[Federal Register Volume 73, Number 207 (Friday, October 24, 2008)]
[Proposed Rules]
[Pages 63387-63406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-25186]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 73, No. 207 / Friday, October 24, 2008 / 
Proposed Rules  

[[Page 63387]]



DEPARTMENT OF AGRICULTURE

48 CFR Part 470

Commodity Credit Corporation

7 CFR Parts 1496 and 1499

Foreign Agricultural Service

7 CFR Part 1599

RIN 0551-AA78


McGovern Dole International Food for Education and Child 
Nutrition Program and Food for Progress Program

AGENCY: Foreign Agricultural Service and Commodity Credit Corporation, 
USDA.

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would amend the regulations to administer 
the Food for Progress (FFPr) Program and the McGovern-Dole 
International Food for Education and Child Nutrition Program (McGovern-
Dole Program) by making revisions to provide greater clarity with 
respect to all aspects of the program with specific emphasis on the 
eligibility requirements that a participant must meet, and the actions 
that must be undertaken by a participant in order to receive assistance 
under these programs, including the reports that are filed by program 
participants with the Foreign Agricultural Service (FAS). This proposed 
rule would also amend the Agriculture Acquisition Regulation (AGAR), to 
specify the criteria that is used in determining whether a commodity 
that is procured under these programs and under domestic feeding 
programs administered by USDA is considered to be a commodity that is a 
product of the United States. The purpose of these amendments is to 
improve efficiency of the programs and make it more clear to 
participants what they must do to meet eligibility requirements.

DATES: We will consider comments that we receive by December 8, 2008.

ADDRESSES: We invite you to submit comments on this proposed rule. In 
your comment, include the volume, date, and page number of this issue 
of the Federal Register. You may submit comments by any of the 
following methods:
     E-Mail: [email protected] and/or 
[email protected].
     Fax: (202) 690-0251.
     Mail to: Babette Gainor, Deputy Director, Food Assistance 
Division, Foreign Agricultural Service, U.S. Department of Agriculture, 
Stop 1034, 1400 Independence Avenue, SW., Washington, DC 20250-1034.
     Hand Delivery or Courier: 1250 Maryland Avenue, SW., Suite 
400, Washington, DC 20024.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Comments may be inspected in Suite 400 of the Portals Building, 
1250 Maryland Avenue, SW., Washington, DC, between 8 a.m. and 4:30 
p.m., Monday through Friday, except holidays. A copy of this proposed 
rule is available through the FAS home page at http://www.fas.usda.gov/foodaid.

FOR FURTHER INFORMATION CONTACT: Babette Gainor at (202) 720-4221, or 
e-mail: [email protected].

SUPPLEMENTARY INFORMATION: 

7 CFR Part 1496--Procurement of Commodities for Foreign Donation

    This proposed rule amends the current regulations governing the 
procurement of commodities for use in international food assistance and 
developmental programs, and to move those regulations to a different 
section of the CFR.
    Personnel of the Farm Service Agency (FSA) acquire commodities for 
use by the Foreign Agricultural Service (FAS) for use in international 
food assistance and developmental programs. These commodities are 
procured in conformity with the Federal Acquisition Regulation (FAR), 
as supplemented by the AGAR found in 48 CFR Chapter 4. In addition, 
regulations at 7 CFR part 1496 set forth provisions applicable to the 
acquisition of commodities to carry out activities under the McGovern-
Dole Program, FFPr Program, and Title II of the Food For Peace Act, 
(Pub. L. 83-480, or referred to as Pub. L. 480). Title II procurements 
are done on behalf of the U. S. Agency for International Development 
(USAID) by FSA. The regulations at 7 CFR part 1496 were amended at 72 
FR 6450, on February 12, 2007, in order to adopt new procedures 
regarding the evaluation of bids submitted in the procurement of 
commodities. This proposed rule would move the current regulations at 7 
CFR part 1496 to a new part in the AGAR, 48 CFR Chapter 4, part 470, 
and delete and revise obsolete provisions in 7 CFR part 1496. This rule 
also proposes minor ``housekeeping'' changes to clarify those 
regulations.
    The substantive changes to this section of the regulations proposed 
in this rule are intended to make the procurement process more 
efficient and responsive. The U. S. Government Accountability Office 
(GAO) issued a report in April 2007, entitled FOREIGN ASSISTANCE--
Various Challenges Impede the Efficiency and Effectiveness of U.S. Food 
Aid. Among the findings in this report is that current contracting 
provisions produce a ``bunching of contracts'' that result in increased 
program costs (GAO Report, pg. 23). USDA shares the overall concerns 
set forth in the GAO report about the need to improve efficiency in 
contracting to improve program delivery and is engaged in a continuing 
process to revise its contracting procedures to have the benefit of 
increased flexibility afforded under the FAR. Accordingly, this 
proposed rule would amend these regulations to ensure that USDA may 
fully utilize all types of acquisition contracts that are authorized by 
the FAR. And, as noted below, under this proposed rule USDA would have 
the option of procuring freight directly from carriers as opposed to 
doing so indirectly through program participants. Such procurements 
would be done in accordance with the FAR, including the AGAR.

Changes to 7 CFR Parts 1499 and 1599--Foreign Donation Programs and 
McGovern-Dole International Food for Education and Child Nutrition 
Program

    The regulations in 7 CFR part 1499, Foreign Donation Programs, are 
used by FAS, on behalf of the Commodity Credit Corporation (CCC), in 
the administration of the FFPr Program. The regulations in 7 CFR part 
1599, McGovern-Dole International Food for Education and Child 
Nutrition Program,

[[Page 63388]]

are used by FAS in the administration of the McGovern-Dole Program. 
Many of the provisions of these regulations have not been reviewed or 
updated since their issuance in 1996 and 2001, respectively. The 
changes proposed in this rule are largely technical in nature to 
improve the efficiency and effectiveness of the programs. The following 
is a discussion of the major proposed amendments.
    In 2006, FAS initiated an agency-wide reorganization. Following the 
completion of this reorganization in 2007, FAS began to evaluate how 
programs are implemented in light of the organizational changes. 
Concurrent with this process, the GAO Report was issued. As a result of 
this review, taking into account the findings in the GAO Report, USDA 
proposed changes to these regulations that are designed to improve the 
delivery of assistance under these programs by removing obsolete 
provisions; consolidating reporting requirements applicable to 
participants; and providing greater flexibility in the settlement of 
claims that arise under the program. For example, the proposed rule 
would set forth with greater clarity the responsibilities of a 
participant in the event unanticipated actions occur that involve the 
protection of commodities provided to the participant by FAS or CCC and 
would provide greater latitude with respect to the actions of the 
participant in such a situation.
    One of the criticisms in the GAO report is related to the ``lengthy 
claims process'' that exists under current regulations (GAO Report, pg. 
27). While the report focused on transportation claims, USDA is also 
concerned about the timely resolution of all claims that arise under 
the program. Under current regulations, generally, for cargo claims: 
(1) If the claim is less than $100 no action is necessary; (2) if the 
claim is between $100 and $300, no action is necessary if the 
participant determines that costs of collection would exceed the likely 
recovery costs; (3) if the recovery on a claim is less than $200, the 
participant may retain the recovery; and (4) if the recovery on a claim 
is more than $200, the participant may retain either $200 plus 10 
percent of the difference between $200 and the total amount of the 
claim up to $500, or the actual amount of collection costs (excluding 
attorney fees and collection agency fees). Other provisions of the 
current regulations generally require that a participant assign all 
rights to a claim to FAS or CCC, as appropriate. In most instances, all 
recoveries are retained by one of these agencies except in cases where 
the participant may have expended its own funds for ocean 
transportation, in which case the recovery is shared with such 
participant.
    This process reflects neither the actual costs of collection of 
claims nor the logistical issues attendant to claims that occur outside 
of the United States. This process was instituted on the premise that 
carriers and other entities would be more likely to make payments to 
the United States if a claim had been assigned to it as opposed to 
requiring a participant pursue collection. Also, when this process was 
originally established, the vast majority of food aid shipments were in 
the form of bulk commodities. Now, however, a significant quantity of 
commodities is shipped in containers and there is a significant 
reduction in the dollar amount of individual losses as such losses are 
generally limited to one container, or a small number of containers, as 
opposed to losses in large bulk grain shipments. The following charts 
set forth cargo claim collection activity for the FFPr Program and the 
McGovern-Dole Program over the past four fiscal years (note the amount 
of recovery in a fiscal year represents amounts recovered in that year 
for claims established in that year and preceding years):

                        Food For Progress Program
------------------------------------------------------------------------
                                                             Claims
               Fiscal year                    Claims       established
                                            collected       (number)
------------------------------------------------------------------------
2004.....................................     $313,686     $468,747 (67)
2005.....................................       64,766       20,414 (47)
2006.....................................      257,832      369,215 (55)
2007.....................................       65,638       126,098 (5)
                                          ------------------------------
    4-Year Totals........................      701,922     984,474 (174)
------------------------------------------------------------------------


      McGovern-Dole Food for Education and Child Nutrition Program
------------------------------------------------------------------------
                                                             Claims
               Fiscal year                    Claims       established
                                            collected       (number)
------------------------------------------------------------------------
2004.....................................      $15,075      $19,792 (12)
2005.....................................       50,397       56,824 (32)
2006.....................................       96,760      106,925 (44)
2007.....................................       18,977        20,989 (8)
                                          ------------------------------
    4-year Totals........................      181,209      204,530 (96)
------------------------------------------------------------------------

    Taking into account the small number of claims and the extremely 
small average amount of claims that were established (FFPr Program--
$5,657 and McGovern-Dole Program--$2,230) and the costs attributable 
for salaries and expenses of USDA employees, this current system is not 
cost-effective. Further, with respect to non-cargo claims, if such 
claims arise in a foreign country after the liability of the carrier 
ends, any litigation which may be required to effectuate collection 
must be brought in the country where the claim arose. In such a 
situation, assignment of the claim to FAS or CCC for collection is 
simply not feasible.
    This process is predicated upon the current manner in which freight 
contracts are entered into for the delivery of commodities made 
available under FFPr Program and the McGovern-Dole Program. Generally, 
the current regulations envision that the program participant will be 
reimbursed for the cost of obtaining freight and that the

[[Page 63389]]

freight contract is between the program participant and the carrier. In 
reality, as the programs have evolved over many years, the program 
participant obtains potential bids from prospective carriers and these 
bids are provided to FSA who, as set forth in 7 CFR part 1496, utilizes 
a sophisticated computer program to analyze the freight bids in 
conjunction with the various bids obtained in the procurement of 
commodities to ascertain which combination of carrier bids and 
commodity bids produces the lowest landed cost of delivery of the 
commodity to a foreign destination. Thus, the selection of the carrier 
bid ultimately rests with USDA. Once the carrier is determined, the 
program participant executes, in most instances, a contract with the 
carrier. As the contract is between the carrier and the program 
participant, any claim that the participant has against the carrier is 
the participant's cause of action and not that of CCC or FAS. The 
current regulations provide that the program participant must assign 
this private cause of action to CCC or FAS as a condition of program 
participation. Questions have been raised concerning whether the 
freight acquisition process is compliant with the FAR and whether CCC 
and FAS should be accepting private causes of action for collection 
purposes. Accordingly, this proposed rule would provide that in 
obtaining freight contracts, FAS or CCC, as applicable, would obtain 
the freight contracts in accordance with the FAR. This would eliminate 
the need for any program participant to assign a claim to FAS or CCC. 
The regulations, as amended, would also provide for the option for FSA 
or CCC to allow a program participant to obtain freight but assignment 
of these claims would, as a general rule, be eliminated. The program 
participant would be responsible for claim collections and would be 
allowed to retain any recovery of the claim, except the expenditure of 
the recovered funds would be limited to carrying out an activity 
authorized by the program under which the commodities had been provided 
to the participant.
    The current regulations for these programs require all participants 
to submit various reports to FAS on a semi-annual basis and to file 
other reports upon the occurrence of certain events. These reports are 
required to be filed in four different offices within FAS and with two 
different offices within FSA, and in some cases must also be filed with 
the Agricultural Attach[eacute] or Agricultural Counselor of FAS with 
responsibility for the country where the agreement is implemented. In 
other cases, a report is required only to be filed with the 
Agricultural Attach[eacute] or Agricultural Counselor. Several of these 
offices referred to in the regulations have been either renamed or 
eliminated, so the current regulations are obsolete. Accordingly, this 
rule proposes to revise these regulations to remove all references to 
specific offices and a generic reference to either FAS or CCC would be 
used. The identification of the location where a report would be 
required to be filed would be specified in the agreement. FAS expects 
that in all, or substantially all, instances these reports will be 
filed with one office in FAS. To the extent other USDA officials need 
the information contained in the reports, FAS would be responsible for 
dissemination of the material to appropriate officials.
    Further, in addition to streamlining the location for reports 
submission, FAS intends to incorporate a greater emphasis on 
performance based reporting which will allow FAS to highlight the 
accomplishments achieved by participants under food aid programs, which 
will, in turn, allow FAS to provide funding to those projects that 
achieve greater results.
    It has been the practice of FAS, acting on behalf of CCC, to 
administer section 1110(h) of the Food For Progress Act which addresses 
the prohibitions against the resale and transshipment of donated 
commodities to apply only to the party with whom CCC directly enters 
into an agreement. This means that the participant is required to ship, 
distribute and/or monetize (sell) the donated commodities in the 
targeted country. Once the initial distribution and/or monetization 
transaction has taken place by the participant, FAS considers the 
program participant to be in compliance with section 1110(h). In 
accordance with section 1110(j) of this Act, it has also been the 
practice of FAS to permit multi-country agreements under the programs 
whereby CCC delivers donated commodities to one country and activities 
to fulfill the agreement objectives are carried out in another. This 
rule proposes to amend the regulations at 7 CFR part 1499 to address 
these types of situations.
    Previously, 7 CFR part 1499 had been used to regulate and 
administer activities authorized by Section 416(b) of the Agricultural 
Act of 1949 (Section 416(b) program) in addition to the FFPr Program. 
Reference to the Section 416(b) Program has been removed from this part 
due to the fact that in order for activities to be conducted under this 
program the Secretary of Agriculture must determine that commodities 
will be made available under Section 416(b). Accordingly, FAS has 
determined that it is more appropriate to announce any future 
availability of commodities under Section 416(b) through a Federal 
Register notice. Upon the announcement of commodity availability for 
Section 416(b) activities, FAS may decide to use this part to 
administer such availability; this decision also would be announced in 
the Federal Register notice at that time.

