[Federal Register Volume 62, Number 17 (Monday, January 27, 1997)]
[Proposed Rules]
[Pages 3810-3823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-1736]


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

  Federal Register / Vol. 62, No. 17 / Monday, January 27, 1997 / 
Proposed Rules  

[[Page 3810]]



DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 17


Regulations Governing the Financing of Commercial Sales of 
Agricultural Commodities

AGENCY: Commodity Credit Corporation, Agriculture.

ACTION: Proposed rule.

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SUMMARY: The Commodity Credit Corporation (CCC) proposes to revise the 
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 purpose of these changes is to simplify the purchasing 
procedures and shorten the regulations, keep the costs of the Pub. L. 
480, title I program as low as possible, reflect the provisions of the 
Federal Agricultural Improvement and Reform Act of 1996 (``FAIR Act of 
1996''), and reduce the public reporting burden.

DATES: Written comments in duplicate should be submitted on or before 
March 28, 1997.

ADDRESSES: Comments should be sent to Christopher E. Goldthwait, 
General Sales Manager, Foreign Agricultural Service, U.S. Department of 
Agriculture, Room 5071 South Building, Stop 1001, 1400 Independence 
Ave., S.W., Washington, D.C. 20250-1001.

FOR FURTHER INFORMATION CONTACT: Connie B. Delaplane, Director, P.L. 
480 Operations Division, Export Credits, Foreign Agricultural Service, 
Room 4549 South Building, Stop 1033, U.S. Department of Agriculture, 
1400 Independence Ave., S.W., Washington, D.C. 20250-1033. Telephone: 
(202) 720-3664.

SUPPLEMENTARY INFORMATION: This proposed rule is issued in conformance 
with Executive Order 12866. It has been determined 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 proposed rule has been reviewed with regard to the 
requirements of the Regulatory Flexibility Act. The Vice President, 
CCC, who is the General Sales Manager, has certified that this rule 
will not have a significant economic impact on a substantial number of 
small entities. The proposed rule would eliminate several existing 
program requirements which should make it easier for firms to 
participate, including small businesses, and may result in some 
suppliers receiving payment more quickly. A copy of this proposed 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).

Paperwork Reduction Act

    This proposed rule revises the Pub. L. 480, title I financing 
regulations. CCC has submitted the information collection requirements 
in this proposed rule to the Office of Management and Budget (OMB) for 
approval under the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
    Title: Regulations--Financing Commercial Sales of Agricultural 
Commodities Under Title I, Pub. L. 480.
     OMB Control Number: 0551-0005.
    Expiration Date of Approval: Three years from OMB approval.
    Type of Request: Revision.
    Abstract: The purpose of the changes in this proposed rule is to 
simplify the purchasing procedures and shorten the regulations, keep 
the costs of the Pub. L. 480, title I program as low as possible, 
reflect the provisions of the ``FAIR Act of 1996'', and reduce the 
public reporting burden. The proposed rule would eliminate the 
requirement that suppliers report to USDA payments to representatives 
of importing countries and the requirement that prospective commodity 
suppliers submit information to the P.L. 480 Operations Division in 
order to participate. Prospective suppliers that have been determined 
to be eligible for participation in the GSM-102 or GSM-103 export 
credit guarantee programs could participate in title I sales. 
Prospective suppliers that are not yet eligible for GSM programs would 
have to submit information to GSM; this information is not as extensive 
as that presently required for becoming an eligible supplier under 
title I. CCC would require shipping agents to provide complete 
information on the firm and its activities only once per fiscal year 
instead of doing so each time they are nominated by a title I importer.
    The recordkeeping requirement would be retained. Successful 
commodity suppliers would still be required to report to USDA the 
details of sales made under the program for price review and to submit 
to USDA, for approval, information on any amendments to the sales.
    Estimate of Burden: CCC estimates the public reporting burden to be 
1 hour for new suppliers that need to develop the information necessary 
for eligibility under GSM programs; 1\1/4\ hours for shipping agents to 
prepare a complete package of information required by the regulations 
each fiscal year and \1/4\ hour to prepare each subsequent submission 
updating information as changes occur; and \1/4\ hour for commodity 
suppliers to prepare telephonic notices of sale and requests for 
approval of sale amendments.
    Respondents: Commodity suppliers that are interested in becoming 
eligible to participate in title I sales; shipping agents that have 
been selected by importers to help them purchase Title I commodities 
and arrange ocean transportation; and commodity suppliers that have 
been awarded sales under the program.
    Estimated Number of Respondents: Eight new commodity suppliers; 10 
shipping agents; and 15 successful commodity suppliers.
    Estimated Number of Responses per Respondent: One for each new 
commodity supplier; between 1 and 4 for each shipping agent; and, 
between 1 and 25 for each successful commodity supplier.
    Estimated Total Annual Burden on Respondents: Including 
recordkeeping requirements, 455 burden hours.
    CCC requests comments regarding: (a) Whether the collection of 
information is necessary for the proper performance of

[[Page 3811]]

the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
burden including the validity of the methodology and assumptions used; 
(c) ways to enhance the quality, utility, and clarity of the 
information to be collected; (d) ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology.
    USDA will accept comments on this information collection at: Desk 
Officer for Agriculture, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Washington, D.C. 20503, and to Connie 
B. Delaplane, Director, Pub. L. 480 Operations Division, Export 
Credits, Foreign Agricultural Service, Room 4549 South Building, Stop 
1033, U.S. Department of Agriculture, 1400 Independence Avenue, SW, 
Washington, DC 20250-1033. USDA will incorporate all comments as part 
of the public record.
    The Paperwork Reduction Act requires OMB to make a decision 
concerning the collection(s) of information contained in this proposed 
rule between 30 and 60 days after publication of this document in the 
Federal Register. Therefore, a comment to OMB is best assured of having 
its full effect if OMB receives it within 30 days of publication. This 
does not affect the deadline for the public to comment to USDA on the 
proposed rule. CCC submitted the information collection requirements to 
OMB totaling 455 burden hours.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The proposed 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

    Title I of the Agricultural Trade Development and Assistance Act of 
1954, as amended (Pub. L. 480) authorizes CCC to finance the sale and 
exportation of agricultural commodities on concessional credit terms. 7 
U.S.C. 1701 et seq. On September 13, 1995, the Foreign Agricultural 
Service (FAS) published an Advance Notice of Proposed Rulemaking (60 FR 
47495) requesting comments on how to streamline and simplify the 
purchasing and shipment procedures under the Public Law 480, title I 
program. CCC considered these comments in drafting the proposed rule, 
and welcomes further input regarding the issues raised in the ANPRM at 
this stage of rulemaking procedure. The key comments received are 
discussed below, except those that were outside the scope of the ANPRM 
and those which have already been implemented by final rules published 
on December 7, 1995 (60 FR 62072) and April 23, 1996 (61 FR 17823). A 
copy of the ``Benefit-Cost Assessment'' prepared in connection with 
this proposed rule can be obtained from Connie B. Delaplane. See ``For 
Further Information Contact.''

Discussion of Comments

Purchase Authorization

    After CCC and the participant have signed a title I agreement, CCC 
issues a purchase authorization (``PA'') which establishes general 
specifications for the commodity to be purchased, sets the contracting 
and delivery periods, and establishes conditions for CCC's financing of 
the commodity and any authorized ocean transportation costs. The 
participant issues, upon CCC approval, public Invitations for Bids 
(``IFB's'') for commodities and ocean transportation. These IFB's 
contain the importer's requirements including precise commodity 
specifications, delivery dates, and payment documents. Subsequently the 
importer and suppliers of commodities and ocean transportation enter 
into contracts based upon offers received in response to these IFB's.
    The ANPRM asked for comments on whether the PA could be eliminated, 
with the relevant portions being incorporated into the financing 
regulations or the IFB, as appropriate. Most comments stated there was 
no urgent need for the PA, agreeing that the PA terms could be 
incorporated in the title I agreement, the buyer's IFB or the 
regulations. One comment supported retaining the PA, suggesting that 
the PA terms were not appropriate for either the regulations or the 
IFB.
    The proposed rule would retain the PA. By doing so CCC could delete 
from the regulations Appendix A (Contracting Requirements) and Appendix 
B (Documentary Requirements). CCC's up-to-date contracting and 
documentary requirements for a commodity would appear in the PA. (The 
regulations specify that the PA may contain requirements in addition 
to, or in lieu of, the regulations.) Through the PA we could quickly 
update CCC's program requirements, if needed, and make that information 
widely available. If the PA did not exist, it would be necessary to 
make such changes by amending the regulations or the title I agreement, 
which could delay purchasing and shipment of the commodities. If the 
buyer were required to include such information in the IFB's, those 
documents would be longer and more complex.
    Some respondents felt that the PA issuance procedure could cause 
delays in implementing the program. We would like to receive specific 
examples of such delays to help us improve the process. A delay in PA 
issuance may simply reflect the fact that the participant is not ready 
to purchase.

