B-99450, FEBRUARY 3, 1958, 37 COMP. GEN. 505

B-99450: Feb 3, 1958

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THERE IS NO LAW WHICH PERMITS OR REQUIRES THE IMPORT TAX ON PETROLEUM PRODUCTS TO BE ADDED TO BIDS FOR FURNISHING JET FUEL FROM FOREIGN SOURCES. SINCE PETROLEUM PRODUCTS ARE EXEMPT FROM THE BUY AMERICAN ACT AND JET FUEL COMES WITHIN THE MEANING OF SUPPLIES FOR AIRCRAFT IN 19 U.S.C. 1309 (A) (1). 1958: REFERENCE IS MADE TO LETTER DATED JANUARY 29. IT IS STATED THAT ON JANUARY 14. IF PROCUREMENT OF THE SUPPLEMENTAL QUANTITY ( IFB 58-67) IS MADE WITHOUT INCLUDING THE IMPORT TAX OF 1.25 CENTS PER GALLON IN THE EVALUATION OF FOREIGN BIDS. 2 MILLION BARRELS OR 60 PERCENT WILL BE BOUGHT IN THE CARIBBEAN. IF THE IMPORT TAX IS ADDED FOR EVALUATION PURPOSES. THIS FIGURE WILL FALL TO 300. 000 BARRELS OR 9 PERCENT AND THE COST TO THE GOVERNMENT WILL INCREASE APPROXIMATELY $500.

B-99450, FEBRUARY 3, 1958, 37 COMP. GEN. 505

PROCUREMENT OF JET FUEL - FOREIGN V. DOMESTIC BIDS - IMPORT TAX - BUY AMERICAN ACT, ETC., APPLICATION IN THE PROCUREMENT OF JET FUEL BY THE MILITARY DEPARTMENTS, THERE IS NO LAW WHICH PERMITS OR REQUIRES THE IMPORT TAX ON PETROLEUM PRODUCTS TO BE ADDED TO BIDS FOR FURNISHING JET FUEL FROM FOREIGN SOURCES, SINCE PETROLEUM PRODUCTS ARE EXEMPT FROM THE BUY AMERICAN ACT AND JET FUEL COMES WITHIN THE MEANING OF SUPPLIES FOR AIRCRAFT IN 19 U.S.C. 1309 (A) (1), WHICH PERMITS THE ADMISSION OF SUCH SUPPLIES FREE OF CUSTOMS DUTY.

TO THE SECRETARY OF THE NAVY, FEBRUARY 3, 1958:

REFERENCE IS MADE TO LETTER DATED JANUARY 29, 1958, FROM THE ASSISTANT SECRETARY OF THE NAVY ( MATERIAL), REQUESTING OUR OPINION AS TO WHETHER THE IMPORT TAX ON JET FUEL, IMPOSED PURSUANT TO SECTION 4521 OF THE 1954 INTERNAL REVENUE CODE, 26 U.S.C. 4521, MUST AS A MATTER OF LAW BE ADDED TO BIDS OFFERING PETROLEUM FUELS F.O.B. FOREIGN REFINERY SOURCES WHEN EVALUATING SUCH BIDS AGAINST BIDS OFFERING SIMILAR FUELS F.O.B. DOMESTIC REFINERY SOURCES.

IT IS STATED THAT ON JANUARY 14, 1958, THE MILITARY PETROLEUM SUPPLY AGENCY OPENED BIDS FOR THE PROCUREMENT OF APPROXIMATELY 46.7 MILLION BARRELS OF JET FUEL UNDER MPSA SOLICITATIONS IFB 58-67 AND IFB 58-55. PRELIMINARY EVALUATION OF THESE SOLICITATIONS INDICATES THAT:

A. IF PROCUREMENT OF THE SUPPLEMENTAL QUANTITY ( IFB 58-67) IS MADE WITHOUT INCLUDING THE IMPORT TAX OF 1.25 CENTS PER GALLON IN THE EVALUATION OF FOREIGN BIDS, 2 MILLION BARRELS OR 60 PERCENT WILL BE BOUGHT IN THE CARIBBEAN. IF THE IMPORT TAX IS ADDED FOR EVALUATION PURPOSES, THIS FIGURE WILL FALL TO 300,000 BARRELS OR 9 PERCENT AND THE COST TO THE GOVERNMENT WILL INCREASE APPROXIMATELY $500,000.

