Document Headings

                    Document headings vary by document type but may contain                    the following:                  
                -                       the agency or agencies that issued and signed a document                    
                -                       the number of the CFR title and the number of each part                      the document amends, proposes to amend, or is directly                      related to                    
                -                       the agency docket number / agency internal file number                    
                -                       the RIN which identifies each regulatory action listed in                      the Unified Agenda of Federal Regulatory and Deregulatory                      Actions                    

                    See the                                          Document Drafting Handbook                                        for more details.                  

###### Department of Agriculture

###### Food and Nutrition Service

# AGENCY:

Food and Nutrition Service, USDA

# ACTION:

Notice.

# SUMMARY:

                        This notice announces the Food and Nutrition Service's (FNS) intent to continue a demonstration project to test program changes designed to improve the State processing of donated foods by allowing the substitution of donated beef and pork supplied by the Department of Agriculture (the Department) with commercial beef and pork. FNS is invoking its authority under 7 CFR                               ( print page 29283)                            250.30(t) to waive the current prohibition in 7 CFR 250.30(f)(1)(i) against the substitution of meat and poultry items and to establish the criteria under which substitution would be permitted. The Department will use the demonstration project results to further examine whether allowing this type of substitution will result in increased processor participation and provide a greater variety of processed end products to recipient agencies in a more timely manner and/or at lower costs.                    

# DATES:

The proposals described in this Notice may be submitted to FNS through December 30, 2001. The demonstration project runs until June 30, 2003.

# ADDRESSES:

Proposals should be sent to Les Johnson, Director, Food Distribution Division, Food and Nutrition Service, U.S. Department of Agriculture, Park Office Center, Room 501, 3101 Park Center Drive, Alexandria, Virginia 22302-1594.

# FOR FURTHER INFORMATION CONTACT:

David Brothers, Schools and Institutions Branch, at (703) 305-2644.

# SUPPLEMENTARY INFORMATION:

## Executive Order 12866

This notice has been determined to be not significant and therefore was not reviewed by the Office of Management and Budget under Executive Order 12866.

## Executive Order 12372

This program is listed in the Catalog of Federal Domestic Assistance under 10.550 and is subject to the provisions of Executive Order 12372, which requires intergovernmental consultation with State and local officials (7 CFR Part 3015, Subpart V and final rule-related notices published at 48 FR 29114, June 24, 1983 and 49 FR 22675, May 31, 1984).

## Regulatory Flexibility Act

This action is not a rule as defined by the Regulatory Flexibility Act (5 U.S.C. 601-612) and is thus exempt from the provisions of that Act.

## Background

Section 250.30 of the current Food Distribution Program regulations (7 CFR Part 250) sets forth the terms and conditions under which distributing agencies, subdistributing agencies, and recipient agencies may enter into contracts with commercial firms for processing donated foods and prescribes the minimum requirements to be included in such contracts. Section 250.30(t) authorizes FNS to waive any of the requirements contained in 7 CFR Part 250 for the purpose of conducting demonstration projects to test program changes designed to improve the State processing of donated foods.

## Current Program Requirements

The State processing regulations at § 250.30(f)(1)(i) currently allow for the substitution of certain donated food items with commercial foods, with the exception of meat and poultry. Section 250.30(g) provides that, when donated meat or poultry products are processed or when any commercial meat or poultry product is incorporated into an end product containing one or more donated foods, all of the processing shall be performed in plants under continuous Federal meat or poultry inspection, or continuous State meat or poultry inspection in States certified to have programs at least equal to the Federal inspection programs. In addition to Food Safety Inspection Service (FSIS) inspection, all donated meat and poultry processing must be performed under Agricultural Marketing Service (AMS) acceptance service grading.

Currently, only a few companies process donated beef and pork. Those processors have stated that the current policy prohibiting the substitution of donated beef and pork reduces the quantity of donated beef and pork they are able to accept and process during a given period. Processors must schedule production around deliveries of the donated beef and pork because those products are highly perishable. Some of the processors must schedule production around deliveries of donated beef and pork for up to 30 States. Vendors do not always deliver donated beef and pork to the processors as scheduled, causing delays in production. These delays may be alleviated if the processors can replace donated beef and pork with their commercial beef and pork.

