[Federal Register Volume 75, Number 103 (Friday, May 28, 2010)]
[Proposed Rules]
[Pages 29920-29932]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12731]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

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

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Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Proposed 
Rules

[[Page 29920]]



DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

7 CFR Parts 1951 and 4284

RIN 0570-AA79


Value-Added Producer Grant Program

AGENCY: Rural Business-Cooperative Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Food, Conservation, and Energy Act of 2008 (the Act), 
amends section 231 of the Agricultural Risk Protection Act of 2000, 
which established the Value-Added Producer Grant Program. This program 
will be administered by the Rural Business-Cooperative Service. Under 
the proposed program, grants will be made to help eligible producers of 
agricultural commodities enter into or expand value-added activities 
including the development of feasibility studies, business plans, and 
marketing strategies. The program will also provide working capital for 
expenses such as implementing an existing viable marketing strategy. 
The Agency proposes to implement the program to meet the goals and 
requirements of the Act.
    The Agency is also proposing an amendment to existing regulations 
that would allow the delegation of the post-award servicing of the 
proposed program to USDA State Office personnel. Please note that this 
amendment would only affect the post-award servicing of the grant and 
would not affect the process for awarding grants, which would still 
occur at the National office.

DATES: Comments on the proposed rule must be received on or before June 
28, 2010 to be assured of consideration. A 30-day comment period is 
provided for interested persons to comment on the regulatory provisions 
of this proposed rule. The Agency has determined that a 30-day comment 
period, rather than the traditional 60 day comment period, is 
appropriate in order to provide a sufficient amount of time to comment 
while ensuring program performance during the current fiscal year. This 
action will also provide applicants more time to develop quality 
applications for the program with minimal disruptions in ongoing 
farming activities.
    The comment period for the information collection under the 
Paperwork Reduction Act of 1995 continues through July 27, 2010.

ADDRESSES: You may submit comments to this proposed rule by any of the 
following methods:
    <bullet> Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the instructions for submitting comments 
electronically.
    <bullet> Mail: Submit your written comments via the U.S. Postal 
Service to the Branch Chief, Regulations and Paperwork Management 
Branch, U.S. Department of Agriculture, Stop 0742, 1400 Independence 
Avenue, SW., Washington, DC 20250-0742.
    <bullet> Hand Delivery/Courier: Submit your written comments via 
Federal Express mail, or other courier service requiring a street 
address, to the Branch Chief, Regulations and Paperwork Management 
Branch, U.S. Department of Agriculture, 300 7th Street, SW., 7th Floor, 
Washington, DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW, 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Andrew Jermolowicz USDA, Rural 
Development, Rural Business-Cooperative Service, Room 4016, South 
Agriculture Building, Stop 3250, 1400 Independence Avenue, SW., 
Washington, DC 20250-3250, Telephone: (202) 720-7558, E-mail 
<a href="/cdn-cgi/l/email-protection#6d2e3d2a1f0c03191e2d1a090e43181e090c430a021b"><span class="__cf_email__" data-cfemail="0142514673606f7572417665622f747265602f666e77">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Authority

    Section 231 of the Agriculture Risk Protection Act of 2000 (Pub. L. 
106-224) as amended by section 6202 of the Food, Conservation, and 
Energy Act of 2008 (Pub. L. 110-246) (see 7 U.S.C. 1621 note) 
authorizes the establishment of the Value-Added Agricultural Product 
Market Development grants, also known as Value-Added Producer Grants. 
The Secretary of Agriculture has delegated the program's administration 
to USDA Rural Development Cooperative Programs.

B. Nature of the Program

    This subpart contains the provisions and procedures by which the 
Agency will administer the Value-Added Producer Grant (VAPG) Program. 
The primary objective of this grant program is to help Independent 
Producers of Agricultural Commodities, Agriculture Producer Groups, 
Farmer and Rancher Cooperatives, and Majority-Controlled Producer-Based 
Business Ventures develop strategies to create marketing opportunities 
and to help develop Business Plans for viable marketing opportunities 
regarding production of bio-based products from agricultural 
commodities. As with all value-added efforts, generating new products, 
creating expanded marketing opportunities, and increasing producer 
income are the end goal.
    Eligible applicants are independent agricultural producers, farmer 
and rancher cooperatives, agricultural producer groups, and majority-
controlled producer-based business ventures.
    Grant funds cannot be used for planning, repairing, rehabilitating, 
acquiring, or constructing a building or facility (including a 
processing facility). They also cannot be used to purchase, rent, or 
install fixed equipment.
    This program requires matching funds equal to or greater than the 
amount of grant funds requested. The Act provides for both mandatory 
and discretionary funding for the program, as may be appropriated. 
During subsequent years, additional funding may be appropriated. The 
number of grants awarded will vary from year to year, based on 
availability of funds and the quality of applications. The maximum 
grant amount that may be awarded is $500,000. However, the Agency may 
reduce that amount depending on the total funds appropriated for the 
program in a given fiscal year. This policy allows more grants to be 
awarded under reduced funding.
    The Agency notes, pursuant to general Federal directives providing 
guidance on grant usage, that the 100 percent matching funds 
requirement described in the Agricultural Risk Protection Act of 2000 
may include payment for the time of the applicant/producer or the 
applicant/producer's family members

[[Page 29921]]

only for the production of the business and marketing plans. Please 
contact the state office for further information.

II. Request for Public Comments on Specific Aspects of the Proposed 
Program

    The Agency is interested in receiving comments on all aspects of 
the proposed rule. Areas in which the Agency is seeking specific 
comments are identified below. All comments should be submitted as 
indicated in the ADDRESSES section of this preamble.
    a. Medium-sized farm. As proposed, medium-sized farm is defined as 
``A farm or ranch that has averaged between $250,001 and $700,000 in 
annual gross sales of agricultural products in the previous three 
years.'' The Agency is specifically requesting comment on whether it is 
more appropriate to use $500,000 as the upper limit in this definition. 
Please be sure to provide rationale for your position.
    b. Branding activities. The Agency is proposing to allow branding, 
packaging, or other product differentiation activities that are not 
more than 25 percent of the total project cost of a value-added project 
for products otherwise eligible in one of the five value-added 
methodologies specified in paragraphs (1)(i) through (v) of the 
definition of value-added agricultural product to be eligible. The 
Agency is seeking specific comment on the proposed 25 percent limit. If 
you believe a different limit is more appropriate, please identify your 
suggested limit and provide your rationale to support your suggestion.

III. Discussion of the Proposed Rule

    The following paragraphs present a discussion of provisions of each 
section of the proposed rule in the order that they appear.

A. Purpose (Sec.  4284.901)

    This section implements the value-added agricultural product market 
development grant program administered by the Rural Business-
Cooperative Service whereby grants are made to enable producers to 
develop businesses that produce and market value-added agricultural 
products.

B. Definitions (Sec.  4284.902)

    This section presents program specific definitions which are 
included to more clearly implement the program.

C. Review or Appeal Rights (Sec.  4284.903)

    This section addresses how a person may seek a review of an Agency 
decision or file an appeal.

D. Exception Authority (Sec.  4284.904)

    This section explains the Administrator's authority to make 
exceptions to regulatory requirements or provisions and specifically 
excludes permission to make exceptions for:

<bullet> Applicant eligibility
<bullet> Project eligibility

    The Agency believes that applicant and project eligibility criteria 
must be maintained at all times in order to be consistent with 
statutory authority.

E. Nondiscrimination and Compliance With Other Federal Laws (Sec.  
4284.905)

    This section explains that applicants must comply with all 
applicable Federal laws. Additionally, this section explains how an 
applicant that believes it has been discriminated against as a result 
of applying for funds under this program can file a Civil Rights 
complaint with the USDA Office of Adjudication and Compliance.

F. State Laws, Local Laws, Regulatory Commission Regulations (Sec.  
4284.906)

    This section addresses how conflicts between this subpart and State 
or local laws, or regulatory commission regulations will be resolved.

G. Environmental Requirements (Sec.  4284.907)

    This section addresses the relationship between grants awarded 
under this subpart and the environmental requirements of subpart G of 7 
CFR part 1940.

H. Incorporation by Reference (Sec.  4284.908)

    This section identifies the various regulations that are 
incorporated by reference in this subpart.

I. Forms, Regulations, and Instructions (Sec.  4284.909)

    This section identifies how forms, regulations, instructions and 
other materials related to programs may be obtained.

J. Notifications (Sec.  4284.915)

    This section describes the methods the Agency will use in making 
notifications regarding funding and programmatic changes.

K. Applicant Eligibility (Sec.  4284.920)

    This section describes the requirements an applicant must meet to 
be eligible for a grant under this subpart, including, but not limited 
to, such areas as citizenship, legal authority, and multiple grants. An 
applicant must demonstrate that they meet all definition requirements 
for one of the following applicant types:
    <bullet> An independent producer;
    <bullet> An agricultural producer group;
    <bullet> A farmer or rancher cooperative; or
    <bullet> A majority-controlled producer-based business venture.

