[Federal Register Volume 59, Number 30 (Monday, February 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-3212]


[[Page Unknown]]

[Federal Register: February 14, 1994]


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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation

7 CFR Part 1499

 

Foreign Donation of Agricultural Commodities

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish regulations governing the 
donation of agricultural commodities by Commodity Credit Corporation 
for distribution in foreign countries pursuant to section 416(b) of the 
Agricultural Act of 1949, or the Food for Progress Act of 1985.

DATES: Comments on the proposed rule must be submitted by March 16, 
1994.

ADDRESSES: Comments should be submitted to: Director/PAD, Foreign 
Agricultural Service, United States Department of Agriculture, 14th and 
Independence Ave., SW., room 4079-S, Washington, DC 20250-1000.
    All comments will be available for public inspection during regular 
business hours in room 4079-S, U.S. Department of Agriculture, 14th and 
Independence Avenue, SW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:
Director/PAD, Foreign Agricultural Service, United States Department of 
Agriculture, 14th and Independence Avenue, SW., Washington, DC 20250-
1000; telephone (202) 720-3573.

SUPPLEMENTARY INFORMATION: This proposed rule is issued in conformance 
with Executive Order 12866. Based on information compiled by the 
Department, it has been determined that this proposed rule:
    (1) Would have an annual effect on the economy of less than $100 
million;
    (2) Would not adversely affect in a material way the economy, a 
sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities;
    (3) Would not create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency;
    (4) Would not alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or rights and obligations of recipients 
thereof; and
    (5) Would not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or principles set forth in 
Executive Order 12866.
    This proposed rule deals primarily with requirements imposed upon 
foreign governments and non-profit entities distributing relief 
supplies overseas. Therefore, the proposed rule does not have a 
significant impact upon a substantial number of small business entities 
and Regulatory Impact Statement was not prepared. A copy of this 
proposed rule has been sent to the Chief Counsel, Office of Advocacy, 
U.S. Small Business Administration.

Paperwork Reduction Act

    This proposed rule contains information collections which are 
subject to review by the Office of Management and Budget (OMB) under 
the Paperwork Reduction Act of 1980 (44 U.S.C. chapter 35). The 
sections requiring information collections are shown below with an 
estimate of the annual reporting and recordkeeping burdens. Included in 
the estimate is the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing the collection of information.

------------------------------------------------------------------------
                       Estimated                 Estimated    Estimated 
                         annual       Annual     burden per     annual  
       Section         number of    frequency     response      burden  
                      respondents                 (hours)      (hours)  
------------------------------------------------------------------------
7 CFR 1499.5:                                                           
    Existing\1\.....           35          N/A           56         1960
    Incl. proposed                                                      
     rule...........           30          N/A           40         1200
7 CFR 1499.8:                                                           
    Existing........           25          N/A            1           25
    Incl. proposed                                                      
     rule...........           25          N/A            1           25
7 CFR 1499.9:                                                           
    Existing........           25          N/A            8          200
    Incl. proposed                                                      
     rule...........           25          N/A            8          200
7 CFR 1499.11:                                                          
    Existing........           21          N/A            4           84
    Incl. proposed                                                      
     rule...........           21          N/A            4           84
7 CFR 1499.14:                                                          
    Existing........            5          N/A            2           10
    Incl. proposed                                                      
     rule...........            5          N/A            2           10
7 CFR 1499.16:                                                          
    Existing........           25            2           24         1200
    Incl. proposed                                                      
     rule...........           25            2           24         1200
      Total Burden Hours Including Proposed Rule=2719                   
      Total Existing Burden Hours=3479                                  
      Net Change in Burden Hours=(760)                                  
------------------------------------------------------------------------
\1\Existing reporting and recordkeeping burdens refer to those          
  requirements that appear in the current standard form section 416(b)  
  and Food for Progress agreements.                                     

    As required by Section 3504(h) of the Paperwork Reduction Act of 
1980, FAS has submitted a copy of this proposed rule to OMB for its 
review of these information collection requirements. Other 
organizations and individuals desiring to submit comments regarding 
this burden estimate or any aspects of these information collection 
requirements, including suggestions for reducing the burdens, should 
direct them to the Acting General Sales Manager, FAS, USDA, at the 
address above, and to the Office of Information and Regulatory Affairs, 
OMB, New Executive Building, Washington, DC 20503, Attention: Desk 
Officer for the Foreign Agricultural Service.
    This rule is not subject to the provisions of Executive Order 12372 
which requires intergovernmental consultation with state and local 
officials. See the notice related to 7 CFR part 3015, subpart V, 
published at 46 FR 29115 (June 24, 1983).
    This proposed rule has been reviewed under the Executive Order 
12778, Civil Justice Reform. The proposed rule would have pre-emptive 
effect with respect to any state or local laws, regulations, or 
policies which conflict with such provisions or which otherwise impede 
their full implementation. The proposed rule would not have retroactive 
effect. Administrative proceedings are not required before parties may 
seek judicial review.
    The Department of Agriculture is committed to carrying out its 
statutory and regulatory mandates in a manner that best serves the 
public interest. Therefore, where legal discretion permits, the 
Department actively seeks to promulgate regulations that promote 
economic growth, create jobs, are minimally burdensome and are easy for 
the public to understand, use or comply with. In short, the Department 
is committed to issuing regulations that maximize net benefits to 
society and minimize costs imposed by those regulations. This principle 
is articulated in Executive Orders 12291 and 12498. The Department 
applies this principle to the full extent possible, consistent with 
law.
    The Department has developed and reviewed this regulatory proposal 
in accordance with these principles. Nonetheless, the Department 
believes that public input from all interested persons can be 
invaluable to ensuring that the final regulatory product is minimally 
burdensome and maximally efficient. Therefore, the Department 
specifically seeks comments and suggestions from the public regarding 
any less burdensome or more efficient alternative that would accomplish 
the purposes described in the proposal. Comments suggesting less 
burdensome or more efficient alternatives should be addressed to the 
agency as provided in this Proposed Rule.
    This proposed rule would govern the donation of agricultural 
commodities overseas pursuant to section 416(b) of the Agricultural Act 
of 1949 (7 U.S.C. 1431(b)) and the Food for Progress Act of 1985 (7 
U.S.C. 1736o). These regulations contain many provisions that have been 
standard terms of agreements with recipients, i.e., Cooperating 
Sponsors, for a number of years. As of October 1, 1991, the Agency for 
International Development no longer is a signatory to section 416(b) 
program agreements and pursuant to E.O. 12752, 56 FR 8255, the 
Secretary of Agriculture was delegated the President's responsibilities 
under the Food for Progress Act. Accordingly, it is appropriate for the 
Department of Agriculture to promulgate regulations to govern 
operations under these two programs.
    Generally, the regulatory provisions herein would apply equally to 
both programs; however, certain provisions dealing with the sale of 
commodities and the use of local currencies generated from such sales 
apply only to the section 416(b) program.
    Interested parties should carefully read the full proposed rule. Of 
particular note are the following points:
    1. Nominations of shipping agents for Cooperating Sponsors 
participating in the Food for Progress Act will be made to USDA in 
conformity with the conflict of interest provisions currently 
applicable only to section 416(b) and of the Agricultural Trade 
Development and Assistance Act of 1954 (Pub. L. 480). This will place 
all USDA concessional export programs on the same basis regarding 
conflict of interest reviews in connection with shipping agents. In 
this regard, the proposed regulations include limitations on 
commissions that may be paid to shipping agents that follow the 
limitations currently proposed for shipping agents participating in the 
title I, Public Law 480 program. See 57 FR 53607, November 12, 1992. 
Comments received regarding these limitations are presently being 
reviewed and will also be considered in relation to this proposed rule. 
These proposed rules, however, would also limit the agents commission 
to a percentage of the gross freight attributable to the ocean segment 
of any movement that may be contracted on a through bill of lading or 
involve obligations at discharge such as bagging grain. This limitation 
is included because freight charges attributed to inland movements to 
many destinations receiving section 416(b) and Food for Progress 
commodities are relatively high due to various difficult conditions in 
these countries. CCC does not have an effective mechanism to determine 
the reasonableness of these charges.
    2. These regulations apply only to agreements for the donation of 
agricultural commodities and not to any sales to Cooperating Sponsors.
    3. Specific criteria are established to govern the approval of 
agreements or of activities under such agreements. Detailed information 
is required in the Plan of Operation submitted in connection with a 
section 416(b) agreement.
    4. The proposed rule contains detailed procedures for the 
procurement of ocean transportation including requirements for 
competitive bidding in the fixture of vessels on charter terms.
    5. The regulations include specific guidance for ocean carrier and 
inland claims and for disposing of commodities unfit for intended use. 
In this regard, the regulations would adopt procedures similar to those 
in effect for title II, Public Law 480 shipments and should be familiar 
to many Cooperating Sponsors.
    6. Responsibility for section 416(b) program oversight in recipient 
countries falls to the resident or regional Agricultural Attache/
Counselor or, in the absence thereof, a representative designated by 
the United States Department of Agriculture.

List of Subjects in 7 CFR Part 1499

    Agricultural commodities, Exports, Foreign aid.

    Accordingly, title 7 of the Code of Federal Regulations is proposed 
to be amended by adding a new part 1499 to read as follows:

PART 1499--FOREIGN DONATION PROGRAMS

Sec.
1499.1  Definitions.
1499.2  General purpose and scope.
1499.3  Eligibility requirements for cooperating sponsor.
1499.4  Availability of commodities from CCC inventory.
1499.5  Program agreements.
1499.6  Criteria for entering into program agreements.
1499.7  Apportionment of costs.
1499.8  Ocean transportation.
1499.9  Restrictions on commodity use and distribution.
1499.10  Agreement between Cooperating Sponsor and Recipient 
Agencies.
1499.11  Liability of the Cooperating Sponsor.
1499.12  Sales, barter, and use of monetized proceeds and program 
income.
1499.13  Usual marketing requirements.
1499.14  Processing, packaging and labeling of section 416(b) 
commodities in the foreign country.
1499.15  Arrangements for entry and handling in the foreign country.
1499.16  Disposition of commodities unfit for authorized use.
1499.17  Liability for loss, damage, or improper distribution of 
commodities--claims and procedures.
1499.18  Records and reporting requirements.
1499.19  Termination of program.
1499.20  Sample documents/guidelines for developing proposals and 
reports.

