[Federal Register Volume 71, Number 175 (Monday, September 11, 2006)]
[Rules and Regulations]
[Pages 53303-53309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7580]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1290

[Docket No. FV06-1290-1 FR]
RIN 0581-AC59


Specialty Crop Block Grant Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule provides regulations to implement the Specialty Crop 
Block Grant Program (SCBGP) to enhance the competitiveness of specialty 
crops. This action establishes the eligibility and application 
requirements, the review and approval process, and grant administration 
procedures for the SCBGP.
    The SCBGP is authorized under Section 101 of the Specialty Crops 
Competitiveness Act of 2004 (7 U.S.C. 1621 note).

EFFECTIVE DATE: October 11, 2006.

FOR FURTHER INFORMATION CONTACT: Trista Etzig, Fruit and Vegetable 
Programs, AMS, USDA, 1400 Independence Avenue, SW., Stop 0243, 
Washington, DC 20250-0243; Telephone: (202) 690-4942; Fax: (202) 690-
0102; or e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be not significant for 
the purposes of Executive Order 12866 by the Office of Management and 
Budget (OMB).

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State and local governments and 
the private sector. Under section 202 of the UMRA, the Agricultural 
Marketing Service (AMS) generally must prepare a written statement, 
including a cost-benefit analysis, for proposed and final rules with 
``Federal mandates'' that may result in expenditures by State and local 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year (2 U.S.C. 1532). When such a statement 
is needed for a rule, section 205 of the UMRA generally requires 
federal agencies to identify and consider a reasonable number of 
regulatory alternatives and adopt the least costly, most cost-
effective, or least burdensome alternative that achieves the objectives 
of the rule (2 U.S.C. 1535).
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State and local governments or 
the private sector of $100 million or more in any one year. Therefore, 
this rule is not subject to the requirements of sections 202 and 205 of 
the UMRA.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This action is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.

Catalog of Federal Domestic Assistance

    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.169, Specialty Crop Block Grant Program.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V 
published at 48 FR 29115 (June 24, 1983).

Executive Order 13132

    It has been determined that this rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. The provisions contained in this rule would 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.

Regulatory Flexibility Act

    The AMS certifies that this rule will not have a significant impact 
on a substantial number of small entities as defined in the Regulatory 
Flexibility Act, Pub. L. 96-534, as amended (5 U.S.C. 601 et seq.). 
This rule only will impact State departments of agriculture that apply 
for grant funds. States include the fifty States, the District of 
Columbia, and the Commonwealth of Puerto Rico. The States are not small 
entities under the Act.

Authority for a Specialty Crop Block Grant Program

    This program is intended to accomplish the goals of increasing 
fruit, vegetable, and nut consumption and improving the competitiveness 
of United States specialty crop producers. The SCBGP is authorized 
under section 101 of the Specialty Crops Competitiveness Act of 2004 (7 
U.S.C. 1621 note). Section 101 directs the Secretary of Agriculture to 
make grants to States for each of the fiscal years 2005 through 2009 to 
be used by State departments of agriculture solely to enhance the 
competitiveness of specialty crops.

Background

    The Fruit and Vegetable Program will periodically announce that 
applications may be submitted for participation in a ``Specialty Crop 
Block Grant Program'' (SCBGP), which will be administered by personnel 
of the Agricultural Marketing Service (AMS).
    Periodically, funding may be appropriated to the Secretary of 
Agriculture to provide specialty crop block grants. To the extent that 
funds are available, each year the AMS will publish a Federal Register 
notice announcing the program and soliciting grant applications.
    Subject to the appropriation of funds, each State that submits an 
application that is reviewed and approved by AMS is to receive at least 
$100,000 to enhance the competitiveness of specialty crops. In 
addition, each State will receive an amount that represents the 
proportion of the value of specialty crop production in the state in 
relation

