B-141900, MAR. 9, 1960

TO THE SECRETARY OF AGRICULTURE:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 1, 1960, FROM ASSISTANT SECRETARY MCLAIN, REQUESTING OUR DECISION WITH REFERENCE TO CERTAIN QUESTIONS WHICH HAVE ARISEN IN CONNECTION WITH THE SALE BY THE COMMODITY CREDIT CORPORATION OF CERTAIN DAIRY PRODUCTS FOR EXPORT.

IT WAS STATED IN THE LETTER OF FEBRUARY 1, 1960, THAT THE COMMODITY CREDIT CORPORATION HAS RECEIVED A NUMBER OF REQUESTS FROM PURCHASERS OF DAIRY PRODUCTS FOR EXPORT ASKING THAT APPROVAL OF A CHANGE IN EXPORT DESTINATION BE MADE AFTER EXPORT OF THE PRODUCTS UNDER CONTRACTS WHICH PROVIDE FOR EXPORT TO A DESIGNATED COUNTRY UNLESS PRIOR APPROVAL TO EXPORT TO ANOTHER DESTINATION IS OBTAINED IN ADVANCE; ALSO, THAT A SIMILAR REQUEST HAS BEEN RECEIVED FROM A PURCHASER WHO FAILED TO OBTAIN PRIOR PERMISSION TO REPACKAGE THE DAIRY PRODUCTS.

IT WAS STATED FURTHER THAT ALL OF THE COMMODITIES WERE TIMELY EXPORTED; THAT IN CASES INVOLVING EXPORT TO A COUNTRY OTHER THAN THAT NAMED, EXPORT WAS MADE IN EACH CASE TO A COUNTRY WHICH THE CCC WOULD HAVE BEEN WILLING TO APPROVE, HAD ITS ASSENT BEEN REQUESTED; THAT ALL CONTRACT PROVISIONS, SAVE THAT OF OBTAINING THE PRIOR APPROVAL OF CCC TO EXPORT TO COUNTRIES OTHER THAN THOSE LISTED IN THE OFFER, OR, IN THE ONE CASE, TO REPACKAGE PRIOR TO EXPORT, WERE COMPLIED WITH, AND THAT THE UNITED STATES HAS SUFFERED NO DAMAGES.

FOR THE REASONS SET FORTH IN THE LETTER OF FEBRUARY 1, 1960, YOUR DEPARTMENT PROPOSES THAT THE CONTRACTING OFFICER OR OTHER APPROPRIATE OFFICER OF THE COMMODITY CREDIT CORPORATION GRANT APPROVAL NOW OF THE CHANGE IN EXPORT DESTINATION AND REPACKAGING IN THE ABOVE INSTANCES WHERE IT HAS BEEN DETERMINED THAT SUCH APPROVAL WOULD HAVE BEEN GRANTED HAD TIMELY REQUEST BEEN MADE AND SINCE THE GOVERNMENT HAS SUFFERED NO INJURY, THEREBY PERMITTING THE FILES IN CONNECTION WITH THOSE TRANSACTIONS TO BE CLOSED. YOU REQUEST OUR DECISION AS TO WHETHER THERE IS ANY LEGAL OBJECTION TO THE PROPOSED ACTION.

WITHOUT REFERRING HEREIN TO ALL OF THE MATTERS SET FORTH IN THE LETTER OF FEBRUARY 1, WE ARE OF THE VIEW THAT, UNDER THE FACTS REPORTED, THE FAILURE OF THE CONTRACTORS TO OBTAIN PRIOR APPROVAL FOR A CHANGE IN EXPORT DESTINATION MAY BE CONSIDERED MERELY AS TECHNICAL VIOLATIONS OF THE CONTRACT PROVISIONS. THIS VIEW IS BASED UPON YOUR REPORT TO THE EFFECT THAT EXPORT OF THE DAIRY PRODUCTS WAS MADE IN EACH CASE TO A COUNTRY WHICH THE CCC WOULD HAVE BEEN WILLING TO APPROVE IF ITS ASSENT HAD BEEN REQUESTED. ALSO, IT HAS BEEN NOTED THAT UNDER ANNOUNCEMENT LD-26, WHICH REPLACED ANNOUNCEMENT LD-25 BUT WHICH APPARENTLY WAS NOT IN EFFECT WHEN THE CONTRACTS HERE INVOLVED WERE EXECUTED, THE CCC WOULD BE AUTHORIZED TO GRANT RELIEF IN THIS CASE. IN ANY EVENT, TAKING INTO CONSIDERATION THE PURPOSE TO BE SERVED BY REQUIRING SUCH PRIOR APPROVAL, IT IS OUR VIEW THAT THE FAILURE OF THE CONTRACTORS TO OBTAIN PRIOR APPROVAL BY THE CCC OF A CHANGE IN THE EXPORT DESTINATION DOES NOT CONSTITUTE SUCH A BREACH OF THEIR WARRANTY AND REPRESENTATION WITH REGARD TO EXPORT OR USE REQUIREMENTS, AS TO JUSTIFY INVOKING THE PRICE ADJUSTMENT PROVISION OF PARAGRAPH 13 (A) OF ANNOUNCEMENT LD-25.