    Authority: 7 U.S.C. 1431(b); 7 U.S.C. 1736o; E.O. 12752.


Sec. 1499.1 Definitions.

    Activity--An action undertaken by a Cooperating Sponsor involving 
the use of agricultural commodities donated under Program Agreements or 
the use of monetized proceeds.
    Agricultural Counselor or Attache--A United States Department of 
Agriculture representative stationed abroad responsible for the country 
where agricultural commodities donated under Program Agreements are to 
be distributed.
    CCC--The Commodity Credit Corporation.
    Commodities--Agricultural commodities or products donated under 
Program Agreements.
    Cooperating Sponsor--An entity with which CCC enters into a Program 
Agreement, including both foreign government and private nongovernment 
entities.
    Director, P.L. 480-OD--The Director, Pub. L. 83-480 Operations 
Division, Foreign Agricultural Service, USDA.
    Director, PAD--The Director, Program Analysis Division, Foreign 
Agricultural Service, USDA.
    Director, PDD--The Director, Program Development Division, Foreign 
Agricultural Service, USDA.
    Food for Progress Program --The donation of commodities under the 
authority of the Food for Progress Act of 1985.
    General Sales Manager--General Sales Manager and Associate 
Administrator, Foreign Agricultural Service, USDA, who is the Vice 
President, CCC.
    KCCO--Kansas City Commodity Office, Agricultural Stabilization and 
Conservation Service, USDA, P.O. Box 419205, Kansas City, Missouri, 
64141-6205.
    KCFMO--Kansas City Financial Management Office, Agricultural 
Stabilization and Conservation Service, USDA, P.O. Box 419205, Kansas 
City, Missouri, 64141-6205.
    Monetization--The sale of commodities by Cooperating Sponsors.
    Monetized proceeds--The local currency proceeds generated from 
monetization.
    Plan of Operation--A description of the activities the Cooperating 
Sponsor will undertake utilizing the donated commodities or monetized 
proceeds.
    Program income--Money received by the Cooperating Sponsor as a 
result of carrying out approved activities, including voluntary 
contributions from recipients of agricultural commodities in the 
importing country or interest received on monetized proceeds.
    Program Agreement--A foreign donation agreement entered into 
between CCC and Cooperating Sponsors.
    Recipient agency--An entity located in the importing country which 
receives commodities or monetized proceeds from a Cooperating Sponsor 
for the purpose of carrying out responsibilities of the Cooperating 
Sponsor under a Program Agreement.
    Shipping Agent--Any person engaged by a Cooperating Sponsor to 
arrange for transportation services.
    Section 416(b) program--The donation of agricultural commodities 
under the authority of section 416(b) of the Agricultural Act of 1949.
    USDA--The United States Department of Agriculture.


Sec. 1499.2  General purpose and scope.

    This part contains the general terms governing agreements between 
CCC and Cooperating Sponsors providing for the donation of agricultural 
commodities to carry out programs of assistance outside the United 
States under the authority of section 416(b) of the Agricultural Act of 
1949, or support of developing countries and countries that have made 
commitments to introduce or expand free enterprise elements in their 
agricultural economies under the authority of the Food for Progress Act 
of 1985. Program Agreements may contain other provisions when CCC 
determines that such provisions are necessary to effectively carry out 
a particular Program Agreement. Except as otherwise specified herein, 
these regulations apply to only donations to Cooperating Sponsors under 
both the section 416(b) and Food for Progress programs. However, these 
regulations do not apply to donations to intergovernmental agencies 
(such as the World Food Program) or organizations unless CCC and such 
intergovernmental agency or organization enters into a Program 
Agreement incorporating this part.


Sec. 1499.3  Eligibility requirements for Cooperating Sponsor.

    All entities registered with the Agency for International 
Development under 22 CFR part 203, are eligible to be Cooperating 
Sponsors. Other entities may be requested to furnish CCC evidence 
sufficient to demonstrate their capabilities to implement proposed 
activities prior to entering into a Program Agreement.


Sec. 1499.4  Availability of commodities from CCC inventory.

    CCC will, to the extent practicable, announce prior to the 
beginning of each fiscal year the types and quantities of agricultural 
commodities available for donation from CCC inventory. The quality of 
agricultural commodities donated by CCC and packaging will be in 
accordance with the specifications set forth in the Program Agreements.


Sec. 1499.5  Program Agreements.

    (a) Agreements. The Cooperating Sponsor must enter into a written 
Program Agreement with CCC which will incorporate by reference the 
terms and conditions set forth in this Part.
    (b) Section 416(b) Plan of Operation. Prior to entering into a 
section 416(b) Program Agreement, each Cooperating Sponsor shall submit 
to the Agricultural Counselor or Attache, and to the Director, PDD, a 
Plan of Operation describing the activities it proposes to undertake. 
When approved by CCC, the Plan of Operation will be incorporated into 
the section 416(b) Program Agreement as Attachment A. In case of a 
conflict between the approved Plan of Operation and other terms of the 
Program Agreement, such other terms in the Program Agreement will 
prevail. The Plan of Operation must follow the format and provide the 
information as follows:

Appendix I to Sec. 1499.5--Section 416(b) Program Plan of Operation 
(Attachment A)

    1. Name and Address of Applicant:
    2. Country:
    3. Kind and Quantity of Commodities Requested:
    4. Delivery Schedule:
    5. Program Description:
    a. Program objectives and expected outcomes, including a 
description of opportunities and constraints to achieving program 
objectives and criteria for measuring progress toward these 
objectives.
    b. Program recipients or participants and how they were chosen.
    c. Detailed description of program methodology and approaches, 
including, as appropriate:

    --plans for distribution, selling commodities, how local 
currencies will be spent, and administrative of technical persons 
involved in each phase;
    --transportation and storage systems that will be used to move 
the agricultural products from the receiving port to the point of 
distribution, or to where the product is reprocessed, packaged or 
sold;
    --any reprocessing or repackaging or the commodity;
    --logistics plan demonstrating the adequacy of port, 
transportation, and storage facilities to deliver commodities to 
recipients or to sell the commodities, without undue risk of 
spoilage or waste.

    d. Governmental or nongovernmental institutions and entities 
involved in the program and the extent to which the program will 
strengthen or increase the capabilities of institutions or entities 
in the recipient country.
    e. Method of educating recipients or participants of donation 
source, program requirements, and, where appropriate, preparation 
and use of the commodity.
    f. Describe records, accountability methods and supervisory 
activities for controlling and monitoring distribution of products, 
sales of commodities, and use of generated proceeds. Describe plans 
for evaluating program outcome.
    g. Information indicating that the host or local government 
supports the program.
    h. Detailed budget for program, including costs that will be 
covered by the applicant, other organizations or local governments; 
which activities monetized proceeds will cover; and any request for 
USDA administrative funds. The budget should include how costs of 
administration, storage, transportation, processing and repackaging 
will be financed.
    6. Use of Funds or Goods and Services Generated:
    When the activity involves the use of monetized proceeds, the 
receipt of goods or services from the barter of commodities, or 
program income, the following information must be provided:
    a. The quantity and type of commodities to be sold or bartered;
    b. The amount of monetized proceeds anticipated to be generated 
from the same, or the value of the goods or services anticipated to 
be generated from the barter, of the donated agricultural 
commodities; except that where such amount or value cannot be 
estimated, the Cooperating Sponsor will describe the method to be 
used to ensure that a fair return of cash, goods or services will be 
received for the commodities;
    c. The steps taken to use the private sector in the process of 
selling commodities;
    d. The amount of program income expected to be generated;
    e. The specific uses of sale proceeds or program income and a 
timetable for their expenditure;
    f. Procedures for assuring the receipt and deposit of monetized 
proceeds and program income into a separate special account and for 
the disbursement of the proceeds and program income;
    g. Information concerning the extent to which any sale or barter 
of the donated agricultural commodities would displace or interfere 
with any sales that may otherwise be made; and
    h. The recipient agency, if any, that will be involved in the 
program and a description of each recipient agency's capability to 
perform its responsibilities as stated in the Plan of Operation.
    7. Distribution Methods:
    a. A thorough description of the transportation and storage 
system which will be used to move the agricultural commodities from 
the receiving port to the point at which distribution is made to the 
recipient;
    b. A thorough description of any reprocessing or repackaging of 
the commodities that will take place; and
    c. A logistics plan that demonstrates the adequacy of port, 
transportation, storage, and warehouse facilities to handle the flow 
of commodities to recipients without undue spoilage or waste.
    8. Duty Free Entry:
    Information indicating that commodities to be directly 
distributed to recipients will be imported and distributed free from 
all customs, duties, tolls, and taxes.
    9. Economic Impact:
    Information indicating that the commodities can be imported and 
distributed without negative impact upon domestic production, prices 
and marketing of same or like products.


Sec. 1499.6  Criteria for entering into Program Agreements.

