13062 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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. 

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; EMail: PPDED@fas.usda.gov and/or 

Babette.Gainor@fas.usda.gov. 

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: 

• Improve the efficiency of the 

programs by providing greater clarity to 

program participants on eligibility, 

reporting and performance 

requirements; 

• Better define the criteria used to 

determine a product of the United 

States; 

• Allow for the full utilization of all 

types of acquisition contracts that are 

authorized under the Federal 

Acquisition Regulations (FAR); and, 

• 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 nongovernmental 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, 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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 

13064 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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 shortcomings. 

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 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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). 

13066 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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] 

■ 1. 7 CFR part 1496 is removed. 

■ 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. 

§ 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. 

§ 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 nonfulfillment 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. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13067 

Targeted country means the country 

in which activities are implemented 

under an agreement. 

§ 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. 

§ 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 § 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 § 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 CCCprovided 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 

13068 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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. 

§ 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 CCCprovided 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. 

§ 1499.6 Payments. 

(a) If the participant arranges for 

transportation in accordance with 

§ 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 

§ 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 

§ 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 § 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 § 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 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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. 

§ 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. 

§ 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. 

§ 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; 

13070 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

(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. 

§ 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 § 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 § 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. 

§ 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 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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 § 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 § 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 §§ 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. 

§ 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. 

§ 1499.13 Recordkeeping and reporting 

requirements. 

(a) A program participant shall retain 

records and permit access to records in 

accordance with the requirements of 

§ 3019.53 of this title. The date of 

submission of the final expenditure 

report, as referenced in § 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 § 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 

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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 § 3019.52 of this title. The 

agreement will specify the acceptable 

forms and time requirements for 

submission. 

§ 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 § 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. 

§ 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 § 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 

§§ 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 §§ 3019.71 

through 3019.73 of this title will apply 

to the closeout of a completed 

agreement. 

§ 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. 

§ 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. 

■ 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. 

§ 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 (McGovernDole Program). Under the McGovernDole 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. 

§ 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, 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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 nonfulfillment 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. 

§ 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 McGovernDole 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. 

§ 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 McGovernDole 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 § 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 § 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 FASprovided 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; 

13074 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

(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 FASprovided 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. 

§ 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 FASprovided 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. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13075 

§ 1599.6 Payments. 

(a) If the participant arranges for 

transportation in accordance with 

§ 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 

§ 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 

§ 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 § 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 § 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. 

§ 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. 

§ 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. 

13076 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

(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. 

§ 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 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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. 

§ 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 § 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 § 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. 

§ 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 § 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 § 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 §§ 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. 

§ 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, 

13078 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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. 

§ 1599.13 Recordkeeping and reporting 

requirements. 

(a) A program participant shall retain 

records and permit access to records in 

accordance with the requirements of 

§ 3019.53 of this title. The date of 

submission of the final expenditure 

report, as referenced in § 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 § 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 endpoint 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 § 3019.52 of this title. The 

agreement will specify the acceptable 

forms and time requirements for 

submission. 

§ 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 § 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. 

§ 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 § 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 

§§ 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 §§ 3019.71 through 

3019.73 of this title will apply to the 

closeout of a completed agreement. 

§ 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. 

§ 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 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 13079 

35 and have been assigned OMB 

Number 0551–0035. 

Title 48—Federal Acquisition 

Regulations System 

CHAPTER 4—DEPARTMENT OF 

AGRICULTURE 

■ 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 solicitationrelated 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 nondomestic 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 

13080 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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, multitrip 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. 

Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 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 

13082 Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Rules and Regulations 

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 

NATIONAL CREDIT UNION 

ADMINISTRATION 

12 CFR Parts 701 and 742 

RIN 3133–AD53 

Regulatory Flexibility Regarding 

Ownership of Fixed Assets 

AGENCY: National Credit Union 

Administration (NCUA). 

ACTION: Final rule. 

