B-117768, DECEMBER 2, 1954, 34 COMP. GEN. 269

B-117768: Dec 2, 1954

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MARITIME ADMINISTRATION - SUBSIDIES - OPERATING-DIFFERENTIAL SUBSIDIES FEDERAL MARITIME BOARD PROPOSAL TO MAKE OPERATING-DIFFERENTIAL SUBSIDY RATES AVAILABLE TO SUBSIDIZED OPERATORS BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY BASED ON OTHER THAN CURRENT DATA IS WITHIN THE CONTEMPLATION OF SECTION 606 OF THE MERCHANT MARINE ACT. "THE FINAL ACCOUNTING" IN SECTION 603 (C) OF SAID ACT WILL BE THE APPLICATION OF SUCH RATES TO THE FINAL AUDITED COSTS OF THE OPERATORS FOR THE YEAR. 1954: REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 1. ADVISING OF A PROPOSAL BY YOUR STAFF WHEREBY OPERATING- DIFFERENTIAL SUBSIDY RATES WILL BE MADE AVAILABLE TO SUBSIDIZED OPERATORS BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY AND STATING THAT UNLESS THIS OFFICE OBJECTS.

B-117768, DECEMBER 2, 1954, 34 COMP. GEN. 269

MARITIME ADMINISTRATION - SUBSIDIES - OPERATING-DIFFERENTIAL SUBSIDIES FEDERAL MARITIME BOARD PROPOSAL TO MAKE OPERATING-DIFFERENTIAL SUBSIDY RATES AVAILABLE TO SUBSIDIZED OPERATORS BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY BASED ON OTHER THAN CURRENT DATA IS WITHIN THE CONTEMPLATION OF SECTION 606 OF THE MERCHANT MARINE ACT, 1936, WHICH AUTHORIZES THE CONTINUED USE OF PREVIOUS YEAR RATES DURING SUBSEQUENT YEARS, PROVIDED THE GOVERNMENT AND THE OPERATOR CONCUR, AND "THE FINAL ACCOUNTING" IN SECTION 603 (C) OF SAID ACT WILL BE THE APPLICATION OF SUCH RATES TO THE FINAL AUDITED COSTS OF THE OPERATORS FOR THE YEAR.

ACTING COMPTROLLER GENERAL WEITZEL TO THE CHAIRMAN, FEDERAL BOARD, DECEMBER 2, 1954:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 1, 1954, WITH ATTACHMENTS, FROM THE ACTING SECRETARY OF THE FEDERAL MARITIME BOARD, FILE REFERENCE L25-23:306, ADVISING OF A PROPOSAL BY YOUR STAFF WHEREBY OPERATING- DIFFERENTIAL SUBSIDY RATES WILL BE MADE AVAILABLE TO SUBSIDIZED OPERATORS BEFORE THE CLOSE OF THE YEAR IN WHICH SUCH RATES APPLY AND STATING THAT UNLESS THIS OFFICE OBJECTS, THE BOARD WILL ADOPT SUCH PROPOSAL.

THE STAFF PROPOSAL CONTEMPLATES THE ESTABLISHMENT DURING A CURRENT YEAR OF AN OPERATING-DIFFERENTIAL SUBSIDY RATE FOR SUCH YEAR UPON THE BASIS OF COST EXPERIENCE, WEIGHTED AVERAGE EXCHANGE RATES, COMPETITION WEIGHTS AND OTHER FACTORS COVERING THE PRECEDING YEAR.

THE STATED ADVANTAGES OF THE PROPOSAL ARE THAT SUBSIDIZED OPERATORS WOULD BE ABLE TO RENDER MORE ACCURATE FINANCIAL STATEMENTS TO MANAGEMENT, PREPARE FINAL INCOME TAX RETURNS IMMEDIATELY AFTER THE CLOSE OF THE CALENDAR YEAR, AND SUBMIT FINAL ACCOUNTINGS PROMPTLY UNDER THE RESERVE AND RECAPTURE PROVISIONS OF THE OPERATING-DIFFERENTIAL SUBSIDY AGREEMENTS. IS UNDERSTOOD THAT UNDER PRESENT PROCEDURES OF THE BOARD, THE EARLIEST TIME AT WHICH THE FINAL DETERMINATION OF THE SUBSIDY APPLICABLE TO A GIVEN YEAR CAN BE MADE--- EVEN UNDER THE MOST FAVORABLE CONDITIONS--- IS NEAR THE CLOSE OF THE SUCCEEDING YEAR.

