On June 8, 2006, the Department of Agriculture (the Department or USDA) published a proposed rule in the Federal Register (71 FR 33344) to amend provisions in 7 CFR part 250, which contain the general regulations for USDA domestic food distribution. The proposals were intended to accomplish the following objectives:

• Establish requirements to ensure that recipient agencies in child nutrition programs receive the benefit and value of all donated foods received and provided to food service management companies for use in the recipient agencies' meal service;

• Revise and clarify requirements for the use and management of donated foods in the National School Lunch Program (NSLP) and other child nutrition programs;

• Reduce the paperwork burden associated with the distribution of donated foods to charitable institutions and summer camps;

• Revise provisions for the distribution of donated foods in the Nutrition Services Incentive Program (NSIP) to reflect legislative changes; and

• Restructure and rewrite revised provisions in a plain language format, including new subparts and sections, to make the regulations easier to read and understand.

The Department received a total of 668 comment submissions to the proposed rule, including 576 schools, 7 school associations, 35 State agencies, 49 members of industry and outside organizations, and one member of Congress. The comments are discussed in detail below.

In the proposed rule, we proposed to remove, add, and revise definitions in 7 CFR 250.3 to provide program administrators and recipients with a better understanding of the requirements contained in 7 CFR part 250. We received three comments expressing general support for the proposed changes in definitions.

We received one comment objecting to the proposed removal of the definition of “Offer and acceptance system”, stating that it supports the current means of ordering donated foods through the Electronic Commodity Ordering System (ECOS). While true, we believe that 7 CFR 250.58 of this final rule clearly describes the requirements for the distributing agency to offer, order, and provide, donated foods to school food authorities for their use, making the definition unnecessary. Since we did not receive any other comments, this final rule will remove definitions, as proposed, of “Nonprofit summer camps for children”, “Nonresidential child or adult care institution”, “Nutrition program for the elderly”, “Offer and acceptance system”, “Program”, and “Students in home economics”.

Since we did not receive any comments in response, this final rule will add definitions, as proposed, of “Adult care institution”, “AoA”, “Bonus foods”, “CACFP”, “Child care institution”, “Commodity offer value”, “DHHS”, “Elderly nutrition project”, “Entitlement”, “Entitlement foods”, “National per-meal value”, “Nonprofit organization”, “Nonprofit school food service account”, “NSIP”, “NSLP”, “Reimbursable meals”, “SBP”, “7 CFR part 3016”, “7 CFR part 3019”, “SFSP”, “Single inventory management”, and “Summer camp”.

We received two comments on the proposed revision of the definition of “Food service management company”. One commenter was unsure if a company that was hired to repair refrigerators would be characterized as a food service management company. Another commenter questioned if a company operating only as a consultant would be required to credit the recipient agency for donated foods, in accordance with the proposed requirements for food service management companies. Under the proposed definition, a food service management company is an entity that manages any aspect of a recipient agency's food service. We believe that this definition clearly excludes a company that simply repairs refrigerators, since this activity would not constitute management of the food service. We also believe that it is clear, in 7 CFR 250.51(a) of this final rule, that a commercial enterprise performing only a consulting service with respect to donated foods would not have to provide a credit for the value of donated foods, since they are not receiving and using such foods in the food service. However, to provide further clarification, in this final rule we refine the definition of “Food service management company” to include the statement in proposed 7 CFR 250.50(a) that, to the extent that such management includes the use of donated foods, the food service management company is subject to the applicable requirements in this part. As discussed in section II.E of the preamble, we are removing the characterization of a food service management company in 7 CFR 250.50 of this final rule.

We did not receive any other comments in objection to proposed revisions to definitions, and received one comment in support of the revised definition of “Charitable institutions”. Accordingly, this final rule will revise definitions, as proposed, of “Charitable institutions”, “Child nutrition program”, “Commodity school”, “End product”, “ Processing”, “Processor”, “Recipient agencies”, “Recipients”, “Section 311”, “Service institutions”, and “State Agency on Aging”.

In the proposed rule, we proposed to remove reference to agreements between the Department and State Agencies on Aging, in 7 CFR 250.12(a), and to remove 7 CFR 250.12(d), which addresses contract requirements with food service management companies, in conjunction with the proposed new requirements for the use of donated foods under such contracts in proposed subpart D of 7 CFR part 250. We also proposed to remove 7 CFR 250.12(e) and (f), as requirements relative to storage facility and processor contracts or agreements are currently addressed in 7 CFR 250.14, and in subpart C of 7 CFR part 250, respectively. Lastly, we proposed to revise the section heading to Agreements. Since we did not receive any comments in response to these proposals, this final rule retains the amendments to 7 CFR 250.12, as proposed.

In the proposed rule, we proposed to clarify or revise required procedures in the distributing agency's review system in 7 CFR 250.19(b)(1), by which the distributing agency ensures compliance with the requirements in 7 CFR part 250. We proposed to amend the introductory text to clarify that the listed requirements may apply to some, but not all, programs that receive donated foods. While we did not receive any comments in response to this proposal, we have further revised the introductory text in this final rule to provide additional clarification.

We proposed to remove the requirement that review procedures must include on-site reviews of recipient agencies in NSIP, since oversight of this program is currently the responsibility of the Department of Health and Human Services (DHHS). We proposed to streamline and clarify the requirement to conduct on-site reviews of charitable institutions and summer camps, and the food service management companies under contract with them. Since we did not receive any comments in response to these proposals, this final rule retains them.

We also proposed to include a requirement that the distributing agency's review procedures include on-site reviews of recipient agencies in NSLP, the Child and Adult Care Food Program (CACFP), and the Summer Food Service Program (SFSP) that have contracts with food service management companies in order to ensure compliance with the proposed requirements for the use of donated foods under such contracts. However, we proposed to permit the distributing agency to enter into an agreement with the appropriate State administering agency (if a different agency) to include its review as part of the State administering agency's required on-site review of such recipient agencies.

We received thirteen comments in response to this proposal. Twelve of the commenters indicated that requiring State agency on-site reviews of recipient agencies to ensure compliance with requirements for the use of donated foods in food service management company contracts would impose a significant additional burden. Commenters indicated that State agencies often do not have sufficient personnel to conduct such reviews, or sufficient funds to permit travel throughout the State. Additionally, commenters noted that State agency personnel often have limited expertise in reviewing contract provisions and ensuring that the value of all Federal resources provided to school food authorities and other recipient agencies has accrued to them. One commenter indicated that the cost of conducting such reviews would likely be passed on to schools.

We agree with commenters that the proposed review requirements would impose an additional burden on the State distributing agency, which does not currently conduct on-site reviews of recipient agencies in NSLP, CACFP, and SFSP. This would be especially true in States in which a large number of recipient agencies have contracts with food service management companies. However, the State agency responsible for administering these programs (usually the State Education Agency) currently conducts on-site reviews of these recipient agencies to ensure compliance with requirements set forth in contracts with food service management companies. Additionally, in accordance with a final rule published in the Federal Register on October 31, 2007 at 72 FR 61479, such State agencies are required to review and approve all school food authority contracts with food service management companies prior to their execution. Accordingly, the proposed requirement that the distributing agency's review system must include an on-site review of recipient agencies in NSLP, CACFP, and SFSP has been removed in this final rule. In accordance with the removal of the proposal described above, this final rule removes current 7 CFR 250.19(b)(1)(v), rather than redesignating and revising it, as proposed.

One commenter suggested that compliance with requirements in food service management company contracts should be determined by auditors, in accordance with Federal audit requirements under the Single Audit Act and Office of Management and Budget (OMB) Circular A-133, and codified in departmental regulations in 7 CFR part 3052. Under the audit requirements, a State or local government or nonprofit agency that expends at least $500,000 in Federal awards in a school or fiscal year (including the value of donated foods) must obtain a single audit (or, in some cases, a program-specific audit) for that year. Audits can be an effective tool in helping State agencies to ensure that Federal resources are used for the intended purpose, and in accordance with Federal requirements. However, auditors do not, as a rule, determine compliance with requirements for donated foods in contracts with food service management companies in conducting the required Federal audit, and including such determination would likely increase the cost of obtaining the audits for school food authorities and other recipient agencies. Accordingly, we do not believe it would be in the best interest of the child nutrition programs served to include the audit as a replacement for the State agency on-site review in ensuring compliance with the requirements for donated foods in contracts with food service management companies. We also received one comment indicating that agreements between State agencies and recipient agencies should include assurance of compliance with requirements relating to the use of donated foods in food service management company contracts. However, we believe that current agreement provisions requiring that recipient agencies distribute and use donated foods in accordance with the requirements in 7 CFR part 250, and that hold them responsible for noncompliance with such requirements, are sufficient.

We proposed to remove 7 CFR 250.19(d), which requires the monitoring of funds in NSIP to ensure purchase of only U.S. agricultural products. As previously indicated, DHHS is currently responsible for the oversight of NSIP. Since we did not receive any comments in response to this proposal, 7 CFR 250.19(d) is removed in this final rule.

In 7 CFR 250.24 of the proposed rule, we proposed to revise current performance standards required of the distributing agency with respect to the ordering of donated foods and their distribution to school food authorities, in accordance with proposed changes in 7 CFR 250.58. We proposed to revise 7 CFR 250.24(d)(8) to state that distributing agencies are responsible for providing recipient agencies with ordering options and commodity values, and considering the specific needs and capabilities of such agencies in ordering donated foods. We received four comments indicating that distributing agencies do not always consider the needs of recipient agencies in ordering donated foods. Two of the commenters indicated that distributing agencies may instead order those donated foods that generate higher delivery fees, or may charge such fees for donated foods delivered directly to a processor. Two other commenters suggested requiring distributing agencies to permit school food authorities capable of accepting full truckload shipments to submit donated food orders to FNS. In 7 CFR 250.58 in this final rule, we are requiring the distributing agency to ensure that all school food authorities have an opportunity to state their food preferences each year before the distributing agency submits donated food orders to FNS. The revision of 7 CFR 250.24(d)(8), as proposed, would ensure that the distributing agency complies with this requirement. However, as discussed in section II.F.3 of the preamble, we have chosen to reserve any revision of requirements relating to the distributing agency's system of donated food distribution for future proposed rulemaking. We received one comment stating that recipient agencies are guaranteed ordering options and visibility of donated food values through ECOS, making this performance standard unnecessary. However, not all distributing agencies utilize ECOS for all food distribution programs. Accordingly, 7 CFR 250.24(d)(8) is revised as proposed.

We proposed to revise 7 CFR 250.24(d)(9) to state that distributing agencies are responsible for offering school food authorities participating in NSLP the commodity offer value of donated food assistance, at a minimum, and for determining an adjusted assistance level in consultation with school food authorities, as appropriate, in accordance with the proposed 7 CFR 250.58. Since we did not receive any comments in response to this proposal, 7 CFR 250.24(d)(9) is revised as proposed in this final rule.

In 7 CFR 250.24(d)(10), we proposed to state that distributing agencies be responsible for providing each school food authority participating in the NSLP with the opportunity to order, or select, donated foods from the full list of available foods, and to distribute the selected donated foods to each school food authority, to the extent that distribution of such foods to, and within, the State would be cost-effective. In accordance with the amendments to the proposed 7 CFR 250.58 in this final rule, we have revised 7 CFR 250.24(d)(10) in this final rule to state that distributing agencies are responsible for ensuring that all school food authorities participating in the NSLP are aware of the full list of available donated foods, have the opportunity to provide input at least annually in determining the donated foods from the full list that they may select for their food service, and receive all such selected donated foods that may be cost-effectively distributed to them.

The proposed rule included a restructuring of some sections of 7 CFR part 250, including:

• The removal of current subpart E.

