[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Rules and Regulations]
[Pages 13062-13082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-6487]



[[Page 13062]]

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DEPARTMENT OF AGRICULTURE

48 CFR Part 470

Commodity Credit Corporation

7 CFR Parts 1496 and 1499

Foreign Agricultural Service

7 CFR Part 1599

RIN 0551-AA78


McGovern Dole International Food for Education and Child 
Nutrition Program and Food for Progress Program

AGENCY: Foreign Agricultural Service and Commodity Credit Corporation, 
USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations to administer the Food 
for Progress (FFPr) Program and the McGovern-Dole International Food 
for Education and Child Nutrition Program (McGovern-Dole Program) by 
making revisions to provide greater clarity with respect to all aspects 
of the program, with specific emphasis on the eligibility requirements 
that a participant must meet and the actions that must be undertaken by 
a participant in order to receive assistance under these programs, 
including the reports that are filed by program participants with the 
Foreign Agricultural Service (FAS). This final rule also amends the 
Agriculture Acquisition Regulation (AGAR), to specify the criteria that 
is used in determining whether a commodity that is procured under these 
programs and under domestic feeding programs administered by U.S. 
Department of Agriculture (USDA) is considered to be a product of the 
United States. The purpose of these amendments is to improve the 
efficiency of the programs and make it clearer to participants what 
they must do to meet eligibility requirements.

DATES: Effective Date: May 26, 2009.

FOR FURTHER INFORMATION CONTACT: Babette Gainor, Deputy Director, Food 
Assistance Division, Foreign Agricultural Service, U.S. Department of 
Agriculture, Stop 1034, 1400 Independence Avenue, SW., Washington, DC 
20250-1034; telephone: (202) 720-4221; Fax: (202) 690-0251; E-Mail: 
<a href="/cdn-cgi/l/email-protection#98c8c8dcdddcd8fef9ebb6edebfcf9b6fff7ee"><span class="__cf_email__" data-cfemail="540404101110143235277a212730357a333b22">[email protected]</span></a> and/or <a href="/cdn-cgi/l/email-protection#fbb99a999e8f8f9ed5bc9a92959489bb9d9a88d58e889f9ad59c948d"><span class="__cf_email__" data-cfemail="2e6c4f4c4b5a5a4b00694f4740415c6e484f5d005b5d4a4f00494158">[email protected]</span></a>.
    The USDA prohibits discrimination in its programs on the basis of 
race, color, national origin, sex, religion, age, disability, political 
beliefs, and marital or familial status. Persons with disabilities who 
require alternative means for communication of program information 
(Braille, large print, audiotape, etc.) should contact the USDA Office 
of Communications at (202) 720-5881 (voice) or (202) 720-7808 (TDD).

SUPPLEMENTARY INFORMATION:

Background

    On October 24, 2008, FAS published a proposed rule (73 FR 63387) to 
remove 7 CFR part 1496; revise 7 CFR parts 1499 and 1599, which contain 
the general regulations governing the FFPr and the McGovern-Dole 
Program; and add 48 CFR part 470, which governs the commodity 
acquisition procedures of USDA. The proposed rule was intended to 
accomplish the following objectives:
    <bullet> Improve the efficiency of the programs by providing 
greater clarity to program participants on eligibility, reporting and 
performance requirements;
    <bullet> Better define the criteria used to determine a product of 
the United States;
    <bullet> Allow for the full utilization of all types of acquisition 
contracts that are authorized under the Federal Acquisition Regulations 
(FAR); and,
    <bullet> Restructure and rewrite the regulations, including new 
subparts and sections, to make them easier to read and understand.

Analysis of Comments Received

    Seventeen comments on the proposed rule were received from private 
entities that are affected by these regulations, including: three 
private voluntary organizations (PVOs), two PVO associations, seven 
commodity organizations, four shipping and freight industry 
representatives, and one Office of Inspector General (OIG). One comment 
was received by an organization comprised of over 250 non-governmental 
organizations that stated, ``Overall we believe FAS has done an 
excellent job in revising part 1499 and that the changes will improve 
the quality of the food aid programs and increase the ability of PVOs 
to assist those in need.'' The comments are discussed below, except for 
those dealing with issues outside of the scope of the proposed rule, 
making editorial suggestions, or simply expressing support for the 
proposed rule.

A. Eligibility Determination: 7 CFR Parts 1499.3(a)(1) and 1599.3(a)(1)

    Comment: One commenter suggested that USDA should change ``grants'' 
to ``awards'' to be more inclusive since ``awards'' includes grants and 
cooperative agreements.
    Response: USDA accepts this suggestion and has made the changes 
accordingly.

B. Agreements: 7 CFR Parts 1499.5(c) and 1599.5(c)

    Comment: One commenter suggested that USDA allow a participant to 
make 100 percent line item adjustments to the budget unless the 
agreement specifies otherwise. The commenter further stated that this 
is the norm for most Government regulations.
    Response: The current language affords USDA the ability to provide 
greater flexibility to participants' budgets other than just line item 
adjustments. Additionally, due to various sources from which USDA 
receives funds for grants governed under parts 1499 and 1599, USDA 
cannot provide 100 percent flexibility between all budget line items as 
it has the potential of inadvertently creating an Antideficiency Act 
violation within the program. For example, FFPr operates under 
statutory authority that limits the amount of funds that may be spent 
each year for freight costs and administrative expenses. USDA only can 
allow flexibility within a budget that would not allow for the 
possibility of these limits being exceeded. This limitation is also 
covered in 7 CFR 3019.25(f).

C. Payments: 7 CFR Parts 1499.6 and 1599.6

    Comments: One commenter questioned whether survey costs noted in 
sections 1499.6(a)(7) and 1599.6(a)(7) included load, discharge, and 
delivery surveys. A comment was received that questioned the necessity 
of an ``original'' bill of lading for payment, particularly given that 
an original is required to take title of commodities. Additionally, a 
commenter requested that all references to 7 CFR part 3019 be quoted 
directly in the relevant sections of 7 CFR parts 1499 and 1599 rather 
than referring the reader back to 7 CFR part 3019.
    Response: Load survey costs are not included in sections 
1499.6(a)(7) and 1599.6(a)(7). The determination whether a discharge 
survey, a delivery survey, or both have been completed is dependent 
upon multiple factors, including but not limited to destination country 
and contract terms. To provide greater clarity in these sections, USDA 
has replaced ``survey costs'' with ``survey costs other than those at 
load port.'' In response to the comment about providing an original 
bill of lading, USDA agrees that an original or ``true copy'' of the 
bill of lading, such as a pdf version of the original bill of lading,

[[Page 13063]]

would be acceptable for payment purposes; this change has been made to 
these sections. USDA cannot accede to the request to directly quote 
applicable sections of 7 CFR part 3019 into the relevant sections of 
the regulations. The provisions of 7 CFR part 3019 are applicable to 
all USDA grant programs and refer to pertinent circulars released by 
the Office of Management and Budget (OMB). This regulation is likely to 
change more often than the FAS and the Commodity Credit Corporation 
(CCC) grant program regulations. Quoting the applicable sections of 7 
CFR part 3019 directly into parts 1499 and 1599 would multiply the 
regulations requiring updates and notifications to the public that 
otherwise could be limited to only 7 CFR part 3019.

D. Transportation of Goods: 7 CFR Parts 1499.7(b) and 1599.7(b)

    Comments: Two comments were received on this section. The first 
commenter encouraged USDA to implement direct ocean freight procurement 
for its food aid programs. The other commenter objected to USDA 
directly contracting for freight in accordance with the FAR on the 
bases that the current process is not unlawful and has been upheld in a 
previous court ruling, the change would preclude freight forwarders 
from participating in the program, the proposed system would return to 
a process that was ruled inefficient by the Grace Commission, and, 
finally, USDA failed to provide sufficient factual detail and rationale 
for the rule to permit interested parties to comment meaningfully on 
this change.
    Response: USDA is committed to providing an efficient and effective 
acquisition process under its food donation programs. USDA is further 
committed to ensuring transparency and fairness in this process. 
Therefore, once the Final Rule is published, USDA will use the Food Aid 
Consultative Group (FACG) to outline acquisition processes that USDA is 
considering implementing under these regulations. The FACG is the 
official consultative group that allows all organizations with an 
interest in food aid programs to provide input to the U.S. Government.
    With respect to the proposal to use the FAR to acquire freight, 
this provision is primarily included to reflect the fact that under 
this rule USDA would be directly contracting for freight in many 
circumstances and program recipients would not have the burden of 
obtaining such services. Further, under current practices, in most 
instances the program recipient is not solely responsible for procuring 
freight services; but rather, while such entities do a significant 
portion of the work related to obtaining freight, decisions regarding 
the acceptance of freight contracts also involve decisions of employees 
of USDA. In order to alleviate any questions that exist concerning the 
propriety of this activity, the determination has been made to follow 
provisions of the FAR. To the extent that a program participant is 
solely responsible for these activities without regard to any 
involvement of employees of USDA, then the FAR provisions would not be 
applicable.
    With respect to the use of freight forwarders, the use of the FAR 
to acquire freight does not preclude the use, by USDA, of the services 
of a licensed freight forwarder, similar to the process currently used 
in Title II of the Food for Peace Act, (Pub. L. 83-480, or referred to 
as Pub. L. 480 Title II). In such a case, a licensed freight forwarder 
would act as directed by USDA.

E. Transportation of Goods: 7 CFR Parts 1499.7(c) and 1599.7(c)

    Comments: Four comments were received concerning the use of a 
licensed freight forwarder rather than a shipping agent. Three 
commenter's objected to the use of a licensed freight forwarder rather 
than a shipping agent to facilitate the acquisition of transportation. 
One commenter stated that sections 1499.7(c)(1)-(3) and 1599.7(c)(1)-
(3) go beyond USDA's authority and conflict with that of the Federal 
Maritime Commission's (FMC) application requirements. Another comment 
was received asking to clarify the intention of sections 1499.7(c) and 
1599.7(c) as to preclude the use of entities other than licensed 
freight forwarders or to govern only licensed freight forwarders within 
these sections.
    Response: USDA agrees with the comments concerning sections 
1499.7(c)(1)-(3) and 1599.7(c)(1)-(3) being in conflict with the FMC's 
application process and has removed these provisions. USDA further 
agrees with the comments concerning sections 1499.7(c)(4) and 
1599.7(c)(4) and has removed this requirement since proof of financial 
responsibility is required in the FMC application process. As to the 
comments requesting the continued use of shipping agents, USDA does not 
agree with this comment and will adopt the proposed change set forth in 
the proposed rule. Currently, there is no definition of ``shipping 
agent'' and there are no services of a shipping agent identified that a 
licensed freight forwarder could not provide. In fact, an unlicensed 
freight forwarder may not book or arrange vessel space for others, 
process shipping documentation or collect freight forwarder 
compensation from the ocean carriers. Further information regarding 
this issue is found at the Web site maintained by FMC at http://www.fmc.gov/home/faq/index.asp. In addition, FMC has a regulated 
process for licensing freight forwarders that will remove this 
duplicative process from USDA. Lastly, USDA has provided further 
clarification on the intention of sections 1499.7(c) and 1599.7(c) to 
allow only licensed freight forwarders to be used by participants in 
arranging transportation.

F. Damage to and Loss of Commodities: 7 CFR Parts 1499.9 and 1599.9

    Comment: One commenter expressed concern regarding the number of 
times a notification of loss or damage to commodities may be required 
during the commodity voyage.
    Response: USDA agrees with the concern expressed by the commenter 
but also notes that timely notification of damages to and losses of 
commodities are necessary to protect the assets of the program. USDA 
has removed the word ``immediately'' from this section and inserted the 
provision for a timeframe of notification to be outlined in the program 
agreement.

G. Claims for Damage to or Loss of Commodities: 7 CFR Parts 1499.10 and 
1599.10

    Comments: Three comments were received on this section. One 
commenter asked if funds arising from a claim could cover the cost of 
services from a third party sub-contract who settled the claims 
process, and if so, would this arrangement have to be stipulated in the 
program agreement or could ``advance approval'' for such a use of these 
funds be obtained in another manner. The second commenter recommended 
USDA to require program participants to purchase marine cargo insurance 
as this requirement would lend itself to the goal of timely resolution 
of cargo claims. This commenter also suggested that USDA adopt a 
percentage threshold for establishing claim value levels. The third 
commenter suggested that USDA allow the participant to determine 
whether or not to file a claim for losses under $10,000 rather than 
$20,000. This commenter also asked for clarification on who would 
provide funds for marine cargo insurance if such insurance were 
required.
    Response: USDA agrees that, if such a situation were to arise, it 
should be handled outside the program agreement. The current regulation 
allows for advance approval and does not stipulate

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that such approval must be stipulated in the program agreement; 
therefore, no changes are made to the regulations. However, USDA will 
include procedures on this subject matter in applicable program 
documents and in the guidance provided to participants, which will be 
developed once the final rule is in effect. Regarding the required 
purchase of marine cargo insurance, USDA will consider this provision 
on an agreement basis as USDA assesses the risk involved in moving the 
commodities. If USDA determines that it is in the best interest of the 
programs, USDA will require and provide funding for marine cargo 
insurance. As to the value for requiring a claim to be filed, USDA does 
not agree with either suggestion and therefore has not made any changes 
to these sections. The current language allows participants to file a 
claim at any level. In setting the $20,000 value level, USDA determined 
that a benefit to the program could be reached while factoring in the 
amount of resources necessary to administer the claims process.

H. Subrecipients: 7 CFR Parts 1499.12 and 1599.12

    Comment: One commenter questioned the need for USDA to receive 
copies of subrecipient contracts. The commenter suggested that the 
participant retain copies of the subrecipient contracts and make them 
available upon request by USDA.
    Response: USDA understands the concern expressed by the commenter; 
however, USDA has had recent experiences with subrecipient contracts 
either not being in place or not providing adequate assurances to 
protect the integrity of the donation programs. Further, OIG also 
recommends that these contracts receive oversight by FAS and CCC. 
Therefore, USDA is retaining the current language in this section.

