B-39374, FEBRUARY 12, 1944, 23 COMP. GEN. 588

B-39374: Feb 12, 1944

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IS UNAUTHORIZED. WHERE A BID FOR THE FURNISHING OF ALCOHOL IN STEEL DRUMS WAS PREPARED IN STRICT ACCORDANCE WITH MAXIMUM PRICE REGULATIONS NO. 28. - AND THE ESTABLISHED MAXIMUM PRICE FOR THE SALE OF DRUMS WAS REDUCED. THERE IS NO AUTHORITY TO AMEND THE CONTRACT TO CHANGE THE DRUM ALLOWANCE FROM $1.25 TO $1. THE SAID CONTRACTOR STIPULATED THAT " SHIPMENT IS CONTEMPLATED IN ICC17-E STEEL DRUMS AND PREFERENCE RATING OF AA-5 OR HIGHER WILL BE REQUIRED BY US TO OBTAIN CONTAINERS.'. THE INVITATION FOR BIDS NOTIFIED BIDDERS THAT THE ALCOHOL WAS TO BE DISTRIBUTED FROM THE ABOVE-MENTIONED SUPPLY DEPOTS TO VARIOUS VETERANS' ADMINISTRATION HOSPITALS THROUGHOUT THE COUNTRY AND. THE CONTRACTOR STIPULATED IN ITS BID AS FOLLOWS: A CREDIT OF $1.25 EACH WILL BE ISSUED FOR ALL EMPTY DRUMS RETURNED AND RECEIVED BY US IN GOOD CONDITION AT OUR PLANT OF ORIGIN.

B-39374, FEBRUARY 12, 1944, 23 COMP. GEN. 588

CONTRACTS - MAXIMUM PRICE REGULATIONS - EMPTY CONTAINERS WHERE A CONTRACT FOR THE FURNISHING OF ALCOHOL IN STEEL DRUMS AT A STIPULATED UNIT PRICE PER GALLON PROVIDED THAT A CREDIT OF $1.25 WOULD BE ALLOWED FOR EACH EMPTY DRUM RETURNED TO THE CONTRACTOR, THE RETURN OF THE DRUMS FOR CREDIT PURSUANT TO THE TERMS OF THE CONTRACT MAY NOT BE REGARDED AS A "SALE" OF SUCH DRUMS WITHIN THE MEANING OF MAXIMUM PRICE REGULATION NO. 43, PROHIBITING THE SALE ON AND AFTER OCTOBER 12, 1943, OF USED STEEL DRUMS AT A PRICE IN EXCESS OF $1, AS THE GOVERNMENT MERELY HELD THE DRUMS AS A BAILEE UNTIL EMPTIED AND RETURNED, AND, THEREFORE, A REDUCTION IN THE CREDIT ALLOWANCE OF $1.25 FOR EMPTY DRUMS RETURNED ON AND AFTER OCTOBER 12, 1943, IS UNAUTHORIZED. WHERE A BID FOR THE FURNISHING OF ALCOHOL IN STEEL DRUMS WAS PREPARED IN STRICT ACCORDANCE WITH MAXIMUM PRICE REGULATIONS NO. 28--- WHICH FIXES A MAXIMUM PRICE FOR THE SALE OF ALCOHOL AND PROVIDES THAT IF THE SELLER REQUIRES THE RETURN OF DRUMS THE PRICE OF THE ALCOHOL SHALL BE DECREASED BY AN AMOUNT EQUAL TO THE MAXIMUM PRICE ESTABLISHED FOR THE SALE OF SUCH DRUMS--- AND THE ESTABLISHED MAXIMUM PRICE FOR THE SALE OF DRUMS WAS REDUCED, AFTER THE DATE OF THE SUBMISSION OF THE BID, FROM $1.25 TO $1 PURSUANT TO MAXIMUM PRICE REGULATION NO. 43, THERE IS NO AUTHORITY TO AMEND THE CONTRACT TO CHANGE THE DRUM ALLOWANCE FROM $1.25 TO $1.

