B-27567, JULY 30, 1942, 22 COMP. GEN. 90

B-27567: Jul 30, 1942

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MAY PARTAKE OF THE NATURE OF A PRIVATE BUSINESS IN THAT THE COST OF THE SUPPLIES AND INCIDENTAL EXPENSES ARE PASSED ON TO CONSUMERS. SUCH ACTIVITIES ARE GOVERNMENTAL AND. ARE WITHIN THE SCOPE OF THE EXEMPTIVE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT OF HAWAII RESERVING TO THE UNITED STATES THE RIGHT TO USE WITHOUT CHARGE THE WHARVES AND LANDINGS OPERATED BY THE GOVERNMENT OF THE TERRITORY OF HAWAII. 1942: I HAVE YOUR LETTER OF JULY 22. THE BILL AND A COPY OF THE BILL OF LADING ARE ATTACHED. - THAT UNTIL FURTHER PROVISION IS MADE BY CONGRESS THE WHARVES AND LANDINGS CONSTRUCTED OR CONTROLLED BY THE REPUBLIC OF HAWAII OR ANY SEACOAST. AT THE TIME THE BOARD REPRESENTATIVES WERE ADVISED THAT IN THE OPINION OF THE AUTHORIZED CERTIFYING OFFICER.

B-27567, JULY 30, 1942, 22 COMP. GEN. 90

APPLICABILITY OF GOVERNMENTAL IMMUNITIES TO THE GOVERNMENT'S COMMERCIAL ACTIVITIES EVEN THOUGH THE ACTIVITIES OF THE FEDERAL SURPLUS COMMODITIES CORPORATION IN CONNECTION WITH PROCURING, TRANSPORTING AND DISTRIBUTING EMERGENCY SUPPLIES FOR THE TERRITORIES AND POSSESSIONS OF THE UNITED STATES IN ACCORDANCE WITH THE ACT OF DECEMBER 23, 1941, MAY PARTAKE OF THE NATURE OF A PRIVATE BUSINESS IN THAT THE COST OF THE SUPPLIES AND INCIDENTAL EXPENSES ARE PASSED ON TO CONSUMERS, SUCH ACTIVITIES ARE GOVERNMENTAL AND, HENCE, ARE WITHIN THE SCOPE OF THE EXEMPTIVE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT OF HAWAII RESERVING TO THE UNITED STATES THE RIGHT TO USE WITHOUT CHARGE THE WHARVES AND LANDINGS OPERATED BY THE GOVERNMENT OF THE TERRITORY OF HAWAII.

COMPTROLLER GENERAL WARREN TO C. F. MCKENZIE, FEDERAL SURPLUS COMMODITIES CORPORATION, JULY 30, 1942:

I HAVE YOUR LETTER OF JULY 22, 1942, AS FOLLOWS:

THERE HAS BEEN RECEIVED IN THE HAWAIIAN OFFICE OF THE FEDERAL SURPLUS COMMODITIES CORPORATION A BILL FOR COLLECTION IN THE AMOUNT OF $407.00, REPRESENTING TOLL CHARGES AT THE RATE OF 40 CENTS PER TON ON 20,000 BAGS OF RICE SHIPPED ON GOVERNMENT BILL OF LADING NO. A-2 699240. THE BILL AND A COPY OF THE BILL OF LADING ARE ATTACHED, TOGETHER WITH A SIGNED COPY OF A LETTER DATED APRIL 4, 1942, ADDRESSED TO MR. A. W. MACDONALD, HAWAIIAN REPRESENTATIVE, FEDERAL SURPLUS COMMODITIES CORPORATION, FROM MR. D. F. BALCH, CHAIRMAN OF THE BOARD OF HARBOR COMMISSIONERS.