• The revision of subpart D to include new sections with proposed requirements for the use and management of donated foods in contracts with food service management companies.

• The addition of a new subpart E to include revisions and clarifications in current requirements for the use of donated foods in the NSLP and other child nutrition programs.

• The addition of a new subpart F to include current requirements, without change, for household programs.

• The addition of a new subpart G to include revisions and clarifications in requirements for the use of donated foods by charitable institutions and summer camps, and in NSIP, and to include current requirements, without change, for the use of donated foods in disasters and situations of distress.

Since we received no comments in response to the proposed restructuring, it is retained as proposed in this final rule. The comments received in response to the specific new or revised requirements proposed in each of these subparts are described below.

We proposed to revise Subpart D of 7 CFR part 250 to include, in six new sections, specific requirements to ensure that recipient agencies receive the benefit and value of donated foods in contracts with food service management companies. As previously indicated, this subpart would replace the current 7 CFR 250.12(d). In the first two sections, we proposed to include the contract and procurement requirements for recipient agencies in retaining the services of a food service management company, and the specific activities relating to donated foods that a food service management company may perform in accordance with the contract.

We also proposed to clarify the distinction between a food service management company and a processor. However, since this distinction is clearly made in the definitions of these two entities in 7 CFR 250.3, as revised in this final rule, we are removing it in this subpart. Consequently, we are consolidating the proposed 7 CFR 250.50 and 250.51 into 7 CFR 250.50 in this final rule, and revising the heading of this section to Contract requirements and procurement. Accordingly, proposed 7 CFR 250.52 through 250.55 are redesignated as 7 CFR 250.51 through 250.54, respectively, in this final rule. The specific comments are described below under the pertinent sections.

We proposed to clarify that the recipient agency must enter into a contract with a food service management company, in accordance with Federal requirements in 7 CFR parts 210, 220, 225, or 226, as applicable, and that the contract must ensure that all donated foods received for use by the recipient agency in the school or fiscal year, as applicable, are used to benefit the recipient agency's food service. We proposed to require that contracts between child nutrition program recipient agencies and food service management companies also ensure compliance with other requirements in this subpart. We also proposed to clarify the two types of contracts—fixed-price and cost-reimbursable—that may be used, and the differences between them. Since we did not receive any comments in response to these proposals, this final rule retains the proposed provisions relating to contract requirements and types of contracts in 7 CFR 250.50(a) and (b), respectively, with one exception. In 7 CFR 250.50(a) of this final rule, we require that the contract ensure that all donated foods received for use by the recipient agency in the school or fiscal year, as applicable, are used in (instead of benefit) the recipient agency's food service. This change is made in accordance with the revised requirements for the use of donated foods in 7 CFR 250.51(d) of this final rule, as discussed in section II.E.2 of the preamble.

We proposed to clarify that the recipient agency must meet Departmental procurement requirements in 7 CFR part 3016 or 3019, and in 7 CFR parts 210, 220, 225, or 226, as applicable, in obtaining the services of a food service management company, and to require that procurement documents, as well as contract provisions, include the donated food activities that the food service management company is to perform. We also proposed to indicate some of the donated food activities that the food service management company may perform, in accordance with its contract, such as preparing and serving meals, and ordering or storing donated foods. We proposed to specifically prohibit a food service management company from entering into a contract or agreement with a processor to process donated foods or finished end products for use in the recipient agency's food service.

Six commenters indicated that the food service management company must play a role in ordering or selecting donated foods, in order to ensure that the selected foods are those that may be most effectively used in the food service. We agree, and 7 CFR 250.50(d), as finalized in this rule, will permit the food service management company to order or select donated foods for use in the food service, in coordination with the recipient agency.

Seven commenters indicated that the food service management company should be permitted to enter into processing contracts, or to procure processed end products, on behalf of recipient agencies, since it would permit those agencies to benefit from the food service management company's purchasing expertise and buying power. Two other commenters indicated that, as most processing agreements are between the processor and the distributing agency, and not the recipient agency, the significance of prohibiting food service management companies from entering into such agreements is unclear. The parties to the processing agreements required in subpart C of 7 CFR part 250 are usually the distributing agency and the processor. Such agreements permit the distributing agency to ensure compliance with the processing requirements in subpart C of 7 CFR part 250, which include the processing of donated foods into approved end products, compliance with processing yields of donated foods, and maintenance of donated food inventories at approved levels. The distributing agency may permit recipient agencies to enter into processing agreements, and to ensure compliance with the processing requirements. However, it would be inappropriate to delegate such oversight of a commercial enterprise (i.e., the processor) to another commercial enterprise (i.e., the food service management company). Hence, we retain in this final rule the prohibition of a food service management company from entering into the processing agreement with the processor required in subpart C of 7 CFR part 250.

The actual procurement of processed end products from processors (or commercial distributors), however, is usually conducted by recipient agencies. Such procurement must be conducted in accordance with Departmental procurement requirements in 7 CFR parts 3016 or 3019, as applicable, and with requirements in subpart C of 7 CFR part 250. Although we included the payment of processing fees or remittance of refunds from a processor among the donated food activities that a food service management company may perform on behalf of a recipient agency, we did not specifically include the procurement of processed end products among such activities. However, such procurement is not prohibited. Furthermore, we agree with commenters that recipient agencies could benefit from food service management company procurements of processed end products on their behalf, since it would reduce their time and labor in conducting such activity, and may result in decreased purchase costs. Thus, we specifically include the procurement of processed end products as an activity that the food service management company may perform on behalf of the recipient agency in 7 CFR 250.50(d) of this final rule. However, we also clarify that such procurement must ensure compliance with the requirements in subpart C of 7 CFR part 250, and with the provisions of distributing or recipient agency processing agreements, and must ensure crediting of the recipient agency for the value of donated foods contained in processed end products at the processing agreement value. Other donated food activities included in the proposed rule are retained in 7 CFR 250.50(d) of this final rule, with some consolidation.

In the proposed rule, we proposed to include requirements to ensure that recipient agencies in child nutrition programs receive the benefit and value of donated foods in the meal service provided by food service management companies. We proposed to require the recipient agency to ensure that the food service management company, in both fixed-price and cost-reimbursable contracts, credits it for the value of all donated foods received for use in the recipient agency's food service in a school year or fiscal year (including both entitlement and bonus foods), with the exception of donated foods contained in processed end products. We proposed to include the accepted means by which crediting for the value of donated foods must be achieved, the required frequency of such crediting, and that, in all cases, crediting be clearly documented.

One commenter suggested that we require crediting for donated foods as they are used (rather than as they are received), to avoid a situation in which credit is provided for donated foods that may not be used during the contract period—e.g., due to receipt of a shipment late in the year. However, requiring crediting for the value of donated foods only as they are used would provide a disincentive to use them. Additionally, we do not want to create a situation in which school food authorities with food service management company contracts must monitor donated food inventories to ensure proper crediting, as such monitoring would impose an additional burden, and would be very difficult under a single inventory management system, in which school food authorities (and, in accordance with 7 CFR 250.52(b) of this final rule, food service management companies) may commingle donated foods and commercially purchased foods.

We received two comments expressing uncertainty whether crediting must occur for donated foods delivered to processors for processing into end products when the end products are delivered to the recipient agency, or when the food service management company uses the end products in the recipient agency's food service. As we described in the proposed rule, the processor (or commercial distributor, as applicable) must credit the recipient agency for donated foods contained in processed end products in the sale of such end products to the recipient agency, in accordance with the requirements in subpart C of 7 CFR part 250. Hence, the value of the donated foods accrues to the recipient agency's nonprofit food service in its purchase of the processed end products. Although the food service management company must use such end products in the recipient agency's food service, it is not required to provide an additional credit for the value of donated foods contained in them when they are used, or received for use, in the food service. However, an exception would be if the food service management company's contract requires it to procure processed end products on behalf of the recipient agency, or to act as an intermediary in passing the donated food value in such end products on to the recipient agency, in accordance with 7 CFR 250.50(d) of this final rule. Hence, in 7 CFR 250.51(a) of this final rule, we clarify that, in such cases, the food service management company must also credit the recipient agency for the value of donated foods contained in processed end products.

We include the proposed methods of crediting permitted, and the required frequency of crediting, together in 7 CFR 250.51(b) of this final rule, in the interest of clarity. We proposed to include “pre-crediting” as an accepted means of crediting for the value of donated foods in fixed-price contracts. In pre-crediting, the food service management company deducts the value of donated foods the recipient agency is expected to receive from the fixed-price bid submitted during procurement of the food service management company to conduct the food service. In contracts with school food authorities, this deduction is usually for the per-meal value of donated food assistance established in accordance with section 6(c) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(c)). However, school food authorities may receive a greater value of donated food assistance for the school year. This may result for a number of reasons (some of which are described in 7 CFR 250.58(d) of this final rule), but is most commonly due to the receipt of surplus, or bonus, foods purchased by the Department to remove market surpluses, and donated to school food authorities and other recipient agencies later in the year.

As indicated in the Office of Inspector General (OIG) audit (#27601-0027-CH) referenced in the proposed rule, food service management companies that utilize “pre-crediting” sometimes fail to credit school food authorities for the additional foods received later in the year. Hence, in the proposed rule, we also proposed to require the food service management company to provide an additional credit for the value of any donated foods not accounted for in the fixed-price per meal.

We received nine comments indicating that this requirement would discourage food service management companies from efficiently using donated foods, since providing recipient agencies with an additional credit for the value of donated foods received later in the year would reduce their revenue. However, as the proposal would require crediting for all donated foods received in the school or fiscal year, and not just those donated foods that are actually used, it would not discourage the use of donated foods. We received four comments questioning whether a recipient agency would have to reimburse the food service management company if it actually received less than the pre-credited value of donated foods. This may occur, for example, if a school food authority does not select donated foods offered by the distributing agency equal to its commodity offer value (i.e., the legislated per-meal value), or if selected foods may not be purchased, due to market conditions or other factors. However, the proposed requirement is intended only to ensure that the recipient agency is credited for the value of all donated foods received. It would not require reimbursement of the food service management company if such crediting is in excess of that value. However, such reimbursement may be established by the food service management company and the recipient agency, in accordance with their contract.

One commenter contended that some recipient agencies are more interested in a guaranteed cost of the service (i.e., in the fixed-price per meal), rather than assurance that credit is received for the value of all donated foods. Another commenter suggested that additional credits be excused when a food service management company does not include other related costs, such as storage, in the fixed price. However, permitting any exceptions to the requirement that the recipient agency receive credit for the value of all donated foods would not meet the primary intent of the regulations, or address the concerns expressed in the OIG audit. Notwithstanding this requirement, a recipient agency may consider storage or handling costs in establishing the value of donated foods to be used in crediting, as permitted in 7 CFR 250.51(c) of this final rule. Another commenter questioned the accuracy of the term “fixed-price” contract if deductions for the value of donated foods are required on invoices. While technically true, this designation is commonly used, and use of an alternate term would be confusing.

We proposed to permit “crediting by disclosure” in cost-reimbursable contracts. Under such contracts, the food service management company bills the recipient agency for costs incurred in conducting the food service, and also charges a fixed management fee. However, one commenter was unsure if crediting by disclosure meant disclose to the recipient agency the value of donated foods received during the period covered by the invoice, or actually credit funds to the recipient agency for such foods. We agree with the commenter that the meaning is not clear. Therefore, we are amending the language in 7 CFR 250.51(b) of this final rule to clarify that, in crediting by disclosure, the food service management company credits the recipient agency for the value of donated foods by disclosing, in its billing for food costs submitted to the recipient agency, the savings resulting from the receipt of donated foods for the billing period. However, it does not require a reduction of the fee charged for conducting the food service, or any other type of payment for the value of donated foods.

