[Federal Register Volume 68, Number 58 (Wednesday, March 26, 2003)]
[Proposed Rules]
[Pages 14546-14558]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7028]


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

  Federal Register / Vol. 68, No. 58 / Wednesday, March 26, 2003 / 
Proposed Rules  

[[Page 14546]]



DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR Part 1599

RIN 0551-AA64


McGovern-Dole International Food for Education and Child 
Nutrition Program

AGENCY: Foreign Agricultural Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The Foreign Agricultural Service proposes to establish rules 
governing the foreign donation of resources, including agricultural 
commodities, to implement the McGovern-Dole International Food for 
Education and Child Nutrition Program. This program would provide 
agricultural commodities and financial and technical assistance to 
carry out preschool and school food for education programs and 
maternal, infant, and child nutrition programs, in foreign countries.

DATES: Submit comments on or before April 25, 2003.

ADDRESSES: Address all comments concerning this proposed rule to 
William S. Hawkins, Director, Program Administration Division, Foreign 
Agricultural Service, United States Department of Agriculture, 1400 
Independence Ave., SW., Stop 1031, Washington, DC 20250-1031; telephone 
(202) 720-3241.
    You may submit comments and data by sending electronic mail (E-
mail) to: [email protected].

FOR FURTHER INFORMATION CONTACT: Lorie Jacobs, Branch Chief, Financial 
Analysis Branch, Program Administration Division, Foreign Agricultural 
Service, U.S. Department of Agriculture (USDA), Ag. Box 1034, 
Washington, DC 20250-1031; telephone (202) 720-2074; FAX (202) 690-
1595. The USDA prohibits discrimination in its programs on the basis of 
race, color, national origin, sex, religion, age, disability, political 
beliefs and marital or familial status. Persons with disabilities who 
require alternative means for communication of program information 
(Braille, large print, audiotape, etc.) should contact the USDA Office 
of Communications at (202) 820-5881 (voice) or (202) 720-7808 (TDD).

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule is issued in conformance with Executive Order 
12866. It has been determined to be significant under Executive Order 
12866 and has been reviewed by the Office of Management and Budget. A 
cost-benefit assessment has been completed and is available to the 
public by contacting Lorie Jacobs at (202) 720-2074.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988, Civil Justice Reform. This proposed rule would have 
preemptive effect with respect to any State or local laws, regulations 
or policies which conflict with such provisions or which otherwise 
impede their full implementation; does not have retroactive effect; and 
does not require administrative proceedings before suit may be filed.

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).

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule because FAS is not required by any 
other provision of law to publish a notice of proposed rulemaking with 
respect to the subject matter of this proposed rule.

Paperwork Reduction Act

    This proposed rule would add new information collection 
requirements applicable to the McGovern-Dole International Food for 
Education and Child Nutrition Program. In accordance with the Paperwork 
Reduction Act of 1995, the Foreign Agricultural Service (FAS) requests 
approval of a new information collection in support of the McGovern-
Dole International Food for Education and Child Nutrition Program.
    Title: McGovern-Dole International Food for Education and Child 
Nutrition Program.
    OMB Control Number: xxxx-xxxx.
    Type of Request: Approval of an information collection.
    Abstract: This information is needed to administer the McGovern-
Dole International Food for Education and Child Nutrition Program. The 
information will be gathered from applicants desiring to receive grants 
under the program to determine the viability of requests for resources 
to implement school feeding and maternal and child nutrition programs 
in foreign countries and other periodic reports during the course of 
implementing the activities.
    Estimate of Burden: Public reporting burden for this collection of 
the additional information is estimated to average 74 hours per 
applicant.
    Respondents: Private voluntary organizations, shipping agents, ship 
owners/brokers, and survey companies.
    Estimated Number of Respondents: 156.
    Estimated Number of Responses per Respondent: 7.
    Estimated Total Annual Burden on Respondents: 11,607 hours.
    Copies of the information collection may be obtained from Kimberly 
Chisley, the Agency Information Collection Coordinator, at (202) 720-
2568.
    Request for Comments: Send comments regarding (a) whether the 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
burden including the validity of the methodology and assumptions used; 
(c) ways to enhance the quality, utility, and clarity of the 
information to be collected; or (d) ways to minimize the burden of the 
collection of information on those who are to respond, including the 
use of appropriate automated, electronic, mechanical or other 
technological collection techniques or other forms of information 
technology.
    Comments should be sent to the Desk Officer for Agriculture, Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
Washington, DC 20503 and to: William

[[Page 14547]]

S. Hawkins, Director, Program Administration Division, Foreign 
Agricultural Service, United States Department of Agriculture, 1400 
Independence Ave., SW., Stop 1031, Washington, DC 20250-1031; telephone 
(202) 720-3241.
    All responses to this notice will be summarized. All comments will 
also become a matter of public record.

Government Paperwork Elimination Act

    FAS is committed to compliance with the Government Paperwork 
Elimination Act, which requires Government agencies, in general, to 
provide the public the option of submitting information or transacting 
business electronically to the maximum extent possible.

Background

    Section 3107 of the Farm Security and Rural Investment Act of 2002, 
Pub. L. 107-171, authorized the President to establish a program to be 
known as the McGovern-Dole International Food for Education and Child 
Nutrition Program. This program would provide agricultural commodities 
and financial and technical assistance to carry out preschool and 
school food for education programs and maternal, infant, and child 
nutrition programs, in foreign countries. By Presidential Memorandum, 
March 11, 2003, the President delegated the responsibility for 
implementing this program to the Secretary of Agriculture and it has 
been further delegated, within the Department of Agriculture, to the 
Administrator, Foreign Agricultural Service. Congress directed that 
$100 million of Commodity Credit Corporation (CCC) funds be used for 
this program in fiscal year 2003. Thereafter, the program is subject to 
annual appropriations.
    In comparison to the pilot Global Food for Education Initiative, 
there will be an increased emphasis on education and nutrition under 
the McGovern-Dole International Food for Education and Child Nutrition 
Program. The Farm Security and Rural Investment Act of 2002 (Farm Act 
of 2002) indicates that funds should be used in part to improve 
literacy and primary education, particularly with respect to girls, and 
to put emphasis on identifying beneficiaries who are malnourished or 
undernourished. In addition, cooperating sponsors should attempt to 
coordinate supplementary feeding and nutrition programs with existing 
programs that provide health-needs interventions.
    The McGovern-Dole International Food for Education and Child 
Nutrition Program is implemented under the authorities of the Foreign 
Agricultural Service and, therefore, this new program will be subject 
to regulations that are separate from other foreign assistance 
commodity grant programs operated under the authority of the Commodity 
Credit Corporation (CCC), i.e., section 416(b) and Food for Progress. 
However, because there are many similarities between these programs and 
it would be advisable to retain the same procedures and rules to the 
extent practical, this proposed rule would adopt, and repeat in 7 CFR 
part 1599, most of the regulations currently in 7 CFR part 1499 that 
are applicable to the section 416(b) and Food for Progress programs. 
Sections 1599.7 and 1599.8, which cover procedures that apply to 
procuring ocean transportation, and arranging for entry and handling of 
commodities in the foreign country, are nearly identical to 7 CFR part 
1499. Comments are encouraged regarding whether using this identical 
language could cause any unforeseen problems under the new program.
    The legislation authorizing the new program would require certain 
additional information to support proposals for funding and authorizes 
certain expenditures not generally permitted under section 416(b) or 
Food for Progress. Also, certain department-wide grant regulations not 
presently applicable to CCC authorized grants would be applicable to 
the McGovern-Dole International Food for Education and Child Nutrition 
Program. These department-wide regulations are referenced in the 
proposed rule. The applicability of these department-wide rules has 
necessitated certain deviations from the rules applicable to section 
416(b) and Food for Progress grants. Of particular note are the 
provisions on advances, interest earned on advances, changes to Program 
Budgets, and audit requirements.
    Under the McGovern-Dole International Food for Education and Child 
Nutrition Program, FAS may pay certain costs not permitted under the 
earlier pilot Global Food for Education Initiative operated under the 
authority of section 416(b). This includes costs for transportation, 
storage and handling within the recipient country in non-emergency 
situations when certain specified findings are met. FAS may also pay 
administrative expenses of nongovernmental Cooperating Sponsors and 
other costs of nongovernmental Cooperating sponsors that enhance the 
effectiveness of program activities. These costs, to the extent FAS 
agrees to pay them, would be detailed in the Program Operations Budget, 
which becomes part of the program agreement. The Farm Act of 2002 
provides for participation by the Food and Nutrition Service (FNS) 
under the McGovern-Dole International Food for Education and Child 
Nutrition Program, wherein FNS may provide technical advice on the 
establishment and implementation of programs, including providing field 
expertise in recipient countries.
    Costs that ``enhance the effectiveness'' of activities is a vague 
concept. FAS is proposing to give priority coverage of these costs to 
those that would increase the likelihood of meeting the activities 
objectives. Examples of costs that may enhance the effectiveness of a 
school feeding program may be the purchase of text books, utensils and 
food trays, the provision of incentives to teachers, as well as the use 
of consultancies to provide technical assistance in the educational 
improvement area when conducting teacher training. While monetization 
proceeds could also be requested and used to cover any program costs 
that are necessary to have a successful activity to enhance the 
effectiveness of a program, organizations need to demonstrate that 
monetization offers more benefits than a direct cash outlay.
    Another significant difference between the McGovern-Dole 
International Food for Education and Child Nutrition Program and the 
prior pilot program is that the new authority requires that Cooperating 
Sponsors demonstrate that the activities undertaken with program 
resources must be sustainable after FAS assistance ends. Consequently, 
FAS will require that proposals include sufficient information to allow 
the Associate Administrator to make a determination that this will be 
the case.
    The development and implementation of the McGovern-Dole 
International Food for Education and Child Nutrition Program helps to 
meet the objective of supporting international economic development and 
trade capacity building set forth in the USDA Strategic Plan for FY 
2002-2007. Under that objective USDA provides targeted foreign food 
assistance to developing countries to foster economic growth and 
development.
    USDA uses an interagency process to review food aid policies and 
programs to ensure the necessary coordination and management of these 
programs, and will continue to use this process for the McGovern-Dole 
International Food for Education and Child Nutrition Program. FAS will 
cooperate with USAID, FNS and other Federal Agencies in the

