[Federal Register Volume 62, Number 197 (Friday, October 10, 1997)]
[Rules and Regulations]
[Pages 52929-52941]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26578]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 197 / Friday, October 10, 1997 / 
Rules and Regulations  

[[Page 52929]]


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DEPARTMENT OF AGRICULTURE

Office of the Secretary

7 CFR Part 17


Regulations Governing the Financing of Commercial Sales of 
Agricultural Commodities

AGENCY: Commodity Credit Corporation.

ACTION: Final rule.

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SUMMARY: This rule amends regulations applicable to the financing of 
the sale and exportation of agricultural commodities pursuant to title 
I of the Agricultural Trade Development and Assistance Act of 1954, as 
amended (``Pub. L. 480'').
    The amendment simplifies the purchasing procedures and shortens the 
regulations. The purpose of these changes is to keep the costs of the 
Pub. L. 480, title I program as low as possible, to reflect the 
provisions of the Federal Agricultural Improvement and Reform Act of 
1996, and to reduce the public reporting burden.
    Executive Order 12752 of February 25, 1991, establishes a program 
under title I of Pub. L. 480 to be implemented by the Secretary of 
Agriculture. In accordance with section 406(c) of Pub. L. 480, the 
funds, facilities, and authorities of the Commodity Credit Corporation 
are used to carry out this program.

EFFECTIVE DATE: This rule is effective November 10, 1997.

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., SW., Washington, D.C. 20250-1033. Telephone: 
(202) 720-3664.

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

Regulatory Flexibility Act

    This final rule has been reviewed with regard to the requirements 
of the Regulatory Flexibility Act. The Vice President, Commodity Credit 
Corporation (``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 final rule eliminates some 
existing program requirements which should make it easier for firms to 
participate, including small businesses. A copy of this final rule has 
been submitted to the General Counsel, Small Business Administration.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372 which requires intergovernmental consultation with state and 
local officials. See the Notice related to 7 CFR Part 3015, Subpart V, 
published at 48 FR 29115 (June 24, 1983).

Paperwork Reduction Act

    In accordance with the provisions of the Paperwork Reduction Act of 
1995, the Department submitted an updated information collection 
package to the Office of Management and Budget (OMB) under OMB control 
number 0551-0005, in conjunction with the publication of the proposed 
rule in the Federal Register (see ``Background.'') OMB has approved the 
estimated total burden of 455 hours through February 28, 2000. Copies 
of this information collection can be obtained from Valerie Countiss, 
the Agency Information Collection Coordinator, at (202) 720-6713.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The final rule would have preemptive effect with 
respect to any state or local laws, regulations, or policies which 
conflict with such provisions or which otherwise impede their full 
implementation. The final rule would not have retroactive effect. The 
rule does not require that administrative remedies be exhausted before 
suit may be filed.

Background

    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 January 27, 1997, the Commodity Credit 
Corporation (``CCC'') published a Proposed Rule (62 FR 3810) to amend 
the regulations governing the financing of the sale and exportation of 
agricultural commodities made available under title I, Pub. L. 480. The 
proposed rule was drafted after considering comments received in 
response to an Advance Notice of Proposed Rulemaking (60 FR 47495) 
published September 13, 1995. Most of the comments received supported 
the changes made by the proposed rule. The comments which raised 
questions are discussed below, except those comments that were outside 
the scope of the proposed rule. A copy of the ``Benefit-Cost 
Assessment'' prepared in connection with this final rule can be 
obtained from Connie B. Delaplane. See For Further Information Contact.

Discussion of Comments

Purchase Authorizations

    After CCC and the participant have signed a title I agreement, CCC 
issues a purchase authorization (``PA'') in response to a request from 
the participant. One comment asked that the importer or the shipping 
agent be permitted to request the PA. However, having the participant 
prepare the brief written request helps to insure that the participant 
also signs the PA when it is issued a few days later. By this signature 
the participant accepts the specific contracting and documentary 
requirements in the PA which govern CCC financing under the program. 
Because the participant must bear any costs which are not eligible for 
CCC financing, it is important that the participant be fully involved 
in both requesting and signing the PA. Since the requirement for 
requesting PA's appears in the title I agreement, there is no need also 
to include it in the regulations and this portion of the proposed rule 
will be adopted without change.

