B-108593, APRIL 15, 1952, 31 COMP. GEN. 516

B-108593: Apr 15, 1952

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1952: REFERENCE IS MADE TO LETTER OF MARCH 17. THE PROCEDURE PROPOSED CONTEMPLATES THAT THE COOPERATING FOREIGN COUNTRY WILL APPLY TO THE TECHNICAL COOPERATION ADMINISTRATION. THE APPLICATION WILL BE SUBJECT TO REVIEW AND APPROVAL BY THE TECHNICAL COOPERATION ADMINISTRATION. WHICH APPROVAL WILL BE EVIDENCED BY THE ISSUANCE OF AN OBLIGATING DOCUMENT SIMILAR TO THE PROCUREMENT AUTHORIZATION FORM USED BY THE ECONOMIC COOPERATION ADMINISTRATION. UPON APPROVAL A CONTRACT WILL BE ENTERED INTO WITH A UNITED STATES BANK SELECTED BY THE COOPERATING COUNTRY AND APPROVED BY THE TREASURY DEPARTMENT UNDER THE TERMS OF WHICH THE BANK WILL AGREE TO ISSUE IRREVOCABLE LETTERS OF CREDIT AT THE REQUEST OF THE COOPERATING COUNTRY IN FAVOR OF SUPPLIERS DESIGNATED BY THAT COUNTRY.

B-108593, APRIL 15, 1952, 31 COMP. GEN. 516

PURCHASES - PROCUREMENTS UNDER THE INTERNATIONAL DEVELOPMENT AND MUTUAL SECURITY ACT OF 1951 - CREDIT FACILITIES WHILE THE ACT FOR INTERNATIONAL DEVELOPMENT DOES NOT SPECIFICALLY AUTHORIZE THE USE OF CREDIT FACILITIES THROUGH COMMERCIAL BANKS IT DOES AUTHORIZE THE MAKING OF ADVANCES TO FOREIGN GOVERNMENTS OR TO ANY PERSON OR CORPORATION AND, THEREFORE, SUPPLIES AND EQUIPMENT FOR TECHNICAL COOPERATION PROGRAMS UNDER THE ACT FOR INTERNATIONAL DEVELOPMENT AND THE MUTUAL SECURITY ACT OF 1951 MAY BE PROCURED THROUGH CREDIT FACILITIES EXTENDED BY THE UNITED STATES BANKS ON A REIMBURSABLE BASIS.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF STATE, APRIL 15, 1952:

REFERENCE IS MADE TO LETTER OF MARCH 17, 1952, FROM THE DEPUTY UNDER SECRETARY, REQUESTING MY CONCURRENCE IN THE USE OF LETTER OF CREDIT FACILITIES THROUGH COMMERCIAL BANKS FOR PROCURING COMMODITIES, SUPPLIES AND EQUIPMENT IN THE ADMINISTRATION OF TECHNICAL COOPERATION PROGRAMS UNDER THE ACT FOR INTERNATIONAL DEVELOPMENT, 64 STAT. 294, 22 U.S.C. 1557, ET SEQ., AND THE MUTUAL SECURITY ACT OF 1951, 65 STAT. 373, 22 U.S.C. 1651, ET SEQ.

