[Federal Register Volume 61, Number 231 (Friday, November 29, 1996)]
[Rules and Regulations]
[Pages 60513-60524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30032]


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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: Final rule.

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SUMMARY: These regulations govern the provision of agricultural 
commodities by Commodity Credit Corporation pursuant to section 416(b) 
of the Agricultural Act of 1949 or the Food for Progress Act of 1985 
for distribution in foreign countries.

EFFECTIVE DATE: December 30, 1996.

FOR FURTHER INFORMATION CONTACT: Director/CCCPSD, Foreign Agricultural 
Service, United States Department of Agriculture, 1400 Independence 
Ave., S.W., Stop 1031; Washington, D.C. 20250-1031; telephone (202) 
720-3573.

SUPPLEMENTARY INFORMATION: This rule is issued in conformance with 
Executive Order 12866. Based on information compiled by the Department, 
it has been determined that this 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.

Regulatory Flexibility Act

    This rule deals primarily with requirements imposed upon foreign 
governments and non-profit entities distributing humanitarian grant 
food supplies overseas. Therefore, the rule does not have a significant 
impact upon a substantial number of small business

[[Page 60514]]

entities and a Regulatory Impact Statement was not prepared. A copy of 
this rule has been sent to the Chief Counsel, Office of Advocacy, U.S. 
Small Business Administration.

Paperwork Reduction Act

    The information collection requirements imposed by this final rule 
have been previously submitted to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. Chapter 35). 
OMB has assigned control number 0051-0035 for this information 
collection. This regulation does not change any of the information 
collection requirements. A submission to extend this approval will be 
submitted to OMB.

Executive Order 12372

    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).

Executive Order 12988

    This rule has been reviewed under the Executive Order 12988, Civil 
Justice Reform. The 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 rule would not have retroactive effect. Administrative proceedings 
are not required before parties may seek judicial review.

Background

    On February 14, 1994, the Commodity Credit Corporation (CCC) 
published a proposed rule (59 FR 6916) to govern its donation of 
agricultural commodities for distribution in foreign countries pursuant 
to section 416(b) of the Agricultural Act of 1949 (section 416(b)) or 
the Food for Progress Act of 1985. Comments on the proposed rule were 
received from private entities which are most affected by these 
regulations: private voluntary organizations (PVOs), shippers, and 
freight forwarders. Their comments are discussed below, except for 
those dealing with issues outside of the scope of the proposed rule, 
making editorial suggestions, or simply expressing support for the 
proposed rule.

Commodity Availability

    Comment: The PVO community requested that the CCC make a commodity 
availability determination for the Food for Progress Program (FFP) 
similar to the one required for the section 416(b) program.
    Response: As a general matter, only commodities in CCC uncommitted 
inventory are available for donation under section 416(b). 
Consequently, CCC annually reviews its inventory to determine commodity 
availability and publicizes the results to assist PVO's in planning 
donation activities. By contrast, FFP donations are not limited to CCC 
inventory; CCC may purchase commodities for FFP donations to meet 
justified needs. Therefore, there is no reason to announce yearly 
availability of commodities in connection with the FFP or to establish 
a specific list of eligible commodities.

Method of Payment to PVOs

    Comment: PVOs requested that CCC delete the requirement in section 
1499.7 of the proposed rule that a portion of the funds provided PVOs 
be paid on a reimbursement basis. The PVO's stated that they were 
unable to finance many expenses out-of-pocket.
    Response: In CCC's experience, this requirement has not constrained 
PVO participation in CCC grant food aid programs. CCC has determined 
that, to maintain adequate program management, it is necessary to 
maintain a minimal 15% reimbursement requirement.

Recipient Agency Agreements

    Comment: PVOs requested that section 1499.10 of the proposed rule 
be revised to delete the requirement that agreements with local 
recipient agencies include by reference the terms of these regulations. 
The PVOs suggested that such agreements need only be consistent with 
these regulations.
    Response: CCC agrees. The final rule, therefore, has been revised 
to require that recipient agency agreements be consistent with these 
rules.

Private sector involvement

    Comment: PVOs suggested that the requirement in 
Sec. 1499.5(b)(6)(d) of the proposed rule that PVOs use private sector 
channels to sell commodities provided under section 416(b) is 
inappropriate because section 416(b) unlike FFP, does not specify 
support for the private sector.
    Response: CCC will maintain this requirement because economic 
development is one of the goals of section 416(b). Development of 
private sector selling mechanisms is an element of economic 
development.

Other comments from PVOs

    Comment: The PVO community proposed a number of changes which it 
asserted would ease its administrative burden without affecting CCC's 
ability to review and monitor the programs. The PVOs suggested that: 
the plan of operations be submitted to the Agricultural Counselor or 
Attache only if the Counselor or Attache is resident in the country 
targeted for assistance; the priorities governing decisions to enter 
into section 416(b) and FFP agreements be refined to better reflect the 
different purposes of each program; CCC allow flexibility in shifting 
funds among approved expenditure categories within the total CCC-
approved commodity distribution budget in order to facilitate 
management of the programs by the PVOs; and a quarterly, rather than 
monthly, financial statement from the PVO will provide CCC sufficient 
and timely information with which to monitor the programs.
    Response: CCC agrees with these suggestions and the final rule has 
been revised accordingly.

Commissions

    Comment: Shippers and shipping agents expressed concern regarding 
section 1499.8(e)(1) of the proposed rule which allows commissions to 
be paid only on the ocean portion of any transportation arranged for 
the commodities even if the movement of the commodities involves inland 
transportation after discharge. A number of freight forwarders noted 
that they were section 8(a) qualified small businesses and that this 
proposed rule would have an adverse impact on their businesses as a 
result of reducing the amount of commissions that they could receive. 
Comments also noted that the Shipping Act of 1984 mandates that 
conference carriers pay to shipping agents a commission based on the 
aggregate of all rates and charges for a movement which would include 
both ocean and inland charges. Finally, they suggested that this 
proposal was unreasonable because it ignored the fact that shipping 
agents did a considerable amount of work with shipments after cargo is 
discharged and moves inland.
    Response: CCC has determined that the complexity of arranging 
inland transportation warrants continued financing of commissions for 
that service when CCC is financing this movement.
    Comment: Section 1499.8(e)(2) proposed a limit on the amount of 
commission payable to a shipping agent. The limit proposed was 2/3 of 
the maximum commission payable (2 1/2 percent of the total freight). A 
number of comments characterized the proposed change as arbitrary and 
unduly

[[Page 60515]]

restrictive and argued that it would not result in overall savings for 
CCC.
    Response: In view of the issues raised by these comments, CCC has 
concluded not to proceed with the proposed 2/3's limitation.