Letters of Credit

    After the participant enters into commodity and ocean freight 
contracts, the existing regulations provide that the importer must 
cause a separate letter of credit to be opened for the commodity 
supplier, and for the supplier of ocean transportation when CCC is 
financing any part of the ocean transportation. CCC also issues a 
Letter of Commitment to the U.S. bank that has issued, confirmed or 
advised the letter of credit. The supplier receives payment from the 
bank upon presentation of required documentation. CCC will reimburse 
the bank, pursuant to this Letter of Commitment, for payments made 
under the letter of credit.
    The ANPRM asked for comments on an alternative procedure under 
which CCC would simply pay the suppliers directly for the commodity and 
for ocean freight costs which are financed by CCC. The participant 
would not open a letter of credit for these amounts, and there would be 
no need for CCC to issue any Letters of Commitment.
    Most comments supported direct payment by CCC, noting that the bank 
charges associated with letters of credit ranged from 1-2% of the value 
of the letter of credit. Since the buyers were required to bear these 
costs, the benefit of the title I program to the recipient was 
lessened. Under the proposed rule, title I recipients would save about 
$2.5-$5 million each year in banking costs, based on an estimated $250 
million per year which would be paid directly to suppliers by CCC 
instead of through letters of credit. U.S. banks would bear some costs 
from this change, based on the loss of these fees, and reduced 
opportunities to develop business relationships with food aid 
recipients.

[[Page 3812]]

The change is proposed based on the assessment that the cost to U.S. 
banks would be outweighed by the significant benefits to food aid 
recipients, given the relatively small size of these letter of credit 
fees relative to total bank income, the static or declining food aid 
budget, and the length of time needed for recipients to develop into 
commercial opportunities for U.S. banks. There would still be 
opportunities for banks to issue letters of credit for a portion of the 
ocean freight costs, as discussed in detail below. Based on the fiscal 
year 1996 title I program, such letters of credit might be opened for 
about $16 million, generating banking fees of $160,000-$320,000.
    Commodity suppliers have generally been unwilling to load vessels 
without a letter of credit to secure payment. Such delayed loading can 
be costly to the recipient, which may owe ``carrying charges'' to the 
commodity supplier and ``detention'' to the supplier of ocean 
transportation. These costs are not financed by CCC and they can be 
significant; for example, one day of ``detention'' for a U.S.-flag 
vessel can cost the recipient as much as $25,000.
    Finally, some title I recipient countries do not have well 
established banking systems through which to open letters of credit.
    As a result, the proposed rule would adopt the procedure for direct 
payment by CCC for all commodity and freight costs which are financed 
by CCC (see Sec. 17.9.) In connection with this change, the proposed 
rule would also prohibit certain payments which are permitted under 
existing regulations, but which cannot be financed by CCC. This 
includes consular fees for legalization of documents, and total ocean 
transportation brokerage commissions in excess of 2\1/2\ percent of the 
freight. Under existing regulations, the supplier is required to show 
on the invoice any amounts which are not eligible for financing by CCC. 
The bank may then pay the supplier the total invoice amount under the 
importer's letter of credit, and CCC would deduct the ineligible amount 
from its reimbursement to the bank under the Letter of Commitment. With 
the proposed direct payment procedure, there is no simple mechanism to 
allow a supplier to be paid for such costs while protecting CCC from 
ultimately bearing the costs. It would not be equitable to prohibit a 
supplier from recouping these costs as part of the supplier's sales 
price and such a rule may discourage firms from showing on the invoice 
any amounts ineligible for CCC financing. Consequently, the proposed 
rule would prohibit payment of these costs; however, suggestions are 
requested regarding other ways to address the issue of costs which are 
ineligible for CCC financing.
    Several comments expressed concern about how quickly CCC would pay 
suppliers, saying that direct payment would not be beneficial if it 
took longer than payment by a bank under a letter of credit. CCC plans 
to pay suppliers as promptly as a bank does, upon receipt of the 
documentation required by the importer and by CCC.
    This proposal is not expected to significantly increase USDA's 
workload, although there will be a slight increase in burden for the 
Farm Service Agency (``FSA''), which would be responsible for making 
the payments to suppliers.
    One comment raised the issue of potential financial exposure on the 
part of CCC for financing a product that did not meet specifications, 
for example. CCC would examine each document with reasonable care to 
ascertain that it appears on its face to be in accord with documentary 
requirements specified in the regulations, the PA, and the buyer's own 
IFB or contract. Agreements between CCC and the participants would 
provide that CCC would be liable only for breaching this standard of 
review.
    Comments indicated some confusion regarding payment of ocean 
transportation costs. CCC would not require the participant to open a 
letter of credit for shipments for which the participant paid the 
entire freight costs, or in the rare instances when CCC financed 100% 
of the freight costs. However, when CCC financed a portion of the 
freight costs on a shipment and the participant paid the balance, the 
participant would be required to open a letter of credit for its share 
of the freight costs. For example, when commodities are shipped on a 
U.S.-flag vessel and CCC finances only the ocean freight differential, 
the supplier would collect the ocean freight differential from CCC and 
the balance from a U.S. bank under the participant's letter of credit.
    The regulations would require the participant to open this partial 
letter of credit in order to provide the supplier of ocean 
transportation a high level of confidence that the participant's 
portion of the freight would be paid in accordance with the contract. 
This should keep freight costs down and encourage competition.
    CCC would not pay any commodity or freight costs which were not to 
be financed by CCC, which is consistent with the current operation of 
the program.

Cost and Freight

    The ANPRM asked for comments on whether CCC should finance 
commodity contracts on a cost and freight (C&F) basis, or a cost, 
insurance and freight (CIF) basis, instead of requiring separate 
contracts for the commodity and the ocean transportation. Under such 
contracts the commodity supplier would be responsible for securing 
ocean transportation.
    Respondents were concerned that such contracts would keep smaller 
commodity suppliers, which do not own or control vessels, from offering 
competitively. They also noted that it would be more difficult to 
enforce cargo preference requirements for use of U.S.-flag vessels with 
C&F or CIF sales. Several comments stated that contracting under these 
terms would blur the distinction between the commodity costs and the 
freight costs, complicating both commodity price review and the 
determination of ``fair and reasonable'' U.S.-flag freight rates by the 
Maritime Administration, Department of Transportation. The proposed 
rule retains the option for such contracts; however, permitting such 
contracts would be a matter of agency policy, as at present.

Other Comments

    The proposed rule contains several provisions based on other 
comments submitted in response to the ANPRM. For example, shipping 
agents (firms helping the buyers arrange the purchase and shipment of 
Title I commodities) would be required to provide complete information 
on the firm and its activities only once per fiscal year. At present, 
they must submit the information each time a firm is nominated by a 
recipient. The firm would certify, in conjunction with any subsequent 
nominations as shipping agent during the fiscal year, that the 
information initially submitted was still current, or would specify any 
changes. This proposal would reduce the reporting burden on shipping 
agents and also save a small amount of FAS staff time.
    Another comment recommended that the Form FAS-359 (``Declaration of 
Sale'') and the Form CCC-105 (``Request for Vessel Approval'') be 
eliminated. We believe that it is necessary to retain a written price 
approval document, a purpose served by the existing ``Declaration of 
Sale'' form. This key document insures that all parties--the commodity 
supplier, FAS, and the entity making payment--clearly understand the 
terms of the sale as approved for financing by CCC. The document 
includes the unit price,

[[Page 3813]]

delivery period, and commodity specifications.
    The Form CCC-105, submitted to FAS by the charterer, is the formal 
written notification from the importer regarding the ocean freight 
contract and contains the information on which the written ``Advice of 
Vessel Approval'' is based (Form CCC-106). The latter form is a 
required payment document, which shows the amount of freight to be 
financed by CCC, along with the main contract terms. If the Form CCC-
105 were eliminated, the CCC-106 would be more likely to contain errors 
and thus delay payment to the supplier.

