[Federal Register Volume 70, Number 7 (Tuesday, January 11, 2005)]
[Rules and Regulations]
[Pages 1792-1812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-399]


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DEPARTMENT OF AGRICULTURE

Office of Energy Policy and New Uses

7 CFR Part 2902

RIN 0503-AA26


Guidelines for Designating Biobased Products for Federal 
Procurement

AGENCY: Office of Energy Policy and New Uses, Office of the Chief 
Economist, USDA.

ACTION: Final rule.

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SUMMARY: The U.S. Department of Agriculture is establishing guidelines 
for designating items made from biobased products that will be afforded 
Federal procurement preference, as required under section 9002 of the 
Farm Security and Rural Investment Act of 2002.

DATES: This rule is effective February 10, 2005.

FOR FURTHER INFORMATION CONTACT: Marvin Duncan, USDA, Office of the 
Chief Economist, Office of Energy Policy and New Uses, Room 361, 
Reporters Building, 300 Seventh Street, SW., Washington, DC 20024; e-
mail: [email protected]; telephone (202) 401-0532. Information 
regarding the Federal Biobased Products Preferred Procurement Program 
is available on the Internet at http://www.biobased.oce.usda.gov.

SUPPLEMENTARY INFORMATION:

I. Authority

    These guidelines are established under the authority of section 
9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), 7 
U.S.C. 8102 (referred to in this document as ``section 9002'').

II. Overview of Section 9002

    Section 9002 provides for preferred procurement of biobased 
products by Federal agencies. Federal agencies are required to purchase 
biobased products, as defined in regulations to implement the statute 
(i.e., this final rule), for all biobased products within designated 
items costing over $10,000 or when the quantities of functionally 
equivalent items purchased over the preceding fiscal year equaled 
$10,000 or more. Procurements by a Federal agency subject to section 
6002 of the Solid Waste Disposal Act (42 U.S.C. 6962) are not subject 
to the requirements under section 9002 to the extent that the 
requirements of the two programs are inconsistent. Federal agencies 
must procure biobased products unless the biobased products within 
designated items are not reasonably available, fail to meet applicable 
performance standards, or are available only at an unreasonable price.
    The Office of Federal Procurement Policy (OFPP) and the USDA will 
work in cooperation to ensure implementation of the requirements of 
section 9002 in the Federal Acquisition Regulation (FAR). In this 
document, USDA is establishing guidelines addressing the designation 
process, how to determine the biobased content and other attributes of 
specific products, and cost sharing for product testing. In addition, 
to provide context, these guidelines address, but do not specifically 
implement, the procurement specific aspects of section 9002. USDA 
consulted with the Environmental Protection Agency (EPA), the General 
Services Administration (GSA), and the Department of Commerce's 
National Institute of Standards and Technology (NIST) in preparing the 
proposed guidelines that it is finalizing in this rule.
    To provide context, these guidelines include the statutory 
requirement that Federal agencies have in place, within one year of the 
publication of final guidelines, a procurement program that assures 
biobased products within designated items will be purchased to the 
maximum extent practical. Those procurement programs will have to 
contain a preference program for purchasing biobased products within 
designated items, an agency promotion program, and provisions for the 
annual review and monitoring of an agency's procurement program. In 
addition to establishing a preferred procurement program, as items are 
designated, Federal agencies may need time to adjust procurement 
practices. In accordance with section 9002(c) and (d), designation 
rules will specify the time frames within which such adjustments must 
occur.
    In designating items (generic groupings of specific products such 
as crankcase oils or synthetic fibers) for preferred procurement, USDA 
will consider the availability of such items and the economic and 
technological feasibility of using such items, including life cycle 
costs. Federal agencies will be required to purchase products that fall 
within an item only after that item has been designated for preferred 
procurement. In addition, USDA will provide information to Federal 
agencies on the availability, relative price, performance, and 
environmental and public health benefits of such items and, where 
appropriate, will recommend the level of biobased content to be 
contained in the procured product. Manufacturers and vendors will be 
able to offer their products to Federal agencies for preferred 
procurement under the program when their products fall within the 
definition of an item that has been designated for preferred 
procurement and the biobased content of the products meets the 
standards set forth in the guidelines.
    Section 9002 provides that USDA, in consultation with the 
Administrator of the EPA, shall establish a voluntary program 
authorizing producers of biobased products to use a ``U.S.D.A. 
Certified Biobased Product'' label. In a subsequent rulemaking, USDA 
intends to establish that voluntary program and provide eligibility 
criteria and guidelines for the use of the ``U.S.D.A. Certified 
Biobased Product'' label.
    Section 9002 provides funds to USDA to support the testing of 
biobased products to carry out the provisions of

[[Page 1793]]

the section. This rule addresses how USDA will use these funds.
    The legislative history of Title IX of FSRIA suggests that Congress 
had in mind three primary objectives that would apply to section 9002. 
The first objective is to improve demand for biobased products. This 
would have a number of salutary effects, one of which would be to 
increase domestic demand for many agricultural commodities that can 
serve as feedstocks for production of biobased products. Another 
important effect would be the substitution of products with a possibly 
more benign or beneficial environmental impact, as compared to the use 
of fossil energy based products.
    As a second objective, Congress wants to spur the development of 
the industrial base through value-added agricultural processing and 
manufacturing in rural communities. Since biobased feedstocks are 
largely produced in rural settings and, in many cases because of their 
bulk, require pre-processing or manufacturing close to where they are 
grown, increased dependence on biobased products appears likely to 
increase the amount of pre-processing and manufacturing of biobased 
products in rural regions of the Nation. This trend would help to 
create new investment, job formation, and income generation in these 
rural regions.
    The third objective is to enhance the Nation's energy security by 
substituting biobased products for fossil energy-based products derived 
from imported oil and natural gas. The growing dependence of the Nation 
on imported oil and natural gas, along with heightened concerns about 
political instability in some of the oil rich regions in the world, 
have led the Congress to place a higher priority on domestic energy and 
biobased product resources.
    To assist manufacturers and vendors and Federal agencies in 
understanding the steps they will need to follow in participating in 
this program, USDA has included the following brief listing of steps 
under the item designation process, manufacturer and vendor guidance, 
and the procurement process.
    Item Designation Process:
    1. USDA gathers product data and vendors may voluntarily provide 
product information on:
    a. Technological and economic feasibility (functional performance, 
commercially available, etc.).
    b. Samples for testing for biobased content.
    c. Information to determine environmental and public health 
benefits and life cycle costs (through BEES analysis).
    2. USDA extrapolates the data to describe an Item.
    3. USDA issues a proposed rule to designate an Item.
    4. The public comments on the proposed rule.
    5. USDA takes comments into consideration.
    6. USDA issues a final rule designating an Item.
    7. Designated Items are posted on Web site.
    8. Manufacturers/vendors are invited to post on the Web site their 
specific product information under a designated Item.
    Manufacturer and Vendor Guidance:
    1. Manufacturers/vendors must certify the biobased products content 
of their products.
    2. Manufacturers/vendors may post products on Web site and may 
market products with claims for:
    a. Biobased products content:
    (1) Must meet minimum content as defined by the designated Item 
description.
    (2) Content must be verified upon request from Federal agency.
    (3) Verification must be based on testing by an independent testing 
entity using ASTM D6866.
    b. Life cycle cost information:
    (1) Must be verified upon request from Federal agency.
    (a) Verification must be based on testing by an independent testing 
entity using (i) BEES analysis or (ii) either a third-party analysis or 
an in-house analysis using ASTM D7075 standard for evaluating and 
reporting on environmental performance of biobased products, including 
life cycle costs.
    c. Performance data, materials safety data sheets, etc.
    d. Contact information.
    Procurement Process:
    1. The Federal agency identifies procurement need for a biobased 
product that falls within a designated item.
    2. The agency conducts search for qualifying biobased products 
meeting this need; one tool is the informational Web site.
    3. The agency issues a solicitation or uses another procurement 
procedure.
    4. Manufacturers/vendors respond to the solicitation.
    5. The agency gives preference to qualifying biobased products 
under a designated item.
    a. Agencies have three exceptions to giving preference to biobased 
products:
    (1) Not available within a reasonable time.
    (2) Does not meet performance standards.
    (3) Unreasonable price.
    6. The agency makes a purchase.
    The product information requirements contained in these guidelines 
are intended to establish standards to guide Federal agencies and 
manufacturers and vendors when such information is relevant in the 
context of a specific procurement. Other than certification of biobased 
content, Federal agencies should request information or verification of 
information only when such information will be of use to the agency in 
the context of the specific procurement. The discussion of product 
information in the guidelines is not intended to suggest that such 
information will be relevant to all procurements. Only self-
certification of biobased content is required for all procurements of 
designated items.

III. Background

    On December 19, 2003, USDA published in the Federal Register (68 FR 
70730) a proposed rule to establish guidelines implementing the 
provisions of section 9002. As described in the proposed rule, the 
guidelines would be contained in a new 7 CFR part 2902, ``Guidelines 
for Designating Biobased Products for Federal Procurement.'' The new 
part would be divided into two subparts, ``Subpart A--General,'' and 
``Subpart B--Biobased Product Eligibility for Federal Preference.'' 
Subpart A would address the purpose and scope of the guidelines and 
their applicability, provide guidance on product availability and 
procurement, define terms used in the part, and address affirmative 
procurement programs and USDA funding for testing. Subpart B would 
address communicating information on qualifying biobased products and 
characteristics required for obtaining designated item status, and 
would set out the initial categories of designated items and minimum 
content.
    USDA solicited comments on the proposed rule for 60 days ending on 
February 17, 2004. USDA received 271 comments from 64 commenters by 
that date. The comments were from private citizens, consultants, 
individual companies, industry organizations and trade groups, 
nonprofit organizations, universities, a Member of Congress, and State 
and Federal agencies.
    With few exceptions, the commenters supported the goals of section 
9002 and the proposed guidelines, although nearly all of the commenters 
had specific suggestions for changes to the proposed guidelines or 
raised issues related to the implementation of the program. These 
suggestions and issues are addressed below by topic.

[[Page 1794]]

IV. Discussion of Comments

    Many comments evidenced confusion regarding how the program would 
work. In an effort to address that confusion, USDA has reorganized the 
final rule into a more reader-friendly format. Along with the 
reorganization, the final rule also uses more descriptive section 
titles and more paragraph headings to enable readers to locate 
information efficiently. Because individuals commented on specific 
sections of the proposed rule, USDA is addressing the comments based on 
the section numbers of the proposed rule. However, the final rule 
section number is indicated after each proposed rule section number.

Applicability (Proposed Rule Sec.  2902.2; Final Rule Sec.  2902.3)

    Paragraph (a) of Proposed Rule Sec.  2902.2 (Final Rule Sec.  
2902.3(a)) explains that part 2902 applies to all procurements by 
Federal agencies of biobased products falling within items designated 
by USDA in this part, where the Federal agency purchases $10,000 or 
more worth of one of those items during the course of a fiscal year, or 
where the quantity of such items or of functionally equivalent items 
purchased during the preceding fiscal year was $10,000 or more. The 
$10,000 threshold applies to procuring agencies as a whole rather than 
to agency subgroups such as regional offices or subagencies of a larger 
department or agency.
    One commenter stated that USDA should clarify that the $10,000 
trigger for purchasing biobased products is an agency-wide requirement. 
Similarly, another commenter stated that the $10,000 trigger for 
purchasing biobased products must be understood by Federal agencies to 
apply to the agency level and not an individual unit within an agency 
or credit card holder level.
    In response to these comments, USDA is revising the text of Sec.  
2902.3(a) to change the word ``procuring'' to ``Federal'' and insert 
``Federal'' in the phrase ``larger department or agency.'' The final 
rule provides that ``the $10,000 threshold applies to Federal agencies 
as a whole rather than to agency subgroups such as regional offices or 
subagencies of a larger Federal department or agency.''
    Some commenters raised points regarding the scope of the $10,000 
threshold's applicability, with one commenter suggesting that USDA 
should educate agencies on how the $10,000 minimum purchase threshold 
is to be applied. With respect to who is making the purchases, one 
commenter stated that the $10,000 level is reasonable if it includes 
purchases made by contractors of the respective agency from outside 
vendors, and another commenter suggested that the guidelines should be 
applicable to State agencies and other governmental and quasi-
governmental entities that receive Federal funding. With respect to 
what is being purchased, a fourth commenter stated that the $10,000 
buying threshold for a product category is appropriate as long as it 
applies to the product category and not to the individual product.
    With respect to educating agencies on how the $10,000 minimum 
purchase threshold is to be applied, USDA is developing a model 
procurement program that will incorporate an educational element. USDA 
anticipates that as the program enters its operational phase, the 
designation of items available for procurement will naturally tend to 
lend greater clarity to the program as it is practically applied. 
Section 9002 does not authorize extending the guidelines to State and 
local agencies using appropriated Federal funds to procure qualifying 
biobased items, or to persons contracting with such agencies with 
respect to work performed under such contracts. In response to the 
fourth commenter, the $10,000 threshold is determined at the item 
level, which is the level of designation, and not at the individual 
product level.
    Some commenters recommended that Federal agencies be required to 
report all purchases, including government credit card purchases, 
subject to the $10,000 threshold on a single purchase or cumulative 
purchase of a single product type of $10,000 worth in the preceding 
year for the purposes of monitoring the program's impact and agency 
compliance. The resulting purchase reports could be made available in a 
searchable database on the program Web site to allow manufacturers to 
determine whether any of their products qualify for procurement 
preference and identify any opportunities or incentives to develop 
specific biobased alternatives.
    As noted in the proposed rule, OFPP is required to prepare and 
submit a report to Congress every 2 years on the actions taken by 
Federal agencies in the implementation of the biobased product 
procurement program. OFPP's report will, of course, be a public 
document available for review by the public, including interested 
manufacturers. Also, a manufacturer seeking information that would help 
it to identify any opportunities or incentives to market or develop 
specific biobased alternatives may consult the Federal Business 
Opportunities Web site maintained by the GSA (http://www.FedBizOpps.gov), which provides, among other things, Federal agency 
recurring procurement forecasts.
    One commenter stated that there should be ``flow down'' procurement 
preference to the subcontractor level, maintaining that subcontractors 
are often unaware of item preferences in Federal procurements and that 
such a ``flow down'' preference would ensure that small producers 
always get a bid opportunity. This comment is outside the scope of this 
rulemaking. It relates to the implementation of the procurement 
procedures for this program, which will be accomplished through the 
Federal Acquisition Regulation (FAR).
    Paragraph (b) of Proposed Rule Sec.  2902.2 (Final Rule Sec.  
2902.3(b) and Sec.  2902.5(c)(1)) identifies two exceptions to the 
applicability of the guidelines, i.e., the guidelines do not apply to:

--Any procurement by any Federal agency that is subject to the 
regulations issued by the EPA under section 6002 of the Solid Waste 
Disposal Act, as amended by the Resource Conservation and Recovery Act 
of 1976 (RCRA) (40 CFR part 247), to the extent that the requirements 
of the guidelines are inconsistent with those regulations; or
--The procurement of motor vehicle fuels or electricity.