    (a) Section 416(b). (1) In determining whether to enter into a 
section 416(b) Program Agreement, CCC will give priority consideration 
to the donation of commodities to support activities designed to meet 
emergency situations, followed by non-emergency humanitarian feeding 
activities, and, finally, activities using monetized proceeds. Within 
this prioritization, CCC will consider the following evaluation 
criteria:
(i) Applicant Capability
    (A) Organizational experience and current institutional capacity to 
implement and manage the type of program proposed (targeted food 
distribution, targeted food distribution and monetization, or 
monetization for economic and other development activities).
    (B) Experience working in the targeted country.
    (C) Experience and capability level of personnel who will be 
responsible for implementing and managing the program.
(ii) Quality and technical soundness of proposal
    (A) Assessment of need and rationale are well presented and 
demonstrate actual need.
    (B) Program objectives and expected outcomes are reasonable and 
realistic and show an understanding of the opportunities and 
constraints to achieving the program objectives.
    (C) Plan for achieving program objectives is completely and clearly 
described and is logical for the type of program being implemented and 
includes, where appropriate, the following:
    (1) Description of transportation mechanisms, facilities, storage 
and warehousing plans, distribution methods, recipients or 
participants, and local institutions or entities involved with the 
project.
    (2) Description of how the commodity will be sold and any 
reprocessing or repackaging.
    (3) For the use of monetized proceeds, description of activities or 
costs that will be paid for by the generated local currencies.
    (4) Appropriateness and adequacy of organizational structure for 
the management of the agreement, including the clear articulation of 
lines of authority and relationships between the applicant and the 
various institutions and entities it proposes to involve.
    (D) Records and accountability methods for monitoring the program, 
including the distribution of commodities or use of local currencies, 
and the method by which the Cooperating Sponsor intends to evaluate the 
success of the proposal are clearly described and appropriate.
    (E) Demonstrates that the program will contribute to strengthening 
institutions, entities, or capabilities in the recipient country.
(iii) USDA Management responsibilities
    USDA assessment of commodity need and acceptability in terms of 
cost, storability, acceptability, and nutritional impact of proposed 
commodities.
    (b) Food for Progress. In determining whether to enter into a Food 
for Progress Foreign Donation Agreement, CCC will consider the extent 
to which the recipient country is committed to carry out, or is 
carrying out, policies that promote economic freedom, private domestic 
production of food commodities for domestic consumption, and the 
creation and expansion of efficient private domestic markets for the 
purchase and sale of such commodities. CCC shall require Cooperating 
Sponsors to submit a Plan of Operation similar to the Plan of Operation 
described in Sec. 1499.5(b) when CCC determines such would be necessary 
to identify specific activities to be undertaken by the Cooperating 
Sponsor in order to accomplish the purposes of the Food for Progress 
program. In such case, proposed activities will be evaluated in 
accordance with the criteria set forth at Sec. 1499.6(a)(2).


Sec. 1499.7  Apportionment of costs.

    (a) CCC will pay that costs of processing, packaging, transporting, 
handling, and other incidental charges incurred in making commodities 
available to Cooperating Sponsors.
    (b)(1) Title to all commodities shall pass to the Cooperating 
Sponsor at the time and place of delivery f.o.b. vessel at U.S. port in 
the case of bulk grain shipments, or f.a.s. vessel at U.S. port or at 
the intermodal point for all other commodities.
    (2) The Cooperating Sponsor shall bear all costs and expenses 
incurred subsequent to the transfer of title, except that, when 
specifically provided in the Program Agreement or upon the 
determination by CCC that it is the best interest of the program to do 
so, CCC may pay or make reimbursement for all or a portion of the 
reasonable transportation costs from U.S. ports to designated ports or 
points of entry abroad, and in the case of urgent and extraordinary 
relief requirements, all or a portion of the reasonable transportation 
costs from designated points of entry abroad to storage and 
distribution sites, and reasonable associated storage and distribution 
costs.
    (3) (i) In the case of countries receiving commodities under the 
Food for Progress Program, CCC may agree to make payments to 
Cooperating Sponsors to assist in the administration, sale, and 
monitoring of food assistance programs to strengthen private sector 
agriculture in such countries. The Program Agreement will specify the 
maximum dollar amount of funding that CCC will pay the Cooperating 
Sponsor for such costs. Payment of the above funds will only be made to 
the Cooperating Sponsor in such amounts, and for such purposes, as may 
be specifically approved in writing by the Controller, CCC and the 
General Sales Manager.
    (ii) CCC may, at its option, advance to the Cooperating Sponsor not 
more than 85 percent of the total dollar amount specified in the 
Program Agreement for the costs identified in paragraph (b)(3)(i) of 
this section. Funds committed but not advanced will be paid on a 
reimbursement basis. Prior to the advance of any funds by CCC, the 
Cooperating Sponsor shall submit to the Director, PAD and to the 
Controller, CCC, a Program Operations Budget detailing all storage, 
distribution, monitoring and administrative costs to be incurred. The 
budget line items must represent reasonable costs, for which written 
approval from the Controller, CCC and the General Sales Manager was 
obtained prior to program implementation. Any revisions of these 
expenditures must also be approved by the Controller, CCC and the 
General Sales Manager.
    (iii) Unless otherwise specifically permitted by CCC, CCC will not 
advance funds for expenditures by the Cooperating Sponsor that have 
been incurred prior to the date of the Program Agreement, that will be 
incurred earlier than 60 days following the date of any previous 
advance, or that will be incurred after a date specified in the Program 
Agreement.
    (iv) The Cooperating Sponsor must submit to the Controller, CCC, 
invoices supporting the charges incurred against the advance, or for 
which reimbursement is claimed, within 60 days from the date the 
service is received. All charges must be reasonable and foreign 
currency transactions must be supported by evidence of the specific 
exchange rate incurred. A delay in receipt, or non-receipt, of 
supporting documentation by the Controller, CCC, may result in CCC's 
refusal to release future advances. The Cooperating Sponsor shall 
promptly refund to CCC all funds advanced, together with all interest 
earned on such funds, if either not utilized within 180 days after the 
advance for purposes for which the funds were advanced, or for which 
documentation supporting the expenditure is not supplied to CCC.
    (v) All CCC advances must be deposited in an interest bearing 
account with interest earned on the funds advanced used for the purpose 
for which the funds were advanced. The Cooperating Sponsor shall submit 
a monthly Federal Funds Cash Report (SF-272) and a quarterly financial 
statement to the Controller, CCC, 10 working days past the end of the 
month or quarter, respectively, detailing the use and status (including 
interest earned on funds not yet utilized) of all funds advanced by CCC 
to Cooperating Sponsor.
    (4) If the Program Agreement specifies that CCC will finance only 
the ocean freight differential (``OFD'') on U.S. flag vessels, the 
Director, Public Law 480-OD will compute OFD as follows:
    (i) when non-U.S.-flag vessels are offered, the OFD will be the 
difference between the weighted average freight rate(s) of non-U.S. 
flag vessel(s) fixed or offered that could carry the quantity of cargo 
absent the requirement to use U.S.-flag vessels, and the rate for the 
U.S. flag vessel(s) fixed; or the rate(s) offered (including any lower 
rates negotiated) by U.S.-flag vessels(s) which could have carried the 
required tonnage and represents the lowest land cost (U.S. flag basis).
    (ii) When non U.S. flag vessels are not offered, or when offered, 
have specifications which preclude their use, the rate to be used in 
computing OFD will be determined by using any market data deemed 
relevant.
    (iii) When the recipient country employs its own flag vessels or 
other flag vessels under its control, the non-U.S. flag rate to be used 
in computing OFD will be determined using any market data deemed 
relevant.


Sec. 1499.8  Ocean transportation.

