B-40414, AUGUST 14, 1944, 24 COMP. GEN. 120

B-40414, AUGUST 14, 1944, 24 COMP. GEN. 120

CONTRACTS - REIMBURSEMENT OF SUPPLIER FOR PREPAID FREIGHT AND FEDERAL PROPERTY TRANSPORTATION TAX WHERE A PURCHASE ORDER DIRECTING A SUPPLIER TO SHIP MERCHANDISE TO THE POINT OF DESTINATION FREIGHT PREPAID IS ISSUED BY THE UNITED STATES OR A GOVERNMENT COST-PLUS-A-FIXED-FEE CONTRACTOR ON THE BASIS OF AN OFFER QUOTING A PRICE F.O.B. SUPPLIER'S FACTORY OR OTHER POINT OF ORIGIN, THE SUPPLIER MAY BE REIMBURSED NOT ONLY THE AMOUNT OF THE PREPAID FREIGHT BUT ALSO THE AMOUNT OF THE FEDERAL PROPERTY TRANSPORTATION TAX PAID IN CONNECTION THEREWITH. 23 COMP. GEN. 793, MODIFIED ON THE BASIS OF AN ADDITIONAL SHOWING.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, AUGUST 14, 1944:

REFERENCE IS MADE TO YOUR LETTER OF MAY 4, 1944, REQUESTING A RECONSIDERATION OF THE DECISION OF THIS OFFICE OF APRIL 18, 1944, 23 COMP. GEN. 793, TO C. P. KNAPP, AN AUTHORIZED CERTIFYING OFFICER OF THE BUREAU OF MINES, WHEREIN IT WAS HELD THAT THE RECORD AS THEN SUBMITTED DID NOT FURNISH A SUFFICIENT BASIS FOR THE CERTIFICATION FOR PAYMENT OF A VOUCHER IN FAVOR OF THE BARRETT DIVISION, ALLIED CHEMICAL AND DYE CORPORATION, IN THE AMOUNT OF $2.62, REPRESENTED AS BEING THE APPLICABLE FEDERAL EXCISE TAX ON THE FREIGHT CHARGES FOR TRANSPORTING CERTAIN MERCHANDISE FURNISHED BY IT TO THE FLUOR CORPORATION, LTD., A GOVERNMENT COST-PLUS-A-FIXED-FEE CONTRACTOR FOR USE IN CONNECTION WITH THE PERFORMANCE OF CONTRACT NO. IM- 1842, DATED FEBRUARY 18, 1943.

AT THE TIME OF THE RENDITION OF SAID DECISION IT WAS THE UNDERSTANDING OF THIS OFFICE THAT THE SUBJECT CLAIM PREVIOUSLY HAD BEEN DISAPPROVED BY REPRESENTATIVES OF YOUR DEPARTMENT IN ACCORDANCE WITH ESTABLISHED ADMINISTRATIVE PROCEDURE AND THAT THE SUBMISSION THEN FOR CONSIDERATION WAS MADE FOR THE PURPOSE OF ASCERTAINING THE LEGAL EFFECT OF THE TERMS OF A SO-CALLED SUPPLEMENTARY AGREEMENT EXECUTED BY THE ABOVE-MENTIONED CORPORATIONS APPROXIMATELY SIX MONTHS AFTER THE DELIVERY OF THE MERCHANDISE COVERED BY THE PURCHASE ORDER REFERRED TO THEREIN AND INVOLVED HERE.

HOWEVER, ALTHOUGH IT APPEARS THAT NO QUESTION NEED HAVE ARISEN IN THIS OR ANY OTHER CASE AS TO WHETHER A PERSON SUPPLYING MERCHANDISE TO THE BUREAU OF MINES OR ITS COST-PLUS-A-FIXED-FEE CONTRACTORS IS ENTITLED TO REIMBURSEMENT OF THE AMOUNT OF THE FEDERAL PROPERTY TRANSPORTATION TAX INVOLVED IN A PARTICULAR CASE IF THE INSTRUCTIONS SET FORTH IN BUSINESS ORDER NO. 695-A, PROMULGATED ON MAY 24, 1943, BY THE ADMINISTRATIVE OFFICER OF THE BUREAU OF MINES--- PRESCRIBING THE PROCEDURE FOR FOLLOWING IN CASES INVOLVING FREIGHT OR EXPRESS SHIPMENTS OF MERCHANDISE--- HAD BEEN COMPLIED WITH, YOU NOW AVER THAT THE MERCHANDISE HERE INVOLVED WAS PURCHASED F.O.B. POINT OF ORIGIN; AND, AFTER INVITING ATTENTION TO THE FACT THAT THE QUOTATIONS ON WHICH MANY OF THE PURCHASE ORDERS ISSUED BY SAID BUREAU AND ITS COST-PLUS-A-FIXED FEE CONTRACTORS ARE BASED SPECIFY A PRICE F.O.B. SUPPLIER'S FACTORY OR OTHER POINT OF ORIGIN, YOU EXPRESS THE VIEW THAT WHEN A PURCHASE ORDER ISSUED ON THE BASIS OF SUCH A QUOTATION DIRECTS THE SUPPLIER TO SHIP THE MERCHANDISE COVERED THEREBY FREIGHT PREPAID TO POINT OF DESTINATION AND DELIVERY IS MADE ACCORDINGLY, THE SUPPLIER IS ENTITLED TO BE REIMBURSED NOT ONLY FOR THE PREPAID FREIGHT BUT, ALSO, FOR THE APPLICABLE FEDERAL PROPERTY TRANSPORTATION TAX.

