B-142765, JUNE 10, 1960, 39 COMP. GEN. 823

B-142765: Jun 10, 1960

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WHERE MORE THAN ONE DELIVERY IS MADE DURING A CALENDAR YEAR. WHERE MORE THAN ONE DELIVERY IS MADE DURING CALENDAR YEAR. IS TO UTILIZE SURPLUS AGRICULTURAL COMMODITIES AND THE PRODUCTS THEREOF PRODUCED IN THE UNITED STATES TO ASSIST THE ECONOMIC DEVELOPMENT OF FRIENDLY NATIONS BY PROVIDING LONG-TERM CREDIT FOR PURCHASES OF SURPLUS AGRICULTURAL COMMODITIES FOR DOMESTIC CONSUMPTION. UNDER ITS TERMS THE PRESIDENT IS AUTHORIZED TO ENTER INTO AGREEMENTS WITH FRIENDLY NATIONS PROVIDING FOR THE DELIVERY ANNUALLY OF SUCH SURPLUS AGRICULTURAL COMMODITIES FOR PERIODS OF NOT TO EXCEED 10 YEARS. PROVIDING SUCH COMMODITIES ARE IN SURPLUS AT THE TIME OF DELIVERY. PAYMENT FOR THE COMMODITIES IS REQUIRED TO BE MADE IN DOLLARS WITH INTEREST AT A RATE DETERMINED BY THE SECRETARY OF AGRICULTURE.

B-142765, JUNE 10, 1960, 39 COMP. GEN. 823

AGRICULTURE - SALE OF SURPLUS COMMODITIES TO FRIENDLY NATIONS - PAYMENT BASIS - STATUTORY CONSTRUCTION TO CONSTRUE SECTION 403 OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, U.S.C. 1731, WHICH PROVIDES WITH RESPECT TO SALES OF SURPLUS AGRICULTURAL COMMODITIES TO FRIENDLY NATIONS ,THAT PAYMENTS MAY BE MADE IN APPROXIMATELY EQUAL ANNUAL AMOUNTS OVER PERIODS NOT TO EXCEED 20 YEARS," AS AUTHORIZING PAYMENTS ON A BIANNUAL OR DEFERRED 10- OR 20- YEAR PAYMENT BASIS WOULD BE TO CONSTRUE THE WORD "MAY" IN ITS PERMISSIVE SENSE WITHOUT CONSIDERATION FOR THE ENTIRE CONTEXT OF THE SENTENCE AND WITHOUT REGARD TO THE QUALIFYING WORDS "IN APPROXIMATELY EQUAL ANNUAL AMOUNTS; " THEREFORE, WHILE THE SECTION DOES PERMIT SLIGHT FLEXIBILITY OR VARIATION IN THE ANNUAL AMOUNTS, IT MAY NOT BE CONSTRUED AS AUTHORIZING PAYMENT IN OTHER THAN EQUAL ANNUAL AMOUNTS OR IN APPROXIMATELY EQUAL ANNUAL AMOUNTS. IN COMPUTING INTEREST ON AGRICULTURAL COMMODITIES SOLD TO FRIENDLY NATIONS UNDER SECTION 403 OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, WHICH PROVIDES FOR PAYMENT OVER PERIODS NOT TO EXCEED 20 YEARS FROM THE DATE OF THE LAST DELIVERY IN EACH CALENDAR YEAR AND INTEREST FROM THE DATE OF SUCH LAST DELIVERY, WHERE MORE THAN ONE DELIVERY IS MADE DURING A CALENDAR YEAR, NO INTEREST WOULD ACCRUE UNTIL THE DATE OF THE LAST DELIVERY IN EACH YEAR CALENDAR YEAR AND INTEREST FROM THE DATE OF SUCH LAST DELIVERY, WHERE MORE THAN ONE DELIVERY IS MADE DURING CALENDAR YEAR, NO INTEREST WOULD ACCRUE UNTIL THE DATE OF THE LAST DELIVERY IN EACH YEAR.