AT AN INFORMAL CONFERENCE HELD IN THE OFFICE OF THE FEDERAL SURPLUS COMMODITIES CORPORATION IN HONOLULU, T.H., THE BOARD REPRESENTATIVES DISCUSSED THE QUESTION AS TO WHETHER OR NOT THE BILL COULD BE PAID, NOTWITHSTANDING THE PROVISIONS OF SECTION 89, REVISED LAWS OF HAWAII, 1935, QUOTED BELOW:

"SEC. 89. REVENUES FROM WHARVES.--- THAT UNTIL FURTHER PROVISION IS MADE BY CONGRESS THE WHARVES AND LANDINGS CONSTRUCTED OR CONTROLLED BY THE REPUBLIC OF HAWAII OR ANY SEACOAST, BAY, ROADSTEAD, OR HARBOR SHALL REMAIN UNDER THE CONTROL OF THE GOVERNMENT OF THE TERRITORY OF HAWAII, WHICH SHALL RECEIVE AND ENJOY ALL REVENUE DERIVED THEREFROM, ON CONDITION THAT SAID PROPERTY SHALL BE KEPT IN GOOD CONDITION FOR THE USE AND CONVENIENCE OF COMMERCE, BUT NO TOLLS OR CHARGES SHALL BE MADE BY THE GOVERNMENT OF THE TERRITORY OF HAWAII FOR THE USE OF ANY SUCH PROPERTY BY THE UNITED STATES, OR BY ANY VESSEL OF WAR, TUG, REVENUE CUTTER, OR OTHER BOAT OR TRANSPORT IN THE SERVICE OF THE UNITED STATES (48 U.S.C.A. 510).'

AT THE TIME THE BOARD REPRESENTATIVES WERE ADVISED THAT IN THE OPINION OF THE AUTHORIZED CERTIFYING OFFICER, THE BILL COULD NOT BE PAID, AS THE COMMODITY AGAINST WHICH THE CHARGE WAS MADE WAS THE PROPERTY OF THE UNITED STATES.

AS NOTED IN THE ATTACHED LETTER, IT WAS THE CONTENTION OF THE BOARD OF HARBOR COMMISSIONERS THAT THE FEDERAL SURPLUS COMMODITIES CORPORATION WAS ENGAGED IN A COMMERCIAL BUSINESS WHERE THE COST OF THE PRODUCTS AND INCIDENTAL EXPENSES WERE PASSED ON TO THE CONSUMER. THE STATEMENT IS ONLY PARTIALLY CORRECT AS AT ALL TIMES THE CORPORATION CARRIES INVENTORIES TO THE EXTENT OF SEVERAL MILLIONS OF DOLLARS WHICH MAY NOT ULTIMATELY BE DISPOSED OF TO THE CONSUMER ON A COMMERCIAL BASIS.

THE PROGRAM IN THE TERRITORY OF HAWAII IS OPERATED UNDER THE PROVISIONS OF PUBLIC LAW 371, 77TH CONGRESS. PURCHASES ARE MADE IN THE CONTINENTAL UNITED STATES AND COMMODITIES ARE SHIPPED TO THE TERRITORY ON A C.I.F. BASIS. ALL CHARGES ACCRUING AGAINST COMMODITIES AFTER ARRIVAL IN THE TERRITORY ARE ADDED TO THE C.I.F. COSTS AND THESE COSTS FIX THE BASIS FOR THE SALES PRICE TO THE PURCHASER WHO IN TURN SELLS THE COMMODITIES TO THE CIVILIAN POPULATION.

THE ABOVE-CITED LAW PROVIDES AMONG OTHER THINGS:

"PROCEEDS FROM SUCH SALES AND OTHER RECEIPTS FROM OPERATIONS THEREUNDER SHALL BE DEPOSITED TO THE CREDIT OF THIS APPROPRIATION WHEN PAYMENT IS RECEIVED.'

IT WILL BE NOTED IN THE LAST PARAGRAPH OF THE LETTER REFERRED TO ABOVE THAT THE BOARD OF HARBOR COMMISSIONERS REQUESTED THAT THE CLAIM BE FORWARDED "TO THE PROPER AUTHORITIES IN WASHINGTON FOR AN OPINION AS TO THE JUSTNESS OF THIS CLAIM.'

