[Federal Register Volume 60, Number 235 (Thursday, December 7, 1995)]
[Rules and Regulations]
[Pages 62702-62708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-29527]



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DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 17


Regulations Governing the Financing of Commercial Sales of 
Agricultural Commodities

AGENCY: Foreign Agricultural Services, USDA.

ACTION: Final rule.

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SUMMARY: This rule amends regulations applicable to the financing of 
the sale and exportation of agricultural commodities pursuant to title 
I of the Agricultural Trade Development and Assistance Act of 1954, as 
amended (Pub. L. 480).
    The purposes of these changes are: To eliminate the potential for 
certain conflicts of interest; to keep the costs of the Public Law 480, 
title I program as low as possible; to insure that all persons seeking 
to participate in supplying and shipping commodities financed under 
Public Law 480, title I, receive fair and equitable treatment; and to 
reflect a reorganization of administrative functions within the 
Department of Agriculture.

EFFECTIVE DATE: See Supplementary Information for compliance 
requirements.

FOR FURTHER INFORMATION CONTACT:
Connie B. Delaplane, Director, P.L. 480 Operations Division, Export 
Credits, 

[[Page 62703]]
Foreign Agricultural Service, U.S. Department of Agriculture, Room 4549 
South Building, 14th and Independence SW., Washington, D.C. 20250-1033. 
Telephone: (202) 720-3664.

SUPPLEMENTARY INFORMATION: This final rule is issued in conformance 
with Executive Order 12866. It has been determined to be significant 
for the purposes of E.O. 12866 and, therefore, has been reviewed by the 
Office of Management and Budget (OMB).

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act. The General Sales Manager has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. Although this rule regulates 
certain activities of shipping agents in the Department's foreign 
assistance activities, the limitations imposed should not adversely 
impact upon the volume of business handled by any particular small 
business entity. A copy of this final rule has been submitted to the 
General Counsel, Small Business Administration.

Executive Order 12372

    This program 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 48 FR 29115 (June 24, 1983).

Executive Order 12778

    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. The final rule would have preemptive 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 final rule would not have retroactive effect. The 
rule does not require that administrative remedies be exhausted before 
suit may be filed.

Background

    The Secretary of Agriculture implements title I of the Agricultural 
Trade Development and Assistance Act of 1954, as amended (Pub. L. 480). 
This function is delegated to the General Sales Manager, Foreign 
Agricultural Service. On November 12, 1992, the Foreign Agricultural 
Service (FAS) published a proposed rule (57 FR 53607) to amend the 
regulations governing the financing of the sale and exportation of 
agricultural commodities made available under title I, Public Law 480. 
Corrections to the proposed rule were published November 27, 1992 (57 
FR 56406).
    Comments suggesting revisions to the proposed rule are discussed 
below, except those that were outside the scope of the proposed rule or 
of an editorial nature. FAS has made minor editorial changes and other 
changes to respond to some of the comments received, and to reflect the 
redesignation of certain offices within the Department of Agriculture 
involved in the administration of the title I, Public Law 480 program.

