B-141459, MAY 10, 1960, 39 COMP. GEN. 760

B-141459: May 10, 1960

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HAVE BEEN ADDED TO THE FOREIGN BID. WHICH UNDER THE TERMS OF THE ACT AND ORDER IS A MATERIAL FACTOR IN DETERMINATION OF THE REQUIREMENTS OF PUBLIC INTEREST. TAKE PRECEDENCE IS VESTED IN THE HEAD OF THE PROCUREMENT DEPARTMENT OR AGENCY. THE ADVERSE AFFECT ON THE MONETARY TRADE BALANCE ARE NOT FOR CONSIDERATION IN BUY AMERICAN ACT CASES. SUCH REMEDIES ARE NOT IN CONFLICT WITH THE BUY AMERICAN ACT. DO NOT AFFORD ANY LEGAL JUSTIFICATION FOR QUESTIONING AN AWARD TO THE FOREIGN BIDDER WHOSE BID IS 72 PERCENT LESS THAN THE AMERICAN BIDDER. WHO WOULD PERFORM IN A LABOR SURPLUS AREA WHEN THE BID OF THE FOREIGN SOURCE IS 72 PERCENT LESS THAN THE AMERICAN BID. LABOR SURPLUS AREA CONSIDERATIONS ARE NOT REQUIRED IN EVALUATION OF BIDS.

