B-134875, DEC. 12, 1967

B-134875: Dec 12, 1967

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SECRETARY: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 7. WE UNDERSTAND THAT THE PURPOSE OF THE PRESENT REQUEST IS TO OBTAIN RELIEF FROM THE REQUIREMENT THAT THE SETOFF AMOUNTS BE FORWARDED TO OUR OFFICE FOR DISPOSITION. IT IS EXPLAINED THAT MTMTS HAS SUBMITTED TO MSTS MANY REQUESTS FOR SETOFF OF AMOUNTS DUE FROM STEAMSHIP COMPANIES. REPAYMENTS TO THE FUND ARE SAID TO BE NECESSARY IN ORDER THAT IT REMAIN SOLVENT. WAS THE OUTCOME OF A CONFERENCE BETWEEN REPRESENTATIVES OF MSTS. IT WAS BELIEVED THAT THE BEST INTERESTS OF THE UNITED STATES JUSTIFIED REQUIRING GOVERNMENT AGENCIES TO REFER SETOFF RECOVERIES TO THE GENERAL ACCOUNTING OFFICE. THE PREVAILING ADMINISTRATIVE PROCEDURE FOR THE HANDLING OF OCEAN CARRIER SETOFFS WAS CONTINUED.

B-134875, DEC. 12, 1967

TRANSPORTATION - OCEAN CARRIERS - SET-OFF - UNRELATED CLAIMS DECISION TO SECRETARY OF THE NAVY APPROVING PROCEDURES WHEREBY MTMTS CLAIMS AGAINST OCEAN CARRIERS MAY BE SATISFIED BY SET-OFF AGAINST MSTS PAYMENT. WITHHELD FUNDS MAY BE CREDITED DIRECTLY TO THE ARMY INDUSTRIAL FUND UNDER WHICH MTMTS OPERATES WITHOUT NOTICE OF CREDIT TO GAO. SEE ISTHMIAN STEAMSHIP CO. V U.S., 255 F.2D 816 (1958).

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 7, 1967, FROM THE COMMANDER, MILITARY SEA TRANSPORTATION SERVICE (MSTS), FILE SER 1137M55, ASKING THAT WE REVIEW THE SETOFF PROCEDURE DESCRIBED IN OUR DECISION B-134875 OF MARCH 6, 1958. THAT DECISION REQUIRES THAT AMOUNTS COLLECTED BY SETOFF FROM OCEAN CARRIER ACCOUNTS BE FORWARDED TO THE GENERAL ACCOUNTING OFFICE WITH AN EXPLANATION CONCERNING THE INDEBTEDNESS BEING ADJUSTED BY SUCH SETOFF.

FROM THE LETTER OF SEPTEMBER 7 AND A LATER MEETING WITH MSTS AND MILITARY TRAFFIC MANAGEMENT AND TERMINAL SERVICE (MTMTS) REPRESENTATIVES, WE UNDERSTAND THAT THE PURPOSE OF THE PRESENT REQUEST IS TO OBTAIN RELIEF FROM THE REQUIREMENT THAT THE SETOFF AMOUNTS BE FORWARDED TO OUR OFFICE FOR DISPOSITION. IT IS EXPLAINED THAT MTMTS HAS SUBMITTED TO MSTS MANY REQUESTS FOR SETOFF OF AMOUNTS DUE FROM STEAMSHIP COMPANIES, BUT THAT THE DECISION OF MARCH 6, 1958, PREVENTS CREDITING THE SETOFF AMOUNTS TO THE ARMY INDUSTRIAL FUND, UNDER WHICH MTMTS OPERATES. REPAYMENTS TO THE FUND ARE SAID TO BE NECESSARY IN ORDER THAT IT REMAIN SOLVENT.

THE PROCEDURE SET FORTH IN THE DECISION OF MARCH 6, 1958, WAS THE OUTCOME OF A CONFERENCE BETWEEN REPRESENTATIVES OF MSTS, THE DEPARTMENT OF JUSTICE AND OUR OFFICE. AT THAT TIME THE SUPREME COURT OF THE UNITED STATES HAD NOT DECIDED THE APPEAL IN ISTHMIAN STEAMSHIP CO. V. UNITED STATES, 255 F.2D 816 (1958). BECAUSE OF THE UNCERTAIN STATE OF THE LAW AT THAT TIME, IT WAS BELIEVED THAT THE BEST INTERESTS OF THE UNITED STATES JUSTIFIED REQUIRING GOVERNMENT AGENCIES TO REFER SETOFF RECOVERIES TO THE GENERAL ACCOUNTING OFFICE. AFTER THE SUPREME COURT DECIDED THE ISTHMIAN STEAMSHIP CO. CASE AGAINST THE UNITED STATES (APRIL 1959, 359 U.S. 314), THE PREVAILING ADMINISTRATIVE PROCEDURE FOR THE HANDLING OF OCEAN CARRIER SETOFFS WAS CONTINUED.

