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GENERAL 

The U. S. Department of Agriculture 

(USDA) and the Agency for International 

Development (AID) are responsible for 

several foreign food assistance programs 

where U. S. agricultural commodities are 

donated abroad for humanitarian and 

developmental purposes. The food 

assistance is provided through three 

channels: The P. L. 480 Program (Title II 

and Title III), which is administered by AID, 

and the Section 416 (b) Program, and the 

Food for Progress Program, both of which 

are administered by USDA. 

The Farm Service Agency’s (FSA) Kansas 

City Commodity Office (KCCO), through 

the Commodity Credit Corporation (CCC), 

is responsible for procuring or supplying 

commodities from CCC inventory for all the 

food assistance donation programs. The 

same procedures described here are used 

when supplying commodities from 

inventory or when procuring commodities 

from commercial sources. 

The foreign food assistance programs are 

designed to address nutritional problems 

throughout the world with speed and 

efficiency. This requires coordination 

among commodity suppliers, package 

manufacturers, domestic transportation 

carriers, ocean carriers, and input from 

private voluntary organizations (PVOs), the 

United Nations World Food Programme 

(WFP), and foreign governments 

(Cooperating Sponsors). This cooperation 

has resulted in meeting program needs 

efficiently. 

The following describes the various foreign 

food assistance donation programs and the 

scope and complexity of the procurement 

and shipment processes. 

FOOD ASSISTANCE PROGRAMS 

Title II, P. L. 480 

Emergency and Private Assistance Programs 

Legislative Authority: Agricultural Trade 

Development and Assistance Act of 1954, as 

amended. 

Funding: Appropriated funds. The Act 

also permits the limited transfer of funds 

among the various P.L. 480 program Titles. 

Program Description: Provides for the 

donation of agricultural commodities to 

meet emergency and nonemergency food 

January 1996 
needs. AID is responsible for the overall 

administration of the Title II program and 

provides guidance to the various cooperating 

sponsors. FSA is responsible for procuring 

the commodities and serves as a technical 

advisor to AID for the program. 

The Secretary of Agriculture determines the 

types and quantities of commodities that are 

available for use in the P.L. 480 program. 

Most of the commodities are distributed 

through nonprofit PVOs such as CARE, the 

Catholic Relief Services, or through WFP, 

which is the humanitarian feeding 

organization of the United Nations. 

Approximately 75 percent of the 

nonemergency food-aid under Title II must 

be distributed by these types of 

organizations. Commodities provided under 

Title II are used for: 1) direct feeding for 

refugees and children; 2) payment to 

workers for labor performed on public 

projects; and 3) sales or barter by the 

cooperating sponsors to cover authorized 

expenses. 

Title III, P.L 480 

Food for Development 

Legislative Authority: Agricultural Trade 

Development and Assistance Act of 1954, as 

amended. 

Funding: Appropriated funds. The Act 

also permits the limited transfer of funds 

among the various P.L. 480 program Titles. 

Program Description: Provides for 

government-to-government grants to support 

long-term growth in agriculture and related 

activities in the lesser developed countries. 

AID is responsible for the overall 

administration of the Title III program. 

However, the Secretary of Agriculture 

determines the types and quantities of 

commodities that are available for use in the 

P.L. 480 program. FSA is responsible for 

procuring the commodities and serves as a 

technical advisor to AID for the program. 

The commodity uses include: 1) direct 

feeding programs that include activities 

dealing with the special health needs of 

children and mothers consistent with the 

Foreign Assistance Act of 1961, relating to 

the Child Survival Fund; 2) development of 

emergency food reserves; and 3) in-country 

sales with proceeds used for economic 

development activities. 

Section 416(b) 

Legislative Authority: Section 416(b) of 

the Agricultural Act of 1949, as amended. 

Funding: CCC borrowing authority. 

Program Description: Permits donations 

of food and feed commodities owned by 

CCC for humanitarian assistance overseas. 

USDA’s Foreign Agricultural Service (FAS) 

is responsible for the overall administration 

of the Section 416(b) program. These 

donations are not permitted to: 1) disrupt 

normal commercial sales of CCC stocks; 

2) reduce the amounts of commodities that 

are traditionally donated to domestic feeding 

programs, or 3) prevent the fulfillment of 

payment-in-kind programs. 

Food for Progress 

Legislative Authority: Food for Progress 

Act of 1985, as amended. 

Funding: There are three sources: 

2 January 1996 
1) transfer of Title I, P.L. 480 funds into 

Food for Progress to procure eligible P.L. 

480 commodities; 2) CCC funds used to 

supply eligible Section 416(b) commodities; 

and 3) CCC funds to procure any 

agricultural food commodity not available 

from CCC inventory. 

Program Description: Provides 

commodities to support countries which 

have made commitments to expand free 

enterprise in their agricultural economies. 

Within USDA, FAS is responsible for the 

overall administration of the Food for 

Progress program. Commodities furnished 

using Title I, P. L. 480 transferred funds 

may be made available on a grant, 

concessional sales, or loan basis. 

