIFIC WHEAT PLUS," WHICH CONTRACT WAS APPROVED BY THE SECRETARY OCTOBER 10, 1933. THE TITLE SUGGESTS, THE PURPOSE OF THE AGREEMENT WAS TO RELIEVE THE DEPRESSED DOMESTIC MARKET BY EXPORTING SURPLUS WITH A VIEW TO MAINTAINING THE PRICE OF WHEAT AT AN AMOUNT CONSIDERED FAIR BY THE SECRETARY OF AGRICULTURE. IT WAS AGREED THAT THE WHEAT SURPLUS IN OREGON, WASHINGTON, AND NORTHERN IDAHO, KNOWN AS THE "PACIFIC NORTHWEST AREA," SHOULD BE PURCHASED BY THE ASSOCIATION PURSUANT TO WRITTEN INSTRUCTIONS OF THE SECRETARY OF AGRICULTURE. IT WAS WITHIN THE DISCRETION OF THE SECRETARY TO DESIGNATE THE QUANTITY OF WHEAT TO BE PURCHASED, THE PRICE AND TERMS OF SUCH PURCHASES AND THE PERSONS FROM WHOM PURCHASES SHOULD BE MADE, BUT PURCHASES WERE TO BE MADE ON THE BASIS SET FORTH IN "EXHIBIT A" ATTACHED TO THE AGREEMENT AND MADE A PART THEREOF.

THE SAID "EXHIBIT A" ATTACHED TO THE CONTRACT OF OCTOBER 10, 1933, PROVIDED FOR SPECIFIC DEDUCTIONS COVERING INTEREST, RESACKING, DAMAGED WHEAT, AND OTHER ITEMS LISTED, BUT IT STATED NO DEDUCTION AS A BUYING CHARGE OR "ESTABLISHED TRADE CHARGE" OTHER THAN AS SET OUT THEREIN. ,EXHIBIT B" ATTACHED TO THE MARKETING AGREEMENT IS ENTITLED "SCHEDULE OF TIDEWATER TERMINAL COSTS WITH RESPECT TO PURCHASE AND SALE OF WHEAT.' STIPULATED FOR DEDUCTIONS WITH RESPECT TO A NUMBER OF ITEMS, INCLUDING INSPECTION, CLEANING SMUTTY WHEAT, CARRYING CHARGES, AND FOR INCLUDING 1 CENT PER BUSHEL "SELLING COSTS," AS COSTS IN CONNECTION WITH SALES. SECTIONS 3, 4, AND 5 ARE, IN PERTINENT PART, AS FOLLOWS:

SEC. 3. THE ASSOCIATION SHALL SERVE AS A CLEARING HOUSE FOR ARRANGING DETAILS OF PURCHASING, SHIPPING, HANDLING, AND SELLING THE WHEAT AND/OR FLOUR PURCHASED FOR EXPORT OR OTHERWISE AS HEREIN PROVIDED. THE ASSOCIATION SHALL MAINTAIN A SYSTEM OF ACCOUNTS WHICH SHALL ACCURATELY REFLECT THE TRUE ACCOUNT AND CONDITION OF ALL SUCH TRANSACTIONS. THE BOOKS, RECORDS, PAPERS, AND MEMORANDA OF THE ASSOCIATION (AND OF EACH MEMBER THEREOF, INSOFAR AS SUCH BOOKS, RECORDS, PAPERS, AND MEMORANDA PERTAIN TO THIS AGREEMENT OR ACTS DONE PURSUANT THERETO) SHALL, DURING THE USUAL HOURS OF BUSINESS, BE SUBJECT TO THE EXAMINATION OF THE SECRETARY TO ASSIST HIM IN THE FURTHERANCE OF HIS DUTIES WITH RESPECT TO THIS AGREEMENT, INCLUDING VERIFICATION BY THE SECRETARY OF THE INFORMATION FURNISHED ON THE FORMS HEREINAFTER REFERRED TO. THE ASSOCIATION, AND EACH MEMBER THEREOF, SHALL, FROM TIME TO TIME, FURNISH INFORMATION TO THE SECRETARY ON AND IN ACCORDANCE WITH FORMS TO BE SUPPLIED BY HIM.

