ROUGH DIAMOND COMPANY, INC. AND A. G. PARSER INCORPORATED v. THE UNITED STATES, 173 Ct. Cl. 15

Davis, Judge, delivered the opinion of the court: In the spring of 1959, plaintiffs , agreed with the Department of Agriculture to barter more than $6,600,000 worth of industrial diamonds for surplus cotton owned by the Commodity Credit Corporation (OCC). In this suit, they demand damages of $1,736,514.45, claimed to stem from the Department’s refusal to exchange its cotton on the basis of the average world market value of cotton, rather than a higher price desired by CCC.

Charging that the agency’s actions contravened its statutory authority, plaintiffs sue for the money value of the additional cotton they say they should have received. Congress, in 1954, authorized the Secretary of Agriculture to “barter or exchange agricultural commodities owned by the Commodity Credit Corporation for * * * such strategic or other materials of which the United States does not domestically produce its requirements * * * as the President may designate * * 68 Stat. 459, as amended, 7 U.S.C. § 1692.

The statute also provided that the Secretary could “take reasonable precautions * * * to assure that barters or exchanges * * * will not unduly disrupt world prices of agricultural commodities or replace cash sales for dollars.” Two years later, in an effort to stimulate lagging cotton exports, Congress directed tlie CCC “to encourage the export of cotton by offering to make cotton available at prices not in excess of the level of prices at which cottons of comparable qualities are being offered * * * by other exporting countries * * * [i.e., the world market price].” Agricultural Act of 1956, § 203, 70 Stat. 188, 199, 7 U.S.C. § 1853.

Until the latter half of 1958, CCC sold and exchanged cotton at minimum prices substantially equal to world market rates. The agency’s practice was to determine its prices in advance of each marketing year for cotton (which begins on August 1st and ends on July 31st), and to adhere to that pattern for the entire marketing year. In the fall of 1958, the rates established by CCC began to exceed those at which comparable grades of cotton were being offered by other countries. In keeping with its previous policy, however, the 'Department did not revise its prices until August 1, 1959.

On December 24,1958, 'CCC sent an announcement to the major dealers in industrial diamonds, inviting offers to exchange such materials for CCC agricultural commodities. Among the conditions stated were the requirements that the bartered commodities be exported, and that their sale be in addition to, rather than in replacement of, normal cash sales of CCC agricultural surplus. During the next month, plaintiffs Rough Diamond Company, Inci and A. G.

Parser, Inc., New York-based industrial diamond concerns, offered to exchange surplus diamonds valued at approximately $6,700,000, in accordance with the specified conditions. To be in a position to take advantage of the barter agreements which would follow acceptance of their offers, the plaintiffs made contingent arrangements with exporters for resale of the cotton. These export agents agreed to purchase stipulated dollar amounts of government cotton at the CCC’s going rate, in the event that the plaintiffs’ bids were approved.

After the execution of formal contracts by plaintiffs and CCC, the latter would refund the exporters’ cash payments to plaintiffs. Under their agreements with the exporters, plaintiffs would in turn remit to them discounts based on the cost of exporting and reselling the cotton, as well as the disparity between the anticipated world market price and CCC’s selling price during the 1958-1959 marketing year.

CCC conditionally accepted plaintiffs’ principal offers on March 16, 1959, agreeing to the terms specified in the bids other than the proffered export deadline (December 31, 1959), which was set by the Department at an earlier date (July 31, 1959). On March 20th, Eough Diamond and Parser wrote similar letters to the Barter and Stockpiling Division of the Commodity Stabilization Service (CSS), requesting in effect that the cotton be exchanged at the world market rate, rather than at the higher price the Department was then receiving.

After their counteroffers had been repeatedly rejected, plaintiffs accepted the Government’s terms and entered into agreements on that basis in late March and early April 1959. But when the contracts formalizing the agreement were to be signed in the fall of 1959, plaintiffs once again balked at Agriculture’s cotton exchange rate, insisting on the world market prices. After fruitless attempts to negotiate an adjustment with the Department, plaintiffs executed the contracts under protest, and thereafter brought suit in this court. a. The principal claim is that

Section 203 of the Agricultural Act of 1956, supra, commanded the Government to barter the cotton for plaintiffs’ diamonds at the world market price of cotton — and forbade any higher rate. As already noted, this

section directed the CCC “to make [its] cotton available at prices not in excess of the level of prices at which cottons of comparable qualities are being offered * * * by other exporting countries * * *” The primary purpose of this part of the statute is stated in the legislation itself, which declares that, “Such quantities of cotton shall be sold as will reestablish and maintain the fair historical share of the world market for United States cotton, said volume to be determined by the Secretary of Agriculture.” In attaining that goal, however, CCC was given some leeway, since it was also authorized to “accept bids in excess of the maximum prices specified herein [i.e., competitive world market prices],” although not permitted to “reject bids at such maximum prices unless a higher bid is received for the same cotton.” 70 Stat. 199, 7 U.S.C. § 1853.

Passing over the Government’s substantive defenses that

Section 203 did not apply at all to barters and did not, in any case, preclude an averaging of the world market price over a three-year period, we concentrate on the plaintiffs’ assumption that, once the court finds a violation of the statute, there is no escape from a judgment of recovery for them. This threshold postulate calls for inquiry. We can presuppose (without deciding) that the Department of Agriculture deviated from

Section 203 when it pegged its cotton price above the current world level, but the probing question is whether that infringement should lead to an award of the additional monies paid by these purchasers for the CCC’s cotton. In a series of decisions growing out of the sale of government-owned vessels after World War II, this court held that buyers who had been charged more than the prices set by Congress could recover the excess, even though-they had entered into contracts to pay those higher, sums. A. H. Bull S.S. Co. v. United States, 123 Ct. Cl. 520, 108 F. Supp. 95 (1952); Southeastern Oil Florida, Inc. v.

United States, 127 Ct. Cl. 409, 411-12, 414, 119 F. Supp. 731, 732-34 (1953), cert. denied, 348 U.S. 834 (1954); Clapp v. United States, 127 Ct. Cl. 505, 508-09, 513-15, 117 F. Supp. 576, 577-78, 581-82, cert. denied, 348 U.S. 834 (1954); Nautilus Shipping Corp. v. United States, 141 Ct. Cl. 391, 394-95, 158 F. Supp. 353, 354-55 (1958) ; Sprague S.S. Co. v. United States, 145 Ct. Cl. 642, 645-47, 172 F. Supp. 674, 675-76 (1959); Suwanee S. S. Co. v. United States, 150 Ct. Cl. 331, 333, 279 F. 2d 874, 877 (1960).

The holding was that the parties could not, by agreement, change the terms prescribed by the statute for, the sale of the ships. This was said to be so even where the purchaser had freely agreed to pay the greater amount, and even though the maritime agencies could have withheld the ships from sale. Judgments were entered for the excess. The Supreme Court had earlier been faced with a similar problem when a vendee of federal land paid considerably more than the statutory price for. some acreage.

The Court ruled that the over-payment was voluntary and the payer had no claim, cognizable in this court, for the extra. United States v. Edmondston, 181 U.S. 500 (1901). In the ship-sale cases, we distinguished Edmondston by stressing the difference in the underlying legislation.

The maritime statutes, we thought, embodied the Congressional wish that “the Government’s surplus ships should be sold at prices, uniform for all purchasers, and ascertainable by mathematical application of the statutory formula, properly interpreted”; this Congressional purpose “was strong enough to override any general legal doctrine, applicable in other situations, but which, if applied in the instant situation, would result in different persons paying different prices” for the same type of ships.

In Edmondston, we said on the other hand, “the Supreme Court did not find a Congressional purpose that land should be sold at the prices fixed by statute sufficiently strong to overcome the general legal doctrine relating to voluntary payments made under mistake of law.” Sprague S. S. Co. v. United States, supra, 145 Ct. Cl. at 646-47, 172 F. Supp. at 676. See, also, Suwanee S. S. Co. v. United States, supra, 150 Ct. Cl. at 337, 279 F. 2d at 877.

