A-96578, JULY 27, 1938, 18 COMP. GEN. 91

A-96578: Jul 27, 1938

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POINT OF SHIPMENT ARE NOT CHARGEABLE TO THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE SUPPLIES WERE PURCHASED IF THE TRANSPORTATION IS PERFORMED IN A SUBSEQUENT FISCAL YEAR AND THE CONTRACT OF TRANSPORTATION IS SEPARATE FROM THE CONTRACT OF PURCHASE. IS APPLICABLE TO THE AUTOMATICALLY RECURRING FISCAL YEAR APPROPRIATIONS MADE BY SECTION 32 OF THE ACT OF AUGUST 24. IS AS FOLLOWS: ON MARCH 12. PLACE OF MANUFACTURE ARE NOT CHARGEABLE TO THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE SUPPLIES WERE PURCHASED IF THE TRANSPORTATION IS PERFORMED IN A SUBSEQUENT FISCAL YEAR AND THE CONTRACT OF TRANSPORTATION IS SEPARATE FROM THE CONTRACT OF PURCHASE IS APPLICABLE TO THE AUTOMATICALLY RECURRING FISCAL YEAR APPROPRIATIONS MADE BY SECTION 32 OF THE ACT OF AUGUST 24.

A-96578, JULY 27, 1938, 18 COMP. GEN. 91

APPROPRIATIONS - AVAILABILITY BEYOND FISCAL YEAR - PURCHASE AND TRANSPORTATION OF SUPPLIES IN DIFFERENT FISCAL YEARS - AGRICULTURAL PRODUCT DIVERSION PURCHASES THE GENERAL RULE THAT CHARGES FOR TRANSPORTATION OF GOVERNMENT SUPPLIES PURCHASED F.O.B. POINT OF SHIPMENT ARE NOT CHARGEABLE TO THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE SUPPLIES WERE PURCHASED IF THE TRANSPORTATION IS PERFORMED IN A SUBSEQUENT FISCAL YEAR AND THE CONTRACT OF TRANSPORTATION IS SEPARATE FROM THE CONTRACT OF PURCHASE, IS APPLICABLE TO THE AUTOMATICALLY RECURRING FISCAL YEAR APPROPRIATIONS MADE BY SECTION 32 OF THE ACT OF AUGUST 24, 1935, 49 STAT. 774, NOTWITHSTANDING THE FINALITY GIVEN BY STATUTE TO THE DETERMINATIONS OF THE SECRETARY OF AGRICULTURE AS TO WHAT CONSTITUTES DIVERSIONS FROM THE NORMAL CHANNELS OF TRADE FOR AGRICULTURAL PRODUCT PURCHASE AND DISTRIBUTION PURPOSES, SUCH DETERMINATIONS NOT IN THEMSELVES OBLIGATING THE APPROPRIATION MADE BY THE SAID ACT. 16 COMP. GEN. 843, AMPLIFIED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, JULY 27, 1938:

YOUR LETTER OF JULY 20, 1938, IS AS FOLLOWS:

ON MARCH 12, 1937 (16 COMP. GEN. 843), YOU RENDERED A DECISION TO THIS DEPARTMENT IN WHICH YOU HELD THAT, QUOTING FROM THE SYLLABUS:

"THE GENERAL RULE THAT CHARGES FOR TRANSPORTATION OF GOVERNMENT SUPPLIES PURCHASED F.O.B. PLACE OF MANUFACTURE ARE NOT CHARGEABLE TO THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE SUPPLIES WERE PURCHASED IF THE TRANSPORTATION IS PERFORMED IN A SUBSEQUENT FISCAL YEAR AND THE CONTRACT OF TRANSPORTATION IS SEPARATE FROM THE CONTRACT OF PURCHASE IS APPLICABLE TO THE AUTOMATICALLY RECURRING FISCAL YEAR APPROPRIATIONS MADE BY SECTION 32 OF THE ACT OF AUGUST 24, 1935, 49 STAT. 774.'

