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CHAPTER XIII-PETROLEUM ADMINISTRATION FOR WAR NOTE: The following orders were issued during the period covered by this Supplement:

Administrative orders. Directives. Distribution orders,

Materials redistribution program. Recommendations.

No. 79. Limitation upon use of butane and propane-butane mixture in oil and gas drilling operations. Oct. 23, 1944, 9 F.R. 12747.

ADMINISTRATIVE ORDERS No. 1. Motor oil and fuel oil for military and other essential uses. As am. Feb. 1, 1943, Amdt. 4, Feb. 15, 1944, 9 F.R. 1819. Amdt. 5, Apr. 19, 9 F.R. 4304.

No. 11. Delivery, acquisition and use of petroleum, As am. Jan. 1, 1944, 9 F.R. 107. As am. July 1, 9 F.R. 7445; Amdt. 1, Nov. 17, 9 F.R. 13807. Supp. Order 1, Aug. 11, 9 F.R. 9789. Supp. Order 4, as am. June 1, 9 F.R. 6031. Supp. Order 5, as am. Apr. 19, 9 F.R. 4303. Supp. Order 7, Aug. 26, 9 F.R. 10648. Supp. Order 8, Amdt. 1, Aug. 25, 9 F.R. 10427. Supp. Order 10, Jan. 21, 9 F.R. 851. Supp. Order 11, May 2, 9 F.R. 4651. Supp. Order 12, July 1, 9 F.R. 7448. Supp. Order 13, Aug. 18, 9 F.R. 10094. Supp. Order 14, Aug. 25, 9 F.R. 10427. Supp. Order 15, Oct. 23, 9 F.R. 12748.

No. 12. Marketing material conservation. As am. Apr. 8, 1944, 9 F.R. 3858. Amdt. 1, Aug. 11, 9 F.R. 9790.

No. 15. Material conservation; pipe lines, terminals and refining. As am. Feb. 3, 1944, 9 F.R. 1458. As am. July 27, 9 F.R. 9170; Amdt. 1, Nov. 17, 9 F.R. 13807.

No. 23. Residual fuel oil. Aug. 25, 1944, 9 F.R. 10428.

DIRECTIVES No. 59. Petroleum supply program. As am. Dec. 1, 1943, Amdt. 1, Jan. 17, 1944, 9 F.R. 1457. Amdt. 2, May 1, 9 F.R. 897. Amd Sept. 23, 9 F.R. 12280.

No. 64. Schedule of production for District Two. Revocation, Sept. 14, 1944, 9 F.R. 11399.

No. 65. Elimination of unnecessary movements within District Two. As am. March 15, 1944, 9 F.R. 3095, 3355.

No. 66. Manufacture of asphalt. Revocation, Oct. 19, 1944, 9 F.R. 12648.

No. 69. Transportation; use of inland waterway equipment in Great Lakes-New York Area. As am. May 29, 1944, 9 F.R. 6112.

No. 70. Foreign Operations Committee. Amdt. 1, May 20, 1944, 9 F.R. 5830.

No. 71. Diesel fuel in West Coast Area and in Hawaii and Alaska. Revocation, Sept. 30, 1944, 9 F.R. 12040.

No. 72. Delivery and use of road oil prohibited. Amdt. 1, Nov. 1, 1944, 9 F.R. 13068.

No. 77. High-octane aviation gasoline. July 24, 1944, 9 F.R. 8933.

No. 78. Supply program in District Three. Oct. 14, 1944, 9 F.R. 12843.

DISTRIBUTION ORDERS No. 13. Marketing fuel oil. As am. July 25, 1944, 9 F.R. 9018. Amdt. 1, Oct. 21, 9 F.R. 12748.

No. 14. Marketing motor fuel. As am. Feb. 26, 1944, 9 F.R. 2302. Amdt. 1, May 18, 9 F.R. 5346. No. 18. Marketing naphtha.

Amdt. 1, Apr, 8, 1944, 9 F.R. 3859,

No. 20. Marketing petroleum. May 18, 1944, 9 F.R. 5346.