FOR YOUR INFORMATION, THE PIERS IN THE TERRITORY OF HAWAII ARE OPERATED BY THREE AGENCIES; NAMELY, THE BOARD OF HARBOR COMMISSIONERS, THE INTER- ISLAND STEAMSHIP COMPANY AND THE OAHU LAND AND RAILROAD COMPANY. ALL OF THESE AGENCIES LEVY A TOLL CHARGE OF 40 CENTS PER TON ON ALL COMMODITIES RECEIVED ON THEIR RESPECTIVE PIERS AND, WITH THE EXCEPTION OF THE PIERS OPERATED BY THE BOARD OF HARBOR COMMISSIONERS, TOLL CHARGES ARE PAID BY GOVERNMENTAL AGENCIES ON COMMODITIES RECEIVED AT THE PIERS.

SINCE THE BOARD OF HARBOR COMMISSIONERS HAS REQUESTED THAT THE CLAIM BE PRESENTED TO THE PROPER AUTHORITIES AND SINCE, UNDER THE PROVISION OF PUBLIC LAW 389, 77TH CONGRESS, A CERTIFYING OFFICER IS ENTITLED TO AN ADVANCE OPINION WITH RESPECT TO THE LEGALITY OF THE PAYMENT, THE CLAIM IS PRESENTED TO YOUR OFFICE FOR DECISION.

THE FEDERAL SURPLUS COMMODITIES CORPORATION HAS MADE AND WILL BE MAKING SIMILAR SHIPMENTS TO TERRITORIAL PIERS FOR THE DURATION OF THE WAR AND THEREFORE IT IS REQUESTED THAT AN EARLY DECISION BE RENDERED WITH RESPECT TO THE ATTACHED CLAIM.

SINCE THE WRITER IS TEMPORARILY ON DUTY IN WASHINGTON, D.C., IT WILL BE APPRECIATED IF YOUR DECISION IS FORWARDED TO HIM IN CARE OF D. J. HARRILL, CHIEF, AUDIT DIVISION, AGRICULTURAL MARKETING ADMINISTRATION, 1014 FIFTH STREET NW., WASHINGTON, D.C.

PUBLIC LAW 371, 77TH CONGRESS ( ACT OF DECEMBER 23, 1941), 55 STAT. 855, 856, TO WHICH YOU REFER, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

EMERGENCY SUPPLIES FOR THE TERRITORIES AND POSSESSIONS: FOR ALL NECESSARY EXPENSES TO ENABLE THE SECRETARY OF AGRICULTURE TO PROCURE, TRANSPORT, AND DISTRIBUTE AGRICULTURAL AND OTHER COMMODITIES AND SUPPLIES TO MEET THE EMERGENT REQUIREMENTS OF THE CIVILIAN POPULATION OF THE TERRITORIES AND POSSESSIONS OF THE UNITED STATES, INCLUDING PURCHASING, EXCHANGING, PROCESSING, DISTRIBUTING, DISPOSING OF, TRANSPORTING, STORING, HANDLING AND INSPECTION, COMMISSIONS, AND INSURANCE EXCLUSIVE OF MARINE RISKS, WITHOUT REGARD TO THE PROVISIONS OF OTHER LAW COVERING THE EXPENDITURES OF PUBLIC FUNDS; AND FOR ADMINISTRATIVE EXPENSES INCIDENT THERETO NOT EXCEEDING IN ANY FISCAL YEAR 3 PERCENTUM OF THE AGGREGATE AMOUNT EXPENDED UNDER AUTHORITY HEREOF IN SUCH FISCAL YEAR, INCLUDING PURCHASE, MAINTENANCE, AND REPAIR OF HORSE-DRAWN AND MOTOR-PROPELLED PASSENGER- CARRYING VEHICLES, PRINTING AND BINDING, PERSONAL SERVICES AND RENTS IN THE DISTRICT OF COLUMBIA AND ELSEWHERE; $35,000,000: PROVIDED, THAT $10,000,000 OF THIS APPROPRIATION SHALL BE USED IMMEDIATELY TO REPLACE AN EQUAL AMOUNT ALLOCATED FOR THIS PURPOSE FROM THE EMERGENCY FUND FOR THE PRESIDENT BY LETTER OF ALLOCATION NUMBERED 42-40, DATED DECEMBER 15, 1941: PROVIDED FURTHER, THAT MATERIALS AND SUPPLIES PROCURED UNDER AUTHORITY HEREOF MAY BE DISPOSED OF BY SALE WITHOUT REGARD TO THE PROVISIONS OF OTHER LAW, OR BY OTHER MEANS, AND THE PROCEEDS FROM SUCH SALES AND ANY OTHER RECEIPTS FROM OPERATIONS HEREUNDER SHALL BE DEPOSITED TO THE CREDIT OF THIS APPROPRIATION WHEN PAYMENT IS RECEIVED, AND SUCH APPROPRIATION INCLUDING SUCH DEPOSITS SHALL REMAIN AVAILABLE FOR EXPENDITURE FOR THE PURPOSES HEREOF UNTIL SIX MONTHS HAVE ELAPSED AFTER THE TERMINATION OF THE UNLIMITED NATIONAL EMERGENCY DECLARED BY THE PRESIDENT ON MAY 27, 1941.