As this court saw it, the basic test in deciding whether a purchaser could recover would always be the particular Congressional will reflected in the particular piece of legislation under scrutiny: “* * * a court, in the application of a statute, cannot evade the task of ascertaining as best it can, and then giving effect to, the Congressional purpose.” 145 Ct. Cl. at 646, 172 F. Supp. at 676. Utilizing that basic yardstick, we seek the Congressional purpose of

Section 203 as it bears on the right of these cotton-purchasers to recover a payment above the world market price. A capital contrast between the ship-sales statutes and

Section 203 is that, in the former, Congress’s establishment of the sale price-formula was evidently for the benefit of the purchasers themselves — the very persons who brought suit to regain the excess payments they had made or agreed to make. The class Congress had in mind comprised those who sought to enhance the country’s merchant marine by buying surplus government vessels; they were to be helped by the sale of the ships at prices Congress considered fair and reasonable. In that way the American merchant fleet would be strengthened.

The purchasers, potential and actual, were thus the direct beneficiaries of the legislative concern and interest. When they were charged more than Congress wished to have them pay, Congress would desire, the court felt, that they be reimbursed so that their ultimate price would not go beyond the moderate, uniform, level set by the statute. Recovery by the buyers of the excess would not be a windfall or unanticipated largesse, but rather a scaling down of the sale price to the maximum figure Congress wanted them to pay.

Section 203, on the contrary, was designed to benefit American farmers, not cotton exporters or merchants (like plaintiffs) who might seek to exchange cotton for diamonds (or other commodities). The goal of the provision was to aid the farmer by enabling more domestic cotton to be sold abroad; the device of ordering sales to be made at the world price was but a means of increasing the distribution of the American product for the benefit of the American grower.

Congress was not concerned with the welfare of exporters or commodity dealers per se, nor would it be primarily interested in the price they would have to pay for CCC cotton. So long as the proper share of domestic cotton reached the channels of international trade, Congress would be satisfied. It would not care that the exporter or the diamond dealer had to pay more than the world price. This Congressional regard for the producer, rather than the exporter, is manifest on the surface of

Section 203. The Secretary of Agriculture is told to sell such quantities of cotton abroad “as will reestablish and maintain the fair historical share of the world market for United States cotton” (as he determines it to be). This build-up of exports would be accomplished, Congress expected, by “encourag[ing] the export of cotton by offering to make cotton available at prices not in excess” of the world level.

But as if to indicate that the increase in exports was its central concern, not the price at which the cotton was sold, Congress simultaneously provided that the CCC “may accept bids in excess of the maximum prices specified herein [the world market price] but shall not reject bids at such maximum prices unless a higher bid is received for the same cotton.” Provided that the cotton was sold, the CCC could lawfully obtain any amount the buyer was willing to give. The important thing was to expand exports so that, ultimately, the domestic farmers could receive a better and less costly return for. their production.

The same notes were sounded in the Congressional debates.

Section 203 was a composition of the Senate committee, after the bill (H.R. 10875) had passed the House. S. Rept. No. 1966, 84th Cong., 2d Sess., pp. 2, 7; 102 Cong. Rec. 8350-1. The provision permitting sales above the world price (under defined conditions) was not included in the Committee’s version of the

section but was added on the floor. Nevertheless, the Committee’s report emphasized the end of sales-expansion (as distinct fr,om the means of sale at the world price) by observing that “such quantities [of cotton] would be required to be sold as would reestablish the United States fair share of the world market.” S. Rept. No. 1966, supra, at 2. In initially sponsoring

Section 203 ('before the proviso was added), Senator Ellender, also stressed the need to increase exports: “The experience of recent weeks demonstrates that only nominal amounts of cotton will be sold under the present export program. Competitive pricing is the key to increased cotton exports, and American cotton must be permitted to move freely into world trade.” 102 Cong. Rec. 8347. Immediately after the proviso was first adopted, Senator Eastland said: “The charge has been made that the bill places a ceiling on the price at which cotton can be sold. That criticism is eliminated by the amendment.” 102 Cong.

Eec. 8484. And he voiced his concern that “the American cotton farmer be permitted to sell on a competitive basis * * * so as to enable us to retain a fair share of our export business”, anticipating the reestablishment under the new measure of “the historic share of the American export cotton market for the American farmer * * Ibid (emphasis added) . Other Senators expressed a similar concern with the impact on the farmer of then-current cotton export policies and the necessity, from the cotton-growers’ viewpoint, to expand exports. 102 Cong. Rec. 8485 (Sen. Young); 8486-7 (Sen. Stennis) ; 8488 (Sen. Goldwater).

In accepting

Section 203, the House conferees likewise emphasized that the goal was the recapture of our portion of the world market: “It is hoped that the Secretary can regain the historical American share of the world market without unnecessarily lowering the level of world prices for cotton, and it is not intended that he shall be required to drastically reduce the price of cotton far below the level of prices received at the sale announced August 12,1955. On the other hand, it is intended that he shall have ample authority to reduce prices to whatever level he finds necessary to accomplish this result.” H. Rept.

No. 2197, 2d Sess. (reprinted at 102 Cong. Eec. 8822). The same theme'of the need to expand exports in order to help the domestic grower was repeated when the House accepted the conference report. 102 Cong. Rec. 8826-7 (Rep. Poage). Throughout the consideration of

Section 203, the main objective was to sell a fair share of American cotton. If that could be done only at the going world price the Secretary was to proffer the cotton at that rate, but if enough sales could be made at a higher level Congtess did not forbid receipt by the CCC of the increment. There were, of course, references in the debates to the world rates as the prices the Agriculture Department would charge (see, e.g., 102 Cong. Rec. 8347, 8483-87), but the presupposition always was that this was the means by which this country would regain its “historical share” of the cotton market. The prices were not the end in themselves. From all of this we infer that the driving force behind

Section 203 was to give a benefit to the farmer through increased exports — not a direct concern with the prices paid by cotton exporters or barterers. To allow these plaintiffs to recover the excess over the world price (assuming that the Agriculture Department departed from the statute by insisting on a higher minimum) would not be to give them the price Congress wanted them to pay but, rather, would permit the purchasers to reap a benefit which Congress gave no indication of wanting them to have for themselves. The beneficiaries on whom Congress focussed were another group altogether.

For the same reason, it would not advance the Congressional goal to reduce, in 1965, the price these plaintiffs paid for their cotton in 1959 — as it helped to fulfill the aim of the ship-sale statutes for this court to lower, through the ship-sale litigation, the prices paid by those plaintiff-purchasers for their vessels. The result is that these exporters and barterers are in the position of individuals affected by a statute without being granted litigable rights under it because it was not enacted for their advantage. Cf. Perkins v. Lukens Steel Co., 310 U.S. 113 (1940); United States v. Binghamton Constr.

Co., 347 U.S. 171, 176-77 (1964). As persons outside the circle of beneficiaries Congress drew for

Section 203, purchasers of CCC cotton are bound by the traditional rules precluding recovery of monies voluntarily paid to the Government under mistake of law (United States v. Edmondston, supra), and holding contractors to the prices they have agreed to pay for federal merchandise (even though they might have obtained better terms by following other routes). See American Smelting & Refining Co. v. United States, 259 U.S. 75, 78-79 (1922); Matson Navigation Co. v. United States, 284 U.S. 352, 357-58 (1932); Parish v. United States, 8 Wall. 489, 490 (1869).

Any protests plaintiffs may have uttered at the time of or after they closed the bargain cannot alter the effect of their voluntary agreements to exchange their diamonds at the CCC price for cotton. See American Smelting & Refining Co. v. United States, supra, 259 U.S. at 79; International Contracting Co. v. Lamont, 155 U.S. 303, 309-10 (1894); Gilbert & Secor v. United States, 8 Wall. (75 U.S.) 358, 359-60, 360-61 (1869); Parish v. United States, supra. It is particularly appropriate that these plaintiffs be bound by the pacts they made in full awareness.

The eye of their interest was not the- export price of CCC cotton but the disposal of their stocks of industrial diamonds for dollars. They knew from the outset that the Department’s price for cotton exceeded the world level; their arrangements were initially made on that basis; and, in the beginning, they plainly entered into the exchange on the Department’s price terms.