[[Page 53304]]

to the national value of specialty crop production using the latest 
available complete specialty crop production data set in all states 
whose applications are accepted. All 50 States, the District of 
Columbia, and the Commonwealth of Puerto Rico are eligible to 
participate.
    ``Specialty crops'' for the purpose of this rule, means fruits and 
vegetables, tree nuts, dried fruits, and nursery crops (including 
floriculture).
    SCBGP applications will be accepted from any State department of 
agriculture, including the agency, commission, or department of a State 
government responsible for agriculture within the State.
    Section 1290.6 prescribes the application procedure that includes a 
State plan to indicate how grant funds will be utilized to enhance the 
competitiveness of specialty crops using measurable expected outcomes. 
Applications can be submitted for projects up to 3 calendar years in 
length. Applicants wishing to serve multi-state projects must submit 
the project in their State plan indicating which State is taking the 
coordinating role and the percent of the budget covered by each State.
    Section 1290.8 prescribes that under the SCBGP program, the AMS 
will enter into agreements with those State departments of agriculture 
or other entities that are responsible for agriculture within a State 
whose applications have been approved. The State department of 
agriculture will assure that the State will comply with the 
requirements of the State plan. The State department of agriculture 
will also assure that funds shall supplement the expenditure of State 
funds in support of specialty crops grown in that State, rather than 
replace State funds.
    The AMS will provide the entire funding to the approved applicants 
by a one-time combined electronic transfer. SCBGP participants must 
deposit funds in federally insured, interest-bearing accounts and remit 
to AMS interest earned in accordance with 7 CFR 3015 and 3016.
    Section 1290.9 prescribes the reporting and oversight requirements. 
If the grant period is more than one year, State departments of 
agriculture are required to submit an annual performance report(s) and 
a final performance report evaluating their project(s)using the 
measurable outcomes presented in the State plan, as well as a final 
financial report. If the grant period is less than a year, State 
departments of agriculture are required to submit a final performance 
report and a final financial report.
    Section 1290.10 prescribes the audit requirements of the State. The 
State is accountable for conducting annual financial audits of the 
expenditures of all SCBGP funds. Not later than 30 days after 
completion of the audit, the State shall submit a copy of the audit 
results with an executive summary to AMS.
    Notice of this action was published in the Federal Register on 
April 20, 2006. Interested persons were invited to submit written 
comments until May 22, 2006. During the comment period, eighty-two 
comments were received from members of Congress, producers of specialty 
crops, marketers of specialty crops, trade organizations, and 
interested consumers. Three comments were received after the comment 
period, but they did not introduce any new issues AMS has considered 
each comment timely submitted, and they are discussed below.

Summary of Comments Received

Purpose and Scope

    Two commenters stated that the rule is not consistent in defining 
the program's purpose to ``enhance the competitiveness of specialty 
crops.'' The commenters went on to say that the rule also states the 
program's purpose as ``increasing fruit, vegetable and nut consumption 
and improving the competitiveness of specialty crops.'' The Act 
includes a provision on Findings and Purpose (Sec. 2) and a provision 
concerning the Availability and Purpose of Grants (Sec. 101(a)). The 
statements appeared in the supplementary information and Paperwork 
Reduction Act sections of the proposed rule and are within the meaning 
of these sections of the Act. Accordingly, no changes have been made as 
a result of these comments.
    One commenter wanted clarification that funding is only to support 
specialty crops grown in the U.S. Another commenter asked if funds 
could be spent on projects in foreign markets to enhance the 
competitiveness of U.S. specialty crops. A purpose of the Act is to 
improve the competitiveness of United States specialty crop producers. 
Accordingly, this program only supports specialty crops grown in the 
United States. Furthermore, the Specialty Crop Block Grant Program 
funding may support U.S. grown specialty crops in both domestic and 
foreign markets.
    Eight commenters requested reference to 7 CFR Part 3016 in Section 
1290.1 be removed because it restricts grant funds from being used for 
advertising, public relations, selling, and marketing. Part 3016 refers 
to OMB Circular A-87 which provides that advertising and public 
relations costs are allowable when they are undertaken for ``purposes 
necessary to meet the requirements of the Federal award'' (i.e. if the 
purpose of the grant is to promote a specialty crop, then it is 
allowable to use grant funds for advertising the specialty crop). 
Accordingly, no change is made as a result of these comments.