SECTION 603 OF THE MERCHANT MARINE ACT OF 1936, 49 STAT. 2002, AUTHORIZES THE BOARD TO ENTER INTO A CONTRACT FOR A PERIOD NOT EXCEEDING TWENTY YEARS TO PAY AN OPERATING-DIFFERENTIAL SUBSIDY NOT IN EXCESS OF THE FAIR AND REASONABLE COSTS OF CERTAIN ITEMS OF EXPENSES TO THE AMERICAN OPERATOR OVER THE ESTIMATED FAIR AND REASONABLE COSTS OF THOSE ITEMS IF THE VESSEL WAS OPERATED UNDER THE REGISTRY OF A FOREIGN COUNTRY WHOSE VESSELS ARE SUBSTANTIAL COMPETITORS OF THE SUBSIDIZED AMERICAN OPERATOR. SUBSECTION 603 (C), 49 STAT. 2002, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

THE AMOUNT OF SUCH SUBSIDY SHALL BE DETERMINED AND PAYABLE ON THE BASIS OF A FINAL ACCOUNTING MADE AS SOON AS PRACTICABLE AFTER THE END OF EACH YEAR OR OTHER PERIOD FIXED IN THE CONTRACT. THE SECRETARY OF COMMERCE MAY PROVIDE FOR IN THE CONTRACT, OR OTHERWISE APPROVE, THE PAYMENT FROM TIME TO TIME DURING ANY SUCH PERIOD OF SUCH AMOUNTS ON ACCOUNT AS HE DEEMS PROPER. SUCH PAYMENTS ON ACCOUNT SHALL IN NO CASE EXCEED 75 PERCENTUM OF THE AMOUNT ESTIMATED TO HAVE ACCRUED ON ACCOUNT OF SUCH SUBSIDY, EXCEPT THAT, WITH RESPECT TO THAT PART OF THE SUBSIDY RELATING TO ANY PARTICULAR VOYAGE, AN ADDITIONAL 15 PERCENTUM MAY BE PAID TO THE CONTRACTOR AFTER SUCH CONTRACTOR'S AUDIT OF THE VOYAGE ACCOUNT FOR SUCH VOYAGE HAS BEEN COMPLETED AND THE SECRETARY OF COMMERCE HAS VERIFIED THE CORRECTNESS OF THE SAME. * * *

SECTION 606, 49 STAT. 2003, PROVIDES, IN PART, THAT---

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. * * *

THE ADMINISTRATIVE PRACTICE OF ARRIVING AT THE "AMOUNT" OF SUBSIDY BY ESTABLISHING A "RATE" BASED UPON REPRESENTATIVE SAMPLINGS OF AMERICAN AND FOREIGN COSTS IS LONG-STANDING AND WELL-KNOWN TO CONGRESS. THE SUBSIDY RATE IS APPLIED TO THE AMERICAN OPERATOR'S ACTUAL EXPENSES FOR THE YEAR TO ARRIVE AT THE SUBSIDY PAYABLE. PAYMENTS "ON ACCOUNT" ARE MADE ON THE BASIS OF ESTIMATES OF RATES AND THE UNAUDITED EXPENSES OF THE AMERICAN OPERATOR. FINAL PAYMENTS MUST AWAIT THE DETERMINATION OF (1) FINAL RATES BASED UPON COST FACTORS, BOTH AMERICAN AND FOREIGN, FOR THE YEAR IN QUESTION; AND (2) FINAL AUDITED COSTS OF THE AMERICAN OPERATOR FOR THE YEAR IN QUESTION.

UNDER THE PROPOSAL, PAYMENTS "ON ACCOUNT" WOULD STILL INVOLVE ESTIMATES OF RATES AND THE UNAUDITED EXPENSES OF THE OPERATOR. HOWEVER, AS TO THE RATE, IT COULD BE DETERMINED AT SOME TIME DURING THE YEAR TO WHICH THE PAYMENTS APPLY AND THE "FINAL ACCOUNTING" REFERRED TO IN SECTION 603 (WILL BE THE APPLICATION OF THAT RATE TO THE FINAL AUDITED COSTS OF THE SUBSIDIZED OPERATOR FOR THE YEAR INVOLVED.

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 PROCEDURES DESCRIBED MUST ALSO BE WITHIN CONTEMPLATION OF THE LAW.

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