THE PROCEDURE PROPOSED CONTEMPLATES THAT THE COOPERATING FOREIGN COUNTRY WILL APPLY TO THE TECHNICAL COOPERATION ADMINISTRATION, UNDER THE TERMS OF ITS AGREEMENT WITH THAT AGENCY, FOR PERMISSION TO ACQUIRE A STATED QUANTITY OF SPECIFIED GOODS AT A MAXIMUM COST STATED IN THE APPLICATION. THE APPLICATION WILL BE SUBJECT TO REVIEW AND APPROVAL BY THE TECHNICAL COOPERATION ADMINISTRATION, WHICH APPROVAL WILL BE EVIDENCED BY THE ISSUANCE OF AN OBLIGATING DOCUMENT SIMILAR TO THE PROCUREMENT AUTHORIZATION FORM USED BY THE ECONOMIC COOPERATION ADMINISTRATION. UPON APPROVAL A CONTRACT WILL BE ENTERED INTO WITH A UNITED STATES BANK SELECTED BY THE COOPERATING COUNTRY AND APPROVED BY THE TREASURY DEPARTMENT UNDER THE TERMS OF WHICH THE BANK WILL AGREE TO ISSUE IRREVOCABLE LETTERS OF CREDIT AT THE REQUEST OF THE COOPERATING COUNTRY IN FAVOR OF SUPPLIERS DESIGNATED BY THAT COUNTRY. THE CONTRACT WILL PROVIDE THAT THE BANK SHALL ISSUE SUCH LETTERS OF CREDIT ONLY FOR THE PURCHASE OF COMMODITIES APPROVED AS EVIDENCED BY COPIES OF THE PROCUREMENT AUTHORIZATION FURNISHED BY THE TECHNICAL COOPERATION ADMINISTRATION TO THE BANK. THE BANK WOULD BE REQUIRED TO DISBURSE UPON DRAFTS SUPPORTED BY SPECIFIED DOCUMENTS SUCH AS BILLS OF LADING, EXPORT LICENSES, SUPPLIERS' CERTIFICATES, WEIGHT CERTIFICATES, ETC., WHICH DISCLOSE COMPLIANCE WITH THE TERMS OF THE CONTRACT BETWEEN THE TECHNICAL COOPERATION ADMINISTRATION AND THE BANK AND WITH THE APPROVED PROCUREMENT AUTHORIZATION. AS PROVIDED IN ITS CONTRACT, THE BANK WOULD BE RESPONSIBLE FOR ANY DISBURSEMENTS NOT MADE IN ACCORDANCE WITH SUCH SPECIFICATIONS. WHILE THE BANK WOULD BE REQUIRED ONLY TO FOLLOW SOUND COMMERCIAL PRACTICE IN THE EXAMINATION OF THE DOCUMENTS, THE AGREEMENTS BETWEEN THE TECHNICAL COOPERATION ADMINISTRATION AND THE COOPERATING FOREIGN COUNTRY WOULD PROVIDE FOR A REFUND OF ANY SUMS OBTAINED AS A RESULT OF UNAUTHORIZED USE OF THE LETTERS OF CREDIT.

IT IS STATED THAT OTHER METHODS OF PROCUREMENT, SUCH AS DIRECT PROCUREMENT BY THE TECHNICAL COOPERATION ADMINISTRATION OR REIMBURSEMENT FOR DISBURSEMENTS MADE BY COOPERATING COUNTRIES WILL BE USED WHERE DEEMED PREFERABLE, BUT THAT THE LETTER OF CREDIT PROCEDURE HAS CERTAIN PROGRAM ADVANTAGES WHICH MAKE ITS USE DESIRABLE IN MANY INSTANCES. THESE ADVANTAGES ARE STATED TO BE AS FOLLOWS:

(1) THE USE OF LETTERS OF CREDIT FOSTERS THE DEVELOPMENT OF NORMAL COMMERCIAL RELATIONSHIPS BETWEEN THE COOPERATING COUNTRY AND THE SUPPLIERS IN THE UNITED STATES, THUS ASSISTING IN THE ECONOMIC DEVELOPMENT OF THE COOPERATING COUNTRY AND ENCOURAGING THE PARTICIPATION OF PRIVATE AGENCIES AND PERSONS IN THE PROGRAM AS DIRECTED BY SECTION 407 OF THE ACT FOR INTERNATIONAL DEVELOPMENT, 64 STAT. 206.

(2) IT DOES NOT REQUIRE THE COOPERATING COUNTRY TO PROVIDE A FUND OF DOLLAR CREDITS, AS WOULD A POLICY OF MAKING DISBURSEMENTS ONLY TO REIMBURSE THE COOPERATING COUNTRY FOR APPROVED PURCHASES. MANY COUNTRIES IN WHICH THE TECHNICAL COOPERATION ADMINISTRATION OPERATES DO NOT HAVE AVAILABLE SUCH DOLLAR CREDITS, AND A POLICY OF EXCLUSIVE RELIANCE ON REIMBURSEMENT WOULD PRECLUDE EFFECTIVE OPERATIONS IN SUCH COUNTRIES.