B-141459, MAY 10, 1960, 39 COMP. GEN. 760

CONTRACTS - BIDS - BUY AMERICAN ACT - APPLICABILITY OF STATUTES PROTECTING AMERICAN INDUSTRY CONSIDERATION OF AN ITEM OFFERED BY AN AMERICAN PRODUCER WHICH EXCEEDS THE COST OF A FOREIGN PRODUCT BY 72 PERCENT, AFTER TRANSPORTATION COSTS, CUSTOMS DUTY, AND THE SIX PERCENT DIFFERENTIAL FIXED BY EXECUTIVE ORDER NO. 10582, PURSUANT TO THE BUY AMERICAN ACT, 41 U.S.C. 10A, ET SEQ., HAVE BEEN ADDED TO THE FOREIGN BID, WOULD BE UNWARRANTED ON THE BASIS OF THE UNREASONABLE PRICE UNDER THE ACT AND EXECUTIVE ORDER WHICH MAKE THE COST ELEMENT A MATERIAL FACTOR IN THE DETERMINATION OF PUBLIC INTEREST REQUIREMENTS. THE DUTY AND AUTHORITY TO MAKE A FINDING UNDER THE BUY AMERICAN ACT AND EXECUTIVE ORDER 10582 THAT FACTORS, OTHER THAN PRICE, WHICH UNDER THE TERMS OF THE ACT AND ORDER IS A MATERIAL FACTOR IN DETERMINATION OF THE REQUIREMENTS OF PUBLIC INTEREST, TAKE PRECEDENCE IS VESTED IN THE HEAD OF THE PROCUREMENT DEPARTMENT OR AGENCY, AND IN THE ABSENCE OF SUCH A FINDING OR IN THE ABSENCE OF STATUTORY AUTHORITY FOR CONSIDERATION OF POLITICAL AND ECONOMIC FACTORS, SUCH ITEMS AS THE AMERICAN INDUSTRY SITUATION, THE DEPRIVATION OF TAX REVENUE, AND THE ADVERSE AFFECT ON THE MONETARY TRADE BALANCE ARE NOT FOR CONSIDERATION IN BUY AMERICAN ACT CASES. THE CONSIDERATION OF A POSSIBLE PATENT INFRINGEMENT CLAIM OF AMERICAN BIDDER IN THE DETERMINATION OF AN AWARD TO A FOREIGN BIDDER, WHO OFFERS A PRODUCT 72 PERCENT LOWER IN COST THAN THE DOMESTIC ITEM, WOULD BE INCONSISTENT WITH PUBLIC INTEREST WHICH REQUIRES THE ENCOURAGEMENT OF COMPETITION IN VIEW OF THE SPECIFIC REMEDIES PROVIDED FOR PATENT HOLDERS IN 28 U.S.C. 1498, AND SUCH REMEDIES ARE NOT IN CONFLICT WITH THE BUY AMERICAN ACT, 41 U.S.C. 10A, ET SEQ. POSSIBLE COSTS TO THE GOVERNMENT IN DEFENDING PATENT INFRINGEMENT LITIGATION WHICH MIGHT ARISE FROM THE PURCHASE OF A PRODUCT FROM A LOW FOREIGN BIDDER, RATHER THAN FROM THE AMERICAN BIDDER WHO HAS A PATENT ON THE PRODUCT, DO NOT AFFORD ANY LEGAL JUSTIFICATION FOR QUESTIONING AN AWARD TO THE FOREIGN BIDDER WHOSE BID IS 72 PERCENT LESS THAN THE AMERICAN BIDDER. THE ADDITION OF A 12 PERCENT PRICE DIFFERENTIAL TO THE BID OF AN AMERICAN BIDDER, WHO WOULD PERFORM IN A LABOR SURPLUS AREA WHEN THE BID OF THE FOREIGN SOURCE IS 72 PERCENT LESS THAN THE AMERICAN BID, WOULD BE INEFFECTUAL AND, THEREFORE, LABOR SURPLUS AREA CONSIDERATIONS ARE NOT REQUIRED IN EVALUATION OF BIDS. CONSIDERATION OF THE ANTIDUMPING ACT, 19 U.S.C. 160-171, WHICH PERMITS THE IMPOSITION OF ADDITIONAL DUTIES ON IMPORTS WHICH UNDERMINE THE AMERICAN MARKET BASED ON THE DIFFERENCE BETWEEN THE FOREIGN MARKET PRICE AND THE DOMESTIC PRICE, IN THE EVALUATION OF A FOREIGN BID WHICH IS 72 PERCENT LESS THAN THE AMERICAN BID AFTER TRANSPORTATION COSTS, CUSTOMS DUTY, AND THE SIX PERCENT DIFFERENTIAL FIXED BY EXECUTIVE ORDER NO. 10582, UNDER THE BUY AMERICAN ACT, 41 U.S.C. 10A, ET EQ., HAVE BEEN ADDED, DOES NOT REQUIRE REJECTION OF THE FOREIGN BID IN THE ABSENCE OF THE APPLICATION OF THE ANTIDUMPING ACT TO THE PROCUREMENT OF AN ITEM WHICH IS NOT FOR SALE OR RESALE AND THE ACCOMPLISHMENT OF THE PRESCRIBED ADMINISTRATIVE PROCEDURES. WHETHER AN AWARD TO A FOREIGN BIDDER, WHICH WAS MADE ON THE BASIS OF A BID PRICE 72 PERCENT LESS THAN THAT OF THE AMERICAN BID, WOULD VIOLATE SECTION 337 OF THE TARIFF ACT OF 1930, 19 U.S.C. 1337, ET SEQ., WHICH ESTABLISHES PROCEDURES IN THE EVENT OF THE EXISTENCE OF UNFAIR ACTS IN THE IMPORTATION OF GOODS WHICH MIGHT INJURE OR DESTROY AMERICAN INDUSTRY, IS NOT A MATTER FOR CONSIDERATION BY THE PROCUREMENT AGENCY OR THE COMPTROLLER GENERAL.

TO CHARLES PFIZER AND COMPANY, INC. MAY 10, 1960:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 18, 1959, AND TO LETTER DATED FEBRUARY 26, 1960, WRITTEN IN YOUR BEHALF BY THE LAW FIRM OF GARDNER, MORRISON AND ROGERS, BOTH PROTESTING AGAINST THE AWARD OF A CONTRACT TO A FOREIGN COMPANY BY THE MILITARY MEDICAL SUPPLY AGENCY UNDER REQUEST FOR QUOTATIONS NO. 5642, COVERING THE PROCUREMENT OF A CONTRACT TO A FOREIGN COMPANY BY THE MILITARY MEDICAL SUPPLY AGENCY UNDER REQUEST FOR QUOTATIONS NO. 5642, COVERING THE PROCUREMENT OF A QUANTITY OF TETRACYCLINE HYDROCHLORIDE TABLETS. THE SEVERAL GROUNDS UPON WHICH YOU PREDICATE YOUR PROTEST, AND THOSE URGED BY YOUR ATTORNEYS, WILL BE CONSIDERED SEPARATELY IN THE ORDER PRESENTED.

