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[Federal Register Volume 62, Number 29 (Wednesday, February 12, 1997)]
[Proposed Rules]
[Pages 6497-6499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3370]

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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 / 
Proposed Rules

[[Page 6497]]

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1496

RIN 0560-AF09

Procurement of Processed Agricultural Commodities for Donation 
Under Title II, Pub. L. 480

AGENCY: Commodity Credit Corporation, USDA

ACTION: Proposed Rule.

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SUMMARY: This proposed regulation would revise Commodity Credit 
Corporation's (``CCC'') procedures for purchasing processed 
agricultural commodities for donation overseas under Title II of the 
Agricultural Trade Development and Assistance Act of 1954, as amended, 
(``Pub. L. 480''). This proposal would implement recent statutory 
changes and adopt a simpler and more efficient procurement process.

DATES: Written comments concerning this proposed rule must be submitted 
by April 14, 1997.

ADDRESSES: Comments must be sent to USDA/FSA, Procurement and Donations 
Division, Export Operations Branch, Rm. 5755-S, Mail Stop 0551, P.O. 
Box 2415, Washington DC 20013-2415.

FOR FURTHER INFORMATION CONTACT: Jeff Jackson, (202) 720-3995.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant for the 
purposes of Executive Order 12866 and therefore has not been reviewed 
by the Office of Management and Budget (OMB).

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule since CCC is not required by 5 U.S.C. 553 
or any other provision of law to publish a notice of rulemaking with 
respect to the subject matter of this rule.

Paperwork Reduction Act

    The amendments to 7 CFR part 1496 set forth in this proposed rule 
do not contain additional information collections that require 
clearance by OMB under the provisions of 44 U.S.C. 35.

Executive Order 12372

    This rule 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 46 FR 29115 (June 24, 1983).

Executive Order 12988

    This rule has been reviewed under the Executive Order 12988, Civil 
Justice Reform. The rule would have pre-emptive 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 rule would not have retroactive effect. Administrative proceedings 
are not required before parties may seek judicial review.

Background

General

    Pursuant to Title II, Pub. L. 480, the United States donates 
agricultural commodities overseas to meet famine or other relief 
requirements, combat malnutrition, and promote economic development. 
This program is administered by the Agency for International 
Development (``A.I.D.''). A.I.D. donates commodities to foreign 
governments, intergovernmental organizations, or private relief 
agencies, commonly referred to as ``cooperating sponsors'' for the 
above purposes through agreements between A.I.D. and a cooperating 
sponsor.
    CCC has the responsibility to acquire and make available the 
agricultural commodities needed to carry out agreements under Title II, 
Pub L. 480. CCC will either provide these commodities from its 
inventory or by purchases in the market. In addition to bearing the 
cost of the donated commodities, CCC is authorized to pay other related 
costs including packaging, processing, surveys, fumigation, 
transportation to ports of export, and ocean transportation costs. CCC 
does not contract for the ocean transportation services to ship the 
commodities. Cooperating sponsors or A.I.D. are responsible for 
contracting for ocean transportation of the commodities. Generally, 
A.I.D. will pay for the ocean freight charges incurred by it or a 
cooperating sponsor from funds advanced to A.I.D. from CCC.

Commodity Procurement

    CCC will procure packaged commodities requested for Title II, Pub. 
L. 480 through a public solicitation for bids requesting offers to sell 
on an f.a.s. vessel or intermodal basis. CCC evaluates offers to sell 
commodities submitted pursuant to an invitation for bids on the general 
principle of ``lowest landed cost.'' This simply means that, in 
deciding which commodity offer to accept, CCC will consider both the 
price it would have to pay to acquire the commodity and the anticipated 
freight costs to ship the commodity to foreign destination. Regulations 
governing the bid evaluation process for the procurement of processed 
agricultural commodities for Title II, Pub. L. 480 appear at 7 CFR part 
1496. In making a lowest landed cost analysis, CCC relies upon 
published tariff rates on file with the Federal Maritime Commission and 
current rate information furnished to the Kansas City Commodity Office 
by the ocean freight carriers. The most economical combination of 
commodity price and transportation rate will determine the commodity 
offer CCC accepts.
    The ocean carriage of Title II, Pub. L. 480 commodities is subject 
to sections 901(b) and 901b of the Merchant Marine Act, 1936, 46 U.S.C. 
App. sections 1241(b) and 1241f, commonly referred to as the ``cargo 
preference laws.'' These provisions generally require that agencies 
involved in certain export programs, including Title II, Pub. L. 480, 
must assure that at least 75 percent of such ocean shipments are 
carried on U.S.-flag vessels to the extent they are available at fair 
and reasonable rates. CCC will decide if the commodity purchased is to 
be shipped on a U.S.-flag vessel after reviewing the various lowest 
landed cost options indicating the most economical means to achieve 
cargo preference requirements. This involves the use of only U.S.-flag 
vessel rates in the lowest landed cost analyses for that portion of the 
cargo to be shipped on U.S.-flag vessels.

