B-148394, SEP. 18, 1963

B-148394, SEP. 18, 1963

TO BRAZILIAN GOVERNMENT TRADE BUREAU:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 7, 1963, WHICH WAS RECEIVED BY US ON AUGUST 13, 1963, REQUESTING FURTHER CONSIDERATION OF YOUR CLAIM FOR $282,000 ARISING OUT OF CONTRACT NO. GS-OOP 3626/SCM),ENTERED INTO ON DECEMBER 23, 1952, BY THE UNITED STATES OF AMERICA, ACTING THROUGH THE GENERAL SERVICES ADMINISTRATION, AND THE UNITED STATES OF BRAZIL, ACTING THROUGH THE BANK OF BRAZIL, UNDER WHICH THE UNITED STATES PURCHASED QUANTITIES OF MONAZITE SAND AND RARE EARTH CHLORIDE. CAREFUL CONSIDERATION HAS BEEN GIVEN TO THE ARGUMENTS ADVANCED IN YOUR LETTER OF AUGUST 7, 1963, AND TO THOSE ADVANCED IN RECENT MEETINGS WITH US ON JULY 11, 1963, AND SEPTEMBER 10, 1963.

YOUR CLAIM CONTINUES TO BE BASED ON TWO POINTS. THE FIRST IS THAT THE BRAZILIAN NEGOTIATORS WERE INDUCED TO ACCEPT THE PRICE FOR RARE EARTH CHLORIDE BY THE REPRESENTATION OF THE UNITED STATES OF AMERICA NEGOTIATORS THAT THE UNITED STATES LAW REQUIRED IMPORT DUTY TO BE TAKEN INTO ACCOUNT AND THAT THEY HAD NO AUTHORITY TO DO OTHERWISE. THE SECOND IS THAT THE PRICE PROVISION OF THE CONTRACT PERTAINING TO RARE EARTH CHLORIDE (ARTICLE VII B) SHOULD BE INTERPRETED TO PROVIDE FOR AN ADJUSTMENT OF THE PRICE BASED ON THE ACTUAL APPLICATION OF A RATE OF DUTY, WHICH YOU CONTEND WAS ZERO PERCENT, BY THE COLLECTOR OF CUSTOMS ON EACH INDIVIDUAL SHIPMENT UNDER THE CONTRACT RATHER THAN ON THE BASIS OF WHAT THE DUTY WOULD HAVE BEEN EXCEPT FOR THE DUTY FREE ENTRY ALLOWED PURSUANT TO THE PROVISIONS OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED. BOTH OF THESE POINTS HAVE BEEN PREVIOUSLY COVERED IN OUR DECISIONS OF JUNE 28, 1962, FEBRUARY 1, 1963, AND JUNE 26, 1963.

WITH RESPECT TO THE QUESTION OF MISREPRESENTATION, THE NEGOTIATOR FOR THE GENERAL SERVICES ADMINISTRATION WROTE A MEMORANDUM ON SEPTEMBER 16, 1952. THIS MEMORANDUM STATES IN PART:

"IN THE DISCUSSIONS OF THE PRICE FOR RARE-EARTH CHLORIDE THE UNITED STATES TEAM STATED THAT THE PRICE WAS FIGURED TAKING INTO ACCOUNT A THIRTY -FIVE PERCENT AD VALOREM DUTY AND WAS ARRIVED AT BY TAKING 49 CENTS PER POUND FREIGHT FREE TO ANYWHERE IN THE UNITED STATES AND TAKING FROM IT THE VALUE OF THE IMPORT DUTY AND THE VALUE OF THE OCEAN FREIGHT ARRIVING AT THE NET PRICE OF 77 CENTS PER KILO. THE BRAZILIANS PUT UP A STRENUOUS ARGUMENT THAT DUTY SHOULD NOT ENTER INTO A GOVERNMENT TRANSACTION AND ALSO ARGUED THAT IT WAS A DUTY DISCRIMINATORY AGAINST BRAZIL. IT WAS POINTED OUT TO THE BRAZILIANS THAT UNDER THE LAW AND POLICY BEHIND PUBLIC LAW 520 STOCKPILE TRANSACTIONS REQUIRED THAT THE DUTY BE TAKEN INTO ACCOUNT TO ITS FULLEST EXTENT AND THAT THE UNITED STATES NEGOTIATORS HAD NO POWER TO DO OTHERWISE AND ALSO THAT THEIR AGENCIES HAD NO SUCH POWER AND HAD NO AUTHORITY OVER THE DETERMINATION OF IMPORT DUTIES. IT IS PROBABLE THAT THE BRAZILIANS WILL MAKE REPRESENTATIONS TO THE STATE DEPARTMENT IN CONNECTION WITH THIS QUESTION OF DUTY. * * *"

IT IS URGED THAT THE STATEMENT TO THE EFFECT THAT THE LAW AND POLICY REQUIRED DUTY TO BE TAKEN INTO ACCOUNT AND THAT NEITHER THE NEGOTIATORS NOR THEIR AGENCIES HAD THE POWER TO DO OTHERWISE CONSTITUTES A MISREPRESENTATION UPON WHICH THE BRAZILIAN NEGOTIATORS RELIED IN AGREEING TO THE CONTRACT PRICE FOR RARE EARTH CHLORIDE.