IT IS CONTENDED BY YOU THAT THE AWARD OF A CONTRACT TO AN ITALIAN COMPANY IN THIS INSTANCE VIOLATES THE BUY AMERICAN ACT, 41 U.S.C. 10A ET SEQ., IN THAT IT IS INCONSISTENT WITH THE PUBLIC INTEREST. THAT ACT PROVIDES, IN PERTINENT PART, THAT---

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, AND UNLESS THE HEAD OF THE DEPARTMENT OR INDEPENDENT ESTABLISHMENT CONCERNED SHALL DETERMINE IT TO BE INCONSISTENT WITH THE PUBLIC INTEREST, OR THE COST TO BE UNREASONABLE, * * * ONLY SUCH MANUFACTURED ARTICLES, MATERIALS, AND SUPPLIES AS HAVE BEEN MANUFACTURED IN THE UNITED STATES SUBSTANTIALLY ALL FROM ARTICLES, MATERIALS, OR SUPPLIES MINED, PRODUCED, OR MANUFACTURED, AS THE CASE MAY BE, IN THE UNITED STATES, SHALL BE ACQUIRED FOR PUBLIC USE.

IN ORDER THAT THE PROVISIONS OF THAT ACT BE UNIFORMLY ADMINISTERED, AND FOR OTHER PURPOSES, THE PRESIDENT OF THE UNITED STATES ISSUED EXECUTIVE ORDER NO. 10582, DATED DECEMBER 17, 1954, WHICH IN PERTINENT PART IS AS FOLLOWS:

SEC. 2 (B) FOR THE PURPOSES OF THE SAID ACT OF MARCH 3, 1933, AND OTHER LAWS REFERRED TO IN THE FIRST PARAGRAPH OF THE PREAMBLE OF THIS ORDER, THE BID OR OFFERED PRICE OF MATERIALS OF DOMESTIC ORIGIN SHALL BE DEEMED TO BE UNREASONABLE, OR THE PURCHASE OF SUCH MATERIALS SHALL BE DEEMED TO BE INCONSISTENT WITH THE PUBLIC INTEREST, IF THE BID OR OFFERED PRICE THEREOF EXCEEDS THE SUM OF THE BID OR OFFERED PRICE OF LIKE MATERIALS OF FOREIGN ORIGIN AND A DIFFERENTIAL COMPUTED AS PROVIDED IN SUBSECTION (C) OF THIS SECTION.

(C) THE EXECUTIVE AGENCY CONCERNED SHALL IN EACH INSTANCE DETERMINE THE AMOUNT OF THE DIFFERENTIAL REFERRED TO IN SUBSECTION (B) OF THIS SECTION ON THE BASIS OF ONE OF THE FOLLOWING-DESCRIBED FORMULAS, SUBJECT TO THE TERMS THEREOF:

(1) THE SUM DETERMINED BY COMPUTING SIX PERCENTUM OF THE BID OR OFFERED PRICE OF MATERIALS OF FOREIGN ORIGIN.

THE RECORD DISCLOSES THAT IN THE COURSE OF NEGOTIATIONS YOU ULTIMATELY BECAME THE LOWEST DOMESTIC OFFEROR, HAVING QUOTED A PRICE OF $965,376 ($16.76 PER UNIT BOTTLE OF 100 TABLETS) FOR THE CONTRACT QUANTITY, COMPARED TO AN OFFER OF $469,440 ($8.13 PER UNIT) SUBMITTED BY THE FOREIGN OFFEROR, FARMOCHIMICA CUTOLO-CALOSI. PURSUANT TO THE BUY AMERICAN ACT, AND THE RELATED EXECUTIVE ORDER, THE FOREIGN OFFER WAS EVALUATED BY ADDING THERETO TRANSPORTATION COSTS, CUSTOMS DUTY, AND THE SIX PERCENT DIFFERENTIAL FIXED BY THE SAID ORDER, RESULTING IN AN ADJUSTED QUOTATION OF $561,445.11. BY COMPARISON YOUR PROPOSAL EXCEEDED THE FOREIGN BID BY $403,931, OR 72 PERCENT.