ACTING COMPTROLLER GENERAL YATES TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, FEBRUARY 12, 1944:

THERE HAS BEEN CONSIDERED YOUR LETTER OF JANUARY 5, 1944, REQUESTING DECISION AS TO WHETHER THE ALLOWANCE FOR THE RETURN OF EMPTY DRUMS PROVIDED FOR IN TWO CONTRACTS OF THE VETERANS' ADMINISTRATION FOR THE SALE AND DELIVERY OF ETHYL ALCOHOL MAY BE REDUCED BY THE CONTRACTORS IN VIEW OF THE PROMULGATION BY THE OFFICE OF PRICE ADMINISTRATION OF MAXIMUM PRICE REGULATION NO. 43, EFFECTIVE OCTOBER 12, 1943.

THE FIRST OF THE CONTRACTS REFERRED TO IN YOUR LETTER--- CONTRACT NO. VAP -19131, DATED FEBRUARY 25, 1943, WITH THE COMMERCIAL SOLVENTS CORPORATION- -- PROVIDED FOR THE FURNISHING OF VARIOUS QUANTITIES OF ALCOHOL AT STIPULATED UNIT PRICES PER GALLON TO BE DELIVERED IN STEEL DRUMS OF 30 AND 54 GALLONS, F.O.B. VETERANS' ADMINISTRATION SUPPLY DEPOTS AT HINES, ILLINOIS, AND PERRY POINT, MARYLAND. IT APPEARS THAT, PURSUANT TO A REQUEST CONTAINED IN THE INVITATION FOR BIDS THAT BIDDERS STATE THE CONDITIONS UNDER WHICH THEY WOULD SUPPLY DRUMS, THE SAID CONTRACTOR STIPULATED THAT " SHIPMENT IS CONTEMPLATED IN ICC17-E STEEL DRUMS AND PREFERENCE RATING OF AA-5 OR HIGHER WILL BE REQUIRED BY US TO OBTAIN CONTAINERS.' ALSO, THE INVITATION FOR BIDS NOTIFIED BIDDERS THAT THE ALCOHOL WAS TO BE DISTRIBUTED FROM THE ABOVE-MENTIONED SUPPLY DEPOTS TO VARIOUS VETERANS' ADMINISTRATION HOSPITALS THROUGHOUT THE COUNTRY AND, CONSEQUENTLY, THAT THE ORIGINAL SHIPPING DRUMS WHICH A CONTRACTOR MIGHT FURNISH, WOULD BE WIDELY DISTRIBUTED FROM THE ORIGINAL DESTINATION AND THAT SEVERAL MONTHS MIGHT ELAPSE BEFORE THE DRUMS WOULD BECOME EMPTY AND BE AVAILABLE FOR RETURN TO THE CONTRACTOR. THE CONTRACTOR STIPULATED IN ITS BID AS FOLLOWS:

A CREDIT OF $1.25 EACH WILL BE ISSUED FOR ALL EMPTY DRUMS RETURNED AND RECEIVED BY US IN GOOD CONDITION AT OUR PLANT OF ORIGIN, FREIGHT COLLECT.

WITH RESPECT TO SUCH CONTRACT IT IS STATED IN YOU LETTER OF JANUARY 5, 1944, AS FOLLOWS:

DELIVERY HAS BEEN COMPLETED BY THE COMMERCIAL SOLVENTS CORPORATION TO VETERANS ADMINISTRATION SUPPLY DEPOTS, PERRY POINT, MARYLAND, AND HINES, ILLINOIS, FROM WHICH POINT ALCOHOL IS DISTRIBUTED TO VETERANS ADMINISTRATION FACILITIES WHEN REQUIRED. THE EMPTY DRUMS ARE RETURNED DIRECT TO THE CONTRACTOR'S PLANT, FREIGHT COLLECT, FOR A REFUND OF $1.25 EACH, AND SEVERAL MONTHS MAY ELAPSE BEFORE ALL EMPTY DRUMS ARE RETURNED FOR CREDIT.

INFORMATION HAS BEEN RECEIVED FROM SEVERAL VETERANS ADMINISTRATION FACILITIES THAT THE COMMERCIAL SOLVENTS CORPORATION WILL NOT REFUND THE STIPULATED AMOUNT FOR EMPTY DRUMS RETURNED, CLAIMING THAT UNDER THE TERMS OF OPA REGULATION NO. 43, EFFECTIVE OCTOBER 12, 1943, THEY ARE PREVENTED FROM ALLOWING MORE THAN $1.00 FOR THE RETURN OF THIS TYPE OF DRUM. THE OFFICE OF PRICE ADMINISTRATION REGULATION MAKES NO PROVISION FOR HONORING ANY OLD CONTRACTS AT THE ORIGINAL TERMS, AND THE ABOVE CONCERN STATES IT IS COMPULSORY ON THEIR PART TO COMPLY WITH THE TERMS OF THE REGULATION.