Discussion of Comments

    Ocean Transportation-Related Services. The proposed rule would have 
prohibited a shipping agent from providing expediting services to a 
vessel owner at discharge ports. FAS proposed this change in order to 
eliminate the potential for a conflict of interest that might arise if 
a shipping agent representing a charterer were also to receive a fee 
from the vessel owner to expedite discharge operations, with the result 
that the agent might show favoritism to the owner in subsequent freight 
solicitations.
    The comments received stressed that the rule would eliminate a 
possible source of revenue for shipping agent firms, with greater 
impact on small businesses, and could thereby reduce the number of 
shipping agents participating in the title I, Public Law 480 program.
    FAS will not adopt this aspect of the proposed rule because any 
adverse impact upon the operations of the title I, Public Law 480 
program from the hypothesized conflict of interest is speculative and, 
therefore, would not justify the harmful effect on competition and 
smaller businesses. Because the title I program requires strict 
competitive bidding procedures in the procurement of freight, there is 
little potential for favoritism in the vessel selection process.
    Affiliates. The proposed rule would have expanded the current 
definition of ``affiliate'' to include two legal entities that are 
owned or controlled by the same legal entity. Currently, a firm cannot 
be a shipping agent during the same fiscal year in which it, or its 
affiliate, provides ocean transportation-related services. If the 
definition of affiliate were expanded as proposed, presumably more 
firms would be subject to this prohibition. The proposal was intended 
to prevent a participant from selecting a firm as shipping agent 
because that firm could offer ocean transportation-related services at 
a discount.
    One comment argued that there was no reason to be concerned because 
an independent but indirectly affiliated company acting as a title I 
shipping agent could not derive inappropriate benefits from a related 
entity providing wholly different services with respect to, for 
example, title III shipments. This comment also recommended CCC return 
to the practice of determining conflicts of interest on a 
``transaction-by-transaction'' basis, an approach followed prior to the 
Food, Agriculture, Conservation, and Trade Act of 1990. Two comments 
noted that the proposed expansion of the definition of affiliate would 
eliminate from competition any multinational freight forwarder, 
including at least one firm currently active as a shipping agent.
    FAS has determined not to expand the affiliate definition in this 
rule because it may, in fact, hinder operations under other assistance 
programs. Although it is theoretically possible, for example, that a 
firm providing inland transportation services overseas could influence 
selection of its ``affiliated'' shipping agent through the prospect of 
discounted services, we have no reason to believe this has taken place. 
Thus, there is no empirical basis to justify expanding the definition 
of ``affiliates,'' especially where to do so would reduce the number of 
firms able to provide ocean transportation-related services in other 
programs, such as titles II and III of Public Law 480, or would reduce 
the number of firms from which participants may select a shipping 
agent.
    Section 407(c)(4) of Public Law 480 requires that CCC analyze the 
potential for conflict of interest over the term of a fiscal year, 
rather than on a transaction-by-transaction basis. Therefore, returning 
to the transaction-by-transaction basis is not an option available to 
CCC.
    Another comment proposed that FAS expand the definition of 
affiliate to cover all situations where two legal entities are owned by 
the same individuals and operate from the same offices using the same 
employees.
    Although FAS is not adopting a rule that would automatically 
consider two firms in this situation as affiliates, FAS will 
investigate questionable situations to determine if two firms may 
legally be considered as one firm or if one firm may be considered as 
the alter ego of an officer or director of another company when 
applying the existing affiliation rules. We also note that the existing 
``affiliate'' definition includes firms with common officers or 
directors or investments between firms and these 