Proposed New 48 CFR Part 470

    The acquisition by USDA of agricultural commodities and ocean 
freight, along with other services, is governed by procurement statutes 
generally applicable to all activities of USDA. The regulations used to 
implement these statutes are set forth in the FAR. But, there are 
several statutes that contain provisions that are specifically 
applicable to the international food assistance and development 
programs and domestic food assistance programs.
    With respect to the international programs, section 402 of Pub. L. 
480 sets forth the definition of an ``agricultural commodity'' for use 
under that Act and the FFPr Act and section 3107(a) of the Farm 
Security and Rural Investment Act of 2002 sets forth a similar 
definition of an ``agricultural commodity.'' Generally, these two 
provisions require the use of commodities produced in the United 
States. A similar approach has historically been used in the 
acquisition of commodities for use in domestic feeding programs. In 
some instances, additives such as vitamins and spices are not available 
from U.S sources and in some instances the commodity which is being 
procured is normally stored in a commingled manner without any way to 
ascertain the country of origin. Accordingly, this rule proposes that 
the AGAR would be revised to set forth in 48 CFR part 470 the 
definition of an agricultural commodity and would reflect the current 
practices of USDA in this regard.
    Commodities provided under the FFPr Program and the McGovern-Dole 
Program are delivered to foreign destinations through the acquisition 
of freight which is ultimately paid for from funds from these programs. 
The regulations at 7 CFR part 1496 require that the government will 
determine which combination of commodity bids and bids for ocean 
freight rates results in the lowest-landed cost of delivery of the 
commodity to the foreign destination. The government generally will 
award the contact for the purchase of the commodity that results in the

[[Page 63390]]

lowest-landed cost and would be transported in compliance with cargo 
preference requirements under regulations prescribed by the Maritime 
Administration. ``Lowest landed cost'' refers to the requirement that, 
in the delivery of U.S. agricultural commodities under international 
food assistance and developmental programs, the United States shall 
generally use the combination of ocean freight contracts and commodity 
acquisition contracts that results in the lowest cost of delivery of 
the product to the desired destination. This requirement is based upon 
provisions in section 901(b) of the Merchant Marine Act, 1936. 
Accordingly, this specific provision of law is used in the procurement 
of freight and agricultural commodities and, to the extent the 
provisions of this section conflict with the more general provisions of 
the Competition in Contracting Act, the provisions of section 901(b) of 
the Merchant Marine Act, 1936 prevail.
    The application of section 901(b) of the Merchant Marine Act, 1936, 
when considered with other provisions of that Act, results in a complex 
review of numerous offers for freight and commodities. In a very simple 
example, in the shipment of commodities, several U.S. port locations 
may provide viable services and the ocean freight contract cost from 
one port may be less costly than the cost of using two other U.S. 
ports. However, the cost of delivery of U.S. agricultural product to 
the U.S. port with the lowest attendant freight cost may be 
considerably greater than the costs of delivery of the commodities to 
other U.S. ports. Thus, in order to ensure that the lowest total cost 
is obtained, USDA reviews a myriad of potential freight and commodity 
contract costs for each delivery of commodities to a foreign 
destination. In order to have all USDA acquisition related regulations 
in one location, 48 CFR Chapter 4, this proposed rule would move the 
current regulations at 7 CFR part 1496 to 48 CFR part 470 but the 
regulations would not be amended regarding the current process used to 
ascertain the lowest landed cost for these contracts. Only the removal 
of obsolete references and editorial changes would be made.

Executive Order 12866

    This proposed rule has been determined to be not significant under 
E.O. 12866, as amended by E.O. 13422, and was therefore not reviewed by 
the Office of Management and Budget (OMB).

Regulatory Flexibility Act

    The Regulatory Flexibility Act does not apply to this rule because 
FAS is not required by 5 U.S.C. 553 or any other law to publish a 
notice of proposed rulemaking with respect to the subject of this.

Environmental Assessment

    FAS has determined that this proposed rule does not constitute a 
major State or Federal action that would significantly affect the human 
or natural environment consistent with the National Environmental 
Policy Act (NEPA) 40 CFR part 1502.4, Major Federal actions requiring 
the preparation of Environmental Impact Statements; and Compliance with 
NEPA implementing the regulations of the Council on Environmental 
Quality, 40 CFR parts 1500-1508. Therefore no environmental assessment 
or environmental impact statement will be prepared.

Executive Order 12988

    This rule has been reviewed under E.O. 12988. This rule is not 
retroactive and it does not preempt State or local laws, regulations, 
or policies unless they present an irreconcilable conflict with this 
rule. This rule would not be retroactive.

Executive Order 12372

    This program is not subject to E. O. 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

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on state and local 
governments. Therefore, consultation with the states is not required.

Unfunded Mandates

    Although we are publishing this as a proposed rule, Title II of the 
Unfunded Mandates Reform Act of 1995 (UMRA) does not apply to this rule 
because FSA and FAS are not required by 5 U.S.C. 553 or any other law 
to publish a notice of proposed rulemaking for the subject of this 
rule. Further, this rule contains no unfunded mandates as defined in 
sections 202 and 205 of UMRA.

Paperwork Reduction Act of 1995

    In accordance with the Paperwork Reduction Act of 1995, FAS has 
previously received approval from the Office of Management and Budget 
(OMB) with respect to the information collection required to support 
these programs. The Information Collection is described below:
    Title: Food Donation Programs (Food for Progress, Section 416(b), 
and McGovern-Dole International Food for Education and Child 
Nutrition).
    OMB Control Number: 0551-0035.

E-Government Act Compliance

    FAS is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes. The forms, regulations, and other 
information collection activities required to be utilized by a person 
subject to this rule are available at http://www.fas.usda.gov.

List of Subjects

7 CFR Part 1496

    Agricultural commodities, Food assistance programs, Foreign aid, 
Government procurement.

7 CFR Part 1499

    Agricultural commodities, Food assistance programs, Foreign aid.

7 CFR Part 1599

    Agricultural commodities, Exports, Foreign aid.

48 CFR Part 470

    Government procurement, Reporting and recordkeeping requirements.
    For the reasons set out in the preamble, under the authority of 5 
U.S.C. 553; 15 U.S.C. 714b and 714c, 7 CFR parts 1496, 1499, 1599 and 
48 CFR part 470 are proposed to be amended as follows:

PART 1496--[REMOVED]

    1. 7 CFR part 1496 is removed.
    2. Revise part 1499 to read as follows:

PART 1499--FOOD FOR PROGRESS PROGRAM

Sec.
1499.1 General statement.
1499.2 Definitions.
1499.3 Eligibility determination.
1499.4 Application process.
1499.5 Agreements.
1499.6 Payments.
1499.7 Transportation of goods.
1499.8 Entry and handling of commodities.

[[Page 63391]]

1499.9 Damage to and loss of commodities.
1499.10 Claims for damage to or loss of commodities.
1499.11 Use of commodities and sales proceeds.
1499.12 Subrecipients.
1499.13 Recordkeeping and reporting requirements.
1499.14 Noncompliance with an agreement.
1499.15 Suspension, termination, and closeout of agreements.
1499.16 Appeals.
1499.17 Paperwork Reduction Act.

    Authority: 7 U.S.C. 1736o; and 15 U.S.C. 714b and 714c.


Sec.  1499.1  General Statement.

    (a) This part sets forth the general terms and conditions governing 
the donation of commodities by the Commodity Credit Corporation (CCC) 
to participants in the Food for Progress Program (FFPr). Under FFPr, 
participants use the donated commodities or proceeds from the sale of 
such commodities to implement activities in a foreign country pursuant 
to an agreement with CCC. The Foreign Agricultural Service (FAS) of the 
Department of Agriculture (USDA) administers FFPr on behalf of CCC.
    (b) In addition to the provisions of this part, other regulations 
of general application issued by USDA, including the regulations set 
forth in Chapter 30 of this title, are applicable to the FFPr. All 
provisions of the CCC Charter Act (15 U.S.C. 714 et seq.) and any other 
statutory provisions that are generally applicable to CCC are 
applicable to FFPr and the regulations set forth in this part.
    (c) This part shall not apply to a donation by CCC to a foreign 
government or an intergovernmental agency or organization (such as the 
United Nations' World Food Program) under FFPr.


Sec.  1499.2  Definitions.

    The following definitions are applicable to this part:
    Activity mean a project to be carried out by a participant, 
directly or through a subrecipient, to fulfill the objectives of an 
agreement.
    Agreement mean a legally binding agreement entered into between CCC 
and a participant to implement activities under FFPr.
    CCC mean the Commodity Credit Corporation and includes any official 
of the United States delegated the responsibility to act on behalf of 
CCC.
    Commodities mean U.S. agricultural commodities or products of U.S. 
agricultural commodities.
    CCC-provided funds means U.S. dollars provided under an agreement 
to a participant for expenses for the internal transportation, storage 
and handling of the donated commodities, expenses involved in the 
administration and monitoring of the activities under the agreement, 
and technical assistance related to the monetization of donated 
commodities.
    Donated commodities means the commodities donated by CCC to a 
participant under an agreement. The term may include donated 
commodities that are used to produce a further processed product for 
use under the agreement.
    FAS means the Foreign Agricultural Service acting on behalf of CCC.
    FFPr means the Food for Progress Program.
    Force majeure is a common clause in contracts, exempting the 
parties for non-fulfillment of their obligations as a result of 
conditions beyond their control, such as earthquakes, floods or war.
    Income means interest earned on sale proceeds and other resources 
received by a participant, other than sale proceeds, as a result of 
carrying out an agreement. The term may include resources from VAT 
refunds, activity fees, interest on loans, and others.
    Participant means an entity with which CCC has entered into an 
agreement.
    Subrecipient means a legal entity that receives donated 
commodities, income, sale proceeds or other resources from a 
participant for the purpose of implementing in the targeted country 
activities described in a FFPr agreement and that is accountable to 
such participant for the use of such commodities, funds, or resources. 
The term may include foreign or international organizations (such as 
agencies of the United Nations) at the discretion of FAS.
    Sale proceeds mean funds received by a participant from the sale of 
donated commodities.
    Targeted country means the country in which activities are 
implemented under an agreement.


Sec.  1499.3  Eligibility determination.

    (a) An entity will be eligible to become a participant only after 
FAS determines that the entity has:
    (1) Organizational experience in implementing and managing grants, 
and the capability and personnel to develop, implement, monitor, report 
on, and provide accountability for activities in accordance with this 
part;
    (2) Experience working in the proposed targeted country;
    (3) Adequate financial framework to implement the activities the 
entity proposes to carry out under FFPr. In order to determine whether 
the entity is financially responsible, FAS may require it to submit 
corporate policies and financial materials that have been audited or 
otherwise reviewed by a third party;
    (4) A person or agent located in the United States with respect to 
which service of judicial process may be obtained by FAS on behalf of 
the entity; and
    (5) An operating financial account in the proposed targeted 
country, or a satisfactory explanation for not having such an account 
and a description of how a FFPr agreement would be administered without 
such an account.
    (b) In determining whether an entity will be eligible to be a 
participant, FAS may consider the entity's previous compliance or 
noncompliance with the provisions of this part and part 1599 of this 
title. FAS may consider matters such as whether the entity corrected 
deficiencies in the implementation of an agreement in a timely manner 
and whether the entity has timely and accurately filed reports and 
other submissions that are required to be filed with FAS and other 
agencies of the United States.


Sec.  1499.4  Application process.