[[Page 14548]]

development and implementation of the McGovern-Dole International Food 
for Education and Child Nutrition Program.
    The Farm Act of 2002 stipulates that funds may be used to pay for 
the packaging, enrichment, preservation, and fortification of 
agricultural commodities under the McGovern-Dole International Food for 
Education and Child Nutrition Program. This proposed rule contains that 
information in Section 1599.6 (a) Apportionment of Costs and Advances, 
in order to emphasize the intent of the Farm Act of 2002 to allow for 
coverage of these costs.

List of Subjects in 7 CFR Part 1599

    Agricultural commodities, Exports, Foreign aid.

    Accordingly, the Foreign Agricultural Service proposes that chapter 
XV of title 7 of the Code of Federal Regulations be amended by adding a 
new part 1599 to read as follows:

PART 1599--MCGOVERN-DOLE INTERNATIONAL FOOD FOR EDUCATION AND CHILD 
NUTRITION PROGRAM

1599.1 What special definitions apply?
1599.2 What is the general purpose and scope of the regulations?
1599.3 Are there eligibility requirements for Cooperating Sponsors?
1599.4 How do I apply?
1599.5 When is a usual marketing requirement included?
1599.6 How are costs and advances apportioned?
1599.7 What procedures apply to procuring ocean transportation?
1599.8 Who arranges for entry and handling in the foreign country?
1599.9 What are the restrictions on commodity use and distribution?
Sec.  1599.10 Are there special requirements for agreements between 
Cooperating Sponsor and Recipient Agencies?
1599.11 What procedures apply to sales and barter of commodities 
provided and the use of proceeds?
1599.12 What procedures apply to the processing, packaging and 
labeling of commodities in the foreign country?
1599.13 How does the Cooperating Sponsor dispose of commodities 
unfit for authorized use?
1599.14 How is liability established for loss, damage, or improper 
distribution of commodities?
1599.15 Are there special record keeping and reporting requirements?
1599.16 What are the Cooperating Sponsor's audit requirements?
1599.17 When may FAS suspend a program?
1599.18 Are there sample documents and guidelines available for 
developing proposals and reports?

    Authority: 7 U.S.C. 1736-1; Presidential Memorandum, March 11, 
2003 (68 FR 12569).


Sec.  1599.1  What special definitions apply?

    Activity--a Cooperating Sponsor's use of agricultural commodities 
and financial and technical assistance provided under Program 
Agreements.
    Agricultural Counselor or Attache--the United States Foreign 
Agricultural Service representative stationed abroad, who has been 
assigned responsibilities with regard to the country into which the 
commodities provided are imported, or such representative's designee.
    Associate Administrator--Associate Administrator, Foreign 
Agricultural Service.
    CCC--the Commodity Credit Corporation.
    Commodities-- U.S. agricultural commodities or products.
    Deputy Administrator--Deputy Administrator for Export Credits, 
Foreign Agricultural Service, USDA.
    Director, CCC-OD--the Director, CCC Operations Division, Foreign 
Agricultural Service, USDA.
    Director, PAD--the Director, Program Administration Division, 
Foreign Agricultural Service, USDA.
    Director, PPDED--the Director, Program Planning, Development & 
Evaluation Division, Foreign Agricultural Service, USDA.
    FAS--Foreign Agricultural Service, USDA.
    Force Majeure--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, princesses, rulers of peoples without 
the fault of the carrier; wars; public disorders; captures; or 
detention by public authority in the interest of public safety.
    KCCO--Kansas City Commodity Office, Farm Services Agency, USDA, 
P.O. Box 419205, Kansas City, Missouri, 64141-6205.
    KCMO/DMD--Debt Management Division, Kansas City Management Office, 
Farm Services Agency, USDA, P.O. Box 419205, Kansas City, Missouri, 
64141-6205.
    Ocean freight differential--the amount, as determined by FAS, by 
which the cost of ocean transportation is higher than would otherwise 
be the case by reason of the requirement that the commodities be 
transported on U.S.-flag vessels.
    Program Agreement--an agreement entered into by FAS and Cooperating 
Sponsors to implement the McGovern-Dole International Food for 
Education and Child Nutrition Program.
    Program income--interest on sale proceeds and money received by the 
Cooperating Sponsor, other than sales proceeds, as a result of carrying 
out approved activities.
    Recipient agency--an entity located in the importing country which 
receives commodities or commodity sale proceeds from a Cooperating 
Sponsor for the purpose of implementing activities.
    Sale proceeds--money received by a Cooperating Sponsor from the 
sale of commodities.
    USDA--the United States Department of Agriculture.


Sec.  1599.2  What is the general purpose and scope of the regulations?

    (a) This part establishes the general terms and conditions 
governing the donation of commodities and financial and technical 
assistance to Cooperating Sponsors under the McGovern-Dole 
International Food for Education and Child Nutrition Program. This part 
does not apply to donations to intergovernmental agencies or 
organizations (such as the World Food Program) unless FAS and such 
intergovernmental agency or organization enter into an agreement 
incorporating this part. Cooperating Sponsors should also familiarize 
themselves with regulations at 7 CFR part 3019-Uniform Administrative 
Requirements for Grants and Agreements with Institutions of Higher 
Education, Hospitals and Other Non-Profit Organizations.
    (b) In addition to the regulations in this part 1599, grants 
awarded to non-governmental Cooperating Sponsors by FAS are subject to 
7 CFR 3015.205, 7 CFR part 3019 and 7 CFR part 3052.


Sec.  1599.3  Are there eligibility requirements for Cooperating 
Sponsors?

    A Cooperating Sponsor may be either:
    (a) A foreign government;
    (b) An entity registered with the Agency for International 
Development (AID) in accordance with AID regulations; or
    (c) An entity that demonstrates to FAS'' satisfaction:
    (1) Organizational experience and resources available to implement 
and manage the type of program proposed, i.e., targeted food 
assistance, activities that improve the food security, health and 
nutrition of women and children, and economic development activities;
    (2) Experience working in the targeted country; and
    (3) Experience and knowledge on the part of personnel who will be 
responsible for implementing and managing the program. FAS may require

[[Page 14549]]

that an entity submit a financial statement demonstrating that it has 
the financial means to implement an effective donation program.


Sec.  1599.4  How do I apply?

