B-125769, OCTOBER 24, 1955, 35 COMP. GEN. 230

B-125769: Oct 24, 1955

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SURPLUS SALES - WAIVER OF EXPORT CLAUSE A CONTRACTOR WHO PURCHASED SURPLUS CLOTHING FROM THE NAVY UNDER A CONTRACT WHICH CONTAINED A CLAUSE REQUIRING RESALE ONLY IN FOREIGN MARKETS BECAUSE OF THE ADVERSE IMPACT THE SALE WOULD HAVE ON THE DOMESTIC TEXTILE MARKET MAY. 1955: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14. IT APPEARS THAT THE MERCHANDISING FIRM OF SLIFKA FABRICS WAS AWARDED ITEM NO. 61 OF SALES CATALOG NO. INCLUDED AMONG THE ITEMS LISTED FOR SALE WERE SIZABLE QUANTITIES OF COTTON HERRINGBONE TWILL AND JUNGLE CLOTH. THAT THEY WERE "IMPACT" ITEMS TO BE OFFERED FOR RESALE ONLY IN FOREIGN MARKETS. THIS DETERMINATION APPARENTLY WAS NECESSITATED BY THE ADVERSE EFFECT THE RELEASE OF THESE COMMODITIES WOULD HAVE UPON THE DOMESTIC TEXTILE MARKET.

B-125769, OCTOBER 24, 1955, 35 COMP. GEN. 230

SURPLUS SALES - WAIVER OF EXPORT CLAUSE A CONTRACTOR WHO PURCHASED SURPLUS CLOTHING FROM THE NAVY UNDER A CONTRACT WHICH CONTAINED A CLAUSE REQUIRING RESALE ONLY IN FOREIGN MARKETS BECAUSE OF THE ADVERSE IMPACT THE SALE WOULD HAVE ON THE DOMESTIC TEXTILE MARKET MAY, ON PAYMENT OF ADDITIONAL CONSIDERATION, BE GRANTED A WAIVER OF THE EXPORT CLAUSE.

TO THE SECRETARY OF THE NAVY, OCTOBER 24, 1955:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14, 1955, WITH ENCLOSURES, WHEREIN YOU REQUEST A DECISION AS TO THE PROPRIETY OF MODIFYING, FOR VALUABLE CONSIDERATION, THE TERMS OF SALES CONTRACT NO. N407S-1195, SO AS TO EFFECT A WAIVER OF THE EXPORT CLAUSE THEREIN INCORPORATED, AND THUS PERMIT THE CONTRACTOR, SLIFKA FABRICS, NEW YORK CITY, TO RESELL A QUANTITY OF WOOL MUFFLERS IN THE UNITED STATES AND ALASKA, INSTEAD OF IN FOREIGN MARKETS.