[[Page 6498]]

    As indicated above, CCC procures packaged commodities on a free 
along side (f.a.s.) vessel, or intermodal basis. These delivery terms 
do not include costs of ocean transportation. Since CCC does not 
contract for ocean transportation, CCC will notify the cooperating 
sponsor or A.I.D of the commodity offer accepted based upon its lowest 
landed cost analysis. The cooperating sponsor or A.I.D then issues its 
own invitation for bids for the procurement of transportation for 
commodities to which interested ocean carriers must respond. The 
cooperating sponsor or A.I.D must contract with a vessel to carry the 
commodity purchased at the rate used by CCC in making its lowest landed 
cost determination, or a lower rate. If CCC has determined that a 
quantity of cargo must be shipped on a U.S.-flag vessel to meet cargo 
preference requirements, the cooperating sponsor or A.I.D must contract 
with a U.S.-flag vessel carrier.

Maritime Security Act of 1996 (MSA)

    Section 17 of the Maritime Security Act of 1996 (``MSA'') amended 
section 901b(c) of the Merchant Marine Act, 1936 (46 App. 1241f(c)) to 
mandate that CCC follow certain procedures in its purchasing process 
for packaged commodities. The new procedures are intended to correct a 
perceived unfairness to Great Lakes ports stemming from cargo 
preference requirements. Currently no U.S.-flag or foreign-flag 
carriers offer service at Great Lakes ports for this type of cargo. It 
is argued that CCC's purchase of commodities on the basis of lowest 
landed cost utilizing U.S.-flag vessel rates for the purpose of meeting 
cargo preference requirements in the most economical manner has the 
effect of drawing cargo away from Great Lakes ports because commodity 
offers for delivery to Great Lakes ports would not be considered at 
that point in the procurement process. In an effort to place Great 
Lakes ports on an equal footing with other coastal ranges, yet 
maintaining cargo preference requirements, section 17 of the MSA 
mandates a change in our purchasing process. Generally, CCC will now be 
required to initially evaluate all commodity offers received in 
response to a particular invitation on a lowest landed cost basis 
without regard to the flag of the vessels offering service. If that 
evaluation demonstrates that commodities offered for delivery at a 
particular Great Lakes port represents the lowest landed cost, CCC must 
purchase such commodities for delivery at that Great Lakes port. This 
purchasing requirement is applicable to up to 25 percent of the total 
annual tonnage of bagged, processed or fortified commodities furnished 
under Title II, Pub. L. 480.
    CCC is still required to assure that, annually, at least 75 percent 
of the Title II cargo is shipped on U.S.-flag vessels. In implementing 
this requirement, CCC is free to purchase commodities on a lowest 
landed cost U.S.-flag vessel basis for cargo offered for delivery to 
any port or port range after the 25 percent Great Lakes quantity is 
reached.
    The new provision requires that a number of issues be addressed. 
First, since CCC generally purchases Title II commodities on a monthly 
basis and it is impossible to determine in advance the quantity of 
commodities to be actually purchased, CCC cannot know, at any point in 
the year, when the 25 percent Great Lakes tonnage point is reached. 
Consequently, CCC proposes to administer the 25 percent requirement on 
a annual basis. In other words, beginning with the first purchase in 
each cargo preference year (April 1--March 31), 25 percent or more of 
the total monthly purchase may be allocated to Great Lakes port range 
on an overall lowest landed basis. This would allow CCC the flexibility 
to take advantage of seasonal and other surges in service offered 
through the Great Lakes ports during the course of the year.
    Section 901b(c) of the Merchant Marine Act, 1936, as amended, now 
requires that CCC allocate to Great Lakes ports ``any cargoes for which 
it has'' the overall lowest landed cost, but does not define what may 
be considered as a Great Lakes port offer. Clearly, the lowest f.a.s. 
vessel offer for export from Great Lakes ports would qualify. A more 
difficult question involves intermodal-bridge-point (bridge-point) 
offers. In bridge-point movements, the commodity supplier is 
responsible for the transportation and related costs to deliver the 
commodity to the designated U.S. bridge-point location. The ocean 
transportation carrier becomes responsible for the cargo at the bridge-
point location and must transport the commodities from that point and 
pay all related costs to deliver the commodity onboard the vessel. Such 
costs include car unloading, container stuffing (where applicable), 
etc. The bridge-point may not be within the confines of a port 
operation and the commodities may be loaded on a vessel at a port that 
is in a different part of the country than the bridge-point. This 
raises the issue of how bridge-point service should be considered when 
determining what are Great Lakes port offers.
    Certain interests have suggested that the purpose of the recent 
amendment was to make-up for potential revenue and employment 
opportunities lost to the Great Lakes by virtue of the cargo preference 
requirements and that bridge-point-service that includes cargo 
handling; i.e., stuffing containers at Great Lakes ports contributes to 
this goal even if the cargo is ultimately exported from other ports. 
For this reason, it is suggested that any commodity offers for this 
type of service that represent the lowest landed cost should be viewed 
as Great Lakes cargo. On the other hand, if the commodities are not 
stuffed into transportation conveyances at the intermodal bridge-point 
at Great Lakes ports and the carrier merely takes risk of loss to the 
cargo, these interests suggest that the commodity offer should not be 
considered as a Great Lakes port range offer.
    While there is certainly some merit to this analysis, the 
suggestion raises some administrative problems. If CCC were to adopt 
this suggestion, it appears that it would have to make some rather 
arbitrary decisions as to what constitutes a port area in order to 
determine whether a particular service facility is geographically part 
of a Great Lakes port. Also, the more inclusive definition could 
disrupt normal trade practices of an ocean transportation carrier. For 
example, a carrier that normally takes possession of the cargo at 
bridge-point (not within the confines of the port) because of certain 
economies would be forced to utilize a less favored facility. 
Furthermore, this interpretation could counteract efforts to generate 
more vessel calls at Great Lakes ports, because once the 25 percent 
annual cargo level is reached by considering service facilities as 
representing Great Lakes ports, CCC could begin to consider lowest 
landed costs on a U.S.-flag vessel basis. This could eliminate 
utilization of f.a.s. vessel offers in the Great Lakes.
    For the above reasons, the proposed rule defines Great Lakes cargo 
as cargo offered for delivery f.a.s. vessel. However, CCC is 
particularly interested in receiving comments from all interested 
parties concerning this problem and will take them into consideration 
when formulating a final rule.
    In addition to the above changes, CCC is proposing to clarify 
Sec. 1496.5(b)(1) without any substantive change.

