`[Federal Register Volume 62, Number 153 (Friday, August 8, 1997)]
[Proposed Rules]
[Pages 42712-42713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20718]


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INTERNATIONAL DEVELOPMENT COOPERATION AGENCY

Agency for International Development

22 CFR Part 201

[AID Reg. 1]
RIN 0412-AA-34


Rules and Procedures Applicable to Commodity Transactions 
Financed by USAID: Inspection and Price Provisions

AGENCY: Agency for International Development, IDCA.

ACTION: Proposed rule.

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SUMMARY: The U.S. Agency for International Development (USAID) proposes 
to amend the regulation to implement the requirement for preshipment 
inspection of commodities and to simplify the current rules on maximum 
prices for commodities. USAID previously employed post-audit procedures 
to assure that commodities and related services financed under its 
programs were not over priced by suppliers. The purpose of preshipment 
inspection is to complete the price review prior to shipment, rather 
than after the fact, and when determined necessary, to complete a 
physical inspection of the commodities being financed. The purpose of 
the proposed amendment to the price rules for commodities is to make it 
easier for suppliers to understand and bring it into line with 
commercial practices used by preshipment inspection firms that will be 
contracted to carry out the preshipment inspection program.

DATES: Comment Deadline: October 7, 1997.

ADDRESSES: Send comments to Kathleen J. O'Hara, Office of Procurement 
Policy Division (M/OP/PP), USAID, Room 1600 A, Washington, DC 20523-
1435.

FOR FURTHER INFORMATION CONTACT: Kathleen J. O'Hara, Office of 
Procurement, Procurement Policy Division (M/OP/PP), USAID, Room 1600 A, 
Washington, DC 20523-1435. Telephone (703) 875-1534, facsimile (703) 
875-1243.

SUPPLEMENTARY INFORMATION: As part of USAID's re-engineering process, a 
decision has been taken to revise the procedure it uses to assure that 
the prices paid to suppliers under transactions financed by Commodity 
Import Programs are fair and reasonable. Currently, this is being done 
through a post-audit function within USAID. The purpose of this 
proposed amendment is to implement a preshipment inspection program 
which would essentially replace the post-audit function. The 
preshipment inspection services will be carried out by a private 
contractor, under a contract with USAID.
    The specific changes being proposed would add a definition for 
``preshipment inspection,'' amend the coverage on responsibilities of 
importers and suppliers to add requirements concerning preshipment 
inspection, add a new Sec. 201.48 establishing the requirement for 
preshipment inspection, and add the requirement for a ``clean'' 
inspection report to the list of documents that the supplier must 
furnish in order to receive payment from USAID in Sec. 201.52(a).
    Preshipment inspection will include a price review, and USAID 
proposes to revise its rules on maximum prices for commodities to be 
more in line with the commercial practices used by the preshipment 
inspection firms. The basic prevailing market price test would be 
reformulated; the method for constructing an allowable price in the 
absence of comparable sales in Sec. 201.63(e) would be removed since it 
does not agree with commercial practices established between 
preshipment inspection firms and the World Trade Organization; and the 
supplier's comparable export price test in Sec. 201.63 (c) would also 
be removed. Various changes in subpart G, Price Provisions, implement 
the new rules.
    USAID has determined that this proposed rule is not a significant 
regulatory action under Executive Order 12866. The rule has been 
reviewed in accordance with the requirement of the Regulatory 
Flexibility Act. USAID has determined that the proposed rule will not 
have a significant economic impact on a substantial number of small 
entities, and, therefore, a Regulatory Flexibility Analysis is not 
required. The additional documentation requirement will be submitted to 
OMB for approval as required by the Paperwork Reduction Act.

List of Subjects in 22 CFR Part 201

    Administrative practice and procedure, Commodity procurement--
foreign relations.

    For the reasons set out in the preamble, 22 CFR part 201 is 
proposed to be amended as follows:
    1. The authority citation continues to read as follows:

    Authority: 22 U.S.C. 2381.

    2. Section 201.01 is amended to add a new paragraph (dd) as 
follows:


Sec. 201.01  Definition.

* * * * *
    (dd) Preshipment inspection means a review by the designated USAID 
contractor of all costs associated with a transaction and, where 
applicable, a physical inspection of the commodity, including packaging 
and packing.
    3. Section 201.21 is amended by removing ``and, where 
appropriate,'' from the end of paragraph (c); by removing the period 
from the end of paragraph (d) and adding ``; and'' in its place; and by 
adding a new paragraph (e) as follows:


Sec. 201.21  Notice to supplier.

* * * * *
    (e) The USAID requirement in Sec. 201.31(j) for preshipment 
inspection, when applicable.
    4. Section 201.31 is amended to add a new paragraph (j) as follows:


Sec. 201.31  Suppliers of commodities.