THE EXIGENCIES THAT GAVE RISE TO THE FOREGOING DECISION HAVE RISEN IN MORE INTENSIFIED FORM AT THE CLOSE OF THE FISCAL YEAR 1938 AND THE BEGINNING OF THE FISCAL YEAR 1939 AND WE DEEM IT ADVISABLE, THEREFORE, TO CALL YOUR ATTENTION TO CERTAIN MATTERS WHICH WE FEEL WILL WARRANT YOUR MAKING AN ABROGATION OF THE RULE INSOFAR AS IT RELATES TO PURCHASES MADE UNDER THE TERMS OF SECTION 32, PUBLIC, NO. 320, SUPRA, BY THE FEDERAL SURPLUS COMMODITIES CORPORATION. IN THE FIRST PLACE, IT IS TO BE RECALLED THAT THE ORIGINAL LANGUAGE OF SECTION 32 WAS AMENDED BY SECTION 2, PUBLIC, NO. 461, 74TH CONGRESS, APPROVED FEBRUARY 29, 1936, SO AS TO PROVIDE THAT "DETERMINATIONS BY THE SECRETARY (OF AGRICULTURE) AS TO WHAT CONSTITUTES DIVERSION AND WHAT CONSTITUTES NORMAL CHANNELS OF TRADE AND COMMERCE AND WHAT CONSTITUTES NORMAL PRODUCTION FOR DOMESTIC CONSUMPTION SHALL BE FINAL * * *.' THE EFFICACY AND FINALITY OF SUCH DETERMINATIONS WERE RECOGNIZED BY YOU IN A DECISION OF MARCH 21, 1936, TO THE SECRETARY OF AGRICULTURE (A 69552). SECTION 32 WAS AMENDED FURTHER BY PUBLIC LAW NO. 165, 75TH CONGRESS APPROVED JUNE 28, 1937 (50 STAT. 323), SO AS TO PROVIDE THAT,"IN CARRYING OUT CLAUSE (2) OF SECTION 32, THE FUNDS APPROPRIATED BY SAID SECTION MAY BE USED FOR THE PURCHASE, WITHOUT REGARD TO THE PROVISIONS OF EXISTING LAW COVERING THE EXPENDITURE OF PUBLIC FUNDS, OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, AND SUCH COMMODITIES, AS WELL AS AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF PURCHASED UNDER THE PRECEDING PARAGRAPH HEREOF, MAY BE DONATED FOR RELIEF PURPOSES.' THE FOREGOING LEGISLATION VESTS IN THE SECRETARY, AS YOU HAVE RECOGNIZED, EXTENSIVE POWER AND DISCRETION IN THE MATTER OF MAKING PURCHASES PURSUANT TO THE TERMS OF SECTION 32 AS AMENDED. DESPITE THE AVAILABILITY OF SUCH BROAD AUTHORITY, THE SECRETARY HAS ELECTED, WHEREVER FEASIBLE, TO UTILIZE HIS AUTHORITY UNDER THE TERMS OF THE LEGISLATION IN SUCH A MANNER AS TO SECURE AND SAVE THE GOVERNMENT APPROPRIATIONS WHEREVER POSSIBLE. FOR INSTANCE, IN MAKING PURCHASES OF AGRICULTURAL COMMODITIES FOR DISTRIBUTION THROUGH RELIEF CHANNELS, WHEREVER PRACTICABLE, THE FEDERAL SURPLUS COMMODITIES CORPORATION HAS ACCEPTED DELIVERY AND TITLE TO THE MATERIALS PURCHASED AT THE PLACE OF PURCHASE AND HAS MADE SHIPMENT THEREOF ON GOVERNMENT BILLS OF LADING. THIS PRACTICE UNDOUBTEDLY HAS SAVED THE GOVERNMENT A GREAT DEAL OF MONEY, BUT, AS WE READ THE FOREGOING LEGISLATIVE AUTHORITY, IT IS NOT A PRACTICE THAT IS UNEQUIVOCALLY REQUIRED. IN OTHER WORDS, THE SECRETARY COULD, IF HE CHOSE, MAKE DETERMINATIONS TO BE CARRIED OUT BY THE FEDERAL SURPLUS COMMODITIES CORPORATION AUTHORIZING CONTRACTS FOR THE PURCHASE OF COMMODITIES TO BE MADE ON A DELIVERY POINT BASIS. IN THIS CONNECTION YOU WILL RECALL THAT IN A DECISION OF MARCH 27, 1937, TO THE SECRETARY (A-72898) YOU HELD THAT UNDER THE TERMS OF CLAUSE (2) OF SECTION 32, AS AMENDED, WHERE THE SECRETARY DETERMINES AND CERTIFIES THAT PURCHASING, PROCESSING, AND DISTRIBUTING OF ALL COMMODITIES PURCHASED WILL ACCOMPLISH THE PURPOSES OF THE ACT, THERE IS NO OBJECTION TO OTHERWISE PROPER PAYMENTS FROM GENERAL FUNDS OF FREIGHT AND PROCESSING COSTS. IN OTHER WORDS, YOU RULED THAT IN CARRYING OUT THE PURPOSES OF SECTION 32 FREIGHT AND PROCESSING CHARGES ARE NOT ADMINISTRATIVE EXPENSES. IN THE LETTER THAT ELICITED THIS DECISION WE POINTED OUT TO YOU SOME DETAILS INVOLVED IN THE PURCHASE OF THE COMMODITIES IN QUESTION.