    (a) An entity seeking to enter into an agreement with CCC shall 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under FFPr in the proposed target 
country. An application shall contain the items specified in paragraph 
(b) of this section and shall be submitted electronically to FAS at the 
address set forth at http://www.fas.usda.gov. An entity that has not 
yet met the eligibility requirements in Sec.  1499.3 may submit an 
application, but FAS will not enter into an agreement with an entity 
until FAS had made a determination of eligibility under Sec.  1499.3.
    (b) An applicant shall include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction that contains the elements specified in 
paragraph (c) of this section; and
    (3) A plan of operation that contains the elements specified in 
paragraph (d) of this section.
    (c) The introduction shall include:
    (1) An explanation of the need for the food aid in the targeted 
country and how the applicant's proposed activities would address that 
need;
    (2) Information regarding the applicant's ability to become 
registered and operate in the targeted country;

[[Page 63392]]

    (3) Information about the applicant's past food aid projects; and
    (4) A budget that details the amount of any sale proceeds, income, 
and CCC-provided funds that the applicant proposes to use to fund:
    (i) Administrative costs;
    (ii) Inland transportation, storage and handling costs; and
    (iii) Activity costs.
    (d) A plan of operation shall include:
    (1) The name of the targeted country where the proposed activities 
would be implemented;
    (2) The kind, quantity, and proposed use of the commodities 
requested, and any commodities that would be acceptable substitutions 
therefore, and the proposed delivery schedule;
    (3) If monetization or barter is proposed:
    (i) The quantity of the requested commodities that would be sold or 
bartered;
    (ii) The amount of sale proceeds anticipated;
    (iii) The amount of income expected to be generated;
    (iv) The anticipated monetization completion date;
    (v) The goods or services to be generated from the barter of the 
requested commodities; and
    (vi) The value of the goods or services anticipated to be generated 
from the barter of the requested commodities.
    (4) A list of each of the activities that would be implemented, 
with a brief statement of the objectives to be accomplished under each 
activity;
    (5) For each proposed activity, the targeted geographic area, 
anticipated beneficiaries, and methods that the applicant would use to 
choose such beneficiaries, including obtaining and considering 
statistics on poverty levels, food deficits, and any other required 
items set forth on the FAS Web site at http://www.fas.usda.gov.
    (6) For each proposed activity:
    (i) An explanation of whether the activity would be carried out 
through the distribution of the requested commodities or funded by sale 
proceeds, income, or a combination thereof; and
    (ii) The amount of commodities, sale proceeds, or income requested 
to carry out such activity; and
    (iii) A detailed description of the activity, including the steps 
involved in its implementation and the anticipated completion date;
    (7) Any cash or non-cash contributions that the applicant expects 
to receive from non-CCC sources that:
    (i) Are critical to the implementation of the proposed activities; 
or
    (ii) Enhance the implementation of the activities;
    (8) Any subrecipient that would be involved and a description of 
each subrecipient's responsibilities and its capability to perform 
responsibilities;
    (9) Any governmental or nongovernmental entities that would be 
involved and the extent to which FFPr will strengthen or increase the 
capabilities of such entities to further economic development in the 
targeted country;
    (10) The method by which the applicant intends to inform 
beneficiaries of an activity about the source of the requested 
commodities or funding for the activity and, where the beneficiaries 
will be receiving the commodities directly, how to prepare and use them 
properly;
    (11) Established baselines, a timeline, and proposed outcomes that 
would enable FAS to measure the applicant's progress towards achieving 
the objectives of proposed activities;
    (12) If the proposed activities would involve the use of sale 
proceeds or income:
    (i) The process that the applicant would use to sell the requested 
commodities, including steps the applicant would take to use, to the 
extent possible, the private sector in the monetization process; and
    (ii) The procedures that the applicant would use to assure that 
sale proceeds and income are received and deposited into a separate, 
interest-bearing account and disbursed from such account for use only 
in accordance with the agreement;
    (13) A description of how the requested commodities would be 
transported from the receiving port to the point at which distribution 
is made to the beneficiaries and a description of any port, 
transportation, storage, and warehouse facilities that would be used 
with sufficient detail to demonstrate that they would be adequate to 
handle the requested commodities without undue spoilage or waste;
    (14) Any reprocessing or repackaging of the requested commodities 
that would take place prior to the distribution, sale or barter by the 
participant;
    (15) The action the applicant would take to ensure that any 
commodities to be distributed to beneficiaries, rather than sold, would 
be imported and distributed free from all customs, duties, tolls, and 
taxes;
    (16) A plan that shows how the requested commodities could be 
imported and distributed without a disruptive impact upon production, 
prices and marketing of the same or like products in the country where 
they will be delivered, and the extent to which any sale or barter of 
the requested commodities would displace or interfere with any sales 
that may otherwise be made by the applicant or any other entity in the 
country where they will be delivered; and
    (17) Any additional required items set forth on the FAS Web site at 
http://www.fas.usda.gov.


Sec.  1499.5  Agreements.

    (a) After FAS approves an applicant's proposal, FAS will develop an 
agreement in consultation with the applicant. The agreement will set 
forth the obligations of CCC and the participant. A participant must 
comply with the terms of the agreement to receive assistance.
    (b) A participant shall not use donated commodities, sale proceeds, 
income or CCC-provided funds for any activity or any expenses incurred 
by the participant prior to the date of the agreement or after the 
agreement is suspended or terminated.
    (c) The agreement will include a budget that sets forth the maximum 
amounts of sale proceeds and CCC-provided funds that may be expended 
for various purposes under the agreement. A participant may make 
adjustments to this budget without prior approval from FAS only as 
specified in the agreement.
    (d) Prior to providing any donated commodities or CCC-provided 
funds to a participant under an agreement, FAS may require the 
participant to complete a training program administered by FAS that is 
designed to ensure that the participant is aware of, and has the 
capacity to complete all required reporting and audit functions set 
forth in this part.
    (e) A participant will be prohibited from using CCC-provided funds 
to acquire goods and services either directly or indirectly through 
another party from certain countries that will be specified in the 
agreement. Any violation of this provision of the agreement will be a 
basis for immediate termination by CCC of the agreement in addition to 
the imposition of any other applicable civil and criminal penalties.
    (f) The agreement will prohibit the sale or transshipment of the 
donated commodities to a country not specified in the agreement for so 
long as such donated commodities are controlled by the participant.
    (g) CCC may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (h) CCC may provide donated commodities and CCC-provided funds 
under a multiyear agreement contingent

[[Page 63393]]

upon the availability of commodities and funds.


Sec.  1499.6  Payments.

    (a) If the participant arranges for transportation in accordance 
with Sec.  1499.7(b)(2), and the participant seeks payment directly, 
the participant shall submit the following documents to FAS in the 
manner set forth in the agreement:
    (1) A signed copy of the completed Form CCC-512;
    (2) The original on-board bills of lading indicating the freight 
rate and signed by the originating carrier;
    (3) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness (Vessel Hold Inspection Certificate; and
    (iii) A signed copy of the National Cargo Bureau Certificate of 
Loading;
    (4) For all containerized cargoes a copy of the FGIS Container 
Condition Inspection Certificate;
    (5) A signed copy of liner booking note or charter party covering 
ocean transportation of cargo;
    (6) In the case of charter shipments, a signed notice of arrival at 
first discharge port, unless FAS has determined that circumstances of 
force majeure have prevented the vessel's arrival at the first port of 
discharge;
    (7) A request by the participant for reimbursement of freight, 
survey costs, and other expenses approved by CCC indicating the amount 
due and accompanied by a certification from the carrier or other 
parties that payments have been received from the participant; and
    (8) A document on letterhead and signed by an officer or agent of 
the participant specifying the name of the entity to receive payment; 
the bank ABA number to which payment is to be made; the account number 
for the deposit at the bank; the participant's taxpayer identification 
number; and the type of the account into which the payment will be 
deposited.
    (b) If the participant arranges for transportation in accordance 
with Sec.  1499.7(b)(2), and the participant has used a freight 
forwarder, the participant shall cause the freight forwarder to submit 
the documents specified in Sec.  1499.6(a) in order to receive payment 
from CCC.
    (c) In no case will CCC reimburse a participant for demurrage costs 
or pay demurrage to any other entity.
    (d) If FAS has agreed to pay the costs of transporting, storing, 
and distributing the donated commodities from the designated port or 
point of entry, the participant will be reimbursed in the manner as set 
forth in the agreement.
    (e) If the agreement authorizes the payment of CCC-provided funds, 
CCC will pay this to the participant on a reimbursement for expenses 
basis, except as provided in paragraph (f)(1) of this section. The 
participant shall request the payment of CCC-provided funds to 
reimburse it for authorized expenses in the manner set forth in the 
agreement.
    (f)(1) A participant may request an advance of the amount of funds 
specified in the agreement. FAS will not approve any request for an 
advance:
    (i) Received earlier than 60 days after the date of a previous 
advance made in connection with the same agreement, and
    (ii) If any required reports, as specified in Sec.  1499.13 and in 
the agreement, are more than six months in arrears.
    (2) Except as may otherwise be provided in the agreement, the 
participant shall deposit and maintain in a bank account located in the 
United States all funds advanced by CCC. The account shall be interest-
bearing, unless the exceptions in Sec.  3019.22(k) of this title apply, 
or FAS determines that this requirement would constitute an undue 
burden. The participant shall remit semi-annually to CCC any interest 
earned on the advanced funds. The participant shall, no later than 10 
days after the end of each calendar quarter, submit a financial 
statement to FAS accounting for all funds advanced and all interest 
earned.
    (3) The participant shall return to CCC any funds that are advanced 
by CCC if such funds have not been obligated as of the 180th day after 
the advance was made. Such funds and interest shall be transferred to 
FAS within 30 days of such date.
    (g) If a participant is required to pay funds to CCC in connection 
with an agreement, the participant shall make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.
    (h) Suppliers of commodities shall seek payment for goods according 
to the purchase contract with CCC.


Sec.  1499.7  Transportation of goods.

    (a) Shipments of donated commodities are subject to the 
requirements of 46 U.S.C. 55305 and 55314, regarding carriage on U.S.-
flag vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by CCC under FFPr will be acquired under a 
specific agreement in the manner determined by FAS. Such transportation 
will be acquired by:
    (1) CCC in accordance with the Federal Acquisition Regulations 
(FAR), USDA's procurement regulations set forth in chapter 4 of title 
48 of the Code of Federal Regulations (the AGAR) and directives issued 
by the Director, Office of Procurement and Property Management, USDA; 
or
    (2) The participant, with reimbursement by CCC, in the manner 
specified in the agreement.
    (c) Participants that acquire transportation in accordance with 
paragraph (b)(2) of this section, may use the services of a licensed 
freight forwarder that:
    (1) Demonstrates at least three years experience in freight 
forwarding and booking services;
    (2) Is accredited or authorized to act as a licensed freight 
forwarder;
    (3) Has the capability to work with the participant to plan, 
implement, and monitor the logistics involved in transporting the 
donated commodities;
    (4) Provides three years of audited financial statements to the 
participant that demonstrates sound financial standing; and
    (5) Would not have a conflict of interest in carrying out the 
freight forwarder duties. To assist FAS in determining whether there is 
a potential conflict of interest, the participant must submit to FAS a 
certification indicating that the freight forwarder:
    (i) Is not engaged in, and will not engage in, supplying 
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under the participant's Food 
for Progress program; and
    (ii) Is not affiliated with and not made arrangements to give or 
receive any payment, kickback, or illegal benefit in connection with 
its selection as an agent of the participant.
    (d) Participants responsible for transportation under Sec.  
1499.7(b)(2) shall declare in the transportation contract the point at 
which the ocean carrier to take custody of commodity to be transported.


Sec.  1499.8  Entry and handling of commodities.

    (a) The participant shall make all necessary arrangements for 
receiving the donated commodities in the targeted country, including 
obtaining appropriate approvals for entry and transit. The participant 
shall store and maintain the donated commodities in good condition from 
the time of delivery at the port of entry or the point of

[[Page 63394]]

receipt from the originating carrier until their distribution, sale or 
barter.
    (b) The participant shall, as provided in the agreement, arrange 
for transporting, storing, and distributing the donated commodities 
from the designated point and time where title to the commodity passes 
to the participant by contracting directly with suppliers of services, 
as set forth in the agreement.
    (c)(1) If a participant arranges for the packaging or repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the people of the United States of America; and
    (iv) Includes a statement indicating that the donated commodities 
shall not be sold, exchanged or bartered.
    (2) If a participant arranges for the reprocessing and repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the reprocessed product;
    (iii) Includes a statement indicating that the reprocessed product 
was made with commodities furnished by the people of the United States 
of America; and,
    (iv) Includes a statement indicating that the reprocessed product 
shall not be sold, exchanged or bartered;
    (3) If a participant distributes donated commodities that are not 
packaged, the participant shall, to the extent practicable, display:
    (i) Banners, posters or other media informing the public of the 
name and source of the donated commodities; and
    (ii) A statement that the donated commodities may not be sold, 
exchanged, or bartered.
    (d) A participant shall arrange with the government of the targeted 
country that all donated commodities to be distributed will be imported 
and distributed free from all customs, duties, tolls, and taxes. A 
participant is encouraged to make similar arrangements, where possible, 
with the government of the country where donated commodities to be sold 
or bartered are delivered.


Sec.  1499.9  Damage to or loss of commodities.