We proposed to require the recipient agency to ensure that crediting for the value of donated foods be performed not less frequently than annually. Two commenters were unsure if the food service management company must credit the recipient agency for the value of donated foods when such foods are delivered to the recipient agency, or when the food service management company actually uses the donated foods in the recipient agency's food service. The proposal did not include a specific time that crediting must be performed, only that it be performed at least annually. Hence, the recipient agency may require a food service management company to credit it for donated foods upon delivery, quarterly, or all at once at the end of the year (provided that, for a school food authority, such a one-time credit would not result in its cash resources exceeding the limits established in 7 CFR 210.9(b)(2)). The recipient agency may also permit crediting for donated foods as they are used in the food service. However, the recipient agency must ensure that the food service management company credits it for the value of all donated foods received during the year; permitting the food service management company to credit for donated foods as they are used may not ensure that this requirement is met. Additionally, it may be difficult to track donated foods as they are used if the entity responsible for storing them is using a single inventory management system.

Another commenter indicated that it should be clear exactly when crediting for the value of donated foods must be achieved, as a food service management company might offer to provide an upfront payment for such value as an inducement to winning the bid for the contract. However, such an upfront payment for the value of donated foods would be acceptable if this method of crediting were provided for in procurement documents and in contract provisions, as required in this final rule. It would be unlikely, though, to include crediting for all donated foods received in the school or fiscal year, and would, therefore, necessitate additional crediting at a later time.

Accordingly, we have retained the allowed methods of crediting for donated foods, as proposed, in 7 CFR 250.51(b) of this final rule, with the clarification of crediting by disclosure in cost-reimbursable contracts. We have also retained, as proposed, the required frequency of crediting, and the requirement that all forms of crediting provide clear documentation of the value received from the donated foods. As in the proposed rule, we have indicated that a school food authority must also ensure that the required method and frequency of crediting does not cause its cash resources to exceed the limits established in 7 CFR 210.9(b)(2).

In the proposed rule, we proposed to provide some flexibility in determining the value of donated foods to be used in crediting, in order to permit the recipient agency to ensure that the donated foods received provide a good value to its food service. Hence, rather than require use of the donated food value utilized by the distributing agency in crediting the recipient agency's donated food “entitlement” (as described in 7 CFR 250.58(e) of this final rule), we proposed to permit the use of an alternate value determined by the recipient agency, and approved by the distributing agency. We proposed to require that the method of determining the donated food values to be utilized in crediting be included in procurement documents and in the contract. We received two comments stating that the donated food values used by food service management companies in crediting school food authorities should be the same as the values used by distributing agencies in crediting the school food authority's donated food “entitlement”. Three commenters indicated that school food authorities do not have the time or expertise to determine alternate donated food values. We agree that most school food authorities would not have the time or expertise to determine alternate donated food values for use in crediting, and will likely use the values established by the distributing agency. However, we believe that having the flexibility to use alternate values may benefit some school food authorities or other recipient agencies. We received three comments indicating that the proposed flexibility in valuation of donated foods, while commendable, may be confusing to the parties responsible (e.g., the distributing agency or the State administering agency) for ensuring that recipient agencies have received credit for the value of all donated foods. We agree that the use of different values in crediting may be confusing to such parties. However, as previously indicated, most recipient agencies will likely use the values established by the distributing agency, rather than use alternate values—which, in any case, would have to be approved by the distributing agency. Additionally, in 7 CFR 250.54(a) of this final rule, we require recipient agencies to maintain a record of the donated food values used in crediting, which will help State agencies or other entities to determine compliance with requirements for crediting of the donated food value.

Accordingly, we have included the options for valuing donated foods as proposed in 7 CFR 250.51(c) of this final rule. We have included, as proposed, the requirement that the method of determining the donated food values to be utilized in crediting be included in procurement documents and in the contract. We have also included, as proposed, the requirement that the method of valuation specified must result in the determination of actual values, and may not permit any negotiation of such values. Lastly, we have included, as proposed, the requirement that the recipient agency must ensure that the specified method of valuation of donated foods permits crediting to be achieved in accordance with regulatory requirements and the provisions of the contract.

We also proposed to provide some flexibility in the use of donated foods by the food service management company, especially in its contracts with school food authorities to conduct the meal service. Under the proposal, the food service management company would not be required to use those donated foods that are not included in school menu plans, with a few exceptions (although it must provide a credit for all donated foods received). Rather, the food service management company could use its food purchasing capacity to provide other foods that meet nutritional requirements in place of those donated foods that do not fit easily into the school menu plans. We received 641 comments in opposition to this proposal. Almost all of them indicated that food service management companies should be required to use all donated foods in the school food service, or should use either the donated foods or a commercial substitute of the same type, of U.S. origin, and of equal or better quality (as required of processors under subpart C of 7 CFR part 250). Many commenters saw the proposal as providing school food authorities under contract with food service management companies with the opportunity to receive cash in exchange for donated foods (i.e., for those donated foods not used in the food service)—an option not available to school food authorities that operate their own food service. Some of the commenters feared that this might lead to a “cash-out” of NSLP. Other commenters feared that the proposal would permit sale of donated foods on the open market and wondered if the Federal government would be liable for donated foods that went out- of-condition and were sold by a food service management company to another party.

In the proposal, we sought to provide school food authorities and food service management companies with the flexibility needed to integrate donated foods into the food service as effectively as possible. It was not meant to provide an advantage to school food authorities with food service management company contracts, or to signal a move to discontinue the distribution of donated foods in NSLP, and provide cash instead. However, we are sensitive to the perception that the proposal would provide a “cash for food” option, and would create an unfair playing field, to the disadvantage of those school food authorities that operate their own food service. Therefore, we have amended the proposed requirements for the use of donated foods by food service management companies in 7 CFR 250.51(d) of this final rule. We require that the food service management company use all donated ground beef, donated ground pork, and all end products, in the recipient agency's food service. We also require that the food service management company use all other donated foods, or commercially purchased foods of the same generic identity, of U.S. origin, and of equal or better quality than the donated foods, in the recipient agency's food service. However, the recipient agency may choose to prohibit the food service management company from using commercial substitutes in place of the donated foods, in accordance with its contract.

In the proposed rule, we addressed the disposition of donated foods upon termination of the contract in this section. However, in the interest of clarity, we have moved this provision to the next section, which includes requirements for storage and inventory management of donated foods, in this final rule.

In the proposed rule, we proposed to include requirements for the storage and inventory management of donated foods by food service management companies. We did not receive any comments in response to the proposal that the food service management company comply with the general storage and inventory management requirements in 7 CFR 250.14. Therefore, we have retained this requirement, as proposed, in 7 CFR 250.52(a) of this final rule. However, as the general storage and inventory requirements are in 7 CFR 250.14(b), we have amended the regulatory citation accordingly in this final rule in the interest of clarity.

We proposed to permit the food service management company to store and inventory donated foods together with commercially purchased foods-i.e., utilize a single inventory management system, as defined in this final rule-if allowed in its contract with the recipient agency. However, we proposed to require that the food service management company store donated ground beef, donated ground pork, and all end products in a manner that ensures they will be used in the recipient agency's food service. We received one comment stating that ensuring the use of donated ground beef and ground pork, and end products, under a single inventory management system will be impractical. Another commenter stated that single inventory management should apply to all school food authorities, irrespective of their contracts with food service management companies. In single inventory management, a school food authority may store and inventory its donated foods together with its commercially purchased foods, unless the distributing agency requires the donated foods to be distinguished from commercially purchased foods in storage and inventoried separately. This applies to all school food authorities, with or without food service management company contracts. Likewise, a food service management company may store and inventory donated foods together with foods it has purchased commercially for use in the school food authority's food service. However, it may store and inventory such foods together with other foods only to the extent that such a system may ensure compliance with the requirements for the use of donated foods in 7 CFR 250.51(d)—i.e., use all donated ground beef and ground pork, and all end products in the food service, and use all other donated foods or commercially purchased foods of the same generic identity, of U.S. origin, and of equal or better quality than the donated foods, in the food service. In the interest of clarity, we have included this revised language in 7 CFR 250.52(b) of this final rule. We have also included, without change, the requirement that, in cost-reimbursable contracts, the system of inventory management must ensure that the recipient agency is not charged for donated foods.

We proposed that, upon termination of the contract, the food service management company return all unused donated ground beef, donated ground pork, and end products, and that it return other donated foods, at the recipient agency's discretion, or pay the recipient agency for the value of the donated foods. One commenter indicated that the recipient agency should take ownership of all unused donated foods upon termination of the contract, in accordance with the contention that all donated foods should be used in the recipient agency's food service. However, if the food service management company is storing donated foods together with foods purchased commercially for the recipient agency, as permitted in this final rule, the return of donated foods remaining in inventory upon termination of the contract may be achieved only if all such foods “owned” by the recipient agency are returned. Such disposition of unused foods would be a matter for the recipient agency and the food service management company to resolve, in accordance with their contract. Therefore, in 7 CFR 250.52(c) of this final rule, we have retained the requirement that the food service management company return all unused donated ground beef, donated ground pork, and end products, and that it return other donated foods at the recipient agency's discretion. However, rather than providing the option of payment for the value of the donated foods, we have included the requirement that the recipient agency must ensure that the food service management company has credited it for the value of all donated foods received for use in its food service in the school or fiscal year. Accordingly, we have revised the heading of this section to Disposition of donated foods and credit reconciliation upon termination of the contract .

In the proposed rule, we proposed to require specific contract provisions to ensure compliance with the proposed requirements for the use of donated foods in contracts with food service management companies. The provisions of 7 CFR 250.53 of this final rule include those contract provisions required to ensure compliance with such requirements in this final rule. It clarifies that the contract must include any activities relating to donated foods that the food service management company will be responsible for, in accordance with 7 CFR 250.50(d), and assurance that such activities will be performed in accordance with the applicable requirements in 7 CFR part 250. It also clarifies that contract provisions must assure compliance with storage and inventory requirements for donated foods, and that an on-site review of the food service management company's operation may include a review of required records.

One commenter indicated that the proposed contract provisions will require State agencies to amend prototype contracts, or to communicate the new requirements to recipient agencies to ensure their inclusion in their contracts with food service management companies, which will impose an additional burden on State agencies. We agree that it will require additional work for State and recipient agencies to implement the new contract requirements. However, once implemented, the additional burden would be minimal. As previously indicated, the inclusion of the contract provisions is necessary to ensure compliance with the requirements in this subpart. Additionally, in accordance with a final rule published in the Federal Register on October 31, 2007 at 72 FR 61479, the State administering agency is required to review and approve all school food authority contracts with food service management companies prior to their execution.

In the proposed rule, we proposed to include specific recordkeeping requirements for recipient agencies and food service management companies in order to clearly document compliance with the requirements in this subpart. We did not receive any comments in response to the proposals. However, in accordance with 7 CFR 250.51(a) of this final rule, we clarify, in 7 CFR 250.54(a) and (b), that documentation of crediting for the value of donated foods must include crediting for such foods in processed end products, as applicable. Additionally, in accordance with 7 CFR 250.50(d) of this final rule, we clarify, in 7 CFR 250.54(b), that the food service management company must include documentation of its procurement of processed end products on behalf of the recipient agency, as applicable.

We also proposed to include specific review requirements for recipient agencies and distributing agencies, in order to ensure compliance with the requirements in this subpart. We proposed to require that the recipient agency include a review of food service management company activities relating to the use of donated foods as part of its required monitoring of the food service operation, in accordance with 7 CFR parts 210, 220, 225, or 226, as applicable. We also proposed to require that the recipient agency conduct a reconciliation to ensure that the food service management company has credited it for the value of all donated foods received for use in the food service in the school or fiscal year, as applicable.