Other Key Changes

    The proposed rule would contain a definition of ``private entity,'' 
and would amend the definition of ``participant'' to cover both private 
entities and foreign countries. This reflects the FAIR Act of 1996 
which permitted title I agreements to be signed with private entities. 
(References to ``private trade entities,'' no longer included under the 
legislation, have been deleted.) The proposed rule would require that, 
in order to participate, a private entity would need to have a legal 
presence in the United States.
    The proposed rule would eliminate the requirement in existing 
Sec. 17.7 that prospective commodity suppliers must submit information 
to the P.L. 480 Operations Division, FAS, including a current financial 
statement, to be determined eligible to participate. Any supplier 
eligible under the GSM-102 or GSM-103 programs could participate. 
Financial information on the firm and experience as an exporter are not 
required for eligibility under the GSM-102 and GSM-103 programs, which 
are fully commercial. Comments are requested as to whether the bid and 
performance bond requirements in the importer's IFB would be sufficient 
to insure performance by a supplier.
    Approximately ten firms per year wish to become eligible commodity 
suppliers under title I. Two or three of those firms are already 
eligible under the GSM programs, and would have no additional reporting 
burden to be eligible under title I. The remaining seven or eight firms 
would require only about an hour to develop the information needed for 
eligibility under the GSM programs instead of the three hours currently 
estimated for title I. FAS would also save a small amount of staff time 
by deleting this separate eligibility requirement for title I 
suppliers.
    The proposed rule would also require that cotton suppliers report 
sales to FAS, instead of to the Kansas City Commodity Office, Farm 
Service Agency. FAS would become responsible for price review and for 
vessel approval for cotton shipments, as it is now for all other 
commodities purchased under title I.
    The proposed rule would eliminate the requirement in existing 
Sec. 17.12 that suppliers report to USDA any payments made to 
representatives of the importer or importing country. The underlying 
legislation was repealed in December 1995 by the Federal Reports 
Elimination and Sunset Act of 1995. CCC will not finance such payments, 
however, except for ocean transportation brokerage commissions which do 
not exceed 2-\1/2\% of the freight.
    The ocean transportation provisions in Sec. 17.8(b)(2) of the 
proposed rule would not contain the prohibition in existing 
Sec. 17.14(b)(2) against ``clarification or submission of additional 
information'' under competitive freight IFB's. This is not intended to 
reflect a substantive policy change. Only freight offers which were 
responsive to the terms of the IFB as of the date and time for receipt 
of offers could be considered, as at present. No information or 
clarification submitted after that date and time could be used to make 
the offer responsive. The prohibition against negotiation also remains 
in the regulations. This change would simply acknowledge that it is 
occasionally necessary to seek factual information after an offer has 
been submitted, such as the maximum tonnage which can be loaded at a 
certain port, given existing draft conditions and stowage factors for 
the commodity in question.
    The proposed rule does not contain the requirement in existing 
Sec. 17.18(c)(7) that a ``transshipment certification'' be placed on 
the commodity invoice in certain circumstances. The Maritime 
Administration of the U.S. Department of Transportation published a 
final rule on May 17, 1996 (61 FR 24895) which amended the definition 
of ``available'' commercial U.S.-flag service for shipments during the 
1996-2000 Great Lakes shipping seasons. This change made the 
transshipment certification unnecessary. (Purchase authorizations for 
affected commodities already exempt exporters from this requirement.)
    The proposed rule would not provide for the obsolete ``letter of 
conditional reimbursement'' procedure (existing Sec. 17.4(h)), nor for 
the ``reimbursement method of financing,'' (existing Sec. 17.16) which 
would no longer be necessary with direct payment to suppliers by CCC.

List of Subjects in 7 CFR Part 17

    Agricultural commodities, Exports, Finance, Maritime carriers.

    Accordingly, it is proposed to revise Part 17 of 7 CFR as follows:

PART 17--SALES OF AGRICULTURAL COMMODITIES MADE AVAILABLE UNDER 
TITLE I OF THE AGRICULTURAL TRADE DEVELOPMENT AND ASSISTANCE ACT OF 
1954, AS AMENDED

Subpart A--Regulations Governing the Financing of Commercial Sales 
of Agricultural Commodities

Sec.
17.1  General.
17.2  Definition of terms.
17.3  Purchase authorizations.
17.4  Agents of the participant or importer.
17.5  Contracts between commodity suppliers and importers.
17.6  Discounts, fees, commissions and payments.
17.7  Notice of sale procedures.
17.8  Ocean transportation.
17.9  CCC payment to suppliers.
17.10  Refunds and insurance.
17.11  Recordkeeping and access to records.

    Authority: 7 U.S.C. 1701-1704, 1731-1736b, 1736f, 5676; E.O. 
12220, 45 FR 44245, 3 CFR, 1980 Comp., p. 263.

Subpart A--Regulations Governing the Financing of Commercial Sales 
of Agricultural Commodities


Sec. 17.1  General.

    (a) What this subpart covers. This subpart contains the regulations 
governing the financing of the sale and exportation of agricultural 
commodities by the Commodity Credit Corporation (CCC), through private 
trade channels to the maximum extent practicable, under the authority 
of Title I of the Agricultural Trade Development and Assistance Act of 
1954, as amended (hereinafter called ``the Act'').
    (b) Agricultural commodities agreements. (1) Under the Act, the 
Government of the United States enters into Agricultural Commodities 
Agreements with governments of foreign countries or with private 
entities. These agreements cover financing of the sale and exportation 
of agricultural commodities, including certain ocean transportation 
costs.
    (2) Agricultural Commodities Agreements may provide that a 
participant will repay CCC for the financing extended by CCC either in 
dollars or in local currencies.
    (c) Purchase authorizations. This subpart covers, among other 
things, the issuance by the General Sales Manager of purchase 
authorizations which authorize the participant to

[[Page 3814]]

    (1) Purchase agricultural commodities and
    (2) Procure ocean transportation therefor.
    (d) Financing. For amounts to be financed by CCC, CCC will pay the 
supplier of commodity or of ocean transportation upon receipt of the 
documents specified in the subpart, the purchase authorization and the 
IFB. The cost of ocean freight or ocean freight differential will be 
financed by CCC only when specifically provided for in the purchase 
authorization.
    (e) Where information is available. General information about 
operations under this subpart is available from the Director, Public 
Law 480 Operations Division, Foreign Agricultural Service, U.S. 
Department of Agriculture, Washington, D.C. 20250-1033. Information 
about financing operations under this subpart, including forms 
prescribed for use thereunder, is available from the Controller, 
Commodity Credit Corporation, U.S. Department of Agriculture, P.O. Box 
2415, Washington, D.C. 20013-2415.


Sec. 17.2  Definition of terms.

    Terms used in the regulations in this subpart are defined or 
identified as follows, subject to amplification in subsequent sections:
    Affiliate and associated company--any legal entity which owns or 
controls, or is owned or controlled by, another legal entity. For a 
corporation, ownership of the voting stock is the controlling 
criterion. A legal entity is considered to own or control a second 
legal entity if--
    (1) The legal entity owns an interest of 50 percent or more in the 
second legal entity, or
    (2) The legal entity and one or more other legal entities, in which 
it owns an interest of 50 percent or more, together own an interest of 
50 percent or more in the second legal entity, or
    (3) The legal entity owns an interest of 50 percent or more in 
another legal entity which in turn owns an interest of 50 percent or 
more in the second legal entity.
    CCC--the Commodity Credit Corporation, U.S. Department of 
Agriculture.
    Commodity--an agricultural commodity produced in the United States, 
or product thereof produced in the United States.
    Controller--the Controller, Commodity Credit Corporation, or the 
Controller's designee.
    Copy--a photocopy or other type of copy of an original document 
showing all data shown on the original, including signature or the name 
of the person signing the original or, if the signature or name is not 
shown on the copy, a statement that the original was signed.
    Delivery--the transfer to or for the account of an importer of 
custody and right of possession of the commodity at U.S. ports or 
Canadian transshipment points in accordance with the delivery terms of 
the contract and purchase authorization. For purposes of financing, 
delivery is deemed to occur as of the on-board date shown on the ocean 
bill of lading.
    Destination country--the foreign country to which the commodity is 
exported.
    Director--the Director, Public Law 480 Operations Division, Foreign 
Agricultural Service.
    Expediting services--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.
    FAS--the Foreign Agricultural Service, U.S. Department of 
Agriculture.
    FSA--the Farm Service Agency, U.S. Department of Agriculture.
    FSA Office--the office designated in the purchase authorization to 
administer this financing operation on behalf of CCC.
    Finance--To expend CCC funds, whether or not the participant is 
required to repay the funds to CCC. For example, this subpart refers to 
CCC ``financing'' both the ocean freight differential, which the 
participant does not repay, and the commodity cost, which the 
participant does repay.
    Form CCC-106--the form entitled ``Advice of Vessel Approval.''
    Form CCC-329--the signed original of the form entitled ``Supplier's 
Certificate.''
    General Sales Manager and GSM--the General Sales Manager, FAS, or 
the General Sales Manager's designee.
    Importer--the person that contracts with the supplier for the 
importation of the commodity. The importer may be the participant or 
any person to which a participant has issued a subauthorization.
    Importing country--any nation with which an agreement has been 
signed under the Act.
    Invitation for bids and IFB--a publicly advertised request for 
offers.
    Legal entity includes, but is not limited to, an individual (except 
that an individual and his or her spouse and their minor children are 
considered as one legal entity), partnership, association, company, 
corporation and trust.
    Letter of credit--an irrevocable commercial letter of credit 
issued, confirmed, or advised by a banking institution in the United 
States and payable in U.S. dollars.
    Local currency and foreign currency--interchangeable terms; the 
currency of the importing or destination country.
    Notice of arrival--a written notice in accordance with Sec. 17.8(g) 
stating that the vessel has arrived at the first port of discharge.
    Ocean bill of lading--
    (1) In the case of cargo carried on a vessel other than LASH 
barges: An ``on-board'' bill of lading, or a bill of lading with an 
``on-board'' endorsement, which is dated and signed or initialed on 
behalf of the carrier, or
    (2) In the case of cargo carried in a LASH barge:
    (i) For the purpose of financing commodity price, an ``on-board'' 
bill of lading showing the date the commodity was loaded on board 
barges, which is dated and signed or initialed on behalf of the 
carrier, or a bill of lading or a LASH barge bill of lading with an 
``on-board barge'' endorsement which is dated and signed or initialed 
on behalf of the carrier.
    (ii) For the purpose of financing ocean freight or ocean freight 
differential, a bill of lading which is dated and signed or initialed 
on behalf of the carrier indicating that the barge containing the cargo 
was placed aboard the vessel named in the Form CCC-106 not later than 
eight running days after the last LASH barge loading date (contract 
layday) specified in the Form CCC-106. This may be either an ``on 
board'' bill of lading or a bill of lading or a LASH barge bill of 
lading with an ``on-board ocean vessel'' endorsement.
    (3) Documentary requirements for a copy of an ``ocean bill of 
lading'' refer to a non-negotiable copy thereof.
    Ocean freight contract--a charter party or liner booking note.
    Ocean transportation--interchangeable with the term ``ocean 
freight''.
    Ocean transportation brokerage--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--furnishing the following 
services: lightening, stevedoring, and bagging (whether these services 
are performed at 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