L. Ineligible Applicants (Sec.  4284.921)

    This section describes those conditions under which an applicant 
will be considered ineligible to participate in this program.

M. Project Eligibility (Sec.  4284.922)

    The eligibility requirements applicable to this subpart are 
described in this section. For a product to be eligible it must meet 
the definition of a value-added agricultural product. The applicant 
must also demonstrate that, as a result of the project, the customer 
base for the agricultural commodity or product is expanded, and that a 
greater portion of the revenue derived from the marketing or processing 
of the value-added product is available to the agricultural producer of 
the commodity or product.
    Other aspects of project eligibility discussed in this section 
include, but are not limited to, availability of matching funds, 
submittal of various items such as work plans, budgets, feasibility 
studies, and business plans, and how applications that include branding 
and packaging will be handled.

N. Eligible Uses of Grant Funds (Sec.  4284.923)

    The section identifies the eligible uses of grant and matching 
funds for both planning funds and working capital funds, and requires 
that grant and matching funds meet the same use restrictions, including 
being used to fund only the costs for approved purposes.

O. Ineligible Uses of Grant and Matching Funds (Sec.  4284.924)

    This section describes those activities for which Agency funds 
under this subpart may not be used. Ineligible uses include expenses 
related to payment for preparation of the grant application and any 
activities prohibited by 7 CFR parts 3015 and 3019, 2 CFR part 230, and 
48 CFR part 31. Expenses related to the production of any agricultural 
commodity or product, including seed, rootstock, labor for harvesting 
the crop, and delivery of the commodity to a processing facility are 
not eligible. Any costs of the project incurred prior to the date of 
grant approval, including legal or other expenses needed to incorporate 
or organize a business, are ineligible.

[[Page 29922]]

P. Funding Limitations (Sec.  4284.925)

    This section describes the maximum grant fund amount that a grant 
recipient can receive ($500,000) and several grant terms, including, 
but not limited to, the portion of total project eligible costs that 
grant funds can be used to pay (up to 50%) and the term of a grant (not 
to exceed 3 years).

Q. Preliminary Review (Sec.  4284.930)

    This section encourages applicants to contact their State Office 
before they submit their applications.

R. Application Package (Sec.  4284.931)

    The application forms, content, evaluation criteria, verifications 
and certifications required in the application package are detailed in 
this section.

S. Siplified Application (Sec.  4284.932)

    This section addresses simplified applications, which are 
applicable to applicants requesting less than $50,000.

T. Filing Instructions (Sec.  4284.933)

    This section provides the instructions for filing an application 
with the Agency. Completed applications must be received on or before 
March 15 of each year to be considered for funding that fiscal year. 
Late and/or incomplete applications will not be considered. Included in 
this section is information on where to submit and the format required 
for submission.

U. Processing Applications (Sec.  4284.940)

    This section explains the process by which the Agency will conduct 
an application review to determine if the application is complete and 
meets program requirements. After review, the Agency will notify 
applicants in writing of their findings. Applicants determined to be 
ineligible may revise and resubmit their applications to the Agency on 
or before the application deadline.

V. Application Withdrawal (Sec.  4284.941)

    This section describes the process whereby an applicant must notify 
the Agency in writing of its intention to withdraw its application for 
assistance.

W. Scoring Applications (Sec.  4284.942)

    This section describes the process and criteria the Agency will use 
to score applications. The Agency will only score applications for 
which it has determined that the applicant and project are eligible and 
that the application is complete and sufficiently responsive to program 
requirements. Each such application the Agency receives on or before 
the application deadline in a fiscal year will be scored in the fiscal 
year in which it was received. Applications will be scored based on the 
information provided and/or referenced in the scoring section of the 
application at the time the applicant submits the application to the 
Agency. The maximum number of points that may be awarded to an 
application is 100, based on the criteria specified in this section.

X. Award Process (Sec.  4284.950)

    This section describes the process by which the Agency will select 
applications for funding. Funding will be based on the score an 
application has received compared to the scores of other applications. 
Higher scoring applications will receive first consideration for 
funding. The Agency will notify in writing applicants whose 
applications have been selected for funding as well as inform those who 
did not receive funding, including a brief explanation as to why.

Y. Grant Agreement (Sec.  4284.951)

    This section describes the conditions under which the grant will be 
made to the applicant. Each grantee will be required to meet all terms 
and conditions of the award within 90 days of receiving the Letter of 
Conditions, unless otherwise specified by the Agency at the time of the 
award.

Z. Monitoring and Reporting Program Performance (Sec.  4284.960)

    The required monitoring and reporting activities are described in 
this section. Requirements include semiannual performance reports which 
must be submitted to the Agency within 30 days following March 31 and 
September 30. Failure to submit timely performance reports may result 
in the Agency withholding grant funds.

AA. Grant Servicing (Sec.  4284.961)

    This section states that all grants awarded under this subpart will 
be serviced pursuant to 7 CFR part 1951, subparts E and O, and in 
Departmental Regulations. Note that as a separate action being proposed 
today, the Agency is proposing an amendment to Sec.  1951.215 of 
subpart E. Paragraph (b)(2) in that section currently states that ``All 
other grants will be serviced in accordance with the Grant Agreement 
and this subpart. Prior approval of the Administrator is required 
except for actions covered in the preceding paragraph.'' The Agency is 
proposing to amend this paragraph by deleting the second sentence. This 
proposed amendment would facilitate the delegation of the servicing of 
the proposed program, and other grant programs that use part 1951 as 
their servicing regulation, to USDA State Office personnel. As noted 
earlier, the awarding of grants will occur at the National office.

BB. Transfer of Obligations (Sec.  4284.962)

    This section explains those circumstances under which an obligation 
of funds established for an applicant may be transferred to a different 
(substituted) applicant.

CC. Grant Close out and Related Activities (Sec.  4284.963)

    This section addresses the requirements for conducting grant close 
out and other related activities.

IV. Administrative Requirements

A. Executive Order 12866

    This proposed rule has been reviewed under Executive Order (EO) 
12866 and has been determined not significant by the Office of 
Management and Budget. The EO defines a ``significant regulatory 
action'' as one that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect, in a material way, the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) 
create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this EO.
    The Agency conducted a cost-benefit analysis to fulfill the 
requirements of Executive Order 12866. The Agency has identified 
potential benefits to prospective program participants and the Agency 
that are associated with improving the availability of funds to help 
producers (farmers) expand their customer base for the products or 
commodities that they produce. This results in a greater portion of the 
revenues derived from the value-added activity being made available to 
the producer of the product. These benefits are important to the 
success of individual producers, farmer or rancher cooperatives, 
agriculture producer groups, and majority-controlled producer based 
business ventures.

B. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of

[[Page 29923]]

their regulatory actions on State, local, and tribal governments and 
the private sector. Under section 202 of the UMRA, Rural Development 
must prepare, to the extent practicable, a written statement, including 
a cost-benefit analysis, for proposed and final rules with ``Federal 
mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. With certain exceptions, section 205 
of UMRA requires Rural Development to identify and consider a 
reasonable number of regulatory alternatives and adopt the least 
costly, most cost-effective, or least burdensome alternative that 
achieves the objectives of the rule.
    This proposed rule contains no Federal mandates (under the 
regulatory provisions of Title II of the UMRA) for State, local, and 
tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

C. Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' Rural Development has determined 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and, in 
accordance with the National Environmental Policy Act (NEPA) of 1969, 
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not 
required.

D. Executive Order 12988, Civil Justice Reform

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. Except where specified, all State and 
local laws and regulations that are in direct conflict with this rule 
will be preempted. Federal funds carry Federal requirements. No person 
is required to apply for funding under this program, but if they do 
apply and are selected for funding, they must comply with the 
requirements applicable to the Federal program funds. This rule is not 
retroactive. It will not affect agreements entered into prior to the 
effective date of the rule. Before any judicial action may be brought 
regarding the provisions of this rule, the administrative appeal 
provisions of 7 CFR parts 11 and 780 must be exhausted.

E. Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this proposed rule does not have sufficient Federalism 
implications to warrant the preparation of a Federalism Assessment. The 
provisions contained in the proposed rule will not have a substantial 
direct effect on States or their political subdivisions or on the 
distribution of power and responsibilities among the various government 
levels.

F. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-602) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute. If an agency 
certifies that the rule will not have a significant economic impact on 
a substantial number of small entities, this analysis is not required. 
Small entities include small businesses, small organizations, and small 
governmental jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have a significant economic impact on a 
substantial number of small entities for the reasons discussed below. 
While, the majority of producers of agricultural commodities expected 
to participate in this Program will be small businesses, the average 
cost to participants is estimated to be approximately 20 percent of the 
total mandatory funding available to the program in fiscal years 2009 
through 2012. Further, this regulation only affects producers that 
choose to participate in the program. Lastly, small entity applicants 
will not be affected to a greater extent than large entity applicants.

G. Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. 
Intergovernmental consultation will occur for the assistance to 
producers of agricultural commodities in accordance with the process 
and procedures outlined in 7 CFR part 3015, subpart V.
    Rural Development will conduct intergovernmental consultation using 
RD Instruction 1940-J, ``Intergovernmental Review of Rural Development 
Programs and Activities,'' available in any Rural Development office, 
on the Internet at http://www.rurdev.usda.gov/regs, and in 7 CFR part 
3015, subpart V. Note that not all States have chosen to participate in 
the intergovernmental review process. A list of participating States is 
available at the following Web site: http://www.whitehouse.gov/omb/grants/spoc.html.

H. Executive Order 13175, Consultation and Coordination With Indian 
Tribal Governments

    This executive order imposes requirements on Rural Development in 
the development of regulatory policies that have tribal implications or 
preempt tribal laws. Rural Development has determined that the proposed 
rule does not have a substantial direct effect on one or more Indian 
tribe(s) or on either the relationship or the distribution of powers 
and responsibilities between the Federal Government and the Indian 
tribes. Thus, the proposed rule is not subject to the requirements of 
Executive Order 13175.

I. Programs Affected

    Catalog of Federal Domestic Assistance (CFDA) Number: This program 
is listed in the Catalog of Federal Domestic Assistance under Number 
10.352.

J. Paperwork Reduction Act

    The collection of information requirements contained in this 
proposed rule have been submitted to the Office of Management and 
Budget (OMB) for clearance. In accordance with the Paperwork Reduction 
Act of 1995, USDA Rural Development will seek standard OMB approval of 
the reporting requirements contained in this proposed rule and hereby 
opens a 60-day public comment period.
    Title: Value-Added Producer Grant Program.
    Type of Request: New Collection.
    Abstract: The collection of information is vital to Rural 
Development to make decisions regarding the eligibility of grant 
recipients in order to ensure compliance with the regulations and to 
ensure that the funds obtained from the Government are being used for 
the purposes for which they were awarded. Entities seeking funding 
under this program will have to submit applications that include 
information on the entity's eligibility, information on each of the 
evaluation criteria, certification of matching funds, verification of 
cost-share matching funds, business plan, and feasibility study. This 
information will be used to determine applicant eligibility and to 
ensure that funds are used for authorized purposes.
    Once an entity has been approved and their application accepted for 
funding, the entity would be required to sign a Letter of Conditions 
and a grant agreement. The grant agreement outlines

[[Page 29924]]

the approved use of funds and actions, as well as the restrictions and 
applicable laws and regulations that apply to the award. Grantees must 
maintain a financial system and, in accordance with Departmental 
regulations, property and procurement standards. Grantees must submit 
semi-annual financial performance reports that include a comparison of 
accomplishments with the objectives stated in the application and a 
final performance report. Finally, grantees must provide copies of 
supporting documentation and/or project deliverables for completed 
tasks (e.g., feasibility studies, business plans, marketing plans, 
success stories, best practices).
    The following estimates are based on the anticipated average over 
the first three years the program is in place:
    Estimate of Burden: Public reporting for this collection of 
information is estimated to average 34.1 hours per response.
    Respondents: Producers of agricultural commodities.
    Estimated Number of Respondents: 535.
    Estimated Number of Responses per Respondent: 3.3.
    Estimated Number of Responses: 1,783.
    Estimated Total Annual Burden (hours) on Respondents: 60,724.
    Copies of this information collection can be obtained from Cheryl 
Thompson, Regulations and Paperwork Management Branch at (202) 692-
0043.
Comments
    Comments are invited regarding: (a) Whether the proposed collection 
of information is necessary for the proper performance of the functions 
of Rural Development, including whether the information will have 
practical utility; (b) the accuracy of Rural Development's estimate of 
the burden of the proposed collection of information including the 
validity of the methodology and assumptions used; (c) ways to enhance 
the quality, utility and clarity of the information to be collected; 
and (d) ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology. Comments may be 
sent to Cheryl Thompson, Regulations and Paperwork Management Branch, 
Support Services Division, U.S. Department of Agriculture, Rural 
Development, Stop 0742, 1400 Independence Ave., SW., Washington, DC 
20250-0742. All responses to this proposed rule will be summarized and 
included in the request for OMB approval. All comments will also become 
a matter of public record.

K. E-Government Act Compliance

    USDA is committed to complying with the E-Government Act of 2002 
(Pub. L. 107-347, December 17, 2002), 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.

List of Subjects in 7 CFR Parts 1951 and 4284

    Agricultural commodities, agricultural products, grant programs, 
rural areas, rural development, value-added activities.
    For the reasons set forth in the preamble, parts 1951 and 4284 of 
title 7 of the Code of Federal Regulations is proposed to be amended as 
follows:

PART 1951--SERVICING AND COLLECTIONS

    1. The authority citation for part 1951 continues to read as 
follows:

    Authority:  5 U.S.C. 301; 7 U.S.C. 1932 Note; 7 U.S.C. 1989; 31 
U.S.C. 3716; 42 U.S.C. 1480.

Subpart E--Servicing of Community and Direct Business Programs 
Loans and Grants

    2. Section 1951.215 is amended by revising paragraph (b)(2) to read 
as follows:


Sec.  1951.215  Grants.

* * * * *
    (b) * * *
    (2) All other grants will be serviced in accordance with the Grant 
Agreement and this subpart.

PART 4284--GRANTS

    3. The authority citation for part 4284 continues to read as 
follows:

    Authority:  5 U.S.C. 301 and 7 U.S.C. 1989

    4. Part 4284 is amended by revising subpart J to read as follows:
Subpart J--Value-Added Producer Grant Program

Section A--General

Sec.
4284.901 Purpose.
4284.902 Definitions.
4284.903 Review or appeal rights.
4284.904 Exception authority.
4284.905 Nondiscrimination and compliance with other Federal laws.
4284.906 State laws, local laws, regulatory commission regulations.
4284.907 Environmental requirements.
4284.908 Incorporation by reference.
4284.909 Forms, regulations, and instructions.
4284.910--4284.914 [Reserved]

Section B--Funding and Programmatic Change Notifications

4284.915 Notifications.
4284.916--4284.919 [Reserved]

Section C--Eligibility

4284.920 Applicant eligibility.
4284.921 Ineligible applicants.
4284.922 Project eligibility.
4284.923 Eligible uses of grant funds.
4284.924 Ineligible uses of grant and matching funds.
4284.925 Funding limitations.
4284.926--4284.929 [Reserved]

Section D--Applying for a Grant

4284.930 Preliminary review.
4284.931 Applications.
4284.932 Simplified applications.
4284.933 Filing instructions.
4284.934--4284.939 [Reserved]

Section E--Processing and Scoring Applications

4284.940 Processing applications.
4284.941 Application withdrawal.
4284.942 Scoring applications.
4284.943--4284.949 [Reserved]

Section F--Grant Awards and Agreement

4284.950 Award process.
4284.951 Grant agreement.
4284.952--4284.959 [Reserved]

Section G--Post Award Activities and Requirements

4284.960 Monitoring and reporting program performance.
4284.961 Grant servicing.
4284.962 Transfer of obligations.
4284.963 Grant close out and related activities.
4284.964--4284.999 [Reserved]

Section A--General


Sec.  4284.901  Purpose.

    This subpart implements the value-added agricultural product market 
development grant program (Value-Added Producer Grants) administered by 
the Rural Business-Cooperative Service whereby grants are made to 
enable producers to develop businesses that produce and market value-
added agricultural products.


Sec.  4284.902  Definitions.

    Administrator. The Administrator of the Rural Business-Cooperative 
Service or designees or successors.
    Agency. The Rural Business-Cooperative Service or successor for the 
programs it administers.
    Agricultural commodity. An unprocessed product of farms, ranches, 
nurseries, and forests and natural and man-made bodies of water to 
which the producer has legal access. Agricultural commodities include 
any product