One commenter indicated that the reconciliation process should be formalized to provide clear guidance on accounting for donated foods, including beginning and ending inventories, processing yields, and theft or damage. However, the recipient agency is not required to monitor the food service management company's beginning and ending donated food inventories as part of the proposed review requirement, or to make a separate accounting of donated food loss. Although the recipient agency would have to ensure crediting for donated foods contained in processed end products procured by the food service management company on its behalf, it would not have to monitor processing yields as part of its reconciliation. We received two comments indicating that the food service management company and the school food authority must receive accurate and timely data on food values to ensure that crediting for the value of donated foods is accurate. While true, the distributing agency is required to provide recipient agencies with information on donated food values, in accordance with 7 CFR 250.24(d)(8) of this final rule.

We received seven comments indicating that the proposed review requirements would impose additional costs on school food authorities, and that such requirements should be reviewed for their impact on schools. Another commenter suggested that FNS test the proposals to assess their impact on a cost-benefit basis. We agree that the proposed requirement to ensure crediting for the value of donated foods through a reconciliation process would require school personnel to commit more time to this activity, and thus has the potential to increase costs. However, we believe the flexibility provided in the method and frequency of crediting for donated foods will permit school food authorities to minimize such an impact. A school food authority may find that it works best to require a one-time refund for the value of all donated foods near the end of the year, or may choose to require that donated food value be credited each month or quarter through reductions on invoices. In short, we expect that school food authorities will find the method that is most cost-effective and efficient for them. Hence, in 7 CFR 250.54(c) of this final rule, we retain the review requirements for recipient agencies as proposed. However, we clarify that the required reconciliation must also ensure crediting for the value of donated foods contained in processed end products, in accordance with the requirements in 7 CFR 250.51(a), and that such reconciliation must be conducted at least annually, and upon termination of the contract.

In accordance with the removal of the proposal in this final rule that the distributing agency's review system include an on-site review of recipient agencies in NSLP, CACFP, and SFSP with food service management company contracts, as described in section II.C of the preamble, this final rule removes the proposed reference to such review requirement in this section.

Lastly, we proposed to indicate that the Department may also conduct reviews of food service management company operations with respect to the use and management of donated foods, in order to ensure compliance with the requirements of 7 CFR part 250. As we did not receive any comments in response to this proposal, it is retained in 7 CFR 250.54(d) of this final rule.

In the proposed rule, we proposed to provide a clearer, more comprehensive, description of the requirements relating to donated foods in NSLP and other child nutrition programs in a new subpart E of 7 CFR part 250, which includes seven new sections. This subpart would replace the current 7 CFR 250.48, 250.49, and 250.50. Since we received no comments in response to the proposed restructuring of these requirements, it is retained in this final rule. Comments received in response to proposed revisions or clarifications of specific requirements are discussed below in the pertinent sections.

In 7 CFR 250.56 of the proposed rule, we proposed to include a general description of the provision of donated foods in NSLP, including the types and amounts provided, and to reference applicable regulatory requirements, in addition to 7 CFR part 250. We also included a streamlined description of the quantity of donated foods provided to distributing agencies each school year, in accordance with Section 6(c) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(c)), and the values of donated foods utilized in determining the quantities provided. Lastly, we included the current description of the cash option offered to States previous to 1974, in lieu of receiving donated foods. We received one comment indicating that the general description, and the types and amounts of donated foods provided, do not add any value to the regulations, and are, therefore, unnecessary. However, we believe that these provisions help to clarify the role of donated foods in NSLP, and have retained them, as proposed, in 7 CFR 250.56 of this final rule.

In 7 CFR 250.57 of the proposed rule, we proposed to describe the provision of donated foods to commodity schools, including a streamlined description of the determination of the quantity of donated foods provided to distributing agencies for commodity schools each school year, in accordance with section 6(c) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(c)). We also included the types of donated foods available to commodity schools. Since we received no comments in response to the proposals, 7 CFR 250.57 is retained in this final rule as proposed.

In 7 CFR 250.58 of the proposed rule, we proposed to describe the means by which the distributing agency orders donated foods and provides them to school food authorities for use in the school food service. We included, in 7 CFR 250.58(a), a description of ECOS, the web-based system implemented in 2003 to permit the distributing agency to submit donated food orders to FNS. We proposed to require that, before submitting orders to FNS, the distributing agency provide the school food authority with the opportunity to order, or select, donated foods for its food service from the full list of available donated foods. We received eighteen comments indicating that, because of the wide variety of donated foods available, this proposal is impractical, and would impose a significant additional burden on distributing agencies. Many orders submitted by school food authorities could not be fulfilled, since they would not constitute full truckload shipments, and would necessitate the submission of alternate selections. This would make the process of submitting food orders to FNS more time-consuming and work-intensive. Several commenters also indicated that, in current practice, distributing agencies “filter out” some foods from the full list, using information received in advance from school food authorities with respect to those foods that are most desired and useful for their food service. Such information may be obtained through annual advisory councils, periodic surveys, or by other means. Seven commenters supported the proposal, indicating the importance of having a “request-driven” ordering system, in which all school food authorities have input, and of providing all schools with the opportunity to order and receive the donated foods that they need and want.

We have amended the proposal in response to the comments received. In 7 CFR 250.58(a) of this final rule, we have required the distributing agency, before submitting orders to FNS, to ensure that all school food authorities are aware of the full list of available donated foods, and have the opportunity to provide input at least annually in determining the donated foods from the full list that are made available to them for ordering or selection. This requirement will ensure that all school food authorities have a chance to submit to the distributing agency their food preferences each year, with knowledge of the full list of foods available, while also permitting the distributing agency to “filter out” some foods from that list, based on the input received, in order to ensure efficient ordering and distribution of donated foods.

We also proposed to require that the distributing agency ensure distribution of all donated foods selected by the school food authority that may be cost-effectively distributed to it, and that the distributing agency explore all available storage and distribution options to determine if such distribution may be performed cost-effectively. In making such determination, the distributing agency may not prohibit the use of split shipments— i.e. , donated food shipments with more than one stop-off or delivery location. We received five comments in support of the proposal that the distributing agency may not prohibit the use of split shipments. We received two comments indicating that the distributing agency may not be aware of, or have the capacity to explore, all available storage and distribution options, and to determine the most cost-effective option. The commenters recommended that the distributing agency be required to permit school food authorities to accept full truckload shipments, rather than use the State distribution system. Two other commenters indicated that the distributing agency should be required to permit recipient agencies to divert donated foods to processors for processing. Another commenter indicated that requiring the distributing agency to explore other storage and distribution options would necessitate costly logistics studies.

The proposal to require the distributing agency to explore all available storage and distribution options was intended to help ensure that school food authorities receive the donated foods that they desired, and could most effectively use in their food service. A few States currently order limited varieties of donated foods for delivery to a distributing agency storage facility with limited storage space, rather than permit direct shipments to school food authorities or to processors. For example, one commenter stated that permitting school food authorities to order from the full list of donated foods would increase the amount of storage space that the State must rent, and that the additional cost would be passed on to school food authorities. However, we agree with commenters that requiring the exploration of all available storage and distribution options could be costly and time-consuming for the distributing agency. Furthermore, the comments received reveal the issue of the cost-effectiveness of the food distribution system to be more complex than simply assuring that school food authorities have access to the donated foods that they desire for their food service. In light of these concerns, this final rule does not require that, in determining the cost-effectiveness of distribution, the distributing agency must explore all available storage and distribution options. However, we have retained in this final rule the proposed requirement, in 7 CFR 250.58(a), that the distributing agency must ensure distribution to school food authorities of all such selected donated foods that may be cost-effectively distributed to them, and may not prohibit the use of split shipments in determining such cost-effectiveness. Since we have consolidated the requirements for ordering and distribution of donated foods in 7 CFR 250.58(a) of this final rule, we have revised the section heading to Ordering and distribution of donated foods . We will review current requirements in 7 CFR 250.14 for the distributing agency to evaluate its storage and distribution system to ensure cost-effective delivery of donated foods to recipient agencies, and may include any proposals for change in future rulemaking as appropriate.

We proposed to remove the current regulatory provision that permits the distributing agency to utilize an “offer and refusal” system, which provides school food authorities with a more limited assurance of receiving the donated foods that they desire for their food service. Since we did not receive any comments in response to this proposal, that provision is removed in this final rule.

We proposed to describe the value of donated foods that the distributing agency must offer to school food authorities each school year, in accordance with section 6(c)(2) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(c)(2)), and the value of donated foods that the distributing agency must offer to commodity schools each school year, in accordance with section 14(f) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1762(f)). We also included the eligibility of the school food authority to receive bonus foods in addition to the Section 6 foods. We proposed to remove the current option provided to the distributing agency to use another method to determine the value of donated foods offered to school food authorities that would provide them with an equitable share of foods. Since we received no comments in response to these proposals, they are retained in 7 CFR 250.58(b) of this final rule as proposed.

For the purpose of clarity, we proposed to describe some factors that might result in a school food authority receiving less than the commodity offer value of donated foods, or an “adjusted assistance level”, and to describe circumstances in which a school food authority might receive more than the commodity offer value of donated foods. We received two comments indicating that, if a school food authority does not utilize its full commodity offer value, the distributing agency should be required to permit it to carry over the remaining value into the next school year. If the school food authority does not utilize such value in that year, then it must be offered in the following year to other school food authorities on a fair-share basis. Currently, the regulations do not restrict the distributing agency in allocating the remaining value of donated foods if a school food authority does not utilize its full commodity offer value. School food authorities are not “entitled” to receive a specific amount of donated foods but must only be offered the commodity offer value. Accordingly, the distributing agency may choose to permit the school food authority to carry over the remaining donated food value into the next year, or may reallocate it in the current year to other school food authorities. Since the distributing agency is in the best position to determine how donated foods may be most efficiently utilized, we have concluded that the regulations should not restrict such decision-making. Therefore, we have retained the proposed list of factors relating to receipt of the commodity offer value in 7 CFR 250.58(c) and (d) in this final rule without change.

We proposed to include the current options in 7 CFR 250.13(a)(5) that the distributing agency may use to value donated foods in crediting school food authorities for the commodity offer value (or adjusted assistance level), but to clarify the meaning of the USDA purchase price. Since we received no comments in response to the proposal, these options are included in 7 CFR 250.58(e) of this final rule as proposed.

In 7 CFR 250.59 of the proposed rule, we proposed to include the requirements for the storage and inventory management of donated foods, including the general requirements in current 7 CFR 250.14, and the specific requirements for distributing agencies and school food authorities. Since we received no comments in response to the reference to the general storage and inventory requirements, it is retained in 7 CFR 250.59(a) of this final rule.

In accordance with 7 CFR 250.14(b)(4), the distributing agency, or subdistributing agency, must store and inventory donated foods in a manner that permits donated foods to be distinguished from commercially purchased foods or other foods. However, a school food authority may utilize single inventory management—i.e., may commingle donated foods and commercially purchased foods in storage, and maintain a single inventory record of such commingled foods, unless the distributing agency imposes other storage and inventory requirements. We received one comment indicating that single inventory management should also be permitted for distributing agencies, since it would save money in contracting with commercial distributors. However, the distributing (or subdistributing) agency must remain accountable for donated foods in its storage facilities, or in those of its commercial distributors, and ensure their distribution to school food authorities. Such accountability cannot be achieved if donated foods are commingled with other foods at the distributing agency level. While retaining the storage and inventory requirements for the distributing agency, as proposed, we have amended 7 CFR 250.59(b) in this final rule to clarify that such storage must permit donated foods to be distinguished from commercially purchased foods or other foods (rather than actual physical separation at the storage facility) in order to ensure compliance with the requirements for the distribution and control of donated foods in this part. In a similar manner, we have retained the single inventory management option for the school food authority, as proposed, in 7 CFR 250.59(c) of this final rule. Such option may be exercised unless the distributing agency requires donated foods to be distinguished from commercially purchased foods in storage and inventoried separately at the school food authority level.