THE COPY WHICH HAS BEEN FURNISHED TO THIS OFFICE OF THE PURCHASE ORDER DATED JULY 21, 1943, HERE INVOLVED SHOWS THAT SAID ORDER CALLED FOR THE DELIVERY BY THE BARRETT DIVISION, ALLIED CHEMICAL AND DYE CORPORATION, OF THE MERCHANDISE COVERED THEREBY AT THE PRICES SPECIFIED THEREIN, F.O.B. CHICAGO, ILLINOIS, WITH FREIGHT PREPAID TO CUNNINGHAM, KANSAS; AND THE RECORD SHOWS THAT THE PREPAID FREIGHT BILL COVERING THE CHARGES FOR TRANSPORTING THE MERCHANDISE AND THE APPLICABLE TAX THEREON WAS PAID BY THE SUPPLIER ON AUGUST 12, 1943. ALSO, IT APPEARS THAT THE PURCHASE ORDER CONTAINED A RECITAL THAT THE "TRANSPORTATION CHARGES ARE NOT INCLUDED" IN THE PRICES SPECIFIED THEREIN "AND MUST BE CONSIDERED AS A SEPARATE ITEM; " AND, WHILE IT DOES NOT APPEAR THAT A COPY OF THE QUOTATION ON WHICH THE ORDER WAS BASED HAS BEEN FURNISHED TO THIS OFFICE, IT IS ASSUMED, IN VIEW OF STATEMENTS IN YOUR LETTER, THAT THE SUPPLIER'S QUOTATION MERELY SPECIFIED A PRICE F.O.B. CHICAGO, ILLINOIS- - THE POINT OF ORIGIN--- AND MADE NO REFERENCE TO THE MATTER OF THE TRANSPORTATION OF THE MERCHANDISE FROM THAT POINT.

OF COURSE, THERE CAN BE, AS POINTED OUT BY YOU, NO DOUBT THAT THE LEGAL EFFECT OF AN OFFER BY A VENDOR TO FURNISH MERCHANDISE AT A PRICE F.O.B. POINT OF ORIGIN IS ENTIRELY DIFFERENT, SO FAR AS THE MATTER HERE FOR CONSIDERATION IS CONCERNED, FROM THAT OF AN OFFER TO FURNISH MERCHANDISE AT A PRICE F.O.B. POINT OF DESTINATION, FOR IN THE FIRST MENTIONED CASE THE QUOTATION DOES NOT ENTAIL ANY OBLIGATION ON THE PART OF THE SUPPLIER TO BEAR THE EXPENSES OF TRANSPORTING THE MERCHANDISE TO THE POINT OF DESTINATION WHEREAS IN THE LATTER THE SUPPLIER OFFERS TO DELIVER THE MERCHANDISE TO THE POINT OF DESTINATION WITHOUT ANY ADDITIONAL CHARGE FOR SUCH DELIVERY. HENCE, THE DECISIONS WHICH HAVE BEEN RENDERED BY HIS OFFICE CONCERNING CLAIMS BY GOVERNMENT CONTRACTORS FOR REIMBURSEMENT OF THE AMOUNT OF THE FEDERAL PROPERTY TRANSPORTATION TAX REQUIRED TO BE PAID BY THEM IN CASES INVOLVING THE PROCUREMENT OF MERCHANDISE AT A PRICE F.O.B. POINT OF DESTINATION ARE NOT FOR APPLICATION IN THE CONSIDERATION OF THE INSTANT CASE.