[[Page 62704]]
factors would likely encompass the situation suggested by the comment.
    Subcontractors of A.I.D. Freight Agents. One comment argued that 
subcontractors of freight agents employed by the Agency for 
International Development (A.I.D.) should be eligible to act as title I 
shipping agents because section 407(d)(3) of Public Law 480 did not 
specifically refer to subcontractors; and that to preclude such 
subcontractors from participating as title I, Public Law 480 shipping 
agents would be an unwarranted extension of the statute.
    The proposed rule specifically precluding subcontractors of freight 
agents employed by A.I.D. from acting as shipping agents under title I, 
Public Law 480 is a codification of FAS's prior interpretation of the 
scope of section 407(d)(3). See 47 FR 53609. This interpretation, 
concurred in by A.I.D., is reasonable given the subcontractor's active 
involvement in arranging ocean transportation.
    No Competitive Advantage. The proposed rule included a prohibition 
against shipping agents affording competitive advantage to any 
particular supplier of commodities or ocean transportation. One comment 
suggested the rule should prohibit limiting competition among suppliers 
of commodities or ocean transportation by artificially or unreasonably 
restricting the quantity purchased or size of vessel which can be 
offered. Such a specific prohibition is unnecessary because FAS reviews 
each proposed commodity and freight invitation for bids to eliminate 
any restrictions that cannot be justified as furthering the purposes of 
the title I program.
    A second comment contended that the proposed rule was too broad and 
prohibited a prudent business person from maintaining regular contact 
with others in the business and unduly limited the exchange of 
information that could benefit an importing country in planning its 
purchases. The comment further questioned whether FAS could effectively 
enforce the prohibition.
    This comment misinterpreted the proposed rule. The rule does not 
prohibit a shipping agent from gathering information, such as price 
trends or crop quality, from trade sources and passing the information 
to its principal. Nor does it prevent an agent from pursuing normal 
business contacts. The rule simply highlights an important aspect of 
the fair and impartial performance of an agent's duties. FAS will 
request investigations of alleged violations of this regulation; the 
agent may be suspended or debarred from the program if violations are 
established.
    Independent Contractors. The proposed rule required that an 
independent contractor hired by a shipping agent to perform functions 
of a shipping agent must furnish to FAS the same information and 
documentation as the agent. One comment stated that this rule was too 
loosely drafted and encompassed certain unintended relationships; i.e., 
a shipping agent may hire ``independent contractors'' to perform any of 
a number of services.
    FAS disagrees and has adopted the proposed rule as written because 
it clearly specifies that the requirement applies only to persons hired 
by a shipping agent ``to perform functions of a shipping agent.'' This 
very narrow category of persons should be subject to the same standards 
as the shipping agent itself to prevent evasion of the regulations.
    Payment or Other Benefit. The proposed rule prohibited participants 
from receiving certain enumerated benefits, such as office space, 
equipment, and travel expenses, from the agents they selected. This was 
intended to make it more likely that participants would select agents 
on merit and to eliminate the possibility that participants might favor 
larger companies, which could more easily afford to offer these 
benefits. One comment, submitted by a small firm, objected to this 
provision because it would prevent a participant from financing trips 
to the United States by potential buyers, thus stifling an important 
opportunity for market development. The commentor recommended that the 
rule permit certain payments, such as reasonable travel expenses 
directly related to the procurement of commodities.
    FAS will not adopt the rule as proposed because improper actions or 
payments made in connection with the selection of a shipping agent 
would already be prohibited by the Foreign Corrupt Practices Act. Also, 
while the efficient operation of the title I, Public Law 480 program 
would suffer from incompetent agents, FAS cannot conclude that the 
payment of benefits which are consistent with existing law results in 
the use of incompetent agents.
    CCC will, however, change the current rule by prohibiting 
``payments, kickbacks, or other illegal benefits'' in connection with 
the agent's selection so that the rule, consistent with other existing 
laws, clearly encompasses any corrupt financial payment to a country in 
connection with the agent's selection. This adequately protects CCC's 
financial interest in the program.
    Limitation on Brokerage Payments. The proposed rule would have 
capped a shipping agent's commission at \2/3\ of the maximum total 
commission which CCC can finance (2.5% of the value paid for freight) 
in order to allow for a commission to a shipping broker under the cap. 
A number of comments from shipping agents stated that such a cap would 
drive some shipping agent firms out of business; would not reduce 
freight rates; and would not have any effect on the decision of vessel 
owners whether to use a ships broker in offering a vessel. Other 
comments, primarily from ships brokers, urged that FAS change the rule 
to limit the shipping agent's commission to 1.25% (one-half of the 
maximum commission which CCC can finance) even if the vessel owner does 
not use a ships broker in the transaction.
    The comments suggest that any reduction in freight rates as a 
result of a cap on shipping agents' commissions is unlikely. Absent 
this benefit to the program, FAS does not see any need to change the 
current regulations because we have not identified any adverse impact 
on the program from the existing regulation.
    Contracts Required. FAS proposed to require that suppliers of ocean 
transportation furnish, if requested by FAS, copies of relevant 
lightening, stevedoring and bagging contracts, whether or not CCC 
financed ocean freight or ocean freight differential in connection with 
the voyage. Since the final rule no longer contains the limitations on 
commissions and affiliates that were published in the proposed rule, 
this requirement will apply only when CCC is financing a portion of the 
ocean freight. FAS has revised the final rule to clarify that it is the 
supplier of ocean transportation which must provide these contracts, if 
requested by CCC. USDA will not delay issuance of the commodity 
supplier's copy of the Form CCC-106 pending receipts of the contracts. 
FAS will use this information in monitoring compliance with the 
supplier reporting requirements contained in Sec. 17.12 of the 
regulations.
    However, CCC will require, as proposed, that, when CCC finances any 
part of the ocean freight, the participant or its agent must provide 
copies of liner booking notes to USDA before USDA releases Form CCC-
106. This will also continue to be the practice with respect to copies 
of charter parties.
    Non-Reversible Laydays and Despatch. Currently, CCC shares despatch 
with the participant and laydays are reversible. The proposed rule 
provided that CCC would share 

