A-68846, OCTOBER 26, 1936, 16 COMP. GEN. 425

A-68846: Oct 26, 1936

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NOT PAID IN YUAN DOLLARS BECAUSE SUCH DOLLARS WERE NOT AVAILABLE MAY NOT BE CREDITED WITH EXCHANGE LOSSES UPON PAYMENTS MADE IN MANCHUKUO DOLLARS ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE. AS FOLLOWS: REFERENCE IS MADE TO NOTICES OF EXCEPTION. ON THE GROUND THAT "NO LOSS DUE TO APPRECIATION OF FOREIGN CURRENCY IS ALLOWABLE ON PAYMENTS MADE IN MANCHUKUO DOLLARS SINCE NO BASIC RATE FOR THAT CURRENCY IS SHOWN IN THE EXECUTIVE ORDERS.'. THIS GOVERNMENT DID NOT AT THE TIME THE PAYMENTS NOW QUESTIONED WERE MADE. HARBIN IS CONSIDERED AS BEING IN CHINA. IS SO LISTED IN THE "REGISTER OF THE DEPARTMENT OF STATE. IT IS QUITE TRUE THAT NO BASIC RATE FOR THE "MANCHUKUO DOLLARS" IS SHOWN BY THE EXECUTIVE ORDERS ISSUED IN PURSUANCE OF THE ACT OF MARCH 26.

A-68846, OCTOBER 26, 1936, 16 COMP. GEN. 425

EXCHANGE - LOSS BY - OFFICERS AND EMPLOYEES IN FOREIGN COUNTRIES THERE HAVING BEEN NO EXCHANGE RATE PRESCRIBED BY EXECUTIVE ORDER FOR MANCHUKUO DOLLARS AND THE EXCHANGE RATE FOR CHINA BEING BASED ON THE YUAN DOLLAR, OFFICERS AND EMPLOYEES OF THE AMERICAN CONSULATE GENERAL AT HARBIN, MANCHURIA, NOT PAID IN YUAN DOLLARS BECAUSE SUCH DOLLARS WERE NOT AVAILABLE MAY NOT BE CREDITED WITH EXCHANGE LOSSES UPON PAYMENTS MADE IN MANCHUKUO DOLLARS

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE, OCTOBER 26, 1936:

THERE HAS BEEN RECEIVED YOUR LETTER OF SEPTEMBER 22, 1936, AS FOLLOWS: REFERENCE IS MADE TO NOTICES OF EXCEPTION, IDENTIFIED BY THE LIST ATTACHED HERETO, TO THE PAYMENT OF CURRENCY APPRECIATION LOSSES TO OFFICERS AND EMPLOYEES OF THE AMERICAN CONSULATE GENERAL AT HARBIN, MANCHURIA, ON THE GROUND THAT "NO LOSS DUE TO APPRECIATION OF FOREIGN CURRENCY IS ALLOWABLE ON PAYMENTS MADE IN MANCHUKUO DOLLARS SINCE NO BASIC RATE FOR THAT CURRENCY IS SHOWN IN THE EXECUTIVE ORDERS.'

THIS GOVERNMENT DID NOT AT THE TIME THE PAYMENTS NOW QUESTIONED WERE MADE, AND DOES NOT NOW, RECOGNIZE "MANCHUKUO" AS AN INDEPENDENT STATE. HARBIN IS CONSIDERED AS BEING IN CHINA, AND IS SO LISTED IN THE "REGISTER OF THE DEPARTMENT OF STATE," "FOREIGN SERVICE LIST," AND OTHER OFFICIAL PUBLICATIONS. IT IS QUITE TRUE THAT NO BASIC RATE FOR THE "MANCHUKUO DOLLARS" IS SHOWN BY THE EXECUTIVE ORDERS ISSUED IN PURSUANCE OF THE ACT OF MARCH 26, 1934, AUTHORIZING APPROPRIATIONS FOR THE PAYMENT OF EXCHANGE LOSSES, AND THE PAYMENTS ON THE VOUCHERS TO WHICH YOU HAVE TAKEN EXCEPTION SHOULD, OF COURSE, HAVE BEEN COMPUTED AT THE RATE FOR CHINESE CURRENCY IN ACCORDANCE WITH EXECUTIVE ORDER NO. 6657-A IN FORCE AT THAT TIME.