I. Recordkeeping and Reporting Requirements: 7 CFR Parts 1499.13 and 
1599.13

    Comment: One commenter recommended the following: require USDA to 
make the annual Single Audit Act and OMB Circular A-133 mandatory, 
regardless of funding availability; provide specific timeframes for 
participants to submit reports and evaluations; and clarify how the new 
evaluation requirement will complement FAS's current system of close-
out reviews.
    Response: USDA agrees that participants must conduct an annual 
audit in accordance with the Single Audit Act (31 U.S.C. 7501-7507) and 
revised OMB Circular A-133. In support of this, 7 CFR 3019.26(a), that 
is referenced in sections 1499.13(d) and 1599.13(d), contains the 
reference to the Single Audit Act and OMB Circular A-133. Regarding the 
timeframe for report submissions, USDA intends to provide a specific 
timeframe for participants to submit reports and evaluations within the 
agreements. At this time, USDA does not foresee a change in reporting 
timeframes but has moved this provision into the agreements to afford 
flexibility in managing the programs. Evaluating activities conducted 
under USDA food aid programs will provide insight to USDA in developing 
more effective programs as well as enable USDA to highlight program 
outcomes rather than program outputs that are currently captured in 
semi-annual reports. These evaluations will complement FAS's current 
system of close-out reviews by using a third party neutral evaluator 
and, in the case of mid-period evaluations, afford more transparency on 
program short-comings prior to the actual closure process so that USDA 
can determine the best course of action to remedy the short-comings.

J. Definitions: 48 CFR Part 470.101

    Comments: Three comments were received that outlined the ability 
for some commodities to be maintained in a non-commingled manner, and, 
therefore, requested that USDA consider either excluding some 
commodities from this definition, removing the definition, and thereby 
the allowance for commingling in its entirety, or modifying it to 
conform more closely to the domestic commodity donation programs.
    Response: USDA recognizes that commodities are maintained and 
stored in various manners. USDA further agrees with protecting the U.S. 
origin integrity of commodities when this is the normal commercial 
practice. Accordingly, 48 CFR 470.101 has been revised to provide that 
in those instances in which it has been determined by USDA that a 
commodity that is stored in a commingled manner but which is one that 
can be reasonably stored on an identity preserved basis with respect to 
its origin, USDA will require such commodity that is being procured to 
originate from the United States.

K. United States Origin of Agricultural Products: 48 CFR Part 
470.103(b)

    Comments: USDA received three comments concerning USDA's attempt to 
harmonize the use of additives in international programs with those 
used in domestic programs. The commenter's suggest replacing ``or'' 
with ``and'' at the end of section 470(b)(1).
    Response: Section 402(2) of Public Law 480 provides, in relevant 
part, that with respect to the administration of Title II of that Act, 
``* * * a product of an agricultural commodity shall not be considered 
to be produced in the United States if it contains any ingredient that 
is not produced in the United States, if that ingredient is produced 
and is commercially available at fair and reasonable prices. This 
provision is also made applicable to the FFPr Program by section 
1110(e)(4) of the FFPr Act. With respect to the McGovern-Dole Program, 
section 3107(a) of the Farm Security and Rural Investment Act of 2002 
defines an agricultural commodity to be ``an agricultural commodity, or 
a product of an agricultural commodity, that is produced in the United 
States.''
    Based upon the review of the issues raised by this comment, since 
procurements of commodities for use in Public Law 480 and the FFPr 
Program must follow the requirements of section 402(2) of Public Law 
480, the definition of ``additive'' has been modified to refer to 
``ingredient'' and the cited statutory provision has been incorporated 
into the definition of ``ingredient''. With respect to the McGovern-
Dole Program, in order to ensure consistency with these other two 
programs and in recognition of the fact that often procurements of 
commodities are done simultaneously for two or more of these programs, 
USDA will use the same definition of ``ingredient.''
    USDA concurs with the comment since it is desirable to harmonize 
the manner in which ingredients are treated for this purpose. USDA has 
revised 48 CFR 470.103(b) to reflect the statutory provision regarding 
ingredients as found in Public Law 480 with regard to procurements made 
for FAS and the U.S. Agency for International Development (USAID) 
programs. Accordingly, for these international programs, the 
procurement of commodities with ingredients will be handled in the same 
manner as procurements relating to programs administered by the Food 
and Nutrition Service except as may otherwise be required by statute.

L. United States Origin of Agricultural Products: 48 CFR Part 
470.103(c)

    Comments: USDA received four comments concerning the use of 
commingled products as a product of the United States. Two of the 
comments expressed concern that non-U.S. origin products may be 
provided under USDA food assistance programs, while two

[[Page 13065]]

other comments suggested modifications related to the timing of the 
commodity procurement to bring the language into commercial norms.
    Response: USDA agrees that this section does not adequately take 
into consideration the situation in which a vendor has procured U.S. 
agricultural products prior to the issuance of a solicitation. 
Accordingly, this provision has been revised to provide that a 
commingled product shall be considered to be a product of the United 
States, if the offeror can establish that the offeror has in inventory 
at the time the contract for the commodity or product is awarded to the 
offeror, or obtains during the contract performance period specified in 
the solicitation, or a combination thereof, a sufficient quantity of 
the commodity or product that was produced in the United States to 
fulfill the contract being awarded, and all unfulfilled contracts that 
the offeror entered into to provide such commingled product to the U.S. 
Government.
    In addition, this section has been revised with respect to the 
domestic origin requirements for products of animals. Upon further 
consideration, USDA has determined that rather than to attempt to set 
forth in this section a generic provision regarding domestic origin, 
that the specific requirements applicable to the country in which the 
animal from which the product was obtained was bred, raised, 
slaughtered and processed should be set forth in individual 
solicitations. Under this process, USDA can take into account the 
differences that exist with respect to various animals, e.g., poultry, 
pork or beef, and the various types of products that are obtained, 
e.g., full cuts of meat or poultry and processed products.

M. Issuance of Invitations: 7 CFR Part 1496.4

    Comment: One commenter pointed out that the removal of the 
provision requiring a one day turnaround of supplier bids would impose 
immense new market risks for suppliers.
    Response: Regarding the turnaround time for the acceptance of 
offers (referred to as ``bids''), the process would follow the 
practices prescribed by the FAR, 48 CFR Chapter 4. These are standard 
solicitation methods prescribed government-wide. Offerors would be 
given the opportunity to propose prices for a specific period of time, 
for example, 24, 36 or 48 hours. This would be the offer acceptance 
period. After that time, offers would expire and would no longer be 
valid, thereby preventing the imposition of new market risks for 
suppliers.

N. Miscellaneous Points of Clarification

    Comments: One comment was received recommending that FAS continue 
to monitor agreements entered into under Section 416(b) of the 
Agricultural Act of 1949 (Section 416(b)) in the same manner and 
subject to the same regulations as the McGovern-Dole Program and FFPr. 
Another comment was received that recommended USDA create and attach 
reporting forms to the agreements. A commenter asked a question about 
the relevant application of OMB A-122 Circular to 7 CFR parts 1499 and 
1599.
    Response: In response to the comment on monitoring Section 416(b), 
USDA intends to monitor Section 416(b) in a manner consistent with 7 
CFR parts 1499 and 1599 as relevant to the purpose and scope of Section 
416(b). Under Section 416(b), CCC makes available commodities that it 
has acquired in its normal operations for use in international 
programs. No commodities are procured for use under this provision. By 
using the Federal Register to announce and administer Section 416(b), 
USDA will have the flexibility to apply the relevant sections of 1499 
and 1599 to this donation program while taking into account any unique 
requirements for this program. In response to the comment on reporting 
forms, USDA may reference the reporting form number and revision date 
within the agreement but attaching the reporting forms will only add to 
the volume of the agreement. With regard to OMB A-122 Circular, this 
circular, as well as others, has been incorporated into 7 CFR 3019, 
entitled ``Uniform Administrative Requirements for Grants and 
Agreements with Institutions of Higher Education, Hospitals, and Other 
Non-Profit Organizations''.
    In reviewing the language in 48 CFR part 470, we have determined 
that while changes to the actual provisions of 48 CFR 470.202(e)(3) are 
not needed, USDA does wish to make clear that with respect to the 
lowest landed cost determination, as the programs have evolved over 
many years, the program participant obtains potential bids from 
prospective carriers and these bids are provided to the Farm Service 
Agency (FSA) which utilizes a sophisticated computer program to analyze 
the freight bids in conjunction with the various bids obtained in the 
procurement of commodities to ascertain which combination of carrier 
bids and commodity bids produces the lowest landed cost of delivery of 
the commodity to foreign destinations. Prior to the computer system 
running a lowest landed cost analysis, the grantees and/or USAID 
determine if each offeror's service and rates are responsive to their 
needs. Once the grantee and/or USAID provides their acceptance of the 
offers of service, USDA then runs an analysis to determine lowest 
landed cost. USAID and grantee organizations will have full discretion 
over carrier responsiveness determinations in accordance with the 
procedures identified in 22 CFR 211.
    Changes to the AGAR have been reviewed and approved by the Acting 
Deputy Assistant Secretary for Departmental Administration as 
authorized in 48 CFR Chapter 4, subpart 401.601(a)(1).

Executive Order 12866

    The final rule has been determined to be non-significant under E.O. 
12866 and has not been reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act because 
FAS is not required by 5 U.S.C. 553 or any other law to publish a 
notice of proposed rulemaking and as such under Section 601(2) of the 
Act it is exempt.

Environmental Assessment

    FAS has determined that this rule does not constitute a major State 
or Federal action that would significantly affect the human or natural 
environment consistent with the National Environmental Policy Act 
(NEPA), 40 CFR part 1502.4, Major Federal actions requiring the 
preparation of Environmental Impact Statements; and Compliance with 
NEPA implementing the regulations of the Council on Environmental 
Quality, 40 CFR parts 1500-1508. Therefore no environmental assessment 
or environmental impact statement will be prepared.

Executive Order 12988

    This rule has been reviewed under E.O. 12988. This rule is not 
retroactive and it does not preempt State or local laws, regulations, 
or policies unless they present an irreconcilable conflict with this 
rule. This rule would not be retroactive.

Executive Order 12372

    This program is not subject to E.O. 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).

[[Page 13066]]

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Unfunded Mandates

    This rule contains no unfunded mandates as defined in sections 202 
and 205 of the Unfunded Mandates Reform Act of 1995 (UMRA).

Paperwork Reduction Act of 1995

    In accordance with the Paperwork Reduction Act of 1995, FAS has 
previously received approval from OMB with respect to the information 
collection required to support these programs. The Information 
Collection is described below:
    Title: Food Donation Programs (Food for Progress, Section 416(b)) 
and McGovern-Dole International Food for Education and Child Nutrition.
    OMB Control Number: 0551-0035.

E-Government Act Compliance

    FAS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes. The forms, regulations, and other 
information collection activities required to be utilized by a person 
subject to this rule are available at http://www.fas.usda.gov.

List of Subjects

7 CFR Part 1496

    Agricultural commodities, Food assistance programs, Foreign aid, 
Government procurement.

7 CFR Part 1499

    Agricultural commodities, Food assistance programs, Foreign aid.

7 CFR Part 1599

    Agricultural commodities, Food assistance programs, Exports, 
Foreign aid.

48 CFR Part 470

    Government procurement, Reporting and recordkeeping requirements.

    For the reasons set out in the preamble, under the authority of 5 
U.S.C. 553: 15 U.S.C. 714b and 714c, 7 CFR parts 1496, 1499, 1599 and 
48 CFR part 470 are amended as follows:

Title 7--Agriculture

PART 1496--[REMOVED]

0
1. 7 CFR part 1496 is removed.

0
2. Revise part 1499 to read as follows:

PART 1499--FOOD FOR PROGRESS PROGRAM

Sec.
1499.1 General statement.
1499.2 Definitions.
1499.3 Eligibility determination.
1499.4 Application process.
1499.5 Agreements.
1499.6 Payments.
1499.7 Transportation of goods.
1499.8 Entry and handling of commodities.
1499.9 Damage to or loss of commodities.
1499.10 Claims for damage to or loss of commodities.
1499.11 Use of commodities and sales proceeds.
1499.12 Subrecipients.
1499.13 Recordkeeping and reporting requirements.
1499.14 Noncompliance with an agreement.
1499.15 Suspension, termination, and closeout of agreements.
1499.16 Appeals.
1499.17 Paperwork Reduction Act.

    Authority: 7 U.S.C. 1736o; and 15 U.S.C. 714b and 714c.


Sec.  1499.1  General statement.

    (a) This part sets forth the general terms and conditions governing 
the donation of commodities by the Commodity Credit Corporation (CCC) 
to participants in the Food for Progress Program (FFPr). Under FFPr, 
participants use the donated commodities or proceeds from the sale of 
such commodities to implement activities in a foreign country pursuant 
to an agreement with CCC. The Foreign Agricultural Service (FAS) of the 
Department of Agriculture (USDA) administers FFPr on behalf of CCC.
    (b) In addition to the provisions of this part, other regulations 
of general application issued by USDA, including the regulations set 
forth in Chapter 30 of this title, are applicable to the FFPr. All 
provisions of the CCC Charter Act (15 U.S.C. 714 et seq.) and any other 
statutory provisions that are generally applicable to CCC are 
applicable to FFPr and the regulations set forth in this part.
    (c) This part shall not apply to a donation by CCC to a foreign 
government or an intergovernmental agency or organization (such as the 
United Nations' World Food Program) under FFPr.


Sec.  1499.2  Definitions.

    The following definitions are applicable to this part:
    Activity means a project to be carried out by a participant, 
directly or through a subrecipient, to fulfill the objectives of an 
agreement.
    Agreement means a legally binding agreement entered into between 
CCC and a participant to implement activities under FFPr.
    CCC means the Commodity Credit Corporation and includes any 
official of the United States delegated the responsibility to act on 
behalf of CCC.
    CCC-provided funds means U.S. dollars provided under an agreement 
to a participant for expenses for the internal transportation, storage 
and handling of the donated commodities, expenses involved in the 
administration and monitoring of the activities under the agreement, 
and technical assistance related to the monetization of donated 
commodities.
    Commodities mean U.S. agricultural commodities or products of U.S. 
agricultural commodities.
    Donated commodities means the commodities donated by CCC to a 
participant under an agreement. The term may include donated 
commodities that are used to produce a further processed product for 
use under the agreement.
    FAS means the Foreign Agricultural Service acting on behalf of CCC.
    FFPr means the Food for Progress Program.
    Force majeure is a common clause in contracts, exempting the 
parties for non-fulfillment of their obligations as a result of 
conditions beyond their control, such as earthquakes, floods or war.
    Income means interest earned on sale proceeds and other resources 
received by a participant, other than sale proceeds, as a result of 
carrying out an agreement. The term may include resources from VAT 
refunds, activity fees, interest on loans, and other sources.
    Participant means an entity with which CCC has entered into an 
agreement.
    Subrecipient means a legal entity that receives donated 
commodities, income, sale proceeds or other resources from a 
participant for the purpose of implementing in the targeted country 
activities described in a FFPr agreement and that is accountable to 
such participant for the use of such commodities, funds, or resources. 
The term may include foreign or international organizations (such as 
agencies of the United Nations) at the discretion of FAS.
    Sale proceeds mean funds received by a participant from the sale of 
donated commodities.