Cooperating sponsors may include PVOs 

and foreign governments. 

COMMODITIES 

In terms of quantities historically provided 

under the foreign food assistance programs, 

the most important products are: bulgur. 

flour, corn-soy blend, cornmeal, vegetable 

oil and whole grains. The states supplying 

the bulk of these products are: Texas, 

Kansas, Wisconsin, Illinois, Louisiana, 

Nebraska, Missouri, Oklahoma, Tennessee, 

Washington, and California. These 

production areas and their geographic 

location have an important impact on inland 

freight rates to U.S. ports and the ultimate 

cost of the commodities when landed at the 

foreign destination. 

At the present time, KCCO provides over 25 

different commodities through purchases or 

from U.S. Government inventory for the 

foreign food assistance programs. These 

commodities include: 

Bulk and Bagged Whole Grains: corn, 

soybeans, sorghum, and wheat. 

Processed Grain Products: 

Wheat based commodities include: 

bulgur, soy-fortified bulgur, all 

purpose flour, soy-fortified flour, 

wheat-soy milk, wheat-soy blend; 

Corn based commodities include: 

cornmeal, soy-fortified cornmeal, 

corn-soya milk, instant corn-soya 

milk, instant corn-soya masa flour, 

and corn-soy blend; 

Sorghum based commodities 

include: soy-fortified sorghum grits. 

Dairy Products: nonfat dry milk, cheese, 

butteroil, and butter. (Note: Contingent 

upon the availability of CCC stocks of dairy 

products.) 

Miscellaneous Products: milled rice, peas, 

beans, lentils, and vegetable oil. 

CARGO PREFERENCE 

Shipments are made according to the 

requirements of the Merchant Marine Act of 

1936, as amended, and the Food Security 

Act of 1985, as amended, which requires 

that at least 75 percent of the annual tonnage 

of all commodities under these programs be 

shipped on U.S.-flag vessels. Within the 

parameters of the cargo preference 

requirements, commodities are procured and 

supplied on the basis of the estimated lowest 

total cost to deliver the commodities to their 

foreign destinations. 

3 January 1996 
LOWEST LANDED COST 

The lowest combined total cost of 

commodity plus freight to the foreign 

destination is the lowest landed cost which 

is calculated on the basis of the estimated 

ocean freight cost added to the commodity 

price. Thus, the principle of lowest landed 

cost evaluation not only determines the 

vendors from which the commodity is 

procured, but also determines the coastal 

range(s) or port(s) through which shipments 

are exported. KCCO will also make such 

determinations which it considers necessary 

and practicable to meet program objectives, 

giving consideration to meeting cargo 

preference requirements. 

INVITATION FOR OFFERS 

Invitation: The first step in the KCCO 

operation is to issue an invitation (bid 

solicitation) to all interested parties inviting 

offers for the approximate quantity of each 

commodity. 

The invitation includes a list of intended 

destinations with the quantities for each 

country and discharge port. About 200 

invitations are made available electronically. 

Usually, vendors are given 13 days to make 

offers. During this time, interested vendors 

compute and submit their offers to KCCO 

for consideration. 

Offers: The commodity vendors offer 

commodity prices on a f.a.s., intermodal 

plant, or intermodal bridge basis to various 

coastal ranges and ports. The f.a.s. offered 

price includes the cost of the commodity, 

inland freight to the U.S. port, and all 

applicable port charges. Although vendors 

naturally use the most advantageous port or 

range of ports in order to offer their lowest 

prices, they are also encouraged to make 

competitive offers at alternate ranges, ports, 

and f.o.b. points. 

RECEIPT OF OFFERS 

The invitation specifies the time by which 

offers must be received by KCCO, which is 

generally on Monday of the week of 

purchase. The quantities to be purchased are 

grouped by commodity, ocean rates and 

service, and then entered into the computer 

in format necessary for simultaneous 

computer analysis of offers, ocean rates, and 

quantities. 

OCEAN SERVICE 

Freight Rates: KCCO receives and reviews 

the available ocean service and applicable 

ocean freight rate quotations from interested 

steamship companies and enters the 

information into its computer files for use in 

analyzing bids and determining the lowest 

landed cost. Published ocean freight rates 

are used to determine ocean rates when no 

rate quotations or service offers are received 

for the destination countries. 

BID EVALUATION 

Constructed Price: Prior to the receipt of 

offers, KCCO calculates a constructed price 

for each commodity to be purchased. This 

4 January 1996 
data is used in the bid evaluation to 

determine the reasonableness of the prices 

bid. 

The basic criteria used in making this 

constructed price calculation are the current 

market prices of raw commodities, byproducts, and historical pricing information. 

If offered prices fall within this constructed 

price range, they are usually considered 

acceptable. 

Evaluation: At the time prescribed in the 

invitation on the closing day, all offers are 

opened and evaluation begins. 

If the commodity offer is basis f.a.s. or 

intermodal bridge, the vendors will indicate 

their base port and at their option, any 

difference in cost to deliver to ports other 

than the base ports specified in their bid. 