SEC. 4. THE SECRETARY MAY, FROM TIME TO TIME, GIVE WRITTEN INSTRUCTIONS TO THE EXECUTIVE COMMITTEE OF THE ASSOCIATION, OR ITS DULY APPOINTED MANAGING AGENT, DIRECTING SUCH ASSOCIATION TO CONTRACT FOR THE PURCHASE OF WHEAT, PRODUCED IN THE AFORESAID PACIFIC NORTHWEST AREA, FOR THE PURPOSE HEREINAFTER PROVIDED. SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY INCLUDE ANY OR ALL OF THE FOLLOWING:

(A) THE QUANTITY OF WHEAT TO BE SO PURCHASED, WHICH PURCHASES SHALL BE MADE ON THE BASIS SET FORTH IN EXHIBIT A ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF;

(B) THE PRICE TO BE PAID FOR THE SAME AND THE TERMS OF SAID PURCHASE; AND

(C) THE PERSONS FROM WHOM SUCH PURCHASES ARE TO BE MADE, WHETHER FROM PRODUCERS, ASSOCIATIONS OF PRODUCERS, LOCAL OR TERMINAL WAREHOUSES, OR OTHERS.

IT IS AGREED THAT THE ASSOCIATION SHALL NOT HAVE AT ANY ONE TIME OUTSTANDING NET PURCHASES IN EXCESS OF 1 MILLION BUSHELS OF WHEAT AGAINST WHICH EXCESS THERE ARE NO OUTSTANDING SALES OR CONTRACTS FOR SALES.

THE ASSOCIATION AND ITS MEMBERS HEREBY AGREE TO CARRY OUT AND FULFILL SUCH INSTRUCTIONS TO THE BEST OF THEIR ABILITY.

SEC. 5. WITH RESPECT TO THE WHEAT SO PURCHASED, THE ASSOCIATION SHALL RECEIVE WRITTEN BIDS FROM ITS MEMBERS, EACH DAY, FOR THE PURCHASE FROM THE ASSOCIATION AND THE SALE IN THE EXPORT TRADE OF ANY PART OF SUCH WHEAT IN THE FORM OF WHEAT OR FLOUR. SUCH BIDS SHALL INCLUDE THE FOLLOWING:

(A) THE AMOUNT OF WHEAT OFFERED TO BE SO PURCHASED AND SOLD IN THE EXPORT TRADE AS WHEAT OR FLOUR;

(B) THE SALES PRICES AT WHICH SUCH WHEAT AND/OR FLOUR SHALL BE SOLD IN THE EXPORT TRADE AND THE TIME OF SHIPMENT. THE SALES OF THE WHEAT, IF ANY, SHALL BE MADE ON THE BASIS OF NO. 2 BULK, F.O.B. SHIP. THE SALES OF THE FLOUR, IF ANY, SHALL BE ON THE F.A.S. BASIS FOR STEAMER LOADING AT PORTLAND AND ASTORIA, OREGON, AND TACOMA AND SEATTLE, WASHINGTON;

(C) THE TERMS OF SUCH PROPOSED SALE AND SHIPMENT INCLUDING THE C.I.F. BID AND THE SPECIFIC DEDUCTIONS MADE IN ESTABLISHING THE F.O.B. OR F.A.S. PRICE; AND

(D) THE PORT OR PORTS OF DESTINATION OF THE WHEAT OR FLOUR TO BE THUS SOLD.

COPIES OF ALL SUCH BIDS SHALL BE SUBMITTED TO THE SECRETARY, WHO WILL THEN ADVISE IN WRITING THE EXECUTIVE COMMITTEE, OR ITS DULY APPOINTED MANAGING AGENT, WHICH BIDS TO ACCEPT, IF ANY. THE ASSOCIATION AGREES TO ACCEPT SUCH SPECIFIED BIDS AND TO NOTIFY THOSE MEMBERS WHOSE BIDS HAVE BEEN THUS ACCEPTED. THE ASSOCIATION FURTHER AGREES TO TRANSFER CONTRACTS FOR A SUFFICIENT AMOUNT OF WHEAT, PURCHASED PURSUANT TO SECTION 4 HEREOF, TO PERMIT THE INDIVIDUAL MEMBERS TO CARRY OUT AND FULFILL THEIR BIDS WHICH HAVE BEEN ACCEPTED BY THE ASSOCIATION. THE MEMBERS AGREE TO PAY THE PURCHASE PRICE FOR THE CONTRACTS SO TRANSFERRED PURSUANT TO THE TERMS OF SUCH CONTRACTS.