    To apply for this program, a Cooperating Sponsor shall submit an 
SF-424, a Program Introduction, a Plan of Operation, and a Budget 
Proposal to the Director, PPDED and to the Agricultural Counselor or 
Attache responsible for the country where activities are to be 
implemented. Electronic submissions of these items are preferred, 
particularly through the FAS on-line system. If on-line submission is 
not available, e-mail or hard copy are acceptable.
    (a) Submit an SF-424.
    (b) Program Introduction shall include the following:
    (1) Information about the organization's past food aid activities 
with particular emphasis on school feeding, maternal child health or 
other relevant development activities, its experience within the 
country where the program is proposed, and any other relevant 
information to demonstrate its capability to implement the program in 
the country, with particular emphasis on the organizations ability to:
    (i) Identify and assess the needs of beneficiaries, especially 
malnourished or undernourished mothers and their children who are 5 
years of age or younger, and school-age children who are malnourished, 
undernourished, or do not regularly attend school;
    (ii) In the case of preschool and school-age children, target low-
income areas where children's enrollment and attendance in school is 
low or girls' enrollment and participation in preschool or school is 
low;
    (iii) Incorporate developmental objectives for improving literacy 
and primary education (especially with girls); and,
    (iv) In the case of maternal and child nutrition activities, 
coordinate supplementary feeding and nutrition programs with existing 
or newly established maternal, infant, and child programs that meet 
maternal, prenatal, postnatal, and newborns health needs;
    (2) Reasons for the need for the food aid and in particular a 
school feeding program in the country. The organization shall include 
statistics on poverty, food deficits, and related items such as 
literacy rates for the target population; percentage of school age 
children attending schools, especially females; malnutrition rates; 
public expenditures on primary education; country's current school 
feeding operations, if they exists, along with current funding 
resources; any information regarding teacher training, community 
infrastructure (PTAs), health, nutrition, and water and sanitation 
information; and lastly, other potential donors;
    (3) Verification that the national government is committed to or is 
working toward, through a national action plan, the goals of the World 
Declaration on Education for All convened in 1990 in Jomtien, Thailand, 
and the follow-up Dakar Framework for Action of the World Education 
Forum, convened in 2000;
    (4) Steps to graduate the program from food aid and address 
sustainability, or sustainable program components, which will continue 
after the end of food aid donations. In addressing graduation or 
sustainability, address how the program will sustain the benefits of 
the education, enrollment, and attendance of children in schools in the 
targeted communities when the provision of commodities and assistance 
to a recipient country under FFE terminates; and estimate the time 
required until the recipient country or eligible organizations will be 
able to provide sufficient assistance without additional assistance 
under FFE; or in the absence of sustainability explain how the program 
will provide other long term benefits to targeted populations of the 
recipient country;
    (5) Information on methods used to involve indigenous institutions 
as well as local communities and governments in the development and 
implementation of the programs and activities to foster local capacity 
building and leadership;
    (6) An explanation of how each requested expenditure identified in 
Sec.  1599.6(b)(4)(i) would enhance the effectiveness of the activities 
implemented under this subpart. For purposes of this section, 
``expenditures that would enhance the effectiveness of the activities 
implemented under this subpart'' are those expenditures which would 
increase the likelihood of meeting the objectives of the activities as 
stated in the Plan of Operation. Examples of costs that may enhance the 
effectiveness of a school feeding program may be the purchase of 
utensils and food trays, text books, and incentives for teachers, as 
well as the use of consultancies to provide technical assistance in the 
educational improvement area when conducting teacher training. These 
costs may include a limited amount to procure locally produced foods.
    (7) If your proposal includes monetization or barter, demonstrate 
that monetization or bartering of commodities offers more benefits than 
a direct cash outlay.
    (c) A Plan of Operation shall provide the following information:
    (1) Country of donation.
    (2) Kind, quantity and delivery schedule of commodities requested.
    (3) Activity objectives. Briefly state what the goals to be 
accomplished for the program are.
    (4) Program description shall include the following:
    (i) Fully describe the steps involved in program implementation;
    (ii) Method for choosing beneficiaries of activities;
    (iii) Program administration, including a description of the 
Cooperating Sponsors plan to develop, implement, monitor, report on, 
and provide accountability for activities. The Cooperating Sponsor 
shall also include, as appropriate, plans for administering the 
distribution or sale of commodities and the expenditure of sale 
proceeds, and identification of the administrative or technical 
personnel who will implement the activities;
    (iv) Activity budgets, including costs that will be borne by the 
Cooperating Sponsor, other organizations or local governments. If a 
nongovernmental Cooperating Sponsor requests FAS to fund costs 
identified in Sec.  1599.6 (b)(4)(i), the Cooperating Sponsor shall 
include a detailed description of:
    (A) The costs for which funding is requested; and,
    (B) The amount of funding requested for each cost;
    (v) The recipient agency, if any, that will be involved in the 
program and a description of each recipient agency's capability to 
perform its responsibilities as stated in the Plan of Operation;
    (vi) Governmental or nongovernmental entities involved in the 
program and the extent to which the program will strengthen or increase 
the capabilities of such entities to further economic development in 
the recipient country. The Cooperating Sponsor shall also include a 
description of the steps that the government of the host country is 
taking to improve the preschool and school systems in the country;
    (vii) Method of educating consumers as to the source of the 
provided commodities and, where appropriate, preparation and use of the 
commodity; and
    (viii) Criteria for measuring progress towards achieving the 
objectives of activities and evaluating program outcome, including 
health, nutrition and education.
    (5) Use of funds or goods and services generated. If the activity 
involves the use of sale proceeds, the receipt of

[[Page 14550]]

goods or services from the barter of commodities, or the use of program 
income, the cooperating sponsor shall provide the following 
information:
    (i) The quantity and type of commodities to be sold or bartered;
    (ii) Extent to which any sale or barter of the agricultural 
commodities provided would displace or interfere with any sales that 
may otherwise be made;
    (iii) The amount of sale proceeds anticipated to be generated from 
the sale, the value of the goods or services anticipated to be 
generated from the barter of the agricultural commodities provided, or 
the amount of program income expected to be generated;
    (iv) The steps taken to use, to the extent possible, the private 
sector in the process of selling commodities;
    (v) The specific uses of sale proceeds or program income and a 
timetable for their expenditure; and
    (vi) Procedures for assuring the receipt and deposit of sale 
proceeds and program income into a separate special account and 
procedures for the disbursement of the proceeds and program income from 
such special account.
    (6) Distribution methods:
    (i) A description of the transportation and storage system which 
will be used to move the agricultural commodities from the receiving 
port to the point at which distribution is made to the recipient;
    (ii) A description of any reprocessing or repackaging of the 
commodities that will take place; and
    (iii) A logistics plan that demonstrates the adequacy of port, 
transportation, storage, and warehouse facilities to handle the flow of 
commodities to recipients without undue spoilage or waste.
    (7) Duty free entry: Documentation indicating that any commodities 
to be distributed to recipients, rather than sold, will be imported and 
distributed free from all customs, duties, tolls, and taxes.
    (8) Economic impact: Information indicating that the commodities 
can be imported and distributed without a disruptive impact upon 
production, prices and marketing of the same or like products within 
the importing country.
    (d) Budget Proposals shall include funds requested, from either 
cash or monetization resources, to fund administrative, ITSH, technical 
and financial assistance costs. Budget proposals shall be submitted in 
a spreadsheet format.
    (e) After submission and approval by FAS, a Program Agreement will 
be developed. The Program Agreement, which will incorporate the terms 
and conditions set forth in this Part, the commodities provided by FAS, 
and any packaging, will meet the specifications set forth in such 
Program Agreement. A Program Agreement may contain special terms or 
conditions, in addition to or in lieu of, the terms and conditions set 
forth in the regulations in this part when FAS determines that such 
special terms or conditions are necessary to effectively carry out the 
particular Program Agreement. The Plan of Operation, Budget Proposal, 
and Commodity specifications will be incorporated into the Program 
Agreement as Attachments.


Sec.  1599.5  When is a usual marketing requirement included?

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


Sec.  1599.6  How are costs and advances apportioned?

    (a) FAS will bear the costs of the packaging, enrichment, 
preservation, and fortification of agricultural commodities, and the 
processing, transportation, handling and other incidental charges 
incurred in delivering commodities to Cooperating Sponsors. FAS will 
deliver bulk grain shipments f.o.b. vessel, and shipments of all other 
commodities f.a.s. vessel or intermodal points. FAS will choose the 
point of delivery based on lowest cost to FAS.
    (b) When the Associate Administrator approves in advance and in 
writing, FAS may agree to bear all or a portion of reasonable costs 
associated with:
    (1) Transportation from U.S. ports to designated ports or points of 
entry abroad;
    (2) Maritime survey costs;
    (3) Transportation from designated ports or points of entry abroad 
to designated storage and distribution sites, and reasonable storage 
and distribution costs if the recipient country is a low income, net 
food-importing country that:
    (i) Meets the poverty criteria established by the International 
Bank for Reconstruction and Development for Civil Works Preference; and
    (ii) Has a national government that is committed to or is working 
toward, through a national action plan, the goals of the World 
Declaration on Education for All and the Dakar Framework for Action of 
the World Education Forum; and
    (4) The costs of a nongovernmental Cooperating Sponsor:
    (i) In the recipient country that enhance the effectiveness of the 
activities including packaging, enrichment, preservation and 
fortification of agricultural commodities; and
    (ii) For administrative or monitoring expenses specified in the 
program agreement.
    (5) The administrative expenses of any Federal agency implementing 
or assisting in the implementation of the McGovern-Dole International 
Food for Education and Child Nutrition Program, including the 
administrative costs of the Food and Nutrition Service to provide 
technical advice on the establishment and implementation of programs, 
including providing field expertise in recipient countries.
    (c) FAS will not pay any costs incurred by the Cooperating Sponsor 
prior to the date of the Program Agreement.
    (d) Except as provided in paragraph (b) of this section, the 
Cooperating Sponsor shall ordinarily bear all costs incurred subsequent 
to FAS' delivery of commodities at U.S. ports or intermodal points.
    (e) A Cooperating Sponsor seeking agreement by FAS to bear the 
storage and distribution costs identified in paragraph (b)(3) or the 
costs identified in paragraph (b)(4) of this section shall submit to 
the Director, PPDED, a Program Operation Budget detailing such costs. 
If approved, the Program Operation Budget shall become part of the 
Program Agreement. The non-governmental Cooperating Sponsor may make 
adjustments between line items of an approved Program Operation Budget 
up to 10 percent of the total amount of the budget as last approved 
without any further approval. Adjustments beyond these limits must be 
specifically approved by the Director, PPDED.
    (f) The Cooperating Sponsor may request advance of up to 100 
percent of the amount of an approved Program Operating Budget if FAS 
determines that the Cooperating Sponsor's financial management system 
meets the

[[Page 14551]]

requirements of 7 CFR 3019.21. However, FAS will not approve any 
request for an advance received earlier than 60 days after the date of 
a previous advance made in connection with the same Program Agreement.
    (g) Funds advanced shall be deposited in an interest bearing 
account until expended. Interest earned on advance of funds must be 
returned to FAS.
    (h) The Cooperating Sponsor shall return to FAS any funds not 
obligated as of the 180th day after being advanced, together with 
interest earned on such unexpended funds. Funds and interest shall be 
returned within 30 days of such date.
    (i) The Cooperating Sponsor shall, not later than 10 days after the 
end of each calendar quarter, submit a financial statement to the 
Director, PPDED, accounting for all funds advanced and all interest 
earned.
    (j) FAS will pay all other costs for which it is obligated under 
the Program Agreement by reimbursement. However, FAS will not pay any 
cost incurred after the final date specified in the Program Agreement.
    (k) Program income may be used to further eligible activity 
objectives.