[[Page 29925]]

cultivated, raised, or harvested by the producer. Agricultural 
commodities do not include horses or other animals raised or sold as 
pets, such as cats, dogs, and ferrets.
    Agricultural producer. An individual or entity directly engaged in 
the production of an agricultural commodity that is the subject of the 
value-added project.
    Agricultural producer group. A membership organization that 
represents independent producers and whose mission includes working on 
behalf of independent producers and the majority of whose membership 
and board of directors is comprised of independent producers.
    Agricultural product. Plant and animal products and their by-
products to include crops (including farming); livestock (including 
ranching); forestry products; hydroponics; nursery stock; aquaculture; 
and fish and seafood products.
    Anticipated award date. A date when the Agency expects to announce 
applications selected to receive grant funding.
    Beginning farmer or rancher. This term has the meaning given it in 
section 343(a) of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1991(a)) and is an entity in which none of the individual owners 
have operated a farm or a ranch for more than 10 years. For the 
purposes of this subpart, a Beginning Farmer or Rancher must currently 
own and produce the agricultural commodity to which value will be 
added.
    Business plan. A formal statement of a set of business goals, the 
reasons why they are believed attainable, and the plan for reaching 
those goals, including pro forma financial statements appropriate to 
the term and scope of the project and sufficient to evidence the 
viability of the venture. It may also contain background information 
about the organization or team attempting to reach those goals.
    Conflict of interest. A situation in which a person or entity has 
competing professional or personal interests that make it difficult for 
the person or business to act impartially. An example is a grant 
recipient or an employee of a recipient that conducts or significantly 
participates in conducting a feasibility study for the recipient.
    Day. Calendar day, unless otherwise stated.
    Departmental regulations. The regulations of the Department of 
Agriculture's Office of Chief Financial Officer (or successor office) 
as codified in 7 CFR parts 3000 through 3099, including, but not 
necessarily limited to, 7 CFR parts 3015 through 3019, 7 CFR part 3021, 
and 7 CFR part 3052, and successor regulations to these parts.
    Emerging market. A new or developing product that is new to the 
applicant or the applicant's product.
    Family Farm. The term has the meaning given it in section 761.2 of 
title 7, Code of Federal Regulations (as in effect on December 30, 
2007), in effect that, a Family Farm produces agricultural commodities 
for sale in sufficient quantity to be recognized as a farm and not a 
rural residence, owners are primarily responsible for daily physical 
labor and management, hired help only supplements family labor, and 
owners are related by blood or marriage or are immediate family.
    Farm or ranch. Any place from which $1,000 or more of agricultural 
products were raised and sold or would have been raised and sold during 
the previous year, but for an event beyond the control of the farmer or 
rancher.
    Farmer or rancher cooperative. A business owned and controlled by 
agricultural producers that is incorporated, or otherwise identified by 
the state in which it operates, as a cooperatively operated business.
    Feasibility study. An analysis by a qualified consultant of the 
economic, market, technical, financial, and management capabilities of 
a proposed project or business in terms of the project's expectation 
for success.
    Financial feasibility. The ability of a project or business to 
achieve the income, credit, and cash flows to financially sustain a 
venture over the long term.
    Fiscal year. The Federal government's fiscal year.
    Immediate family. Individuals who are closely related by blood, 
marriage, or adoption, or live within the same household, such as a 
spouse, domestic partner, parent, child, brother, sister, aunt, uncle, 
grandparent, grandchild, niece, or nephew.
    Independent producers.
    (1) Individual agricultural producers or entities that are solely 
owned or controlled by agricultural producers. Independent producers 
must produce and own a majority of the agricultural commodity to which 
value is being added and that is the subject of the project proposal. 
Independent producers must maintain ownership of the agricultural 
commodity or product from its raw state through the production of the 
value-added product. Producers who produce the agricultural commodity 
under contract for another entity, but do not own the product produced 
are not considered independent producers. Entities that contract out 
the production of an agricultural commodity are not considered 
independent producers.
    (2) A steering committee composed of specifically identified 
agricultural producers in the process of organizing an eligible entity 
to operate a value-added venture that will be owned or controlled by 
those specifically identified agricultural producers supplying the 
agricultural product to the market. The steering committee must have 
formed the eligible entity by the time of award.
    Local or regional supply network. An interconnected group of 
entities through which agricultural based products move from production 
through consumption in a local or regional area of the United States. 
Examples of participants in a supply network may include agricultural 
producers, processors, distributors, wholesalers, retailers, consumers, 
and entities that organize or provide technical assistance for 
development of such networks.
    Locally-produced agricultural food product. Any agricultural food 
product that is raised, produced, and distributed in:
    (1) The locality or region in which the final product is marketed, 
so that the total distance that the product is transported is less than 
400 miles from the origin of the product; or
    (2) The State in which the product is produced.
    Majority-controlled producer-based business venture. An entity 
(except farmer or rancher cooperatives) in which more than 50 percent 
of the financial ownership and voting control is held by independent 
producers.
    Marketing plan. A plan for the project conducted by a qualified 
consultant that identifies a market window, potential buyers, a 
description of the distribution system and possible promotional 
campaigns.
    Matching funds. A cost-sharing contribution to the project via 
confirmed cash or funding commitments from eligible sources without a 
conflict of interest, that are used for eligible project purposes 
during the grant period. Eligible matching funds include confirmed 
applicant cash, loan or line of credit, non-Federal grant sources 
(unless otherwise provided by law), and third-party cash or eligible 
third-party in-kind contributions. Matching funds must be at least 
equal to the grant amount, and combined grant and matching funds must 
equal 100 percent of the total project costs. All eligible cash and 
third-party in-kind matching funds contributions must be spent on 
eligible expenses during the grant period, and are subject to the same

[[Page 29926]]

use restrictions as grant funds. Matching funds must be spent at a rate 
equal to or greater than the rate at which grant funds are expended, 
and if matching funds are proposed in an amount exceeding the grant 
amount, those matching funds must be spent at a proportional rate 
equaling the match-to-grant ratio identified in the budget. Expected 
program income may not be used to fulfill the matching funds 
requirement at time of application. Further, funds used for an 
ineligible purpose, contributions donated outside the proposed grant 
period, and in-kind contributions that are invalid, over-valued or 
include potential for a conflict of interest are not acceptable 
matching funds. All matching funds must be verified by authentic 
documentation from the source as part of the application.
    Medium-sized farm. A farm or ranch that has averaged between 
$250,001 and $700,000 in annual gross sales of agricultural products in 
the previous three years.
    Mid-tier value chain. Local and regional supply networks that link 
independent producers with businesses and cooperatives that market 
value-added agricultural products in a manner that:
    (1) Targets and strengthens the profitability and competitiveness 
of small and medium-sized farms and ranches that are structured as a 
family farm; and
    (2) Obtains agreement from an eligible agricultural producer group, 
farmer or rancher cooperative, or majority-controlled producer-based 
business venture that is engaged in the value chain on a marketing 
strategy.
    (3) For mid-tier value chain projects the Agency recognizes that, 
in a supply chain network, a variety of raw agricultural commodity and 
value-added product ownership and transfer arrangements may be 
necessary. Consequently, applicant ownership of the raw agricultural 
commodity and value-added product from raw through value-added is not 
necessarily required, as long as the mid-tier value chain proposal can 
demonstrate an increase in customer base and an increase in revenue 
returns to the applicant producers supplying the majority of the raw 
agricultural commodity for the project.
    Planning grant. A grant to facilitate the development of a defined 
program of economic planning activities to determine the viability of a 
potential value-added venture, and specifically for the purpose of 
paying for a qualified (third-party) consultant to conduct and develop 
a feasibility study, business plan, and/or marketing plan associated 
with the processing and/or marketing of a value-added agricultural 
product.
    Product segregation. Separating an agricultural commodity or 
product on the same farm from other varieties of the same commodity or 
product on the same farm during production and harvesting, with 
assurance of continued separation from similar products during 
processing and marketing in a manner that results in the enhancement of 
the value of the separated commodity or product.
    Pro forma financial statement. A financial statement that projects 
the future financial position of a company. The statement is part of 
the business plan and includes an explanation of all assumptions, such 
as input prices, finished product prices, and other economic factors 
used to generate the financial statements. The statement must include 
projections in the form of cash flow statements, income statements, and 
balance sheets.
    Project. All activities to be funded by grant and matching funds.
    Qualified consultant. An independent, third-party possessing the 
knowledge, expertise, and experience to perform the specific task 
required in an efficient, effective, and authoritative manner.
    Rural Development. A mission area of the Under Secretary for Rural 
Development within the U.S. Department of Agriculture (USDA), which 
includes Rural Housing Service, Rural Utilities Service, and Rural 
Business-Cooperative Service and their successors.
    Rural or rural area. Any area of a State not in a city or town that 
has a population of more than 50,000 inhabitants, according to the 
latest decennial census of the United States, and the contiguous and 
adjacent urbanized area, and any area that has been determined to be 
``rural in character'' by the Under Secretary for Rural Development, or 
as otherwise identified in this definition. In determining which census 
blocks in an urbanized area are not in a rural area, the Agency will 
exclude any cluster of census blocks that would otherwise be considered 
not in a Rural Area only because the cluster is adjacent to not more 
than two census blocks that are otherwise considered not in a rural 
area under this definition.
    (1) For the purposes of this definition, cities and towns are 
incorporated population centers with definite boundaries, local self 
government, and legal powers set forth in a charter granted by the 
State.
    (2) For the Commonwealth of Puerto Rico, the island is considered 
rural and eligible for Business Programs assistance, except for the San 
Juan Census Designated Place (CDP) and any other CDP with greater than 
50,000 inhabitants. CDPs with greater than 50,000 inhabitants, other 
than the San Juan CDP, may be determined to be eligible if they are 
``not urban in character.'' Any such requests must be forwarded to the 
National Office, Business and Industry Division, with supporting 
documentation as to why the area is ``not urban in character'' for 
review, analysis, and decision by the Rural Development Under 
Secretary.
    (3) For the State of Hawaii, all areas within the State are 
considered rural and eligible for Business Programs assistance, except 
for the Honolulu CDP within the County of Honolulu.
    (4) For the purpose of defining a rural area in the Republic of 
Palau, the Federated States of Micronesia, and the Republic of the 
Marshall Islands, the Agency shall determine what constitutes rural and 
rural area based on available population data.
    (5) The determination that an area is ``rural in character'' under 
this definition will be to areas that are within:
    (i) An urbanized area that has two points on its boundary that are 
at least 40 miles apart, which is not contiguous or adjacent to a city 
or town that has a population of greater than 150,000 inhabitants or 
the urbanized area of such a city town; or
    (ii) An urbanized area contiguous and adjacent to a city or town of 
greater than 50,000 population that is within one-quarter mile of a 
rural area.
    Small farm. A farm or ranch that has averaged $250,000 or less in 
annual gross sales of agricultural products in the previous three 
years.
    Socially disadvantaged farmer or rancher. This term has the meaning 
given it in section 355(e) of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 2003(e)). A farmer or rancher who is a member 
of a ``socially disadvantaged group.'' In this definition, the term 
farmer or rancher means a person that is engaged in farming or ranching 
or an entity solely owned by individuals who are engaged in farming or 
ranching. A socially disadvantaged group means a group whose members 
have been subjected to racial, ethnic, or gender prejudice because of 
their identity as members of a group without regard to their individual 
qualities. In the event that there are multiple farmer or rancher 
owners of the applicant organization, the Agency requires that at least 
51 percent of the ownership be held by

