[Federal Register Volume 75, Number 74 (Monday, April 19, 2010)]
[Proposed Rules]
[Pages 20316-20320]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8850]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210, 215, 220, 225, and 226

RIN 0584-AE03


Geographic Preference Option for the Procurement of Unprocessed 
Agricultural Products in Child Nutrition Programs

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

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SUMMARY: The 2008 Farm Bill amended the Richard B. Russell National 
School Lunch Act to direct that the Secretary of Agriculture encourage 
institutions operating Child Nutrition Programs to purchase unprocessed 
locally grown and locally raised agricultural products. Effective 
October 1, 2008, institutions receiving funds through the Child 
Nutrition Programs may apply an optional geographic preference in the 
procurement of unprocessed locally grown or locally raised agricultural 
products. This provision applies to institutions in all of the Child 
Nutrition Programs, including the National School Lunch Program, School 
Breakfast Program, Fresh Fruit and Vegetable Program, Special Milk 
Program for Children, Child and Adult Care Food Program and Summer Food 
Service Program, as well as to purchases made for these programs by the 
Department of Defense Fresh Program. The provision also applies to 
State Agencies making purchases on behalf of any of the aforementioned 
Child Nutrition Programs. The purpose of this proposed rule is to 
incorporate this procurement option in the Programs' regulations and to 
define the term ``unprocessed locally grown or locally raised 
agricultural products'' to ensure that both the intent of Congress in 
providing for such a procurement option is met and that any such 
definition will facilitate ease of implementation for institutions 
participating in the Child Nutrition Programs. The proposed rule is 
intended to be implemented by institutions choosing to apply the 
geographic preference option for the procurement of locally grown and 
locally raised agricultural products.

DATES: Comments must be received on or before June 18, 2010 to be 
assured of consideration.

ADDRESSES: The Food and Nutrition Service, USDA, invites interested 
persons to submit comments on this proposed rule. Comments may be 
submitted by one of the following methods:
     Federal e-Rulemaking Portal: Go to http://www.regulations.gov. Preferred method; follow the online instructions 
for submitting comments.
     Fax: Submit comments by facsimile transmission to: (703) 
305-2879, Attention: Melissa Rothstein.
     Mail: Comments should be addressed to Melissa Rothstein, 
Chief, Policy and Program Development Branch, Child Nutrition Division, 
Food and Nutrition Service, U.S. Department of Agriculture, 3101 Park 
Center Drive, Room 634, Alexandria, Virginia 22302.
     Hand Delivery or Courier: Deliver comments to 3101 Park 
Center Drive, Room 634, Alexandria, Virginia 22302-1594, during normal 
business hours of 8:30 a.m.-5 p.m.
     All comments submitted in response to this proposed rule 
will be included in the record and will be made available to the 
public. Please be advised that the substance of the comments and the 
identity of the individuals or entities submitting the comments will be 
subject to public disclosure. FNS will make the comments publicly 
available on the Internet via http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Melissa Rothstein, Chief, Policy and 
Program Development Branch at the above address or by telephone at 
(703) 305-2590.

SUPPLEMENTARY INFORMATION:

Background

    Section 4302 of Public Law 110-246, the Food, Conservation, and 
Energy Act of 2008, amended section 9(j) of the Richard B. Russell 
National School Lunch Act (42 U.S.C. 1758(j)) to require the Secretary 
of Agriculture to encourage institutions operating Child Nutrition 
Programs to purchase unprocessed locally grown and locally raised 
agricultural products. Pursuant to section 4407 of Public Law 110-246, 
beginning October 1, 2008, institutions receiving funds as participants 
in the Child Nutrition Programs may apply an optional geographic 
preference in the procurement of unprocessed locally grown or locally 
raised agricultural products. This provision applies to institutions 
operating all of the Child Nutrition Programs, including the National 
School Lunch Program, School Breakfast Program, Fresh Fruit and 
Vegetable Program, Special Milk Program, Child and Adult Care Food 
Program and Summer Food Service Program, as well as to purchases made 
for these programs by the Department of Defense Fresh Program. The 
provision does not apply to purchases made by the Department. However, 
the provision does also apply to State agencies making purchases on 
behalf of any of the aforementioned Child Nutrition Programs. We 
initially implemented the provisions through policy memoranda and 
explanatory question and answer communications dated January 9, 2009, 
July 22, 2009 and October 9, 2009.
    Traditionally, a geographic preference established for a 
procurement provides bidders located in a specified geographic area 
additional points or credit calculated during the evaluation of the 
proposals or bids received in response to a solicitation. A geographic 
preference is not a procurement set-aside for bidders located in the 
specified geographic area, guaranteeing them a certain level or 
percentage of business. In addition, including a geographic preference 
in a procurement does not preclude a bidder from outside the specified 
geographic area from competing for, and possibly being awarded, the 
contract subject to the geographic preference. Rather, a geographic 
preference is a tool that gives bidders in a specified geographic area 
a specific, defined advantage in the procurement process.
    By utilizing the statutorily established geographic preference 
option in Child Nutrition Programs, purchasing institutions, such as 
States, school food authorities, child care institutions and SFSP 
sponsors, may specifically identify the geographic area within which 
unprocessed locally raised and locally grown agricultural products will 
originate. As proposed in this rule, a responsive bidder would offer to 
provide unprocessed locally raised and locally grown agricultural 
products from the specifically identified geographic area. In most 
cases, we would expect that a bidder would be located in the identified 
geographic area, though it is possible for a responsive bidder to be 
located outside of that area. These procurements may be accomplished 
through informal or formal procurement procedures, as required by 
respective Child Nutrition Program regulations.

