B-154982, OCT. 13, 1964

B-154982: Oct 13, 1964

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TO THE HONORABLE SECRETARY OF AGRICULTURE: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 21. THE PERTINENT FACTS ARE SET FORTH BELOW: THE PROGRAMS INVOLVED ARE: (1) ANNOUNCEMENT CN-EX-18. THE ACTING SECRETARY POINTS OUT THAT UNDER THESE PROGRAMS THE TIME FOR EXPORT IS SPECIFIED AS . " AND THAT THE PROGRAMS SPECIFY THAT "THE DATE OF THE APPLICABLE ON-BOARD BILL OF LADING OR ON-BOARD ENDORSEMENT OF PORT OR CUSTODY BILL OF LADING * * * WILL BE ACCEPTED AS THE DATE OF EXPORT.'. THE ACTING SECRETARY STATES THAT UNDER ANNOUNCEMENT CN-EX-18 THE PROVISION RELATING TO DAMAGES FOR FAILURE TO EXPORT IS WRITTEN IN DIFFERENT TERMS BECAUSE OF THE STATUTORY MINIMUM PRICE APPLICABLE TO SALES BY CCC OF COTTON FOR UNRESTRICTED USE.

B-154982, OCT. 13, 1964

TO THE HONORABLE SECRETARY OF AGRICULTURE:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 21, 1964, AND ENCLOSURES, FROM THE ACTING SECRETARY OF AGRICULTURE CONCERNING CONTRACTS ENTERED INTO BY THE COMMODITY CREDIT CORPORATION (CCC) WITH J. B. HUBBARD AND CO., DALLAS, TEXAS; COTTON IMPORT AND EXPORT COMPANY, DALLAS, TEXAS; AND R. G. SHARP AND COMPANY, LUBBOCK, TEXAS.

THE ACTING SECRETARY RECOMMENDS THAT UNDER THE AUTHORITY OF 41 U.S.C. 256A, THE COMPTROLLER GENERAL WAIVE ALL OF THE LIQUIDATED DAMAGES INVOLVED IN THESE CONTRACTS WHICH WOULD OTHERWISE BE PAYABLE TO THE GOVERNMENT BECAUSE OF THE DELAY IN EXPORTING COTTON WHERE SUCH DELAY RESULTED IN ITS EXPORT ON AUGUST 1 OR AUGUST 2, 1964, INSTEAD OF JULY 31, 1964, THE FINAL EXPORT DATE UNDER THE PROVISIONS OF THE PROGRAMS HERE INVOLVED.

THE PERTINENT FACTS ARE SET FORTH BELOW:

THE PROGRAMS INVOLVED ARE: (1) ANNOUNCEMENT CN-EX-18, COTTON EXPORT PROGRAM-SALES (1963-64 MARKETING YEAR); (2) ANNOUNCEMENT NUMBER NO-C-22- SALE OF UPLAND COTTON (COTTON EXPORT PROGRAMS 1963-64 MARKETING YEAR); AND (3) ANNOUNCEMENT CN-EX-19, 1963-64 COTTON EXPORT PROGRAM (PAYMENT-IN-KIND) REGULATIONS.

THE ACTING SECRETARY POINTS OUT THAT UNDER THESE PROGRAMS THE TIME FOR EXPORT IS SPECIFIED AS ,NOT LATER THAN JULY 31, 1964; " AND THAT THE PROGRAMS SPECIFY THAT "THE DATE OF THE APPLICABLE ON-BOARD BILL OF LADING OR ON-BOARD ENDORSEMENT OF PORT OR CUSTODY BILL OF LADING * * * WILL BE ACCEPTED AS THE DATE OF EXPORT.'

ANNOUNCEMENT CN-EX-19 IN SECTION 1482.605, PARAGRAPH (D), PROVIDES FOR LIQUIDATED DAMAGES FOR FAILURE TO EXPORT. THE ACTING SECRETARY STATES THAT UNDER ANNOUNCEMENT CN-EX-18 THE PROVISION RELATING TO DAMAGES FOR FAILURE TO EXPORT IS WRITTEN IN DIFFERENT TERMS BECAUSE OF THE STATUTORY MINIMUM PRICE APPLICABLE TO SALES BY CCC OF COTTON FOR UNRESTRICTED USE. HE FURTHER STATES THAT UNDER THE PROVISION OF THE AGRICULTURAL ACT OF 1949, AS AMENDED (72 STAT. 993) WHICH WAS APPLICABLE TO THE 1963-64 MARKETING YEAR THE CORPORATION WAS NOT PERMITTED TO SELL ITS COTTON FOR UNRESTRICTED USE (USE IN THE DOMESTIC MARKET) FOR LESS THAN 115 PERCENT OF SUPPORT PRICE PLUS REASONABLE CARRYING CHARGES.

