The maximum price on any sale of domestic shorn wool shall be the applicable price set forth above; where wool is shipped, such maximum price must be computed in accordance with subparagraphs (1), (2) or (3) below. Where such maximum is a shipping point price, the total delivered price may not exceed the shipping point price plus actual cost of transportation from shipping point to destination. Where such maximum is a delivered price, the shipping point price may not exceed such delivered price less actual cost of transportation from shipping point to destination.

Whenever delivery is made in the seller's conveyance, the transportation charge shall not exceed the charge which would be applicable on an identical shipment from the same shipping point to the same destination at the lowest available commercial rate. In such cases, the transportation charge must be separately shown in the invoice or similar document delivered to the purchaser.

(1) Shipments from Boston to other points. On shipments from Boston to other points, the maximum price shall be a shipping point price no higher than the applicable price set forth above ex warehouse at Boston.

(2) Shipments to Boston from other points. On shipments to Boston from other points, the maximum price shall be a delivered price no higher than the applicable price set forth above f. o. b. at destination in Boston.

(3) Other shipments. On other shipments, the maximum price shall be a delivered price no higher than the applicable price: Provided, That (i) if the transportation charge per pound from shipping point to the railroad siding nearest the point of destination at the lowest railroad carload rate applicable to shipments of greasy wool is more than such charge from shipping point to Boston, then the amount of such excess may be added; and (ii) on resales of wool where the point

of shipment is in the same locality as the point of destination, the cost of local cartage and loading may be added. (b) Wools of choice character. The maximum prices for wools of choice character shall be the maximum prices set forth above plus the following amounts:

(1) Grades 70s to 58s, inclusive. (2) Grades 56s to 48s, inclusive_ (3) Grades 46s and coarser

Cents per

pound

3

5

8

(c) Inferior wools. The maximum prices for inferior wools shall be determined by deducting from the applicable maximum price for wools of average to good character, set forth in paragraph (a) of this section, the following amounts: (1) Slightly stained wools, 2¢ per lb.

(2) Yellow or heavily stained wools, 5¢ per lb.

1

(3) Seedy or burry wools not requiring carbonizing, and cotts, 3¢ per lb., after adjustment has been made for color in accordance with (1) or (2) above. (4) Seedy or burry wools requiring carbonizing,1 10¢ per lb. after adjustment has been made in accordance with (1) or (2) above: Provided, That where such wools are sold in a carbonized state the actual carbonizing charges plus an allowance for actual shrinkage may be added to the maximum price so long as such charges and shrinkage allowance_are_set_forth in the invoice or similar document delivered to the purchaser.

(5) Black or grey wools, 20¢ per lb.

(6) Dead wools, 25¢ per lb.

(7) Karrakul wools, 35¢ per lb.

(8) Wools tied with sisal or loom-spun jute twine, 10¢ per lb.

(9) Improved navajo wools, 5¢ per lb.

(10) Unimproved navajo wools, 10¢ per lb.

(d) Wools sold in lots containing mixed grades or lengths. When wools are sold in original bags or in lots containing different grades or lengths, the amounts of each grade and length included shall be determined by grading a sample portion of the lot or by an estimate made in accordance with established trade practices, and the maximum price for the quantity sold shall be based upon the applicable maximum price for each grade or length included.

(e) Brokers' commissions. In cases where a purchaser or a seller of domestic shorn wool employs a broker or other agent to make a purchase or sale on his behalf, a commission of not to exceed 1% of the applicable maximum price may be charged for such services and added to the applicable maximum price. A commission may not be charged to both buyer and seller on the same lot of wool. Such commission shall be payable only if (1) the wool is purchased at a price not exceeding the maximum price established by Maximum Price Regulation No. 106, (2) it is shown as a separate charge on the invoice or similar document delivered to the purchaser and (3) the commission is not split or divided with the seller or with an agent or an employee of the seller.* Issued this 28th day of February 1942.

LEON HENDERSON,
Administrator.

[F. R. Doc. 42-1767; Filed, February 28, 1942; 12:45 p. m,.]

(7 F. R. 1648)

Mr. BANCROFT. I believe that the statement of the considerations, taken in conjunction with the letter from the Secretary of Agriculture, answers the question with regard to the legality of the maximum price regulations for domestic shorn wool under the Domestic Price Control Act.