MOREOVER, IN A CASE WHERE IT APPEARS THAT A PURCHASE ORDER DIRECTING THE SUPPLIER TO SHIP THE MERCHANDISE COVERED THEREBY TO THE POINT OF DESTINATION FREIGHT PREPAID WAS ISSUED BY THE UNITED STATES OR A GOVERNMENT COST-PLUS-A-FIXED-FEE CONTRACTOR IN CONSEQUENCE OF THE SUBMISSION BY THE SUPPLIER OF AN OFFER WHICH MERELY QUOTED A PRICE F.O.B. POINT OF ORIGIN, AS IS ASSUMED TO BE THE SITUATION IN THE PARTICULAR CASE HERE INVOLVED, AND THERE IS NOTHING TO INDICATE ANY EXPRESS UNDERSTANDING BETWEEN THE PARTIES PRIOR TO THE SHIPMENT THAT THE SUPPLIER WOULD NOT BE REIMBURSED THE AMOUNT OF THE APPLICABLE TAX, THERE IS A SUBSTANTIAL BASIS FOR CONCLUDING THAT THE SUPPLIER'S OFFER WAS ACCEPTED ON THE SAME BASIS THAT IT WAS SUBMITTED AND THAT THE PROVISION IN THE PURCHASE ORDER DIRECTING THAT SHIPMENT BE MADE FREIGHT PREPAID CANNOT PROPERLY BE CONSIDERED AS IN ANY WISE ENLARGING THE EXTENT OF THE SUPPLIER'S OBLIGATION UNDER THE TERMS OF HIS OFFER. COMPARE IN THIS CONNECTION, DECISION OF AUGUST 17, 1943, TO YOU, 23 COMP. GEN. 113, WHEREIN YOU WERE ADVISED THAT A COST-PLUS-A-FIXED-FEE CONTRACTOR IS ENTITLED TO BE REIMBURSED THE AMOUNT OF THE APPLICABLE FEDERAL PROPERTY TRANSPORTATION TAX IN A CASE WHERE MERCHANDISE IS PURCHASED FROM A SUPPLIER F.O.B. FACTORY AND THE TRANSPORTATION CHARGES AND TAX ARE ITEMIZED SEPARATELY IN THE INVOICE AS RENDERED BY THE SUPPLIER AND PAID BY THE CONTRACTOR. WHILE IT IS TRUE THAT THE TERMS "FREIGHT" AND "TRANSPORTATION CHARGES" ORDINARILY ARE NOT TO BE REGARDED AS EMBRACING AN AMOUNT REPRESENTING THE FEDERAL PROPERTY TRANSPORTATION TAX, IT APPEARS THAT, IN A CASE WHERE THE CIRCUMSTANCES ARE AS ABOVE DESCRIBED, THE CONCLUSION IS JUSTIFIED THAT NEITHER A DIRECTION TO SHIP FREIGHT PREPAID NOR A RECITAL CONCERNING TRANSPORTATION CHARGES SUCH AS APPEAR IN THE PURCHASE ORDER HERE INVOLVED MAY BE CONSIDERED AS LIMITING THE RESPONSIBILITY OF THE UNITED STATES OR OF A GOVERNMENT COST-PLUS-A-FIXED-FEE CONTRACTOR, AS THE CASE MAY BE, FOR THE TRANSPORTATION OF THE MERCHANDISE TO SUCH CHARGES ONLY AS ARE PAYABLE TO THE CARRIER FOR ITS SERVICES SO AS TO PRECLUDE A SUPPLIER FROM OBTAINING REIMBURSEMENT OF AN AMOUNT REPRESENTING THE APPLICABLE PROPERTY TRANSPORTATION TAX PAID IN CONNECTION WITH THE FREIGHT CHARGES.

IN VIEW OF THE FOREGOING, AND SINCE IT APPEARS THAT THE TERMS OF THE ABOVE-MENTIONED CONTRACT NO. IM-1842 AUTHORIZE THE UNITED STATES TO MAKE PAYMENTS DIRECTLY TO SUPPLIERS FOR THE COST OF MERCHANDISE PROCURED BY THE FLUOR CORPORATION, LTD., FOR USE IN CONNECTION WITH THE PERFORMANCE OF SAID CONTRACT, I HAVE TO ADVISE THAT, IF THE OFFER OF THE BARRETT DIVISION, ALLIED CHEMICAL AND DYE CORPORATION, ON WHICH THE PURCHASE ORDER INVOLVED WAS BASED MERELY QUOTED A PRICE F.O.B. CHICAGO, ILLINOIS, AND THERE IS NO EVIDENCE OF ANY EXPRESS UNDERSTANDING BETWEEN THE REPRESENTATIVES OF SAID CORPORATIONS PRIOR TO THE SHIPMENT THAT THE SUPPLIER WOULD NOT BE REIMBURSED THE AMOUNT OF THE APPLICABLE FEDERAL EXCISE TAX ON THE CHARGES FOR TRANSPORTING THE PROPERTY, THIS OFFICE WILL NOT BE REQUIRED TO QUESTION AN OTHERWISE PROPER PAYMENT REPRESENTING REIMBURSEMENT TO SAID SUPPLIER OF THE AMOUNT EXPENDED BY IT ON ACCOUNT OF SAID TAX.