THE ACTING SECRETARY ADVISES THAT IF THE CORPORATION SOLD COTTON FOR EXPORT AND SUCH COTTON OR SUBSTITUTE COTTON WAS NOT IN FACT EXPORTED IT WOULD PRESUMABLY HAVE BEEN USED IN THE DOMESTIC MARKET AND THE INTENT OF THE LEGISLATION WOULD NOT BE FOLLOWED IF UNDER SUCH CIRCUMSTANCES CCC ACCEPTED IN SETTLEMENT OF THE BREACH OF CONTRACT LESS THAN THE DIFFERENCE BETWEEN ITS EXPORT SALES PRICE AND THE STATUTORY SALES PRICE FOR UNRESTRICTED USE.

THE ACTING SECRETARY EXPRESSES THE VIEW THAT ALTHOUGH THE PROVISION IN ANNOUNCEMENT CN-EX-18 IS REFERRED TO AS AN "ADJUSTED SALES PRICE" IT COULD JUST AS WELL HAVE BEEN TITLED "LIQUIDATED DAMAGES" WITHOUT DOING ANY VIOLENCE TO ITS CONTENT. HE STATES THAT IN THE CASE OF SOUTHERN MILLING COMPANY V. UNITED STATES, 270 F.2D 880 (5TH CIR.), A SIMILAR ADJUSTED PRICE PROVISION USED IN CONNECTION WITH THE SALE OF NONFAT DRY MILK POWDER FOR ANIMAL FEED WAS ATTACKED AS A LIQUIDATED DAMAGE PROVISION. THE ACTING SECRETARY POINTS OUT THAT THE COURT, HOWEVER, SUSTAINED THE PROVISION AS A FAIR MEASURE OF LIQUIDATED DAMAGES, THE PURCHASER HAVING DISPOSED OF THE NONFATDRY MILK FOR USES OTHER THAN AS AUTHORIZED IN THE CONTRACT. EXPRESSES THE VIEW THAT THE AMOUNT OF PRICE ADJUSTMENT IN CN-EX-18 WHILE REASONABLE IN THE CASE OF TOTAL FAILURE TO PERFORM BEARS NO RELATION TO THE DAMAGES SUSTAINED BY THE GOVERNMENT WHERE AS IN THE CASES HERE INVOLVED THERE WAS FULL PERFORMANCE A FEW DAYS AFTER THE CONTRACT DEADLINE.

FURTHER FACTS ARE SET FORTH BELOW.

DOCUMENTS RECEIVED FROM THE EXPORTERS AND FROM PORT OFFICIALS OF BROWNSVILLE, TEXAS, INDICATE THAT ON JULY 31, 1964, EIGHT VESSELS WERE IN THE PORT TO LOAD COTTON THAT HAD BEEN STORED THERE ON DOCKS FOR EXPORT. BECAUSE OF A SHORTAGE OF LABOR SOME OF THE COTTON BOOKED ON THE SS "DICK ES," THE SS "ADABELLE LYKES," THE M.S. "MONFIORE," THE SS "ANDYKE" AND THE SS "ALICE BROWN" WAS NOT LOADED BY CLOSE OF BUSINESS JULY 31. THE ACTING SECRETARY ADVISES THAT IT APPEARS THAT EVERY REASONABLE EFFORT WAS MADE TO OBTAIN A SUFFICIENT NUMBER OF LONGSHOREMEN TO COMPLETE THE LOADING ON JULY 31 WITHOUT AVAIL. AS A RESULT EACH OF THE THREE EXPORTERS HAS PRESENTED BILLS OF LADING DATED IN JULY BUT WITH ON-BOARD ENDORSEMENTS DATED AUGUST 1.

THE ACTING SECRETARY'S LETTER CONTINUES:

"IT MAY BE ARGUED THAT TWO OF THE EXPORTERS HAD A MONTH OR MORE IN WHICH TO FULFILL THEIR EXPORT OBLIGATION AND SHOULD HAVE ARRANGEMENTS FOR EARLIER SHIPMENT. THE COTTON MARKETING YEAR RUNS FROM AUGUST 1 THROUGH JULY 31 OF THE FOLLOWING YEAR. IN THE LOWER RIO GRANDE VALLEY COTTON FROM THE 1964 CROP IS ACTUALLY HARVESTED BEFORE THE BEGINNING OF THE 1964-65 MARKETING YEAR. SOME OF THE COTTON HERE INVOLVED WAS FROM THE CURRENT CROP AND PROBABLY COULD NOT HAVE BEEN EXPORTED EARLIER TAKING INTO ACCOUNT THE AVAILABILITY OF VESSELS AT THE PORT OF BROWNSVILLE. THE DEPARTMENT HAS NEVER TAKEN THE POSITION THAT EXPORT OBLIGATIONS SHOULD BE CARRIED OUT IN ANY PARTICULAR PART OF THE MARKETING YEAR. IT IS OUR PURPOSE TO HAVE THE COTTON MOVE AT SUCH TIMES AND IN SUCH AMOUNTS AS ARE NEEDED IN OR CAN BE ABSORBED BY THE EXPORT MARKET. NOR HAVE WE TAKEN THE POSITION THAT COTTON FROM THE CURRENT CROP HARVESTED IN THE LOWER RIO GRANDE VALLEY SHOULD NOT BE USED TO FILL OBLIGATIONS INCURRED UNDER OUR 1963-64 EXPORT PROGRAMS.'

FACTS APPLICABLE TO THE THREE INDIVIDUAL CASES PRESENTED TO US ARE AS FOLLOWS:

J. B. HUBBARD AND CO.

ON JUNE 23, 1964, J. B. HUBBARD AND CO., ACQUIRED COTTON FROM CCC UNDER THE PROVISIONS OF ANNOUNCEMENT CN-EX-18 AND AMENDMENTS THERETO. AS PART OF THE SALES CONTRACT IT WAS REQUIRED TO EXPORT THE SAME OR AN EQUAL QUANTITY OF SUBSTITUTE COTTON. IT HAD ENTERED INTO AN EXPORT CONTRACT WITH SOME FOREIGN BUYER EARLIER ON MAY 11, 1964. ON JULY 21 IT PURCHASED SUBSTITUTE COTTON TO USE IN FILLING THE EXPORT CONTRACT. (PRESUMABLY IT SOLD THE COTTON PURCHASE FROM CCC IN THE DOMESTIC MARKET.)

THE 100 BALES OF COTTON WHICH J. B. HUBBARD AND CO., WISHED TO EXPORT WERE DELIVERED ON JULY 27, 1964, TO LYKES BROS. STEAMSHIP CO., AT CORPUS CHRISTI, TEXAS, TO BE LOADED ON THE S.S. DICK LYKES WHICH HAD LISTED CORPUS CHRISTI AS A PORT OF CALL FOR JULY 29 OR 30.

SUBSEQUENTLY THE CALL AT CORPUS CHRISTI WAS CANCELLED AND THE STEAMSHIP COMPANY MOVED THE COTTON BY TRUCK TO BROWNSVILLE, TEXAS, TO BE PICKED UP ON JULY 30 OR 31. THE COTTON WAS ACTUALLY LOADED ON AUGUST 1, 1964.

THE DIRECTOR OF THE NEW ORLEANS COMMODITY OFFICE OF THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE OF THE DEPARTMENT OF AGRICULTURE HAS CERTIFIED THAT THE DOCUMENTS FILED BY J. B. HUBBARD AND CO., IN CONNECTION WITH THIS TRANSACTION HAVE BEEN EXAMINED IN THE REGULAR MANNER AND IT HAS BEEN DETERMINED THAT EXCEPT FOR THE ON-BOARD BILL OF LADING DATE OF AUGUST 1, 1064, THE DOCUMENTS WOULD HAVE BEEN ACCEPTED AS MEETING AN OBLIGATION TO EXPORT 51,795 POUNDS OF COTTON BUT BECAUSE OF THE DATE UNDER EXISTING INSTRUCTIONS IT WILL BE NECESSARY TO BILL J. B. HUBBARD AND O., FOR APPROXIMATELY $8,777.12 IN ACCORDANCE WITH THE PROVISIONS OF SECTION IV OF ANNOUNCEMENT CN-EX 18.

THE BILLING FIGURE HAS BEEN ESTIMATED AT 16 CENTS PER POUND FOR THE PURPOSES OF THE DEPARTMENT'S LETTER. THE ACTUAL FIGURE WILL DEPEND ON THE EXPORT SALES PRICE AND THE STATUTORY MINIMUM UNRESTRICTED SALES PRICE FOR THE COTTON IN THE INDIVIDUAL BALES COVERED BY THE SALE AND CAN BE DETERMINED ONLY AFTER MAKING EXTENSIVE CALCULATIONS.