UNDER THE TERMS OF THE ACT AND EXECUTIVE ORDER, THE COST ELEMENT IS MADE A MATERIAL FACTOR FOR CONSIDERATION IN DETERMINING THE REQUIREMENTS OF THE PUBLIC INTEREST IN SUCH CASES, AND CERTAINLY THE PAYMENT TO A DOMESTIC PRODUCER OF AN AMOUNT EXCEEDING BY 72 PERCENT THE COST OF A FOREIGN PRODUCT, IN THE ABSENCE OF OTHER CONSIDERATIONS NOT PRESENT IN THIS CASE, WOULD, IN OUR OPINION, BE UNWARRANTED. IF, AS YOU CONTEND, THIS PROCUREMENT IS INCONSISTENT WITH THE PUBLIC INTEREST ON OTHER GROUNDS WHICH MIGHT TAKE PRECEDENCE OVER THE UNREASONABLENESS OF YOUR BID, THE DUTY AND AUTHORITY PROVIDED FOR IN THE ACT TO MAKE SUCH FINDING IS VESTED IN THE HEAD OF THE DEPARTMENT OR AGENCY CONCERNED. ALSO, YOUR FURTHER CONTENTIONS THAT AWARD TO AN ITALIAN CONCERN WOULD WEAKEN THE AMERICAN ANTIBIOTIC INDUSTRY, DEPRIVE THE GOVERNMENT OF TAX REVENUE, AND ADVERSELY AFFECT OUR MONETARY TRADE BALANCE, ARE ARGUMENTS OF A POLITICAL OR ECONOMIC NATURE WHICH CANNOT BE CONSIDERED BY US EXCEPT AS THEY MAY BE EMBODIED IN PERTINENT STATUTORY ENACTMENTS.

A FURTHER BASIS FOR YOUR PROTEST RELATES TO THE VIOLATION BY THE GOVERNMENT OF YOUR PATENT RIGHTS AS A RESULT OF THE PURCHASE OF THE TABLETS FROM A FOREIGN PRODUCER. YOU CONTEND THAT THE REMEDIAL PROVISIONS OF 28 U.S.C. 1498 WERE NOT ENACTED BY THE CONGRESS TO UNDERMINE THE BUY AMERICAN ACT; THAT THE DEFENSE OF INFRINGEMENT LITIGATION WILL BE COSTLY TO THE GOVERNMENT; AND THAT YOU ARE DEPRIVED OF AN ADDITIONAL LEGAL RECOURSE AGAINST THE CONTRACTOR OTHERWISE AVAILABLE TO A PATENTEE AGAINST UNLICENSED SOURCES, SINCE THE MANUFACTURER IS AN ITALIAN CONCERN.

IN A PREVIOUS CASE INVOLVING SOMEWHAT SIMILAR CIRCUMSTANCES IT WAS HELD BY OUR OFFICE IN DECISION OF OCTOBER 5, 1958, 38 COMP. GEN. 276, THAT IT WOULD BE IMPROPER TO REJECT A LOW BID MERELY BECAUSE THE BIDDER WAS NOT LICENSED TO MANUFACTURE A PATENTED ARTICLE. SUCH CONCLUSION WAS PREDICATED UPON THE PRINCIPLE THAT COMPETITIVE BIDDING ON GOVERNMENT CONTRACTS SHOULD BE ENCOURAGED, REGARDLESS OF A POSSIBLE INFRINGEMENT CLAIM, PARTICULARLY IN VIEW OF THE OBVIOUS PURPOSE AND INTENT OF 28 U.S.C. 1498, WHICH WAS DESIGNED TO COMPENSATE THE PATENT HOLDER IN SUCH SITUATIONS. TO CONCLUDE OTHERWISE WOULD BE INCONSISTENT WITH PUBLIC INTEREST SINCE IT WOULD DISCOURAGE COMPETITION, AND WE SEE NO CONFLICT BETWEEN THAT STATUTE AND THE PROVISIONS OF THE BUY AMERICAN ACT.

