**ANNEX 6**

**Farm Security and Rural Investment Act of 2002 (Farm Bill)**

The following is a summary of the legislative changes resulting from the
2002 Farm Bill. It is meant for general informational purposes only, and
is not intended for use as a substitute to the statute or as an
interpretation of the Farm Bill.

The full text of the Farm Bill is available at
<http://agriculture.house.gov/fbconftxt.pdf>, the relevant food aid
sections being from page 153 to 179.

The Statement of Managers is available at
<http://agriculture.house.gov/fbconfmgrs.pdf>, the relevant food aid
sections being from page 86 to 100.

**1. Sec. 3001. United States Policy**

[Amendment]{.underline}: "Prevent conflicts" is added to the list of
policy objectives (P.L. 480, Section 2) to achieve through P.L. 480
programs.

[Comments]{.underline}: Provides statutory recognition to the use of
food aid as a conflict prevention development tool.

**2. Sec 3002(1). Provision of Agricultural Commodities**

[Amendments]{.underline}: The following language is added to P.L. 480,
Section 202(b):

"(3) Program Diversity.-The Administrator shall-

> \(A\) encourage eligible organizations to propose and implement
> program plans to address 1 or more aspects of the program under
> section 201; and
>
> \(B\) consider proposals that incorporate a variety of program
> objectives and strategic plans based on the identification by eligible
> organizations of appropriate activities, consistent with section 201,
> to assist development of foreign countries."
>
> (Section 201 is the list of objectives of Title II programs, e.g.
> combat famine, malnutrition, alleviate causes of hunger, mortality and
> morbidity, etc.)

**3. Sec. 3002(2). Provision of Agricultural Commodities, cont.**

[Amendment]{.underline}: Changes P.L. 480, Section 202(e) funding from
"not less than \$10 million and not more than 28 million" to "not less
than 5 percent nor more than 10 percent."

202(e) money is used to meet administrative, management, personnel, and
other needs of CS's carrying out Title II programs.

[Comments]{.underline}: FFP is developing policy to determine how to
utilize this increase.

However, the policy for this increase will take into consideration the
subminimum (see Sec. 3004 below).

**4. Sec 3002(3). Provision of Agricultural Commodities, cont.**

[Amendment]{.underline}: The following language is added to P.L. 480,
Section 202.

"(h) STREAMLINED PROGRAM MANAGEMENT.-

> \(1\) IMPROVEMENTS.-Not later than 1 year after the date of enactment
> of this subsection, the Administrator shall-
>
> \(A\) streamline program procedures and guidelines under this title
> for agreements with eligible organizations for programs in 1 or more
> countries; and
>
> \(B\) effective beginning with fiscal year 2004, to the maximum extent
> practicable, incorporate the changes into the procedures and
> guidelines for programs and the guide-lines for resource requests.
>
> \(2\) STREAMLINED PROCEDURES AND GUIDELINES.- In carrying out
> paragraph (1), the Administrator shall make improvements in the Office
> of Food for Peace management systems that include-
>
> \(A\) expedition of and greater consistency in the program review and
> approval process under this title;
>
> \(B\) streamlining of information collection and reporting systems by
> identifying the critical information that needs to be monitored and
> reported on by eligible organizations; and
>
> \(C\) for approved programs, provision of greater flexibility for an
> eligible organization to make modifications in program activities to
> achieve program results with streamlined procedures for reporting such
> modifications.

\(3\) CONSULTATION.-

> \(A\) IN GENERAL.-Paragraphs (1) and (2) shall be carried out in
> accordance with section 205 and subsections (b) and (c) of section
> 207.
>
> \(B\) CONSULTATION WITH CONGRESSIONAL COMMITTEES.-Not later than 180
> days after the date of enactment of this subsection, the Administrator
> shall consult with the Committee on Agriculture and the Committee on
> International Relations of the House of Representatives and the
> Committee on Agriculture, Nutrition, and Forestry of the Senate on
> progress made in carrying out this subsection.
>
> \(4\) REPORT.-Not later than 270 days after the date of enactment of
> this subsection, the Administrator shall submit to the Committee on
> Agriculture and the Committee on International Relations of the House
> of Representatives and the Committee on Agriculture, Nutrition, and
> Forestry of the Senate a report on the improvements made and planned
> upgrades in the information management, procurement, and financial
> management systems to administer this title."

[Comments]{.underline}: FFP has one year to complete the streamlining
changes in paragraph 2 above. Additionally, FFP must make an effort to
make changes effective for programs in FY 2004.

Paragraph 3(A) instructs USAID to utilize the Food Aid Consultative
Group (FACG) and provide an opportunity for notice and comment for
changes in guidelines and regulations.

Per paragraph 4, within 270 days of enactment, USAID must submit a
report to the relevant Congressional committees on efforts to improve
FFP information management, procurement, and financial management
systems. The provision encourages USAID to incorporate these FFP systems
into agency systems-thus improving the overall management of food aid
programs. For example, the Statement of Managers states that a report is
to be submitted on \"modernizing USAID\'s information management,
procurement, and financial management systems to accommodate Title II
needs.\"

**5. Sec. 3003. Generation and Use of Currencies by**

**Private Voluntary Organizations and Cooperatives**

[Amendment]{.underline}: This section makes two changes to P.L. 480,
Section 203. First, it changes "in the recipient country, or in a
country in the same region" to "1 or more recipient countries, or in 1
or more countries in the same region." Second, it changes "foreign
currency proceeds" and "foreign currency" to read only "proceeds."