[[Page 13067]]

    Targeted country means the country in which activities are 
implemented under an agreement.


Sec.  1499.3  Eligibility determination.

    (a) An entity will be eligible to become a participant only after 
FAS determines that the entity has:
    (1) Organizational experience in implementing and managing awards, 
and the capability and personnel to develop, implement, monitor, report 
on, and provide accountability for activities in accordance with this 
part;
    (2) Experience working in the proposed targeted country;
    (3) An adequate financial framework to implement the activities the 
entity proposes to carry out under FFPr. In order to determine whether 
the entity is financially responsible, FAS may require it to submit 
corporate policies and financial materials that have been audited or 
otherwise reviewed by a third party;
    (4) A person or agent located in the United States with respect to 
which service of judicial process may be obtained by FAS on behalf of 
the entity; and
    (5) An operating financial account in the proposed targeted 
country, or a satisfactory explanation for not having such an account 
and a description of how a FFPr agreement would be administered without 
such an account.
    (b) In determining whether an entity will be eligible to be a 
participant, FAS may consider the entity's previous compliance or 
noncompliance with the provisions of this part and part 1599 of this 
title. FAS may consider matters such as whether the entity corrected 
deficiencies in the implementation of an agreement in a timely manner 
and whether the entity has timely and accurately filed reports and 
other submissions that are required to be filed with FAS and other 
agencies of the United States.


Sec.  1499.4  Application process.

    (a) An entity seeking to enter into an agreement with CCC shall 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under FFPr in the proposed 
targeted country. An application shall contain the items specified in 
paragraph (b) of this section and shall be submitted electronically to 
FAS at the address set forth at http://www.fas.usda.gov. An entity that 
has not yet met the eligibility requirements in Sec.  1499.3 may submit 
an application, but FAS will not enter into an agreement with an entity 
until FAS had made a determination of eligibility under Sec.  1499.3.
    (b) An applicant shall include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction that contains the elements specified in 
paragraph (c) of this section; and
    (3) A plan of operation that contains the elements specified in 
paragraph (d) of this section.
    (c) The introduction shall include:
    (1) An explanation of the need for the food aid in the targeted 
country and how the applicant's proposed activities would address that 
need;
    (2) Information regarding the applicant's ability to become 
registered and operate in the targeted country;
    (3) Information about the applicant's past food aid projects; and
    (4) A budget that details the amount of any sale proceeds, income, 
and CCC-provided funds that the applicant proposes to use to fund:
    (i) Administrative costs;
    (ii) Inland transportation, storage and handling costs; and
    (iii) Activity costs.
    (d) A plan of operation shall include:
    (1) The name of the targeted country where the proposed activities 
would be implemented;
    (2) The kind, quantity, and proposed use of the commodities 
requested, and any commodities that would be acceptable substitutions 
therefor, and the proposed delivery schedule;
    (3) If monetization or barter is proposed:
    (i) The quantity of the requested commodities that would be sold or 
bartered;
    (ii) The amount of sale proceeds anticipated;
    (iii) The amount of income expected to be generated;
    (iv) The anticipated monetization completion date;
    (v) The goods or services to be generated from the barter of the 
requested commodities; and
    (vi) The value of the goods or services anticipated to be generated 
from the barter of the requested commodities.
    (4) A list of each of the activities that would be implemented, 
with a brief statement of the objectives to be accomplished under each 
activity;
    (5) For each proposed activity, the targeted geographic area, 
anticipated beneficiaries, and methods that the applicant would use to 
choose such beneficiaries, including obtaining and considering 
statistics on poverty levels, food deficits, and any other required 
items set forth on the FAS Web site at http://www.fas.usda.gov.
    (6) For each proposed activity:
    (i) An explanation of whether the activity would be carried out 
through the distribution or barter of the requested commodities or 
funded by sale proceeds, income, or a combination thereof; and
    (ii) The amount of commodities requested and of any sale proceeds 
and income expected to be generated to carry out such activity; and
    (iii) A detailed description of the activity, including the steps 
involved in its implementation and the anticipated completion date;
    (7) Any cash or non-cash contributions that the applicant expects 
to receive from non-CCC sources that:
    (i) Are critical to the implementation of the proposed activities; 
or
    (ii) Enhance the implementation of the activities;
    (8) Any subrecipient that would be involved and a description of 
each subrecipient's responsibilities and its capability to perform 
responsibilities;
    (9) Any governmental or nongovernmental entities that would be 
involved and the extent to which FFPr will strengthen or increase the 
capabilities of such entities to further economic development in the 
targeted country;
    (10) The method by which the applicant intends to inform 
beneficiaries of an activity about the source of the requested 
commodities or funding for the activity and, where the beneficiaries 
will be receiving the commodities directly, how to prepare and use them 
properly;
    (11) Established baselines, a timeline, and proposed outcomes that 
would enable FAS to measure the applicant's progress towards achieving 
the objectives of the proposed activities;
    (12) If the proposed activities would involve the use of sale 
proceeds or income:
    (i) The process that the applicant would use to sell the requested 
commodities, including steps the applicant would take to use, to the 
extent possible, the private sector in the monetization process; and
    (ii) The procedures that the applicant would use to assure that 
sale proceeds and income are received and deposited into a separate, 
interest-bearing account and disbursed from such account for use only 
in accordance with the agreement;
    (13) A description of any port, transportation, storage, and 
warehouse facilities that would be used with sufficient detail to 
demonstrate that they would be adequate to handle the requested 
commodities without undue spoilage or waste, and, in cases where the 
applicant proposes to distribute some or all of the requested

[[Page 13068]]

commodities, a description of how they would be transported from the 
receiving port to the point at which distribution would be made to the 
beneficiaries;
    (14) Any reprocessing or repackaging of the requested commodities 
that would take place prior to the distribution, sale or barter by the 
applicant;
    (15) The action the applicant would take to ensure that any 
commodities to be distributed to beneficiaries, rather than sold, would 
be imported and distributed free from all customs, duties, tolls, and 
taxes;
    (16) A plan that shows how the requested commodities could be 
imported and distributed without a disruptive impact upon production, 
prices and marketing of the same or like products in the country where 
they will be delivered, and the extent to which any sale or barter of 
the requested commodities would displace or interfere with any sales 
that may otherwise be made by the applicant or any other entity in the 
country where they will be delivered; and
    (17) Any additional required items set forth on the FAS Web site at 
http://www.fas.usda.gov.


Sec.  1499.5  Agreements.

    (a) After FAS approves an applicant's proposal, FAS will develop an 
agreement in consultation with the applicant. The agreement will set 
forth the obligations of CCC and the participant. A participant must 
comply with the terms of the agreement to receive assistance.
    (b) A participant shall not use donated commodities, sale proceeds, 
income or CCC-provided funds for any activity or any expenses incurred 
by the participant prior to the date of the agreement or after the 
agreement is suspended or terminated, except as approved by FAS.
    (c) The agreement will include a budget that sets forth the maximum 
amounts of sale proceeds and CCC-provided funds that may be expended 
for various purposes under the agreement. A participant may make 
adjustments to this budget without prior approval from FAS only as 
specified in the agreement.
    (d) Prior to providing any donated commodities or CCC-provided 
funds to a participant under an agreement, FAS may require the 
participant to complete a training program administered by FAS that is 
designed to ensure that the participant is aware of, and has the 
capacity to complete, all required reporting and audit functions set 
forth in this part.
    (e) A participant will be prohibited from using CCC-provided funds 
to acquire goods and services, either directly or indirectly through 
another party, from certain countries that will be specified in the 
agreement. Any violation of this provision of the agreement will be a 
basis for immediate termination by CCC of the agreement, in addition to 
the imposition of any other applicable civil and criminal penalties.
    (f) The agreement will prohibit the sale or transshipment of the 
donated commodities to a country not specified in the agreement for as 
long as such donated commodities are controlled by the participant.
    (g) CCC may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (h) CCC may provide donated commodities and CCC-provided funds 
under a multiyear agreement contingent upon the availability of 
commodities and funds.


Sec.  1499.6  Payments.

    (a) If the participant arranges for transportation in accordance 
with Sec.  1499.7(b)(2), and the participant seeks payment directly, 
the participant shall, as specified in the agreement, either submit to 
FAS, or maintain on file and make available to FAS, the following 
documents:
    (1) A signed copy of the completed Form CCC-512;
    (2) The original, or a true copy of, each on-board bill of lading 
indicating the freight rate and signed by the originating carrier;
    (3) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness (Vessel Hold Inspection Certificate); and,
    (iii) A signed copy of the National Cargo Bureau Certificate of 
Loading;
    (4) For all containerized cargoes, a copy of the FGIS Container 
Condition Inspection Certificate;
    (5) A signed copy of the liner booking note or charter party 
covering ocean transportation of the cargo;
    (6) In the case of charter shipments, a signed notice of arrival at 
the first discharge port, unless FAS has determined that circumstances 
of force majeure have prevented the vessel's arrival at the first port 
of discharge;
    (7) A request by the participant for reimbursement of freight, 
survey costs other than at load port, and other expenses approved by 
CCC, indicating the amount due and accompanied by a certification from 
the carrier or other parties that payments have been received from the 
participant; and
    (8) A document on letterhead and signed by an officer or agent of 
the participant specifying the name of the entity to receive payment; 
the bank ABA number to which payment is to be made; the account number 
for the deposit at the bank; the participant's taxpayer identification 
number; and the type of the account into which the payment will be 
deposited.
    (b) If the participant arranges for transportation in accordance 
with Sec.  1499.7(b)(2), and the participant has used a freight 
forwarder, the participant shall cause the freight forwarder to submit 
the documents specified in Sec.  1499.6(a) in order to receive payment 
from CCC.
    (c) In no case will CCC reimburse a participant for demurrage costs 
or pay demurrage to any other entity.
    (d) If FAS has agreed to pay the costs of transporting, storing, 
and distributing the donated commodities from the designated port or 
point of entry, the participant will be reimbursed in the manner set 
forth in the agreement.
    (e) If the agreement authorizes the payment of CCC-provided funds, 
CCC will pay these funds to the participant on a reimbursement for 
expenses basis, except as provided in paragraph (f)(1) of this section. 
The participant shall request the payment of CCC-provided funds to 
reimburse it for authorized expenses in the manner set forth in the 
agreement.
    (f)(1) A participant may request an advance of the amount of funds 
specified in the agreement. FAS will not approve any request for an 
advance if:
    (i) It is received earlier than 60 days after the date of a 
previous advance made in connection with the same agreement; or
    (ii) Any required reports, as specified in Sec.  1499.13 and in the 
agreement, are more than six months in arrears.
    (2) Except as may otherwise be provided in the agreement, the 
participant shall deposit and maintain in a bank account located in the 
United States all funds advanced by CCC. The account shall be interest-
bearing, unless the exceptions in Sec.  3019.22(k) of this title apply, 
or FAS determines that this requirement would constitute an undue 
burden. The participant shall remit semi-annually to CCC any interest 
earned on the advanced funds. The participant shall, no later than 10 
days after the end of each calendar quarter, submit a financial 
statement to FAS

[[Page 13069]]

accounting for all funds advanced and all interest earned.
    (3) The participant shall return to CCC any funds that are advanced 
by CCC if such funds have not been obligated as of the 180th day after 
the advance was made. Such funds and interest shall be transferred to 
FAS within 30 days of such date.
    (g) If a participant is required to pay funds to CCC in connection 
with an agreement, the participant shall make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.
    (h) Suppliers of commodities shall seek payment according to the 
purchase contract with CCC.


Sec.  1499.7  Transportation of goods.

    (a) Shipments of donated commodities are subject to the 
requirements of 46 U.S.C. 55305 and 55314, regarding carriage on U.S.-
flag vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by CCC under FFPr will be acquired under a 
specific agreement in the manner determined by FAS. Such transportation 
will be acquired by:
    (1) CCC in accordance with the Federal Acquisition Regulations 
(FAR), USDA's procurement regulations set forth in chapter 4 of title 
48 of the Code of Federal Regulations (the AGAR), and directives issued 
by the Director, Office of Procurement and Property Management, USDA; 
or
    (2) The participant, with reimbursement by CCC, in the manner 
specified in the agreement.
    (c) A participant that acquires transportation in accordance with 
paragraph (b)(2) of this section may only use the services of a freight 
forwarder that is licensed by the FMC and that would not have a 
conflict of interest in carrying out the freight forwarder duties. To 
assist FAS in determining whether there is a potential conflict of 
interest, the participant must submit to FAS a certification indicating 
that the freight forwarder:
    (1) Is not engaged in, and will not engage in, supplying 
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under any FFPr agreement to 
which the participant is a party; and
    (2) Is not affiliated with the participant and has not made 
arrangements to give or receive any payment, kickback, or illegal 
benefit in connection with its selection as an agent of the 
participant.
    (d) A participant that is responsible for transportation under 
paragraph (b)(2) of this section shall declare in the transportation 
contract the point at which the ocean carrier will take custody of 
commodities to be transported.


Sec.  1499.8  Entry and handling of commodities.

