B-102701, JUN 28, 1951

B-102701: Jun 28, 1951

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ARMY: REFERENCE IS MADE TO YOUR LETTER OF MARCH 13. WHICH WAS REFERRED TO THIS OFFICE BY 2ND INDORSEMENT. THE CONTRACT WAS MADE IN NEW YORK CITY FOR THE DELIVERY BY THE CONTRACTOR. SUBCONTRACTORS OR AGENTS IN REICHSMARKS IN THE PERFORMANCE OF THE CONTRACT OR TO SERVICES PERFORMED BY THEM UNDER THE CONTRACT WITHIN THE TERRITORIAL AREA OF GERMANY - ARTICLE 3(G) - WAS CONVERTED FROM UNITED STATES DOLLARS TO GERMAN CURRENCY AT THE PREVAILING RATE OF EXCHANGE AND PAID TO THE CONTRACTOR IN GERMANY BY THE U.S. AN ADJUSTMENT OF THE PRICES WAS NEGOTIATED AND - AS IN ALL OTHER PROVISIONS OF THE CONTRACT EXCEPTING CONTRACTOR'S DISBURSEMENTS IN GERMANY - WAS STATED IN UNITED STATES DOLLARS WITHOUT ANY INDICATION THAT A PORTION OF THE RESULTING REPAYMENT WAS TO BE MADE IN GERMANY IN GERMAN CURRENCY.

B-102701, JUN 28, 1951

PRECIS-UNAVAILABLE

LIEUTENANT COLONEL J.E. COLBERT, F.C., U.S. ARMY:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 13, 1951 (FINCD 167-), WITH ENCLOSURES, TO THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, WASHINGTON, D.C., WHICH WAS REFERRED TO THIS OFFICE BY 2ND INDORSEMENT, DATED APRIL 10, 1951 (FINEY 167/695437 ESSO EXPORT CORPORATION (23 AUG 50)), REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF AN ACCEPTANCE OF 67,350.80 DEUTSCHEMARKS AS FULL REFUND OF 30 PERCENT BALANCE DUE THE UNITED STATES FOR OVERPAYMENT MADE TO ESSO EXPORT CORPORATION ON CONTRACT NO. W 49-137-AC-181.

THE CONTRACT WAS MADE IN NEW YORK CITY FOR THE DELIVERY BY THE CONTRACTOR, IN GERMANY, OF AVIATION ENGINE FUEL AND LUBRICATING OIL WITH PAYMENT THEREFOR TO BE MADE TO THE CONTRACTOR IN THE UNITED STATES IN UNITED STATES DOLLARS BY THE FINANCE OFFICER, USAF, WRIGHT-PATTERSON AIR FORCE BASE, DAYTON, OHIO - ARTICLES 3(E) AND (F) - EXCEPT THAT, IN VIEW OF GOVERNMENTAL RESTRICTIONS ON COMMERCIAL TRANSACTIONS WITH GERMANY, THAT PART OF THE TOTAL PAYMENT WHICH RELATES TO DISBURSEMENTS MADE BY THE CONTRACTOR'S LOCAL (GERMANY) ASSIGNEES, SUBCONTRACTORS OR AGENTS IN REICHSMARKS IN THE PERFORMANCE OF THE CONTRACT OR TO SERVICES PERFORMED BY THEM UNDER THE CONTRACT WITHIN THE TERRITORIAL AREA OF GERMANY - ARTICLE 3(G) - WAS CONVERTED FROM UNITED STATES DOLLARS TO GERMAN CURRENCY AT THE PREVAILING RATE OF EXCHANGE AND PAID TO THE CONTRACTOR IN GERMANY BY THE U.S. ARMY FINANCE OFFICER, APO 807.