Sec.  1599.7  What procedures apply to procuring ocean transportation?

    (a) Cargo preference. Shipments of commodities are subject to the 
requirements of sections 901(b) and 901b of the Merchant Marine Act, 
1936, regarding carriage on U.S.-flag vessels. A Cooperating Sponsor 
shall comply with the instructions of FAS regarding the quantity of 
commodities that must be carried on U.S. flag vessels.
    (b) Freight procurement requirements. When FAS is financing any 
portion of the ocean freight, whether on U.S. flag or non-U.S. flag 
vessels, and the Cooperating Sponsor arranges ocean transportation:
    (1) The Cooperating Sponsor shall arrange ocean transportation 
through competitive bidding and shall obtain approval of all 
invitations for bids from the Director, CCC-OD.
    (2) Invitations for bids shall be issued through the Transportation 
News Ticker (TNT), New York, and at least one other comparable means of 
trade communication.
    (3) Freight invitations for bids shall include specified procedures 
for payment of freight, including the party responsible for the freight 
payments, and expressly require that:
    (i) Offers include a contract canceling date no later than the last 
contract layday specified in the invitation for bids;
    (ii) Offered rates be quoted in U.S. dollars per metric ton;
    (iii) If destination bagging or transportation to a point beyond 
the discharge port is required, the offer separately state the total 
rate and the portion thereof attributable to the ocean segment of the 
movement;
    (iv) Any non-liner U.S. flag vessel 15 years or older offer, in 
addition to any other offered rate, a one-way rate applicable in the 
event the vessel is scrapped or transferred to foreign flag registry 
prior to the end of the return voyage to the United States;
    (v) In the case of packaged commodities, U.S. flag carriers specify 
whether delivery will be direct breakbulk shipment, container shipment, 
or breakbulk transshipment and identify whether transshipment 
(including container relays) will be via U.S. or foreign flag vessel;
    (vi) Vessels offered subject to Maritime Administration approval 
will not be accepted; and
    (vii) Offers be received by a specified closing time, which must be 
the same for both U.S. and non-U.S. flag vessels.
    (4) In the case of shipments of bulk commodities and non-liner 
shipments of packaged commodities, the Cooperating Sponsor shall open 
offers in public in the United States at the time and place specified 
in the invitation for bids and consider only offers that are responsive 
to the invitation for bids without negotiation. Late offers shall not 
be considered or accepted.
    (5) All responsive offers received for both U.S. flag and foreign 
flag service shall be presented to KCCO which will determine the extent 
to which U.S.-flag vessels will be used.
    (6) The Cooperating Sponsor shall promptly furnish the Director, 
CCC-OD, or other official specified in the Program Agreement, copies of 
all offers received with the time of receipt indicated thereon. The 
Director, CCC-OD, or other official specified in the Program Agreement, 
will approve all vessel fixtures. The Cooperating Sponsor may fix 
vessels subject to the required approval; however, the Cooperating 
Sponsor shall not confirm a vessel fixture until advised of the 
required approval and the results of the Maritime Administration's 
guideline rate review. The Cooperating Sponsor shall not request 
guideline rate advice from the Maritime Administration. The Cooperating 
Sponsor will, promptly after receipt of vessel approval, issue a public 
notice of the fixture details on the TNT or other means of 
communication approved by the Director, CCC-OD.
    (7) Non-Vessel Operating Common Carriers may not be employed to 
carry shipments on either U.S. or foreign-flag vessels.
    (8) The Cooperating Sponsor shall promptly furnish the Director 
CCC-OD, a copy of the signed laytime statement and statement of facts 
at the discharge port.
    (c) Shipping agents. (1) The Cooperating Sponsor may appoint a 
shipping agent to assist in the procurement of ocean transportation. 
The Cooperating Sponsor shall nominate the shipping agent in writing to 
the Deputy Administrator, Room 4077-S, Foreign Agricultural Service, 
U.S. Department of Agriculture, Washington, DC 20250-1031, and include 
a copy of the proposed agency agreement. The Cooperating Sponsor shall 
specify the time period of the nomination.
    (2) The shipping agent so nominated shall submit the information 
and certifications required by 7 CFR 17.4 to the Deputy Administrator.
    (3) A person may not act as a shipping agent for a Cooperating 
Sponsor unless the Deputy Administrator has notified the Cooperating 
Sponsor in writing that the nomination is accepted.
    (d) Commissions. (1) When any portion of the ocean freight is paid 
by FAS, total commissions earned on U.S. and foreign flag bookings by 
all parties arranging vessel fixtures, shall not exceed 2-1/2 percent 
of the total freight costs.
    (2) Address commissions are prohibited.
    (e) Contract terms. When FAS is paying any portion of the ocean 
freight, charter parties and liner booking contracts must conform to 
the following requirements, as applicable:
    (1) Packaged commodities on liner vessels shall be shipped on the 
basis of full berth terms with no demurrage or despatch;
    (2) Shipments of bulk liquid commodities may be contracted in 
accordance with trade custom. Other bulk commodities, including 
shipments that require bagging or stacking for the account of the 
vessel, shall be shipped on the basis of vessel load, free out, with 
demurrage and despatch applicable at load and discharge ports; except 
that, if bulk commodities require further inland distribution, they 
shall be shipped on the basis of vessel load with demurrage and 
despatch at load and berth terms discharge, i.e., no demurrage, 
despatch, or detention at discharge. Demurrage and despatch shall be 
settled between the ocean carrier and commodity suppliers at load port 
and between the ocean carrier and charterers at discharge ports. FAS is 
not responsible for resolving disputes involving the

[[Page 14552]]

