B-149726, JAN. 10, 1963

B-149726, JAN. 10, 1963

TO MR. D. L. DULLUM:

THIS IS IN RESPONSE TO YOUR TELEGRAM OF NOVEMBER 27, 1962, CONCERNING THE REFUSAL BY THE DEPARTMENT OF AGRICULTURE TO PAY WHARFAGE CHARGES ON CCC BULK GRAIN CARGOES MOVING THROUGH PACIFIC COAST PORTS.

THE UNIFORM GRAIN STORAGE AGREEMENT GOVERNS THE CONDITIONS AND RATES UNDER WHICH MOST CCC-OWNED GRAIN IS HANDLED AND STORED. THE SCHEDULE OF RATES MADE A PART OF THE AGREEMENT PROVIDES SPECIFIC CHARGES FOR SUCH SERVICES AS RECEIVING, STORING, AND LOADING OUT GRAIN. IN ADDITION, THE AGREEMENT PROVIDES FOR THE PAYMENT OF "CUSTOMARY OR MANDATORY WHARFAGE CHARGES WHERE GRAIN IS RECEIVED AT PORT LOCATIONS.'

UNIFORM GRAIN STORAGE AGREEMENT RATES FOR STORING AND HANDLING BULK GRAIN ARE BASED UPON A CCC NATIONWIDE COST STUDY AND NEGOTIATIONS WITH THE WAREHOUSE INDUSTRY. THE STUDY COVERED ALL COSTS APPLICABLE TO OWNING OR LEASING NECESSARY WAREHOUSES, EQUIPMENT, AND OTHER FACILITIES, AS WELL AS OPERATION, MAINTENANCE, AND OTHER COSTS INCIDENT TO STORING AND HANDLING GRAIN. UNDER THE AGREEMENT, THE WAREHOUSEMAN REPRESENTS THAT HE OWNS OR OPERATES A WAREHOUSE AND HAS SPECIFIED EQUIPMENT AND FACILITIES FOR RECEIVING, HANDLING, CONDITIONING, WAREHOUSING, STORING, AND LOADING OUT BULK GRAIN COVERED THEREUNDER. RECEIVING GRAIN IS DEFINED AS RECEIVING AND UNLOADING GRAIN FROM CARS, BOATS, BARGES, TRUCKS, OR OTHER CONVEYANCES, AND ELEVATING INTO THE WAREHOUSE. LOADING OUT INCLUDES MOVING FROM THE WAREHOUSE TO AND LOADING INTO CARS, BOATS, BARGES, TRUCKS OR OTHER CONVEYANCES. IN HANDLING BULK GRAIN, THE GRAIN IS GENERALLY CONVEYED BY CHUTE OVER SUCH WHARFS, QUAYS, OR PIERS AS MIGHT BE INVOLVED, NO USE BEING MADE OF THESE FACILITIES FOR WHICH WHARFING CHARGES ARE CUSTOMARILY ASSESSED.

IN OREGON AND WASHINGTON, CCC PAYS WHARFAGE ON ALL GRAIN RECEIVED BY PORT TERMINAL WAREHOUSEMEN REGARDLESS OF THE LOAD OUT METHODS USED. THE WHARFAGE CHARGE HERE IS ONE FOR THE USE OF GRAIN FACILITIES AND IS COLLECTED AND RETAINED BY THE WAREHOUSEMEN.

IN CALIFORNIA, CCC PAYS A WHARFAGE CHARGE WHEN ITS GRAIN IS LOADED OUT OF PORT WAREHOUSES FOR EXPORT. HERE, THE CHARGE IS COLLECTED BY THE WAREHOUSEMEN FOR THE ACCOUNT OF LOCAL PORT AUTHORITIES. THE BASIS FOR PORT CHARGES IN CALIFORNIA LIES IN A COST FORMULA, KNOWN AS THE FREAS FORMULA. UNITED STATES MARITIME COMMISSION DOCKET NO. 640. HOWEVER, TESTIMONY RELATING TO THE FORMULA SHOWS THAT GRAIN WAREHOUSES AND APPURTENANT RAIL AND TRUCK AREAS WERE NOT INCLUDED IN THE BASIS FOR COMPUTING WHARFAGE AND OTHER PORT CHARGES INASMUCH AS GRAIN WAREHOUSING WAS NOT CONSIDERED A WHARF FUNCTION.