No. 21. Premium motor fuel. June 21, 1944, 9 F.R. 6952. Amdt. 1, July 21, 9 F.R. 8934. Amdt. 2, Sept. 25, 9 F.R. 11805. Amdt. 3, Dec. 27, 9 F.R. 15108.

No. 22. Manufacture and delivery of fuel oil. June 28, 1944, 9 F.R. 7203. Amdt. 1, July 14, 9 F.R. 7944. As am. Sept. 2, 9 FR. 10880.


No. 2. Determination of surplus critical materials. Amdt. 1, June 3, 1944, 9 F.R. 6111. Amdt. 2, Nov. 17, 9 F.R. 13807.

RECOMMENDATIONS No. 5. Petroleum products in District 1. Revocation, July 25, 1944, 9 F.R. 9068.

No. 8. Use of blending agents; base stock of aviation gasoline of 85.0 octane number or less. Revocation, July 24, 1944, 9 F.R. 8933.

No. 10. Reports on procurement of petroleum on East Coast. Revocatton, July 25, 1944, 9 F.R. 9068.

No. 16. Aviation gasoline. Revocation, July 24, 1944, 9 F.R. 8933.

No. 19. District 5, Pacific Coast area. Amdt. July 3, 1944, 9 F.R. 7525.

No. 28. Aviation grade petroleum. Revocation, June 8, 1944, 9 F.R. 6263.

No. 37. Contractual commitments for distribution of fuel oil. Revocation, Oct. 19, 1944, 9 F.R. 12647.

No. 39. Conservation of fuel oil. Revocation, Oct. 19, 1944, 9 F.R. 12647.

No. 47. Abandonment of oil or gas wells. Revocation, June 23, 1944, 9 F.R. 7020.

No. 56. Petroleum coke. Revocation, Oct. 7, 1944, 9 F.R. 12360.


BOARD [ADDED] NOTE: This chapter applies to renegotiation for fiscal years ending after June 30, 1943.


Part 1601 Authority and organization for 1605 Agreements and statements. renegotiation,

1606 Impasse procedure. 1602 Procedure for renegotiation.

1607 Forms for renegotiation. 1603 Determination of renegotiable 1608 Text of statutes, orders, joint regbusiness and costs.

ulations and directives. 1604 Determination and elimination of

excessive profits. AUTHORITY: Parts 1601 to 1608, inclusive, issued under 56 Stat. 245, as amended; 50 U.S.C. App., Sup., 1191 (d).

NOTE: For an explanation of the numbering and arrangement of the original Renegotiation Regulations, see $ 1601.123.



Subpart A Summary of Renegotiation Act of

1943 and Related Statutes Sec. 1601.101 Scope of subpart. 1601.102 War Contracts Price Adjustment

Board. 1601.103 Coverage. 1601.104 Exclusions and exemptions. 1601.104–1 Mandatory. 1601.104-2 Permissive. 1601.104-3 Exemption measured by volume

of business. 1601.1044 Profits from increment in value

of excess inventories. 1601.105 Renegotiation clauses in con

tracts. 1601.106 Determination of excessive prof

its. 1601.106-1 Costs. 1601.106-2 Unused amortization deduction. 1601.106-3 Fair cost allowance in the ex

empted state for raw materials and agricultural commodities in the case of integrated pro

ducers. 1601.106-4 Factors in determining excessive

profits. 1601.107 Renegotiation by fiscal years. 1601.108 Renegotiation procedure. 1601.108-1 Mandatory filing of statement. 1601.108–2 Commencement of renegotiation

proceedings. 1601.108-3 Statute of limitations. 1601.108-4 Agreement or order determining

excessive profits. 1601.108-5 Statement to the contractor or


Sec. 1601.108–6 Eliminating excessive profits. 1601.109 Delegation and review. 1601.109–1 Delegation, 1601.109–2 Review by the War Contracts

Board. 1601.110 Redetermination of excessive

profits by The Tax Court of the

United States. 1601.111 Applicability. 1601.111-1 Applicability of the 1943 act in

general. 1601.111-2 Applicability in special cases. 1601.111-3 Termination of renegotiation. 1601.112 Applicable and related statutes. 1601.112–1 Renegotiation Act of 1943. 1601.112-2 Section 3806 of the Internal

Revenue Code. 1601.112-3 Title XIII of Second War Powers

Act. 1601.112–4 Repricing of war contracts.