TO THE SECRETARY OF AGRICULTURE, JUNE 10, 1960:

LETTER OF APRIL 29, 1960, FROM THE ASSISTANT SECRETARY OF AGRICULTURE REQUESTS OUR DECISION ON TWO QUESTIONS ARISING OUT OF THE ENACTMENT OF TITLE IV OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 1954, AS AMENDED ( PUBLIC LAW 480), 7 U.S.C. 1691, ET SEQ., AS ADDED BY SECTION 14 OF PUBLIC LAW 86-341, APPROVED SEPTEMBER 21, 1959, 73 STAT. 610, 7 U.S.C. 1731.

THE PURPOSE OF THIS TITLE, AS STATED IN THE LETTER, IS TO UTILIZE SURPLUS AGRICULTURAL COMMODITIES AND THE PRODUCTS THEREOF PRODUCED IN THE UNITED STATES TO ASSIST THE ECONOMIC DEVELOPMENT OF FRIENDLY NATIONS BY PROVIDING LONG-TERM CREDIT FOR PURCHASES OF SURPLUS AGRICULTURAL COMMODITIES FOR DOMESTIC CONSUMPTION. UNDER ITS TERMS THE PRESIDENT IS AUTHORIZED TO ENTER INTO AGREEMENTS WITH FRIENDLY NATIONS PROVIDING FOR THE DELIVERY ANNUALLY OF SUCH SURPLUS AGRICULTURAL COMMODITIES FOR PERIODS OF NOT TO EXCEED 10 YEARS, PURSUANT TO THE TERMS AND CONDITIONS SET OUT IN THE TITLE, PROVIDING SUCH COMMODITIES ARE IN SURPLUS AT THE TIME OF DELIVERY. PAYMENT FOR THE COMMODITIES IS REQUIRED TO BE MADE IN DOLLARS WITH INTEREST AT A RATE DETERMINED BY THE SECRETARY OF AGRICULTURE, BUT NOT MORE THAN THE COST OF THE FUNDS TO THE UNITED STATES AS DETERMINED BY THE SECRETARY OF THE TREASURY. THE SECOND SENTENCE OF SECTION 403 OF THE TITLE PERTAINING TO PAYMENT FOR THE COMMODITIES IS SAID TO BE THE BASIS FOR THE SUBMISSION AND PROVIDES AS FOLLOWS:

PAYMENT MAY BE MADE IN APPROXIMATELY EQUAL ANNUAL AMOUNTS OVER PERIODS OF NOT TO EXCEED TWENTY YEARS FROM THE DATE OF THE LAST DELIVERY OF COMMODITIES IN EACH CALENDAR YEAR UNDER THE AGREEMENT AND INTEREST SHALL BE COMPUTED FROM THE DATE OF SUCH LAST DELIVERY.

SPECIFICALLY, YOU REQUEST OUR DECISION ON THE FOLLOWING QUESTIONS:

DOES AUTHORITY EXIST TO PROVIDE FOR PAYMENT BY A RECIPIENT FOREIGN NATION IN OTHER THAN APPROXIMATELY EQUAL ANNUAL AMOUNTS?

DOES AUTHORITY EXISTS TO PROVIDE FOR THE ACCRUAL OF INTEREST FROM THE DATE, AND ON THE BASIS OF THE VALUE, OF EACH DELIVERY OF THE COMMODITY?

THE VIEWS OF THE ASSISTANT SECRETARY WITH REFERENCE TO THE PAYMENT PROVISIONS OF SECTION 403 OF THE TITLE ARE AS FOLLOWS:

IN CONNECTION WITH PAYMENT, IT WOULD APPEAR THAT A MEANS OF AIDING IN THE MAXIMIZING OF SALES OF SURPLUS AGRICULTURAL COMMODITIES WOULD BE TO ESTABLISH PAYMENT SCHEDULES ON THE BASIS OF THE SPECIFIC FOREIGN EXCHANGE, DOLLAR INDEBTEDNESS, AND GENERAL FINANCIAL SITUATION OF THE PARTICULAR RECIPIENT FOREIGN NATION, RATHER THAN TO SCHEDULE PAYMENTS IN APPROXIMATELY EQUAL ANNUAL AMOUNTS. AUTHORITY WOULD EXIST TO ADOPT THE MORE FLEXIBLE PAYMENT SCHEDULE, AND NOT TO REQUIRE PAYMENT IN APPROXIMATELY EQUAL ANNUAL AMOUNTS, IF THE WORD "MAY," AS USED IN THE SENTENCE QUOTED ABOVE FROM SECTION 403, IS GIVEN ITS ORDINARY, PERMISSIVE MEANING, AND IF THE SENTENCE IS NOT CONSIDERED UNDER SECTION 402, AS A "TERM AND CONDITION" FOR INCLUSION IN THE AGREEMENTS WITH FRIENDLY NATIONS. IF THE WORD "MAY" IS GIVEN ITS PERMISSIVE MEANING BUT THE SENTENCE IS FOR INCLUSION AS A "TERM AND CONDITION" OF AGREEMENTS WITH FRIENDLY NATIONS, PRESUMABLY DEFERRED PAYMENTS OR PAYMENTS IN SIGNIFICANTLY VARYING ANNUAL AMOUNTS WOULD NOT BE AUTHORIZED EVEN THOUGH FULL PAYMENT WERE TO BE MADE WITHIN THE AUTHORIZED CREDIT PERIOD; HOWEVER, PAYMENTS UPON DELIVERY OR PREPAYMENTS OF THE AMOUNTS DUE ON AN ANNUAL BASIS COULD BE ACCEPTED BY THE UNITED STATES. IF THE WORD "MAY" IS CONSTRUED AS MANDATORY, IN THE SENSE OF "SHALL," IT WOULD APPEAR THAT ONLY PAYMENTS IN APPROXIMATELY EQUAL ANNUAL AMOUNTS WOULD BE AUTHORIZED; PAYMENTS UPON DELIVERY OR PREPAYMENTS OF THE AMOUNTS DUE ON AN ANNUAL BASIS COULD NOT BE ACCEPTED BY THE UNITED STATES.

IN CONNECTION WITH INTEREST, IF THE WORD "SHALL" AS USED IN THE PHRASE ". . . INTEREST SHALL BE COMPUTED FROM THE DATE OF SUCH LAST DELIVERY (OF COMMODITIES IN EACH CALENDAR YEAR)," IS GIVEN ITS USUAL MANDATORY MEANING, ALL CREDIT EXTENDED AS A RESULT OF DELIVERIES OF SUCH COMMODITIES DURING A CALENDAR YEAR BUT PRIOR TO THE DATE OF THE LAST DELIVERY DURING SUCH CALENDAR YEAR WOULD BE WITHOUT INTEREST UNTIL THE DATE OF SUCH LAST DELIVERY. THE ASSESSING OF INTEREST IN SUCH MANNER WOULD NOT BE IN ACCORDANCE WITH NORMAL COMMERCIAL PRACTICE. SUCH ASSESSING OF INTEREST MAY BE CONSIDERED, HOWEVER, AS A BENEFIT TO THE RECIPIENT FOREIGN NATION. IN SUCH VIEW, IT MAY BE DEEMED MEANS INTENDED BY THE CONGRESS TO ACCOMPLISH THE OBJECTIVE OF TITLE IV.

IN THE ANALYSIS OF TITLE IV APPEARING AT PAGES 23, 24 OF HOUSE REPORT NO. 908 ON H.R. 8609, WHICH WAS ENACTED AS PUBLIC LAW 86-341, IT IS EXPLAINED BY THE COMMITTEE ON AGRICULTURE THAT:

* * * UNDER THIS TITLE, SURPLUS AGRICULTURAL COMMODITIES MAY BE SOLD THROUGH SUPPLY AGREEMENTS OVER PERIODS NOT TO EXCEED 19 YEARS. PAYMENT FOR SUCH COMMODITIES MAY BE MADE OVER PERIODS NOT TO EXCEED 20 YEARS IN APPROXIMATELY EQUAL INSTALLMENTS. PAYMENT WOULD BE IN DOLLARS. * * * INTEREST WOULD BE PAID ON THE UNPAID BALANCES. THE RATE OF INTEREST COULD NOT EXCEED THE COST OF MONEY TO THE UNITED STATES AS DETERMINED BY THE SECRETARY OF THE TREASURY. * * * UNDER SUCH AGREEMENTS THE U.S. GOVERNMENT WOULD NOT UNDERTAKE THE PHYSICAL DELIVERY OF ANY AGRICULTURAL COMMODITIES BUT WOULD MERELY AGREE TO FINANCE EXPORTS OF SUCH COMMODITIES, IN STIPULATED AMOUNTS AND PROVIDING THE COMMODITIES ARE ACTUALLY IN SURPLUS AT THE TIME THEY ARE TO BE DELIVERED, BY ACCEPTING NOTES OF THE RECIPIENT COUNTRY TO PAY FOR SUCH COMMODITIES IN DOLLARS IN PERIODS OF NOT TO EXCEED 20 YEARS. SECTION 404 OF THIS TITLE MAKES IT CLEAR THAT THE SECRETARY IS TO ENDEAVOR TO MAXIMIZE SALES UNDER THIS TITLE, BUT IN SO DOING REASONABLE PRECAUTIONS ARE TO BE TAKEN TO AVOID REPLACING SALES WHICH THE SECRETARY FINDS AND DETERMINES WOULD OTHERWISE BE MADE FOR CASH DOLLARS. * * * SALES UNDER THIS TITLE SHOULD BE MADE UPON SUCH TERMS AND RATES OF INTEREST AS MAY BE NECESSARY TO THE END THAT MAXIMUM QUANTITIES OF SURPLUS AGRICULTURAL COMMODITIES WILL BE SOLD FOR DOLLARS.

WHILE THE STATUTE CONTEMPLATES THAT SALES OF SURPLUS AGRICULTURAL COMMODITIES BY THE SECRETARY OF AGRICULTURE SHOULD BE MADE UPON SUCH TERMS AND RATES OF INTEREST AS MAY BE NECESSARY TO THE END THAT MAXIMUM QUANTITIES OF SUCH COMMODITIES WILL BE SOLD FOR DOLLARS, THE SALES ARE EXPRESSLY MADE SUBJECT TO THE "TERMS AND CONDITIONS" SET OUT THEREIN WHICH OF NECESSITY MUST INCLUDE THE PAYMENT PROVISIONS OF SECTION 403. THAT SECTION READS IN ITS ENTIRETY AS FOLLOWS:

SEC. 403. PAYMENT FOR SUCH COMMODITIES SHALL BE IN DOLLARS WITH INTEREST AT SUCH RATE AS THE SECRETARY MAY DETERMINE BUT NOT MORE THAN THE COST OF THE FUNDS TO THE UNITED STATES TREASURY AS DETERMINED BY THE SECRETARY OF THE TREASURY, TAKING INTO CONSIDERATION THE CURRENT AVERAGE MARKET YIELDS ON OUTSTANDING MARKETABLE OBLIGATIONS OF THE UNITED STATES HAVING MATURITY COMPARABLE TO THE MATURITIES OF LOANS MADE BY THE PRESIDENT UNDER THIS SECTION. PAYMENT MAY BE MADE IN APPROXIMATELY EQUAL ANNUAL AMOUNTS OVER PERIODS OF NOT TO EXCEED TWENTY YEARS FROM THE DATE OF THE LAST DELIVERY OF COMMODITIES IN EACH CALENDAR YEAR UNDER THE AGREEMENT AND INTEREST SHALL BE COMPUTED FROM THE DATE OF SUCH LAST DELIVERY.'