Definitions

    USDA received 10 comments on the definition of ``specialty crops''. 
The commenters recommended the following be included in the specialty 
crop definition: Low growing dense perennial turfgrass sod, processed 
fruit and vegetable products, Christmas trees, potatoes, dry beans, 
sugar beets, grapes for wine, vegetable seeds, maple syrup, apple 
cider, certified organic crops, flax, dry peas, exotic fruits and 
vegetables grown in Hawaii such as coffee, cacoa, seed crops, algae and 
seaweed, kava, ginger root, vanilla, lavender, honey, and sugar cane. 
While in some instances including examples in a definition may improve 
clarity, we believe that additions beyond the language reflected in the 
Act would be counter productive given the numerous commodities that 
come within the definition of specialty crops. USDA will work with 
State departments of agriculture in providing further assistance with 
this definition.
    Fourteen comments were received requesting that a definition for 
``enhancing the competitiveness'' of specialty crops be included in the 
regulations. AMS believes that these comments have merit and a 
definition has been included in the regulations for clarity at Sec.  
1290.2(c). Examples of enhancing the competitiveness of specialty crops 
include, but are not limited to: Research, promotion, marketing, 
nutrition, trade enhancement, food safety, food security, plant health 
programs, education, ``buy local'' programs, increased consumption, 
increased innovation, improved efficiency and reduced costs of 
distribution systems, environmental concerns and conservation, product 
development, and developing cooperatives.
    Nine comments were received concerning how to incorporate outcome 
measures in a State plan. In order to provide additional clarity 
concerning this matter, examples of outcome measures may include per 
capita consumption, consumer awareness as a percent of target market 
reached, market penetration based on sales by geographic region, dollar 
value of exports, or Web site hits. Furthermore, for clarity, the final 
rule at Sec.  1290.6(b)(7) has been modified to state that expected

[[Page 53305]]

measurable outcomes may be long term that exceed the grant period and 
that timeframes should be included in the State plan when long term 
outcome measures will be achieved.

Eligible Grant Projects

    Seventy-one comments were received from processors and wineries to 
remove the last sentence of Sec.  1290.4(b) which provides that 
``priority will be given to fresh specialty crop projects.'' These 
comments have merit. The Act does not restrict the term specialty crops 
to only fresh commodities and, as such, both fresh and processed 
specialty crop producers would benefit from the block grants provided 
for in this program. Accordingly, this sentence has been removed from 
Sec.  1290.4(b) in the final rule.
    USDA received four comments on the timeframe of eligible grant 
projects. One commenter requested projects longer than three years 
should be allowed without the requirement to obtain approval from USDA. 
Two commenters recommended project deadlines be set by the State. One 
commenter pointed out that the authorizing statute does not specify a 
time constraint of three years. Based upon experience with other grant 
programs, we consider three years as appropriate and reasonable. 
Furthermore, USDA intends to track projects through performance reports 
during the grant period. The grant period is established by the longest 
approved project in the State plan, so if a project goes beyond the 
grant period, AMS must be notified. Secondly, the final rule in Sec.  
1290.4(b) has been clarified to state, for cause, an extension of the 
grant period not to exceed three years may be granted by AMS on a case 
by case basis with a written request from the State.
    Another commenter recommended USDA give extra time for evaluation 
of projects in addition to three years. State departments of 
agriculture have appropriate time for project evaluation. Reporting 
requirements are based on the grant period established by the longest 
project submitted and approved in the State plan which can not exceed 
three years. Some projects may be completed prior to the annual or 
final reporting period. Therefore, State departments of agriculture 
will have at least 90 days, if not more, to evaluate their projects and 
submit performance reports to USDA. This commenter also requested that 
a definition for project activities should be added to the regulations. 
We disagree. Each State department of agriculture has discretion to 
select projects to include in their State plan and, as such, providing 
examples of project activities in the regulations could suggest 
limitation and a narrowing of the range of project activities.

Restrictions and Limitations on Grant Funds

    Two comments were received concerning the language in Sec.  
1290.5(c) ``grant funds shall supplement the expenditure of State funds 
in support of specialty crops grown in that State, rather than replace 
State funds.'' One commenter stated ``it is unrealistic for programs 
not to cross between state funding and federal funding.'' Another 
commenter wanted clarification if the language prevents a State from 
creating a new state program that would support specialty crops. This 
language in Sec.  1290.5(c) of the rule reflects the statutory language 
that appears in Sec. 101(d)(3) of the Act which provides that a grant 
application should contain an assurance that grant funds received under 
this section shall supplement the expenditure of State funds in support 
of specialty crops grown in that State, rather than replace State 
funds. Under section Sec.  1290.5(c) of the rule, grant funds can 
supplement existing programs or create new programs, but not replace 
state funds. Accordingly, no changes are made as a result of these 
comments.

