B-117768, DEC. 18, 1961

B-117768: Dec 18, 1961

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MARITIME ADMINISTRATION: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 22. IN THE LETTER OF SEPTEMBER 22 IT IS STATED THAT IN CONSEQUENCE OF OUR DECISION OF DECEMBER 2. WHICH PROCEDURE WAS CONCURRED IN BY ALL OF THE SUBSIDIZED OPERATORS. IT WAS POINTED OUT IN THE BOARD'S LETTER OF SEPTEMBER 1. THE OBJECTIVE OF THE PROPOSAL WAS TO MAKE AVAILABLE TO THE SUBSIDIZED OPERATORS THE OPERATING-DIFFERENTIAL SUBSIDY RATES BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY IN ORDER THAT THE OPERATORS WOULD BE ABLE TO RENDER MORE ACCURATE FINANCIAL STATEMENTS TO MANAGEMENT. THE ADVANTAGE TO THE GOVERNMENT WAS THE ELIMINATION OF PART OF A MAJOR BACKLOG SINCE IT OBVIATED THE NECESSITY OF ESTABLISHING RATES FOR ONE CALENDAR YEAR.

B-117768, DEC. 18, 1961

TO CHAIRMAN, MARITIME SUBSIDY BOARD, MARITIME ADMINISTRATION:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 22, 1961, FROM MR. THOMAS E. STAKEM, THEN CHAIRMAN OF THE MARITIME SUBSIDY BOARD, REFERRING TO A DECISION OF THIS OFFICE DATED DECEMBER 2, 1954, B 117768, PUBLISHED IN 34 COMP. GEN. 269, CONCERNING A PROPOSAL OF THE FEDERAL MARITIME BOARD WHEREBY OPERATING-DIFFERENTIAL SUBSIDY RATES WOULD BE MADE AVAILABLE TO SUBSIDIZE SHIP OPERATORS BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY.

IN THE LETTER OF SEPTEMBER 22 IT IS STATED THAT IN CONSEQUENCE OF OUR DECISION OF DECEMBER 2, 1954, THE FEDERAL MARITIME BOARD ON DECEMBER 6, 1954, APPLIED THE 1953 OPERATION-DIFFERENTIAL SUBSIDY RATES TO THE CALENDAR YEAR 1954 ACTUAL COSTS OF OPERATORS RECEIVING OPERATING- DIFFERENTIAL SUBSIDIES AND THEREBY MADE UNNECESSARY THE COMPUTATION OF RATES FOR 1954, WHICH PROCEDURE WAS CONCURRED IN BY ALL OF THE SUBSIDIZED OPERATORS. IT WAS POINTED OUT IN THE BOARD'S LETTER OF SEPTEMBER 1, 1954, THE OBJECTIVE OF THE PROPOSAL WAS TO MAKE AVAILABLE TO THE SUBSIDIZED OPERATORS THE OPERATING-DIFFERENTIAL SUBSIDY RATES BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY IN ORDER THAT THE OPERATORS WOULD BE ABLE TO RENDER MORE ACCURATE FINANCIAL STATEMENTS TO MANAGEMENT, PREPARE FINAL TAX RETURNS IMMEDIATELY AFTER THE CLOSE OF THE CALENDAR YEAR, AND SUBMIT FINAL ACCOUNTINGS PROMPTLY UNDER THE RESERVE AND RECAPTURE PROVISIONS OF THEIR SUBSIDY AGREEMENTS; AND THE ADVANTAGE TO THE GOVERNMENT WAS THE ELIMINATION OF PART OF A MAJOR BACKLOG SINCE IT OBVIATED THE NECESSITY OF ESTABLISHING RATES FOR ONE CALENDAR YEAR.

THE MARITIME SUBSIDY BOARD NOW ADVISES THAT, WHILE THE ADOPTION OF THE 1953-4 CARRY-OVER PRINCIPLE REDUCED THE BACKLOG SUBSTANTIALLY, THE FULL ATTAINMENT OF THE OBJECTIVE SOUGHT HAS NOT BEEN REALIZED. CONSEQUENTLY, IT IS PROPOSED TO ADOPT THE SAME PRINCIPLE BY MAKING THE 1960 OPERATING- DIFFERENTIAL SUBSIDY RATES WHICH WERE BASED UPON 1959 COSTS APPLICABLE TO THE CALENDAR YEAR 1961 COSTS, AGAIN WITH THE CONCURRENCE OF THE SUBSIDIZED OPERATORS.