WITH RESPECT TO THE MATTER OF THE GOVERNMENT'S BEING A PARTY TO INFRINGEMENT OF YOUR PATENT, IT SEEMS APPARENT TO US THAT 28 U.S.C. 1498 (WHICH WAS DERIVED FROM THE ACT OF JUNE 25, 1910, 36 STAT. 851, AS AMENDED BY THE ACT OF JULY 1, 1918, AND FORMERLY WAS CARRIED AS 35 U.S.C. 68) WAS ENACTED BY THE CONGRESS SPECIFICALLY TO ENABLE THE GOVERNMENT TO OBTAIN OR USE PATENTED ARTICLES FROM ANY SOURCE BY PAYMENT OF REASONABLE COMPENSATION TO THE PATENTEE. CLEARLY, THAT ACT IS AN AMENDMENT TO THE PATENT LAWS AND RESTRICTS THE RIGHTS OF A PATENTEE BY PROVIDING FOR GOVERNMENT USE OF PATENTS SUBJECT TO PAYMENT OF FAIR COMPENSATION FOR SUCH USE. THE POSSIBLE COSTS TO THE GOVERNMENT OF DEFENDING ANY LITIGATION WHICH MIGHT BE INSTITUTED AS A RESULT OF THIS PROCUREMENT AFFORD NO LEGAL JUSTIFICATION FOR QUESTIONING THE ADMINISTRATIVE ACTION TAKEN. YOU ARE NOT DEPRIVED OF ANY REMEDY BY THE AWARD TO A FOREIGN CONTRACTOR, SINCE YOUR ACTION AGAINST THE GOVERNMENT UNDER 28 U.S.C. 1498 IS THE SOLE AND EXCLUSIVE REMEDY ALLOWED. SEE RICHMOND SCREW ANCHOR CO. V. UNITED STATES, 275 U.S. 331.

YOU FURTHER ALLEGE, AS GROUNDS FOR YOUR PROTEST, THAT THE CONTRACT COULD HAVE BEEN PERFORMED IN A LABOR DISTRESSED AREA. UNDER APPLICABLE REGULATIONS ISSUED PURSUANT TO LAW, A PRICE DIFFERENTIAL OF 12 PERCENT IN FAVOR OF A DOMESTIC SOURCE FROM SUCH LABOR SURPLUS AREA WOULD APPLY IN EVALUATION OF THE BIDS. IN VIEW OF THE SUBSTANTIAL EXCESS OF YOUR OFFER OVER THE FOREIGN BID SUCH DIFFERENTIAL WOULD BE INEFFECTUAL.

WITH RESPECT TO YOUR CONTENTIONS THAT THE AWARD WAS IMPROPER BECAUSE THE ITALIAN FIRM WAS NOT QUALIFIED AS A RESPONSIBLE CONTRACTOR; THAT THE PROCUREMENT PROCEDURE FOLLOWED BY THE AGENCY WAS CONTRARY TO REGULATIONS; AND THAT THE TRANSACTION DISCRIMINATED AGAINST DOMESTIC PRODUCERS, THE RECORD FURNISHES NO FACTUAL SUPPORT FOR YOUR POSITION.

THE MAIN CONTENTION OF YOUR COUNSEL IS THAT A PROPER EVALUATION OF THE BID OF THE ITALIAN FIRM WOULD HAVE SHOWN A TRUE PRICE OF $22.03 PER UNIT, AS AGAINST YOUR QUOTATION OF APPROXIMATELY $16.75 PER UNIT. THIS RESULT IS PREMISED UPON A FIGURE OF $19.20 PER UNIT AS THE "MARKET VALUE" OF THE PRODUCT IN ITALY. ON THIS VALUATION IT IS CLAIMED THAT THE APPLICABLE AD VALOREM DUTY OF 12 1/2 PERCENT WOULD AMOUNT TO $2.03, AND THAT AN "ANTIDUMPING" DUTY UNDER THE PROVISIONS OF 19 U.S.C. 160 171 SHOULD BE ASSESSED IN THE AMOUNT OF $11.07 PER UNIT (THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND THE ALLEGED MARKET VALUE).