Electronic Transfer of Funds

    Three comments were received on the electronic transfer of funds. 
One commenter recommended direct payments be made to a third party. 
Another commenter recommended USDA award funding on a fixed-based or 
deliverable-based basis and another commenter explained one State has a 
policy that state funds are spent on projects and then the State seeks 
a one time reimbursement of federal dollars at the end of the projects. 
Since the grant agreements are made with the State department of 
agriculture, it is appropriate that the funds will be transferred to 
the State department of agriculture after the grant agreement is 
signed. The State department of agriculture can then disperse the funds 
based upon their approved State plans.

Completed Application

    Comments from seventeen organizations were received on the 
application process. Seven commenters recommended USDA notify the State 
departments of agriculture on the exact amount of funds they are to 
receive prior to submitting State plans. USDA intends to notify the 
State departments of agriculture of the exact amount of grant funds 
they may receive in the Notice for Applications, which will be 
published in the Federal Register soon after publication of this final 
rule.
    In addition, three comments were received recommending USDA explain 
how funds will be distributed if one or more States do not file an 
application or if an application is denied. One commenter recommended 
funds not distributed be rolled over and made available the following 
fiscal year to that respective State who did not apply the previous 
year and another commenter recommended that funds not distributed be 
allocated pro rata to all other States. The commenter went on further 
to request that USDA provide for an appeal process by a State 
department of agriculture should USDA deny a State plan. With regard to 
rolling over funds to the following fiscal year, States who do not 
apply for or do not request all available funding during the specified 
grant application period will forfeit all or that portion of available 
funding not requested for that application year. Finally, Sec. 101(f) 
of the Act provides that the Secretary of Agriculture may accept or 
reject applications for a grant. Accordingly, no change is made in the 
regulations concerning additional processes. However, we are clarifying 
Sec.  1290.7 concerning review of applications to include language 
concerning not only accepting applications, but also rejecting them as 
well. Nonetheless, USDA will work closely with State departments of 
agriculture to assist applicants in meeting deadlines.
    Ten commenters recommended that the application process be adjusted 
because State departments of agriculture need time to work with grant 
partners and decide on projects. In addition, 10 comments were received 
recommending USDA allow State departments of agriculture flexibility to 
establish granting processes, collaborate with subgrantees, and select 
projects based on the unique needs and priorities of that State. Under 
the Specialty Crop Block Grant Program, State departments of 
agriculture must submit their State plans within one year after the 
publication of the Notice for Applications. This one year period is 
reasonable and provides State departments of agriculture a sufficient 
amount of time to establish granting processes, collaborate with 
subgrantees, decide on projects, and develop and submit their State 
plan to USDA. Accordingly, no changes to the regulations are made as a 
result of these comments.
    Another commenter recommended post-approval adjustments to allow 
States to participate in multi-state projects. State departments of

[[Page 53306]]

agriculture will have one year to work with other State departments of 
agriculture to coordinate multi-state projects prior to submitting 
State plans. Again, a one year period is appropriate and will provide a 
reasonable amount of time for participation in multi-state projects. 
Therefore, no change to the regulations is made as a result of this 
comment.
    Another commenter requested clarification on the number of State 
plans that need to be submitted to USDA. A State department of 
agriculture must submit one plan to USDA that includes all projects and 
submit annual performance reports and a final report that summarizes 
progress on all projects in the State plan. This comment has merit and 
has been clarified in the final rule in Sec.  1290.6(b) and Sec.  
1290.9.
    One commenter asked for guidance on what is an acceptable 
percentage for project administrative costs. Based upon experience with 
other grant programs, we consider administrative costs not exceeding 10 
percent of any proposed budget as appropriate and reasonable. If 
administrative costs exceed 10 percent, a State department of 
agriculture should include a justification in their State plan. This 
comment has merit and Sec.  1290.6(b)(4) has been clarified 
accordingly. One commenter asked if a State department of agriculture 
may charge the paperwork burden costs and audit costs to administrative 
expenses. These are acceptable administrative expenses. While these 
costs may be considered acceptable, USDA will work with States 
concerning acceptable costs on a case-by-case basis.
    Five commenters wanted clarification that an application would be 
reviewed and approved by USDA before the grant funds are dispersed. 
These comments have merit and this has been clarified at Sec.  1290.8 
in the final rule.

