This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

52929

Vol. 62, No. 197

Friday, October 10, 1997

DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 17

Regulations Governing the Financing

of Commercial Sales of Agricultural

Commodities

AGENCY: Commodity Credit Corporation.

ACTION: Final rule.

SUMMARY: This rule amends regulations

applicable to the financing of the sale

and exportation of agricultural

commodities pursuant to title I of the

Agricultural Trade Development and

Assistance Act of 1954, as amended

(‘‘Pub. L. 480’’).

The amendment simplifies the

purchasing procedures and shortens the

regulations. The purpose of these

changes is to keep the costs of the Pub.

L. 480, title I program as low as

possible, to reflect the provisions of the

Federal Agricultural Improvement and

Reform Act of 1996, and to reduce the

public reporting burden.

Executive Order 12752 of February

25, 1991, establishes a program under

title I of Pub. L. 480 to be implemented

by the Secretary of Agriculture. In

accordance with section 406(c) of Pub.

L. 480, the funds, facilities, and

authorities of the Commodity Credit

Corporation are used to carry out this

program.

EFFECTIVE DATE: This rule is effective

November 10, 1997.

FOR FURTHER INFORMATION CONTACT:

Connie B. Delaplane, Director, P.L. 480

Operations Division, Export Credits,

Foreign Agricultural Service, Room

4549, South Building, Stop 1033, U.S.

Department of Agriculture, 1400

Independence Ave., SW., Washington,

D.C. 20250–1033. Telephone: (202) 720–

3664.

SUPPLEMENTARY INFORMATION: This final

rule is issued in conformance with

Executive Order 12866. It has been

determined significant for the purposes

of E.O. 12866 and, therefore, has been

reviewed by the Office of Management

and Budget (‘‘OMB’’).

Regulatory Flexibility Act

This final rule has been reviewed

with regard to the requirements of the

Regulatory Flexibility Act. The Vice

President, Commodity Credit

Corporation (‘‘CCC’’), who is the

General Sales Manager, has certified

that this rule will not have a significant

economic impact on a substantial

number of small entities. The final rule

eliminates some existing program

requirements which should make it

easier for firms to participate, including

small businesses. A copy of this final

rule has been submitted to the General

Counsel, Small Business

Administration.

Executive Order 12372

This program is not subject to the

provisions of Executive Order 12372

which requires intergovernmental

consultation with state and local

officials. See the Notice related to 7 CFR

Part 3015, Subpart V, published at 48

FR 29115 (June 24, 1983).

Paperwork Reduction Act

In accordance with the provisions of

the Paperwork Reduction Act of 1995,

the Department submitted an updated

information collection package to the

Office of Management and Budget

(OMB) under OMB control number

0551–0005, in conjunction with the

publication of the proposed rule in the

Federal Register (see ‘‘Background.’’)

OMB has approved the estimated total

burden of 455 hours through February

28, 2000. Copies of this information

collection can be obtained from Valerie

Countiss, the Agency Information

Collection Coordinator, at (202) 720–

6713.

Executive Order 12988

This final rule has been reviewed

under Executive Order 12988, Civil

Justice Reform. The final rule would

have preemptive effect with respect to

any state or local laws, regulations, or

policies which conflict with such

provisions or which otherwise impede

their full implementation. The final rule

would not have retroactive effect. The

rule does not require that administrative

remedies be exhausted before suit may

be filed.

Background

Title I of the Agricultural Trade

Development and Assistance Act of

1954, as amended (Pub. L. 480)

authorizes CCC to finance the sale and

exportation of agricultural commodities

on concessional credit terms. 7 U.S.C.

1701 et seq. On January 27, 1997, the

Commodity Credit Corporation (‘‘CCC’’)

published a Proposed Rule (62 FR 3810)

to amend the regulations governing the

financing of the sale and exportation of

agricultural commodities made

available under title I, Pub. L. 480. The

proposed rule was drafted after

considering comments received in

response to an Advance Notice of

Proposed Rulemaking (60 FR 47495)

published September 13, 1995. Most of

the comments received supported the

changes made by the proposed rule. The

comments which raised questions are

discussed below, except those

comments that were outside the scope

of the proposed rule. A copy of the

‘‘Benefit-Cost Assessment’’ prepared in

connection with this final rule can be

obtained from Connie B. Delaplane. See

For Further Information Contact.

Discussion of Comments

Purchase Authorizations

After CCC and the participant have

signed a title I agreement, CCC issues a

purchase authorization (‘‘PA’’) in

response to a request from the

participant. One comment asked that

the importer or the shipping agent be

permitted to request the PA. However,

having the participant prepare the brief

written request helps to insure that the

participant also signs the PA when it is

issued a few days later. By this signature

the participant accepts the specific

contracting and documentary

requirements in the PA which govern

CCC financing under the program.

Because the participant must bear any

costs which are not eligible for CCC

financing, it is important that the

participant be fully involved in both

requesting and signing the PA. Since the

requirement for requesting PA’s appears

in the title I agreement, there is no need

also to include it in the regulations and

this portion of the proposed rule will be

adopted without change.
52930 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

Shipping Agents

The proposed rule would require an

agent of the participant or importer

(shipping agent) to provide complete

information on the firm and its activities

only once per fiscal year, instead of each

time the firm is nominated by a

participant. One commenter requested

that we further change the procedure to

adopt an ‘‘initial registration’’ of

interested firms at the beginning of each

fiscal year, similar to the determination

of eligibility for commodity suppliers.

The firm would not have to be

nominated by a participant to be

registered.

We do not believe that adopting this

suggestion would further reduce the

reporting burden on a shipping agent, or

expedite the FAS review process. In

fact, it would place a greater burden on

firms which would submit information

for such ‘‘initial registration,’’ yet never

be nominated as a shipping agent. Also,

if FAS were to ‘‘register’’ any interested

firm, regardless of whether a participant

wished to employ the firm, FAS’

workload would be increased. Finally,

such ‘‘registration’’ could imply

endorsement or approval by FAS, which

could be misleading to participants.

FAS does not investigate firms which

wish to act as shipping agents; it simply

accepts the nomination of an agent by

the participant if the requirements of the

regulations are met. The regulations

implement the provisions of section

407(b)(4) of the Federal Agriculture

Improvement and Reform Act of 1996

regarding conflicts of interest. Based on

this evaluation, CCC will adopt the rule

as proposed.

Eligibility of Commodity Suppliers

The proposed rule would have

permitted any supplier eligible under

the GSM–102 or GSM–103 programs to

participate in sales under title I. FAS

would not have evaluated the firm’s

responsibility or its experience as an

exporter of U.S. agricultural

commodities. After reviewing the

potential impact of this change on food

aid recipients under the program, we

have reinstated the requirement for a

separate, but simplified, eligibility

determination for title I suppliers. It is

crucial for most food aid recipients that

suppliers fulfill their contracts without

problems or significant delay. Title I

shipments are often a key part of the

supply pipeline for recipients, which

generally are not able to make a prompt

commercial purchase should a supplier

fail to perform. In addition, if a

commodity supplier did not deliver the

commodity, the recipient might also be

required to pay the full shipping costs

to the contracted vessel (‘‘deadfreight’’).

By retaining the requirement that FAS

evaluate the export experience and

financial responsibility of a prospective

supplier, we will help protect

participants against non-performance.

One comment noted that the IFB

requirements for bid and performance

bonds have ‘‘adequately guaranteed

performance by suppliers in the past.’’

It is true that recipients normally

require commodity suppliers to submit

a bid bond (generally 2% of the value

of the offer) and to open a performance

bond when they receive a contract. The

performance bond is usually 5% of the

value of the contract. These bonds

provide some protection against an

unreliable supplier, but would be

insufficient to cover the full cost of

‘‘deadfreight,’’ for example. Buyers, of

course, have not relied solely on these

bonds in the past; FAS has screened out

firms which did not demonstrate export

experience and financial responsibility.

It is not practical for recipients to

increase the amount of the bid and

performance bonds to cover the

maximum costs of a default by the

supplier; such bonds would be more

expensive for the suppliers, and would

increase all commodity costs under the

program.

Under Title I, recipients must buy

either on the ‘‘lowest landed cost’’ basis

(the lowest combination of commodity

and freight offered) or on the basis of the

lowest priced commodity offered. This

helps insure that CCC funds provide as

much tonnage as possible, and to give

qualified commodity suppliers an equal

opportunity to compete. Because of this

program requirement, recipients may

not simply select the supplier(s) with

which they are familiar. It would be

inefficient to require each recipient to

evaluate the ability of potential U.S.

suppliers to perform; some recipients

would not be able to conduct such an

analysis. Submitting information to each

recipient would also increase the

workload for suppliers wishing to

participate in the program.

In order to reduce the reporting

burden for suppliers, we have

eliminated the requirement that

prospective suppliers provide the name,

address and chief executive officers for

all branches, affiliates and subsidiaries,

and that eligible suppliers keep this

information current.

Although the final rule is not as

beneficial to suppliers as the proposed

rule, it does reduce the reporting burden

for suppliers while maintaining an

acceptable level of protection for the

recipient. As a result, CCC has

determined to adopt the provisions in

the final rule regarding eligibility of

suppliers.

Invitations for Bids

One comment asked that the

Invitation for Bids (‘‘IFB’’) specify how

the buyer will pay the supplier

whenever the buyer requests a supplier

to bear a cost not eligible for CCC

financing. Although § 17.5(e) provides

that the contracts between commodity

suppliers and buyers ‘‘* * * should

stipulate the responsibility of each party

for payment of any costs not eligible for

financing by CCC’’ we agree that this

information should also be included in

the IFB. Sections 17.5(c)(2) and

17.8(b)(1)(iv) have been amended to add

this requirement for IFB’s for

commodity and for ocean

transportation.