THE ANTIDUMPING ACT OF MAY 27, 1921, 42 STAT. 15 (19 U.S.C. 160-171) PROVIDES, IN PERTINENT PART THAT---

160 (A) WHENEVER THE SECRETARY OF THE TREASURY * * * DETERMINES THAT A CLASS OR KIND OF FOREIGN MERCHANDISE IS BEING * * * SOLD IN THE UNITED STATES * * * AT LESS THAN ITS FAIR VALUE, HE SHALL SO ADVISE THE UNITED STATES TARIFF COMMISSION, AND THE SAID COMMISSION SHALL DETERMINE * * * WHETHER AN INDUSTRY IN THE UNITED STATES IS BEING OR IS LIKELY TO BE INJURED * * * BY REASON OF THE IMPORTATION OF SUCH MERCHANDISE INTO THE UNITED STATES.

161 (A) IN THE CASE OF ALL IMPORTED MERCHANDISE * * * TO WHICH THE SECRETARY OF THE TREASURY HAS MADE A PUBLIC FINDING AS PROVIDED FOR IN SECTION 160 OF THIS TITLE * * * IF THE PURCHASE PRICE OR THE EXPORTER'S SALE PRICE IS LESS THAN THE FOREIGN MARKET VALUE (OR IN THE ABSENCE OF SUCH VALUE, THAN THE CONSTRUCTED VALUE) THERE SHALL BE LEVIED, COLLECTED, AND PAID, IN ADDITION TO ANY OTHER DUTIES IMPOSED THEREON BY LAW, A SPECIAL DUMPING DUTY IN AN AMOUNT EQUAL TO SUCH DIFFERENCE.

THE PURPOSE OF THIS ACT IS TO IMPOSE ADDITIONAL DUTIES ON IMPORTS WHICH, BECAUSE OF THEIR VOLUME AND LOWER PRICE, THREATEN TO UNDERMINE THE AMERICAN MARKET FOR DOMESTIC PRODUCTS. SUCH PURPOSE IS INTENDED TO BE ACCOMPLISHED BY EQUALIZING THE COST OF A FOREIGN ARTICLE WITH ITS DOMESTIC EQUIVALENT THROUGH A SUPPLEMENTAL DUTY BASED UPON THE DIFFERENCE BETWEEN THE FOREIGN MARKET PRICE AND THE PURCHASE, OR CONTRACT PRICE.

THE DETERMINATION OF THE FOREIGN MARKET PRICE IS VESTED BY THE ACT IN THE SECRETARY OF THE TREASURY, SUBJECT TO STANDARDS SPECIFIED IN 19 U.S.C. 161, 164, AND 165. HOWEVER, WE ARE WHOLLY UNABLE TO ACCEPT EVEN TENTATIVELY THE FIGURE OF $19.20 PROPOSED BY YOUR COUNSEL, WHICH WE UNDERSTAND FROM THE NAVY DEPARTMENT HAS BEEN DERIVED FROM ITALIAN PRICING OF BOTTLES OF EIGHT CAPSULES. CONSIDERING THE QUANTITY INVOLVED IN THE SUBJECT PROCUREMENT, PARTICULARLY IN THE LIGHT OF THE REPORTED FACT THAT YOUR BID PRICE IS APPROXIMATELY 46 PERCENT UNDER YOUR PUBLISHED WHOLESALE PRICE PER BOTTLE OF 100 TABLETS, WE PERCEIVE NO REASONABLE BASIS FOR ANTICIPATING THAT THE SECRETARY OF THE TREASURY COULD, WITH DUE REGARD TO THE MANDATE OF 19 U.S.C. 161 (B) (1), FIND A FOREIGN MARKET VALUE APPROACHING SUCH A FIGURE AS $19.20 FIGURE AS THE NORMAL ITALIAN PRICE, AND CONCEDING ARGUENDO, THE APPLICABILITY OF THE ANTIDUMPING ACT, IT APPEARS THAT A QUANTITY DISCOUNT OF 30 PERCENT WOULD OVERCOME THE SIX PERCENT DIFFERENTIAL PRESCRIBED BY THE PRESIDENT UNDER THE BUY AMERICAN ACT. IN THE CIRCUMSTANCES, WE HAVE NO MORE REASON TO BELIEVE THAT THE CONTRACT PRICE IN QUESTION IS UNREASONABLY LOW BASED ON THE FOREIGN MARKET, THAN WE HAVE REASON TO BELIEVE THAT YOUR QUOTATION IS UNREASONABLY HIGH BASED ON ACTUAL PRODUCTION COSTS.