Freight payments

    Comments: Several parties suggested that CCC make full freight 
payment upon loading, stating this would be consistent with standard 
commercial practice.
    Response: In CCC's experience, payment upon discharge is necessary 
to assure proper handling and discharge of the commodities provided and 
to protect CCC's programmatic interests. These programs are not 
commercial; they often provide commodities that would not otherwise be 
moved in normal international trade to recipients facing emergency food 
needs.

Agents

    Comment: Section 1499.8(c) of the proposed rule extends conflict of 
interest requirements currently applicable to title I, P.L. 480 and 
section 416(b) to the FFP. Comments argued that this provision would 
punish status rather than address any actual conflict of interest, and 
would reduce competition and increase costs.
    Response: The provisions complained of are legislatively required 
in connection with shipments under title I and section 416(b). CCC has 
determined to extend the conflict of interest provisions to the FFP in 
order to maintain consistency between these food donation programs.

Other Changes to Proposed Rule

    The final rule also incorporates the changes to the section 416(b) 
and Food for Progress (FFP) programs mandated by the Federal 
Agriculture Improvement and Reform Act of 1996, Pub. L. 104-127. That 
Act allows the use of generated local currency in section 416(b) for 
administrative expenses, extends the time period to expend such 
currency; authorizes the participation of international organizations 
in the FFP; expands CCC's authority to provide commodities on credit 
terms under the FFP; and to fund technical assistance for monetization 
programs in the FFP. Finally, the final rule makes a number of 
editorial and organizational changes to the text of the proposed rule.

List of Subjects in 7 CFR Part 1499

    Agricultural commodities, Exports, Foreign aid.

    Accordingly, title 7 of the Code of Federal Regulations is 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 Sponsors.
1499.4  Availability of commodities from CCC inventory.
1499.5  Program Agreements and Plans of Operation.
1499.6  Usual marketing requirements.
1499.7  Apportionment of costs and advances.
1499.8  Ocean transportation.
1499.9  Arrangements for entry and handling in the foreign country.
1499.10  Restrictions on commodity use and distribution.
1499.11  Agreement between Cooperating Sponsor and Recipient 
Agencies.
1499.12  Sales and barter of commodities provided and use of 
proceeds.
1499.13  Processing, packaging and labeling of section 416(b) 
commodities in the foreign country.
1499.14  Disposition of commodities unfit for authorized use.
1499.15  Liability for loss, damage, or improper distribution of 
commodities--claims and procedures.
1499.16  Records and reporting requirements.
1499.17  Audits.
1499.18  Suspension of the program.
1499.19  Sample documents and guidelines for developing proposals 
and reports.
1499.20  Paperwork reduction requirement.

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


Sec. 1499.1  Definitions.

    Activity--a Cooperating Sponsor's use of agricultural commodities 
provided under Program Agreements or use of sale proceeds.
    Agricultural Counselor or Attache--the United States Foreign 
Agricultural Service representative stationed abroad, who has been 
assigned responsibilities with regard to the country into which the 
commodities provided are imported, or such representative's designee.
    CCC--the Commodity Credit Corporation.
    Commodities--agricultural commodities or products.
    Director, P.L. 480-OD--the Director, Pub. L. 480 Operations 
Division, Foreign Agricultural Service, USDA.
    Director, CCCPSD--the Director, CCC Program Support Division, 
Foreign Agricultural Service, USDA.
    Director, PDD--the Director, Program Development Division, Foreign 
Agricultural Service, USDA.
    Deputy Administrator--Deputy Administrator for Export Credits, 
Foreign Agricultural Service, USDA.
    Force Majeure--damage caused by perils of the sea or other waters; 
collisions; wrecks; standing without the fault of the carrier; 
jettison; fire from any cause; Act of God; public enemies or pirates; 
arrest or restraint of princes, princesses, rulers of peoples without 
the fault of the carrier; wars; public disorders; captures; or 
detention by public authority in the interest of public safety.
    General Sales Manager--General Sales Manager and Associate 
Administrator, Foreign Agricultural Service, USDA, who is a Vice 
President, CCC.
    KCCO--Kansas City Commodity Office, Farm Services Agency, USDA, 
P.O. Box 419205, Kansas City, Missouri, 64141-6205.
    KCFMO--Kansas City Financial Management Office, Farm Services 
Agency, USDA, P.O. Box 419205, Kansas City, Missouri, 64141-6205.
    Ocean freight differential--the amount, as determined by CCC, by 
which the cost of ocean transportation is higher than would otherwise 
be the case by reason of the requirement that the commodities be 
transported on U.S.-flag vessels.
    Program Agreement--an agreement entered into between CCC and 
Cooperating Sponsors.
    Program income--interest on sale proceeds and money received by the 
Cooperating Sponsor, other than sales proceeds, as a result of carrying 
out approved activities.
    Recipient agency--an entity located in the importing country which 
receives commodities or commodity sale proceeds from a Cooperating 
Sponsor for the purpose of implementing activities.
    Sale proceeds--money received by a Cooperating Sponsor from the 
sale of commodities.
    Section 416(b)--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 establishes the general terms and conditions governing 
CCC's donation of commodities to Cooperating Sponsors under the section 
416(b) and Food for Progress programs. This does not apply to donations 
to intergovernmental agencies or organizations (such as the World Food 
Program) unless CCC and such intergovernmental agency or organization 
enters into an agreement incorporating this part.


Sec. 1499.3  Eligibility requirements for Cooperating Sponsor.

    A Cooperating Sponsor may be either:

[[Page 60516]]

    (a) A foreign government;
    (b) An entity registered with the Agency for International 
Development (AID) in accordance with AID regulations; or
    (c) An entity that demonstrates to CCC's satisfaction:
    (1) Organizational experience and resources available to implement 
and manage the type of program proposed, i.e., targeted food assistance 
or sale of commodities for economic development activities;
    (2) Experience working in the targeted country; and
    (3) Experience and knowledge on the part of personnel who will be 
responsible for implementing and managing the program. CCC may require 
that an entity submit a financial statement demonstrating that it has 
the financial means to implement an effective donation program.