Review of Grant Applications

    Eight comments were received on the grant application review 
process stating USDA should not need to approve each project and the 
State department of agriculture should have flexibility in selecting 
projects. Each State department of agriculture has discretion to select 
projects to include in their State plan, while final review and 
approval of the State plan resides with USDA.

Grant Agreements

    One commenter suggested language be added to the rule to indicate 
``it shall be allowable to include fee-based or deliverable-based 
projects as part of an approvable grant agreement with the State 
department of agriculture.'' A State department of agriculture is 
responsible for selecting the type of projects that enhance the 
competitiveness of specialty crops to include in their State plan 
subject to USDA review and approval. We believe that it is preferable 
to retain a measure of flexibility in the regulations. Including such 
language in the regulations is not necessary. Accordingly, no change to 
the regulations is made as a result of this comment.

Reporting and Oversight Requirements

    One commenter wanted language added to the rule to indicate the 
allowance for subgrantees, and whether subgrantees would be subject to 
the same reporting requirements and financial audit requirements of the 
applicant as stated previously. The State department of agriculture is 
responsible for selecting the type of projects that enhance the 
competitiveness of specialty crops and whether to include subgrantees 
or not. Retaining a measure of flexibility in the regulations is 
preferable. As such, the recommended language is not necessary in the 
regulations. Whether subgrantees are included or not in a project is a 
matter for a State department of agriculture to decide. The State 
department of agriculture remains accountable for the project 
reporting.

Audit Requirements

    Four comments were received regarding the requirement to follow 
Government Auditing Standards as being costly. Two commenters 
recommended the Single Audit Act should oversee the audit requirement. 
Two commenters asked for clarification on who would perform the audit, 
how the audit requirement affected subgrantees, and if the audit was 
fiscal or performance based. Section 101 (h) of the Specialty Crops 
Competitiveness Act provides that the State shall conduct an audit of 
the expenditures of grant funds by the State. The Act further provides 
that not later than 30 days after the completion of the audit, the 
State shall submit a copy of the audit to the USDA. Accordingly, the 
State and not the subgrantee is accountable for audit requirements. 
Furthermore, under this program, an audit is required to be conducted. 
Whether the Single Audit Act applies or not to an eligible grantee, 
audit results must be provided to AMS for the SCBGP grant expenditures. 
Government Auditing Standards are applicable as provided for under the 
Act as well as revised OMB Circular A-133, ``Audits of States, Local 
Governments, and Non-Profit Organizations.''

General

    One commenter asked for a cost benefit analysis on the SCBGP. The 
SCBGP is authorized by statute to enhance the competitiveness of 
specialty crops. We have conducted the required analyses for the 
rulemaking, which appear as part of this document. The commenter also 
recommended records be kept for seven years. We disagree. State 
departments of agriculture will be required to retain records 
pertaining to the SCBGP for 3 years after completion of the grant 
period or until final resolution of any audit findings or litigation 
claims relating to the SCBGP. This is a part of normal business 
practice and consistent with USDA regulations (7 CFR parts 3015 and 
3016).
    Finally, we have added for clarity a paragraph (f) to Sec.  1290.9 
concerning the three year record retention period.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.), the AMS had previously submitted this information 
collection to OMB and obtained approval of this information collection 
under OMB number 0581-0236.
    The information collection requirements in this request are applied 
only to those State departments of agriculture who voluntarily 
participate in the SCBGP. The information collected is needed for the 
implementation of the SCBGP, to determine a State department of 
agriculture's eligibility in the program, and to certify that grant 
participants are complying with applicable program regulations. Data 
collected is the minimum information necessary to effectively carry out 
the requirements of the program, and to fulfill the intent of Section 
101 of the Competitiveness Act of 2004.
    State departments of agriculture who wish to participate in the 
SCBGP will have to submit standard form SF-424, ``Application for 
Federal Assistance'', approved under OMB4040-0004. After 
receipt of the SF-424, the State department of agriculture will have to 
submit SF-424B, ``Assurances-Non-Construction Programs'', approved 
under OMB0348-0040 as part of the grant agreement to the AMS. 
The State department of agriculture will then submit to the AMS 90 days 
after the expiration date of the grant period SF269 ``Financial Status 
Report (Long Form)'', if the project had program income, approved under 
OMB0348-

