B-84781, APR 25, 1949

B-84781: Apr 25, 1949

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FOR DECISION AS TO WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER SUBMITTED THEREWITH IN FAVOR OF BOEKI CHO (BOARD OF TRADE. THE SAID VOUCHER IS STATED IN THE AMOUNT OF $1. 195.04 TONS WAS THEN CANCELLED BECAUSE OF NON DELIVERY. UPON THESE FACTS YOU STATE THAT THE QUESTION AT ISSUE ARE: "*** (1) WHETHER THE ORAL AGREEMENT ENTERED INTO DURING THE FY 1947 BETWEEN THE UNITED STATES GOVERNMENT AND CENTRAL TRUST OF CHINA FOR DELIVERY OF 50. SINCE THE INFORMATION SUBMITTED IN SUPPORT OF THE INSTANT CLAIM WAS INCONCLUSIVE WITH RESPECT TO THE DATE THE FISCAL YEAR 1947 FUNDS IN QUESTION WERE OBLIGATED. ON THE BASIS OF THE INFORMATION NOW FURNISHED IT APPEARS THAT THE ORIGINAL FIRM OFFER FOR SOYA BEANS WAS MADE IN THE FORM OF A LETTER FROM ESS/FT DIVISION.

B-84781, APR 25, 1949

PRECIS-UNAVAILABLE

MAJOR L. A. LEGER, F.D., U.S. ARMY:

THERE HAS BEEN RECEIVED BY INDORSEMENT OF MARCH 22, 1949, YOUR REQUEST OF FEBRUARY 7, 1949, FOR DECISION AS TO WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER SUBMITTED THEREWITH IN FAVOR OF BOEKI CHO (BOARD OF TRADE, JAPANESE GOVERNMENT). THE SAID VOUCHER IS STATED IN THE AMOUNT OF $1,880,082.88, CHARGEABLE TO THE APPROPRIATION "GOVERNMENT AND RELIEF IN OCCUPIED AREAS, WAR DEPARTMENT, 1947."

CONTRACT NO. W91-00-001 G101, DATED JANUARY 12, 1949, SIGNED BY REPRESENTATIVES OF BOEKI CHO AND THE UNITED STATES GOVERNMENT, UNDER WHICH THE INSTANT CLAIM FOR PAYMENT ARISES, CONTAINS A CERTIFICATE TO THE EFFECT THAT SUCH CONTRACT REPRESENTS A REOBLIGATION OF PART OF THE FISCAL YEAR 1947 FUNDS ORIGINALLY ALLOCATED FOR THE PROCUREMENT OF 50,000 METRIC TONS OF SOYA BEANS FROM CHINA. THE CERTIFICATE FURTHER STATES THAT UNDER AN ORAL AGREEMENT OF ABOUT MAY 26, 1947, FOR 20,000 TONS AND AN ORAL AGREEMENT OF ABOUT JUNE 6, 1947, FOR 30,000 TONS, THE CENTRAL TRUST OF CHINA AGREED TO FURNISH THE SAID 50,000 TONS OF SOYA BEANS FOR WHICH FUNDS HAD PREVIOUSLY BEEN ALLOTTED AND FURTHER THAT THE CENTRAL TRUST OF CHINA DELIVERED ONLY 7,804.96 TONS AND THE AGREEMENT AS TO THE BALANCE OF 42,195.04 TONS WAS THEN CANCELLED BECAUSE OF NON DELIVERY.

UPON THESE FACTS YOU STATE THAT THE QUESTION AT ISSUE ARE:

"*** (1) WHETHER THE ORAL AGREEMENT ENTERED INTO DURING THE FY 1947 BETWEEN THE UNITED STATES GOVERNMENT AND CENTRAL TRUST OF CHINA FOR DELIVERY OF 50,000 METRIC TONS OF SOYA BEANS CONSTITUTED A PROPER CONTRACT WITHIN THE MEANING OF 2 CG 130 IN THAT REOBLIGATION OF 1947 FUNDS MAY BE MADE UNDER THE INCLOSED CONTRACT DUE TO DEFAULT OF THE ORIGINAL CONTRACTOR AND (2) WHETHER CLAIM FOR DAMAGE AGAINST THE COST OF THE ITEM PURCHASED UNDER THE INCLOSED CONTRACT."