[[Page 20317]]

    Local purchasing power not only supports increasing economic 
opportunities for local farmers but also helps schools and other 
institutions include wholesome food choices which will encourage 
children to make healthy food choices. Allowing a geographic 
procurement preference option serves to reinforce the fundamental and 
critical reconnection between producers and consumers. The effort 
builds on the 2008 Farm Bill, which provides for increases and 
flexibility for USDA programs in an effort to promote local foods.
    The geographic preference option basically allows institutions 
operating Child Nutrition Programs to specifically define geographic 
areas from which they will seek to procure unprocessed local 
agricultural products. It is up to each institution, whether it be a 
school food authority, a child care institution or a Summer Food 
Service Program sponsor, to determine how to define the geographic 
area.
    As provided in the Joint Explanatory Statement of the Committee of 
Conference in House Report 110-627, the term ``unprocessed'' precludes 
the use of geographic preference in procuring agricultural products 
that have significant value added components. The Conference report 
also noted the acceptability of de minimus handling and preparation 
``such as may be necessary to present an agricultural product to a 
school food authority in a useable form, such as washing vegetables, 
bagging greens, butchering livestock and poultry, pasteurizing milk, 
and putting eggs in a carton.''

Proposed Action

    We have determined that it is necessary to propose a rulemaking to 
define what would constitute ``unprocessed agricultural products'' for 
the purposes of implementing the geographic preference procurement 
option in the Child Nutrition Programs. In developing such a rule, we 
are proposing that the definition should:
    (1) Comply with the language and reflect the intent of the statute;
    (2) Ensure that any processing of agricultural products results in 
only minimal value added to such products; and
    (3) Facilitate ease of use of such products for institutions.
    In preparation for the development of this proposed rule, we 
researched a variety of definitions of ``unprocessed food'' used by a 
number of Federal agencies. Upon review, however, those definitions do 
not meet the needs of the Child Nutrition Programs.
    We also researched the types of handling and processing techniques 
that are available to bring agricultural products to the marketplace. 
There are a variety of methods that may be used to process agricultural 
products for consumption. In addition, we would note that at least one 
method--pasteurization--is already a regulatory requirement for all 
milk served in Child Nutrition Programs. While the Conference Report 
discusses de minimus processing of such products, the geographic 
preference option allowed by statute prohibits the use of processing 
methods that add significant value to the products. This is 
particularly important since the geographic preference provision is a 
noteworthy exception to the standard procurement provisions of Child 
Nutrition Programs and other programs government-wide.
    Based upon our research, as well as keeping in mind the intent of 
Congress as expressed in the Conference Report, we are proposing that 
the definition of ``unprocessed food'' specify a prohibition against 
any processing method that alters the inherent character of the 
agricultural product. To that end, we have included in the proposed 
definition a list of acceptable food handling and preservation 
techniques for purposes of applying the geographic preference 
procurement option. Such techniques would include: General heat 
transfer methods such as cooling, refrigerating and freezing; size 
adjustment through size reduction (peeling, slicing, dicing, cutting 
and grinding); drying/dehydration; vacuum packing and bagging; 
pasteurization for milk; cold storage; the application of high water 
pressure (``cold pasteurization''); butchering of livestock and poultry 
and the cleaning of fish. We believe that these handling and 
preservation techniques comply with the intent of the statute and do 
not alter the inherent character of agricultural products subjected to 
them.
    The reduction of the size of larger products would not be 
considered as altering the inherent character of the agricultural 
product, nor would such size reduction add significant value to the 
product. For example, cutting full size carrots into smaller, student-
friendly carrot sticks would not alter the inherent character of the 
agricultural product but would enhance its usable form. However, 
combining or forming any agricultural product would not meet the 
definition of unprocessed agricultural products as proposed. For 
example, while ground and frozen meat or poultry would not be 
considered as having had its inherent character changed, forming such a 
ground frozen product into a ready-to-prepare meat patty would be 
considered as changing the inherent character of the product while 
adding significant value to that product. Under the proposed 
definition, the geographic preference procurement option would not 
apply to the procurement of such products.
    This proposed rule would prohibit the application of the geographic 
preference procurement option for products subjected to processing 
methods not included in the definition of ``unprocessed agricultural 
products.''
    The geographic preference procurement option could only be used 
when purchasing locally grown and locally raised agricultural products 
as defined in this rule. However, once such a purchase is made, the 
institution would be free to have the agricultural product further 
processed under a separate processing contract. An institution would 
use regular procurement procedures in acquiring processing services to 
have such products processed in any way that they would like. In 
addition, it is important to note that, due to the geographic diversity 
in each state, the institution responsible for the procurement of the 
locally grown and locally raised product has the discretion to define 
the local area for which any geographic preference (e.g., State, 
county, region, etc.) will be applied. However, institutions should 
keep in mind that local preference should not be defined in a way that 
excludes bidders from outside the designated geographic area or 
otherwise unnecessarily restricts competition.
    Accordingly, this rule proposes to add new paragraphs to sections 
210.21, 215.14a, 220.16, 225.17 and 226.22 of Title 7, CFR, to include 
the geographic preference procurement option and define the term 
``unprocessed locally grown or locally raised agricultural products''.