[[Page 53307]]

0039, or SF269A ``Financial Status Report (Short Form)'', approved 
under OMB0348-0038.
    Completed applications must also include a State plan to show how 
grant funds will be utilized to enhance the competitiveness of 
specialty crops.
    After approval of a grant application, State departments of 
agriculture will have to enter into a grant agreement with AMS by 
reading and signing the grant agreement.
    The grant period is not to exceed three calendar years, therefore 
State departments of agriculture will have to submit to AMS annual 
performance reports within 90 days after the first year of the grant 
agreement and within 90 days after the second year of the grant 
agreement.
    If a project goes beyond the grant period, not to exceed three 
years, a State department of agriculture will have to submit a letter 
to AMS requesting a grant period extension.
    A State department of agriculture will have to submit a final 
performance report to AMS within 90 days following the expiration date 
of the grant period.
    No later than 60 days after expiration of the grant period, a State 
will be required to conduct an audit of SCBGP grant funds. An audit 
report will be required to be submitted to AMS no later than 30 days 
after completion of the audit.
    The SCBGP is expected to accomplish the goal of enhancing the 
competitiveness of specialty crops.
    This program would not be maintained by any other agency, 
therefore, the requested information will not be available from any 
other existing records.
    AMS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies in general 
to provide the public the option of submitting information or 
transacting business electronically to the maximum extent possible. The 
SF forms and State plan can be filled out electronically and printed 
out for submission or filled out electronically and submitted as an 
attachment through Grants.gov. The annual performance reports, final 
performance report, and the audit report/executive summary can be 
submitted electronically. The grant agreement requires an original 
signature and can be submitted by mail.
    Finally, State departments of agriculture will be required to 
retain records pertaining to the SCBGP for 3 years after completion of 
the grant period or until final resolution of any audit findings or 
litigation claims relating to the SCBGP. This is a part of normal 
business practice and consistent with USDA regulations (7 CFR Parts 
3015 and 3016).
    The estimated one-time cost for all State departments of 
agriculture in completing the information collection is $9,980. This 
total cost was calculated by multiplying the estimated 499 total burden 
hours by $20 per hour (a sum deemed reasonable, shall the respondents 
be compensated for this time).
    Comments were invited on the information collection in the April 
20, 2006, notice of proposed rulemaking. The deadline for comments 
ended on June 19, 2006. Five comments were received stating the time 
estimated to prepare applications and reports is understated because 
many hours of planning would have to occur before a State department of 
agriculture could prepare an application that might include multiple 
projects and subgrantees. AMS recognized that there would be planning 
involved in the preparation of the information collection and included 
this time into the average burden hours per response. AMS believes that 
the burden hours stated in the rule are accurate because the burden 
hours are based on the average time it takes the 52 State departments 
of agriculture to complete the information collection requirements.

List of Subjects in 7 CFR Part 1290

    Specialty crop block grants, Agriculture, Reporting and 
recordkeeping requirements.


0
For the reasons set forth in the preamble, Title 7, Chapter XI of the 
Code of Federal Regulations is amended as follows:
0
1. A new part 1290 is added to read as follows:

PART 1290--SPECIALTY CROP BLOCK GRANT PROGRAM

Sec.
1290.1 Purpose and scope.
1290.2 Definitions.
1290.3 Eligible grant applicants.
1290.4 Eligible grant project.
1290.5 Restrictions and limitations on grant funds.
1290.6 Completed application.
1290.7 Review of grant applications.
1290.8 Grant agreements.
1290.9 Reporting and oversight requirements.
1290.10 Audit requirements.

    Authority: 7 U.S.C. 1621 note.

Sec.  1290.1  Purpose and scope.