    (a) FAS will be responsible for the donated commodities prior to 
the transfer of title to the commodities to the participant. The 
participant will be responsible for the donated commodities following 
the transfer of title to the commodities to the participant. The title 
will transfer at the time and place specified in the agreement.
    (b) A participant shall immediately inform FAS, in the manner set 
forth in the agreement, of any damage to or loss of the donated 
commodities that occurs following the transfer of title to the 
commodities to the participant. The participant shall take all steps 
necessary to protect its interests and the interests of CCC with 
respect to any damage to or loss of the donated commodities that occurs 
after title has been transferred to the participant.
    (c) If the donated commodities are damaged or lost during the time 
that they are in the care of the carrier:
    (1) And either FAS or the participant engages the services of an 
independent cargo surveyor, the surveyor will provide to FAS and the 
participant any report, narrative chronology or other commentary that 
it prepares;
    (2) FAS and the participant will provide to each other the names 
and addresses of any individuals known to be present at the time of 
discharge or during the survey who can verify the quantity of damaged 
or lost commodities;
    (3) And the participant engages the services of the surveyor, CCC 
will reimburse the participant for the reasonable costs, as determined 
by FAS, of the survey, unless:
    (i) The participant was required by the agreement to pay for the 
survey;
    (ii) The survey was a delivery survey and the surveyor did not also 
prepare a discharge survey; or
    (iii) The survey was not conducted contemporaneously with the 
discharge of the vessel, unless FAS determines that such action was 
justified under the circumstances;
    (4) Any survey obtained by the participant shall, to the extent 
practicable, be conducted jointly by the surveyor, the participant, the 
carrier, and the survey report shall be signed by all parties;
    (5) And the damage or loss occurred with respect to a bulk grain 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall obtain the 
services of an independent cargo surveyor to:
    (i) Observe the discharge of the cargo;
    (ii) Report on discharging methods, including scale type, 
calibrations and any other factor that may affect the accuracy of scale 
weights, and, if scales are not used, state the reason therefore and 
describe the actual method used to determine weight;
    (iii) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (iv) Advise on the quality of sweepings;
    (v) Obtain copies of port or vessel records, if possible, showing 
the quantity discharged; and
    (vi) Notify the participant immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and, (6) And 
the damage or loss occurred with respect to a container shipment, if 
the agreement provides that the participant is responsible for survey 
and outturn reports, the participant shall obtain the services of an 
independent cargo surveyor to list the container numbers and seal 
numbers shown on the containers, indicate whether the seals were intact 
at the time the containers were opened, and note whether the containers 
were in any way damaged.
    (d) If the value of any damaged donated commodities is in excess of 
$1,000, the participant shall immediately arrange for an inspection by 
a public health official or other competent authority approved by FAS 
and provide to FAS a certification by such public health official or 
other competent authority regarding the exact quantity and condition of 
the damaged commodities. The participant shall inform FAS of the 
results of the inspection and indicate whether the damaged commodities 
are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (e)(1) If the participant has title to the donated commodities, the 
participant shall arrange for the recovery of that portion of the 
donated commodities designated as suitable for the use authorized in 
the agreement. The participant shall dispose of donated commodities 
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or for other non-food use; or
    (iii) Destruction of the commodities if they are unfit for any use, 
in such manner as to prevent their use for any purpose.

[[Page 63395]]

    (2) The participant shall arrange for all U.S. Government markings 
to be obliterated or removed before the donated commodities are 
transferred by sale or donation.
    (f) A participant may retain any proceeds generated by the disposal 
of the donated commodities in accordance with paragraph (e)(1) of this 
section, and shall use the proceeds for expenses related to the 
disposal of the donated commodities and for activities specified in the 
agreement.
    (g) The participant shall notify FAS immediately and provide 
detailed information about the actions taken in accordance with 
paragraph (e)(1) of this section, including the quantities, values and 
dispositions used to handle commodities determined to be unfit.


Sec.  1499.10  Claims for damage to or loss of commodities.

    (a) FAS will be responsible for claims arising out of damage to or 
loss of a quantity of the donated commodities prior to the transfer of 
title to the commodities to the participant.
    (b) If the value of the damaged or lost donated commodities is 
estimated to be $20,000 or more and the title to the commodities has 
transferred to the participant, the participant will be responsible 
for:
    (1) Initiating a claim arising out of such damage or loss, 
including actions relating to collections pursuant to commercial 
insurance contracts; and
    (2) Notifying FAS immediately and providing detailed information 
about the circumstances surrounding such damage or loss, the quantity 
of damaged or lost donated commodities, and the value of the damage or 
loss.
    (c) If the value of the damaged or lost donated commodities is 
estimated to be less than $20,000, the participant will be responsible 
for providing detailed information about the damage or loss in the next 
report required to be filed under Sec.  1499.13(c) and shall not be 
required to initiate a claim collection action.
    (d)(1) The value of a claim for lost donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities.
    (2) The value of a claim for damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by CCC with respect to such commodities, 
less any funds generated if such commodities are sold in accordance 
with Sec.  1499.9(e)(1).
    (e) If FAS determines that a participant is not exercising due 
diligence in the pursuit of a claim, FAS may require the participant to 
assign its rights to pursue the claim to FAS.
    (f)(1) The participant may retain any funds obtained as a result of 
a claims collection action initiated by it in accordance with this 
section, or recovered pursuant to any insurance policy or other similar 
form of indemnification, but such funds shall only be expended for 
purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims 
collection action initiated by it under this section; provided, 
however, that if the participant paid for the freight or a portion 
thereof, FAS will use a portion of such funds to reimburse the 
participant for such expense on a prorated basis.


Sec.  1499.11  Use of commodities and sale proceeds.

    (a) A participant must use the donated commodities in accordance 
with the agreement.
    (b) A participant shall not permit the distribution, handling, or 
allocation of donated commodities on the basis of political 
affiliation, geographic location, or the ethnic, tribal or religious 
identity of affiliation of the potential consumers or beneficiaries.
    (c) A participant shall not permit the distribution, handling, or 
allocation of donated commodities by the military forces or any 
government or insurgent group without the specific authorization of 
FAS.
    (d) A participant may sell or barter donated commodities only if 
such sale or barter is provided for in the agreement or the participant 
is disposing of damaged commodities as specified in Sec.  1499.9. The 
participant shall sell the donated commodities at a reasonable market 
price in the economy where the sale occurs. The participant shall use 
any sale proceeds, income, or goods or services derived from the sale 
or barter of the donated commodities only as provided in the agreement.
    (e) The participant shall retain copies of and make available to 
FAS all barter receipts, contracts or other documents related to the 
barter of the donated commodities and the services or goods derived 
from such barter, for a minimum of 24 months after the agreement has 
been terminated or closed out.
    (f) The participant shall deposit all sale proceeds and income into 
a separate, interest-bearing account unless the exceptions in Sec.  
3019.22(k) of this title apply, the account is in a country where the 
laws or customs prohibit the payment of interest, or FAS determines 
that this requirement would constitute an undue burden.
    (g) A participant may use sale proceeds or income to purchase real 
or personal property only if local law permits the participant to 
retain title to such property. However, the participant shall not use 
sale proceeds or income to pay for the acquisition, development, 
construction, alteration or upgrade of real property that is:
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a 
participant may use sale proceeds or income to pay for repairs to or 
rehabilitation of a structure located on such real property to the 
extent necessary to avoid spoilage or loss of donated commodities, but 
only if such structure is not used in whole or in part for any 
religious or sectarian purposes while the donated commodities are 
stored in it. If such use is not specifically provided for in the 
agreement, such use may only occur after receipt of written approval 
from FAS.
    (h) A participant shall endeavor to comply with Sec. Sec.  3019.41 
through 3019.43 of this title when procuring goods and services and 
when engaging in construction work to implement the agreement. The 
participant shall also establish procedures to prevent fraud. The 
participant shall enter into a written contract with each provider of 
goods, services or construction work that requires the provider to 
maintain adequate records to account for all donated commodities or 
funds or both provided to the provider by the participant and to submit 
periodic reports to the participant. The participant shall submit a 
copy of the signed contracts to FAS.


Sec.  1499.12  Subrecipients.

    (a) If provided for in the agreement, a participant may utilize the 
services of a subrecipient to implement activities under this 
agreement. The participant shall enter into a written subagreement with 
the subrecipient, and provide a copy of such subagreement to FAS, in 
the manner set forth in the agreement, prior to the transfer of any 
donated commodities, sale proceeds, income or CCC-provided funds to the 
subrecipient. Such written subagreement shall require the subrecipient 
to pay to the participant the value of any donated commodities, sale 
proceeds, income, or CCC-provided cash funds that is not used in 
accordance with the subagreement, or are lost, damaged, or

[[Page 63396]]

misused as a result of the subrecipient's failure to exercise 
reasonable care.
    (b) If a participant demonstrates to FAS that it is not feasible to 
enter into a subagreement with a subrecipient, FAS may grant approval 
to proceed without a subagreement; provided, however, that the 
participant must obtain such approval from FAS prior to transferring 
any donated commodities, sale proceeds, income, or CCC-provided funds 
to the subrecipient.
    (c) The participant shall monitor the actions of a subrecipient as 
necessary to ensure that donated commodities or funds provided to the 
subrecipient are used for authorized purposes in compliance with 
applicable laws and regulations and the agreement and that performance 
goals are achieved. The participant shall provide in the subagreement 
that the subrecipient must comply with applicable provisions of the 
regulations set forth in Chapter 30 of this title.


Sec.  1499.13  Recordkeeping and reporting requirements.

    (a) A program participant shall retain records and permit access to 
records in accordance with the requirements of Sec.  3019.53 of this 
title. The date of submission of the final expenditure report, as 
referenced in Sec.  3019.53(b) of this title, shall be the final date 
of submission of the forms required by paragraphs (c)(1) and (2) of 
this section as prescribed by FAS.
    (b) A participant shall, within 30 days after export of all or a 
portion of the donated commodities, submit evidence of such export to 
FAS, in the manner set forth in the agreement. The evidence may be 
submitted through an electronic media approved by FAS or by providing 
the carrier's on board bill of lading. The evidence of export must show 
the kind and quantity of commodities exported, the date of export, and 
the country where commodities were delivered.
    (c)(1) A participant shall submit to FAS information, using a form 
as prescribed by FAS, covering the receipt, handling and disposition of 
the donated commodities. Such report shall be submitted to FAS, by the 
dates and for the reporting periods specified in the program agreement, 
until all of the donated commodities have been distributed, sold or 
bartered and such disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated 
commodities, the participant shall submit to FAS information, using a 
form as prescribed by FAS, covering the receipt and use of sale 
proceeds and income, and in the case of bartered commodities, covering 
the services and goods derived from the barter of donated commodities. 
Such reports shall be submitted to FAS, by the dates and for the 
reporting periods specified in the agreement, until all of the 
generated sales proceeds and income have been disbursed and reported to 
FAS. When reporting financial information, the participant shall 
include the amounts in U.S. dollars and the exchange rate.
    (3) The participant shall provide to FAS additional information or 
reports relating to the agreement if requested by FAS.
    (4) The participant shall report, in the manner specified in the 
agreement, its progress, measured against established baselines, 
towards achieving the objectives of the activities under the agreement.
    (d) A participant shall submit to FAS, in the manner specified in 
the agreement, an annual audit in accordance with Sec.  3019.26 of this 
title. If FAS requires an audit with respect to a particular agreement, 
and CCC provides funds for this purpose, participant shall arrange for 
such audit and shall submit to FAS, in the manner specified in the 
agreement, an annual financial audit of the agreement.
    (e)(1) A participant shall, as provided in the agreement, submit to 
FAS interim and final evaluations of the implementation of the 
agreement. Unless otherwise provided in the agreement, the evaluations 
shall be submitted at the mid-point and end-point of the implementation 
period. The participant shall arrange for the evaluations to be 
conducted by an independent third party that:
    (i) Is financially and legally separate from the participant's 
organization;
    (ii) Has staff with demonstrated knowledge, analytical capability, 
language skills and experience in conducting evaluations of development 
programs involving agriculture, education, and nutrition;
    (iii) Uses acceptable analytical frameworks such as comparison with 
non-project areas, surveys, involvement of stakeholders in the 
evaluation, and statistical analyses;
    (iv) Uses local consultants, as appropriate, to conduct portions of 
the evaluation;
    (v) Provides a detailed outline of the evaluation, major task, and 
specific schedules prior to initiating the evaluation.
    (2) Receipt by FAS of the evaluations referred to in paragraph (1) 
of this section, is a condition of retaining funds received to carry 
out the evaluations.
    (f) Participants shall submit to FAS the financial reports and 
information outlined in Sec.  3019.52 of this title. The agreement will 
specify the acceptable forms and time requirements for submission.


Sec.  1499.14  Noncompliance with an agreement.

    If a participant fails to comply with a term of an agreement, FAS 
may take one or more of the enforcement actions set forth in Sec.  
3019.62 of this title and, if, appropriate, initiate a claim against 
the participant. FAS may also initiate a claim against a participant if 
the donated commodities are damaged or lost or the sale proceeds, 
income, of CCC-provided funds are lost due to an action or omission of 
the participant.


Sec.  1499.15  Suspension, termination, and closeout of agreements.

    (a) An agreement may be suspended or terminated by CCC if it 
determines that:
    (1) The continuation of the assistance provided under this 
agreement is no longer necessary or desirable; or
    (2) Storage facilities are inadequate to prevent spoilage or waste, 
or distribution of the donated commodities will result in substantial 
disincentive to, or interference with, domestic production or marketing 
in the targeted country.
    (b) An agreement may be terminated in accordance with Sec.  3019.61 
of this title. If an agreement is terminated, the participant shall:
    (1) Be responsible for the safety of any undistributed donated 
commodities and dispose of such commodities only as agreed to by FAS; 
and
    (2) Follow the closeout procedures in Sec. Sec.  3019.71 through 
3019.73 of this title will apply to the closeout of an agreement.
    (c) An agreement will be considered completed when CCC and the 
participant have fulfilled their responsibilities under the agreement 
or the agreement has been terminated. The procedures in Sec. Sec.  
3019.71 through 3019.73 of this title will apply to the closeout of an 
agreement.