[[Page 52930]]

Shipping Agents

    The proposed rule would require an agent of the participant or 
importer (shipping agent) to provide complete information on the firm 
and its activities only once per fiscal year, instead of each time the 
firm is nominated by a participant. One commenter requested that we 
further change the procedure to adopt an ``initial registration'' of 
interested firms at the beginning of each fiscal year, similar to the 
determination of eligibility for commodity suppliers. The firm would 
not have to be nominated by a participant to be registered.
    We do not believe that adopting this suggestion would further 
reduce the reporting burden on a shipping agent, or expedite the FAS 
review process. In fact, it would place a greater burden on firms which 
would submit information for such ``initial registration,'' yet never 
be nominated as a shipping agent. Also, if FAS were to ``register'' any 
interested firm, regardless of whether a participant wished to employ 
the firm, FAS' workload would be increased. Finally, such 
``registration'' could imply endorsement or approval by FAS, which 
could be misleading to participants. FAS does not investigate firms 
which wish to act as shipping agents; it simply accepts the nomination 
of an agent by the participant if the requirements of the regulations 
are met. The regulations implement the provisions of section 407(b)(4) 
of the Federal Agriculture Improvement and Reform Act of 1996 regarding 
conflicts of interest. Based on this evaluation, CCC will adopt the 
rule as proposed.

Eligibility of Commodity Suppliers

    The proposed rule would have permitted any supplier eligible under 
the GSM-102 or GSM-103 programs to participate in sales under title I. 
FAS would not have evaluated the firm's responsibility or its 
experience as an exporter of U.S. agricultural commodities. After 
reviewing the potential impact of this change on food aid recipients 
under the program, we have reinstated the requirement for a separate, 
but simplified, eligibility determination for title I suppliers. It is 
crucial for most food aid recipients that suppliers fulfill their 
contracts without problems or significant delay. Title I shipments are 
often a key part of the supply pipeline for recipients, which generally 
are not able to make a prompt commercial purchase should a supplier 
fail to perform. In addition, if a commodity supplier did not deliver 
the commodity, the recipient might also be required to pay the full 
shipping costs to the contracted vessel (``deadfreight''). By retaining 
the requirement that FAS evaluate the export experience and financial 
responsibility of a prospective supplier, we will help protect 
participants against non-performance.
    One comment noted that the IFB requirements for bid and performance 
bonds have ``adequately guaranteed performance by suppliers in the 
past.'' It is true that recipients normally require commodity suppliers 
to submit a bid bond (generally 2% of the value of the offer) and to 
open a performance bond when they receive a contract. The performance 
bond is usually 5% of the value of the contract. These bonds provide 
some protection against an unreliable supplier, but would be 
insufficient to cover the full cost of ``deadfreight,'' for example. 
Buyers, of course, have not relied solely on these bonds in the past; 
FAS has screened out firms which did not demonstrate export experience 
and financial responsibility. It is not practical for recipients to 
increase the amount of the bid and performance bonds to cover the 
maximum costs of a default by the supplier; such bonds would be more 
expensive for the suppliers, and would increase all commodity costs 
under the program.
    Under Title I, recipients must buy either on the ``lowest landed 
cost'' basis (the lowest combination of commodity and freight offered) 
or on the basis of the lowest priced commodity offered. This helps 
insure that CCC funds provide as much tonnage as possible, and to give 
qualified commodity suppliers an equal opportunity to compete. Because 
of this program requirement, recipients may not simply select the 
supplier(s) with which they are familiar. It would be inefficient to 
require each recipient to evaluate the ability of potential U.S. 
suppliers to perform; some recipients would not be able to conduct such 
an analysis. Submitting information to each recipient would also 
increase the workload for suppliers wishing to participate in the 
program.
    In order to reduce the reporting burden for suppliers, we have 
eliminated the requirement that prospective suppliers provide the name, 
address and chief executive officers for all branches, affiliates and 
subsidiaries, and that eligible suppliers keep this information 
current.
    Although the final rule is not as beneficial to suppliers as the 
proposed rule, it does reduce the reporting burden for suppliers while 
maintaining an acceptable level of protection for the recipient. As a 
result, CCC has determined to adopt the provisions in the final rule 
regarding eligibility of suppliers.