WHILE, FOR THE REASONS STATED IN OUR DECISION OF JUNE 26, 1963, WE HAVE CONSIDERABLE QUESTION THAT THE NEGOTIATORS FOR THE UNITED STATES MADE A MISREPRESENTATION AT THE TIME OF THE NEGOTIATIONS, EVEN ASSUMING ARGUENDO THAT THE NEGOTIATORS' STATEMENT WAS NOT A CORRECT REPRESENTATION AND THAT THE BRAZILIAN NEGOTIATORS ACCEPTED THE CONTRACT PRICE FOR RARE EARTH CHLORIDE IN RELIANCE THEREON, WE CANNOT, FOR THE REASONS SET FORTH IN OUR DECISION OF JUNE 26, 1963, CONCLUDE THAT EVEN IF THE DUTY HAD NOT BE CONSIDERED IN THE NEGOTIATIONS THERE WOULD HAVE BEEN AGREEMENT ON A PRICE OF $1.04 PER KILO FOR RARE EARTH CHLORIDE.

YOUR SECOND POINT FOR THE ALLOWANCE OF THE CLAIM INVOLVES THE INTERPRETATION OF ARTICLE VII B OF THE CONTRACT AS FOLLOWS:

"B) THE PRICE FOR RARE EARTH CHLORIDE MEETING THE SPECIFICATIONS SET FORTH IN ARTICLE V ABOVE SHALL BE SEVENTY-SEVEN ($0.77) PER KILO OF MATERIAL.

"THE ABOVE PRICES SHALL INCLUDE ALL DUTIES, TAXES, AND OTHER LEVIES IMPOSED BY ANY GOVERNMENT OTHER THAN THE GOVERNMENT OF THE UNITED STATES OF AMERICA, IT BEING INTENDED THAT THE MATERIAL SOLD HEREUNDER SHALL BE DELIVERED TO THE GSA F.O.B. VESSEL BRAZILIAN PORT FREE OF ALL SUCH TAXES OR CHARGES, IF ANY.

"IN COMPUTING THE ABOVE PRICE FOR RARE EARTH CHLORIDE THERE HAS BEEN TAKEN INTO ACCOUNT THE UNITED STATES OF AMERICA IMPORT DUTY WHICH APPLIES TO SUCH MATERIAL AS OF THE DATE THAT IT ENTERS A U.S.A. PORT. IF AT THE TIME ANY LOT OF RARE EARTH CHLORIDE ENTERS A U.S.A. PORT,THE RATE OF U.S.A. IMPORT DUTY DIFFERS FROM THE RATE EXISTING ON THE DATE THAT THE PARTIES THERETO AFFIXED THEIR SIGNATURES TO THIS CONTRACT, THE PRICE FOR SUCH LOT WILL BE APPROPRIATELY ADJUSTED.'

ELEVEN SHIPMENTS OF RARE EARTH CHLORIDE WERE MADE UNDER THE CONTRACT. EACH ENTRY WAS LIQUIDATED FREE OF DUTY BY THE BUREAU OF CUSTOMS AFTER ONLY SUCH EXAMINATION AS WAS NECESSARY TO IDENTIFY THE SHIPMENT BASED ON A CERTIFICATION EXECUTED BY THE EMERGENCY PROCUREMENT SERVICE TO THE EFFECT THAT THE CONTENTS WERE STRATEGIC AND CRITICAL MATERIALS PROCURED UNDER THE STRATEGIC AND CRITICAL MATERIALS STOCK PILING ACT. UNDER SECTION 602 (A) (6) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 474 (6), IN THE FORM IN WHICH IT EXISTED AT THE TIME OF THE ENTRIES, MATERIALS BROUGHT WITH SUCH CERTIFICATION COULD BE ENTERED FREE OF DUTY.