    One commenter noted that in addition to these two exceptions to the 
applicability of the guidelines, paragraph (e) of Proposed Rule Sec.  
2902.11 (Final Rule Sec.  2902.5(c)(2)) also contains an exclusion from 
the program for products having mature markets. The commenter suggested 
that all the program exclusions be located in one place.
    USDA agrees with the essence of this comment. To that end, items 
excluded from consideration for designation are consolidated in Final 
Rule Sec.  2902.5(c). However, because an inconsistency with 
regulations implementing Section 6002 of the Solid Waste Disposal Act 
is an applicability factor, and not a blanket exclusion from this 
program or consideration for designation, USDA has retained that 
provision in the applicability Section, now Final Rule Sec.  2902.3(b). 
Additionally, because the regulations implementing section 6002 of the 
Solid Waste Disposal Act are popularly known as the RCRA regulations or 
RCRA guidelines, USDA revised Final Rule Sec.  2902.3(b) to acknowledge 
the connection between RCRA and the Solid Waste Disposal Act.
    One commenter stated that the proposed rule was ambiguous as to 
whether the proposed procurement

[[Page 1795]]

requirements constitute a mandatory purchasing program or a 
preferential program. This commenter asked if agencies would be 
required to buy only biobased products unless one of the identified 
circumstances applies, or would the biobased program be subject to some 
sort of evaluative preference that goes into the procurement decision.
    Section 9002 provides for preferred procurement of biobased 
products by Federal agencies, and the guidelines in this final rule 
reflect the statutory requirement that agencies must establish a 
procurement preference program. In developing the required preference 
program, Federal agencies are expected to adopt a policy that will 
maximize the purchase or use of biobased products to the extent 
practicable, with exceptions being made only when they: (1) Are not 
available within a reasonable time; (2) fail to meet performance 
standards set forth in the applicable specifications, or the reasonable 
performance standards of the Federal agency; or (3) are available only 
at an unreasonable price. To help clarify this and other aspects of the 
program, USDA will develop a model procurement policy and program for 
designated items to support its own procurement practices. The FAR also 
will be amended to implement the procurement aspects of the program.
    One commenter stated preferred procurement programs like the 
proposed program are not the most effective mechanisms for changing or 
driving environmental behaviors. This commenter maintained that product 
claims regarding environmental and performance attributes could mislead 
public and private sector buyers and lead to less efficient, more 
costly, buying practices that would not assure more environmental 
benefits. Based on this position, the commenter recommended that USDA 
reconsider the ``must procure'' aspect of the program, which goes 
beyond simply encouraging new markets and could lead to undue 
substitution of viable products.
    Section 9002 sets the basic parameters for this program. USDA must 
consider the economic and technological feasibility of using items, 
including life cycle costs, in designating items under this program. 
Additionally, vendors must provide information about product 
environmental and public health benefits, if so requested by the 
procuring official (see Final Rule Sec. Sec.  2902.6 and 2902.8).
    In most situations, self-certification should be satisfactory for 
Federal agencies. Manufacturers and vendors are expected to verify this 
information only in specific procurements where a Federal agency 
expressly requires verification of environmental benefits, public 
health benefits, or life cycle costs. Such information must be verified 
using an analytical method authorized in these guidelines. USDA, 
through these guidelines, requires verification with (a) a third-party 
test using the NIST Building for Environmental and Economic 
Sustainability (BEES) analytical tool or (b) either a third-party or an 
in-house test using the ASTM International (ASTM) standard for 
evaluating and reporting on environmental performance of biobased 
products, including life cycle costs. Both BEES and the ASTM standard 
are in accordance with International Organization for Standardization 
(ISO) standards, are focused on testing of biobased products, and will 
provide the life cycle assessment and life cycle cost information 
Federal agencies might require. Such information will empower the 
procuring official to consider all relevant factors and make 
determinations that best meet the Federal agency's needs.

USDA Guidance on Item Availability and Procurement (Proposed Rule Sec.  
2902.3; Final Rule Sec.  2902.6)

    Proposed Rule Sec.  2902.3 (Final Rule Sec.  2902.6) contained a 
discussion of the voluntary Web-based information site USDA intends to 
maintain for manufacturers and vendors of designated items produced 
with biobased products and Federal agencies. Through this Web site, 
USDA intends to provide access to information as to the availability, 
relative price, performance and environmental and public health 
benefits of the designated items. In the proposed rule, USDA solicited 
comments on the kinds of contact and product information that should be 
made available on the Web-based information system, as well as comments 
on the appropriate components of a model procurement program for 
biobased items.
    With respect to the model procurement program, one commenter asked 
that, in the final rule, USDA better spell out how it will use its 
model procurement program or other assistance to help other Federal 
agencies in complying with section 9002. One suggestion made in this 
vein by two commenters was that USDA should provide sample solicitation 
and contract language that Federal agencies can insert into support 
services solicitations and performance-based contracts.
    USDA is in the process of developing the model procurement program 
referred to in the proposed rule. It is the USDA intention to have the 
model procurement program in place prior to designation of the first 
items under the program. The USDA Office of Chief Economist has 
forwarded these comments to USDA Departmental Administration for its 
consideration in developing the model procurement program. With respect 
to the provision of sample solicitation and contract language, this 
comment and many similar comments reflect a misunderstanding of how 
these requirements will be implemented into the Federal procurement 
framework. To address this point in the guidelines, USDA added a new 
paragraph (a) in Final Rule Sec.  2902.4 stating that: ``The Office of 
Federal Procurement Policy, in cooperation with USDA, has the 
responsibility to coordinate this policy's implementation in the 
Federal procurement regulations. These guidelines are not intended to 
address full implementation of these requirements into the Federal 
procurement framework. This will be accomplished through revisions to 
the Federal Acquisition Regulation.'' The USDA Office of Chief 
Economist has forwarded these comments to USDA Departmental 
Administration for its consideration in developing the model 
procurement program.
    One commenter was concerned that the program's procedures are too 
complicated for acquisitions under the Simplified Acquisition Threshold 
as defined in Sec.  2.101 of the Federal Acquisition Regulation. This 
commenter was also concerned that procurement automation efforts would 
be negatively affected due to the potential need to manually procure 
biobased items. This comment is outside the scope of this rulemaking. 
It relates to the implementation of the procurement aspects of this 
program, which will be accomplished through the FAR.
    One commenter, noting that procuring agencies will be looking for 
articles such as truck bed liners and chairs, not ``molded plastics and 
composites,'' recommended that the program Web site include links so 
that products that fall under designated item groupings can be cross 
referenced or displayed by product categories in a manner that will be 
useful to Federal buyers. USDA appreciates the emphasis on purchasing 
of end products and will take that into account in future item 
designation. USDA intends to design the program Web site to be as user-
friendly as possible, which would include providing features such as 
those described by the commenter.
    Two commenters suggested that USDA should work closely with the 
Biobased Manufacturers Association

[[Page 1796]]

(BMA) and use BMA's ``Biobased Supercenter'' as a model for the USDA 
Web-based information center. One of these commenters also suggested 
that USDA work with BMA to coordinate product sub-categories, classes, 
and codes.
    USDA will work to identify opportunities to coordinate its efforts 
under the biobased preference program with the efforts of other public 
and private entities with which the program has shared or overlapping 
interests.
    One commenter noted that procurement agencies such as the Defense 
Logistics Agency (DLA) are tasked with purchasing materials identified 
by their customers as necessary to perform the customers' mission and 
stated that, while DLA and similar agencies can facilitate making 
alternative products available and visible, the decision on product 
choice will rest with the end user. This commenter recommended that the 
final regulations provide that customers (end users) should specify 
biobased products when ordering from Federal Supply Schedule or prime 
vendor type contracts.
    Section 2902.4(c) in this final rule provides that after the 
publication of each designated item, Federal agencies that have the 
responsibility for drafting or reviewing specifications for items 
procured by Federal agencies shall ensure within a specified time frame 
that their specifications require the use of that item composed of 
biobased products, consistent with the guidelines. USDA will specify 
the allowable time frame in each designation rule.
    The proposed rule preamble stated, ``Information on relative price, 
performance, and environmental and public health benefits that USDA is 
required to provide to Federal agencies will be gathered from 
manufacturers and vendors at the individual product level. This 
information, to be of maximum value to Federal agencies in making 
procurement decisions, must be considered at an individual product 
level.'' One commenter objected to the notion of gathering 
environmental and public health information directly from vendors of 
biobased products. Instead, this commenter stated, USDA must establish 
a set of standards that must be met by vendors who want their products 
to qualify. The commenter asserted that, to be truly useful, those 
standards must address safety and health effects on workers, 
performance, costs (of purchase, use, and disposal), and environmental 
impact.
    As noted in the proposed rule, we intend to gather information on 
the relative price, performance, and environmental and public health 
benefits of specific products from industry using a Web site to which 
manufacturers and vendors of products that fall within designated items 
will be invited to voluntarily provide information, including 
availability of the products with biobased content that they offer to 
Federal agencies. Final rule Sec.  2902.6(a) also includes biobased 
content among the information to be provided on the Web site. The Web 
site will employ a standardized format with interactive capabilities 
that will permit manufacturers and vendors to enter information into 
the Web site. Final rule Sec.  2902.6(a) clarifies that the Web site 
will provide instructions for the posting of information. USDA will 
periodically audit the information displayed on the Web site and, where 
questions arise, contact the manufacturer or vendor to verify, correct, 
or remove incorrect or out-of-date information. In addition, USDA added 
to Final Rule Sec.  2902.6(a) a general requirement that manufacturers 
and vendors, when requested, be able to verify any relevant product 
characteristic information provided to Federal agencies. USDA believes 
that these procedures, along with the fact that the designation process 
for each item will provide USDA and the public with an opportunity to 
consider the economic and technological feasibility, including life 
cycle costs, of items and the types of products that would fall within 
each item grouping, will ensure that the factors identified by the 
commenter are adequately considered.

Definitions (Proposed Rule Sec.  2902.4; Final Rule Sec.  2902.2)

    With respect to the definition of biobased product, one commenter 
noted the use of the term ``renewable domestic agricultural materials'' 
and asked for clarification of the ``domestic'' qualifier. Does it 
refer to the origin of the agricultural materials, or to where the 
agricultural materials were turned into usable feedstock? The commenter 
stated that agricultural materials are sourced from all around the 
world, and that producers may be unable to certify that a particular 
raw material is ``domestic.'' On this same subject, one commenter noted 
that in section 9002, the qualifier ``domestic'' appears to apply only 
to renewable agricultural materials, and not to biological products, 
and asked that USDA clarify whether that is indeed the case.
    The statutory definition refers to ``biological products or 
renewable domestic agricultural materials (including plant, animal, and 
marine materials) or forestry materials.'' 7 U.S.C. 8101(2). USDA 
considers the qualifier ``domestic,'' as well as the qualifier 
``renewable,'' to apply to both agricultural materials and forestry 
materials. Given that the statute refers to the materials themselves 
and not to, for example, domestically processed materials, USDA 
construes an intent to promote the use of U.S. origin agricultural and 
forestry materials.
    Also with respect to the definition of biobased product, one 
commenter noted there was no reference to products manufactured 
primarily from ``naturally occurring microorganisms'' and asked if such 
products were being considered for inclusion in the program. To the 
extent that these products would be composed in whole or in part of 
biological products, such products would fall within the definition of 
biobased product.
    One commenter stated there appeared to be an inconsistency between 
the definition of ``biobased content'' and the provisions of Proposed 
Rule Sec.  2902.11(d)(1) (Final Rule Sec.  2902.7(c)). The proposed 
definition of ``biobased content'' stated, in part, ``[t]otal product 
weight may be calculated exclusive of water or other inactive 
ingredients, fillers and diluents,'' while Proposed Rule Sec.  
2902.11(d)(1) stated ``[b]iobased content shall be determined based on 
the weight of the biobased material (exclusive of water and other non-
active ingredients, fillers, and diluents) divided by the total weight 
of the product and expressed as a percentage.'' The commenter stated it 
was confusing as to whether total product weight is determined with or 
without inactive ingredients, including inorganic materials. On this 
same subject, another commenter stated that, in order to realistically 
promote the introduction of biobased products, the biobased content 
should--not ``may'' as in the definition--be defined exclusive of 
water, pigments, fillers, rheology modifiers, additives, and other 
inactive materials.
    USDA agrees that the definition of ``biobased content'' needs 
clarification. In order to be consistent with the ASTM International 
Radioisotope Standard Method that USDA is requiring for determining and 
certifying biobased content, the term ``biobased content'' is defined 
in this final rule as the amount of biobased carbon in the material or 
product as a percent of the weight (mass) of the total organic carbon 
in the product. This calculation excludes all inorganic material in the 
product. USDA similarly revised Final Rule Sec.  2902.7(c) to be 
consistent with the revised definition in Final Rule Sec.  2902.2.

[[Page 1797]]

    One commenter suggested that, to eliminate confusion, a definition 
of ``biodegradable'' should be added to the definitions section of the 
guidelines, as well as a note elsewhere in the guidelines that a 
biobased product is not necessarily a biodegradable product, i.e., that 
biodegradability is a characteristic that must be addressed and 
qualified separately.
    As biodegradability is a characteristic that will be a 
consideration in the designation of some items but not others, USDA 
does not think that it is necessary to add a definition of the term in 
this final rule. USDA will, however, propose to define the term in a 
future rulemaking when it is appropriate in the context of the item or 
items being considered for designation, which will give the public an 
opportunity to comment upon the proposed definition.
    The same commenter suggested that a definition of ``total 
manufactured value'' be added to the guidelines to help clarify the use 
of the term in Proposed Rule Sec.  2902.11.
    As discussed later in this document, USDA has removed the ``5 
percent of total manufactured value'' criterion from the guidelines in 
this final rule. Thus, it is not necessary to define the term.
    One commenter stated that the definitions in the final guidelines 
should be inclusive rather than exclusive, thus food crops and food 
waste should have equal footing and utilization of agricultural and 
animal waste should be given equal, if not special, consideration over 
virgin agricultural food crops.
    USDA considers the definitions in the guidelines to be inclusive. 
The statute and the guidelines focus on promoting the use of biobased 
products generally, without special emphasis on any particular class of 
biobased product.
    In addition to the above changes made in response to specific 
comments, USDA is making several other minor technical or stylistic 
changes to the definitions of ``Biobased product,'' ``Designated 
item,'' and ``Sustainably managed forests.'' USDA is substituting 
``USDA'' for ``Secretary'' in the definition of ``Biobased product'' to 
reflect the fact that the Secretary has delegated this authority within 
USDA and need not make such determinations personally. USDA revised the 
definition of ``Designated item'' to replace the term ``category'' with 
``generic grouping'' because the use of the term ``category'' in the 
proposed rule generated confusion. In that same definition, USDA added 
``biobased'' to modify ``products'' to clarify that the generic group 
was of ``biobased products.'' Also in that definition, because of the 
reorganization from the proposed rule to the final rule, USDA replaced 
the reference to ``Sec.  2902.12'' with ``subpart B.'' Regarding the 
definition of ``Sustainably managed forest,'' USDA added ``Refers to 
the'' at the beginning of the definition. Finally, in addition to these 
minor changes, USDA wants to clarify the origin of the definition of 
``Small and emerging private business enterprise.'' That definition is 
based on the USDA Rural Business Service definition of the same term 
used in the Rural Business Enterprise Grant Program (see 7 CFR 
1942.304).