IT HAS NOW DEVELOPED THAT DURING THE MONTHS OF MAY AND JUNE 1938 THE SECRETARY OF AGRICULTURE DETERMINED THAT THE PURCHASE AND DISTRIBUTION FOR RELIEF PURPOSES OF IRISH POTATOES, BUTTER, CABBAGE, DRY SKIM MILK, ORANGES, GRAPEFRUIT JUICE, CARROTS, SNAP BEANS, WHEAT FLOUR, CEREAL, TRUCK CROPS, TOMATOES, SYRUP, PEACHES, RAISINS, AND CHEESE WOULD EFFECTUATE THE PURPOSES OF SECTION 32. PURSUANT TO SUCH FINDINGS AND DETERMINATIONS THE SECRETARY DIRECTED THE FEDERAL SURPLUS COMMODITIES CORPORATION TO MAKE THE PURCHASES AND, WHERE NECESSARY, TO INSPECT, LOAD, PROCESS, PACKAGE, STORE, TRANSPORT, DONATE, AND DISTRIBUTE THE COMMODITIES ENUMERATED AND THUS ACCOMPLISH THEIR DIVERSION FROM THE NORMAL CHANNELS OF TRADE AND COMMERCE.

THE CORPORATION WAS ABLE TO PURCHASE MOST OF THESE COMMODITIES IN THE QUANTITIES DIRECTED BY THE SECRETARY UNDER ADVANTAGEOUS MARKET CONDITIONS PRIOR TO THE FIRST OF JULY 1938. IN ORDER TO ECONOMIZE ON GOVERNMENT FUNDS THESE PURCHASES WERE MADE IN THE CUSTOMARY WAY, THAT IS, AT POINT OF ORIGIN. BECAUSE OF THE VOLUME OF THE PURCHASES AND THE IMPOSSIBILITY OF MAKING IMMEDIATE COMMITMENTS FOR DELIVERIES INTO RELIEF CHANNELS IT WAS IMPOSSIBLE TO OBTAIN COMPLETE DELIVERY OR TO INSPECT, HANDLE, PACKAGE, TRANSPORT, AND DISTRIBUTE ALL OF THESE COMMODITIES PRIOR TO THE END OF THE FISCAL YEAR. AS A RESULT, SUCH ACTIVITIES WILL HAVE TO BE CARRIED OUT DURING THE FORE PART OF THE FISCAL YEAR 1939. IF YOU FIND THERE IS NO DISTINCTION BETWEEN CIRCUMSTANCES GIVING RISE TO THIS LETTER AND THOSE THAT PRECEDED YOUR DECISION OF MARCH 12, 1937, SUPRA, IT WOULD MEAN THAT ALL COSTS IN CONNECTION WITH THE PURCHASES MADE DURING MAY AND JUNE WOULD HAVE TO BE MET FROM THIS YEAR'S APPROPRIATION. THIS, IN OUR OPINION, WOULD BE A HARSH RESULT AND ONE THAT MIGHT LEAD IN THE FUTURE TO THE NECESSITY OF THE SECRETARY MAKING A DETERMINATION TO PURCHASE MANY SUCH COMMODITIES ON A DELIVERY POINT BASIS. IT IS SUBMITTED THAT THE AMENDMENTS TO SECTION 32 CITED ABOVE PLUS THE OBVIOUS ECONOMIES THAT WILL RESULT FROM A CHANGE OF YOUR DECISION OF MARCH 12, 1937, WILL JUSTIFY YOU IN HOLDING THAT PURCHASES MADE BY THE FEDERAL SURPLUS COMMODITIES CORPORATION ARE AN EXCEPTION TO THE GENERAL RULE ANNOUNCED IN THIS AND OTHER DECISIONS (SEE, FOR INSTANCE, YOUR DECISION OF OCTOBER 25, 1937, TO THE SECRETARY OF AGRICULTURE, 17 C.G. 379, AND DECISIONS CITED THEREIN).