IN OUR DECISION OF JUNE 28, 1962, WE CONCLUDED THAT ARTICLE VII B, AS PROPERLY INTERPRETED, PROVIDES THAT THE PRICE STATED (?77 PER KILO) SHOULD BE ADJUSTED TO REFLECT THE DIFFERENCE BETWEEN THE RATE OF DUTY WHICH WOULD HAVE BEEN APPLICABLE AT THE TIME OF ENTRY BUT FOR THE EXEMPTION AND THE FIGURE OF 35 PERCENT UTILIZED IN REACHING THE STATED PRICE. OUR CONCLUSION WAS BASED ON WHAT WE CONSIDER TO BE THE REASONABLE INTERPRETATION OF THE LANGUAGE AND A STATEMENT MADE IN 1962, DURING OUR CONSIDERATION OF YOUR CLAIM, BY THE GENERAL SERVICES ADMINISTRATION NEGOTIATOR WHO PARTICIPATED IN THE NEGOTIATION OF THE CONTRACT.

IT IS URGED BY YOU THAT THE PROVISION SHOULD BE INTERPRETED TO MEAN THAT THE PRICE ADJUSTMENT SHOULD BE BASED ON THE DIFFERENCE BETWEEN THE 35 PERCENT FIGURE AND THE DUTY DETERMINED BY THE BUREAU OF CUSTOMS TO BE APPLICABLE TO EACH SHIPMENT AT THE TIME OF ENTRY. YOU STATE THAT REPRESENTATIVES OF THE GENERAL SERVICES ADMINISTRATION HEARD AS WITNESSES BY THE GSA BOARD OF REVIEW IN ITS CONSIDERATION OF THE CLAIM AND THE BOARD ITSELF IN ITS OPINIONS TOOK THE POSITION THAT THE INTERPRETATION URGED BY YOU IS CORRECT.

WE WISH TO POINT OUT THAT THE INTERPRETATION OF A CONTRACT PROVISION IS A QUESTION OF LAW AND, THEREFORE, OUR OFFICE IS BOUND NEITHER BY STATEMENTS MADE BY GSA OFFICIALS IN THE COURSE OF THE HEARINGS NOR BY THE CONCLUSIONS REACHED BY THE BOARD.

WE HAVE AGAIN REVIEWED THE ENTIRE RECORD AND REMAIN OF THE VIEW THAT OUR INTERPRETATION OF ARTICLE VII B, AS PREVIOUSLY EXPRESSED, IS CORRECT. STATED ABOVE, NOT ONLY DO WE CONSIDER THAT OUR INTERPRETATION IS A REASONABLE INTERPRETATION OF THE LANGUAGE OF THE CONTRACT PROVISION, BUT THE INTERPRETATION IS SUPPORTED BY A STATEMENT MADE TO US IN 1962 BY THE GENERAL SERVICES ADMINISTRATION NEGOTIATOR. IN ADDITION, FURTHER SUPPORT FOR SUCH AN INTERPRETATION IS FOUND IN THE EXCHANGE OF CORRESPONDENCE IN MARCH AND APRIL 1953 WHEN THE CONTRACT PRICE OF RARE EARTH CHLORIDE WAS RAISED FROM ?77 PER KILO TO ?80 FOR SHIPMENTS MADE ON AND AFTER MARCH 21, 1953. WE REFER SPECIFICALLY TO LETTER DATED MARCH 18, 1953, FROM THE EXPORT AND IMPORT DEPARTMENT, BANK OF BRAZIL, S.A., TO THE AMERICAN EMBASSY (PGS. 11 AND 12 OF THE STATEMENT OF FACTS, DOCKET 491, BOARD OF REVIEW, GENERAL SERVICES ADMINISTRATION, APPEAL OF ORQUIMA, NOVEMBER 10, 1960); LETTER DATED MARCH 31, 1953, FROM THE COMMISSIONER, EMERGENCY PROCUREMENT SERVICE, GSA, TO THE COMMISSIONER OF CUSTOMS, TREASURY DEPARTMENT (PGS. 12 AND 13 OF THE STATEMENT OF FACTS, DOCKET 491); LETTER DATED APRIL 3, 1953, FROM THE BUREAU OF CUSTOMS TO THE GENERAL SERVICES ADMINISTRATION (PG. 13 OF THE STATEMENT OF FACTS, DOCKET 491); AND LETTER DATED APRIL 10, 1953, FROM THE SPECIAL ASSISTANT TO THE COMMISSIONER, EMERGENCY PROCUREMENT SERVICE, GSA, TO THE BANCO DE BRASIL, S.A., (PGS. 13 AND 14 OF THE STATEMENT OF FACTS, DOCKET 491). THIS EXCHANGE OF LETTERS, WHICH TOOK PLACE ONLY A FEW MONTHS AFTER THE CONTRACT NEGOTIATIONS, CLEARLY IMPLIES, IN OUR OPINION, A PRICE ADJUSTMENT ON THE BASIS OF APPLICABLE DUTY AS DISTINGUISHED FROM ACTUAL DUTY ON EACH SHIPMENT. FURTHER, OUR INTERPRETATION OF ARTICLE VII B IS THE SAME INTERPRETATION ADVANCED BY THE ATTORNEY FOR ORQUIMA, WHO REPRESENTED THE COMPANY AT THAT TIME, IN FIRST PRESENTING A CLAIM TO THE GENERAL SERVICES ADMINISTRATION FOR ADJUSTMENT OF THE CONTRACT PRICE IN 1959, AND SUCH AN INTERPRETATION WAS CONTINUED TO BE ADVANCED IN THE FIRST APPEAL FROM DENIAL OF THE CLAIM, WHICH APPEAL WAS THE SUBJECT OF AN OPINION OF THE BOARD OF REVIEW OF THE GENERAL SERVICES ADMINISTRATION DATED NOVEMBER 10, 1960.