THE SECRETARY MAY, FROM TIME TO TIME, GIVE WRITTEN INSTRUCTIONS TO THE EXECUTIVE COMMITTEE, OR ITS DULY APPOINTED MANAGING AGENT, TO SELL IN THE EXPORT TRADE OR TO ANY PUBLIC UNEMPLOYMENT RELIEF AGENCY ANY PART OF THE WHEAT SO PURCHASED PURSUANT TO SECTION 4 HEREOF, IN THE FORM OF WHEAT OR FLOUR. SUCH WRITTEN INSTRUCTIONS MAY, IN THE DISCRETION OF THE SECRETARY, INCLUDE ANY OR ALL OF THE FOLLOWING:

(A) THE AMOUNT OF WHEAT AND/OR FLOUR TO BE SOLD;

(B) THE SALES PRICES AT WHICH SUCH WHEAT AND/OR FLOUR SHALL BE SOLD. THE SALES OF THE WHEAT, IF ANY, SHALL BE MADE ON THE BASIS OF NO. 2 BULK, F.O.B. SHIP. THE SALES OF THE FLOUR, IF ANY, SHALL BE MADE ON F.A.S. BASIS FOR STEAMER LOADING AT PORTLAND AND ASTORIA, OREGON, AND TACOMA AND SEATTLE, WASHINGTON;

(C) THE TERMS OF SUCH PROPOSED SALE AND SHIPMENT INCLUDING THE C.I.F. BIDS AND THE SPECIFIC DEDUCTIONS MADE IN ESTABLISHING THE F.O.B. OR F.A.S. PRICE;

(D) THE PORT OR PORTS OF DESTINATION OF THE WHEAT AND/OR FLOUR TO BE THUS SOLD; AND

(E) THE PURCHASER TO WHOM THE WHEAT AND/OR FLOUR SHALL BE THUS SOLD.

THE ASSOCIATION AND ITS MEMBERS HEREBY AGREE TO CARRY OUT AND FULFILL SUCH INSTRUCTIONS TO THE BEST OF THEIR ABILITY.

IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT ANY WHEAT THAT IS PURCHASED PURSUANT TO THE WRITTEN DIRECTIONS OF THE SECRETARY AS PROVIDED IN SECTION 4 HEREOF SHALL NOT BE SOLD EXCEPT AS PROVIDED IN THIS SECTION 5.

IT IS STATED IN A LETTER DATED OCTOBER 9, 1935, FROM THE DEPARTMENT OF AGRICULTURE THAT THE WAY IN WHICH A MEMBER OF THE NORTH PACIFIC EXPORT ASSOCIATION BOUGHT WHEAT IN THE COUNTRY, PAID FOR IT, SOLD IT, AND PREPARED HIS CLAIM FOR PAYMENT UNDER THE TERMS OF THE AGREEMENT FOR THE DISPOSAL OF PACIFIC NORTHWEST WHEAT SURPLUS IS AS FOLLOWS:

I. ON ANY GIVEN DAY THE SECRETARY'S REPRESENTATIVE ANNOUNCES TO ALL ASSOCIATION MEMBERS THAT UP TO 6 A.M. OF THE FOLLOWING DAY HE WILL APPROVE PURCHASE CONTRACTS FOR MEMBERS AT 85 CENTS PER BUSHEL FOR WHEAT ON TRACK IN SACKS AT TIDEWATER TERMINALS. THIS ANNOUNCEMENT PUTS THE WHEAT-BUYING MEMBER (WHOM WE WILL HEREAFTER REFER TO AS THE MEMBER) IN THE FOLLOWING POSITION:

1. HE KNOWS THAT IF HE BUYS 10,000 BUSHELS OF NO. 1 WHEAT IN THE COUNTRY HE CAN EXPECT TO RECEIVE 85 CENTS PER BUSHEL FOR IT WHEN IT IS DELIVERED IN SACKS ON TRACK AT TIDEWATER TERMINALS PROVIDED THAT HE CONFIRMS THE TRANSACTION WITH THE ASSOCIATION AND THE SECRETARY'S REPRESENTATIVE BY 6 A.M. THE FOLLOWING MORNING.