THE PROVISIONS OF THE REVISED LAWS OF HAWAII QUOTED BY YOU ARE EMBRACED IN SECTION 89 OF THE ORGANIC LAW OF HAWAII ENACTED BY THE CONGRESS ON APRIL 30, 1900, 31 STAT. 141, 159, AND IT IS APPARENT FROM A READING OF SAID PROVISIONS THAT IT WAS THE INTENT OF THE CONGRESS TO RESERVE TO THE VARIOUS AGENCIES OF THE FEDERAL GOVERNMENT THE RIGHT TO MAKE SUCH USE OF THE WHARVES OR OTHER LANDINGS OPERATED BY THE GOVERNMENT OF THE TERRITORY OF HAWAII AS SHOULD BE NECESSARY IN CONNECTION WITH THE PERFORMANCE OF THEIR RESPECTIVE GOVERNMENTAL FUNCTIONS, WITHOUT THE PAYMENT OF ANY TOLL OR OTHER CHARGE THEREFOR.

HOWEVER, IT APPEARS THAT ALTHOUGH NO ATTEMPT ORDINARILY IS MADE BY THE BOARD OF HARBOR COMMISSIONERS OF THE TERRITORY OF HAWAII TO LEVY ANY TOLLS ON COMMODITIES RECEIVED BY AGENCIES OF THE FEDERAL GOVERNMENT AT PIERS OPERATED BY THE BOARD, IT IS THE CONTENTION OF THE BOARD, AS SET FORTH IN THE LETTER DATED APRIL 4, 1942, ADDRESSED TO MR. A. W. MACDONALD, HAWAIIAN REPRESENTATIVE, FEDERAL SURPLUS COMMODITIES CORPORATION FROM MR. D. F. BALCH, CHAIRMAN OF THE BOARD OF HARBOR COMMISSIONERS, A COPY OF WHICH WAS FORWARDED BY YOU,"THAT IN A CASE WHERE THE FEDERAL GOVERNMENT, YOU MIGHT SAY, ENGAGES IN COMMERCIAL BUSINESS, AS IN THIS INSTANCE WHERE THE COST OF THE PRODUCT AND ALL INCIDENTAL EXPENSES ARE PASSED ON TO THE CONSUMER, THAT SECTION 89 OF THE ORGANIC ACT SHOULD NOT APPLY AND THAT THE FEDERAL GOVERNMENT SHOULD PAY WHARFAGE AND TOLLS THE SAME AS IF A PRIVATE IMPORTER BROUGHT IN THE GOODS.' IN OTHER WORDS, THE CONTENTION OF THE BOARD IS THAT THE EXEMPTIVE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT ARE NOT FOR APPLICATION WHERE USE IS MADE OF THE PIERS BY AN AGENCY OF THE FEDERAL GOVERNMENT IN CONNECTION WITH THE DISCHARGE OF FUNCTIONS WHICH PARTAKE OF THE NATURE OF A PRIVATE BUSINESS.

