[Federal Register Volume 68, Number 119 (Friday, June 20, 2003)]
[Rules and Regulations]
[Pages 36885-36898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-15530]



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  Federal Register / Vol. 68, No. 119 / Friday, June 20, 2003 / Rules 
and Regulations  

[[Page 36885]]



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: Final rule.

-----------------------------------------------------------------------

SUMMARY: These regulations govern the foreign donation of agricultural 
commodities, and the provision of financial and technical assistance 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.

EFFECTIVE DATE: June 20, 2003.

FOR FURTHER INFORMATION CONTACT: 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. 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 rule is issued in conformance with Executive Order 12866. It 
has been determined significant for purposes of Executive Order 12866 
and, therefore, has been reviewed by the Office of Management and 
Budget.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. This 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

    The Regulatory Flexibility Act is not applicable to this 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 rule. In any event, this rule deals primarily with requirements 
imposed upon foreign governments and non-profit entities distributing 
humanitarian grant food supplies overseas. Therefore, the rule does not 
have a significant impact upon a substantial number of small business 
entities.

Paperwork Reduction Act

    The information collection requirements imposed by this final rule 
have been previously submitted to the Office of Management and Budget 
(OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35). 
OMB has assigned control number 0551-0039 for this information 
collection. This regulation does not change any of the information 
collection requirements from the proposed rule.

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.
    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 rule will 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.
    On March 26, 2003, the Foreign Agricultural Service (FAS) published 
a proposed rule (68 FR 14546) to govern

[[Page 36886]]

the foreign donation of resources, including agricultural commodities, 
to implement the McGovern-Dole International Food for Education and 
Child Nutrition Program. Comments on the proposed rule were received 
from one private voluntary organization, one nutritionally focused 
organization, and the Maritime Administration (MARAD). Their comments 
are discussed below, except for those dealing with issues outside of 
the scope of the proposed rule, or those making editorial suggestions.

Types of Food Available

    Comment: A PVO asked if there is any assurance that food types will 
be consistent from one year to the next. The PVO expressed concern that 
it is very difficult to manage a program when it is unsure--from one 
year to the next--whether the same commodities will be available. This 
is important for both monetization and distribution, as any 
organization selects commodities based on marketability and 
acceptability to target beneficiaries.
    Response: USDA may procure commodities of U.S. origin for use in 
the McGovern-Dole International Food for Education and Child Nutrition 
Program. The program is not subject to declarations of surplus or lack 
of availability. The program is not subject to the surplus 
determinations required for section 416(b) programs nor the limitations 
resulting from determinations of short supply, which limit the 
commodities available under Pub. L. 480 Title I and Title II. FAS is 
willing to sign multiple year agreements with the funding of each year 
subject to the annual appropriations process. So assuming that funds 
are available, if FAS commits to provide a specific commodity, a PVO 
can be assured of receiving that commodity.

Focus on School Feeding and Maternal-Child Health

    Comment: A PVO requested that USDA determine in advance of 
programming decisions, the allocation of resources between school 
feeding and maternal-child health (MCH). The PVO expressed concern 
regarding the implications of opening up the program to an entirely new 
sector, given that the resources are already reduced in comparison to 
the pilot Global Food for Education Program, and all of the pilot 
projects were in education.
    Response: No set division between the school feeding and MCH 
components will be established by USDA. USDA would give priority 
consideration to those proposals that integrate a MCH component within 
an educational environment. This could be done through several means, 
but not limited to: (1) Situations where the school can be utilized as 
a setting for normalcy to the family undergoing a crisis situation 
(conflicts in the country, natural disasters, etc.), and (2) areas 
where children entering school are not exhibiting sufficient growth and 
development to maintain age-to-grade graduation targets. USDA will also 
look favorably upon those proposals that link MCH programs funded 
through outside resources to the proposed school feeding program.

