[Federal Register Volume 64, Number 126 (Thursday, July 1, 1999)]
[Notices]
[Pages 35582-35584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16761]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service


Food Distribution Program: Substitution of Donated Poultry With 
Commercial Poultry

AGENCY: Food and Nutrition Service, USDA

ACTION: Notice.

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SUMMARY: This notice announces the Food and Nutrition Service's (FNS) 
intent to continue a demonstration project to test program changes 
designed to improve the State processing of donated poultry by allowing 
the substitution of donated poultry supplied by the Department of 
Agriculture (the Department) with commercial poultry. The Department is 
currently operating a demonstration project that allows selected 
poultry processors to substitute commercial poultry for donated poultry 
in the State processing of donated poultry. Only bulk pack poultry and 
poultry parts are eligible for substitution under the current 
demonstration

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project. Notice of the project, which has operated from February 1, 
1996 through June 30, 1997, was first published in the Federal Register 
at 61 FR 5373 on February 12, 1996. The project was then expanded and 
extended through June 30, 1999 (62 FR 25885). Under the demonstration 
project, FNS invoked its authority under 7 CFR 250.30(t) to waive the 
current prohibition at 7 CFR 250.30(f)(1)(i) against the substitution 
of poultry items and to establish the criteria under which substitution 
will be permitted.
    The Department will continue to operate the demonstration project 
from July 1, 1999 through June 30, 2000. The Department will use the 
results of the demonstration project to further examine whether 
allowing the substitution will result in increased processor 
participation and provide a greater variety of processed end products 
to recipient agencies in a more timely manner at lower costs. The 
Department believes that the demonstration is providing additional 
benefits to the program recipients currently. However, the Food 
Distribution Division has undertaken a complete review of the current 
program through Business Process Reengineering (BPR). Recommendations 
for program change will be forthcoming and the issues regarding 
substitution of all donated foods will be a priority topic of 
discussion.

DATES: The proposals described in this Notice may be submitted to FNS 
through December 30, 1999. Note that the demonstration project runs 
until June 30, 2000.

ADDRESSES: Proposals should be sent to David Brothers, Program Analyst, 
Schools and Institutions Branch, Food Distribution Division, Food and 
Nutrition Service, U.S. Department of Agriculture, Park Office Center, 
3101 Park Center Drive, Alexandria, Virginia 22302-1594.

FOR FURTHER INFORMATION CONTACT: David Brothers, Schools and 
Institutions Branch, at (703) 305-2644.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This notice has been determined to be not significant and therefore 
was not reviewed by the Office of Management and Budget under Executive 
Order 12866.

Executive Order 12372

    This program is listed in the Catalog of Federal Domestic 
Assistance under 10.550 and is subject to the provisions of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials (7 CFR part 3015, subpart V and final rule-related 
notices published at 48 FR 29114, June 24, 1983 and 49 FR 22675, May 
31, 1984).

Regulatory Flexibility Act

    This action is not a rule as defined by the Regulatory Flexibility 
Act (5 U.S.C. 601-612) and is thus exempt from the provisions of that 
Act.

Background

    Section 250.30 of the current Food Distribution Program regulations 
(7 CFR part 250) sets forth the terms and conditions under which 
distributing agencies, subdistributing agencies, or recipient agencies 
may enter into contracts for processing donated foods and prescribes 
the minimum requirements to be included in such contracts. Section 
250.30(t) authorizes FNS to waive any of the requirements contained in 
7 CFR part 250 for the purpose of conducting demonstration projects to 
test program changes designed to improve the State processing of 
donated foods.

Current Program Requirements

    The State processing regulations at Sec. 250.30(f)(1)(i) currently 
allow for the substitution of certain specified donated food items with 
commercial foods, with the exception of meat and poultry. Under the 
current regulations at Sec. 250.30(g), when donated meat or poultry 
products are processed or when any commercial meat or poultry products 
are incorporated into an end product containing one or more donated 
foods, all of the processing is required to be performed in plants 
under continuous Federal meat or poultry inspection or continuous State 
meat or poultry inspection in States certified to have programs at 
least equal to the Federal inspection programs. In addition to Food 
Safety Inspection Service (FSIS) inspection, all donated meat and 
poultry processing must be performed under Agricultural Marketing 
Service (AMS) acceptance service grading.
    Traditionally only a few companies have processed donated poultry. 
Those processors have stated that the policy prohibiting the 
substitution of donated poultry reduces the quantity of donated poultry 
they are able to accept and process during a given period. Poultry 
purchased by USDA for further processing is bulk chill packed. 
Processors must schedule production around deliveries of the donated 
poultry because it is a highly perishable product. Some of the 
processors must schedule production around deliveries of donated 
poultry for up to 30 individual States. Vendors do not always deliver 
donated poultry to the processors as scheduled, causing delays in 
production of end products. These delays may be alleviated if the 
processors can substitute their commercial poultry for donated poultry.

