B-170891, NOV. 16, 1970

B-170891, NOV. 16, 1970

CONTRACT LIABILITY - FOREIGN CURRENCY DENIAL OF CLAIM REPRESENTING LOSS DUE TO DEVALUATION OF ENGLISH POUND FOR AVIATION FUEL OIL SUPPLIED AT IRANIAN AIR PORTS FOR FAA AIRPLANES DURING OCTOBER AND NOVEMBER 1967. SINCE FUEL DELIVERED TO FAA UPON PRESENTATION OF SHELL INTERNATIONAL CREDIT CARDS WAS NOT PURSUANT TO A CONTRACT BETWEEN U.S. AND NATIONAL IRANIAN OIL COMPANY, FAA HAS NO DIRECT LIABILITY TO NATIONAL IRANIAN OIL COMPANY FOR LOSSES DUE TO DEVALUATION.

TO NATIONAL IRANIAN OIL COMPANY:

YOUR LETTER DATED FEBRUARY 16, 1970 (YOUR REFERENCE: H/15), CLAIMS THAT, BECAUSE OF THE DEVALUATION OF THE ENGLISH POUND STERLING IN NOVEMBER 1967, AN ADDITIONAL AMOUNT IS OWED YOUR COMPANY FOR AVIATION FUEL AND OIL SUPPLIED AT IRANIAN AIRPORTS TO THE UNITED STATES FEDERAL AVIATION ADMINISTRATION (FAA) DURING OCTOBER AND NOVEMBER 1967. YOUR LETTER STATES THAT DELIVERIES OF FUEL AND OIL TO HOLDERS OF SHELL CARNETS (SHELL INTERNATIONAL CREDIT CARDS) AT IRANIAN AIRPORTS IS SUBJECT TO INTERNAL REGULATIONS AND THE COST MUST BE EXPRESSED IN "RIALS," THE OFFICIAL CURRENCY OF IRAN, AND THAT THE PRACTICE OF ISSUING INVOICES IN THE FOREIGN CURRENCY IS MERELY FOR THE CONVENIENCE OF INTERNATIONAL CUSTOMERS.

THE DOCUMENTS SUBMITTED TO US BY FAA SHOW THAT THE SUPPLIES IN QUESTION WERE DELIVERED PRIOR TO THE DEVALUATION OF THE ENGLISH POUND STERLING ON NOVEMBER 18, 1967, AND THAT YOUR INVOICES TO SHELL INTERNATIONAL PETROLEUM COMPANY, LTD. IN LONDON, ENGLAND, WERE DATED AFTER THE DEVALUATION DATE AND WERE EXPRESSED IN TERMS OF POUNDS AND NOT RIALS. ALTHOUGH YOUR LETTER DOES NOT SO STATE, WE ASSUME THAT BY MISTAKE THE NEW RATE OF EXCHANGE WAS NOT USED IN YOUR INVOICES TO SHELL. THEREFORE, BASED ON A DEVALUATION DIFFERENCE OF 16.67 PERCENT, YOU SUBMITTED THREE ADDITIONAL INVOICES TO SHELL IN DECEMBER 1968, FOR THE ACCOUNT OF THE FAA, IN THE TOTAL ADDITIONAL AMOUNT OF 197 POUNDS, 16 SHILLINGS. SHELL, ON APRIL 17, 1969, SUBMITTED THE ADDITIONAL INVOICES TO FAA IN THE TOTAL AMOUNT OF US $474.72, BASED UPON THE NEW EXCHANGE RATE OF APPROXIMATELY 1 - US $2.40, REPRESENTING THE ALLEGED UNDERPAYMENT BY FAA.

THE FEDERAL AVIATION ADMINISTRATION HAS CONFIRMED THE STATEMENTS IN YOUR LETTER THAT THERE ARE NO CONTRACTS OR PURCHASE ORDERS BETWEEN IT AND NATIONAL IRANIAN OIL COMPANY AND THAT THE DELIVERIES OF FUEL AND OIL ARE MADE AGAINST PRESENTATION OF THE SHELL CARNETS. IN MAKING THE CLAIM FOR THE ADDITIONAL AMOUNT ON APRIL 17, 1969, SHELL INTERNATIONAL ADVISED US THAT THEY HAVE ACTED AS COLLECTING COMPANY ON BEHALF OF NATIONAL IRANIAN, TAKING A CREDIT RISK ON SUPPLIES ON WHICH THEY HAVE NO DIRECT OUTLET OR COMMERCIAL INTEREST.

SINCE THE FUEL AND OIL WERE DELIVERED TO FAA AIRPLANES UPON THE PRESENTATION OF THE SHELL INTERNATIONAL CARNETS AND NOT PURSUANT TO A CONTRACT BETWEEN THE UNITED STATES AND THE NATIONAL IRANIAN OIL COMPANY, WE CONCLUDE THAT THE FEDERAL AVIATION ADMINISTRATION HAS NO DIRECT LIABILITY TO THE NATIONAL IRANIAN OIL COMPANY. IT IS, OF COURSE, LIABLE TO SHELL INTERNATIONAL FOR PURCHASES MADE WITH THE SHELL CARNETS. IN THAT CONNECTION OUR REVIEW OF THE SIX ORIGINAL INVOICES SUBMITTED TO THE FEDERAL AVIATION ADMINISTRATION BY SHELL INTERNATIONAL ON FEBRUARY 19, 1968, AND MARCH 28, 1968, WHICH HAVE BEEN PAID IN FULL, SHOWS THAT SHELL, NOTWITHSTANDING THE DEVALUATION, APPLIED THE PRE DEVALUATION RATE OF EXCHANGE OF APPROXIMATELY LB 1 US $2.78 RATHER THAN THE RATE OF EXCHANGE OF LB 1 $2.4110 PREVAILING ON FEBRUARY 19, 1968, AND THE RATE OF LB 1 $2.3990 PREVAILING ON MARCH 28, 1968. IT APPEARS THEREFORE THAT SHELL USED THE RATES OF EXCHANGE IN EFFECT ON THE DATES WHEN THE AVIATION FUEL AND OIL WERE DELIVERED; IF THIS IS CORRECT, THEN THE FEDERAL AVIATION ADMINISTRATION HAS ALREADY PAID TO SHELL THE FULL AMOUNT DUE IN UNITED STATES DOLLARS BASED ON THE RATES OF EXCHANGE EXISTING (PRIOR TO DEVALUATION) AT THE TIME WHEN THE PURCHASES WERE MADE. IN ANY EVENT, UNDER THE CIRCUMSTANCES ANY LOSS THAT YOUR COMPANY MAY HAVE SUFFERED BECAUSE OF THE DEVALUATION OF THE ENGLISH POUND IS FOR ADJUSTMENT WITH SHELL INTERNATIONAL.

COPIES OF THIS LETTER ARE BEING SENT TO SHELL INTERNATIONAL AND THE FEDERAL AVIATION ADMINISTRATION.