[Comments]{.underline}: The change in recipient country language
specifically authorizes multi-country proposals. The change in proceeds
language results in monetization now being authorized in US Dollars.

**6. Sec. 3004. Levels of Assistance**

[Amendment]{.underline}: P.L. 480, Section 204(a) is amended to raise
the minimum amount of commodities to be purchased each fiscal year from
2,025,000 mt to 2,500,000 mt. The subminimum (tonnage for non-emergency
program) is raised from 1,550,000 mt to 1,875,000 mt. There was no
change to the 75% processed, bagged, or fortified requirement. However,
the Statement of Managers included the following, \"\[t\]he Managers ask
the Administrator to examine the commodities currently shipped under
Title II non-emergency programs, and determine which ones qualify as
value added products.. ..\"

**7. Sec. 3005. Food Aid Consultative Group**

[Amendment]{.underline}: The FACG is continued through the life of the
Bill (2007).

**8. Sec. 3006. Maximum Level of Expenditures**

[Amendment]{.underline}: The P.L. 480, Section 206 expenditure cap (with
available waiver) of \$1 billion per fiscal year is repealed

**9. Sec 3007(1). Administration.**

[Amendment]{.underline}: P.L. 480, Section 207 is amended by deleting
the current language regarding the 45 day review periods and replacing
it with the following language:

> "(1) RECIPIENT COUNTRIES. - A proposal to enter into a non-emergency
> food assistance agreement under this title shall identify the
> recipient country or countries that are the subject of the agreement.
>
> \(2\) TIMING. -- Not later than 120 days after the date of receipt by
> the Administrator of a proposal submitted by an eligible organization
> under this title, the Administrator shall determine whether to accept
> the proposal."

[Comments]{.underline}: The amendment does away with the old approval
time frame and institutes a strict 120 days. FFP is developing policy to
implement this new provision.

**10. Sec 3007(2). Administration, cont.**

[Amendment]{.underline}: P.L. 480, Section 207(b) is amended to require
publication of FFP annual policy guidance in addition to the annual DAP
guidelines for 30 days notice and comment.

**11. Sec 3007(3). Administration, cont.**

[Amendment]{.underline}: P.L. 480, Section 207 is amended by adding a
new paragraph (e) as follows:

"(e) TIMELY APPROVAL.-

> \(1\) IN GENERAL.-The Administrator is encouraged to finalize program
> agreements and resource requests for programs under this section
> before the beginning of each fiscal year.
>
> \(2\) REPORT.-Not later than December 1 of each year, the
> Administrator shall submit to the Committee on Agriculture and the
> Committee on International Relations of the House of Representatives
> and the Committee on Agriculture, Nutrition, and Forestry of the
> Senate a report that contains-
>
> \(A\) a list of programs, countries, and commodities approved to date
> for assistance under this section; and
>
> \(B\) a statement of the total amount of funds approved to date for
> transportation and administrative costs under this section."

**12. Sec. 3008. Assistance for Stockpiling and Rapid Transportation,
Delivery, and Distribution of Shelf-Stable Prepackaged Foods.**

[Amendment]{.underline}: The program is continued through the life of
the Bill (2007).

**13. Sec. 3009(1). Sale Procedure.**

[Amendment]{.underline}: P.L. 480, Section 403(e) now reads:

"(e) WORLD PRICES-

> \(1\) IN GENERAL.-In carrying out this Act, reasonable precautions
> shall be taken to assure that sales or donations of agricultural
> commodities will not unduly disrupt world prices for agricultural
> commodities or normal patters of commercial trade with foreign
> countries.
>
> \(2\) SALE PRICE.-Sales of agricultural commodities described in
> paragraph (1) shall be made at a reasonable market price in the
> economy where the agricultural commodity is to be sold, as determined
> by the Secretary or the Administrator, as appropriate."

[Comment]{.underline}: FFP is refining its monetization cost recovery
policy in light of the new language in paragraph (2) above.

**14. Sec. 3009(2). Sale Procedure, cont.**

[Amendment]{.underline}: Explicitly applies the Bellmon and Usual
Marketings Analysis (UMR)

(P.L. 480, Sections 403 (b) and (h)) to USDA\'s 416(b) and Food for
Progress programs. It also explicitly authorizes monetization of Title
II commodities into US Dollars.

**15. Sec. 3010. Prepositioning.**

[Amendment]{.underline}: The program is continued through the life of
the Bill (2007).