Sec.  1499.16  Appeals

    A participant may appeal a determination arising under this part to 
FAS. Such appeal will be in writing and submitted to the FAS official 
and in the manner set forth in the agreement. The participant will be 
given an opportunity to have a hearing before a final decision is made 
regarding its appeal.


Sec.  1499.17  Paperwork Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
under provisions of 44 U.S.C. Chapter 35 and

[[Page 63397]]

have been assigned OMB Numbers 0551-0035.
    3. Revise part 1599 to read as follows:

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

Sec.
1599.1 General statement.
1599.2 Definitions.
1599.3 Eligibility determination.
1599.4 Application process.
1599.5 Agreements.
1599.6 Payments.
1599.7 Transportation of goods.
1599.8 Entry and handling of commodities.
1599.9 Damage to and loss of commodities.
1599.10 Claims for damage to or loss of commodities.
1599.11 Use of commodities and sales proceeds.
1599.12 Subrecipients.
1599.13 Recordkeeping and reporting requirements.
1599.14 Noncompliance with an agreement.
1599.15 Suspension, termination, and closeout of agreements.
1599.16 Appeals.
1599.17 Paperwork Reduction Act.

    Authority: 7 U.S.C. 1736o-1.


Sec.  1599.1  General Statement.

    (a) This part sets forth the general terms and conditions governing 
the donation of commodities by the Foreign Agricultural Service (FAS) 
to participants in the McGovern-Dole International Food for Education 
and Child Nutrition Program (McGovern-Dole Program). Under the 
McGovern-Dole Program, participants use the donated commodities, FAS-
provided funds, and/or proceeds from the sale of donated commodities to 
implement activities in a foreign country pursuant to an agreement with 
FAS. In cases where the agreement is funded with Commodity Credit 
Corporation (CCC) resources, the Foreign Agricultural Service (FAS) of 
the Department of Agriculture (USDA) will administer the McGovern-Dole 
Program on behalf of CCC.
    (b) In addition to the provisions of this part, other regulations 
of general application issued by USDA, including the regulations set 
forth in Chapter 30 of this title, are applicable to the McGovern-Dole 
Program.
    (c) This part shall not apply to a donation by FAS to a foreign 
government or an intergovernmental agency or organization (such as the 
United Nations' World Food Program) under the McGovern-Dole Program.


Sec.  1599.2  Definitions.

    The following definitions are applicable to this part:
    Activity means a project to be carried out by a participant, 
directly or through a subrecipient, to fulfill the objectives of an 
agreement.
    Agreement means a legally binding agreement entered into between 
FAS and a participant to implement activities under the McGovern-Dole 
Program.
    CCC means the Commodity Credit Corporation and includes any 
official of the United States delegated the responsibility to act on 
behalf of CCC.
    Commodities mean U.S. agricultural commodities or products of U.S. 
agricultural commodities.
    FAS-provided funds mean U.S. dollars provided under an agreement to 
a participant for expenses for the internal transportation, storage and 
handling of the donated commodities, expenses involved in the 
administration and monitoring of the activities under the agreement, 
expenses to carry out activities that enhance the effectiveness of the 
commodities, and technical assistance to develop school feeding 
programs and determine nutritional composition of school meals.
    Donated commodities mean the commodities donated by FAS to a 
participant under an agreement. The term may include donated 
commodities that are used to produce a further processed product for 
use under the agreement.
    FAS means the Foreign Agricultural Service of the United States 
Department of Agriculture.
    Force majeure is a common clause in contracts, exempting the 
parties for non-fulfillment of their obligations as a result of 
conditions beyond their control, such as earthquakes, floods or war.
    Income means interest earned on sale proceeds and other resources 
received by a participant, other than sale proceeds, as a result of 
carrying out an agreement. The term may include resources from VAT 
refunds, activity fees, interest on loans, and others.
    McGovern-Dole Program means the McGovern-Dole International Food 
for Education and Child Nutrition Program.
    Participant means an entity with which FAS has entered into an 
agreement.
    Sale proceeds mean funds received by a participant from the sale of 
donated commodities.
    Subrecipient means a legal entity that receives donated 
commodities, income, sale proceeds or other resources from a 
participant for the purpose of implementing in the targeted country 
activities described in a McGovern-Dole Program agreement and that is 
accountable to such participant for the use of such commodities, funds, 
or resources. The term may include foreign or international 
organizations (such as agencies of the United Nations) at the 
discretion of FAS.
    Targeted country means the country in which activities are 
implemented under an agreement.


Sec.  1599.3  Eligibility determination.

    (a) An entity will be eligible to become a participant only after 
FAS determines that the entity has:
    (1) Organizational experience in implementing and managing grants, 
and the capability and personnel to develop, implement, monitor, report 
on, and provide accountability for activities in accordance with this 
part;
    (2) Experience working in the proposed targeted country;
    (3) Adequate financial framework to implement the activities the 
entity proposes to carry out under McGovern-Dole Program. In order to 
determine whether the entity is financially responsible, FAS may 
require it to submit corporate policies and financial materials that 
have been audited or otherwise reviewed by a third party;
    (4) A person or agent located in the United States with respect to 
which service of judicial process may be obtained by FAS on behalf of 
the entity; and
    (5) An operating financial account in the proposed targeted 
country, or a satisfactory explanation for not having such an account 
and a description of how a McGovern-Dole Program agreement would be 
administered without such an account.
    (b) In determining whether an entity will be eligible to be a 
participant, FAS may consider the entity's previous compliance or 
noncompliance with the provisions of this part and part 1499 of this 
title. FAS may consider matters such as whether the entity corrected 
deficiencies in the implementation of an agreement in a timely manner 
and whether the entity has timely and accurately filed reports and 
other submissions that are required to be filed with FAS and other 
agencies of the United States.


Sec.  1599.4  Application process.

    (a) An entity seeking to enter into an agreement with FAS shall 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under the McGovern-Dole Program in 
the proposed target country. An application shall contain the items 
specified in paragraph (b) of this section, and shall be submitted 
electronically to FAS at the address set forth at http://www.fas.usda.gov. An

[[Page 63398]]

entity that has not yet met the eligibility requirements in Sec.  
1599.3 may submit an application, but FAS will not enter into an 
agreement with an entity until FAS had made a determination of 
eligibility under Sec.  1599.3.
    (b) An applicant shall include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction that contains the elements specified in 
paragraph (c) of this section; and
    (3) A plan of operation that contains the elements specified in 
paragraph (d) of this section.
    (c) The introduction shall include:
    (1) An explanation of the need for the food aid in the targeted 
country and how the applicant's proposed activities would address that 
need;
    (2) Reasons for the need for a school feeding program in the 
targeted country, including the following:
    (i) Country's current school feeding operations, if they exist, 
length and sessions of a typical school year, along with current 
funding resources;
    (ii) Any information regarding teacher training, community 
infrastructure (PTAs), health, nutrition, and water and sanitation 
information;
    (3) Information regarding the applicant's ability to become 
registered and operate in the targeted country;
    (4) Information about the applicant's past food aid projects;
    (5) Methods used to involve indigenous institutions as well as 
local communities and governments in the development and implementation 
of the programs and activities to foster local capacity building and 
leadership;
    (6) A budget that details the amount of any sale proceeds, income, 
and FAS-provided funds that the applicant proposes to use to fund:
    (i) Administrative costs;
    (ii) Inland transportation, storage and handling costs; and
    (iii) Activity costs;
    (7) Provide a statement verifying the government's commitment to 
work toward, through a national action plan, the goals of the World 
Declaration on Education for All convened in 1990 in Jomtien, Thailand, 
and the follow-up Dakar Framework for Action of the World Education 
Forum, convened in 2000; and,
    (8) Steps that will be taken to continue the program activities 
after termination of the program agreement to address sustainability of 
all, or portions of the program, including a description of:
    (i) How the program participant or another entity will sustain the 
benefits of education, enrollment, and attendance of children in 
schools in the targeted communities; and
    (ii) The estimated time necessary for the program to graduate and 
be sustained by the recipient country or other organizations without 
additional assistance under the program.
    (d) A plan of operation shall include:
    (1) The name of the targeted country where the proposed activities 
would be implemented;
    (2) The kind, quantity, and proposed use of the commodities 
requested, and any commodities that would be acceptable substitutions 
therefore, and the proposed delivery schedule;
    (3) If monetization or barter is proposed:
    (i) The quantity of the requested commodities that would be sold or 
bartered;
    (ii) The amount of sale proceeds anticipated;
    (iii) The amount of income expected to be generated;
    (iv) The anticipated monetization completion date;
    (v) The goods or services to be generated from the barter of the 
requested commodities;
    (vi) The value of the goods or services anticipated to be generated 
from the barter of the requested commodities; and
    (vii) A justification of why monetization provides a greater 
benefit to the program than the receipt of FAS-provided funds to carry 
out activities.
    (4) A list of each of the activities that would be implemented, 
with a brief statement of the objectives to be accomplished under each 
activity;
    (5) For each proposed activity, the targeted geographic area, 
anticipated beneficiaries, and methods that the applicant would use to 
choose such beneficiaries, including obtaining and considering 
statistics on poverty levels, food deficits, literacy rates, and any 
other required items set forth on the FAS Web site at http://www.fas.usda.gov.
    (6) For each proposed activity:
    (i) An explanation of whether the activity would be carried out 
through the distribution of the requested commodities or funded by FAS-
provided funds, sale proceeds, income, or a combination thereof; and
    (ii) The amount of commodities, FAS-provided funds, sale proceeds, 
or income requested to carry out such activity; and
    (iii) A detailed description of the activity, including the steps 
involved in its implementation and the anticipated completion date;
    (7) Any cash or non-cash contributions that the applicant expects 
to receive from non-FAS sources that:
    (i) Are critical to the implementation of the proposed activities; 
or
    (ii) Enhance the implementation of the activities;
    (8) Any subrecipient that would be involved and a description of 
each subrecipient's responsibilities and its capability to perform 
responsibilities;
    (9) Any governmental or nongovernmental entities that would be 
involved and the extent to which the McGovern-Dole Program will 
strengthen or increase the capabilities of such entities to further 
educational and economic development in the targeted country;
    (10) The method by which the applicant intends to inform 
beneficiaries of an activity about the source of the requested 
commodities or funding for the activity and, where the beneficiaries 
will be receiving the commodities directly, how to prepare and use them 
properly;
    (11) Established baselines, a timeline, and proposed outcomes that 
would enable FAS to measure the applicant's progress towards achieving 
the objectives of proposed activities and the McGovern-Dole Program 
objective that include:
    (i) Increased enrollment and attendance rates, especially for 
girls;
    (ii) Improved student achievement levels through improvements in 
the learning environment;
    (iii) Improved maternal, child and student health and nutrition;
    (iv) Attracting non-FAS contributions to development activities;
    (v) Enabling community support for infrastructure development; and
    (vi) Increased government and community support in education;
    (12) If the proposed activities would involve the use of sale 
proceeds or income:
    (i) The process that the applicant would use to sell the requested 
commodities, including steps the applicant would take to use, to the 
extent possible, the private sector in the monetization process; and
    (ii) The procedures that the applicant would use to assure that 
sale proceeds and income are received and deposited into a separate, 
interest-bearing account and disbursed from such account for use only 
in accordance with the agreement;
    (13) A description of how the requested commodities would be 
transported from the receiving port to the point at which distribution 
is made to the beneficiaries and a description of any port, 
transportation, storage, and warehouse facilities that would be used

[[Page 63399]]

with sufficient detail to demonstrate that they would be adequate to 
handle the requested commodities without undue spoilage or waste;
    (14) Any reprocessing or repackaging of the requested commodities 
that would take place prior to the distribution, sale or barter by the 
participant;
    (15) The action the applicant would take to ensure that any 
commodities to be distributed to beneficiaries, rather than sold, would 
be imported and distributed free from all customs, duties, tolls, and 
taxes;
    (16) A plan that shows how the requested commodities could be 
imported and distributed without a disruptive impact upon production, 
prices and marketing of the same or like products in the country where 
they will be delivered, and the extent to which any sale or barter of 
the requested commodities would displace or interfere with any sales 
that may otherwise be made by the applicant or any other entity in the 
country where they will be delivered; and
    (17) Any additional required items set forth on the FAS Web site at 
http://www.fas.usda.gov.


Sec.  1599.5  Agreements.

    (a) After FAS approves an applicant's proposal, FAS will develop an 
agreement in consultation with the applicant. The agreement will set 
forth the obligations of FAS and the participant. A participant must 
comply with the terms of the agreement to receive assistance.
    (b) A participant shall not use donated commodities, sale proceeds, 
income or FAS-provided funds for any activity or any expenses incurred 
by the participant prior to the date of the agreement or after the 
agreement is suspended or terminated.
    (c) The agreement will include a budget that sets forth the maximum 
amounts of sale proceeds and FAS-provided funds that may be expended 
for various purposes under the agreement. A participant may make 
adjustments to this budget without prior approval from FAS only as 
specified in the agreement.
    (d) Prior to providing any donated commodities or FAS-provided 
funds to a participant under an agreement, FAS may require the 
participant to complete a training program administered by FAS that is 
designed to ensure that the participant is aware of, and has the 
capacity to complete all required reporting and audit functions set 
forth in this part.
    (e) A participant will be prohibited from using FAS-provided funds 
to acquire goods and services either directly or indirectly through 
another party from certain countries that will specified in the 
agreement. Any violation of this provision of the agreement will be a 
basis for immediate termination by FAS of the agreement in addition to 
the imposition of any other applicable civil and criminal penalties.
    (f) The agreement will prohibit the sale or transshipment of the 
donated commodities to a country not specified in the agreement for so 
long as such donated commodities are controlled by the participant.
    (g) FAS may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (h) FAS may provide donated commodities and FAS-provided funds 
under a multiyear agreement contingent upon the availability of 
commodities and funds.