Demonstration Project

    From July 1, 1999 to June 30, 2000, the Department will continue to 
operate a demonstration project under which it will permit approved 
processors to substitute commercial poultry for donated poultry in the 
State processing of donated poultry. Processors may submit proposals 
and be approved to participate in the demonstration project during this 
time. FNS is invoking its authority under 7 CFR 250.30(t) to waive the 
current prohibition in 7 CFR 250.30(f)(1)(i) against the substitution 
of poultry for purposes of this demonstration project.
    The demonstration project will continue to be limited to bulk pack 
poultry and poultry parts because the processing of such items can be 
readily evaluated. The definition of substitution in Sec. 250.3 
requires the replacement of commercial product for donated food to be 
of the same generic identity and equal or better quality.
    FNS is inviting interested poultry processors to submit written 
proposals to participate in the demonstration project. The following 
basic requirements will apply to the demonstration project:
     As with the processing of donated poultry into end 
products, AMS graders must monitor the processing of any substituted 
commercial poultry to ensure program integrity is maintained.
     Only bulk pack poultry and poultry parts delivered by USDA 
vendors to the processor will be eligible for substitution. No 
backhauled product will be eligible. (Backhauled product is typically 
cut-up frozen poultry parts delivered to schools which may be turned 
over to processors for further processing at a later time.)
     Commercial poultry substituted for donated poultry must be 
certified by an AMS grader as complying with all product specifications 
for the donated poultry.
     Substitution of commercial poultry may occur in advance of 
the actual receipt of the donated poultry by the processor. However, no 
substitution may occur before the product is purchased by USDA and the 
contract is awarded. Lead time between the purchase and delivery of 
donated poultry may be up to five weeks. Any variation between the 
amount of

[[Page 35584]]

commercial poultry substituted and the amount of donated poultry 
received by the processor will be adjusted according to guidelines 
furnished by USDA.
     Any donated poultry not used in end products because of 
substitution must only be used by the processor at one of its 
facilities in other commercial processed products and cannot be sold as 
an intact unit. However, in lieu of processing the donated poultry, the 
processor may use the product to fulfill other contracts with USDA 
provided all terms of the other contract are met.
     The only regulatory provision or State processing contract 
term affected by the demonstration project is the prohibition on 
substitution of poultry (Sec. 250.30(f)(1)(i) of the regulations). All 
other regulatory and contract requirements remain unchanged and must 
still be met by processors participating in the demonstration project.
    The demonstration project will enable FNS to evaluate whether to 
amend program regulations to provide for the substitution of donated 
poultry with commercial poultry in the State processing program. 
Particular attention will be paid to whether such an amendment of the 
regulations would probably increase the number of processors 
participating, and whether it would probably increase the quantity of 
donated poultry that each processor accepts for processing. Further, 
FNS will attempt to determine whether the expected increase in 
competition and the expected increase in the quantity of donated 
poultry accepted for processing enables processors to function more 
efficiently, producing a greater variety of processed poultry end 
products in a more timely manner at lower costs.
    The data gathered to date from recipient agencies, AMS graders, and 
AMS procurement has been positive. The data suggests that given 
additional time, more poultry processors will decide to participate.
    Interested processors should submit a written proposal to FNS 
outlining how they plan to carry out the substitution while complying 
with the above conditions. Processors who are currently participating 
in the demonstration should apply to continue in the demonstration. The 
proposal must contain (1) a step-by-step description of how production 
will be monitored (2) a complete description of the records that will 
be maintained for (a) the commercial poultry substituted for the 
donated poultry (b) the disposition of the donated poultry delivered. 
All proposals will be reviewed by representatives of the Food 
Distribution Division of FNS and by representatives of AMS Poultry 
Division's Grading Branch. Companies approved for participation in the 
demonstration project will be required to enter into an agreement with 
FNS and AMS which authorizes the processor to substitute commercial 
bulk pack poultry and poultry parts in fulfilling any current or future 
State processing contracts during the demonstration project period. 
Participation in the demonstration project will not ensure the 
processor will receive any State processing contracts.

    Dated: June 24, 1999.
Samuel Chambers, Jr.,
Administrator, Food and Nutrition Service.
[FR Doc. 99-16761 Filed 6-30-99; 8:45 am]
BILLING CODE 3410-30-P