Preferred Procurement Program (Proposed Rule Sec.  2902.5(b); Final 
Rule Sec.  2902.4(b))

    Under Proposed Rule Sec.  2902.5(b) (Final Rule 2902.4(b)(1)), 
agencies would be required to develop a procurement program that will 
assure that products that fall within designated items composed of 
biobased products will be purchased to the maximum extent practicable, 
consistent with applicable provisions of Federal procurement laws. Such 
programs would provide for preferential purchasing of products that 
fall within designated items unless the items are not available within 
a reasonable time, fail to meet performance standards, or are available 
only at an unreasonable price.
    Several commenters focused on the ``unreasonable price'' criterion. 
Some of the commenters simply stated that USDA must provide guidance to 
Federal agencies as to what constitutes an ``unreasonable price'' or, 
conversely, what a ``reasonable price'' would be. Other commenters 
suggested that USDA should formulate a quantifiable ``allowable 
premium'' that procurement officials may pay, similar to that allowed 
for the purchase of recycled paper, that takes into account the 
socioeconomic and environmental benefits of using biobased products 
instead of petrochemical or mineral products. Flat 10, 15, and 20 
percent premiums were suggested, as was a one percent premium for each 
10 percent of biobased content.
    The reasonable/unreasonable assessment, which the statute and the 
guidelines offer for consideration with respect to both the price of a 
product and the amount of time in which it would be available, is an 
assessment that USDA thinks must be made by the procurement official in 
the context of a specific procurement. Through the biobased program Web 
site and other initiatives, USDA will attempt to provide as much 
relevant information as possible for those procurement officials to 
consider. In the end, however, it will be agency procurement officials, 
acting in accordance with their agencies' particular procurement 
programs and the FAR, who will have to decide how to best meet the 
procurement needs of their agencies.
    Other commenters sought a greater emphasis on value, rather than 
price. One of those commenters suggested that Federal agencies should 
be required to purchase biobased products despite initial price 
differentials, unless they can demonstrate through a full life-cycle 
analysis that the non-biobased product is a better value. Another 
commenter stated that USDA should clarify, quantify, and incorporate 
the concept of ``best value'' in its guidelines for Federal purchasing. 
In identifying the ``best value,'' some commenters stated, USDA should 
quantify the benefits of creating a new economic sector in rural 
America, the environmental benefits of using biobased products, and the 
national security and economic benefits of reduction of dependence on 
imported fossil fuels. One of these commenters concluded by suggesting 
that information by suppliers that documents ``best value'' should be 
included on the program Web site and a maximum allowable premium for 
biobased products should be set at 10 percent over a non-biobased 
alternative after a best value comparison.
    The above comments relate to the implementation of the procurement 
aspects of this program, which will be accomplished through revisions 
to the FAR. The law provides the ``unreasonable price'' exemption, but 
application of this exemption will likely be based on a comparison of 
product price, price of alternative products, life cycle costs, and 
other benefits. In many, perhaps most, cases this will involve 
nonquantifiable determinations or determinations that can only be made 
by the procuring agency. Therefore, USDA believes that the degree to 
which such factors are incorporated into the procurement system can 
best be addressed through the implementing regulations in the FAR.
    One commenter was concerned that the proposed program may be too 
cumbersome and too easily circumvented by unwilling procurement 
specialists. Similarly, other commenters were concerned that price and 
availability considerations may provide loopholes allowing purchasing 
agents to circumvent the original intent of section 9002 and suggested 
that exceptions to the purchasing requirement should be kept to a 
minimum. Some of these commenters stated that USDA needs to

[[Page 1798]]

provide explicit guidance to agencies to ensure that agencies do not 
use price to avoid their obligation to ``buy biobased,'' with one 
commenter stating that cost, in and of itself, is no excuse not to 
purchase biobased products. These commenters suggested that USDA 
guidance provide for the consideration of a variety of factors, such as 
product lifespan, energy savings, reduced disposal costs, reduced 
health and safety costs, environmental benefits, and compliance with 
other governmental ``green'' initiatives.
    The guidelines in this final rule reflect the statutory parameters 
for making procurement decisions. That is, agencies must give a 
preference to designated biobased items unless the items:

--Are not reasonably available within a reasonable period of time;
--Fail to meet the performance standards set forth in the applicable 
specifications or fail to meet the reasonable performance standards of 
the procuring agencies; or
--Are available only at an unreasonable price.

    In addition to the statutory parameters, USDA has set forth 
recommended procurement practices in these guidelines. Those 
recommended procurement practices include acceptable standards for 
determining biobased content and product attributes. USDA encourages 
procurement officials to consider a product's life cycle costs and 
environmental and public health benefits when appropriate in the 
context of a specific procurement, but USDA is not in a position to 
mandate consideration of and establish specific qualifying standards 
for all possible products for all procurements.
    Proposed Rule Sec.  2902.5(a) (Final Rule Sec.  2902.4(c)) stated, 
in part, that ``Within 1 year after the publication date of each 
designated item, Federal agencies that have the responsibility for 
drafting or reviewing specifications for items procured by Federal 
agencies shall ensure that their specifications require the use of 
designated items composed of biobased products, consistent with the 
guidelines in this part.'' One commenter offered that it may be 
possible for agencies to conduct a review of their specifications 
within the specified year, but that the development of new or revised 
specifications resulting from such reviews may not be possible within 
that time frame.
    USDA expects that the required reviews and revisions of 
specifications will be an ongoing process, and certainly not a one-time 
effort that would overwhelm most agencies. USDA agrees with the 
commenter to the extent that the comment expresses that the one-year 
time frame might not be appropriate in all instances. To that end, USDA 
has revised Final Rule Sec.  2902.4(c) to remove ``Within 1 year'', 
insert ``within a specified time frame'', and indicate that ``USDA will 
specify the allowable time frame in each designation rule.''
    One commenter stated that the guidelines need to take into account 
the fact that more Government purchasing organizations are using 
methods involving long-term contracts, often in the 5- to 10-year 
range, in order to ensure supply continuity and realize savings. The 
commenter pointed out that some items that may be designated in the 
future will likely have non-biobased competition that is already on a 
long-term contract, and that the guidelines need to provide some 
flexibility in such cases, as changing those contracts would entail 
substantial time, effort, and costs. Along these same lines, one 
commenter stated that biobased procurement should become a mandatory 
feature of any new contracts or contract renewals, but simply 
encouraged in the context of existing contracts. These comments relate 
to the implementation of the procurement aspects of this program, which 
will be accomplished through the FAR.

Funding for Testing (Proposed Rule Sec.  2902.6; Final Rule Sec.  
2902.9)

    As discussed in the proposed rule, section 9002 provides to USDA $1 
million per year for each of the fiscal years 2002 through 2007 to 
support the testing of biobased products to carry out the provisions of 
the section. Section 9002 further provides that USDA, at its 
discretion, may ``give priority to the testing of products for which 
private sector firms provide cost sharing for the testing.'' In the 
proposed guidelines, Sec.  2902.6 (Final Rule Sec.  2902.9) described 
the manner in which available funds for testing would be allocated and 
the priority-setting mechanism USDA would use to evaluate proposals for 
cost sharing. Under Proposed Rule Sec.  2902.6(a) (Final Rule Sec.  
2902.9(a)), USDA will use these funds directly for biobased content 
testing and environmental/public health benefits testing using the BEES 
Analysis. Once USDA begins the cost sharing programs, USDA will provide 
cost sharing under Proposed Rule Sec.  2902.6(b) (Final Rule Sec.  
2902.9(b)) for environmental and public health benefits testing, using 
the BEES Analysis, and for performance testing.
    One commenter stated that while funding for testing was desirable, 
such funding should not be ``wasted on frivolous testing of products 
that are not already well down the path for qualification.'' This 
commenter stated that the funding should instead be directed toward 
simplifying the process so that the maximum number of vendors can 
perform the testing necessary to qualify products in the most cost-
effective manner. The commenter encouraged USDA to use the funding to 
fill in limited data gaps to expedite designation of items, as 
discussed in the proposed rule.
    USDA thinks that both the USDA-supported testing described in 
Proposed Rule Sec.  2902.6(a) (Final Rule Sec.  2902.9(a)) and the cost 
sharing criteria described in Proposed Rule Sec.  2902.6(b) (Final Rule 
Sec.  2902.9(b)) address directly the points raised by the commenter. 
With limited funding for testing, USDA is keenly aware of the need to 
maximize the usefulness of those resources.
    With respect to the setting of priorities for the distribution of 
testing funds described in the proposed rule, one commenter encouraged 
USDA to give priority to products with a higher minimum biobased 
content, while another commenter stated that priority should be given 
to the funding of testing for products developed by small companies 
located in rural areas.
    Once USDA has concluded that a critical mass of items has been 
designated, USDA will exercise its discretion to make cost sharing a 
more determinative factor in product testing. Paragraph (b)(3) of Final 
Rule Sec.  2902.9 provides that cost-sharing proposals will be 
considered first for high priority products of small and emerging 
private business enterprises, which would include the small companies 
in rural areas identified by one of those commenters. Proposals for 
cost sharing will be prioritized, with rating points assigned based on 
the product's market readiness, the potential size of the market for 
that product in Federal agencies, the financial need for assistance of 
the manufacturer or vendor, the product's prospective competitiveness 
in the market place, and the product's likely benefit to the 
environment. If funds remain available, proposals from other than small 
and emerging private business enterprises will be considered, based on 
those same priority factors. These factors will allow USDA to give 
favorable consideration to products with higher biobased content and 
products developed by smaller companies.
    In response to these and the previous comments, USDA reorganized 
and revised Final Rule Sec.  2902.9(b)(2) and (3) to clarify these 
points. Final Rule

[[Page 1799]]

Sec.  2902.9(b)(2) and (3) make clear that USDA will use these criteria 
to rank the priority of both small and emerging private business 
enterprise proposals and other producer proposals. Final Rule Sec.  
2902.9(b)(3) also clarifies that USDA will consider first only ``high 
priority'' products of small and emerging private business enterprises 
before considering proposals for products of other producers of 
biobased items. In other words, after considering all ``high priority'' 
proposals for products of small and emerging private business 
enterprises, USDA will consider all remaining cost sharing proposals 
together, including both the remaining proposals for products of small 
and emerging private business enterprises and all proposals for 
products of all producers of biobased items. These clarifications help 
ensure that this framework will result in the efficient and cost-
effective use of these funds to further the program objectives.
    In addition, USDA made several minor technical revisions in Final 
Rule Sec.  2902.9(b). In paragraph (b)(1), USDA revised ``testing of 
biobased products to carry out this program'' to reference the testing 
that would be funded under paragraph (b)(4) and the applicable testing 
standards from Sec.  2902.8. The revised phrase reads ``life cycle 
costs, environmental and health benefits, and performance testing of 
biobased products in accordance with the standards set forth in Sec.  
2902.8 to carry out this program.'' USDA also revised paragraph (b)(4) 
to replace the first reference to BEES with the phrase ``life cycle 
costs and environmental and health benefits'' and to strike the second 
reference to BEES. These revisions are to make this section consistent 
with Final Rule Sec.  2902.8, as discussed below.
    One commenter recommended that USDA should provide opportunities 
for colleges and universities to gain the necessary funding to develop 
the capacity to conduct the performance, health effects, and 
environmental testing necessary for the designation of biobased 
products; in the future, these institutions could also perform the 
carbon dating and BEES analyses provided for by the guidelines.
    USDA agrees that building such capacity would be consistent with 
the goals of section 9002. However, the funds made available under 
section 9002(j)(2) are ``to support testing of biobased products.'' 
These funds are not available for capacity building of colleges and 
universities, nor is the focus of section 9002 institutional capacity 
building. Within USDA, the Cooperative State Research, Education, and 
Extension Service (CSREES) mission includes capacity building. The 
Office of Energy Policy and New Uses (OEPNU) will discuss this comment 
with CSREES as part of overall USDA biobased program coordination.

