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B-118991, DECEMBER 2, 1954, 34 COMP. GEN. 271

B-118991 Dec 02, 1954
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FOR FIXING A MINIMUM SALE PRICE FOR VESSELS BASED ON ESTIMATED FOREIGN CONSTRUCTION COSTS DETERMINED AS OF THE DATE THE CONSTRUCTION CONTRACT IS EXECUTED REFERS GENERALLY TO THE TIME OF CONSTRUCTION. SO THAT IT IS PROPER FOR THE FEDERAL MARITIME BOARD TO ESTABLISH A UNIFORM SALES PRICE FOR ALL MARINER VESSELS BASED ON A WEIGHTED AVERAGE OF THE ESTIMATED FOREIGN CONSTRUCTION COSTS OVER THE PERIOD COVERED BY THE CONSTRUCTION CONTRACT. 1954: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 12. IN THE ABSENCE OF ADVICE FROM THE GENERAL ACCOUNTING OFFICE THAT THERE ARE LEGAL OBJECTIONS TO SUCH A PROCEDURE. THE 35 " MARINER" CLASS VESSELS ARE SUBSTANTIALLY IDENTICAL. WERE CONSTRUCTED AS A SERIES PURSUANT TO AUTHORIZATION GIVEN IN THE SECOND SUPPLEMENTAL APPROPRIATION ACT OF 1951.

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B-118991, DECEMBER 2, 1954, 34 COMP. GEN. 271

VESSELS - SALES - PRICE THE PROVISION IN SECTION 705 OF THE MERCHANT MARINE ACT, 1936, FOR FIXING A MINIMUM SALE PRICE FOR VESSELS BASED ON ESTIMATED FOREIGN CONSTRUCTION COSTS DETERMINED AS OF THE DATE THE CONSTRUCTION CONTRACT IS EXECUTED REFERS GENERALLY TO THE TIME OF CONSTRUCTION, AND NOT TO THE PRECISE DATE OF THE CONTRACT, SO THAT IT IS PROPER FOR THE FEDERAL MARITIME BOARD TO ESTABLISH A UNIFORM SALES PRICE FOR ALL MARINER VESSELS BASED ON A WEIGHTED AVERAGE OF THE ESTIMATED FOREIGN CONSTRUCTION COSTS OVER THE PERIOD COVERED BY THE CONSTRUCTION CONTRACT.

ACTING COMPTROLLER GENERAL WEITZEL TO THE CHAIRMAN, FEDERAL MARITIME BOARD, DECEMBER 2, 1954:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 12, 1954, STATING THAT THE MARITIME BOARD PLANS TO ESTABLISH A UNIFORM SALES PRICE FOR ALL MARINER VESSELS, IN THE ABSENCE OF ADVICE FROM THE GENERAL ACCOUNTING OFFICE THAT THERE ARE LEGAL OBJECTIONS TO SUCH A PROCEDURE.

THE 35 " MARINER" CLASS VESSELS ARE SUBSTANTIALLY IDENTICAL, AND WERE CONSTRUCTED AS A SERIES PURSUANT TO AUTHORIZATION GIVEN IN THE SECOND SUPPLEMENTAL APPROPRIATION ACT OF 1951, 64 STAT. 1223, 1225. ESTABLISHMENT OF A UNIFORM SALES PRICE FOR THESE VESSELS IS CONCEDEDLY DESIRABLE IN LINE WITH THE BASIC PURPOSES OF THE MERCHANT MARINE ACT OF 1936, AS AMENDED. HOWEVER, SOME DOUBT HAS ARISEN AS TO THE PROPRIETY OF FIXING A UNIFORM PRICE BECAUSE OF THE LAST SENTENCE OF SECTION 705 OF THE MERCHANT MARINE ACT, 49 STAT. 2009, 46 U.S.C. 1195, WHICH READS AS FOLLOWS:

* * * NO VESSEL CONSTRUCTED UNDER THE PROVISIONS OF THIS ACT, AS AMENDED, SHALL BE SOLD BY THE SECRETARY FOR OPERATION IN THE FOREIGN TRADE FOR A SUM LESS THAN THE ESTIMATED FOREIGN CONSTRUCTION COST EXCLUSIVE OF NATIONAL DEFENSE FEATURES (DETERMINED AS OF THE DATE THE CONSTRUCTION CONTRACT THEREFOR IS EXECUTED) LESS DEPRECIATION BASED ON A TWENTY-YEAR LIFE, NOR SHALL ANY SUCH VESSEL BE SOLD BY THE SECRETARY FOR OPERATION IN THE DOMESTIC TRADE FOR A SUM LESS THAN THE COST OF CONSTRUCTION IN THE UNITED STATES EXCLUSIVE OF NATIONAL DEFENSE FEATURES LESS DEPRECIATION BASED ON A TWENTY-YEAR LIFE.