[[Page 3815]]

port is not located in the destination country.
    Participant--the collective term used to denote the importing 
country or the private entity with which an agreement has been 
negotiated under the Act.
    Person--an individual or other legal entity.
    Private entity--the nongovernmental legal entity with which an 
agreement has been signed under the Act. A foreign private entity must 
maintain a bona fide business office in the United States and have a 
person, principal, or agent on whom service of judicial process may be 
had in the United States.
    Purchase authorization--Form FAS-480, ``Authorization to Purchase 
Agricultural Commodities,'' issued to a participant under this subpart.
    Purchasing agent--any person engaged by a participant to procure 
agricultural commodities.
    Secretary--the Secretary of Agriculture of the United States, or 
the Secretary's designee.
    Selling agent--a representative for the supplier of the commodity, 
who is not employed by or otherwise connected with the importer or the 
participant.
    Shipping agent--any person engaged by a participant to arrange 
ocean transportation.
    Ships broker--any person engaged by a supplier of ocean 
transportation to arrange employment of vessels.
    Supplier--any person who sells a commodity to an importer under the 
terms of a purchase authorization, or who sells ocean transportation to 
an importer or supplier of the commodity under the terms of a purchase 
authorization.
    United States--the 50 States, the District of Columbia, and Puerto 
Rico.
    USDA--the U.S. Department of Agriculture; includes all or any of 
the agencies mentioned in this section.


Sec. 17.3  Purchase authorizations.

    (a) Issuance. After an agreement is signed, the GSM will issue a 
purchase authorization to the participant for each commodity included 
in the agreement.
    (b) Contents. Each purchase authorization includes the following 
information:
    (1) The commodity to be purchased and specifications, approximate 
quantity and maximum dollar amount authorized;
    (2) Contracting requirements;
    (3) The contracting period, during which suppliers and importers 
must enter into contracts; and the delivery period, during which the 
commodity must be delivered;
    (4) The terms of delivery to the importer;
    (5) Documentation required for CCC financing in addition to or in 
lieu of the documentation specified in Sec. 17.9;
    (6) Provisions relating to payment to CCC, if applicable;
    (7) The address of the FSA office administering the financing 
operation on behalf of CCC;
    (8) The method of financing provided under the Agricultural 
Commodities Agreement;
    (9) Any provisions relating to financing by CCC in addition to or 
in lieu of those specified in this subpart;
    (10) Authorization to procure ocean transportation, and provisions 
relating to the financing of ocean freight or ocean freight 
differential, as applicable;
    (11) Any other provisions considered necessary by the General Sales 
Manager.
    (c) Applicability of this subpart. In addition to the provisions of 
a particular purchase authorization, each purchase authorization, 
unless otherwise provided, is subject to the provisions of this subpart 
to the same extent as if the provisions were fully set forth in the 
purchase authorization.
    (d) Modification or revocation. The General Sales Manager reserves 
the right at any time for any reason or cause whatsoever to supplement, 
modify or revoke any purchase authorization, including the termination 
of deliveries, if it is determined to be in the interest of the U.S. 
Government. CCC shall reimburse suppliers who would otherwise be 
entitled to be financed by CCC for costs which were incurred as a 
result of such action by the GSM in connection with firm sales or 
shipping contracts, and which were not otherwise recovered by the 
supplier after a reasonable effort to minimize such costs: Provided, 
however, That such reimbursement shall not be made to a supplier if the 
GSM determines that the GSM's action was taken because the supplier 
failed to comply with the requirements of the regulations in this 
subpart or the applicable purchase authorization; Provided further, 
That reimbursement to suppliers of ocean transportation shall not 
exceed the ocean freight differential when the purchase authorization 
provides only for financing the differential.
    (e) Subauthorizations. The participant may issue subauthorizations 
to importers consistent with the terms of the applicable purchase 
authorization. The participant, in subauthorizing, shall specify to 
importers all the provisions of the applicable purchase authorization 
which apply to the subauthorization.
    (f) Cotton textiles. (1) Except as provided in paragraph (f)(2) of 
this section, financing of textiles under this subpart is limited to 
cotton yarns and fabrics processed up to and including the dyed and 
printed state, and preshrinking. Any processing of such yarns and 
fabrics beyond this stage will be at the expense of the participant.
    (2) Purchase authorizations may permit cotton textiles processed 
beyond the stage described in paragraph (f)(1) of this section to be 
purchased, but the maximum financing by CCC is limited to the 
equivalent value of the cotton yarns and fabrics described in paragraph 
(f)(1) of this section, contained in the textiles, plus eligible ocean 
transportation costs.
    (3) Financing is available only for textiles manufactured entirely 
of U.S. cotton in the United States.


Sec. 17.4  Agents of the participant or importer.

    (a) General. (1) A participant or importer is not required to use a 
purchasing agent or shipping agent, or employ the services of any other 
agent, broker, consultant, or other representative (hereafter 
``agent'') in connection with arranging the purchase of agricultural 
commodities under title I of the Act and arranging ocean transportation 
for such commodities. However, if an agent is used, the participant 
shall submit a written nomination of the agent to the Deputy 
Administrator, Export Credits, along with a copy of the proposed 
agreement between the participant or importer and such agent. The 
written nomination shall also specify the period of time to be covered 
by the nomination. A person may not act as agent for a participant or 
importer unless the Deputy Administrator, Export Credits, has provided 
a written statement that the nomination is accepted in accordance with 
the provisions of this section.
    (2) See Sec. 17.6(c) regarding commissions, fees, or other 
compensation of any kind to agents of a participant or importer.
    (3) A freight agent employed by the Agency for International 
Development under titles II and III of the Act 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.
    (b) Affiliate defined. For purposes of this section, the term 
affiliate has the meaning provided in Sec. 17.2 and, in addition, 
persons will also be considered to be affiliates if any of the 
following conditions are met:
    (1) There are any common officers or directors.

[[Page 3816]]

    (2) There is any investment by eligible commodity suppliers, 
selling agents, or persons engaged in 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 or not any part of the 
ocean transportation is financed by the U.S. Government, or by agents 
of such persons, or their officers or directors, in the agent of the 
participant or importer.
    (3) There is any investment by the agent of the participant or 
importer, or its officers or directors, in approved commodity 
suppliers; selling agents; or persons engaged in 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 or not any 
part of the ocean transportation is financed by the U.S. Government, or 
in agents of such persons. These conditions include those cases in 
which investment has been concealed by the utilization of any scheme or 
device to circumvent the purposes of this section but does not include 
investment in any mutual fund.
    (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:
    (1) The names of all incorporators;
    (2) The names and titles of all officers and directors;
    (3) The names of all affiliates, including the names and titles of 
all officers and directors of each affiliate, and a description of the 
type of business in which the affiliate is engaged;
    (4) The names and proportionate share interest of all stockholders;
    (5) If beneficial interest in stock is held by other than the named 
shareholders, the names of the holders of the beneficial interest and 
the proportionate share of each;
    (6) The amount of the subscribed capital;
    (7) For USDA acceptance of a nomination covering services provided 
during each U.S. fiscal year (October 1--September 30), 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 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 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; 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. (1) USDA will consider accepting the 
nomination of a person to act as an agent of the participant or 
importer when the documents required to be submitted by this section 
are received by the Deputy Administrator, Export Credits.
    (2) USDA's acceptance of such nomination shall remain in effect for 
the period of time requested by the participant or such shorter period 
as the Deputy Administrator, Export Credits, may determine. 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 paragraphs (c) (7) and (8) of this 
section.
    (3) A person is required to submit the information and 
documentation required by paragraph (c) of this section to support the 
person's first nomination to act as an agent of any participant or 
importer for each fiscal year. For subsequent nominations covering the 
same fiscal year, the person must provide a written certification that 
all the information and documentation provided earlier is still 
accurate and complete, or must provide the details of any changes.
     (e) Notification. The Deputy Administrator, Export Credits shall 
promptly notify persons nominated as agents of the participant or 
importer, of the determination or of the need for further inquiry, and 
shall provide a written response within 30 calendar days of receipt of 
all the required documents. If USDA will not accept the nomination, the 
notification shall state the reasons therefor. The determination of the 
Deputy Administrator, Export Credits is effective immediately and 
continues in effect pending the result of any appeal to the General 
Sales Manager.
     (f) Non-acceptance or withdrawal. (1) If USDA does not accept the 
nomination of a person, or if acceptance has been withdrawn pursuant to 
the provisions of this section, the person may, within 30 calendar 
days, present to the General Sales Manager, orally or in writing, any 
reasons as to why such action should not stand. Nothing in this 
paragraph shall be construed as to prohibit a person whose nomination 
has not been accepted or whose acceptance has been withdrawn by USDA 
from being nominated at a later time.
    (2) If, in the procurement of commodities made available under 
title I, Public Law 480, a participant or importer uses an agent whose 
nomination has not been accepted in writing by the Deputy 
Administrator, Export Credits, USDA may withhold sales approval.
    (3) If, in the shipping of commodities made available under title 
I, Public Law 480, a participant or importer uses an agent whose 
nomination has not been accepted in writing by the Deputy 
Administrator, Export Credits, USDA may withhold vessel approval or may 
deduct from the ocean freight differential to be paid, the amount of 
any commission to the agent in connection with the shipment.
    (g) No competitive advantage. 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.