In this regard, it is important to note

that some payments which had been

permitted under the existing

regulations, but which cannot now be

financed by CCC, will be prohibited

when this final rule becomes effective.

This includes consular fees for

legalization of documents, for example,

and total brokerage commissions which

exceed 21⁄2 percent of the freight. We

have added a new paragraph,

§ 17.6(c)(3), for improved clarity

regarding total brokerage commissions.

This paragraph is consistent with the

regulations governing brokerage

commissions for commodities shipped

under section 416(b) of the Agricultural

Act of 1949 and the Food for Progress

Act of 1985 (7 CFR 1499.8(d)). The

preamble to the proposed rule discussed

the ceiling on brokerage commissions

and requested suggestions for other

ways to address the general issue of

costs which are ineligible for CCC

financing. Since no comments were

submitted offering alternative

procedures, the final rule retains the

provisions in the proposed rule.

Ocean Transportation

A comment asked that we delete the

requirement that the vessel owner may

claim detention when a required letter

of credit is not available at loading

(§ 17.8(k)(6)). The comment questioned

the appropriateness of a claim for

detention in this case since the freight

could not be collected until after the

vessel arrived at the first discharge port.

However, it is very important to the

program that the vessel owner have the

letter of credit available before loading.

This provides assurance of payment

when the voyage is completed, reducing

the owner’s risk and thereby keeping

freight costs as low as possible. The

comment also noted that the

requirement for detention
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52931

disadvantaged foreign flag vessels. The

regulations apply to freight contracts for

voyages for which CCC finances all or

part of the costs, whether on U.S.-flag or

non-U.S. flag vessels.

Another comment agreed with the

proposed change (§ 17.8(b)(2)) which no

longer prohibits clarification or

submission of certain technical

information after opening of ocean

transportation offers; the author

requested confirmation that this would

not be a vehicle through which an offer

could be made responsive after it had

been submitted. As described in the

preamble to the proposed rule, only

freight offers which are responsive to

the terms of the IFB as of the date and

time for receipt of offers could be

considered. No information or

clarification submitted after that date

and time could be used to make the

offer responsive. The prohibition against

negotiation also remains in the

regulations. The change simply

acknowledges that it is occasionally

necessary to seek factual information

after an offer has been submitted, such

as the maximum tonnage which can be

loaded at a certain port, given existing

draft conditions and stowage factors for

the commodity in question. Another

comment requested that ocean freight be

earned (and paid) when the vessel

loads, stating that this is the commercial

standard. The program operated in this

manner before 1960, at which time CCC

found it necessary to change freight

procedures to protect its interest, so that

freight was payable on the vessel’s

arrival at the first discharge port. An

importing country had fixed a vessel

which was abandoned by the owner

before the vessel departed the load port,

but after receipt of freight payment on

loading. CCC incurred additional costs

and freight charges to ship the cargo on

another vessel.

More recent program experience still

supports this position. Within the last

ten years, several vessels carrying title I

cargo sank en route to the discharge

port. Under the final rule, the risk of

non-performance of the voyage remains

on the ocean carrier, subject to a

determination of force majeure. The

final rule does continue the policy of

allowing a supplier to receive freight

prior to arrival if the supplier posts

acceptable security.

In general, requiring freight to be

payable on discharge maximizes the

incentive to the supplier of ocean

transportation to complete the voyage as

contracted. In order to maintain this

protection for CCC, and for program

recipients, the proposed rule has been

adopted as proposed. The requirement

applies, of course, only when CCC

finances any part of the ocean freight.

The same comment also requested

that we change the method for

settlement of demurrage and despatch at

the load port. The current procedure

was instituted in a final rule published

December 7, 1995 (60 FR 62702). This

rule provided that demurrage and

despatch at load would be settled

between the parties which controlled

the loading (the supplier of ocean

transportation and the commodity

supplier.) This change was made to

make the program operate closer to

commercial practice than in the past,

when CCC shared in despatch earnings.

It also made title I more consistent with

other food aid programs in this regard.

Although it is true that no contract

exists between the two suppliers, FAS

has not heard of serious problems in

arranging payment of demurrage and

despatch on this basis. We have retained

this provision in the final rule, but will

review the issue if it appears

appropriate based on further experience.

Payment to Suppliers

Most comments supported the

proposal that CCC pay suppliers directly

for all amounts which CCC finances,

instead of requiring participants to open

letters of credit covering these amounts.

Two comments asked whether CCC

would be able to pay as promptly as a

bank does (generally, examining

documents within two business days

from presentation, with payment no

later than one business day following

the date documents are found in order.)

Another comment asked whether the

Uniform Customs and Practices for

Documentary Credits (‘‘UCP 500’’)

would be the standard by which CCC

would examine documents. CCC’s

examination of documents will be more

extensive than that conducted by banks;

it will not be based on UCP 500 but on

the ‘‘post audit’’ process now performed

by CCC on documents submitted to CCC

by banks after they have made payment

to suppliers. CCC staff will compare the

documents to the documentary

requirements in the PA and the IFB, and

will check all calculations on the

documents to ensure that no

mathematical errors have been made.

CCC will also review the documents

received to ensure there are no

discrepancies among the documents. As

part of the direct payment process, CCC

must also prepare and process the

payment document, SF–1166, ‘‘Voucher

and Schedule of Payments.’’ The CCC

review will replace CCC’s existing ‘‘post

audit’’ of documents and the banks’’

own review of documents. CCC expects

to be able to pay suppliers within a

maximum of seven business days after

receipt of all the required documents, if

there are no discrepancies. CCC will not

disburse any funds to the supplier until

all documents are received, audited, and

found to be in order.

Therefore, suppliers should take note

that they are solely responsible for

ensuring that all the proper documents

are included in the package submitted

to CCC for payment, and that they are

completed correctly. This will help CCC

pay the suppliers sooner. Section

17.9(a)(3) has been revised to contain a

more detailed description of the

examination of documents by CCC. In

addition, a new § 17.9(a)(4) has been

added to reflect the provisions of the

Debt Collection Improvement Act of

1996, Pub. L. 104–134, which requires

that CCC must issue all payments by

electronic transfer. Suppliers must

provide CCC with the necessary

information to facilitate this procedure.

One comment said that the seller had

no assurance of receiving payment

without a letter of credit since CCC can

alter or revoke the PA. However,

§ 17.3(d) states that, if the GSM were to

‘‘supplement, modify or revoke’’ a PA,

CCC would ‘‘* * * reimburse suppliers

who would otherwise be entitled to be

financed by CCC for costs which were

incurred as a result of such action * * *

in connection with firm sales or

shipping contracts * * *.’’ This longstanding provision remains in the

regulations.

The comment added that the proposal

overstated the benefits to recipients of

the change to direct payment by CCC, in

part because the banking fees were

actually lower than estimated in the

proposed rule. The fees charged by

banks related to letters of credit are not

public information, but the estimate in

the proposed rule was based on

comments from program participants,

which have paid such fees. The issue is

greater than the bank fees, however;

participants face the very real potential

for significant freight and commodity

costs (detention and carrying charges)

which are not financed by CCC. These

costs must be paid by the participant

when loading is delayed because

operable letters of credit were not

available. If a dispute arises,

participants may also be responsible for

legal costs.

Finally, this comment stated that

banks may be reluctant to issue letters

of credit for small amounts of freight not

covered by CCC, or may increase their

fees to cover costs for these low-revenue

transactions. It is possible that some

banks may forego this business, or

increase their fees slightly, but we do
52932 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

not anticipate that all banks will decline

to participate.

We have evaluated these comments

carefully. It is true that suppliers may

not be paid by CCC quite as quickly as

they were by banks under letters of

credit, because of the more detailed

document review conducted by CCC,

and that this may lead some firms to

increase commodity prices slightly

under the program, to cover a few days

of lost interest. To the extent this

occurs, it would mean a very small

reduction in the commodity tonnage

which could be shipped within the

fixed funding provided under a Pub. L.

480, title I agreement. However, we

anticipate that the significant cost

savings to recipients will clearly

outweigh this disadvantage, and the

other concerns discussed in this

preamble. Recipients must pay bank

charges for letters of credit and must

pay suppliers if loading is delayed

because the letter of credit is not

available. (Commodity suppliers receive

‘‘carrying charges’’ in such cases, and

suppliers of ocean transportation can

collect ‘‘detention.’’ One day of

‘‘detention’’ for a U.S.-flag vessel can

cost the recipient as much as $25,000.)

As a result, the final rule retains the

change to direct payment by CCC.

However, we will carefully monitor the

impact of this change and will review

the decision based on a year’s

experience.

Documentation

A comment requested that weight

certificates be issued only by the

Federal Grain Inspection Service, USDA

(‘‘FGIS’’) or its cooperators. By law,

FGIS must weigh certain commodities

which are exported, such as wheat or

corn. For other commodities, the

program has, for many years, permitted

private firms to provide weight

certificates. Since including this option

is consistent with commercial practice

and it gives both buyer and seller more

flexibility in contracting under title I,

we have determined that the proposed

rule will be adopted as published.

Another comment asked whether the

‘‘federal appeal inspection certificate’’

(§ 17.9(c)(5)) were still valid. We have

revised this paragraph to reflect the

current procedure when a certificate is

issued representing an appeal

inspection. The same comment noted

that a phytosanitary certificate issued by

USDA cannot show a number on its

face, including the PA number.

(§ 17.9(b) requires that the supplier

arrange for the PA number to be put on

required documents.) The comment

explained that the PA number could be

placed on a separate sheet of paper

which is stapled to the phytosanitary

certificate. CCC will accept this

procedure for the phytosanitary

certificate, and the provision will be

adopted as proposed.

List of Subjects in 7 CFR Part 17

Agricultural commodities, Exports,

Finance, Maritime carriers.