2. HE ALSO KNOWS THAT HE WILL HAVE TO REPRESENT IN HIS CONTRACT THAT THE 10,000 BUSHELS OF WHEAT COVERED BY THE PURCHASE CONTRACT WAS BOUGHT IN THE COUNTRY AT 85 CENTS PER BUSHEL LESS ,ESTABLISHED" TRADE CHARGES FOR CONVERTING WHEAT FROM THE COUNTRY TO SACKED TRACK TIDEWATER TERMINAL. CAN ASSUME THAT IF HE DOES NOT PAY THIS PRICE HIS CONTRACT MAY SUBSEQUENTLY BE VOIDED.

3. IN VIEW OF 1 AND 2 ABOVE, HE MUST DETERMINE WHAT HE MAY SAFELY BID ON A SPECIFIC LOT OF WHEAT IN THE COUNTRY WHICH HE BELIEVES TO BE FOR SALE. THIS WHEAT, LET US ASSUME IS IN AN AMOUNT OF 10,000 BUSHELS, GRADE NO. 1, IS OWNED BY A FARMER, AND IS STORED AT A COUNTRY WAREHOUSE IN SACKS AT ROSEBUD, WASHINGTON, WHICH CARRIES A FREIGHT RATE OF 15 CENTS PER BUSHEL ON SACKED WHEAT TO SEATTLE.

THIS WHEAT IS WORTH 85 CENTS TO THE MEMBER IN SEATTLE, AND CERTAIN EXPENSES, SOME KNOWN AND SOME ONLY APPROXIMATELY KNOWN, MUST BE INCURRED IN SHIPPING THE WHEAT. THE "ESTABLISHED TRADE CHARGES," USING THE PHRASE TO MEAN "KNOWN AND UNIFORM" CHARGES, ARE FREIGHT AND LOADING CHARGES. LET US ASSUME THAT THESE CHARGES AGGREGATE 17 CENTS. NOW, THE MEMBER COULD BID 85 CENTS, LESS 17 CENTS, OR 68 CENTS, BUY THE WHEAT, DELIVER IT TO SEATTLE, AND HAVE A CLEAN AND UNQUESTIONABLE CONTRACT. UNFORTUNATELY, HOWEVER, THE MEMBER REPRESENTS THAT HE WOULD INCUR A DEFINITE CASH LOSS ON SUCH A TRANSACTION, BECAUSE THERE ARE CERTAIN OTHER EXPENSES WHICH MUST BE INCURRED WHICH ARE NOT "ESTABLISHED" IN THE SENSE OF BEING UNIFORM. THE FIRST PLACE, HE MUST CONTACT THE OWNER OF THE WHEAT. THIS MEANS EITHER A TELEPHONE CALL, A TELEGRAM, OR A CALL BY A SOLICITOR. SECOND, HE MUST REPLACE ANY SACKS WHICH ARE IN BAD ORDER WHEN THEY REACH THE TERMINAL. THIRD, HE MAY HAVE TO PAY AN UNDETERMINED AMOUNT OF INTEREST AND COUNTRY STORAGE, DEPENDING UPON THE TIME WHICH ELAPSES BETWEEN HIS PURCHASE AND THE 21 DAYS' FREE TIME HE HAS PROMISED TO GIVE IN THIS PURCHASE CONTRACT. FOURTH, HE MAY SUFFER A LOSS FROM WASTE IN TRANSIT OR A LOSS DUE TO A DIFFERENTIAL BETWEEN COUNTRY AND STATE TERMINAL GRADES. FIFTH, HE INCURS CERTAIN UNFIXED BUT INEVITABLE EXPENSES FOR ACCOUNTING, BILLING, EXPRESS ON SAMPLE, ETC.

