B-131652, MAY 16, 1957

B-131652, MAY 16, 1957

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED APRIL 24, 1957, WITH ENCLOSURES, FROM CAPTAIN D. C. MACKENZIE, ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REQUESTING A DECISION AS TO WHETHER THERE MAY BE CANCELED CONTRACT NO. N62649S-3505 AWARDED TO NISHIKI INDUSTRY COMPANY, LTD., YOSHIKURA, YOKOSUKA, JAPAN.

BY INVITATION NO. B-122-57, DATED JANUARY 5, 1957, BIDS WERE REQUESTED FOR THE PURCHASE OF SURPLUS PROPERTY LOCATED AT SALVAGE YARD OF THE UNITED STATES NAVAL SUPPLY DEPOT, YOKOSUKA, JAPAN. NISHIKI INDUSTRY COMPANY, LTD., BEING THE HIGHEST BIDDER ON ITEM 2, ONE LOT CONSISTING PRIMARILY OF ELECTRIC CABLE AND ELECTRIC WIRE WEIGHING APPROXIMATELY 12 TONS, WAS AWARDED THIS ITEM FOR $9,266.67, REPRESENTING A BID OF APPROXIMATELY 278 YEN PER KILOGRAM. IT IS REPORTED THAT AT THE TIME THE BIDS WERE RECEIVED, THE CURRENT WIRE PRICE, ACCORDING TO SHIGAN SHIMPO, A JAPANESE TRADE PERIODICAL, OF NO. 1 CABLE WAS 465 YEN PER KILOGRAM. FROM THE TIME THE COMPANY'S BID WAS ACCEPTED, JANUARY 24, 1957, TO MARCH 18, 1957, THE CONTRACTOR WAS UNABLE TO GET JAPANESE CUSTOM'S CLEARANCE DUE TO VERBAL INSTRUCTIONS ALLEGEDLY RECEIVED FROM THE JAPANESE PROCUREMENT OFFICE. THEIR REFUSAL TO RELEASE THE CABLE WAS BASED ON THE BELIEF THAT THE PROPERTY BELONGED TO THE JAPANESE GOVERNMENT. HOWEVER, AS THE JAPANESE GOVERNMENT WAS UNABLE TO PRODUCE EVIDENCE OF PROPER OWNERSHIP, THE MATERIAL WAS FINALLY RELEASED BY IT ON MARCH 29, 1957, BUT BY THAT TIME THE MARKET VALUE OF THE CABLE HAD DROPPED APPROXIMATELY 135 YEN PER KILOGRAM. THE CONTRACTOR HAS REQUESTED THAT THE CONTRACT BE CANCELED.

WHILE PARAGRAPH 23 OF THE CONTRACT TERMS AND CONDITIONS IMPOSED UPON THE PURCHASER THE OBLIGATION OF COMPLIANCE WITH JAPANESE LAWS RELATING TO THE IMPORTATION INTO OR TRANSPORTATION OUT OF JAPAN OF THE PROPERTY, AND PROVIDED THAT THE PROPERTY WOULD NOT BE RELEASED UNTIL A CUSTOMS CERTIFICATE WAS FILED WITH THE CONTRACTING OFFICER, THE RECORD INDICATES THAT THE DIFFICULTY IN OBTAINING CUSTOMS CLEARANCE WAS OCCASIONED BY QUESTIONS AS TO THE TITLE OR RIGHT OF THE UNITED STATES TO SELL THE PROPERTY IN QUESTION. SINCE THE GOVERNMENT WAS OBLIGATED TO GIVE THE PURCHASER GOOD TITLE TO THE PROPERTY, WE FEEL THAT THE DELAY IN SATISFYING THE JAPANESE AUTHORITIES AS TO THE GOVERNMENT'S TITLE MAY PROPERLY BE ATTRIBUTED TO THE GOVERNMENT, AND SINCE THE PURCHASER APPEARS TO HAVE BEEN SERIOUSLY PREJUDICED THEREBY THE CONTRACT MAY BE CANCELED AND THE BID DEPOSIT RETURNED TO THE CONTRACTOR, AS REQUESTED.