THE DETERMINATIONS MADE BY THE SECRETARY UNDER THE TERMS OF SECTION 32 ARE DIRECTED TO A DIVERSION OF THE COMMODITIES IN QUESTION FROM THE NORMAL CHANNELS OF TRADE AND COMMERCE RATHER THAN MERELY TO THE FINDING THAT THE PURCHASE OF SUCH COMMODITIES WITHOUT DELIVERY, TRANSPORTATION, HANDLING, INSPECTION, OR DISTRIBUTION TO THE NEEDY AND UNDERFED WILL ACCOMPLISH THE PURPOSES OF THE ACT. IN VIEW OF THIS OBVIOUSLY REQUIRED STATUTORY INTERPRETATION, THE FEDERAL SURPLUS COMMODITIES CORPORATION FEELS THAT ONCE IT HAS RECEIVED THE SECRETARY'S DIRECTION TO PURCHASE COMMODITIES FOR DIVERSION TO RELIEF, IT IS OBLIGATED BY LAW TO SECURE DELIVERY OF THE COMMODITIES, TO INSPECT, LOAD, PROCESS, PACKAGE, STORE, TRANSPORT, DONATE, AND DISTRIBUTE THEM, AND TO PERFORM ALL OF THE NECESSARY ACTS TO INSURE DIVERSION IN FACT FROM THE NORMAL CHANNELS OF TRADE AND COMMERCE IN THE MANNER DIRECTED BY THE SECRETARY. UNTIL THESE SUPPLEMENTARY BUT ESSENTIAL ACTIVITIES ARE ACCOMPLISHED THE LEGAL OBLIGATION OF THE CORPORATION WHICH ATTACHED WITH THE PURCHASE OF THE COMMODITIES IS NOT DISCHARGED.

WE TRUST THAT, IN RENDERING A DECISION INCIDENT TO THIS LETTER, YOU WILL TAKE INTO SERIOUS CONSIDERATION THE FOREGOING FACTORS AND WILL HONOR THE GOOD FAITH OF THIS DEPARTMENT IN CARRYING INTO EFFECT THE PROVISIONS OF SECTION 32 IN THE MOST ECONOMICAL AND EFFICIENT MANNER AND WILL MAKE IT POSSIBLE FOR THE FEDERAL SURPLUS COMMODITIES CORPORATION TO MEET THE SUPPLEMENTARY EXPENSES MENTIONED FROM LAST YEAR'S APPROPRIATION.

IN ORDER TO FACILITATE YOUR REPLY WE ARE ENCLOSING A COPY OF "COMPILATION OF SECTION 32, PUBLIC LAW NO. 320, 74TH CONGRESS, APPROVED AUGUST 24, 1935, AS AMENDED, AND LEGISLATION RELATING RETO.' YOU WILL FIND REFERENCE TO A CONTINUATION OF THE FEDERAL SURPLUS COMMODITIES CORPORATION AND ITS APPROPRIATION UNTIL JUNE 30, 1942, IN SECTION 204, PUBLIC, NO. 430, 75TH CONGRESS, APPROVED FEBRUARY 16, 1938. INASMUCH AS ACTION ON SEVERAL SHIPMENTS WILL BE HELD UP PENDING YOUR REPLY, WE SHALL APPRECIATE THE COURTESY OF EXPEDITED ATTENTION.

EXCEPT AS TO DETAIL, THE ARGUMENT SET FORTH THEREIN IS THE SAME AS THAT SUBMITTED IN LETTER OF APRIL 17, 1937, WHICH WAS CONSIDERED IN DECISION OF MAY 3, 1937, A-83862, IN WHICH IT WAS STATED:

* * * IT IS THE ESTABLISHED RULE THAT TRANSPORTATION COSTS WHEN NOT INCLUDED IN THE PURCHASE PRICE ARE CHARGEABLE TO THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE CONTRACT FOR THE TRANSPORTATION IS MADE RATHER THAN THE APPROPRIATION FOR THE FISCAL YEAR IN WHICH THE GOODS ARE PURCHASED. IT IS NOT APPARENT HOW SUCH A RULE WOULD IN ANY WAY INTERFERE WITH THE DIVERSION PROGRAM, AS IT WOULD NOT CHANGE IN ANY RESPECT THE COST OF THE TRANSPORTATION BUT MERELY THE APPROPRIATION TO WHICH THE COST IS TO BE CHARGED. IN THIS CONNECTION,YOUR SUBMISSION ACKNOWLEDGES THAT THE APPROPRIATIONS FOR THE FISCAL YEARS 1936 AND 1937 HAVE BEEN IN EXCESS OF THE PROGRAM REQUIREMENTS SO THAT OBVIOUSLY THERE WERE, AND ARE, AVAILABLE FUNDS TO DEFRAY TRANSPORTATION COST IRRESPECTIVE OF WHETHER THE PURCHASE BE IN ONE FISCAL YEAR AND THE PURCHASED COMMODITIES TRANSPORTED IN THE FOLLOWING FISCAL YEAR.