THE MEMBER BUYER DOES NOT KNOW, AND CANNOT KNOW FOR SEVERAL DAYS, THE AGGREGATE OF THESE CHARGES AND EXPENSES IN CONNECTION WITH THE SHIPMENT OF THE SPECIFIC 10,000 BUSHELS OF WHEAT WHICH IS LOCATED AT ROSEBUD, WASHINGTON. NOTWITHSTANDING THIS FACT, HE MUST MAKE HIS BID TO THE FARMER AND HAVE HIS PURCHASE CONTRACT WITH THE ASSOCIATION CONFIRMED WITHIN A PERIOD OF APPROXIMATELY 16 HOURS.

4. THE CIRCUMSTANCES OUTLINED IN PARAGRAPH THREE ABOVE AROSE IN THE CASE OF EVERY PURCHASE OF WHEAT BY A MEMBER OF THE NORTHWEST EMERGENCY EXPORT ASSOCIATION. MEMBERS REALIZED THAT IT WOULD BE IMPOSSIBLE TO DETERMINE WITHIN A REASONABLE TIME THE CHARGES OTHER THAN FREIGHT AND LOADING EXPENSE INCIDENTAL TO BUYING AND TRANSFERRING WHEAT FROM COUNTRY POINTS TO TERMINAL. TAKING INTO ACCOUNT THE FACT (A) THAT ON THE AVERAGE, IT COSTS SOMEWHERE BETWEEN 1 AND 2 CENTS PER BUSHEL TO CONVERT WHEAT FROM COUNTRY TO TERMINAL POINTS, AND (B) THAT THESE COSTS WOULD NOT BE THE SAME ON ANY TWO INDIVIDUAL TRANSACTIONS, THEY AGREED INFORMALLY THAT THEY WOULD INVARIABLY ALLOW THEMSELVES 1 CENT PER BUSHEL TO COVER THESE CHARGES, THUS MAKING IT AN ESTABLISHED CHARGE INSOFAR AS TRANSACTIONS WITH THE SECRETARY WERE CONCERNED. THIS INFORMAL AGREEMENT WAS WELL UNDERSTOOD BY THE REPRESENTATIVE OF THE SECRETARY AND BY THE CHIEF OF THE GRAIN MARKETING SECTION WHO WAS DIRECTING THE OPERATION. IT WAS UNDERSTOOD THAT WHEN MEMBERS OFFERED WHEAT TO THE ASSOCIATION AT THE ASSOCIATION PRICE THEY WOULD DEDUCT, IN ADDITION TO THE FREIGHT AND LOADING CHARGES, 1 CENT PER BUSHEL TO COVER ALL OTHER CHARGES IN ORDER TO ARRIVE AT THE PRICE TO BE PAID IN THE COUNTRY. CONSEQUENTLY, WHEN THE MEMBER PREVIOUSLY REFERRED TO OFFERED WHEAT TO THE ASSOCIATION AT 85 CENTS, HE UNDERSTOOD, AND THE ASSOCIATION UNDERSTOOD, THAT HE WOULD DEDUCT 17 CENTS PLUS 1 CENT IN ARRIVING AT THE PRICE CONSIDERED NECESSARY TO BID IN THE COUNTRY IN ORDER TO SATISFY THE CONTRACT. 5. THE MEMBER, REFERRING TO OUR PREVIOUS EXAMPLE, DESIRING TO KEEP WITHIN THE TERMS OF HIS CONTRACT AND DESIRING NOT TO INCUR A LOSS, WOULD BID, THEREFORE, ON THE 10,000 BUSHELS OF WHEAT AT ROSEBUD, WASHINGTON, 85 CENTS LESS 17 CENTS, LESS 1 CENT, OR 67 CENTS PER BUSHEL.