[[Page 3817]]

Sec. 17.5  Contracts between commodity suppliers and importers.

    (a) Commodity suppliers and selling agents. (1) In order to 
participate in the Public Law 480, title I program, a prospective 
commodity supplier must submit to CCC the information required by 7 CFR 
1493.30.
    (2) If, at the time the commodity supplier reports the sale it is 
determined that an agent employed or engaged by a commodity supplier to 
obtain a contract is not a selling agent as defined in Sec. 17.2, the 
sale will not be eligible for financing.
    (b) Eligibility for financing. To be eligible for financing, 
commodity contracts must comply with the following requirements unless 
otherwise specified in the purchase authorization.
    (1) Commodity contracts between suppliers and importers are 
considered to be conditioned on the approval by USDA of the contract 
price; conformance of the sale to the provisions of the purchase 
authorization; responsiveness of the offer to IFB terms; and compliance 
by the supplier and the selling agent, if any, with paragraph (a) of 
this section.
    (2) Importers and suppliers must enter into contracts within the 
contracting period specified in the purchase authorization. The 
contracts must provide for deliveries to the importer in accordance 
with the delivery terms and during the delivery period specified in the 
purchase authorization, or any amendment or modification thereto.
    (3) Contracts for a commodity, under a purchase authorization which 
limits delivery terms to f.o.b. or f.a.s., must be separate and apart 
from the contracts for ocean transportation of the commodity.
    (4) The supplier's sales price may not exceed the prevailing range 
of export market prices as applied to the terms of sale at the time of 
sale, as determined by USDA. The ``time of sale'' is the date and time 
specified in the IFB for receipt of offers; or the date of the contract 
amendment if the amendment affects the sale price, as determined by 
USDA. The contract price may not be on a cost plus a percentage-of-cost 
basis.
    (c) Contracting procedures--(1) Purchasing--general. (i) Importers 
must purchase commodities on the basis of IFB's.
    (ii) The participant shall maintain a record of all offers received 
from suppliers until the expiration of three years after final payment 
under contracts awarded under the purchase authorization. The GSM may 
examine these records or request specific information in connection 
with the offers.
    (2) Invitations for bids. The following conditions shall apply on 
all purchases of commodities on the basis of IFB's:
    (i) The General Sales Manager must approve the terms of the IFB 
before it is issued by the importer.
    (ii) The importer shall issue the IFB in the United States and 
shall open all offers in public in the United States at the time and 
place specified in the IFB.
    (iii) The IFB must permit submission of offers from all suppliers 
who meet the requirements of this subpart.
    (iv) The IFB may not preclude offers for shipment from any United 
States port(s) unless the purchase authorization provides for 
exportation only from certain ports.
    (v) The IFB may not establish minimum quantities to be offered or 
which will be considered.
    (vi) The IFB must be in compliance with the regulations, the 
purchase authorization, and sound commercial standards.
    (3) Contract awards. (i) The importer shall consider only offers 
which are responsive to the IFB and shall make awards either on the 
basis of the lowest commodity price(s) offered or on the basis of 
lowest landed cost. However, when vessels offered under the flag of the 
participant, the importing country or the destination country; or 
vessels controlled by the participant, the importing country or the 
destination country are to be used, the participant must purchase 
commodities for shipment on such vessels only on the basis of the 
lowest commodity price(s) offered. This limitation may, however, be 
waived by the GSM:
    (A) When the lowest commodity price(s) offered are in locations 
where vessels cannot reasonably be made available without a substantial 
increase in freight costs to the participant;
    (B) For small quantities offered at additional loading points (in 
aggregate not more than 15 percent of the total tonnage offered by a 
vessel); or
    (C) Where this limitation would conflict with the purposes of the 
program.
    (ii) For purposes of this section, ``lowest commodity price(s)'' 
means the lowest commodity price(s) offered for loading onto the type 
of vessel (dry bulk carrier, tanker, etc.) to be utilized to carry the 
commodity purchased.
    (iii) For purposes of this section, ``lowest landed cost'' means 
the combination of commodity price and ocean freight rate resulting in 
the lowest total cost to deliver the commodity to the importing 
country, considering the quantity which must be shipped on privately 
owned U.S.-flag commercial vessels, as determined by the Director. 
Lowest landed cost may be defined on either a foreign flag or U.S. flag 
basis. Awards may not be made on the lowest landed cost basis unless 
IFB's are issued for commodity and ocean freight so that all commodity 
and ocean freight offers are reviewed simultaneously.
    (iv) Participants are encouraged to purchase commodities on the 
basis of lowest landed cost when U.S. flag vessels are to be used. If 
such commodity purchases are not made on the basis of lowest landed 
cost (U.S. flag), ocean freight differential payments will nonetheless 
be calculated on the rates of U.S. flag vessels which would represent 
the lowest landed cost.
    (v) Announcement of awards shall be made in the United States. The 
importer shall promptly submit to the Director copies of all offers 
received with a copy of the IFB which was issued. No sale can be 
approved for financing until this information has been received by FAS. 
The decision of the GSM shall be final regarding the responsiveness of 
offers to IFB terms in the awarding of contracts.
    (d) Contract quantity eligible for financing. The quantity eligible 
for financing in the contract between the supplier and the importer may 
not exceed that quantity approved by the Public Law 480 Operations 
Division, FAS, including any approved contract tolerance.
    (e) Contract disputes. Contracts between suppliers and importers 
should stipulate the responsibility of each party for payment of any 
costs not eligible for financing by CCC. Questions as to payment of 
ineligible costs should be resolved between the contracting parties.
    (f) Contract provisions. Each contract entered into for financing 
under this subpart is deemed to include all terms and conditions 
required by this subpart.
    (g) Export Trade Act (Webb-Pomerene Law). A supplier who is a 
member of a Webb-Pomerene association and who enters into contracts 
with importers as a member of such an association shall so indicate in 
a statement on, or attached to, the copy of the supplier's detailed 
invoice referred to in Sec. 17.9(c)(2).


Sec. 17.6  Discounts, fees, commissions and payments.

    For purposes of this section, the term ``payment'' means a 
commission, fee or other compensation of any kind. The term ``other 
compensation of any kind'' includes anything given in return for any 
consideration, services, or benefits received or to be received.
    (a) Discounts. If a contract provides for one or more discounts 
(including but not limited to trade or quantity

[[Page 3818]]

discounts and discounts for prompt payment) whether expressed as such 
or as ``commissions'' to the importer, CCC will only pay the invoice 
amount after the discount (supplier's contracted price less all 
discounts).
    (b) Selling agents. (1) A supplier may not make a payment to a 
selling agent employed or engaged by the supplier to obtain a contract. 
This prohibition applies to any payment to a person who has acted as a 
selling agent to obtain a contract even though the payment may be for 
services performed that are not themselves services to obtain a 
contract.
    (2) A person is deemed to act ``to obtain a contract'' if the 
person acts on behalf of a commodity supplier to:
    (i) Influence a buyer to award a contract to the supplier;
    (ii) Give the supplier a competitive advantage in relation to other 
potential suppliers; or
    (iii) Influence CCC to approve a contract for financing under these 
regulations.
    (3) CCC will not consider acts which are purely ministerial in 
nature and do not require the exercise of personal influence, judgment, 
or discretion (such as attending bid openings or presenting offers at 
bid openings), or services to implement a contract after it has been 
entered into by the parties (such as handling documentation problems or 
contract disputes), as acts to obtain a contract.
    (c) Other prohibitions. (1) Suppliers of commodities or ocean 
transportation may not:
    (i) Pay a commission to the participant or importer; to any agency, 
including an agency of the government of the importing country or the 
destination country; or to a corporation owned or controlled by the 
participant or the government of the importing country or the 
destination country.
    (ii) Pay a commission to any affiliate of the participant, if the 
participant is a private entity;
    (iii) Make any payment to an agent of the participant or importer, 
in the person's capacity as such agent, other than total ocean 
transportation brokerage commissions which do not exceed 2\1/2\ percent 
of the freight.
    (iv) Pay an address commission or payment.
    (2) For ocean transportation, in addition to this paragraph, see 
also Sec. 17.8(j).
    (3) If a payment is made in violation of this section, CCC may 
demand dollar refund of the entire amount financed by CCC under the 
contract.


Sec. 17.7  Notice of sale procedures.