Subpart B-Preliminary Material 1601.120 Scope of subpart. 1601.121 Applicability of

renegotiation regulations. 1601.121-1 Years to which applicable. 1601.121-2 Rescission of prior instructions. 1601.122 Definitions of terms. 1601.122–1 Statutory definitions. 1601.122-2 Chief of a service. 1601.122-3 Contract. 1601.122-4 Contractor. 1601.122–5 Department. 1601.122–6 Departmental Board. 1601.122–7 Joint Board. 1601.122-8 Mandatory financial statement. 1601.122–9 Renegotiation Act. 1601.122–10 Renegotiation Act of 1943, 1943

act. 1601.122–11 Renegotiation Act of 1942, 1942


Sec. 1601.122–12 Renegotiable business, renegotia

ble sales, and nonrenegotiable

business. 1601.122–13 Secretary, 1601.122-14 Section. 1601.122–15 Service. 1601.122–16 Statutory renegotiation, 1601.122-17 War Contracts Board. 1601.123 Arrangement of renegotiation

regulations. 1601.123–1 Organization. 1601.123-2 Numbering. 1601.123-3 Citations. 1601.124 Amendments and additions. 1601.125 Changes in interpretations. 1601.126 Federal Register. 1601.127 Official copies. 1601.128 Copies of renegotiation regula

tions. Subpart C-Organization and Functions of the

Price Adjustment Boards and Sections 1601.130 Statutory authority. 1601.131 War Contracts Price Adjustment

Board. 1601.131-1 Functions. 1601.131-2 Seal. 1601.131-3 Delegations. 1601.131-4 Jurisdiction. 1601.131–5 Review by the Board. 1601.132 War Department Organization. 1601.132-1 Organization and functions of

War Department Price Adjust

ment Board. 1601.132–2 Organization and functions of

War Department Price Adjust

ment Sections. 1601.133 Navy Department organization. 1601.133–1 Navy Price Adjustment Board. 1601.133-2 Services and Sales Renegotiation

Section. 1601.134 Treasury Department Price Ad

justment Board. 1601.135 Maritime Commission Price Ad

justment Board. 1601.136 War Shipping Administration

Price Adjustment Board. 1601.137 RFC Price Adjustment Board. 1601.138 Joint Price Adjustment Board. 1601.139 Addresses.

Subpart A-Summary of Renegotiation

Act of 1943 and Related Statutes § 1601.101 Scope of subpart. The summary of the Renegotiation Act of 1943 in this subpart is designed to provide only a general outline of its structure and basic provisions. The detailed discussion of these provisions and of their interpretation and application is contained under the appropriate subparts of subsequent parts of this chapter. (RR 101]

$ 1601.102 War Contracts Price Adjustment Board. Subsection (d) of the 1943 act creates the War Contracts Price Adjustment Board, which, for convenience, is referred to in these regulations as the War Contracts Board. Authority with respect to renegotiation is vested in this Board subject, however, to being delegated, in the Board's discretion, to the Secretaries of the Departments, with right of redelegation. The Board is composed of six members, one each from the War Department, the Navy Department, the Treasury, the Maritime Commission or the War Shipping Administration, the Reconstruction Finance Corporation, and the War Production Board. The War Contracts Board, its powers, duties and functions, and its authority to delegate its duties and functions are described more fully in $ 1601.130 and following. (RR 102]

§ 1601.103 Coverage. (a) In general, the 1943 act applies to amounts received or accrued in fiscal years ending after June 30, 1943 under all contracts with the Departments and subcontracts, with the exceptions stated under $ 1601.104 (subsection (c) (6)

discussed in $ 1603.348).

(b) Subcontracts include purchase orders or agreements to perform all or any part of the work, or to make or furnish any article, required for the performance of any other contract or subcontract but do not include any purchase order or agreement to furnish office supplies. A contract or arrangement to procure a contract with a Department or a subcontract thereunder is also a subcontract. Subcontracts are not limited to those made by a prime contractor but include those made by a subcontractor or sub-subcontractor down through the various tiers (subsection (a) (5), discussed in 1603.333).