IT APPEARS THAT THE MERCHANDISING FIRM OF SLIFKA FABRICS WAS AWARDED ITEM NO. 61 OF SALES CATALOG NO. B-23-55, ISSUED MARCH 24, 1955, BY THE U.S. NAVAL SUPPLIES DEPOT, MECHANICSBURG, PENNSYLVANIA, ON THE BASIS OF ITS QUOTED PRICE OF $0.1009 EACH ON 286,900 WOOL MUFFLERS, MAKING A TOTAL BID PRICE OF $28,948.21 FOR THE LOT. INCLUDED AMONG THE ITEMS LISTED FOR SALE WERE SIZABLE QUANTITIES OF COTTON HERRINGBONE TWILL AND JUNGLE CLOTH, WATER REPELLENT, AS SPECIFICALLY COVERED BY ITEMS NOS. 1, 2, 5, 7 THROUGH 14, 22 AND 23, CONCERNING WHICH THERE HAD BEEN A PRIOR DETERMINATION BY THE TEXTILE AND CLOTHING DIVISION OF THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION, DEPARTMENT OF COMMERCE, THAT THEY WERE "IMPACT" ITEMS TO BE OFFERED FOR RESALE ONLY IN FOREIGN MARKETS. THIS DETERMINATION APPARENTLY WAS NECESSITATED BY THE ADVERSE EFFECT THE RELEASE OF THESE COMMODITIES WOULD HAVE UPON THE DOMESTIC TEXTILE MARKET. BECAUSE OF THIS ADVERSE ,IMPACT" FACTOR, IT WAS PROVIDED IN CLAUSE 26 OF THE CATALOG THAT THE MATERIALS PURCHASED THEREUNDER MUST BE EXPORTED AND SHIPPED FROM A UNITED STATES PORT WITHIN FOUR MONTHS AFTER REMOVAL OF THE MATERIALS FROM THE GOVERNMENT'S WAREHOUSE. ARTICLE 28, ADDITIONAL PROVISIONS OF THE SALES CATALOG, ALSO REQUIRED THE PURCHASER TO FURNISH A PERFORMANCE BOND SUBSTANTIALLY EQUIVALENT TO THE SPECIFIED CONTRACT PRICE OF THE MATERIALS, AND FURTHER PROVIDED FOR THE FORFEITURE OF SUCH BOND AS LIQUIDATED DAMAGES IN THE EVENT OF THE PURCHASER'S BREACH OF THE EXPORT CLAUSE OF THE CATALOG.

FURTHER, IT APPEARS THAT THE CONTRACTOR PAID FOR AND REMOVED THE CONTRACT MATERIALS--- MUFFLERS--- SHORTLY AFTER RECEIPT OF THE AWARD. IT ALSO APPEARS THAT THE CONTRACTOR MADE PROMPT AND DILIGENT EFFORTS TO RESELL THE WOOL MUFFLERS TO NUMEROUS PROSPECTIVE PURCHASERS IN THE FOREIGN MARKETS, BUT THAT HE MET WITH NO SUCCESS WHATSOEVER. IT HAS BEEN INFORMALLY REPORTED THAT CONSIDERABLE QUANTITIES OF THIS SAME COMMODITY RECENTLY WERE SOLD BY A WEST COAST NAVAL DEPOT WITHOUT ANY REQUIREMENT THAT THE MATERIALS BE RESOLD IN THE FOREIGN MARKETS.

INCLUDED AMONG THE PAPERS IN THE CASE IS A MEMORANDUM DATED OCTOBER 4, 1955, FROM THE DEPARTMENT OF DEFENSE, AND DIRECTED TO THE ASSISTANT SECRETARY OF THE NAVY ( MATERIAL), SPECIFICALLY RELATING TO THE GOODS HERE UNDER CONSIDERATION, WHICH READS:

INQUIRY HAS BEEN MADE BY THE DEPARTMENT OF THE NAVY AS TO WHETHER THE SALE OF SOME 289,000 BLUE WOOLEN MUFFLERS WOULD ADVERSELY AND SUBSTANTIALLY AFFECT THE DOMESTIC MARKET. THIS MATTER WAS REFERRED FOR A TECHNICAL RECOMMENDATION TO THE TEXTILE AND CLOTHING DIVISION OF THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION, DEPARTMENT OF COMMERCE, AND THEY HAVE ADVISED THAT THE SALE OF THESE MUFFLERS WOULD NOT AFFECT MARKETS ADVERSELY. ACCORDINGLY, IT HAS BEEN DETERMINED THAT SALE OF THESE BLUE WOOLEN MUFFLERS WOULD NOT RESULT IN AN ADVERSE AND SUBSTANTIAL IMPACT ON THE DOMESTIC MARKET.