    (a) Telephonic notice of sale. The supplier shall, immediately upon 
making a firm sale, telephone a notice of sale to Public Law 480 
Operations Division, FAS. A sale is considered firm when the supplier 
has been notified by the importer of an award, even though the contract 
is conditioned on approval by FAS (see Sec. 17.5(b)(1).) If the 
supplier fails to furnish a notice of sale within 3 working days after 
the date of sale, CCC has the right to refuse to finance the sale.
    (b) Sale approval. (1) Public Law 480 Operations Division will 
notify the supplier by telephone of approval of the notice of sale.
    (2) The supplier will prepare Form FAS-359, ``Declaration of 
Sale,'' and submit it to Public Law 480 Operations Division promptly as 
soon as FAS has provided the CCC Registration Number to the supplier. 
The supplier or the supplier's authorized representative must sign the 
form.
    (3) Each Form FAS-359 shall cover only a single sale contract. If a 
sale is made under two or more purchase authorizations, the supplier 
will prepare separate forms for each purchase authorization.
    (4) If any correction is needed to the Form FAS-359, the supplier 
must immediately notify FAS. If a contract is amended, the supplier 
should present the original Form FAS-359 for payment along with a copy 
of the written USDA approval of the contract amendment.
    (c) Sale disapproval. (1) Public Law 480 Operations Division, FAS, 
will notify the supplier by telephone when a sale is disapproved for 
financing. The related contract between the supplier and importer 
shall, for purposes of financing, be considered null and void.
    (2) On receipt of a notice of disapproval, the supplier shall 
promptly notify the importer.
    (d) Contract delivery period. Price approval is limited to exports 
made during the delivery period stated in the notice of sale or any 
contract amendment approved by the Public Law 480 Operations Division, 
FAS. If the supplier cannot complete delivery by the terminal delivery 
date of the contract delivery period, the supplier and the participant 
or importer shall submit a notice of contract amendment as provided in 
paragraph (e) of this section. If the supplier fails to comply, 
Sec. 17.10(d) of the regulations shall apply.
    (e) Contract amendments. (1) The supplier and the participant or 
importer shall each submit a written notice of each contract amendment 
to the Director immediately after the amendment to the contract is 
made. This includes not only any change in the contract delivery period 
or any other terms and conditions of the contract as provided in the 
information given in the original notice of sale or any amendment 
thereto, but also any change in any other terms and conditions of the 
contract.
    (2) The notice of contract amendment must contain the following:
    (i) A request that USDA approve an amendment to the specifically 
identified sale contract between (the participant or importer) and (the 
commodity supplier).
    (ii) A statement of what the amendment consists of (as, extension 
of delivery period through (date)) and a detailed explanation of the 
reasons for the amendment.
    (iii) A statement that the contract amendment has been agreed to by 
both buyer and seller.
    (3) Public Law 480 Operations Division, FAS, will notify the 
supplier as to whether the amendment is approved or disapproved.
    (4) The supplier shall furnish a copy of the USDA approval of the 
amendment with other documentation submitted to obtain payment.
    (5) If the supplier fails to furnish notice of a contract amendment 
to Public Law 480 Operations Division, FAS, within 3 working days after 
the date of such amendment, CCC has the right to refuse to finance the 
sale or any portion of the sale.
    (6) Any amendment must be consistent with the provisions of the 
purchase authorization and this subpart and must otherwise be 
acceptable to Public Law 480 Operations Division, FAS.


Sec. 17.8  Ocean transportation.

    (a) General. (1) This section applies to the financing of ocean 
freight or ocean freight differential. Ocean freight will be financed 
by CCC only to the extent specifically provided for in the purchase 
authorization. The purchase authorization may provide requirements in 
addition to or in lieu of those specified in this section.
    (2) The supplier of ocean transportation must be engaged in the 
business of furnishing ocean transportation from the United States and 
must have a person, principal or agent, on whom service of judicial 
process may be had in the United States.
    (3) The quantity of the commodity which must be shipped on 
privately owned U.S.-flag commercial vessels will be determined by the 
Director.
    (4) The supplier of ocean transportation shall release copies of 
the ocean bills of lading to the supplier of the commodity promptly 
upon completion of loading of the vessel.
    (5) When CCC finances any part of the ocean freight or the ocean 
freight

[[Page 3819]]

differential, the participant must open an operable irrevocable letter 
of credit for the portion of the ocean freight not financed by CCC. The 
amount of the letter of credit shall be computed using the information 
provided in the Form CCC-106. The letter of credit shall provide for 
sight payment or acceptance of a draft, payable in U.S. dollars, on the 
basis of the quantities specified in the applicable ocean freight 
contract. If the supplier of ocean transportation accepts the commodity 
before receipt of an acceptable letter of credit from a bank, the 
supplier takes such action at its own risk. This action in itself does 
not affect eligibility for CCC financing.
    (b) Contracting procedures.--(1) Invitations for Bids (IFB's). (i) 
Public freight ``Invitations for Bids'' are required in the 
solicitation of freight offers from all U.S. and non-U.S. flag vessels 
when CCC is financing any portion of the ocean freight.
    (ii) For non-U.S. flag vessels when CCC is not financing any 
portion of the ocean freight, public freight IFB's are also required 
unless otherwise authorized by the Director, or unless the participant 
requires the use of vessels under its flag, the flag of the destination 
country, or other non-U.S. flag vessels under its control. Vessels 
considered to be under the control of the participant or the 
destination country include vessels under time charters, bare boat 
charters, consecutive voyage charters, or other contractual 
arrangements for the carriage of commodities which provide guaranteed 
access to vessels.
    (iii) Prior to release to the trade, all freight IFB's must be 
submitted to the Director for approval. Freight IFB's must be issued by 
means of the Transportation News Ticker, New York, plus at least one 
other means of communication.
    (iv) All freight IFBs must:
    (A) Specify a closing time for the receipt of offers and state that 
late offers will not be considered;
    (B) Provide that offers are required to have a canceling date no 
later than the last contract layday specified in the IFB;
    (C) Provide the same deadline for receipt of offers from both U.S. 
flag vessels and non-U.S. flag vessels.
    (2) Competitive bidding. When CCC is financing any portion of the 
freight, all offers shall be opened in public in the United States at 
the time and place specified in the IFB. Offers shall be opened prior 
to receipt of offers for the sale of commodities as the Director 
determines appropriate. Only offers which are responsive to the IFB may 
be considered, and no negotiation shall be permitted.
    (3) Records of offers. Copies of all offers received must be 
promptly furnished to the Director, who may require the participant, or 
its shipping agent, to submit a written certification to the GSM that 
all offers received (with the times of receipt designated thereon) were 
transmitted to the Department. For purposes of this paragraph ``time of 
receipt'' shall be the time a hand-carried offer, mailed offer, or 
telegram was received at the designated location for presentation or, 
if transmitted electronically, the time the offer was received, as 
supported by evidence satisfactory to the Director.
    (4) Re-tenders. The Director may permit or require a participant to 
refuse any and all bids, and in such case a participant may conduct a 
re-tender with the approval of the Director. The Director shall not 
approve or require freight re-tenders unless they will increase the 
likelihood of meeting U.S. flag cargo preference requirements, will 
permit the desired quantity to be shipped, will likely result in 
reduced CCC expenditures, or are otherwise determined to be in the best 
interest of the program.
    (c) Request for vessel approval. The pertinent terms of all 
proposed charters and all proposed liner bookings, regardless of 
whether any portion of ocean freight is financed by CCC, must be 
submitted to the Director for review and approval before fixture of the 
vessel. Tentative advance vessel approvals may be obtained by telephone 
provided Form CCC-105, Ocean Shipment Data--Pub. L. 480 (Request for 
Vessel Approval), is furnished promptly confirming the information 
supplied by telephone. The Form CCC-105 shall be submitted in duplicate 
to the Director.
    (d) Advice of vessel approval. (1) 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 CCC will finance any 
part of the ocean freight. For f.a.s. or f.o.b. shipments, CCC will 
issue a signed original of Form CCC-106 to the ocean carrier when CCC 
finances any part of the ocean freight. For c.& f. or c.i.f. shipments, 
CCC will issue Form CCC-106 to the supplier of commodity.
    (2) If CCC agrees to finance any portion of the ocean freight, the 
participant or its agent shall forward a copy of the ocean freight 
contract immediately after execution to the Director for review and 
approval prior to issuance of Form CCC-106.
    (3) 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.
    (e) Special charter party provisions required when any part of 
ocean freight is financed by CCC. This paragraph applies when CCC 
finances any part of the ocean freight for commodities booked on 
charter terms. In the event of any conflict between the provisions of 
the regulations in this subpart and the charter party or ocean bills of 
lading issued pursuant thereto, the provisions of the regulations in 
this subpart shall prevail. The charter party shall contain or, for the 
purpose of financing pursuant to the regulations in this subpart, be 
deemed to contain the following provisions:
     (1) That if there is any failure on the part of the supplier of 
ocean transportation to perform the charter party after the vessel has 
tendered at the loading port, the charterer shall be entitled to incur 
all expenses which in the judgment of the General Sales Manager are 
required to enable the vessel to carry out her obligations under the 
charter party including, but not limited to, expenses for lifting any 
liens asserted against the vessel.
     (2) That, notwithstanding any prior assignments of freight made by 
the owner or operator, the expenses authorized in paragraph (e)(1) of 
this section may be deducted from the freight earned under the charter 
party.
     (3) That ocean freight is earned and that 100% 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)(1) of this section results in the loss of part of the vessel's 
cargo, 100% 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.
     (4) That if a force majeure as described in paragraph (l)(1) of 
this section prevents the vessel's arrival at the first port of 
discharge, the freight shall be payable by the charterer at the time 
the General Sales Manager determines that such force majeure was the 
cause of nonarrival.
    (5) That laydays are non-reversible.
    (6) That in a dispute involving any rights and obligations of CCC, 
including rights and obligations as successor or assignee, which cannot 
be settled by agreement, the dispute shall not be subject to 
arbitration.
     (f) Special charter party information required when any part of 
ocean freight is financed by CCC. When CCC finances