They did, thereafter, request that the barter be at the world market price, but when the Government refused they nevertheless confirmed (in effect) the existing informal agreements although they could have withdrawn at that stage without incurring any statutory or contractual penalties. As detailed in Part B of this opinion, infra, they were not misled by the Government or subjected to economic duress.

On the contrary, they were so anxious to complete the barter (in order to dispose of their diamonds) notwithstanding the less favorable exchange rate that they in fact proceeded, and would in any event have proceeded, with the transactions despite the Department’s policy. They never expected to make any profit on the cotton part of the barter; the cotton was simply an intricate device for converting their diamonds into dollars. They could just as well have selected others of the many CCC-commodities which the Agriculture Department was offering for barter.

Unlike the ship-buyers with whom this court dealt in the earlier cases, purchasers of plaintiffs’ type can hardly say that Congress clearly intended, through

Section 203, that they should be charged no more than the world market price for cotton even though they had freely agreed with the Government to pay more.

Section 203, in other words, did not override the general legal doctrines applicable to monetary suits by those who have voluntarily purchased property from the Government. b. Plaintiffs seem to argue alternatively that, in any event, the contracts should be reformed to reflect a cotton exchange rate based on the world market price because these agreements resulted from misrepresentation and coercion by the Government. They contend that they would have abandoned the negotiations had they not been misled into believing they might be able to exchange their diamonds for cotton priced,at competitive world rates.

But, as we have already indicated, the trial commissioner has found that “plaintiffs were so anxious to dispose of their large surplus diamond inventories * * * that they would have proceeded with the transactions in any event.” Finding 41. In effect, the commissioner determined that plaintiffs were intent on completing the barter notwithstanding a less favorable exchange rate, and that they did not rely on allegedly misleading govemment statements concerning that rate.

Although the plaintiffs challenge this ultimate finding, they do not attack any of the commissioner’s preliminary findings which lead up to his conclusion, i.e. that plaintiffs were well aware of the disparity between world market prices and the floor price for CCC cotton (finding 11) ; that they made their initial offers and arranged to pay substantial discounts to cotton exporters on the basis of the higher rate (findings 11,12,13, 16); and that they were concerned to dispose of their surplus diamonds even though they suffered such ostensible losses (finding 11).

We think that the defendant made no misrepresentations, and that even if Rough Diamond and Parser were temporarily misled by the statements in question they did not rely thereon to their detriment. On February 3, 1959, officials of the Department of Agriculture testified in hearings before a House subcommittee on appropriations, at which the Department was severely criticized for allegedly failing to comply with

Section 203 during the 1958-1959 marketing year. The chairman of the subcommittee stated explicitly that he thought the pricing policy for 1958-1959 violated the statute. In the next two days, the Department of Agriculture issued press releases announcing changes in the CCC’s cotton export program for the 1959-1960 marketing year (beginning August 1, 1959). The revisions were designed to enable CCC to sell its cotton at world market prices.

On the basis of these statements, plaintiffs apparently concluded that there was a strong possibility that, even prior to the end of the 1958-1959 marketing year, CCC would lower its cotton export prices. See finding 21. But it is difficult to see anything misleading about either the hearing-testimony or the subsequent press releases. At no time did the Department state that it would modify its cotton prices prior to July 31st, although such an inference might possibly be drawn from admissions at the hearings 'by representatives of the Department that the pricing policy for 1958-1959 had gone somewhat awry.

See findings 15, 17. This is, however, far short of the “clear and convincing” evidence of misrepresentation necessary for the reformation of a contract. Associated Traders, Inc. v. United States, 144 Ct. Cl. 744, 749-50, 169 F. Supp. 502, 505-06 (1959). Plaintiffs simply drew their own inferences from official statements which were, at most, ambiguous and murky. Even if these pronouncements were misleading, Parser and Rough Diamond could not possibly -have relied on them. On March 16,1959, CCC “accepted” plaintiffs’ offers, but varied the terms by specifying an earlier export deadline.

While plaintiffs had proposed to export the bartered cotton by December 31, 1959, CCC stipulated that all cotton be exported on or before July 31,1959. Since plaintiffs had made extensive commitments with cotton brokers based on rates above the world market level, it can be assumed that they did not originally consider the world market price to be essential or the later deadline to be a means of obtaining that price. But as a result of the press releases in February 1959, plaintiffs knew that, as of August 1, 1959, CCC would lower its prices to approximately the going international rate.

The selection of the export deadline then became important because it could permit the purchase of the CCC cotton at the lower rate. On March 20th, plaintiffs tendered counteroffers, requesting that the deadline be set forward to March 16, 1960, or, alternatively, that cotton received in exchange from CCC prior to July 31, 1959, be valued “in accordance with

Section 203 of the Agricultural Act of 1956” (by which plaintiffs meant current world market prices). On the very same day, however, Parser sent a “confirmation” (acceptance) letter, agreeing to exchange diamonds valued at $135,000 on CCC’s terms. At conferences with Department of Agriculture representatives on March 24th, 25th, and 26th, and April 3rd, plaintiffs’ proposals were rejected. Findings 22,23(d), 24, and 25(a).

Moreover, plaintiffs were told at these meetings that, to be considered, their revised offers would have to be treated as new ones and placed at the bottom of the list, since offers were passed on in the order in which, they were submitted. This might mean losing out entirely on the barter, because CCC had received numerous offers. Wanting to avoid such a result at all costs, plaintiffs agreed to make the exchanges on the basis of the then prevailing rate for CCC-owned cotton.

In a letter dated March 25th, Parser “confirmed” (accepted) the part of the defendant’s March 16th offer it had left open by its earlier confirmation, and Rough Diamond followed suit on April 6th. Apparently because they had accepted these terms, plaintiffs never replied to a letter from CCC on April 8th, formally reiterating the agency’s rejection of plaintiffs’ counteroffers. Plaintiffs now claim that CCC intentionally timed its formal reply of April 8th so that it would arrive after the specified deadline for acceptance of the agency’s barter offers.

As a result, it is said, CCC deceived them into thinking their alternative proposals might still be accepted, even after plaintiffs had agreed to less favorable terms. But the meetings of March 24-26th and April 3rd, at which government officials flatly rejected plaintiff’s counteroffers, can have left no doubt on this score. Before Rough Diamond and Parser accepted the defendant’s terms, they had already been told quite specifically that there was no hope for a better cotton exchange rate at that time.

Plaintiffs accepted the higher rates with full knowledge of the surrounding circumstances and were in no way deceived when they acquiesced in CCC’s terms. Plaintiffs argue also that they consented to the terms stated in the Government’s acceptance letter of March 16, 1959, in order to avoid the imposition of severe fines by the defendant. Assuming that reformation is an appropriate remedy (rather than rescission, which plaintiffs definitely do not desire), they have failed to prove their case. There is no evidence of duress.

First, the OCC rules then in effect seem to us to make it clear that prospective barterers were not subject to any penalty prior to their confirmation of the acceptance letters. See findings 19(a), 28; tr. 833-38. Even if the rules had so provided, they were published and plaintiffs would have been on notice as to any sanctions specified for the withdrawal of an offer. Perhaps most significant is the absence of a scintilla of evidence that plaintiffs were concerned with the question of possible penalties if they backed out after March 16th.

The record contains no indication that either Rough Diamond or Parser made any inquiries in this regard before submitting their confirmations. Plaintiffs’ main concern at that time was still to dispose of the surplus diamonds for which there was no other market. Even if their prior enthusiasm had diminished somewhat, plaintiffs remained anxious to complete the barter transactions and were not coerced into doing so. In the fall of 1959, plaintiffs were asked to sign contracts formalizing the agreements reached in March and April.