Accordingly, part 17 of 7 CFR is

revised to read as follows:

PART 17—SALES OF AGRICULTURAL

COMMODITIES MADE AVAILABLE

UNDER TITLE I OF THE

AGRICULTURAL TRADE

DEVELOPMENT AND ASSISTANCE

ACT OF 1954, AS AMENDED

Sec.

17.1 General.

17.2 Definition of terms.

17.3 Purchase authorizations.

17.4 Agents of the participant or importer.

17.5 Contracts between commodity

suppliers and importers.

17.6 Discounts, fees, commissions and

payments.

17.7 Notice of sale procedures.

17.8 Ocean transportation.

17.9 CCC payment to suppliers.

17.10 Refunds and insurance.

17.11 Recordkeeping and access to records.

Authority: 7 U.S.C. 1701–1704, 1731–

1736b, 1736f, 5676; E.O. 12220, 45 FR 44245.

§ 17.1 General.

(a) What this part covers. This part

contains the regulations governing the

financing of the sale and exportation of

agricultural commodities by the

Commodity Credit Corporation (CCC),

through private trade channels to the

maximum extent practicable, under the

authority of title I of the Agricultural

Trade Development and Assistance Act

of 1954, as amended (hereinafter called

‘‘the Act’’).

(b) Agricultural commodities

agreements. (1) Under the Act, the

Government of the United States enters

into Agricultural Commodities

Agreements with governments of foreign

countries or with private entities. These

agreements cover financing of the sale

and exportation of agricultural

commodities, including certain ocean

transportation costs.

(2) Agricultural Commodities

Agreements may provide that a

participant will repay CCC for the

financing extended by CCC either in

dollars or in local currencies.

(3) A private entity must maintain a

bona fide business office in the United

States and have a person, principal, or

agent on whom service of judicial

process may be had in the United States.

(c) Purchase authorizations. This part

covers, among other things, the issuance

by the General Sales Manager of

purchase authorizations which

authorize the participant to:

(1) Purchase agricultural

commodities; and

(2) Procure ocean transportation

therefor.

(d) Financing. For amounts to be

financed by CCC, CCC will pay the

supplier of commodity or of ocean

transportation in accordance with

§ 17.9(a)(3). The cost of ocean freight or

ocean freight differential will be

financed by CCC only when specifically

provided for in the purchase

authorization.

(e) Where information is available.

General information about operations

under this part is available from the

Director, Pub. L. 480 Operations

Division, Foreign Agricultural Service,

USDA, Washington, D.C. 20250–1033.

Information about financing operations

under this part, including forms

prescribed for use thereunder, is

available from the Controller,

Commodity Credit Corporation, USDA,

1400 Independence Avenue, SW,

Washington, D.C. 20250–0581.

§ 17.2 Definition of terms.

Terms used in the regulations in this

part are defined or identified as follows,

subject to amplification in subsequent

sections:

Affiliate and associated company—

any legal entity which owns or controls,

or is owned or controlled by, another

legal entity. For a corporation,

ownership of the voting stock is the

controlling criterion. A legal entity is

considered to own or control a second

legal entity if—

(1) The legal entity owns an interest

of 50 percent or more in the second

legal entity; or

(2) The legal entity and one or more

other legal entities, in which it owns an

interest of 50 percent or more, together

own an interest of 50 percent or more

in the second legal entity; or

(3) The legal entity owns an interest

of 50 percent or more in another legal

entity which in turn owns an interest of

50 percent or more in the second legal

entity.

CCC—the Commodity Credit

Corporation, USDA.

Commodity—an agricultural

commodity produced in the United

States, or product thereof produced in

the United States, as specified in the

applicable purchase authorization.

Controller—the Controller,

Commodity Credit Corporation, or the

Controller’s designee.

Copy—a photocopy or other type of

copy of an original document showing

all data shown on the original,

including signature or the name of the
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52933

person signing the original or, if the

signature or name is not shown on the

copy, a statement that the original was

signed.

Delivery—the transfer to or for the

account of an importer of custody and

right of possession of the commodity at

U.S. ports or Canadian transshipment

points in accordance with the delivery

terms of the contract and purchase

authorization. For purposes of

financing, delivery is deemed to occur

as of the on-board date shown on the

ocean bill of lading.

Destination country—the foreign

country to which the commodity is

exported.

Director—the Director, Pub. L. 480

Operations Division, Foreign

Agricultural Service.

Expediting services—services

provided to the vessel owner at the

discharge port in order to facilitate the

discharge and sailing of the vessel; this

may include assisting with paperwork,

obtaining permits and inspections,

supervision and consultation.

FAS—the Foreign Agricultural

Service, USDA.

FSA—the Farm Service Agency,

USDA.

FSA Office—the office designated in

the purchase authorization to

administer this financing operation on

behalf of CCC.

Finance—To expend CCC funds,

whether or not the participant is

required to repay the funds to CCC. For

example, this part refers to CCC

‘‘financing’’ both the ocean freight

differential, which the participant does

not repay, and the commodity cost,

which the participant does repay.

Form CCC–106—the form entitled

‘‘Advice of Vessel Approval.’’

Form CCC–329—the signed original of

the form entitled ‘‘Supplier’s

Certificate.’’

General Sales Manager and GSM—the

General Sales Manager, FAS, or the

General Sales Manager’s designee.

Importer—the person that contracts

with the supplier for the importation of

the commodity. The importer may be

the participant or any person to which

a participant has issued a

subauthorization.

Importing country—any nation with

which an agreement has been signed

under the Act.

Invitation for bids and IFB—a

publicly advertised request for offers.

Legal entity includes, but is not

limited to, an individual (except that an

individual and his or her spouse and

their minor children are considered as

one legal entity), partnership,

association, company, corporation and

trust.

Letter of credit—an irrevocable

commercial letter of credit issued,

confirmed, or advised by a banking

institution in the United States and

payable in U.S. dollars.

Local currency—the currency of the

importing or destination country.

Notice of arrival—a written notice in

accordance with § 17.8(g) stating that

the vessel has arrived at the first port of

discharge.

Ocean bill of lading—(1) In the case

of cargo carried on a vessel other than

LASH barges: An ‘‘on-board’’ bill of

lading, or a bill of lading with an ‘‘onboard’’ endorsement, which is dated

and signed or initialed on behalf of the

carrier; or

(2) In the case of cargo carried in a

LASH barge: (i) For the purpose of

financing commodity price, an ‘‘onboard’’ bill of lading showing the date

the commodity was loaded on board

barges, which is dated and signed or

initialed on behalf of the carrier, or a

bill of lading or a LASH barge bill of

lading with an ‘‘on-board barge’’

endorsement which is dated and signed

or initialed on behalf of the carrier.

(ii) For the purpose of financing ocean

freight or ocean freight differential, a

bill of lading which is dated and signed

or initialed on behalf of the carrier

indicating that the barge containing the

cargo was placed aboard the vessel

named in the Form CCC–106 not later

than eight running days after the last

LASH barge loading date (contract

layday) specified in the Form CCC–106.

This may be either an ‘‘on board’’ bill

of lading or a bill of lading or a LASH

barge bill of lading with an ‘‘on-board

ocean vessel’’ endorsement.

(3) Documentary requirements for a

copy of an ‘‘ocean bill of lading’’ refer

to a non-negotiable copy thereof.

Ocean freight contract—a charter

party or liner booking note.

Ocean transportation—

interchangeable with the term ‘‘ocean

freight’’.

Ocean transportation brokerage—

services provided by shipping agents

related to their engagement to arrange

ocean transportation and services

provided by ships brokers related to

their engagement to arrange

employment of vessels.

Ocean transportation-related

services—furnishing the following

services: lightening, stevedoring, and

bagging (whether these services are

performed at load or discharge), and

inland transportation, i.e.,

transportation from the discharge port to

the designated inland point of entry in

the destination country, if the discharge

port is not located in the destination

country.

Participant—the collective term used

to denote the importing country or the

private entity with which an agreement

has been negotiated under the Act.

Person—an individual or other legal

entity.

Private entity—the nongovernmental

legal entity with which an agreement

has been signed under the Act.

Purchase authorization—Form FAS–

480, ‘‘Authorization to Purchase

Agricultural Commodities,’’ issued to a

participant under this part.

Purchasing agent—any person

engaged by a participant to procure

agricultural commodities.

Secretary—the Secretary of

Agriculture of the United States, or the

Secretary’s designee.

Selling agent—a representative for the

supplier of the commodity, who is not

employed by or otherwise connected

with the importer or the participant.

Shipping agent—any person engaged

by a participant to arrange ocean

transportation.

Ships broker—any person engaged by

a supplier of ocean transportation to

arrange employment of vessels.

Supplier—any person who sells a

commodity to an importer under the

terms of a purchase authorization, or

who sells ocean transportation to an

importer or supplier of the commodity

under the terms of a purchase

authorization.

USDA—the U.S. Department of

Agriculture.

United States—the 50 States, the

District of Columbia, and Puerto Rico.

§ 17.3 Purchase authorizations.

(a) Issuance. After an agreement is

signed, the GSM will issue a purchase

authorization to the participant for each

commodity included in the agreement.

(b) Contents. Each purchase

authorization includes the following

information:

(1) The commodity to be purchased

and specifications, approximate

quantity and maximum dollar amount

authorized;

(2) Contracting requirements;

(3) The contracting period, during

which suppliers and importers must

enter into contracts; and the delivery

period, during which the commodity

must be delivered;

(4) The terms of delivery to the

importer;

(5) Documentation required for CCC

financing in addition to or in lieu of the

documentation specified in § 17.9;

(6) Provisions relating to payment to

CCC, if applicable;

(7) The address of the FSA office

administering the financing operation

on behalf of CCC;
52934 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

(8) The method of financing provided

under the Agricultural Commodities

Agreement;

(9) Any provisions relating to

financing by CCC in addition to or in

lieu of those specified in this part;

(10) Authorization to procure ocean

transportation, and provisions relating

to the financing of ocean freight or

ocean freight differential, as applicable;

(11) Any other provisions considered

necessary by the General Sales Manager.