    (a) The participant shall make all necessary arrangements for 
receiving the donated commodities in the targeted country, including 
obtaining appropriate approvals for entry and transit. The participant 
shall store and maintain the donated commodities in good condition from 
the time of delivery at the port of entry or the point of receipt from 
the originating carrier until their distribution, sale or barter.
    (b) The participant shall, as provided in the agreement, arrange 
for transporting, storing, and distributing the donated commodities 
from the designated point and time where title to the commodities 
passes to the participant by contracting directly with suppliers of 
services, as set forth in the agreement.
    (c)(1) If a participant arranges for the packaging or repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the people of the United States of America; and,
    (iv) Includes a statement indicating that the donated commodities 
shall not be sold, exchanged or bartered.
    (2) If a participant arranges for the reprocessing and repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the reprocessed product;
    (iii) Includes a statement indicating that the reprocessed product 
was made with commodities furnished by the people of the United States 
of America; and,
    (iv) Includes a statement indicating that the reprocessed product 
shall not be sold, exchanged or bartered.
    (3) If a participant distributes donated commodities that are not 
packaged, the participant shall, to the extent practicable, display:
    (i) Banners, posters or other media informing the public of the 
name and source of the donated commodities; and
    (ii) A statement that the donated commodities may not be sold, 
exchanged, or bartered.
    (d) A participant shall arrange with the government of the targeted 
country that all donated commodities to be distributed will be imported 
and distributed free from all customs, duties, tolls, and taxes. A 
participant is encouraged to make similar arrangements, where possible, 
with the government of the country where donated commodities to be sold 
or bartered are delivered.


Sec.  1499.9  Damage to or loss of commodities.

    (a) FAS will be responsible for the donated commodities prior to 
the transfer of title to the commodities to the participant. The 
participant will be responsible for the donated commodities following 
the transfer of title to the commodities to the participant. The title 
will transfer as specified in the agreement.
    (b) A participant shall inform FAS, in the manner and within the 
time period set forth in the agreement, of any damage to or loss of the 
donated commodities that occurs following the transfer of title to the 
commodities to the participant. The participant shall take all steps 
necessary to protect its interests and the interests of CCC with 
respect to any damage to or loss of the donated commodities that occurs 
after title has been transferred to the participant. The agreement will 
specify whether the participant is responsible for obtaining a survey 
in the event that the donated commodities are damaged or lost following 
the transfer of title to the commodities to the participant.
    (c) If the donated commodities are damaged or lost during the time 
that they are in the care of the carrier:
    (1) And either FAS or the participant engages the services of an 
independent cargo surveyor, the surveyor will provide to FAS and the 
participant any report, narrative chronology or other commentary that 
it prepares;
    (2) FAS and the participant will provide to each other the names 
and addresses of any individuals known to be present at the time of 
discharge or during the survey who can verify the quantity of damaged 
or lost commodities;
    (3) And the participant engages the services of the surveyor, CCC 
will reimburse the participant for the reasonable costs, as determined 
by FAS, of the survey, unless:
    (i) The participant was required by the agreement to pay for the 
survey;

[[Page 13070]]

    (ii) The survey was a delivery survey and the surveyor did not also 
prepare a discharge survey; or
    (iii) The survey was not conducted contemporaneously with the 
discharge of the vessel, unless FAS determines that such action was 
justified under the circumstances;
    (4) Any survey obtained by the participant shall, to the extent 
practicable, be conducted jointly by the surveyor, the participant, and 
the carrier, and the survey report shall be signed by all parties;
    (5) And the damage or loss occurred with respect to a bulk grain 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall engage the 
services of an independent cargo surveyor to:
    (i) Observe the discharge of the cargo;
    (ii) Report on discharging methods, including scale type, 
calibrations and any other factor that may affect the accuracy of scale 
weights, and, if scales are not used, state the reason therefor and 
describe the actual method used to determine weight;
    (iii) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (iv) Advise on the quality of sweepings;
    (v) Obtain copies of port or vessel records, if possible, showing 
the quantity discharged; and
    (vi) Notify the participant immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and
    (6) And the damage or loss occurred with respect to a container 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall engage the 
services of an independent cargo surveyor to list the container numbers 
and seal numbers shown on the containers, indicate whether the seals 
were intact at the time the containers were opened, and note whether 
the containers were in any way damaged.
    (d) If the participant has title to the donated commodities, and 
the value of any damaged donated commodities is in excess of $1,000, 
the participant shall immediately arrange for an inspection by a public 
health official or other competent authority approved by FAS and 
provide to FAS a certification by such public health official or other 
competent authority regarding the exact quantity and condition of the 
damaged commodities. The value of damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities. The 
participant shall inform FAS of the results of the inspection and 
indicate whether the damaged commodities are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (e)(1) If the participant has title to the donated commodities, the 
participant shall arrange for the recovery of that portion of the 
donated commodities designated as suitable for the use authorized in 
the agreement. The participant shall dispose of donated commodities 
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or for other non-food use; or
    (iii) Destruction of the commodities if they are unfit for any use, 
in such manner as to prevent their use for any purpose.
    (2) The participant shall arrange for all U.S. Government markings 
to be obliterated or removed before the donated commodities are 
transferred by sale or donation.
    (f) A participant may retain any proceeds generated by the disposal 
of the donated commodities in accordance with paragraph (e)(1) of this 
section and shall use the proceeds for expenses related to the disposal 
of the donated commodities and for activities specified in the 
agreement.
    (g) The participant shall notify FAS immediately and provide 
detailed information about the actions taken in accordance with 
paragraph (e)(1) of this section, including the quantities, values, and 
dispositions of commodities determined to be unfit.


Sec.  1499.10  Claims for damage to or loss of commodities.

    (a) FAS will be responsible for claims arising out of damage to or 
loss of a quantity of the donated commodities prior to the transfer of 
title to the commodities to the participant.
    (b) If the participant has title to the donated commodities, and 
the value of the damaged or lost donated commodities is estimated to be 
$20,000 or greater, the participant will be responsible for:
    (1) Initiating a claim arising out of such damage or loss, 
including actions relating to collections pursuant to commercial 
insurance contracts; and
    (2) Notifying FAS immediately and providing detailed information 
about the circumstances surrounding such damage or loss, the quantity 
of damaged or lost donated commodities, and the value of the damage or 
loss.
    (c) If the participant has title to the donated commodities, and 
the value of the damaged or lost donated commodities is estimated to be 
less than $20,000, the participant will be responsible for providing 
detailed information about the damage or loss in the next report 
required to be filed under Sec.  1499.13(c)(1) or (2) and shall not be 
required to initiate a claim collection action.
    (d)(1) The value of a claim for lost donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities.
    (2) The value of a claim for damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities, 
less any funds generated if such commodities are sold in accordance 
with Sec.  1499.9(e)(1).
    (e) If FAS determines that a participant is not exercising due 
diligence in the pursuit of a claim, FAS may require the participant to 
assign its rights to pursue the claim to FAS.
    (f)(1) The participant may retain any funds obtained as a result of 
a claims collection action initiated by it in accordance with this 
section, or recovered pursuant to any insurance policy or other similar 
form of indemnification, but such funds shall only be expended for 
purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims 
collection action initiated by it under this section; provided, 
however, that if the participant paid for the freight or a portion 
thereof, FAS will use a portion of such funds to reimburse the 
participant for such expense on a prorated basis.


Sec.  1499.11  Use of commodities and sale proceeds.

    (a) A participant must use the donated commodities in accordance 
with the agreement.
    (b) A participant shall not permit the distribution, handling, or 
allocation of donated commodities on the basis of political 
affiliation, geographic location, or the ethnic, tribal or religious 
identity or affiliation of the potential consumers or beneficiaries.
    (c) A participant shall not permit the distribution, handling, or 
allocation of

[[Page 13071]]

donated commodities by the military forces or any government or 
insurgent group without the specific authorization of FAS.
    (d) A participant may sell or barter donated commodities only if 
such sale or barter is provided for in the agreement or the participant 
is disposing of damaged commodities as specified in Sec.  1499.9. The 
participant shall sell the donated commodities at a reasonable market 
price in the economy where the sale occurs. The participant shall use 
any sale proceeds, income, or goods or services derived from the sale 
or barter of the donated commodities only as provided in the agreement.
    (e) The participant shall deposit all sale proceeds and income into 
a separate, interest-bearing account unless the exceptions in Sec.  
3019.22(k) of this title apply, the account is in a country where the 
laws or customs prohibit the payment of interest, or FAS determines 
that this requirement would constitute an undue burden.
    (f) A participant may use sale proceeds or income to purchase real 
or personal property only if local law permits the participant to 
retain title to such property. However, the participant shall not use 
sale proceeds or income to pay for the acquisition, development, 
construction, alteration or upgrade of real property that is:
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a 
participant may use sale proceeds or income to pay for repairs to or 
rehabilitation of a structure located on such real property to the 
extent necessary to avoid spoilage or loss of donated commodities, but 
only if such structure is not used in whole or in part for any 
religious or sectarian purposes while the donated commodities are 
stored in it. If such use is not specifically provided for in the 
agreement, such use may only occur after receipt of written approval 
from FAS.
    (g) A participant shall endeavor to comply with Sec. Sec.  3019.41 
through 3019.43 of this title when procuring goods and services and 
when engaging in construction work to implement the agreement. The 
participant shall also establish procedures to prevent fraud. As 
provided for in the agreement, the participant shall enter into a 
written contract with each provider of goods, services or construction 
work that requires the provider to maintain adequate records to account 
for all donated commodities or funds or both provided to the provider 
by the participant and to submit periodic reports to the participant. 
The participant shall submit a copy of the signed contracts to FAS.


Sec.  1499.12  Subrecipients.

    (a) If provided for in the agreement, a participant may utilize the 
services of a subrecipient to implement activities under this 
agreement. The participant shall enter into a written subagreement with 
the subrecipient, and provide a copy of such subagreement to FAS, in 
the manner set forth in the agreement, prior to the transfer of any 
donated commodities, sale proceeds, income or CCC-provided funds to the 
subrecipient. Such written subagreement shall require the subrecipient 
to pay to the participant the value of any donated commodities, sale 
proceeds, income, or CCC-provided cash funds that are not used in 
accordance with the subagreement or are lost, damaged, or misused as a 
result of the subrecipient's failure to exercise reasonable care.
    (b) If a participant demonstrates to FAS that it is not feasible to 
enter into a subagreement with a subrecipient, FAS may grant approval 
to proceed without a subagreement; provided, however, that the 
participant must obtain such approval from FAS prior to transferring 
any donated commodities, sale proceeds, income, or CCC-provided funds 
to the subrecipient.
    (c) The participant shall monitor the actions of a subrecipient as 
necessary to ensure that donated commodities or funds provided to the 
subrecipient are used for authorized purposes in compliance with 
applicable laws and regulations and the agreement and that performance 
goals are achieved. The participant shall provide in the subagreement 
that the subrecipient must comply with applicable provisions of the 
regulations set forth in Chapter XXX of this title.


Sec.  1499.13  Recordkeeping and reporting requirements.

    (a) A program participant shall retain records and permit access to 
records in accordance with the requirements of Sec.  3019.53 of this 
title. The date of submission of the final expenditure report, as 
referenced in Sec.  3019.53(b) of this title, shall be the final date 
of submission of the forms required by paragraphs (c)(1) and (2) of 
this section as prescribed by FAS.
    (b) A participant shall, within 30 days after export of all or a 
portion of the donated commodities, submit evidence of such export to 
FAS, in the manner set forth in the agreement. The evidence may be 
submitted through an electronic media approved by FAS or by providing 
the carrier's on board bill of lading. The evidence of export must show 
the kind and quantity of commodities exported, the date of export, and 
the country where commodities were delivered.
    (c)(1) A participant shall submit to FAS information, using a form 
as prescribed by FAS, covering the receipt, handling and disposition of 
the donated commodities. Such report shall be submitted to FAS, by the 
dates and for the reporting periods specified in the agreement, until 
all of the donated commodities have been distributed, sold or bartered 
and such disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated 
commodities, the participant shall submit to FAS information, using a 
form as prescribed by FAS, covering the receipt and use of sale 
proceeds and income, and, in the case of bartered commodities, covering 
the services and goods derived from the barter of donated commodities. 
Such reports shall be submitted to FAS, by the dates and for the 
reporting periods specified in the agreement, until all of the sale 
proceeds and income have been disbursed and reported to FAS. When 
reporting financial information, the participant shall include the 
amounts in U.S. dollars and the exchange rate.
    (3) The participant shall report, in the manner specified in the 
agreement, its progress, measured against established baselines, 
towards achieving the objectives of the activities under the agreement.
    (4) The participant shall retain copies of and make available to 
FAS all barter receipts, contracts or other documents related to the 
barter of the donated commodities and the services or goods derived 
from such barter, for a minimum of two years after the agreement has 
been closed out.
    (5) The participant shall provide to FAS additional information or 
reports relating to the agreement if requested by FAS.
    (d) A participant shall submit to FAS, in the manner specified in 
the agreement, an annual audit in accordance with Sec.  3019.26 of this 
title. If FAS requires an annual financial audit with respect to a 
particular agreement, and CCC provides funds for this purpose, the 
participant shall arrange for such audit and submit it to FAS, in the 
manner specified in the agreement.
    (e)(1) A participant shall, as provided in the agreement, submit to 
FAS interim and final evaluations of the implementation of the 
agreement. Unless otherwise provided in the agreement, the evaluations 
shall be submitted at the mid-point and end-

[[Page 13072]]

point of the implementation period. The participant shall arrange for 
the evaluations to be conducted by an independent third party that:
    (i) Is financially and legally separate from the participant's 
organization;
    (ii) Has staff with demonstrated knowledge, analytical capability, 
language skills and experience in conducting evaluations of development 
programs involving agriculture, education, and nutrition;
    (iii) Uses acceptable analytical frameworks such as comparison with 
non-project areas, surveys, involvement of stakeholders in the 
evaluation, and statistical analyses;
    (iv) Uses local consultants, as appropriate, to conduct portions of 
the evaluation; and,
    (v) Provides a detailed outline of the evaluation, major tasks, and 
specific schedules prior to initiating the evaluation.
    (2) Receipt by FAS of the evaluations referred to in paragraph 
(e)(1) of this section is a condition for the participant to retain any 
funds provided by CCC to carry out the evaluations.
    (f) A participant shall submit to FAS the financial reports and 
information outlined in Sec.  3019.52 of this title. The agreement will 
specify the acceptable forms and time requirements for submission.


Sec.  1499.14  Noncompliance with an agreement.