When they refused!, seeking the better exchange rate, CCC did “threaten” to impose fines if plaintiffs backed out of the deal. See finding 51. By that time, plaintiffs were already bound by their prior acceptances, in the spring, of CCC’s offers. See Restatement, Contracts § 26; Hunt & Willett, Inc. v. United States, 168 Ct. Cl. 256, 266, 351 F. 2d 980 (1964) , The Government’s offers had incorporated by reference certain sanctions which could be invoked by CCC if the private party accepted the offer and then subsequently breached the resulting barter agreement. See findings 18, 19.

By suggesting that it might employ such sanctions, the defendant was not guilty of duress. It was saying no more than it would be free to exercise its legal rights. See, e.g., Electric Power Plants Corp. v. United States, 146 Ct. Cl. 98, 100, 173 F. Supp. 615, 616 (1959); Beatty v. United States, 144 Ct. Cl. 203, 205-07, 168 F. Supp. 204, 206-07 (1958). In short, plaintiffs were neither coerced nor misled. The end result of the negotiations was plaintiffs’ acceptance, in the spring of 1959, of a cotton exchange agreement based on prevailing CCC prices for the 1958-1959 marketing year.

Having voluntarily agreed to these terms, Rough Diamond and Parser got what they ultimately bargained to receive, and they are entitled to no more. Cf. Austin Co. v. United States, 161 Ct. Cl. 76, 80-81, 314 F. 2d 518, 520, cert. denied, 375 U.S. 830 (1963); Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 445, 312 F. 2d. 774, 778 (1963). Plaintiffs are not entitled to recover, and their petition is dismissed. FINDINGS 03?

FACT The court, having considered the evidence, the report of Trial Commissioner Saul Richard Gamer, and the briefs and arguments of counsel, makes findings of fact as follows: 1. Plaintiffs are corporations organized under the laws of the State of New York, with their principal offices in New York City. They were, at all times material herein, industrial diamond concerns whose main business was the acquisition, classification and sale of industrial diamonds. 2.

By letter dated December 24, 1958, the Barter and Stockpiling Division of the Commodity Stabilization Seirvice (CSS), United States Department of Agriculture (USDA), informed the major dealers in industrial diamonds, including plaintiffs, that Commodity Credit Corporation (CCC) would consider the exchange of a limited quantity of industrial diamonds for agricultural commodities which were owned by CCC and required to be exported.

This letter provided in part as follows: Subject: CCC Policy Governing Acquisition of Industrial Diamonds Under Barter This is to inform you that the Commodity Credit Corporation is now in a position to consider barter offers of limited quantities of industrial diamonds, which is one of the materials approved by the President of the United States for acquisition through barter and announced by USDA Press Release dated November 14,1958. A copy of this press release, setting forth CCC’s general policies governing the barter program, is enclosed for your information.

In addition, there are set forth below the policy and procedure pursuant to which CCC will consider offers of industrial diamonds. It is emphasized that under present policy the main purpose of the barter program is the exportation of CCC-owned agricultural commodities in addition to those exported under cash sales. Therefore, an offer of any strategic and critical material, assuming of course that price and other terms and conditions relating to such materials are acceptable, merits consideration only when it serves the purpose set forth above.

Since it is now more difficult to export barter commodities in compliance with CCC’s policy looking toward additional exports under barter, the Commodity Credit Corporation, both in its own interest and in the interest of potential barter contractors, is trying to guard against a most undesirable situation where, in the light of the estimated capacity of available foreign markets to absorb barter commodities, there would be at any time too large a total value of commodities to be exported under barter contracts for which there is neither a sale nor commitment for exportation.

In the interest of orderly transaction of business, in consideration of the already heavy workload under the recently announced program, and in order not to exclude other materials from some proportionate participation in current barter transactions which can be concluded in furtherance of CCC program objectives, it is not the intention of the Commodity Credit Corporation to call for submission of offers of industrial diamonds by a certain date. Instead, as in the case of any other material, offers of industrial diamonds will be considered in the order in which they are received and on the basis of their merits.

Since industrial diamonds are appraised by the Government, the attractiveness of an offer of this material depends mainly upon the proposed disposition of agricultural commodities and the degree and nature of a commitment for disposition of a named commodity to a named country of destination, in line with CCC’s program objectives. In addition to these general considerations, there are given below some further points which may assist you when submitting an offer of industrial diamonds in exchange for CCC-owned agricultural commodities for export to eligible destinations:

(1) It is the desire of the Commodity Credit Corporation to undertake this proposed procurement with the least possible effect on the industrial diamond market, and without depriving industrial users of their normal supplies of this material. Therefore, each offer must contain a statement that the material offered is considered in excess of the historic requirements of the offeror’s normal customers.

(2) Offers of industrial diamonds may be submitted at any time after the date of this letter, and all material offered must meet the requirements of National Stockpile Specification P-19, dated April 1, 1949, * * *.

(3) An offer must show the estimated total value of material offered and may show the estimated caratage in each class.

(4) The proposed delivery period for industrial diamonds shall be stated in the offer but, except where very prompt delivery is offered, CCC reserves the right to propose a different delivery period in individual cases which it deems more in line with the total dollar value of material offered. A delivery period exceeding one year from dafe of CCC’s acceptance telegram cannot be considered in any event.

(5) CCC reserves the right to reject any and all offers or any part of any individual offers.

(6) Due to the nature of the proposed transactions, involving the exportation of agricultural commodities and the administrative expense of preparing and administering detailed contracts, it is hoped that even the smallest offers will still represent a quantity of agricultural commodities susceptible to exportation. * * *

(7) Prior to telegraphic acceptance by CCC, offers may be withdrawn in writing.

(8) Prior to inspection and acceptance, COG assumes no obligation whatsoever regarding material - offered.

(9) The following standard provisions of barter contracts are particularly being called to your attention: a. The acceptability and exchange value of industrial diamonds offered will be determined by a Government appraiser or appraisers whose decision shall be final; * * # * ip d. CCC requires irrevocable letter of credit performance guarantee of one percent of the total value of stones offered to assure delivery of any diamonds which may be contracted for; e. A barter contractor is responsible for selling and exporting agricultural commodities involved; and i. A contract, if any, will be based on CCC’s customary provisions, will contain detailed provisions concerning points (

a) to (

e) above. ip * * * * This letter applied to cotton and several other agricultural commodities. 3. (

a) By telegram dated December 26, 1958, plaintiff A. G. Parser, Inc. (“Parser”) wired an offer to exchange $1,245,600 in industrial diamonds available for delivery “starting second week of January, 1959, * * * providing suitable agricultural delivery arrangements have been made by then.” The diamonds were listed in assorted lots in 10 classes and 65 subgroupings. The wire stated in part: “The carats and amounts offered in this proposal are clearly in excess of the normal and historic requirements of the customers supplied by our firm, for industrial diamonds.” (

b) The following day, Parser, by telegram dated December 27,1958, telegraphed a second offer of $300,000 in additional industrial diamonds “for delivery second week of January,” “to barter against surplus agriculture commodities.” The offer similarly stated: “We offer out of our own stock on hand and certify that these goods are in excess of the historic need of our regular customers * * *.” 4. By telegram dated December 31, 1958, plaintiff Bough Diamond Company, Inc. (“Bough Diamond”) offered to barter $4,740,000 worth of industrial diamonds for CCC-owned cotton.

The telegram read in part as follows: Beurlet December 24 we offer for barter out of our own stock on hand for immediate delivery approximately five million dollars industrial diamonds of following caratage and estimated values: * * * * * We certify (1) the entire amount offered is in excess of the historic requirements of our normal customers and was imported for barter purposes (2) the entire amount meets National Stockpile Specification P-19 (3) our total diamond import from England during period accumulation material offered herein greatly exceeds value this offering and inquiry of Customs Authorities New York Division will verify (4) all these diamond purchases were paid for in United States dollars.

Being in excess our normal customers requirements we submit such purchases by this company generated additional purchasing power in England for agricultural commodities to be exported. Therefore we propose bilateral barter transaction and we hold firm commitments from United States cotton merchants to export cotton to England in dollar amount of CCC exchange value. We will supply you with verification of these commitments upon request. The CCC owned commodity received in exchange under this transaction will be exported no later than December 31, 1959. We agree other provisions your letter December 24.