(c) Applicability of this part. In

addition to the provisions of a particular

purchase authorization, each purchase

authorization, unless otherwise

provided, is subject to the provisions of

this part to the same extent as if the

provisions were fully set forth in the

purchase authorization.

(d) Modification or revocation. The

General Sales Manager reserves the right

at any time for any reason or cause

whatsoever to supplement, modify or

revoke any purchase authorization,

including the termination of deliveries,

if it is determined to be in the interest

of the U.S. Government. CCC shall

reimburse suppliers who would

otherwise be entitled to be financed by

CCC for costs which were incurred as a

result of such action by the GSM in

connection with firm sales or shipping

contracts, and which were not otherwise

recovered by the supplier after a

reasonable effort to minimize such

costs: Provided, however, That such

reimbursement shall not be made to a

supplier if the GSM determines that the

GSM’s action was taken because the

supplier failed to comply with the

requirements of the regulations in this

part or the applicable purchase

authorization; Provided further, That

reimbursement to suppliers of ocean

transportation shall not exceed the

ocean freight differential when the

purchase authorization provides only

for financing the differential.

(e) Subauthorizations. The participant

may issue subauthorizations to

importers consistent with the terms of

the applicable purchase authorization.

The participant, in subauthorizing, shall

specify to importers all the provisions of

the applicable purchase authorization

which apply to the subauthorization.

(f) Cotton textiles. (1) Except as

provided in paragraph (f)(2) of this

section, financing of textiles under this

part is limited to cotton yarns and

fabrics processed up to and including

the dyed and printed state, and

preshrinking. Any processing of such

yarns and fabrics beyond this stage will

be at the expense of the participant.

(2) Purchase authorizations may

permit cotton textiles processed beyond

the stage described in paragraph (f)(1) of

this section to be purchased, but the

maximum financing by CCC is limited

to the equivalent value of the cotton

yarns and fabrics described in paragraph

(f)(1) of this section, contained in the

textiles, plus eligible ocean

transportation costs.

(3) Financing is available only for

textiles manufactured entirely of U.S.

cotton in the United States.

§ 17.4 Agents of the participant or

importer.

(a) General. (1) A participant or

importer is not required to use a

purchasing agent or shipping agent, or

employ the services of any other agent,

broker, consultant, or other

representative (hereafter ‘‘agent’’) in

connection with arranging the purchase

of agricultural commodities under title

I of the Act and arranging ocean

transportation for such commodities.

However, if an agent is used, the

participant shall submit a written

nomination of the agent to the Deputy

Administrator, Export Credits, FAS,

along with a copy of the proposed

agreement between the participant or

importer and such agent. The written

nomination shall also specify the period

of time to be covered by the nomination.

A person may not act as agent for a

participant or importer unless the

Deputy Administrator, Export Credits,

FAS, has provided a written statement

that the nomination is accepted in

accordance with the provisions of this

section.

(2) See § 17.6(c) regarding

commissions, fees, or other

compensation of any kind to agents of

a participant or importer.

(3) A freight agent employed by the

Agency for International Development

under titles II and III is not eligible to

act as an agent for the participant or

importer during the period of such

employment. A subcontractor of such

freight agent is not eligible to act as an

agent for the participant or importer

during the period of its subcontract.

(b) Affiliate defined. For purposes of

this section, the term affiliate has the

meaning provided in § 17.2 and, in

addition, persons will also be

considered to be affiliates if any of the

following conditions are met:

(1) There are any common officers or

directors.

(2) There is any investment by eligible

commodity suppliers, selling agents, or

persons engaged in furnishing ocean

transportation or ocean transportationrelated services for commodities

provided under any title of the Act,

section 416(b) of the Agricultural Act of

1949, or the Food for Progress Act of

1985, whether or not any part of the

ocean transportation is financed by the

U.S. Government, or by agents of such

persons, or their officers or directors, in

the agent of the participant or importer.

(3) There is any investment by the

agent of the participant or importer, or

its officers or directors, in approved

commodity suppliers; selling agents; or

persons engaged in furnishing ocean

transportation or ocean transportationrelated services for commodities

provided under any title of the Act,

section 416(b) of the Agricultural Act of

1949, or the Food for Progress Act of

1985, whether or not any part of the

ocean transportation is financed by the

U.S. Government, or in agents of such

persons. These conditions include those

cases in which investment has been

concealed by the utilization of any

scheme or device to circumvent the

purposes of this section but does not

include investment in any mutual fund.

(c) Information to be furnished. A

person nominated to act as an agent of

the participant or importer, and any

independent contractor that may be

hired by such person to perform

functions of a shipping agent, shall

furnish to the Deputy Administrator,

Export Credits, FAS, the following

information or documentation as may be

applicable:

(1) The names of all incorporators;

(2) The names and titles of all officers

and directors;

(3) The names of all affiliates,

including the names and titles of all

officers and directors of each affiliate,

and a description of the type of business

in which the affiliate is engaged;

(4) The names and proportionate

share interest of all stockholders;

(5) If beneficial interest in stock is

held by other than the named

shareholders, the names of the holders

of the beneficial interest and the

proportionate share of each;

(6) The amount of the subscribed

capital;

(7) For USDA acceptance of a

nomination covering services provided

during each U.S. fiscal year (October

11–September 30), a written statement

signed by such person:

(i) Certifying that, during the U.S.

fiscal year covered by USDA’s

acceptance of the nomination, the

person has not engaged in, and will not

engage in, supplying commodities

under any title of the Act or the Food

for Progress Act of 1985 or furnishing

ocean transportation or ocean

transportation-related services for

commodities provided under any title of

the Act, section 416(b) of the

Agricultural Act of 1949, or the Food for

Progress Act of 1985, whether any part

of the ocean transportation is financed
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52935

by the U.S. Government; and that the

person has not served and will not serve

as an agent of firms engaged in

providing such commodities, ocean

transportation and ocean transportationrelated services;

(ii) Certifying that, for ocean

transportation brokerage services

provided during the U.S. fiscal year

covered by USDA’s acceptance of the

nomination, the person has not shared

and will not share freight commissions

with the participant, the importer, or

any agent of the participant or the

importer, whether CCC finances any

part of the ocean freight. CCC will

consider as sharing a commission a

situation where the agent forgoes part or

all of a commission and the supplier of

ocean transportation pays a commission

directly to the participant, the importer,

or any other person on behalf of the

participant or the importer; and

(iii) Undertaking that, during the U.S.

fiscal year covered by USDA’s

acceptance of the nomination, affiliates

of such person have not engaged in and

will not engage in the activities or

actions prohibited in this paragraph

(c)(7).

(8) A certification that neither the

person nor any affiliates has arranged to

give or receive any payment, kickback,

or illegal benefit in connection with the

person’s selection as agent of the

participant or importer.

(d) USDA acceptance. (1) USDA will

consider accepting the nomination of a

person to act as an agent of the

participant or importer when the

documents required to be submitted by

this section are received by the Deputy

Administrator, Export Credits, FAS.

(2) USDA’s acceptance of such

nomination shall remain in effect for the

period of time requested by the

participant or such shorter period as the

Deputy Administrator, Export Credits,

FAS, may determine. USDA will

withdraw such acceptance if the agent

of the participant or importer, or any of

the affiliates of such agent, violates the

certifications or undertakings made

pursuant to paragraphs (c) (7) and (8) of

this section.

(3) A person is required to submit the

information and documentation

required by § 17.4(c) to support the

person’s first nomination to act as an

agent of any participant or importer for

each fiscal year. For subsequent

nominations covering the same fiscal

year, the person must provide a written

certification that the information and

documentation provided earlier are still

accurate and complete, or must provide

the details of any changes to previously

submitted information.

(e) Notification. The Deputy

Administrator, Export Credits, FAS,

shall promptly notify persons

nominated as agents of the participant

or importer, of the determination or of

the need for further inquiry, and shall

provide a written response within 30

calendar days of receipt of all the

required documents. If USDA will not

accept the nomination, the notification

shall state the reasons therefor. The

determination of the Deputy

Administrator, Export Credits, FAS, is

effective immediately and continues in

effect pending the result of any appeal

to the General Sales Manager.

(f) Non-acceptance or withdrawal. (1)

If USDA does not accept the nomination

of a person, or if acceptance has been

withdrawn pursuant to the provisions of

this section, the person may, within 30

calendar days, present to the General

Sales Manager, orally or in writing, any

reasons as to why such action should

not stand. Nothing in this paragraph

shall be construed as to prohibit a

person whose nomination has not been

accepted or whose acceptance has been

withdrawn by USDA from being

nominated at a later time.

(2) If, in the procurement of

commodities made available under title

I, Pub. L. 480, a participant or importer

uses an agent whose nomination has not

been accepted in writing by the Deputy

Administrator, Export Credits, FAS,

USDA may withhold sales approval.

(3) If, in the shipping of commodities

made available under title I, Pub. L. 480,

a participant or importer uses an agent

whose nomination has not been

accepted in writing by the Deputy

Administrator, Export Credits, FAS,

USDA may withhold vessel approval or

may deduct from the ocean freight

differential to be paid, the amount of

any commission to the agent in

connection with the shipment.

(g) No competitive advantage. A

shipping agent may not take any action

which would give a competitive

advantage to any supplier of

commodities or ocean transportation.

This includes, but is not limited to,

providing advance notice of IFB’s or

amendments, or selectively enforcing

IFB or contract requirements.

§ 17.5 Contracts between commodity

suppliers and importers.

(a) Commodity suppliers and selling

agents. (1) Commodity suppliers must

be determined to be eligible under the

Pub. L. 480, title I program in order for

their contracts to be eligible for CCC

financing. A prospective commodity

supplier must be engaged in the

business of selling agricultural

commodities for export from the United

States. The commodity supplier must

maintain a bona fide business office in

the United States, and must have a

person, principal or agent on whom

service of judicial process may be had

in the United States.