Subpart D-Relation of Renegotiation Act and

Royalty Adjustment Act Concerning Patents 1601.140 Scope of subpart. 1601.141 Royalty Adjustment Act. 1601.142 Patent licenses subject to rene

gotiation. 1601.143 Allowance of royalties as costs.

SOURCE: $$ 1601.101 to 1601.143, inclusive, contained in Renegotiation Regulations, Mar. 24, 1944, complete through Revision 14, Dec. 29, 1944, 10 F.R. 963.

NOTE: Part 1601, as originally issued Mar. 24, 1944, appears at 9 F.R. 4135; amendments thereto appear at 9 F.R. 6154, 9107, 11764, 12845.

(c) The coverage of the 1943 act is discussed in detail in Part 1603. (RR 103)

$ 1601.104 Exclusions and exemptions. (RR 104]

§ 1601.104-1 Mandatory. The 1943 act does not apply to:

(a) Contracts between the Departments and other Governmental agencies (subsection (1) (1) (A), discussed in § 1603.343);

(b) Contracts or subcontracts for certain raw materials (subsection (i) (1) (B), discussed in $ 1603.344);

(c) Contracts or subcontracts for agricultural commodities in a certain form or state (subsection () (1) (C), discussed in § 1603.344-2);

(d) Contracts or subcontracts with tax exempt charitable, religious or educational institutions (subsection (i). (1) (D), discussed in § 1603.345);

(e) Construction contracts with a Department let under competitive bidding (subsection (i) (r) (E), discussed in $ 1603.346); or

(f) Subcontracts under prime contracts or other subcontracts of the types listed above which are exempted by subsection (i) (1) (subsection (i) (1) (F), discussed in § 1603.347). (RR 104.1)

$ 1601.104–2 Permissive. The War Contracts Board may, in its discretion, exempt from any or all of the provisions of the 1943 act:

(a) Any contract or subcontract:

(1) To be performed outside of the continental United States or in Alaska (subsection (i) (4) (A), discussed in $ 1603.351);

(2) Under which the profits can be determined with reasonable certainty when the contract price is established (subsection (i) (4) (B), discussed in $ 1603.352);

(3) During a specified period or periods, to the extent that the contract provisions are adequate to prevent excessive profits (subsection (i) (4) (C), discussed in $ 1603.353);

14) For a standard commercial article if competitive conditions are such as will reasonably protect the Government (subsection (i) (4) (D), discussed in $ 1603.354)

(5) If competitive conditions affecting the making of such contract or subcontract are likely to result in effective

competition with respect to the contract price (subsection (i) (4) (E), discussed in $ 1603.355); or

(b) Any subcontract or group of subcontracts, if it is not administratively feasible to segregate the renegotiable from the non-renegotiable business (subsection (i) (4) (F), discussed in § 1603.356). The Board may make such exemptions by individual contracts or by general classes or types of contracts (subsection (i) (4), discussed in $1603.357). (RR 104.2]

$ 1601.104-3 Exemption measured by volume of business. Subsection (c) (6) provides that renegotiation shall not apply to any contractor or subcontractor unless the aggregate of the amounts received or accrued by the contractor or subcontractor (and all persons under the control of or controlling or under common control with the contractor or subcontractor) under contracts with the Departments and subcontracts, not including subcontracts for procuring contracts or subcontracts, exceed $500,000 (discussed in § 1603.348). In the case of subcontracts for the procuring of contracts or subcontracts, this figure is $25,000 (discussed in $ 1603.348). (RR 104.3)

$ 1601.104-4 Profits from increment in value of excess inventories. The 1943 act excludes from renegotiation that portion of the profits derived from contracts with the Departments and subcontracts attributable to the increment in value of excess inventories of certain raw materials and agricultural commodities (subsection (i) (3), discussed in $ 1603.344–4). (RR 104.4)

$ 1601.105 Renegotiation clauses in contracts. (a) The 1943 act directs each Secretary to insert in each contract made by his Department, involving more than $100,000, terms under which the contractor agrees (1) to renegotiation, (2) to the withholding or recovery of excessive profits by the United States and (3) that he will insert like terms in all subcontracts made by him involving more than $100,000, and will require the subcontractor to insert like terms in contracts entered into by him. In the case of subcontracts for procuring contracts with the Departments these terms are to be placed in all such subcontracts for more than $25,000 (subsection (b), discussed in $ 1603.331).