Sec. 1499.4  Availability of commodities from CCC inventory.

    CCC will periodically announce the types and quantities of 
agricultural commodities available for donation from CCC inventory for 
the section 416(b) program.


Sec. 1499.5  Program Agreements and Plans of Operation.

    (a) Plan of Operation. (1) Prior to entering into a section 416(b) 
Program Agreement, a Cooperating Sponsor shall submit a Plan of 
Operation to the Director, PDD and to the Agricultural Counselor or 
Attache, if an Agricultural Counselor or Attache is resident in the 
country where activities are to be implemented. After approval by CCC, 
the Plan of Operation will be incorporated into the section 416(b) 
Program Agreement as ``Attachment A.''
    (2) CCC may require Cooperating Sponsors to submit a Plan of 
Operation in connection with the Food for Progress program.
    (3) A Plan of Operation shall be in the following format and 
provide the following information:

    1. Name and Address of Applicant:
    2. Country of Donation:
    3. Kind and Quantity of Commodities Requested:
    4. Delivery Schedule:
    5. Program Description:
    Provide the following information:
    (a) Activity objectives, including a description of any problems 
anticipated in achieving the activities' objectives;
    (b) Method for choosing beneficiaries of activities;
    (c) Program administration including, as appropriate, plans for 
administering the distribution or sale of commodities and the 
expenditure of sale proceeds, and identification of the 
administrative or technical personnel who will implement the 
activities;
    (d) Activity budgets, including costs that will be borne by the 
Cooperating Sponsor, other organizations or local governments;
    (e) 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;
    (f) Governmental or nongovernmental entities involved in the 
program and the extent to which the program will strengthen or 
increase the capabilities of such entities to further economic 
development in the recipient country;
    (g) Method of educating consumers as to the source of the 
provided commodities and, where appropriate, preparation and use of 
the commodity; and
    (h) Criteria for measuring progress towards achieving the 
objectives of activities and evaluating program outcome.
    6. Use of Funds or Goods and Services Generated:
    When the activity involves the use of sale proceeds, the receipt 
of goods or services from the barter of commodities, or the use of 
program income, the following information must be provided:
    (a) the quantity and type of commodities to be sold or bartered;
    (b) extent to which any sale or barter of the agricultural 
commodities provided would displace or interfere with any sales that 
may otherwise be made;
    (c) the amount of sale proceeds anticipated to be generated from 
the sale, the value of the goods or services anticipated to be 
generated from the barter of the agricultural commodities provided, 
or the amount of program income expected to be generated;
    (d) the steps taken to use, to the extent possible, the private 
sector in the process of selling commodities;
    (e) the specific uses of sale proceeds or program income and a 
timetable for their expenditure; and
    (f) procedures for assuring the receipt and deposit of sale 
proceeds and program income into a separate special account and 
procedures for the disbursement of the proceeds and program income 
from such special account.
    7. Distribution Methods:
    (a) a 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 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:
    Documentation indicating that any commodities to be distributed 
to recipients, rather than sold, 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 a disruptive impact upon production, prices and 
marketing of the same or like products within the importing country.

    (b) Agreements. CCC and the Cooperating Sponsor will enter into a 
written Program Agreement which will incorporate the terms and 
conditions set forth in this part. The commodities provided by CCC, and 
any packaging, will meet the specifications set forth in such Program 
Agreement. A Program Agreement may contain special terms or conditions, 
in addition to or in lieu of, the terms and conditions set forth in the 
regulations in this part when CCC determines that such special terms or 
conditions are necessary to effectively carry out the particular 
Program Agreement.


Sec. 1499.6  Usual marketing requirements.

    (a) A foreign government Cooperating Sponsor shall provide to the 
Director, PDD, data showing commercial and non-commercial imports of 
the types of agricultural commodities requested during the prior five 
years, by country of origin, and an estimate of imports of such 
commodities during the current year.
    (b) CCC may require that a Program Agreement with a foreign 
government include a ``usual marketing requirement'' that establishes a 
specific level of imports for a specified period. The Program Agreement 
may also include a prohibition on the export of provided commodities, 
as well as of other similar commodities specified in the Program 
Agreement.


Sec. 1499.7   Apportionment of costs and advances.

    (a) CCC will bear the costs of processing, packaging, 
transportation, handling and other incidental charges incurred in 
delivering commodities to Cooperating Sponsors. CCC will deliver bulk 
grain shipments f.o.b. vessel, and shipments of all other commodities 
f.a.s. vessel or intermodal points. CCC will choose the point of 
delivery based on lowest cost to CCC.
    (b) When the General Sales Manager approves in advance and in 
writing, CCC may agree to bear all or a portion of reasonable costs 
associated with:
    (1) Transportation from U.S. ports to designated ports or points of 
entry abroad, maritime survey costs, and in cases of urgent and 
extraordinary relief requirements, transportation from designated ports 
or points of entry abroad to designated storage and distribution sites;
    (2) In cases of urgent and extraordinary relief requirements,

[[Page 60517]]

reasonable storage and distribution costs; and
    (3) Under the Food for Progress Program, administration or 
monitoring of food assistance programs, or technical assistance 
regarding sales of commodities provided by CCC.
    (c) CCC will not pay any costs incurred by the Cooperating Sponsor 
prior to the date of the Program Agreement.
    (d) Except as provided in paragraph (b) of this section, the 
Cooperating Sponsor shall ordinarily bear all costs incurred subsequent 
to CCC's delivery of commodities at U.S. ports or intermodal points.
    (e) A Cooperating Sponsor seeking agreement by CCC to bear the 
costs identified in paragraphs (b)(2) or (b)(3) of this section shall 
submit to the Director, PDD, a Program Operation Budget detailing such 
costs. If approved, the Program Operation Budget shall become part of 
the Program Agreement. The Cooperating Sponsor may make adjustments 
between line items of an approved Program Operation Budget up to 20 
percent of the total amount approved or $1,000, whichever is less, 
without any further approval. Adjustments beyond these limits must be 
specifically approved by the Controller and the General Sales Manager.
    (f) The Cooperating Sponsor may request advance of up to 85 percent 
of the amount of an approved Program Operating Budget. However, CCC 
will not approve any request for an advance received earlier than 60 
days after the date of a previous advance made in connection with the 
same Program Agreement.
    (g) Funds advanced shall be deposited in an interest bearing 
account until expended. Interest earned may be used only for the 
purposes for which the funds were advanced.
    (h) The Cooperating Sponsor shall return to CCC any funds not 
obligated as of the 180th day after being advanced, together with any 
interest earned on such unexpended funds. Funds and interest shall be 
returned within 30 days of such date.
    (i) The Cooperating Sponsor shall, not later than 10 days after the 
end of each calendar quarter, submit a financial statement to the 
Director, CCCPSD, accounting for all funds advanced and all interest 
earned.
    (j) CCC will pay all other costs for which it is obligated under 
the Program Agreement by reimbursement. However, CCC will not pay any 
cost incurred after the final date specified in the Program Agreement.