COTTON IMPORT AND EXPORT COMPANY

ON JULY 1, 1964, THE COTTON IMPORT AND EXPORT COMPANY ACQUIRED 140 BALES OF COTTON FROM CCC UNDER THE PROVISIONS OF ANNOUNCEMENT CN-EX-18 AND AMENDMENTS THERETO. AS PART OF THE SALES CONTRACT IT WAS REQUIRED TO EXPORT THIS OR SUBSTITUTE COTTON. IT HAD ENTERED INTO AN EXPORT CONTRACT WITH SOME FOREIGN BUYER EARLIER ON DECEMBER 19, 1963. IT ELECTED TO EXPORT 70 BALES OF COTTON WHICH IT HAD PURCHASED EARLIER FROM CCC TO FILL A PART OF ITS EXPORT OBLIGATION OF JULY 1. THE 70 BALES OF COTTON WHICH THE COTTON IMPORT AND EXPORT COMPANY WISHED TO EXPORT WERE PLACED IN EXPORT POSITION ON JULY 21, 1964, WHEN A BILL OF LADING WAS ISSUED BY TEXAS TRANSPORT AND TERMINAL COMPANY, INC., AS AGENTS FOR M.S.'MONFIORE.' THIS VESSEL ARRIVED IN BROWNSVILLE, TEXAS, ON JULY 30 AT 12:20 P.M. HOWEVER, THE COTTON WAS NOT ACTUALLY LOADED UNTIL AUGUST 1, 1964. THE DIRECTOR OF THE NEW ORLEANS OFFICE OF THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE OF THE DEPARTMENT OF AGRICULTURE HAS CERTIFIED THAT DOCUMENTS FILED BY THE COTTON IMPORT AND EXPORT COMPANY IN CONNECTION WITH THIS TRANSFER HAVE BEEN EXAMINED IN THE REGULAR MANNER, AND IT HAS BEEN DETERMINED THAT EXCEPT FOR THE BILL OF LADING DATE OF AUGUST 1, 1964, THE DOCUMENTS WOULD HAVE BEEN ACCEPTED AS MEETING AN OBLIGATION TO EXPORT 36,223 POUNDS OF COTTON BUT BECAUSE OF THE DATE UNDER EXISTING INSTRUCTIONS IT WILL BE NECESSARY TO BILL THE COTTON IMPORT AND EXPORT COMPANY FOR APPROXIMATELY $5,795.68 IN ACCORDANCE WITH THE PROVISIONS OF SECTION 4 OF ANNOUNCEMENT CN-EX-18. THE BILLING FIGURE HAS BEEN ESTIMATED AT 16 CENTS PER POUND. HOWEVER, THE ACTUAL FIGURE WILL BE HIGHER OR LOWER DEPENDING ON THE SALES PRICE AND THE SUPPORT PRICE OF THE COTTON PURCHASED FROM CCC.

R. G. SHARP AND COMPANY

ON JULY 31, 1964, R. G. SHARP AND COMPANY FILED A TELEGRAPHIC NOTICE OF CONSIGNMENT OF COTTON WITH THE NEW ORLEANS OFFICE OF ASCS. THIS NOTICE WHICH COVERED 1,022 BALES OF COTTON WAS FILED PURSUANT TO SECTION 1482.604 OF ANNOUNCEMENT CN-EX-19 IN ORDER TO QUALIFY FOR THE PAYMENT-IN-KIND MADE BY CCC IN CONNECTION WITH PROPERLY REGISTERED EXPORT SHIPMENTS.

THE 1,022 BALES OF COTTON WERE ON THE DOCKS READY FOR LOADING PRIOR TO JULY 30, 1964. THE BILL OF LADING FOR THE COTTON IS DATED JULY 31, 1964, BUT THE ON-BOARD ENDORSEMENT IS DATED AUGUST 1, 1964.

THE DIRECTOR OF THE NEW ORLEANS OFFICE OF THE ASCS OF THE DEPARTMENT OF AGRICULTURE HAS CERTIFIED THAT THE DOCUMENTS FILED BY R. G. SHARP AND COMPANY IN CONNECTION WITH THIS TRANSACTION HAVE BEEN EXAMINED IN THE REGULAR MANNER, AND IT HAS BEEN DETERMINED THAT EXCEPT FOR THE ON BOARD BILL OF LADING DATE OF AUGUST 1, 1964, THE DOCUMENTS WOULD HAVE BEEN ACCEPTED AS QUALIFYING THE EXPORTER FOR PAYMENT-IN-KIND OF VALUE OF $43,786.39 BUT BECAUSE OF THIS DATE UNDER EXISTING INSTRUCTIONS IT WILL BE NECESSARY TO DISALLOW THE PAYMENT AND BILL THE COMPANY FOR $5,153.14 IN ACCORDANCE WITH SECTION 1482.605 (D) OF ANNOUNCEMENT CN EX-19.