We also proposed to clarify that a commercial storage facility under contract with the school food authority may store and inventory donated foods together with commercially purchased foods it is storing for the school food authority, unless prohibited in its contract. However, the commercial enterprise may not commingle foods it is storing for a school food authority with foods it is storing for a commercial enterprise or other entity, since this might jeopardize the use of the donated foods provided in the school food service. Since we received no comments in response to the proposal, 7 CFR 250.59(d) is retained in this final rule as proposed.

In 7 CFR 250.60 of the proposed rule, we proposed to include the requirements for school food authorities in the use of donated foods in the school food service. We proposed to require that the school food authority use donated foods, as far as practical, in the school lunches, but that they may also use donated foods in other nonprofit school food service activities. Such activities are listed in 7 CFR 250.60(a), and include, for example, school breakfasts, a la carte foods sold to children, and meals served to adults directly involved in the operation and administration of the food service. Revenues received from all such activities must accrue to the school food authority's nonprofit school food service account. We proposed to state that donated foods should not be used in food service activities that do not benefit primarily schoolchildren, such as banquets or catered events. However, we recognized that their use in such activities may not always be avoided—e.g., if a school food authority utilizes a single inventory management system. Hence, we proposed to require that the school food authority ensure reimbursement to the nonprofit school food service account for the value of the donated foods used in such activities, in addition to its responsibility to ensure reimbursement for any other resources utilized from that account.

The only comment received in response to the proposals indicated that school food authorities should be permitted to use donated foods only in those a la carte meals that may be claimed as reimbursable meals, in accordance with the nutritional requirements for such meals in 7 CFR part 210. However, the intent of the proposal was to ensure that schoolchildren receive the nutritional benefits provided by the donated foods, which they would receive whether those foods were included in the reimbursable meals or in the a la carte foods provided. Therefore, we have retained the requirements in 7 CFR 250.60(a) and (b) of this final rule as proposed, with one clarification. In addition to permitting donated foods to be used in meals served to adults directly involved in the operation and administration of the food service, this final rule permits their use in meals served to other school staff as well.

We proposed to include in this section the option for the school food authority to use donated foods in a contract with a food service management company to provide meals for use in its food service, in accordance with the requirements in subpart D of 7 CFR part 250. We proposed to require the school food authority to assure that a food service management company ensures reimbursement to the nonprofit food service account for donated foods used in catered meals or other activities outside of the nonprofit school food service. We also proposed to state that a school food authority may use donated foods to provide a meal service to other school food authorities, in accordance with an agreement between the parties. Under such an agreement, a school food authority providing the food service may commingle its own donated foods and the donated foods of the other school food authorities that are parties to the agreement. Since we received no comments in response to the proposals, they are retained in 7 CFR 250.60(c) and (d) of this final rule as proposed, except that the reference to “catered meals” in 7 CFR 250.60(c) is changed to “meals for banquets or catered events”, in order to be consistent with the use of this term in 7 CFR 260.60(b).

In 7 CFR 250.61 of the proposed rule, we proposed to describe the provision of donated foods in CACFP, through the distributing agency, for use in serving lunches and suppers to eligible participants in child care and adult care institutions. We proposed to include, in streamlined form, the determination of the minimum value of donated foods provided for distribution to such institutions participating in CACFP, in accordance with section 6(c) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1755(c)). We proposed to indicate that the number of reimbursable lunches and suppers may be adjusted during, or at the end of the year, in accordance with 7 CFR part 226. We also proposed to include the types of donated foods that the distributing agency may receive for distribution to child and adult care institutions. Since we did not receive any comments in response to the proposals, they are retained in 7 CFR 250.61(a) and (b) of this final rule as proposed, with only the following clarification. In 7 CFR 250.61(b), we clarify that, for each school year, the distributing agency receives, at a minimum, the national per-meal value of donated food assistance, or cash in lieu of donated foods, for each lunch and supper served in the previous year.

We proposed to include the responsibility of the State administering agency to determine whether child care and adult care institutions wish to receive donated foods or cash, and to work with the distributing agency (if a different agency) to ensure that donated foods are provided to those institutions that wish to receive them. We also proposed to include in this section the option for child care and adult care institutions to use donated foods in a contract with a food service management company to provide meals for use in its food service, in accordance with the requirements in subpart D of 7 CFR part 250. Lastly, we proposed to indicate that the requirements in this subpart relating to the ordering, storage and inventory management, and use of donated foods in NSLP, also apply to CACFP, except that a child care or adult care institution that uses donated foods to prepare and provide meals to other such institutions is considered a food service management company. Since we received no comments in response to the proposals, they are retained in 7 CFR 250.61(c), (d), and (e) of this final rule.

In 7 CFR 250.62 of the proposed rule, we proposed to describe the provision of donated foods to service institutions participating in SFSP for use in serving meals to needy children primarily in the summer months, in their nonprofit food service programs. We proposed to describe the types and quantities of donated foods received by the distributing agency in SFSP. We proposed to indicate that the distributing agency provides donated foods to service institutions based on the number of meals served that are eligible for donated food support, in accordance with 7 CFR part 225. We also proposed to include in this section the option for service institutions to use donated foods in a contract with a food service management company to provide meals for use in its food service, in accordance with the requirements in subpart D of 7 CFR part 250. Lastly, we proposed to indicate that the requirements in this subpart relating to the ordering, storage and inventory management, and use of donated foods in NSLP, also apply to SFSP. Since we received no comments in response to the proposals, they are retained in 7 CFR 250.62 of this final rule.

In the proposed rule, we proposed to include, in a new subpart F of 7 CFR part 250, current requirements in 7 CFR 250.45, 250.46, 250.47, and 250.51, and redesignate them as 7 CFR 250.63 through 250.66, respectively, but otherwise without change. Since we received no comments in response to the proposed restructuring, it is included in this final rule as proposed.

In the proposed rule, we proposed to add a new subpart G of 7 CFR part 250 to include the distribution of donated foods to other outlets, including charitable institutions, NSIP, and to organizations assisting in situations of disasters and distress. In this new subpart, we proposed to include requirements for the distribution of donated foods to charitable institutions and to summer camps together in 7 CFR 250.67, which would replace current 7 CFR 250.40 and 250.41. We proposed to include requirements for the distribution of donated foods in NSIP in 7 CFR 250.68, which would replace the current 7 CFR 250.42. We proposed to include the current requirements in 7 CFR 250.43 and 250.44 for the distribution of donated foods in disasters and situations of distress in redesignated 7 CFR 250.69 and 250.70, but otherwise without change. Since we received no comments in response to the proposed redesignation and restructuring, it is included in this final rule as proposed. The following sections describe the specific changes to the current requirements for charitable institutions and NSIP.

In the proposed rule, we proposed to remove current requirements that a charitable institution's agreement with the distributing agency include information on the institution's days of operation and number of participants and meals served, data relating to the number of needy persons served, and a statement assuring that proper inventory controls will be maintained. We also proposed to remove current requirements that a summer camp's agreement with the distributing agency include data on the number of adults participating at camps relative to the number of children. We proposed to list some types of charitable institutions that may receive donated foods, if they meet the eligibility requirements in this section (including summer camps that do not participate in child nutrition programs), as well as some organizations that may not receive donated foods as charitable institutions. We proposed to streamline the qualifying criteria with respect to the rehabilitation programs of adult correctional institutions, which determine if such institutions may receive donated foods as charitable institutions. Since we received no comments in response to the proposals, they are retained in 7 CFR 250.67(a) and (b) of this final rule.

We proposed to include the appropriate data for the distributing agency to use in determining if an institution or organization serves predominantly needy persons, which is a requirement to meet the revised definition of “Charitable institution” in this final rule. The distributing agency may use, for example, socioeconomic data on the area in which the organization is located, or on the clientele served by the organization. We received one comment indicating that the proposal seems cumbersome considering the amount of donated foods provided to charitable institutions; for example, summer camps are often located in remote economically poor areas, but some participants may be from financially secure families. However, such a summer camp would be eligible to receive donated foods under the proposed requirements. The wide array of data permitted to determine if an institution serves predominantly needy persons would be considerably less of a burden on a distributing agency than the currently required submission and review of data on meals and participants served, or, for summer camps, data on the number of adults compared to the number of children at the camp. Thus, the proposals are retained in 7 CFR 250.67(c) of this final rule without change.

We proposed to include the types of donated foods that charitable institutions are eligible to receive—i.e., surplus donated foods, as available, which may be purchased under section 4(a), 32, 416, or 709. We proposed to include the requirement that the distributing agency distribute donated foods to charitable institutions based on the amounts that they may effectively utilize without waste, and the total amounts available for distribution to such institutions. Since we received no comments in response to the proposals, they are retained in 7 CFR 250.67(d) of this final rule.

Lastly, we proposed to include the option that a charitable institution may use donated foods in a contract with a food service management company, which must ensure that all donated foods received for use by the charitable institution in a fiscal year are used to benefit the charitable institution's food service. We did not receive any comments in response to this proposal. However, in accordance with the amended requirement in7 CFR 250.50(a) of this final rule, we have amended 7 CFR 250.67(e) in this final rule to require that all such donated foods must be used in (instead of benefit) the charitable institution's food service.

As described in the proposed rule, amendments to the Older Americans Act of 1965 (42 U.S.C. 3030a) in 2000 and 2003 made changes in the allocation of resources in, and the administration of, NSIP. In order to incorporate the legislative changes, we proposed to revise current requirements to indicate the role of the DHHS Administration on Aging (AoA) in administering the allocation of resources in NSIP, and the USDA role in purchasing and providing donated foods to those State Agencies on Aging requesting them as part of their NSIP grant. However, since the publication of the proposed rule, further amendments to the Older Americans Act of 1965 have been made. The Older Americans Act Amendments of 2006 (Pub. L. 109-365), enacted on October 17, 2006, removed the option for State Agencies on Aging to receive all or part of their NSIP grant as donated foods for fiscal year 2007. The enactment of the Older Americans Reauthorization Technical Corrections Act (Pub. L. 110-19), on April 23, 2007, restored this option for fiscal year 2008 and subsequent years. The latter legislation also requires a transfer of funds from AoA to FNS for the cost of purchasing donated foods and for expenses related to such purchases, rather than provide for reimbursement for such expenses. Lastly, the legislation authorizes FNS to carry over unused funds to make donated food purchases for the appropriate State Agencies on Aging in the subsequent fiscal year, rather than require the return of such funds to AoA for disbursal to State Agencies on Aging. Other procedures for the purchase and distribution of donated foods in NSIP were not changed by legislation, nor did we receive any comments in response to the clarification of such procedures in the proposed rule. Accordingly, 7 CFR 250.68, as finalized in this rule, incorporates the nondiscretionary legislative changes, as follows:

(1) 7 CFR 250.68(a) describes the transfer of funds from AoA to FNS for the purpose of purchasing donated foods and for related expenses; and

(2) 7 CFR 250.68(e) describes the carryover of any unused funds that have been transferred, to make donated food purchases in the following fiscal year, rather than the return of such funds to AoA.