USDA Providing Financial/Technical Assistance

    Comment: A PVO requested clarification on the provision of 
technical assistance to programs during project implementation, which 
is mentioned in the proposed rule. The PVO further requested that FAS 
indicate who will set the priorities in terms of what type of technical 
assistance is needed, and how can PVOs benefit from it.
    Response: USDA considers technical assistance to cover any type of 
supplemental or specialized technical knowledge that the organization 
needs to establish and implement the program. An example of technical 
assistance in the establishment phase of the program would be providing 
expertise to organizations to develop a health curriculum to be used in 
the implementation phase of the program. Technical assistance could 
also include the cost of nutritionists to design appropriate meals, the 
cost of health specialists to design de-worming programs, and the cost 
of specialists who would design teacher training classes. The Farm 
Security and Rural Investment Act of 2002 (Farm Act of 2002) allows for 
the Food and Nutrition Service (FNS) to provide technical advice under 
the McGovern-Dole Program. FNS may, for example provide field expertise 
or work with the Cooperating Sponsor to evaluate the nutritional impact 
of the fortification of commodities under the McGovern-Dole Program.

Budget Reporting Requirements

    Comment: A PVO questioned the need for the reporting requirements 
in Sec.  1599.15(c)(3)(v) in the proposed rule ``Disbursements from the 
special account, including date, amount and purpose of the 
disbursement''. The PVO states that including the date in the report 
implies that cooperating sponsors would need to give details on every 
single item purchased or activity performed out of these funds. If 
sales proceeds are used for program activities, disbursement might be 
on an almost-daily basis. This report might be very lengthy and time-
consuming for both cooperating sponsor and USDA. The PVO requested that 
FAS remove this date requirement and allow the cooperating sponsor to 
categorize expenses.
    Response: The requirement to include the date of disbursements made 
from the special funds account is necessary because it provides an 
accurate record of the expenditures made from the account for the 
specific purpose of monitoring and evaluating the financial 
transactions of the agreement. A broad categorization of expenses would 
not allow the adequate tracking of the progress of the agreement and 
disbursements made during the designated reporting period. The 
requirement to include dates of disbursement is consistent with 
regulations covering other USDA programs. Previous participants in 
these other programs have not reported any difficulties.

Fortification of Commodities

    Comment: A nutritionally focused organization requested that FAS 
incorporate expenditures related to evaluation of the potential 
nutritional impact of the fortification of commodities, as well as 
their actual impact on targeted recipients in post-program 
implementation, into the overall plan for implementing the McGovern-
Dole International Food for Education and Child Nutrition Program.
    Response: USDA did not add requested language to the proposed rule. 
USDA believes that the costs discussed in the comment could be 
considered as technical assistance. The proposed rule makes clear that 
Cooperating Sponsors can request technical assistance.

Ocean Freight Differential

    Comment: MARAD requested that, since the amount of ocean freight 
differential (OFD) is jointly determined by USDA and MARAD, the 
definition in Sec.  1599.l regarding OFD be revised to read: ``OFD--the 
amount as jointly determined by FAS and the Maritime Administration, 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.''
    Response: The OFD is solely computed by USDA, therefore, FAS will 
maintain the language as is. MARAD's involvement is limited to 
interagency reimbursements, which is outside the scope of this rule.

[[Page 36887]]