[[Page 29927]]

members of a socially disadvantaged group.
    State. Any of the 50 States of the United States, the Commonwealth 
of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the 
Commonwealth of the Northern Mariana Islands, the Republic of Palau, 
the Federated States of Micronesia, and the Republic of the Marshall 
Islands.
    State director. The term ``State Director'' means, with respect to 
a State, the Director of the Rural Development State Office.
    State office. USDA Rural Development offices located in each state.
    Total project cost. The sum of all grant and matching funds in the 
project budget that reflects the eligible project tasks associated with 
the work plan.
    Value-added agricultural product. Any agricultural commodity or 
product that meets the requirements specified in paragraphs (1) and (2) 
of this definition.
    (1) The agricultural commodity or product must meet one of the 
following five value-added methodologies:
    (i) Has undergone a change in physical state;
    (ii) Was produced in a manner that enhances the value of the 
agricultural commodity or product;
    (iii) Is physically segregated in a manner that results in the 
enhancement of the value of the agricultural commodity or product;
    (iv) Is a source of farm- or ranch-based renewable energy, 
including E-85 fuel; or
    (v) Is aggregated and marketed as a locally-produced agricultural 
food product.
    (2) As a result of the change in physical state or the manner in 
which the agricultural commodity or product was produced, marketed, or 
segregated:
    (i) The customer base for the agricultural commodity or product is 
expanded and
    (ii) A greater portion of the revenue derived from the marketing, 
processing, or physical segregation of the agricultural commodity or 
product is available to the producer of the commodity or product.
    Venture. The business, including the project and other related 
activities.
    Working capital grant. A grant to provide funds to operate a value-
added project, specifically to pay the eligible project expenses 
related to the processing and/or marketing of the value-added product 
that are eligible uses of grant funds.


Sec.  4284.903  Review or appeal rights.

    A person may seek a review of an Agency decision under this subpart 
from the appropriate Agency official that oversees the program in 
question or appeal to the National Appeals Division in accordance with 
7 CFR part 11.


Sec.  4284.904  Exception authority.

    Except as specified in paragraphs (a) and (b) of this section, the 
Administrator may make exceptions to any requirement or provision of 
this subpart, if such exception is necessary to implement the intent of 
the authorizing statute in a time of national emergency or in 
accordance with a Presidentially-declared disaster, or, on a case-by-
case basis, when such an exception is in the best financial interests 
of the Federal Government and is otherwise not in conflict with 
applicable laws.
    (a) Applicant eligibility. No exception to applicant eligibility 
can be made.
    (b) Project eligibility. No exception to project eligibility can be 
made.


Sec.  4284.905  Nondiscrimination and compliance with other Federal 
laws.

    (a) Other Federal laws. Applicants must comply with other 
applicable Federal laws, including the Equal Employment Opportunities 
Act of 1972, the Americans with Disabilities Act, the Equal Credit 
Opportunity Act, Title VI of the Civil Rights Act of 1964, Section 504 
of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, 
and 7 CFR part 1901-E.
    (b) Nondiscrimination. The U.S. Department of Agriculture (USDA) 
prohibits discrimination in all its programs and activities on the 
basis of race, color, national origin, age, disability, and where 
applicable, sex, marital status, familial status, parental status, 
religion, sexual orientation, genetic information, political beliefs, 
reprisal, or because all or part of an individual's income is derived 
from any public assistance program. (Not all prohibited bases apply to 
all programs.) Persons with disabilities who require alternative means 
for communication of program information (Braille, large print, 
audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 
(voice and TDD). Any applicant that believes it has been discriminated 
against as a result of applying for funds under this program should 
contact: USDA, Director, Office of Adjudication and Compliance, 1400 
Independence Avenue, SW., Washington, DC 20250-9410, or call (800) 795-
3272 (voice) or (202) 720-6382 (TDD) for information and instructions 
regarding the filing of a Civil Rights complaint. USDA is an equal 
opportunity provider, employer, and lender.
    (c) Civil rights compliance. Recipients of grants must comply with 
Title VI of the Civil Rights Act of 1964, Section 504 of the 
Rehabilitation Act of 1973. This includes collection and maintenance of 
data on the basis of race, sex and national origin of the recipient's 
membership/ownership and employees. These data must be available to 
conduct compliance reviews in accordance with 7 CFR part 1901, subpart 
E. For grants initial compliance review will be conducted after Form RD 
400-4, ``Assurance Agreement,'' is signed and one subsequent compliance 
review after the last disbursement of grant funds have been made, and 
the facility or programs been in full operations for 90 days.
    (d) Executive Order 12898. When a project is proposed and financial 
assistance is requested, the Agency will conduct a Civil Rights Impact 
Analysis (CRIA) with regards to environmental justice. The CRIA must be 
conducted and the analysis documented utilizing Form RD 2006-38, 
``Civil Right Impact Analysis Certification.'' This certification must 
be done prior to grant approval, obligation of funds, or other 
commitments of Agency resources, including issuance of a Letter of 
Conditions, whichever occurs first.


Sec.  4284.906  State laws, local laws, regulatory commission 
regulations.

    If there are conflicts between this subpart and State or local laws 
or regulatory commission regulations, the provisions of this subpart 
will control.


Sec.  4284.907  Environmental requirements.

    All grants awarded under this subpart are subject to the 
environmental requirements in subpart G of 7 CFR part 1940 or successor 
regulations. Applications for planning grants are generally excluded 
from the environmental review process by Sec.  1940.333 of this title. 
Applicants for working capital grants must submit Form 1940-22, 
Categorical Exclusion Checklist.


Sec.  4284.908  Incorporation by reference.

    (a) Departmental regulations. Unless specifically stated, this 
subpart incorporates by reference the regulations of the Department of 
Agriculture's Office of Chief Financial Officer (or successor office) 
as codified in 7 CFR parts 3000 through 3099, including, but not 
necessarily limited to, 7 CFR parts 3015 through 3019, 7 CFR part 3021, 
and 7 CFR part 3052, and successor regulations to these parts.
    (b) Cost principles. This subpart incorporates by reference the 
cost

[[Page 29928]]

principles found in 2 CFR part 230 and in 48 CFR part 31.2.
    (c) Definitions. If a term is defined differently in the 
Departmental Regulations, 2 CFR 230, or 48 CRF 31.2 and in this 
subpart, such term shall have the meaning as found in this subpart.


Sec.  4284.909  Forms, regulations, and instructions.

    Copies of all forms, regulations, instructions, and other materials 
related to the program referenced in this subpart may be obtained 
through the Agency.


Sec. Sec.  4284.910-4284.914  [Reserved]

Section B--Funding and Programmatic Change Notifications


Sec.  4284.915  Notifications.

    In implementing this subpart, the Agency will issue notifications 
addressing funding and programmatic changes, as specified in paragraphs 
(a) and (b) of this section, respectively. The methods that the Agency 
will use in making these notifications is specified in paragraph (c) of 
this section, and the timing of these notifications is specified in 
paragraph (d) of this section.
    (a) Funding and simplified applications. The Agency will issue 
notifications concerning:
    (1) The funding level and the minimum and maximum grant amount and 
any additional funding information as determined by the Agency; and
    (2) The contents of simplified applications, as provided for in 
Sec.  4284.932.
    (b) Programmatic changes. The Agency will issue notifications of 
the programmatic changes specified in paragraphs (b)(1) through (4) of 
this section.
    (1) The set of Administrator priority categories or their point 
allocation, if the provisions specified in Sec.  4284.942(b)(6) are not 
to be used for awarding Administrator points. Administrator priorities 
that the program may consider are:
    (i) Unserved or underserved areas.
    (ii) Geographic diversity.
    (iii) Emergency conditions.
    (iv) To more effectively accomplish the mission area's plans, 
goals, and objectives.
    (v) Public health and safety.
    (2) Additional reports that are generally applicable across 
projects within a program associated with the monitoring of and 
reporting on project performance.
    (3) Any information specified in Sec.  4284.933.
    (4) Preliminary review information.
    (c) Notification methods. The Agency will issue the information 
specified in paragraphs (a) and (b) in one or more Federal Register 
notices. In addition, all information will be available at any Rural 
Development office.
    (d) Timing. The Agency will make the information specified in 
paragraphs (a) and (b) of this section available as specified in 
paragraphs (d)(1) through (3) of this section.
    (1) The Agency will make the information specified in paragraph (a) 
of this section available each fiscal year.
    (2) The Agency will make the information specified in paragraphs 
(b)(1) of this section available at least 60 days prior to the 
application deadline, as applicable.
    (3) The Agency will make the information specified in paragraphs 
(b)(2) through (4) of this section available on an as needed basis.