We received ten comments indicating that FNS should provide adequate time for implementation of new requirements, for updating of program information, and for amendment of agreements between distributing and recipient agencies. We received two comments indicating that extensive training will be needed to ensure effective implementation of the requirements. We agree that the requirements imposed by this final rule may necessitate some changes in procedures, including those related to recordkeeping and reviews, for distributing and recipient agencies, as well as amendments to agreements. Therefore, we have made this final rule effective 90 days after its publication in the Federal Register , rather than the more common 30- or 60-day period, to provide additional time to implement new procedures and agreement provisions. We are also committed to providing any necessary training to ensure effective implementation of the new requirements, and will work closely with distributing agencies, FNS Regional Offices, and with other parties, as appropriate, to ensure that such training is provided.

We received seven comments questioning how the proposed changes in food service management company contract requirements would affect existing contracts and contract extensions. In a final rule published in the Federal Register on October 31, 2007 at 72 FR 61479, an implementation schedule was established to balance the need for prompt implementation of new food service management company contract requirements established in that rule with consideration of the need to honor existing contracts and procurements. The schedule was established in accordance with the one-year duration of food service management company contracts, with an option for up to four additional one-year renewals. In the interest of consistency, we will use the same basic implementation schedule for the new contract requirements established in this final rule, as follows:

(1) The requirements will be applicable for all new procurement solicitations initiated on or after the effective date of this final rule.

(2) For all procurement solicitations for contracts issued prior to the effective date of this final rule:

a. Recipient agencies and State agencies with contracts with a term of 12 months or fewer remaining are exempt from applying the provisions of this rulemaking to those contracts; and

b. With State administering agency approval, recipient agencies with contracts that have annual renewal provisions may delay implementation until expiration of the current contract plus one 12-month renewal period.

As in the final rule referenced in the previous paragraph, the State administering agency may choose to establish shorter time frames for implementation, or may require some recipient agencies to implement the requirements sooner than others. However, in no case may a recipient agency be permitted to delay implementation beyond the timeframes specified above.

This rule has been determined to be significant and was reviewed by the Office of Management and Budget (OMB) in conformance with Executive Order 12866.

This action is needed to respond to an OIG audit, which found that, in contracting with food service management companies, school food authorities did not always receive the full value of the donated foods provided for use in the NSLP. It also incorporates amendments to the Older Americans Act of 1965 (42 U.S.C. 3030a) that affect the NSIP, and revises and clarifies other requirements to ensure the efficient and effective management and use of donated foods.

The regulatory changes help to ensure that recipient agencies receive the full benefit and value of donated foods provided to food service management companies for use in the recipient agencies' meals programs. The changes also remove reporting requirements used to determine the amount of surplus donated foods that charitable institutions may receive for service to needy persons. FNS quantified these benefits using audit results reported by the OIG. If the size and nature of the accounting problems uncovered by the OIG are indicative of problems with FSMC contracts nationwide, then an effective rule could generate benefits as high as $36 million over five years. However, given that the OIG did not choose a nationally representative sample for audit, this estimate is subject to considerable uncertainty.

This action is not expected to significantly increase costs of State and local agencies, or their commercial contractors, in using donated foods. FNS estimates five-year costs of roughly $243,000. Despite uncertainty with the estimate of potential benefits, the rule is undoubtedly cost-effective.

This rule has been reviewed with regard to the requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). The Under Secretary of Food, Nutrition, and Consumer Services, Nancy Montanez Johner, has certified that this action will not have a significant economic impact on a substantial number of small entities. Although the rule requires specific procedures for food service management companies, State distributing agencies, and recipient agencies to follow in using donated foods, USDA does not expect them to have a significant impact on such entities.

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. L. 104-4, establishes requirements for Federal agencies to assess the effects of their regulatory actions on State, local, and tribal governments and the private sector. Under Section 202 of the UMRA, FNS generally must prepare 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. When such a statement is needed for a rule, section 205 of the UMRA generally requires FNS to identify and consider a reasonable number of regulatory alternatives and adopt the least costly, more cost-effective or least burdensome alternative that achieves the objectives of the rule. This rule contains no Federal mandates (under the regulatory provisions of Title II of the UMRA) that impose costs on State, local, or tribal governments or the private sector of $100 million or more in any one year. This rule is, therefore, not subject to the requirements of sections 202 and 205 of the UMRA.

The donation of foods in USDA food distribution and child nutrition programs, and to charitable institutions and elderly nutrition projects in NSIP, is included in the Catalog of Federal Domestic Assistance under 10.550. For the reasons set forth in the final rule in 7 CFR part 3015, subpart V and related Notice published at 48 FR 29114, June 24, 1983, the donation of foods in such programs is included in the scope of Executive Order 12372, which requires intergovernmental consultation with State and local officials.

In accordance with Executive Order 13132, FNS has considered the impact of the regulatory actions on State and local governments. The following paragraphs describe FNS's considerations in terms of the three categories called for under section (6)(b)(2)(B) of Executive Order 13132.

The programs affected by the regulatory proposals in this rule are all State-administered, Federally-funded programs. FNS headquarters and regional offices have formal and informal discussions with State and local officials on an ongoing basis regarding program issues relating to the distribution of donated foods. FNS meets annually with the American Commodity Distribution Association, a national group with State, local, and industry representation, and the School Nutrition Association, to discuss issues relating to donated foods.

The rule addresses concerns identified in an OIG audit with respect to the benefit and value of donated foods received by recipient agencies in their contracts with food service management companies. While the regulatory requirements imposed by this rule may increase the workload of State and local agencies to a certain extent, the provisions will help to ensure that recipient agencies receive the benefit and value of the donated foods provided for their use.

FNS has considered the impact of this final rule on State and local agencies. FNS has established compliance timeframes that give due consideration to the need for changes in contract requirements and in the procedures necessary to assure compliance with such requirements.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. This rule is intended to have preemptive effect with respect to any State or local laws, regulations, or policies which conflict with its provisions or which would otherwise impede its full implementation. This rule is not intended to have retroactive effect. Prior to any judicial challenge to the provisions of this rule or the application of its provisions, all applicable administrative procedures must be exhausted.

FNS has reviewed this rule in accordance with the Department Regulation 4300-4, “Civil Rights Impact Analysis”, to identify and address any major civil rights impacts the rule might have on minorities, women, and persons with disabilities. After a careful review of the rule's intent and provisions, FNS has determined that this rule will not in any way limit or reduce the ability of participants to receive the benefits of donated foods in food distribution programs on the basis of an individual's or group's race, color, national origin, sex, age, or disability. FNS found no factors that would negatively and disproportionately affect any group of individuals.

The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR part 1320) requires that the Office of Management and Budget (OMB) approve all collections of information by a Federal agency before they can be implemented. In the publication of the proposed rule on June 8, 2006, FNS solicited comments on the burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility and clarity; and ways to minimize the burden on respondents, including the use of automated collection techniques or other forms of information technology. Although FNS sought public comments specific to the estimated reporting and recordkeeping burden detailed in the proposed rule, no comments were received and the information collection burden associated with the proposed rule, OMB No. 0584-0293, was approved on August 8, 2006. However, since the publication of the proposed rule, FNS has found that the total estimated annual burden for OMB No. 0584-0293 should reflect a decrease to 1,070,452 hours, rather than the decrease to 1,085,814 hours included in the proposed rule. The discrepancy is a result of mathematical errors in calculating the burden hours. Additionally, in the most recent survey of school food authorities (SFAs) conducted in school year 2003-04, it was estimated that 13.4 percent of SFAs had contracts with FSMCs. Hence, for school year 2005-06, it is estimated that 2,783 of the 20,770 SFAs participating in NSLP had such contracts, rather than the 1,765 included in the proposed rule. This adjustment results in an increase of 1,272 burden hours for this particular activity, making the total estimated annual burden for OMB No. 0584-0293 1,071,724 hours, which is still a decrease from the proposed rule. The resulting changes in the reporting and recordkeeping burdens associated with food service management contracts, from both current levels, and those included in the proposed rule, are shown in the following table.

Estimated total number of respondents: 18,552.

Estimated total annual responses: 1,160,746.

Estimated annual burden: 1,071,724.

FNS will request an adjustment in the total annual burden associated with OMB No. 0584-0293 to reflect the changes indicated above. Additionally, these requirements will not become effective until approved by OMB. When these information collection requirements have been approved, FNS will publish separate action in the Federal Register announcing OMB's approval.

FNS is committed to compliance with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to government information and services, and for other purposes.

The Truth in Lending Act (TILA; 15 U.S.C. 1601-1666j) requires creditors to disclose credit terms and the cost of consumer credit as an annual percentage rate. The act requires additional disclosures for loans secured by a consumer's home, and permits consumers to cancel certain transactions that involve their principal dwelling. TILA is implemented by the Board's Regulation Z (12 CFR part 226). The Board's official staff commentary (12 CFR part 226 (Supp. I)) interprets the regulation, and provides guidance to creditors in applying the regulation to specific transactions.

HOEPA was contained in the Riegle Community Development and Regulatory Improvement Act of 1994 and was enacted as an amendment to TILA. Public Law 103-325, 108 Stat. 2160 (60 FR 15463). In 1995, the Board amended Regulation Z to implement HOEPA. These amendments, contained in §§ 226.32 and 226.34 of the regulation, impose substantive limitations and additional disclosure requirements on certain closed-end home mortgage loans bearing rates or fees above a certain percentage or amount. As enacted, the statute requires creditors to comply with HOEPA's requirements if the total points and fees payable by the consumer at or before loan consummation exceed the greater of $400 or 8 percent of the total loan amount. The statute requires the Board to adjust the $400 figure annually on January 1 based on the annual percentage change in the Consumer Price Index (CPI) that was reported on the preceding June 1. 15 U.S.C. 1602(aa)(3) and 12 CFR 226.32(a)(1)(ii). The Board adjusted the $400 amount to $561 for the year 2008.

The Bureau of Labor Statistics publishes consumer-based indices monthly, but does not report a CPI change on June 1; adjustments are reported in the middle of each month. The Board uses the CPI-U index, which is based on all urban consumers and represents approximately 87 percent of the U.S. population, as the index for adjusting the $400 dollar figure. The adjustment to the CPI-U index reported by the Bureau of Labor Statistics on May 14, 2008, was the CPI-U index in effect on June 1, and reflects the percentage increase from April 2007 to April 2008. The adjustment to the $400 figure below reflects a 3.94 percent increase in the CPI-U index for this period and is rounded to whole dollars for ease of compliance.

Effective January 1, 2009, for purposes of determining whether a home mortgage transaction is covered by 12 CFR 226.32 (based on the total points and fees payable by the consumer at or before loan consummation), a loan is covered if the points and fees exceed the greater of $583 or 8 percent of the total loan amount. Comment 32(a)(1)(ii)-2, which lists the adjustments for each year, is amended to reflect the dollar adjustment for 2009. Because the timing and method of the adjustment is set by statute, the Board finds that notice and public comment on the change are unnecessary.

This adjustment is being made pursuant to TILA section 103(aa)(3). In July 2008, the Board used its authority in TILA section 129(l)(2) to amend Regulation Z to prohibit certain acts and practices in connection with “higher-priced mortgage loans.” These additional protections and the definition of “higher-priced mortgage loans” are contained in section 226.35 of Regulation Z. The adjustment being published today pursuant to section 103(aa) does not affect the new rules for “higher-priced mortgage loans” adopted by the Board in section 226.35.

The Board certifies that this amendment will not have a substantial effect on regulated entities because the only change is to raise the threshold for transactions requiring HOEPA disclosures.

We encourage you to participate in this rulemaking by submitting comments and related material. All comments received will be posted, without change, to http://www.regulations.gov and will include any personal information you have provided. We have an agreement with the Department of Transportation to use the Docket Management Facility.