    (a) Cargo Preference. Shipments of commodities donated under the 
section 416(b) and Food for Progress programs are subject to the 
requirements of sections 901(b) and 901b of the Merchant Marine Act, 
1936, regarding carriage on U.S.-flag vessels. CCC will endeavor to 
meet these requirements separately for each program for each 12-month 
compliance period.
    (b) Coordination between CCC and the Cooperating Sponsor. When the 
Program Agreement specifies that the Cooperating Sponsor will arrange 
ocean transportation:
    (1) KCCO will furnish the Cooperating Sponsor with a Notice of 
Commodity Availability (Form CCC-512) which will specify the receiving 
country, commodity, quantity, and date at U.S. port or intermodal 
delivery point.
    (2) The Cooperating Sponsor will arrange ocean transportation in 
accordance with the procedures specified in paragraph (c) of this 
section and shall comply with the instructions of CCC regarding the 
quantity of commodities that must be carried on U.S. flag vessels. U.S. 
ports of export will be selected on the basis of the lowest cost to 
CCC.
    (3) The Cooperating Sponsor will complete the Form CCC-512 
indicating name of steamship company, vessel name, vessel flag and 
estimated time of arrival at U.S. port, sign and return the completed 
form to KCCO, with a copy to the Director, Public Law 480-OD. For liner 
cargoes, if CCC has agreed to pay any part of the ocean transportation, 
the Form CCC-512 must also contain the ocean freight rate as stated in 
the Federal Maritime Commission tariff, with tariff identification.
    (4) KCCO will issue instructions to have the commodity shipped 
f.a.s. or f.o.b. vessel, U.S. port of export, or to an intermodal 
delivery point, and consigned to the Cooperating Sponsor specified in 
the Form CCC-512.
    (b) Shipping agents. (1) The Cooperating Sponsor may appoint a 
shipping agent to assist in the procurement of ocean transportation. If 
a shipping agent is to be used, the Cooperating Sponsor must nominate 
the shipping agent in writing to the General Sales Manager, room 4071-
S, Foreign Agricultural Service, U.S. Department of Agriculture, 
Washington, DC 20250-1000. The written nomination shall specify the 
period of time to be covered by the nomination. A copy of the proposed 
agency agreement must also be provided. A Cooperating Sponsor may 
submit a single written nomination for a shipping agent for more than 
one program or may submit separate written nominations for each 
program.
    (2) The shipping agent must submit the information and 
certifications required by 7 CFR 17.5.
    (3) A person may not act as shipping agent for a Cooperating 
Sponsor unless the Assistant General Sales Manager has notified the 
Cooperating Sponsor in writing that the nomination is accepted.
    (c) Freight procurement requirements. The following requirements 
apply when the Cooperating Sponsor arranges ocean transportation and 
CCC is financing any portion of the ocean freight.
    (1) Freight invitations for bids must be issued for the 
solicitation of freight offers through the Transportation News Ticker 
(TNT), New York, plus at least one other means of communication, to 
assure the broadest possible market coverage and adequate notice to 
interested parties.
    (2) The Cooperating Sponsor must obtain approval of all invitations 
for bids as specified in the Program Agreement prior to their issuance.
    (3) Freight invitations for bids must provide: (i) That offers have 
a canceling date no later than the last contract layday specified in 
the invitation for bids;
    (ii) that offered rates be quoted in U.S. dollars per metric ton, 
and if destination bagging or transportation to a point beyond the 
discharge port is required, offered rates shall separately state the 
total rates and the portion of the rates attributable to the ocean 
segment of the movement;
    (iii) that any non-liner U.S. flag vessel 15 years or older must 
furnish, in addition to any other offered rate, a one way rate to be 
applicable in the event the vessel is scrapped or transferred to 
foreign flag registry prior to the end of the return voyage to the 
United States;
    (iv) specify the procedures for payment of freight, including the 
party responsible for the freight payments;
    (v) require, in the case of packaged commodities, that U.S. flag 
carriers specify whether delivery will be direct breakbulk shipment, 
container shipment, or breakbulk transshipment and identify whether 
transshipment (including container relays) will be via U.S. or foreign 
flag vessel;
    (vi) provide that vessels offered subject to Maritime 
Administration approval will not be accepted; and
    (vii) specify a closing time for the submission of offers and state 
that late offers will not be accepted.
    (4) In the case of shipments of bulk commodities, the Cooperating 
Sponsor shall open offers in public in the United States at the time 
and place specified in the invitation for bids and consider only offers 
that are responsive to the invitation for bids without negotiation, 
clarification, or submission of additional information. All responsive 
offers received for both U.S. flag and foreign flag service must be 
presented to KCCO which will determine the extent to which U.S.-flag 
vessels will be used.
    (5) The Director, Public Law 480-OD, or another official specified 
in the Program Agreement, must approve all vessel fixtures. The 
Cooperating Sponsor may fix vessels subject to that approval of the 
Director, Public Law 480-OD, or such other official. The Cooperating 
Sponsor shall not confirm a vessel fixture until the Director, Public 
Law 480-OD, or such other official, advises the Cooperating Sponsor of 
the required approval and the results of the Maritime Administration's 
guideline rate review. The Cooperating Sponsor shall not request 
guideline rate advice from the Maritime Administration.
    (6) Non-Vessel Operating Common Carriers may not be employed to 
carry U.S.-flag shipments.
    (d) Commissions. (1) Total commissions earned on U.S. and foreign 
flag bookings by all parties arranging vessel fixtures, when any 
portion of the ocean freight is paid by CCC, shall not exceed 2\1/2\ 
percent of that portion of the gross freight attributable to the ocean 
segment of the cargo movement.
    (2) Total commissions to a shipping agent shall not exceed \2/3\ of 
2\1/2\ percent of that portion of the gross freight attributable to the 
ocean transportation segment of the movement.
    (3) The Cooperating Sponsor shall require liner carriers to assure 
that tariffs on file at the Federal Maritime Commission reflect the 
maximum commissions payable under this paragraph.
    (4) Address commissions are prohibited.
    (e) Contract terms. (1) The Cooperating Sponsor shall assure that, 
when CCC is paying any portion of the ocean freight, charter parties 
and liner booking contracts contain clauses that implement the 
following paragraphs:
    (i) packaged commodities on liner vessels shall be shipped on the 
basis of full berth terms with no demurrage or despatch;
    (ii) bulk commodities shall be shipped on the basis of vessel load, 
free out, with demurrage and despatch applicable at load and discharge 
ports. Laytime accounts are to be settled between the ocean carrier and 
export elevators at load port and between the ocean carrier and 
charterers at discharge ports. CCC is not responsible for resolving 
disputes involving the calculation of laytime or the payment of 
demurrage or despatch.
    (iii) if the Program Agreement requires the Cooperating Sponsor to 
open an irrevocable letter of credit for ocean freight, the Cooperating 
Sponsor shall be liable for detention of the vessel for loading delays 
attributable solely to the decision of the ocean carrier not to 
commence loading because of the failure of the Cooperating Sponsor to 
establish such letter of credit. Charter parties and liner booking 
contracts may not contain a specified detention rate. The ocean carrier 
shall be entitled to reimbursement, as damages for detention, all time 
so lost, for each calendar day or any part of the calendar day, 
including Saturdays, Sundays and holidays. The period of such delay 
shall not commence earlier than upon presentation of the vessel at the 
designated loading port within the laydays specified in the charter 
party or liner booking contract, and upon notification of the vessel's 
readiness to load in accordance with the terms of the applicable 
charter party or liner booking contract. The period of such delay shall 
end at the time that operable irrevocable letters of credit have been 
established for ocean freight or the time the vessel begins loading, 
whichever is earlier. Time calculated as detention shall not count as 
laytime. Reimbursement for such detention shall be payable no later 
than upon the vessel's arrival at the first port of discharge.
    (iv) charges attributable to the failure of the vessel to present 
before the canceling date including, but not limited to inspection, 
fumigation, and carrying charges, will be for the account of the ocean 
carrier.
    (v) ocean freight is earned under a charter party when the vessel 
and cargo arrive at the first port of discharge, Provided, That if a 
force majeure as described in paragraph (f)(3) below prevents the 
vessels arrival at the first port of discharge, 95% of the ocean 
freight is payable or, if the charter party provides for completing 
additional requirements after discharge such as bagging, stacking, or 
inland transportation, 85% of the ocean freight is payable, at the time 
the General Sales Manager determines that such force majeure was the 
cause of nonarrival; and
    (vi) when the ocean carrier offers delivery to destination ports on 
U.S.-flag vessels, but foreign-flag vessels are used for any part of 
the voyage to the destination port, without first obtaining the 
approval of the Cooperating Sponsor, KCCO, and any other approval that 
may be required by the Program Agreement, the ocean freight rate will 
be reduced to the lowest responsive foreign-flag vessel rate offered in 
response to the same invitation for bids and the carrier agrees to pay 
CCC the difference between the contracted ocean freight rate and the 
freight rate offered by such foreign-flag vessel.
    (f) Freight Payment by CCC. When the Program Agreement provides 
that CCC will pay any portion of the ocean freight:
    (1) 100% of the ocean freight is payable upon receipt of the 
documents specified in paragraph (g) of this section, unless the 
charter party or liner booking note provides for completing additional 
requirements after discharge such as bagging, stacking, or inland 
transportation, in which case 85% of the ocean freight is payable. The 
balance of freight remaining will be paid upon receipt of notification 
from the Cooperating Sponsor that the vessel has fulfilled all the 
requirements of the charter party or liner booking contract in a 
successful manner.
    (2) Demurrage will not be paid or reimbursed by CCC.
    (3) CCC will waive the requirement in paragraph (g) of this section 
for a notice of arrival if the General Sales Manager determines upon 
submission of evidence on the part of the ocean carrier that the vessel 
is lost or unable to proceed to destination after completion of loading 
as a result of one or more of the following causes (force majeure): 
Damage caused by perils of the sea or other waters; collisions; wrecks; 
stranding without the fault of the carrier; jettison; fire from any 
cause; Act of God; public enemies or pirates; arrest or restraint of 
princes, rulers, or peoples without the fault of the ocean carrier; 
wars; public disorders; captures; or detention of public authority in 
the interest of public safety. If the General sales Manager determines 
that a force majeure prevents the vessels arrival at the first port of 
discharge, 95% of the ocean freight is payable or, if the charter party 
provides for completing additional requirements after discharge such as 
bagging, stacking, or inland transportation, 85% of the ocean freight 
is payable upon submission of the documents specified in paragraph (g) 
of this section, except that the notice of arrival need not be 
submitted. The balance of ocean freight shall not be due or payable.
    (g) Documentation required for payment or reimbursement of freight 
charges by CCC.
    (1) One copy of completed Form CCC-512;
    (2) Three copies of ``on board'' bills of lading indicating the 
freight rate and signed by originating carrier;
    (3) National Cargo Bureau vessel hold inspection and certificate of 
loading as applicable;
    (4) Two signed copies of liner booking note or charter party 
covering ocean transportation of cargo;
    (5) For charter movements, a notice of arrival at first discharge 
point, to be submitted by the Cooperating Sponsor;
    (6)(i) Request by the Cooperating Sponsor for reimbursement of 
ocean freight indicating amount due, accompanied by a certification 
from the ocean carrier that payment has been made;
    (ii) Request for direct payment of ocean freight to the ocean 
carrier, indicating amount due; or
    (iii) Request for direct payment of ocean freight differential to 
the ocean carrier, accompanied by a certification from the carrier that 
payment of the Cooperating Sponsor's portion of the ocean freight has 
been received.


Sec. 1499.9  Restrictions on commodity use and distribution.

    (a) The Cooperating Sponsor may use the donated commodities only in 
accordance with the terms of the Program Agreement.
    (b) Donated commodities may not be distributed within the importing 
country on the basis of political affiliation, geographic location, or 
the ethnic, tribal or religious identify or affiliations of the 
potential consumers or recipients.
    (c) Donated commodities may not be distributed, handled or 
allocated by military forces except where such activities are 
specifically authorized by CCC.


Sec. 1499.10  Agreement between Cooperating Sponsor and Recipient 
Agency(ies).

    (a) The Cooperating Sponsor shall, prior to the transfer of any 
donated commodities, monetized proceeds or program income, enter into 
and formally execute an agreement with each recipient agency engaged 
for the purpose of the distribution of commodities or for the 
implementation of any other approved activity. Copies of such 
agreements shall be provided to the appropriate Agricultural Counselor 
or Attache. Such agreements shall include the following terms:
    (1) a requirement that the recipient agency pay the Cooperating 
Sponsor the value of any commodities, monetized proceeds or program 
income that is used for purposes not expressly permitted under the Plan 
of Operation;
    (2) a requirement that the recipient agency pay the Cooperating 
Sponsor for any commodities, monetized proceeds or program income that 
is lost, damaged, or misused as result of the recipient agency's 
failure to exercise reasonable care;
    (3) a provision expressly incorporating the terms and conditions of 
this part which govern the implementation of the approved Plan of 
Operation, the use of funds, record keeping, inspection and audit.
    (b) Upon request, CCC may, within its sole discretion, elect to 
waive the requirement of paragraph (a) of this section where it 
determines that such an agreement is not feasible or appropriate for 
any reason, including the nature of the recipient agency, or the amount 
of commodities, monetized proceeds or program income that may be 
transferred to the recipient agency. In any case where waiver is 
granted, however, such waiver shall not otherwise affect or diminish 
the Cooperating Sponsor's obligations or responsibilities with respect 
to program commodities, monetized proceeds or program income.