[[Page 62705]]
despatch earnings at the load port with the commodity supplier thereby 
encouraging quicker loading and lower freight rates. Comments suggested 
that CCC should not share in any despatch since it is not involved in 
loading and discharge operations. These comments also suggested that 
the vessel operator should pay despatch to the commodity supplier at 
loading and to the charterer at discharge, pointing out that such a 
change would more closely reflect commercial practices and possibly 
expedite vessel operations.
    CCC agrees with these comments. Accordingly, the few rule 
eliminates CCC's sharing in any despatch earnings. With this change, 
title I procedures in this regard will follow those of the title III, 
Public Law 480 program administered by A.I.D.
    Several other changes to the rule follow from this change. There is 
no longer any need for CCC to delay payment of the final 5 percent of 
the ocean freight or ocean freight differential pending completion of 
demurrage/despatch calculations. Therefore, the final rule also 
provides that 100% of the ocean freight or ocean freight differential 
is payable when the vessel and cargo arrive at the first port of 
discharge, and, in the event of a force majeure, 100% of the freight 
will be payable. Further, the amount of security that CCC will require 
before it advances payments for ocean freight or ocean freight 
differential is increased from 95% to 100% to reflect the increased 
freight payable on arrival. Participants and vessel owners should 
recognize that, because CCC will not share in despatch, CCC will not be 
responsible for resolving disputes involving calculation of laytime or 
payment of demurrage or despatch.
    The final rule adopts non-reversible laydays to reflect the fact 
that different parties will be sharing in despatch at load and 
discharge. Several comments noted that a change to non-reversible 
laydays would disadvantage importing countries because these countries 
may be more likely to owe demurrage if they cannot offset time lost at 
discharge against time gained at loading. FAS proposed this change in 
order to reflect commercial practices in the shipping trade that would 
benefit title I, Public Law 480 by reducing freight rates. Countries 
which can turn vessels around quickly at the discharge port will 
benefit by retaining the entire despatch earned.
    Commodity Letters of Credit. The proposed change in 
Sec. 17.15(h)(1) addressed a specific situation that occurred under the 
tile I program. Suppliers of ocean transportation under title I have 
issued bills of lading containing a provision noting a lien on the 
cargo if they have loaded commodities before they have been advised 
that an acceptable freight letter of credit has been opened to their 
benefit. This has unfairly delayed commodity suppliers from receiving 
payment from the bank because letters of credit typically contain a 
documentary requirement for a ``clean bill of lading.'' This practice, 
if allowed to continue, could have increased program costs by placing 
an unreasonable burden on commodity suppliers. The final rule adopts 
the proposal to specifically require that commodity letters of credit 
allow for payment even if the bill of lading states that the vessel 
owner has a lien on the cargo. The vessel owner may include such a 
statement on bills of lading and, of course, may refuse to load and may 
claim detention if there is no freight letter of credit.
    Miscellaneous Change to Supplier Reporting Requirements. The 
proposed rule also added, as a clarification, a list of specific items 
that must be reported to CCC pursuant to section 17.12 of the 
regulations. This section implements section 407(b) of Public Law 480. 
In reviewing this matter, FAS has determined that it would also be 
helpful to the trade to specify that suppliers must also report 
payments to foreign governments or their agencies. While FAS has 
interpreted the current regulations to require reports of payments to 
foreign government agencies (because they fall within the class of 
persons included in the term ``representative of the importer or 
participant''), FAS believes that this interpretation should be 
reflected in the regulations. Therefore, the final rule amends 
Sec. 17.12 of the regulations by specifying that suppliers must also 
report payment of commissions, fees or other compensation to the 
participant, or any agency of the participant.