Invitations for Bids

    One comment asked that the Invitation for Bids (``IFB'') specify 
how the buyer will pay the supplier whenever the buyer requests a 
supplier to bear a cost not eligible for CCC financing. Although 
Sec. 17.5(e) provides that the contracts between commodity suppliers 
and buyers ``* * * should stipulate the responsibility of each party 
for payment of any costs not eligible for financing by CCC'' we agree 
that this information should also be included in the IFB. Sections 
17.5(c)(2) and 17.8(b)(1)(iv) have been amended to add this requirement 
for IFB's for commodity and for ocean transportation.
    In this regard, it is important to note that some payments which 
had been permitted under the existing regulations, but which cannot now 
be financed by CCC, will be prohibited when this final rule becomes 
effective. This includes consular fees for legalization of documents, 
for example, and total brokerage commissions which exceed 2\1/2\ 
percent of the freight. We have added a new paragraph, Sec. 17.6(c)(3), 
for improved clarity regarding total brokerage commissions. This 
paragraph is consistent with the regulations governing brokerage 
commissions for commodities shipped under section 416(b) of the 
Agricultural Act of 1949 and the Food for Progress Act of 1985 (7 CFR 
1499.8(d)). The preamble to the proposed rule discussed the ceiling on 
brokerage commissions and requested suggestions for other ways to 
address the general issue of costs which are ineligible for CCC 
financing. Since no comments were submitted offering alternative 
procedures, the final rule retains the provisions in the proposed rule.

Ocean Transportation

    A comment asked that we delete the requirement that the vessel 
owner may claim detention when a required letter of credit is not 
available at loading (Sec. 17.8(k)(6)). The comment questioned the 
appropriateness of a claim for detention in this case since the freight 
could not be collected until after the vessel arrived at the first 
discharge port. However, it is very important to the program that the 
vessel owner have the letter of credit available before loading. This 
provides assurance of payment when the voyage is completed, reducing 
the owner's risk and thereby keeping freight costs as low as possible. 
The comment also noted that the requirement for detention

[[Page 52931]]

disadvantaged foreign flag vessels. The regulations apply to freight 
contracts for voyages for which CCC finances all or part of the costs, 
whether on U.S.-flag or non-U.S. flag vessels.
    Another comment agreed with the proposed change (Sec. 17.8(b)(2)) 
which no longer prohibits clarification or submission of certain 
technical information after opening of ocean transportation offers; the 
author requested confirmation that this would not be a vehicle through 
which an offer could be made responsive after it had been submitted. As 
described in the preamble to the proposed rule, only freight offers 
which are responsive to the terms of the IFB as of the date and time 
for receipt of offers could be considered. 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. The change simply acknowledges 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. Another comment requested that ocean freight 
be earned (and paid) when the vessel loads, stating that this is the 
commercial standard. The program operated in this manner before 1960, 
at which time CCC found it necessary to change freight procedures to 
protect its interest, so that freight was payable on the vessel's 
arrival at the first discharge port. An importing country had fixed a 
vessel which was abandoned by the owner before the vessel departed the 
load port, but after receipt of freight payment on loading. CCC 
incurred additional costs and freight charges to ship the cargo on 
another vessel.
    More recent program experience still supports this position. Within 
the last ten years, several vessels carrying title I cargo sank en 
route to the discharge port. Under the final rule, the risk of non-
performance of the voyage remains on the ocean carrier, subject to a 
determination of force majeure. The final rule does continue the policy 
of allowing a supplier to receive freight prior to arrival if the 
supplier posts acceptable security.
    In general, requiring freight to be payable on discharge maximizes 
the incentive to the supplier of ocean transportation to complete the 
voyage as contracted. In order to maintain this protection for CCC, and 
for program recipients, the proposed rule has been adopted as proposed. 
The requirement applies, of course, only when CCC finances any part of 
the ocean freight.
    The same comment also requested that we change the method for 
settlement of demurrage and despatch at the load port. The current 
procedure was instituted in a final rule published December 7, 1995 (60 
FR 62702). This rule provided that demurrage and despatch at load would 
be settled between the parties which controlled the loading (the 
supplier of ocean transportation and the commodity supplier.) This 
change was made to make the program operate closer to commercial 
practice than in the past, when CCC shared in despatch earnings. It 
also made title I more consistent with other food aid programs in this 
regard. Although it is true that no contract exists between the two 
suppliers, FAS has not heard of serious problems in arranging payment 
of demurrage and despatch on this basis. We have retained this 
provision in the final rule, but will review the issue if it appears 
appropriate based on further experience.