MAXIMUM PRICE REGULATION NO. 43 OF THE OFFICE OF PRICE ADMINISTRATION, ISSUED ON OCTOBER 6, TO BE EFFECTIVE OCTOBER 12, 1943, PROVIDES IN PERTINENT PART, AS FOLLOWS:

SECTION 1. * * * ON AND AFTER OCTOBER 12, 1943, REGARDLESS OF ANY CONTRACT OR OBLIGATION:

(A) NO PERSON SHALL SELL OR DELIVER USED STEEL DRUMS, PAILS AND CONTAINERS, OR THE SERVICE OF RECONDITIONING USED STEEL DRUMS OF A CAPACITY OF 50-58 GALLONS INCLUSIVE, AT PRICES HIGHER THAN THE MAXIMUM PRICES PERMITTED BY THIS REGULATION.

(B) NO PERSON SHALL BUY OR RECEIVE ANY USED STEEL DRUMS, PAILS OR CONTAINERS, OR THE SERVICE OF RECONDITIONING USED STEEL DRUMS OF A CAPACITY OF 50-58 GALLONS INCLUSIVE, AT PRICES HIGHER THAN THE MAXIMUM PRICES PERMITTED BY THIS REGULATION.

SEC. 6. * * * THE MAXIMUM PRICES FOR RAW USED STEEL DRUMS, PAILS AND CONTAINERS WHEN SOLD BY ANY PERSON OTHER THAN ONE WHO PURCHASED FOR RESALE, F.O.B. THE PLACE WHERE THE DRUM, PAIL OR CONTAINER IS SOLD, SHALL BE AS FOLLOWS: (THE MAXIMUM PRICE ESTABLISHED FOR THE SALE OF DRUMS OF 50- 58 GALLONS CAPACITY IN STATES OTHER THAN CALIFORNIA, OREGON OR WASHINGTON WAS FIXED AT $1.00).

SEC. 7. * * * THE MAXIMUM PRICES FOR RAW USED DRUMS, PAILS OR CONTAINERS WHEN SOLD BY A PERSON WHO HAS PURCHASED FOR RESALE, SHALL BE AS FOLLOWS * * *. (THE MAXIMUM PRICE FOR DRUMS 50-58 GALLONS CAPACITY WHEN SOLD IN STATES OTHER THAN CALIFORNIA, OREGON OR WASHINGTON AND DELIVERED TO PURCHASER WAS FIXED AT $1.35).

IF IT MAY BE SAID THAT THE RETURN OF THE DRUMS BY THE VETERANS' ADMINISTRATION TO THE CONTRACTOR PURSUANT TO THE TERMS OF THE INSTANT CONTRACT, AS SET FORTH ABOVE, CONSTITUTES A SALE OF THE DRUMS WITHIN THE MEANING OF THE ABOVE QUOTED PROVISIONS OF MAXIMUM PRICE REGULATION NO. 43, THEN, IN VIEW OF THE PROVISIONS OF SECTION 4 (A) AND SECTION 302 (H) OF THE EMERGENCY PRICE CONTROL ACT OF 1942, 56 STAT. 24, 28 AND 37, IT WOULD BE UNLAWFUL FOR THE UNITED STATES TO DEMAND OR RECEIVE FOR DRUMS RETURNED TO THE CONTRACTOR ON AND AFTER OCTOBER 12, 1943, ANY AMOUNT IN EXCESS OF THE APPLICABLE PRICES SPECIFIED IN SECTION 6 (A) OF THE SAID REGULATION NO. 43--- NOTWITHSTANDING THAT THE CONTRACT INVOLVED MAY HAVE PROVIDED FOR THE PAYMENT BY THE CONTRACTOR OF A HIGHER PRICE. SEE 21 COMP. GEN. 1046; 22 ID. 484.