* * * * *
    (j) Preshipment inspection. As applicable, the supplier shall be 
responsible for coordinating the preshipment inspection of the

[[Page 42713]]

commodity with the contractor designated by USAID. In the case of a 
physical inspection of the commodity, the supplier shall make the 
commodity available to the contractor's inspector and, when applicable, 
in a condition for operational testing. The supplier shall provide 
reasonable assistance to the inspector in completing the inspection, to 
include, but not limited to, unpacking, packing, weighing, etc. Any 
costs associated with making the commodity available for inspection 
will be for the account of the supplier.
    5. Section 201.48 is added to read as follows:


Sec. 201.48  Preshipment inspection of commodities.

    For each shipment under a purchase contract with an f.o.b. value in 
excess of $100,000, a preshipment documentary inspection is required. 
For each shipment under a purchase contract with an f.o.b. value in 
excess of $1,000,000, a full preshipment inspection, to include a 
physical inspection, is required unless USAID determines in writing to 
limit the inspection to a review of the documentation for the 
transaction. USAID may also require documentary and/or physical 
inspections in other situations.
    6. Section 201.52 is amended to remove ``(8)'' in paragraph (a), 
introductory text, and add ``(9)'' in its place and to add a new 
paragraph (a)(9) to read as follows:


Sec. 201.52  Required documents.

    (a) * * *
    (9) Pre-shipment inspection report. When required in the letter of 
credit, direct letter of commitment, or other payment document, one 
signed original of the ``clean'' inspection report, issued by the 
inspection firm designated by USAID to undertake preshipment 
inspections.
* * * * *
    7. Section 201.60 is amended by revising paragraph (c) as follows:


Sec. 201.60  Purpose and applicability of this subpart.

* * * * *
    (c) Compliance. Compliance with this subpart G and with any 
additional price requirement contained in the implementing document 
shall be a condition to the financing by USAID of procurement 
transactions under this part. Preshipment inspection of the commodities 
will include a price review for compliance. Additionally, USAID may 
post-audit transactions to determine that there has been compliance.
    8. Section 201.63 is amended by removing paragraphs (c), (d) and 
(e); by redesignating paragraphs (f) and (g) as paragraphs (c) and (d), 
respectively; by removing ``(f)(1)'' from the newly redesignated 
paragraph (c)(2) and adding ``(c)(1)'' in its place, and by revising 
paragraphs (a) and (b) as follows:


Sec. 201.63  Maximum prices for commodities.

    (a) Prevailing export market price. (1) The purchase price of a 
commodity shall not exceed the prevailing export price range in the 
country of supply for comparable goods sold under comparable terms of 
sale. If there are no export sales of comparable goods, then the 
purchase price shall not exceed the prevailing domestic price range in 
the country of supply for comparable goods, adjusted upward or downward 
by the appropriate export differential. The prevailing price range, 
whether export or domestic, shall be determined through analysis of 
prices during a reference period prior to the date the purchase price 
for the USAID-financed transaction was fixed. The analysis identifies 
the applicable range of prices which the ex-factory or f.o.b. price of 
the commodity shall not exceed.
    (2) The purchase price of a commodity from a source outside the 
United States shall also not exceed the prevailing export price range 
in the United States for comparable goods sold under comparable terms 
of sale, as determined in paragraph (a)(1) of this section, adjusted 
for differences in the cost of transportation to destination when 
applicable.
    (b) Paragraph (a) of this section shall not apply to the purchase 
price:
    (1) In any sale under formal competitive bid procedures; or
    (2) In any sale of a commodity generally traded on an organized 
commodity exchange.
* * * * *
    9. In Sec. 201.64, paragraph (a) is revised to read as follows:


Sec. 201.64  Application of the price rules to commodities.

    (a) Calculation of commodity prices on a common basis. In testing 
whether the purchase price of a commodity complies with the 
requirements of Sec. 201.63(a) it is necessary to insure that the price 
being tested as well as the prices being used as a test or measurement 
are calculated on the basis of delivery alongside or on board the 
vessel or other export conveyance. Therefore, in addition to the price 
of the commodity at an internal point in the source country, prices 
will include transportation from that point to the port of export in 
the source country and, to the extent not already included in the price 
at the internal point, inspection, export packing, forwarder's fees at 
customary rates, the cost of placing the commodities on board the 
vessel or export conveyance (unless this cost is covered in the export 
freight), and other necessary costs customary in the trade.


Sec. 201.64  [Added]

    9. In Sec. 201.64, paragraph (b)(1) is amended by removing ``(c), 
(d) and (e),'' and paragraph (c) is amended by removing ``(f)(1)'', 
``(f)(1)(i)'' and ``(f)(2)'' from wherever they appear in and adding 
``(c)(1)'', ``(c)(1)(i)'' and ``(c)(2)'', respectively, in their 
places.

    Dated: June 26, 1997.
Marcus L. Stevenson,
Procurement Executive.
[FR Doc. 97-20718 Filed 8-7-97; 8:45 am]
BILLING CODE 6116-71-M`