(2) Persons who wish to participate as

commodity suppliers shall submit the

following information to the Foreign

Agricultural Service, Stop 1033, USDA,

1400 Independence Ave., SW,

Washington, D.C. 20250–1033:

(i) A current financial statement of the

prospective supplier, preferably an

audited statement, as evidence of

financial responsibility. Submission of a

letter of reference from a bank is also

encouraged.

(ii) A statement containing general

background information about the firm,

including the names and titles of the

chief executive officers and a

description of the firm’s experience as

an exporter of U.S. agricultural

commodities. Copies of bills of lading

supporting this statement are also

requested.

(iii) Any other information requested

relating to whether the prospective

supplier is responsible and is able to

perform its obligations under this part

and the purchase authorization.

(3) If, at the time the commodity

supplier reports the sale it is determined

that an agent employed or engaged by a

commodity supplier to obtain a contract

is not a selling agent as defined in

§ 17.2, the sale will not be eligible for

financing.

(b) Eligibility for financing. To be

eligible for financing, commodity

contracts must comply with the

following requirements unless

otherwise specified in the purchase

authorization.

(1) Commodity contracts between

suppliers and importers are considered

to be conditioned on the approval by

USDA of the contract price;

conformance of the sale to the

provisions of the purchase

authorization; responsiveness of the

offer to IFB terms; and compliance by

the supplier and the selling agent, if

any, with paragraph (a) of this section.

(2) Importers and suppliers must enter

into contracts within the contracting

period specified in the purchase

authorization. The contracts must

provide for deliveries to the importer in

accordance with the delivery terms and

during the delivery period specified in

the purchase authorization, or any

amendment or modification thereto.

(3) Contracts for a commodity, under

a purchase authorization which limits

delivery terms to f.o.b. or f.a.s., must be

separate and apart from the contracts for

ocean transportation of the commodity.
52936 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

(4) The supplier’s sales price may not

exceed the prevailing range of export

market prices as applied to the terms of

sale at the time of sale, as determined

by USDA. The ‘‘time of sale’’ is the date

and time specified in the IFB for receipt

of offers; or the date of the contract

amendment if the amendment affects

the sale price, as determined by USDA.

The contract price may not be on a cost

plus a percentage-of-cost basis.

(c) Contracting procedures. (1)

Purchasing—general—(i) Importers

must purchase commodities on the basis

of IFB’s.

(ii) The participant shall maintain a

record of all offers received from

suppliers until the expiration of three

years after final payment under

contracts awarded under the purchase

authorization. The GSM may examine

these records or request specific

information in connection with the

offers.

(2) Invitations for bids. The following

conditions shall apply on all purchases

of commodities on the basis of IFB’s:

(i) The General Sales Manager must

approve the terms of the IFB before it is

issued by the importer.

(ii) The importer shall issue the IFB

in the United States and shall open all

offers in public in the United States at

the time and place specified in the IFB.

(iii) The IFB must permit submission

of offers from all suppliers who meet the

requirements of this subpart.

(iv) The IFB may not preclude offers

for shipment from any United States

port(s) unless the purchase

authorization provides for exportation

only from certain ports.

(v) The IFB may not establish

minimum quantities to be offered or

which will be considered.

(vi) The IFB must stipulate the

responsibility for each party for

payment of any costs not eligible for

financing by CCC.

(vii) The IFB must be in compliance

with this part, the purchase

authorization, and sound commercial

standards.

(3) Contract awards. (i) The importer

shall consider only offers which are

responsive to the IFB and shall make

awards either on the basis of the lowest

commodity price(s) offered or on the

basis of lowest landed cost. However,

when vessels offered under the flag of

the participant, the importing country or

the destination country; or vessels

controlled by the participant, the

importing country or the destination

country are to be used, the participant

must purchase commodities for

shipment on such vessels only on the

basis of the lowest commodity price(s)

offered. This limitation may, however,

be waived by the GSM:

(A) When the lowest commodity

price(s) offered are in locations where

vessels cannot reasonably be made

available without a substantial increase

in freight costs to the participant;

(B) For small quantities offered at

additional loading points (in aggregate

not more than 15 percent of the total

tonnage offered by a vessel); or

(C) Where this limitation would

conflict with the purposes of the

program.

(ii) For purposes of this section,

‘‘lowest commodity price(s)’’ means the

lowest commodity price(s) offered for

loading onto the type of vessel (dry bulk

carrier, tanker, etc.) to be utilized to

carry the commodity purchased.

(iii) For purposes of this section,

‘‘lowest landed cost’’ means the

combination of commodity price and

ocean freight rate resulting in the lowest

total cost to deliver the commodity to

the importing country, considering the

quantity which must be shipped on

privately owned U.S.-flag commercial

vessels, as determined by the Director.

Lowest landed cost may be defined on

either a foreign flag or U.S. flag basis.

Awards may not be made on the lowest

landed cost basis unless IFB’s are issued

for commodity and ocean freight so that

all commodity and ocean freight offers

are reviewed simultaneously.

(iv) Participants are encouraged to

purchase commodities on the basis of

lowest landed cost when U.S. flag

vessels are to be used. If such

commodity purchases are not made on

the basis of lowest landed cost (U.S.

flag), ocean freight differential payments

will nonetheless be calculated on the

rates of U.S. flag vessels which would

represent the lowest landed cost.

(v) Announcement of awards shall be

made in the United States. The importer

shall promptly submit to the Director

copies of all offers received with a copy

of the IFB which was issued. No sale

can be approved for financing until this

information has been received by FAS.

The decision of the GSM shall be final

regarding the responsiveness of offers to

IFB terms in the awarding of contracts.

(d) Contract quantity eligible for

financing. The quantity eligible for

financing in the contract between the

supplier and the importer may not

exceed that quantity approved by the

Pub. L. 480 Operations Division, FAS,

including any approved contract

tolerance.

(e) Contract disputes. Contracts

between suppliers and importers should

stipulate the responsibility of each party

for payment of any costs not eligible for

financing by CCC. Questions as to

payment of ineligible costs should be

resolved between the contracting

parties.

(f) Contract provisions. Each contract

entered into for financing under this

part is deemed to include all terms and

conditions required by the regulations

in this part.

(g) Export Trade Act (Webb-Pomerene

Law). A supplier who is a member of a

Webb-Pomerene association and who

enters into contracts with importers as

a member of such an association shall

so indicate in a statement on, or

attached to, the copy of the supplier’s

detailed invoice referred to in

§ 17.9(c)(2).

§ 17.6 Discounts, fees, commissions and

payments.

For purposes of this section, the term

‘‘payment’’ means a commission, fee or

other compensation of any kind. The

term ‘‘other compensation of any kind’’

includes anything given in return for

any consideration, services, or benefits

received or to be received.

(a) Discounts. If a contract provides

for one or more discounts (including but

not limited to trade or quantity

discounts and discounts for prompt

payment) whether expressed as such or

as ‘‘commissions’’ to the importer, CCC

will only pay the invoice amount after

the discount (supplier’s contracted price

less all discounts).

(b) Selling agents. (1) A supplier may

not make a payment to a selling agent

employed or engaged by the supplier to

obtain a contract. This prohibition

applies to any payment to a person who

has acted as a selling agent to obtain a

contract even though the payment may

be for services performed that are not

themselves services to obtain a contract.

(2) A person is deemed to act ‘‘to

obtain a contract’’ if the person acts on

behalf of a commodity supplier to:

(i) Influence a buyer to award a

contract to the supplier;

(ii) Give the supplier a competitive

advantage in relation to other potential

suppliers; or

(iii) Influence CCC to approve a

contract for financing under this part.

(3) CCC will not consider acts which

are purely ministerial in nature and do

not require the exercise of personal

influence, judgment, or discretion (such

as attending bid openings or presenting

offers at bid openings), or services to

implement a contract after it has been

entered into by the parties (such as

handling documentation problems or

contract disputes), as acts to obtain a

contract.

(c) Other prohibitions. (1) Suppliers of

commodities or ocean transportation

may not:
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52937

(i) Pay a commission to the

participant or importer; to any agency,

including an agency of the government

of the importing country or the

destination country; or to a corporation

owned or controlled by the participant

or the government of the importing

country or the destination country.

(ii) Pay a commission to any affiliate

of the participant, if the participant is a

private entity;

(iii) Make any payment to an agent of

the participant or importer, in the

person’s capacity as such agent, other

than ocean transportation brokerage

commissions.

(iv) Pay an address commission or

payment.

(2) For ocean transportation, in

addition to this paragraph, see also

§ 17.8(j).

(3) When any portion of the ocean

freight is financed by CCC, total ocean

transportation brokerage commissions

earned on U.S. and non-U.S.-flag

bookings by all parties arranging vessel

fixtures shall not exceed 21⁄2 percent of

the total freight costs.

(4) If a payment is made in violation

of this section, CCC may demand dollar

refund of the entire amount financed by

CCC under the contract.

§ 17.7 Notice of sale procedures.

(a) Telephonic notice of sale. The

supplier shall, immediately upon

making a firm sale, telephone a notice

of sale to Pub L. 480 Operations

Division, FAS. A sale is considered firm

when the supplier has been notified by

the importer of an award, even though

the contract is conditioned on approval

by FAS (see § 17.5(b)(1).) If the supplier

fails to furnish a notice of sale within 3

working days after the date of sale, CCC

has the right to refuse to finance the

sale.

(b) Sale approval. (1) Pub. L. 480

Operations Division will notify the

supplier by telephone of approval of the

notice of sale.

(2) The supplier will prepare Form

FAS–359, ‘‘Declaration of Sale,’’ and

submit it to Pub. L. 480 Operations

Division promptly as soon as FAS has

provided the CCC Registration Number

to the supplier. The supplier or the

supplier’s authorized representative

must sign the form.