Communicating Information on Qualifying Biobased Products (Proposed 
Rule Sec.  2902.10; Final Rule Sec.  2902.6)

    As proposed, paragraph (a) of Proposed Rule Sec.  2902.10 (Final 
Rule Sec.  2902.6) would require that manufacturers be able to verify 
the biobased content in their products. The level of biobased content 
in a product would have to be determined using the ASTM International 
standard that is a Radioisotope Standard Method (D 6866) to distinguish 
between carbon from fossil resources and carbon from renewable sources.
    Several commenters weighed in on the use of the ASTM International 
Radioisotope Standard Method for determining the level of biobased 
content in a product; however, only one of those commenters fully 
supported its use. While the one supportive commenter noted that the 
method can produce results in as little as 2 days at a cost of $305, 
many other commenters objected to the costs and delays that would be 
associated with the use of the method, especially with respect to 
products that are already being marketed. While several commenters 
referred to the testing as ``costly,'' other commenters simply stated 
that the costs associated with the testing were unknown and that USDA 
must provide more cost information before requiring such testing.
    According to information USDA received from Iowa State University, 
which is conducting some testing under a cooperative agreement with 
USDA, test results could be expected in 2 to 4 weeks at a cost of $250 
to $500 per sample, depending on the specific methodology used. USDA 
anticipates that each item designation will address minimum biobased 
content for that item. Therefore, manufacturers and vendors must know 
the biobased content of their products in order to know whether the 
products qualify under a designated item. Manufacturers and vendors 
must be able to certify that information to the procuring official. 
Adoption of a standard test method is necessary for the integrity of 
this program, providing a degree of certainty for Federal agencies, 
manufacturers, and vendors. A standard test method informs 
manufacturers and vendors of the standard against which their products 
and their competitors' products will be judged, and Federal procuring 
officials of the standard to apply, should questions arise.
    It is notable that no commenters proposed alternative standard test 
methods. Because use of a standard test method is essential for 
successful program implementation, USDA considers the projected costs 
and testing periods associated with the ASTM International Radioisotope 
Standard Method to be reasonable. Additionally, given the benefits that 
could be expected to accrue to a manufacturer or vendor as a result of 
a product being eligible for the procurement preference, it would 
appear that a $250 to $500 investment for testing would be viewed as a 
worthwhile business investment.
    In response to comments regarding the expense and time required for 
biobased content, BEES, and performance testing of specific products 
(the latter addressed in more detail below), USDA revised the final 
rule to provide alternatives to BEES, simplified the provision 
addressing biobased content test data for products that are essentially 
the same formulation and extended this concept to environmental and 
health effects and life cycle cost test data and in part to performance 
test data. Final Rule Sec. Sec.  2902.7(d) and 2902.8(a) clarify that 
biobased content and BEES or the other ASTM biobased product standards 
test data need not be brand-name specific for products that are 
essentially the same formulation. Regarding performance test data, 
Final Rule Sec.  2902.8(b) leaves to the discretion of the procuring 
official whether such test data must be brand-name specific. The 
different standard for performance test data recognizes that even minor 
changes to a formulation may impact critical performance 
characteristics, and thus the sufficiency of test data for a product 
that is essentially the same formulation must be determined on a case-
by-case basis by the procuring official. Proposed Rule Sec.  
2902.11(d)(2) had presented this concept in a more confusing manner and 
as limited to biobased content testing.
    Several commenters suggested that USDA should accept manufacturers' 
self-certification as to biobased content levels, and that the ASTM 
International Radioisotope Standard Method should be required only if a 
product's biobased content level was challenged by an agency, 
competitor, or consumer. To support the idea of self-certification, two 
of these commenters noted that RCRA regulations (40 CFR part 247) do 
not require affirmative tests to determine if wastes meet the toxicity 
characteristics of hazardous waste.
    Under Proposed Rule Sec.  2902.10(a) (Final Rule Sec.  2902.6(a), 
Sec.  2902.7(a), and

[[Page 1800]]

Sec.  2902.8) manufacturers and vendors are expected to provide 
relevant information to Federal agencies, upon request, with respect to 
product characteristics. This requirement is essentially the same as 
the self-certification described by the commenters. The same paragraph 
goes on to provide that manufacturers and vendors must be able to 
verify the biobased content in their products, and that the ASTM 
International Radioisotope Standard Method must be used to determine 
the level of biobased content in the product. Because biobased content 
is a key element in the statutory and regulatory framework, procuring 
officials, when necessary, must be able to request verification of 
biobased product content of products offered under specific 
procurements. Statutory requirements of this program differ from those 
of the program noted by the commenters. To reaffirm this position, USDA 
revised Final Rule Sec.  2902.7(a) to state that ``Upon request, 
manufacturers and vendors must provide'' such verification information 
in lieu of the text in Proposed Rule Sec.  2902.11(b) that ``Federal 
agencies and USDA may request''. USDA encourages Federal agencies to 
request such verification only when necessary.
    Several commenters were concerned about the method itself. Some 
noted that the Radioisotope Standard Method had not yet been approved 
by ASTM, and stated that only consensus standards should be used. Other 
commenters stated that the test is new and untried and the results may 
not reflect actual biobased content. Two of these commenters stated 
that the \14\C/\12\C ratio measurement must be used with considerable 
caution, if at all; if it is required, USDA must allow for test error 
in setting the minimum content for a product.
    The Radioisotope Standard Method is now an ASTM consensus standard 
(ASTM D 6866), thus USDA is confident that it has moved beyond the 
``new and untried'' stage. USDA added the ASTM number in the text of 
Final Rule Sec.  2902.7(c). With respect to the potential for test 
errors, this ASTM method, like any other test, should produce results 
that are repeatable, and thus could be verified in the event that a 
manufacturer or vendor disagreed with the level of biobased content 
indicated in the test results.
    As proposed, paragraph (b) of Sec.  2902.10 (Final Rule 2902.8(a)) 
would require manufacturers and vendors to use the BEES analytical tool 
to provide information on life cycle costs and environmental and health 
benefits to Federal agencies, when asked.
    Some commenters stated that the regulations should provide for the 
use of other appropriate analytical tools for generating life cycle 
costs information in addition to BEES, including life cycle costs 
assessments conducted by product manufacturers or their contractors. 
Three of these commenters appeared to be basing this suggestion on the 
existence of other analytical methodologies, with two suggesting 
ISO14040 and the third suggesting that the EPA Environmental Technology 
Verification (ETV) Program could be used in place of, or as a 
supplement to, BEES. Two other commenters suggested that additional 
tools should be available because, while BEES may be appropriate for 
some categories and items, it may not be the best alternative for all 
of them, with one commenter pointing to the differences between 
traditionally produced biobased products and those produced using 
biotechnology. One of those commenters stated that while quantitative 
methods are needed to support environmental attributes, producers 
should have the flexibility to choose the most appropriate tools, as 
long as they are scientifically based; recognized by standards 
organizations, such as ISO or ASTM; and include peer review to ensure 
accuracy. In a similar vein, one commenter suggested that manufacturers 
should be able to substantiate claims related to biobased product 
content and environmental performance themselves using ISO-compliant 
methodologies, with the BEES life cycle model then being applied to 
determine life cycle costs.
    USDA, in response to public comments, has concluded that 
alternative methods may be used to verify environmental and health 
effects and life cycle costs. Manufacturers and vendors must provide 
the necessary information by using either (a) the BEES analytical tool 
along with the qualifications of the independent testing entity that 
performed the tests, or (b) either a third-party or an in-house 
conducted analysis using ASTM D7075, the standard for evaluating and 
reporting on environmental performance of biobased products, including 
life cycle assessment and cost analysis for biobased products. Both 
BEES and the ASTM standard are in accordance with ISO standards, are 
focused on testing of biobased products, and will provide the life 
cycle assessment and life cycle cost information Federal agencies might 
require. USDA believes the above noted tests are particularly well 
suited for the needs of this program.
    Several commenters objected entirely to the required use of BEES. 
The reasons given were: (1) BEES may require the release of 
confidential trade secret information; (2) BEES testing will be an 
undue burden on producers, especially small producers, which may 
eliminate some operations from participation in the program; and (3) 
other Federal programs, such as RCRA, do not require such testing. One 
commenter stated that manufacturers should be allowed to use BEES if 
they believed it would be useful to their own marketing efforts, but 
that BEES should not be required generally.
    In response to these concerns, USDA offers the following: (1) The 
security of confidential trade secret information will be an issue 
between the manufacturer or vendor and the laboratory performing the 
BEES analysis. USDA expects that the contractual agreement between the 
two involved parties would address the issue of business information 
security. (2) In accordance with the procedures outlined in Final Rule 
Sec.  2902.9, USDA will provide some funding for BEES, ASTM 
environmental testing, and performance testing of individual products 
with biobased content, with priority being given to products of small 
and emerging private business enterprises. (3) In designating items, 
section 9002 requires USDA to consider the economic and technological 
feasibility of using the items, including life cycle costs. Such life 
cycle costs can be ascertained through the use of the BEES analytical 
tool and the ASTM environmental testing standard.
    Several commenters objected to the required use of BEES for 
biobased products--a requirement termed a burden by some--when there 
was no similar requirement for competing non-biobased products. These 
commenters questioned the usefulness of BEES-generated life cycle and 
other information in the absence of comparable information related to 
competing products, with one commenter stating the goal of such testing 
should be to compare biobased products with petroleum-based products. 
Another commenter suggested that some of the testing funds that would 
be available should be used to test established, competing products. A 
third commenter stated USDA should eliminate the use of BEES analyses 
unless competing non-biobased products are required to have BEES 
analyses. Finally, one commenter recognized that BEES would result in a 
level playing field for biobased products, but stated that biobased 
product manufacturers and vendors should not be required to provide 
more

[[Page 1801]]

data than other manufacturers and vendors offering products for sale to 
Federal agencies.
    USDA agrees that it would be quite useful to be able to make a 
point-by-point comparison, using the same standards of measure, between 
a biobased and a non-biobased product prior to making a procurement 
decision. However, under section 9002, USDA has neither the authority 
to require nor the funding for the testing of non-biobased products. 
Even absent comparable data for non-biobased products, USDA thinks that 
BEES test data, or test data from the ASTM standard for evaluating and 
reporting on environmental performance of biobased products and the 
ASTM standard for life cycle cost analysis, for biobased products will 
have utility for the procuring officials in making procurement 
decisions. Test data from these two alternative sources will facilitate 
procuring official consideration of non-price factors, such as life 
cycle costs, in making procurement decisions. To that end, the final 
rule retains the requirement that manufacturers and vendors provide 
such information upon request. However, USDA encourages Federal 
agencies to request verification only when necessary.
    Regarding the comment advocating allowing manufacturers and vendors 
to perform environmental attribute tests in-house, USDA is requiring in 
Final Rule Sec.  2902.8(a) only that, when requested to provide 
environmental and health effects and life cycle test data, 
manufacturers and vendors use a third-party BEES analysis or either a 
third-party or in-house analysis using the ASTM standard for evaluating 
and reporting on environmental performance of biobased products. 
Several commenters questioned the need for manufacturers to have BEES 
testing conducted at the product or item level. Most of these 
commenters stated that BEES should not be required for each product, 
with some suggesting that one generic product should be allowed to 
serve as a standard bearer for a group of products and others 
suggesting that qualifications should be done by product formulations 
within a category.
    As described in the proposed rule, USDA will compile information on 
the economic and technological feasibility, including life cycle costs, 
of biobased items from industry. Once this information is available on 
a sufficient number of such products within an item, the information 
will be evaluated and extrapolated to the generic item level for use in 
meeting the requirements of section 9002 that such information be 
considered in designating an item for preferred procurement. USDA added 
a new paragraph to that effect in Final Rule Sec.  2902.5(b) in order 
to clarify this concept in the guidelines. Additionally, as discussed 
above, in the case of products that are essentially the same 
formulation, but marketed under different brand names, the manufacturer 
or vendor could apply test data from one product to other such 
products.
    Other commenters stated that USDA itself should use BEES to provide 
generic information at the item level, perhaps using the testing 
funding discussed in Final Rule Sec.  2902.9. Another commenter was 
concerned that the designation of items will be delayed due to the 
reluctance of manufacturers to pay the costs associated with a BEES 
analysis only to have other manufacturers use the resulting information 
for their own products, getting, in essence, a ``free ride.''
    USDA is already using BEES testing to provide generic information 
at the item level, and is funding BEES testing for those products that 
it has identified as representing the best opportunity to designate 
items expeditiously. USDA does not think the ``free ride'' issue 
brought up by one commenter necessarily would discourage a manufacturer 
from proceeding with BEES testing or any other efforts that might be 
required under the program as long as that particular manufacturer had 
concluded that the benefits of program participation outweighed the 
costs.
    As proposed, Sec.  2902.10(c) (Final Rule Sec.  2902.8(b)) would 
require that, in assessing performance of qualifying biobased products, 
Federal agencies rely on results of performance tests using applicable 
ASTM, ISO, Federal or military specifications, or other similarly 
authoritative industry test standards. Such testing must be conducted 
by a third party ASTM/ISO compliant test facility.
    With respect to performance testing, one commenter cautioned that 
USDA needs to recognize the difference between performance 
specifications and product specifications. For example, motor oil has a 
Society of Automotive Engineers (SAE) standard, which is a product 
specification, not a performance specification. Thus, saying that a 
biobased motor oil should meet the SAE standard may not be applicable 
unless that standard was based on performance testing.
    USDA is aware of that distinction and will work with manufacturers 
and testing facilities to ensure that the appropriate criteria are 
applied with respect to performance testing.
    Another commenter was concerned that trying to determine whether a 
company's product meets the performance standards could add 
unacceptable lead-time to procurements, if the company is not required 
to have the necessary testing completed prior to its submission of an 
offer.
    USDA expects that the program Web site will be the primary 
interface between procuring agencies and the manufacturers/vendors of 
biobased products; the latter will be expected to provide sufficient 
information regarding their products--including performance data--when 
they post their products on the website. This comment also relates to 
the implementation of the procurement aspects of this program regarding 
which USDA defers to OFPP.
    Several commenters objected to the third-party performance testing 
requirements. One of those commenters stated that such testing was not 
required by section 9002. Several other commenters suggested that 
third-party testing should not be a general requirement, with 
manufacturers being required only to offer their own evidence and proof 
that their products meet or exceed Federal agency requirements. One 
commenter stated that third-party testing should be required only for 
critical applications (e.g., required for specialized lubricants, but 
not for landscaping material). Several other commenters suggested that 
testing should be required only in the event of a challenge to a 
manufacturer's claims.
    While section 9002 may not specifically require testing, the 
statute requires USDA to provide such information to agencies. In this 
final rule, USDA has retained the requirement for manufacturers and 
vendors to use test results obtained from testing against industry 
accepted performance standards (e.g., ASTM, ISO, Military 
Specifications, etc.) for their product. While performance testing is 
not required for program participation, the final rule requires that 
manufacturers and vendors provide this information to Federal agencies 
when requested. USDA encourages Federal agencies to request such 
information only when necessary. USDA revised Final Rule Sec.  
2902.8(b) to require that ``Results from performance tests completed 
must be available to Federal agencies upon their request, along with 
the qualifications of the testing laboratory.'' USDA encourages third-
party testing to support the integrity of this program.