    If a participant fails to comply with a term of an agreement, FAS 
may take one or more of the enforcement actions set forth in Sec.  
3019.62 of this title and, if appropriate, initiate a claim against the 
participant. FAS may also initiate a claim against a participant if the 
donated commodities are damaged or lost or the sale proceeds, income, 
or CCC-provided funds are lost due to an action or omission of the 
participant.


Sec.  1499.15  Suspension, termination, and closeout of agreements.

    (a) An agreement may be suspended or terminated by CCC if it 
determines that:
    (1) The continuation of the assistance provided under the agreement 
is no longer necessary or desirable; or
    (2) Storage facilities are inadequate to prevent spoilage or waste, 
or distribution of the donated commodities will result in substantial 
disincentive to, or interference with, domestic production or marketing 
in the targeted country.
    (b) An agreement may be terminated in accordance with Sec.  3019.61 
of this title. If an agreement is terminated, the participant shall:
    (1) Be responsible for the safety of any undistributed donated 
commodities and dispose of such commodities only as agreed to by FAS; 
and
    (2) Follow the closeout procedures in Sec. Sec.  3019.71 through 
3019.73 of this title.
    (c) An agreement will be considered completed when CCC and the 
participant have fulfilled their responsibilities under the agreement 
or the agreement has been terminated. The procedures in sections 
Sec. Sec.  3019.71 through 3019.73 of this title will apply to the 
closeout of a completed agreement.


Sec.  1499.16  Appeals.

    A participant may appeal a determination arising under this part to 
FAS. Such appeal will be in writing and submitted to the FAS official 
and in the manner set forth in the agreement. The participant will be 
given an opportunity to have a hearing before a final decision is made 
regarding its appeal.


Sec.  1499.17  Paperwork Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
under provisions of 44 U.S.C. Chapter 35 and have been assigned OMB 
Number 0551-0035.

0
3. Revise part 1599 to read as follows:

PART 1599--McGOVERN-DOLE INTERNATIONAL FOOD FOR EDUCATION AND CHILD 
NUTRITION PROGRAM

Sec.
1599.1 General statement.
1599.2 Definitions.
1599.3 Eligibility determination.
1599.4 Application process.
1599.5 Agreements.
1599.6 Payments.
1599.7 Transportation of goods.
1599.8 Entry and handling of commodities.
1599.9 Damage to or loss of commodities.
1599.10 Claims for damage to or loss of commodities.
1599.11 Use of commodities and sales proceeds.
1599.12 Subrecipients.
1599.13 Recordkeeping and reporting requirements.
1599.14 Noncompliance with an agreement.
1599.15 Suspension, termination, and closeout of agreements.
1599.16 Appeals.
1599.17 Paperwork Reduction Act.

    Authority: 7 U.S.C. 1736o-1.


Sec.  1599.1  General statement.

    (a) This part sets forth the general terms and conditions governing 
the donation of commodities by the Foreign Agricultural Service (FAS) 
of the U.S. Department of Agriculture (USDA) to participants in the 
McGovern-Dole International Food for Education and Child Nutrition 
Program (McGovern-Dole Program). Under the McGovern-Dole Program, 
participants use the donated commodities, proceeds from the sale of 
such commodities, or funds provided by FAS to implement activities in a 
foreign country pursuant to an agreement with FAS. FAS administers the 
McGovern-Dole Program and acts on behalf of the Commodity Credit 
Corporation (CCC) in cases where the agreement is funded with CCC 
resources.
    (b) In addition to the provisions of this part, other regulations 
of general application issued by the Department, including the 
regulations set forth in Chapter 30 of this title, are applicable to 
the McGovern-Dole Program. In cases where an agreement is funded with 
CCC resources, provisions of the CCC Charter Act (15 U.S.C. 714 et 
seq.) and any other statutory provisions that are generally applicable 
to CCC are applicable to McGovern-Dole Program and the regulations set 
forth in this part.
    (c) This part shall not apply to a donation by FAS to a foreign 
government or an intergovernmental agency or organization (such as the 
United Nations' World Food Program) under the McGovern-Dole Program.


Sec.  1599.2  Definitions.

    The following definitions are applicable to this part:
    Activity means a project to be carried out by a participant, 
directly or through a subrecipient, to fulfill the objectives of an 
agreement.
    Agreement means a legally binding agreement entered into between 
FAS and a participant to implement activities under the McGovern-Dole 
Program.
    CCC means the Commodity Credit Corporation and includes any 
official of the United States delegated the responsibility to act on 
behalf of CCC.
    Commodities mean U.S. agricultural commodities or products of U.S. 
agricultural commodities.
    Donated commodities mean the commodities donated by FAS to a 
participant under an agreement. The term may include donated 
commodities that are used to produce a further processed product for 
use under the agreement.
    FAS means the Foreign Agricultural Service of the United States 
Department of Agriculture.
    FAS-provided funds means U.S. dollars provided under an agreement 
to a participant for expenses for the internal transportation, storage 
and handling of the donated commodities,

[[Page 13073]]

expenses involved in the administration and monitoring of the 
activities under the agreement, and the costs of activities conducted 
in the targeted country that would enhance the effectiveness of the 
activities implemented by the participant under the McGovern-Dole 
Program.
    Force majeure is a common clause in contracts, exempting the 
parties for non-fulfillment of their obligations as a result of 
conditions beyond their control, such as earthquakes, floods or war.
    Income means interest earned on sale proceeds and other resources 
received by a participant, other than sale proceeds, as a result of 
carrying out an agreement. The term may include resources from VAT 
refunds, activity fees, interest on loans, and other sources.
    McGovern-Dole Program means the McGovern-Dole International Food 
for Education and Child Nutrition Program.
    Participant means an entity with which FAS has entered into an 
agreement.
    Subrecipient means a legal entity that receives donated 
commodities, income, sale proceeds or other resources from a 
participant for the purpose of implementing in the targeted country 
activities described in a McGovern-Dole Program agreement and that is 
accountable to such participant for the use of such commodities, funds, 
or resources. The term may include foreign or international 
organizations (such as agencies of the United Nations) at the 
discretion of FAS.
    Sale proceeds mean funds received by a participant from the sale of 
donated commodities.
    Targeted country means the country in which activities are 
implemented under an agreement.


Sec.  1599.3  Eligibility determination.

    (a) An entity will be eligible to become a participant only after 
FAS determines that the entity has:
    (1) Organizational experience in implementing and managing awards, 
and the capability and personnel to develop, implement, monitor, report 
on, and provide accountability for activities in accordance with this 
part;
    (2) Experience working in the proposed targeted country;
    (3) An adequate financial framework to implement the activities the 
entity proposes to carry out under McGovern-Dole Program. In order to 
determine whether the entity is financially responsible, FAS may 
require it to submit corporate policies and financial materials that 
have been audited or otherwise reviewed by a third party;
    (4) A person or agent located in the United States with respect to 
which service of judicial process may be obtained by FAS on behalf of 
the entity; and
    (5) An operating financial account in the proposed targeted 
country, or a satisfactory explanation for not having such an account 
and a description of how a McGovern-Dole Program agreement would be 
administered without such an account.
    (b) In determining whether an entity will be eligible to be a 
participant, FAS may consider the entity's previous compliance or 
noncompliance with the provisions of this part and part 1499 of this 
title. FAS may consider matters such as whether the entity corrected 
deficiencies in the implementation of an agreement in a timely manner 
and whether the entity has timely and accurately filed reports and 
other submissions that are required to be filed with FAS and other 
agencies of the United States.


Sec.  1599.4  Application process.

    (a) An entity seeking to enter into an agreement with FAS shall 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under the McGovern-Dole Program in 
the proposed targeted country. An application shall contain the items 
specified in paragraph (b) of this section and shall be submitted 
electronically to FAS at the address set forth at http://www.fas.usda.gov. An entity that has not yet met the eligibility 
requirements in Sec.  1599.3 may submit an application, but FAS will 
not enter into an agreement with an entity until FAS had made a 
determination of eligibility under Sec.  1599.3.
    (b) An applicant shall include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction that contains the elements specified in 
paragraph (c) of this section; and
    (3) A plan of operation that contains the elements specified in 
paragraph (d) of this section.
    (c) The introduction shall include:
    (1) An explanation of the need for food aid in the targeted country 
and how the applicant's proposed activities would address that need;
    (2) An explanation of the need for a school feeding program in the 
targeted country and information regarding:
    (i) The country's current school feeding operations, if they exist, 
the length and sessions of a typical school year, and current funding 
resources; and
    (ii) Teacher training, parent-teacher associations, community 
infrastructure, and health, nutrition, water and sanitation conditions;
    (3) Information regarding the applicant's ability to become 
registered and operate in the targeted country;
    (4) Information about the applicant's past food aid projects;
    (5) Methods that the applicant proposes to use to involve 
indigenous institutions as well as local communities and governments in 
the development and implementation of the activities in order to foster 
local capacity building and leadership;
    (6) A budget that details the amount of any sale proceeds, income, 
and FAS-provided funds that the applicant proposes to use to fund:
    (i) Administrative costs;
    (ii) Inland transportation, storage and handling costs; and
    (iii) Activity costs;
    (7) A statement verifying the commitment of the government of the 
targeted country to work toward, through a national action plan, the 
goals of the World Declaration on Education for All convened in 1990 in 
Jomtien, Thailand, and the follow-up Dakar Framework for Action of the 
World Education Forum, convened in 2000; and
    (8) A description of:
    (i) How the benefits of education, enrollment, and attendance of 
children in schools in the targeted communities will be sustained when 
the assistance under the McGovern-Dole Program terminates; and
    (ii) The estimated period of time required until the targeted 
country or the applicant would be able to sustain the program without 
additional assistance under the McGovern-Dole Program.
    (d) A plan of operation shall include:
    (1) The name of the targeted country where the proposed activities 
would be implemented;
    (2) The kind, quantity, and proposed use of the commodities 
requested, and any commodities that would be acceptable substitutions 
therefor, and the proposed delivery schedule;
    (3) If monetization or barter is proposed:
    (i) The quantity of the requested commodities that would be sold or 
bartered;
    (ii) The amount of sale proceeds anticipated;
    (iii) The amount of income expected to be generated;
    (iv) The anticipated monetization completion date;
    (v) The goods or services to be generated from the barter of the 
requested commodities;

[[Page 13074]]

    (vi) The value of the goods or services anticipated to be generated 
from the barter of the requested commodities; and
    (vii) A justification for monetizing the requested commodities that 
discusses why monetization would provide a greater benefit than the 

receipt of FAS-provided funds to carry out activities.
    (4) A list of each of the activities that would be implemented, 
with a brief statement of the objectives to be accomplished under each 
activity;
    (5) For each proposed activity, the targeted geographic area, 
anticipated beneficiaries, and methods that the applicant would use to 
choose such beneficiaries, including obtaining and considering 
statistics on poverty levels, food deficits, literacy rates, and any 
other required items set forth on the FAS Web site at http://www.fas.usda.gov.
    (6) For each proposed activity:
    (i) An explanation of whether the activity would be carried out 
through the distribution or barter of the requested commodities or 
funded by FAS-provided funds, sale proceeds, income, or a combination 
thereof; and
    (ii) The amount of commodities and FAS-provided funds requested, 
and of any sale proceeds and income expected to be generated, to carry 
out such activity; and
    (iii) A detailed description of the activity, including the steps 
involved in its implementation and the anticipated completion date;
    (7) Any cash or non-cash contributions that the applicant expects 
to receive from non-FAS sources that:
    (i) Are critical to the implementation of the proposed activities; 
or
    (ii) Enhance the implementation of the activities;
    (8) Any subrecipient that would be involved and a description of 
each subrecipient's responsibilities and its capability to perform 
responsibilities;
    (9) Any governmental or nongovernmental entities that would be 
involved and the extent to which the McGovern-Dole Program will 
strengthen or increase the capabilities of such entities to further 
educational and economic development in the targeted country;
    (10) The method by which the applicant intends to inform 
beneficiaries of an activity about the source of the requested 
commodities or funding for the activity and, where the beneficiaries 
will be receiving the commodities directly, how to prepare and use them 
properly;
    (11) Established baselines, a timeline, and proposed outcomes that 
would enable FAS to measure the applicant's progress towards achieving 
the objectives of the proposed activities and the McGovern-Dole 
Program, which include:
    (i) Increased enrollment and attendance rates, especially for 
girls;
    (ii) Improved student achievement levels through improvements in 
the learning environment;
    (iii) Improved maternal, child and student health and nutrition;
    (iv) Attracting non-FAS contributions to development activities;
    (v) Enabling community support for infrastructure development; and
    (vi) Increased government and community support in education;
    (12) If the proposed activities would involve the use of sale 
proceeds or income:
    (i) The process that the applicant would use to sell the requested 
commodities, including steps the applicant would take to use, to the 
extent possible, the private sector in the monetization process; and
    (ii) The procedures that the applicant would use to assure that 
sale proceeds and income are received and deposited into a separate, 
interest-bearing account and disbursed from such account for use only 
in accordance with the agreement;
    (13) A description of any port, transportation, storage, and 
warehouse facilities that would be used with sufficient detail to 
demonstrate that they would be adequate to handle the requested 
commodities without undue spoilage or waste, and, in cases where the 
applicant proposes to distribute some or all of the requested 
commodities, a description of how they would be transported from the 
receiving port to the point at which distribution is made to the 
beneficiaries;
    (14) Any reprocessing or repackaging of the requested commodities 
that would take place prior to the distribution, sale or barter by the 
applicant;
    (15) The action the applicant would take to ensure that any 
commodities to be distributed to beneficiaries, rather than sold, would 
be imported and distributed free from all customs, duties, tolls, and 
taxes;
    (16) A plan that shows how the requested commodities could be 
imported and distributed without a disruptive impact upon production, 
prices and marketing of the same or like products in the country where 
they will be delivered, and the extent to which any sale or barter of 
the requested commodities would displace or interfere with any sales 
that may otherwise be made by the applicant or any other entity in the 
country where they will be delivered; and
    (17) Any additional required items set forth on the FAS Web site at 
http://www.fas.usda.gov.


Sec.  1599.5  Agreements.