(3) IT DOES NOT REQUIRE DISBURSEMENT OF FUNDS FROM THE TREASURY AT AS EARLY AT TIME AS WOULD THE MAKING OF ADVANCES. AS A RESULT OF THIS FACT, THE UNITED STATES GOVERNMENT WOULD BE SAVED SUBSTANTIAL INTEREST EXPENSE, PARTICULARLY IN THE CASE OF PURCHASES OF ITEMS WHICH REQUIRE A LONG PERIOD FOR MANUFACTURE, WHILE PERMITTING THE MANUFACTURER TO GET THE ASSURANCE OF EVENTUAL PAYMENT, WHICH IS NEEDED UNDER THE PRESENT CIRCUMSTANCES TO ASSURE ACCEPTANCE OF ORDERS FOR THIS TYPE OF EQUIPMENT.

(4) IT GIVES A GREATER ACCOUNTING CONTROL OVER EXPENDITURES THAN WOULD ADVANCES OR ANY OTHER TYPE OF PROCUREMENT EXCEPT REIMBURSEMENT OR DIRECT PAYMENTS TO SUPPLIERS.

(5) IT REDUCES THE NECESSITY FOR THE SERVICES OF FEDERAL PERSONNEL AND THE ACCOMPANYING ADMINISTRATIVE EXPENSE, AS COMPARED WITH DIRECT PROCUREMENT BY THE TECHNICAL COOPERATION ADMINISTRATION OR BY ANOTHER GOVERNMENT AGENCY ON ITS BEHALF.

(6) IT WORKS EQUALLY WELL FOR PROCUREMENT ABROAD AND WITHIN THE UNITED STATES. MANY OTHER METHODS OF FINANCING PROCUREMENT, INCLUDING DIRECT PAYMENTS TO SUPPLIERS, DO NOT OPERATE SATISFACTORILY ABROAD. DUE TO SHORTAGES OF SOME MATERIALS IN THE UNITED STATES, PROCUREMENT OF SUCH MATERIALS ABROAD IS BECOMING INCREASINGLY DESIRABLE IN THE PUBLIC INTEREST.

THE PROPOSED PROCEDURE IS STATED TO BE VERY SIMILAR TO THAT APPROVED FOR USE BY THE GENERAL SERVICES ADMINISTRATION IN ITS STOCKPILING PROGRAM BY DECISION B-87880, DATED JANUARY 8, 1951, AND THE LETTER OF COMMITMENT PROCEDURE USED BY THE ECONOMIC COOPERATION ADMINISTRATION AND APPROVED IN DECISION B-75995, DATED MAY 10, 1948.

THE FUNDS INVOLVED ARE STATED TO BE THOSE MADE AVAILABLE BY THE ACT FOR INTERNATIONAL DEVELOPMENT, AND THE MUTUAL SECURITY ACT OF 1951, SUPRA. HOWEVER, SINCE NEITHER OF THESE ACTS IS AN APPROPRIATION ACT, IT APPEARS THAT THE FUNDS CONCERNED ACTUALLY WERE MADE AVAILABLE BY THE MUTUAL SECURITY APPROPRIATION ACT, 1952, PUBLIC LAW 249, APPROVED OCTOBER 31, 1951. IT IS FURTHER STATED THAT THE PARTICULAR FUNDS IN QUESTION ARE THOSE INVOLVED UNDER TITLES II, III, AND IV OF THE MUTUAL SECURITY ACT OF 1951. SO FAR AS CONCERNS ECONOMIC AND TECHNICAL ASSISTANCE UNDER THESE TITLES, THE MUTUAL SECURITY APPROPRIATION ACT, 1952, APPROPRIATED CERTAIN SUMS FOR THE FISCAL YEAR ENDING JUNE 30, 1952, AS AUTHORIZED BY SECTIONS 203, 302, AND 402 OF THE MUTUAL SECURITY ACT OF 1951. SECTIONS 203 AND 302 OF THE LATTER ACT STATE THAT FUNDS APPROPRIATED PURSUANT THERETO SHALL BE AVAILABLE UNDER THE APPLICABLE PROVISIONS OF THE ECONOMIC COOPERATION ACT OF 1948, AS AMENDED (22 U.S.C. 1501-1522), AND OF THE ACT FOR INTERNATIONAL DEVELOPMENT (22 U.S.C. 1557), WHILE SECTION 402 AUTHORIZES APPROPRIATIONS FOR TECHNICAL ASSISTANCE UNDER THE PROVISIONS OF THE ACT FOR INTERNATIONAL DEVELOPMENT (22 U.S.C. 1557) AND OF THE INSTITUTE OF INTER-AMERICAN AFFAIRS ACT, AS AMENDED (22 U.S.C. 281).