Payment to Suppliers

    Most comments supported the proposal that CCC pay suppliers 
directly for all amounts which CCC finances, instead of requiring 
participants to open letters of credit covering these amounts. Two 
comments asked whether CCC would be able to pay as promptly as a bank 
does (generally, examining documents within two business days from 
presentation, with payment no later than one business day following the 
date documents are found in order.) Another comment asked whether the 
Uniform Customs and Practices for Documentary Credits (``UCP 500'') 
would be the standard by which CCC would examine documents. CCC's 
examination of documents will be more extensive than that conducted by 
banks; it will not be based on UCP 500 but on the ``post audit'' 
process now performed by CCC on documents submitted to CCC by banks 
after they have made payment to suppliers. CCC staff will compare the 
documents to the documentary requirements in the PA and the IFB, and 
will check all calculations on the documents to ensure that no 
mathematical errors have been made. CCC will also review the documents 
received to ensure there are no discrepancies among the documents. As 
part of the direct payment process, CCC must also prepare and process 
the payment document, SF-1166, ``Voucher and Schedule of Payments.'' 
The CCC review will replace CCC's existing ``post audit'' of documents 
and the banks'' own review of documents. CCC expects to be able to pay 
suppliers within a maximum of seven business days after receipt of all 
the required documents, if there are no discrepancies. CCC will not 
disburse any funds to the supplier until all documents are received, 
audited, and found to be in order.
    Therefore, suppliers should take note that they are solely 
responsible for ensuring that all the proper documents are included in 
the package submitted to CCC for payment, and that they are completed 
correctly. This will help CCC pay the suppliers sooner. Section 
17.9(a)(3) has been revised to contain a more detailed description of 
the examination of documents by CCC. In addition, a new Sec. 17.9(a)(4) 
has been added to reflect the provisions of the Debt Collection 
Improvement Act of 1996, Pub. L. 104-134, which requires that CCC must 
issue all payments by electronic transfer. Suppliers must provide CCC 
with the necessary information to facilitate this procedure.
    One comment said that the seller had no assurance of receiving 
payment without a letter of credit since CCC can alter or revoke the 
PA. However, Sec. 17.3(d) states that, if the GSM were to ``supplement, 
modify or revoke'' a PA, CCC would ``* * * reimburse suppliers who 
would otherwise be entitled to be financed by CCC for costs which were 
incurred as a result of such action * * * in connection with firm sales 
or shipping contracts * * *.'' This long-standing provision remains in 
the regulations.
    The comment added that the proposal overstated the benefits to 
recipients of the change to direct payment by CCC, in part because the 
banking fees were actually lower than estimated in the proposed rule. 
The fees charged by banks related to letters of credit are not public 
information, but the estimate in the proposed rule was based on 
comments from program participants, which have paid such fees. The 
issue is greater than the bank fees, however; participants face the 
very real potential for significant freight and commodity costs 
(detention and carrying charges) which are not financed by CCC. These 
costs must be paid by the participant when loading is delayed because 
operable letters of credit were not available. If a dispute arises, 
participants may also be responsible for legal costs.
    Finally, this comment stated that banks may be reluctant to issue 
letters of credit for small amounts of freight not covered by CCC, or 
may increase their fees to cover costs for these low-revenue 
transactions. It is possible that some banks may forego this business, 
or increase their fees slightly, but we do

[[Page 52932]]

not anticipate that all banks will decline to participate.
    We have evaluated these comments carefully. It is true that 
suppliers may not be paid by CCC quite as quickly as they were by banks 
under letters of credit, because of the more detailed document review 
conducted by CCC, and that this may lead some firms to increase 
commodity prices slightly under the program, to cover a few days of 
lost interest. To the extent this occurs, it would mean a very small 
reduction in the commodity tonnage which could be shipped within the 
fixed funding provided under a Pub. L. 480, title I agreement. However, 
we anticipate that the significant cost savings to recipients will 
clearly outweigh this disadvantage, and the other concerns discussed in 
this preamble. Recipients must pay bank charges for letters of credit 
and must pay suppliers if loading is delayed because the letter of 
credit is not available. (Commodity suppliers receive ``carrying 
charges'' in such cases, and suppliers of ocean transportation can 
collect ``detention.'' One day of ``detention'' for a U.S.-flag vessel 
can cost the recipient as much as $25,000.) As a result, the final rule 
retains the change to direct payment by CCC. However, we will carefully 
monitor the impact of this change and will review the decision based on 
a year's experience.