HOWEVER, IT DOES NOT APPEAR FROM THE PRESENT RECORD THAT THE RETURN OF THE DRUMS BY THE VETERANS' ADMINISTRATION TO THE CONTRACTOR PURSUANT TO THE SAID TERMS OF CONTRACT NO. VAP-19131, MAY BE SAID TO CONSTITUTE A SALE THEREOF WITHIN THE MEANING AND INTENT OF THE ABOVE QUOTED PROVISIONS OF REGULATION NO. 43. IT IS TO BE NOTED THAT THE CONTRACT WAS ONE PRIMARILY FOR THE SALE AND PURCHASE OF ALCOHOL AND THAT THE DELIVERY OF THE STEEL DRUMS BY THE CONTRACTOR TO THE GOVERNMENT WAS MERELY INCIDENT THERETO. IS TO BE NOTED FURTHER THAT IT DOES NOT APPEAR TO HAVE BEEN THE INTENTION OF THE PARTIES THAT, AT THE TIME THE ALCOHOL WAS DELIVERED BY THE CONTRACTOR TO THE DESTINATION SPECIFIED, TITLE TO THE STEEL DRUMS AS WELL AS TO THE ALCOHOL WAS TO VEST IN THE UNITED STATES. ON THE CONTRARY, THE TERMS BOTH OF THE INVITATION FOR BIDS AND OF THE CONTRACTOR'S BID INDICATE THAT THE INTENT OF THE PARTIES WAS THAT THE VETERANS' ADMINISTRATION WOULD MERELY HOLD THE DRUMS AS A BAILEE UNTIL THE ALCOHOL WAS USED AT WHICH TIME THEY WOULD BE RETURNED TO THE CONTRACTOR. THUS, IN THE INVITATION FOR BIDS, THE VETERANS' ADMINISTRATION EXPRESSLY NOTIFIED BIDDERS THAT THE DRUMS WERE TO BE RETURNED AND REQUESTED BIDDERS TO STATE THE CONDITIONS UNDER WHICH THEY WOULD SUPPLY SUCH DRUMS. IN RESPONSE THERETO, THE INSTANT CONTRACTOR STIPULATED IN ITS BID THAT A "CREDIT OF $1.25" WOULD BE ALLOWED FOR ALL EMPTY DRUMS RETURNED BY THE VETERANS' ADMINISTRATION AND RECEIVED BY THE CONTRACTOR IN GOOD CONDITION. IN OTHER WORDS, IT APPEARS THAT THE CONTRACTOR INCLUDED IN ITS BID PRICE THE SUM OF $1.25 AS A DEPOSIT ON EACH DRUM TO INSURE THE RETURN THEREOF BY THE VETERANS' ADMINISTRATION. HENCE, IT CANNOT BE SAID THAT, UNDER THE TERMS OF THE CONTRACT HERE INVOLVED, TITLE TO ANY OF THE DRUMS WHICH ARE RETURNED BY THE VETERANS' ADMINISTRATION HAD PASSED TO THE GOVERNMENT, AT THE TIME THE ALCOHOL WAS DELIVERED BY THE CONTRACTOR. CONSEQUENTLY, SINCE IT WAS NOT THE INTENTION OF THE PARTIES THAT TITLE TO THE DRUMS WAS TO VEST IN THE UNITED STATES IMMEDIATELY UPON DELIVERY OF THE ALCOHOL, IT MAY NOT BE SAID THAT THE RETURN OF THE DRUMS BY THE VETERANS' ADMINISTRATION CONSTITUTES A SALE THEREOF TO THE CONTRACTOR WITHIN THE MEANING OF SECTION 6 OF THE MAXIMUM PRICE REGULATION NO. 43, QUOTED ABOVE.