Sec. 1499.8   Ocean transportation.

    (a) Cargo preference. Shipments of commodities provided under 
either the section 416(b) or 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. A Cooperating Sponsor shall comply with the 
instructions of CCC regarding the quantity of commodities that must be 
carried on U.S. flag vessels.
    (b) Freight procurement requirements. In all cases where the 
Cooperating Sponsor arranges ocean transportation, whether by U.S. or 
non-U.S. flag vessel and CCC is financing any portion of the ocean 
freight:
    (1) The Cooperating Sponsor shall arrange ocean transportation 
through competitive bidding and shall obtain approval of all 
invitations for bids from the offices specified in the Program 
Agreement prior to issuance.
    (2) Invitations for bids shall be issued through the Transportation 
News Ticker (TNT), New York, and at least one other comparable means of 
trade communication.
    (3) Freight invitations for bids shall include specified procedures 
for payment of freight, including the party responsible for the freight 
payments, and expressly require that:
    (i) Offers include a contract canceling date no later than the last 
contract layday specified in the invitation for bids;
    (ii) Offered rates be quoted in U.S. dollars per metric ton;
    (iii) If destination bagging or transportation to a point beyond 
the discharge port is required, the offer separately state the total 
rate and the portion thereof attributable to the ocean segment of the 
movement;
    (iv) Any non-liner U.S. flag vessel 15 years or older offer, in 
addition to any other offered rate, a one-way rate 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;
    (v) In the case of packaged commodities, 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) Vessels offered subject to Maritime Administration approval 
will not be accepted; and
    (vii) Offers be received by a specified closing time, which must be 
the same for both U.S. and non-U.S. flag vessels.
    (4) In the case of shipments of bulk commodities and non-liner 
shipments of packaged 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. Late offers shall not be 
considered or accepted.
    (5) All responsive offers received for both U.S. flag and foreign 
flag service shall be presented to KCCO which will determine the extent 
to which U.S.-flag vessels will be used.
    (6) The Cooperating Sponsor shall promptly furnish the Director, 
Public Law 480-OD, or other official specified in the Program 
Agreement, copies of all offers received with the time of receipt 
indicated thereon. The Director, Public Law 480-OD, or other official 
specified in the Program Agreement, will approve all vessel fixtures. 
The Cooperating Sponsor may fix vessels subject to the required 
approval; however, the Cooperating Sponsor shall not confirm a vessel 
fixture until advised 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. The Cooperating Sponsor will, promptly after receipt of 
vessel approval, issue a public notice of the fixture details on the 
TNT or other means of communication approved by the Director, Public 
Law 480-OD.
    (7) Non-Vessel Operating Common Carriers may not be employed to 
carry shipments on either U.S. or foreign-flag vessels.
    (8) The Cooperating Sponsor shall promptly furnish the Director 
Public Law 480-OD, a copy of the signed laytime statement and statement 
of facts at the discharge port.
    (c) Shipping agents. (1) The Cooperating Sponsor may appoint a 
shipping agent to assist in the procurement of ocean transportation. 
The Cooperating Sponsor shall nominate the shipping agent in writing to 
the Deputy Administrator, Room 4077-S, Foreign Agricultural Service, 
U.S. Department of Agriculture, Washington, DC 20250-1031, and include 
a copy of the proposed agency agreement. The Cooperating Sponsor shall 
specify the time period of the nomination.
    (2) The shipping agent so nominated shall submit the information 
and

[[Page 60518]]