    Comment: MARAD suggested that Sec.  1599.6 is not clear and could 
appear to set up a conflict when (a) refers to domestic points and 
states FAS will choose the point of delivery based on lowest cost to 
FAS. However, the objective is lowest landed cost at ultimate foreign 
destination.
    Response: The proposed regulation states FAS will choose the point 
of delivery basis lowest cost to FAS. This language is necessary to 
allow for the situation where FAS may not choose to finance any portion 
of the ocean freight, i.e., lowest cost for commodities. At the same 
time, it is broad enough to include lowest landed cost, i.e., lowest 
cost for both commodities and freight.
    Comment: MARAD commented that Sec.  1599.7 (b)(2) and (6) refer to 
Transportation News Ticker (TNT), which no longer exists, and suggested 
FAS establish a Web site to publish all tenders as the primary source, 
and utilize Reuters or Dow-Jones as a secondary source.
    Response: The fact that the TNT no longer exists is reflected in 
the final rule. FAS has established a Web site that publicizes all 
freight tenders for the programs under FAS oversight as well as the 
notice of awards. FAS prefers that shipping agents use a commercially 
available news wire service. The FAS Web site is only done as a 
convenience and should not be the primary source of information because 
these are not government invitations for bids.
    Comment: MARAD requested that in Sec.  1599.7, FAS state that 
shipments must comply with all laws and international conventions to 
which USA is a signator, not just the Merchant Marine Act of 1936. For 
example, Pub. L. 105-383 prohibits the shipment of these cargoes on any 
vessel found to be ``substandard'' as defined in that law.
    Response: The purpose of the regulation is only to inform food aid 
grantees of their affirmative obligation to comply with cargo 
preference requirements. Questions of vessel eligibility, e.g. Pub. L. 
105-383, will be addressed in the vessel approval process. 
Additionally, a general reference to ``all'' laws and conventions would 
not be informative. It is understood that shipments must comply with 
all laws and international conventions.
    Comment: MARAD commented that Sec.  1599.7(b)(4) only requires 
public bid openings for shipments of bulk and non-liner packaged 
commodities, and questions why liner shipments are excluded. MARAD 
stated that there should be public bid openings for all shipments 
regardless of type of commodity or vessel.
    Response: FAS does not preclude negotiations in contracting for 
liner shipments due to the complexity of the freight bids and the liner 
trade in general. Open tenders do not allow the flexibility needed for 
arranging liner shipments.
    Comment: MARAD stated that in Sec.  1599.7(b)(8) the Cooperating 
Sponsor is required to furnish to the Director, Operations Division, a 
copy of the signed laytime statement and statement of facts at the 
discharge port. MARAD requested that copies of those documents also be 
sent to the Office of Cargo Preference. The rationale is to provide 
that office with the necessary information to address any questions or 
complaints regarding the cargo delivery, and to be able to furnish 
vessel-owners who may make future call at those ports with historical 
data that may be helpful in future deliveries to those destinations to 
avoid recurring problems.
    Response: This would add an unnecessary burden. It is FAS' 
responsibility to address any questions and complaints regarding food 
aid programs under their oversight. FAS keeps close contact with all 
parties involved in the food aid shipments to resolve problems that may 
arise. Furthermore, each U.S. flag vessel is required to send a post 
voyage report to the Office of Financial and Rate Approvals in MARAD. 
This report creates historical data that is kept on file in that 
office.
    Comment: MARAD commented that Sec.  1599.7(e)(5) states ocean 
freight is earned when vessel and cargo arrives at first port of 
discharge. MARAD requested that FAS use standard commercial terms and 
state that ocean freight is earned when cargo is loaded on the vessel. 
MARAD further stated that the regulation's force majeure clause takes 
care of any non-arrival.
    Response: FAS desires to retain the policy, applicable to all 
USDA's foreign food aid programs, that freight is not payable under 
charter parties until the vessel arrives at the discharge port or, if 
additional services are to be performed, only a portion of the freight 
be paid until the services are performed. This assures, to the maximum 
extent possible, that carriers will perform their obligations. Upon 
reviewing this regulation, FAS believes that the use of the phrase 
``freight is earned'' is confusing and may conflict with the remainder 
of the paragraph. Therefore, the final rule has been revised to make it 
clear that not more than 85% of the freight will be deemed ``earned'' 
if the charter party provides that the carrier must complete additional 
requirements after discharge.
    Comment: MARAD requested a language change in Sec.  1599.15(b), 
which requires evidence of export by onboard bill of lading 
authenticated by Customs. It requires the bill of lading to state 
destination country. MARAD suggested that FAS insert the word ``final'' 
before ``destination country'' as current practice has been the bills 
only show the destination country of discharge port when the cargo is 
actually destined to another inland nation. Bills have a field which 
allows the showing of both discharge port and final destination and 
both these fields should be utilized.
    Response: Bills of lading show destination country where vessel 
carrier's responsibility ends. If inland transportation is required and 
the cargo is to be shipped on a through bill of lading, the bill of 
lading will show the ultimate destination country. However, if the 
Cooperating Sponsor is arranging inland transportation, the bill of 
lading will only show the discharge port, which is where the carrier's 
responsibility ends. Carriers would not want to be liable for ultimate 
destination if their responsibility ended at the ocean port of 
discharge.
    Comment: MARAD expressed concern regarding language in Sec.  
1599.15(c)(i), asking why FAS only requires a report regarding claims 
be submitted for US-flag vessels, and not for foreign flag vessels. 
MARAD stated that this rule should apply equally to all vessels 
regardless of nationality of registry.
    Response: KCCO does pursue claims on both U.S. and foreign flag 
vessels. FAS will amend the regulation to require both U.S. and foreign 
flag vessel reports.
    Effective Date: In order to ensure that the McGovern-Dole 
International Food for Education and Child Nutrition Program is 
implemented this fiscal year, it is essential that this rule be made 
effective June 20, 2003. A delay in the effective date may jeopardize 
FAS' ability to review the assistance proposals received in sufficient 
time to conclude agreements prior to the lapse of funding authorization 
for this fiscal year. In addition, the program's focus on school 
feeding and other educational aspects of assistance requires that FAS 
strive to conclude agreements in sufficient time to meet the needs of 
the school year. The need to prepare and review proposals and procure 
and ship commodities consequently constitutes good cause to make this 
rule effective June 20, 2003.