MOREOVER, WHILE IT IS STATED IN YOUR LETTER OF JANUARY 5, THAT THE CONTRACTOR WILL NOT REFUND THE SUM OF $1.25 FOR ANY DRUMS RETURNED AFTER OCTOBER 12, 1943--- ON THE GROUND THAT UNDER THE TERMS OF SAID REGULATION NO. 43 IT IS PREVENTED FROM ALLOWING A CREDIT OF MORE THAN $1 FOR THE TYPE OF DRUMS INVOLVED--- IT DOES NOT APPEAR THAT EITHER THE CONTRACTOR OR THE VETERANS' ADMINISTRATION HAS RECEIVED FROM THE OFFICE OF PRICE ADMINISTRATION A DEFINITE RULING TO THE EFFECT THAT SUCH A REFUND WOULD CONSTITUTE A VIOLATION OF THE REGULATIONS. HOWEVER, EVEN IF IT BE ASSUMED THAT TITLE TO THE DRUMS HAD PASSED TO THE GOVERNMENT AT THE TIME THE ALCOHOL WAS DELIVERED BY THE CONTRACTOR, THE TERMS OF THE CONTRACT DISCUSSED ABOVE SHOW CLEARLY THAT, BASED ON SUCH ASSUMPTION, IT WAS THE INTENTION OF THE VETERANS' ADMINISTRATION TO RESELL THE DRUMS TO THE CONTRACTOR. THEREFORE, THE RETURN OF THE DRUMS BY THE VETERANS' ADMINISTRATION TO THE CONTRACTOR WOULD CONSTITUTE A SALE BY A PERSON WHO HAD PURCHASED THE SAME FOR RESALE AND, UNDER THE PROVISIONS OF SECTION 7 OF MAXIMUM PRICE REGULATION NO. 43, QUOTED ABOVE, THE MAXIMUM PRICE FIXED FOR SUCH A RESALE IF $1.35. HENCE, THE ALLOWANCE BY THE CONTRACTOR OF THE CREDIT OF $1.25 STIPULATED IN THE CONTRACT FOR EACH DRUM RETURNED BY THE VETERANS' ADMINISTRATION WOULD NOT CONSTITUTE A VIOLATION OF REGULATION NO. 43 EVEN IF SUCH RETURN IS TO BE CONSIDERED A SALE.

ACCORDINGLY, YOU ARE ADVISED THAT, ON THE PRESENT RECORD, THERE IS NO AUTHORITY FOR PERMITTING ANY REDUCTION IN THE CREDIT ALLOWANCE OF $1.25 SPECIFIED IN CONTRACT NO. VAP-19131 FOR EMPTY DRUMS RETURNED BY THE VETERANS' ADMINISTRATION.

THE SECOND CONTRACT REFERRED TO IN YOUR LETTER --- NO. VAP-19834, ENTERED INTO WITH THE U.S. INDUSTRIAL CHEMICALS, INC., AND CONSISTING OF THE CONTRACTOR'S BID DATED SEPTEMBER 22, 1943, AND THE GOVERNMENT'S ACCEPTANCE THEREOF ON OCTOBER 26, 1943--- PROVIDES FOR THE DELIVERY OF 4,050 GALLONS OF ETHYL ALCOHOL IN STEEL DRUMS OF 54 GALLONS EACH TO THE VETERANS' ADMINISTRATION SUPPLY DEPOT AT PERRY POINT, MARYLAND, AT A UNIT PRICE OF 57 CENTS PER GALLON, F.O.B. CONTRACTOR'S SHIPPING POINT, LESS A "DRUM SALVAGE ALLOWANCE" OF $1.25 ON 75 DRUMS, OR $93.75, PLUS A "DRUM DEPOSIT" OF $5 EACH ON THE 75 DRUMS, OR $375. WITH RESPECT TO THE "DRUM DEPOSIT," THE CONTRACTOR'S BID CONTAINED THE FOLLOWING STIPULATION--- " DRUMS ON A DEPOSIT RETURNABLE BASIS DEPOSIT PAYABLE WITH INVOICE.' ALSO, IT APPEARS THAT THE INVITATION, PURSUANT TO WHICH THE CONTRACTOR SUBMITTED ITS BID, CONTAINED A NOTATION THAT THE ALCOHOL WAS TO BE DISTRIBUTED TO VARIOUS VETERANS' ADMINISTRATION HOSPITALS AND THAT SEVERAL MONTHS WOULD ELAPSE BEFORE THE ORIGINAL SHIPPING DRUMS BECAME EMPTY AND WERE AVAILABLE FOR RETURN TO THE CONTRACTOR.