IT IS HELD IN 15 COMP. GEN. 212 THAT IT IS NOT NECESSARY THAT CHECKS FOR SALARIES OR ALLOWANCES BE ACTUALLY CONVERTED INTO FOREIGN CURRENCY TO ENTITLE TO CURRENCY APPRECIATION LOSS, EXCEPT IN CERTAIN CIRCUMSTANCES NOT HERE FOR CONSIDERATION. SINCE PAYMENTS AT HARBIN ARE NOT MADE BY TREASURY CHECK, BUT FROM THE PROCEEDS OF THE SALE OF DRAFTS, THE EXCHANGE APPRECIATION LOSSES, ONCE PROPERLY COMPUTED, COULD ONLY HAVE BEEN PAID BY THE OFFICER IN CHARGE WITH THE MEANS AT HIS DISPOSAL. THE CORRECT PAYMENT IN UNITED STATES CURRENCY SHOULD HAVE BEEN CALCULATED UPON THE EXCHANGE RATE FOR THE SHANGHAI YUAN, AND THIS GOVERNMENT'S OBLIGATION DISCHARGED BY THE PAYMENT OF UNITED STATES CURRENCY, IF AVAILABLE, OR THE EQUIVALENT THEREOF IN FOREIGN CURRENCY AT THE BANK'S SELLING RATE FOR SIGHT DRAFT ON NEW YORK.

THE CALCULATIONS MADE UNDER A MISAPPREHENSION AT HARBIN ON THE BASIS OF THE "MANCHUKUO YUAN" INSTEAD OF THE SHANGHAI YUAN HAVE RESULTED IN THE PAYMENT OF A SMALLER AMOUNT IN EXCHANGE RELIEF THAN WOULD HAVE BEEN MADE IF CALCULATIONS HAD BEEN ON THE CORRECT BASIS. THIS STATEMENT IS VERIFIED BY REFERENCE TO THE ACCOUNTS OF THE CONSULATE GENERAL AT SHANGHAI, WHERE PAYMENTS WERE CORRECTLY CALCULATED, FOR THE PERIOD IN QUESTION.

IN THE CIRCUMSTANCES, THEREFORE, IT IS REQUESTED THAT THE EXCEPTIONS WHICH HAVE BEEN RAISED TO THESE PAYMENTS AT HARBIN BE WITHDRAWN, AND FULL CREDIT ALLOWED IN THE NEXT CERTIFICATE OF SETTLEMENT TO THE ACCOUNTABLE OFFICER. EVEN WITH THE WITHDRAWAL OF THESE EXCEPTIONS, THERE WILL REMAIN DUE TO THE INDIVIDUAL OFFICERS AND EMPLOYEES THE DIFFERENCE BETWEEN THE CALCULATION ON THE "MANCHUKUO YUAN" AND THE CALCULATIONS ON THE "SHANGHAI YUAN," FOR SETTLEMENT BY PAYMENTS ON DIRECT CLAIMS OF THOSE OFFICERS AND EMPLOYEES WHO MAY PRESENT SUCH CLAIMS.

IT IS TO BE NOTED THAT THE EXCEPTIONS TAKEN IN THIS CASE ORIGINATED IN THE BUREAU OF ACCOUNTS OF YOUR DEPARTMENT BY LETTER DATED APRIL 16, 1935, FROM THE ACTING CHIEF, BUREAU OF ACCOUNTS, TO WALTER A. ADAMS, HARBIN, CHINA, AS FOLLOWS:

YOU ARE INFORMED THAT YOUR ACCOUNTS FOR THE PERIOD FEBRUARY 1, 1935, TO FEBRUARY 28, 1935, HAVE BEEN EXAMINED, APPROVED, AND FORWARDED TO THE GENERAL ACCOUNTING OFFICE, AUDIT DIVISION, FOR SETTLEMENT.