SUMMARY: NCUA is amending its 

Regulatory Flexibility (RegFlex) 

Program to provide additional flexibility 

to qualifying federal credit unions 

(FCUs) when acquiring unimproved 

land for future expansion. Previously, 

when an FCU acquired unimproved 

land for future expansion and did not 

fully occupy the completed premises 

within one year, it was required to 

partially occupy the completed 

premises within three years or obtain a 

waiver. This amendment increases the 

three years to six years for RegFlex 

FCUs without a waiver. NCUA is also 

making conforming amendments to its 

fixed asset rule to be consistent with the 

RegFlex changes. 

DATES: The rule is effective April 27, 

2009. 

FOR FURTHER INFORMATION CONTACT: 

Frank Kressman, Staff Attorney, Office 

of General Counsel, National Credit 

Union Administration, 1775 Duke 

Street, Alexandria, Virginia 22314– 

3428, or telephone: (703) 518–6540. 

SUPPLEMENTARY INFORMATION: 

A. Background 

1. Proposal 

NCUA issued proposed amendments 

to its RegFlex and fixed assets rules in 

September 2008 as summarized above. 

73 FR 57013 (October 1, 2008). NCUA 

received six comment letters on the 

proposal: three from credit unions, two 

from credit union trade associations, 

and one from a bank trade association. 

All commenters except the bank trade 

association support the amendments. 

2. Fixed Assets 

The Federal Credit Union Act 

authorizes an FCU to purchase, hold, 

and dispose of property necessary or 

incidental to its operations. 12 U.S.C. 

1757(4). Generally, the fixed asset rule 

provides limits on fixed asset 

investments, establishes occupancy and 

other requirements for acquired and 

abandoned premises, and prohibits 

certain transactions. 12 CFR 701.36. 

Fixed assets are defined in § 701.36(e) as 

premises, furniture, fixtures, and 

equipment and include any office, 

branch office, suboffice, service center, 

parking lot, facility, real estate where a 

credit union transacts or will transact 

business, office furnishings, office 

machines, computer hardware and 

software, automated terminals, and 

heating and cooling equipment. 

Section 701.36 prohibits an FCU with 

$1 million or more in assets from 

investing in fixed assets, the aggregate of 

which exceeds five percent of the FCU’s 

shares and retained earnings; although 

upon an FCU’s application, a regional 

director may set a higher limit. 12 CFR 

701.36(a)(1)–(2). If an FCU acquires 

premises, as broadly defined in 

§ 701.36(e), for future expansion and 

does not fully occupy the space within 

one year, its board must have a 

resolution in place by the end of that 

year with plans for full occupation and 

make those plans available to NCUA 

upon request. 12 CFR 701.36(b)(1). 

Additionally, the FCU must partially 

occupy the premises within a 

reasonable period, not to exceed three 

years, unless the FCU obtains a waiver 

within 30 months of acquiring the 

premises. 12 CFR § 701.36(b)(1)–(2). In 

this rulemaking, NCUA is only 

addressing the circumstance where an 

FCU is acquiring unimproved land but 

no other kind of premises. 

3. Regulatory Flexibility Program 

The RegFlex Program exempts from 

certain regulatory restrictions and grants 

additional powers to those FCUs that 

have demonstrated sustained superior 

performance as measured by CAMEL 

ratings and net worth classifications. 12 

CFR 742.1. An FCU may qualify for 

RegFlex treatment automatically or by 

application to the appropriate regional 

director. 12 CFR 742.2. Also, an FCU’s 

RegFlex authority can be lost or 

revoked. 12 CFR 742.3. 

B. Discussion 

Although a RegFlex eligible FCU is 

exempt from the five percent aggregate 

limit on fixed asset investments under 

the current rule, it is not exempt from 

the requirement to partially occupy 

premises acquired for future expansion 

within three years or request a waiver of 

this requirement. 12 CFR 701.36(a), 

701.36(b)(2), 701.36(d), 742.4(a)(3). 

Where an FCU is acquiring unimproved 

land, the partial occupancy requirement 

often is more difficult to satisfy than if 

the FCU were purchasing premises with 

an existing branch building. The Board 

is aware that some FCUs contend the 

fixed asset rule’s three-year partial 

occupancy requirement, even with a 

waiver option, is burdensome and an 

unnecessary level of oversight for