Sec.  1599.6  Payments.

    (a) If the participant arranges for transportation in accordance 
with Sec.  1599.7(b)(2), and the participant seeks payment directly, 
the participant shall submit the following documents to FAS in the 
manner set forth in the agreement:
    (1) A signed copy of the completed Form CCC-512;
    (2) The original on-board bills of lading indicating the freight 
rate and signed by the originating carrier;
    (3) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate (Vessel Hold Certificate);
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness (Vessel Hold Inspection Certificate); and,
    (iii) A signed copy of the National Cargo Bureau Certificate of 
Loading;
    (4) For all containerized cargoes s copy of the FGIS Container 
Condition Inspection Certificate;
    (5) A signed copy of liner booking note or charter party covering 
ocean transportation of cargo;
    (6) In the case of charter shipments, a signed notice of arrival at 
first discharge port, unless FAS has determined that circumstances of 
force majeure have prevented the vessel's arrival at the first port of 
discharge;
    (7) A request by the participant for reimbursement of freight, 
survey costs, and other expenses approved by FAS indicating the amount 
due and accompanied by a certification from the carrier or other 
parties that payments have been received from the participant; and
    (8) A document on letterhead and signed by an officer or agent of 
the participant specifying the name of the entity to receive payment; 
the bank ABA number to which payment is to be made; the account number 
for the deposit at the bank; the participant's taxpayer identification 
number; and the type of the account into which the payment will be 
deposited.
    (b) If the participant arranges for transportation in accordance 
with Sec.  1599.7(b)(2), and the participant has used a freight 
forwarder, the participant shall cause the freight forwarder to submit 
the documents specified in Sec.  1599.6(a) in order to receive payment 
from FAS.
    (c) In no case will FAS reimburse a participant for demurrage costs 
or pay demurrage to any other entity.
    (d) If FAS has agreed to pay the costs of transporting, storing, 
and distributing the donated commodities from the designated port or 
point of entry, the participant will be reimbursed in the manner as set 
forth in the agreement.
    (e) If the agreement authorizes the payment of FAS-provided funds, 
FAS will pay this to the participant on a reimbursement for expenses 
basis, except as provided in paragraph (f)(1) of this section. The 
participant shall request the payment of FAS-provided funds to 
reimburse it for authorized expenses in the manner set forth in the 
agreement.
    (f)(1) A participant may request an advance of the amount of funds 
specified in the agreement. FAS will not approve any request for an 
advance:
    (i) Received earlier than 60 days after the date of a previous 
advance made in connection with the same agreement, and
    (ii) If any required reports, as specified in Sec.  1499.13 and in 
the agreement, are more than six months in arrears.
    (2) Except as may otherwise be provided in the agreement, the 
participant shall deposit and maintain in a bank account located in the 
United States all funds advanced by FAS. The account shall be interest-
bearing, unless the exceptions in Sec.  3019.22(k) of this title apply, 
or FAS determines that this requirement would constitute an undue 
burden. The participant shall remit semi-annually to FAS any interest 
earned on the advanced funds. The participant shall, no later than 10 
days after the end of each calendar quarter, submit a financial 
statement to FAS accounting for all funds advanced and all interest 
earned.
    (3) The participant shall return to FAS any funds that are advanced 
by FAS if such funds have not been obligated as

[[Page 63400]]

of the 180th day after the advance was made. Such funds and interest 
shall be transferred to FAS within 30 days of such date.
    (g) If a participant is required to pay funds to FAS in connection 
with an agreement, the participant shall make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.
    (h) Suppliers of commodities shall seek payment for goods according 
to the purchase contract.


Sec.  1599.7  Transportation of goods.

    (a) Shipments of donated commodities are subject to the 
requirements of 46 U.S.C. 55305 and 55314, regarding carriage on U.S.-
flag vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by FAS under the McGovern-Dole Program will 
be acquired under a specific agreement in the manner determined by FAS. 
Such transportation will be acquired by:
    (1) FAS in accordance with the Federal Acquisition Regulations 
(FAR), USDA's procurement regulations set forth in chapter 4 of title 
48 of the Code of Federal Regulations (the AGAR) and directives issued 
by the Director, Office of Procurement and Property Management, USDA; 
or
    (2) The participant, with reimbursement by FAS, in the manner 
specified in the agreement.
    (c) Participants that acquire transportation in accordance with 
paragraph (b)(2) of this section, may use the services of a licensed 
freight forwarder that:
    (1) Demonstrates at least three years experience in freight 
forwarding and booking services;
    (2) Is accredited or authorized to act as a licensed freight 
forwarder;
    (3) Has the capability to work, with the participant to plan, 
implement, and monitor the logistics involved in transporting the 
donated commodities;
    (4) Provides three years of audited financial statements to the 
participant that demonstrates sound financial standing; and
    (5) Would not have a conflict of interest in carrying out the 
freight forwarder duties. To assist FAS in determining whether there is 
a potential conflict of interest, the participant must submit to FAS a 
certification indicating that the freight forwarder:
    (i) Is not engaged in, and will not engage in, supplying 
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under the participant's 
McGovern-Dole program; and
    (ii) Is not affiliated with and not made arrangements to give or 
receive any payment, kickback, or illegal benefit in connection with 
its selection as an agent of the participant.
    (d) Participants responsible for transportation under Sec.  
1599.7(b)(2) shall declare in the transportation contract the point at 
which the ocean carrier is to take custody of commodity to be 
transported.


Sec.  1599.8  Entry and handling of commodities.

    (a) The participant shall make all necessary arrangements for 
receiving the donated commodities in the targeted country, including 
obtaining appropriate approvals for entry and transit. The participant 
shall store and maintain the donated commodities in good condition from 
the time of delivery at the port of entry or the point of receipt from 
the originating carrier until their distribution, sale or barter.
    (b) The participant shall, as provided in the agreement, arrange 
for transporting, storing, and distributing the donated commodities 
from the designated point and time where title to the commodity passes 
to the participant or by contracting directly with suppliers of 
services, as set forth in the agreement.
    (c)(1) If a participant arranges for the packaging or repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the people of the United States of America; and
    (iv) Includes a statement indicating that the donated commodities 
shall not be sold, exchanged or bartered.
    (2) If a participant arranges for the reprocessing and repackaging 
of donated commodities that are to be distributed, the participant 
shall ensure that the packaging:
    (i) Is plainly labeled in the language of the targeted country;
    (ii) Contains the name of the reprocessed product;
    (iii) Includes a statement indicating that the reprocessed product 
was made with commodities furnished by the people of the United States 
of America; and.
    (iv) Includes a statement indicating that the reprocessed product 
shall not be sold, exchanged or bartered;
    (3) If a participant distributes donated commodities that are not 
packaged, the participant shall, to the extent practicable, display:
    (i) Banners, posters or other media informing the public of the 
name and source of the donated commodities; and
    (ii) A statement that the donated commodities may not be sold, 
exchanged, or bartered.
    (e) A participant shall arrange with the government of the targeted 
country that all donated commodities to be distributed will be imported 
and distributed free from all customs, duties, tolls, and taxes. A 
participant is encouraged to make similar arrangements, where possible, 
with the government of the country where donated commodities to be sold 
or bartered are delivered.


Sec.  1599.9  Damage to or loss of commodities.

    (a) FAS will be responsible for the donated commodities prior to 
the transfer of title to the commodities to the participant. The 
participant will be responsible for the donated commodities following 
the transfer of title to the commodities to the participant. The title 
will transfer at the time specified in the agreement.
    (b) A participant shall immediately inform FAS, in the manner set 
forth in the agreement, of any damage to or loss of the donated 
commodities that occurs following the transfer of title to the 
commodities to the participant. The participant shall take all steps 
necessary to protect its interests and the interests of FAS with 
respect to any damage to or loss of the donated commodities that occurs 
after title has been transferred to the participant.
    (c) If the donated commodities are damaged or lost during the time 
that they are in the care of the carrier:
    (1) And either FAS or the participant engages the services of an 
independent cargo surveyor, the surveyor will provide to FAS and the 
participant any report, narrative chronology or other commentary that 
it prepares;
    (2) FAS and the participant will provide to each other the names 
and addresses of any individuals known to be present at the time of 
discharge or during the survey who can verify the quantity of damaged 
or lost commodities;
    (3) And the participant engages the services of the surveyor; FAS 
will reimburse the participant for the reasonable costs, as determined 
by FAS, of the survey, unless:
    (i) The participant was required by the agreement to pay for the 
survey;
    (ii) The survey was a delivery survey and the surveyor did not also 
prepare a discharge survey; or
    (iii) The survey was not conducted contemporaneously with the 
discharge

[[Page 63401]]

of the vessel, unless FAS determines that such action was justified 
under the circumstances;
    (4) Any survey obtained by the participant shall, to the extent 
practicable, be conducted jointly by the surveyor, the participant, the 
carrier, and the survey report shall be signed by all parties;
    (5) And the damage or loss occurred with respect to a bulk grain 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall obtain the 
services of an independent cargo surveyor to:
    (i) Observe the discharge of the cargo;
    (ii) Report on discharging methods, including scale type, 
calibrations and any other factor that may affect the accuracy of scale 
weights, and, if scales are not used, state the reason therefore and 
describe the actual method used to determine weight;
    (iii) Estimate the quantity of cargo, if any, lost during discharge 
through carrier negligence;
    (iv) Advise on the quality of sweepings;
    (v) Obtain copies of port or vessel records, if possible, showing 
the quantity discharged; and
    (vi) Notify the participant immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and
    (6) And the damage or loss occurred with respect to a container 
shipment, if the agreement provides that the participant is responsible 
for survey and outturn reports, the participant shall obtain the 
services of an independent cargo surveyor to list the container numbers 
and seal numbers shown on the containers, indicate whether the seals 
were intact at the time the containers were opened, and note whether 
the containers were in any way damaged.
    (d) If the value of any damaged donated commodities is in excess of 
$1,000, the participant shall immediately arrange for an inspection by 
a public health official or other competent authority approved by FAS 
and provide to FAS a certification by such public health official or 
other competent authority regarding the exact quantity and condition of 
the damaged commodities. The participant shall inform FAS of the 
results of the inspection and indicate whether the damaged commodities 
are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (e)(1) If the participant has title to the donated commodities, the 
participant shall arrange for the recovery of that portion of the 
donated commodities designated as suitable for the use authorized in 
the agreement. The participant shall dispose of donated commodities 
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or for other non-food use; or
    (iii) Destruction of the commodities if they are unfit for any use, 
in such manner as to prevent their use for any purpose.
    (2) The participant shall arrange for all U.S. Government markings 
to be obliterated or removed before the donated commodities are 
transferred by sale or donation.
    (f) A participant may retain any proceeds generated by the disposal 
of the donated commodities in accordance with paragraph (e) of this 
section, and shall use the proceeds for expenses related to the 
disposal of the donated commodities and for activities specified in the 
agreement.
    (g) The participant shall notify FAS immediately and provide 
detailed information about the actions taken in accordance with 
paragraph (e) of this section, including the quantities, values and 
dispositions used to handle commodities determined to be unfit.


Sec.  1599.10  Claims for damage to or loss of commodities.

    (a) FAS will be responsible for claims arising out of damage to or 
loss of a quantity of the donated commodities prior to the transfer of 
title to the commodities to the participant.
    (b) If the value of the damaged or lost donated commodities is 
estimated to be $20,000 or more and the title to the commodities has 
transferred to the participant, the participant will be responsible 
for:
    (1) Initiating a claim arising out of such damage or loss, 
including actions relating to collections pursuant to commercial 
insurance contracts; and
    (2) Notifying FAS immediately and providing detailed information 
about the circumstances surrounding such damage or loss, the quantity 
of damaged or lost donated commodities, and the value of the damage or 
loss.
    (c) If the value of the damaged or lost donated commodities is 
estimated to be less than $20,000, the participant will be responsible 
for providing detailed information about the damage or loss in the next 
report required to be filed under Sec.  1599.13(c) and shall not be 
required to initiate a claim collection action.
    (d)(1) The value of a claim for lost donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities.
    (2) The value of a claim for damaged donated commodities shall be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, 
less any funds generated if such commodities are sold in accordance 
with Sec.  1599.9(e)(1).
    (e) If FAS determines that a participant is not exercising due 
diligence in the pursuit of a claim, FAS may require the participant to 
assign its rights to pursue the claim to FAS.
    (f)(1) The participant may retain any funds obtained as a result of 
a claims collection action initiated by it in accordance with this 
section, or recovered pursuant to any insurance policy or other similar 
form of indemnification, but such funds shall only be expended for 
purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims 
collection action initiated by it under this section; provided, 
however, that if the participant paid for the freight or a portion 
thereof, FAS will use a portion of such funds to reimburse the 
participant for such expense on a prorated basis.