Documentation

    A comment requested that weight certificates be issued only by the 
Federal Grain Inspection Service, USDA (``FGIS'') or its cooperators. 
By law, FGIS must weigh certain commodities which are exported, such as 
wheat or corn. For other commodities, the program has, for many years, 
permitted private firms to provide weight certificates. Since including 
this option is consistent with commercial practice and it gives both 
buyer and seller more flexibility in contracting under title I, we have 
determined that the proposed rule will be adopted as published.
    Another comment asked whether the ``federal appeal inspection 
certificate'' (Sec. 17.9(c)(5)) were still valid. We have revised this 
paragraph to reflect the current procedure when a certificate is issued 
representing an appeal inspection. The same comment noted that a 
phytosanitary certificate issued by USDA cannot show a number on its 
face, including the PA number. (Sec. 17.9(b) requires that the supplier 
arrange for the PA number to be put on required documents.) The comment 
explained that the PA number could be placed on a separate sheet of 
paper which is stapled to the phytosanitary certificate. CCC will 
accept this procedure for the phytosanitary certificate, and the 
provision will be adopted as proposed.

List of Subjects in 7 CFR Part 17

    Agricultural commodities, Exports, Finance, Maritime carriers.

    Accordingly, part 17 of 7 CFR is revised to read 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

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.


Sec. 17.1  General.

    (a) What this part covers. This part 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.
    (3) A 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.
    (c) Purchase authorizations. This part covers, among other things, 
the issuance by the General Sales Manager of purchase authorizations 
which authorize the participant to:
    (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 in accordance with 
Sec. 17.9(a)(3). 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 part is available from the Director, Pub. L. 480 
Operations Division, Foreign Agricultural Service, USDA, Washington, 
D.C. 20250-1033. Information about financing operations under this 
part, including forms prescribed for use thereunder, is available from 
the Controller, Commodity Credit Corporation, USDA, 1400 Independence 
Avenue, SW, Washington, D.C. 20250-0581.


Sec. 17.2  Definition of terms.

    Terms used in the regulations in this part 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, USDA.
    Commodity--an agricultural commodity produced in the United States, 
or product thereof produced in the United States, as specified in the 
applicable purchase authorization.
    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

[[Page 52933]]

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, Pub. L. 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, USDA.
    FSA--the Farm Service Agency, USDA.
    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 part 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--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 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.
    Purchase authorization--Form FAS-480, ``Authorization to Purchase 
Agricultural Commodities,'' issued to a participant under this part.
    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.
    USDA--the U.S. Department of Agriculture.
    United States--the 50 States, the District of Columbia, and Puerto 
Rico.


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;

[[Page 52934]]

    (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 part;
    (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 part. In addition to the provisions of a 
particular purchase authorization, each purchase authorization, unless 
otherwise provided, is subject to the provisions of this part 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 part 
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 part 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, FAS, 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, FAS, 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 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.
    (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, FAS, 
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 11-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

[[Page 52935]]

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, FAS.
    (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, FAS, 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 Sec. 17.4(c) 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 the information 
and documentation provided earlier are still accurate and complete, or 
must provide the details of any changes to previously submitted 
information.
    (e) Notification. The Deputy Administrator, Export Credits, FAS, 
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, FAS, 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, Pub. L. 480, a participant or importer uses an agent whose 
nomination has not been accepted in writing by the Deputy 
Administrator, Export Credits, FAS, USDA may withhold sales approval.
    (3) If, in the shipping of commodities made available under title 
I, Pub. L. 480, a participant or importer uses an agent whose 
nomination has not been accepted in writing by the Deputy 
Administrator, Export Credits, FAS, 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.


Sec. 17.5  Contracts between commodity suppliers and importers.