PURSUANT TO ARTICLE 8(C) OF THE CONTRACT, AN ADJUSTMENT OF THE PRICES WAS NEGOTIATED AND - AS IN ALL OTHER PROVISIONS OF THE CONTRACT EXCEPTING CONTRACTOR'S DISBURSEMENTS IN GERMANY - WAS STATED IN UNITED STATES DOLLARS WITHOUT ANY INDICATION THAT A PORTION OF THE RESULTING REPAYMENT WAS TO BE MADE IN GERMANY IN GERMAN CURRENCY. UNDER THE EXPRESS TERMS OF THE CONTRACT THERE IS NO PROVISION FOR PAYMENT TO THE CONTRACTOR ON A PERCENTAGE BASIS; THE PERCENTAGES TO BE 70 PERCENT IN DOLLARS PAID IN THE UNITED STATES, AND 30 PERCENT IN REICHSMARKS PAID IN GERMANY, NOR FOR THE SUBJECT REPAYMENT TO BE MADE IN LIKE PERCENTAGES. HOWEVER, IN VIEW OF THE GOVERNMENT RESTRICTIONS ON COMMERCIAL TRANSACTIONS WITH GERMANY, IT APPEARS FROM THE CORRESPONDENCE OF RECORD AND CERTAIN MEMORANDUM COPIES OF VOUCHERS THAT THIS PERCENTAGE BASIS FOR PAYMENTS WAS, BY MUTUAL AGREEMENT, AN ADOPTION OF AN ARRANGEMENT MADE IN CONNECTION WITH JANPPA CONTRACT NO. W 49-137 AC 50 WHICH WAS DEEMED ESSENTIAL BECAUSE THE EXPENDITURES INVOLVED IN OPERATING PROVISIONS OF THE CONTRACT IN GERMANY WOULD REPRESENT APPROXIMATELY 30 PERCENT OF THE CHARGES AND BECAUSE IT WAS NOT POSSIBLE TO ESTABLISH EXACT EXPENDITURES IN VIEW OF THE CHANGING NATURE OF THE DEMAND FOR SERVICE AND FLUCTUATIONS IN THE COSTS OF PRODUCTS. THUS, IT IS APPARENT THAT PAYMENTS TO THE CONTRACTOR IN REICHSMARKS (OR DEUTSCHEMARKS) REPRESENTED - BY STIPULATION OF THE PARTIES - AMOUNTS FOR USE IN PAYING CURRENT EXPENDITURES IN GERMANY AND ANY SUBSEQUENT FLUCTUATIONS DUE TO THE GERMAN CURRENCY REFORM DID NOT IMPOSE A HARDSHIP ON THE CONTRACTOR BUT FELL UPON THOSE TO WHOM SUCH DISBURSEMENTS HAD BEEN MADE.

IN ANY EVENT, ARTICLE 3(G) (1) PROVIDES THAT CONTRACTOR'S INVOICES WOULD BREAK DOWN THE TOTAL AMOUNTS DUE IN UNITED STATES DOLLARS WHICH WOULD THEN BE CONVERTED INTO AND PAID IN GERMAN CURRENCY, AND ARTICLE 3(G) (4) STIPULATES THAT PAYMENT WAS MADE IN GERMAN CURRENCY ONLY BECAUSE NECESSITATED BY GOVERNMENTAL RESTRICTIONS. NO SUCH RESTRICTIONS ARE APPLICABLE TO A REPAYMENT TO THE UNITED STATES IN DOLLARS PURSUANT TO THE SUPPLEMENTAL AGREEMENT NO. 8 WHICH IS STATED IN DOLLARS. CONSEQUENTLY, IT SEEMS CLEAR THAT IN THE NEGOTIATION OF SUPPLEMENTAL AGREEMENT NO. 8, THE PARTIES CONTEMPLATED REPAYMENT IN THE UNITED STATES IN UNITED STATES DOLLARS. IN THIS CONNECTION, A LETTER OF APRIL 22, 1949, SIGNED BY L.E. BROWN FOR W.W. WHITE, VICE PRESIDENT, ESSO EXPORT CORPORATION (WHO SIGNED SUPPLEMENTAL AGREEMENT NO. 8), TO HEADQUARTERS, AIR MATERIEL COMMAND, WRIGHT-PATTERSON AIR FORCE BASE, DAYTON, OHIO, INDICATES THAT THE CONTRACTOR OFFERED PAYMENT TO THAT OFFICE IN UNITED STATES CURRENCY OF THE ENTIRE ADJUSTMENT BUT WAS ADVISED TO MAKE A REFUND TO (OR CREDIT INVOICES OF) THAT OFFICE IN DOLLARS OF 70 PERCENT OF THE TOTAL AMOUNT OF REFUND AND TO THE FISCAL DIRECTOR, FRIEDBERG, GERMANY, IN GERMAN CURRENCY OF THE REMAINING 30 PERCENT - THE SAME PERCENTAGE BASIS USED IN PAYMENT. THE CONTRACTOR AGREED AND STATED AS FOLLOWS:

"WE PROPOSE SETTLING THE REMAINING CREDIT OF $108,383.65 DUE THE U.S. GOVERNMENT FOR LOCATIONS IN GERMANY IN THE FOLLOWING MANNER: -

"1. WE WILL ISSUE CORRECTED CREDIT INVOICES SHOWING THE ENTIRE AMOUNT IN U.S. DOLLARS WITH AN EXPLANATORY NOTE THAT 70% OF THIS AMOUNT IS CREDITED TO YOUR ACCOUNT WITH THIS OFFICE, THE BALANCE OF 30% TO BE REFUNDED IN THE GERMAN CURRENCY EQUIVALENT BY D.A.P.G. TO THE FISCAL DIRECTOR, U.S. ARMY FINANCE OFFICE, FREIDBERG, GERMANY.