(3) Each Form FAS–359 shall cover

only a single sale contract. If a sale is

made under two or more purchase

authorizations, the supplier will prepare

separate forms for each purchase

authorization.

(4) If any correction is needed to the

Form FAS–359, the supplier must

immediately notify FAS. If a contract is

amended, the supplier should present

the original Form FAS–359 for payment

along with a copy of the written USDA

approval of the contract amendment.

(c) Sale disapproval. (1) Pub. L. 480

Operations Division, FAS, will notify

the supplier by telephone when a sale

is disapproved for financing. The

related contract between the supplier

and importer shall, for purposes of

financing, be considered null and void.

(2) On receipt of a notice of

disapproval, the supplier shall promptly

notify the importer.

(d) Contract delivery period. Price

approval is limited to exports made

during the delivery period stated in the

notice of sale or any contract

amendment approved by the Pub. L. 480

Operations Division, FAS. If the

supplier cannot complete delivery by

the terminal delivery date of the

contract delivery period, the supplier

and the participant or importer shall

submit a notice of contract amendment

as provided in paragraph (e) of this

section. If the supplier fails to comply,

§ 17.10(d) shall apply.

(e) Contract amendments. (1) The

supplier and the participant or importer

shall each submit a written notice of

each contract amendment to the

Director immediately after the

amendment to the contract is made.

This includes not only any change in

the contract delivery period or any other

terms and conditions of the contract as

provided in the information given in the

original notice of sale or any

amendment thereto, but also any change

in any other terms and conditions of the

contract.

(2) The notice of contract amendment

must contain the following:

(i) A request that USDA approve an

amendment to the specifically identified

sale contract between (the participant or

importer) and (the commodity supplier).

(ii) A statement of what the

amendment consists of (as, extension of

delivery period through (date)) and a

detailed explanation of the reasons for

the amendment.

(iii) A statement that the contract

amendment has been agreed to by both

buyer and seller.

(3) Pub. Law 480 Operations Division,

FAS, will notify the supplier as to

whether the amendment is approved or

disapproved.

(4) The supplier shall furnish a copy

of the USDA approval of the

amendment with other documentation

submitted to obtain payment.

(5) If the supplier fails to furnish

notice of a contract amendment to Pub.

L. 480 Operations Division, FAS, within

3 working days after the date of such

amendment, CCC has the right to refuse

to finance the sale or any portion of the

sale.

(6) Any amendment must be

consistent with the provisions of the

purchase authorization and this part

and must otherwise be acceptable to

Pub. L. 480 Operations Division, FAS.

§ 17.8 Ocean transportation.

(a) General. (1) This section applies to

the financing of ocean freight or ocean

freight differential. Ocean freight will be

financed by CCC only to the extent

specifically provided for in the purchase

authorization. The purchase

authorization may provide requirements

in addition to or in lieu of those

specified in this section.

(2) The supplier of ocean

transportation must be engaged in the

business of furnishing ocean

transportation from the United States

and must have a person, principal or

agent, on whom service of judicial

process may be had in the United States.

(3) The quantity of the commodity

which must be shipped on privately

owned U.S.-flag commercial vessels will

be determined by the Director.

(4) The supplier of ocean

transportation shall release copies of the

ocean bills of lading to the supplier of

the commodity promptly upon

completion of loading of the vessel.

(5) When CCC finances any part of the

ocean freight or the ocean freight

differential, the participant must open

an operable irrevocable letter of credit

for the portion of the ocean freight not

financed by CCC. All banking

institution charges, such as

commissions, expenses, etc., are for the

account of the participant. The amount

of the letter of credit shall be computed

using the information provided in the

Form CCC–106. The letter of credit shall

provide for sight payment or acceptance

of a draft, payable in U.S. dollars, on the

basis of the quantities specified in the

applicable ocean freight contract. If the

supplier of ocean transportation accepts

the commodity before receipt of an

acceptable letter of credit from a bank,

the supplier takes such action at its own

risk. This action in itself does not affect

eligibility for CCC financing.

(b) Contracting procedures—(1)

Invitations for Bids (IFB’s)—(i) Public

freight ‘‘Invitations for Bids’’ are

required in the solicitation of freight

offers from all U.S. and non-U.S. flag

vessels when CCC is financing any

portion of the ocean freight.

(ii) For non-U.S. flag vessels when

CCC is not financing any portion of the

ocean freight, public freight IFB’s are

also required unless otherwise

authorized by the Director, or unless the

participant requires the use of vessels
52938 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

under its flag, the flag of the destination

country, or other non-U.S. flag vessels

under its control. Vessels considered to

be under the control of the participant

or the destination country include

vessels under time charters, bare boat

charters, consecutive voyage charters, or

other contractual arrangements for the

carriage of commodities which provide

guaranteed access to vessels.

(iii) Prior to release to the trade, all

freight IFB’s must be submitted to the

Director for approval. Freight IFB’s must

be issued by means of Bridge News,

New York, plus at least one other means

of communication.

(iv) All freight IFB’s must:

(A) Specify a closing time for the

receipt of offers and state that late offers

will not be considered;

(B) Provide that offers are required to

have a canceling date no later than the

last contract layday specified in the IFB;

(C) Provide the same deadline for

receipt of offers from both U.S. flag

vessels and non-U.S. flag vessels;

(D) Stipulate the responsibility for

each party for payment of any costs not

eligible for financing by CCC (in the IFB

or the pro forma charter party).

(2) Competitive bidding. When CCC is

financing any portion of the freight, all

offers shall be opened in public in the

United States at the time and place

specified in the IFB. Offers shall be

opened prior to receipt of offers for the

sale of commodities as the Director

determines appropriate. Only offers

which are responsive to the IFB may be

considered, and no negotiation shall be

permitted.

(3) Records of offers. Copies of all

offers received must be promptly

furnished to the Director, who may

require the participant, or its shipping

agent, to submit a written certification

to the GSM that all offers received (with

the times of receipt designated thereon)

were transmitted to the Department. For

purposes of this paragraph ‘‘time of

receipt’’ shall be the time a hand-carried

offer or a mailed offer was received at

the designated location for presentation

or, if transmitted electronically, the time

the offer was received, as supported by

evidence satisfactory to the Director.

(4) Re-tenders. The Director may

permit or require a participant to refuse

any and all bids, and in such case a

participant may conduct a re-tender

with the approval of the Director. The

Director shall not approve or require

freight re-tenders unless they will

increase the likelihood of meeting U.S.

flag cargo preference requirements, will

permit the desired quantity to be

shipped, will likely result in reduced

CCC expenditures, or are otherwise

determined to be in the best interest of

the program.

(c) Request for vessel approval. The

pertinent terms of all proposed charters

and all proposed liner bookings,

regardless of whether any portion of

ocean freight is financed by CCC, must

be submitted to the Director for review

and approval before fixture of the

vessel. Tentative advance vessel

approvals may be obtained by telephone

provided Form CCC–105, ‘‘Ocean

Shipment Data—Pub. L. 480 (Request

for Vessel Approval)’’, is furnished

promptly confirming the information

supplied by telephone. The Form CCC–

105 shall be submitted in duplicate to

the Director.

(d) Advice of vessel approval. (1)

USDA will give written approval of

charters and liner bookings on Form

CCC–106, ‘‘Advice of Vessel Approval.’’

The Form CCC–106 will state whether

CCC will finance any part of the ocean

freight. For f.a.s. or f.o.b. shipments,

CCC will issue a signed original of Form

CCC–106 to the ocean carrier when CCC

finances any part of the ocean freight.

For c.& f. or c.i.f. shipments, CCC will

issue Form CCC–106 to the supplier of

commodity.

(2) If CCC agrees to finance any

portion of the ocean freight, the

participant or its agent shall forward a

copy of the ocean freight contract

immediately after execution to the

Director for review and approval prior

to issuance of Form CCC–106.

(3) CCC may also require the supplier

of ocean transportation to submit copies

of lightening, stevedoring, or bagging

contracts for any voyage for which CCC

finances ocean freight or ocean freight

differential.

(e) Special charter party provisions

required when any part of ocean freight

is financed by CCC. This paragraph

applies when CCC finances any part of

the ocean freight for commodities

booked on charter terms. In the event of

any conflict between the provisions of

the regulations in this part and the

charter party or ocean bills of lading

issued pursuant thereto, the provisions

of the regulations in this part shall

prevail. The charter party shall contain

or, for the purpose of financing pursuant

to the regulations in this part, be

deemed to contain the following

provisions:

(1) That if there is any failure on the

part of the supplier of ocean

transportation to perform the charter

party after the vessel has tendered at the

loading port, the charterer shall be

entitled to incur all expenses which in

the judgment of the General Sales

Manager are required to enable the

vessel to carry out her obligations under

the charter party including, but not

limited to, expenses for lifting any liens

asserted against the vessel.

(2) That, notwithstanding any prior

assignments of freight made by the

owner or operator, the expenses

authorized in paragraph (e)(1) of this

section may be deducted from the

freight earned under the charter party.

(3) That ocean freight is earned and

that 100% thereof is payable by the

charterers when the vessel and cargo

arrive at the first port of discharge,

subject to paragraph (e)(4) of this

section, and to the further condition that

if a force majeure as described in

paragraph (l)(1) of this section results in

the loss of part of the vessel’s cargo,

100% of the ocean freight is payable on

the part so lost. This provision does not

relieve the carrier of the obligation to

carry to other points of discharge if so

required by the charter party.

(4) That if a force majeure as

described in paragraph (l)(1) of this

section prevents the vessel’s arrival at

the first port of discharge, the freight

shall be payable by the charterer at the

time the General Sales Manager

determines that such force majeure was

the cause of nonarrival.