THE FOLLOWING DIFFERENCES HAVE BEEN MADE IN THE APPROVAL THEREOF:

A SUSPENSION IS MADE IN THE ABOVE ACCOUNTS IN THE AMOUNT OF $637.39, REPRESENTING A CHARGE FOR CURRENCY APPRECIATION LOSSES AS SHOWN ON VOUCHERS NO. 170 TO AND INCLUDING NO. 187. IT IS NOTED THAT THE VOUCHERS IN QUESTION COVER THE PERIOD FROM JULY 1 TO AND INCLUDING NOVEMBER 30, 1934, AND THAT DURING THIS PERIOD ALL SALARIES AND ALLOWANCES WERE PAID IN MANCHUKUO DOLLARS AND THE OFFICERS AND EMPLOYEES RECEIVED THE ADDITIONAL NUMBER OF FOREIGN UNITS IN THAT CURRENCY TO MAKE UP THE LOSS SUFFERED BY PAYMENT IN THAT CURRENCY, AS COMPUTED BY THE BASIC AND SELLING RATES AS SHOWN IN THE ACCOUNTS.

CURRENCY APPRECIATION MAY ONLY BE PAID UPON THE LOSSES SUSTAINED ON THE CURRENCY ACTUALLY PAID TO THE EMPLOYEES; SINCE THE PAYMENT IN SHANGHAI YUAN DID NOT BEGIN UNTIL DECEMBER 1, 1934, TO THE EMPLOYEES OF YOUR OFFICE, CURRENCY APPRECIATION LOSSES ON THAT UNIT COULD NOT GO BACK OF THAT DATE.

IT IS REQUESTED THAT THE AMOUNT SUSPENDED BE CREDITED IN YOUR NEXT REGULAR ACCOUNTS TO THE APPROPRIATION FROM WHICH THE SUSPENSION WAS MADE.

EXECUTIVE ORDER 6657-A OF MARCH 27, 1934, PRESCRIBES ONLY ONE EXCHANGE RATE FOR CHINA BASED ON THE YUAN DOLLAR. PARAGRAPH 5 OF THAT ORDER FURTHER PROVIDES:

FROM AND AFTER THE EFFECTIVE DATE OF THIS ORDER, EACH EMPLOYEE SHALL BE ENTITLED TO RECEIVE IN FOREIGN CURRENCY SUCH AMOUNT AS HE WOULD HAVE RECEIVED BY CONVERTING INTO SUCH FOREIGN CURRENCY, AT THE BASIC RATES SPECIFIED IN SECTION 4, HIS NET SALARY AND NET ALLOWANCES, OR HIS NET PAY AND ALLOWANCES, AS PROVIDED IN SECTION 3.

AS THE EMPLOYEES IN QUESTION WERE NOT PAID IN YUAN DOLLARS AND AS SUCH DOLLARS WERE APPARENTLY NOT AVAILABLE, THERE IS NO EXCHANGE RATE WHICH COULD BE USED IN DETERMINING THE AMOUNT OF YUAN DOLLARS WHICH THE EMPLOYEES MIGHT OTHERWISE HAVE BEEN ENTITLED TO RECEIVE--- EXCHANGE RATES QUOTED AT OTHER POINTS WOULD CONSTITUTE NO EVIDENCE OF THE VALUE OF YUAN DOLLARS AT HARBIN WHERE NO SUCH CURRENCY WAS AVAILABLE. FURTHER, THERE HAS NOT BEEN PRESCRIBED BY EXECUTIVE ORDER ANY BASIC RATE FOR MANCHUKUO DOLLARS AND IT WOULD NOT, THEREFORE, BE POSSIBLE TO COMPUTE EXCHANGE LOSSES IN SUCH CURRENCY UPON EITHER AN ACTUAL OR AN ESTIMATED BASIS. THE ACTION OF THIS OFFICE IN DISALLOWING CREDIT FOR EXCHANGE LOSSES COMPUTED UPON PAYMENTS MADE IN MANCHUKUO DOLLARS WAS CORRECT AND, UPON REVIEW, MUST BE AND IS SUSTAINED.