B-149987, APR. 27, 1965

B-149987, APR. 27, 1965

TO VICE ADMIRAL GLYNN R. DONAHO, COMMANDER, MILITARY SEA TRANSPORTATION SERVICE:

REFERENCE IS MADE TO A LETTER FROM MR. WILBUR L. MORSE, COUNSEL, DATED MARCH 15, 1965, FILE (E-143) SER 174M7, CONCERNING HANDLING CHARGES ON BERTH TERM SHIPMENTS LOADED (OR UNLOADED) AT MILITARY TERMINALS AT WEST COAST PORTS DURING THE PERIOD FROM 1951 THROUGH JUNE 1955.

THE SITUATION CONCERNS A CHARGE FOR HANDLING SERVICES (USUALLY 80 CENTS A NET TON) WHICH THE STEAMSHIP COMPANIES INCLUDED IN THEIR BILLS FOR FREIGHT ON BERTH TERM SHIPMENTS HANDLED OVER WEST COAST MILITARY TERMINALS DURING THE PERIOD IN QUESTION. IN THE PAYMENT OF THE BILLS THE MILITARY SEA TRANSPORTATION SERVICE (MSTS) DEDUCTED THE CHARGE FOR HANDLING, CONSISTENT WITH A NOTICE ISSUED BY MSTS ON OCTOBER 21, 1953, THAT HANDLING CHARGES SHOULD BE BILLED DIRECTLY TO THE SHIPPER SERVICES. THOSE SERVICES, HOWEVER, REFUSED TO HONOR BILLS FOR HANDLING CHARGES, BECAUSE THE VESSEL DID NOT PERFORM SUCH SERVICES, AS CARGO AT MILITARY TERMINALS IS HANDLED BY THE OPERATORS OF THE TERMINAL.

THE TARIFF RATES ON THE FREIGHT IN QUESTION ARE TACKLE TO TACKLE RATES, SO THAT THE COST OF LOADING AND UNLOADING THE VESSEL IS FOR ACCOUNT OF THE VESSEL. IN EACH INSTANCE MSTS DEDUCTED A LOADING AND UNLOADING CHARGE, SET UP BY THE ARMY, AS AN ALLOWANCE FOR PERFORMING THE LOADING SERVICE.

THE CARRIERS FILED CLAIMS TO RECOVER THE 80 CENTS PER NET TON HANDLING CHARGE DEDUCTED FROM THEIR BILLS BY MSTS BECAUSE IT WAS ALLEGED THAT THE ALLOWANCE FOR LOADING CLAIMED BY THE SHIPPER SERVICES INCLUDED HANDLING COSTS. THE MATTER WAS REFERRED TO OUR OFFICE WITH YOUR LETTER DATED JULY 13, 1962, FILE (E-143) SER 574M7, WHICH EXPLAINED THE SITUATION IN DETAIL AND RECOMMENDED ALLOWANCE OF THE CLAIMS. IT WAS ALSO STATED THAT PAYMENT COULD BE MADE BY MSTS RATHER THAN THE SHIPPER SERVICES AS IT WAS PROPERLY A CHARGE FOR FREIGHT.

WE AGREED IN SUBSTANCE WITH THE VIEW THAT, INSOFAR AS THE ARMY SHIPMENTS WERE CONCERNED, THE CARRIERS WERE ENTITLED TO BE REIMBURSED, INASMUCH AS THE CHARGE FOR LOADING ASSESSED BY THE ARMY INCLUDED A CHARGE FOR HANDLING. IN OUR LETTER TO YOUR OFFICE DATED JANUARY 8, 1965, WE EXPLAINED, HOWEVER, THAT THE CARRIERS WERE NOT ENTITLED TO THE FULL 80CENTS PER NET TON HANDLING CHARGE NAMED IN THEIR TARIFFS, SINCE THAT CHARGE WAS APPLICABLE ONLY WHEN THE VESSEL PERFORMED THE HANDLING. UPON ADVICE FROM THE ARMY THAT ITS CHARGE FOR LOADING WAS DETERMINED TO INCLUDE 15 PERCENT FOR HANDLING AS A PART OF THE TOTAL CHARGE, WE INFORMED YOUR OFFICE THAT THE CARRIERS WERE ENTITLED TO A REFUND OF THE 15 PERCENT WHICH WAS DETERMINED TO BE ALLOWABLE FOR HANDLING.