Applicability to the Fresh Fruit and Vegetable Program

    The geographic preference procurement option is applicable to 
purchases made in the Fresh Fruit and Vegetable Program, 42 U.S.C. 
1769a (FFVP). However, this provision shall only be applied within the 
context of the FFVP's requirement that produce utilized in the program 
be fresh. The definition of ``unprocessed locally grown or locally 
raised agricultural products'' does not change the basic statutory 
requirement that only fresh produce may be purchased using funds for 
the Fresh Fruit and Vegetable Program. Development of regulations

[[Page 20318]]

pertaining to the requirements for the Fresh Fruit and Vegetable 
Program are currently in process and the provisions relating to the 
geographic preference procurement option will be included in that 
proposed rule, as appropriate.

Executive Order 12866

    This rule has been determined to be not significant and was not 
reviewed by the Office Management and Budget in conformance with 
Executive Order 12866.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). It has been 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under Section 202 of the UMRA, the 
Department generally must prepare a written statement, including a 
cost/benefit analysis, for proposed and final rules with Federal 
mandates that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Department to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, more cost-effective or least burdensome 
alternative that achieves the objectives of the rule. This rule does 
not contain Federal mandates (under the regulatory provisions of Title 
II of the UMRA) that impose costs on State, local, or tribal 
governments or to the private sector of $100 million or more in any one 
year. This rule is, therefore, not subject to the requirements of 
sections 202 and 205 of the UMRA.

Executive Order 12372

    The National School Lunch Program and the School Breakfast Program 
are listed in the Catalog of Federal Domestic Assistance under No. 
10.555 and 10.553, respectively. The Special Milk Program is listed 
under No. 10.556. The Child and Adult Care Food Program is listed under 
No. 10.558 and the Summer Food Service Program for Children is listed 
under No. 10.559. For the reasons set forth in the final rule in 7 CFR 
Part 3015, Subpart V and related Notice (48 FR 29115, June 24, 1983), 
these programs are included in the scope of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(2)(B) of Executive Order 13132. The 
Food and Nutrition Service (FNS) has considered the impact of this rule 
on State and local governments and has determined that this rule does 
not have federalism implications. This rule does not impose substantial 
or direct compliance costs on State and local governments. Therefore, 
under Section 6(b) of the Executive Order, a federalism summary impact 
statement is not required.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless specified in the DATES section of the final rule. Prior to any 
judicial challenge to the provisions of this rule or the application of 
its provisions, all applicable administrative procedures must be 
exhausted.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with Departmental 
Regulations 4300-4, ``Civil Rights Impact Analysis'', and 1512-1, 
``Regulatory Decision Making Requirements.'' After a careful review of 
the rule's intent and provisions, FNS has determined that this rule is 
not intended to limit or reduce in any way the ability of protected 
classes of individuals to receive benefits on the basis of their race, 
color, national origin, sex, age or disability nor is it intended to 
have a differential impact on minority owned or operated business 
establishments, and woman-owned or operated business establishments 
that participate in the Child Nutrition Programs. This rule simply 
allows institutions that participate in the Child Nutrition Programs 
the option to apply a geographic preference should such institutions 
wish to procure unprocessed locally grown or locally raised 
agricultural products.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency before they can be 
implemented. Respondents are not required to respond to any collection 
of information unless it displays a current valid OMB control number. 
This rule does not contain information collection requirements subject 
to approval by OMB under the Paperwork Reduction Act of 1995.