calculation of laytime or the payment of demurrage or despatch.
    (3) If the Program Agreement requires the Cooperating Sponsor to 
arrange an irrevocable letter of credit for ocean freight, the 
Cooperating Sponsor shall be liable for detention of the vessel for 
loading delays attributable solely to the decision of the ocean carrier 
not to commence loading because of the failure of the Cooperating 
Sponsor to establish such letter of credit. Charter parties and liner 
booking contracts may not contain a specified detention rate. The ocean 
carrier shall be entitled to reimbursement, as damages for detention 
for all time so lost, for each calendar day or any part of the calendar 
day, including Saturdays, Sundays and holidays. The period of such 
delay shall not commence earlier than upon presentation of the vessel 
at the designated loading port within the laydays specified in the 
charter party or liner booking contract, and upon notification of the 
vessel's readiness to load in accordance with the terms of the 
applicable charter party or liner booking contract. The period of such 
delay shall end at the time that operable irrevocable letters of credit 
have been established for ocean freight or the time the vessel begins 
loading, whichever is earlier. Time calculated as detention shall not 
count as laytime. Reimbursement for such detention shall be payable no 
later than upon the vessel's arrival at the first port of discharge.
    (4) Charges including, but not limited to charges for inspection, 
fumigation, and carrying charges, attributable to the failure of the 
vessel to present before the canceling date will be for the account of 
the ocean carrier.
    (5) Ocean freight is earned under a charter party when the vessel 
and cargo arrive at the first port of discharge, Provided, That if a 
force majeure prevents the vessel's arrival at the first port of 
discharge, 100% of the ocean freight is payable or, if the charter 
party provides for completing additional requirements after discharge 
such as bagging, stacking, or inland transportation, not more than 85% 
of the ocean freight is payable, at the time the Associate 
Administrator determines that such force majeure was the cause of 
nonarrival; and
    (6) When the ocean carrier offers delivery to destination ports on 
U.S.-flag vessels, but foreign-flag vessels are used for any part of 
the voyage to the destination port without first obtaining the approval 
of the Cooperating Sponsor, KCCO, and any other approval that may be 
required by the Program Agreement, the ocean freight rate will be 
reduced to the lowest responsive foreign-flag vessel rate offered in 
response to the same invitation for bids and the carrier agrees to pay 
FAS the difference between the contracted ocean freight rate and the 
freight rate offered by such foreign-flag vessel.
    (f) Coordination between FAS and the Cooperating Sponsor. When a 
Program Agreement specifies that the Cooperating Sponsor will arrange 
ocean transportation:
    (1) FAS will provide that KCCO furnishes the Cooperating Sponsor, 
or its agent, a Notice of Commodity Availability (Form FAS-512) which 
will specify the receiving country, commodity, quantity, and date at 
U.S. port or intermodal delivery point.
    (2) The Cooperating Sponsor shall complete the Form FAS-512 
indicating name of steamship company, vessel name, vessel flag and 
estimated time of arrival at U.S. port; and shall sign and return the 
completed form to KCCO, with a copy to the Director, CCC-OD. If FAS 
agrees to pay any part of the ocean transportation for liner cargoes, 
the Cooperating Sponsor shall also indicate on the Form FAS-512 the 
applicable Federal Maritime Commission tariff rate, and tariff 
identification.
    (3) FAS will arrange for KCCO to issue instructions to have the 
commodity delivered f.a.s. or f.o.b. vessel, U.S. port of export or 
intermodal delivery point, consigned to the Cooperating Sponsor.
    (g) Documents required for payment of freight--(1) General rule. To 
receive payment for ocean freight, the Cooperating Sponsor shall submit 
the following documents to the Director, CCC-OD:
    (i) One signed copy of completed Form FAS-512;
    (ii) Four copies of the original on-board bills of lading 
indicating the freight rate and signed by the originating carrier;
    (iii) For all non-containerized grain cargoes,
    (A) One signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (B) One signed copy of the National Cargo Bureau Certificate of 
Readiness (Vessel Hold Inspection Certificate); and
    (C) One signed copy of the National Cargo Bureau Certificate of 
Loading;
    (iv) For all containerized grain and grain product cargoes, one 
copy of the FGIS Container Condition Inspection Certificate;
    (v) One signed copy of liner booking note or charter party covering 
ocean transportation of cargo;
    (vi) For charter shipments, a signed notice of arrival at first 
discharge port submitted by the Cooperating Sponsor;
    (vii) For all liner cargoes, a copy of the tariff page;
    (viii) Four copies of either:
    (A) A request by the Cooperating Sponsor for reimbursement of ocean 
freight or ocean freight differential indicating the amount due, and 
accompanied by a certification from the ocean carrier that payment has 
been received from the Cooperating Sponsor; or
    (B) A request for direct payment to the ocean carrier, indicating 
amount due; or
    (C) A request for direct payment of ocean freight differential to 
the ocean carrier accompanied by a certification from the carrier that 
payment of the Cooperating Sponsor's portion of the ocean freight has 
been received.
    (ix) Each request to FAS for payment must provide a document, on 
letterhead and signed by an official or agent of the requester, the 
name of the entity to receive payment, the bank ABA number to which 
payment is to be made; the account number for the deposit at the bank; 
the requester's taxpayer identification number; and the type of the 
account into which funds will be deposited.
    (2) In cases of force majeure. To receive payment in cases where 
the Associate Administrator determines that circumstances of force 
majeure have prevented the vessel's arrival at the first port of 
discharge, the Cooperating Sponsor shall submit all documents required 
by paragraph (g)(1) of this section except for the notice of arrival 
required by paragraph (g)(1)(vi) of this section.
    (h) FAS payment of ocean freight or ocean freight differential. (1) 
General rule. FAS will pay, not later than 30 days after receipt in 
good order of the required documentation, 100 percent of either the 
ocean freight or the ocean freight differential, whichever is specified 
in the Program Agreement.
    (2) Additional requirements after discharge. Where the charter 
party or liner booking note provide for the completion of additional 
services after discharge, such as bagging, stacking or inland 
transportation, FAS will pay, not later than 30 days after receipt in 
good order of the required documentation, either not more than 85 
percent of the total freight charges or 100 percent of the ocean 
freight differential, whichever is specified in the Program Agreement. 
FAS will pay the remaining balance, if any, of the freight charges not 
later than 30 days after receipt of notification from the Cooperating 
Sponsor that such additional services have been provided;

[[Page 14553]]

except that FAS will not pay any remaining balance where the Associate 
Administrator determines that the vessel's arrival at first port of 
discharge was prevented by force majeure.
    (3) No demurrage. FAS will not pay demurrage.


Sec.  1599.8  Who arranges for entry and handling in the foreign 
country?

    (a) The Cooperating Sponsor shall make all necessary arrangements 
for receiving the commodities in the recipient country, including 
obtaining appropriate approvals for entry and transit. The Cooperating 
Sponsor shall store and maintain the commodities from time of delivery 
at port of entry or point of receipt from originating carrier in good 
condition until their distribution, sale or barter.
    (b) When FAS has agreed to pay costs of transporting, storing, and 
distributing commodities from designated points of entry or ports of 
entry, the Cooperating Sponsor shall arrange for such services, by 
through bill of lading, or by contracting directly with suppliers of 
services, as FAS may approve. If the Cooperating Sponsor contracts 
directly with the suppliers of such services, the Cooperating Sponsor 
may seek reimbursement by submitting documentation to FAS indicating 
actual costs incurred. All supporting documentation must be sent to the 
Director, CCC-OD. FAS, at its option, will reimburse the Cooperating 
Sponsor for the cost of such services in U.S. dollars at the exchange 
rate in effect on the date of payment by FAS, or in foreign currency.


Sec.  1599.9  What are the restrictions on commodity use and 
distribution?

    (a) The Cooperating Sponsor may use the commodities provided only 
in accordance with the terms of the Program Agreement.
    (b) In the event that its participation in the program terminates, 
the nongovernmental Cooperating Sponsor will safeguard any 
undistributed commodities and sales proceeds and dispose of such 
commodities and proceeds as directed by FAS.


Sec.  1599.10  Are there special requirements for agreements between 
Cooperating Sponsor and Recipient Agencies?

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


Sec.  1599.11  What procedures apply to sales and barter of commodities 
provided and the use of proceeds?

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


Sec.  1599.12  What procedures apply to the processing, packaging and 
labeling of commodities in the foreign country?

    (a) Cooperating Sponsors may arrange for the processing of 
commodities provided under the Program Agreement, or for packaging or 
repackaging prior to distribution. When a third party provides such 
processing, packaging or repackaging, the Cooperating Sponsor shall 
enter into a written agreement requiring that the provider of such 
services maintain adequate records to account for all commodities 
delivered and submit periodic reports to the Cooperating Sponsor. The 
Cooperating Sponsor shall submit a copy of the executed agreement to 
the Agricultural Counselor or Attache.
    (b) If, prior to distribution, the Cooperating Sponsor arranges for 
packaging or repackaging commodities, the packaging shall be plainly 
labeled in the language of the country in which the commodities are to 
be distributed with the name of the commodity and, except where the 
commodities are to be sold or bartered after processing, packaging or 
repackaging, to indicate that the commodity is furnished by the people 
of the United States of America and not to be sold or exchanged. If the 
commodities are not packaged, the Cooperating Sponsor shall, to the 
extent practicable, display banners, posters or other media containing 
the information prescribed in this paragraph.
    (c) FAS will reimburse Cooperating Sponsors that are nonprofit 
private voluntary organizations or cooperatives for expenses incurred 
for repackaging if the packages of commodities are

[[Page 14554]]

discharged from the vessel in damaged condition, and are repackaged to 
ensure that the commodities arrive at the distribution point in 
wholesome condition. No prior approval is required for such expenses 
equaling $500 or less. If such expense is estimated to exceed $500, the 
authority to repackage and incur such expense must be approved by the 
Agricultural Counselor or Attache in advance of repackaging.


Sec.  1599.13  How does the Cooperating Sponsor dispose of commodities 
unfit for authorized use?