## Demonstration Project

From June 30, 2001 until June 30, 2003, the Department will continue to operate a demonstration project under which it will permit selected processors to substitute donated beef and pork in the State processing program for commercial beef and pork. Processors may submit proposals and be approved to participate in the demonstration project during this time. FNS is invoking its authority under 7 CFR 250.30(t) to waive the current prohibition in 7 CFR 250.30(f)(1)(i) against substitution of beef and pork for purposes of this demonstration project.

The term substitution in 7 CFR 250.3 is defined to mean the replacement of donated foods with like quantities of domestically produced commercial foods of the same generic identity and equal or better quality.

FNS is soliciting interested beef and pork processors to submit written proposals to participate in the demonstration project. The following basic requirements will apply to the demonstration project:
    - As with the processing of donated beef and pork into end products, AMS graders must monitor the process of substituting commercial beef and pork to ensure program integrity is maintained.
    - Only bulk beef and pork delivered by USDA vendors to the processor will be eligible for substitution. No backhauled product will be eligible. (Backhauled product is typically frozen beef and pork in 10 pound chubbs delivered to schools which may be sent to processors for further processing at a later time.)
    - Commercial beef and pork substituted for donated beef and pork must be certified by an AMS grader as complying with the same product specifications as the donated beef and pork. The age of any commercial product that is used in replacement for donated food may not exceed six months.
    - Substitution of commercial beef and pork may occur in advance of the actual receipt of the donated beef and pork by the processor. However, no substitution may occur before the notice to deliver for that processor is issued by USDA. Lead time between the purchase and delivery of donated beef and pork may be up to five weeks. Any variation between the amount of commercial beef and pork substituted and the amount of donated beef and pork received by the processor will be adjusted according to guidelines furnished by USDA.
    - Any donated beef and pork not used in end products because of substitution must only be used by the processor in other commercial processed products and cannot be sold as an intact unit. However, it may be used to fulfill other USDA contracts provided all terms of the other contract are met.
    - The only regulatory provision or State processing contract term affected by the demonstration project is the prohibition on substitution of beef and pork (section 250.30(f)(1)(i) of the regulations). All other regulatory and contract requirements remain unchanged and must still be met by processors participating in the demonstration project.       ( print page 29284)      

The demonstration project will enable FNS to continue to evaluate whether to amend program regulations to allow the substitution of donated beef and pork with commercial beef and pork in the State processing program. Particular attention will be paid to whether such an amendment of the regulations would increase the number of processors participating, and whether it would increase the quantity of donated beef and pork that each processor accepts for processing. Further, FNS will attempt to determine whether the expected increase in competition and the expected increase in the quantity of donated beef and pork accepted for processing will enable processors to function more efficiently, producing a greater variety of processed end products more quickly and/or at lower costs.

Interested processors should submit a written proposal to FNS outlining how they plan to carry out the substitution while complying with the above conditions. The proposal must contain (1) a step-by-step description of how production will be monitored; and (2) a complete description of the records that will be maintained for (a) the commercial beef and pork substituted for the donated beef and pork and (b) the disposition of the donated beef and pork delivered by USDA. All proposals will be reviewed by representatives of the Food Distribution Division of FNS and by representatives of the AMS Livestock Division's Commodity Procurement Branch and Grading Branch. Companies approved for participation in the demonstration project will be required to enter into an agreement with FNS and AMS which authorizes the processor to substitute donated beef and pork with commercial bulk beef and pork in fulfilling any current or future State processing contracts during the demonstration project period. Participation in the demonstration project will not ensure that processors will be awarded any State processing contracts.

Dated: May 23, 2001.

George A. Braley,

Acting Administration, Food and Nutrition Service.

[FR Doc. 01-13520  Filed 5-29-01; 8:45 am]

BILLING CODE 3410-30-U