[[Page 1802]]

Characteristics Required for Obtaining Designated Item Status (Proposed 
Rule Sec.  2902.11; Final Rule Sec.  2902.5 and Sec.  2902.7)

    As proposed, paragraph (a) of Sec.  2902.11 would require that all 
qualifying items under the program have at least five percent of their 
total manufactured value (measured after manufacture at the location of 
manufacture) made up of biobased product(s). Proposed paragraph (b) 
(Final Rule Sec.  2902.7(b)) went on to explain that the minimum 
biobased content requirements for specific items, once designated, 
refer to the biobased portion of the product, and not the entire item. 
The specific product requirements would be in addition to the five 
percent total manufactured value requirement in proposed paragraph (a).
    Several commenters addressed the proposed ``five percent of total 
manufactured value'' provision. Some of those commenters requested that 
USDA clarify the standard, stating that readers may confuse five 
percent total manufactured value with five percent biobased content. 
Other commenters asked how the standard would be applied to components 
versus completed end products. One commenter asked why USDA would 
require two certifications from manufacturers and vendors--i.e., a 
self-certification with respect to the five percent of total 
manufactured value and a third-party certification with respect to the 
biobased content of a specific product--when the latter alone should 
suffice. Finally, one commenter stated that manufacturers and vendors 
do not understand the need for the five percent manufactured value 
test, noting that section 9002 did not require such a test and that the 
value will be difficult to determine.
    USDA has reviewed the proposed ``five percent of total manufactured 
value'' provision and, after considering the comments received on the 
subject, has decided to remove that provision from the guidelines in 
this final rule. USDA retained in Final Rule Sec.  2902.7(b) the 
explanation that minimum biobased content requirements refer to the 
biobased portion of a product, and not the entire product. However, in 
light of the removal of the ``five percent of total manufactured 
value'' provision and the revised definition of ``biobased content'' 
(discussed above), USDA revised Final Rule Sec.  2902.7(b) to add the 
phrase ``Unless specified otherwise in the designation of a particular 
item,'' in order to preserve USDA flexibility should application of the 
minimum biobased content requirements to only the biobased portion of a 
product be inappropriate or insufficient for a particular item 
contemplated for designation. The proposed rule to designate an item 
will address biobased content and provide an opportunity for public 
comment.
    Proposed paragraph (c) of Sec.  2902.11 (Final Rule Sec.  
2902.8(a)) deals with verifying the biobased content of products by 
third party ASTM/ISO compliant test facilities using the ASTM 
International Radioisotope Standard Method. The comments received 
regarding the ASTM standard are discussed previously above. Similarly, 
the comments received regarding proposed paragraph (d) (Final Rule 
Sec.  2902.7(c) and (d)), which deals with determining biobased content 
of products, are addressed above in the discussion regarding the 
definition.
    Under proposed paragraph (e) of Sec.  2902.11 (Final Rule Sec.  
2902.5(c)(2)), products having mature markets would be excluded from 
the program. For purposes of this program, a product would be 
considered to have a mature market if it fell within any of the 
following groups:

--Silk, cotton and wool garments, household items, and industrial or 
commercial products unless made with a substantial amount of biobased 
plastic product.
--Wood products made from traditionally-harvested forest materials.
--Products having significant national market penetration prior to 
1972.

    USDA received comments both for and against the exclusion of 
products having mature markets. The commenters who supported the 
exclusion agreed that the intent of section 9002 was to aid the 
development of new and emerging markets, and not to focus on already 
mature traditional markets or articles that are inherently biobased. 
While the commenters who opposed the exclusion did not dispute that the 
focus should be on developing markets, they argued that such a goal 
should not necessarily mean that products having more established 
markets should be excluded from the program. To these commenters, the 
goal of section 9002 was to increase overall demand for biobased 
products, which leaves room for the inclusion of proven, existing 
technology in the program. In this vein, some commenters objected to 
the exclusion of wood and other products from the guidelines, stating 
that such exclusions fail to consider the overall societal benefits 
resulting from the use of biobased materials over petrochemical-based 
materials. With respect to the exclusion of products having significant 
national market penetration prior to 1972, one commenter stated that 
the age of a product is not necessarily an indicator of its market 
maturity, that the 1972 cutoff is arbitrary and possibly contrary to 
the goals of section 9002, and that the guidelines should offer a 
greater degree of flexibility.
    The intent of section 9002, as described in the conference report 
accompanying FSRIA, ``is to stimulate the production of new biobased 
products and to energize emerging markets for those products.'' Given 
that, USDA finds that it is entirely appropriate for the guidelines to 
exclude products having mature markets from the program. However, after 
considering the comments received on the subject, USDA has amended the 
guidelines in this final rule by removing the proposed exclusions for 
``silk, cotton, and wool garments, household items, and industrial or 
commercial products unless made with a substantial amount of biobased 
plastic product'' (Proposed Rule Sec.  2902.11(e)(1)) and ``wood 
products made from traditionally-harvested forest materials'' (Proposed 
Rule Sec.  2902.11(e)(2)). The exclusion of certain wood products was 
considered unnecessary in light of the definition of ``Forestry 
materials'' in Final Rule Sec.  2902.2 as ``materials derived from the 
practice of planting and caring for forests and the management of 
growing timber. Such materials must come from short rotation woody 
crops (less than 10 years old), sustainably managed forests, wood 
residues, or forest thinnings.''
    Further, USDA considered the likelihood that there are biobased 
products that have come full circle, i.e., products that were in 
widespread use at some point prior to 1972 but then supplanted by 
petroleum-based products. To account for this, USDA has changed the 
``significant national market penetration'' criterion from ``prior to 
1972'' to ``in 1972.'' As explained in the proposed rule, the oil 
supply and price shocks that began in this country around 1972 provided 
the impetus for sustained serious new development of biobased 
alternatives to fossil-based energy and other products; in addition to 
that new development, there also was a return to existing, perhaps 
neglected or underutilized, biobased products. USDA thinks that using 
1972 as a point in time standard, rather than a dividing line between 
two eras, can provide for the designation of some items that would 
otherwise be excluded.

[[Page 1803]]

Items and Minimum Biobased Content (Proposed Rule Sec.  2902.12; Final 
Rule 2902.5(a) and Subpart B)

    As discussed in the proposed rule, Sec.  2902.12 will contain a 
list of items that are designated for procurement preference, as these 
items are designated by rule making, and will provide the minimum 
biobased content for each listed item. Although USDA did not propose to 
designate any specific items in the proposed rule, USDA did present a 
number of items in the preamble of the proposed rule that it identified 
as illustrative of the items it intends to propose for designation for 
preferred procurement after USDA has sufficient information on 
availability of the items and the economic and technological 
feasibility of using such items, including life cycle costs.
    One commenter noted that there was no time line provided in the 
proposed rule for the future designation of products and asked that 
USDA, in the final rule, provide a prioritized ``wish list'' ranking 
product types in order of strategic importance to the United States and 
the likelihood of their acceptance under the program assuming they meet 
requirements of competitiveness in cost, availability, and performance.
    As noted above and in the proposed rule, USDA will be unable to 
propose specific items for designation until it has sufficient 
information on availability of the items and the economic and 
technological feasibility of using such items, including life cycle 
costs. Without such information, USDA cannot speculate as to the 
likelihood of the designation of any item under the program. Further, 
given that the program is still in its infancy, it would be premature 
to assign any ``strategic importance'' to specific items or classes of 
items. The rationale and process for the designation of each item will 
be detailed in the proposed rule to designate that item, and will be 
open to public comment. USDA notes, however, that it have already has 
begun the preliminary work necessary to initiate rulemaking to 
designate several items and hopes to have that rulemaking concluded 
before the end of the year.
    In the proposed rule, USDA specifically solicited comments on the 
categories and items it presented, as well as on the reasonableness of 
the suggested biobased content percentages. USDA received numerous 
comments in response to that request, along with many suggestions for 
additional items, categories, and subcategories. USDA appreciates the 
many detailed suggestions and insights offered by the commenters 
regarding items and biobased content percentages, the standards and 
specifications that should be taken into account when designating 
particular items, and other technical considerations related to those 
items; USDA will fully consider that information as we move forward 
with the process of designating items. Because no items are designated 
in this final rule, USDA will not address any of the specific, item-
oriented comments that it received. However, USDA also received a 
number of more general comments regarding item designations and 
biobased content; those comments are discussed below.
    In the proposed rule, USDA presented the items contemplated for 
future designation as being grouped according to category, with each 
category consisting of one or more items; each item consists of 
specific products offered by manufacturers and vendors. That is, an 
item is made up of individual products and a category consists of 
items. One commenter objected to this manner of arranging products, 
claiming that Congress intended ``item'' to refer to an actual product 
purchased, not to a generic grouping of products as USDA has used the 
word. This same commenter pointed out that ASTM's ``Standard Guide for 
the Determination of Biobased Content, Resource Consumption, and 
Environmental Profile of Materials and Products'' (ASTM D 6852) 
proposed a classification scheme/decision tree for biobased materials 
and products and suggested that USDA adopt that or a similar approach 
for developing its classification framework. The commenter recommended 
that, to refer to the generic grouping, USDA should use the terms 
``biobased product group'' and ``biobased material group,'' which would 
accommodate what appears to be USDA's intention to designate both end 
products and the materials used to produce end products.
    USDA does not think that there is any conflict between the statute 
and the proposed guidelines with respect to the use of the term 
``item.'' While the statutory phrase, ``the quantity of such items or 
of functionally equivalent items,'' could be read as to equate ``item'' 
as the guidelines use ``product,'' USDA finds that the end result of 
either approach would be the same, i.e., the designation process will 
result in specific products being identified for procurement 
preference. For the sake of clarity, USDA has amended the definition of 
``designated item'' in this final rule by replacing the word 
``category'' with ``generic grouping.'' As amended, the definition 
reads: ``A generic grouping of products identified in Subpart B that is 
eligible for the procurement preference established under section 9002 
of FSRIA.'' For example, hydraulic fluid for stationary uses could 
constitute an item. Company ABC's branded hydraulic fluid could 
constitute a product.
    Several commenters voiced other concerns regarding the items, 
categories, and minimum content levels presented in the preamble of the 
proposed rule. As noted in the proposed rule, the items and the 
indicated biobased content of items contained within the categories 
were based on a study conducted in 2002 for the USDA Agricultural 
Research Service by Concurrent Technologies Corporation (CTC).
    Some commenters pointed to the age of the CTC study and stated it 
must be updated before it can be used as the basis for describing 
categories. These commenters stated that the study does not reflect the 
current availability of items and that the categories in the study were 
inconsistent with the categories in the proposed rule. One commenter 
suggested that USDA should convene a group of industry representatives 
and government purchasing agents to develop a list of categories and 
items that will be clear both to product manufacturers and purchasing 
agents. Several other commenters were concerned that neither the CTC 
study nor the information presented by USDA in the proposed rule 
offered any technical basis or justification for the minimum content 
levels that were offered. Without a well-documented, transparent, and 
strong technical basis for setting minimum biobased content levels, the 
proposed minimum content levels appear arbitrary.
    The minimum content levels in the CTC study were based on data 
provided by industry, academic, and government experts. In the proposed 
rule, USDA did not propose to designate any items; rather, the 
presentation of the categories, items, and minimum biobased content 
levels was intended to stimulate the submission of comments in those 
areas. As USDA will designate items using notice-and-comment rulemaking 
procedures, items will not be designated without (1) an explanation of 
the rationale for designation of an item and its proposed attributes, 
including minimum content levels, and (2) an opportunity for public 
comment upon the proposed designation and supporting information.
    One commenter suggested that a standard other than minimum content 
be used to qualify products under the rule. Specifically, this 
commenter suggested that USDA use a ``total

[[Page 1804]]

biobased content impact equation'' that would more adequately take into 
account: (1) The functionality of the biobased component of a product 
(i.e., is the biobased component key to the functionality or an add-
on?); (2) the impact of use of the product on the consumption of 
petroleum stocks from the perspective of product composition; and (3) 
the impact on rural economies through the utilization of domestic 
agricultural inputs.
    As a practical matter, USDA thinks that biobased content should be 
a primary consideration, given that section 9002 requires agencies to 
give procurement preference to items composed of the highest percentage 
of biobased products practicable. However, the statute requires USDA 
take into account product availability, technological and economic 
feasibility, including life cycle costs, in designating items. USDA is 
also required to provide information for Federal agencies use on 
availability, price, performance, and environmental and public health 
benefits.
    Another commenter stated that USDA should not set minimum biobased 
content levels, which can have undesirable ``floor and ceiling'' 
effects (i.e., the merits of products with content below the minimum 
level would not be considered, and manufacturers would have little 
incentive to exceed the minimum level). Instead, USDA should simply 
require that the manufacturer post the biobased content level on the 
product.
    Section 9002 provides that USDA will, where appropriate, recommend 
the level of biobased material to be contained in the procured product. 
The process of designating items would take into account the concerns 
of the commenter by ensuring that issues such as biobased content vs. 
performance are addressed in an open, transparent fashion.
    One commenter stated that, in the interest of reconciling the 
minimum content levels presented in the proposed rule with the BMA's 
self-certification system already in place, USDA should adopt just four 
minimum standards (15, 36, 66, or 86 percent) to be applied as 
appropriate. This approach would reconcile the USDA minimums to BMA 
minimums with only minor adjustments in most cases to the USDA minimums 
presented in the proposed rule and allow for the use of the four 
content ratings already established by BMA and used by manufacturers 
(i.e., BMA-25 for products ranging from 15 to 35 percent biobased 
content, BMA-50 for the 36 to 65 percent range, BMA-75 for the 66 to 85 
percent range, and BMA-100 for products that are 86 percent biobased or 
better).
    While the idea of adopting an existing industry classification 
system is appealing, USDA is bound to consider the charge in section 
9002 that each Federal agency which procures any items designated in 
such guidelines shall, in making procurement decisions, give preference 
to such items composed of the highest percentage of biobased products 
practicable. With that in mind, using only four content ratings would 
mean that agencies would be unable to capture the distinction between, 
for example, a BMA-50 rated product with 36 percent biobased content 
and one with 65 percent biobased content.
    One commenter recommended that one product alone should be 
sufficient to establish an ``item,'' citing the infancy of the biobased 
industry and the likelihood that, at least initially, only a single 
product may be available that meets the necessary performance and other 
requirements of a particular application.
    Given that the intent of section 9002 is largely to stimulate the 
production of new biobased products and to energize emerging markets 
for those products, USDA agrees with the commenter that the 
identification of even a single biobased product could serve to trigger 
the designation of an item.
    One commenter suggested that the final rule should include a 
reasonable deadline for USDA to give manufacturers or vendors a 
decision on whether a product that a manufacturer or vendor has 
submitted to USDA for item designation has ``survived the filtering 
process,'' i.e., whether a particular product may be eligible or 
appropriate for designation. The commenter suggested a time frame not 
to exceed 30 days from the date of submission.
    These guidelines do not establish a formal process for manufacturer 
or vendor initiation of designation of items. While USDA welcomes 
manufacturer or vendor suggestions, USDA has no formal process or 
deadlines to respond to such suggestions. USDA added the last sentence 
in Final Rule Sec.  2902.5(a) to clarify this point. USDA will post on 
its Web site, http://www.biobased.oce.usda.gov, a pro forma list of 
possible items for designation. In developing this list, USDA will 
consider a number of factors, including, but not limited to, the cost 
competitiveness of an item, whether performance of the products within 
an item meet Federal requirements, availability of products within an 
item, interest by manufacturers in the preferred procurement program, 
and potential Federal demand for the product. USDA will be gathering 
information on a range of specific products that fall under an item to 
determine the certain characteristics of that item, to meet the 
statutory requirements that USDA consider availability of items and the 
economic and technological feasibility of using such items, including 
life cycle costs, when considering the designation of a given item. In 
this process, USDA will be seeking both that information and indication 
of interest in providing the information from manufacturers and 
vendors. To the extent that the commenter is asking USDA whether a 
specific product falls under a specific designated item, there is no 
filtering process. Where manufacturers and vendors believe their 
products fall under a designated item, they are free to assert coverage 
under the preferred procurement program when marketing the products to 
Federal agencies.
    Two commenters urged USDA to designate only final products, not the 
components of those products. Both pointed out that Federal agencies 
purchase finished products, and suggested that designating the 
components of products would be confusing to purchasers and make it 
more difficult for them to ``buy biobased.''
    Section 9002 states that, in its guidelines, USDA shall designate 
those items which are or can be produced with biobased products and 
whose procurement by procuring agencies will carry out the objectives 
of the statute. With that in mind, USDA agrees that the items 
designated should correlate to the degree possible with the products 
routinely purchased by Federal agencies.
    One commenter urged USDA to, at least initially, focus its energies 
on designating items that are composed primarily of biobased material, 
rather than items that may have components that may have biobased 
content.
    As noted earlier in this document, the first few years of the 
program will focus on identifying and testing those items that can be 
designated in the most expeditious manner possible. It is likely that 
those items will be indeed largely of the type described by the 
commenter.
    On the subject of biobased components, one commenter cautioned 
against designating items that incorporate biobased feedstocks into 
non-degradable, non-durable applications. Such items, the commenter 
stated, would break the closed loop cycle that can be achieved by 
composting, necessitate the separation of such items from other