Sec.  1599.11  Use of commodities and sale proceeds.

    (a) A participant must use the donated commodities in accordance 
with the agreement.
    (b) A participant shall not permit the distribution, handling, or 
allocation of donated commodities on the basis of political 
affiliation, geographic location, or the ethnic, tribal or religious 
identity of affiliation of the potential consumers or beneficiaries.
    (c) A participant shall not permit the distribution, handling, or 
allocation of donated commodities by the military forces or any 
government or insurgent group without the specific authorization of 
FAS.
    (d) A participant may sell or barter donated commodities only if 
such sale or barter is provided for in the agreement or the participant 
is disposing of damaged commodities as specified in Sec.  1599.9. The 
participant shall sell the donated commodities at a reasonable market 
price in the economy where the sale occurs. The participant

[[Page 63402]]

shall use any sale proceeds, income, or goods or services derived from 
the sale or barter of the donated commodities only as provided in the 
agreement.
    (e) The participant shall retain copies of and make available to 
FAS all barter receipts, contracts or other documents related to the 
barter of the donated commodities and the services or goods derived 
from such barter, for a minimum of 24 months after the agreement has 
been terminated or closed out.
    (f) The participant shall deposit all sale proceeds and income into 
a separate, interest-bearing account unless the exceptions in Sec.  
3019.22(k) of this title apply, the account is in a country where the 
laws or customs prohibit the payment of interest, or FAS determines 
that this requirement would constitute an undue burden.
    (g) A participant may use sale proceeds or income to purchase real 
or personal property only if local law permits the participant to 
retain title to such property. However, the participant shall not use 
sale proceeds or income to pay for the acquisition, development, 
construction, alteration or upgrade of real property that is:
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a 
participant may use sale proceeds or income to pay for repairs to or 
rehabilitation of a structure located on such real property to the 
extent necessary to avoid spoilage or loss of donated commodities, but 
only if such structure is not used in whole or in part for any 
religious or sectarian purposes while the donated commodities are 
stored in it. If such use is not specifically provided for in the 
agreement, such use may only occur after receipt of written approval 
from FAS.
    (h) A participant shall endeavor to comply with Sec. Sec.  3019.41 
through 3019.43 of this title when procuring goods and services and 
when engaging in construction work to implement the agreement. The 
participant shall also establish procedures to prevent fraud. The 
participant shall enter into a written contract with each provider of 
goods, services or construction work that requires the provider to 
maintain adequate records to account for all donated commodities or 
funds or both provided to the provider by the participant and to submit 
periodic reports to the participant. The participant shall submit a 
copy of the signed contracts to FAS.


Sec.  1599.12  Subrecipients.

    (a) If provided for in the agreement, a participant may utilize the 
services of a subrecipient to implement activities under this 
agreement. The participant shall enter into a written subagreement with 
the subrecipient, and provide a copy of such subagreement to FAS, in 
the manner set forth in the agreement, prior to the transfer of any 
donated commodities, sale proceeds, income or FAS-provided funds to the 
subrecipient. Such written subagreement shall require the subrecipient 
to pay to the participant the value of any donated commodities, sale 
proceeds, income, or FAS-provided cash funds that is not used in 
accordance with the subagreement, or are lost, damaged, or misused as a 
result of the subrecipient's failure to exercise reasonable care.
    (b) If a participant demonstrates to FAS that it is not feasible to 
enter into a subagreement with a subrecipient, FAS may grant approval 
to proceed without a subagreement; provided, however, that the 
participant must obtain such approval from FAS prior to transferring 
any donated commodities, sale proceeds, income, or FAS-provided funds 
to the subrecipient.
    (c) The participant shall monitor the actions of a subrecipient as 
necessary to ensure that donated commodities or funds provided to the 
subrecipient are used for authorized purposes in compliance with 
applicable laws and regulations and the agreement and those performance 
goals are achieved. The participant shall provide in the subagreement 
that the subrecipient must comply with applicable provisions of the 
regulations set forth in Chapter 30 of this title.


Sec.  1599.13  Recordkeeping and reporting requirements.

    (a) A program participant shall retain records and permit access to 
records in accordance with the requirements of Sec.  3019.53 of this 
title. The date of submission of the final expenditure report, as 
referenced in Sec.  3019.53(b) of this title, shall be the final date 
of submission of the forms required by paragraphs (c)(1) and (2) of 
this section, as prescribed by FAS.
    (b) A participant shall, within 30 days after export of all or a 
portion of the donated commodities, submit evidence of such export to 
FAS, in the manner set forth in the agreement. The evidence may be 
submitted through an electronic media approved by FAS or by providing 
the carrier's on board bill of lading. The evidence of export must show 
the kind and quantity of commodities exported, the date of export, and 
the country where commodities were delivered.
    (c)(1) A participant shall submit to FAS information, using a form 
as prescribed by FAS, covering the receipt, handling and disposition of 
the donated commodities. Such report shall be submitted to FAS, by the 
dates and for the reporting periods specified in the program agreement, 
until all of the donated commodities have been distributed, sold or 
bartered and such disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated 
commodities, the participant shall submit to FAS information, using a 
form as prescribed by FAS, covering the receipt and use of sale 
proceeds and income, and in the case of bartered commodities, covering 
the services and goods derived from the barter of donated commodities. 
Such reports shall be submitted to FAS, by the dates and for the 
reporting periods specified in the agreement, until all of the 
generated sales proceeds and income have been disbursed and reported to 
FAS. When reporting financial information, the participant shall 
include the amounts in U.S. dollars and the exchange rate.
    (3) The participant shall provide to FAS additional information or 
reports relating to the agreement if requested by FAS.
    (4) The participant shall report, in the manner specified in the 
agreement, its progress, measured against established baselines, 
towards achieving the objectives of the activities under the agreement.
    (d) A participant shall submit to FAS, in the manner specified in 
the agreement, an annual audit in accordance with Sec.  3019.26 of this 
title. If FAS requires an audit with respect to a particular agreement, 
and FAS provides funds for this purpose, participant shall arrange for 
such audit and shall submit to FAS, in the manner specified in the 
agreement, an annual financial audit of the agreement.
    (e)(1) A participant shall, as provided in the agreement, submit to 
FAS interim and final evaluations of the implementation of the 
agreement. Unless otherwise provided in the agreement, the evaluations 
shall be submitted at the mid-point and end-point of the implementation 
period. The participant shall arrange for the evaluations to be 
conducted by an independent third party that:
    (i) Is financially and legally separate from the participant's 
organization;
    (ii) Has staff with demonstrated knowledge, analytical capability, 
language skills and experience in conducting evaluations of development 
programs involving agriculture, education, and nutrition;

[[Page 63403]]

    (iii) Uses acceptable analytical frameworks such as comparison with 
non-project areas, surveys, involvement of stakeholders in the 
evaluation, and statistical analyses;
    (iv) Uses local consultants, as appropriate, to conduct portions of 
the evaluation;
    (v) Provides a detailed outline of the evaluation, major task, and 
specific schedules prior to initiating the evaluation.
    (2) Receipt by FAS of the evaluations referred to in paragraph 
(e)(1) of this section, is a condition of retaining funds received to 
carry out the evaluations.
    (f) Participants shall submit to FAS the financial reports and 
information outlined in Sec.  3019.52 of this title. The agreement will 
specify the acceptable forms and time requirements for submission.


Sec.  1599.14  Noncompliance with an agreement.

    If a participant fails to comply with a term of an agreement, FAS 
may take one or more of the enforcement actions set forth in Sec.  
3019.62 of this title and, if, appropriate, initiate a claim against 
the participant. FAS may also initiate a claim against a participant if 
the donated commodities are damaged or lost or the sale proceeds, 
income, or FAS-provided funds are lost due to an action or omission of 
the participant.


Sec.  1599.15  Suspension, termination, and closeouts of agreements.

    (a) An agreement may be suspended or terminated by FAS if it 
determines that:
    (1) The continuation of the assistance provided under this 
agreement is no longer necessary or desirable; or
    (2) Storage facilities are inadequate to prevent spoilage or waste, 
or distribution of the donated commodities will result in substantial 
disincentive to, or interference with, domestic production or marketing 
in the targeted country.
    (b) An agreement may be terminated in accordance with Sec.  3019.61 
of this title. If an agreement is terminated, the participant shall:
    (1) Be responsible for the safety of any undistributed donated 
commodities and dispose of such commodities only as agreed to by FAS; 
and
    (2) Follow the closeout procedures in Sec. Sec.  3019.71 through 
3019.73 of this title, which will apply to the closeout of an 
agreement.
    (c) An agreement will be considered completed when FAS and the 
participant have fulfilled their responsibilities under the agreement 
or the agreement has been terminated. The procedures in Sec. Sec.  
3019.71 through 3019.73 of this title will apply to the closeout of an 
agreement.


Sec.  1599.16  Appeals

    A participant may appeal a determination arising under this part to 
FAS. Such appeal will be in writing and submitted to the FAS official 
and in the manner set forth in the agreement. The participant will be 
given an opportunity to have a hearing before a final decision is made 
regarding its appeal.


Sec.  1599.17  Paperwork Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by the Office of Management and Budget 
under provisions of 44 U.S.C. Chapter 35 and have been assigned OMB 
Numbers 0551-0035.
    4. Amend 48 CFR Chapter 4 by adding part 470 to read as follows:

CHAPTER 4--DEPARTMENT OF AGRICULTURE

PART 470--COMMODITY ACQUISITIONS

Sec.
470.000 Scope of part.
470.101 Definitions.
470.102 Policy.
470.103 United States origin of agricultural products.
470.200 [Reserved]
470.201 Acquisition of commodities and freight shipment for Foreign 
Agricultural Service programs.
470.202. Acquisition of commodities for United States Agency for 
International Development (USAID) programs.
470.203 Cargo preference.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1691 through 1726b; 1731 
through 1736g-3; 1736o; 1736o-1; 40 U.S.C. 121(c); 46 U.S.C. 53305, 
55314 and 55316.


470.000  Scope of part.

    This part sets forth the policies, procedures and requirements 
governing the procurement of agricultural commodities by the Department 
of Agriculture for use:
    (a) Under any domestic feeding and assistance program administered 
by the Food and Nutrition Service; and
    (b) Under Title II of the Food For Peace Act (7 U.S.C. 1721 et 
seq.); the Food for Progress Act of 1985; the McGovern-Dole 
International Food for Education and Child Nutrition Program; and any 
other international food assistance program.


470.101  Definitions.

    Additives means spices, vitamins, micronutrients, desiccants, and 
preservatives when added to an agricultural commodity product.
    Commingled product means grains, oilseeds, rice, pulses, other 
similar commodities and the products of such commodities, when such 
commodity or product is normally stored on a commingled basis in such a 
manner that the commodity or product produced in the United States can 
not be readily distinguished from a commodity or product not produced 
in the United States.
    Department means the Department of Agriculture.
    Food and Nutrition Service means such agency located within the 
Department of Agriculture.
    Foreign Agriculture Service means such agency located within the 
Department of Agriculture.
    Free alongside ship (f.a.s.) means delivery free of expense to the 
Government delivered alongside the ocean vessel and within reach of its 
loading tackle at the specified location of shipment.
    Grantee organization means an organization which will receive 
commodities from the United States Agency for International Development 
under Title II of the Food for Peace Act (7 U.S.C. 1721 et seq.) or 
from the Foreign Agricultural Service under the Food for Progress Act 
of 1985; the McGovern-Dole International Food for Education and Child 
Nutrition Program; and any other international food assistance program.
    Intermodal bridge-point means an inland location where cargo is 
received by a carrier and is then moved to a coastal port for loading.
    Last contract lay day means the last day specified in an ocean 
freight contract by which the carriage of goods must start for contract 
performance.
    Lowest landed cost means, as authorized by 46 U.S.C. 55314(c), with 
respect to an agricultural product acquired under this part, the lowest 
aggregate cost for the acquisition of such product and the shipment of 
such product to a foreign destination.
    Multi-trip voyage charter means the charter of an ocean carrier in 
which the carrier will stop at two or more ports to discharge cargo.


470.102  Policy.

    (a) It is the policy of the Department to follow the policies and 
procedures set forth in the Federal Acquisition Regulation (FAR) as 
supplemented by the Agriculture Acquisition Regulation, including this 
part, in the procurement of agricultural commodities and products of 
agricultural commodities that are used in domestic feeding and 
international feeding and development programs.

[[Page 63404]]

    (b) To the maximum extent possible, the use of electronic 
submission of solicitation-related documents shall be used with respect 
to the acquisition of agricultural commodities and related freight; 
however, to the extent that a solicitation allows for the submission of 
written information in addition to information in an electronic format 
and there is a discrepancy in such submissions, the information 
submitted in a written format shall prevail unless the electronic 
submission states that a specific existing written term is superseded 
by the electronic submission.
    (c) With respect to the acquisition of freight for the shipment of 
agricultural commodities and products of agricultural commodities, the 
provisions of the FAR, including part 47, shall be utilized and various 
types of services to be obtained may include multi-trip voyage 
charters.


