[Federal Register Volume 70, Number 241 (Friday, December 16, 2005)]
[Proposed Rules]
[Pages 74717-74721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-7460]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1496

RIN 0560-AH39


Procurement of Commodities for Foreign Donation

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would adopt new procedures to be used by 
the Commodity Credit Corporation (CCC) in the evaluation of bids in 
connection with the procurement of commodities for donation overseas. 
In general, CCC proposes to amend the existing regulations to provide 
for the simultaneous review of commodity and ocean freight offers when 
evaluating lowest-landed cost options in connection with the 
procurement of commodities. This proposed rule would enhance bidding 
opportunities for potential vendors while allowing CCC to more 
efficiently acquire commodities.

DATES: Comments on this proposed rule must be received on or before 
January 17, 2006 in order to be assured consideration. Comments on the 
information collections in this proposed rule must be received by 
February 14, 2006 in order to be assured consideration.

ADDRESSES: CCC invites interested persons to submit comments on this 
proposed rule and on the collection of information. Comments may be

[[Page 74718]]

submitted by any of the following methods:
     E-Mail: Send comments to [email protected].
     Fax: Submit comments by facsimile transmission to: (202) 
690-2221.
     Mail: Send comments to: Director, Commodity Procurement 
Policy & Analysis Division, Farm Service Agency, United States 
Department of Agriculture (USDA), Rm. 5755-S, 1400 Independence Avenue, 
SW., Washington, DC 20250-0512.
     Hand Delivery or Courier: Deliver comments to the above 
address.
     Federal Rulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Comments on the information collection requirements of this rule 
must also be sent to the addresses listed in the Paperwork Reduction 
Act section of this Notice. Comments may be inspected in the Office of 
the Director, Commodity Procurement Policy & Analysis Division, Rm. 
5755-S, 1400 Independence Avenue, SW., Washington, DC, between 8 a.m. 
and 4:30 p.m., Monday through Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Richard Chavez, phone: (202) 690-0194; 
E-Mail: [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The Kansas City Commodity Office (KCCO), within the Farm Service 
Agency, U.S. Department of Agriculture, procures agricultural 
commodities on behalf of CCC for donation overseas under various food 
aid authorities. These authorities include Title II of the Agricultural 
Trade Development and Assistance Act of 1954 (Pub. L. 480), which is 
administered by the U.S. Agency for International Development (USAID), 
and the Food for Progress and the McGovern-Dole International Food for 
Education and Child Nutrition Programs, which are administered by the 
Foreign Agricultural Service within USDA. Currently, KCCO follows a 
two-step ocean freight bid evaluation process in connection with the 
purchase of commodities for these programs. First, KCCO issues a public 
invitation soliciting bids for the sale of commodities and requests 
that ocean carriers provide indications of available freight rates to 
KCCO. These ``indications'' of rates are not offers to KCCO. In fact, 
KCCO does not contract for ocean transportation for the donated 
commodities. Ocean transportation contracting is done by the 
Cooperating Sponsors (grantee organizations or foreign governments 
receiving the commodities) or by USAID in the case of some Title II, 
P.L. 480 shipments.
    At this point, KCCO evaluates commodity bids together with the 
freight rate indications to identify the combination which would most 
likely result in the lowest-landed cost, i.e., the lowest combined cost 
of commodities and freight to destination. CCC will purchase the 
commodities to be donated overseas on that basis. Lowest-landed cost is 
calculated on the basis of U.S.-flag rates for that quantity of the 
commodities being purchased that is determined necessary and practical 
to meet cargo preference requirements, i.e., the tonnage required to be 
shipped on U.S.-flag vessels. Although KCCO does not contract for 
freight, the freight costs are borne by the U.S. government from the 
same accounts as the commodity costs. Therefore, purchasing on the 
basis of lowest-landed cost will reduce outlays and maximize the use of 
funds.
    KCCO's commodity purchase determines the point at which the 
commodity is delivered to the carriers. However, as stated above, the 
freight rates used for this lowest-landed cost evaluation were not 
firm, fixed offers. Therefore, a second step is currently necessary 
that involves the Cooperating Sponsors or USAID issuing invitations for 
firm freight offers. KCCO will notify the Cooperating Sponsors or USAID 
of the location of the commodity as determined in its commodity bid 
evaluation and the Cooperating Sponsors or USAID will issue ocean 
freight invitations that will lead to actual freight bookings by the 
Cooperating Sponsors or USAID on firm, fixed ocean rates.
    This two-step process has been in place for many years and was 