"2. THUS $75,868.56 WILL BE CREDITED TO YOUR ACCOUNT WITH US; AND THE GERMAN CURRENCY EQUIVALENT OF $32,515.09 WILL BE REFUNDED BY D.A.P.G. TO THE FISCAL DIRECTOR, U.S. ARMY FINANCE OFFICE, FREIDBERG, GERMANY.

"IF THIS IS ACCEPTABLE TO YOU, WILL YOU PLEASE INSTRUCT US TO ISSUE YOU THE CORRECTED CREDIT INVOICES AND CONFIRM THAT YOU ARE INFORMING THE FISCAL DIRECTOR, U.S. ARMY FINANCE OFFICE, FREIDBERG, GERMANY, THAT HE SHOULD ACCEPT A REFUND FROM DEUTSCH-AMERIKANISCHE PETROLEUM GESSELSCHAFT OF THE GERMAN CURRENCY EQUIVALENT OF $32,515.09. WE IN TURN WILL INSTRUCT D.A.P.G. TO MAKE THIS REFUND TO THE FISCAL DIRECTOR, U.S. ARMY FINANCE OFFICE, FREIDBERG, GERMANY, INFORMING US WHEN THE REFUND HAS BEEN MADE."

THE "GERMAN CURRENCY EQUIVALENT" IS NOT STATED TO BE AS OF ANY PRIOR DATE AND IN THE ABSENCE THEREOF, IT APPEARS THAT THE PROPOSAL CONTEMPLATED USING THE THEN PRESENT RATE OF EXCHANGE IN DETERMINING THE AMOUNT OF GERMAN CURRENCY EQUIVALENT OF THE $32,515.09 (THIS AMOUNT WAS SUBSEQUENTLY CORRECTED TO $35,866.69). TO CONCLUDE OTHERWISE WOULD REQUIRE INTERPRETING THIS PROPOSAL TO BE FOR PAYMENT TO THE UNITED STATES IN THE TOTAL AMOUNT OF $91,904.46 ($75,868.56 PLUS $16,035.90) INSTEAD OF $108,383.65. IT IS NOTED THAT THE MEMORANDUM PREPARED BY DR. DEISSMAN, LEGAL ADVISOR, DEUTSCH-AMERIKANISCHE PETROLEUM GESELLSCHAFT, IN SUPPORT OF THE CONTRACTOR'S POSITION IN THIS MATTER, STATES THAT "HAD PAYMENT OF THIS 30% BALANCE BEEN STIPULATED TO BE MADE IN US DOLLAR THE VIEWS HELD BY THE FINANCE DIVISION WOULD BE CORRECT." ALL AMOUNTS IN THE CONTRACT AND SUPPLEMENTAL AGREEMENTS WERE STATED IN UNITED STATES DOLLARS AND THE REQUEST THAT 30 PERCENT OF THE REFUND BE PAID TO THE FISCAL DIRECTOR AT FREIDBERG, GERMANY, DOES NOT WARRANT A REDUCTION OF THE DOLLAR REFUND DUE BY APPLYING A RATE OF EXCHANGE IN EFFECT AT SOME PRIOR DATE.

IN VIEW OF THE FOREGOING, AND SINCE THE ENTIRE CONTRACT AND ADJUSTMENTS ARE STATED IN UNITED STATES DOLLARS WITH THE ONLY CONVERSION TO AND PAYMENT OF GERMAN CURRENCY BEING IN AN AMOUNT STIPULATED AS REPRESENTING DISBURSEMENTS IN GERMANY BY THE CONTRACTOR, THERE IS NO APPARENT BASIS FOR REQUIRING REPAYMENT OF 30 PERCENT OF THE REFUND IN GERMANY IN GERMAN CURRENCY BUT, IN ANY EVENT, THE RECEIPT BY THE UNITED STATES OF LESS THAN THE AMOUNT OF THE REFUND DUE - WHETHER IN UNITED STATES CURRENCY OR IN FOREIGN CURRENCY AT THE RATE OF EXCHANGE IN EFFECT AT TIME OF REFUND - WOULD NOT CONSTITUTE A FULL DISCHARGE OF THE CONTRACTOR'S OBLIGATIONS UNDER THE CONTRACT AS SUPPLEMENTED.