If you submit a comment, please include the docket number for this rulemaking (USCG-2008-0785), indicate the specific section of this document to which each comment applies, and give the reason for each comment. We recommend that you include your name and mailing address, an e-mail address, or a phone number in the body of your document so that we can contact you if we have questions regarding your submission. You may submit your comments and materials by electronic means, mail, fax, or delivery to the Docket Management Facility at the address under ADDRESSES ; but please submit your comments and materials by only one means. If you submit them by mail or delivery, submit them in an unbound format, no larger than 8 1/2 by 11 inches, suitable for copying and electronic filing. If you submit them by mail and would like to know that they reached the Facility, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them.

To view comments, as well as documents mentioned in this preamble as being available in the docket, go to http://www.regulations.gov at any time. Enter the docket number for this rulemaking (USCG-2008-0785) in the Search box, and click “Go>>.” You may also visit either the Docket Management Facility in Room W12-140, on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue, SE., Washington, DC 20590-0001, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays; or First Coast Guard District, Bridge Branch, One South Street, New York, NY 10004, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays.

Anyone can search the electronic form of all comments received into any of our dockets by the name of the individual submitting the comment (or signing the comment), if submitted on behalf of an association, business, labor union, etc. You may review a Privacy Act, system of records notice regarding our public dockets in the January 17, 2008, issue of the Federal Register (73 FR 3316).

We do not plan to hold a public meeting. But you may submit a request for one to the Docket Management Facility at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register .

The Route 36 Bridge has a vertical clearance in the closed position of 35 feet at mean high water and 39 feet at mean low water. The existing drawbridge operation regulations are listed at 33 CFR 117.755(a). The bridge presently opens on the hour and half hour between 7 a.m. and 8 p.m. from May 15 through October 15, and on signal from 8 p.m. to 11 p.m. From 11 p.m. to 7 a.m. the bridge opens on signal after a four-hour advance notice is given.

The Shrewsbury River is navigated predominantly by recreational power boats and sail boats of various sizes.

Currently only one lane of vehicular traffic is open northbound on the Route 36 Bridge due to the Highlands Bridge replacement project presently underway. Two lanes of vehicular traffic were closed in early July 2008, to facilitate the new bridge construction.

As a result of the vehicular travel lane closures traffic congestion has become a major concern to motorists and local officials. The nearby Gateway National Recreation Area, operated by the National Park Service, has been particularly impacted on weekends by traffic delays as a result of the bridge construction and drawbridge openings for vessel traffic.

The National Park Service, the New Jersey Department of Transportation, and local officials have made various adjustments to traffic control to help mitigate the vehicular traffic congestion; however, the traffic congestion on weekends in the afternoon continues to be a major safety concern when motorists are exiting the Sandy Hook area and the Gateway National Recreation Park.

As a result, the National Park Service requested a temporary deviation from the drawbridge operation regulations to test an alternate drawbridge operation schedule to help better balance the needs between vehicular land traffic and marine vessel traffic.

Under this temporary deviation, in effect from August 2, 2008 through September 1, 2008, the Route 36 Bridge at mile 1.8, across the Shrewsbury River, shall operate as follows:

Monday through Friday, the draw shall open on signal, from 7 a.m. to 8 p.m., on the hour and half hour only. From 8 p.m. to 11 p.m. the draw shall open on signal. From 11 p.m. to 7 a.m. the draw shall open on signal after at least a four-hour notice is given by calling 732-872-1052.

Saturday, Sunday and Labor Day, the draw shall open on signal from 7 a.m. to 4 p.m., and 7 p.m. to 8 p.m. on the hour and half hour only. From 4 p.m. to 7 p.m. the draw shall open on signal once an hour, on the hour only. From 8 p.m. to 11 p.m. the draw shall open on signal. From 11 p.m. to 7 a.m. the draw shall open on signal after at least a four-hour advance notice is given by calling 732-872-1052.

In accordance with 33 CFR 117.35(e), the bridge must return to its regular operating schedule immediately at the end of the designated time period. This deviation from the operating regulations is authorized under 33 CFR 117.35.

On May 15, 2008, we published a notice of proposed rulemaking (NPRM) entitled “Drawbridge Operation Regulations; Smith Creek at Wilmington, NC” in the Federal Register (73 FR 28069). We received no comments on the published NPRM. No public meeting was requested, and none was held.

The North Carolina Department of Transportation (NCDOT) is responsible for the operation of the S117-S133 Bridge, at mile 1.5, across Smith Creek at Wilmington, NC. The existing operating regulation is set out in 33 CFR 117.841 and requires the draw to open on signal if at least 24 hour notice is given. In the closed-to-navigation position, the S117-S133 Bridge has a vertical clearance of 12 feet, above mean high water.

From the 1930s to the 1970s, Smith Creek was the main waterway route for commercial vessel traffic servicing lumber mills and factories along the waterfront in Wilmington, NC. There are no longer any commercial interests requiring access upstream. NCDOT has not received a request to open the bridge in over 20 years for waterway navigation, and it has been more than 35 years since the bridge was actually manned by operators.

Due to the lack of requests for vessel openings of the drawbridge for the past 20 years, NCDOT requested to change the current operating regulations that the draw need not be opened for the passage of vessels.

The Coast Guard received no comments to the NPRM. Based on the information provided, we will implement a final rule with no changes to the NPRM.

The Coast Guard is amending 33 CFR 117.841, which governs the S117-S133 Bridge by revising the paragraph to read that the draw need not be opened for the passage of vessels.

We developed this rule after considering numerous statutes and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This rule is not a “significant regulatory action” under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. We reached this conclusion based on the fact that NCDOT has not received a request to open the bridge in over 20 years for waterway navigation.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will not have a significant economic impact on a substantial number of small entities because NCDOT has not received a request to open the bridge in over 20 years for waterway navigation.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process. Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520.).

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and would not create an environmental risk to health or risk to safety that might disproportionately affect children.

This rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it would not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes.

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Commandant Instruction M16475.1D and Department of Homeland Security Management Directive 5100.1, which guides the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (32) (e) of the Instruction, from further environmental documentation.

Under figure 2-1, paragraph (32)(e), of the Instruction, an environmental analysis checklist and a categorical exclusion determination are not required for this rule.

On May 22, 2008, we published a notice of proposed rulemaking (NPRM) entitled Safety Zones: Annual Events Requiring Safety Zones in the Captain of the Port Detroit Zone in the Federal Register (73 FR 29725). We received zero letters commenting on the rule. No public meeting was requested, and none was held.

Under 5 U.S.C. 553(d)(3), the Coast Guard finds that good cause exists for making this rule effective less than 30 days after publication in the Federal Register . Delaying this rule would be contrary to the public interest of ensuring the safety and security of the spectators and participants during this event and immediate action is necessary to prevent possible loss of life or property.

In 2005, the Coast Guard consolidated the Captain of the Port Toledo Zone and the Captain of the Port Detroit Zone into one zone re-defining the Captain of the Port Detroit Zone. This rule consolidates the regulations found in 33 CFR 165.907, Safety Zones; Annual Fireworks Events in the Captain of the Port Detroit Zone with additional events not previously published in the CFR.

These safety zones are necessary to protect vessels and people from the hazards associated with fireworks displays or other events. Such hazards include obstructions to the waterway that may cause marine casualties and the explosive danger of fireworks and debris falling into the water that may cause death or serious bodily harm.

These safety zones are necessary to ensure the safety of vessels and people during annual firework events in the Captain of the Port Detroit area of responsibility that may pose a hazard to the public. This new section unites all the annual firework events in the recently consolidated COTP Detroit zone into one section of the CFR. In addition, there are several events that are added and some events that have been deleted in this new section.

This rule adds the following events to those already occurring annually: (1) Roostertail Fireworks (land); (2) Roostertail Fireworks (barge); (3) Celebrate America Fireworks; (4) Target Fireworks; (5) Washington Township Summerfest Fireworks; (6) Au Gres City Fireworks; (7) The Old Club Fireworks; (8) Alpena Fireworks; (9) Put-In-Bay Fourth of July Fireworks; (10) Gatzeros Fireworks; (11) Harrisville Fireworks; (12) Harbor Beach Fireworks; (13) Trenton Rotary Roar on the River Fireworks; (14) Nautical Mile Venetian Festival Fireworks; (15) Cheeseburger Festival Fireworks; (16) Detroit International Jazz Festival Fireworks; (17) Marine City Maritime Festival Fireworks; (18) Schoenith Family Foundation Fireworks; (19) Toledo Country Club Memorial Celebration and Fireworks; (20) Luna Pier Fireworks Show; (21) Toledo Country Club 4th of July Fireworks; (22) Pharm Lights Up The Night Fireworks; (23) Perrysburg/Maumee 4th of July Fireworks; (24) Lakeside July 4th Fireworks; (25) Catawba Island Club Fireworks; (26) Red, White and Blues Bang Fireworks; (27) Huron Riverfest Fireworks; (28) Kellys Island, Island Fest Fireworks; (29) Riverfest at the International Docks; (30) Rossford Labor Day Fireworks; (31) Lakeside Labor Day Fireworks; and (32) Catawba Island Club Fireworks.

The following events in the rule already exist in the current regulation and are only being reorganized in this rule: (33) Bay-Rama Fishfly Festival Fireworks; (34) Jefferson Beach Marina Fireworks; (35) Sigma Gamma Association Fireworks; (36) Lake Erie Metropark Fireworks; (37) City of St. Clair Fireworks; (38) Oscoda Township Fireworks; (39) Port Austin Fireworks; (40) City of Wyandotte Fireworks; (41) Grosse Point Farms Fireworks; (42) Caseville Fireworks; (43) Algonac Pickerel Tournament Fireworks; (44) Port Sanilac Fireworks; (45) St. Clair Shores Fireworks; (46) Port Huron 4th of July Fireworks; (47) Grosse Point Yacht Club 4th of July Fireworks; (48) Lexington Independence Festival Fireworks; (49) City of Ecorse Water Festival Fireworks; (50) Grosse Isle Yacht Club Fireworks; (51) Trenton Fireworks; (52) Belle Maer Harbor 4th of July Fireworks; (53) Tawas City 4th of July Fireworks; and (54) Venetian Festival Boat Parade and Fireworks.

The safety zones will be enforced only immediately before, during, and after events that pose hazard to the public, and only upon notice by the Captain of the Port.

The Captain of the Port Detroit will notify the public that that the safety zones in this rule will be enforced by all appropriate means to the affected segments of the public including publication in the Federal Register as practicable, in accordance with 33 CFR 165.7(a). Such means of notification may also include, but are not limited to, Broadcast Notice to Mariners or Local Notice to Mariners. The Captain of the Port will issue a Broadcast Notice to Mariners notifying the public if enforcement of a safety zone established by this section is cancelled.

All persons and vessels shall comply with the instructions of the Coast Guard Captain of the Port or the designated representative. Entry into, transiting, or anchoring within the safety zone is prohibited unless authorized by the Captain of the Port Detroit, or his designated representative. The Captain of the Port or his designated representative may be contacted via VHF Channel 16.

We received no comments with regard to this rule and no changes have been made to this rule.

We developed this rule after considering numerous statues and executive orders related to rulemaking. Below we summarize our analyses based on 13 of these statutes or executive orders.

This rule is not a significant regulatory action under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order.

This determination is based on the minimal time that vessels will be restricted from the zone and the zone is an area where the Coast Guard expects insignificant adverse impact to mariners from the zone's activation.

Under the Regulatory Flexibility Act (5 U.S.C. 601-612), we have considered whether this rule would have a significant economic impact on a substantial number of small entities. The term “small entities” comprises small businesses, not-for-profit organizations that are independently owned and operated and are not dominant in their fields, and governmental jurisdictions with populations of less than 50,000.