KCCO’s evaluation considers the 

commodity price offered to port(s) or 

intermodal point, the transportation rates, 

and service to the foreign destination, and 

port and storage capacity. 

Contract Acceptance: In order to minimize 

vendors’ speculative positions in the 

commodity markets, CCC confirms 

commodity contracts the day following 

receipt of offers. 

Transportation: Methods of transportation 

for programs include extensive use of the 

inland waterway system and intermodal 

movements by boxcar and container vans. 

A variety of different vessel types are 

utilized to transport the commodities 

including: breakbulk, bulkers, and tankers 

for grain, container ships, and seagoing 

barges. 

Carrier Constraints: The competitive 

transportation situation results in detailed 

and specific offers of service from carriers. 

However, this has increased the number of 

constraints and variables that must be 

considered in bid analysis, making the 

evaluation process significantly more 

complex. For example, carriers may offer 

rates that are contingent upon minimum or 

maximum tonnages, a maximum number of 

ports a vessel will call within a coastal 

range, or a maximum number of ports of 

discharge, or different rates for each port 

within a coastal range. 

PORT ALLOCATION 

Normally, the lowest landed cost evaluation 

will determine the coastal range and port 

through which shipments will be exported. 

If the bid analysis indicates an equal vendor 

cost at more than one port within a port 

range, KCCO must determine which port 

will be allocated the tonnage. The 

destination is based on a number of factors, 

such as the need to consolidate cargo to limit 

vessel’s ports of call. Port allocations are 

approved by the Director, KCCO and 

subsequently furnished to the public via an 

information release entitled "Notice of Port 

Allocations." 

Immediately upon issuance of the Port 

Allocations, KCCO offers commodities to 

freight agents who in turn contract for ocean 

transportation on behalf of the cooperating 

sponsors. 

Each cooperating sponsor privately contracts 

for the services of freight forwarders and 

freight agents for making ocean 

5 January 1996 
transportation arrangements. However, AID 

contracts the ocean transportation 

arrangements for all government-togovernment shipments under Title II and 

Title III, P.L. 480. 

BOOKINGS 

Booking Agents: KCCO advises the 

booking agent of the lowest landed cost 

(LLC) evaluation results. Booking agents 

are required to solicit offers utilizing the 

Transportation News Ticker (TNT). 

Booking agents will submit the lowest 

responsive U.S. flag and foreign flag offers 

to KCCO for a determination whether the 

award must be made on a U.S. flag or 

foreign flag basis. 

All agents are required to solicit and award 

freight contracts in compliance with the AID 

Booking Guidelines issued December 1995. 

Carrier Performance: Agents may exclude 

individual carriers because of past 

performance that has been afforded due 

process, however, such exclusions must be 

done in writing and prior to the issuance of a 

freight solicitation. Such information is to 

be shared by all booking agents in ad hoc 

meetings created to share carrier 

performance. 

Charters: Commodity requests and awards 

are examined for possible consolidation of 

cargo for vessel charter. When charterable 

quantities are purchased at a port or range of 

ports destined to the same or approximate 

foreign destination, KCCO requests the 

booking agents to consider consolidation of 

tonnage for charter booking. If the 

consolidated tonnage cannot be chartered, it 

is booked as liner cargo. Confirmed 

bookings, shipping instructions are then 

issued to vendors and documents are 

prepared. 

CARGO MONITORING 

In carrying out its contract administration 

and cargo monitoring responsibilities, 

KCCO controls and monitors the shipment 

of all commodities from the supplier’s plant 

until vessel loading is completed and ocean 

bills of lading are issued. 

Although KCCO is responsible for 

monitoring freight forwarding functions 

nationwide, AID and the PVOs also employ 

commercial freight forwarders whose 

services include, but are not limited to 

calling the commodity forward and 

preparing or securing documentation 

evidencing the quantity loaded on board. 

Freight forwarders monitor current vessel 

status and advise KCCO of any major vessel 

delays. In the event of a significant delay, 

KCCO will take steps to protect the 

commodity and coordinate rebooking if 

deemed appropriate. 

OUTTURN SERVICES 

Prior to the cargo arriving at the foreign 

destination, the PVOs or KCCO will arrange 

for inspection of the commodities by a 

qualified independent survey firm. The 

surveyor is responsible for observing 

discharge and reporting the count and 

condition of the cargo as it is unloaded from 

the vessel. The carrier is held accountable 

and a claim is filed for any quantity or 

6 January 1996 
quality deficiencies noted at discharge. On 

the basis of the report issued by the 

independent surveyor, a claim is filed 

against the carrier for the net loss of product 

(commodity plus freight value), after 

reconstitution of any salvageable 

commodity. 

Although several PVOs have the staff and 

expertise to handle survey arrangements, 

KCCO also contracts on a competitive bid 

basis, surveys for government-togovernment cargoes as well as for 

approximately 25 PVOs. WFP operates 

under different authorities than the other 

cooperating sponsors and insures cargoes 

independently. 

7 January 1996