Sec. 1499.11  Liability of the Cooperating Sponsor.

    (a) The Cooperating Sponsor shall be required to reimburse CCC for 
all costs incurred by CCC, including the cost of acquisition of the 
donated commodity where such Cooperating Sponsor has either:
    (1) Failed to export the commodities from the United States;
    (2) Been responsible for the reentry of the commodity into the 
United States; or
    (3) Used the commodities, monetized proceeds or sale profits in a 
manner inconsistent with program requirements.
    (b) [Reserved]


Sec. 1499.12  Sales, barter, and use of monetized proceeds and program 
income.

    (a) Section 416(b). (1) Except as provided in paragraph (a)(3) of 
this section, commodities donated under a section 416(b) Program 
Agreement may be sold or bartered only in accordance with an approved 
Plan of Operation. Such sales or barters may be approved by CCC on a 
case-by-case basis for the following purposes only:
    (i) to finance the distribution, handling or processing costs of 
the donated commodities in the importing country or in a country 
through which the commodities must be transshipped, or other activities 
in the importing country that are consistent with providing food 
assistance to needy people;
    (ii) in the case of sales of commodities furnished to nonprofit and 
voluntary agencies, or cooperatives, to generate proceeds to be used to 
transport, store, distribute and otherwise enhance the effectiveness of 
the use of commodities, and to implement income generating community 
development, health, nutrition, cooperative development, agricultural 
program, and other development activities;
    (iii) to cover expenses of the type identified in section 406 of 
the Agricultural Trade Development and Assistance Act of 1954; or
    (iv) for any other use specifically authorized by statute.
    (2) Commodities may be sold or bartered only in the importing 
country or other country specifically approved by CCC. Monetized 
proceeds must be expended within either the country of origin or in 
other countries as necessary to expedite transportation of commodities, 
or in countries which generally accept the type of currency generated 
by the sale. Monetized proceeds must be expended within one year of 
acquisition unless CCC specifically agrees that a longer period is 
necessary to achieve the purposes of paragraph (a)(1)(i) and (ii) of 
section.
    (3) Notwithstanding paragraphs (a) (1) and (2) of this section, 
commodities may be sold or bartered without prior approval of CCC where 
damage has occurred to the commodity rendering it unfit for the 
intended program purposes, and sale or barter is necessary to mitigate 
the loss of the value of the damaged commodity.
    (4) Cooperating Sponsors who sell or barter commodities must enter 
into a written agreement with the other party to the sale transaction. 
A copy of the executed agreement must be provided to the Agricultural 
Counselor or Attache.
    (5) All monetized proceeds shall be deposited into a special 
interest bearing account for control and monitoring unless interest 
bearing accounts are prohibited by the laws or customs of the importing 
country or such requirement would impose an undue burden on the 
Cooperating Sponsor. Any accrued interest shall be used only for 
approved activities.
    (6) Cooperating Sponsors shall not be required to monitor, manage, 
report on, or account for the distribution or use of such sold or 
bartered commodities after all sales proceeds have been fully deposited 
in a special account and title to the commodities has passed to buyers 
or other third parties pursuant to a sale or barter transaction. The 
sales proceeds and the uses thereof, however, must be monitored, 
managed, reported and accounted for as provided in the relevant 
sections of this part 1499.
    (7) Commodities approved for sale or barter need not be imported 
and sold free of all duties and taxes, but nongovernmental Cooperating 
Sponsors may negotiate agreements with the host government permitting 
the duty and tax-free import and sale of such commodities. Even where 
the Cooperating Sponsor negotiates such exempt status, the prices at 
which the Cooperating Sponsor sells the commodities to the purchaser 
shall reflect prices that would be obtained in a competitive commercial 
transaction, i.e., the prices would include the cost of duties and 
taxes, so that the amounts normally paid for duties and taxes would 
accrue for the benefit of the Cooperating Sponsor's approved program.
    (8) No part of the proceeds or services realized from sales or 
barters may be used for operating and overhead expenses, other than for 
personnel and administrative costs of local cooperatives. Operating and 
overhead expenses are costs attributable to the overall administration 
and management expenses of the Cooperating Sponsor in its regional, 
national, or U.S. offices, including rent, taxes, insurance, utilities, 
telephone, office supplies, and depreciation, and in the case of 
nonprofit private and voluntary agencies and cooperatives, costs of 
monitoring, evaluation, auditing, and travel within the host country 
except where such costs are directly related to a specific activity and 
essential to the effective implementation of the activity.
    (9) The Cooperating Sponsor shall use commercially reasonable 
procurement practices in purchasing goods or services and in 
construction activities using monetization proceeds or program income, 
and shall employ procedures that prevent fraud, self-dealing, and 
conflicts of interest and provide for free and open competition to the 
maximum extent practicable. Title to real and personal property 
acquired with monetization proceeds and program income shall be vested 
in the Cooperating Sponsor, with the Cooperating Sponsor providing the 
Controller, CCC with an inventory list of all assets valued at one 
thousand dollars (USD) or more. The Cooperating Sponsor shall dispose 
of such property as directed by the Agricultural Counselor or Attache 
in the event the program terminates or is transferred to another 
Cooperating Sponsor.
    (10) Monetized proceeds and program income may not be used to 
acquire, develop, construct, alter or upgrade land, buildings or other 
real property improvements or structures that are either:
    (i) owned or managed by a church or other organization engaged 
exclusively in religious activity, or
    (ii) used in whole or in part for sectarian purposes. 
Notwithstanding the preceding sentence, monetized proceeds or program 
income may be used to finance repair or rehabilitation of an existing 
structure owned or managed by a church or organization engaged 
exclusively in religious activity to the extent necessary to avoid 
spoilage or loss of donated commodities, provided that the structure is 
not used in whole or in part for any sectarian purpose while donated 
commodities are stored in it. The use of monetized proceeds or program 
income to finance construction of such a structure may be approved in 
the operational plan or by the Agricultural Counselor or Attache if the 
structure is needed and will be used for the storage of donated 
commodities for a sufficient period of time to warrant the expenditure 
of monetized proceeds or program income and the structure will not be 
used for any sectarian purpose during this period.
    (b) Food for Progress. Unless the Food for Progress Program 
Agreement provides otherwise, commodities donated under Food for 
Progress may be sold within the recipient country without restriction 
or special procedural requirements.


Sec. 1499.13  Usual marketing requirements.

    A foreign government Cooperating Sponsor shall provide data showing 
commercial and non-commercial imports of the types of agricultural 
commodities requested for the past five years, by country of origin, 
and an estimate of expected imports of such commodities during the 
current year. A Program Agreement with a foreign government may include 
a usual marketing requirement and shall prohibit the re-export of 
donated commodities, as well as of other related commodities specified 
in the Program Agreement.


Sec. 1499.14  Processing, packaging and labeling of section 416(b) 
commodities in the foreign country.

    (a) Cooperating Sponsors may arrange for the processing of 
commodities donated under a section 416(b) Program Agreement and for 
packaging or repackaging prior to distribution. When a third party 
provides such processing, packaging, or repackaging, the Cooperating 
Sponsor shall enter into written agreements for such services. The 
agreement shall require that the provider of such services (1) shall 
fully account to the Cooperating Sponsor for all commodities delivered 
or otherwise be liable for the value of all unaccounted commodities and 
(2) shall maintain adequate records and submit periodic reports 
pertaining to performance under the agreements. Copies of the executed 
agreements shall be provided to the Agricultural Counselor or Attache.
    (b) If, prior to distribution, the Cooperating Sponsor arranges for 
packaging or repackaging commodities donated under section 416(b), the 
cartons, sacks, or other containers in which the commodities are packed 
shall be plainly labeled in the language of the country in which the 
commodities are to be distributed with the name of the commodity and, 
except where the donated commodities are to be sold or bartered 
pursuant to an approved Plan of Operation after processing, packaging 
or repackaging, that the commodity is furnished by the people of the 
United States of America and not to be sold or exchanged. If the 
commodities are not packaged, to the extent practicable, the 
Cooperating Sponsor shall display banners, posters or other media and 
provide individual identification cards containing the information 
prescribed in this paragraph.
    (c) If the packages of commodities donated under section 416(b) are 
discharged from vessel in a damaged condition, and are repackaged to 
ensure that the commodities arrive at the distribution point in 
wholesome condition, CCC will reimburse Cooperating Sponsors who are 
nonprofit private voluntary organizations and cooperatives for approved 
expenses incurred for such repackaging. No prior approval is required 
for such expenses equaling $500 or less. If such expense is estimated 
to exceed $500, the authority to repackage and incur such expense must 
be approved by the Agricultural Counselor or Attache in advance of 
repackaging.


Sec. 1499.15  Arrangements for entry and handling in the foreign 
country.

    (a) The Cooperating Sponsor shall make all necessary arrangements 
for receiving the donated commodities in the recipient country, 
including obtaining appropriate approvals for entry and transit, and 
shall ensure that agricultural commodities which are to be distributed 
to recipients in direct feeding programs shall be admitted duty free 
and exempt from all taxes. The Cooperating Sponsor shall be responsible 
for storing and maintaining the commodities from time of delivery at 
port of entry or point of receipt from originating carrier in such 
manner as to ensure that the commodities remain in good condition until 
their distribution, sale or barter.
    (b) The Cooperating Sponsor may use either of the following methods 
to arrange for the transport, storage, and distribution from designated 
points of entry or ports of entry when CCC has agreed to pay costs of 
such services:
    (1) Through bill of lading; or
    (2) Contract directly with suppliers of services, and submit a 
billing, with supporting documentation, to CCC indicating actual costs 
incurred. All supporting documentation must be sent to the Director, 
Public Law 480-OD. Payment will be made, at the option of CCC, in 
dollars at the exchange rate as of the date of payment by CCC, or in 
foreign currency.