    Pursuant to the authority conferred by Section 101 of the Specialty 
Crops Competitiveness Act of 2004 (7 U.S.C. 1621 note) AMS will make 
grants to States to enhance the competitiveness of specialty crops in 
accordance with the terms and conditions set forth herein and other 
applicable federal statutes and regulations including, but not limited 
to, 7 CFR Part 3016.


Sec.  1290.2  Definitions.

    (a) AMS means the Agricultural Marketing Service of the U. S. 
Department of Agriculture.
    (b) Application means application for Specialty Crop Block Grant 
Program.
    (c) ``Enhancing the competitiveness'' of specialty crops includes, 
but is not limited to: Research, promotion, marketing, nutrition, trade 
enhancement, food safety, food security, plant health programs, 
education, ``buy local'' programs, increased consumption, increased 
innovation, improved efficiency and reduced costs of distribution 
systems, environmental concerns and conservation, product development, 
and developing cooperatives.
    (d) Grant period means the period of time from when the grant 
agreement is signed until the completion of all SCBGP projects 
submitted in the State plan.
    (e) Grantee means the government to which a grant is awarded and 
which is accountable for the use of the funds provided. The grantee is 
the entire legal entity even if only a particular component of the 
entity is designated in the grant agreement.
    (f) Outcome measure means an event or condition that is external to 
the project and that is of direct importance to the intended 
beneficiaries and/or the public.
    (g) Project means all proposed activities to be funded by the 
SCBGP.
    (h) Specialty crop means fruits and vegetables, tree nuts, dried 
fruits, and nursery crops (including floriculture).
    (i) State means the fifty States, the District of Columbia, and the 
Commonwealth of Puerto Rico.
    (j) State department of agriculture means the agency, commission, 
or department of a State government responsible for agriculture within 
the State.
    (k) Subgrantee means the government or other legal entity to which 
a subgrant is awarded and which is accountable to the grantee for the 
use of funds provided.


Sec.  1290.3  Eligible grant applicants.

    Eligible grant applicants are State departments of agriculture from 
the fifty states, the District of Columbia, and the Commonwealth of 
Puerto Rico.

[[Page 53308]]

Sec.  1290.4  Eligible grant project.

    (a) To be eligible for a grant, the project(s) must enhance the 
competitiveness of specialty crops.
    (b) To be eligible for a grant, the project(s) must be completed 3 
calendar years after the grant agreement prescribed in Sec.  1290.8 is 
signed. The grant period is established by the longest approved project 
submitted in the State plan. However, for cause, an extension of the 
grant period not to exceed three years may be granted by AMS on a case 
by case basis with a written request from the State.


Sec.  1290.5  Restrictions and limitations on grant funds.

    (a) Grant funds may not be used to fund political activities in 
accordance with provisions of the Hatch Act (5 U.S.C. 1501-1508 and 
7324-7326).
    (b) All travel expenses associated with SCBGP projects must follow 
Federal Travel Regulations (41 CFR Chapters 300 through 304) unless 
State travel requirements are in place.
    (c) Grant funds shall supplement the expenditure of State funds in 
support of specialty crops grown in that State, rather than replace 
State funds.


Sec.  1290.6  Completed application.