designed at the time that processed commodities were shipped at ocean 
carrier tariff rates that could be readily identified. Now, as rates 
are ``submitted rates'' and not tied to tariffs the process is 
exceedingly cumbersome and time-consuming, typically requiring 80 man 
hours each month to analyze the first-step indications. Additionally, 
the process does not guarantee that commodities will be actually 
purchased and shipped on the basis of lowest-landed cost. One reason 
for this is that the Maritime Administration, within the Department of 
Transportation, prioritizes U.S.-flag ocean service for purposes of 
cargo preference and assigns a higher priority to service that uses 
only U.S.-flag vessels to the final discharge point. The current two-
step process often results in commodities being purchased at locations 
based upon indications of service available from U.S.-flag carriers 
that have a lower priority. These port locations may not be cost-
effective for the higher priority vessels, which can then ``trump,'' or 
displace, the rate of the lower priority vessels and secure the cargo 
at a substantially higher rate.
    CCC proposes to add clarity to the commodity bid evaluation process 
by eliminating the two-step process. A major constraint to revising 
this two-step process has been that computer resources available to 
KCCO have been unable to analyze the large number of variables that 
comprise modern government commodity procurements and the complexities 
of cargo preference compliance. These include the many contract 
priorities that are mandated by law as well as the shear volume of 
possible commodity and freight cost variables that result from a 
national bidding system. KCCO is now in the process of updating its 
computer bid-evaluation systems that would be able to accommodate a 
more unified one-step bid evaluation. The procurement for commodities 
using firm, fixed ocean rates to determine lowest-landed cost would be 
the most efficient method of procurement. Under such a system, the 
cargo preference requirements would be determined initially and not 
subject to a change of carriers. This should reduce the ocean freight 
costs considerably because the tonnage would be consolidated by the 
carriers' bids and by allowing lowest-landed cost and cargo preference 
requirements to determine the U.S. delivery points. The delivery time 
from call forward issuance to delivery abroad could be reduced because 
the current freight evaluation process would be streamlined.
    The new procedures would apply to processed and bulk commodities 
and cover the assistance programs identified above. Under the proposed 
system, KCCO would issue invitations for commodity bids and Cooperating 
Sponsors or USAID would issue separate invitations for freight offers 
at approximately the same time. Freight invitations may call for bids 
to be submitted to the donee organizations or USAID via an Internet-
based bid entry system maintained by CCC approximately 3 days prior to 
the time for receipt of commodity bids. Such a process would speed data 
input and evaluation as compared to the transmittal of written offers. 
Offers of commodities and freight would be invited on a ``bid-point'' 
basis, i.e., a point where the transfer of care and custody of the 
commodity from the vendor to the ocean carrier takes place. This point 
of transfer may include one or more terminals included under the 
specific bid point designation. CCC

[[Page 74719]]

believes this specificity is desirable because a more general offer 
that designates a port area can have additional transfer costs once a 
specific terminal is named. CCC should be able to identify these extra 
costs at the time the bids are evaluated as it may impact on true 
lowest-landed cost calculations. The submitted freight offers will be 
reviewed by the donee organization, AID, and/or USDA prior to bid 
evaluation in order to determine the availability of service for 
commodities and destinations. Furthermore, this proposed bid evaluation 
process will be more efficient because ocean carriers are expected to 
offer quantity increments that are the most economical for them.
    After commodity offers are received, KCCO would evaluate the offers 
on the basis of lowest-landed cost by a comparison with offered freight 
rates. KCCO would award the commodity bid on that basis and notify the 
Cooperating Sponsor of the bid accepted. The Cooperating Sponsor would 
be required to book freight at the rate KCCO used for the lowest-landed 
cost determination, or a lower rate, except in circumstances where, in 
the opinion of the Contracting Officer and the applicable program 
agency's representative, extenuating circumstances (such as internal 
strife at the foreign destination or urgent humanitarian conditions 
threatening the lives of persons at the foreign destination) preclude 
such awards, or efficiencies and cost-savings lead to the use of 
different types of ocean services such as multi-trip voyage charters, 
indefinite delivery/indefinite quantity (IDIQ), delivery Cost and 
Freight (C & F), delivery Cost Insurance and Freight (C I F), and 
indexed ocean freight costs.