Sec. 1499.16  Disposition of commodities unfit for authorized use.

    (a) Prior to delivery to Cooperating Sponsor at discharge port or 
point of entry. If the commodity is damaged prior to delivery to a 
governmental Cooperating Sponsor at discharge port or point of entry 
overseas, the Agricultural Counselor or Attache, or CCC designated 
representative, shall immediately arrange for inspection by a public 
health official or other competent authority. A nongovernmental 
Cooperating Sponsor shall arrange for such inspection of commodities 
damaged prior to delivery. If the commodity is determined to be unfit 
for the use authorized in the Program Agreement, the commodities shall 
be disposed of in accordance with the priority set forth in paragraph 
(b) of this section. Expenses incidental to the handling and 
disposition of the damaged commodity shall be paid by CCC from the 
sales proceeds or from an appropriate CCC account as determined by CCC. 
The net proceeds of sales shall be deposited with the U.S. Disbursing 
Officer American Embassy, for the credit of CCC in an appropriate CCC 
account as determined by CCC. However, if the commodities were donated 
for monetization programs, the net sales proceeds, after deducting 
expenses incidental to handling and disposition of the damaged 
commodity, shall be deposited to the special account established for 
monetized proceeds, and the Cooperating Sponsor is responsible for 
documenting the amount of the sales proceeds from the sale of damaged 
commodities deposited to the special account. The Cooperating Sponsor 
shall seek guidance from CCC regarding sales proceeds in the event the 
Cooperating Sponsor executed a sales agreement under which title passed 
to the purchaser prior to delivery.
    (b) After delivery to Cooperating Sponsor. If after arrival in a 
foreign country it appears that the commodity, or any part thereof, may 
be unfit for the use authorized in the Program Agreement, the 
Cooperating Sponsor shall immediately arrange for inspection of the 
commodity by a public health official or other competent authority 
approved by the Agricultural Counselor or Attache. If no competent 
local authority is available, the Agricultural Counselor or Attache may 
determine whether the commodities are unfit for the use authorized in 
the Program Agreement, and, if so, may direct disposal in accordance 
with paragraphs (b) (1) through (4) of this section. The Cooperating 
Sponsor shall arrange for the recovery for authorized use of that part 
designated during the inspection as suitable for authorized use. If, 
after inspection, the commodity (or any part thereof) is determined to 
be unfit for authorized use, the Cooperating Sponsor shall notify the 
Agricultural Counselor or Attache of the circumstances pertaining to 
the loss or damage. With the concurrence of the Agricultural Counselor 
or Attache, the commodity determined to be unfit for authorized use 
shall be disposed of in the following order of priority:
    (1) By transfer to an approved section 416(b) program for use as 
livestock feeding feed. CCC shall be advised promptly of any such 
transfer so that shipments from the United States to the livestock 
feeding program can be reduced by an equivalent amount;
    (2) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, or industrial use, at the highest obtainable price. When 
the commodity is sold, all U.S. Government markings shall be 
obliterated or removed;
    (3) By donation to a governmental or charitable organization for 
use as animal feed or for other non-food use; or
    (4) If the commodity is unfit for any use or if disposal in 
accordance with paragraph (b)(1), (2) or (3) of this section is not 
possible, the commodity shall be destroyed under the observation of a 
representative of the Agricultural Counselor or Attache, if 
practicable, in such manner as to prevent its use for any purpose.

Expenses incidental to the handling and disposition of the damaged 
commodity shall be paid by the Cooperating Sponsor unless it is 
determined by the Agricultural Counselor or Attache that the damage 
could not have been prevented by the Cooperating Sponsor under the 
terms of the Program Agreement. Actual expenses incurred, including 
third party costs, in effecting any sale may be deducted from the sales 
proceeds and, except for monetization programs, the net proceeds shall 
be deposited with the U.S. Disbursing Officer, American Embassy, with 
instructions to credit the deposit to an appropriate CCC account as 
determined by CCC. In monetization programs, the gross proceeds shall 
be deposited in the special interest bearing account and after approved 
costs related to the handling and disposition of damaged commodities 
are paid, remaining funds used for purposes of the approved program. 
The Cooperating Sponsor shall promptly furnish to the Agricultural 
Counselor or Attache a written report of all circumstances relating to 
the loss and damage. The report and any supplemental report shall 
include a certification by a public health official or other competent 
authority of the exact quantity of the damaged commodity disposed of 
because it was determined to be unfit for the use authorized in the 
Program Agreement. A report must also be provided to the Chief, Debt 
Management Division, KCFMO, of action taken to dispose of commodities 
unfit for authorized use.


Sec. 1499.17  Liability for loss, damage, or improper distribution of 
commodities--claims and procedures.