IT IS FURTHER EXPLAINED THAT WITH RESPECT TO WAGE SUBSIDY RATES, WHICH REPRESENT 85 PERCENT OF THE SUBSIDY ACCRUAL, INFORMATION INDICATES THAT RELATIVE STABILITY EXISTS BETWEEN UNITED STATES AND FOREIGN WAGE COSTS FOR THE YEARS 1960 AND 1961; BUT WITH RESPECT TO THE OTHER ITEMS OF SUBSIDIZABLE EXPENSE YOUR INFORMATION LEAVES LITTLE DOUBT THAT THE 1960 DISPARITY INCREASED IN 1961, WITH THE RESULT THAT THE RATES, IF CALCULATED, WOULD BE SOMEWHAT HIGHER THAN THE 1960 RATES. HOWEVER, IT IS STATED THAT THERE CAN BE NO ABSOLUTE CERTAINTY OF THAT RESULT, AND THE ADOPTION OF SUCH A PROCEDURE COULD RESULT IN VARIATIONS BETWEEN THE OPERATORS; BUT THE BOARD IS OF THE OPINION THAT THESE RESULTS WOULD TEND TO OFFSET EACH OTHER FROM THE STANDPOINT OF THE OVER-ALL SUBSIDY PAID, IRRESPECTIVE OF THE INDIVIDUAL OPERATORS CONCERNED, AND THAT BENEFITS WOULD FLOW BOTH TO THE GOVERNMENT AND THE SUBSIDIZED OPERATORS FROM THE EARLY ADOPTION OF THE RATES FOR 1961. HOWEVER, THE LETTER OF SEPTEMBER 22, 1961, IT IS STATED IT IS CONTEMPLATED THAT NO SUBSEQUENT CALCULATIONS WOULD BE MADE TO ASCERTAIN WHETHER THE GOVERNMENT OR THE OPERATOR GAINED AN ADVANTAGE OR SUSTAINED A DISADVANTAGE.

THE BOARD REQUESTS OUR CONFIRMATION THAT WE WILL NOT OBJECT TO THE ADOPTION OF THE PROPOSED PROCEDURE. IT IS FURTHER UNDERSTOOD INFORMALLY THAT IT IS INTENDED, IN THE EVENT OF OUR CONCURRENCE, TO RESUME THE DETERMINATION OF SUBSIDY RATES ON THE BASIS OF COSTS FOR THE YEAR IMMEDIATELY PRECEDING BEGINNING WITH 1961 COSTS.

THE RECORDS ON FILE IN THIS OFFICE INDICATE THAT DURING OUR STUDY OF THE MATTER, WHICH RESULTED IN OUR DECISION OF DECEMBER 2, 1954, IT WAS RECOGNIZED BY BOTH THE FEDERAL MARITIME BOARD AND OUR OFFICE THAT THE ADOPTION OF THE PROPOSAL SUBMITTED AT THAT TIME COULD POSSIBLY OPERATE TO THE MONETARY DISADVANTAGE OF EITHER THE GOVERNMENT OR THE OPERATORS. NOTWITHSTANDING THIS FACT, HOWEVER, WE COULD NOT ESCAPE THE CONCLUSION THAT FROM A STRICTLY LEGAL STANDPOINT SECTION 606 OF THE MERCHANT MARINE ACT AUTHORIZED THE BOARD, WITH THE CONCURRENCE OF THE OPERATORS, TO CONTINUE TO PAY SUBSIDY YEAR AFTER YEAR WITHOUT CHANGING THE RATES AT ALL. IN OUR DECISION OF DECEMBER 2, 1954, WE REFERRED TO THAT PORTION OF SECTION 606 OF THE ACT WHICH READS, IN PERTINENT PART, AS FOLLOWS:

"EVERY CONTRACT FOR AN OPERATING-DIFFERENTIAL SUBSIDY UNDER THIS TITLE SHALL PROVIDE (1) THAT THE AMOUNT OF THE FUTURE PAYMENTS TO THE CONTRACTOR SHALL BE SUBJECT TO REVIEW AND READJUSTMENT FROM TIME TO TIME, BUT NOT MORE FREQUENTLY THAN ONCE A YEAR, AT THE INSTANCE OF THE FEDERAL MARITIME BOARD OR OF THE CONTRACTOR. * * *"

IN CONSTRUING THIS SECTION, WE CONCLUDED AS FOLLOWS:

"THE CONGRESS HAS AUTHORIZED, UNDER THAT PART OF SECTION 606 QUOTED ABOVE, THE CONTINUED USE OF A PREVIOUS YEAR'S RATES DURING SUBSEQUENT YEARS, PROVIDED BOTH THE GOVERNMENT AND THE OPERATOR CONCUR. OF COURSE, IT IS TO BE ASSUMED THAT IF THE COST FACTORS SHOW A TENDENCY TO RISE OR FALL DURING A GIVEN YEAR TO THE DECIDED ADVANTAGE OF ONE PARTY OR THE OTHER, A REVIEW AND READJUSTMENT WILL BE REQUESTED BY THAT PARTY. BUT THE VERY EXISTENCE OF THE AUTHORITY TO CALCULATE THE SUBSIDY ON THE BASIS OF OTHER THAN CURRENT DATA COMPELS THE CONCLUSION THAT THE PROCEDURE DESCRIBED MUST ALSO BE WITHIN CONTEMPLATION OF THE LAW.'

SINCE THE FACTS INVOLVED IN THE PRESENT PROPOSAL APPEAR TO BE SUBSTANTIALLY SIMILAR TO THOSE EXISTING WHEN THE PRESENT PROCEDURE WAS ADOPTED BY THE BOARD IN 1954, WE AFFIRM THE CONCLUSION REACHED IN OUR DECISION OF DECEMBER 2, 1954, THAT THE PROCEDURE IS PERMITTED UNDER THE LAW. THE DECISION WHETHER TO ADOPT THE PROPOSED PROCEDURE IS, OF COURSE, A MATTER FOR ADMINISTRATIVE DETERMINATION BY THE BOARD. THE BASIS FOR THIS DETERMINATION AND ITS EFFECT UPON SUBSIDY PAYMENTS ARE OF COURSE SUBJECT TO REVIEW BY THIS OFFICE.

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