Executive Order 12866

    This proposed rule is issued in conformance with Executive Order 
12866. This rule has been determined to be not significant and, 
therefore, it has not been reviewed by the Office of Management and 
Budget.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because CCC is not required by 5 U.S.C. 553 or 
any other provision of law to publish a notice of proposed rulemaking 
with respect to the subject matter of this rule.

Environmental Evaluation

    The environmental impacts of this rule have been considered 
consistent with the provisions of the National Environmental Policy Act 
of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA, 7 CFR part 799. FSA concluded 
that the rule requires no further environmental review because it is 
categorically excluded. No extraordinary circumstances or other 
unforeseeable factors exist which would require preparation of an 
environmental assessment or environmental impact statement.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this rule preempt State laws to the 
extent such laws are inconsistent with the provisions of this proposed 
rule.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

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) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

Paperwork Reduction Act

    Title: Procurement of Processed Agricultural Commodities for 
Donation.
    OMB Control Number: 0560-NEW.
    Type of Request: New Information Collection Package.
    Abstract: The information collected under OMB Control Number 0560-
NEW is needed in the evaluation of bids in connection with the 
procurement of commodities for donation overseas. This information is 
submitted by steamship lines, or their respective agents, and collected 
by the Kansas City Commodity Office (KCCO). This reporting requirement 
imposed on the public by the regulations at 7 CFR part 1496 is 
necessary to effectively administer the Title II, Pub. L. 480 program. 
This proposed rule will reduce information requirements which are 
imposed on the public by eliminating the need for steamship lines, or 
their respective agents, to provide indications of available freight 
rates to KCCO before submitting a final fixed ocean freight offer. The 
procurement of commodities using firm fixed ocean rates to determine 
the lowest-landed cost would be the most efficient method of 
procurement. The revisions to 7 CFR part 1496 proposed in this rule 
will adopt new procedures to be used by the Commodity Credit 
Corporation (CCC) in the evaluation of bids in connection with the 
procurement of commodities for donation overseas.
    Estimate of Burden:
    Respondents: Steamship Lines an/or their agents.
    Estimated Number of Respondents: Approximately 15.
    Estimated Number of Responses per Respondent: Approximately 8.
    Estimated Total Annual Burden on Respondents: 15 hours.
    Topics for comments include but are limited to the following: (a) 
Whether the collection of information is necessary for the proper 
performance of the functions of the agency, including whether the 
information will have practical utility; (b) the accuracy of the 
agency's estimated burden including the validity of the methodology and 
assumptions used; (c) ways to enhance the quality, utility and clarity 
of the information to be collected; (d) ways to minimize the burden of 
the collection of 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. Comments regarding these issues should be sent to the Desk 
Officer for Agriculture, Office of Information and Regulatory Affairs, 
Office of Management and Budget, Washington, DC 20503 and to the 
Director, Commodity and Procurement Policy & Analysis Division, Farm 
Service Agency, United States Department of Agriculture (USDA), Rm. 
5755-S, 1400 Independence Avenue, SW., Washington, DC 20250-0512.
    Comments regarding paperwork burden will be summarized and included 
in the request for OMB approval. All comments will also become a matter 
of public record.

Government Paperwork Elimination Act

    FSA is committed to compliance with the Government Paperwork 
Elimination Act, which requires Federal Government agencies to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. The KCCO is now in the 
process of updating its computer bid-evaluation systems that would 
accommodate a more unified one step bid evaluation. Freight invitations 
would call for bids to be submitted through a web-based entry system.

