ing wages, prices, and rents based on the changed practices are comparable to ceiling wages, prices, and rents charged for similar products and services during the base period.

For instance, if a firm decides to change from selling only a finished product to selling raw materials and the service of processing raw materials, the firm must sell raw materials to anyone, not just those buying his processing service. The price for a raw material must be determined in accordance with Council rulings previously announced.

If a firm changes from selling a finished product to selling the processing service, the price for the processing service must relate only to service actually being provided. For example, a firm sold a processed product for $150 per unit during the base period and this price included $50 for the raw material, thus making the charge for the processing $100. During the freeze the price for that service would not be $100 per unit since the $150 per unit price for the processed product included (in addition to the $50 per-unit purchase price for raw materials) brokerage, inventory-carrying, overhead, and other services related to the raw materials. Hence, the price for the processing service alone would be lower than $100 because the value of the services applied to the raw material cannot be included since the service is not provided.

(5) Producers of castings, forgings, and special machined parts, often produce to a manufacturer's proprietary design and/or with customer owned proprietary patterns, molds, and dies. Production generally is in quantity runs, which may occur as infrequently as every 2 to 3 years. The cost of production in the 1971 base period may exceed the price at which the item was last shipped. If the producer refuses the order, his customer can take the design to a manufacturer who can price the production run in accordance with more recent production of comparable items, thus avoiding the intent of placing a ceiling price on the original supplier. No changes in the application of current policy may be permitted, however. The price during the freeze must be held to that at which substantial transactions last occurred, unless other provisions of the regulation and pertinent circulars afford relief.

(6) Where sporting events are being presented in new facilities, prices may be adjusted to levels prevailing for compar

able service in that locality in the base period. Capital improvements to existing facilities are not of themselves sufficient basis for increasing prices.

The burden of proof is on the vendor and his records should be adequate to show the basis for determination of these price levels. Records are subject to OEP inspection. In the event of legal action by a customer demanding restitution for alleged overpayment, such records may be subject to court review.

(7) If different prices were charged to different classes of customer (e.g., retail, wholesale, manufacturer, etc.) in the base period, the effective ceiling price is determined for each such class of customers separately. Furthermore, if different quantity discounts were granted to different classes of customers during the base period, each quantity discount group is to be treated as having a separate ceiling price.

For each distinct set of transactions (quantity discount groups within classes), list the number of units shipped during the base period in order to de termine the price at which the ship. ments accounted for 10 percent of the units shipped. The price charged for the lowest priced shipment in this top 10percent group is the ceiling price.

SAMPLE CALCULATION OF CEILING PRICES
EXAMPLE NO. 1

Class of Customer: Retailers.

(8) State and local tax rates are not frozen by the program. If a State or local government should increase local or State taxes, i.e., property or business taxes, merchants and other commercial businesses may not pass on to consumers the amount of the tax increase. However, where there has been an increase in surcharges or other sales or excise taxes which are direct taxes on commodities or services, the new ceiling prices for such commodities or services are equal to the ceiling prices established during the applicable base period, plus those additional surcharges or taxes.

(9) The Cost of Living Council provides the following additional guidance:

(a) At each place of sale, sellers must maintain lists of ceiling prices for all goods or services offered for sale. Upon specific request, sellers are required to permit prompt public inspection of a ceiling price from the lists on an itemby-item basis.

(b) If a customer is not satisfied with the ceiling price provided by the seller for a given product or service, the customer should file a complaint with the local office of the Internal Revenue Service.

(c) When customers question ceiling prices, sellers are encouraged, but not required, to reveal their supporting records (i.e., records of transactions from which ceiling prices are calculated). Sellers are required, however, to reveal all lists and supporting records to Federal employees responsible for investigating complaints.

(10) The lists of ceiling prices from which the seller is required to provide information to the public must be available at the place of sale on or before November 1, 1971. The ceiling price list may be a single master list for the entire establishment or, alternatively, separate lists of ceiling prices may be maintained in each section or department of the establishment.