THE BID SUBMITTED BY THE CONTRACTOR APPARENTLY WAS PREPARED IN STRICT ACCORDANCE WITH THE PROVISIONS OF SECTION 1412.263, SUBSECTIONS (A) AND (D) OF MAXIMUM PRICE REGULATION NO. 28, ISSUED BY THE OFFICE OF PRICE ADMINISTRATION ON FEBRUARY 22, 1943, TO BE EFFECTIVE ON AND AFTER FEBRUARY 27, 1943. IT APPEARS THAT SUBSECTION (A) (2) OF SAID SECTION 1412.263 FIXED THE MAXIMUM PRICES FOR SALES OF ETHYL ALCOHOL IN STEEL DRUMS FOR DELIVERY F.O.B. MANUFACTURER'S PRODUCTION POINT AND THAT SUBSECTION (D) OF SAID SECTION PROVIDES AS FOLLOWS:

(D) CONTAINERS.--- NO EXTRA CHARGE MAY BE MADE FOR CONTAINERS. THE SELLER MAY, HOWEVER, REQUIRE THE BUYER TO RETURN A CONTAINER, BUT WHERE HE DOES SO THE MAXIMUM PRICE FOR THE CONTENTS OF ANY SUCH CONTAINER AS ESTABLISHED BY PARAGRAPHS (A), (B) AND (C) ABOVE SHALL BE DECREASED BY AN AMOUNT EQUAL TO THE MAXIMUM PRICE ESTABLISHED BY THE APPLICABLE REGULATION OF THE OFFICE OF PRICE ADMINISTRATION FOR A USED CONTAINER OF THE SAME KIND IN GOOD CONDITION, F.O.B. BUYER'S PLANT. WHERE A SELLER REQUIRES THE RETURN OF A CONTAINER, HE MAY CHARGE A REASONABLE DEPOSIT FOR THE RETURN OF SUCH CONTAINER. THE DEPOSIT MUST BE REPAID TO THE BUYER UPON HIS RETURN OF THE CONTAINER IN GOOD CONDITION WITHIN A REASONABLE TIME. TRANSPORTATION COSTS WITH RESPECT TO THE RETURN OF EMPTY CONTAINERS TO THE SELLER SHALL IN ALL CASES BE BORNE BY THE SELLER.

WITH RESPECT TO SAID CONTRACT IT IS STATED IN YOUR LETTER OF JANUARY 5, 1944, THAT DELIVERY HAS BEEN MADE BY THE CONTRACTOR, BUT THAT, BY ITS LETTER OF NOVEMBER 30, 1943, THE CONTRACTOR REQUESTED THAT AN AMENDMENT BE MADE TO THE CONTRACT TO CHANGE THE "DRUM SALVAGE ALLOWANCE" SPECIFIED THEREIN FROM $1.25 TO $1. THE LETTER OF NOVEMBER 30, 1943, FROM THE CONTRACTOR IS AS FOLLOWS:

WE HAVE YOUR ORDER NO. 44-VA-4714 COVERING 75 DRUMS OF PURE ETHYL ALCOHOL. SINCE QUOTING ON YOUR INQUIRY, THE OFFICE OF PRICE ADMINISTRATION HAS REDUCED THE SALVAGE VALUE OF RAW USED DRUMS FROM $1.25 PER DRUM TO $1.00 PER DRUM.

THIS BEING THE CASE, WE ASK THAT YOU AMEND YOUR ORDER TO SHOW THE SALVAGE ALLOWANCE ON EACH DRUM AS $1.00.

WE ARE PLACING YOUR ORDER ON THIS BASIS.

THE REQUEST OF THE CONTRACTOR APPARENTLY IS BASED ON THE GROUND THAT, EFFECTIVE OCTOBER 12, 1943, MAXIMUM PRICE REGULATION NO. 43, SUPRA, ESTABLISHED THE MAXIMUM SALE PRICE OF USED DRUMS OF THE TYPE HERE INVOLVED AT $1 EACH, WHEREAS THE MAXIMUM PRICE WHICH APPARENTLY HAD BEEN ESTABLISHED BY THE OFFICE OF PRICE ADMINISTRATION PREVIOUS THERETO AND WHICH WAS IN EFFECT ON THE DATE OF ITS BID, WAS $1.25--- THE AMOUNT WHICH THE CONTRACTOR SPECIFIED IN ITS BID OF SEPTEMBER 22, 1943, WOULD BE DEDUCTED FROM ITS QUOTED UNIT PRICE FOR THE ALCOHOL AS A "DRUM SALVAGE ALLOWANCE.' HOWEVER, IT IS TO BE NOTED THAT, WHILE UNDER THE PROVISIONS OF SECTION 6 OF MAXIMUM PRICE REGULATION NO. 43, QUOTED ABOVE, NO SALE OF A DRUM OF THE TYPE HERE INVOLVED WAS TO BE MADE AT A PRICE IN EXCESS OF $1, ON AND AFTER OCTOBER 12, 1943, THE INSTANT TRANSACTION DOES NOT CONTEMPLATE THE SALE OF DRUMS BY THE GOVERNMENT TO THE CONTRACTOR AFTER SUCH DATE AT A PRICE OF $1.25. ON THE CONTRARY, UNDER THE PLAIN TERMS OF THE CONTRACT THE DRUMS MERELY ARE LOANED TO THE GOVERNMENT ON A RETURNABLE BASIS, SUBJECT TO A DEPOSIT OF $5 PER DRUM PAYABLE BY THE GOVERNMENT AT THE SAME TIME PAYMENT IS MADE FOR THE ALCOHOL, WHICH DEPOSIT OF $5 IS TO BE RETURNED BY THE CONTRACTOR UPON REDELIVERY OF EMPTY DRUMS BY THE GOVERNMENT.