IN ANY EVENT, THIS PROCUREMENT IS NOT FOR THE SALE OR RESALE OF THE DRUG IN THE UNITED STATES, AND WILL NOT, IN OUR OPINION, AFFECT THE INDUSTRY IN GENERAL. FURTHERMORE, AS IS ALSO TRUE WITH RESPECT TO SECTION 337 OF THE TARIFF ACT, THE IMPORTS DO NOT BECOME SUBJECT TO THE DUTY UNTIL THE PROCEDURES PRESCRIBED THEREBY HAVE BEEN ACCOMPLISHED. FOR THE REASONS STATED IT IS OUR CONSIDERED OPINION THAT THE ANTIDUMPING ACT HAS NO APPLICATION TO THE PRESENT CASE, BUT THAT EVEN IF IT SHOULD BE CONSIDERED APPLICABLE IT IS NOT REASONABLY PROBABLE THAT IT WOULD REQUIRE REJECTION OF THE ITALIAN BID UNDER THE BUY AMERICAN EVALUATION.

THE SECOND MAJOR CONTENTION OF YOUR COUNSEL IS THAT THE CONTRACT VIOLATES SECTION 337 OF THE TARIFF ACT OF 1930, AS AMENDED, 19 U.S.C. 1337, ET SEQ., WHICH ESTABLISHES CERTAIN PROCEDURES TO BE FOLLOWED BY THE EXECUTIVE BRANCH OF THE GOVERNMENT IN THE EVENT THERE HAVE BEEN FOUND TO EXIST UNFAIR ACTS IN THE IMPORTATION OF ARTICLES INTO THE UNITED STATES, THE EFFECT OR TENDENCY OF WHICH IS TO INJURE OR DESTROY A DOMESTIC INDUSTRY. THE CITED STATUTORY PROVISIONS, IN OUR OPINION, HAVE NO APPLICATION TO THE INSTANT TRANSACTION FOR SEVERAL REASONS. INITIALLY, THE ACT IS DEVOID OF SPECIFIC LANGUAGE MAKING THE UNITED STATES SUBJECT TO ITS TERMS, AND WE ARE NOT AWARE OF ANY JUDICIAL PRECEDENT, NOR IS ANY CITED, HOLDING THAT ITS PROVISIONS APPLY TO THE GOVERNMENT IN CONNECTION WITH PURCHASES FOR ITS OWN USE. FURTHERMORE, IT APPEARS THAT THE ACT BECOMES OPERATIVE ONLY AFTER THE STATUTORY REQUIREMENTS AS TO INVESTIGATION, ETC., HAVE BEEN COMPLIED WITH, AND HAVE RESULTED IN AN AFFIRMATIVE FINDING THAT SUCH IMPORTATION SHOULD BE DECLARED UNLAWFUL. CLEARLY, SUCH MATTERS ARE NOT FOR CONSIDERATION BY THE PROCUREMENT AGENCY OR BY THE GENERAL ACCOUNTING OFFICE. FINALLY, THE RECORD BEFORE US APPEARS TO BE INADEQUATE FOR US TO CONCLUDE THAT THE EFFECT OF THE TRANSACTION WOULD BE "TO DESTROY OR SUBSTANTIALLY INJURE AN INDUSTRY, EFFICIENTLY AND ECONOMICALLY OPERATED, IN THE UNITED STATES," OR TO RESTRAIN OR MONOPOLIZE TRADE OR COMMERCE.

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT THERE IS NO BASIS UPON WHICH THIS OFFICE MAY PROPERLY OBJECT TO THE ACTION TAKEN BY THE DEPARTMENT OF THE NAVY.

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