Effective Date

    The provisions of this rule shall apply to contracts entered into 
under purchase authorizations issued on or after January 8, 1996 and to 
USDA acceptance of nominations of shipping agents received after 
January 8, 1996 covering services provided during U.S. fiscal year 1996 
(October 1, 1995-September 30, 1996) and each U.S. fiscal year 
thereafter.

Paperwork Reduction Act

    Most reporting and recordkeeping requirements contained in this 
final rule have been previously approved by the Office of Management 
and Budget (OMB) under the Paperwork Reduction Act of 1980. OMB has 
assigned control number 0551-0005 to this information collection. 
Reporting and recordkeeping requirements in this final rule that have 
not been previously approved by OMB are not effective until approved by 
OMB.

List of Subjects in 7 CFR Part 17

    Agricultural commodities; exports; finance; maritime carriers.

    Accordingly, 7 CFR Part 17, Subpart A, is amended as follows:

PART 17--[AMENDED]

    1. The authority citation for Part 17 continues to read as follows:

    Authority: 7 U.S.C. 1701-1705, 1736a, 1736c, 5676; E.O. 12220, 
45 FR 44245.

    2. The zip codes ``20250-1000'' is revised to read ``20250-1033'' 
each time it appears in Secs. 17.1(f), 17.7(c)(4)(i), 17.10(b)(5), 
17.14(c)(2) and paragraphs (B)(6)(a) and (F)(4)(a) in Appendix A.
    3. Section 17.2 is amended by removing definitions of ``ASCS'' and 
``ASCS offices'' in paragraph (a) and adding definitions of ``FSA'' and 
``FSA offices'' in alphabetical order, and by adding definitions of 
``expediting services,'' ``ocean transportation brokerage,'' and 
``ocean transportation-related services'' in paragraph (c) to read as 
follows:


Sec. 17.2  Definitions of terms. * * *

    (a) Terms relating to the United States, its agencies and 
officials.
* * * * *
    ``FSA'' means the Farm Service Agency, U.S. Department of 
Agriculture.
    ``FSA offices'' means the FSA offices listed in Sec. 17.21 and any 
other offices or agencies which may succeed to the functions of these 
offices.
* * * * *
    (c) Other terms.
* * * * *
    Expediting services means services provided to the vessel owner at 
the discharge port in order to facilitate the discharge and sailing of 
the vessel; this may include assisting with paperwork, obtaining 
permits and inspections, supervision and consultation.
* * * * *
    Ocean transportation brokerage means services provided by shipping 
agents related to their engagement to arrange ocean transportation and 
services provided by ships brokers related to their engagement to 
arrange employment of vessels.
    Ocean transportation-related services means furnishing the 
following services: lightening, stevedoring, and bagging (whether these 
services are performed at 

[[Page 62706]]
load or discharge), and inland transportation, i.e., transportation 
from the discharge port to the designated inland point of entry in the 
destination country, if the discharge port is not located in the 
destination country.
* * * * *
    4. Part 17 is provided by revising the term ``ASCS'' to read 
``FSA'' wherever it appears.
    5. Section 17.5 is amended by changing the term ``Assistant General 
Sales Manager'' to read ``Deputy Administrator, Export Credits'' in 
paragraph (a)(1), (d)(1) and (2), (e), and (g)(1) and (2), removing and 
reserving paragraph (a)(3), revising paragraph (a)(4), adding a new 
paragraph (a)(5), adding ``section 416(b) of the Agricultural Act of 
1949, or the Food for Progress Act of 1985,'' after ``any title of the 
Act,'' in paragraphs (b)(2) and (3), revising paragraphs (c)(7) and 
(8), and revising the last sentence of paragraph (d)(2) to read as 
follows:


Sec. 17.5  Agents for the participant or importer.