THE MARINERS WERE CONSTRUCTED UNDER SEVEN DIFFERENT CONTRACTS FOR FIVE SHIPS EACH, AND WHILE FIVE OF THE CONTRACTS WERE AWARDED ON FEBRUARY 7, 1951, ONE CONTRACT WAS AWARDED ON JUNE 25, 1951, AND THE LAST ON AUGUST 1, 1951. THE ESTIMATED FOREIGN CONSTRUCTION COST OF A MARINER VESSEL, EXCLUSIVE OF NATIONAL DEFENSE FEATURES, INCREASED BY $304,000 BETWEEN FEBRUARY 7 AND AUGUST 1, 1951. THUS, IF THE CLAUSE "DETERMINED AS OF THE DATE THE CONSTRUCTION CONTRACT THEREFOR IS EXECUTED" IN SECTION 705 IS APPLIED ON A CONTRACT BY CONTRACT BASIS, IT WILL RESULT IN THE REQUIREMENT THAT 25 MARINERS MUST BE SOLD AT A MINIMUM PRICE OF $4,120,000 EACH, FIVE AT $4,261,000 EACH, AND FIVE AT $4,424,000 EACH, WHICH ARE THE ESTIMATED FOREIGN CONSTRUCTION COSTS AS OF RESPECTIVE CONTRACT DATES.

THE LAST SENTENCE OF SECTION 705, QUOTED ABOVE, WAS ADDED TO THE MERCHANT MARINE ACT BY THE ACT OF AUGUST 4, 1939, 53 STAT. 1182, 1185. EXAMINATION OF THE LEGISLATIVE HISTORY OF THAT ACT SHOWS THAT IT WAS RECOMMENDED BY THE MARITIME COMMISSION FOR THE PURPOSE OF PREVENTING THE SALE OF COMMISSION-OWNED VESSELS AT BARGAIN PRICES BELOW THE PRICES WHICH WOULD HAVE BEEN APPLICABLE TO CONSTRUCTION UNDER TITLE V OF THE MERCHANT MARINE ACT. UNDER SECTION 502 (A) OF THE ACT, 49 STAT. 1996, IT WAS PROVIDED THAT:

* * * CONCURRENTLY WITH ENTERING INTO SUCH CONTRACT WITH THE SHIPBUILDER, THE COMMISSION IS AUTHORIZED TO ENTER INTO A CONTRACT WITH THE APPLICANT FOR THE PURCHASE BY HIM OF SUCH VESSEL UPON ITS COMPLETION, AT A PRICE CORRESPONDING TO THE ESTIMATED COST, AS DETERMINED BY THE COMMISSION PURSUANT TO THE PROVISIONS OF THIS ACT, OF BUILDING SUCH VESSEL IN A FOREIGN SHIPYARD.

THE VESSELS TO BE SOLD UNDER SECTION 705 MIGHT BE OF VARIOUS AGES, AND IT WAS NECESSARY, THEREFORE, IF THE ESTIMATED FOREIGN CONSTRUCTION COST WAS TO BE USED AS A MINIMUM SALES PRICE, TO STATE WHETHER SUCH ESTIMATE SHOULD BE MADE AS OF THE TIME OF SALE, THE TIME OF CONSTRUCTION, OR SOME OTHER TIME. IT IS NOT UNREASONABLE TO ASSUME THAT THE LANGUAGE USED WAS INTENDED TO ASSIMILATE SECTION 705 TO SECTION 502, THAT IS, TO HAVE THE ESTIMATE MADE "CONCURRENTLY" WITH THE VESSEL CONSTRUCTION CONTRACT. VIEWED IN THIS LIGHT, THE LANGUAGE USED PROPERLY MIGHT BE CONSTRUED AS REFERRING ONLY GENERALLY TO THE TIME OF CONSTRUCTION AND NOT TO THE PRECISE CONSTRUCTION CONTRACT DATE WHERE TO DO SO WOULD, AS HERE, RESULT IN THE FIXING OF INCONSISTENT PRICES FOR IDENTICAL VESSELS. AND TO THE EXTENT THAT A STRICT CONSTRUCTION WOULD TEND TO DEFEAT ONE OF THE BASIC OBJECTIVES OF THE ACT--- TO FOSTER THE DEVELOPMENT OF A PRIVATELY-OWNED AND OPERATED MERCHANT MARINE--- SUCH A CONSTRUCTION MUST YIELD.

MOREOVER, THE LIMITATION IN QUESTION IS PHRASED IN THE SINGULAR AS IT APPEARS IN THE STATUTE WHERE IT READS "DETERMINED AS OF THE DATE THE CONSTRUCTION CONTRACT THEREFOR IS EXECUTED.' BUT CONSIDERING THE MARINERS AS A GROUP OF 35, THE LANGUAGE REALLY SHOULD BE VIEWED AS READING ,DETERMINED AS OF THE DATES THE CONSTRUCTION CONTRACTS THEREFOR ARE EXECUTED.' SEE THE RULES OF CONSTRUCTION OF THE LAWS OF THE UNITED STATES, 1 U.S.C. 1. THUS, THE PROPOSAL TO FIX A UNIFORM MINIMUM PRICE FOR THE MARINERS BASED UPON A WEIGHTED AVERAGE OF THEIR ESTIMATED FOREIGN CONSTRUCTION COSTS OVER THE PERIOD COVERED BY THE CONSTRUCTION CONTRACTS IS NOT ONLY PERMISSIBLE BUT IS CONSISTENT WITH SOUND AND SENSIBLE ADMINISTRATION OF THE ACT.

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