B-141459, AUG. 5, 1960

B-141459: Aug 5, 1960

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ATTORNEYS AT LAW: REFERENCE IS MADE TO YOUR LETTERS OF JUNE 27 AND JULY 15. IS IN SUBSTANCE. FOR THAT REASON YOU REQUEST TO BE INFORMED WHAT ADVICE WE HAVE ISSUED TO THE PROCUREMENT AGENCY. WHAT ACTIONS ULTIMATELY WERE TAKEN IN REGARD THERETO. WE UNDERSTAND THAT THE SUPPLIES INVOLVED WERE. THE PROPRIETY OF THIS ACTION IS PRIMARILY FOR CONSIDERATION BY THE BUREAU OF CUSTOMS AND THE DEPARTMENT OF THE NAVY. CONSEQUENTLY NO INSTRUCTIONS HAVE BEEN ISSUED TO THE PROCUREMENT AGENCY. NONE ARE CONTEMPLATED. THAT THE BUREAU OF CUSTOMS WAS INFORMED OF THE PURCHASE BY THE PROCUREMENT OFFICIALS. N32-6995 WAS EXECUTED. WE HAVE NO REASON TO QUESTION THE TRUTH OF THE CONTRACTOR'S WARRANTY THAT THE CONTRACT CONSIDERATION DID NOT INCLUDE THE COST OF ANY AD VALOREM DUTY.

B-141459, AUG. 5, 1960

TO GARDNER, MORRISON AND ROGERS, ATTORNEYS AT LAW:

REFERENCE IS MADE TO YOUR LETTERS OF JUNE 27 AND JULY 15, 1960, REQUESTING RECONSIDERATION OF OUR DECISION OF MAY 10, 1960, 39 COMP. GEN.

- , WHICH REJECTED THE PROTEST OF YOUR CLIENT, CHARLES PFIZER AND COMPANY, INC., 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 QUANTITY OF TETRACYCLINE HYDROCHLORIDE TABLETS.

THE FIRST CONTENTION SET FORTH IN YOUR LETTER OF JUNE 27, 1960, IS IN SUBSTANCE, THAT SINCE CONTRACT NO. N32-6995 HAS BEEN AWARDED TO FARMOCHIMICA CUTOLO-CALOSI, S.P.A. OF NAPLES, ITALY, AND SINCE THE IMPORTATION OF THE DRUGS DOES NOT QUALIFY AS A DUTY-FREE ENTRY UNDER "EMERGENCY PURCHASES OF WAR MATERIALS ABROAD," THE CONTRACTOR SHOULD BE CHARGED A 12 1/2 PERCENT AD VALOREM DUTY. FOR THAT REASON YOU REQUEST TO BE INFORMED WHAT ADVICE WE HAVE ISSUED TO THE PROCUREMENT AGENCY, AND WHAT ACTIONS ULTIMATELY WERE TAKEN IN REGARD THERETO.

WE UNDERSTAND THAT THE SUPPLIES INVOLVED WERE, IN FACT, IMPORTED AS A DUTY-FREE ENTRY UNDER THE PROVISIONS OF 10 U.S.C. 2383, UPON APPLICATION BY THE DEPARTMENT OF THE NAVY. THE PROPRIETY OF THIS ACTION IS PRIMARILY FOR CONSIDERATION BY THE BUREAU OF CUSTOMS AND THE DEPARTMENT OF THE NAVY, RATHER THAN THE GENERAL ACCOUNTING OFFICE, AND CONSEQUENTLY NO INSTRUCTIONS HAVE BEEN ISSUED TO THE PROCUREMENT AGENCY, AND NONE ARE CONTEMPLATED. THE RECORD SHOWS, HOWEVER, THAT THE BUREAU OF CUSTOMS WAS INFORMED OF THE PURCHASE BY THE PROCUREMENT OFFICIALS. SEE, IN THIS CONNECTION SECTION 6-601 OF THE ARMED SERVICES PROCUREMENT REGULATION AND THE FOLLOWING SECTIONS.

MOREOVER, WE DO NOT SHARE YOUR OPINION THAT THE PROVISIONS OF MODIFICATION NO. 1, ISSUED TWO DAYS AFTER CONTRACT NO. N32-6995 WAS EXECUTED, WHEREBY THE CONTRACTOR WARRANTED THAT THE CONTRACT PRICE EXCLUDED THE COST OF UNITED STATES DUTY, RENDERS THE CONTRACTOR LIABLE THEREFOR IF THE SUPPLIES FAILED TO QUALIFY AS DUTY-FREE ARTICLES. WE HAVE NO REASON TO QUESTION THE TRUTH OF THE CONTRACTOR'S WARRANTY THAT THE CONTRACT CONSIDERATION DID NOT INCLUDE THE COST OF ANY AD VALOREM DUTY. THAT CONCLUSION IS SUPPORTED BY THE FACT THAT UNDER THE DELIVERY TERMS OF THE CONTRACT THE GOVERNMENT AGREED TO TAKE TITLE TO THE ARTICLES FAS PORT OF NAPLES, OR FAS MILITARY AIRPORT, NAPLES. FURTHERMORE, THE GOVERNMENT WAS BOTH CONSIGNOR AND CONSIGNEE OF THE SHIPMENT, THUS REMOVING ANY STATUTORY LIABILITY ON THE PART OF THE CONTRACTOR UNDER THE TARIFF ACT OF 1930, 19 U.S.C. 1001.