THE ACTING SECRETARY ADVISES THAT IT WOULD NOT BE CORRECT TO SAY THAT TIME IS NOT OF THE ESSENCE IN CCC'S SALES FOR EXPORT PROGRAMS AND THAT TIME IS QUITE IMPORTANT IN MANY CASES; BUT THAT IN THE INSTANT CASES THERE WAS ABSOLUTELY NO DAMAGE TO THE GOVERNMENT BECAUSE OF THE DELAY, SINCE THE COTTON WAS MOVING INTO CHANNELS OF EXPORT AND WAS ON THE DOCK INSTEAD OF HAVING MOVED A FEW HUNDRED FEET FURTHER ONTO THE SHIPS AS OF CLOSE OF BUSINESS JULY 31, 1964.

THE ACTING SECRETARY STATES THAT HE IS NOT ANXIOUS TO PENALIZE THESE COTTON EXPORTERS WHO IN GOOD FAITH PARTICIPATED IN THE PROGRAMS AND WHO PROVIDED THE SERVICES WHICH THE GOVERNMENT DESIRED BUT FAILED THROUGH NO FAULT OF THEIR OWN TO MEET THE EXACT TIME LIMIT SPECIFIED. ACCORDINGLY HE REQUESTS THAT WE WAIVE THE LIQUIDATED DAMAGES AND ADVISES THAT HE PROPOSES TO MAKE THE PAYMENT-IN-KIND PROVIDED IN CN-EX 19 TO R. G. SHARP AND COMPANY AND A FEW OTHERS WHO MAY BE SIMILARLY SITUATED ON THE BASIS THAT THERE HAS BEEN SUBSTANTIAL COMPLIANCE AND NO LOSS OF CONSIDERATION TO THE GOVERNMENT. IN THE EVENT WE CONCLUDE THAT THE "ADJUSTED SALES PRICE" IN CN-EX-18 IS NOT A PROVISION FOR LIQUIDATED DAMAGES WHICH CAN BE HANDLED UNDER 41 U.S.C. 256A, THE ACTING SECRETARY PROPOSES TO ALLOW CREDIT FOR THE EXPORTS MADE BY J. B. HUBBARD AND CO., COTTON IMPORT AND EXPORT COMPANY, AND OTHERS SIMILARLY SITUATED, UNDER THE 1962-64 COTTON SALES FOR EXPORT PROGRAM, ON THE GROUND THAT THERE HAS BEEN SUBSTANTIAL PERFORMANCE WITH THE CONTRACT PROVISIONS. THE ACTING SECRETARY STATES THAT IN THE CASES INVOLVED HERE HE IS CONVINCED THAT THERE WAS A TRUE IMPOSSIBILITY OF MEETING THE STRICT PROVISIONS OF THE PROGRAM AFTER THE DIFFICULTY IN LOADING BECAME KNOWN AND THAT THIS DIFFICULTY COULD NOT REASONABLY HAVE BEEN FORESEEN. ALSO, WE UNDERSTAND THAT THE VESSELS ON WHICH THE COTTON INVOLVED WAS LOADED CONTAINED OTHER COTTON BEING EXPORTED UNDER THE SAME PROGRAMS WHICH WAS LOADED BEFORE MIDNIGHT JULY 31, SO THAT ALL THE COTTON ON THE VESSELS WAS, IN FACT, SHIPPED AT THE SAME TIME.

IN VIEW OF ALL THE FACTS AND CIRCUMSTANCES SET FORTH ABOVE WE CONCUR WITH THE ACTING SECRETARY'S DETERMINATION THAT IN THE THREE CASES CITED THERE HAS BEEN SUBSTANTIAL PERFORMANCE WITH THE CONTRACT PROVISIONS BY THE EXPORTERS. UNDER THE DOCTRINE OF SUBSTANTIAL PERFORMANCE LIQUIDATED DAMAGES ARE NOT PROPERLY FOR ASSESSMENT. SEE B 154655, JULY 30, 1964, 44 COMP. GEN. ----; CONTINENTAL ILLINOIS NATIONAL BANK, ET AL. V. UNITED STATES, 121 CT.CL. 203, 243 (1952), 101 F.SUPP. 755, CERTIORARI DENIED, 343 U.S. 963. ACCORDINGLY, IN THE INSTANT CASES IT IS NOT NECESSARY TO CONSIDER THE QUESTION OF REMISSION OR WAIVER OF LIQUIDATED DAMAGES UNDER 41 U.S.C. 256A. THE DOCUMENTS TRANSMITTED WITH THE ACTING SECRETARY'S LETTER ARE RETURNED HEREWITH AS REQUESTED.