BUT SUCH A CONTENTION COMPLETELY DISREGARDS THE WELL ESTABLISHED PRINCIPLE THAT SINCE THE FEDERAL GOVERNMENT IS ONE OF DELEGATED POWERS ANY CONSTITUTIONAL EXERCISE OF SUCH POWERS MUST BE CONSIDERED AS GOVERNMENTAL. THE LANGUAGE USED BY THE SUPREME COURT OF THE UNITED STATES IN ITS OPINION IN THE CASE OF FEDERAL LAND BANK OF SAINT PAUL V. BISMARCK LUMBER COMPANY, ET AL., 314 U.S. 95, 102, SEEMS ESPECIALLY APPROPRIATE IN THIS CONNECTION. IN THAT CASE, THE COURT IN HOLDING THAT THE CONGRESS CONSTITUTIONALLY COULD IMMUNIZE FROM STATE TAXATION ACTIVITIES IN FURTHERANCE OF THE LENDING FUNCTIONS OF FEDERAL LAND BANKS, SAID:

THE ARGUMENT THAT THE LENDING FUNCTIONS OF THE FEDERAL LAND BANKS ARE PROPRIETARY RATHER THAN GOVERNMENTAL MISCONCEIVES THE NATURE OF THE FEDERAL GOVERNMENT WITH RESPECT TO EVERY FUNCTION WHICH IT PERFORMS. THE FEDERAL GOVERNMENT IS ONE OF DELEGATED POWERS, AND FROM THAT IT NECESSARILY FOLLOWS THAT ANY CONSTITUTIONAL EXERCISE OF ITS DELEGATED POWERS IS GOVERNMENTAL. GRAVES V. NEW YORK EX REL. O-KEEFE, 306 U.S. 466, 477. IT ALSO FOLLOWS THAT, WHEN CONGRESS CONSTITUTIONALLY CREATES A CORPORATION THROUGH WHICH THE FEDERAL GOVERNMENT LAWFULLY ACTS, THE ACTIVITIES OF SUCH CORPORATION ARE GOVERNMENTAL. PITTMAN V. HOME OWNERS' LOAN CORP., 308 U.S. 21, 32; GRAVES V. NEW YORK EX REL. O-KEEFE, SUPRA, 477.

THERE, OF COURSE, CAN BE NO QUESTION AS TO THE CONSTITUTIONALITY OF THE ABOVE-QUOTED PROVISIONS OF PUBLIC LAW 371, 77TH CONGRESS, UNDER WHICH COMMODITIES SUCH AS HERE INVOLVED ARE RECEIVED AND DISTRIBUTED IN HAWAII BY THE FEDERAL SURPLUS COMMODITIES CORPORATION. NOR CAN THERE BE ANY DOUBT AS TO THE CONSTITUTIONALITY OF THE EXISTENCE OF THAT CORPORATION AS AN AGENCY OF THE UNITED STATES. SEE ACT OF JUNE 28, 1937, 50 STAT. 323; ACT OF FEBRUARY 16, 1938, 52 STAT. 38. PUBLIC LAW 634, 77TH CONGRESS, APPROVED JUNE 27, 1942, CONTINUES THE FEDERAL SURPLUS COMMODITIES CORPORATION "AS AN AGENCY OF THE UNITED STATES," UNTIL JUNE 30, 1945.

HENCE, IN VIEW OF THE FOREGOING IT IS APPARENT THAT WHEN THE FACTS IN THE INSTANT CASE ARE VIEWED IN THE LIGHT OF THE ABOVE STATED PRINCIPLE OF LAW THE CONCLUSION IS REQUIRED THAT THE ACTIVITIES OF THE FEDERAL SURPLUS COMMODITIES CORPORATION IN CONNECTION WITH THE SHIPMENT OF RICE HERE INVOLVED WERE GOVERNMENTAL; AND, SUCH BEING THE CASE THE BOARD OF HARBOR COMMISSIONERS IS PROHIBITED BY THE PROVISIONS OF SECTION 89 OF THE ORGANIC ACT OF HAWAII FROM LEVYING ANY TOLL OR OTHER CHARGE ON SUCH COMMODITY.

ACCORDINGLY, YOU ARE NOT AUTHORIZED TO CERTIFY THE INSTANT BILL FOR PAYMENT.