This offer void for acceptance no later than January 15, 1959. 5.

By telegram dated January 2, 1959, Parser submitted additional information relative to its December 26, 1958, offer indicating in part that: ‡ ^ $ 3-All the diamond purchases were paid for in U.S. dollars and originated in the Union of South Africa and/or Belgium thus creating additional purchasing power for U.S. commodities. 4-We have firm commitments from cotton exporters to export cotton to Belgium for a CCC exchange value of 875,000 dollars and to export cotton to the "Onion of South Africa for a CCC exchange value of 135,000 dollars, and we will supply with verification of these commitments upon request. 5-Our offer is good for CCC acceptance until we withdraw bid. 6-As our firm cotton commitments are, as of now, in total of 1,010,000 dollars and our offer of December 26, 1958 is in a total of 1,250,000 dollars we ask for the privilege to eventually increase our cotton commitments to 1,250,000 dollars. 7-We will submit later data supporting the contentions of the cotton exporters that without this special barter transaction the United States cotton would otherwise not be sold. -6.

Under

section 303 of the Agricultural Trade Development and Assistance Act of 1954, as amended, 7 U.S.C. § 1692, the Secretary of Agriculture is authorized “to barter or exchange agricultural commodities owned by the Commodity Credit Corporation for (

a) such strategic or other materials of which the United States does not domestically produce its requirements * * * as the President may designate * * * .” The

section further provides that “In carrying out barters or exchanges authorized by this section, no restrictions shall be placed on the countries of the free world into which surplus agricultural commodities may be sold except to the extent that the Secretary shall find necessary in order to take reasonable precautions to safeguard usual marketings of the United States and to assure that barters or exchanges * * * will not unduly disrupt world prices of agricultural commodities or replace cash sales for dollars.” In furtherance of these provisions, it has been the policy of the Secretary to require barter contractors proposing to export commodities to countries which might otherwise purchase such commodities for dollars, to establish that the proposed barter transaction will not unduly disrupt world market prices and will represent additional exports of such commodities over and above those which might reasonably be expected to be made.

Such evidence of so-called “additionality” was required of the plaintiffs in connection with their offers. 7.

By letter of January 7, 1959, Rough Diamond referred to its December 31, 1958, $4,740,000 proposal “involving the exchange of industrial diamonds imported from England for CCC-owned cotton to be exported to England, having an exchange value equal to the value of the industrial diamonds offered therein” and submitted five telegrams of commitments from the following U.S. cotton exporters, referred to as Rough Diamond’s “commodity agents”, to export cotton to England in the indicated amounts: Stemberg-Martin & Co., Ine_$2,000, 000 W. D. Felder & Company_ 500,000 C.

Itoh & Company (America) Inc_ 400,000 Cook & Co., Inc- 1,750,000 Volkart Brothers, Inc_ 90,000 Total- 4,740,000 The letter further stated: Please note that these foremost cotton exporters have assured us that without this special barter transaction they would not be able to sell this cotton to importers in England because these importers are buying their cotton requirements elsewhere,. and that this barter transaction, if accepted by CCC, will assure greater export of U.S. cotton. (See attached telegrams.) We are. also assured that sale of this cotton will not unduly disrupt world market prices and that under present marketing conditions it will not displace U.S. dollar sales.

We call to your attention the fact that for the first three months of the current market year only 46,172 bales of U.S. cotton have been exported to England; whereas, for the same period during the last prevailing marketing year, export to England was 185,995 bales. This is a clear indication that importers are. buying cotton elsewhere and that this barter transaction will not displace additional U.S. marketing of cotton but will serve to recapture some of the business now going to other countries.

We urge that you accept our offer at the earliest possible moment so that this opportunity to export surplus cotton to England will not be lost. Each of the enclosed five telegrams, all dated January 7, 1959, stated that it would not be possible to sell the indicated amounts of cotton in England without the barter transaction. The following statement in the telegram from C. Itoh & Company (America) Inc. was typical: * * * The situation is such that we could not otherwise sell this cotton for shipment to England without the proposed barter transaction.

Importers are buying other growths of cotton as reflected in official U.S. export figures. It is hoped that the OCC will accept your proposal and thereby assure an increase in cotton exports. 8a (

a) Also by letter of January 7, 1959, Parser referred to its December 26, 1958, $1,250,000 proposal and its January 2,1959, telegram with respect thereto, and enclosed- “two (2) commitment telegrams and verifications from Cook & Company, Inc. and Volkart Brothers, Inc. [cotton exporters] showing that we have on hand firm commitments from reputable and large cotton exporters to ship cotton .to countries designated in the barter proposal.” The letter went on to state: It is obvious from these telegrams that the cotton considered in this transaction does not displace any normal sales but, in view of the special barter conditions, would generate new sales for American cotton where, at present, this material is being supplied mostly from other countries.

Thus the barter sales would not disrupt world market conditions nor would they replace normal U.S. Dollar sales. The enclosed commitment telegram, also dated January 7, 1959, from Cook & Co., Inc., to Parser, stated in part: * * * Under present and projected marketing conditions we could not sell this U.S. cotton to importers in Belgium without this special barter transaction. Importers there are consistently buying their cotton requirements from other countries. Therefore this barter transaction, if accepted by CCC, will assure greater exports of U.S. cotton.

The enclosed telegram from Volkart Brothers, Inc., also dated January 7,1959, similarly stated that “Cotton marketing conditions at present preclude us from making sales of cotton to Union of South Africa without this barter transaction. Importers there are buying cotton elsewhere. CCC approval of your barter proposal would help increase exports U.S. cotton.” (

b) By another letter of January 9, 1959, relating to its December 26,1958 proposal, Parser forwarded two more commitment communications from two additional cotton exporters [Hohenberg Bros. Company and Stemberg-Martin & Company, Inc.]. Parser’s letter repeated the above-quoted portion of its January 7, 1959, letter and then added: The CCC-owned commodities received in exchange for the industrial diamonds will be exported no later than December 31, 1959. (

c) All the additional offers made by Parser, as will hereinafter appear, were similarly supported. 9. By telegram dated January 26, 1959, Parser wired a third offer “of $700,000 of industrial diamonds to be bartered against agriculture products”, the diamonds to “be available for delivery three weeks after acceptance of our offer.” The telegram further stated that plaintiff had “firm commitments for the amount of $300,000 from Cook & Company for cotton to be exported to the Netherlands and also for $400,000 from C. Itoh (America) Inc. for export to Belgium.” 10.

In January 1959, the Foreign Agricultural Service, USDA, issued a publication entitled “Factors Affecting the Export Outlook for United States Cotton Production and Export Availabilities” in which it was noted that cotton production was increasing in many foreign countries although it was decreasing in the United States; that “price behavior” would “have an important bearing on the future of cotton in general”; that there was “evidence in recent years that the U.S.S.R. and Communist China can trade in cotton * * * in a manner that has a most demoralizing effect upon world prices and trade”; and that the “ability and willingness of these countries to make use of cotton * * * as a political and economic weapon is disconcerting * * The publication closed as follows: Since the legislation requiring that U.S. cotton be available for export at competitive prices [section 203 of the Agricultural Act of 1956] continues in force, there should be no doubt in any quarter, either at home or abroad, that the United States expects to maintain a strong position in the export market.

The overall policy is quite clear. If ambiguity exists, it is not with respect to the general cotton export policy of the United States but only with respect to the details of implementation. 11.

Although there are approximately 400 grades of cotton, each bearing its own price at different locations, nevertheless at the time of defendant’s December 1958 barter invitation and plaintiffs’ subsequent offers, the prices at which many grades of cotton were being offered in various world markets, including England, by other exporting countries were generally approximately 5 to I cents per pound lower than the prices at which comparable growths of CCC-owned United States cotton was being offered in those markets.

Such competitive disparity continued to exist in at least such amount throughout the remainder of the then current marketing year, i.e., until July 31, 1959. At the time plaintiffs made their offers and selected cotton for their barter commodity, they were familiar with the then current price disparity. However, plaintiffs’ representatives had, especially through Rough Diamond’s previous barter transactions, become familiar with cotton commodity dealings and plaintiffs had confidence that their agents would be able to move the cotton in foreign markets.