certifications required by 7 CFR 17.5 to the Deputy Administrator.
    (3) A person may not act as a shipping agent for a Cooperating 
Sponsor unless the Deputy Administrator has notified the Cooperating 
Sponsor in writing that the nomination is accepted.
    (d) Commissions. (1) When any portion of the ocean freight is paid 
by CCC, total commissions earned on U.S. and foreign flag bookings by 
all parties arranging vessel fixtures, shall not exceed 2\1/2\ percent 
of the total freight costs.
    (2) Address commissions are prohibited.
    (e) Contract terms. When CCC is paying any portion of the ocean 
freight, charter parties and liner booking contracts must conform to 
the following requirements, as applicable:
    (1) Packaged commodities on liner vessels shall be shipped on the 
basis of full berth terms with no demurrage or despatch;
    (2) Shipments of bulk liquid commodities may be contracted in 
accordance with trade custom. Other bulk commodities, including 
shipments that require bagging or stacking for the account of the 
vessel, shall be shipped on the basis of vessel load, free out, with 
demurrage and despatch applicable at load and discharge ports; except 
that, if bulk commodities require further inland distribution, they 
shall be shipped on the basis of vessel load with demurrage and 
despatch at load and berth terms discharge, i.e., no demurrage, 
despatch, or detention at discharge. Demurrage and despatch shall be 
settled between the ocean carrier and commodity suppliers 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.
    (3) If the Program Agreement requires the Cooperating Sponsor to 
arrange 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 
for 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.
    (4) Charges including, but not limited to charges for inspection, 
fumigation, and carrying charges, attributable to the failure of the 
vessel to present before the canceling date will be for the account of 
the ocean carrier.
    (5) 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 prevents the vessel's arrival at the first port of 
discharge, 100% 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, not more than 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
    (6) 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) Coordination between CCC and the Cooperating Sponsor. When a 
Program Agreement specifies that the Cooperating Sponsor will arrange 
ocean transportation:
    (1) KCCO will furnish the Cooperating Sponsor, or its agent, 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 shall complete the Form CCC-512 
indicating name of steamship company, vessel name, vessel flag and 
estimated time of arrival at U.S. port; and shall sign and return the 
completed form to KCCO, with a copy to the Director, P.L. 480-OD. If 
CCC agrees to pay any part of the ocean transportation for liner 
cargoes, the Cooperating Sponsor shall also indicate on the Form CCC-
512 the applicable Federal Maritime Commission tariff rate, and tariff 
identification.
    (3) KCCO will issue instructions to have the commodity delivered 
f.a.s. or f.o.b. vessel, U.S. port of export or intermodal delivery 
point, consigned to the Cooperating Sponsor.
    (g) Documents required for payment of freight--(1) General rule. To 
receive payment for ocean freight, the following documents shall be 
submitted to the Director, CCCPSD:
    (i) One copy of completed Form CCC-512;
    (ii) Four copies of the original on-board bills of lading 
indicating the freight rate and signed by the originating carrier;
    (iii) For all non-containerized grain cargoes,
    (A) One copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (B) One copy of the National Cargo Bureau Certificate of Readiness 
(Vessel Hold Inspection Certificate); and
    (C) One copy of the National Cargo Bureau Certificate of Loading;
    (iv) For all containerized grain and grain product cargoes, one 
copy of the FGIS Container Condition Inspection Certificate;
    (v) One signed copy of liner booking note or charter party covering 
ocean transportation of cargo;
    (vi) For charter shipments, a notice of arrival at first discharge 
port submitted by the Cooperating Sponsor;
    (vii) Four copies of either:
    (A) A request by the Cooperating Sponsor for reimbursement of ocean 
freight or ocean freight differential indicating the amount due, and 
accompanied by a certification from the ocean carrier that payment has 
been received from the Cooperating Sponsor; or
    (B) A request for direct payment to the ocean carrier, indicating 
amount due; or
    (C) A 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.
    (2) In cases of force majeure. To receive payment in cases where 
the General Sales Manager determines that circumstances of force 
majeure have prevented the vessel's arrival at the first port of 
discharge, the Cooperating

[[Page 60519]]

Sponsor shall submit all documents required by paragraph (g)(1) of this 
section except for the notice of arrival required by paragraph 
(g)(1)(vi) of this section.
    (h) CCC payment of ocean freight or ocean freight differential--(1) 
General rule. CCC will pay, not later than 30 days after receipt in 
good order of the required documentation, 100 percent of either the 
ocean freight or the ocean freight differential, whichever is specified 
in the Program Agreement.
    (2) Additional requirements after discharge. Where the charter 
party or liner booking note provide for the completion of additional 
services after discharge, such as bagging, stacking or inland 
transportation, CCC will pay, not later than 30 days after receipt in 
good order of the required documentation, either not more than 85 
percent of the total freight charges or 100 percent of the ocean 
freight differential, whichever is specified in the Program Agreement. 
CCC will pay the remaining balance, if any, of the freight charges not 
later than 30 days after receipt of notification from the Cooperating 
Sponsor that such additional services have been provided; except that 
CCC will not pay any remaining balance where the GSM determines that 
the vessel's arrival at first port of discharge was prevented by force 
majeure.
    (3) No demurrage. CCC will not pay demurrage. Sec. 1499.9 
Arrangements for entry and handling in the foreign country.
    (a) The Cooperating Sponsor shall make all necessary arrangements 
for receiving the commodities in the recipient country, including 
obtaining appropriate approvals for entry and transit. The Cooperating 
Sponsor shall store and maintain the commodities from time of delivery 
at port of entry or point of receipt from originating carrier in good 
condition until their distribution, sale or barter.
    (b) When CCC has agreed to pay costs of transporting, storing, and 
distributing commodities from designated points of entry or ports of 
entry, the Cooperating Sponsor shall arrange for such services, by 
through bill of lading, or by contracting directly with suppliers of 
services, as CCC may approve. If the Cooperating Sponsor contracts 
directly with the suppliers of such services, the Cooperating Sponsor 
may seek reimbursement by submitting documentation to CCC indicating 
actual costs incurred. All supporting documentation must be sent to the 
Director, CCCPSD. CCC, at its option, will reimburse the Cooperating 
Sponsor for the cost of such services in U.S. dollars at the exchange 
rate in effect on the date of payment by CCC, or in foreign currency.


Sec. 1499.10   Restrictions on commodity use and distribution.

    (a) The Cooperating Sponsor may use the commodities provided only 
in accordance with the terms of the Program Agreement.
    (b) Commodities shall not be distributed within the importing 
country on the basis of political affiliation, geographic location, or 
the ethnic, tribal or religious identity or affiliations of the 
potential consumers or recipients.
    (c) Commodities shall not be distributed, handled or allocated by 
military forces without specific CCC authorization.


Sec. 1499.11   Agreement between cooperating sponsor and recipient 
agencies.

    (a) The Cooperating Sponsor shall enter into a written agreement 
with a recipient agency prior to the transfer of any commodities, sale 
proceeds or program income to the recipient agency. Copies of such 
agreements shall be provided to the Agricultural Counselor or Attache, 
and the Director, PDD. Such agreements shall require the recipient 
agency to pay the Cooperating Sponsor the value of any commodities, 
sale proceeds or program income that are used for purposes not 
expressly permitted under the Program Agreement, or that are lost, 
damaged, or misused as result of the recipient agency's failure to 
exercise reasonable care;
    (b) CCC may waive the requirements of paragraph (a) of this section 
where it determines that such an agreement is not feasible or 
appropriate.


Sec. 1499.12   Sales and barter of commodities provided and use of 
proceeds.