IT IS FUNDAMENTAL THAT, IN THE ABSENCE OF STATUTORY AUTHORITY TO THE CONTRARY, AN APPROPRIATION FOR A PARTICULAR FISCAL YEAR CEASES TO BE AVAILABLE FOR OBLIGATING AFTER JUNE 30 OF THAT FISCAL YEAR. AND CLEARLY A CONTRACT FOR THE PURCHASE OF A COMMODITY F.O.B. POINT OF SHIPMENT IS NOT A CONTRACT "PROPERLY MADE" FOR THE TRANSPORTATION OF THE COMMODITY WITHIN THE PURVIEW OF SECTION 3690, REVISED STATUTES.

SEE, ALSO, 16 COMP. GEN. 843.

THE APPROPRIATION HERE INVOLVED IS A FISCAL YEAR APPROPRIATION. UNDER PRESENT LAW IT IS AUTOMATICALLY RECURRING AND BECOMES AVAILABLE IMMEDIATELY AFTER THE CLOSE OF THE PREVIOUS FISCAL YEAR. WHILE YOU REFER TO THIS SITUATION AS AN EXIGENCY, THE FACTS DO NOT DISCLOSE ANY EXIGENCY. IF THERE WERE NO APPROPRIATION AVAILABLE IN THE YEAR DURING WHICH SHIPMENT WAS MADE FROM WHICH TRANSPORTATION CHARGES COULD BE PAID, THE MATTER MIGHT BE CONSIDERED AN EXIGENCY. THAT IS NOT THE CASE HERE.

IT IS SUGGESTED IN YOUR LETTER THAT APPLICATION OF THE GENERAL RULE WILL PRODUCE A HARSH RESULT. HOWEVER, THE ONLY DIFFERENCE BETWEEN THE RESULT UNDER THE ESTABLISHED RULE AND THE RESULT UNDER THE RULE YOU ARE CONTENDING FOR IS IN THE FISCAL YEAR APPROPRIATION TO BE CHARGED. THE SERVICES WILL NOT COST THE UNITED STATES ANY MORE UNDER ONE RULE THAN UNDER THE OTHER. IF THE APPROPRIATION FOR ANY YEAR IS NOT SUFFICIENT TO CARRY OUT THE PROGRAM, THAT IS A MATTER FOR CONSIDERATION OF THE CONGRESS. THIS OFFICE HAS NO POWER TO AUTHORIZE THE USE OF A FISCAL YEAR APPROPRIATION AFTER THE CLOSE OF THE YEAR FOR WHICH MADE EXCEPT FOR THE PAYMENT OF OBLIGATIONS LEGALLY INCURRED DURING THE YEAR FOR WHICH AVAILABLE. THE DETERMINATION OF THE SECRETARY OF AGRICULTURE THAT PURCHASE AND DISTRIBUTION OF CERTAIN AGRICULTURAL PRODUCTS CONSTITUTE A DIVERSION FROM THE NORMAL CHANNELS OF TRADE AND COMMERCE WITHIN THE MEANING OF SECTION 32, PUBLIC, NO. 320, SEVENTY-FOURTH CONGRESS, AS AMENDED, DOES NOT SERVE TO OBLIGATE THE APPROPRIATION MADE BY SAID ACT. CONTRACT FOR THE PURCHASE OF THE PRODUCTS COULD NOT OBLIGATE THE APPROPRIATION FOR THE TRANSPORTATION THEREOF WHEN THE TRANSPORTATION COST IS NOT INCLUDED IN THE PURCHASE PRICE. WHEN CONTRACTED SEPARATELY, PURCHASE AND TRANSPORTATION ARE SEPARATE AND DISTINCT OBLIGATIONS, AND THE GENERAL RULE IS FOR APPLICATION.