Mr. GILLIS. Mr. Bancroft, the other statement which was made by Mr. Fawcett is as follows:

A very earnest discussion was had with Attorney Bancroft of the Textile Division of the Office of Price Administration upon May 26, 1942, in regard to the 1 According to established trade practice.

general maximum price regulation as it applies to the textile industries, and particularly to the contracts upon which the manufacturers are now working. Some very amazing statements were made by this gentleman to the effect that they, the Office of Price Administration, intended to cut right through the outstanding Government contracts which were based upon wool purchased well within ceiling prices placed upon grease wool by the Office of Price Administration in February. He further stated that wool values were too high and everyone knew it, that they intended to cut through the outstanding contracts and adjust prices on the finished material to such an extent that it would force the manufacturers to put the wool market where it belonged. This is the same gentleman who a few weeks before read to wool-growers and their represenatives price ceilings on wool not in accordance with the Emergency Price Control Act but a scale of values based upon their own interpretation. Now he says they propose to lower wool values by repudiating Government contracts that are now well along in the process of manufacture. Such utter disregard for the sanctity of Government contracts as displayed by this official of the Office of Price Administration is unthinkable and strongly tends to destroy confidence in all Government obligations, including defense bonds. Our democratic form of Government is based upon the confidence of its citizens. Let nothing be done to destroy it.

This untenable situation has demoralized the whole wool and textile industries and, as usual, the wool market is absorbing the shock, and Mr. Bancroft has accomplished his avowed purpose.

The top futures market sagged from a high of about $1.37 to approximately $1.18 in a very short time. It is only fair to state, however, that upon June 3, 1942, price regulation No. 157 was issued by the Office of Price Administration which provides for a special method of figuring price ceilings on certain textile products as distinguished from the methods provided in the general maximum price regulation, which affords some measure of relief to the present holders of Government contracts but does not provide for the fulfillment of the original contracts as executed.

Mr. Bancroft, do you care to comment on that statement which was made by Mr. Fawcett?

Mr. BANCROFT. It would seem that, for adequate answer, the statement should be divided into separate parts. I will deal with any one or more of them, according to your suggestion.

Senator HATCH. I have a copy of that statement before me. I have examined it and that is the reason I came down to be present at the committee this afternoon. Please take the statement and divide it yourself and make any explanation you care to make regarding it. Mr. BANCROFT. All right, sir.

The first question, as I understand it, is with regard to the authority of the Office of Price Administration under the Emergency Price Control Act to cut across existing Government contracts. Do you wish for me to answer that question first?

Senator HATCH. You divide it up yourself and answer it in your

own way.

Mr. BANCROFT. Section 4 (a) of the act specifically provides as follows:

It shall be unlawful, regardless of any contract, agreement, lease, or other obligation heretofore or hereafter entered into, for any person to sell or deliver any commodity, or in the course of trade or business to buy or receive any commodity, or to demand or receive any rent for any defense-area housing accommodations, or otherwise to do or omit to do any act, in violation of any regulation or order under section 2, or of any price schedule effective in accordance with the provisions of section 206, or of any regulation, order, or requirement under section 202 (b) or section 205 (f), or to offer, solicit, attempt, or agree to do any of the foregoing.

When that section is read in conjunction with the definition of the word "person" appearing in section 302 (h) of the act, it appears clear that authority was given to the Office of Price Administration

to cut across existing Government contracts, as well as existing contracts between civilians.

Section 302 (h) provides as follows:

The term "person" includes an individual, corporation, partnership, association, or any other organized group of persons, or legal successor or representative of any of the foregoing, and includes the United States or any agency thereof, or any other government, or any of its political subdivisions, or any agency of any of the foregoing: Provided, That no punishment provided by this Act shall apply to the United States, or to any such government, political subdivision, or

agency.

I should like to submit for the record a memorandum which has been prepared by our Office relating to the constitutionality of the power referred to under the act.

Senator HATCH. The memorandum should be included with your statement. Do you have a copy of it with you?

Mr. BANCROFT. I have a copy of the memorandum with me; yes, sir.

Senator HATCH. I suggest that it be given to the reporter, Mr. Chairman.

Mr. BANCROFT. May I apologize for the informal style of it. This memorandum relates solely to cutting across Government contracts. It refers to, and incorporates by reference, other memoranda relating to cutting across private contracts.

Senator HATCH. That refers to the first part of the statement you have just read into the record; you are giving your authority for it. Mr. BANCROFT. Yes, sir; that is correct.

Senator HATCH. All right. Proceed.

The CHAIRMAN. The committee reporter will make the memorandum referred to by Mr. Bancroft a part of the record. (The paper referred to is as follows:)

To: David Ginsburg, general counsel; Thomas I. Emerson, associate general counsel; David Cobb, Thomas Harris, Harold Leventhal, Brunson MacChesney, Robert Wales, assistant general counsels.

From: Nathaniel L. Nathanson.

Subject: Constitutionality of Office of Price Administration price schedules and regulations cutting across existing Government contracts.