    (a) Commodities may be sold or bartered without the prior approval 
of CCC where damage has rendered the commodities unfit for intended 
program purposes and sale or barter is necessary to mitigate loss of 
value.
    (b) A Cooperating Sponsor may, but is not required to, negotiate an 
agreement with the host government under which the commodities imported 
for a sale or barter may be imported, sold, or bartered without 
assessment of duties or taxes. In such cases and where the commodities 
are sold, they shall be sold at prices reflecting prevailing local 
market value.
    (c) The Cooperating Sponsor shall deposit all sale proceeds into an 
interest-bearing account unless prohibited by the laws or customs of 
the importing country or CCC determines that to do so would constitute 
an undue burden. Interest earned on such deposits shall only be used 
for approved activities.
    (d) Except as otherwise provided in this part the Cooperating 
Sponsor may use sale proceeds and resulting interest only for those 
purposes approved in the applicable Plan of Operation.
    (e) CCC will approve the use of sale proceeds and interest to 
purchase real and personal property where local law permits the 
Cooperating Sponsor to retain title to such property, but will not 
approve the use of sale proceeds or interest to pay for the 
acquisition, development, construction, alteration or upgrade of real 
property that is;
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious activity, or
    (2) Used in whole or in part for sectarian purposes; except that, a 
Cooperating Sponsor may use such sale proceeds or interest to pay for 
repairs or rehabilitation of a structure located on such real property 
to the extent necessary to avoid spoilage or loss of provided 
commodities but only if such structure is not used in whole or in part 
for any religious or sectarian purposes while the provided commodities 
are stored in such structure. When not approved in the Plan of 
Operation, such use may be approved by the Agricultural Counsellor or 
Attache.
    (f) The Cooperating Sponsor shall follow commercially reasonable 
practices in procuring goods and services and when engaging in 
construction activity in accordance with the approved Plan of 
Operation. Such practices shall include procedures to prevent fraud, 
self-dealing and conflicts of interest, and shall foster free and open 
competition to the maximum extent practicable.
    (g) To the extent required by the Program Agreement, the 
Cooperating Sponsor shall submit to the Controller, CCC, and to the 
Director, PDD, an inventory of all assets acquired with sale proceeds 
or interest or program income. In the event that its participation in 
the program terminates, the Cooperating Sponsor shall dispose, at the 
direction of the Director, PDD, of any property, real or personal, so 
acquired.


Sec. 1499.13   Processing, packaging and labeling of section 416(b) 
commodities in the foreign country.

    (a) Cooperating Sponsors may arrange for the processing of 
commodities provided under a section 416(b) Program Agreement, or for 
packaging or repackaging prior to distribution. When a third party 
provides such processing, packaging or repackaging, the

[[Page 60520]]

Cooperating Sponsor shall enter into a written agreement requiring that 
the provider of such services maintain adequate records to account for 
all commodities delivered and submit periodic reports to the 
Cooperating Sponsor. The Cooperating Sponsor shall submit a copy of the 
executed agreement to the Agricultural Counselor or Attache.
    (b) If, prior to distribution, the Cooperating Sponsor arranges for 
packaging or repackaging commodities provided under section 416(b), the 
packaging 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 commodities are to be sold or bartered 
after processing, packaging or repackaging, to indicate 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, 
the Cooperating Sponsor shall, to the extent practicable, display 
banners, posters or other media containing the information prescribed 
in this paragraph.
    (c) CCC will reimburse Cooperating Sponsors that are nonprofit 
private voluntary organizations or cooperatives for expenses incurred 
for repackaging if the packages of commodities provided under section 
416(b) are discharged from the vessel in damaged condition, and are 
repackaged to ensure that the commodities arrive at the distribution 
point in wholesome condition. 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. 1499.14   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 will immediately 
arrange for inspection by a public health official or other competent 
authority. If the commodity is damaged prior to delivery to a 
nongovernmental Cooperating Sponsor at the discharge port or point of 
entry, the nongovernmental Cooperating Sponsor shall arrange for such 
inspection. If inspection discloses the commodity to be unfit for the 
use authorized in the Program Agreement, the Agricultural Counselor or 
Attache or the nongovernmental Cooperating Sponsor shall dispose of the 
commodities in accordance with the priority set forth in paragraph (b) 
of this section. Expenses incidental to the handling and disposition of 
the damaged commodity will be paid by CCC from the sale proceeds or 
from an appropriate CCC account designated 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 designated 
by CCC; however, if the commodities are provided for a sales program, 
the net sale proceeds, net of expenses incidental to handling and 
disposition of the damaged commodity, shall be deposited to the special 
account established for sale proceeds. The Cooperating Sponsor shall 
consult with CCC regarding the inspection and disposition of 
commodities and accounting for sale proceeds in the event the 
Cooperating Sponsor executed a sales agreement under which title passed 
to the purchaser prior to delivery to the Cooperating Sponsor.
    (b) After delivery to Cooperating Sponsor. (1) If after arrival in 
a foreign country and after delivery to a Cooperating Sponsor, 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 this paragraph (b) of this 
section. The Cooperating Sponsor shall arrange for the recovery of that 
portion of the commodities designated during the inspection as suitable 
for authorized use. If, upon inspection, the commodity (or any part 
thereof) is determined to be unfit for the 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:
    (i) By transfer to an approved section 416(b) program for use as 
livestock 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;
    (ii) 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;
    (iii) By donation to a governmental or charitable organization for 
use as animal feed or for other non-food use; or
    (iv) If the commodity is unfit for any use or if disposal in 
accordance with paragraph (b)(1) (i), (ii) or (iii) 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.
    (2) Actual expenses incurred, including third party costs, in 
effecting any sale may be deducted from the sale proceeds and, if the 
commodities were intended for direct distribution, the Cooperating 
Sponsor shall deposit the net proceeds with the U.S. Disbursing 
Officer, American Embassy, with instructions to credit the deposit to 
an appropriate CCC account as designated by CCC. If the commodities 
were intended to be sold, the Cooperating Sponsor shall deposit the 
gross proceeds into the special interest bearing account and, after 
approved costs related to the handling and disposition of damaged 
commodities are paid, shall use the remaining funds 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 on any commodity loss in excess of 
$5,000; quarterly reports shall be made on all other losses. If the 
commodity was inspected by a public health official or other competent 
authority, the report and any supplemental report shall include a 
certification by such public health official or other competent 
authority as to the condition of the commodity and the exact quantity 
of the damaged commodity disposed. Such certification shall be obtained 
as soon as possible after the discharge of the cargo. 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. 1499.15  Liability for loss, damage, or improper distribution of 
commodities--claims and procedures.