When the original offers were made, plaintiffs’ primary concern was divesting themselves of their large surplus diamond inventory accumulations, amounting to many millions of dollars, in which problem they were much more interested than in the cotton competitive situation. Even prior to its December 1958 offer, and going back to 1957, Rough Diamond, in an attempt to dispose of surplus diamond inventory, had submitted barter offers on a continuing basis to CCC.

However, prior to the instant ones, no acceptances had been made which resulted in plaintiffs’ having purchased any cotton from CCC during the 1958-59 marketing year. 12. The arrangements between plaintiffs and their agent cotton exporters were as follows:

(1) The cotton agent agreed to purchase cotton from the CCC in the amount of the commitment within 45 days after notification that the CCC had accepted, and the plaintiff had confirmed, the barter transaction, provided that such acceptance and confirmation occurred on or before January 15, 1959. All of the commitments were good only to such date.

(2) The cotton agent would pay cash for the cotton to CCC and would then notify CCC to make refund of such payments to the plaintiff.

(3) When the plaintiff, after the execution of a formal contract with the CCC, received the refund of the cash payment, it would at that time remit to the cotton agent a discount in an amount provided in the commitment between the plaintiff and the cotton agent. The amount of the discount was in large part predicated upon the level needed to make United States cotton competitive with foreign growths.

The original commitments obtained by Rough Diamond on December 28 and 30,1958, provided for discounts to the cotton agents in the following amounts: Volkart Brothers, 8 percent; Sternberg-Martin, 8 percent; Cook & Co., 10 percent; and C. Itoh & Co., 10 percent. (The discount allowed W. D. Felder & Company does not appear.) On January 5, 1959, the discount to Stemberg-Martin was increased to 10 percent. 13. (

a) Section 203 of the Agricultural Act of 1956 (70 Stat. 199; 7 U.S.C. § 1853) provides as follows: Sec. 203. Expoet Sales Program: Foe CottoN.

In furtherance of the current policy of the Commodity Credit Corporation of offering surplus agricultural commodities for sale for export at competitive world prices, tbe Commodity Credit Corporation is directed to use its existing powers and authorities immediately upon the enactment of this Act to encourage the export of cotton by offering to make cotton available at prices not in excess of the level of prices at which cottons of comparable qualities are being offered in substantial quantity by other exporting countries and, in any event, for the cotton marketing year beginning August 1, 1956,_ at prices not in excess of the minimum prices (plus carrying charges, beginning October 1,1956, as established pursuant to

Section 40? of the Agricultural Act of 1949) at which cottons of comparable qualities were sold under the export program announced by the United States Department of Agriculture on August 12, 1955. _ The Commodity Credit Corporation may accept bids in excess of the maximum prices specified herein but shall not reject bids at such maximum prices unless a higher bid is received for the same cotton.

Cottons of qualities not comparable to those of cottons sold under the program announced on August 12,1955, shall be offered at prices not in excess of the maximum prices prescribed hereunder for cottons of qualities comparable to those of cottons sold under such program, with appropriate adjustment for differences in quality. Such quantities of cotton shall be sold as will reestablish and maintain the fair historical share of the world market for United States cotton, said volume to be determined by the Secretary of Agriculture. (

b) The CCC marketing year for cotton commences on August 1 and ends on July 31. Under the cotton export program, CCC sold cotton at not less than a minimum price which it established. Since August 1, 1956, and until the early part of the 1958-59 marketing year, these minimum prices were such as to enable United States cotton to be offered in world markets at prices substantially equal to the level of prices at which cotton of comparable quality was being offered in substantial quantity in such markets by other exporting countries.

However, after the first few months of the 1958-59 marketing year, the prices at which most grades of cotton were being offered in world markets by other cotton exporting countries became lower than the prices at which comparable growths of CCC-owned cotton could, considering COC’s minimum price, be offered and were being offered. As stated, by December 1958 the discrepancy was, in many cases, 5 to 7 cents per pound. To promote the export of United States cotton privately held, defendant made export payments to exporters. For the 1958-59 marketing year, such payment was fixed at 6.5 cents per pound.

The amount of the payment which would become effective on August 1, the beginning of the marketing year, was customarily announced approximately 4 to 6 months in advance in order to permit the exporters to make necessary export arrangements. Prior to the 1958-^59 marketing year, there had never been any change made during a marketing year in the previously announced export payment, although it was the USDA’s prerogative to do so.

The amount of the payment previously fixed and announced was maintained throughout the year without any attempt at daily, weekly, or monthly adjustments to keep all grades of United States cotton finely competitive at all times in the various world markets (as was done, for instance, with wheat, for which daily adjustments were made). The principal reason for maintaining the same price throughout a marketing year was the belief that such a policy would contribute to price stability which in turn importantly affects cotton consumption.

The introduction of uncertainty into the price structure might result, USDA felt, in the export of less cotton because the cotton merchants, in the constant expectation of lower prices, might refrain from bidding and purchasing. However, prior to the 1958-59 marketing year, there had been, as pointed out, no substantial need for such frequent adjustments. Similarly, ever since the commencement of the cotton export program on August 1, 1956 under

section 203 of the Agricultural Act of 1956, there had not been any changes made during any marketing year in the minimum prices CCC had established for the sale of CCC-owned cotton for export, although it was similarly its prerogative to do so. However, unlike the situation pertaining to the announced amount of the export payment, the minimum price which CCC fixed for the sale of its cotton for export during a marketing year was never previously publicly announced. Despite this failure to disclose, however, cotton merchants were, under the established procedure for the sale of such CCC-owned cotton by competitive bids (as authorized by

section 203), quickly able to ascertain, within the first month of the marketing year, what CCC’s floor price was. By “ranging” their bids on the first two bid openings (sales being made, and bids being opened, every 2 weeks), bidders were thus able to determine what the floor price was, since no bids below such price were accepted. In early May 1958, the Secretary of Agriculture, through administratively confidential action, established a minimum base price of 28.30 cents per pound for middling 1-inch cotton at average location for the marketing year commencing August 1, 1958.

At the time defendant requested barter proposals in December 1958, this base price was well known by cotton merchants. After each biweekly bid opening, tbe New Orleans office of CSS issued press releases stating specifically what the average price at which cotton was sold during the period (on the basis of middling 1-inch cotton at average location). In every instance during the then current marketing year the average selling price was slightly in excess of 28.30 cents per pound. As a result, virtually all the offers received by CSS during the 1958-1959 marketing year were based on that price.

The discounts in the cotton merchants’ commitments to plaintiffs were based on such 28.30-cent price and the deductions therefrom that would have to be made to make it competitive in world markets.

While, in view of the Secretary’s right to change the price at any time, no one could be absolutely certain as to what the base price would be at the next bid opening, the knowledge as to such base price being based only on past bid openings, the discounts were in fact based on such price and the assumption, grounded upon the theretofore consistent Departmental policy and practice of maintaining the same floor price throughout the entire marketing year, that the past 28.30-cent floor price would be maintained throughout the current marketing year. (

c) There is no official, published “world price” of cotton, although in the trade the expression “world price” is frequently employed. When so employed, it commonly refers to a composite or average of prices in various foreign markets on one base type of cotton, such as the strict middling l%6-inch grade (the base type purchased in Liverpool, England) . 14. (

a) The procedure for the acquisition of cotton from CCC for export under barter transactions was, during the period herein involved, governed and prescribed by two so-called CSS “Announcements”, each dated April 23, 1958. One, designated “Announcement CN-EX-5” and entitled “Cotton Export Program — Sales”, was issued by the Director of the Cotton Division in Washington. The other, designated “Announcement Number NO-C-11” and entitled “Sale of Upland Cotton (Cotton Export Program 1958-59 Marketing Year) ”, was issued by the New Orleans office. Announcement CN-EX-5 provided in part: I.