B. IF PROCUREMENT OF THE 43.4 MILLION BARREL QUANTITY FOR THE PERIOD 1 APRIL THROUGH 30 SEPTEMBER 1958 ( IFB 58-55) IS MADE WITHOUT INCLUDING THE IMPORT TAX IN EVALUATION, 10.5 TO 12.3 MILLION BARRELS OR 24 TO 28 PERCENT WILL BE PURCHASED FROM THE CARIBBEAN. IF THE IMPORT TAX IS ADDED, THIS FIGURE WILL FALL TO 4.4 TO 5.4 MILLION BARRELS OR 10 TO 12 PERCENT AND THE COST TO THE GOVERNMENT WILL INCREASE APPROXIMATELY $2,500,000. THIS INFORMATION IS SET FORTH IN GREATER DETAIL IN ENCLOSURES (1) AND (2).

IT IS FURTHER STATED THAT THE MILITARY PETROLEUM SUPPLY AGENCY HAS SINCE WORLD WAR II FOLLOWED A PRACTICE OF EVALUATING BIDS OFFERING BULK QUANTITIES OF PETROLEUM FUELS F.O.B. TANKER AT DOMESTIC REFINERIES AND BIDS OFFERING SUCH FUELS F.O.B. TANKER AT FOREIGN REFINERIES ON AN ESSENTIALLY EQUAL BASIS WHEN PURCHASING DOMESTIC UNITED STATES AND OTHER WESTERN HEMISPHERE MILITARY REQUIREMENTS. PURCHASES HAVE BEEN BASED UPON THE LOWEST NET COST TO THE GOVERNMENT, BASED ON APPLICABLE TRANSPORTATION AND HANDLING COSTS. NEITHER THE BUY AMERICAN ACT NOR THE IMPORT TAX ON PETROLEUM FUELS HAS BEEN APPLIED IN THE EVALUATION OF SUCH BIDS.

IT CONSISTENTLY HAS BEEN HELD THAT THE LOWEST BID IS THAT BID WHICH RESULTS IN THE LOWEST NET COST TO THE GOVERNMENT. THERE IS NO GENERAL AUTHORITY TO DISTINGUISH BETWEEN BIDDERS, OR SOURCES FROM WHICH THE SUPPLIES ARE TO BE OBTAINED, FOREIGN, DOMESTIC, LARGE OR SMALL, EXCEPT AS SPECIFICALLY AUTHORIZED BY LAW. SO FAR AS IS KNOWN THE ONLY DISTINCTION THAT PROPERLY COULD BE DRAWN BETWEEN THE FOREIGN AND DOMESTIC BIDS HERE INVOLVED ARISES FROM THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10, AND IT IS STATED THAT PETROLEUM FUELS HAVE BEEN EXCEPTED FROM THAT ACT, IN THE PUBLIC INTEREST, ON THE GROUND OF DEVELOPING AND MAINTAINING BALANCED WESTERN HEMISPHERE PETROLEUM RESOURCES ASPR 6-109.1.

THE IMPORT TAX ON PETROLEUM PRODUCTS IMPOSED BY SECTION 4521 OF THE 1954 INTERNAL REVENUE CODE IS, BY THE PROVISIONS OF SECTION 4601, 26 U.S.C. 4601, TO BE TREATED FOR THE PURPOSES OF ALL PROVISIONS OF LAW RELATING TO CUSTOMS REVENUE AS A DUTY IMPOSED BY THE TARIFF ACT OF 1930 (46 STAT. 590, 19 U.S.C., CHAPTER 4). PURSUANT TO THE PROVISIONS OF SECTION 1309 (A) (1) OF TITLE 19 U.S.C., SUPPLIES FOR VESSELS OR AIRCRAFT OPERATED BY THE UNITED STATES MAY BE ADMITTED FREE OF CUSTOMS DUTY. JET FUEL IS TO BE REGARDED AS "SUPPLIES" FOR AIRCRAFT. THEREFORE, IT IS STATED THAT THE MILITARY DEPARTMENTS HAVE NOT PAID, AND ARE NOT REQUIRED TO PAY, THE IMPORT TAX ON JET FUEL.

IN VIEW OF THE FOREGOING AND SINCE PETROLEUM PRODUCTS HAVE BEEN COMPLETELY EXCEPTED FROM THE PROVISIONS OF THE BUY AMERICAN ACT, WE ARE NOT AWARE OF ANY PROVISION OF LAW THAT REQUIRES OR PERMITS, FOR EVALUATION PURPOSES, THE ADDING OF THE IMPORT TAX ON PETROLEUM PRODUCTS TO BIDS QUOTING ON FURNISHING FROM FOREIGN SOURCES JET FUEL UNDER THE CIRCUMSTANCES RELATED.