II. SO FAR WE HAVE SKETCHED THE PROCEDURE OF A MEMBER PURCHASE OPERATION. WE NOW HAVE THIS MEMBER, HAVING PAID 67 CENTS FOR WHEAT AT ROSEBUD, WASHINGTON, AND, HAVING TRANSFERRED THIS WHEAT TO A POSITION OF ON TRACK AT SEATTLE, HOLDING A CONTRACT TO SELL THE SAME WHEAT TO THE ASSOCIATION FOR 85 CENTS. IN THE FOLLOWING PARAGRAPH WE OUTLINE BRIEFLY THE PROCEDURE OF HIS GETTING PAID THE CONTRACT PRICE FOR HIS WHEAT AND SETTLING HIS ACCOUNT WITH THE SECRETARY.

1. THE MEMBER, HAVING 10,000 BUSHELS OF WHEAT AT SEATTLE, LOOKS ABOUT FOR AN EXPORT PURCHASER FOR HIS WHEAT. HE FINDS SOMEONE WILLING TO BID 65 CENTS. HE SUBMITS THIS BID TO THE ASSOCIATION. IT IS ACCEPTED BY THE ASSOCIATION WITH THE APPROVAL OF THE SECRETARY'S AGENT, AND THE WHEAT IS SOLD.

2. THE FOREIGN BUYER PAYS 65 CENTS PER BUSHEL TO THE MEMBER, THE MEMBER NETTING, AFTER HE PAYS THE EXPENSES OF LOADING ON SHIPBOARD, 62 CENTS PER BUSHEL. (THIS SPREAD BETWEEN THE TRACK PRICE AND THE F.O.B. SHIP PRICE IS COVERED BY THE SALES CONTRACT WHICH IS NOT HERE IN QUESTION.)

3. THE SITUATION NOW IS THAT THE MEMBER HAS BOUGHT 10,000 BUSHELS OF WHEAT IN THE COUNTRY FOR 67 CENTS, PAID 17 CENTS COUNTRY LOADING AND FREIGHT CHARGES, AND HAS INCURRED CERTAIN MISCELLANEOUS EXPENSES WHICH HE CARRIES ON HIS BOOKS AT 1 CENT PER BUSHEL. INCLUDING THE 1 CENT, THEREFORE, THE WHEAT HAS COST HIM ON TRACK AT TERMINAL 85 CENTS PER BUSHEL, AND HE HAS SOLD IT AT A NET RETURN TO HIMSELF OF 62 CENTS. INCLUDING THE 1 CENT, HE IS, THEREFORE, OUT OF POCKET THE DIFFERENCE BETWEEN 85 CENTS AND 62 CENTS, OR 23 CENTS.

4. UNDER THE TERMS OF THE MARKETING AGREEMENT, THE SECRETARY NOW OWES THE MEMBER 23 CENTS PER BUSHEL ON 10,000 BUSHELS OF WHEAT. BEFORE THE SECRETARY PAYS THIS CLAIM OF 23 CENTS, HOWEVER, HE IS OBLIGED TO AUDIT THE WHOLE TRANSACTION IN ORDER TO DISCOVER WHETHER THE FACTS ARE AS REPRESENTED BY THE MEMBER AND WHETHER HE (THE SECRETARY) IS ACTUALLY OBLIGATED TO THE EXTENT OF 23 CENTS PER BUSHEL. IN THE COURSE OF THIS AUDITING, IT IS DISCOVERED THAT THE MEMBER HAS NOT PAID THE FARMER 85 CENTS LESS 17 CENTS (OR THE PURCHASE CONTRACT PRICE LESS FREIGHT AND LOADING CHARGES) BUT HAS PAID THE FARMER 85 CENTS LESS 17 CENTS LESS 1 CENT (OR THE PURCHASE CONTRACT PRICE LESS FREIGHT AND LOADING CHARGES) AND LESS 1 CENT WHICH IS SET UP TO COVER ALL OTHER CHARGES.