    (a) Prior to delivery to Cooperating Sponsor at discharge port or 
point of entry. If the commodity is damaged prior to delivery to a 
governmental Cooperating Sponsor at discharge port or point of entry 
overseas, the Agricultural Counselor or Attache will immediately 
arrange for inspection by a public health official or other competent 
authority. If the commodity is damaged prior to delivery to a 
nongovernmental Cooperating Sponsor at the discharge port or point of 
entry, the nongovernmental Cooperating Sponsor shall arrange for such 
inspection. If inspection discloses the commodity to be unfit for the 
use authorized in the Program Agreement, the Agricultural Counselor or 
Attache or the nongovernmental Cooperating Sponsor shall dispose of the 
commodities in accordance with the priority set forth in paragraph (b) 
of this section. Expenses incidental to the handling and disposition of 
the damaged commodity will be paid by FAS from the sale proceeds or 
from an appropriate FAS account designated by FAS. The net proceeds of 
sales shall be deposited with the U.S. Disbursing Officer, American 
Embassy, in an account designated by FAS; however, if the commodities 
are provided for a sales program, the net sale proceeds, net of 
expenses incidental to handling and disposition of the damaged 
commodity, shall be deposited to the special account established for 
sale proceeds. The Cooperating Sponsor shall consult with FAS regarding 
the inspection and disposition of commodities and accounting for sale 
proceeds in the event the Cooperating Sponsor executed a sales 
agreement under which title passed to the purchaser prior to delivery 
to the Cooperating Sponsor.
    (b) After delivery to Cooperating Sponsor. (1) If after arrival in 
a foreign country and after delivery to a Cooperating Sponsor, it 
appears that the commodity, or any part thereof, may be unfit for the 
use authorized in the Program Agreement, the Cooperating Sponsor shall 
immediately arrange for inspection of the commodity by a public health 
official or other competent authority approved by the Agricultural 
Counselor or Attache. If no competent local authority is available, the 
Agricultural Counselor or Attache may determine whether the commodities 
are unfit for the use authorized in the Program Agreement and, if so, 
may direct disposal in accordance with this paragraph. The Cooperating 
Sponsor shall arrange for the recovery of that portion of the 
commodities designated during the inspection as suitable for authorized 
use. If, upon inspection, the commodity (or any part thereof) is 
determined to be unfit for the authorized use, the Cooperating Sponsor 
shall notify the Agricultural Counselor or Attache of the circumstances 
pertaining to the loss or damage. With the concurrence of the 
Agricultural Counselor or Attache, the commodity determined to be unfit 
for authorized use shall be disposed of in the following order of 
priority:
    (i) By transfer to an approved USDA sponsored program for use as 
livestock feed. FAS shall be advised promptly of any such transfer so 
that shipments from the United States to the livestock feeding program 
can be reduced by an equivalent amount;
    (ii) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, or industrial use, at the highest obtainable price. When 
the commodity is sold, all U.S. Government markings shall be 
obliterated or removed;
    (iii) By donation to a governmental or charitable organization for 
use as animal feed or for other non-food use; or
    (iv) If the commodity is unfit for any use or if disposal in 
accordance with paragraph (b)(1)(i), (ii) or (iii) of this section is 
not possible, the commodity shall be destroyed under the observation of 
a representative of the Agricultural Counselor or Attache, if 
practicable, in such manner as to prevent its use for any purpose.
    (2) Actual expenses incurred, including third party costs, in 
effecting any sale may be deducted from the sale proceeds and, if the 
commodities were intended for direct distribution, the Cooperating 
Sponsor shall deposit the net proceeds with the U.S. Disbursing 
Officer, American Embassy, with instructions to credit the deposit to 
an account as designated by FAS. If the commodities were intended to be 
sold, the Cooperating Sponsor shall deposit the gross proceeds into the 
special interest bearing account and, after approved costs related to 
the handling and disposition of damaged commodities are paid, shall use 
the remaining funds for purposes of the approved program. The 
Cooperating Sponsor shall promptly furnish to the Agricultural 
Counselor or Attache a written report of all circumstances relating to 
the loss and damage on any commodity loss in excess of $5,000; 
quarterly reports shall be made on all other losses. If the commodity 
was inspected by a public health official or other competent authority, 
the report and any supplemental report shall include a certification by 
such public health official or other competent authority as to the 
condition of the commodity and the exact quantity of the damaged 
commodity disposed. Such certification shall be obtained as soon as 
possible after the discharge of the cargo. A report must also be 
provided to the Chief, Debt Management Division, KCMO/DMD, of action 
taken to dispose of commodities unfit for authorized use.


Sec.  1599.14  How is liability established for loss, damage, or 
improper distribution of commodities?

    (a) Fault of Cooperating Sponsor prior to loading on ocean vessel. 
The Cooperating Sponsor shall immediately notify KCCO, Chief, Export 
Operations Division if the Cooperating Sponsor will not have a vessel 
for loading at the U.S. port of export in accordance with the agreed 
shipping schedule. FAS will determine whether the commodity will be: 
moved to another available outlet; stored at the port for delivery to 
the Cooperating Sponsor when a vessel is available for loading; or 
disposed of as FAS may deem proper. The Cooperating Sponsor shall take 
such action as directed by FAS and shall reimburse FAS for expenses 
incurred if FAS determines that the expenses were incurred because of 
the fault or negligence of the Cooperating Sponsor.
    (b) Fault of others prior to loading on ocean vessel. The 
Cooperating Sponsor shall immediately notify the Chief, Debt Management 
Office, KCMO/DMD, when any damage or loss to the commodity occurs that 
is attributable to a warehouseman, carrier, or other person between the 
time title is transferred to a Cooperating Sponsor and the time the 
commodity is loaded on board vessel at the designated port of export. 
The Cooperating Sponsor shall promptly assign to CCC any rights to 
claims which may arise as a result of such loss or damage and shall 
promptly forward to CCC all documents pertaining thereto. CCC shall 
have the right to initiate claims, and retain the proceeds of all 
claims, for such loss or damage.
    (c) Survey and outturn reports related to claims against ocean 
carriers. (1) If the Program Agreement provides that CCC will arrange 
for an independent

[[Page 14555]]

cargo surveyor to attend the discharge of the cargo, CCC will require 
the surveyor to provide a copy of the report to the Cooperating 
Sponsor.
    (2)(i) If the Cooperating Sponsor arranges for an independent cargo 
surveyor, the Cooperating Sponsor shall forward to the Chief, Debt 
Management Office, KCMO/DMD, any narrative chronology or other 
commentary it can provide to assist in the adjudication of ocean 
transportation claims and shall prepare such a narrative in any case 
where the loss is estimated to be in excess of $5,000.00. The 
Cooperating Sponsor may, at its option, also engage the independent 
surveyor to supervise clearance and delivery of the cargo from customs 
or port areas to the Cooperating Sponsor or its agent and to issue 
delivery survey reports thereon.
    (ii) In the event of cargo loss and damage, the Cooperating Sponsor 
shall provide to the Chief, Debt Management Office, KCMO/DMD, the names 
and addresses of individuals who were present at the time of discharge 
and during survey and who can verify the quantity lost or damaged. For 
bulk grain shipments, in those cases where the Cooperating Sponsor is 
responsible for survey and outturn reports, the Cooperating Sponsor 
shall obtain the services of an independent surveyor to:
    (A) Observe the discharge of the cargo;
    (B) Report on discharging methods including scale type, 
calibrations and any other factor which may affect the accuracy of 
scale weights, and, if scales are not used, state the reason therefore 
and describe the actual method used to determine weights;
    (C) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (D) Advise on the quality of sweepings;
    (E) Obtain copies of port or vessel records, if possible, showing 
quantity discharged;
    (F) Provide immediate notification to the Cooperating Sponsor if 
additional services are necessary to protect cargo interests or if the 
surveyor has reason to believe that the correct quantity was not 
discharged; and
    (G) In the case of shipments arriving in container vans, list the 
container van numbers and seal numbers shown on the container vans, and 
indicate whether the seals were intact at the time the container vans 
were opened, and whether the container vans were in any way damaged. To 
the extent possible, the independent surveyor should observe discharge 
of container vans from the vessel to ascertain whether any damage to 
the container van occurred and arrange for surveying as container vans 
are opened.
    (iii) Cooperating Sponsors shall send copies to KCMO/DMD, Chief, 
Debt Management Office of all reports and documents pertaining to the 
discharge of commodities.
    (iv) FAS will reimburse the Cooperating Sponsor for costs incurred 
upon receipt of the survey report and the surveyor's invoice or other 
documents that establish the survey cost. FAS will not reimburse a 
Cooperating Sponsor for the costs of a delivery survey unless the 
surveyor also prepares a discharge survey, or for any other survey not 
taken contemporaneously with the discharge of the vessel, unless FAS 
determines that such action was justified in the circumstances.
    (3) Survey contracts shall be let on a competitive bid basis unless 
FAS determines that the use of competitive bids would not be 
practicable. FAS may preclude the use of certain surveyors because of 
conflicts of interest or lack of demonstrated capability to properly 
carry out surveying responsibilities.
    (4) If practicable, all surveys shall be conducted jointly by the 
surveyor, the consignee, and the ocean carrier, and the survey report 
shall be signed by all parties.
    (d) Ocean carrier loss and damage. (1) Notwithstanding transfer of 
title, CCC shall have the right to file, pursue, and retain the 
proceeds of collection from claims arising from ocean transportation 
cargo loss and damage arising out of shipments of commodities provided 
to governmental Cooperating Sponsors; however, when the Cooperating 
Sponsor pays the ocean freight or a portion thereof, it shall be 
entitled to pro rata reimbursement received from any claims related to 
ocean freight charged. FAS will pay general average contributions for 
all valid general average incidents which may arise from the movement 
of commodity to the destination ports. CCC shall receive and retain all 
allowances in general average.
    (2) Nongovernmental Cooperating Sponsors shall: file notice with 
the ocean carrier immediately upon discovery of any cargo loss or 
damage, promptly initiate claims against the ocean carriers for such 
loss and damage, take all necessary action to obtain restitution for 
losses, and provide CCC copies of all such claims. Notwithstanding the 
preceding sentence, the nongovernmental Cooperating Sponsor need not 
file a claim when the cargo loss is less than $100, or in any case when 
the loss is between $100 and $300 and the nongovernmental Cooperating 
Sponsor determines that the cost of filing and collecting the claim 
will exceed the amount of the claim. The nongovernmental Cooperating 
Sponsor shall transmit to KCMO/DMD, Chief, Debt Management Office 
information and documentation on such lost or damaged shipments when no 
claim is to be filed. In the event of a declaration of General Average:
    (i) The Cooperating sponsor shall assign all claim rights to CCC 
and shall provide CCC all documentation relating to the claim, if 
applicable;
    (ii) CCC shall be responsible for settling general average and 
marine salvage claims;
    (iii) FAS has sole authority to authorize any dispositions of 
commodities which have not commenced ocean transit or of which the 
ocean transit is interrupted;
    (iv) FAS will receive and retain any monetary proceeds resulting 
from such disposition;
    (v) CCC will initiate, prosecute, and retain all proceeds of cargo 
loss and damage against ocean carriers and any allowance in general 
average; and
    (vi) FAS will pay any general average or marine salvage claims 
determined to be due.
    (3) Amounts collected by nongovernmental Cooperating Sponsors on 
claims against ocean carriers which are less than $200 may be retained 
by the nongovernmental Cooperating Sponsor. On claims involving loss or 
damage of $200 or more, nongovernmental Cooperating Sponsors may retain 
from collections received by them, either $200 plus 10 percent of the 
difference between $200 and the total amount collected on the claim, up 
to a maximum of $500; or the actual administrative expenses incurred in 
collection of the claim, provided retention of such administrative 
expenses is approved by CCC. Allowable collection costs shall not 
include attorneys fees, fees of collection agencies, and similar costs. 
In no event will FAS pay collection costs in excess of the amount 
collected on the claim.
    (4) A nongovernmental Cooperating Sponsor also may retain from 
claim recoveries remaining after allowable deductions for 
administrative expenses of collection, the amount of any special 
charges, such as handling and packing costs, which the nongovernmental 
Cooperating Sponsor has incurred on the lost or damaged commodity and 
which are included in the claims and paid by the liable party.
    (5) A nongovernmental Cooperating Sponsor may redetermine claims on 
the basis of additional documentation or information not considered 
when the