(5) That laydays are non-reversible.

(6) That in a dispute involving any

rights and obligations of CCC, including

rights and obligations as successor or

assignee, which cannot be settled by

agreement, the dispute shall not be

subject to arbitration.

(f) Special charter party information

required when any part of ocean freight

is financed by CCC. When CCC finances

any part of the ocean freight for

commodities booked on charter terms,

the charter party shall contain the

following information:

(1) The name of each party

participating in the ocean freight

brokerage commission, if any, and the

percentage thereof payable to each

party;

(2) The name of the vessel and the

name of the substitute vessel, if any.

(g) Notice of arrival. Each Form CCC–

106 will indicate whether a notice of

arrival is required. A notice of arrival,

when required, must be furnished

promptly by the participant or its

designated agent or other source

acceptable to CCC (excluding the carrier

or its agent) and must include the name

of the vessel, the purchase authorization

number, the first port of discharge, and

the date of arrival. The notice of arrival

of the vessel also constitutes prima facie

evidence of arrival of the cargo.

(h) Foreign flag vessels. The cost of

ocean transportation will be financed by

CCC on non-U.S. flag vessels only when,

and to the extent, specifically provided
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52939

in the applicable purchase

authorization.

(i) U.S.-flag vessels. When a

commodity is required to be shipped on

a privately owned U.S.-flag commercial

vessel, Form CCC–106 will set forth:

(1) The rate of the ocean freight

differential, if any, which the Director

determines to exist between the

prevailing foreign-flag vessel rate and

the U.S.-flag vessel rate; and

(2) The approximate tonnage for

which CCC will authorize

reimbursement of ocean freight or ocean

freight differential, as appropriate.

(j) Items not eligible for financing by

CCC. The following costs will not be

financed by CCC, either separately or as

part of the commodity contract price:

(1) Loading, trimming, and other

related shipping expenses unless

included in the ocean freight rate;

(2) Discharge costs unless included in

the ocean freight rate;

(3) The cost of ‘‘dead freight’’;

(4) Cargo dues and taxes assessed by

the importing or recipient country;

(5) Surcharges assessed by steamship

conferences or carriers, unless

specifically authorized by the Director;

(6) General average contributions;

(7) Stevedoring overtime and vessel

crew overtime;

(8) Ship’s disbursements;

(9) Any payments prohibited in § 17.6

(b) and (c); and

(10) Detention.

(k) General financing provisions.

When any part of ocean freight will be

financed either separately or as part of

the commodity contract price, the

following shall apply:

(1) Ocean freight contracts must show

the ocean freight rate from one loading

port to one discharge port, and may

provide for an increase in rate for an

additional port of loading or discharge,

or other option. CCC, however, will

finance initially the lowest such rate or

OFD, as appropriate. Increased amounts

due because of the exercise of such

option will be financed only after

receipt of an ocean bill of lading or

other evidence showing that the option

was exercised.

(2) In the case of transshipment to a

foreign flag vessel, CCC will finance the

ocean freight or OFD, as appropriate,

only to the point of transshipment, at a

rate determined by the GSM, and CCC

will not finance any part of the ocean

freight beyond the point of

transshipment unless specifically

approved by the GSM. If the commodity

was transported from a U.S. port and

was transshipped at another U.S. port,

CCC will not finance, without prior

approval of the GSM, any part of the

ocean freight incurred before

transshipment.

(3) The ocean freight rate eligible for

CCC financing and the rate used for the

U.S.-flag vessel in calculating ocean

freight differential shall not exceed the

following rates for the category of the

vessel concerned:

(i) For commodities covered by

published tariff rates—the published

conference contract rate;

(ii) For other commodities—the

market rate prevailing at the time of

request for approval as determined by

the Director, but in any event not in

excess of rates charged other shippers

(irrespective of booking dates) for like

commodities on the voyage concerned.

(4) Payment will be made for ocean

freight or OFD, as appropriate, from

loading points to discharge points at

rates approved by the Director on Form

CCC–106 in conformity with paragraph

(k)(3) of this section.

(5) Freight for a vessel designated on

Form CCC–106 as a U.S. flag vessel shall

not be eligible for financing unless such

vessel complies with the provisions of

Pub. L. 87–266.

(6) Ocean freight contracts must

specify that the participant shall be

liable for detention of the vessel for

loading delays attributable solely to the

decision of the supplier of ocean

transportation not to commence loading

because of the failure of the participant

to establish an ocean freight letter of

credit in accordance with paragraph

(a)(5) of this section. However, ocean

freight contracts may not contain a

specified detention rate. The ocean

transportation supplier shall be entitled

to reimbursement for detention costs for

all time so lost, for each calendar day or

any part of the calendar day, including

Saturdays, Sundays and holidays. The

period of such delay shall not

commence earlier than upon

presentation of the vessel at the

designated loading port within the

laydays specified in the ocean freight

contract, and upon notification of the

vessel’s readiness to load in accordance

with the terms of the applicable ocean

freight contract. The period of such

delay shall end at the time that operable

irrevocable letters of credit have been

established for the applicable ocean

freight or the time the vessel begins

loading, whichever is earlier. Time

calculated as detention shall not count

as laytime. Reimbursement for such

detention shall be payable no later than

upon the vessel’s arrival at the first port

of discharge.

(l) Force majeure. (1) The GSM will

waive the requirement for the notice of

arrival required by Form CCC–106 by a

written notice to the supplier of ocean

transportation on the receipt of evidence

satisfactory to the General Sales

Manager that the vessel is lost or unable

to proceed to destination after

completion of loading as a result of one

or more of the following causes: Damage

caused by perils of the sea or other

waters; collisions; wrecks; stranding

without the fault of the carrier; jettison;

fire from any cause; Act of God; public

enemies or pirates; arrest or restraint of

princes, rulers or peoples without the

fault of the supplier of ocean

transportation; wars; public disorders;

captures; or detention by public

authority in the interest of public safety.

The supplier may substitute such

waiver for the notice of arrival.

(2) The determination of a force

majeure by the GSM shall not relieve

the participant from its obligation under

the Agricultural Commodities

Agreement to pay CCC, when due, the

dollar amount of ocean freight, plus

interest (exclusive of ocean freight

differential), financed by CCC.

(m) Demurrage/despatch. CCC will

not finance demurrage and CCC will not

share in despatch earnings. Owners and

commodity suppliers will settle laytime

accounts at load port(s) and owners and

charterers will settle laytime accounts at

discharge port(s). Under no

circumstances shall CCC be responsible

for resolving disputes involving

calculation of laytime or the payment of

demurrage or despatch.

(n) Ocean freight included in the

commodity contract price. For cost and

freight or c.i.f. contracts the ocean

freight, or the ocean freight differential,

as appropriate, will be financed only to

the extent specifically provided in the

applicable purchase authorization.

(o) Separate freight contracts.

Contracts for ocean transportation,

under a purchase authorization which

limits delivery terms to f.o.b. or f.a.s.,

must be separate and apart from the

contracts for the commodity.

§ 17.9 CCC payment to suppliers.

(a) General. (1) The supplier shall

request payment from CCC for the

amount of the commodity price or the

ocean freight or ocean freight

differential to be financed by CCC.

(2) The supplier shall support such a

request for payment by presenting to

CCC the documents required by this

section, the purchase authorization, and

the IFB, unless such documents were

previously submitted to CCC. Such

documents, however, need not be

submitted when and to the extent that

the Controller determines that the

intended purpose of a document is

served by documents otherwise

available to or under the control of CCC

or by alternate documents specified in

such determination.
52940 Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations

(3) CCC will examine each document

to ascertain that it is in accordance with

this part, the purchase authorization,

and the IFB. CCC will audit all the

required documents to ensure accuracy,

completeness, and consistency. When

CCC has determined that all required

documents have been submitted and

that the documents are acceptable for

payment, CCC will pay the supplier for

the commodity price or the ocean

freight or ocean freight differential to be

financed by CCC which is supported by

the documents.

(4) CCC is required to issue all

payments by electronic transfer. Each

supplier submitting documents to CCC

for payment must provide the name of

the company, the bank ABA number to

which payment is to be made, the

account number for the company at the

bank, the company’s Taxpayer

Identification Number, and the type of

account being used.

(b) General documentation

requirements. The supplier must put the

appropriate purchase authorization

number on all required documents

which are prepared under the supplier’s

control, and should arrange for the

appropriate purchase authorization

number to be put on all other required

documents at the time of their

preparation.

(c) Documents required for payment—

commodity. The general provisions

relating to such documents are as

follows. Additional requirements for

payment to commodity suppliers for

c.& f. or c.i.f. sales are contained in

paragraph (c)(8) of this section.

(1) Supplier’s certificate. A signed

original of Form CCC–329 ‘‘Supplier’s

Certificate’’ from the commodity

supplier covering the net invoice price

for the commodity.

(2) Supplier’s detailed invoice. Two

copies of the supplier’s detailed invoice

showing quantity, description,

contracted price, net total invoice price

expressed in dollars, the amount for

which financing is requested from CCC,

the amount not eligible for financing by

CCC, and basis of delivery of the

commodity (e.g., f.o.b. vessel). In

arriving at the net invoice price there

shall be deducted:

(i) All discounts from the supplier’s

contracted price through payments,

credits, or other allowances made or to

be made to the importer, the importer’s

agent or consignee;

(ii) All purchasing agents’

commissions;

(iii) All other amounts not eligible for

financing.

(3) Additional payment. A request for

an additional payment submitted for a

transaction for which all or part of the

required documents have been

previously submitted to CCC shall be

supported by a Form CCC–329

‘‘Supplier’s Certificate’’ and the

supplier’s detailed invoice, covering the

additional amount requested. The

supplier’s invoice must show the date,

serial number and the amount of the

original invoice and the basis for the

additional amount claimed.

