Mexican Intermodal Equipment, No. 4182 (May 31, 1996)
Docket No. SIZ-95-12-7-114



                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.


___________________________________
                                   )
SIZE APPEAL OF:                    )
                                   )
Mexican Intermodal Equipment       )
                                   )
     Appellant                     )  
                                   )  Docket No. SIZ-95-12-7-114
Solicitation No.                   )
N62387-95-C-3094                   )   
Department of the Navy             )    
Military Sealift Command           )
Washington, DC                     )
___________________________________)


                             DIGEST

A firm incorporated in Mexico, which manufactures its products
solely in Mexico, is a wholly-owned subsidiary of a United States
corporation, which advertises its Mexican address and telephone
number but has a token office in the United States, does not
qualify as a small business under the Small Business Act.

                            DECISION

                          May 31, 1996

HOLLEMAN, Administrative Judge:

                          Jurisdiction

     This appeal is decided under the Small Business Act of 1958,
15 U.S.C. Sections 631 et seq., and 13 C.F.R. Part 121.[1]

                              Issue

     Whether a firm incorporated in Mexico, which manufactures
its products solely in Mexico, is a wholly-owned subsidiary of a
United States corporation, which advertises its Mexican address
and telephone number but has a token office in the United States,
qualifies as a small business under the Small Business Act.

                      I. FACTUAL BACKGROUND

     On September 14, 1995, the Department of the Navy, Military
Sealift Command (Navy), issued Request For Proposals (RFP) 
No. N62387-95-R-3094, for the manufacture and delivery of 500 dry
cargo freight containers.  The Contracting Officer (CO)
classified the solicitation under Standard Industrial
Classification (SIC) code 3715 (Truck Trailers), with a
corresponding size standard of 500 employees.  This was an
unrestricted procurement, and the CO would award to the lowest-
priced, technically-acceptable, responsible offeror.  The
solicitation also required that the offeror provide references
from similar, successfully-performed contracts.  Initial
proposals were due on September 22, 1995.

     In a letter dated September 21, 1995, the Navy received the
initial proposal of Mexican Intermodal Equipment, S.A. de C.V.,
(Appellant), in response to the solicitation.  The offerors in
the competitive range were required to submit Best and Final
Offers (BAFOs) on September 29, 1995.  Appellant's offer was the
lowest-priced, technically-acceptable offer of the BAFOs
received.

     However, the CO was required to determine Appellant's level
of responsibility prior to award.  In researching Appellant's
responsibility, the CO contacted several of Appellant's
references, regarding its past performance.  The CO contacted the
U.S. Marine Corps, Blount Island Command, about two contracts
Appellant previously performed.  The Marine Corps replied that
Appellant had delivered a year late on both contracts, and
Appellant's First Article had failed testing under one of the
contracts.  The Marine Corps also advised the CO of a Marine
Corps procurement in which the Defense Contract Management Area
Office (DCMAO) issued a negative pre-award survey against
Appellant on September 14, 1995.

     Based upon the above facts, the CO determined that Appellant
was not a responsible contractor, and awarded the contract to
Military Transfer Inc. (MTI), on September 29, 1995.  On
October 3, 1995, the CO notified Appellant she had determined
that Appellant was not a responsible party, in accordance with
Federal Acquisition Regulation (FAR) Section 9.104.  The CO
further informed Appellant she had awarded the contract to MTI on
September 29, 1995.

     On October 4, 1995, via facsimile transmission, Appellant
requested that the CO withhold the contract award and refer the
determination of responsibility to the Small Business
Administration (SBA).  On October 5, 1995, the CO advised
Appellant that she could not withhold the contract, as she had
already awarded it to MTI. 

     On October 10, 1995, Appellant timely filed a bid protest
with the General Accounting Office (GAO).  The protest asserted
the CO had exceeded her authority in rendering a determination on
Appellant's responsibility.  Appellant also asserted the CO
should have withheld the contract award from MTI, and referred
the issue of responsibility to SBA.

     On October 13, 1995, the CO informed SBA's Office of General
Counsel of Appellant's GAO protest.  The CO requested that SBA
determine Appellant's size status, as well as its eligibility for
a Certificate of Competency (COC).  The CO stated she was
contacting the Office of General Counsel since she was not sure
which Area Office to contact, as Appellant was a Mexican
corporation.

     On October 24, 1995, the SBA San Francisco Area VI Office of
Government Contracting (Area Office) asked Appellant to complete
a size determination application.  On October 30, 1995, Appellant
submitted its size application to the Area Office.