470.103  United States origin of agricultural products.

    (a) As provided by 7 U.S.C. 1732(2) and 17360-1(a) commodities and 
the products of agricultural commodities acquired for use in 
international feeding and development programs shall be products of 
United States origin.
    (b) Commodities and the products of agricultural commodities 
acquired for use by the Food and Nutrition Service shall be a product 
of the United States, except as may otherwise be required by law, and 
shall be considered to be such a product if it is grown, processed, and 
otherwise prepared for sale or distribution exclusively in the United 
States except with respect to additives. Additives from non-domestic 
sources will be allowed to be utilized as a United States product if 
such additives are not otherwise:
    (1) Produced in the United States; or
    (2) Commercially available at fair and reasonable prices in the 
United States from domestic sources.
    (c) A commingled product shall be considered to be a product of the 
United States if, during the contract performance period specified in a 
solicitation, the contractor procures a quantity of the product that is 
of United States origin in a quantity equal to or more than the 
quantity to be delivered under the solicitation.
    (d) With respect to the procurement of products derived from 
animals, such products shall not be considered products of the United 
States if the animal from which the product was obtained:
    (1) Entered the United States from a foreign country; and
    (2) Was delivered directly to a processing plant for processing.


470.200  [Reserved]


470.201  Acquisition of commodities and freight shipment for Foreign 
Agricultural Service programs.

    (a) Lowest Landed Cost and Delivery Considerations.
    (1) Except as provided in paragraphs (a)(3) and (4) of this 
section, in contracts for the Foreign Agricultural Service for 
commodities and related freight shipment for delivery to foreign 
destinations, the contracting officer shall consider the lowest landed 
cost of delivering the commodity to the intended destination. This 
lowest landed cost determination will be calculated on the basis of 
rates and service for that portion of the commodities being purchased 
that is determined is necessary and practicable to meet 46 U.S.C. 
55314(c)(3) and cargo preference requirements and on an overall 
(foreign and U.S. flag) basis for the remaining portion of the 
commodities being procured and the additional factors set forth in this 
section. Accordingly, the solicitations issued with respect to a 
commodity procurement or a related freight procurement will specify 
that in the event an offer submitted by a party is the lowest offered 
price, the contracting officer reserves the right to reject such offer 
if the acceptance of another offer for the commodity or related 
freight, when combined with other offers for commodities or related 
freight, results in a lower landed cost to the Department.
    (2) The Department may contact any port prior to award to determine 
the port's cargo handling capabilities, including the adequacy of the 
port to receive, accumulate, handle, store, and protect the cargo. 
Factors considered in this determination may 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. The Department may consider the 
use of another coastal range or port if a situation exists at a port 
that may adversely affect the ability of the Department to have the 
commodity delivered in a safe and timely manner. Such situations 
include:
    (i) A port is congested;
    (ii) Port facilities are overloaded;
    (iii) A vessel would not be able to dock and load cargo without 
delay;
    (iv) Labor disputes or lack of labor may prohibit the loading of 
the cargo onboard a vessel in a timely manner; or
    (v) Other similar situation that may adversely affect the ability 
of the Department to have the commodity delivered in a timely manner.
    (3) Use of Other Than Lowest Landed Cost. In order to ensure that 
commodities are delivered in a timely fashion to foreign destinations 
and without damage, the contracting officer may award an acquisition 
without regard to the lowest land cost process set forth in paragraph 
(a)(1) of this section, if:
    (i) The solicitation specifies that the lowest land cost process 
will not be followed in the completion of the contract; or
    (ii) After issuance of the solicitation, it is determined that:
    (A) Internal strife at the foreign destination or urgent 
humanitarian conditions threatens the lives of persons at the foreign 
destination;
    (B) A specific port's cargo handling capabilities (including the 
adequacy of the port to receive, accumulate, handle, store, and protect 
commodities) and other similar factors may adversely affect the 
delivery of such commodities through damage or untimely delivery. Such 
similar factors include, but are not limited to: port congestion; 
overloaded facilities at the port; vessels not being able to dock and 
load cargo without delay due to conditions at the port; labor disputes 
or lack of labor may prohibit the loading of the cargo onboard a vessel 
in a timely manner; and the existence of inadequate or unsanitary 
warehouse and other supporting facilities;
    (C) The total transit time of a carrier, as it relates to a final 
delivery date at the foreign destination may impair the ability of the 
Department to achieve timely delivery of the commodity;
    (D) Other similar situations arise that materially affect the 
administration of the program for which the commodity or freight is 
being procured; or
    (E) The contracting officer determines that extenuating 
circumstances preclude awards on the basis of lowest-landed cost, or 
that efficiency and cost-savings justify use of types of ocean service 
that would not involve an analysis of freight. However, in all such 
cases, commodities would be transported in compliance with cargo 
preference requirements. Examples of extenuating circumstances are 
events such as 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 (CIF), and indexed ocean freight costs.

[[Page 63405]]

    (4) If a contracting officer determines that action may be 
appropriate under paragraph (a)(3) of this section, prior to the 
acceptance of any applicable offer, the contracting officer will 
provide to the Head of Contacting Activity Designee a written request 
to obtain commodities and freight in a manner other than on a lowest 
landed cost basis consistent with Title 48 of the Code of Federal 
Regulations. This request shall include a statement of the reasons for 
not using lowest landed cost basis. The Head of the Contracting 
Activity Designee, or the designee one level above the contracting 
officer, may either accept or reject this request and shall document 
this determination.
    (b) Multiple Offers or Delivery Points. If more than one offer for 
the sale of commodities is received or more than one delivery point has 
been designated in such offers, 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 destination, the 
contracting officer shall evaluate offers submitted on a delivery point 
by delivery point basis; however, consideration shall be given to 
prioritized ocean transport service in determining lowest landed cost.
    (c) Freight Shipping and Rates. (1) In determining the lowest-
landed cost, the Department shall use the freight rates offered in 
response to solicitations issued by the Department or, if applicable, 
the grantee organization.
    (2) Freight rates offered must be submitted as specified in the 
solicitation issued by the Department or, if applicable, the grantee 
organization. Any such solicitation issued by a grantee organization 
must contain the following elements:
    (i) If directed by the Department, include a closing time for the 
receipt of written freight offers and state that late written freight 
offers will not be considered;
    (ii) Provide that freight offers are required to have a canceling 
date no later than the last contract lay day specified in the 
solicitation;
    (iii) Provide the same deadline for receipt of written freight 
offers from both U.S. flag vessel and non-U.S. flag vessels; and
    (iv) Be received and opened prior to any related offer for 
acquisition of commodities to be shipped.
    (3) The Department may require organizations that will receive 
commodities from the Department to submit information relating to the 
capacity of a United States port, or, if applicable, a terminal, prior 
to the acquisition of such commodities or freight.
    (d) If the Department is not the party procuring freight with 
respect to a shipment of an agricultural commodity for delivery to a 
foreign destination, the organization that will receive commodities 
from the Department, or its shipping agent, shall be notified by the 
Department of the vessel freight rate used in determining the commodity 
contract award and the organization will be responsible for finalizing 
the charter or booking contract with the vessel representing the 
freight rate.


470.202  Acquisition of commodities for United States Agency for 
International Development (USAID) programs.

    (a) Lowest Landed Cost and Delivery Considerations. (1) Except as 
provided in paragraphs (a)(3) and (e)(2) of this section, with respect 
to the acquisition of agricultural commodities for delivery to foreign 
destinations and related freight to transport such commodities under 
Title II of Pub. L. 480, contracts will be entered into in a manner 
that will result in the lowest landed cost of such commodity delivery 
to the intended destination. This lowest landed cost determination 
shall be calculated on the basis of rates and service for that portion 
of the commodities being purchased that is determined is necessary and 
practicable to meet 46 U.S.C. 55314(c)(3) and cargo preference 
requirements and on an overall (foreign and U.S. flag) basis for the 
remaining portion of the commodities being procured and the additional 
factors set forth in this section. Accordingly, the solicitations 
issued with respect to a commodity procurement or a freight procurement 
will specify that in the event an offer submitted by a party is the 
lowest offered price, the contracting officer reserves the right to 
reject such offer if the acceptance of another offer for the commodity 
or freight, when combined with other offers for commodities or freight, 
results in a lower landed cost to USAID.
    (2) The Department may contact any port prior to award 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. The Department may 
consider the use of another coastal range or port if a situation exists 
at a port that may adversely affect the ability of the Department of 
Agriculture to have the commodity delivered in a safe and/or timely 
manner. Such situations include:
    (i) A port is congested;
    (ii) Port facilities are overloaded;
    (iii) A vessel would not be able to dock and load cargo without 
delay;
    (iv) Labor disputes or lack of labor may prohibit the loading of 
the cargo onboard a vessel in a timely manner; or
    (v) Other similar situation that may adversely affect the ability 
of the Department of Agriculture to have the commodity delivered in a 
timely manner.
    (3) Use of Other than Lowest Landed Cost. In order to ensure that 
commodities are delivered in a timely fashion to foreign destinations 
and without damage, the Department of Agriculture may complete an 
acquisition without regard to the lowest land cost process set forth in 
paragraph (a)(1) of this section, if:
    (i) The solicitation specifies that the lowest land cost process 
will not be followed in the completion of the contract; or
    (ii) After issuance of the solicitation, it is determined that:
    (A) Internal strife at the foreign destination or urgent 
humanitarian conditions threatens the lives of persons at the foreign 
destination;
    (B) A specific port's cargo handling capabilities (including the 
adequacy of the port to receive, accumulate, handle, store, and protect 
commodities) and other similar factors will adversely affect the 
delivery of such commodities without damage or in a timely manner. Such 
similar factors include, but are not limited to: port congestion; 
overloaded facilities at the port; vessels 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; 
and the existence of inadequate or unsanitary warehouse and other 
supporting facilities;
    (C) The total transit time of a carrier, as it relates to a final 
delivery date at the foreign destination may impair the ability of the 
Department of Agriculture to achieve timely delivery of the commodity; 
or
    (D) Other similar situations arise that materially affect the 
administration of the program for which the commodity or freight is 
being procured.
    (4) If the contracting officer determines that action may be 
appropriate under paragraph (a)(3) of this section, prior to the 
acceptance of any applicable offer, the contracting officer shall 
provide to the head of contacting activity designee and to

[[Page 63406]]

USAID, a written request to obtain commodities and freight in a manner 
other than on a lowest landed cost basis. This request shall include a 
statement of the reasons for not using lowest landed cost basis. The 
head of contracting authority designee, or one level above the 
contracting officer, with the concurrence of USAID, shall, on an 
expedited basis, either accept or reject this request and shall 
document this determination in writing and provide a copy to USAID.
    (b) Freight Shipping and Rates. (1) In determining lowest-landed 
cost as specified in paragraph (a) of this section, the Department 
shall use vessel rates offered in response to solicitations issued by 
USAID or grantee organizations receiving commodities under 7 U.S.C. 
1731 et seq.
    (2) USAID may require, or direct a grantee organization to require, 
an ocean carrier to submit offers electronically through a Web-based 
system maintained by the Department. If electronic submissions are 
required, the Department may, at its discretion, accept corrections to 
such submissions that are submitted in a written form other than by use 
of such Web-based system.
    (c) The contracting officer shall consider total transit time, as 
it relates to a final delivery date, in order to satisfy Title II 
program requirements.
    (d)(1) Commodities offered for delivery free alongside ship to 
Great Lakes port range or intermodal bridge-point Great Lakes port 
range that represent the overall (foreign and U.S. flag) lowest landed 
cost will be awarded on a lowest landed cost basis. Tonnage allocated 
on this basis will not be reevaluated on a lowest landed cost U.S.-flag 
basis unless the contracting officer determines that 25 percent of the 
total annual tonnage of bagged, processed or fortified commodities 
furnished under 7 U.S.C. 1731 et seq. has been, or will be, transported 
from the Great Lakes port range during that fiscal year.
    (2) The contracting officer shall consider commodity offers as 
offers for delivery ``intermodal bridge-point Great Lakes port range'' 
only if:
    (i) The offer specifies delivery at a marine cargo-handling 
facility that is capable of loading ocean going vessels at a Great 
Lakes port, as well as loading ocean going conveyances such as barges 
and container vans, and
    (ii) The commodities will be moved from one transportation 
conveyance to another at such a facility.
    (e) Multiple Awards or Delivery Points. (1) If more than one offer 
for the sale of commodities is received or more than one delivery point 
has been designated in such offers, 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 destination, the 
contracting officer shall evaluate offers submitted on a delivery point 
by delivery point basis; however, consideration shall be given to 
prioritized ocean transport service in determining lowest landed cost.
    (2) The contracting officer may determine that extenuating 
circumstances preclude awards on the basis of lowest landed cost. 
However, in all such cases, commodities may be transported in 
compliance with cargo preference requirements as determined by USAID.
    (3) The contracting officer shall notify USAID or, if applicable, 
the grantee organization, that its shipping agent will be notified of 
the vessel freight rate used in determining the commodity contract 
award. The grantee organization or USAID will be responsible for 
finalizing the charter or booking contract with the vessel representing 
the freight rate so used.


470.203  Cargo preference.

    An agency having responsibility under this subpart shall administer 
its programs, with respect to this subpart, in accordance with 
regulations prescribed by the Secretary of the Department of 
Transportation.

Michael W. Yost,
Executive Vice President, Commodity Credit Corporation, and 
Administrator, Foreign Agricultural Service.
[FR Doc. E8-25186 Filed 10-23-08; 8:45 am]
BILLING CODE 3410-10-P