Sec. Sec.  4284.916-4284.919   [Reserved]

Section C--Eligibility


Sec.  4284.920  Applicant eligibility.

    To be eligible for a grant under this subpart, an applicant must 
demonstrate that they meet the requirements specified in paragraphs (a) 
through (d) of this section, as applicable, and are subject to the 
limitations specified in paragraphs (e) and (f) of this section.
    (a) Type of applicant. The applicant must demonstrate that they 
meet all definition requirements for one of the following applicant 
types:
    (1) An independent producer;
    (2) An agricultural producer group;
    (3) A farmer or rancher cooperative; or
    (4) A majority-controlled producer-based business venture.
    (b) Emerging market. An applicant that is an agricultural producer 
group, a farmer or rancher cooperative, or a majority-controlled 
producer-based business venture must demonstrate that they are entering 
into an emerging market as a result of the proposed project.
    (c) Citizenship.
    (1) Individual applicants must demonstrate that they:
    (i) Are citizens or nationals of the United States (U.S.), the 
Republic of Palau, the Federated States of Micronesia, the Republic of 
the Marshall Islands, or American Samoa, or
    (ii) Reside in the U.S. after legal admittance for permanent 
residence.
    (2) Entities other than individuals must demonstrate that they are 
at least 51 percent owned by individuals who are either citizens as 
identified under paragraph (c)(1)(i) of this section or legally 
admitted permanent residents residing in the U.S. This paragraph is not 
applicable if the entity is owned solely by members of one immediate 
family. In such instance, if at least one of the immediate family 
members is a citizen or national, as defined in paragraph (c)(1) of 
this section, then the entity is eligible.
    (d) Legal authority and responsibility. Each applicant must 
demonstrate that they have, or can obtain, the legal authority 
necessary to carry out the purpose of the grant.
    (e) Multiple grant eligibility. An applicant may submit only one 
application in response to this notice, and must direct that it compete 
in either the general funds competition or in one of the reserved funds 
competitions. Separate entities with identical or greater than 75 
percent common ownership may only submit one application for one entity 
per year. Applicants who have already received a planning grant for the 
proposed project cannot receive another planning grant for the same 
project. Applicants who have already received a working capital grant 
for the proposed project cannot receive any additional grants for that 
project.
    (f) Active VAPG grant. If an applicant has an active value-added 
grant at the time of a subsequent application, the current grant must 
be closed out within 90 days of the annual NOFA.


Sec.  4284.921  Ineligible applicants.

    (a) Consistent with the Departmental regulations, an applicant is 
ineligible if the applicant is debarred or suspended or is otherwise 
excluded from or ineligible for participation in Federal assistance 
programs under Executive Order 12549, ``Debarment and Suspension.''
    (b) An applicant will be considered ineligible for a grant due to 
an outstanding judgment obtained by the U.S. in a Federal Court (other 
than U.S. Tax Court), is delinquent on the payment of Federal income 
taxes, or is delinquent on Federal debt.


Sec.  4284.922  Project eligibility.

    To be eligible for a VAPG grant, the application must demonstrate 
that the project meets the requirements specified in paragraphs (a) 
through (d) of this section, as applicable.
    (a) Product eligibility. Each product that is the subject of the 
proposed project must meet the definition of a value-added agricultural 
product, including a demonstration that:
    (1) The value-added product results from one of the value-added 
methodologies identified in paragraphs

[[Page 29929]]

(1)(i) through (v) of the definition of value-added agricultural 
product;
    (2) As a result of the project, the customer base for the 
agricultural commodity or product is expanded; and
    (3) As a result of the project, a greater portion of the revenue 
derived from the marketing or processing of the value-added product is 
available to the agricultural producer of the commodity or product.
    (b) Purpose eligibility.
    (1) The grant funds requested must not exceed the amount specified 
annually for planning and working capital grant requests.
    (2) The matching funds required for the project budget must be 
available during the project period and verified in the application.
    (3) The proposed project must be limited to eligible planning or 
working capital activities as defined at Sec.  4284.923, as applicable, 
with eligible tasks directly related to the processing and/or marketing 
of the subject value-added product.
    (4) The project work plan and budget must:
    (i) Present a detailed breakdown of all estimated costs associated 
with the eligible planning or working capital activities related to the 
processing and/or marketing of the value-added product and allocate 
those costs among the listed tasks;
    (ii) Identify the sources and uses of grant and matching funds for 
all tasks specified in the budget; and
    (iii) Present a project budget period of not longer than 36 months, 
scaled to complexity, and concluding not later than 3 years after the 
proposed start date.
    (5) Working capital applications must include a feasibility study 
and business plan completed specifically for the proposed value-added 
project by a qualified consultant. The Agency must concur in the 
acceptability or adequacy of the feasibility study and business plan 
for eligibility purposes.
    (6) If the applicant is an agricultural producer group, a farmer or 
rancher cooperative, or a majority-controlled producer-based business 
venture, the applicant must demonstrate that it is entering an emerging 
market.
    (7) All applicants for working capital must either be currently 
marketing each value-added agricultural product that is the subject of 
the grant application, or be ready to implement the working capital 
activities in accord with the budget and work plan timeline proposed.
    (c) Branding activities. Applications that propose only branding, 
packaging, or other similar means of product differentiation are not 
eligible under this subpart. However, applications that propose 
branding, packaging, or other product differentiation activities that 
are no more than 25 percent of total project costs of a value-added 
project for products otherwise eligible in one of the five value-added 
methodologies specified in paragraphs (1)(i) through (v) of the 
definition of value-added agricultural product are eligible.
    (d) Reserved funds eligibility. In addition to the requirements 
specified in paragraphs (a) through (c) of this section, the 
requirements specified in paragraphs (d)(1) and (2) of this section 
must be met, as applicable. All eligible, but unfunded reserved funds 
applications will be eligible to compete for general funds in that same 
fiscal year, as funding levels permit.
    (1) If the applicant is applying for beginning farmer or rancher, 
or socially-disadvantaged farmer or rancher reserved funds, the 
applicant must provide documentation demonstrating that the applicant 
meets one of these definitions.
    (2) If the applicant is applying for mid-tier value chain reserved 
funds, the application must:
    (i) Demonstrate that the project proposes development of a local or 
regional supply network of an interconnected group of entities through 
which agricultural products move from production through consumption in 
a local or regional area of the United States, including a description 
of the network, its component members, and its purpose;
    (ii) Describe at least two alliances, linkages or partnerships 
within the value chain that link independent producers with businesses 
and cooperatives that market value-added agricultural products in a 
manner that benefits small or medium-sized farms and ranches that are 
structured as a family farm, including the names of the parties and the 
nature of their collaboration;
    (iii) Demonstrate how the project, due to the manner in which the 
value-added product is marketed, will increase the profitability and 
competitiveness of at least two eligible small or medium-sized farms or 
ranches that are structured as a family farm;
    (iv) Document that the eligible agricultural producer group/
cooperative/majority-controlled producer-based business venture 
applicant organization has obtained at least one agreement with another 
member of the supply network that is engaged in the value chain on a 
marketing strategy; or that the eligible independent producer applicant 
has obtained at least one agreement from an eligible agricultural 
producer group/cooperative/majority-controlled producer-based business 
venture engaged in the value-chain on a marketing strategy;
    (v) Demonstrate that the applicant organization currently owns and 
produces more than 50 percent of the raw agricultural commodity that 
will be used for the value-added product that is the subject of the 
proposal; and
    (vi) Demonstrate that the project will result in an increase in 
customer base and an increase in revenue returns to the applicant 
producers supplying the majority of the raw agricultural commodity for 
the project.


Sec.  4284.923  Eligible uses of grant and matching funds.