    (a) After FAS approves an applicant's proposal, FAS will develop an 
agreement in consultation with the applicant. The agreement will set 
forth the obligations of FAS and the participant. A participant must 
comply with the terms of the agreement to receive assistance.
    (b) A participant shall not use donated commodities, sale proceeds, 
income or FAS-provided funds for any activity or any expenses incurred 
by the participant prior to the date of the agreement or after the 
agreement is suspended or terminated, except as approved by FAS.
    (c) The agreement will include a budget that sets forth the maximum 
amounts of sale proceeds and FAS-provided funds that may be expended 
for various purposes under the agreement. A participant may make 
adjustments to this budget without prior approval from FAS only as 
specified in the agreement.
    (d) Prior to providing any donated commodities or FAS-provided 
funds to a participant under an agreement, FAS may require the 
participant to complete a training program administered by FAS that is 
designed to ensure that the participant is aware of, and has the 
capacity to complete, all required reporting and audit functions set 
forth in this part.
    (e) A participant will be prohibited from using FAS-provided funds 
to acquire goods and services, either directly or indirectly through 
another party, from certain countries that will be specified in the 
agreement. Any violation of this provision of the agreement will be a 
basis for immediate termination by FAS of the agreement in addition to 
the imposition of any other applicable civil and criminal penalties.
    (f) The agreement will prohibit the sale or transshipment of the 
donated commodities to a country not specified in the agreement for as 
long as such donated commodities are controlled by the participant.
    (g) FAS may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (h) FAS may provide donated commodities and FAS-provided funds 
under a multiyear agreement contingent upon the availability of 
commodities and funds.

[[Page 13075]]

Sec.  1599.6  Payments.

    (a) If the participant arranges for transportation in accordance 
with Sec.  1599.7(b)(2), and the participant seeks payment directly, 
the participant shall, as specified in the agreement, either submit to 
FAS, or maintain on file and make available to FAS, the following 
documents:
    (1) A signed copy of the completed Form CCC-512;
    (2) The original, or a true copy of, each on-board bill of lading 
indicating the freight rate and signed by the originating carrier;
    (3) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness (Vessel Hold Inspection Certificate); and
    (iii) A signed copy of the National Cargo Bureau Certificate of 
Loading;
    (4) For all containerized cargoes, a copy of the FGIS Container 
Condition Inspection Certificate;
    (5) A signed copy of the liner booking note or charter party 
covering ocean transportation of the cargo;
    (6) In the case of charter shipments, a signed notice of arrival at 
the first discharge port, unless FAS has determined that circumstances 
of force majeure have prevented the vessel's arrival at the first port 
of discharge;
    (7) A request by the participant for reimbursement of freight, 
survey costs other than at load port, and other expenses approved by 
FAS indicating the amount due and accompanied by a certification from 
the carrier or other parties that payments have been received from the 
participant; and
    (8) A document on letterhead and signed by an officer or agent of 
the participant specifying the name of the entity to receive payment; 
the bank ABA number to which payment is to be made; the account number 
for the deposit at the bank; the participant's taxpayer identification 
number; and the type of the account into which the payment will be 
deposited.
    (b) If the participant arranges for transportation in accordance 
with Sec.  1599.7(b)(2), and the participant has used a freight 
forwarder, the participant shall cause the freight forwarder to submit 
the documents specified in Sec.  1599.6(a) in order to receive payment 
from FAS.
    (c) In no case will FAS reimburse a participant for demurrage costs 
or pay demurrage to any other entity.
    (d) If FAS has agreed to pay the costs of transporting, storing, 
and distributing the donated commodities from the designated port or 
point of entry, the participant will be reimbursed in the manner set 
forth in the agreement.
    (e) If the agreement authorizes the payment of FAS-provided funds, 
FAS will pay these funds to the participant on a reimbursement for 
expenses basis, except as provided in paragraph (f)(1) of this section. 
The participant shall request the payment of FAS-provided funds to 
reimburse it for authorized expenses in the manner set forth in the 
agreement.
    (f)(1) A participant may request an advance of the amount of funds 
specified in the agreement. FAS will not approve any request for an 
advance if:
    (i) It is received earlier than 60 days after the date of a 
previous advance made in connection with the same agreement; or
    (ii) Any required reports, as specified in Sec.  1499.13 and in the 
agreement, are more than six months in arrears.
    (2) Except as may otherwise be provided in the agreement, the 
participant shall deposit and maintain in a bank account located in the 
United States all funds advanced by FAS. The account shall be interest-
bearing, unless the exceptions in Sec.  3019.22(k) of this title apply, 
or FAS determines that this requirement would constitute an undue 
burden. The participant shall remit semi-annually to FAS any interest 
earned on the advanced funds. The participant shall, no later than 10 
days after the end of each calendar quarter, submit a financial 
statement to FAS accounting for all funds advanced and all interest 
earned.
    (3) The participant shall return to FAS any funds that are advanced 
by FAS if such funds have not been obligated as of the 180th day after 
the advance was made. Such funds and interest shall be transferred to 
FAS within 30 days of such date.
    (g) If a participant is required to pay funds to FAS in connection 
with an agreement, the participant shall make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.
    (h) Suppliers of commodities shall seek payment according to the 
purchase contract.


Sec.  1599.7  Transportation of goods.

    (a) Shipments of donated commodities are subject to the 
requirements of 46 U.S.C. 55305 and 55314, regarding carriage on U.S.-
flag vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by FAS under the McGovern-Dole Program will 
be acquired under a specific agreement in the manner determined by FAS. 
Such transportation will be acquired by:
    (1) FAS in accordance with the Federal Acquisition Regulations 
(FAR), the Department's procurement regulations set forth in chapter 4 
of title 48 of the Code of Federal Regulations (the AGAR) and 
directives issued by the Director, Office of Procurement and Property 
Management, U.S. Department of Agriculture; or
    (2) The participant, with reimbursement by FAS, in the manner 
specified in the agreement.
    (c) A participant that acquires transportation in accordance with 
paragraph (b)(2) of this section may only use the services of a freight 
forwarder that is licensed by the Federal Maritime Commission (FMC) and 
that would not have a conflict of interest in carrying out the freight 
forwarder duties. To assist FAS in determining whether there is a 
potential conflict of interest, the participant must submit to FAS a 
certification indicating that the freight forwarder:
    (1) Is not engaged, and will not engage, in supplying commodities 
or furnishing ocean transportation or ocean transportation-related 
services for commodities provided under any McGovern-Dole Program 
agreement to which the participant is a party; and
    (2) Is not affiliated with the participant and has not made 
arrangements to give or receive any payment, kickback, or illegal 
benefit in connection with its selection as an agent of the 
participant.
    (d) A participant that is responsible for transportation under 
paragraph (b)(2) of this section shall declare in the transportation 
contract the point at which the ocean carrier will take custody of 
commodities to be transported.


Sec.  1599.8  Entry and handling of commodities.

    (a) The participant shall make all necessary arrangements for 
receiving the donated commodities in the targeted country, including 
obtaining appropriate approvals for entry and transit. The participant 
shall store and maintain the donated commodities in good condition from 
the time of delivery at the port of entry or the point of receipt from 
the originating carrier until their distribution, sale or barter.
    (b) The participant shall, as provided in the agreement, arrange 
for transporting, storing, and distributing the donated commodities 
from the designated point and time where title to the commodity passes 
to the participant by contracting directly with suppliers of services, 
as set forth in the agreement.

[[Page 13076]]

    (c)(1) If a participant arranges for the packaging or repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the people of the United States of America; and
    (iv) Includes a statement indicating that the donated commodities 
shall not be sold, exchanged or bartered.
    (2) If a participant arranges for the reprocessing and repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the reprocessed product;
    (iii) Includes a statement indicating that the reprocessed product 
was made with commodities furnished by the people of the United States 
of America; and
    (iv) Includes a statement indicating that the reprocessed product 
shall not be sold, exchanged or bartered;
    (3) If a participant distributes donated commodities that are not 
packaged, the participant shall, to the extent practicable, display:
    (i) Banners, posters or other media informing the public of the 
name and source of the donated commodities; and
    (ii) A statement that the donated commodities may not be sold, 
exchanged, or bartered.
    (d) A participant shall arrange with the government of the targeted 
country that all donated commodities to be distributed will be imported 
and distributed free from all customs, duties, tolls, and taxes. A 
participant is encouraged to make similar arrangements, where possible, 
with the government of the country where donated commodities to be sold 
or bartered are delivered.


Sec.  1599.9  Damage to or loss of commodities.

    (a) FAS will be responsible for the donated commodities prior to 
the transfer of title to the commodities to the participant. The 
participant will be responsible for the donated commodities following 
the transfer of title to the commodities to the participant. The title 
will transfer as specified in the agreement.
    (b) A participant shall inform FAS, in the manner and within the 
time period set forth in the agreement, of any damage to or loss of the 
donated commodities that occurs following the transfer of title to the 
commodities to the participant. The participant shall take all steps 
necessary to protect its interests and the interests of FAS with 
respect to any damage to or loss of the donated commodities that occurs 
after title has been transferred to the participant. The agreement will 
specify whether the participant is responsible for obtaining a survey 
in the event that the donated commodities are damaged or lost following 
the transfer of title to the commodities to the participant.
    (c) If the donated commodities are damaged or lost during the time 
that they are in the care of the carrier:
    (1) And either FAS or the participant engages the services of an 
independent cargo surveyor, the surveyor will provide to FAS and the 
participant any report, narrative chronology or other commentary that 
it prepares;
    (2) FAS and the participant will provide to each other the names 
and addresses of any individuals known to be present at the time of 
discharge or during the survey who can verify the quantity of damaged 
or lost commodities;
    (3) And the participant engages the services of the surveyor, FAS 
will reimburse the participant for the reasonable costs, as determined 
by FAS, of the survey, unless:
    (i) The participant was required by the agreement to pay for the 
survey;
    (ii) The survey was a delivery survey and the surveyor did not also 
prepare a discharge survey; or
    (iii) The survey was not conducted contemporaneously with the 
discharge of the vessel, unless FAS determines that such action was 
justified under the circumstances;
    (4) Any survey obtained by the participant shall, to the extent 
practicable, be conducted jointly by the surveyor, the participant, and 
the carrier, and the survey report shall be signed by all parties;
    (5) And the damage or loss occurred with respect to a bulk grain 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall obtain the 
services of an independent cargo surveyor to:
    (i) Observe the discharge of the cargo;
    (ii) Report on discharging methods, including scale type, 
calibrations and any other factor that may affect the accuracy of scale 
weights, and, if scales are not used, state the reason therefor and 
describe the actual method used to determine weight;
    (iii) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (iv) Advise on the quality of sweepings;
    (v) Obtain copies of port or vessel records, if possible, showing 
the quantity discharged; and
    (vi) Notify the participant immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and
    (6) And the damage or loss occurred with respect to a container 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall engage the 
services of an independent cargo surveyor to list the container numbers 
and seal numbers shown on the containers, indicate whether the seals 
were intact at the time the containers were opened, and note whether 
the containers were in any way damaged.
    (d) If the participant has title to the donated commodities, and 
the value of any damaged donated commodities is in excess of $1,000, 
the participant shall immediately arrange for an inspection by a public 
health official or other competent authority approved by FAS and 
provide to FAS a certification by such public health official or other 
competent authority regarding the exact quantity and condition of the 
damaged commodities. The value of damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities. The 
participant shall inform FAS of the results of the inspection and 
indicate whether the damaged commodities are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (e)(1) If the participant has title to the donated commodities, the 
participant shall arrange for the recovery of that portion of the 
donated commodities designated as suitable for the use authorized in 
the agreement. The participant shall dispose of donated commodities 
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or for other non-food use; or
    (iii) Destruction of the commodities if they are unfit for any use, 
in such

[[Page 13077]]

manner as to prevent their use for any purpose.
    (2) The participant shall arrange for all U.S. Government markings 
to be obliterated or removed before the donated commodities are 
transferred by sale or donation.
    (f) A participant may retain any proceeds generated by the disposal 
of the donated commodities in accordance with paragraph (e)(1) of this 
section and shall use the proceeds for expenses related to the disposal 
of the donated commodities and for activities specified in the 
agreement.
    (g) The participant shall notify FAS immediately and provide 
detailed information about the actions taken in accordance with 
paragraph (e) of this section, including the quantities, values and 
dispositions of commodities determined to be unfit.


Sec.  1599.10  Claims for damage to or loss of commodities.

    (a) FAS will be responsible for claims arising out of damage to or 
loss of a quantity of the donated commodities prior to the transfer of 
title to the commodities to the participant.
    (b) If the participant has title to the donated commodities, and 
the value of the damaged or lost donated commodities is estimated to be 
$20,000 or greater, the participant will be responsible for:
    (1) Initiating a claim arising out of such damage or loss, 
including actions relating to collections pursuant to commercial 
insurance contracts; and
    (2) Notifying FAS immediately and providing detailed information 
about the circumstances surrounding such damage or loss, the quantity 
of damaged or lost donated commodities, and the value of the damage or 
loss.
    (c) If the participant has title to the donated commodities, and 
the value of the damaged or lost donated commodities is estimated to be 
less than $20,000, the participant will be responsible for providing 
detailed information about the damage or loss in the next report 
required to be filed under Sec.  1599.13(c)(1) or (2) and shall not be 
required to initiate a claim collection action.
    (d)(1) The value of a claim for lost donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities.
    (2) The value of a claim for damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, 
less any funds generated if such commodities are sold in accordance 
with Sec.  1599.9(e)(1).
    (e) If FAS determines that a participant is not exercising due 
diligence in the pursuit of a claim, FAS may require the participant to 
assign its rights to pursue the claim to FAS.
    (f)(1) The participant may retain any funds obtained as a result of 
a claims collection action initiated by it in accordance with this 
section, or recovered pursuant to any insurance policy or other similar 
form of indemnification, but such funds shall only be expended for 
purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims 
collection action initiated by it under this section; provided, 
however, that if the participant paid for the freight or a portion 
thereof, FAS will use a portion of such funds to reimburse the 
participant for such expense on a prorated basis.


Sec.  1599.11  Use of commodities and sale proceeds.