General Commodity Credit Corporation (hereinafter referred to as “CCC”) will make available for sale upland cotton from its inventories acquired in price support operations for export pursuant to the terms and conditions of this announcement. Sales will be made on a competitive bid basis through the CSS Commodity Office, Wirth Building, 120 Marais Street, New Orleans 16, Louisiana (hereinafter referred to as the “New Orleans office”).

The New Orleans office will issue a sales announcement (identified as Announcement Number NO-C-11) which, together with this announcement, will contain the terms and conditions under which the cotton will be sold and exported. * * * CottoN Cannot Be Exported Under the Program:, Prior to August 1,1958. II. Export Conditions A. Exportation of Gotton.

All cotton sold hereunder is sold upon the condition that the purchaser exports or causes to be exported to a destination * * * outside the continental United States either the identical bales of cotton purchased from CCC or in substitution therefor an; equal quantity of cotton (the cotton exported or caused to be exported by the purchaser is hereinafter referred to as “the cotton”). * * * While the purchaser may arrange to have some other person or firm export the cotton, the responsibility for such exportation cannot be transferred. CCC will hold the purchaser solely responsible for its export.

Satisfactory evidence of exportation of the cotton must be submitted by the purchaser. If the purchaser causes the cotton to be exported by some other person or firm, the purchaser must have sold the cotton to or through such person or firm so that the cotton would be exported. Cotton exported hereunder shall not be cotton exported pursuant to any program of the Department under which a payment in kind or cash export payment has been or will be made * * *. B. Exportation of Substitute Gotton.

If other than the identical bales of cotton purchased from CCC are exported in fulfillment of the export requirements of this announcement, the unpatchea gross weight of the cotton exported (including any identical bales in the shipment) must equal the gross weight of the cotton purchased from CCC. Cotton exported in substitution must be of grades within the universal standards for American upland cotton, must have a staple length of 13Aq' or longer, must have been produced in the continental United States, and must not be reginned, loose, or pickery cotton or any other such irregular cotton. U. Time for Export.

The cotton must be exported on or after August 1, 1958, and not later than (1) 9 months after the date the warehouse receipts covering the cotton purchased from CCC are made available to the purchaser or such cotton is delivered by CCC to the purchaser, or

(2) July 31, 1959, whichever is earlier. iotton exported in substitution for cotton purchased from CCC hereunder must be exported after the date of purchase of such cotton from CCC. $ $ $ $ $ IV. Price Adjustment CCC sells cotton for unrestricted use at not less than the statutory minimum sales price for sales for unrestricted use (105 percent of the current support price for such cotton plus reasonable carrying charges) or the domestic market price, whichever is the higher. Sales of cotton by CCC for export are not subject to the statutory price restriction.

Sales of cotton under this program may be made at reduced prices and are made upon the condition that the purchaser exports or causes to be exported in conformity with the requirements of this announcement either the identical bales purchased or in substitution therefor an equal quantity of cotton. * * * (

b) Announcement NO-C-11 provided in part: Commodity Credit Corporation (hereinafter referred to as “CCC”) has issued Announcement CN-EX-5 announcing a Cotton Export Program under which it will make available for sale, for export on and after August 1, 1958, upland cotton acquired in price support operations and listed in the catalog. The CSS Commodity Office, New Orleans, Louisiana, announces that it will consider for CCC offers to purchase cotton for export under Announcement CN-EX-5. Cotton available for sale is listed in the catalog.

This announcement and Announcement CN-EX-5 contain the terms and conditions under which the cotton will be sold and exported under the Cotton Export Program. * * * * * 4. (

a) The cotton will be invoiced on receipt weights and on the basis of the classification of the cotton as listed in the catalog. * * * Delivery and payment shall be made by sight draft with invoice and warehouse receipts attached unless * * * (2) cotton is being delivered under a barter contract entered into by CCC. * * * Delivery under a barter contract will be in accordance with the terms of such contract. * * * It was further provided that competitive bids would be received by the New Orleans CSS Commodity Office from time to time throughout the 1958-59 marketing year.

Such bids could be made by interested cotton merchants on lots or portions of lots of cotton listed in the CCC catalog. Bids were required to state the price in cents per pound that such merchants were willing to pay for cotton for export of the class and staple length and at the various locations described in the catalog. These bids on opening would then be compared by personnel of the New Orleans CSS Commodity Office.

The first bid opening for the 1958-59 marketing year which commenced on August 1, 1958, was set for May 12, 1958, and bid openings were provided for every 2 weeks thereafter. (In practice, following acceptance by CCC of a bid, a confirmation of sale was issued to the purchaser setting out the sales number assigned to the purchase from which a part or whole of the cotton so acquired could be allocated to one or more barter contracts.) The Announcement closed with the following: 12.

In submitting an offer under this announcement, the offeror represents and warrants that he is regularly engaged in the business of buying or selling commodities and for this purpose maintains a business office in the United States, its territories, or possessions including Puerto Rico and therein has a person, principal or resident agent, upon whom service of judicial process may be had. CCC reserves the right to determine the eligibility of any offeror. (

c) The issuance of these two Announcements was accompanied by a USDA Press Release, also dated April 28, 1958, and entitled “USDA Announces 1958-59 Cotton Export Programs.” The release stated in part: The U.S. Department of Agriculture announced today that a cotton export sales program similar to the current program will be in effect during the 1958-69 marketing year, and that it will be supplemented by a “payment-in-kind” program to encourage exports from commercial stocks. Under the program now in effect, Government-owned cotton is offered for export sale at competitive-bid prices.

Under the supplemental payment-in-kind program, payments in the form of cotton from Government stocks will be earned by export shipments of cotton from commercial stocks. ¥ «í» 'i* CCC inventory stocks are now reduced to less than 1.4 million bales. Some of these stocks will be sold for unrestricted use. Under these conditions, a supplemental export program drawing on commercial stocks is necessary in order to maintain a fair historical share of the world cotton market for the United States. 15. (

a) On February 4 and 5, 1959, the USDA issued press releases announcing the Cotton Export Program for the 1959-60 Marketing Year, which was to commence August 1, 1959. The February 4, 1959, press release provided as follows: USDA Announces Cotton Export Program for 1959-60 Marketing Year: The U.S. Department of Agriculture today made the following announcements regarding cotton export programs for the marketing year which begins Aug. 1, 1959: 1. The payment-in-kind export program which has been in effect since the start of the current marketing year will be continued and expanded.

Under this program, cotton for export shipment is drawn from commercial stocks, with the exporter earning dollar credits which he uses to buy other cotton from Commodity Credit Corporation stocks. 2. The initial rate of export payment under the payment-in-kind program will be 8 cents per pound for cotton shipped on or after Aug. 1, 1959. This rate will be subject to change without prior announcement. The payment rate under the current payment-in-kind program is 6.5 cents per pound.

However, the effect of the announced payment rate for next year, in making United States cotton competitive on world markets, will be increased by a greater amount than indicated by the dollars-and-cents difference from this year’s rate. The domestic price at which exporters will be able to buy cotton from commercial stocks is expected to be materially lower than this year. 3. The “direct sales” program, which has been in effect since 1956 and under which CCu-owned cotton is offered for export sale at competitive-bid prices, will be discontinued at the beginning of the marketing year which starts Aug. 1, 1959.

Cotton will be drawn from CCC stocks only for the payments-in-kind under the export program, for barter, for credit sales, for donations, and any emergency operations. The payment-in-kind program which is being continued for next year permits greater participation in the merchandising of cotton by the various segments of the cotton industry, from the country merchant to the futures exchanges. It lessens Government control over the marketing of cotton, and serves to concentrate export demand on commercial or “free market” stocks.

Department officials explain that it is their intention to keep United States cotton in a competitive position on world markets. To achieve this objective, the initially announced export payment rate may be adjusted from time to time during the year in line with developing conditions. The effective payment rate will be under constant study, with a full review at least once a month. The announcement containing the terms and conditions of the export program is now being developed.

Copies of such announcement will be made available as soon as development work is completed, so that exporters and others in the cotton industry will be in position to plan ahead for operations in the new marketing year. (

b) The February 5 press release stated in part: In response to inquiries about possible cotton export programs after the present marketing year, the U.S.