    Grant and cost-share matching funds have the same use restrictions 
and must be used to fund only the costs for approved purposes as 
defined in paragraphs (a) and (b) of this section.
    (a) Planning funds may be used to pay for a qualified consultant to 
conduct and develop a feasibility study, business plan, and/or 
marketing plan associated with the processing and/or marketing of a 
value-added agricultural product. Planning funds may not be used for 
applicant participation in feasibility studies. In-kind contribution of 
matching funds to cover applicant participation in development of 
business plans and/or marketing plans is allowed to the extent that the 
value of such work can be appropriately valued. Funds may not be used 
to evaluate the agricultural production of the commodity itself, other 
than to determine the project's input costs related to the feasibility 
of processing and marketing the value-added product.
    (b) Working capital funds may be used to pay the project's 
operational costs directly related to the processing and/or marketing 
of the value-added product. Examples of eligible working capital 
expenses include designing or purchasing a financial accounting system 
for the project, paying salaries of employees without ownership 
interest to process and/or market and deliver the value-added product 
to consumers, paying for inventory supply costs necessary to produce 
the value-added product from the agricultural commodity or product, and 
paying for a marketing campaign for the value-added product.


Sec.  4284.924  Ineligible uses of grant and matching funds.

    Grant funds awarded under this subpart may not be used to:

[[Page 29930]]

    (a) Plan, repair, rehabilitate, acquire, or construct a building or 
facility (including a processing facility);
    (b) Purchase, lease purchase, or install fixed equipment, including 
processing equipment;
    (c) Purchase or repair vehicles, including boats;
    (d) Pay for the preparation of the grant application;
    (e) Pay expenses not directly related to the funded project;
    (f) Fund research and development;
    (g) Fund political or lobbying activities;
    (h) Fund any activities prohibited by 7 CFR parts 3015 and 3019, 2 
CFR part 230, and 48 CFR part 31.2.
    (i) Fund architectural or engineering design work;
    (j) Fund expenses related to the production of any agricultural 
commodity or product, including seed, rootstock, labor for harvesting 
the crop, and delivery of the commodity to a processing facility;
    (k) Conduct activities on behalf of anyone other than a 
specifically identified independent producer or group of independent 
producers. The Agency considers conducting industry-level feasibility 
studies or business plans, that are also known as feasibility study 
templates or guides or business plan templates or guides, to be 
ineligible because the assistance is not provided to a specific group 
of Independent Producers;
    (l) Duplicate current services or replace or substitute support 
previously provided;
    (m) Pay any costs of the project incurred prior to the date of 
grant approval, including legal or other expenses needed to incorporate 
or organize a business;
    (n) Pay for assistance to any business that does not meet the 
requirements of Sec.  4284.920(c);
    (o) Pay any judgment or debt owed to the United States;
    (p) Pay for any goods or services provided by a person or entity 
that has a conflict of interest or an appearance of a conflict of 
interest. Also, note that in-kind matching funds may not be provided by 
a person or entity that has a conflict of interest or an appearance of 
a conflict of interest;
    (q) Purchase land; or
    (r) Pay for costs associated with illegal activities.


Sec.  4284.925  Funding limitations.

    (a) Grant funds may be used to pay up to 50 percent of the total 
eligible project costs, subject to the limitations established for 
maximum total grant amount.
    (b) The maximum total grant amount provided to a grantee in any one 
year shall not exceed the amount announced in an annual notice issued 
pursuant to Sec.  4284.915, but in no event may the total amount of 
grant funds provided to a grant recipient exceed $500,000.
    (c) A grant under this subsection shall have a term that does not 
exceed 3 years. Grant project periods should be scaled to the 
complexity of the objectives for the project. The Agency may extend the 
term of the grant period, not to exceed the 3-year maximum.
    (d) The aggregate amount of awards to majority controlled producer-
based businesses may not exceed 10 percent of the total funds obligated 
under this subpart during any fiscal year.
    (e) Not more than 5 percent of funds appropriated each year may be 
used to fund the Agricultural Marketing Resource Center, to support 
electronic capabilities to provide information regarding research, 
business, legal, financial, or logistical assistance to independent 
producers and processors.
    (f) Each fiscal year, the following amounts of reserved funds will 
be made available:
    (1) 10 percent to fund projects that benefit beginning farmers or 
ranchers, or socially-disadvantaged farmers or ranchers; and
    (2) 10 percent to fund projects that propose development of mid-
tier value chains.
    (3) Funds not obligated by June 30 of each fiscal year shall be 
available to the general fund for the program.


Sec. Sec.  4284.926-4284.929   [Reserved]

Section D--Applying for a Grant


Sec.  4284.930  Preliminary review.

    The Agency encourages applicants to contact their State Office well 
in advance of the application submission deadline, to ask questions and 
to discuss project eligibility potential. At its option, the Agency may 
establish a preliminary review deadline so that it may informally 
assess the eligibility of the application and its completeness. The 
result of the preliminary review is not binding on the Agency. To 
implement this section, the Agency will issue a notification addressing 
this issue in accordance with Sec.  4284.915.


Sec.  4284.931  Application package.

    All applicants are required to submit an application package that 
is comprised of the elements in this section.
    (a) Application forms. The following application forms (or their 
successor forms) must be completed when applying for a grant under this 
subpart.
    (1) Form SF-424, ``Application for Federal Assistance.''
    (2) Form SF-424A, ``Budget Information-Non-Construction Programs.''
    (3) Form SF-424B, ``Assurances--Non-Construction Programs.''
    (4) Form RD 400-4, ``Assurance Agreement.''
    (5) Form RD 400-1, ``Equal Opportunity Agreement.''
    (6) All applicants are required to have a DUNS number (including 
individuals and sole proprietorships).
    (b) Application content. The following content items must be 
completed when applying for a grant under this subpart:
    (1) Eligibility discussion. Using the format prescribed by the 
application package, the applicant must describe in detail how the:
    (i) Applicant (Sec. Sec.  4284.920 and 921) and project eligibility 
(Sec.  4284.922) requirements are met;
    (ii) Eligible use of grant and matching funds (Sec. Sec.  4284.923 
and 924) requirements are met; and
    (iii) Funding limitation (Sec.  4284.925) requirements are met.
    (2) Evaluation criteria. Using the format prescribed by the 
application package, the applicant must address each evaluation 
criterion identified below.
    (i) Performance evaluation criteria. Applicants for planning grants 
must suggest at least one criterion by which their performance under a 
grant could be evaluated. Applicants for working capital grants must 
identify the projected increase in customer base, revenue accruing to 
independent producers, and number of jobs attributed to the project. 
Working capital projects with significant renewable energy components 
must also identify the projected increase in capacity per unit of 
measure annually attributed to the project. Performance criteria will 
be incorporated into the applicant's semi-annual and final reporting 
requirements if selected for award.
    (ii) Proposal evaluation criteria. Applicants must address each 
proposal evaluation criterion identified in Sec.  4284.942 in narrative 
form, in the application package.
    (3) Certification of matching funds. Using the format prescribed by 
the application package, applicants must certify that:
    (i) Cost-share matching funds will be spent in advance of grant 
funding, such that for every dollar of grant funds disbursed, not less 
than an equal amount of matching funds will have

[[Page 29931]]

been expended prior to submitting the request for reimbursement; and
    (ii) If matching funds are proposed in an amount exceeding the 
grant amount, those matching funds must be spent at a proportional rate 
equal to the match-to-grant ratio identified in the proposed budget.
    (4) Verification of cost-share matching funds. Using the format 
prescribed by the application package, the applicant must provide 
authentic documentation from the source to confirm the eligibility and 
availability of both cash and in-kind contributions that meet the 
following requirements:
    (i) Matching funds are subject to the same use restrictions as 
grant funds, and must be spent on eligible project expenses during the 
grant project period.
    (ii) Matching funds must be from eligible sources without a 
conflict of interest and without the appearance of a conflict of 
interest.
    (iii) Matching funds must be at least equal to the amount of grant 
funds requested, and combined grant and matching funds must equal 100 
percent of the total eligible project costs.
    (iv) Unless provided by other authorizing legislation, other 
Federal grant funds cannot be used as matching funds.
    (v) Matching funds must be provided in the form of confirmed 
applicant cash, loan, or line of credit; or confirmed third-party cash 
or eligible third-party in-kind contribution.
    (vi) Examples of ineligible matching funds include funds used for 
an ineligible purpose, contributions donated outside the proposed grant 
period, third-party in-kind contributions that are over-valued, 
expected program income at time of application, or instances where the 
potential for a conflict of interest exists, including applicant in-
kind contributions in Sec.  4284.923(a).
    (5) Business plan. As part of the application package, applicants 
for working capital grants must provide a copy of the business plan 
that was completed for the proposed project. The Agency must concur in 
the acceptability or adequacy of the business plan.
    (6) Feasibility study. As part of the application package, 
applicants for working capital grants must provide a copy of the third-
party feasibility study that was completed for the proposed project. 
The Agency must concur in the acceptability or adequacy of the 
feasibility study.


Sec.  4284.932  Simplified application.

    Applicants requesting less than $50,000 will be allowed to submit a 
simplified application, the contents of which will be announced in an 
annual notice issued pursuant to Sec.  4284.915.


Sec.  4284.933  Filing instructions.