IT IS THUS APPARENT THAT THE ITEM OF WOOL MUFFLERS DOES NOT FALL WITHIN THE CATEGORY OF THOSE ,IMPACT" ITEMS WHICH, UNDER ORDERS OR DIRECTIVES OF THE DEPARTMENT OF COMMERCE, ARE REQUIRED TO BE EXPORTED AND RESOLD IN FOREIGN MARKETS IN ORDER TO PROTECT OUR DOMESTIC TEXTILE INDUSTRY. IN THE CIRCUMSTANCES, IT WOULD SEEM THAT THE INCLUSION OF THIS NON-IMPACT ITEM IN THE CATALOG AND THE PROPOSED IMPOSITION UPON THE PURCHASER OF THOSE SAME TERMS AND CONDITIONS, WHICH WERE ORIGINALLY DESIGNED AND INTENDED TO GOVERN THE RESALE OF IMPACT ITEMS ONLY, WAS IMPROPER AND PREJUDICIAL TO THE BEST INTERESTS OF THE PURCHASER, AND OF THE GOVERNMENT.

IT LONG HAS BEEN RECOGNIZED AS A GENERAL RULE, OF COURSE, THAT OFFICERS OR AGENTS OF THE GOVERNMENT ARE WITHOUT THE AUTHORITY TO WAIVE OR SURRENDER GRATUITOUSLY AND VESTED RIGHT OR INTEREST ACQUIRED BY THE UNITED STATES UNDER CONTRACT, OR OTHERWISE. SEE UNITED STATES V. AMERICAN SALES COMPANY, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE COMPANY V. UNITED STATES, 49 C.1CLS. 327; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 C.1CLS. 584. UNDER A TECHNICAL INTERPRETATION OF THE TERMS OF THIS CONTRACT, AS EXECUTED, THE GOVERNMENT MIGHT POSSIBLY BE CONSIDERED AS HAVING ACQUIRED THE RIGHT TO DECLARE A FORFEITURE OF THE CONTRACTOR'S PERFORMANCE BOND AS LIQUIDATED DAMAGES, OCCASIONED BY ITS BREACH OF THE EXPORT CLAUSE OF THE CATALOG. HOWEVER, AFTER CONSIDERING THE EXTRAORDINARY AND DILIGENT EFFORTS WHICH THIS PURCHASER HAS EXERTED TOWARD DISPOSING OF THIS PROPERTY IN FOREIGN MARKETS, IT WOULD SEEM UNCONSCIONABLE TO ARBITRARILY INVOKE THE PENALTY PROVISIONS OF THE CONTRACT AGAINST HIM IN THIS INSTANCE, ESPECIALLY SINCE IT APPEARS THAT THEY WERE NOT INTENDED FOR APPLICATION TO THESE PARTICULAR MATERIALS.

IT IS UNDERSTOOD THAT THE CONTRACTOR HAS OFFERED TO PAY THE GOVERNMENT THE ADDITIONAL AMOUNT OF $0.0242 FOR EACH MUFFLER SOLD IN THE DOMESTIC MARKETS, WHICH AUTOMATICALLY WOULD INCREASE ITS BID PRICE ON THE ITEM TO $0.1251 FOR EACH MUFFLER SOLD, THUS BRINGING TIS QUOTATION WITHIN THE PRICE RANGE OF ANOTHER SIMILAR CONTRACT RECENTLY AWARDED BY THE U.S. NAVAL SUPPLY DEPOT, OAKLAND, CALIFORNIA, TO ANOTHER BIDDER ON THE SAME COMMODITY. IN THESE CIRCUMSTANCES, IT IS UNDERSTOOD THAT THE INCREASED CONSIDERATION NOW OFFERED BY THE CONTRACTOR FOR A WAIVER OF THE EXPORT CLAUSE OF ITS CONTRACT NO. N407S-1195, IS FAIR AND ENTIRELY ADEQUATE.

YOU ARE ACCORDINGLY ADVISED THAT WE WOULD NOT BE DISPOSED TO OFFER ANY OBJECTION TO THE MODIFICATION PROPOSED BY THE CONTRACTOR IN THIS INSTANCE.