(b) The 1943 act permits these terms to be incorporated in contracts and subcontracts by reference and each contract or subcontract is made subject to such terms whether or not they are incorporated either physically or by reference. (RR 105]

$ 1601.106 Determination of excessive profits. (RR 106]

$ 1601.106-1 Costs. In determining the profits from renegotiable business, the 1943 act requires the War Contracts Board to allow costs determined in accordance with the method of cost accounting regularly employed by the contractor or if such method does not properly reflect such costs, the Board is authorized to prescribe the method under which such costs shall be determined. No item of cost shall be allowed which is unreasonable or which is not properly chargeable to the contract or subcontract. Notwithstanding these provisions, all items estimated to be allowable as deductions or exclusions for income tax purposes, to the extent they are allocable to renegotiable business, are to be allowed in determining excessive profits. State income taxes, to th extent they are attributable to the portion of the contractor's profits determined to be excessive, however, are not allowable (subsection (a) (4) (B), discussed in § 1603.389). (RR 106.1]

$ 1601.106–2 Unused amortization deduction. The 1943 act provides for the repayment by the United States to a contractor or subcontractor, without interest, of the amount of the net renegotiation rebate determined in accordance with procedures and principles set forth in the 1943 act in the event of a recomputation of the amortization deduction provided for in section 124 (d) of the Internal Revenue Code (subsections (a) (4) (C) and (D), discussed in § 1603.388-2). (RR 106.2]

$ 1601.106-3 Fair cost allowance in the exempted state for raw materials and agricultural commodities in the case of integrated producers. In order to provide for equitable treatment of the integrated producer, the 1943 act provides for the allowance of a fair amount of cost in the exempted state for certain raw materials and agricultural commodities in the case of integrated producers who produce or acquire such materials or commodities below such state and process them up to and beyond such state (subsection (i)

(3), discussed in § 1603.344-3). In this connection attention is also directed to § 1601.104 4 supra, which in effect gives the contractor or subcontractor who acquires the exempted raw materials and agricultural commodities at the exempt stage the benefit of a similar special cost allowance to the extent that such products constitute excess inventory of such a contractor subcontractor. (RR 106.3)

$ 1601.106-4 Factors in determining excessive profits. The 1943 act defines excessive profits to be the portion of the profits from the renegotiable business of the contractor or subcontractor which in the light of a list of factors set out in subsection (a) (4) (A) of the act is determined to be excessive. These factors cover such matters as eficiency, costs, capital, risk, contribution to the war effort, character of business, and such other factors as the public interest and fair and equitable dealing may require (discussed fully in § 1604.408 and follow. ing). (RR 106.4)

§ 1601.107 Renegotiation by fiscal years. The 1943 act applies to fiscal years ending after June 30, 1943, and requires that renegotiation be conducted on an overall fiscal year basis. Renegotiation may relate to any period other than a full fiscal year only with the consent of the contractor or subcontractor. The 1943 act requires that renegotiation relate to the aggregate of the contractor's war business for the year unless the contractor requests and the War Contracts Board agrees to the renegotiation of separate contracts (subsection (c) (1), discussed in $$ 1603.301-1601.303). (RR 107]

$ 1601.108 Renegotiation procedure. (RR 108]

$ 1601.108-1 Mandatory filing of statement. The 1943 act requires every contractor or subcontractor not specifically exempted from renegotiation to file with the Board on or before the first day of the fourth month following the close of the fiscal year, or after the date of the enactment of the Revenue Act of 1943, whichever is the later, a statement con. taining such information as the Board may by regulations prescribe (subsection (c) (5) (A), discussed in $ 1602.220 and following). In addition to this statement, which is considered to be the statement for the purposes of the beginning of the statute of limitations, the War

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