YOUR LETTER OF AUGUST 7, 1963, ALSO RAISES A QUESTION AS TO HOW OUR OFFICE COULD ARRIVE AT A CONCLUSION AS TO THE PROPER RATE OF DUTY APPLICABLE TO RARE EARTH CHLORIDE AS OF THE DATES OF ENTRY IN 1953 WHEN IN FACT NO ENTRIES OF THE COMMODITY WERE MADE DURING THE PERIOD, EXCEPT FOR 11 ENTRIES UNDER THE CONTRACT IN QUESTION. WE BELIEVE OUR DECISION OF JUNE 28, 1962, IS QUITE CLEAR ON THIS POINT.

IN A LETTER OF MAY 25, 1962, FROM THE DEPUTY COMMISSIONER, BUREAU OF CUSTOMS, IN RESPONSE TO AN INQUIRY FROM THE THEN GENERAL COUNSEL OF GSA, IT WAS STATED IN EFFECT THAT CUSTOMS HAD RULED IN 1959 THAT MATERIAL OF THE KIND IN QUESTION WAS PROPERLY CLASSIFIABLE UNDER PARAGRAPH 5 OF THE TARIFF ACT OF 1930 WITH DUTY AT A RATE OF 10 1/2 PERCENT AND THAT THERE WAS NO EVIDENCE TO SHOW THAT RULING RESULTED IN A CHANGE OF PRACTICE IN THE CLASSIFICATION OF SUCH MATERIAL. WHILE IT WAS ALSO NOTED IN THE LETTER FROM THE BUREAU OF CUSTOMS THAT THE BUREAU COULD NOT ADVISE UNDER WHAT PROVISIONS THE ENTRIES IN QUESTION WOULD HAVE BEEN LIQUIDATED BUT FOR THE CERTIFICATION "AS THAT INFORMATION IS NOT AVAILABLE" WE WERE THEN, AND REMAIN, OF THE VIEW THAT THE BEST EVIDENCE AVAILABLE TO SHOW WHAT THE RATE WOULD HAVE BEEN BUT FOR THE CERTIFICATION WAS THE BUREAU OF CUSTOMS' RULING OF 1959, TOGETHER WITH STATEMENT OF THE BUREAU THAT THERE WAS NO EVIDENCE TO SHOW THAT THE RULING RESULTED IN A CHANGE IN PRACTICE. THE RATE OF 10 1/2 PERCENT FOR PURPOSES OF THE CLAIM WAS ADJUSTED TO 12 1/2 PERCENT BASED ON INFORMATION THAT THE LATTER RATE WAS PRESCRIBED BY PARAGRAPH 5 AT THE TIME THE ENTRIES WERE MADE AND WAS SUBSEQUENTLY REDUCED UNDER INTERNATIONAL AGREEMENT. WHILE WE MIGHT HAVE TAKEN THE POSITION THAT SINCE NO ENTRIES WERE MADE IN 1953, OTHER THAN THE 11 ENTRIES UNDER THE CONTRACT, WE HAD NO BASIS FOR CONCLUDING WHAT THE APPLICABLE RATE WOULD HAVE BEEN, WE DID NOT BELIEVE THAT SUCH A POSITION, WHICH WOULD HAVE RESULTED IN NO ADDITIONAL PAYMENT TO YOU, WAS PROPER OR EQUITABLE UNDER THE CIRCUMSTANCES.

IN ACCORDANCE WITH THE FOREGOING, WE REMAIN OF THE VIEW THAT YOUR CLAIM WAS PROPERLY ADJUSTED UNDER OUR DECISION OF JUNE 28, 1962, AND THAT THERE IS NO ADDITIONAL AMOUNT DUE YOU UNDER THE CONTRACT.