[[Page 1805]]

compostable materials such as food scraps, and create competition 
between such items and those items that are both biobased and 
biodegradable, which will only confuse the end users and harm the 
growth of the overall biobased sector.
    USDA acknowledges the validity of the considerations raised by the 
commenter. In the course of designating items in the future, such 
considerations would play a role when compostability is a factor in the 
economic and technological feasibility of using such items.
    Several commenters asked for clarification regarding the minimum 
content standard. One commenter stated that there were inconsistencies 
in the minimum content levels offered in the proposed rule, noting that 
a biobased polymer could qualify for preference when used as the sole 
component of an item in the plastics category, but not if it was used 
to produce synthetic fibers used in clothing or carpet. Another 
commenter used a similar example to frame the question: A minimum 
biobased content level is set for a durable film; is that content level 
for the durable film itself, or for the finished product that 
incorporates the durable film? Yet, another commenter further stated 
that USDA must make clear what products with biobased components 
qualify for preferred procurement.
    The minimum content levels will apply to designated items. If the 
durable film in the one commenter's example is the designated item, 
then the minimum content level will apply to the durable film. If a 
finished product that incorporates that durable film is a designated 
item, then that product must meet the minimum content level for the 
item under which that product falls. Through subsequent proposed and 
final rules, USDA will designate items; qualifying products that fall 
under those designated items will qualify for preferred procurement.
    One commenter suggested that only products having a minimum of 65 
to 70 percent biobased content be eligible to be designated for 
preferred procurement under the program. Other commenters also sought 
to maximize biobased content in designated items, with one commenter 
stating that products with the highest biobased content--everything 
else being equal--must be preferred over products with lower biobased 
content, and the other urging USDA to eliminate all language in its 
rules on this program that undermine the ``highest percentage of 
biobased products practicable'' directive from Congress.
    While the 65 to 70 percent minimum recommended by the one commenter 
would certainly ensure a high level of biobased content in designated 
items, such a high level of biobased content is not realistically 
obtainable for many items, which means that entire classes of articles 
with lower content levels would be excluded from the program. USDA 
fully agrees with the goals expressed by the other commenters, and does 
not think that the guidelines contain any provisions that would 
undermine section 9002's requirement to give preference to products 
with the highest percentage of biobased products practicable.
    One commenter suggested that rather than determining biobased 
content on an item-by-item basis, USDA should focus on determining the 
biobased content of ingredients; with that information, the total 
biobased content of a product could simply be determined by adding the 
content of its ingredients. This commenter stated that the ASTM 
International Radioisotope Standard Method could be used to determine 
biobased content of ingredients, and a database of results could be 
maintained and used to determine quickly whether a product would 
qualify for designation.
    Section 9002 focuses on the biobased content of the product itself. 
Section 9002(e) requires USDA to set forth recommended practices with 
respect to certification by vendors of the percentage of biobased 
products used and, where appropriate, recommend the level of biobased 
material to be contained in the procured product. Given those 
requirements, as a policy matter USDA has decided that the process of 
setting minimum content standards on an item-by-item basis described in 
the proposed rule and these final guidelines is necessary and 
practical.
    One commenter stated that rather than developing a finite list of 
biobased products for preferred procurement, USDA should: (1) Develop 
standard formulas for calculating biobased content; (2) develop a 
biobased content label for ease of product comparison (somewhat like 
the USDA organic labeling system); and (3) publish regularly updated 
product bulletins reporting the latest in biobased product 
availability.
    Section 9002 requires, among other things, that USDA: (1) Designate 
items that are or can be produced with biobased products; (2) provide 
information as to the availability, relative price, performance, and 
environmental and public health benefits of those items; and (3) in 
making designations, consider the availability of such items. Taken 
together, these requirements demand the development of a list; to the 
extent that such a list would be a ``living document'' subject to 
updates as often as appropriate, it would serve the same function as 
the regular bulletins suggested by the commenter. USDA's electronic 
information system will include information on designated items and 
will post information voluntarily submitted by manufacturers or vendors 
on the products they intend to offer for preferred procurement under 
each item designated.
    Looking beyond the initial setting of minimum biobased content 
levels and designation of items, three commenters addressed the subject 
of subsequent adjustments to established minimum content levels. Two of 
those comments simply pointed out the need for USDA to create a 
mechanism to adjust minimum content levels for items to reflect the 
development of new technologies and product refinements over time, 
perhaps by seating a standing review committee of experts from the 
manufacturing, academic, public interest, government, and consumer 
sectors. The third commenter suggested that adjustments to minimum 
biobased content levels should be made no more often than once every 
five years. This would be sufficient time to allow products with higher 
biobased content to be developed while providing an adequate ``useful 
life'' for products meeting existing standards. Without a five-year 
assurance, producers may be reluctant to invest in products for fear 
that they may become stranded when new levels are set.
    USDA currently does not anticipate the need to make the sorts of 
adjustments described by the commenters. Minimum content levels will be 
set as items are designated, and agencies will be provided with 
information on, among other things, the biobased content of specific 
products within the designated items. Section 9002 requires that 
agencies purchasing designated items give preference to those products 
that have the highest percentage of biobased products practicable. If 
competitive factors lead vendors to increase the biobased content of 
their products, those increases would not necessarily invalidate the 
minimum content levels expressed in the guidelines.
    Three commenters addressed the relationship between minimum 
biobased content levels and product performance. One commenter simply 
stated that USDA must take into account a product's end use, and the 
performance necessary to function properly in that use, when setting

[[Page 1806]]

minimum biobased content. The other two commenters suggested that, in 
general, minimum percentages should be set at the lower end of a range 
in order for biobased products to meet necessary performance standards 
and be cost competitive. Still other commenters, most often referring 
to specific items or generic groupings of items, urged USDA to apply or 
reference the existing standards used by manufacturers (for example, 
the American Petroleum Institute (API) and SAE standards for 
lubricants) when preparing performance, content, and other 
specifications during the designation process.
    USDA expects that evidence of performance will be a very important 
factor in Federal agencies' decisions to procure an item, and that in 
most cases biobased items can be manufactured with a blend of 
components that enable them to meet required performance standards. It 
is in the best interests of the program for minimum biobased content to 
be set at levels that will realistically allow products to possess the 
necessary performance attributes and allow them to compete with fossil 
energy based products in performance and economics. The goal of section 
9002 is to promote the use of biobased products to the extent possible, 
and that goal would not be served by requirements for unrealistically 
high biobased content levels. In many cases, especially for users of 
high performance items in Federal agencies, formal evidence of 
performance may be required, and these guidelines encourage agencies to 
request this information from manufacturers or vendors of designated 
items, focusing on performance against ASTM, ISO, Federal or military 
specifications, or other industry performance standards.
    One commenter asked if energy is produced from biomass using the 
gasification/steam reforming process, would that energy, if offered for 
sale to Federal agencies, qualify for procurement preference under the 
proposed program? While the commenter did not specify, it appears that 
the energy he is referring to is electricity. As provided by paragraph 
(i) of section 9002, these guidelines do not apply to the procurement 
of electricity.
    One commenter noted that, under EPA's regulations in 40 CFR part 
279, generators of used oil are not required to determine whether their 
oil displays any hazardous waste characteristics; however, under Sec.  
279.1 of those regulations, ``used oil'' is limited only to those spent 
oils that have been refined from crude or synthetic oils. Thus, oils 
derived from vegetable or animal sources are specifically excluded from 
used oil regulation, which means that generators of used bio-oils will 
be required to determine if those oils display any hazardous waste 
characteristics (which could have been acquired by the bio-oil during 
its usage). The commenter urged USDA to work with EPA in developing a 
workable and environmentally sound strategy for managing spent bio-oils 
before any items in this category are designated, arguing that any 
benefits that might be gained through conserving petroleum resources 
could be undermined by the more stringent hazardous waste management 
standards that would have to be met by users of bio-oils.
    USDA agrees that it is important that these sorts of issues be 
addressed in order to prevent the unintended consequences highlighted 
by the commenter from complicating efforts to attain the goals of 
section 9002. However, this final rule is not the appropriate place to 
address the commenter's point. In an effort to address this concern, 
USDA will, therefore, initiate a dialog with our counterparts at EPA 
before designating bio-oils that could, after use, potentially be 
considered hazardous waste.
    One commenter expressed broad and far-reaching concerns regarding 
the program and the proposed rule, mainly with respect to its potential 
negative impact on the procurement of non-biobased products in general 
and non-biobased plastics in particular. This commenter brought up a 
variety of issues on the subject, including: (1) The veracity of claims 
relating to the compostability/biodegradability of biobased materials, 
especially in light of the lack of municipal solid waste composting in 
the United States; (2) the potential for such claims to mislead buyers 
and the public into assuming that biobased materials are always 
environmentally preferable to non-biobased materials, especially when 
there appears to be little in the guidelines in the way of 
substantiating claims of compostability/biodegradability; (3) the 
potential for the proposed ``U.S.D.A. Certified Biobased Product'' 
label to further reinforce those mistaken consumer perceptions; (4) the 
potential for the program as a whole to lead consumers to neglect the 
broader benefits of non-biobased products; and (5) the failure of the 
proposed rule's economic analysis to address adequately the potential 
economic impact of the program's displacement of non-biobased products 
in the marketplace.
    In designating items, USDA will consider the item's compostability 
and biodegradability to the extent that these factors are relevant to 
the economic and technological feasibility of the item, including life 
cycle costs. As discussed below, USDA has yet to prepare eligibility 
criteria and guidelines for the use of the ``U.S.D.A. Certified 
Biobased Product'' label. Finally, in the proposed rule's discussion of 
the Regulatory Flexibility Act, USDA acknowledged that the program may 
decrease opportunities for small businesses that manufacture or sell 
non-biobased products or provide components for the manufacturing of 
such products. However, USDA cannot address the potential economic 
effects of designating an item--positive or negative--on affected 
entities until it is prepared to propose that item for designation and 
has conducted the analyses needed to support the proposal.

Comments on Planned Labeling Program and Other Issues

    In the preamble of the proposed rule, USDA discussed the provisions 
of section 9002 that direct USDA, in consultation with the 
Administrator of the EPA, to establish a voluntary program authorizing 
producers of biobased products to use a ``U.S.D.A. Certified Biobased 
Product'' label. USDA indicated that in a subsequent rulemaking it 
would establish that voluntary program and provide eligibility criteria 
and guidelines for the use of the ``U.S.D.A. Certified Biobased 
Product'' label.
    Two commenters urged USDA to move forward as quickly as possible 
with the labeling aspect of the biobased program. Two other commenters, 
however, urged caution. These commenters raised several specific 
concerns about the potential impact the label could have on market and 
consumer perceptions--e.g., an assumption that a labeled product is 
automatically ``better'' or ``more environmentally friendly'' than an 
unlabeled product--and argued that a simple label cannot adequately 
communicate necessary information about life cycle results, 
performance, and environmental health benefits. Without qualifying the 
claims or disclosing the relevant information, one commenter claimed, 
misinterpretation of the label by consumers and government purchasers 
is virtually assured. Another commenter stated that any products that 
have been subjected to a BEES analysis should be automatically eligible 
to use the ``U.S.D.A. Certified Biobased'' label without further 
analysis or rulemaking.
    Section 9002 provides that USDA, in consultation with the 
Administrator of

[[Page 1807]]

the EPA, will issue criteria for determining which products may qualify 
to receive the label. The statute intends that those criteria will 
encourage the purchase of products with the maximum biobased content, 
and should, to the maximum extent possible, be consistent with the 
guidelines in this final rule. In the proposed rule, in order to signal 
USDA thinking on the subject, USDA described its view of the potential 
parameters of the labeling program. Those parameters were not 
definitive; indeed, numerous other considerations such as those 
described by the commenters will be considered as USDA drafts the 
criteria for determining which products may qualify to receive the 
label. Once drafted, the specific criteria that USDA develops in 
consultation with EPA will be presented in a proposed rule; the public 
will have a meaningful opportunity to comment upon the scope and 
adequacy of the criteria, and comments received will be considered 
before the criteria become final.
    One commenter noted that the FAR will require revision in order for 
agencies to fully implement the new biobased content product purchasing 
program and encouraged USDA to coordinate with Federal agencies in 
preparing the draft changes to the FAR. As previously discussed, the 
FAR will be revised to implement the procurement aspects of the 
program.
    One commenter stated that USDA should recognize agencies' past 
green purchasing efforts by recommending that agencies revise their 
existing plans to incorporate a biobased purchasing preference rather 
than creating a separate program solely for purchasing biobased 
products. This comment is outside the scope of this rulemaking. It 
relates to the implementation of the procurement aspects of this 
program, which will be accomplished through revisions to the FAR.
    Several commenters addressed the relationship between the proposed 
biobased program and existing ``green'' and other purchasing 
initiatives already underway within the Federal Government or the 
private sector. These commenters stressed the need for coordination 
between the USDA program and others such as EPA's RCRA programs, the 
Department of Energy's (DOE's) Energy Star program, the consensus 
standards of the Green Seal organization, and the U.S. Green Building 
Council's Leadership in Energy and Environmental Design (LEED) system 
for sustainable building construction. To illustrate this point, one 
commenter noted that EPA is considering the designation of recycled-
content roofing materials under RCRA, DOE has made recommendations for 
energy efficient and Energy Star roofing materials, and USDA could 
consider the designation of biobased-content roofing materials. This 
commenter suggested that USDA should coordinate its designation of 
products with EPA and DOE, with the goal of seamlessly integrating the 
purchasing of biobased products into the existing green purchasing 
infrastructure.
    Section 9002 requires specific actions on the parts of USDA, OFPP, 
and individual agencies. Similarly, EPA and DOE are charged with 
specific mandates with respect to RCRA and Energy Star. In some 
respects, the language of the enabling statutes that gave rise to these 
and similar programs may limit the extent to which the implementing 
agencies can coordinate these programs. USDA, to the extent 
practicable, will strive to coordinate the biobased preference program 
with existing green purchasing programs.
    One commenter suggested that all compost materials, and perhaps 
other products in the landscaping products category, should be added to 
the JWOD Procurement List as ``mandatory buy'' items in order to 
streamline product introduction and reduce procurement costs. (JWOD 
refers to the Javits-Wagner-O'Day Program, a Federal employment and job 
training program for people who are blind and/or have severe 
disabilities.)
    Under the JWOD Act, it is the Committee for Purchase from People 
Who Are Blind or Severely Disabled that is responsible for determining 
which commodities and services procured by the Federal Government are 
suitable to be furnished by qualified nonprofit agencies employing 
persons who are blind or have other severe disabilities. Thus it is the 
committee, and not USDA, that would add such items to the JWOD 
Procurement List.
    Therefore, for the reasons given in the proposed rule and in this 
document, USDA adopts the proposed rule as a final rule, with the 
changes discussed in this document.