SINCE THE INFORMATION SUBMITTED IN SUPPORT OF THE INSTANT CLAIM WAS INCONCLUSIVE WITH RESPECT TO THE DATE THE FISCAL YEAR 1947 FUNDS IN QUESTION WERE OBLIGATED, THIS OFFICE INFORMALLY REQUESTED THE OFFICE OF FOOD ADMINISTRATOR FOR OCCUPIED AREAS, DEPARTMENT OF THE ARMY, FOR AN ADMINISTRATIVE REPORT OF THE MATTER.

ON THE BASIS OF THE INFORMATION NOW FURNISHED IT APPEARS THAT THE ORIGINAL FIRM OFFER FOR SOYA BEANS WAS MADE IN THE FORM OF A LETTER FROM ESS/FT DIVISION, SCAP, DATED MARCH 7, 1947, TO MR. E. A. BAYNE, SPECIAL ADVISER TO THE CHINESE GOVERNMENT, WHICH STATED:

"REFERENCE IS MADE TO OUR CONVERSATIONS CONCERNING THE SHIPMENT OF SUGAR AND SOYA BEANS FROM FORMOSA AND CHINA TO JAPAN. THIS LETTER WILL SERVE AS A FIRM OFFER TO PURCHASE FOR UNITED STATES DOLLARS IN CASH ON DELIVERY THE FOLLOWING: SOYA BEANS: THE JAPANESE GOVERNMENT WITH THE APPROVAL OF THE SUPREME COMMANDER FOR THE ALLIED POWERS AGREES TO PURCHASE 50,000 METRIC TONS OF MANCHURIAN SOYA BEANS, FOB CHINA PORTS AT U.S. DOLLARS 172 PER METRIC TON. ***"

SUBSEQUENTLY, ON MAY 26, 1947, AN OFFICIAL MEMORANDUM FROM THE CHINESE MISSION IN JAPAN TO SCAP, STATED IN REFERENCE TO THE ABOVE OFFER THAT--

"THE CENTRAL TRUST CONFIRMS CASH SALE TO JAPAN OF ONLY 20,000 METRIC TONS MANCHURIAN SOYA BEANS, AT US DOLLARS 172 PER METRIC TON FOB CHINA PORTS. THE QUESTION OF THE REMAINING 30,000 TONS WILL BE TAKEN UP AT A LATER DATE.

IN A MEMORANDUM DATED JUNE 6, 1947, FROM THE CHINESE MISSION IN JAPAN TO SCAP, REFERRING TO THE MEMORANDUM OF MAY 26, 1947, ABOVE, IT WAS STATED--

"IN ADDITION TO CHINA'S SALE OF 20,000 TONS MENTIONED IN REFERENCE MEMORANDUM, THE CENTRAL TRUST CONFIRMS SALE TO JAPAN OF AN ADDITIONAL 30,000 TONS MANCHURIAN SOYA BEANS ON THE FOLLOWING TERMS AND CONDITIONS:--

"QUANTITY: 30,000 METRIC TONS. PRICE: U.S. DOLLARS 176 PER METRIC TON, FOB CHINA PORT. PAYMENT: CASH PAYMENT IN U.S. DOLLARS, PRIOR TO SHIPMENT. DELIVERY: CONTRACT FOR 30,000 TONS IS TO BECOME EFFECTIVE AFTER COMPLETION OF DELIVERY OF 20,000 TONS PREVIOUSLY CONTRACTED. CONSEQUENTLY DELIVERY WILL EXTEND TO YEAR 1948.

"IT IS FURTHER STIPULATED THAT FULFILLMENT OF CONTRACT WILL BE GOVERNED BY FUTURE DEVELOPMENTS OF THE MANCHURIAN POLITICAL SITUATION. THE CENTRAL TRUST OF CHINA CANNOT BE HELD RESPONSIBLE SHOULD DELIVERIES BE DELAYED OR BECOME IMPOSSIBLE DUE TO CIRCUMSTANCES BEYOND ITS CONTROL.

"YOUR EARLY ACCEPTANCE IN WRITING OF THE ABOVE TERMS WILL BE APPRECIATED."

THE REPLY FROM SCAP, DATED JUNE 9, 1947, TO THE CHINESE MISSION IN JAPAN, REFERS TO THE ABOVE LETTER OF JUNE 6, 1947, AND STATES:

"THIS MEMORANDUM CONFIRMS THE PURCHASE OF 30,000 TONS OF SOYA BEANS AT $176 PER TON ON THE TERMS AND CONDITIONS AS OUTLINED IN ABOVE REFERENCE MEMORANDUM."