[[Page 74720]]

    Most of the information collections required by this rule are fully 
implemented for the public to conduct business with FSA electronically. 
However, a few may be completed and saved on a computer, but must be 
printed, signed and submitted to FSA in paper form.

Executive Order 12612

    This rule does not have sufficient Federalism implications to 
warrant the preparation of a Federalism Assessment. The provisions 
contained in 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 levels of government.

List of Subjects in 7 CFR Part 1496

    Agricultural commodities, Exports, Foreign aid.
    Accordingly, CCC proposes to amend 7 CFR part 1496 as follows:

PART 1496--PROCUREMENT OF PROCESSED AGRICULTURAL COMMODITIES FOR 
DONATION UNDER TITLE II, PUB. L. 480

    1. The authority citation for part 1496 is revised to read as set 
forth above:

    Authority:  7 U.S.C. 1431(b); 1721-1726a; 1731-1736g-2; 1736o; 
1736o-1; 15 U.S.C. 714b and 714c; 46 U.S.C. App. 1241(b), and 
1241(f).

    2. The heading for part 1496 is revised to read as set forth above:

PART 1496--PROCUREMENT OF COMMODITIES FOR FOREIGN DONATION

    3. Section 1496.1 is revised to read as follows:


Sec.  1496.1  General statement.

    This subpart sets forth the policies, procedures and requirements 
governing the procurement of agricultural commodities by CCC to be 
donated for assistance overseas under title II of the Agricultural 
Trade Development and Assistance Act of 1954 (Pub. L. 480); the Food 
for Progress Act of 1985; the McGovern-Dole International Food for 
Education and Child Nutrition Program; and any other program under 
which CCC is authorized to provide agriculture commodities for 
assistance overseas.
    4. In Sec.  1496.2, paragraph (a) is amended by removing the last 
sentence and paragraph (b) is revised to read as follows:


Sec.  1496.2  Administration.

* * * * *
    (b) Purchases are made to fulfill commodity requests received from 
AID in the administration of Public Law 480 and from a grantee 
organization receiving commodities under the other authorities set 
forth in Sec.  1496.1 of this part.
    5. In Sec.  1496.4, the first sentence is revised to read as 
follows:


Sec.  1496.4  Issuance of invitations.

    From time to time, CCC will issue invitations to purchase or 
process agricultural products for utilization in the foreign assistance 
programs enumerated in Sec.  1496.1 of this part. * * *
    6. In Sec.  1496.5, paragraph (b) is revised, paragraph (c) is 
removed and reserved, and paragraph (d) is revised as follows:


Sec.  1496.5  Consideration of bids.

* * * * *
    (b) Availability of ocean service.
    (1) In determining lowest-landed cost as specified in paragraph (a) 
of this section, CCC will use vessel rates offered in response to 
invitations issued by AID or grantee organizations receiving 
commodities under the authorities set forth in section 1496.1 of this 
part. If CCC or AID, in the case of title II, Public Law 480, 
determines that it is not practicable to evaluate lowest-landed cost on 
the basis of a competitive ocean freight bid process, CCC may use other 
methods of soliciting freight rates that CCC or AID may approve for the 
foreign assistance programs that they respectively administer.
    (2) In order to be considered in lowest-landed cost commodity bid 
evaluations, ocean freight rates must be submitted to grantee 
organizations or AID in response to an invitation for bids issued by 
grantee organizations or AID. All such freight invitations for bids 
must:
    (i) Specify a closing time for the receipt of offers and state that 
late offers will not be considered;
    (ii) Provide that offers are required to have a canceling date no 
later than the last contract lay day specified in the invitation for 
bids;
    (iii) Provide the same deadline for receipt of offers from both 
U.S. flag vessel and non-U.S. flag vessels; and
    (iv) Must be received and opened prior to receipt of offers for the 
sale of commodities to CCC. The extent to which offered rates may be 
made public will depend upon regulations or guidelines applicable to 
the specific foreign assistance program involved.
    (3) CCC may require donee organizations or USAID to specify in 
their freight invitations that the ocean carriers submit bids 
electronically through a web based system maintained by CCC. In the 
event of any discrepancy between information furnished to CCC 
electronically and the written offers submitted to grantee 
organizations or AID, the offers submitted to the grantee organization 
or AID will prevail. Copies of all written freight offers received in 
response to invitations for bids must be promptly furnished to CCC and 
CCC may require the grantee organization or it shipping agent to submit 
a written certification that all non-electronic offers received were 
transmitted to CCC.
    (c) [Reserved]
    (d) Port performance.
    (1) CCC may contact any port prior to bid evaluation to determine 
the port's cargo handling capabilities including the adequacy of the 
port to receive, accumulate, handle, store, and protect the cargo. 
Factors which will be considered in this determination will include, 
but not be limited to, the adequacy of building structures, proper 
ventilation, freedom from insects and rodents, cleanliness, and overall 
good housekeeping and warehousing practices. CCC will require that 
capacity information be submitted electronically by the port and or the 
terminal prior to bid evaluation.
    (2) If CCC determines that: A port is congested; facilities are 
overloaded; a vessel would not be able to dock and load cargo without 
delay; labor disputes or lack of labor may prohibit the loading of the 
cargo onboard a vessel in a timely manner; or other similar situation 
exists that may adversely affect the ability of CCC to have the 
commodity delivered in a timely manner, CCC may consider the use of 
another coastal range or port. In considering another combination of 
commodity offers and vessel rate offers, CCC will adhere as closely as 
possible to the principal of lowest-landed cost.
* * * * *
    7. Section 1496.7 is revised to read as follows:


Sec.  1496.7  Final contract determinations.

    (a) Commodity awards. (1) Invitations for the procurement of 
commodities and the evaluation of bids submitted in response to such 
invitations shall be performed as provided in the Federal Acquisition 
Regulations (FAR) and Department of Agriculture's procurement 
regulations set forth in Title 48 of the Code of Federal Regulations 
(the AGAR).
    (2) If more than one bid for the sale of commodities is received 
and more than one delivery point has been designated in such bids, in 
order to achieve a combination of a freight rate and commodity award 
that produces the lowest-landed cost for the delivery of the commodity 
to the foreign

[[Page 74721]]

destination, CCC may evaluate bids submitted for the sale of 
commodities on a delivery point by delivery point basis. In such cases, 
all bids submitted with respect to a specific delivery point will be 
evaluated under the provisions of the FAR, AGAR, and the solicitation, 
and CCC will determine the lowest bid for each delivery point.
    (b) Combination of bids. CCC will determine which combination of 
commodity bids and bids for ocean freight rate result in the lowest-
landed cost of delivery of the commodity to the foreign destination. 
CCC will award the contract for the purchase of the commodity that 
results in the lowest-landed cost unless the Contracting Officer 
determines that extenuating circumstances preclude such awards, or 
efficiency and cost-savings justify use of a different type of ocean 
service. Examples of extenuating circumstances may include, but are not 
limited to, internal strife at the foreign destination or urgent 
humanitarian conditions threatening the lives of persons at the foreign 
destination. Other types of services may include, but are not limited 
to, multi-trip voyage charters, indefinite delivery/indefinite quantity 
(IDIQ), delivery Cost and Freight (C & F), delivery Cost Insurance and 
Freight (C I F), and indexed ocean freight costs. Before contracts are 
awarded for other than a lowest-landed cost, the Contracting Officer 
shall consult with the applicable program agencies, and set forth, in 
writing, the reasons the contracts should be awarded on other than a 
lowest-landed cost.
    (c) Notification of awards. (1) The party submitting the accepted 
commodity procurement bid will be notified of the acceptance of the bid 
by CCC.
    (2) AID or the grantee organization, or its shipping agent, will be 
notified of the vessel freight rate used in determining the commodity 
contract award. The grantee organization or AID will be responsible for 
finalizing the charter or booking contract with the vessel representing 
the freight rate so used.

    Signed at Washington, DC, on December 6, 2005.
Teresa C. Lasseter,
Executive Vice President, Commodity Credit Corporation.
 [FR Doc. E5-7460 Filed 12-15-05; 8:45 am]
BILLING CODE 3410-05-P