    (a) General.
* * * * *
    (3) [Reserved]
    (4) A freight agent employed by the Agency for International 
Development under titles II and III and is not eligible to act as an 
agent for the participant or importer during the period of such 
employment. A subcontractor of such freight agent is not eligible to 
act as an agent for the participant or importer during the period of 
its subcontract.
    (5) A shipping agent may not take any action which would give a 
competitive advantage to any supplier of commodities or ocean 
transportation. This includes, but is not limited to, providing advance 
notice of IFB's or amendments, or selectively enforcing IFB or contract 
requirements.
* * * * *
    (c) Information to be furnished. A person nominated to act as an 
agent of the participant or importer, and any independent contractor 
that may be hired by such person to perform functions of a shipping 
agent, shall furnish to the Deputy Administrator, Export Credits, the 
following information or documentation as may be applicable:
* * * * *
    (7) For USDA acceptance of a nomination covering services provided 
during U.S. fiscal year 1996 (October 1-September 30) and each U.S. 
fiscal year thereafter, a written statement signed by such person:
    (i) Certifying that, during the U.S. fiscal year covered by USDA's 
acceptance of the nomination, the person has not engaged in, and will 
not engage in, supplying commodities under any title of the Act or the 
Food for Progress Act of 1985 or furnishing ocean transportation or 
ocean transportation-related services for commodities provided under 
any title of the Act, section 416(b) of the Agricultural Act of 1949, 
or the Food for Progress Act of 1985, whether any part of the ocean 
transportation is financed by the U.S. Government; and that the person 
has not served and will not serve as an agent, broker, consultant or 
other representative of firms engaged in providing such commodities, 
ocean transportation and ocean transportation-related services;
    (ii) Certifying that, for ocean transportation brokerage services 
provided during the U.S. fiscal year covered by USDA's acceptance of 
the nomination, the person has not shared and will not share freight 
commissions with the participant, the importer, or any agent, broker, 
consultant or other representative of the participant or the importer, 
whether CCC finances any part of the ocean freight. CCC will consider 
as sharing a commission a situation where the agent forgoes part or all 
of a commission and the supplier of ocean transportation pays a 
commission directly to the participant, the importer, or any other 
person on behalf of the participant or the importer. (See also 
Sec. 17.8(c)(8), which prohibits address commissions or payments); and
    (iii) Undertaking that, during the U.S. fiscal year covered by 
USDA's acceptance of the nomination, affiliates of such person have not 
engaged in and will not engage in the activities or actions prohibited 
in this paragraph (c)(7).
    (8) A certification that neither the person nor any affiliates has 
arranged to give or receive any payment, kickback, or illegal benefit 
in connection with the person's selection as agent of the participant 
or importer.
    (d) USDA acceptance.
* * * * *
    (2) * * * USDA will withdraw such acceptance if the agent of the 
participant or importer, or any of the affiliates of such agent, 
violates the certifications or undertakings made pursuant to paragraph 
(c)(7) of this section.
* * * * *
    6. The address of the Kansas City FSA Commodity Office is revised 
to read ``U.S. Department of Agriculture, P.O. Box 419205, Kansas City, 
Missouri 64141-6205'' in Secs. 17.7(c)(4)(iii), 17.14(c)(1), and 
paragraphs (V)(1), (6) and (10) and paragraphs (W)(1), (6) and (10) in 
Appendix A.
    7. Section 17.7 is amended by adding the following text at the end 
of paragraph (c)(6):


Sec. 17.7   Eligibility of suppliers and selling agents.

* * * * *
    (c) Commodity suppliers (approval). * * *
* * * * *
    (6) * * * Such performance security shall be in addition to the 
amount of the standard performance security required of all offerors in 
the Invitation for Bids. This additional performance security shall 
conform to the requirements in the Invitation for Bids for the 
performance security, and may be combined with the standard performance 
security into a single performance security. Upon successful completion 
of one or more contracts by the supplier, CCC may remove the 
requirement for the additional performance security.


Sec. 17.10   [Amended]

* * * * *
    8. Section 17.10 is amended by revising the telephone number to 
read ``(202) 720-5780'' in paragraph (a) introductory text and in 
paragraph (b)(5).
    9. Section 17.12 is amended by revising paragraph (a), and revising 
the last sentence of paragraph (c) to read as follows:


Sec. 17.12  Reports required from suppliers of commodities and ocean 
transportation.