IT IS STATED TO BE THE VIEW OF YOUR DEPARTMENT THAT THE PROPOSED LETTER OF CREDIT PROCEDURE IS WITHIN THE LEGAL AUTHORITY OF THE ADMINISTRATOR OF THE TECHNICAL COOPERATION ADMINISTRATION, TO WHOM THE POWERS VESTED IN THE PRESIDENT BY THE ACT FOR INTERNATIONAL DEVELOPMENT HAVE BEEN DELEGATED. SECTION 405 OF THAT ACT, 64 STAT. 205, PROVIDES THAT THE PRESIDENT IS AUTHORIZED, WITHIN APPROPRIATIONS MADE AVAILABLE FOR THE PURPOSE, TO MAKE ADVANCES AND GRANTS IN AID OF TECHNICAL COOPERATION PROGRAMS TO ANY PERSON, CORPORATION, OR OTHER BODY OF PERSONS, OR TO ANY FOREIGN GOVERNMENT OR FOREIGN GOVERNMENT AGENCY, AND TO MAKE CONTRACTS IN RESPECT OF TECHNICAL COOPERATION PROGRAMS WITH ANY PERSON, CORPORATION, OR OTHER BODY OF PERSONS, WITHIN OR WITHOUT THE UNITED STATES, OR WITH ANY FOREIGN GOVERNMENT OR FOREIGN GOVERNMENT AGENCY.

WHILE THE ACT FOR INTERNATIONAL DEVELOPMENT DOES NOT SPECIFICALLY AUTHORIZE THE USE OF CREDIT FACILITIES THROUGH COMMERCIAL BANKS AS DID THE ECONOMIC COOPERATION ACT OF 1948, 62 STAT. 137, IT DOES AUTHORIZE THE MAKING OF ADVANCES TO FOREIGN GOVERNMENTS OR TO ANY PERSON OR CORPORATION. THE PROCEDURE PROPOSED IN THE DEPUTY UNDER SECRETARY'S LETTER OF MARCH 17, 1952, HAS OBVIOUS ADVANTAGES FROM THE STANDPOINT OF PROTECTING THE GOVERNMENT'S INTERESTS OVER THE OUTRIGHT ADVANCE OF FUNDS TO COOPERATING COUNTRIES. FOR THAT REASON, AND IN VIEW OF THE OTHER ADVANTAGES MENTIONED IN THE LETTER OF MARCH 17, 1952, YOU ARE ADVISED THAT THIS OFFICE WILL NOT OBJECT TO THE PROCUREMENT OF COMMODITIES, SUPPLIES, AND EQUIPMENT FOR TECHNICAL COOPERATION PROGRAMS UNDER THE ACT FOR INTERNATIONAL DEVELOPMENT AND THE MUTUAL SECURITY ACT OF 1951 THROUGH CREDIT FACILITIES EXTENDED BY UNITED STATES BANKS ON A REIMBURSABLE BASIS.

SO FAR AS CONCERNS THE DETAILED PROCEDURES AND FORMS TO BE USED TO ACCOMPLISH THIS PURPOSE, THE FORMS SUBMITTED WITH THE LETTER OF MARCH 17, 1952, APPEAR TO BE GENERALLY ACCEPTABLE, ALTHOUGH IT SHOULD BE UNDERSTOOD THAT CHANGES THEREIN MAY BE FOUND DESIRABLE IN THE LIGHT OF ACTUAL PROCUREMENT EXPERIENCE.