    (a) Fault of Cooperating Sponsor prior to loading on ocean vessel. 
If the Cooperating Sponsor fails to have a vessel for loading at the 
U.S. port of export in accordance with the agreed shipping schedule, 
the Cooperating Sponsor shall immediately notify KCCO, Chief, Export 
Operations Division. CCC will determine whether the commodity shall be: 
Moved to another available outlet; stored at the port for delivery to 
the Cooperating Sponsor when a vessel is available for loading; or 
disposed of as CCC may deem proper. The Cooperating Sponsor shall take 
such action as directed by CCC and shall reimburse CCC for expenses 
incurred.
    (b) Fault of others prior to loading on ocean vessel. When any 
damage or loss to the commodity occurs which is attributable to a 
warehouseman, carrier, or other person between the time title is 
transferred to a Cooperating Sponsor and the time the commodity is 
loaded on board vessel at designated port of export, the Cooperating 
Sponsor shall immediately notify KCFMO, Chief, Debt Management Office. 
The Cooperating Sponsor shall promptly assign to CCC any rights to 
claims which may accrue as a result of such loss or damage and shall 
promptly forward to CCC all documents pertaining thereto. CCC shall 
have the right to initiate, prosecute, and retain the proceeds of all 
claims for such loss or damage.
    (c) Survey and outturn reports. (1) Unless the Program Agreement 
provides otherwise, CCC shall arrange for an independent cargo surveyor 
to attend the discharge of the cargo and to report on the quantity and 
condition of the commodities discharged and the probable cause of any 
damage. All cargoes provided under an agreement shall be surveyed. If 
practicable, the examination of the cargo shall be conducted jointly by 
the surveyor, the consignee, and the ocean carrier, and the survey 
report shall be signed by all parties.
    (2) (i) If the Cooperating Sponsor arranges for an independent 
cargo surveyor, the Cooperating Sponsor shall obtain a certification by 
a public health official or similar competent authority as to the 
condition of the commodity in any case where a damaged commodity 
appears to be unfit for the use authorized in the Program Agreement; 
and a certificate of disposition in the event the commodity is 
determined to be unfit for its intended use. Such certificates shall be 
obtained as soon as possible after discharge of the cargo. The 
Cooperating Sponsor shall forward any narrative chronology or other 
commentary it can provide to assist in the adjudication of ocean 
transportation claims and shall prepare such a narrative in any case 
where the loss is estimated to be in excess of $5,000.00. The 
Cooperating Sponsor may, at its option, also engage the independent 
surveyor to supervise clearance and delivery of the cargo from customs 
or port areas to the Cooperating Sponsor or its agent and to issue 
delivery survey reports thereon.
    (ii) In the event of cargo loss and damage, the Cooperating Sponsor 
shall provide the names and addresses of individuals who were present 
at the time of discharge and during survey and who can verify the 
quantity lost or damaged. For bulk grain shipments, in those cases 
where the Cooperating Sponsor is responsible for survey and outturn 
reports, the Cooperating Sponsor shall obtain the services of an 
independent surveyor to:
    (A) Observe the discharge of the cargo and report on discharging 
methods including scale type, calibrations and any other factor which 
may affect the accuracy of scale weights, and if scales are not used, 
the reason should be stated and the method of weight determination 
fully described;
    (B) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (C) Advise on the quality of sweepings;
    (D) Obtain copies of port or vessel records, if possible, showing 
quantity discharged; and
    (E) Provide immediate notification to the Cooperating Sponsor if 
additional services are necessary to protect cargo interests of if 
surveyor has reason to believe that the correct quantity was not 
discharged. In the case of shipments arriving in container vans, 
Cooperating Sponsors shall require the independent surveyor to list the 
container van numbers and seal numbers shown on the container vans, and 
indicate whether the seals were intact at the time the container vans 
were opened, and whether the container vans were in any way damaged. To 
the extent possible, the independent surveyor should observe discharge 
of container vans from the vessel to ascertain whether any damage to 
the container van occurred and arrange for surveying the contents as 
soon as possible after opening.
    (iii) Cooperating Sponsors shall send copies to KCFMO, Chief, Debt 
Management Office of all reports and documents pertaining to the 
discharge of commodities.
    (iv) CCC will reimburse the Cooperating Sponsor for incurred costs 
upon receipt of the survey report and the surveyor's invoice or other 
documents that establish the survey cost. CCC shall not reimburse a 
Cooperating Sponsor for the costs of only a delivery survey, in the 
absence of a discharge survey, or for any other survey not taken 
contemporaneously with the discharge of the vessel, unless such 
deviation is justified to the satisfaction of CCC.
    (3) Survey contracts shall be let on a competitive bid basis unless 
CCC determines that the use of competitive bids would not be 
practicable. CCC may preclude the use of certain surveyors because of 
conflicts of interest or lack of demonstrated capability to properly 
carry out surveying responsibilities.
    (d) Ocean carrier loss and damage. (1) Notwithstanding transfer of 
title to the Cooperating Sponsor, the CCC shall have the right to file, 
pursue, and retain the proceeds of collection from claims arising from 
ocean transportation cargo loss and damage, including loss and damage 
occurring between the time of transfer of title and loading aboard a 
vessel. CCC assumes general average contributions and all valid general 
average incidents which may arise from the movement of commodity to the 
destination ports. CCC shall receive and retain all allowances in 
general average. Where the Cooperating Sponsor pays the ocean freight 
or a portion thereof, it shall be entitled to pro rata reimbursement 
received from any claims related to ocean freight charged.
    (2) The Cooperating Sponsor shall: File notice with the ocean 
carrier immediately upon discovery of any cargo loss or damage, 
promptly initiate claims against the ocean carriers for such loss and 
damage, take all necessary action to obtain restitution for losses, and 
provide CCC copies of all such claims. Notwithstanding the foregoing, 
the Cooperating Sponsors need not file a claim when the cargo loss is 
less than $100, or in any case when the loss is between $100 and $300 
and the Cooperating Sponsors determine that the cost of filing and 
collecting the claim will exceed the amount of the claim. Cooperating 
Sponsors shall transmit to KCFMO, Chief, Debt Management Office 
information and documentation on such lost or damaged shipments when no 
claim is to be filed. When General Average has been declared, 
Cooperating Sponsors need not file or collect claims for loss of, or 
damage to, commodities.
    (3) Amounts collected by Cooperating Sponsors on claims against 
ocean carriers which are less than $200 may be retained by the 
Cooperating Sponsor. On claims involving loss of damage of $200 or more 
the Cooperating Sponsors may retain from collections received by them, 
either $200 plus 10 percent of the difference between $200 and the 
total amount collected on the claim, up to a maximum of $500; or the 
actual administrative expenses incurred in collection of the claim, 
provided retention of such administrative expenses is approved by CCC. 
Allowable collection costs shall not to include attorneys fees, fees of 
collection agencies, and similar costs. In no event will CCC pay 
collection costs in excess of the amount collected on the claim.
    (4) The Cooperating Sponsors also may retain from claim recoveries 
remaining after allowable deductions for administrative expenses of 
collection, the amount of any special charges, such as handling and 
packing costs, which the Cooperating Sponsor has incurred on the lost 
or damaged commodity and which are included in the claims and paid by 
the liable party.
    (5) The Cooperating Sponsor may redetermine claims on the basis of 
additional documentation or information not considered when the claims 
were originally filed when such documentation or information clearly 
changes the ocean carrier's liability. Approval of such changes by CCC 
is not required regardless of amount. However, copies of redetermined 
claims and supporting documentation or information shall be furnished 
to CCC.
    (6) The Cooperating Sponsor may negotiate compromise settlements of 
claims of any amount, provided that proposed compromise settlements of 
claims having a value of $5,000 or more shall require prior approved in 
writing by CCC. When a claim is compromised, the Cooperating Sponsor 
may retain from the amount collected, the amounts authorized in 
paragraph (d)(3) of this section, and in addition, an amount 
representing such percentage of the special charges described in 
paragraph (d)(4) of this section as compromised amount is to the full 
amount of the claim. When a claim is less than $600, the Cooperating 
Sponsor may terminate collection activity when it is determined that 
pursuit of such claims will not be economically sound. Approval for 
such termination by CCC is not required; however, the Cooperating 
Sponsor shall notify KCFMO, Chief, Debt Management Division when 
collection activity on a claim is terminated.
    (7) All amounts collected in excess of the amounts authorized 
herein to be retained shall be remitted to CCC. For the purpose of 
determining the amount to be retained by the Cooperating Sponsor from 
the proceeds of claims filed against ocean carriers, the word ``claim'' 
shall refer to the loss and damage to commodities which are shipped on 
the same voyage of the same vessel to the same port destination, 
irrespective of the kinds of commodities shipped or the number of 
different bills of lading issued by the carrier.
    (8) If a Cooperating Sponsor is unable to effect collection of a 
claim or negotiate an acceptable compromise settlement within the 
applicable period of limitation or any extension thereof granted in 
writing by the liable party or parties, the rights of the Cooperating 
Sponsor to the claim shall be assigned to CCC in sufficient time to 
permit the filing of legal action prior to the expiration of the period 
of limitation or any extension thereof. Generally, the Cooperating 
Sponsor shall assign claim rights to CCC no later than 60 days prior to 
the expiration of the period of limitation or any extension thereof. In 
all cases, the Cooperating Sponsor, shall keep CCC informed of the 
progress of its collection efforts and shall promptly assign their 
claim rights to CCC upon request. Subsequently, if CCC collects on or 
settles the claim, CCC shall, except as indicated below, pay to the 
Cooperating Sponsor the amount to which it would have been entitled had 
it collected on the claim. The additional 10 percent on amounts 
collected in excess of $200 will be payable, however, only if CCC 
determines that reasonable efforts were made to collect the claim prior 
to the assignment, or if payment is determined to be commensurate with 
the extra efforts exerted in further documenting the claim. If 
documentation requirements have not been fulfilled and the lack of such 
documentation has not been justified to the satisfaction of CCC, CCC 
will deny payment of all allowances to the Cooperating Sponsor.
    (9) When a Cooperating Sponsor fails to file a claim, permit a 
claim to become time-barred, or fail to take timely actions to insure 
the right of CCC to assert such claims, and CCC determines that the 
Cooperating Sponsor failed to properly exercise its responsibilities 
under the Agreement, the Cooperating Sponsor shall be liable to the 
United States for the cost and freight value of the commodities lost to 
the program.
    (e) Fault of Cooperating Sponsor in country of distribution. The 
Cooperating Sponsor shall pay to CCC the value of the commodities, 
proceeds or program income lost, damaged, or misused (or may, with 
prior Agricultural Counselor or Attache approval, replace such 
commodities with similar commodities of equal value). If the 
Cooperating Sponsor:
    (1) improperly distributed a commodity;
    (2) uses a commodity, monetized proceeds from the sale thereof or 
program income for purposes not permitted under the Program Agreement, 
the approved Plan of Operation or this part 1499;
    (3) causes loss or damage to a commodity or loss of monetized 
proceeds or program income through any act or omission; or
    (4) fails to provide proper storage, care, and handling. The 
Cooperating Sponsor may be excused of its obligations for such payment 
or replacement if it is determined by CCC that such improper 
distribution or use, or such loss or damage, could not have been 
prevented by proper exercise of the Cooperating Sponsor's 
responsibility under the terms of the Program Agreement. Normal 
commercial practices in the country of distribution shall be considered 
in determining whether there was a proper exercise of the Cooperating 
sponsor's responsibility. Payment by the Cooperating Sponsor shall be 
made in accordance with paragraph (g) of this section.
    (f) Fault of others in country of distribution and in intermediate 
country. (1) In addition to survey or outturn reports to determine 
ocean carrier loss and damage, the Cooperating Sponsor shall, in the 
case of landlocked countries, arrange for an independent survey at the 
point of entry into the recipient country and make a report as set 
forth in paragraph (c)(1) of this section. CCC will reimburse the 
Cooperating Sponsor for the costs of survey as set forth in paragraph 
(c)(2)(iv) of this section.
    (2) Where any damage to or loss of the commodity or any loss of 
monetized proceeds or program income is attributable to a warehouseman, 
carrier or other person, the Cooperating Sponsor shall make every 
reasonable effort to pursue collection of claims for such loss or 
damage. The Cooperating Sponsor shall furnish a copy of the claim and 
related documents to the Agricultural Counselor or Attache. Cooperating 
Sponsors who fail to file or pursue such claims shall be liable to CCC 
for the value of the commodities or loss of monetized proceeds or 
program income is attributable to a warehouseman, carrier or other 
person, the Cooperating Sponsor shall make every reasonable effort to 
pursue collection of claims for such loss or damage. The Cooperating 
Sponsor shall furnish a copy of the claim and related documents to the 
Agricultural Counselor or Attache. Cooperating Sponsors who fail to 
file or pursue such claims shall be liable to CCC for the value of the 
commodities or monetized proceeds or program income lost, damaged, or 
misused: Provided, however, that the Cooperating Sponsor may elect not 
to file a claim if the loss is less than $500. The Cooperating Sponsor 
may retain $150 of any amount collected on an individual claim. In 
addition, Cooperating Sponsors may, with the written approval of the 
Agricultural Counselor or Attache, retain amounts to cover special 
costs of collection such as legal fees, or pay such collection costs 
with monetized proceeds or program income. Any proposed settlement for 
less than the full amount of the claim requires prior approval by the 
Agricultural Counselor or Attache. When the Cooperating Sponsor has 
exhausted all reasonable attempts to collect a claim, it shall request 
the Agricultural Counselor or Attache to provide further instructions.
    (3) At a minimum, the Cooperating Sponsor shall pursue any claim by 
initial billings and with three progressively stronger demands at not 
more than 30 day intervals. If these efforts fail to elicit a 
satisfactory response, legal action in the judicial system of the 
cooperating country shall be pursued unless:
    (i) Liability of the third party is not provable,
    (ii) The cost of pursuing the claim would exceed the amount of the 
claim,
    (iii) The third party would not have enough assets to satisfy the 
claim after a judicial decision favorable to the cooperating sponsor, 
or
    (iv) Maintaining legal action in the country's judicial system 
would seriously impair the Cooperating Sponsor's ability to conduct an 
effective program in the country.
    A Cooperating Sponsor's decisions not to take legal action, and 
reasons therefore, must be submitted in writing to the Agricultural 
Counselor or Attache for review and approval, and the Agricultural 
Counselor or Attache may require the Cooperating Sponsor to obtain the 
opinion of competent legal counsel to support its decision. A 
Cooperating Sponsor may request approval to terminate legal action 
after it has commenced for any of the exceptions described above or if 
CCC determines that it is otherwise appropriate to terminate legal 
action prior to judgment. In each instance the Agricultural Counsel or 
Attache must provide the Cooperating Sponsor with a written explanation 
of its decision. If the Agricultural Counselor or Attache approves a 
Cooperating Sponsor's decision not to take further action on the claim 
for reasons described in paragraph (f)(3)(iv) of this section, the 
Cooperating Sponsor shall assign the claim to CCC and shall provide to 
CCC all documentation relating to the claim.
    (4) As an alternative to legal action in the judicial system of the 
country with regard to claims against a public entity of the government 
of the cooperating country, the Cooperating Sponsor and the cooperating 
country may agree in writing to settle disputed claims by an 
appropriate administrative procedure or arbitration.
    (g) Determination of value. When payment is to be made for 
commodities misused, lost or damaged, the value shall be determined on 
the basis of the domestic market price at the time and place the 
misuse, loss or damage occurred. When it is not feasible to determine 
such market price, the value shall be the f.o.b. or f.a.s. commercial 
export price of the commodity at the time and place of export, plus 
ocean freight charges and other costs incurred by the U.S. Government 
in making delivery to the Cooperating Sponsor. When the value is 
determined on a cost basis, the Cooperating Sponsor may add to the 
value any provable costs it has incurred prior to delivery by the ocean 
carrier. In preparing the claim statement, these costs shall be clearly 
segregated from costs incurred by the Government of the United States. 
With respect to claims other than ocean carrier loss or damage claims, 
the value of misused, lost or damaged commodities may be determined on 
some other justifiable basis, at the request of the Cooperating Sponsor 
or upon the recommendation of the Agricultural Counselor or Attache or 
CCC designated representative. When replacement is made, the value of 
commodities misused, lost or damaged shall be their value at the time 
and place the misuse, loss, or damage occurred and the value of the 
replacement commodities shall be their value at the time and place 
replacement is made.
    (h) Reporting losses to the Agricultural Counselor or Attache or 
CCC designated representative. (1) The Cooperating Sponsor shall 
promptly notify the Agricultural Counselor or Attache or CCC designated 
representative, in writing, of the circumstances pertaining to any 
loss, damage, or misuse of commodities valued at $500 or more occurring 
within the country of distribution or intermediate country. The report 
shall be made as soon as the Cooperating Sponsor has adequately 
investigated the circumstances, but in no event more than ninety (90) 
days from the date the loss became known to the Cooperating Sponsor. 
The report shall identify the party in possession of the commodities 
and the party responsible for the loss, damage or misuse; the kind and 
quantities of commodities; the size and type of containers; the time 
and place of misuse, loss, or damage; the current location of the 
commodity; the Program Agreement number, the CCC contract numbers, or 
if unknown, other identifying numbers printed on the commodity 
containers; the action taken by the Cooperating Sponsor with respect to 
recovery or disposal; and the estimated value of the commodity. The 
Cooperating Sponsor shall explain the unavailability of any of the 
above information. The Cooperating Sponsor shall also report the 
details regarding any loss or misuse of monetized proceeds or program 
income.
    (2) The Cooperating Sponsor shall report quarterly to the 
Agricultural Counselor or Attache any loss, damage to or misuse of 
commodities resulting in loss of less than $500. The Cooperating 
Sponsor shall inform the Agricultural Counselor or Attache or CCC 
designated representative if it has reason to believe there is a 
pattern or trend in the loss, damage, or misuse of such commodities and 
submit a report on the basis described in paragraph (h)(1) of this 
section together with such other information as the Cooperating Sponsor 
has available to it. The Agricultural Counselor or Attache may require 
additional information about any commodities lost, damaged or misused 
if it believes such information is necessary in order to maintain the 
integrity of the program.
    (i) Handling claims proceeds. Claims against ocean carriers shall 
be collected in U.S. dollars (or in currency in which freight is paid, 
or a pro data share of either) and shall be remitted (less amounts 
authorized to be retained) by Cooperation Sponsors to CCC. Claims 
against Cooperating Sponsors shall be paid to CCC in U.S. dollars. With 
respect to commodities lost, damaged or misused, amounts paid by 
Cooperating Sponsors and third parties in the country of distribution 
shall be deposited with the U.S. Disbursing Officer, American Embassy, 
preferably, in U.S. dollars with instructions to credit the deposit to 
an appropriate CCC account as determined by CCC, or in local currency 
at the official exchange rate applicable to dollar imports at the time 
of deposit with instructions to credit the deposit to an appropriate 
CCC account as determined by CCC. With respect to monetized proceeds 
and program income, amounts recovered may be deposited in the same 
account as the monetized proceeds and may be used for purposes of the 
program.