V. Regulatory Information

A. Executive Order 12866, Regulatory Planning and Review

    It is estimated this final rule will not adversely affect or have 
an annual effect of $100 million or more on the economy. The actual 
designation of items under this program through future rulemaking 
actions are what will have an effect on the economy. The extent of the 
impact necessarily can be determined only at the time of those future 
rulemaking actions and will be addressed at that time. This rule does 
not designate any items. Each time an item is proposed for designation, 
USDA will evaluate the economic effect of that designation.
    Furthermore, this rule will not create a serious inconsistency or 
otherwise interfere with prior or intended actions of another agency, 
will not materially alter the budgetary impact of grants or similar 
programs or the rights of recipients thereof, and does not raise novel 
legal or policy issues. For the above reasons, this rule has been 
determined to be not significant for purposes of Executive Order 12866 
and, therefore, has not been reviewed by the Office of Management and 
Budget (OMB).

B. Regulatory Flexibility Act

    When an agency issues a final rule following a proposed rule, the 
Regulatory Flexibility Act (RFA, 5 U.S.C. 601-612) requires the agency 
to prepare a final regulatory flexibility analysis. 5 U.S.C. 604. 
However, the requirement for a final regulatory flexibility analysis 
does not apply if the head of the agency certifies that the rule will 
not, if promulgated, have a significant economic impact on a 
substantial number of small entities. 5 U.S.C. 605(b).
    Although this program ultimately may have a direct impact on a 
substantial number of small entities, USDA has determined that this 
rule itself will not have a direct significant economic impact on a 
substantial number of small entities. This rule will affect directly 
primarily Federal agencies. Private sector manufacturers and vendors of 
biobased products voluntarily may provide information to USDA through 
the means set forth in this rule. However, the rule imposes no 
requirement on manufacturers and vendors to do so, and does not 
differentiate between manufacturers and vendors based on size. USDA 
does not know how many small manufacturers and vendors may opt to 
participate at this stage of the program.
    As explained above, when USDA issues a proposed rulemaking to 
designate items for preferred procurement under this program, USDA will 
assess the anticipated impact of such designations, including the 
impact on small entities. USDA anticipates that this program will 
impact small entities which manufacture or sell biobased products. For 
example, once items are designated, this program will provide 
additional opportunities for small businesses to manufacture and sell

[[Page 1808]]

biobased products to Federal agencies. This program also will impact 
indirectly small entities that supply biobased materials to 
manufacturers. Additionally, this program may decrease opportunities 
for small businesses that manufacture or sell non-biobased products or 
provide components for the manufacturing of such products. Again, USDA 
cannot assess these anticipated impacts on small entities until USDA 
proposes items for designation. This rule does not designate any items.
    The rule will directly impact small entities by implementing a 
cost-sharing program which gives first consideration to proposals for 
products of ``small and emerging business enterprises.'' Submission of 
a proposal is voluntary and not limited to small entities. The direct 
impact would be beneficial for those entities whose products are 
selected for cost sharing. Because of the limited amount of funds 
available for cost sharing, the ceilings on cost sharing, and the 
anticipated breadth of any competition (not limited to a particular 
manufacturing sector and open to other than small entities), USDA does 
not anticipate that this cost-sharing competition will have a 
significant economic impact on a substantial number of small entities.
    Accordingly, USDA hereby certifies that this rule will not have a 
significant economic impact on a substantial number of small entities.

C. Executive Order 12630

    This rule has been reviewed in accordance with Executive Order 
12630, Governmental Actions and Interference with Constitutionally 
Protected Property Rights, and does not contain policies that would 
have implications for these rights.

D. Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, Civil Justice Reform. This rule does not preempt State or local 
laws, is not intended to have retroactive effect, and does not involve 
administrative appeals.

E. Executive Order 13132

    This rule does not have sufficient federalism implications to 
warrant the preparation of a Federalism Assessment. Provisions of this 
rule will not have a substantial direct effect on States or their 
political subdivisions or on the distribution of power and 
responsibilities among the various government levels.

F. Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA), 2 U.S.C. 1531-1538, for State, local, and tribal governments, 
or the private sector. Therefore, a statement under Section 202 of UMRA 
is not required.

G. Executive Order 12372

    For the reasons set forth in the Final Rule Related Notice for 7 
CFR part 3015, subpart V (48 FR 29115, June 24, 1983), this program is 
excluded from the scope of the Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. This 
program does not directly affect State and local governments.

H. Executive Order 13175

    The policies contained in this rulemaking do not have tribal 
implications and thus no further action is required under Executive 
Order 13175.

I. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 through 3520), USDA published notice of the proposed information 
collection with the proposed rule on December 19, 2003 (68 FR 70730). 
During the course of program implementation, USDA realized that it 
overestimated the overall average burden per respondent in that notice 
and underestimated the number of respondents during the first three 
years of item designation under the program. Therefore, USDA is 
republishing herein a revised proposed information collection notice. 
Comments addressing the revised proposed information collection should 
be submitted to the Office of Information and Regulatory Affairs of 
OMB, Attention: Desk Officer for Agriculture, Margaret Malanoski, 725 
17th Street, NW., Room 10202, Washington, DC 20503. Comments should be 
submitted within 30 days of the date of publication of this notice. In 
the interim, USDA has received through emergency processing short-term 
information collection approval by OMB under OMB control number 0503-
0011. The short-term information collection approval will expire on 
March 31, 2005.
    Title: Guidelines for Designating Biobased Products for Preferred 
Procurement.
    Abstract: The USDA Federal Biobased Products Preferred Procurement 
Program (FB4P) provides that qualifying biobased products that fall 
under items (generic groupings of biobased products) that have been 
designated for preferred procurement by rule making are required to be 
purchased by Federal agencies, with certain limited exceptions. USDA is 
required by section 9002 to gather certain information on items before 
it can designate them by rule making. Further, USDA also is required by 
section 9002 to provide certain information on qualified biobased 
products to Federal agencies. To meet those statutory requirements, 
USDA will use a number of forms to gather that information from 
manufacturers and vendors of biobased products. To the extent feasible, 
the information sought by USDA can be transmitted electronically using 
the Web site http://www.biobased.oce.usda.gov. If electronic 
transmission of information is not practical, USDA will provide 
technical assistance to support the transmission of information to 
USDA. The information collected will enable USDA to meet statutory 
information requirements that then permit USDA to designate items for 
preferred procurement under FB4P. Once items are designated, 
manufacturers and vendors of qualifying biobased products that fall 
under these designated items will benefit from preferred procurement by 
Federal agencies.
    USDA currently has identified 83 potential items for designation 
and estimates there may be on average 30 separate products per item. 
Designation of items will begin after publication of this final rule 
for the FB4P. While it is expected that additional items will be 
identified over time as the biobased products industry develops and 
matures, it is not expected that there will be a rapid increase in the 
number of items beyond the number identified thus far. Because of 
fiscal year (FY) 2005 appropriations to support this program, USDA 
intends to place special emphasis on designating by rule making as many 
of the 83 identified items as possible during the next three fiscal 
years. USDA hopes to designate by rule making between 40 and 50 items 
during FY 2005. The balance of the currently identified items are 
expected to be designated by rule making during FY 2006 and FY 2007.
    For designating items, USDA estimates collecting information from 
an average of five manufacturers per item proposed for designation. 
USDA estimates that each manufacturer will expend 80 hours per response 
to the information collection.
    Once an item is designated, OEPNU will invite manufacturers and 
vendors of biobased products that fall under that item to post product 
and contact information about their qualifying

[[Page 1809]]

biobased products on the USDA Web site http://www.biobased.oce.usda.gov. This Web site will be a major source of 
product information for Federal agencies seeking to purchase biobased 
products. Information requested will include identification of products 
offered for preferred procurement within a designated item, contact 
information for the manufacturer or vendor, and demographic information 
about the manufacturer or vendor that will assist Federal agencies in 
reporting on the performance of the preferred procurement program. 
Additional information will be sought regarding availability; relative 
prices of the products; performance of the products; and environmental 
and public health benefits. This information may be included on the Web 
site or a hotlink may be established to manufacturers' or vendors' web 
sites to access the information. The information sought for this 
voluntary Web site is envisioned to be non-proprietary.
    USDA estimates that it will require 4 hours per product of 
manufacturers' or vendors' time to post this information, and that 
there will be an average of 30 products per item eligible to be posted. 
Many items will have fewer than 30 products in the marketplace, 
however. Thus, for example, 30 products each from 50 items would create 
a burden of 6,000 hours of manufacturers' time in FY 2005. Thus, the 
total manufacturers' time burden for FY 2005, if 50 items are 
designated by rule making, would be 26,000 hours.
    Beyond FY 2007, new item designations would slow dramatically and 
be premised on development of new biobased products that did not fit 
into already designated items.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 14.9 hours per response.
    Respondents: Manufacturers and vendors of biobased products.
    Estimated Number of Respondents: 2,905.
    Estimated Number of Responses Per Respondent: One per manufacturer 
or vendor.
    Estimated Total Annual Burden on Respondents: 14,387 hours one time 
only. Manufacturers and vendors are asked to respond only once per 
product. Thereafter, there is no ongoing annual paperwork burden on 
respondents.
    USDA invites written comments on: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; (b) the accuracy of the agency's estimate of 
the burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; (c) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (d) ways to minimize the burden of the collection of the 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology.
    After receipt of notification of OMB action on this request for 
information collection approval, USDA will publish a notice in the 
Federal Register to inform the public of OMB's decision.

J. Government Paperwork Elimination Act Compliance

    OEPNU is committed to compliance with the Government Paperwork 
Elimination Act (GPEA) (44 U.S.C. 3504 note), which requires Government 
agencies in general to provide the public the option of submitting 
information or transacting business electronically to the maximum 
extent possible. For information pertinent to GPEA compliance related 
to this rule, please contact Marvin Duncan at (202) 401-0532.

K. Small Business Regulatory Enforcement Fairness Act

    This rule is not a major rule under 5 U.S.C. 804(2), the Small 
Business Regulatory Enforcement Fairness Act. This rule will not have 
an annual effect on the economy of $100 million or more; will not cause 
a major increase in costs or prices for consumers, individual 
industries, Federal, State, or local government agencies, or geographic 
regions; and does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises.

List of Subjects in 7 CFR Part 2902

    Biobased products, Procurement.


0
For the reasons stated in the preamble, the Department of Agriculture 
is amending 7 CFR chapter XXIX as follows:

CHAPTER XXIX--OFFICE OF ENERGY POLICY AND NEW USES, DEPARTMENT OF 
AGRICULTURE

0
1. The chapter heading of chapter XXIX is revised to read as set forth 
above.
0
2. A new part 2902 is added to chapter XXIX to read as follows:

PART 2902--GUIDELINES FOR DESIGNATING BIOBASED PRODUCTS FOR FEDERAL 
PROCUREMENT

Subpart A--General
Sec.
2902.1 Purpose and scope.
2902.2 Definitions.
2902.3 Applicability to Federal procurements.
2902.4 Procurement programs.
2902.5 Item designation.
2902.6 Providing product information to Federal agencies.
2902.7 Determining biobased content.
2902.8 Determining life cycle costs, environmental and health 
benefits, and performance.
2902.9 Funding for testing.
Subpart B--Designated Items [Reserved]

    Authority: 7 U.S.C. 8102.

Subpart A--General


Sec.  2902.1  Purpose and scope.

    (a) Purpose. The purpose of the guidelines in this part is to 
assist Federal agencies in complying with the requirements of section 
9002 of the Farm Security and Rural Investment Act of 2002 (FSRIA), 
Public Law 107-171, 116 Stat. 476 (7 U.S.C. 8102), as they apply to the 
procurement of the items designated in subpart B of this part.
    (b) Scope. The guidelines in this part designate items that are or 
can be produced with biobased products and whose procurement by Federal 
agencies will carry out the objectives of section 9002 of FSRIA.


Sec.  2902.2  Definitions.