Until the lists are prepared, the seller may utilize the following interim procedure:

(a) There shall posted on each floor of the seller's establishment at least one sign (minimum of 30 inches by 40 inches), as specified below, announcing availability of ceiling price information:

CEILING PRICE INFORMATION

Information regarding the lawful ceiling price for any item sold by this store may be obtained by filling in a Ceiling Price Infor

(Owner or Company Officer)

403. Specific guidelines. (1) Specialized items produced to buyers' specifications are manufactured on an annual contract determined by competitive bids. The invitation for bids calls for shipments over a period of 3 months, with only the first month falling in the freeze period. The price is frozen at the base period level.

(2) The freeze applies to prices of advance sale tickets for sporting events occurring during the freeze.

(3) A company manufactured a product in 1968 and the product was sold at a given price. The product has not been sold since then. The company now wishes to resume production of this product. It holds the patent on the product and nothing similar is sold on the market. The article must be priced at the level at which substantial transactions took place in the past. If the company had nothing comparable on the market during the base period, the price for this article is the 1968 price.

(4) A trade association is planning to broaden its services to its membership.

To do this, it must obtain additional funds through a dues increase. The association is not allowed to increase its dues to cover the increased services. Accordingly, dues as such cannot be increased. However, when the scope of services provided to members increases, the members may be assessed a pro rata share of the increased cost of the expanded services on a penny-for-penny basis.

(5) For Cost of Living Council purposes increases in school tuition and room and board have been treated as complete transactions if payments of any form were received from students after announcement of increased rates. This treatment of the student-school relationship is unique to tuition and room and board transactions and does not apply to any other form of transactions.

Schools generally offer a package of services (tuition, room and board) and where all three are offered as a combined package, and increases in rates were announced prior to August 15 and payments were received prior to August 15 but after the increases were announced, the increase may remain in effect for the school year. The substantial transaction test may be met by one deposit or payment if it represented at least 10 percent of the transactions made during the base period.

However, where tuition, room and board are offered as separate services the following applies: If increases for each were announced prior to August 15, and deposits received for each after announcement of the increase but prior to August 15, then each of the service rate increases may remain in effect. If only one of the services (say tuition) met this criteria, then only the increased rates for that service can be charged. The interpretation for room charges applies only to university-owned or controlled housing operated exclusively for student housing in the manner of dormitories (as evidenced by school-year, semester, or quarter lump-sum rates covering room). University-owned or operated apartments, houses, trailers or other accommodations in which separate units are leased or rented in the manner of commercially owned rental units (e.g., monthly rental payments, annual leases or month-to-month tenancies) are subject to the regulations on rental housing, and rental rates are determined on an

apartment-by-apartment basis according to the rate prevailing in the base period, just as in the case of rental property generally.

The use of prior announcement and payment to show completion of transactions results from the unique arrangement schools have with their enrolled students. Although the level of service performed by schools varies with the school year, certain year-round services are available to enrolled students, i.e., access to research facilities (libraries), administrative support, student guidance activities, etc.

(6) Meatcutters who priced and sold meat on an individual basis during the base period may not price those same types of cuts on a carcass basis during the freeze. The ceiling price for individual cuts can be no higher than that during the base period.

Marketers who priced and sold on a carcass basis during the base period may continue to sell on a carcass basis during the freeze.

Sales may be made at the highest price at which a substantial volume of actual transactions was made during the base period.

(7) A professional association composed of salaried members (teachers) is authorized to maintain a system of annual dues based on a percentage of average salaries of members, even when the effect of the system is to increase the dollar dues of the members as average salaries increase during the base period and during the freeze period. The established formula may continue to be employed. In many other instances, formulas in existence in the base period have been allowed to continue operating during the freeze.

(8) Where a publisher attains a new higher circulation during the freeze than he had during the base period, and application of his preexisting pricing formula would result in a charge to advertisers (e.g., price per page) which is higher than that charged to any advertiser during the base period, this higher charge will be allowed. If circulation increases during the freeze, prices may be adjusted according to an established pricing formula (e.g., price per thousand paid circulation) in effect before the freeze.

(9) Retail outlets may discontinue trading stamps (S&H, Top Value, Blue

Chip, Gold Bond, etc.) if they pass on the value of the stamps to their customers in the form of lower prices on their merchandise. Merchants can lower their prices in either of two ways. They can lower the prices of everything they sell by the value of the stamps, or, at cash registers, they can deduct the value of the stamps for the prices of those items for which trading stamps would have been given. The value of the stamps is the market value of the merchandise for which they may be exchanged, and not the cost to the retailer.