Sec. 1499.18  Records and reporting requirements.

    (a) Records and reports--general requirements. (1) The Cooperating 
Sponsor shall maintain records and documents in a manner which 
accurately reflects all transactions pertaining to the receipt, 
storage, distribution sale, inspection and use of commodities and the 
receipt and disbursement of any monetized proceeds and program income, 
including interest and fees. Such records shall be retained for a 
period of three years from the close of the U.S. fiscal year to which 
they pertain. The Cooperating Sponsor shall provide CCC with any 
records, or copies thereof, requested by CCC.
    (2) The Cooperating Sponsor shall cooperate with and assist to U.S. 
government representatives to enable examination of any activities, 
facilities or records of the Cooperating Sponsor pertaining to the 
receipt, storage, distribution, sale, inspection and use of commodities 
and the receipt and disbursement of any monetized proceeds and program 
income, including interest and fees.
    (b) Evidence of export. The Cooperating Sponsor shall, within 
thirty (30) days after export, furnish evidence of export of the 
agricultural commodities to the Director, P.L. 480-OD. If export is by 
sea or air, two copies of the on board carrier's bill of lading or 
consignee's receipt authenticated by a representative of the U.S. 
Customs Service shall be furnished. The evidence of export must show 
the kind and quantity of agricultural commodities exported, the date of 
export, and the destination country.
    (c) Special reports required under section 416(b). (1) The 
Cooperating Sponsor shall submit a semiannual Logistics Report to the 
Director, PAD, and to the Agricultural Counselor or Attache or CCC 
designated representative. The first logistics report shall be 
submitted on or before the date specified in the section 416(b) Program 
Agreement and shall cover the full period since the date of that 
agreement. Subsequent reports shall be made at six month intervals 
during the period in which commodities received are being distributed 
by the Cooperating Sponsor. The logistics report shall contain the 
following information:
    (i) Receipts of agricultural commodity including the name of each 
vessel, discharge ports, the date discharge was completed, the 
condition of the commodities on arrival, any significant loss or damage 
in transit; advice of any claim for, or recovery of, or reduction of 
freight charges due to loss or damage in transit on U.S. flag vessels;
    (ii) Estimated commodity inventory at the end of the reporting 
period;
    (iii) Quantity of commodity on order and in transit during the 
reporting period;
    (iv) Status of claims for commodity losses both resolved and 
unresolved during the reporting period; and
    (v) Quantity of commodity damaged or declared unfit during the 
reporting period.
    (2) In the event that an approved program calls for the 
monetization of all, or any portion of the donated agricultural 
commodities, the Cooperating Sponsor shall also submit a semiannual 
monetization report to the Director, PAD, containing the information 
specified below, and a quarterly report to the Controller, CCC, 
containing the information specified in paragraphs (c)(2)(i) through 
(iv) of this section. The first monetization report shall be submitted 
by the date specified in the section 416(b) Program Agreement and shall 
cover the full period from the date of that agreement. Reports 
thereafter should cover each subsequent semiannual or quarterly period 
in which commodities received are being distributed, or monetized 
proceeds are being held or disbursed, by the Cooperating Sponsor. The 
monetization report must contain the following data:
    (i) The quantity of each type of commodity furnished for the 
purpose of sale or barter, and the actual amount sold or bartered;
    (ii) The amount of funds and value of services generated from sales 
and barter of the commodities, in both local currency and U.S. dollar 
equivalent.
    (iii) Deposits into and disbursements from the special account, the 
total amount of funds used to date, and balance in special account, in 
both local currencies and U.S. dollar equivalents.
    (iv) The amount of generated currencies not yet programmed that 
will be used and an estimate of when they will be disbursed.
    (v) A thorough description of how the funds and services generated 
were or will be used, including information regarding project goals, 
accomplishments, and the number of beneficiaries.
    (vi) Quantity of commodities as yet unsold, and an estimate of when 
sales and barter will be completed.
    (vii) A thorough description of the effectiveness of sales and 
barter provisions in facilitating the distribution of commodities and 
products to targeted recipients.
    (viii) A description of the extent, if any, that sales, barter or 
use of section 416(b) commodities:
    (A) affected the usual marketing of the United States;
    (B) displaced or interfered with commercial sales of the United 
States;
    (C) disrupted world commodity prices or normal patterns of trade 
with friendly countries; and
    (D) discouraged local production and marketing of commodities in 
the recipient country;
    (ix) An explanation of the extent to which agreement objectives 
were achieved.
    (x) Recommendations for improving sale, barter, or use provisions 
of future section 416(b) programs.


Sec. 1499.19  Termination of program.

    All or any part of the assistance provided under a Program 
Agreement, including commodities in transit, may be suspended or 
terminated by CCC if:
    (a) The Cooperating Sponsor fails to comply with the provisions of 
the Program Agreement or this part;
    (b) It is determined by CCC that the continuation of such 
assistance is no longer necessary or desirable; or
    (c) CCC determines that storage facilities are inadequate to 
prevent spoilage or waste or that distribution of commodities will 
result in substantial disincentive to, or interfere with, domestic 
production or marketing in the recipient country.


Sec. 1499.20  Sample documents and guidelines for developing proposals 
and reports.

    To assist with effective reporting on program logistics and 
monetization, etc., guidelines have been developed. Examples of these 
guidelines may be obtained from the Director, PAD.

    Signed this 7th day of February 1994, in Washington, DC.
Christopher E. Goldthwait,
General Sales Manger, FAS, and Vice President, Commodity Credit 
Corporation.
[FR Doc. 94-3212 Filed 2-11-94; 8:45 am]
BILLING CODE 3410-10-M