Mr. Leventhal has inquired whether a maximum price established by the Office of Price Administration may constitutionally cut across an existing contract to which the United States Government is a party. I am of the opinion that Office of Price Administration price schedules and maximum price regulations may constitutionally cut across existing Government contracts and that the Gold Clause cases and the case of Lynch v. United States (292 U. S. 571 (1933)) do not raise any substantial doubts. A detailed memorandum pointing to this conclusion is in my files. Briefly the reasoning is:

(1) We are agreed that Office of Price Administration may cut across private contracts. (See memorandum of H. R. Schneider, January 2, 1942.)

(2) As a matter of statutory interpretation it is clear that sections 205 (d), 302 (h), and 4 (a) of the Emergency Price Control Act of 1942 permit regulations and price schedules to cut across Government contracts.

(3) One argument against the validity of this congressional exercise of power springs from concepts of contract law. The argument is that the Government as promisor may not defend its failure to perform on account of impossibility or supervening illegality when it has prevented its own performance. This argument is disposed of in a well-settled line of cases, of which, the leading is Horowitz v. United States (267 U. S. 458 (1925)) by pointing out that the United States qua private contractor is a different entity than the United States qua sovereign.

This concept of the separate capacities in which the United States acts permits the normal operation of the general doctrine of supervening illegality.

(4) The constitutional question of congressional power to make the regulation which cuts across Government contracts is the same as in the case of private contracts. We have assumed the constitutionality of the price control law and the price schedules and regulations issued thereunder. This power of regulation entrusted to Congress by the Constitution may not be contracted away. North American Commercial Co. v. United States (171 U. S. 110).

(5) The manner in which this congressional power is exercised is subject to scrutiny under the due process limitations of the fifth amendment. Congress' granted power may not operate against Government contracts when the use of the power is discriminatory, destroying Government contracts only, and with no relation to any proper subject of regulation and without operating against private and public contracts equally. The Economy Act (48 Stat. 9) involved in Lynch v. United States (292 U. S. 571) was held invalid because there was no other reason for the legislation except to avoid the Government's obligations under its war-risk insurance contracts. This was discriminatory and not due process. Mr. Justice Brandeis' opinion in this case, however, points out that congressional action might invalidate Government contracts if the action was taken "within the Federal

police power or some other paramount power.' The exercise of the war power through the Emergency Price Control Act and regulations issued thereunder to carry out its purposes is clearly action taken within a "paramount power", and the effects of the action are felt by private contracts equally with Government contracts.

(6) Perry v. United States (294 U. S. 348 (1934) held (5 to 4)) that the holder of a Government gold bond could show no injury from the act of Congress in abolishing his right to be paid in gold. However, four of the Justices indulged in the following dictum:

"The bond in suit differs from an obligation of private parties, or states, * * * whose contracts are necessarily made in subjection to the dominant power of Congress.

"Thereis a clear distinction between the power of the Congress to control * * * contracts of private parties * * * and the power to alter or repudiate the

substance of its own engagements".

Mr. Justice Stone was the fifth majority judge but he did not concur in this opinion and in his concurring opinion he took the position that the Government bond was equally subject to congressional power as was the corporate bond involved in Norman v. Baltimore and Ohio R. R. (294 U. S. 240 (1934)). The Court dictum has been frequently criticized and in Smyth v. United States (302 U. S. 329 (1937)) (involving interest on a Government bond) the Court was careful to express no opinion on the correctness of the Perry case. Mr. Justice Stone again voted with the majority, this time in holding that the suit was premature, but wrote a separate opinion to the same effect as his opinion in the Perry case.

The extent of the cirticism of this doctrine, the shift in the personnel of the Supreme Court (Mr. Justice Reed argued for the position Mr. Chief Justice Stone adopted in the Smyth case) and the unsoundness of the dictum all suggest that should the issue be presented today, the congressional action would probably be upheld even on identical facts.

(7) The facts in the Perry case are distinguishable from the situation under discussion: Where the Government is the purchaser and delivery has been made, the Emergency Price Control Act and price schedules thereunder would not prevent payment of the contract price. Thus the injury to the other contracting party is simply to prevent further performance under the contract. In the Perry case the plaintiff had made delivery but the statute in effect prevented the Government from making full payment.

It is well-settled that Congress might requisition commodities upon the payment of a fair price. The Office of Price Administration maximum price is presumably a fair price. The seller is therefore not injured by restricting his future sales to such price. In the Perry case the plaintiff had loaned money to the Government and the subsequent statute altered the terms of repayment. The result was to cut down the United States debt by nearly 25 percent.

The price control law is an exercise of the war power of the United States and this power is certainly not limited or restricted by the inherent power of Congress to enter into contracts. The issuance of the bond in the Perry case was an exercise of the congressional power to borrow money. Inherent in the act of borrowing