     The basic facts are undisputed.  Appellant is a Mexican
corporation, of which a United States corporation, Olympic
Container Corporation (OCC), owns 96%.[2]  OCC is 100% owned by
George C. Ballard, a U.S. citizen resident in Washington State.  
Appellant manufactures all of its products at a facility in
Monterrey, Mexico.  When submitting its offer to the Navy on a
Standard Form 33, Appellant listed its address in Mexico.

     In Section K-5 of its offer, Appellant certified it is a
nonresident, alien, foreign corporation that does not have income
effectively connected with the conduct of a trade or business in
the U.S.  Appellant also certified it does not have an office or
place of business or a fiscal paying agent in the U.S.  In
Section K-8 of its offer, Appellant certified that, as a
corporation registered for business in Mexico, it is a foreign
entity.  Appellant and OCC place joint advertisements, in which
Appellant is identified as OCC's subsidiary.  The ad copy lists
OCC's address and telephone number in Washington State, and
Appellant's in Mexico. 

     In response to the protest, Appellant asserted that it has
one office in the United States, located in Silverdale,
Washington.  It shares this office with OCC, and the office sign
identifies both firms as tenants.  Appellant submitted a copy of
the lease, listing both firms as lessees.  Appellant asserted it
shares one employee with OCC at the address.

                II. THE AREA OFFICE DETERMINATION

     On November 29, 1995, the Area Office issued a formal size
determination, finding that, because Appellant did not have a
place of business in the United States, it did not meet the
definition of a business concern eligible for assistance as a
small business.  Thus, Appellant was ineligible for a COC.  The
Area Office noted that, when questioned about the certifications
made by Appellant in its offer, Appellant's counsel asserted
these certifications were mistakes.  However, the Area Office
further noted that Appellant had consistently made these
certifications.

     The Area Office relied on 13 C.F.R. Section 121.403(a),
noting it  required a small business have a place of business in
the United States.  The Area Office characterized Appellant's
Silverdale, Washington office as "at most, a token office".  The
Area Office further found Appellant had not proven that the
employee working at Silverdale was its employee.  In addition,
the Area Office noted SBA has not traditionally recognized
foreign manufacturers as small businesses.

     Appellant received the Area Office's size determination on
December 4, 1995.  On December 7, 1995, Appellant appealed to
this Office, in a letter sent by facsimile transmission and
commercial overnight delivery.  On January 18, 1996, the
Presiding Judge extended the date for the close of the record to
January 25, 1996, because of the furlough of Federal employees
and the closing of many Government offices due to the blizzard of
January 1996.  On January 25, 1996, the Navy filed its Memorandum
in Opposition to the instant appeal.  On January 31, 1996, GAO
issued its decision in the bid protest, which affirmed the CO's
determination that Appellant was not a responsible contractor. 
Mexican Intermodal Equipment, S.A. de C.V., 96-1 CPD Para. 31, B-
270144 (January 31, 1996).

                    III. ARGUMENTS ON APPEAL

     Appellant asserts that the nationality of the business
determines whether a small business concern qualifies for COC
proceedings, citing Discount Machinery & Equipment, Inc., 70
Comp. Gen. 108, B-240525 (November 23, 1990).  Appellant further
asserts the fact that Appellant is 100% U.S.-owned is
dispositive, and establishes its eligibility as a small business.

Appellant asserts the certifications accompanying its offer were
mistakes, "an honest slip of the pen", which it has since
corrected, and which SBA should ignore since its mission is to
assist small, unsophisticated businesses.

     Appellant further asserts it offers its products for sale or
lease to the public through its U.S. office, and has done so for
years.  It therefore has a place of business in the U.S. 
Appellant also asserts that compliance with the North American
Free Trade Agreement (NAFTA) compels a finding it is an eligible
small business.  Finally, Appellant asserts a manufacturing
concern is not required to manufacture its products within the
U.S. to qualify as an eligible small business.

     The Navy asserts, since Appellant is a Mexican corporation,
it does not qualify as a small business within the meaning of
SBA's size regulations.  The Navy further asserts Appellant does
not have a place of business in the U.S., both because of its
earlier certifications and because a manufacturing concern's
place of business is where the manufacturer combines the
essential components to produce the end item.

                         IV. DISCUSSION

     Since Appellant filed its appeal within five business days
of its receipt of the Area Office determination, the appeal is
timely and, therefore, will apply to the instant solicitation. 
13 C.F.R. Section 121.1705(a)(2).