    Completed applications shall be clear and succinct and shall 
include the following documentation satisfactory to AMS.
    (a) Completed applications must include an SF-424 ``Application for 
Federal Assistance''.
    (b) Completed applications must also include one State plan to show 
how grant funds will be utilized to enhance the competitiveness of 
specialty crops. The state plan shall include the following:
    (1) Cover page. Include the lead agency for administering the plan 
and an abstract of 200 words or less for each proposed project.
    (2) Project purpose. Clearly state the specific issue, problem, 
interest, or need to be addressed. Explain why each project is 
important and timely.
    (3) Potential impact. Discuss the number of people or operations 
affected, the intended beneficiaries of each project, and/or potential 
economic impact if such data are available and relevant to the 
project(s).
    (4) Financial feasibility. For each project, provide budget 
estimates for the total project cost. Indicate what percentage of the 
budget covers administrative costs. Administrative costs should not 
exceed 10 percent of any proposed budget. Provide a justification if 
administrative costs are higher than 10 percent.
    (5) Expected measurable outcomes. Describe at least two discrete, 
quantifiable, and measurable outcomes that directly and meaningfully 
support each project's purpose. The outcome measures must define an 
event or condition that is external to the project and that is of 
direct importance to the intended beneficiaries and/or the public.
    (6) Goal(s). Describe the overall goal(s) in one or two sentences 
for each project.
    (7) Work plan. Explain briefly how each goal and measurable outcome 
will be accomplished for each project. Be clear about who will do the 
work. Include appropriate time lines. Expected measurable outcomes may 
be long term that exceed the grant period. If so, provide a timeframe 
when long term outcome measure will be achieved.
    (8) Project oversight. Describe the oversight practices that 
provide sufficient knowledge of grant activities to ensure proper and 
efficient administration.
    (9) Project commitment. Describe how all grant partners commit to 
and work toward the goals and outcome measures of the proposed 
project(s).
    (10) Multi-state projects. If the project is a multi-state project, 
describe how the States are going to collaborate effectively with 
related projects. Each State participating in the project should submit 
the project in their State plan indicating which State is taking the 
coordinating role and the percent of the budget covered by each State.


Sec.  1290.7  Review of grant applications.

    Applications will be reviewed and approved or rejected as 
appropriate for conformance with the provisions in Sec.  1290.6. AMS 
may request the applicant provide for additional information or 
clarification.


Sec.  1290.8  Grant agreements.

    (a) After review and approval of a grant application, AMS will 
enter into a grant agreement with the State department of agriculture.
    (b) AMS grant agreements will include at a minimum the following:
    (1) The projects in the approved State plan.
    (2) Total amount of Federal financial assistance that will be 
advanced.
    (3) Terms and conditions pursuant to which AMS will fund the 
project(s).


Sec.  1290.9  Reporting and oversight requirements.

    (a) An annual performance report will be required of all State 
departments of agriculture 90 days after the end of the first year of 
the date of the signed grant agreement and each year until the 
expiration date of the grant period. If the grant period is one year or 
less, then only a final performance report (see paragragh (b) of this 
section) is required. The annual performance report shall include the 
following:
    (1) Briefly summarize activities performed, targets, and/or 
performance goals achieved during the reporting period for each 
project.
    (2) Note unexpected delays or impediments as well as favorable or 
unusual developments for each project.
    (3) Outline work to be performed during the next reporting period 
for each project.
    (4) Comment on the level of grant funds expended to date for each 
project.
    (b) A final performance report will be required by the State 
department of agriculture within 90 days following the expiration date 
of the grant period. The final progress report shall include the 
following:
    (1) An outline of the issue, problem, interest, or need for each 
project.
    (2) How the issue or problem was approached via the project(s).
    (3) How the goals of each project were achieved.
    (4) Results, conclusions, and lessons learned for each project.
    (5) How progress has been made to achieve long term outcome 
measures for each project.
    (6) Additional information available (e.g. publications, Web 
sites).
    (7) Contact person for each project with telephone number and e-
mail address.
    (c) A final SF-269A ``Financial Status Report (Short Form)'' (SF-
269 ``Financial Status Report (Long Form)'' if the project(s) had 
program income) is required within 90 days following the expiration 
date of the grant period.
    (d) AMS will monitor States, as it determines necessary, to assure 
that projects are completed in accordance with the approved State plan. 
If AMS, after reasonable notice to a State, finds that there has been a 
failure by the State to comply substantially with any provision or 
requirement of the State plan, AMS may disqualify, for one or more 
years, the State from receipt of future grants under the SCBGP.
    (e) States shall diligently monitor performance to ensure that time 
schedules are being met, project work within designated time periods is 
being accomplished, and other performance measures are being achieved.
    (f) State departments of agriculture shall retain records 
pertaining to the SCBGP for 3 years after completion of the grant 
period or until final resolution of any audit findings or litigation 
claims relating to the SCBGP.

[[Page 53309]]

Sec.  1290.10  Audit requirements.

    The State is accountable for conducting a financial audit of the 
expenditures of all SCBGP funds. The State shall submit to AMS not 
later than 30 days after completion of the audit, a copy of the audit 
results.

    Dated: September 6, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-7580 Filed 9-6-06; 4:24 pm]
BILLING CODE 3410-02-P