[[Page 14556]]

claims were originally filed when such documentation or information 
clearly changes the ocean carrier's liability. Approval of such changes 
by FAS is not required regardless of amount. However, copies of 
redetermined claims and supporting documentation or information shall 
be furnished to FAS.
    (6) A nongovernmental Cooperating Sponsor may negotiate compromise 
settlements of claims of any amount, provided that proposed compromise 
settlements of claims having a value of $5,000 or more shall require 
prior approval in writing by FAS. When a claim is compromised, a 
nongovernmental Cooperating Sponsor may retain from the amount 
collected, the amounts authorized in paragraph (d)(3) of this section, 
and in addition, an amount representing such percentage of the special 
charges described in paragraph (d)(4) of this section as compromised 
amount is to the full amount of the claim. When a claim is less than 
$600, a nongovernmental Cooperating Sponsor may terminate collection 
activity when it is determined that pursuit of such claims will not be 
economically sound. Approval for such termination by FAS is not 
required; however, the nongovernmental Cooperating Sponsor shall notify 
KCMO/DMD, Chief, Debt Management Division when collection activity on a 
claim is terminated.
    (7) All amounts collected in excess of the amounts authorized in 
this section to be retained shall be remitted to CCC. For the purpose 
of determining the amount to be retained by a nongovernmental 
Cooperating Sponsor from the proceeds of claims filed against ocean 
carriers, the word ``claim'' shall refer to the loss and damage to 
commodities which are shipped on the same voyage of the same vessel to 
the same port destination, irrespective of the kinds of commodities 
shipped or the number of different bills of lading issued by the 
carrier.
    (8) If a nongovernmental Cooperating Sponsor is unable to effect 
collection of a claim or negotiate an acceptable compromise settlement 
within the applicable period of limitation or any extension thereof 
granted in writing by the party alleged responsible for the damage, the 
nongovernmental Cooperating Sponsor shall assign its rights to the 
claim to CCC in sufficient time to permit the filing of legal action 
prior to the expiration of the period of limitation or any extension 
thereof. Generally, a nongovernmental Cooperating Sponsor should assign 
claim rights to CCC no later than 60 days prior to the expiration of 
the period of limitation or any extension thereof. In all cases, a 
nongovernmental Cooperating Sponsor shall keep CCC informed of the 
progress of its collection efforts and shall promptly assign their 
claim rights to CCC upon request. Subsequently, if CCC collects on or 
settles the claim, CCC shall, except as indicated in this paragraph, 
pay to a nongovernmental Cooperating Sponsor the amount to which it 
would have been entitled had it collected on the claim. The additional 
10 percent on amounts collected in excess of $200 will be payable, 
however, only if CCC determines that reasonable efforts were made to 
collect the claim prior to the assignment, or if payment is determined 
to be commensurate with the extra efforts exerted in further 
documenting the claim. If documentation requirements have not been 
fulfilled and the lack of such documentation has not been justified to 
the satisfaction of CCC, CCC will deny payment of all allowances to the 
nongovernmental Cooperating Sponsor.
    (9) When a nongovernmental Cooperating Sponsor permits a claim to 
become time-barred, or fails to take timely actions to insure the right 
of CCC to assert such claims, and CCC determines that the 
nongovernmental Cooperating Sponsor failed to properly exercise its 
responsibilities under the Agreement, the nongovernmental Cooperating 
Sponsor shall be liable to the United States for the cost and freight 
value of the commodities lost to the program.
    (e) Fault of Cooperating Sponsor in country of distribution. If a 
commodity, sale proceeds or program income is used for a purpose not 
permitted by the Program Agreement, or if a Cooperating Sponsor causes 
loss or damage to a commodity, sale proceeds, or program income through 
any act or omission or failure to provide proper storage, care and 
handling, FAS may require the Cooperating Sponsor to pay to the United 
States the value of the commodities, sale proceeds or program income 
lost, damaged or misused, or undertake other remedies FAS deems 
appropriate. FAS will consider normal commercial practices in the 
country of distribution in determining whether there was a proper 
exercise of the Cooperating Sponsor's responsibility. Payment by the 
Cooperating Sponsor shall be made in accordance with paragraph (g) of 
this section.
    (f) Fault of others in country of distribution and in intermediate 
country. (1) In addition to survey or outturn reports to determine 
ocean carrier loss and damage, the Cooperating Sponsor shall, in the 
case of landlocked countries, arrange for an independent survey at the 
point of entry into the recipient country and make a report as set 
forth in paragraph (c)(l) of this section. FAS will reimburse the 
Cooperating Sponsor for the costs of survey as set forth in paragraph 
(c)(2)(iv) of this section.
    (2) Where any damage to or loss of the commodity or any loss of 
sale proceeds or program income is attributable to a warehouseman, 
carrier or other person, the Cooperating Sponsor shall make every 
reasonable effort to pursue collection of claims for such loss or 
damage. The Cooperating Sponsor shall furnish a copy of the claim and 
related documents to the Agricultural Counselor or Attache. Cooperating 
Sponsors who fail to file or pursue such claims shall be liable to FAS 
for the value of the commodities or sale proceeds or program income 
lost, damaged, or misused: Provided, however, that the Cooperating 
Sponsor may elect not to file a claim if the loss is less than $500. 
The Cooperating Sponsor may retain $150 of any amount collected on an 
individual claim. In addition, Cooperating Sponsors may, with the 
written approval of the Agricultural Counselor or Attache, retain 
amounts to cover special costs of collection such as legal fees, or pay 
such collection costs with sale proceeds or program income. Any 
proposed settlement for less than the full amount of the claim requires 
prior approval by the Agricultural Counselor or Attache. When the 
Cooperating Sponsor has exhausted all reasonable attempts to collect a 
claim, it shall request the Agricultural Counselor or Attache to 
provide further instructions.
    (3) The Cooperating Sponsor shall pursue any claim by initial 
billings and at least three subsequent demands at not more than 30 day 
intervals. If these efforts fail to elicit a satisfactory response, the 
cooperating sponsor shall pursue legal action in the judicial system of 
country unless otherwise agreed by the Agricultural Counselor or 
Attache. The Cooperating Sponsors must inform the Agricultural 
Counselor or Attache in writing of the reasons for not pursuing legal 
action; and the Agricultural Counselor or Attache may require the 
Cooperating Sponsor to obtain the opinion of competent legal counsel to 
support its decision prior to granting approval. If the Agricultural 
Counselor or Attache approves a Cooperating Sponsor's decision not to 
take further action on the claim, the Cooperating Sponsor shall assign 
the claim to CCC and shall forward all documentation relating to the 
claim to CCC.