TO CONSTRUE THE WORD "MAY" APPEARING IN THE SECOND SENTENCE AS CONFERRING DISCRETIONARY POWER UPON THE SECRETARY OF AGRICULTURE TO FIX THE TERMS OF PAYMENT UNDER SALES AGREEMENTS, WITHIN THE MAXIMUM PERIOD OF 20 YEARS, ON OTHER THAN AN ANNUAL PAYMENT BASIS WOULD BE TO IGNORE AND RENDER MEANINGLESS THE WORDS "IN APPROXIMATELY EQUAL ANNUAL AMOUNTS.' HAD THE CONGRESS INTENDED TO AUTHORIZE THE SECRETARY OF AGRICULTURE TO EXERCISE COMPLETE DISCRETION WITH REFERENCE TO PAYMENTS, THAT IS TO SAY, AUTHORIZE PAYMENTS, FOR EXAMPLE, BIANNUALLY, OR TO DEFER PAYMENTS UNTIL THE 10TH OR 20TH YEAR OF SALES AGREEMENTS, THE PHRASE COULD HAVE BEEN DELETED AND THE SENTENCE THEN WOULD READ ,PAYMENT MAY BE MADE OVER PERIODS OF NOT TO EXCEED TWENTY YEARS.'

HOWEVER, SINCE THIS IS NOT THE CASE, WE MUST ASCRIBE TO THE WORD "MAY" ITS PERMISSIVE MEANING IN RELATION TO THE WORDS "IN APPROXIMATELY EQUAL ANNUAL AMOUNTS" AND TO THE ENTIRE CONTEXT OF THE SENTENCE. AS WE SEE IT, THE STATUTE CONTEMPLATES THAT, UNDER THE MOST LIBERAL TERMS, PAYMENTS UNDER SALES AGREEMENTS MAY BE MADE IN EQUAL ANNUAL AMOUNTS OVER PERIODS OF NOT MORE THAN 20 YEARS; AND THAT THE WORD "MAY" IN RELATION TO THE QUALIFYING WORD "APPROXIMATE" AND THE OTHER WORDS IN THE SENTENCE WAS USED IN THE SENSE TO CONFER DISCRETION UPON THE SECRETARY OF AGRICULTURE IN SCHEDULING THE PAYMENTS, TO PERMIT SLIGHT FLEXIBILITY OR VARIATION IN THE AMOUNTS THEREOF SO AS TO PERMIT PAYMENTS IN APPROXIMATELY EQUAL ANNUAL AMOUNTS WHERE DETERMINED NECESSARY OR DESIRABLE, OR DISCRETION TO AGREE TO TERMS MORE FAVORABLE TO THE UNITED STATES.

ACCORDINGLY, AND IN SPECIFIC ANSWER TO THE FIRST QUESTION PRESENTED, WE ARE OF THE OPINION THAT UNDER TITLE IV SALES OF SURPLUS AGRICULTURAL COMMODITIES NO AUTHORITY EXISTS FOR PROVIDING FOR PAYMENT BY A RECIPIENT NATION IN OTHER THAN EQUAL ANNUAL AMOUNTS OR IN APPROXIMATELY EQUAL ANNUAL AMOUNTS. IT IS TO BE UNDERSTOOD, OF COURSE, THAT THE STATUTE DOES NOT PRECLUDE PAYMENT FOR THE COMMODITIES UPON DELIVERY, PREPAYMENT OR ACCELERATED PAYMENT.

WITH REFERENCE TO THE ACCRUAL OF INTEREST ON PAYMENTS DUE UNDER SALES AGREEMENTS, THE STATUTE EXPRESSLY AUTHORIZES PAYMENT FOR SALES OF SURPLUS AGRICULTURAL COMMODITIES OVER PERIODS OF NOT TO EXCEED 20 YEARS, WHICH PERIODS ARE TO BE MEASURED FROM THE DATE OF THE LAST DELIVERY OF SUCH COMMODITIES IN EACH CALENDAR YEAR. ALSO, THAT INTEREST IS TO BE COMPUTED FROM THE DATE OF SUCH LAST DELIVERY. IT NECESSARILY FOLLOWS THAT WHERE MORE THAN ONE DELIVERY IS MADE DURING A CALENDAR YEAR UNDER A SALES AGREEMENT, DELIVERIES MADE PRIOR TO THE LAST DELIVERY IN EACH CALENDAR YEAR WOULD BE WITHOUT INTEREST UNTIL THE DATE OF SUCH LAST DELIVERY. THE SECOND QUESTION IS ANSWERED ACCORDINGLY.