5. IN VIEW OF THE ABOVE FACT, THE SECRETARY REQUESTED THE COMPTROLLER GENERAL'S OPINION AS TO WHETHER HE (THE SECRETARY) SHOULD PAY TO THE MEMBER, IN THE CIRCUMSTANCES OUTLINED, 23 CENTS PER BUSHEL OR 22 CENTS PER BUSHEL ON 10,000 BUSHELS OF WHEAT. THE COMPTROLLER GENERAL REPLIED TO THE FOLLOWING EFFECT. THE MEMBER AGREED IN THIS CASE TO PAY TO THE FARMER 85 CENTS LESS 17 CENTS LESS 1 CENT. CONSEQUENTLY, THE MEMBER HAD PAID THE FARMER 1 CENT LESS THAN HE (THE MEMBER) HAD PROMISED THE SECRETARY HE WOULD PAY THE FARMER. SINCE THE MEMBER HAS PAID THE FARMER 1 CENT TOO LITTLE, THE SECRETARY SHOULD IN TURN PAY THE MEMBER 1 CENT LESS THAN HE (THE SECRETARY) HAD PROMISED HE WOULD PAY TO THE MEMBER, AND THE SECRETARY SHOULD, THEREFORE, PAY NOT 23 CENTS BUT 22 CENTS.

WHILE THERE APPEARS TO HAVE BEEN NO EXPRESS STIPULATION IN THE CONTRACT WITH THE ASSOCIATION DATED OCTOBER 10, 1933, OR IN THE EXHIBITS ATTACHED THERETO, FOR INCLUSION AS PART OF THE PURCHASE PRICE OF WHEAT OF A 1-CENT BUYING CHARGE TO COVER MISCELLANEOUS COSTS AND SIMILAR TO THE INCLUSION OF A 1-CENT SELLING CHARGE, THERE APPEARS A STIPULATION IN "EXHIBIT A" THAT THE PURCHASE PRICE SHALL BE BASIS NO. 1, FEDERAL GRADES, SACKED, DELIVERED ON TRACK AT TIDEWATER TERMINAL MARKETS, AND THAT THERE WAS ADOPTED FOR USE A FORM OF PURCHASE CONTRACT WHICH PARTICIPATING MEMBERS WERE TO USE, WITH PROVISION FOR APPROVAL OF THE PURCHASE TRANSACTION ON BEHALF OF THE SECRETARY OF AGRICULTURE, WHEREIN IT WAS STATED THAT THE PRICE PAID IN THE COUNTRY FOR WHEAT COVERED BY THE CONTRACT WAS THE FULL ASSOCIATION-QUOTED PRICE, AS IN EFFECT ON DATE OF PURCHASE, LESS "ONLY ESTABLISHED TRADE CHARGES" TO CONVERT WHEAT FROM COUNTRY BASIS TO BASIS NO. 1, SACKED TRACK, TIDEWATER TERMINAL. AND IT NOW APPEARS FROM THE ABOVE-QUOTED LETTER OF OCTOBER 9, 1935, TO HAVE BEEN UNDERSTOOD AND AGREED BY ALL CONCERNED, INCLUDING THE SECRETARY OF AGRICULTURE, THAT THOSE UNCERTAIN BUT NECESSARY COSTS IN CONNECTION WITH COUNTRY PURCHASES AND CONVERSION THEREOF TO BASIS NO. 1, SACKED TRACK, TIDEWATER TERMINAL, AS REQUIRED BY THE BASIC CONTRACT, SHOULD BE IN A FLAT AMOUNT OF 1 CENT PER BUSHEL ON SUCH PURCHASES AS WERE ULTIMATELY APPROVED BY THE SECRETARY--- AND IT IS UNDERSTOOD THERE ARE HERE INVOLVED ONLY PURCHASES SO MADE AND APPROVED ON BEHALF OF THE SECRETARY.

IN VIEW THEREOF AND THE BROAD PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, AND THE TERMS OF THE CONTRACT IN QUESTION WITH THE PROCEDURE FOLLOWED IN PURCHASING AND SELLING THE WHEAT, THIS OFFICE IS NOT REQUIRED TO OBJECT TO THE REIMBURSEMENT OF PURCHASES IN THE ADDITIONAL AMOUNT OF 1 CENT PER BUSHEL, AS PROPOSED BY YOU, IN THOSE INSTANCES WHERE PAYMENT THEREOF HAS NOT HERETOFORE BEEN MADE.

GAO Contacts

Office of Public Affairs