Department of Agriculture today expanded and clarified the announcement of the cotton export program which was issued yesterday, Feb. 4. * * * * * In connection with the above announcement, Department officials explain that there is a definite responsibility on the Department and the cotton trade to make the cotton export program work to the extent of reestablishing and maintaining the fair historical share of the world market for United States cotton, as required by law.

If the payment-in-kind program does not prove effective, with reasonable export payments, the Department will be required to reinstate a competitive sales program (from CCC-owned stocks) to the point of reestablishing and maintaining “the fair historical share of the world market.” Department officials also called attention to the fact that during the marketing year which begins Aug. 1, 1959, the Commodity Credit Corporation will offer cotton owned by it for sale for unrestricted use at not less than 10 percentum above the current level of price support effective for Choice B cotton under the alternate price-support programs available in 1959. 16.

The original commitments from the cotton merchants to Rough Diamond having expired (no action having been taken as yet by CCC on plaintiffs’ offers), the following new commitments for export of cotton to England were negotiated on February 12, 1959 at the following discounts: Vol-kart Brothers — $590,000—12 percent; Stemberg-Martin— $2,000,000 — 12 percent; Cook & Co. — $1,750,000—13 percent; and C. Itoh & Co. — $400,000—12 percent. These commitments expired on February 28, 1959, and were subsequently extended first to March 16,1959, and then to March 31,1959. ■17.

On or about March 4, 1959, a transcript of the hearings before the Subcommittee of the Committee on Appropriations, House of Representatives, 86th Congress, First Session, which had taken place on February 3,1959, was made public. These hearings involved testimony by the Secretary of Agriculture and other USDA officials on whether the USDA was, especially during the then current 1958-59 marketing year, complying with

section 203 of the Agricultural Act of 1956 in making CCC-owned cotton available for export at prices competitive with foreign growths. During the hearings, Congressman Whitten took the position that in the three marketing years since

section 203 had been enacted, the USDA had complied with the law for the first two (1956-57 and 1957-58) but that for the then current year (1958-59) USDA had failed to comply, resulting in the loss of exports for American cotton. He felt that the Department was wrongfully refusing “to vary the subsidy on cotton” during the year, and pointed to the export subsidy on wheat which was changed daily in order to stay competitive.

The Secretary conceded that the USD A was: obligated to follow the law, which means that we are to be competitive in the world market and get our fair share of the world market but regardless of the conscientious manner in which we try to administer that law, there are bound to be some periods when we will be getting more than our share and other periods when we will be getting less than our share. You can’t fix it * * * we overshot the mark the first 2 years; we undershot it this year. But, averaging the 3 years out we have, I think, done a good job.

The Assistant Secretary testified that if the cotton subsidy to be set for the 1959-60 marketing year resulted in the United States share of the world market not being maintained, “that subsidy will be changed to maintain it,” but that in arriving at “the decision not to change this year,” the Department had “weighed tire 3 years” and had concluded “that for the 3-year period we have complied with the law because we have moved this much cotton.

In the fourth year if we are not doing that we will take the steps necessary under the statute to carry it out.” In answer to Congressman Whit-ten’s question that: “If to carry out that law, if it takes a change in the subsidy rate, periodically, monthly, would you make those changes?”, the Secretary replied “Yes”, and that in the future the Department would “probably need to vary it within the year, possibly.” The Department’s General Counsel testified that “Of course, the law doesn’t require the impossible, * * * there is no place you can call up and get the world market for cotton”, that, although the Assistant Secretary and the Secretary “have admitted that at the present time cotton is too high, and they plan to change the basis”, nevertheless “I think there is á reasonable basis for finding that they have complied with the statute.” 18. (

a) On March 16, 1959, CCC sent the following telegram to Parser with respect to Parser’s offer of December 26, 1958 (finding 3), as supplemented by its telegram of January 2, 1959 (finding 5) : Beurtels 12-26-58 and 1-2-59, CCC accepts your offer of industrial diamonds from Belgium and Union South Africa in exchange for CCC-owned cotton on the following basis:

(1) Value of stones deliverable from Belgium shall be $875,000.00 and from South Africa $135,000.00, one fourth of one percent more or less at your option. * * * * &

(3) Exchange value of stones shall be determined in New York City by Government inspector during inspection period (

s) to be established by CCC. Government inspector’s evaluation shall be final.

(4) In event evaluation by Government inspector is less than your estimated invoiced value, or in case of rejection of all or any part of material submitted for inspection and evaluation, you may, within 24 hours after such evaluation or rejection, substitute or add stones for, and to, stones inspected and appraised or withdraw stones submitted for inspection and evaluation. In the case of such withdrawal by you, the total value of stones covered by this telegram, and your obligation to export agricultural commodities, shall be reduced accordingly.

To extent you may have taken commodities before any such withdrawal having value in excess of value of stones accepted, such commodities shall be considered as sold for cash. Industrial Diamonds to be exchanged for CCC-owned cotton having exchange value of $875,000.00 which shall be exported to Belgium and having exchange value of $135,000.00 which shall be exported to South Africa. All cotton shall be exported on or before 7-31-59.

Acquisition of cotton and provisional credit or settlement for diamonds delivered prior to contract execution will be in accordance with “Transactions Prior to Signing Barter Contracts” dated 5-SU58. This acceptance subject to execution mutually acceptable contract which will provide (

a) U.'S. funds made available for' purchase U.S. agricultural commodities or as result of financing by any U.S. Government agency on sales of agricultural commodities for foreign currency may not be used as payment for cotton to be delivered under ensuing contract ; and (

b) importation of cotton by such countries will not increase availability of cotton for export therefrom to unfriendly foreign countries. Please confirm within 10 days. (

b) On the same day, March 16, 1959, CCC sent a similar telegram to Rough Diamond with respect to its $4,740,000 offer of December 31, 1958, advising that: Reurtel 12-31-58, CCC accepts your offer of industrial diamonds from England in exchange for CCC-owned cotton on the following basis:

(1) Value of stones deliverable shall be $4,740,000.00 one fourth of one percent more or less at your option. * * * * * and that: Industrial Diamonds to be exchanged for CCC-owned cotton having equivalent total exchange value which shall be exported to England on or before 7-31-59. * * * 19. (

a) The document referred to in the March 16, 1959, CCC acceptance telegrams entitled “Transactions Prior to Signing of Barter Contracts” stated as follows: Transactions Prior to Signing of Barter Contracts In instances in which Commodity Credit Corporation has accepted an offer from a contractor to barter materials for agricultural commodities, subject to the execution by the parties of a mutually agreeable contract containing all of the terms and conditions upon which such barter would be made, and the contractor has confirmed CCC’s acceptance, but negotiations for the contract have not been concluded, the contractor may acquire agricultural commodities from CCC for application against the proposed contract and receive provisional credit or settlement for materials delivered in accordance with the following terms: A.

The contractor may acquire any agricultural commodities available for barter, except as may be provided otherwise in CCC’s acceptance. The contractor shall acquire such agricultural commodities for export pursuant to the provisions of the CCC sales announcements offering such commodities for sale, except as provided herein. At the time of purchase of any such commodity (or within three business days after the time of purchase in the case of cotton), the contractor shall inform the CSS Commodity Office that the purchase (or a designated part thereof) is to be made applicable to the barter contract.

The contractor must either pay for such commodities in accordance with the applicable CCC sales announcements or, notwithstanding the provisions of such announcements, if lie so elects, furnish, an irrevocable letter of credit in favor of and acceptable to CCC in an amount at least equal to tlie sales price of tlie commodities, provided the contractor has agreed to the provisions hereof.

If agricultural commodities are delivered by CCC to the contractor against such a letter of credit, the contractor shall pay to CCC interest on the unpaid balance of the sales price of such commodities (at the rate applicable to CCC credit sales on the date such commodities are purchased) from the date the commodities are delivered until (1) the contractor delivers to CCC material (as specified in the offer and acceptance) which is retained by CCC having an exchange value (as determined by CCC in accordance with the offer and acceptance) equal to such sales price, or (2) payment for such com

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