THE PRESENT QUESTION IS WHETHER MSTS OR THE SHIPPER SERVICES--- THE ARMY, IN THIS CASE--- SHOULD BE CHARGED FOR THE PAYMENTS TO BE MADE TO THE CARRIERS FOR THE HANDLING PERFORMED BY THEM. CERTIFICATES OF SETTLEMENT WERE ISSUED HERE ON OVER 100 CARRIER CLAIMS, DIRECTING THE MSTS TO REFUND THE AMOUNTS DUE, AS STATED IN THE SETTLEMENTS. THE CERTIFICATES WERE RETURNED TO OUR OFFICE WITH A LETTER DATED JUNE 23, 1964, WHICH ASKS THAT MSTS BE RELIEVED OF THE RESPONSIBILITY FOR REFUNDING THE AMOUNTS CERTIFIED AS DUE THE CLAIMANTS, BECAUSE "THE MONIES TO BE "REFUNDED" WERE COLLECTED, NOT BY COMSTS, BUT BY THE DEPARTMENT OF THE ARMY.'

IN OUR LETTER DATED JANUARY 8, 1965, WE INDICATED THAT MSTS HAD THE RESPONSIBILITY OF PAYING THE CLAIMS IN QUESTION, SINCE HANDLING CHARGES ON THE WEST COAST ARE PART OF THE TOTAL FREIGHT RATE. HOWEVER, SINCE YOUR OFFICE SAID, IN THE LETTER OF JUNE 23, 1964, THAT THE ARMY, NOT COMSTS, COLLECTED THE HANDLING CHARGE, WE ASKED FOR COMMENTS AS TO THE PROCEDURE FOLLOWED IN CHARGING AND CREDITING THE ARMY ON TWO REPRESENTATIVE BILLS, IDENTIFIED IN OUR LETTER OF JANUARY 8, BECAUSE IT SEEMED TO US THAT THE MONEY WITHHELD FROM THE CARRIERS FOR LOADING, UNLOADING AND HANDLING WAS NOT CREDITED TO THE ARMY. IF IT COULD BE ESTABLISHED THAT THE ARMY WAS CREDITED WITH THE 80 CENTS PER NET TONCHARGE FOR HANDLING SERVICES WHICH MSTS DELETED IN PAYING CARRIER BILLS FOR TRANSPORTATION, AS WELL AS THE LOADING AND UNLOADING CHARGES SUBTRACTED FROM THE TOTAL CHARGES BILLED, THERE WOULD THEN BE NO QUESTION THAT THE ARMY WOULD BE RESPONSIBLE FOR THE PAYMENT OF THE 15 PERCENT INVOLVED IN EACH INSTANCE.

A LETTER OF MARCH 15, 1965, FROM MR. MORSE, MAKES IT CLEAR THAT THE MONEY WITHHELD FROM THE CARRIERS FOR HANDLING WAS NOT CREDITED TO THE ARMY. THE CONCLUSION THAT SINCE "THE DEDUCTIONS MADE BY MSTS WERE NOT CREDITED TO THE ARMY, THE ARMY HAS BORNE THE HANDLING COSTS," IS NOT UNDERSTOOD. THE STATEMENT SUGGESTS THAT MSTS CHARGED THE ARMY FOR HANDLING COSTS IT (MSTS) DID NOT PAY TO THE CARRIERS. FURTHERMORE, SINCE IT HAS BEEN ESTABLISHED THAT THE LOADING CHARGE WHICH YOU DEDUCTED FROM THE CARRIERS' BILLS CONTAINED AN ELEMENT OF HANDLING--- 15 PERCENT--- WHICH MSTS RETAINED, IT IN EFFECT HAS CREDIT IN ITS ACCOUNT FOR TWO CHARGES FOR HANDLING, I.E., THE HANDLING INCLUDED IN THE LOADING COSTS DEDUCTED, AND THE 80 CENTS PER NET TON CHARGE NOT ALLOWED IN PAYMENT OF THE ORIGINAL BILLING.

IN THESE CIRCUMSTANCES, WE SEE NO REASON WHY THE ARMY SHOULD BE EXPECTED TO ASSUME THE EXPENSES REPRESENTED BY THE 15 PERCENT TO BE REFUNDED, SINCE THEY ARE CLEARLY CHARGEABLE TO THE NAVY INDUSTRIAL FUND WHERE CREDIT WAS RETAINED WHEN THE DEDUCTIONS FROM THE CARRIERS' BILLS WERE MADE.

THE SETTLEMENTS IN QUESTION WILL BE RETURNED FOR PAYMENT IN ACCORDANCE WITH THE FOREGOING.