     While the Navy did not formally move to intervene, the
Presiding Judge will so characterize its Memorandum in Opposition
and grant the Navy Intervenor status.  13 C.F.R. Section
121.1709(b).

     Although Appellant is 100% U.S.-owned, that is not
dispositive.  The applicable regulation, 13 C.F.R. Section
121.403(a), establishes a three part-test for an eligible small
business:

     A business concern eligible for assistance as a small
     business is a business entity organized for profit,
     with a place of business located in the United States
     and which makes a significant contribution to the U.S. 
     economy through payment of taxes and/or use of American
     products, materials, and/or labor.

     Appellant clearly meets two parts of the test.  Appellant is
a business entity organized for profit, and it makes a
significant contribution to the U.S. economy.[3]  The remaining
question is, whether Appellant has a place of business in the
U.S.

     This Office previously has considered the question, and has
held a place of business must be something more substantial than
a mail drop.  A firm must either offer for sale or perform the
services it sells at the location, and the public must know the
location as that firm's place of business.  Size Appeal of Com-
Tech Services, Inc., No. 4119 (1995).  The undisputed evidence
shows that Appellant's business is manufacturing, and all of that
manufacturing takes place in Mexico.

     Appellant asserts its Silverdale office satisfies the Com-
Tech criteria.  However, the status of the Silverdale office is
ambiguous.  The advertisements, which Appellant offers as
corroborating evidence, all list a Mexican address and telephone
number under its name.  A prospective customer reading these
advertisements reasonably could conclude that, to contact OCC, he
should call a Washington State number; to contact Appellant he
should call Mexico.  This does not constitute Appellant's
offering products for sale at the Silverdale address.

     Moreover, Appellant's contention that it is eligible because
it is 100% U.S.-owned is without merit.  Appellant's position
here is the mirror image of a case where this Office found
eligibility.  In Size Appeal of RG Software Systems, Inc., 
No. 4113 (1995), the appellant was a Virginia corporation, with a
place of business in the U.S. where it manufactured its product
and employed Americans.  However, 80% of the firm's stock was
foreign-owned.  This Office found eligibility because the firm
had a place of business in the U.S. and made a significant
contribution to the U.S. economy.  The mere fact of foreign 

ownership did not disqualify it.  Conversely, the mere fact of
U.S. ownership cannot render Appellant a U.S. business, when it
maintains only a token office in the U.S.[4]

     Finally, the Presiding Judge must consider Appellant's tardy
attempt to disown its certifications which stated it was not a
U.S. firm.  Despite Appellant's assertions to the contrary, it
should be bound by its own voluntary and unequivocal statements. 
Appellant's assertions of mistake, once it learned the
certifications might be prejudicial, simply lack credibility. 
Appellant's assertion that SBA should overlook its "mistake" in
the spirit of assisting small business confuses helpfulness with
gullibility.[5]

     Therefore, this Office concludes that Appellant does not
have a place of business in the United States and, thus, it is
not an eligible small business.

                          V. CONCLUSION

     In view of the above analysis, the Area Office VI size
determination is AFFIRMED and the appeal is DENIED.

     This is the final decision of the Small Business
Administration.  See 13 C.F.R. Section 121.1720(b).




                                   __________________________
                                   Christopher Holleman
                                   Administrative Judge
____________________
[1]  The Small Business Administration has revised its
     substantive Size and SIC regulations and its procedural
     regulations, including those for this Office.  See 13 C.F.R.
     Parts 121 and 134, effective March 1, 1996.  Since the
     instant solicitation was issued in 1995 and the instant
     appeal also was filed in that year, the size regulations in
     effect in 1995, both procedural and substantive, apply here.

[2]  Of the remaining stock, 1% is owned by George C. Ballard;
     and 1% each is owned by three other corporations, all of
     which are affiliated with Mr. Ballard.

[3]  Appellant's reliance on Discount Machinery and Equipment,
     supra, is misplaced.  The dicta upon which Appellant relies
     is merely GAO's paraphrase of 13 C.F.R. Section 121.403(a).

[4]  Since Appellant does not have a place of business in the
     U.S., the Presiding Judge need not consider its argument
     that in order to be an eligible small business, it need not
     manufacture its products in the U.S.


[5]  Appellant's reliance upon NAFTA is misplaced.  NAFTA does
     not apply to small business assistance programs such as
     SBA's COC and size programs.  NAFTA Implementation Act, P.L.
     103-182 (1993) Sections 102, 381, 107 Stat. 2057, 2062,
     2128, codified at 19 U.S.C. Sections 2511, 3312.