**16. Sec. 3011. Transportation and Related Costs.**

[Amendment]{.underline}: P.L. 480, Section 407( c )(1) is amended to
authorize payment of certain

ITSH costs for non-emergency programs. This section now reads:

\(1\) ACQUISTION.-

> \(A\) IN GENERAL.-The Administrator shall transfer, arrange for the
> transportation, and take other steps necessary to make available
> agricultural commodities to be provided under title II and title III.
>
> \(B\) CERTAIN COMMODITIES MADE AVAILABLE FOR NON- EMERGENCY
> ASSISTANCE.-In the case of agricultural commodities made available for
> nonemergency assistance under title II for least developed countries
> that meet the poverty and other eligibility criteria established by
> the International Bank for Reconstruction and Development for
> financing under the International Development Association, the
> Administrator may pay the transportation costs incurred in moving the
> agricultural commodities from designated points of entry or ports of
> entry abroad to storage and distribution sites and associated storage
> and distribution costs.\"

[Comment]{.underline}: ITSH payments are no longer limited to emergency
programs. However, FFP needs to develop policy to delineate under what
circumstances these ITSH payments shall be made and procedures for
making determinations on the poverty and other eligibility criteria
established by the International Bank for Reconstruction and Development
for financing under the International Development Association. Moreover,
the policy for this new authority will take into consideration the
subminimum.

**17. Sec. 3012. Expiration Date.**

[Amendment]{.underline}: No agreements to finance sales or to provide
other assistance under P.L. 480 shall be entered into after December 31,
2007.

**18. Sec 3013. Micronutrient Fortification Programs.**

[Amendment]{.underline}: Micronutrient Fortification Program is no
longer a pilot. The Administrator, in consultation with the Secretary,
must establish a permanent program by September 30, 2003.

**19. Sec 3013. Micronutrient Fortification Programs, cont.**

[Amendment]{.underline}: The amendments also make four substantive
changes to the program:

\(1\) \"Whole grain\" is changed to \"grain.\"

\(2\) The following is added as a purpose of the program:

> "(C) assess and apply technologies and systems to improve and ensure
> the quality, shelf life, bioavailability, and safety of fortified food
> aid commodities, and products of those commodities, that are provided
> to developing countries, by using the same mechanism that was used to
> assess the micronutrient fortification program in the report entitled
> 'Micronutrient Compliance Review of Fortified P.L. 480 Commodities',
> published October 2001 with funds from the Bureau for Humanitarian
> Response of the United States Agency for International Development."

\(3\) Folic Acid is added to the list of micronutrients in P.L. 480,
Section 415(c).

\(4\) This list of micronutrients used in the program is now prefaced
with "such as" instead of "including."

**20. Sec. 3014 - 3015. Farmer to Farmer Program**.

Not included in this discussion.

**21. Sec. 3106. McGovern-Dole International Food**

**for Education and Child Nutrition Program**

[Amendment]{.underline}: A separate, stand-alone global food for
education program is authorized, not mandated. The new legislation is
relatively long, detailed, and self-explanatory. Nonetheless, listed
below are a few highlights of particular importance and/or interest. For
a detailed analysis, the legislation is available at the following link
on pages 168 to 172 <http://agriculture.house.gov/fbconftxt.pdf>.

-   The program is authorized only. It is left to the discretion of the
    President whether or not to establish the program.

-   If the President decides to establish the program, he also chooses
    which agency or agencies will implement the program.

-   If established, the program will be to carry out:

> \(1\) preschool and school food for education programs in foreign
> countries to improve food security, reduce the incidence of hunger,
> and improve literacy and primary education, particularly with respect
> to girls; and
>
> \(2\) maternal, infant, and child nutrition programs for pregnant
> women, nursing mothers, infants, and children who are 5 years of age
> or younger.

-   It has notwithstanding authority for the use of eligible commodities
    and the payment of cost items.

-   Authorizes the payment of internal transportation, storage, and
    handling (ITSH) costs in low income, net food-importing countries.

-   Authorizes 202(e)-type payments for costs associated with conducting
    programs in-country and CS administrative expenses.

-   Authorizes monetization.

-   Eligible organizations to carry out the programs include PVOs,
    cooperatives, intergovernmental organizations, governments of
    developing countries and their agencies, and "other organizations."

-   Lists "priorities for program" funding the implementing agency may
    consider when deciding on program approval. In general, they are the
    requesting entity\'s capacity to accomplish such things as identify
    and assess needs, incorporate development objectives for literacy
    and primary education, improve nutrition, and involve indigenous
    organizations and the local communities.

-   Annual reporting requirement to relevant committees.

-   A "graduation" provision must be incorporated in every agreement
    that shall include: either (1) efforts to sustain the benefits after
    program completion and an estimate of time until the recipient
    country or eligible organization can provide sustainability, or (2)
    "other long-term benefits to targeted populations of the recipient
    country."

-   P.L. 480, Section 403(a) provisions to safeguard local production
    and usual marketings are incorporated by reference.

-   For FY2003, mandates \$100 million of CCC funds be used to carry out
    the program. For FY 2004-2007 "such sums as are necessary to carry
    out this section" are authorized. The Statement of Managers states
    that the \$100 million for FY2003 was authorized to continue the
    pilot program.

-   Funds made available for this program may be used to pay for
    implementing agency administrative expenses associated with carrying
    out the program.