    These definitions apply to this part:
    Agricultural materials. Agricultural-based, including plant, 
animal, and marine materials, raw materials or residues used in the 
manufacture of commercial or industrial, nonfood/nonfeed products.
    ASTM International. ASTM International, a nonprofit organization 
organized in 1898, is one of the largest voluntary standards 
development organizations in the world with about 30,000 members in 
over 100 different countries. ASTM provides a forum for the development 
and publication of voluntary consensus standards for materials, 
products, systems, and services.
    BEES. An acronym for ``Building for Environmental and Economic 
Sustainability,'' an analytic tool used to determine the environmental 
and health benefits and life cycle costs of items, developed by the 
U.S. Department of Commerce National Institute of Standards and 
Technology, with support from the U.S. Environmental Protection Agency, 
Office of Pollution

[[Page 1810]]

Prevention and Toxics (BEES 3.0, Building for Environmental and 
Economic Sustainability Technical Manual and User Guide, NISTIR 6916, 
National Institute of Standards and Technology, U.S. Department of 
Commerce, October 2002). Also, see http://www.bfrl.nist.gov/oae/software/bees_USDA.html for a discussion of how biobased feedstocks 
are addressed in the BEES Analysis.
    Biobased components. Any intermediary biobased materials or parts 
that, in combination with other components, are functional parts of the 
biobased product.
    Biobased content. Biobased content shall be determined based on the 
amount of biobased carbon in the material or product as a percent of 
weight (mass) of the total organic carbon in the material or product.
    Biobased product. A product determined by USDA to be a commercial 
or industrial product (other than food or feed) that is composed, in 
whole or in significant part, of biological products or renewable 
domestic agricultural materials (including plant, animal, and marine 
materials) or forestry materials.
    Biological products. Products derived from living materials other 
than agricultural or forestry materials.
    Designated item. A generic grouping of biobased products identified 
in subpart B that is eligible for the procurement preference 
established under section 9002 of FSRIA.
    Diluent. A substance used to diminish the strength, scent, or other 
basic property of a substance.
    Engineered wood products. Products produced with a combination of 
wood, food fibers and adhesives.
    Federal agency. Any executive agency or independent establishment 
in the legislative or judicial branch of the Government (except the 
Senate, the House of Representatives, the Architect of the Capitol, and 
any activities under the Architect's direction).
    Filler. A substance added to a product to increase the bulk, 
weight, viscosity, strength, or other property.
    Forest thinnings. Refers to woody materials removed from a dense 
forest, primarily to improve growth, enhance forest health, or recover 
potential mortality. (To recover potential mortality means to remove 
trees that are going to die in the near future.)
    Forestry materials. Materials derived from the practice of planting 
and caring for forests and the management of growing timber. Such 
materials must come from short rotation woody crops (less than 10 years 
old), sustainably managed forests, wood residues, or forest thinnings.
    Formulated product. A product that is prepared or mixed with other 
ingredients, according to a specified formula and includes more than 
one ingredient.
    FSRIA. The Farm Security and Rural Investment Act of 2002, Public 
Law 107-171, 116 Stat. 134 (7 U.S.C. 8102).
    Ingredient. A component; part of a compound or mixture; may be 
active or inactive.
    ISO. The International Organization for Standardization, a network 
of national standards institutes from 145 countries working in 
partnership with international organizations, governments, industries, 
business, and consumer representatives.
    Neat product. A product that is made of only one ingredient and is 
not diluted or mixed with other substances.
    Relative price. The price of a product as compared to the price of 
other products on the market that have similar performance 
characteristics.
    Residues. That which remains after a part is taken, separated, 
removed, or designated; a remnant; a remainder; and, for this purpose, 
is from agricultural materials, biological products, or forestry 
materials.
    Secretary. The Secretary of the United States Department of 
Agriculture.
    Small and emerging private business enterprise. Any private 
business which will employ 50 or fewer new employees and has less than 
$1 million in projected annual gross revenues.
    Sustainably managed forests. Refers to the practice of a land 
stewardship ethic that integrates the reforestation, management, 
growing, nurturing, and harvesting of trees for useful products while 
conserving soil and improving air and water quality, wildlife, fish 
habitat, and aesthetics.


Sec.  2902.3  Applicability to Federal procurements.

    (a) Applicability to procurement actions. The guidelines in this 
part apply to all procurement actions by Federal agencies involving 
items designated by USDA in this part, where the Federal agency 
purchases $10,000 or more worth of one of these items during the course 
of a fiscal year, or where the quantity of such items or of 
functionally equivalent items purchased during the preceding fiscal 
year was $10,000 or more. The $10,000 threshold applies to Federal 
agencies as a whole rather than to agency subgroups such as regional 
offices or subagencies of a larger Federal department or agency.
    (b) Exception for procurements subject to EPA regulations under the 
Solid Waste Disposal Act. For any procurement by any Federal agency 
that is subject to regulations of the Administrator of the 
Environmental Protection Agency under section 6002 of the Solid Waste 
Disposal Act as amended by the Resource Conservation and Recovery Act 
of 1976 (40 CFR part 247), these guidelines do not apply to the extent 
that the requirements of this part are inconsistent with such 
regulations.
    (c) Procuring items composed of highest percentage of biobased 
products. FSRIA section 9002(c)(1) requires Federal agencies to procure 
designated items composed of the highest percentage of biobased 
products practicable, consistent with maintaining a satisfactory level 
of competition, considering these guidelines. Federal agencies may 
decide not to procure such items if they are not reasonably priced or 
readily available or do not meet specified or reasonable performance 
standards.


Sec.  2902.4  Procurement programs.

    (a) Integration into the Federal procurement framework. The Office 
of Federal Procurement Policy, in cooperation with USDA, has the 
responsibility to coordinate this policy's implementation in the 
Federal procurement regulations. These guidelines are not intended to 
address full implementation of these requirements into the Federal 
procurement framework. This will be accomplished through revisions to 
the Federal Acquisition Regulation.
    (b) Federal agency preferred procurement programs. (1) On or before 
January 11, 2006, each Federal agency shall develop a procurement 
program which will assure that items composed of biobased products will 
be purchased to the maximum extent practicable and which is consistent 
with applicable provisions of Federal procurement laws. Each 
procurement program shall contain:
    (i) A preference program for purchasing designated items,
    (ii) A promotion program to promote the preference program; and
    (iii) Provisions for the annual review and monitoring of the 
effectiveness of the procurement program.
    (2) In developing the preference program, Federal agencies shall 
adopt one of the following options, or a substantially equivalent 
alternative, as part of the procurement program:
    (i) A policy of awarding contracts to the vendor offering a 
designated item composed of the highest percentage of biobased product 
practicable except when such items:

[[Page 1811]]

    (A) Are not available within a reasonable time;
    (B) Fail to meet performance standards set forth in the applicable 
specifications, or the reasonable performance standards of the Federal 
agency; or
    (C) Are available only at an unreasonable price.
    (ii) A policy of setting minimum biobased products content 
specifications in such a way as to assure that the biobased products 
content required is consistent with section 9002 of FSRIA and the 
requirements of the guidelines in this part except when such items:
    (A) Are not available within a reasonable time;
    (B) Fail to meet performance standards for the use to which they 
will be put, or the reasonable performance standards of the Federal 
agency; or
    (C) Are available only at an unreasonable price.
    (c) Procurement specifications. After the publication date of each 
designated item, Federal agencies that have the responsibility for 
drafting or reviewing specifications for items procured by Federal 
agencies shall ensure within a specified time frame that their 
specifications require the use of designated items composed of biobased 
products, consistent with the guidelines in this part. USDA will 
specify the allowable time frame in each designation rule. The biobased 
content of a designated item may vary considerably from product to 
product based on the mix of ingredients used in its manufacture. In 
procuring designated items, the percentage of biobased product content 
should be maximized, consistent with achieving the desired performance 
for the product.


Sec.  2902.5  Item designation.

    (a) Procedure. Designated items are listed in subpart B. In 
designating items, USDA will designate items composed of generic 
groupings of specific products and will identify the minimum biobased 
content for each listed item. As items are designated for procurement 
preference, they will be added to subpart B. Items are generic 
groupings of specific products. Products are specific products offered 
for sale by a manufacturer or vendor. Although manufacturers and 
vendors may submit recommendations to USDA for future item designations 
at any time, USDA does not have a formal process for such submissions 
or for responding to such submissions.
    (b) Considerations. In designating items, USDA will consider the 
availability of such items and the economic and technological 
feasibility of using such items, including life cycle costs. USDA will 
gather information on individual products within an item and 
extrapolate that product information to the item level for 
consideration in designating items. In considering these factors, USDA 
will use life cycle cost information only from tests using the BEES 
analytical method.
    (c) Exclusions. (1) Motor vehicle fuels and electricity are 
excluded by statute from this program.
    (2) USDA additionally will not designate items for preferred 
procurement that are determined to have mature markets. USDA will 
determine mature market status by whether the item had significant 
national market penetration in 1972.


Sec.  2902.6  Providing product information to Federal agencies.

    (a) Informational Web site. An informational USDA Web site 
implementing section 9002 can be found at: http://www.biobased.oce.usda.gov. USDA will maintain a voluntary Web-based 
information site for manufacturers and vendors of designated items 
produced with biobased products and Federal agencies to exchange 
product information. This Web site will provide information as to the 
availability, relative price, biobased content, performance and 
environmental and public health benefits of the designated items. USDA 
encourages manufacturers and vendors to provide product, business 
contacts, and product information for designated items. Instructions 
for posting information are found on the Web site itself. USDA also 
encourages Federal agencies to utilize this Web site to obtain current 
information on designated items, contact information on manufacturers 
and vendors, and access to information on product characteristics 
relevant to procurement decisions. In addition to any information 
provided on the Web site, manufacturers and vendors are expected to 
provide relevant information to Federal agencies, upon request, with 
respect to product characteristics, including verification of such 
characteristics if requested.
    (b) Advertising, labeling and marketing claims. Manufacturers and 
vendors are reminded that their advertising, labeling, and other 
marketing claims, including claims regarding health and environmental 
benefits of the product, must conform to the Federal Trade Commission 
Guides for the Use of Environmental Marketing Claims, 16 CFR part 260.


Sec.  2902.7  Determining biobased content.

    (a) Certification requirements. For any product offered for 
preferred procurement, manufacturers and vendors must certify that the 
product meets the biobased content requirements for the designated item 
within which the product falls. Paragraph (c) of this section addresses 
how to determine biobased content. Upon request, manufacturers and 
vendors must provide USDA and Federal agencies information to verify 
biobased content for products certified to qualify for preferred 
procurement.
    (b) Minimum biobased content. Unless specified otherwise in the 
designation of a particular item, the minimum biobased content 
requirements in a specific item designation refer to the biobased 
portion of the product, and not the entire product.
    (c) Determining biobased content. Verification of biobased content 
must be based on third party ASTM/ISO compliant test facility testing 
using the ASTM International Radioisotope Standard Method D 6866. ASTM 
International Radioisotope Standard Method D 6866 determines biobased 
content based on the amount of biobased carbon in the material or 
product as percent of the weight (mass) of the total organic carbon in 
the material or product.
    (d) Products with the same formulation. In the case of products 
that are essentially the same formulation, but marketed under a variety 
of brand names, biobased content test data need not be brand-name 
specific.


Sec.  2902.8  Determining life cycle costs, environmental and health 
benefits, and performance.

    (a) Providing information on life cycle costs and environmental and 
health benefits. When requested by Federal agencies, manufacturers and 
vendors must provide information on life cycle costs and environmental 
and health benefits based on tests using either of two analytical 
approaches: The BEES analytical tool along with the qualifications of 
the independent testing entity that performed the tests; or either a 
third-party or an in-house conducted analysis using the ASTM standard 
for evaluating and reporting on environmental performance of biobased 
products D7075. Both BEES and the ASTM standard are in accordance with 
ISO standards, are focused on testing of biobased products, and will 
provide the life cycle assessment and life cycle cost information 
Federal agencies might require. As with biobased content, test

[[Page 1812]]

data using the above analytical methods need not be brand-name 
specific.
    (b) Performance test information. In assessing performance of 
qualifying biobased products, USDA requires that Federal agencies rely 
on results of performance tests using applicable ASTM, ISO, Federal or 
military specifications, or other similarly authoritative industry test 
standards. Such testing must be conducted by an ASTM/ISO compliant 
laboratory. The procuring official will decide whether performance data 
must be brand-name specific in the case of products that are 
essentially of the same formulation.


Sec.  2902.9  Funding for testing.

    (a) USDA use of funds for biobased content and BEES testing. USDA 
will use funds to support testing for biobased content and conduct of 
BEES testing for products within items USDA has selected to designate 
for preferred procurement through early regulatory action. USDA 
initially will focus on gathering the necessary test information on a 
sufficient number of products within an item (generic grouping of 
products) to support regulations to be promulgated to designate an item 
or items for preferred procurement under this program. USDA may accept 
cost sharing for such testing to the extent consistent with USDA 
product testing decisions. During this period USDA will not consider 
cost sharing in deciding what products to test. When USDA has concluded 
that a critical mass of items have been designated, USDA will exercise 
its discretion, in accordance with the competitive procedures outlined 
in paragraph (b) of this section, to allocate a portion of the 
available USDA testing funds to give priority to testing of products 
for which private sector firms provide cost sharing for the testing.
    (b) Competitive program for cost sharing for determining life cycle 
costs, environmental and health benefits, and performance. (1) Subject 
to the availability of funds and paragraph (a) of this section, USDA 
will announce annually the solicitation of proposals for cost sharing 
for life cycle costs, environmental and health benefits, and 
performance testing of biobased products in accordance with the 
standards set forth in Sec.  2902.8 to carry out this program. 
Information regarding the submission of proposals for cost sharing also 
will be posted on the USDA informational Web site, http://www.biobased.oce.usda.gov.
    (2) Proposals will be evaluated and assigned a priority rating. 
Priority ratings will be based on the following criteria:
    (i) A maximum of 25 points will be awarded a proposal based on the 
market readiness;
    (ii) A maximum of 20 points will be awarded a proposal based on the 
potential size of the market for that product in Federal agencies;
    (iii) A maximum of 25 points will be awarded based on the financial 
need for assistance of the manufacturer or vendor;
    (iv) A maximum of 20 points will be awarded a proposal based on the 
product's prospective competitiveness in the market place;
    (v) A maximum of 10 points will be awarded a proposal based on its 
likely benefit to the environment.
    (3) Cost-sharing proposals will be considered first for high 
priority products of small and emerging private business enterprises. 
If funds remain to support further testing, USDA will consider cost 
sharing proposals for products of all other producers of biobased items 
as well as the remaining proposals for products of small and emerging 
private business enterprises. Proposals will be selected based on 
priority rating until available funds for the fiscal year are 
committed.
    (4)(i) For products selected for life cycle costs and environmental 
and health benefits testing under this paragraph, USDA could provide up 
to 50 percent of the cost of determining the life cycle costs and 
environmental and health effects, up to a maximum of $5,000 of 
assistance per product.
    (ii) For products selected for performance testing under this 
paragraph, USDA could provide up to 50 percent of the cost for 
performance testing, up to $100,000 of assistance per product for up to 
two performance tests (measures of performance) per product.
    (5) For selected proposals, USDA will enter into agreements with 
and provide the funds directly to the testing entities.
    (6) Proposals submitted in one fiscal year, but not selected for 
cost sharing of testing in that year, may be resubmitted to be 
considered for cost sharing in the following year.

Subpart B--Designated Items [Reserved]

    Dated: January 3, 2005.
Keith Collins,
Chief Economist, Department of Agriculture.
[FR Doc. 05-399 Filed 1-10-05; 8:45 am]
BILLING CODE 3410-GL-P