THE ADMINISTRATIVE REPORT EXPLAINS THAT THE METHOD OF PROCEDURE AT THE TIME OF SUCH AGREEMENT WAS FOR SCAP TO MAKE OFFERS IN THE NAME OF THE JAPANESE GOVERNMENT, WHICH PROCEDURE AVOIDED COMMITTING THE UNITED STATES GOVERNMENT UNTIL THE DEPARTMENT OF THE ARMY HAD APPROVED OF THE PRICE AND TERMS OF THE PURCHASE AND HAD ALLOCATED FUNDS FOR THE SAME. THE ADMINISTRATIVE REPORT FURTHER STATES THAT THE FAILURE OF THE CHINESE GOVERNMENT IN DELIVERING ONLY 7,804.96 TONS OF SOYA BEANS UNDER THE ABOVE AGREEMENTS WAS OCCASIONED BY THE DEVELOPMENT OF INTERNAL POLITICAL SITUATIONS WHICH CLOSED OFF CERTAIN AREAS OF SUPPLIES THUS MAKING IT NECESSARY FOR SCAP TO "DEOBLIGATE" THE UNEXPECTED BALANCE OF THE FUNDS ORIGINALLY ALLOCATED FOR THE PURCHASE OF SUCH BEANS AND TO APPLY IT TO THE PURCHASE OF ACCEPTABLE FOOD REPLACEMENT ITEMS FROM OTHER PROCUREMENT AREAS, AND THAT THE INSTANT CONTRACT (FOR WHICH PAYMENT IS NOW BEING CLAIMED) FOR 10,400 METRIC TONS OF SOYA BEANS WAS ENTERED INTO AS A PARTIAL REPLACEMENT FOR THE UNDELIVERED PORTION OF THE EARLIER CONTRACT WITH THE CENTRAL TRUST OF CHINA.

THIS OFFICE HAS HELD THAT THE AWARD OF A CONTRACT DURING A FISCAL YEAR FOR AN AUTHORIZED PURPOSE PROPERLY OBLIGATES THE APPROPRIATION FOR THAT YEAR AND THAT WHERE THERE HAS BEEN A DEFAULT UNDER THAT CONTRACT DURING A SUBSEQUENT FISCAL YEAR, THE EXECUTION OF A NEW CONTRACT AT THE TIME AND FOR THE SAME PURPOSE IS IN EFFECT A PURCHASE AGAINST THE ACCOUNT OF THE DEFAULTING CONTRACTOR AND IS PROPERLY CHARGEABLE TO THE APPROPRIATION OBLIGATED BY THE DEFAULTED CONTRACT. SEE B-53731, DECEMBER 13, 1945.

HOWEVER, IN THE INSTANT CASE, THE PRESENT PURCHASE OF 10,400 METRIC TONS OF SOYA BEANS DOES NOT APPEAR TO BE ONE AGAINST THE ACCOUNT OF THE DEFAULTED CONTRACT WITH THE CENTRAL TRUST OF CHINA BUT RATHER A SEPARATE AND DISTINCT TRANSACTION. THE RECORD INDICATES THAT, WHEN THE CENTRAL TRUST OF CHINA BECAME UNABLE TO DELIVER UNDER ITS CONTRACT, THE TRANSACTION WITH IT WAS CONSIDERED CLOSED AND STEPS WERE TAKEN TO PURCHASE SUBSTITUTE COMMODITIES. THUS, AS INDICATED ABOVE, THE ORIGINAL CONTRACT FOR ALL INTENTS AND PURPOSES WAS CONSIDERED AS HAVING BEEN COMPLETED, THE BALANCE OF THE FUNDS ORIGINALLY ALLOCATED TO COVER PAYMENTS THEREUNDER WAS "DEOBLIGATED", AND SUCH BALANCE WAS USED FOR THE PURCHASE OF OTHER FOODSTUFFS THEN NEEDED.

UNDER THE CIRCUMSTANCES, THE CONTRACT ENTERED INTO WITH BOEKI CHO UNDER DATE OF JANUARY 12, 1949, MUST BE CONSIDERED A A COMPLETELY DIFFERENT TRANSACTION. HENCE, PAYMENTS THEREUNDER ARE NOT CHARGEABLE TO FUNDS APPROPRIATED FOR THE FISCAL YEAR 1947. ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT ON THE VOUCHER SUBMITTED, WHICH IS RETURNED HEREWITH, MAY NOT BE MADE FROM FUNDS CONTAINED IN THE APPROPRIATION CITED THEREON.

QUESTION 2 IS ANSWERED IN THE NEGATIVE.