List of Subjects in 7 CFR Part 1496

    Agricultural commodities; exports.

    Accordingly, it is proposed that 7 CFR part 1496 be revised as 
follows:

[[Page 6499]]

PART 1496--PROCUREMENT OF PROCESSED AGRICULTURAL COMMODITIES FOR 
DONATION UNDER TITLE II, PUB. L. 480

    1. The authority citation for part 1496 is revised to read as 
follows:

    Authority: 7 U.S.C. 1721-1726a; 1731-1736g-2; 46 U.S.C. App. 
1241(b), and 1241(f).

    2. In Sec. 1496.5, paragraphs (b)(1) and (f) are proposed to be 
revised to read as follows:

Sec. 1496.5  Consideration of bids.

* * * * *
    (b)(1) Availability of ocean service. Prior to receipt of offers 
from commodity suppliers, CCC will review ocean freight information 
from available sources including but not limited to, trade journal 
newspapers, port publications, steamship publications in order to 
determine the availability of appropriate ocean service.
* * * * *
    (f) Great Lakes ports. Commodities offered for delivery f.a.s. 
vessel Great Lakes port range that represent the overall (foreign and 
U.S. flag) lowest landed cost will be awarded on that basis and will 
not be evaluated on a lowest landed cost U.S.-flag basis unless CCC 
determines that 25 percent of the total annual tonnage of bagged, 
processed or fortified commodities furnished under Title II of Public 
Law 480 has been, or will be, transported from the Great Lakes port 
range during that fiscal year.

    Signed at Washington, DC, on February 3, 1997.
Bruce R. Weber,
 Acting Executive Vice President,Commodity Credit Corporation.
[FR Doc. 97-3370 Filed 2-11-97; 8:45 am]
BILLING CODE 3410-05-P
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