WE HAVE BEEN FURNISHED WITH A COPY OF A LETTER DATED JANUARY 22, 1959, FROM THE UNITED STATES ATTORNEY FOR THE SOUTHERN DISTRICT OF NEW YORK TO THE DEPARTMENT OF JUSTICE, RELATING TO A CLAIM ASSERTED BY THE COMMODITY CREDIT CORPORATION ON THE BASIS OF FACTS SIMILAR TO THOSE INVOLVED IN THIS MATTER. THE UNITED STATES ATTORNEY TOOK THE POSITION THAT THE REPORTED BREACH OF CONTRACT IN THAT CASE WAS PURELY A TECHNICAL ONE. HE INDICATED THAT THE CLAIM UNDER CONSIDERATION WAS SIMILAR TO A "SUBSTANTIAL NUMBER" OF CLAIMS BEING ASSERTED BY THE COMMODITY CREDIT CORPORATION. HE THEN EXPRESSED HIS OPINION REGARDING THE MATTER IN THE FOLLOWING LANGUAGE:

"IT IS THE OPINION OF THIS WRITER THAT THE TECHNICAL VIOLATIONS OF THE OLD CONTRACT SHOULD NOT BE ENFORCED IF UNDER THE PRESENT CONTRACT THEY WOULD NOT BE VIOLATIONS, I.E., WHEN THERE IS AN ACTION PENDING TO RECOVER FOR A VARIANCE UNDER THE OLD TYPE CONTRACT, THEN THE C.C.C. SHOULD BE CONSULTED. IF THE C.C.C., AFTER TAKING EVERYTHING INTO CONSIDERATION, DECIDES THAT THE VARIANCE IS ONE WHICH IT NORMALLY WOULD APPROVE, THEN WE SHOULD NOT TAKE ANY ACTION IN CONNECTION WITH A TECHNICAL VIOLATION OF THE NOW OBSOLETE "TIMELINESS, CLAUSE IN THE OLD CONTRACT, EITHER IN THE FORM OF A CAUSE OF ACTION ON THE CONTRACT OR A DEMAND LETTER WHICH WE DO NOT INTEND TO BACK UP WITH COURT ACTION.'

ON THE BASIS OF THE SHOWING MADE IN THE LETTER OF JANUARY 22, 1959, THE DEPARTMENT OF JUSTICE ADVISED YOUR DEPARTMENT BY LETTER OF MARCH 19, 1959, THAT THE FILE WAS BEING CLOSED.

WITH RESPECT TO THE REPACKING WITHOUT OBTAINING PRIOR PERMISSION, IT IS REPORTED THAT SUCH REPACKAGING WAS PERFORMED UNDER THE CONTINUOUS SUPERVISION OF THE INSPECTION SERVICE OF YOUR DEPARTMENT AND THAT THE PROOF OF ACTUAL EXPORT IS SATISFACTORY. NO COMMENT BY US APPEARS TO BE REQUIRED SINCE IT IS STATED THAT THE PURPOSE OF THE REQUIREMENT FOR PRIOR APPROVAL WAS ACCOMPLISHED.

UNDER THE FACTS REPORTED, WE FEEL THERE IS NO LEGAL OBJECTION TO THE PRESENT APPROVAL BY THE COMMODITY CREDIT CORPORATION OF THE REQUESTED CHANGES IN EXPORT DESTINATIONS, AND YOU ARE ADVISED ACCORDINGLY.