    Unless otherwise specified in a notification issued under Sec.  
4284.915, the requirements specified in paragraphs (a) through (e) of 
this section apply to all applications.
    (a) When to submit. Complete applications must be received by the 
Agency on or before March 15 of each year to be considered for funding 
for that fiscal year. Applications received by the Agency after March 
15 will not be considered.
    (b) Incomplete applications. Incomplete applications will be 
rejected. Applicants will be informed of the elements that made the 
application incomplete. If a resubmitted application is received by the 
applicable application deadline, the Agency will reconsider the 
application.
    (c) Where to submit. All applications must be submitted to the 
State Office of Rural Development in the State where the project 
primarily takes place, or on-line through grants.gov.
    (d) Format. Applications may be submitted as hard copy, or 
electronically via grants.gov. If submitted as hard copy, only one 
original copy should be submitted.
    (e) Other forms and instructions. Upon request, the Agency will 
make available to the public the necessary forms and instructions for 
filing applications. These forms and instructions may be obtained from 
any State Office of Rural Development, or the Agency's Value-Added 
Producer Grant program Web site--http://www.rurdev.usda.gov/rbs/coops/vadg.htm.


Sec. Sec.  4284.934-4284.939  [Reserved]

Section E--Processing and Scoring Applications


Sec.  4284.940  Processing applications.

    (a) Initial review. Upon receipt of an application on or before the 
application submission deadline for each fiscal year, the Agency will 
conduct a review to determine if the applicant and project are 
eligible, and if the application is complete and sufficiently 
responsive to program requirements.
    (b) Notifications. After the review in paragraph (a) of this 
section has been conducted, the Agency will notify the applicant in 
writing of the Agency's findings. If the Agency has determined that 
either the applicant or project is ineligible or that the application 
is not complete to allow evaluation of the application or sufficiently 
responsive to program requirements, it will include in the notification 
the reason(s) for its determination(s).
    (c) Resubmittal by applicants. Applicants may submit revised 
applications to the Agency in response to the notification received 
under paragraph (b) of this section. If a revised grant application is 
received on or before the application deadline, it will be processed by 
the Agency. If such revised applications are not received by the 
specified application deadline, the Agency will not process the 
application and will inform the applicant that their application was 
not reviewed due to tardiness.
    (d) Subsequent ineligibility determinations. If at any time an 
application is determined to be ineligible, the Agency will notify the 
applicant in writing of its determination.


Sec.  4284.941  Application withdrawal.

    During the period between the submission of an application and the 
execution of award documents, the applicant must notify the Agency in 
writing if the project is no longer viable or the applicant no longer 
is requesting financial assistance for the project. When the applicant 
so notifies the Agency, the selection will be rescinded or the 
application withdrawn.


Sec.  4284.942  Proposal evaluation criteria and scoring applications.

    (a) General. The Agency will only score applications for which it 
has determined that the applicant and project are eligible, the 
application is complete and sufficiently responsive to program 
requirements, and the project is likely feasible. Any applicant whose 
application will not be reviewed because the Agency has determined it 
fails to meet the preceding criteria will be notified of appeal rights 
pursuant to Sec.  4284.903. Each such application the Agency receives 
on or before the application deadline in a fiscal year will be scored 
in the fiscal year in which it was received. Each application will be 
scored based on the information provided and/or referenced in the 
scoring section of the application at the time the applicant submits 
the application to the Agency.
    (b) Scoring applications. The maximum number of points that will be 
awarded to an application is 100, plus an additional 10 points if the 
project is located in a rural area. The criteria specified in 
paragraphs (b)(1) through (7) of this section will be used to score 
each application. The Agency will specify how points are awarded for 
each

[[Page 29932]]

criterion in a Notice published each fiscal year.
    (1) Nature of the proposed project (maximum 25 points).
    (2) Personnel qualifications (maximum 20 points).
    (3) Commitments and support (maximum 10 points).
    (4) Work plan/budget (maximum 20 points).
    (5) Type of applicant (maximum 15 points).
    (6) Administrator priority categories and points (maximum 10 
points).
    (7) Rural or rural area location (10 points may be awarded).


Sec. Sec.  4284.943-4284.949  [Reserved]

Section F--Grant Awards and Agreement


Sec.  4284.950  Award process.

    (a) Selection of applications for funding and for potential 
funding. The Agency will select and rank applications for funding based 
on the score an application has received in response to the proposal 
evaluation criteria, compared to the scores of other value-added 
applications received in the same fiscal year. Higher scoring 
applications will receive first consideration for funding. The Agency 
will notify applicants, in writing, whether or not they have been 
selected for funding. For those applicants not selected for funding, 
the Agency will provide a brief explanation for why they were not 
selected.
    (b) Ranked applications not funded. A ranked application that is 
not funded in the fiscal year in which it was submitted will not be 
carried forward into the next fiscal year. The Agency will notify the 
applicant in writing.
    (c) Intergovernmental review. If State or local governments raise 
objections to a proposed project under the intergovernmental review 
process that are not resolved within 90 days of the Agency's award 
announcement date, the Agency will rescind the award and will provide 
the applicant with a written notice to that effect. The Agency, in its 
sole discretion, may extend the 90-day period if it appears resolution 
is imminent.


Sec.  4284.951  Grant agreement.

    (a) Letter of conditions. When a grant is obligated subject to 
conditions established by the Agency, the Agency will notify, in 
writing, each applicant whose application has been selected for funding 
using a Letter of Conditions, which defines the conditions under which 
the grant will be made. If the applicant agrees with the conditions, 
the applicant must complete, sign, and return the Agency's ``Letter of 
Intent to Meet Conditions.'' If the applicant believes that certain 
conditions cannot be met, the applicant may propose alternate 
conditions to the Agency. The Agency must concur with any proposed 
changes to the Letter of Conditions by the applicant before the 
application will be further processed. If the Agency agrees to any 
proposed changes, the Agency will issue a revised or amended Letter of 
Conditions that defines the final conditions under which the grant will 
be made.
    (b) Grant agreement and conditions. Each grantee will be required 
to meet all terms and conditions of the award within 90 days of 
receiving a Letter of Conditions unless otherwise specified by the 
Agency at the time of award. Each grantee will also be required to sign 
a grant agreement that outlines the approved use of funds and actions 
under the award, as well as the restrictions and applicable laws and 
regulations that pertain to the award.
    (c) Grant disbursements. Grant disbursement will be made in 
accordance with the Letter of Conditions, and/or the grant agreement, 
as applicable. Adequate supporting documentation is required for all 
disbursements.


Sec. Sec.  4284.952-4284.959  [Reserved]

Section G--Post Award Activities and Requirements


Sec.  4284.960  Monitoring and reporting program performance.

    The requirements specified in this section shall apply to grants 
made under this subpart.
    (a) Grantees are responsible to expend funds only for eligible 
purposes and will be monitored by Agency staff for compliance. Grantees 
must maintain a financial management system, and property and 
procurement standards in accordance with Departmental Regulations.
    (b) Grantees must submit prescribed narrative and financial 
performance reports that include a comparison of accomplishments with 
the objectives stated in the application. The Agency will prescribe 
both the narrative and financial report formats in the grant agreement.
    (1) Semi-annual performance reports shall be submitted within 30 
days following March 31 and September 30 each fiscal year. A final 
performance report shall be submitted to the Agency within 90 days of 
project completion. Failure to submit a performance report within the 
specified timeframes may result in the Agency withholding grant funds.
    (2) Additional reports shall be submitted as specified in the grant 
agreement or Letter of Conditions, or as otherwise provided in a 
notification issued under Sec.  4284.915.
    (3) Copies of supporting documentation and/or project deliverables 
for completed tasks must be provided to the Agency in a timely manner 
in accord with the development or completion of materials and in 
conjunction with the budget and project timeline. Examples include, but 
are not limited to, a feasibility study, marketing plan, business plan, 
success story, or best practice.
    (4) The Agency may request any additional project and/or 
performance data for the project for which grant funds have been 
received.


Sec.  4284.961  Grant servicing.

    All grants awarded under this subpart shall be serviced in 
accordance with 7 CFR part 1951, subparts E and O, and the Departmental 
Regulations.


Sec.  4284.962  Transfer of obligations.

    An obligation of funds established for an applicant may be 
transferred to a different (substituted) applicant provided:
    (a) The substituted applicant:
    (1) Is eligible;
    (2) Has a close and genuine relationship with the original 
applicant; and
    (3) Has the authority to receive the assistance approved for the 
original applicant; and
    (b) The need, purpose(s), and scope of the project for which the 
Agency funds will be used remain substantially unchanged.


Sec.  4284.963  Grant close out and related activities.

    In addition to the requirements specified in the Departmental 
regulations, failure to submit satisfactory reports on time under the 
provisions of Sec.  4284.970(b) may result in the suspension or 
termination of a grant.


Sec. Sec.  4284.964-4284.999  [Reserved]

    Dated: May 21, 2010.
Pandor H. Hadjy,
Acting Administrator, Rural Business-Cooperative Service.
[FR Doc. 2010-12731 Filed 5-27-10; 8:45 am]
BILLING CODE 3410-XY-P


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