E-Government Act Compliance

    The Food and Nutrition Service 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.

List of Subjects

7 CFR Part 210

    Grant programs-education; Grant programs-health; Infants and 
children; Nutrition; Penalties; Reporting and recordkeeping 
requirements; School breakfast and lunch programs; Surplus agricultural 
commodities.

7 CFR Part 215

    Food assistance programs; Grant programs-education; Grant programs-
health; Infants and children; Milk; Reporting and recordkeeping 
requirements.

7 CFR Part 220

    Grant programs-education; Grant programs-health; Infants and 
children; Nutrition; Reporting and recordkeeping requirements; School 
breakfast and lunch programs.

7 CFR Part 225

    Food assistance programs; Grant programs-health; Infants and 
children; Labeling; Reporting and recordkeeping requirements.

7 CFR Part 226

    Accounting; Aged; Day care; Food assistance programs; Grant 
programs; Grant programs-health; Indians; Individuals with 
disabilities; Infants and children; Intergovernmental relations; Loan 
programs; Reporting and recordkeeping requirements; Surplus 
agricultural commodities.

[[Page 20319]]

    Accordingly, 7 CFR Parts 210, 215, 220, 225, and 226 are proposed 
to be amended as follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

    1. The authority citation for 7 CFR Part 210 continues to read as 
follows:

    Authority: 42 U.S.C. 1751-1760, 1779.

    2. In Sec.  210.21, paragraph (g) is added to read as follows:

Subpart E--State Agency and School Food Authority Responsibilities


Sec.  210.21  Procurement.

* * * * *
    (g) Geographic preference. (1) A school food authority 
participating in the Program, as well as State agencies making 
purchases on behalf of such school food authorities, may apply a 
geographic preference when procuring unprocessed locally grown or 
locally raised agricultural products. When utilizing the geographic 
preference to procure such products, the school food authority making 
the purchase or the State agency making purchases on behalf of such 
school food authorities have the discretion to determine the local area 
to which the geographic preference option will be applied;
    (2) For the purpose of applying the optional geographic procurement 
preference in paragraph (g)(1) of this section, ``unprocessed locally 
grown or locally raised agricultural products'' means only those 
agricultural products that retain their inherent character. The effects 
of the following food handling and preservation techniques shall not be 
considered as changing an agricultural product into a product of a 
different kind or character: cooling; refrigerating; freezing; size 
adjustment made by peeling, slicing, dicing, cutting, chopping, 
shucking, and grinding; drying/dehydration; washing; applying high 
water pressure or ``cold pasteurization''; packaging (such as placing 
eggs in cartons), vacuum packing and bagging (such as placing 
vegetables in bags); butchering livestock and poultry; cleaning fish; 
and the pasteurization of milk.

PART 215--SPECIAL MILK PROGRAM FOR CHILDREN

    3. The authority citation for 7 CFR Part 215 continues to read as 
follows:

    Authority: 42 U.S.C. 1772 and 1779.

    4. In Sec.  215.14a, paragraph (e) is added to read as follows:


Sec.  215.14a  Procurement standards.

* * * * *
    (e) Geographic preference. A school food authority participating in 
the Program may apply a geographic preference when procuring milk. When 
utilizing the geographic preference to procure milk, the school food 
authority making the purchase has the discretion to determine the local 
area to which the geographic preference option will be applied.
* * * * *

PART 220--SCHOOL BREAKFAST PROGRAM

    5. The authority citation for 7 CFR Part 220 continues to read as 
follows:

    Authority:  42 U.S.C. 1773, 1779, unless otherwise noted.