    (a) A participant must use the donated commodities in accordance 
with the agreement.
    (b) A participant shall not permit the distribution, handling, or 
allocation of donated commodities on the basis of political 
affiliation, geographic location, or the ethnic, tribal or religious 
identity or affiliation of the potential consumers or beneficiaries.
    (c) A participant shall not permit the distribution, handling, or 
allocation of donated commodities by the military forces or any 
government or insurgent group without the specific authorization of 
FAS.
    (d) A participant may sell or barter donated commodities only if 
such sale or barter is provided for in the agreement or the participant 
is disposing of damaged commodities as specified in Sec.  1599.9. The 
participant shall sell the donated commodities at a reasonable market 
price in the economy where the sale occurs. The participant shall use 
any sale proceeds, income, or goods or services derived from the sale 
or barter of the donated commodities only as provided in the agreement.
    (e) The participant shall deposit all sale proceeds and income into 
a separate, interest-bearing account unless the exceptions in Sec.  
3019.22(k) of this title apply, the account is in a country where the 
laws or customs prohibit the payment of interest, or FAS determines 
that this requirement would constitute an undue burden.
    (f) A participant may use sale proceeds or income to purchase real 
or personal property only if local law permits the participant to 
retain title to such property. However, the participant shall not use 
sale proceeds or income to pay for the acquisition, development, 
construction, alteration or upgrade of real property that is:
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a 
participant may use sale proceeds or income to pay for repairs to or 
rehabilitation of a structure located on such real property to the 
extent necessary to avoid spoilage or loss of donated commodities, but 
only if such structure is not used in whole or in part for any 
religious or sectarian purposes while the donated commodities are 
stored in it. If such use is not specifically provided for in the 
agreement, such use may only occur after receipt of written approval 
from FAS.
    (g) A participant shall endeavor to comply with Sec. Sec.  3019.41 
through 3019.43 of this title when procuring goods and services and 
when engaging in construction work to implement the agreement. The 
participant shall also establish procedures to prevent fraud. As 
provided for in the agreement, the participant shall enter into a 
written contract with each provider of goods, services or construction 
work that requires the provider to maintain adequate records to account 
for all donated commodities or funds or both provided to the provider 
by the participant and to submit periodic reports to the participant. 
The participant shall submit a copy of the signed contracts to FAS.


Sec.  1599.12  Subrecipients.

    (a) If provided for in the agreement, a participant may utilize the 
services of a subrecipient to implement activities under this 
agreement. The participant shall enter into a written subagreement with 
the subrecipient, and provide a copy of such subagreement to FAS, in 
the manner set forth in the agreement, prior to the transfer of any 
donated commodities, sale proceeds, income or FAS-provided funds to the 
subrecipient. Such written subagreement shall require the subrecipient 
to pay to the participant the value of any donated commodities, sale 
proceeds, income, or FAS-provided cash funds that are not used in 
accordance with the subagreement or are lost, damaged, or misused as a 
result of the subrecipient's failure to exercise reasonable care.
    (b) If a participant demonstrates to FAS that it is not feasible to 
enter into a subagreement with a subrecipient,

[[Page 13078]]

FAS may grant approval to proceed without a subagreement; provided, 
however, that the participant must obtain such approval from FAS prior 
to transferring any donated commodities, sale proceeds, income, or FAS-
provided funds to the subrecipient.
    (c) The participant shall monitor the actions of a subrecipient as 
necessary to ensure that donated commodities or funds provided to the 
subrecipient are used for authorized purposes in compliance with 
applicable laws and regulations and the agreement and that performance 
goals are achieved. The participant shall provide in the subagreement 
that the subrecipient must comply with applicable provisions of the 
regulations set forth in Chapter XXX of this title.


Sec.  1599.13  Recordkeeping and reporting requirements.

    (a) A program participant shall retain records and permit access to 
records in accordance with the requirements of Sec.  3019.53 of this 
title. The date of submission of the final expenditure report, as 
referenced in Sec.  3019.53(b) of this title, shall be the final date 
of submission of the forms required by paragraphs (c)(1) and (2) of 
this section, as prescribed by FAS.
    (b) A participant shall, within 30 days after export of all or a 
portion of the donated commodities, submit evidence of such export to 
FAS, in the manner set forth in the agreement. The evidence may be 
submitted through an electronic media approved by FAS or by providing 
the carrier's on board bill of lading. The evidence of export must show 
the kind and quantity of commodities exported, the date of export, and 
the country where commodities were delivered.
    (c)(1) A participant shall submit to FAS information, using a form 
as prescribed by FAS, covering the receipt, handling and disposition of 
the donated commodities. Such report shall be submitted to FAS, by the 
dates and for the reporting periods specified in the program agreement, 
until all of the donated commodities have been distributed, sold or 
bartered and such disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated 
commodities, the participant shall submit to FAS information, using a 
form as prescribed by FAS, covering the receipt and use of sale 
proceeds and income, and, in the case of bartered commodities, covering 
the services and goods derived from the barter of donated commodities. 
Such reports shall be submitted to FAS, by the dates and for the 
reporting periods specified in the agreement, until all of the sale 
proceeds and income have been disbursed and reported to FAS. When 
reporting financial information, the participant shall include the 
amounts in U.S. dollars and the exchange rate.
    (3) The participant shall report, in the manner specified in the 
agreement, its progress, measured against established baselines, 
towards achieving the objectives of the activities under the agreement.
    (4) The participant shall retain copies of and make available to 
FAS all barter receipts, contracts or other documents related to the 
barter of the donated commodities and the services or goods derived 
from such barter, for a minimum of two years after the agreement has 
been closed out.
    (5) The participant shall provide to FAS additional information or 
reports relating to the agreement if requested by FAS.
    (d) A participant shall submit to FAS, in the manner specified in 
the agreement, an annual audit in accordance with Sec.  3019.26 of this 
title. If FAS requires an annual financial audit with respect to a 
particular agreement, and FAS provides funds for this purpose, the 
participant shall arrange for such audit and submit to FAS, in the 
manner specified in the agreement.
    (e)(1) A participant shall, as provided in the agreement, submit to 
FAS interim and final evaluations of the implementation of the 
agreement. Unless otherwise provided in the agreement, the evaluations 
shall be submitted at the mid-point and end-point of the implementation 
period. The participant shall arrange for the evaluations to be 
conducted by an independent third party that:
    (i) Is financially and legally separate from the participant's 
organization;
    (ii) Has staff with demonstrated knowledge, analytical capability, 
language skills and experience in conducting evaluations of development 
programs involving agriculture, education, and nutrition;
    (iii) Uses acceptable analytical frameworks such as comparison with 
non-project areas, surveys, involvement of stakeholders in the 
evaluation, and statistical analyses;
    (iv) Uses local consultants, as appropriate, to conduct portions of 
the evaluation; and
    (v) Provides a detailed outline of the evaluation, major tasks, and 
specific schedules prior to initiating the evaluation.
    (2) Receipt by FAS of the evaluations referred to in paragraph 
(e)(1) of this section is a condition for the participant to retain any 
funds provided by FAS to carry out the evaluations.
    (f) A participant shall submit to FAS the financial reports and 
information outlined in Sec.  3019.52 of this title. The agreement will 
specify the acceptable forms and time requirements for submission.


Sec.  1599.14  Noncompliance with an agreement.

    If a participant fails to comply with a term of an agreement, FAS 
may take one or more of the enforcement actions set forth in Sec.  
3019.62 of this title and, if appropriate, initiate a claim against the 
participant. FAS may also initiate a claim against a participant if the 
donated commodities are damaged or lost or the sale proceeds, income, 
or FAS-provided funds are lost due to an action or omission of the 
participant.


Sec.  1599.15  Suspension, termination, and closeouts of agreements.

    (a) An agreement may be suspended or terminated by FAS if it 
determines that:
    (1) The continuation of the assistance provided under the agreement 
is no longer necessary or desirable; or
    (2) Storage facilities are inadequate to prevent spoilage or waste, 
or distribution of the donated commodities will result in substantial 
disincentive to, or interference with, domestic production or marketing 
in the targeted country.
    (b) An agreement may be terminated in accordance with Sec.  3019.61 
of this title. If an agreement is terminated, the participant shall:
    (1) Be responsible for the safety of any undistributed donated 
commodities and dispose of such commodities only as agreed to by FAS; 
and
    (2) Follow the closeout procedures in Sec. Sec.  3019.71 through 
3019.73 of this title.
    (c) An agreement will be considered completed when FAS and the 
participant have fulfilled their responsibilities under the agreement 
or the agreement has been terminated. The procedures in Sec. Sec.  
3019.71 through 3019.73 of this title will apply to the closeout of a 
completed agreement.


Sec.  1599.16  Appeals.

    A participant may appeal a determination arising under this part to 
FAS. Such appeal will be in writing and submitted to the FAS official 
and in the manner set forth in the agreement. The participant will be 
given an opportunity to have a hearing before a final decision is made 
regarding its appeal.


Sec.  1599.17  Paperwork Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by OMB under provisions of 44 U.S.C. 
Chapter

[[Page 13079]]

35 and have been assigned OMB Number 0551-0035.

Title 48--Federal Acquisition Regulations System

CHAPTER 4--DEPARTMENT OF AGRICULTURE

0
4. Amend 48 CFR Chapter 4 by establishing subchapter I consisting of 
part 470 to read as follows:

SUBCHAPTER I--FOOD ASSISTANCE PROGRAMS

PART 470--COMMODITY ACQUISITIONS

Sec.
470.000 Scope of part.
470.101 Definitions.
470.102 Policy.
470.103 United States origin of agricultural products.
470.200 [Reserved]
470.201 Acquisition of commodities and freight shipment for Foreign 
Agricultural Service programs.
470.202 Acquisition of commodities for United States Agency for 
International Development (USAID) programs.
470.203 Cargo preference.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1691 through 1726b; 1731 
through 1736g-3; 1736o; 1736o-1; 40 U.S.C. 121(c); 46 U.S.C. 53305, 
55314 and 55316.


470.000  Scope of part.

    This part sets forth the policies, procedures and requirements 
governing the procurement of agricultural commodities by the Department 
of Agriculture for use:
    (a) Under any domestic feeding and assistance program administered 
by the Food and Nutrition Service; and
    (b) Under Title II of the Food for Peace Act (7 U.S.C. 1721 et 
seq.); the Food for Progress Act of 1985; the McGovern-Dole 
International Food for Education and Child Nutrition Program; and any 
other international food assistance program.


470.101  Definitions.

    The following definitions are applicable to this part:
    Commingled product means grains, oilseeds, rice, pulses, other 
similar commodities and the products of such commodities, when such 
commodity or product is normally stored on a commingled basis in such a 
manner that the commodity or product produced in the United States 
cannot be readily distinguished from a commodity or product not 
produced in the United States.
    Department means the Department of Agriculture.
    Food and Nutrition Service means such agency located within the 
Department of Agriculture.
    Foreign Agriculture Service means such agency located within the 
Department of Agriculture.
    Free alongside ship (f.a.s.) (* * * named port of shipment) means a 
term of sale which means the seller fulfills its obligation to deliver 
when the goods have been placed alongside the vessel on the quay or in 
lighters at the named port of shipment. The buyer bears all costs and 
risks of loss of or damage to the goods from that moment.
    Grantee organization means an organization which will receive 
commodities from the United States Agency for International Development 
under Title II of the Food for Peace Act (7 U.S.C. 1721 et seq.) or 
from the Foreign Agricultural Service under the Food for Progress Act 
of 1985; the McGovern-Dole International Food for Education and Child 
Nutrition Program; and any other international food assistance program.
    Ingredient means spices, vitamins, micronutrients, desiccants, and 
preservatives when added to an agricultural commodity product.
    Free carrier (FCA) (* * * named place) means a term of sale which 
means the seller fulfills its obligation when the seller has handed 
over the goods, cleared for export, into the charge of the carrier 
named by the buyer at the named place or point. If no precise point is 
indicated by the buyer, the seller may choose, within the place or 
range stipulated, where the carrier should take the goods into their 
charge.
    Last contract lay day means the last day specified in an ocean 
freight contract by which the carriage of goods must start for contract 
performance.
    Lowest landed cost means, as authorized by 46 U.S.C. 55314(c), with 
respect to an agricultural product acquired under this part the lowest 
aggregate cost for the acquisition of such product and the shipment of 
such product to a foreign destination.
    Multi-port voyage charter means the charter of an ocean carrier in 
which the carrier will stop at two or more ports to discharge cargo.


470.102  Policy.

    (a) Policy. It is the policy of the Department to follow the 
policies and procedures set forth in the Federal Acquisition Regulation 
(FAR) as supplemented by the Agriculture Acquisition Regulation, 
including this part, in the procurement of agricultural commodities and 
products of agricultural commodities that are used in domestic feeding 
and international feeding and development programs.
    (b) Electronic submission. To the maximum extent possible, the use 
of electronic submission of solicitation-related documents shall be 
used with respect to the acquisition of agricultural commodities and 
related freight; however, to the extent that a solicitation allows for 
the submission of written information in addition to information in an 
electronic format and there is a discrepancy in such submissions, the 
information submitted in a written format shall prevail unless the 
electronic submission states that a specific existing written term is 
superseded by the electronic submission.
    (c) Freight. With respect to the acquisition of freight for the 
shipment of agricultural commodities and products of agricultural 
commodities, the provisions of the FAR, including Part 47, shall be 
utilized and various types of services to be obtained may include 
multi-trip voyage charters.


470.103  United States origin of agricultural products.

    (a) Products of United States origin. As provided by 7 U.S.C. 
1732(2) and 1736o-1(a) commodities and the products of agricultural 
commodities acquired for use in international feeding and development 
programs shall be products of United States origin. A product shall not 
be considered to be a product of the United States if it contains any 
ingredient that is not produced in the United States if that ingredient 
is:
    (1) Produced in the United States; and
    (2) Commercially available in the United States at fair and 
reasonable prices from domestic sources.
    (b) Use by the Food and Nutrition Service. Commodities and the 
products of agricultural commodities acquired for use by the Food and 
Nutrition Service shall be a product of the United States, except as 
may otherwise be required by law, and shall be considered to be such a 
product if it is grown, processed, and otherwise prepared for sale or 
distribution exclusively in the United States except with respect to 
ingredients. Ingredients from non-domestic sources will be allowed to 
be utilized as a United States product if such ingredients are not 
otherwise:
    (1) Produced in the United States; and
    (2) Commercially available in the United States at fair and 
reasonable prices from domestic sources.
    (c) Commingled product.
    (1) Except as provided in paragraph (c)(2) of this section, a 
commingled product shall be considered to be a product of the United 
States if the offeror can establish that the offeror has in inventory 
at the time the contract for the commodity or product is awarded to

[[Page 13080]]

the offeror, or obtains during the contract performance period 
specified in the solicitation, or a combination thereof, a sufficient 
quantity of the commodity or product that was produced in the United 
States to fulfill the contract being awarded, and all unfulfilled 
contracts that the offeror entered into to provide such commingled 
product to the United States.
    (2) To the extent the Department has determined a commodity is one 
that is generally commingled, but is also one which can be readily 
stored on an identity preserved basis with respect to its country of 
origin, the Department may require that the commodity procured by the 
Department shall be of 100 percent United States origin.
    (d) Product derived from animals. With respect to the procurement 
of products derived from animals, the solicitation will set forth any 
specific requirement that is applicable to the country in which the 
animal was bred, raised, slaughtered or further processed.