    (a) Commodity suppliers and selling agents. (1) Commodity suppliers 
must be determined to be eligible under the Pub. L. 480, title I 
program in order for their contracts to be eligible for CCC financing. 
A prospective commodity supplier must be engaged in the business of 
selling agricultural commodities for export from the United States. The 
commodity supplier must maintain a bona fide business office in the 
United States, and must have a person, principal or agent on whom 
service of judicial process may be had in the United States.
    (2) Persons who wish to participate as commodity suppliers shall 
submit the following information to the Foreign Agricultural Service, 
Stop 1033, USDA, 1400 Independence Ave., SW, Washington, D.C. 20250-
1033:
    (i) A current financial statement of the prospective supplier, 
preferably an audited statement, as evidence of financial 
responsibility. Submission of a letter of reference from a bank is also 
encouraged.
    (ii) A statement containing general background information about 
the firm, including the names and titles of the chief executive 
officers and a description of the firm's experience as an exporter of 
U.S. agricultural commodities. Copies of bills of lading supporting 
this statement are also requested.
    (iii) Any other information requested relating to whether the 
prospective supplier is responsible and is able to perform its 
obligations under this part and the purchase authorization.
    (3) 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.

[[Page 52936]]

    (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 stipulate the responsibility for each party for 
payment of any costs not eligible for financing by CCC.
    (vii) The IFB must be in compliance with this part, 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 Pub. L. 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 part is deemed to include all terms and conditions required 
by the regulations in this part.
    (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 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 this 
part.
    (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:

[[Page 52937]]

    (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 ocean transportation 
brokerage commissions.
    (iv) Pay an address commission or payment.
    (2) For ocean transportation, in addition to this paragraph, see 
also Sec. 17.8(j).
    (3) When any portion of the ocean freight is financed by CCC, total 
ocean transportation brokerage commissions earned on U.S. and non-U.S.-
flag bookings by all parties arranging vessel fixtures shall not exceed 
2\1/2\ percent of the total freight costs.
    (4) 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 Pub L. 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) Pub. L. 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 Pub. L. 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) Pub. L. 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 Pub. L. 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) 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) Pub. 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 Pub. L. 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 part and must otherwise be acceptable 
to Pub. L. 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 differential, the participant must open an operable irrevocable 
letter of credit for the portion of the ocean freight not financed by 
CCC. All banking institution charges, such as commissions, expenses, 
etc., are for the account of the participant. 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

[[Page 52938]]

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 Bridge News, New York, plus at least one other means of 
communication.
    (iv) All freight IFB's 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;
    (D) Stipulate the responsibility for each party for payment of any 
costs not eligible for financing by CCC (in the IFB or the pro forma 
charter party).
    (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 or a mailed offer 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 part and the charter party or ocean bills of 
lading issued pursuant thereto, the provisions of the regulations in 
this part shall prevail. The charter party shall contain or, for the 
purpose of financing pursuant to the regulations in this part, 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 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

[[Page 52939]]

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) Any payments prohibited in Sec. 17.6 (b) and (c); and
    (10) 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 Pub. L. 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)(5) 
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 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.

[[Page 52940]]

    (3) CCC will examine each document to ascertain that it is in 
accordance with this part, the purchase authorization, and the IFB. CCC 
will audit all the required documents to ensure accuracy, completeness, 
and consistency. When CCC has determined that all required documents 
have been submitted and that the documents are acceptable for payment, 
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.
    (4) CCC is required to issue all payments by electronic transfer. 
Each supplier submitting documents to CCC for payment must provide the 
name of the company, the bank ABA number to which payment is to be 
made, the account number for the company at the bank, the company's 
Taxpayer Identification Number, and the type of account being used.
    (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 such 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. The official certificate 
representing the results of an appeal inspection, when included in the 
documents presented for payment, shall supersede any other inspection 
certificate required by this part, 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 requirements of 
paragraph (c)(1) through (7) of this section, 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 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'', 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 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)

[[Page 52941]]

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.

    Signed at Washington, D.C. on July 14, 1997.
Christopher E. Goldthwait,
General Sales Manager, Foreign Agricultural Service and Vice-President, 
Commodity Credit Corporation.
[FR Doc. 97-26578 Filed 10-9-97; 8:45 am]
BILLING CODE 3410-10-P