    (a) General. Suppliers of--
    (1) Agricultural commodities financed under the Act, and
    (2) Vessels on which such commodities are transported, if ocean 
freight or ocean freight differential with respect thereto is financed 
by CCC, shall report to the General Sales Manager any commission, fee 
or other compensation of any kind which in connection with the 
supplying of such commodities or vessels is paid or to be paid by the 
supplier to any agent, broker, consultant or other representative of 
the importer or participant; to the participant; or to any agency, 
including a corporation owned or controlled by the importer or 
participant, to which the supplier furnishes such commodities or 
vessels. This includes, but is not limited to, payments to such 
entities for services such as lightening, stevedoring, discharging, and 
bagging if such services are included in the ocean freight contract as 
being for the account of the vessel owner; freight commissions; address 
commissions; bank commissions; inward freight 

[[Page 62707]]
commissions; agency fees; consular fees; stevedoring overtime; 
brokerage fees; dispatcher's fees; outport agent's services; freight 
forwarding fees; supervision fees and payments for expediting services.
    (3) Suppliers shall report any such payment delivered to an agent, 
broker, or other representative of the importer or importing country 
even if the payment is not designated for the agent.
* * * * *
    (c) Reporting. * * * Suppliers shall submit reports to the General 
Sales Manager, Foreign Agricultural Service, U.S. Department of 
Agriculture, Washington, D.C. 20250-1001.
* * * * *
    10. Section 17.14 is amended by revising the introductory text of 
paragraph (d), removing the first sentence of the introductory text in 
paragraph (e), revising paragraph (e)(3), revising ``95 percent'' to 
read ``100 percent'' in the first sentence of paragraph (e)(4) and 
removing the second and third sentences of paragraph (e)(4), removing 
paragraph (e)(5) and redesignating paragraph (e)(6) as (e)(5), removing 
paragraph (k)(8), revising the heading of paragraph (1) revising 
paragraphs (l) (1) and (2), removing and reserving paragraphs (l) (3) 
and (4), revising paragraphs (l) (5) and (6), revising ``95 percent'' 
to read ``100 percent'' in the second sentence of paragraph (l)(7) and 
the first sentence of paragraph (l)(8), removing the second and third 
sentences of paragraph (l)(8), revising paragraph (m), and removing and 
reserving paragraph (n) to read as follows:


Sec. 17.14  Ocean transportation.

* * * * *
    (d) Advice of vessel approval. USDA will give written approval of 
charters and liner bookings on Form CCC-106, Advice of Vessel Approval. 
The Form CCC-106 will state whether the vessel is approved as a dry 
cargo liner, dry bulk carrier, or tanker, and whether CCC will finance 
any part of the ocean freight. If CCC agrees to finance any portion of 
the ocean freight, the importing country or its agent shall forward a 
copy of the charter party or liner booking note immediately after 
execution to the Director, P.L. 480 Operations Division, FAS (or the 
Director, Kansas City FSA Commodity Office, for cotton), for review and 
approval prior to issuance of Form CCC-106-2. CCC may also require the 
supplier of ocean transportation to submit copies of lightening, 
stevedoring, or bagging contracts for any voyage for which CCC finances 
ocean freight or ocean freight differential. USDA will issue Form CCC-
106, Advice of Vessel Approval, as follows:
* * * * *
    (e) Special charter party provisions required when any part of 
ocean freight is financed by CCC.
* * * * *
    (3) The ocean freight is earned and that 100 percent thereof is 
payable by the charterers when the vessel and cargo arrive at the first 
port of discharge, subject to paragraph (e)(4) of this section, and to 
the further condition that if a force majeure as described in paragraph 
(l)(7) of this section results in the loss of part of the vessel's 
cargo, 100 percent of the ocean freight is payable on the part so lost. 
This provision does not relieve the carrier of the obligation to carry 
to other points of discharge if so required by the charter party.
* * * * *
    (1) Reimbursement for ocean freight or ocean freight differential 
separately financed. (1) When the Form CCC-106 states that a notice of 
arrival is not required, CCC will reimburse 100 percent of the ocean 
freight or ocean freight differential, as appropriate, upon 
presentation of required documents.
    (2) When the Form CCC-106 states that a notice of arrival is 
required, CCC will reimburse up to 100 percent of the ocean freight or 
ocean freight differential, as appropriate, before the vessel arrives 
at the first port of discharge if the supplier has furnished CCC, as 
security, a letter of credit, acceptable in amount and form to CCC and 
issued by a U.S. bank.
    (3) [Reserved]
    (4) [Reserved]
    (5) The amount of security required by CCC under paragraph (2) of 
this section may be computed as follows: 100 percent of the ocean 
freight or ocean freight differential, as appropriate, on the basis of 
either:
    (i) The tonnage stated in the charter party (without tolerance), if 
the supplier does not furnish to CCC a copy of the ocean bill of 
lading, or
    (ii) The tonnage shown on the ocean bill of lading, times the ocean 
freight rate or ocean freight differential rate, as appropriate, shown 
on the related Form CCC-106, if the supplier furnishes to CCC a copy of 
the ocean bill of lading.
    (6) On receipt of an acceptable letter of credit, the Controller 
will waive the notice of arrival requirement established by 
Sec. 17.18(d)(2).
* * * * *
    (m) Demurrage/Despatch. CCC will not finance demurrage and CCC will 
not share in despatch earnings. Owners and commodity suppliers will 
settle laytime accounts at load port(s) and owners and charterers will 
settle laytime accounts at discharge port(s). Under no circumstances 
shall CCC be responsible for resolving disputes involving calculation 
of laytime or the payment of demurrage or despatch.
    (n) [Reserved]
* * * * *
    11. Section 17.15 is amended by revising the first sentence of 
paragraph (h)(1) to read as follows:


Sec. 17.15  Letter of commitment method of financing.

* * * * *
    (h) Issuance of letters of credit. * * *
    (1) General. The application or request for, and any agreement 
relating to, any letter of credit issued, confirmed, or advised in 
connection with a letter of commitment to a banking institution, may 
contain such provisions as the approved applicant and the banking 
institution may agree on, and the approved applicant and the banking 
institution may agree to any extension of the life of, or any other 
modification of, or variation from, the provisions of any such letter 
of credit: Provided, That such provisions and any such extension, 
modification or variance shall be in no respect inconsistent with or 
contrary to the provisions of the letter of commitment; in the event of 
any such inconsistency or conflict, the provisions of the letter of 
commitment shall prevail with respect to CCC financing: And provided 
further, That when a letter of credit provides for acceptance of time 
drafts, such letter of credit (or application therefor) shall specify 
that the discount and acceptance fees shall be for the account of the 
importer: And provided further, That commodity letters of credit must 
allow payment to the commodity supplier even if the bill of lading 
states that the vessel owner has placed a lien on the cargo. * * *
* * * * *


Sec. 17.18  [Amended]

    12. Section 17.18 is amended by removing paragraph (d)(6) and 
redesignating paragraph (d)(7) as (d)(6).
    13. Section 17.21 is revised to read as follows:


Sec. 17.21  FSA Offices.

    (a) Kansas City Commodity Office, FSA, U.S. Department of 
Agriculture, P.O. Box 419205, Kansas City, Missouri 64141-6205.
    (b) Financial Management Division, FSA, U.S. Department of 
Agriculture, P.O. Box 2415, Washington, DC 20013.
    14. Section 17.22 is revised to read as follows:
    
[[Page 62708]]



Sec. 17.22  Recordkeeping and access to records.

    Suppliers and agents of the participant or importer shall keep 
accurate books, records and accounts with respect to all contracts 
entered into hereunder, including those pertaining to ocean 
transportation-related services and records of all payments by 
suppliers to representatives of the importer or participant, if CCC 
finances any part of the ocean freight. Suppliers and agents shall 
permit authorized representatives of the U.S. Government to have access 
to their premises during regular hours to inspect, examine, audit and 
make copies of such books, records and accounts. Suppliers and agents 
shall retain such records until the expiration of three years after 
final payment under such contracts.


Sec. 17.23  [Removed]

    15. Section 17.23 is removed.

    Signed at Washington, DC on August 22, 1995.
Christopher E. Goldthait,
General Sales Manager, Foreign Agricultural Service; and Vice 
President, Commodity Credit Corporation.
[FR Doc. 95-29527 Filed 12-6-95; 8:45 am]
BILLING CODE 3410-10-M