SINCE OUR DECISION OF MARCH 6, 1958, IT APPEARS THAT THERE HAS BEEN LITTLE, IF ANY, COLLECTION REFERRAL ACTIVITY, ALTHOUGH PURSUANT TO THOSE INSTRUCTIONS COLLECTED AMOUNTS PRESUMABLY WOULD HAVE BEEN DEPOSITED TO THE CREDIT OF THE ARMY INDUSTRIAL FUND, CONSISTENT WITH THE HANDLING OF COLLECTIONS UNDER SECTION 5, TITLE 5, OF THE GAO MANUAL FOR GUIDANCE OF FEDERAL AGENCIES (5 GAO 5060), PROVIDING FOR DEPOSITS TO THE CREDIT OF THE WORKING FUND FROM WHICH THE FUNDS HAD BEEN ORIGINALLY PAID.

AS INDICATED IN ISTHMIAN STEAMSHIP CO. V. UNITED STATES, 359 U.S. 314 (1959), THE DEFENSE OF SETOFF OF UNRELATED CLAIMS WAS NOT AVAILABLE IN ADMIRALTY ACTIONS BECAUSE RULE 50 OF THE ADMIRALTY RULES OF PRACTICE PRECLUDED SUCH SETOFFS. WE DID, HOWEVER, ON THE REQUEST OF THE NAVY, AUTHORIZE DEPARTURES FROM THE GENERAL REQUIREMENTS OF OUR CIRCULAR LETTER OF AUGUST 4, 1960, RELATIVE TO SETOFFS AND REFERRALS TO OUR OFFICE OF TIME -BARRED OCEAN CARRIER ACCOUNTS. SEE OUR LETTER TO THE SECRETARY OF THE NAVY, B-114365, B-139598, B-139994, DATED JUNE 27, 1961, WHICH ALSO EXEMPTED FROM THE REFERRAL PROCEDURE BILLINGS INVOLVING TERMINAL OPERATIONS OF THE ARMY AND NAVY.

EFFECTIVE JULY 1, 1966, THE ADMIRALTY RULES WERE RESCINDED, AND THE ADMIRALTY AND CIVIL PROCEDURES WERE UNIFIED AND BROUGHT UNDER THE FEDERAL RULES OF CIVIL PROCEDURE. ON SEVERAL OCCASIONS WE HAVE BEEN ADVISED BY THE DEPARTMENT OF JUSTICE THAT UNDER THE MODIFIED RULES THE DEFENSE OF SETOFF OF UNRELATED CLAIMS IS AVAILABLE. FOR EXAMPLE, SEE ATTACHED COPY OF LETTER DATED JULY 20, 1966, FROM THAT DEPARTMENT TO OUR OFFICE.

YOUR REQUEST FOR APPROVAL OF PROCEDURES WHEREBY MTMTS CLAIMS AGAINST OCEAN CARRIERS MAY BE SATISFIED BY SETOFF AGAINST MSTS PAYMENTS IS APPROVED. HOWEVER, IT IS QUESTIONABLE THAT THE PROCEDURE IS AVAILABLE WHEN THE BILL OF LADING OR CHARTER PARTY CONTAINS A RESTRICTION AGAINST SETOFFS OF FREIGHT CHARGES. WITHHELD FUNDS MAY BE CREDITED DIRECTLY TO MTMTS WITHOUT NOTICE OF THE CREDITS TO THIS OFFICE. FOR GENERAL INFORMATION AS TO THE HANDLING OF COLLECTIONS MADE FROM CONTRACTORS INDEBTED TO THE GOVERNMENT, SEE 4 GAO 61.3. THE SECRETARY OF THE ARMY HAS BEEN APPROPRIATELY ADVISED IN OUR LETTER OF TODAY, COPY ATTACHED. AS WE INDICATE, IF ANY PARTICULAR ITEM WAS PREVIOUSLY REFERRED TO OUR OFFICE FOR COLLECTION WE SHOULD BE NOTIFIED IN THE EVENT COLLECTION IS ACCOMPLISHED BY MSTS OR MTMTS.