B-148394, FEB. 1, 1963

B-148394, FEB. 1, 1963

TO BRAZILIAN GOVERNMENT TRADE BUREAU:

WE HAVE YOUR LETTER OF DECEMBER 21, 1962, WITH ENCLOSURE, SUBMITTING A CLAIM FOR $282,000 ARISING OUT OF CONTRACT NO. GS-00P-3626 (SCM), ENTERED INTO DECEMBER 23, 1952, BY THE UNITED STATES OF AMERICA, ACTING THROUGH THE GENERAL SERVICES ADMINISTRATION, AND THE UNITED STATES OF BRAZIL, ACTING THROUGH THE BANK OF BRAZIL, UNDER WHICH THE UNITED STATES OF AMERICA PURCHASED QUANTITIES OF MONAZITE SANDS AND RARE EARTH CHLORIDES.

ARTICLE VII OF THE CONTRACT PROVIDED THAT THE PRICE FOR RARE EARTH CHLORIDE SHOULD BE $0.77 PER KILO OF MATERIAL. THE ARTICLE FURTHER PROVIDED THAT SUCH PRICE INCLUDED ALL DUTIES, TAXES AND OTHER LEVIES IMPOSED BY ANY GOVERNMENT OTHER THAN THE UNITED STATES OF AMERICA AND INCLUDED DELIVERY F.O.B. VESSEL, BRAZILIAN PORT, FREE OF ANY TAXES OR CHARGES OTHER THAN THE PRICE. FINALLY, THE ARTICLE STATED THAT THE UNITED STATES OF AMERICA IMPORT DUTY APPLICABLE TO THE MATERIAL HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE PRICE AND SHOULD SUCH DUTY CHANGE THE PRICE WOULD BE APPROPRIATELY ADJUSTED.

IT IS CONTENDED THAT THE PRICE WAS AGREED TO BY THE BRAZILIAN NEGOTIATORS ON THE REPRESENTATION MADE BY THE UNITED STATES OF AMERICA NEGOTIATOR THAT IN AGREEING TO A PRICE THE LATTER WAS REQUIRED BY LAW TO TAKE INTO CONSIDERATION THE APPLICABLE DUTY. IT IS FURTHER CONTENDED THAT THE LAW IN FACT IMPOSED NO SUCH REQUIREMENT, THAT THE REPRESENTATION, THOUGH INNOCENTLY MADE, WAS IN FACT FALSE AND, THEREFORE, THAT THE PRICE AGREED UPON SHOULD NOT HAVE BEEN REDUCED BY THE AMOUNT OF APPLICABLE DUTY.

A CLAIM FOR $581,863.65 WAS PRESENTED BY YOUR OFFICE BY LETTER OF APRIL 14, 1962. THIS AMOUNT REPRESENTED THE ENTIRE SUM BY WHICH THE PRICE WAS REDUCED BECAUSE OF THE DUTY CONSIDERED TO BE APPLICABLE. IN OUR DECISION B-148394, JUNE 28, 1962, WE HELD THAT A LOWER DUTY THAN THAT USED FOR PURPOSES OF COMPUTING THE PRICE HAD IN FACT BEEN IN EFFECT AND, AS A RESULT, WE UNDERSTAND THE GOVERNMENT OF BRAZIL HAS BEEN PAID $299,863.65. THE PRESENT CLAIM REPRESENTS THE AMOUNT OF DUTY CONSIDERED IN ARRIVING AT THE PRICE AS MODIFIED IN ACCORDANCE WITH OUR DECISION OF JUNE 28, 1962.

IN THE NEGOTIATIONS LEADING UP TO THE CONTRACT, PRICE WAS A MAJOR CONSIDERATION. THE UNITED STATES OF AMERICA NEGOTIATOR, AFTER EXTENSIVE DISCUSSIONS WITH BRAZILIAN COUNTERPARTS, SAW FIT TO OFFER A PRICE OF $0.77 PER KILO. THIS WAS BASED IN PART UPON HIS UNDERSTANDING OF THE EXISTING APPLICABLE RATE OF DUTY. THIS PRICE WAS ACCEPTED BY THE BRAZILIAN NEGOTIATORS WITH THE UNDERSTANDING THAT AN ADJUSTMENT WOULD BE MADE FOR THE DUTY RATE EXISTING AT THE TIME OF ENTRY. IN OUR EARLIER DECISION ON THE MATTER, WE CONCLUDED THAT THE DUTY RATE APPLICABLE IS THAT WHICH WOULD HAVE APPLIED TO THE MATERIAL IF THE TRANSACTION HAD BEEN BETWEEN PRIVATE PARTIES AND HAD NOT BEEN EXEMPT FROM THE PAYMENT OF THE DUTY. IN OUR VIEW THE AUTHORIZED REPRESENTATIVES OF THE BRAZILIAN GOVERNMENT AGREED TO ACCEPT THE $0.77 PRICE PURSUANT TO THE ADJUSTMENT PROVISION. IT MAY WELL BE THAT THEY WERE INDUCED TO ACCEPT THE PRICE ON THE BASIS OF THE MISTAKEN REPRESENTATION MADE IN GOOD FAITH THAT THE LAW OF THE UNITED STATES PRECLUDED A HIGHER PRICE. THE FACT REMAINS THAT THE PRICE WAS SUFFICIENTLY ACCEPTABLE TO THE BRAZILIAN NEGOTIATORS TO RESULT IN THEIR VOLUNTARY ENTRY INTO THE CONTRACT. WE CAN FIND NO BASIS FOR CONCLUDING THAT A HIGHER PRICE WOULD HAVE BEEN AGREED UPON HAD THE AMERICAN NEGOTIATOR SIMPLY TAKEN THE POSITION THAT HIS SUPERIORS WOULD NOT PERMIT HIM TO OFFER A HIGHER PRICE OR THAT HIS OWN JUDGMENT PREVENTED HIM FROM OFFERING MORE.

AS INDICATED, THE PARTIES ENTERED VOLUNTARILY INTO THE AGREEMENT AND THE WRITTEN AGREEMENT ACCURATELY REFLECTED THEIR INTENTION. THE FACT THAT ONE OF THE PARTIES WAS MISTAKEN AS TO AN ANTECEDENT SITUATION AND BUT FOR SUCH MISTAKE MIGHT NOT HAVE ENTERED INTO THE CONTRACT DOES NOT JUSTIFY THE REFORMATION OF THE CONTRACT FOR WHICH YOU CONTEND IN THIS CASE. SEE RUSSELL V. SHELL PETROLEUM CORP., 66 F.2D 864 (CCA 10, 1933); BACH V. INTERURBAN RY. CO., 171 N.W. 723 (IOWA 1919).

ON THE BASIS OF THE FOREGOING, AND AFTER CAREFUL CONSIDERATION, WE MUST DECLINE TO AUTHORIZE PAYMENT OF YOUR CLAIM.