    6. In Sec.  220.16, paragraph (f) is added to read as follows:


Sec.  220.16  Procurement.

* * * * *
    (f) Geographic preference. (1) School food authorities 
participating in the Program, as well as State agencies making 
purchases on behalf of such school food authorities, may apply a 
geographic preference when procuring unprocessed locally grown or 
locally raised agricultural products. When utilizing the geographic 
preference to procure such products, the school food authority making 
the purchase or the State agency making purchases on behalf of such 
school food authorities have the discretion to determine the local area 
to which the geographic preference option will be applied;
    (2) For the purpose of applying the optional geographic preference 
in paragraph (f)(1) of this section, ``unprocessed locally grown or 
locally raised agricultural products'' means only those agricultural 
products that retain their inherent character. The effects of the 
following food handling and preservation techniques shall not be 
considered as changing an agricultural product into a product of a 
different kind or character: Cooling; refrigerating; freezing; size 
adjustment made by peeling, slicing, dicing, cutting, chopping, 
shucking, and grinding; drying/dehydration; washing; applying high 
water pressure or ``cold pasteurization''; packaging (such as placing 
eggs in cartons), vacuum packing and bagging (such as placing 
vegetables in bags); butchering livestock and poultry; cleaning fish; 
and the pasteurization of milk.
* * * * *

PART 225--SUMMER FOOD SERVICE PROGRAM

    7. The authority citation for 7 CFR Part 225 continues to read as 
follows:

    Authority: Secs. 9, 13 and 14, Richard B. Russell National 
School Lunch Act, as amended, (42 U.S.C. 1758, 1761 and 1762a).

    8. In Sec.  225.17, paragraph (e) is added to read as follows:


Sec.  225.17  Procurement standards.

* * * * *
    (e) Geographic preference. (1) Sponsors participating in the 
Program may apply a geographic preference when procuring unprocessed 
locally grown or locally raised agricultural products. When utilizing 
the geographic preference to procure such products, the sponsor making 
the purchase has the discretion to determine the local area to which 
the geographic preference option will be applied;
    (2) For the purpose of applying the optional geographic preference 
in paragraph (e)(1) of this section, ``unprocessed locally grown or 
locally raised agricultural products'' means only those agricultural 
products that retain their inherent character. The effects of the 
following food handling and preservation techniques shall not be 
considered as changing an agricultural product into a product of a 
different kind or character: Cooling; refrigerating; freezing; size 
adjustment made by peeling, slicing, dicing, cutting, chopping, 
shucking, and grinding; drying/dehydration; washing; applying high 
water pressure or ``cold pasteurization''; packaging (such as placing 
eggs in cartons), vacuum packing and bagging (such as placing 
vegetables in bags); butchering livestock and poultry; cleaning fish; 
and the pasteurization of milk.

PART 226--CHILD AND ADULT CARE FOOD PROGRAM

    9. The authority citation for 7 CFR Part 226 continues to read as 
follows:

    Authority: Secs. 9, 11, 14, 16, 17, Richard B. Russell National 
School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and 
1766).

    10. In Sec.  226.22, paragraph (n) is added to read as follows:


Sec.  226.22  Procurement standards.

* * * * *
    (n) Geographic preference. (1) Institutions participating in the 
Program may apply a geographic preference when procuring unprocessed 
locally grown or locally raised agricultural products. When utilizing 
the geographic preference to procure such products, the

[[Page 20320]]

institution making the purchase has the discretion to determine the 
local area to which the geographic preference option will be applied;
    (2) For the purpose of applying the optional geographic preference 
in paragraph (n)(1) of this section, ``unprocessed locally grown or 
locally raised agricultural products'' means only those agricultural 
products that retain their inherent character. The effects of the 
following food handling and preservation techniques shall not be 
considered as changing an agricultural product into a product of a 
different kind or character: Cooling; refrigerating; freezing; size 
adjustment made by peeling, slicing, dicing, cutting, chopping, 
shucking, and grinding; drying/dehydration; washing; applying high 
water pressure or ``cold pasteurization''; packaging (such as placing 
eggs in cartons), vacuum packing and bagging (such as placing 
vegetables in bags); butchering livestock and poultry; cleaning fish; 
and the pasteurization of milk.

    Dated: April 8, 2010.
Julia M. Paradis,
Administrator, Food and Nutrition Service.
[FR Doc. 2010-8850 Filed 4-16-10; 8:45 am]
BILLING CODE 3410-30-P