[[Page 3820]]

any part of the ocean freight for commodities booked on charter terms, 
the charter party shall contain the following information:
     (1) The name of each party participating in the ocean freight 
brokerage commission, if any, and the percentage thereof payable to 
each party;
     (2) The name of the vessel and the name of the substitute vessel, 
if any.
     (g) Notice of arrival. Each Form CCC-106 will indicate whether a 
notice of arrival is required. A notice of arrival, when required, must 
be furnished promptly by the participant or its designated agent or 
other source acceptable to CCC (excluding the carrier or its agent) and 
must include the name of the vessel, the purchase authorization number, 
the first port of discharge, and the date of arrival. The notice of 
arrival of the vessel also constitutes prima facie evidence of arrival 
of the cargo.
     (h) Foreign flag vessels. The cost of ocean transportation will be 
financed by CCC on non-U.S. flag vessels only when, and to the extent, 
specifically provided in the applicable purchase authorization.
     (i) U.S.-flag vessels. When a commodity is required to be shipped 
on a privately owned U.S.-flag commercial vessel, Form CCC-106 will set 
forth:
     (1) The rate of the ocean freight differential, if any, which the 
Director determines to exist between the prevailing foreign-flag vessel 
rate and the U.S.-flag vessel rate; and
     (2) The approximate tonnage for which CCC will authorize 
reimbursement of ocean freight or ocean freight differential, as 
appropriate.
     (j) Items not eligible for financing by CCC. The following costs 
will not be financed by CCC, either separately or as part of the 
commodity contract price:
     (1) Loading, trimming, and other related shipping expenses unless 
included in the ocean freight rate;
     (2) Discharge costs unless included in the ocean freight rate;
     (3) The cost of ``dead freight'';
     (4) Cargo dues and taxes assessed by the importing or recipient 
country;
     (5) Surcharges assessed by steamship conferences or carriers, 
unless specifically authorized by the Director;
     (6) General average contributions;
     (7) Stevedoring overtime and vessel crew overtime;
     (8) Ship's disbursements;
     (9) Ocean transportation brokerage commissions in excess of 2-1/2 
percent of the freight;
     (10) Any payments prohibited in Sec. 17.6(b) and (c); and
     (11) Detention.
     (k) General financing provisions. When any part of ocean freight 
will be financed either separately or as part of the commodity contract 
price, the following shall apply:
     (1) Ocean freight contracts must show the ocean freight rate from 
one loading port to one discharge port, and may provide for an increase 
in rate for an additional port of loading or discharge, or other 
option. CCC, however, will finance initially the lowest such rate or 
OFD, as appropriate. Increased amounts due because of the exercise of 
such option will be financed only after receipt of an ocean bill of 
lading or other evidence showing that the option was exercised.
     (2) In the case of transshipment to a foreign flag vessel, CCC 
will finance the ocean freight or OFD, as appropriate, only to the 
point of transshipment, at a rate determined by the GSM, and CCC will 
not finance any part of the ocean freight beyond the point of 
transshipment unless specifically approved by the GSM. If the commodity 
was transported from a U.S. port and was transshipped at another U.S. 
port, CCC will not finance, without prior approval of the GSM, any part 
of the ocean freight incurred before transshipment.
     (3) The ocean freight rate eligible for CCC financing and the rate 
used for the U.S.--flag vessel in calculating ocean freight 
differential shall not exceed the following rates for the category of 
the vessel concerned:
     (i) For commodities covered by published tariff rates--the 
published conference contract rate;
     (ii) For other commodities--the market rate prevailing at the time 
of request for approval as determined by the Director, but in any event 
not in excess of rates charged other shippers (irrespective of booking 
dates) for like commodities on the voyage concerned.
     (4) Payment will be made for ocean freight or OFD, as appropriate, 
from loading points to discharge points at rates approved by the 
Director on Form CCC-106 in conformity with paragraph (k)(3) of this 
section.
     (5) Freight for a vessel designated on Form CCC-106 as a U.S. flag 
vessel shall not be eligible for financing unless such vessel complies 
with the provisions of Public Law 87-266.
     (6) Ocean freight contracts must specify that the participant 
shall be liable for detention of the vessel for loading delays 
attributable solely to the decision of the supplier of ocean 
transportation not to commence loading because of the failure of the 
participant to establish an ocean freight letter of credit in 
accordance with paragraph (a)(4) of this section. However, ocean 
freight contracts may not contain a specified detention rate. The ocean 
transportation supplier shall be entitled to reimbursement for 
detention costs 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 ocean freight contract, and upon notification of the 
vessel's readiness to load in accordance with the terms of the 
applicable ocean freight contract. The period of such delay shall end 
at the time that operable irrevocable letters of credit have been 
established for the applicable 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.
     (l) Force majeure. (1) The GSM will waive the requirement for the 
notice of arrival required by Form CCC-106 by a written notice to the 
supplier of ocean transportation on the receipt of evidence 
satisfactory to the General Sales Manager that the vessel is lost or 
unable to proceed to destination after completion of loading as a 
result of one or more of the following causes: Damage caused by perils 
of the sea or other waters; collisions; wrecks; stranding without the 
fault of the carrier; jettison; fire from any cause; Act of God; public 
enemies or pirates; arrest or restraint of princes, rulers or peoples 
without the fault of the supplier of ocean transportation; wars; public 
disorders; captures; or detention by public authority in the interest 
of public safety. The supplier may substitute such waiver for the 
notice of arrival.
     (2) The determination of a force majeure by the GSM shall not 
relieve the participant from its obligation under the Agricultural 
Commodities Agreement to pay CCC, when due, the dollar amount of ocean 
freight, plus interest (exclusive of ocean freight differential), 
financed by CCC.
     (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) Ocean freight included in the commodity contract price. For 
cost and freight or c.i.f. contracts the ocean

[[Page 3821]]

freight, or the ocean freight differential, as appropriate, will be 
financed only to the extent specifically provided in the applicable 
purchase authorization.
    (o) Separate freight contracts. Contracts for ocean transportation, 
under a purchase authorization which limits delivery terms to f.o.b. or 
f.a.s., must be separate and apart from the contracts for the 
commodity.


Sec. 17.9  CCC payment to suppliers.

    (a) General. (1) The supplier shall request payment from CCC for 
the amount of the commodity price or the ocean freight or ocean freight 
differential to be financed by CCC.
    (2) The supplier shall support such a request for payment by 
presenting to CCC the documents required by this section, the purchase 
authorization, and the IFB, unless such documents were previously 
submitted to CCC. Such documents, however, need not be submitted when 
and to the extent that the Controller determines that the intended 
purpose of a document is served by documents otherwise available to or 
under the control of CCC or by alternate documents specified in such 
determination.
    (3) CCC will examine each document with reasonable care to 
ascertain that it appears on its face to be in accord with documentary 
requirements. When CCC has determined that all required documents have 
been submitted and that the documents are acceptable, CCC will pay the 
supplier for the commodity price or the ocean freight or ocean freight 
differential to be financed by CCC which is supported by the documents.
    (b) General documentation requirements. The supplier must put the 
appropriate purchase authorization number on all required documents 
which are prepared under the supplier's control, and should arrange for 
the appropriate purchase authorization number to be put on all other 
required documents at the time of their preparation.
    (c) Documents required for payment--commodity. The general 
provisions relating to required documents are as follows. Additional 
requirements for payment to commodity suppliers for c.& f. or c.i.f. 
sales are contained in paragraph (c)(8) of this section.
    (1) Supplier's certificate. A signed original of Form CCC-329 
``Supplier's Certificate'' from the commodity supplier covering the net 
invoice price for the commodity.
    (2) Supplier's detailed invoice. Two copies of the supplier's 
detailed invoice showing quantity, description, contracted price, net 
total invoice price expressed in dollars, the amount for which 
financing is requested from CCC, the amount not eligible for financing 
by CCC, and basis of delivery of the commodity (e.g., f.o.b. vessel). 
In arriving at the net invoice price there shall be deducted:
    (i) All discounts from the supplier's contracted price through 
payments, credits, or other allowances made or to be made to the 
importer, the importer's agent or consignee;
    (ii) All purchasing agents' commissions;
    (iii) All other amounts not eligible for financing.
    (3) Additional payment. A request for an additional payment 
submitted for a transaction for which all or part of the required 
documents have been previously submitted to CCC shall be supported by a 
Form CCC-329 ``Supplier's Certificate'' and the supplier's detailed 
invoice, covering the additional amount requested. The supplier's 
invoice must show the date, serial number and the amount of the 
original invoice and the basis for the additional amount claimed.
    (4) Weight certificate. The weight certificate shall be issued by 
or on authority of a State or other governmental weighing department, 
Chamber of Commerce, Board of Trade, Grain Exchange, or other 
independent organization or firm providing public weighing services. 
Such organization or firm must have
    (i) Qualified, impartial, paid employees who are stationed at the 
port facility or, if authorized under the applicable purchase 
authorization, other facility where weights customarily are determined, 
one of whom performed the weighing covered by the certificate, or
    (ii) Qualified, independent, impartial, supervised, weighmasters 
stationed at the port facility or, if authorized under the applicable 
purchase authorization, other facility where weights are customarily 
determined, one of whom supervised the employee of such a facility in 
the performance of the weighing covered by the certificate.
    (5) Federal appeal inspection certificate. A Federal appeal 
inspection certificate, when included in the documents presented for 
payment, shall supersede any other inspection certificate required by 
this subpart, the applicable purchase authorization, the IFB or the 
contract.
    (6) Form CCC-359. (i) Form FAS-359, ``Declaration of Sale,'' signed 
for the GSM, is the written document by which USDA notified the 
supplier that the sale was approved for financing. The supplier shall 
submit Form FAS-359 to CCC with the documents covering the first 
transaction under the contract. The unit price shown on the supplier's 
invoice must not exceed the approved unit price shown on the Form FAS-
359.
    (ii) For subsequent transactions under the same contract, the 
supplier shall certify on the CCC copy of the detailed invoice as 
follows:

    I hereby certify that the applicable Form FAS-359 was submitted 
to CCC with documents covering Invoice No.

________________ dated ________________________ for 
$____________________.
    (7) Bill of lading. Four copies of the ocean bill of lading.
    (8) C.&.f. or c.i.f. sales. In addition to the above, the following 
requirements apply for c.& f. or c.i.f. sales:
    (i) Signed original of Form CCC-106.
    (ii) The supplier's detailed invoice shall show a computation of 
the dollar amount of ocean freight differential, whenever the Form CCC-
106 provides for an ocean freight rate differential on a cost and 
freight or c.i.f. sale and authorizes financing of any portion of ocean 
freight by CCC. In arriving at the net invoice price the supplier shall 
deduct the ocean freight, or portion thereof which is not being 
financed by CCC.
    (iii) One nonnegotiable copy of the insurance certificate or policy 
where the cost of insurance is included in the price of the commodity 
to be financed by CCC.
    (iv) A request for an additional payment shall also include a 
statement signed by the ship's master or owner (or agent of either of 
them) showing exercise of the higher-rated option, if the payment is 
stated to be due because of the exercise of a higher-rated option 
provided in an ocean freight contract.
    (d) Documents required for payment--ocean freight financed 
separately from commodity price.
    (1) Supplier's certificate. A signed original of Form CCC-329, 
``Supplier's Certificate'', to be executed by the carrier or its agent, 
covering the dollar cost of ocean freight or ocean freight 
differential.
    (2) Ocean bill of lading. One copy of the ocean bill of lading and, 
if required by the related Form CCC-106, a notice of arrival at the 
first port of discharge of the vessel named in the Form CCC-106. In 
lieu of a notice of arrival the carrier may present a waiver of the 
notice of arrival signed by the GSM or Controller.
    (3) Invoice. One copy of the carrier's invoice which shows the 
total freight costs, the amount not eligible for financing by CCC, and 
the amount for which payment is requested from CCC. If the invoice 
relates to a U.S.-flag

[[Page 3822]]

vessel, such invoice shall contain the following typed or stamped 
certification, executed by the supplier:

    The undersigned hereby certifies that the vessel named herein 
and for which ocean freight is claimed, qualifies as a privately 
owned U.S.-flag commercial vessel within the requirements of Pub. L. 
87-266 and is an eligible U.S.-flag vessel for the purposes of Pub. 
L. 664, 83rd Congress.

    (4) Form CCC-106. Signed original of Form CCC-106.
    (5) Ocean freight contract. One copy of the ocean freight contract.
    (6) Higher rated option. A request for payment of any amounts 
claimed because of the exercise of a higher rated option following 
payment of a lower rated option pursuant to Sec. 17.8(k)(1) shall be 
supported by the following documents:
    (i) One copy of the carrier's invoice as described in paragraph 
(d)(3) of this section except for the certification required therein.
    (ii) The Form CCC-329, Supplier's Certificate, for the balance 
claimed.
    (iii) A statement signed by the ship's master, owner, or owner's 
agent, and signed laytime statements or other written concurrence of 
charterer or the charterer's agent showing the exercise of the higher 
rated option.
    (e) Payment of freight by CCC prior to the vessel's arrival at the 
discharge port.
    (1) Upon request by the supplier, CCC may pay the ocean freight or 
ocean freight differential to be financed by CCC before the vessel 
arrives at the first port of discharge if the supplier furnishes CCC 
financial coverage in the form of an acceptable letter of credit from a 
U.S. bank.
    (2) The amount of security required by CCC under paragraph (e)(1) 
of this section may be computed by multiplying the ocean freight rate 
or ocean freight differential rate financed by CCC as shown on the 
related Form CCC-106 times either--
    (i) The tonnage shown on the related bill of lading, if the bill of 
lading is furnished to CCC; or
    (ii) The tonnage stated in the ocean freight contract (without 
tolerance).
    (3) On receipt of an acceptable letter of credit, the Controller 
will issue a waiver of the notice of arrival which is required under 
paragraph (d)(2) of this section.
    (f) Advice of amount financed. CCC will forward advice of payment 
to the participant.


Sec. 17.10  Refunds and insurance.

    (a) Participant--failure to comply. The participant shall pay in 
U.S. dollars promptly to CCC on demand by the General Sales Manager the 
entire amount financed by CCC (or such lesser amount as the GSM may 
demand) whenever the GSM determines that the participant has failed to 
comply with any agreement or commitment made by the participant in 
connection with the transaction financed or with the applicable 
Agricultural Commodities Agreement between the U.S. and the 
participant.
    (b) Adjustment refunds. All claims by importers for adjustment 
refunds arising out of terms of the contract or out of the normal 
customs of the trade, including arbitration and appeal awards, 
allowances, and claims for overpayment of ocean transportation, if such 
refunds relate to amounts financed by CCC, shall be settled by payment 
in U.S. dollars and such payment shall be remitted by the supplier to 
CCC. The remittance shall be identified with the date and amount of the 
original payment and the applicable purchase authorization number.
    (c) Insurance on c.i.f. sales. The provisions of this paragraph 
apply only to transactions under purchase authorizations that 
specifically authorize c.i.f. sales in which the cost of insurance is 
included in the net c.i.f. invoice price of the commodity financed. 
When the supplier furnishes insurance in favor of or for the account of 
the importer, the policies or certificates of insurance shall include a 
loss payable clause which provides that all claims shall be paid in 
U.S. dollars to the Controller. Such payments shall be accompanied by 
advice of the purchase authorization number, the names and addresses of 
the supplier and importer, the nature of the claim, the quantity of the 
commodity involved in the claim, the date of shipment, the bill of 
lading number, and the name of the vessel. CCC will credit the account 
of the participant or will refund local currency in accordance with 
paragraph (e) of this section.
    (d) Refund of ineligible amounts. If a sale has been financed and 
CCC determines that the sales price exceeds the price permissible under 
Sec. 17.5(b)(4), or that the sale is otherwise ineligible for 
financing, in whole or in part, the supplier shall refund in dollars 
such excess price or ineligible amount to CCC promptly on demand. If 
not promptly refunded, such amount may be set off by CCC against monies 
it owes to the supplier. The making of any such refund to CCC, or any 
such setoff by CCC shall not prejudice the right of the supplier to 
challenge such determination in a court action brought against CCC for 
recovery of the amount refunded or set off.
    (e) Refund of local currency or reduction of amount due. 
Immediately after receipt by CCC of U.S. dollar payment from suppliers 
or from or for the account of the participant under this section, CCC 
will provide for payment to the participant of the local currency 
equivalent of dollars received, if such local currency has been 
deposited for the particular transaction or will credit the 
participant's account as follows:
    (1) For payments under this section, except paragraph (a), the 
local currency refunded will be at the exchange rate agreed to by the 
Government of the United States and the participant in effect at the 
time the local currency is paid to or for the account of the importer 
except that if there has been a change in the exchange system or 
structure of the importing country or the destination country, such 
payment shall be made at the agreed exchange rate which was in effect 
on the date of dollar disbursement for the transaction financed, and 
except further that local currency shall not be paid when the dollars 
are to be reauthorized for replacement of the commodity.
    (2) For payment under paragraph (a) of this section, the local 
currency refunded will be at the agreed exchange rate in effect on the 
date of the dollar disbursement for the transaction financed: Provided, 
that local currency will not be refunded to the extent that deposits of 
such currency have been made available to the participant on a grant 
basis.
    (3) For refunds received by CCC under long-term credit agreements 
the participant's account shall be credited with the dollar amount 
refunded or otherwise recovered, and the participant notified 
accordingly.


Sec. 17.11  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.


[[Page 3823]]


    Signed at Washington, D.C. on September 13, 1996.
Christopher E. Goldthwait,
General Sales Manager, Foreign Agricultural Service and Vice-President, 
Commodity Credit Corporation.
[FR Doc. 97-1736 Filed 1-24-97; 8:45 am]
BILLING CODE 3410-10-P