Retailers choosing to deduct the value of stamps at cash registers on items for which they would have issued stamps, must post in a prominent place in each retail outlet at least one sign (minimum of 30'' x 40''), plus a readily visible sign at each cash register, advising customers of the discontinuance of trading stamps and the reduction in total cost to the purchaser of the merchandise they are buying.

(10) The only trading prices for commodity futures subject to the freeze are those futures contracts that would require physical shipment during the freeze.

Settlement under commodity futures contracts maturing during the freeze period may not be made at prices in excess of the ceiling price for each such commodity during the base period. The ceiling price under mature commodity futures contracts may be increased or decreased by adjustments (penalties and premiums) pursuant to applicable requirements of each commodity exchange for different destinations, variations in grade of the commodity, and prepared charges, other than carrying charges. Such adjustments may not be larger than those of the base period and must be established practice for the particular exchange.

(11) Where student housing is owned or operated by a university-owned housing authority or other university-owned entity, it shall be considered "universitycontrolled." Other housing facilities are considered to be "university-controlled" only when all of the following criteria are met:

(a) There is a contract with the university, whereby a facility is provided and/or operated under conditions agreed to by the university.

(b) There is a stipulation in the contract that the facility is operated exclusively for students of the university.

(c) The university approves the rates charged the students, and receives the payments made pursuant to these rates.

(12) If a team which has overcharged customers in contravention of the freeze prefers to offer patrons tickets to future games or other forms of compensation in lieu of a cash refund, it must still offer at the same time the option of a cash refund when the other forms of compensation are unsatisfactory to the patron.

(13) Increased literary and artistic royalties may be paid during the freeze when such an increase is a part of the contract providing for payment thereof, but only if the higher percentage or contractual rate was specified in a contract agreed upon prior to the freeze.

404. Prices on imports. (1) An importer or distributor of imported goods may avoid showing the import surcharge on sales tickets or invoices if he absorbs the entire amount of the surcharge.

(2) Surcharge: An importer, or distributor of imported goods, must show on the sales ticket or invoice, in dollars and cents, the surcharge passed on to the purchaser. If the importer or distributor elects to pass on only a portion of the surcharge, he is still required to indicate penny for penny the exact amount passed on.

(3) As explained in paragraph 404(2) in OEP Economic Stabilization Circular No. 101, an importer may pass on a price increase of an imported product to the purchaser so long as the product is neither physically transformed by the seller nor becomes a component of another product. However, in the case of goods produced in the United States which are sent abroad and subsequently reenter the United States without substantial modification (i.e., 25 percent or greater increase in value), no change in ceiling price is permitted.

(4) Fluctuations in international exchange rates: As previously ruled an import price increase due to a change in the world market price may be passed on so long as the product is neither physically transformed by the seller nor incorporated as a component of another product.

An import price increase due to appreciation in the value of a foreign currency in relation to the dollar is treated in exactly the same way as an increase arising from changes in world market prices.

These provisions apply only to import transactions that took place after Au

gust 15. They do not apply to goods in inventory on that date.

Sellers of imported goods who pass on price increases to their customers must maintain adequate records to document the increases and must, on request, provide this information to buyers. Such increases may be passed on only cent for cent, and markups may not be increased.

NOTE: See paragraph 404 (6) of OEP Economic Stabilization Circular No. 101.

NOTE: Changes in prices arising from appreciation in the value of a foreign currency in relation to the dollar and changes instituted by foreign suppliers are treated differently from the supplemental duty (the import surcharge) in two respects:

(a) The surcharge may be passed on to the final customer even when the import is transformed or incorporated into another product.

(b) Sellers who pass on the surcharge must show the amount of the surcharge on the sales ticket or invoice, with the exception that retailers may elect to follow an alternate procedure.

(5) Indication of import surcharge passed on to the consumer: As previously stated, sellers who do not absorb the total amount of surcharge on imported goods must show on sales tickets or invoices the exact cent for cent amount that is passed on to the consumer. As an alternative, firms selling at retail to final consumers will be in compliance if all of the following conditions are met:

(a) Mark the price tag, or use a distinctive colored price tag, to indicate that the price of the item includes a portion or all of the import surcharge (exhibit A).