470.200  [Reserved]


470.201  Acquisition of commodities and freight shipment for Foreign 
Agricultural Service programs.

    (a) Lowest landed cost and delivery considerations.
    (1) Except as provided in paragraphs (a)(3) and (4) of this 
section, in contracts for the Foreign Agricultural Service for 
commodities and related freight shipment for delivery to foreign 
destinations, the contracting officer shall consider the lowest landed 
cost of delivering the commodity to the intended destination. This 
lowest landed cost determination will be calculated on the basis of 
rates and service for that portion of the commodities being purchased 
that is determined is necessary and practicable to meet 46 U.S.C. 
55314(c)(3) and cargo preference requirements and on an overall 
(foreign and U.S. flag) basis for the remaining portion of the 
commodities being procured and the additional factors set forth in this 
section. Accordingly, the solicitations issued with respect to a 
commodity procurement or a related freight procurement will specify 
that in the event an offer submitted by a party is the lowest offered 
price, the contracting officer reserves the right to reject such offer 
if the acceptance of another offer for the commodity or related 
freight, when combined with other offers for commodities or related 
freight, results in a lower landed cost to the Department.
    (2) The Department may contact any port prior to award to determine 
the port's cargo handling capabilities, including the adequacy of the 
port to receive, accumulate, handle, store, and protect the cargo. 
Factors considered in this determination may include, but not be 
limited to, the adequacy of building structures, proper ventilation, 
freedom from insects and rodents, cleanliness, and overall good 
housekeeping and warehousing practices. The Department may consider the 
use of another coastal range or port if a situation exists at a port 
that may adversely affect the ability of the Department to have the 
commodity delivered in a safe and timely manner. Such situations 
include:
    (i) A port is congested;
    (ii) Port facilities are overloaded;
    (iii) A vessel would not be able to dock and load cargo without 
delay;
    (iv) Labor disputes or lack of labor may prohibit the loading of 
the cargo onboard a vessel in a timely manner; or
    (v) Other similar situation that may adversely affect the ability 
of the Department to have the commodity delivered in a timely manner.
    (3) Use of other than lowest landed cost. In order to ensure that 
commodities are delivered in a timely fashion to foreign destinations 
and without damage, the contracting officer may award an acquisition 
without regard to the lowest land cost process set forth in paragraph 
(a)(1) of this section if:
    (i) The solicitation specifies that the lowest land cost process 
will not be followed in the completion of the contract; or
    (ii) After issuance of the solicitation, it is determined that:
    (A) Internal strife at the foreign destination or urgent 
humanitarian conditions threatens the lives of persons at the foreign 
destination;
    (B) A specific port's cargo handling capabilities (including the 
adequacy of the port to receive, accumulate, handle, store, and protect 
commodities) and other similar factors may adversely affect the 
delivery of such commodities through damage or untimely delivery. Such 
similar factors include, but are not limited to: port congestion; 
overloaded facilities at the port; vessels not being able to dock and 
load cargo without delay due to conditions at the port; labor disputes 
or lack of labor may prohibit the loading of the cargo onboard a vessel 
in a timely manner; and the existence of inadequate or unsanitary 
warehouse and other supporting facilities;
    (C) The total transit time of a carrier, as it relates to a final 
delivery date at the foreign destination may impair the timely delivery 
of the commodity;
    (D) Other similar situations arise that materially affect the 
administration of the program for which the commodity or freight is 
being procured; or
    (E) The contracting officer determines that extenuating 
circumstances preclude awards on the basis of lowest-landed cost, or 
that efficiency and cost-savings justify use of types of ocean service 
that would not involve an analysis of freight. However, in all such 
cases, commodities would be transported in compliance with cargo 
preference requirements. Examples of extenuating circumstances are 
events such as internal strife at the foreign destination or urgent 
humanitarian conditions threatening the lives of persons at the foreign 
destination. Other types of services may include, but are not limited 
to, multi-trip voyage charters, indefinite delivery/indefinite quantity 
(IDIQ), delivery cost and freight (C & F), delivery cost insurance and 
freight (CIF), and indexed ocean freight costs.
    (4) If a contracting officer determines that action may be 
appropriate under paragraph (a)(3) of this section, prior to the 
acceptance of any applicable offer, the contracting officer will 
provide to the Head of Contracting Activity Designee a written request 
to obtain commodities and freight in a manner other than on a lowest 
landed cost basis consistent with Title 48 Code of Federal Regulations. 
This request shall include a statement of the reasons for not using 
lowest landed cost basis. The Head of the Contracting Activity 
Designee, or the designee one level above the contracting officer, may 
either accept or reject this request and shall document this 
determination.
    (b) Multiple offers or delivery points. If more than one offer for 
the sale of commodities is received or more than one delivery point has 
been designated in such offers, in order to achieve a combination of a 
freight rate and commodity award that produces the lowest landed cost 
for the delivery of the commodity to the foreign destination, the 
contracting officer shall evaluate offers submitted on a delivery point 
by delivery point basis; however, consideration shall be given to 
prioritized ocean transport service in determining lowest landed cost.
    (c) Freight shipping and rates.
    (1) In determining the lowest-landed cost, the Department shall use 
the freight rates offered in response to solicitations issued by the 
Department or, if applicable, the grantee organization.
    (2) Freight rates offered must be submitted as specified in the 
solicitation issued by the Department or, if applicable, the grantee 
organization.

[[Page 13081]]

Any such solicitation issued by a grantee organization must contain the 
following elements:
    (i) If directed by the Department, include a closing time for the 
receipt of written freight offers and state that late written freight 
offers will not be considered;
    (ii) Provide that freight offers are required to have a canceling 
date no later than the last contract lay day specified in the 
solicitation;
    (iii) Provide the same deadline for receipt of written freight 
offers from both U.S. flag vessel and non-U.S. flag vessels; and
    (iv) Be received and opened prior to any related offer for 
acquisition of commodities to be shipped.
    (3) The Department may require organizations that will receive 
commodities from the Department to submit information relating to the 
capacity of a U.S. port, or, if applicable, a terminal, prior to the 
acquisition of such commodities or freight.
    (d) Freight rate notification. If the Department is not the party 
procuring freight with respect to a shipment of an agricultural 
commodity for delivery to a foreign destination, the organization that 
will receive commodities from the Department, or its shipping agent, 
shall be notified by the Department of the vessel freight rate used in 
determining the commodity contract award and the organization will be 
responsible for finalizing the charter or booking contract with the 
vessel representing the freight rate.


470.202  Acquisition of commodities for United States Agency for 
International Development (USAID) programs.

    (a) Lowest landed cost and delivery considerations.
    (1) Except as provided in paragraphs (a)(3) and (e)(2) of this 
section, with respect to the acquisition of agricultural commodities 
for delivery to foreign destinations and related freight to transport 
such commodities under Title II of Public Law 480, contracts will be 
entered into in a manner that will result in the lowest landed cost of 
such commodity delivery to the intended destination. This lowest landed 
cost determination shall be calculated on the basis of rates and 
service for that portion of the commodities being purchased that is 
determined is necessary and practicable to meet 46 U.S.C. 55314(c)(3) 
and cargo preference requirements and on an overall (foreign and U.S. 
flag) basis for the remaining portion of the commodities being procured 
and the additional factors set forth in this section. Accordingly, the 
solicitations issued with respect to a commodity procurement or a 
freight procurement will specify that in the event an offer submitted 
by a party is the lowest offered price, the contracting officer 
reserves the right to reject such offer if the acceptance of another 
offer for the commodity or freight, when combined with other offers for 
commodities or freight, results in a lower landed cost to USAID.
    (2) The Department may contact any port prior to award to determine 
the port's cargo handling capabilities, including the adequacy of the 
port to receive, accumulate, handle, store, and protect the cargo. 
Factors which will be considered in this determination will include, 
but not be limited to, the adequacy of building structures, proper 
ventilation, freedom from insects and rodents, cleanliness, and overall 
good housekeeping and warehousing practices. The Department may 
consider the use of another coastal range or port if a situation exists 
at a port that may adversely affect the ability of the Department to 
have the commodity delivered in a safe and/or timely manner. Such 
situations include:
    (i) A port is congested;
    (ii) Port facilities are overloaded;
    (iii) A vessel would not be able to dock and load cargo without 
delay;
    (iv) Labor disputes or lack of labor may prohibit the loading of 
the cargo onboard a vessel in a timely manner; or
    (v) Other similar situation that may adversely affect the ability 
of the Department to have the commodity delivered in a timely manner.
    (3) Use of other than lowest landed cost. In order to ensure that 
commodities are delivered in a timely fashion to foreign destinations 
and without damage, the Department may complete an acquisition without 
regard to the lowest land cost process set forth in paragraph (a)(1) of 
this section, if:
    (i) The solicitation specifies that the lowest land cost process 
will not be followed in the completion of the contract; or
    (ii) After issuance of the solicitation, it is determined that:
    (A) Internal strife at the foreign destination or urgent 
humanitarian conditions threatens the lives of persons at the foreign 
destination;
    (B) A specific port's cargo handling capabilities (including the 
adequacy of the port to receive, accumulate, handle, store, and protect 
commodities) and other similar factors will adversely affect the 
delivery of such commodities without damage or in a timely manner. Such 
similar factors include, but are not limited to: port congestion; 
overloaded facilities at the port; vessels would not be able to dock 
and load cargo without delay; labor disputes or lack of labor may 
prohibit the loading of the cargo onboard a vessel in a timely manner; 
and the existence of inadequate or unsanitary warehouse and other 
supporting facilities;
    (C) The total transit time of a carrier, as it relates to a final 
delivery date at the foreign destination may impair the ability of the 
Department to achieve timely delivery of the commodity; or
    (D) Other similar situations arise that materially affect the 
administration of the program for which the commodity or freight is 
being procured.
    (4) If the contracting officer determines that action may be 
appropriate under paragraph (a)(3) of this section, prior to the 
acceptance of any applicable offer, the contracting officer shall 
provide to the head of contracting activity designee and to USAID, a 
written request to obtain commodities and freight in a manner other 
than on a lowest landed cost basis. This request shall include a 
statement of the reasons for not using lowest landed cost basis. The 
head of contracting authority designee, or one level above the 
contracting officer, with the concurrence of USAID, shall, on an 
expedited basis, either accept or reject this request and shall 
document this determination in writing and provide a copy to USAID.
    (b) Freight shipping and rates.
    (1) In determining lowest-landed cost as specified in paragraph (a) 
of this section, the Department shall use vessel rates offered in 
response to solicitations issued by USAID or grantee organizations 
receiving commodities under 7 U.S.C. 1731 et seq.
    (2) USAID may require, or direct a grantee organization to require, 
an ocean carrier to submit offers electronically through a Web-based 
system maintained by the Department. If electronic submissions are 
required, the Department may, at its discretion, accept corrections to 
such submissions that are submitted in a written form other than by use 
of such Web-based system.
    (c) Delivery date. The contracting officer shall consider total 
transit time, as it relates to a final delivery date, in order to 
satisfy Public Law 480 Title II program requirements.
    (d) Delivery points.
    (1) Commodities offered for delivery free alongside ship Great 
Lakes port range or intermodal bridge-point Great Lakes port range that 
represent the overall (foreign and U.S. flag) lowest landed cost will 
be awarded on a lowest landed cost basis. Tonnage allocated on this 
basis will not be reevaluated on a lowest landed cost U.S.-flag basis 
unless

[[Page 13082]]

the contracting officer determines that 25 percent of the total annual 
tonnage of bagged, processed, or fortified commodities furnished under 
7 U.S.C. 1731 et seq. has been, or will be, transported from the Great 
Lakes port range during that fiscal year.
    (2) The contracting officer shall consider commodity offers as 
offers for delivery ``intermodal bridge-point Great Lakes port range'' 
only if:
    (i) The offer specifies delivery at a marine cargo-handling 
facility that is capable of loading ocean going vessels at a Great 
Lakes port, as well as loading ocean going conveyances such as barges 
and container vans, and
    (ii) The commodities will be moved from one transportation 
conveyance to another at such a facility.
    (e) Multiple awards or delivery points.
    (1) If more than one offer for the sale of commodities is received 
or more than one delivery point has been designated in such offers, in 
order to achieve a combination of a freight rate and commodity award 
that produces the lowest landed cost for the delivery of the commodity 
to the foreign destination, the contracting officer shall evaluate 
offers submitted on a delivery point by delivery point basis; however, 
consideration shall be given to prioritized ocean transport service in 
determining lowest landed cost.
    (2) The contracting officer may determine that extenuating 
circumstances preclude awards on the basis of lowest landed cost. 
However, in all such cases, commodities may be transported in 
compliance with cargo preference requirements as determined by USAID.
    (3) The contracting officer shall notify USAID or, if applicable, 
the grantee organization, that its shipping agent will be notified of 
the vessel freight rate used in determining the commodity contract 
award. The grantee organization or USAID will be responsible for 
finalizing the charter or booking contract with the vessel representing 
the freight rate so used.


470.203  Cargo preference.

    An agency having responsibility under this subpart shall administer 
its programs, with respect to this subpart, in accordance with 
regulations prescribed by the Secretary of Transportation.

    Dated: March 19, 2009.
Suzanne Hall,
Acting Administrator, Foreign Agricultural Service, and Acting 
Executive Vice President, Commodity Credit Corporation.
 [FR Doc. E9-6487 Filed 3-25-09; 8:45 am]
BILLING CODE 3410-10-P


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