MOREOVER, WHILE IT MAY BE THAT, IN VIEW OF THE TERMS OF SUBSECTION (D) OF SECTION 1412.263 OF MAXIMUM PRICE REGULATION NO. 28, QUOTED ABOVE, THE MAXIMUM PRICES SET FORTH IN SUBSECTION (A) (2) OF SAID SECTION FOR THE SALE OF ALCOHOL IN STEEL DRUMS OF THE TYPE HERE INVOLVED WILL, ON AND AFTER OCTOBER 12, 1943, BE INCREASED TO THE EXTENT OF 25 CENTS FOR EACH DRUM REQUIRED TO BE FURNISHED--- SINCE THE SAID MAXIMUM PRICES WILL BE SUBJECT TO A REDUCTION OF $1, ONLY, FOR EACH DRUM REQUIRED RATHER THAN $1.25 IN VIEW OF THE MAXIMUM PRICE FIXED FOR THE SALE OF SUCH DRUMS BY MAXIMUM PRICE REGULATION 43, SUPRA--- NOTHING IS FOUND IN EITHER REGULATION FROM WHICH IT MAY BE SAID THAT SUCH CHANGE IN THE ALLOWANCE TO BE MADE FOR DRUMS IS TO BE RETROACTIVE TO BIDS SUBMITTED PRIOR TO OCTOBER 12, 1943. HOWEVER, EVEN IF THE CHANGE WERE MADE RETROACTIVE, THE ALLOWANCE BY THE CONTRACTOR OF A REDUCTION OF $1.25 FOR EACH DRUM FROM ITS CONTRACT UNIT PRICE FOR THE ALCOHOL, RATHER THAN $1 PER DRUM, MERELY RESULTS IN A SALE OF THE ALCOHOL AT A PRICE BELOW THE MAXIMUM PRICES ESTABLISHED BY MAXIMUM PRICE REGULATION NO. 28, AND IT IS EXPRESSLY PROVIDED IN SECTION 1412.253 OF SAID REGULATION THAT LOWER PRICES THAN THOSE ESTABLISHED THEREIN MAY BE CHARGED, DEMANDED, PAID OR OFFERED.

ACCORDINGLY, SINCE IT DOES NOT APPEAR THAT, IN MAKING PAYMENT FOR THE ALCOHOL WHICH HAS BEEN FURNISHED UNDER CONTRACT NO. VAP-19834, THE DEDUCTION BY THE UNITED STATES OF THE DRUM SALVAGE ALLOWANCE OF $1.25 STIPULATED IN SAID CONTRACT WILL RESULT IN ANY VIOLATION OF THE MAXIMUM PRICE REGULATIONS PRESCRIBED BY THE OFFICE OF PRICE ADMINISTRATION WITH RESPECT TO THE SALE OF EITHER ALCOHOL OR DRUMS, THERE IS NO AUTHORITY TO AMEND SAID CONTRACT TO CHANGE THE ALLOWANCE TO $1 PER DRUM, AS REQUESTED BY THE CONTRACTOR.

THE LETTER OF NOVEMBER 30, 1943, FROM U.S. INDUSTRIAL CHEMICALS, INC., IS RETURNED HEREWITH AS REQUESTED BY YOU.

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