List of Subjects in 7 CFR Part 1599

    Agricultural commodities, Exports, Foreign aid.


[[Page 36888]]



0
Accordingly, Title 7 of the Code of Federal Regulations is amended by 
adding a new part 1599 to read as follows:

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

Sec.
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?
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?
1599.19 Has the Office of Management and Budget reviewed the 
paperwork and record keeping requirements contained in this part?

    Authority: 7 U.S.C. 1736-1; Presidential Memorandum, March 11, 
2003.


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.
    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.
    Deputy Administrator--Deputy Administrator for Export Credits, 
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, PO 
Box 419205, Kansas City, Missouri, 64141-6205.
    KCMO/DMD--Debt Management Division, Kansas City Management Office, 
Farm Services Agency, USDA, PO 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?

    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.
    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 
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, which is a standard application for federal assistance, a 
Program Introduction, a Plan of Operation, and a Budget Proposal to the 
Director, PPDED and to the Agricultural Counselor or Attach[eacute] 
responsible for the country where activities are to be implemented. 
Electronic submissions of these items are preferred, particularly 
through the

[[Page 36889]]

FAS on-line system. If on-line submission is not available, e-mail or 
hard copy are acceptable.
    (a) 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 child 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:
    (i) Literacy rates for the target population;
    (ii) Percentage of school age children attending schools, 
especially females;
    (iii) Malnutrition rates;
    (iv) Public expenditures on primary education;
    (v) Country's current school feeding operations, if they exists, 
along with current funding resources;
    (vi) Any information regarding teacher training, community 
infrastructure (PTAs), health, nutrition, and water and sanitation 
information; and lastly,
    (vii) 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,
    (i) 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;
    (ii) 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; and
    (iii) 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 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

[[Page 36890]]

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) of this 
section 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 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.

[[Page 36891]]

    (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 posted on FAS' Web site and a 
commercially available news wire service.
    (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.
    (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 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

[[Page 36892]]

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) 100% of ocean freight is earned and payable 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, and 
provided further, that 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 earned 
and 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; 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

[[Page 36893]]

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 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

[[Page 36894]]

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 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

[[Page 36895]]

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 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

[[Page 36896]]

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.
    (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

[[Page 36897]]

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 record keeping 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 
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 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

[[Page 36898]]

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.


Sec.  1599.19  Has the Office of Management and Budget reviewed the 
paperwork and record keeping requirements contained in this part?

    The paperwork and record keeping requirements imposed by this part 
have been submitted to the Office of Management and Budget for review 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et. seq.). 
OMB has assigned control number 0051-0039 for this information 
collection.

    Signed June 16, 2003, in Washington, DC.
A. Ellen Terpstra,
Administrator, Foreign Agricultural Service.
[FR Doc. 03-15530 Filed 6-19-03; 8:45 am]
BILLING CODE 3410-10-P