YOUR SECOND CONTENTION IS THAT WE WERE IN ERROR IN CONCURRING IN THE ADMINISTRATIVE EVALUATION OF THE FOREIGN BID UNDER THE REQUIREMENTS OF THE BUY AMERICAN ACT, 41 U.S.C. 10A ET SEQ., ASSUMING THE APPLICABILITY TO THE TRANSACTION OF THE ANTIDUMPING ACT OF MAY 27, 1921, 19 U.S.C. 160-171. MORE SPECIFICALLY, YOU ALLEGE THAT NO BASIS EXISTS TO SUPPORT A FINDING THAT THE FOREIGN MARKET PRICE OF THE TABLETS IS LESS THAN $19.20 PER BOTTLE, AND THAT THERE IS NO AUTHORITY IN THE ACT FOR USE OF A QUANTITY DISCOUNT OF 30 PERCENT FOR SUCH EVALUATION PURPOSES.

THE UNSUPPORTED CONTENTIONS YOU MAKE IN ATTEMPTING TO JUSTIFY THE CONCLUSION THAT THE FOREIGN MARKET PRICE FOR THE SUPPLIES IS AT LEAST $19.20 PER BOTTLE COMPLETELY DISREGARDS THE QUANTITY INVOLVED IN THIS TRANSACTION. WHILE THE UNIT FIGURE YOU QUOTE MAY BE THE PREVAILING COST IN ITALY FOR A SMALL QUANTITY, TO ASSUME THAT THE UNUSUALLY LARGE QUANTITY COVERED BY THIS CONTRACT, WHICH IS REPORTED TO BE UNPRECEDENTED IN ITALY, COULD NOT BE OBTAINED FOR SUBSTANTIALLY LESS, WOULD BE TO UTTERLY DISREGARD KNOWN BUSINESS PRACTICES. WE DO NOT AGREE THAT THE ACT PRECLUDES A FINDING BASED UPON WHAT WOULD BE A SIMILAR TRANSACTION IN ITALY, INCLUDING THE QUANTITY INVOLVED, AND THEREFORE SUCH FINDINGS WILL NOT BE DISTURBED.

IN ANY EVENT, IT IS OUR OPINION THAT SUCH CONTROVERSY IS ACADEMIC SINCE THE ACT DOES NOT BECOME OPERATIVE UNTIL A DETERMINATION HAS BEEN MADE BY THE SECRETARY OF THE TREASURY THAT THE DOMESTIC MARKET FOR A PARTICULAR PRODUCT IS IN JEOPARDY DUE TO THE IMPORTATION OF SUCH PRODUCT IN QUANTITIES AND AT AN UNFAIR PRICE. NO SUCH FINDING, OR APPLICATION THEREFOR, HAS BEEN BROUGHT TO THE ATTENTION OF THIS OFFICE. AND, SO FAR AS CONCERNS THIS OR SIMILAR TRANSACTIONS, IT IS SERIOUSLY DOUBTED THAT THE SAID ACT WOULD BE INVOKED SINCE THE SUPPLIES PURCHASED ARE NOT IMPORTED BY THE GOVERNMENT FOR THE PURPOSES OF SALE OR RESALE, AND THEREFORE COULD NOT IN ANY WAY AFFECT THE DOMESTIC MARKET PRICE OF THE COMMODITY IN COMMERCIAL CHANNELS.

IN YOUR LETTER OF JUNE 27, 1960, YOU CONTEND, IN SUBSTANCE, THAT THE REMEDIAL PROVISIONS OF 28 U.S.C. 1498, WERE NOT ENACTED BY THE CONGRESS FOR THE PURPOSE OF EXTENDING TO THE GOVERNMENT AN OPEN AND UNRESTRICTED RIGHT TO APPROPRIATE TO ITS OWN USE ANY DESIRED PATENT RIGHTS, AND THAT SUCH POLICY SHOULD BE ABANDONED EXCEPT IN CASES OF NATIONAL SECURITY. THE QUESTION WHETHER THE UNITED STATES SHOULD, UNDER CERTAIN CIRCUMSTANCES, BECOME A PARTY TO THE INFRINGEMENT OF A PATENT IN THE COURSE OF ITS VAST PROCUREMENT ACTIVITIES, WAS INCLUDED IN YOUR CLIENT'SORIGINAL PROTEST. CAN ONLY REPEAT THAT NORMALLY, AND PARTICULARLY IN VIEW OF THE SAID STATUTE, A LOW BID SHOULD NOT BE REJECTED MERELY BECAUSE THE BIDDER IS NOT A PATENTEE OR LICENSEE. TO HOLD OTHERWISE WOULD DISCOURAGE COMPETITION AND BE INCONSISTENT WITH PUBLIC INTEREST. OF COURSE, THE EXTENT TO WHICH THE VARIOUS DEPARTMENTS AND AGENCIES OF THE GOVERNMENT RESORT TO SUCH POLICY IS NOT A MATTER FOR CONSIDERATION BY THE GENERAL ACCOUNTING OFFICE.

YOUR LETTERS PRESENT NO EVIDENCE OR PERTINENT LEGAL CONTENTIONS NOT HERETOFORE CONSIDERED, AND THEREFORE THE DECISION OF MAY 10, 1960, SUPRA, WILL NOT BE DISTURBED.

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