The Coast Guard certifies under 5 U.S.C. 605(b) that this rule will not have a significant economic impact on a substantial number of small entities.

This rule will affect the following entities, some of which may be small entities: The owners of operators of vessels intending to transit or anchor in the areas designated as safety zones in subparagraphs (1) through (49) during the dates and times the safety zones are being enforced.

These safety zones would not have a significant economic impact on a substantial number of small entities for the following reasons: this rule would be in effect for short periods of time, and only once per year, per zone. The safety zones have been designed to allow traffic to pass safely around the zone whenever possible and vessels will be allowed to pass through the zones with the permission of the Captain of the Port. The Coast Guard will give notice to the public via a Broadcast Notice to Mariners that the regulation is in effect. Additionally, the COTP will suspend enforcement of the safety zone if the event for which the zone is established ends earlier than the expected time.

Under section 213(a) of the Small Business Regulatory Enforcement Fairness Act of 1996 (Pub. L. 104-121), in the NPRM we offered to assist small entities in understanding the rule so that they could better evaluate its effects on them and participate in the rulemaking process.

Small businesses may send comments on the actions of Federal employees who enforce, or otherwise determine compliance with, Federal regulations to the Small Business and Agriculture Regulatory Enforcement Ombudsman and the Regional Small Business Regulatory Fairness Boards. The Ombudsman evaluates these actions annually and rates each agency's responsiveness to small business. If you wish to comment on actions by employees of the Coast Guard, call 1-888-REG-FAIR (1-888-734-3247). The Coast Guard will not retaliate against small entities that question or complain about this rule or any policy or action of the Coast Guard. We did not receive any comments for this section.

This rule calls for no new collection of information under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). We did not receive any comments for this section.

A rule has implications for federalism under Executive Order 13132, Federalism, if it has a substantial direct effect on State or local governments and would either preempt State law or impose a substantial direct cost of compliance on them. We have analyzed this rule under that Order and have determined that it does not have implications for federalism. We did not receive any comments for this section.

The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) requires Federal agencies to assess the effects of their discretionary regulatory actions. In particular, the Act addresses actions that may result in the expenditure by a State, local, or tribal government, in the aggregate, or by the private sector of $100,000,000 or more in any one year. Though this rule will not result in such an expenditure, we do discuss the effects of this rule elsewhere in this preamble. We did not receive any comments for this section.

This rule will not effect a taking of private property or otherwise have taking implications under Executive Order 12630, Governmental Actions and Interference with Constitutionally Protected Property Rights. We did not receive any comments for this section.

This rule meets applicable standards in sections 3(a) and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize litigation, eliminate ambiguity, and reduce burden. We did not receive any comments for this section.

We have analyzed this rule under Executive Order 13045, Protection of Children from Environmental Health Risks and Safety Risks. This rule is not an economically significant rule and does not create an environmental risk to health or risk to safety that may disproportionately affect children. We did not receive any comments for this section.

The Coast Guard recognizes the treaty rights of Native American Tribes. Moreover, the Coast Guard is committed to working with Tribal Governments to implement local policies and to mitigate tribal concerns. We have determined that these regulations and fishing rights protection need not be incompatible. We have also determined that this Rule does not have tribal implications under Executive Order 13175, Consultation and Coordination with Indian Tribal Governments, because it does not have a substantial direct effect on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes. Nevertheless, Indian Tribes that have questions concerning the provisions of this Rule or options for compliance are encourage to contact the point of contact listed under FOR FURTHER INFORMATION CONTACT .

We have analyzed this rule under Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use. We have determined that it is not a “significant energy action” under that order because it is not a “significant regulatory action” under Executive Order 12866 and is not likely to have a significant adverse effect on the supply, distribution, or use of energy. The Administrator of the Office of Information and Regulatory Affairs has not designated it as a significant energy action. Therefore, it does not require a Statement of Energy Effects under Executive Order 13211.

The National Technology Transfer and Advancement Act (NTTAA) (15 U.S.C. 272 note) directs agencies to use voluntary consensus standards in their regulatory activities unless the agency provides Congress, through the Office of Management and Budget, with an explanation of why using these standards would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., specifications of materials, performance, design, or operation; test methods; sampling procedures; and related management systems practices) that are developed or adopted by voluntary consensus standards bodies.

This rule does not use technical standards. Therefore, we did not consider the use of voluntary consensus standards.

We have analyzed this rule under Department of Homeland Security Management Directive 5100.1 and Commandant Instruction M16475.lD, which guide the Coast Guard in complying with the National Environmental Policy Act of 1969 (NEPA) (42 U.S.C. 4321-4370f), and have concluded under the Instruction that there are no factors in this case that would limit the use of a categorical exclusion under section 2.B.2 of the Instruction. Therefore, this rule is categorically excluded, under figure 2-1, paragraph (34)(g), of the Instruction, from further environmental documentation. This event establishes a safety zone, therefore paragraph (34)(g) of the Instruction applies.

An environmental analysis checklist and a categorical exclusion determination are available in the docket where indicated under ADDRESSES .

The Coast Guard will enforce the security zone for the annual Labor Day Mackinac Bridge Walk in 33 CFR 165.928 on September 1, 2008, from 6 a.m. to 11:59 p.m.

Under provisions of 33 CFR 165.928, a vessel may not enter or move with the regulated area, unless it receives permission from the COTP or a Designated Representative as defined in 33 CFR 165.928(a)(1). The Coast Guard may be assisted by other Federal, State, or local law enforcement agencies in enforcing this regulation.

This notice is issued under the authority of 33 CFR 165.928 and 5 U.S.C. 552(a). In addition to this notice in the Federal Register , the Coast Guard will provide the maritime community with advance notification of this enforcement period via a Local Broadcast Notice to Mariners.

On June 5, 2008 (73 FR 31947), EPA published a notice of proposed rulemaking (NPR) for the Commonwealth of Pennsylvania. The NPR proposed approval of Pennsylvania's SIP revision that establishes a maintenance plan for the Schuylkill County Area that provides for continued attainment of the 8-hour ozone NAAQS for at least 10 years after designation, and a 2002 base-year emissions inventory. The formal SIP revisions were submitted by PADEP on December 17, 2007. Other specific requirements of Pennsylvania's SIP revision and the rationales for EPA's proposed actions are explained in the NPR and will not be restated here. No public comments were received on the NPR.

EPA is approving the maintenance plan and the 2002 base-year inventory for the Schuylkill County Area, submitted on December 17, 2007, as revisions to the Pennsylvania SIP. EPA is approving the maintenance plan and 2002 base-year inventory for the Schuylkill County Area because it meets the requirements of section 110(a)(1) of the CAA.

Under the Clean Air Act, the Administrator is required to approve a SIP submission that complies with the provisions of the Act and applicable Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in reviewing SIP submissions, EPA's role is to approve state choices, provided that they meet the criteria of the Clean Air Act. Accordingly, this action merely approves state law as meeting Federal requirements and does not impose additional requirements beyond those imposed by state law. For that reason, this action:

• Is not a “significant regulatory action” subject to review by the Office of Management and Budget under Executive Order 12866 (58 FR 51735, October 4, 1993);

• Does not impose an information collection burden under the provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq. );

• Is certified as not having a significant economic impact on a substantial number of small entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq. );

• Does not contain any unfunded mandate or significantly or uniquely affect small governments, as described in the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4);

• Does not have Federalism implications as specified in Executive Order 13132 (64 FR 43255, August 10, 1999);

• Is not an economically significant regulatory action based on health or safety risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997);

• Is not a significant regulatory action subject to Executive Order 13211 (66 FR 28355, May 22, 2001);

• Is not subject to requirements of Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 note) because application of those requirements would be inconsistent with the Clean Air Act; and

• Does not provide EPA with the discretionary authority to address, as appropriate, disproportionate human health or environmental effects, using practicable and legally permissible methods, under Executive Order 12898 (59 FR 7629, February 16, 1994).

In addition, this rule does not have tribal implications as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), because the SIP is not approved to apply in Indian country located in the state, and EPA notes that it will not impose substantial direct costs on tribal governments or preempt tribal law.

The Congressional Review Act, 5 U.S.C. 801 et seq. , as added by the Small Business Regulatory Enforcement Fairness Act of 1996, generally provides that before a rule may take effect, the agency promulgating the rule must submit a rule report, which includes a copy of the rule, to each House of the Congress and to the Comptroller General of the United States. EPA will submit a report containing this action and other required information to the U.S. Senate, the U.S. House of Representatives, and the Comptroller General of the United States prior to publication of the rule in the Federal Register . A major rule cannot take effect until 60 days after it is published in the Federal Register . This action is not a “major rule” as defined by 5 U.S.C. 804(2).

Under section 307(b)(1) of the Clean Air Act, petitions for judicial review of this action must be filed in the United States Court of Appeals for the appropriate circuit by October 7, 2008. Filing a petition for reconsideration by the Administrator of this final rule does not affect the finality of this action for the purposes of judicial review nor does it extend the time within which a petition for judicial review may be filed, and shall not postpone the effectiveness of such rule or action. This action approving the maintenance plan and the 2002 base-year inventory for the Schuylkill County Area may not be challenged later in proceedings to enforce its requirements. (See section 307(b)(2).)

GSA published an Advance Notice of Proposed Rulemaking (ANPR) in the Federal Register at 71 FR 7910, February 15, 2006 with request for comments because the agency was beginning the review and update of the General Services Administration Acquisition Regulation (GSAR).

This GSAR rewrite has—

• Changed “you” to “contracting officer.”

• Maintained consistency with the FAR but eliminated duplication.

• Revised GSAR sections that are out of date or imposed inappropriate burdens on the Government or contractors, especially small businesses.

• Streamlined and simplified procedures, guidance, and policies wherever possible.

In addition, GSA has recently reorganized into two (2) operating services rather than three (3). Therefore, the reorganization of the Federal Supply Service (FSS) and the Federal Technology Service (FTS) into the Federal Acquisition Service (FAS) was considered in the Rewrite Initiative.

This final rule contains the revisions made to Part 522, Application of Labor Laws to Government Acquisitions. There are no substantive changes to the policies. Information previously contained in GSAR 522.101-1 regarding the necessary impartiality of GSA personnel in disputes between labor and contractor management is deleted as unnecessary because it repeats Federal Acquisition Regulation (FAR) language. GSAR 522.101-1(b) adds language to require contracting officers to notify the Office of General Counsel and the agency labor advisor when they are contacted by external organizations. GSAR 522.103-5 is revised to clarify that FAR clause 52.222-1, Notice to the Government of Labor Disputes, must be inserted in solicitations and contracts for DX-rated orders under the Defense Priorities and Allocations System (DPAS). GSAR Subpart 522.4, Labor Standards for Contracts, is deleted in its entirety because of its potential for conflict with FAR Subpart 22.4.

GSAR 522.804-1(b) is revised to indicate that contractors, subcontractors, and financial institutions must develop a written affirmative action compliance program for each of its establishments regardless of the contract or holding value, in accordance with 41 CFR 60-1.40. Paragraph 522.805(b) is revised to add websites that list the various Office of Federal Contract Compliance Programs (OFCCP) Regional Offices.

As a result of the ANPR, GSA did not receive any comments pertaining to GSAR Part 522.

This is not a significant regulatory action and, therefore, was not subject to review under Section 6(b) of Executive Order 12866, Regulatory Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.

The General Services Administration certifies that this final rule will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. , because no new requirements are being placed on the vendor community. No comments on this issue were received from small business concerns or other interested parties.

The Paperwork Reduction Act does not apply because the changes to the GSAR do not impose recordkeeping or information collection requirements, or otherwise collect information from offerors, contractors, or members of the public that require approval of the Office of Management and Budget under 44 U.S.C.3501, et seq.