IN VIEW OF THE ABOVE FACTS IT APPEARED TO US, IN THE COURSE OF OUR REVIEW OF THE UNIFORM GRAIN STORAGE AGREEMENT APPROVED MAY 17, 1960, THAT THE PAYMENT OF "CUSTOMARY OR MANDATORY WHARFAGE CHARGES" UNDER THE CIRCUMSTANCES WAS AT LEAST QUESTIONABLE, SINCE THERE WAS NO SERVICE RENDERED IN CONSIDERATION OF THE CHARGES.

WE THEREFORE, BROUGHT THE MATTER TO THE ATTENTION OF THE ADMINISTRATOR OF THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE OF THE DEPARTMENT OF AGRICULTURE AND REQUESTED HIS VIEWS AND COMMENTS WITH RESPECT TO THE PRACTICABILITY OF ELIMINATING THE PAYMENT OF WHARFAGE CHARGES ON CCC BULK GRAIN SHIPMENTS AT WEST COAST PORTS. UPON RECEIPT OF THIS INFORMATION THE STABILIZATION AND CONSERVATION SERVICE REVIEWED CCC'S PRACTICE REGARDING WHARFAGE CHARGES AND THE BASIS FOR SUCH CHARGES. AS A RESULT OF ITS REVIEW, THE SERVICE RECOMMENDED THAT CCC TAKE WHATEVER STEPS MIGHT BE NECESSARY TO ELIMINATE THE CHARGES. THIS RECOMMENDATION WAS PREDICATED UPON THE FINDINGS THAT NO SERVICE, DIRECT OR INDIRECT, IS PROVIDED TO CCC BY WAREHOUSEMEN OR PORT AUTHORITIES IN RETURN FOR WHARFAGE PAYMENTS ON BULK GRAIN AND THERE IS NO ECONOMIC JUSTIFICATION FOR THE PAYMENT OF SUCH WHARFAGE SINCE THE COSTS OF ALL SERVICES ARE COVERED BY AGREEMENT. THE SECRETARY OF AGRICULTURE APPROVED A RESOLUTION OF THE BOARD OF DIRECTORS OF CCC ADOPTING THE RECOMMENDATION. AND ON NOVEMBER 2, 1962, THE AGRICULTURAL STABILIZATION AND CONSERVATION SERVICE INSTRUCTED ITS COMMODITY OFFICES TO HAVE PORT WAREHOUSEMEN EXECUTE A SUPPLEMENT TO THEIR UNIFORM GRAIN STORAGE AGREEMENTS ELIMINATING THE PROVISION FOR PAYMENT OF "CUSTOMARY OR MANDATORY WHARFAGE CHARGES WHERE GRAIN IS RECEIVED AT PORT LOCATIONS" FROM THE APPLICABLE SCHEDULE OF RATES. THE COMMODITY OFFICES WERE ALSO INSTRUCTED TO INFORM THE WAREHOUSEMEN THAT IF THEY SHOULD REFUSE TO EXECUTE THE SUPPLEMENT, CCC WOULD DISCONTINUE DIRECTING ITS GRAIN TO THEIR FACILITIES AND WOULD PROGRAM OUT ITS EXISTING STOCKS OF GRAIN AT THE EARLIEST POSSIBLE DATE.

IN SUMMARY, WHILE MANY COMMUNICATIONS WHICH WE HAVE RECEIVED INDICATE AN UNDERSTANDING THAT THE ACTION TO STOP WHARFAGE PAYMENTS WAS BASED UPON A DIRECTIVE FROM THIS OFFICE, NO SUCH DIRECTIVE HAS, IN FACT, BEEN ISSUED. THE DEPARTMENT OF AGRICULTURE ACTED IN THE MATTER ON THE BASIS OF ITS OWN INVESTIGATION AFTER WE HAD RAISED A QUESTION.

WE DO NOT BELIEVE THAT ANY DIRECTIVE BY THE GENERAL ACCOUNTING OFFICE CONCERNING THE MATTER IS ..END :