    (a) Fault of Cooperating Sponsor prior to loading on ocean vessel. 
The Cooperating Sponsor shall immediately notify KCCO, Chief, Export 
Operations Division if the Cooperating Sponsor will not have a vessel 
for loading at the U.S. port of export in accordance with the

[[Page 60521]]

agreed shipping schedule. CCC will determine whether the commodity will 
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 if CCC determines that the expenses were incurred because of 
the fault or negligence of the Cooperating Sponsor.
    (b) Fault of others prior to loading on ocean vessel. The 
Cooperating Sponsor shall immediately notify the Chief, Debt Management 
Office, KCFMO, when any damage or loss to the commodity occurs that 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 the designated port of export. 
The Cooperating Sponsor shall promptly assign to CCC any rights to 
claims which may arise 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 claims, and retain the proceeds of all 
claims, for such loss or damage.
    (c) Survey and outturn reports related to claims against ocean 
carriers. (1) If the Program Agreement provides that CCC will arrange 
for an independent cargo surveyor to attend the discharge of the cargo, 
CCC will require the surveyor to provide a copy of the report to the 
Cooperating Sponsor.
    (2)(i) If the Cooperating Sponsor arranges for an independent cargo 
surveyor, the Cooperating Sponsor shall forward to the Chief, Debt 
Management Office, KCFMO, 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 to the Chief, Debt Management Office, KCFMO, 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;
    (B) 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, state the reason therefore 
and describe the actual method used to determine weights;
    (C) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (D) Advise on the quality of sweepings;
    (E) Obtain copies of port or vessel records, if possible, showing 
quantity discharged;
    (F) Provide immediate notification to the Cooperating Sponsor if 
additional services are necessary to protect cargo interests or if the 
surveyor has reason to believe that the correct quantity was not 
discharged; and
    (G) In the case of shipments arriving in container vans, 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 as container vans 
are opened.
    (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 costs incurred 
upon receipt of the survey report and the surveyor's invoice or other 
documents that establish the survey cost. CCC will not reimburse a 
Cooperating Sponsor for the costs of a delivery survey unless the 
surveyor also prepares a discharge survey, or for any other survey not 
taken contemporaneously with the discharge of the vessel, unless CCC 
determines that such action was justified in the circumstances.
    (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.
    (4) If practicable, all surveys shall be conducted jointly by the 
surveyor, the consignee, and the ocean carrier, and the survey report 
shall be signed by all parties.
    (d) Ocean carrier loss and damage. (1) Notwithstanding transfer of 
title, CCC shall have the right to file, pursue, and retain the 
proceeds of collection from claims arising from ocean transportation 
cargo loss and damage arising out of shipments of commodities provided 
to governmental Cooperating Sponsors; however, when 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. CCC will pay general average contributions for 
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.
    (2) Nongovernmental Cooperating Sponsors 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 (iv) provide CCC copies of all such claims. Notwithstanding 
the preceding sentence the nongovernmental Cooperating Sponsor 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 nongovernmental Cooperating 
Sponsor determines that the cost of filing and collecting the claim 
will exceed the amount of the claim. The nongovernmental Cooperating 
Sponsor 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 nongovernmental Cooperating Sponsors on 
claims against ocean carriers which are less than $200 may be retained 
by the nongovernmental Cooperating Sponsor. On claims involving loss or 
damage of $200 or more, nongovernmental 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 
include attorneys fees, fees of collection agencies, and similar costs. 
In no event

[[Page 60522]]

will CCC pay collection costs in excess of the amount collected on the 
claim.
    (4) A nongovernmental Cooperating Sponsor 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 nongovernmental 
Cooperating Sponsor has incurred on the lost or damaged commodity and 
which are included in the claims and paid by the liable party.
    (5) A nongovernmental 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) A nongovernmental 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 approval in writing by CCC. When a claim is compromised, a 
nongovernmental 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, a nongovernmental 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 nongovernmental 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 in 
this section to be retained shall be remitted to CCC. For the purpose 
of determining the amount to be retained by a nongovernmental 
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 nongovernmental 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 party alleged responsible for the damage, the 
nongovernmental Cooperating Sponsor shall assign its rights to the 
claim 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, a nongovernmental Cooperating Sponsor should 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, a 
nongovernmental 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 in this paragraph pay 
to a nongovernmental 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 
nongovernmental Cooperating Sponsor.
    (9) When a nongovernmental Cooperating Sponsor permits a claim to 
become time-barred, or fails to take timely actions to insure the right 
of CCC to assert such claims, and CCC determines that the 
nongovernmental Cooperating Sponsor failed to properly exercise its 
responsibilities under the Agreement, the nongovernmental 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. If a 
commodity, sale proceeds or program income is used for a purpose not 
permitted by the Program Agreement, or if a Cooperating Sponsor causes 
loss or damage to a commodity, sale proceeds, or program income through 
any act or omission or failure to provide proper storage, care and 
handling, the cooperating sponsor shall pay to the United States the 
value of the commodities, sale proceeds or program income lost, damaged 
or misused. CCC will consider normal commercial practices in the 
country of distribution 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 
sale 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 sale 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 sale 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) The Cooperating Sponsor shall pursue any claim by initial 
billings and at least three subsequent demands at not more than 30 day 
intervals. If these efforts fail to elicit a satisfactory response, the 
Cooperating Sponsor shall pursue legal action in the judicial system of 
country unless otherwise agreed by the Agricultural Counselor or 
Attache. The Cooperating Sponsors

[[Page 60523]]

must inform the Agricultural Counselor or Attache in writing of the 
reasons for not pursuing legal action; and the Agricultural Counselor 
or Attache may require the Cooperating Sponsor to obtain the opinion of 
competent legal counsel to support its decision prior to granting 
approval. If the Agricultural Counselor or Attache approves a 
Cooperating Sponsor's decision not to take further action on the claim, 
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. The Cooperating Sponsor shall determine 
the value of commodities misused, lost or damaged 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 Cooperating Sponsor may 
request the Agricultural Counselor or Attache to approve a commercially 
reasonable alternative basis to value the claim.
    (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 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 
report shall explain why any of the information required by this 
paragraph cannot be provided. The Cooperating Sponsor shall also report 
the details regarding any loss or misuse of sale 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 as described in paragraph (h)(1) of this section, 
together with any other relevant information the Cooperating Sponsor 
has available to it. The Agricultural Counselor or Attache may require 
additional information about any commodities lost, damaged or misused.
    (i) Handling claims proceeds. Claims against ocean carriers shall 
be collected in U.S. dollars (or in the currency in which freight is 
paid) and shall be remitted (less amounts authorized to be retained) by 
Cooperating 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 highest rate of exchange 
legally obtainable on the date of deposit with instructions to credit 
the deposit to an appropriate CCC account as determined by CCC. With 
respect to sale proceeds and program income, amounts recovered may be 
deposited in the same account as the sale proceeds and may be used for 
purposes of the program.