(4) Weight certificate. The weight

certificate shall be issued by or on

authority of a State or other

governmental weighing department,

Chamber of Commerce, Board of Trade,

Grain Exchange, or other independent

organization or firm providing public

weighing services. Such organization or

firm must have:

(i) Qualified, impartial, paid

employees who are stationed at the port

facility or, if authorized under the

applicable purchase authorization, other

facility where weights customarily are

determined, one of whom performed the

weighing covered by the certificate; or

(ii) Qualified, independent, impartial,

supervised, weighmasters stationed at

the port facility or, if authorized under

the applicable purchase authorization,

other facility where weights are

customarily determined, one of whom

supervised the employee of such a

facility in the performance of the

weighing covered by the certificate.

(5) Federal appeal inspection. The

official certificate representing the

results of an appeal inspection, when

included in the documents presented

for payment, shall supersede any other

inspection certificate required by this

part, the applicable purchase

authorization, the IFB or the contract.

(6) Form CCC–359. (i) Form FAS–359,

‘‘Declaration of Sale,’’ signed for the

GSM, is the written document by which

USDA notified the supplier that the sale

was approved for financing. The

supplier shall submit Form FAS–359 to

CCC with the documents covering the

first transaction under the contract. The

unit price shown on the supplier’s

invoice must not exceed the approved

unit price shown on the Form FAS–359.

(ii) For subsequent transactions under

the same contract, the supplier shall

certify on the CCC copy of the detailed

invoice as follows:

I hereby certify that the applicable Form

FAS–359 was submitted to CCC with

documents covering Invoice No.

llllll dated llllll for

$llllll.

(7) Bill of lading. Four copies of the

ocean bill of lading.

(8) C.&.f. or c.i.f. sales. In addition to

the requirements of paragraph (c)(1)

through (7) of this section, the following

requirements apply for c.& f. or c.i.f.

sales:

(i) Signed original of Form CCC–106.

(ii) The supplier’s detailed invoice

shall show a computation of the dollar

amount of ocean freight differential,

whenever the Form CCC–106 provides

for an ocean freight differential on a cost

and freight or c.i.f. sale and authorizes

financing of any portion of ocean freight

by CCC. In arriving at the net invoice

price the supplier shall deduct the

ocean freight, or portion thereof which

is not being financed by CCC.

(iii) One nonnegotiable copy of the

insurance certificate or policy where the

cost of insurance is included in the

price of the commodity to be financed

by CCC.

(iv) A request for an additional

payment shall also include a statement

signed by the ship’s master or owner (or

agent of either of them) showing

exercise of the higher-rated option, if

the payment is stated to be due because

of the exercise of a higher-rated option

provided in an ocean freight contract.

(d) Documents required for

payment—ocean freight financed

separately from commodity price.

(1) Supplier’s certificate. A signed

original of Form CCC–329, ‘‘Supplier’s

Certificate’’, executed by the carrier or

its agent, covering the dollar cost of

ocean freight or ocean freight

differential.

(2) Ocean bill of lading. One copy of

the ocean bill of lading and, if required

by the related Form CCC–106, a notice

of arrival at the first port of discharge of

the vessel named in the Form CCC–106.

In lieu of a notice of arrival the carrier

may present a waiver of the notice of

arrival signed by the GSM or Controller.

(3) Invoice. One copy of the carrier’s

invoice which shows the total freight

costs, the amount not eligible for

financing by CCC, and the amount for

which payment is requested from CCC.

If the invoice relates to a U.S.-flag

vessel, such invoice shall contain the

following typed or stamped

certification, executed by the supplier:

The undersigned hereby certifies that the

vessel named herein and for which ocean

freight is claimed, qualifies as a privately

owned U.S.-flag commercial vessel within

the requirements of Pub. L. 87–266 and is an

eligible U.S.-flag vessel for the purposes of

Pub. L. 664, 83rd Congress.

(4) Form CCC–106. Signed original of

Form CCC–106.

(5) Ocean freight contract. One copy

of the ocean freight contract.

(6) Higher rated option. A request for

payment of any amounts claimed

because of the exercise of a higher rated

option following payment of a lower

rated option pursuant to § 17.8(k)(1)
Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / Rules and Regulations 52941

shall be supported by the following

documents:

(i) One copy of the carrier’s invoice as

described in paragraph (d)(3) of this

section except for the certification

required therein.

(ii) The Form CCC–329, ‘‘Supplier’s

Certificate’’, for the balance claimed.

(iii) A statement signed by the ship’s

master, owner, or owner’s agent, and

signed laytime statements or other

written concurrence of charterer or the

charterer’s agent showing the exercise of

the higher rated option.

(e) Payment of freight by CCC prior to

the vessel’s arrival at the discharge port.

(1) Upon request by the supplier, CCC

may pay the ocean freight or ocean

freight differential to be financed by

CCC before the vessel arrives at the first

port of discharge if the supplier

furnishes CCC financial coverage in the

form of an acceptable letter of credit

from a U.S. bank.

(2) The amount of security required

by CCC under paragraph (e)(1) of this

section may be computed by

multiplying the ocean freight rate or

ocean freight differential rate financed

by CCC as shown on the related Form

CCC–106 times either:

(i) The tonnage shown on the related

bill of lading, if the bill of lading is

furnished to CCC; or

(ii) The tonnage stated in the ocean

freight contract (without tolerance).

(3) On receipt of an acceptable letter

of credit, the Controller will issue a

waiver of the notice of arrival which is

required under paragraph (d)(2) of this

section.

(f) Advice of amount financed. CCC

will forward advice of payment to the

participant.

§ 17.10 Refunds and insurance.

(a) Participant—failure to comply.

The participant shall pay in U.S. dollars

promptly to CCC on demand by the

General Sales Manager the entire

amount financed by CCC (or such lesser

amount as the GSM may demand)

whenever the GSM determines that the

participant has failed to comply with

any agreement or commitment made by

the participant in connection with the

transaction financed or with the

applicable Agricultural Commodities

Agreement between the U.S. and the

participant.

(b) Adjustment refunds. All claims by

importers for adjustment refunds arising

out of terms of the contract or out of the

normal customs of the trade, including

arbitration and appeal awards,

allowances, and claims for overpayment

of ocean transportation, if such refunds

relate to amounts financed by CCC, shall

be settled by payment in U.S. dollars

and such payment shall be remitted by

the supplier to CCC. The remittance

shall be identified with the date and

amount of the original payment and the

applicable purchase authorization

number.

(c) Insurance on c.i.f. sales. The

provisions of this paragraph apply only

to transactions under purchase

authorizations that specifically

authorize c.i.f. sales in which the cost of

insurance is included in the net c.i.f.

invoice price of the commodity

financed. When the supplier furnishes

insurance in favor of or for the account

of the importer, the policies or

certificates of insurance shall include a

loss payable clause which provides that

all claims shall be paid in U.S. dollars

to the Controller. Such payments shall

be accompanied by advice of the

purchase authorization number, the

names and addresses of the supplier and

importer, the nature of the claim, the

quantity of the commodity involved in

the claim, the date of shipment, the bill

of lading number, and the name of the

vessel. CCC will credit the account of

the participant or will refund local

currency in accordance with paragraph

(e) of this section.

(d) Refund of ineligible amounts. If a

sale has been financed and CCC

determines that the sales price exceeds

the price permissible under § 17.5(b)(4),

or that the sale is otherwise ineligible

for financing, in whole or in part, the

supplier shall refund in dollars such

excess price or ineligible amount to CCC

promptly on demand. If not promptly

refunded, such amount may be set off by

CCC against monies it owes to the

supplier. The making of any such

refund to CCC, or any such setoff by

CCC shall not prejudice the right of the

supplier to challenge such

determination in a court action brought

against CCC for recovery of the amount

refunded or set off.

(e) Refund of local currency or

reduction of amount due. Immediately

after receipt by CCC of U.S. dollar

payment from suppliers, or from or for

the account of the participant under this

section, CCC will provide for payment

to the participant of the local currency

equivalent of dollars received, if such

local currency has been deposited for

the particular transaction, or will credit

the participant’s account as follows:

(1) For payments under this section,

except paragraph (a), the local currency

refunded will be at the exchange rate

agreed to by the Government of the

United States and the participant in

effect at the time the local currency is

paid to or for the account of the

importer, except that if there has been

a change in the exchange system or

structure of the importing country or the

destination country, such payment shall

be made at the agreed exchange rate

which was in effect on the date of dollar

disbursement for the transaction

financed, and except further that local

currency shall not be paid when the

dollars are to be reauthorized for

replacement of the commodity.

(2) For payment under paragraph (a)

of this section, the local currency

refunded will be at the agreed exchange

rate in effect on the date of the dollar

disbursement for the transaction

financed: Provided, that local currency

will not be refunded to the extent that

deposits of such currency have been

made available to the participant on a

grant basis.

(3) For refunds received by CCC under

long-term credit agreements the

participant’s account shall be credited

with the dollar amount refunded or

otherwise recovered, and the participant

notified accordingly.

§ 17.11 Recordkeeping and access to

records.

Suppliers and agents of the

participant or importer shall keep

accurate books, records and accounts

with respect to all contracts entered into

hereunder, including those pertaining to

ocean transportation-related services

and records of all payments by suppliers

to representatives of the importer or

participant, if CCC finances any part of

the ocean freight. Suppliers and agents

shall permit authorized representatives

of the U.S. Government to have access

to their premises during regular hours to

inspect, examine, audit and make copies

of such books, records and accounts.

Suppliers and agents shall retain such

records until the expiration of three

years after final payment under such

contracts.

Signed at Washington, D.C. on July 14,

1997.

Christopher E. Goldthwait,

General Sales Manager, Foreign Agricultural

Service and Vice-President, Commodity

Credit Corporation.

[FR Doc. 97–26578 Filed 10–9–97; 8:45 am]

BILLING CODE 3410–10–P