[[Page 14557]]

    (4) As an alternative to legal action in the judicial system of the 
country with regard to claims against a public entity of the government 
of the cooperating country, the Cooperating Sponsor and the cooperating 
country may agree in writing to settle disputed claims by an 
appropriate administrative procedure or arbitration.
    (g) Determination of value. The Cooperating Sponsor shall determine 
the value of commodities misused, lost or damaged on the basis of the 
domestic market price at the time and place the misuse, loss or damage 
occurred. When it is not feasible to determine such market price, the 
value shall be the f.o.b. or f.a.s. commercial export price of the 
commodity at the time and place of export, plus ocean freight charges 
and other costs incurred by the U.S. Government in making delivery to 
the Cooperating Sponsor. When the value is determined on a cost basis, 
the Cooperating Sponsor may add to the value any provable costs it has 
incurred prior to delivery by the ocean carrier. In preparing the claim 
statement, these costs shall be clearly segregated from costs incurred 
by the Government of the United States. With respect to claims other 
than ocean carrier loss or damage claims, the Cooperating Sponsor may 
request the Agricultural Counselor or Attache to approve a commercially 
reasonable alternative basis to value the claim.
    (h) Reporting losses to the Agricultural Counselor or Attache or 
FAS designated representative. (1) The Cooperating Sponsor shall 
promptly notify the Agricultural Counselor or Attache or FAS designated 
representative, in writing, of the circumstances pertaining to any 
loss, damage, or misuse of commodities valued at $500 or more occurring 
within the country of distribution or intermediate country. The report 
shall be made as soon as the Cooperating Sponsor has adequately 
investigated the circumstances, but in no event more than ninety days 
from the date the loss became known to the Cooperating Sponsor. The 
report shall identify the party in possession of the commodities and 
the party responsible for the loss, damage or misuse; the kind and 
quantities of commodities; the size and type of containers; the time 
and place of misuse, loss, or damage; the current location of the 
commodity; the Program Agreement number, the procurement contract 
numbers, or if unknown, other identifying numbers printed on the 
commodity containers; the action taken by the Cooperating Sponsor with 
respect to recovery or disposal; and the estimated value of the 
commodity. The report shall explain why any of the above-required 
information can not be provided. The Cooperating Sponsor shall also 
report the details regarding any loss or misuse of sale proceeds or 
program income.
    (2) The Cooperating Sponsor shall report quarterly to the 
Agricultural Counselor or Attache any loss, damage to or misuse of 
commodities resulting in loss of less than $500. The Cooperating 
Sponsor shall inform the Agricultural Counselor or Attache or FAS 
designated representative if it has reason to believe there is a 
pattern or trend in the loss, damage, or misuse of such commodities and 
submit a report as described in paragraph (h)(1) of this section, 
together with any other relevant information the Cooperating Sponsor 
has available to it. The Agricultural Counselor or Attache may require 
additional information about any commodities lost, damaged or misused.
    (i) Handling claims proceeds. Claims against ocean carriers shall 
be collected in U.S. dollars (or in the currency in which freight is 
paid) and shall be remitted (less amounts authorized to be retained) by 
Cooperating Sponsors to CCC. Claims against Cooperating Sponsors shall 
be paid to CCC in U.S. dollars. With respect to commodities lost, 
damaged or misused, amounts paid by Cooperating Sponsors and third 
parties in the country of distribution shall be deposited with the U.S. 
Disbursing Officer, American Embassy, preferably in U.S. dollars with 
instructions to credit the deposit to an account as determined by FAS, 
or in local currency at the highest rate of exchange legally obtainable 
on the date of deposit with instructions to credit the deposit to an 
FAS account as determined by FAS. With respect to sale proceeds and 
program income, amounts recovered may be deposited in the same account 
as the sale proceeds and may be used for purposes of the program.


Sec.  1599.15  Are there special recordkeeping and reporting 
requirements?

    (a) Records and reports--general requirements. The Cooperating 
Sponsor shall maintain records for a period of three (3) years from the 
final date specified in the program agreement. FAS may, at reasonable 
times, inspect the Cooperating Sponsor's records pertaining to the 
receipt and use of the commodities and proceeds realized from the sale 
of the commodities, and have access to the Cooperating Sponsor's 
commodity storage and distribution sites and to locations of activities 
supported with proceeds realized from the sale of the commodities.
    (b) Evidence of export. The Cooperating Sponsor's freight forwarder 
shall, within thirty (30) days after export, submit evidence of export 
of the agricultural commodities to the Chief, Export Operations 
Division, KCCO. If export is by sea or air, the Cooperating Sponsor's 
freight forwarder shall submit five copies of the carrier's on board 
bill of lading or consignee's receipt authenticated by a representative 
of the U.S. Customs Service. The evidence of export must show the kind 
and quantity of agricultural commodities exported, the date of export, 
and the destination country.
    (c) Reports. (1) The Cooperating Sponsor shall submit a semiannual 
logistics report to the Agricultural Counselor or Attache and to the 
Director, PPDED, FAS/USDA, Washington, DC 20250-1034, covering the 
receipt of commodities. Cooperating sponsors must submit reports on 
Form CCC-620 and submit the first report by May 16 for agreements 
signed during the period, October 1 through March 31, or by November 16 
for agreements signed during the period, April 1 through September 30. 
The first report must cover the time period from the date of signing 
and subsequent reports must be provided at six months intervals 
covering the period from the due date of the last report until all 
commodities have been distributed or sold and such distribution or sale 
reported to FAS. The report must contain the following data:
    (i) Receipts of agricultural commodities including the name of each 
vessel, discharge port(s) or point(s) of entry, the date discharge was 
completed, the condition of the commodities on arrival, any significant 
loss or damage in transit; advice of any claim for, or recovery of, or 
reduction of freight charges due to loss or damage in transit on U.S. 
flag vessels;
    (ii) Estimated commodity inventory at the end of the reporting 
period;
    (iii) Quantity of commodity on order during the reporting period;
    (iv) Status of claims for commodity losses both resolved and 
unresolved during the reporting period;
    (v) Quantity of commodity damaged or declared unfit during the 
reporting period; and
    (vi) Quantity and type of the commodity that has been directly 
distributed by the Cooperating Sponsor, distribution date, region of 
distribution, and estimated number of individuals benefitting from the 
distribution.
    (2) Program Agreements will require Cooperating Sponsors to report 
periodically, against collected, established baseline indicators, on 
the

[[Page 14558]]

number of meals served, enrollment levels, total attendance numbers, 
including female attendance levels, learning developments, nutrition 
and health progress of mothers and children, and progress towards 
sustaining the feeding program.
    (3) If the Program Agreement authorizes the sale or barter of 
commodities by the Cooperating Sponsor, the Cooperating Sponsor shall 
also submit a semiannual monetization report to the Agricultural 
Counselor or Attache and to the Director, PPDED, FAS/USDA, Washington, 
DC 20250-1034, covering the deposits into and disbursements from the 
special account for the purposes specified in the Program Agreement. 
Cooperating Sponsors must submit reports on Form CCC-621 and submit the 
first report by May 16 for agreements signed during the period, October 
1 through March 31, or by November 16 for agreements signed during the 
period, April 1 through September 30. The first report must cover the 
time period from the date of signing and subsequent reports must be 
provided at six months intervals covering the period from the due date 
of the last report until all funds generated from commodity sales have 
been distributed and such distribution reported to FAS. The report must 
contain the following information and include both local currency 
amounts and U.S. dollar equivalents:
    (i) Quantity and type of commodities sold;
    (ii) Proceeds generated from the sale;
    (iii) Proceeds deposited to the special account including the date 
of deposit;
    (iv) Interest earned on the special account;
    (v) Disbursements from the special account, including date, amount 
and purpose of the disbursement; and
    (vi) Any balance carried forward in the special account from the 
previous reporting period.
    (4) The Cooperating Sponsor shall furnish FAS such additional 
information and reports relating to this agreement as FAS may 
reasonably request.


Sec.  1599.16  What are the Cooperating Sponsor's audit requirements?

    Non-governmental Cooperating Sponsors are subject to the audit 
requirements of OMB Circular A-133 as implemented in USDA by 7 CFR part 
3052, ``Audits of States, Local Governments, and Non-Profit 
Organizations.'' The Cooperating Sponsor is also responsible for 
auditing the activities of recipient agencies that receive more than 
$25,000 of provided commodities or sale proceeds. This responsibility 
may be satisfied by relying upon independent audits of the recipient 
agency or upon a review conducted by the Cooperating Sponsor.


Sec.  1599.17  When may FAS suspend a program?

    All or any part of the assistance provided under a Program 
Agreement, including commodities in transit, may be suspended by FAS 
if:
    (a) The Cooperating Sponsor fails to comply with the provisions of 
the Program Agreement or this part;
    (b) FAS determines that the continuation of such assistance is no 
longer necessary or desirable; or
    (c) FAS determines that storage facilities are inadequate to 
prevent spoilage or waste, or that distribution of commodities will 
result in substantial disincentive to, or interference with, domestic 
production or marketing in the recipient country.


Sec.  1599.18  Are there sample documents and guidelines available for 
developing proposals and reports?

    FAS has developed guidelines to assist the Cooperating Sponsors 
with effective reporting on program logistics and commodity sales. 
Cooperating Sponsors may obtain these guidelines from the Director, 
PPDED.

    Signed March 19th, 2003, in Washington, DC.
Kenneth J. Roberts,
Acting Administrator, Foreign Agricultural Service.
[FR Doc. 03-7028 Filed 3-25-03; 8:45 am]
BILLING CODE 3410-10-P