Sec. 1499.16  Records and reporting requirements.

    (a) Records and reports--general requirements. The Cooperating 
Sponsor shall maintain records for a period of three (3) years from the 
date of export of the commodities that accurately reflect the receipt 
and use of the commodities and any proceeds realized from the sale of 
commodities. The Government of the Exporting Country may, at reasonable 
times, inspect the Cooperating Sponsor's records pertaining to the 
receipt and use of the commodities and proceeds realized from the sale 
of the commodities, and have access to the Cooperating Sponsor's 
commodity storage and distribution sites and to locations of activities 
supported with proceeds realized from the sale of the commodities.
    (b) Evidence of export. The Cooperating Sponsor's freight forwarder 
shall, within thirty (30) days after export, submit evidence of export 
of the agricultural commodities to the Chief, Export Operations 
Division, KCCO. If export is by sea or air, the Cooperating Sponsor's 
freight forwarder shall submit five copies of the carrier's on board 
bill of lading or consignee's receipt authenticated by a representative 
of the U.S. Customs Service. The evidence of export must show the kind 
and quantity of agricultural commodities exported, the date of export, 
and the destination country.
    (c) Reports. (1) The Cooperating Sponsor shall submit a semiannual 
logistics report to the Agricultural Counselor or Attache and to the 
Director, CCC Program Support Division, FAS/USDA, Washington, DC 20250-
1031, covering the receipt of commodities. The first report shall be 
submitted by the date specified in the Program Agreement, and cover the 
time period specified in the Program Agreement. Reports thereafter will 
cover each subsequent six (6) month period until all commodities have 
been distributed or sold. The report must contain the following data:
    (i) Receipts of agricultural commodities including the name of each 
vessel, discharge port(s) or point(s) of entry, 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 during the reporting period;

[[Page 60524]]

    (iv) Status of claims for commodity losses both resolved and 
unresolved during the reporting period;
    (v) Quantity of commodity damaged or declared unfit during the 
reporting period; and
    (vi) Quantity and type of the commodity that has been directly 
distributed by the Cooperating Sponsor, distribution date, region of 
distribution, and estimated number of individuals benefiting from the 
distribution.
    (2) If the Program Agreement authorizes the sale or barter of 
commodities by the Cooperating Sponsor, the Cooperating Sponsor shall 
also submit a semiannual monetization report to the Agricultural 
Counselor or Attache and to the Director, CCC Program Support Division, 
FAS/USDA, Washington, DC 20250-1031, a monetization report covering the 
deposits into and disbursements from the special account for the 
purposes specified in the Program Agreement. The first report shall be 
submitted by the date specified in the Program Agreement, and cover the 
time period specified in the Program Agreement. Reports thereafter will 
cover each subsequent six (6) month period until all commodities have 
been distributed, bartered, or sale proceeds disbursed. The report must 
contain the following information and include both local currency 
amounts and U.S. dollar equivalents:
    (i) Quantity and type of commodities sold;
    (ii) Proceeds generated from the sale;
    (iii) Proceeds deposited to the special account including the date 
of deposit;
    (iv) Interest earned on the special account;
    (v) Disbursements from the special account, including date, amount 
and purpose of the disbursement;
    (vi) Any balance carried forward in the special account from the 
previous reporting period; and
    (vii) In connection with a section 416(b) Program Agreement only, a 
description of the effectiveness of sales and barter provisions in 
facilitating the distribution of commodities and products to targeted 
recipients, and a description of the extent, if any, that sales, barter 
or use of commodities:
    (A) Affected the usual marketings 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;
    (D) Discouraged local production and marketing of commodities in 
the recipient country;
    (E) Achieved the objectives of the Program Agreement; and
    (F) Could be improved in future agreements.
    (3) The Cooperating Sponsor shall furnish the Government of the 
Exporting Country such additional information and reports relating to 
the agreement as the Government of the Exporting Country may reasonably 
request.


Sec. 1499.17  Audits.

    Nongovernmental Cooperating Sponsors shall assure that audits are 
performed to assure compliance with Program Agreements and the 
provisions of this part. An audit undertaken in accordance with OMB 
Circular A-133, shall fulfill the audit requirements of this section. 
Audits shall be performed at least annually until all commodities have 
been distributed and sale proceeds expended. Both the auditor and the 
auditing standards to be used by the Cooperating Sponsor must be 
acceptable to CCC. The Cooperating Sponsor is also responsible for 
auditing the activities of recipient agencies that receive more than 
$25,000 of provided commodities or sale proceeds. This responsibility 
may be satisfied by relying upon independent audits of the recipient 
agency or upon a review conducted by the Cooperating Sponsor.


Sec. 1499.18  Suspension of the program.

    All or any part of the assistance provided under a Program 
Agreement, including commodities in transit, may be suspended by CCC 
if:
    (a) The Cooperating Sponsor fails to comply with the provisions of 
the Program Agreement or this part;
    (b) CCC determines 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 interference with, domestic 
production or marketing in the recipient country.


Sec. 1499.19  Sample documents and guidelines for developing proposals 
and reports.

    CCC has developed guidelines to assist the Cooperating Sponsors in 
developing proposals and reporting on program logistics and commodity 
sales. Cooperating Sponsors may obtain these guidelines from the 
Director, PDD.


Sec. 1499.20  Paperwork reduction requirement.

    The paperwork and record keeping requirements imposed by this part 
have been previously submitted to the Office of Management and Budget 
(OMB) for review under the Paperwork Reduction Act of 1995. OMB has 
assigned control number 0551-0035 for this information collection.

    Signed this November 18, 1996, in Washington, D.C.
Christopher E. Goldthwait,
General Sales Manager, FAS, and Vice President, Commodity Credit 
Corporation.
[FR Doc. 96-30032 Filed 11-27-96; 8:45 am]
BILLING CODE 3410-10-P