[Federal Register Volume 80, Number 89 (Friday, May 8, 2015)]
[Rules and Regulations]
[Pages 26788-26811]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10441]



[[Page 26787]]

Vol. 80

Friday,

No. 89

May 8, 2015

Part IV





Department of Agriculture





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Rural Business-Cooperative Service





Rural Utilities Service





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7 CFR Part 4284





Value-Added Producer Grant Program; Final Rule

  Federal Register / Vol. 80 , No. 89 / Friday, May 8, 2015 / Rules and 
Regulations  

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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4284

RIN 0570-AA79


Value-Added Producer Grant Program

AGENCY: Rural Business-Cooperative Service and Rural Utilities Service, 
USDA.

ACTION: Final rule; request for comment.

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SUMMARY: The Rural Business-Cooperative Service (Agency) is publishing 
this final rule for the Value-Added Producer Grant (VAPG) program. This 
final rule modifies the interim rule for VAPG based on comments 
received on the interim rule, which was published on February 23, 2011, 
on the Agricultural Act of 2014 (2014 Farm Bill), and on a listening 
session, held on April 25, 2014, on the VAPG provisions in the 2014 
Farm Bill.
    Under the final rule, grants will be made to help eligible 
producers of agricultural commodities enter into or expand value-added 
activities including the development of feasibility studies, business 
plans, and marketing strategies. The program also provides working 
capital for expenses such as implementing an existing viable marketing 
strategy.
    The program provides a priority for funding for applicants that are 
Beginning Farmers and Ranchers, Veteran Farmers and Ranchers, Socially-
Disadvantaged Farmers and Ranchers, operators of Small- and Medium-
sized Family Farms and Ranches, Farmer and Rancher Cooperatives and 
applicants that propose a Mid-Tier Value Chain project. Additional 
priority points will be given to Agricultural Producer Groups, Farmer 
or Rancher Cooperatives, and Majority-Controlled Producer-Based 
Business Ventures whose projects ``best contribute'' to creating or 
increasing marketing opportunities for Beginning Farmers and Ranchers, 
Veteran Farmers and Ranchers, Socially-Disadvantaged Farmers and 
Ranchers, and operators of Small- and Medium-sized Family Farms and 
Ranches. Further, it creates two reserved funds, each of which will 
include 10 percent of program funds each year, for applications that 
support opportunities for Beginning and Socially-Disadvantaged Farmers 
and Ranchers and for proposed projects that develop mid-tier value 
marketing chains.

DATES: Effective Date: This final rule is effective May 8, 2015.
    Comments Due Date: Written comments on this rule must be received 
on or before July 7, 2015.

ADDRESSES: You may submit comments on this final rule by any of the 
following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: USDA, Rural Development, Rural 
Business-Cooperative Service, Room 4008, South Agriculture Building, 
Stop 3253, 1400 Independence Avenue SW., Washington, DC 20250-3253, 
Telephone: (202) 690-1376, Email [email protected].

SUPPLEMENTARY INFORMATION:

Executive Summary

I. Purpose of the Regulatory Action

    This action is needed in order to implement the final rule for the 
Value-Added Producer Grant (VAPG) program. This final rule modifies the 
interim rule for VAPG based on comments received on the interim rule, 
which was published on February 23, 2011 (76 FR 10122), on the 
Agricultural Act of 2014 (2014 Farm Bill), and on a listening session, 
held on April 25, 2014, on the VAPG provisions in the 2014 Farm Bill. 
This action addresses these modifications, as well as a number of 
program clarifications, including but not limited to, allowing seafood 
producers to be able to apply under the locally-produced value-added 
agricultural product methodology and eligibility for tribal entities. 
Finally, this action gives the State Director discretion to award 
priority points in the event that the VAPG program is State-allocated 
in accordance with 7 CFR 1940.593.

II. Summary of the Major Provisions

    1. Program. Section 6203 of Agricultural Act of 2014, Public Law 
113-79 provides priority for funding applicants that are Veteran 
Farmers and Ranchers. It further provides additional priority points 
for Agricultural Producer Groups, Farmer or Rancher Cooperatives, and 
Majority-Controlled Producer-Based Business Ventures whose projects 
``best contribute'' to creating or increasing marketing opportunities 
for Beginning Farmers and Ranchers, Veteran Farmers and Ranchers, 
Socially-Disadvantaged Farmers and Ranchers, and operators of Small- 
and Medium-sized Family Farms and Ranches.
    2. Applications. Applicants must meet all program eligibility and 
evaluation requirements to be considered for funding. To be eligible to 
compete for reserved funding and/or receive priority points in the 
scoring process, applicants must include additional information in 
their grant application for their respective priority or reservation 
category (Beginning Farmers and Ranchers, Veteran Farmers and Ranchers, 
Socially-Disadvantaged Farmers and Ranchers, operators of Small- and 
Medium-sized Family Farms and Ranches, Farmer and Rancher Cooperatives, 
Mid-Tier Value Chain projects, and projects that `best contribute' to 
new or expanded marketing opportunities for Beginning Farmers and 
Ranchers, Socially-Disadvantaged Farmers and Ranchers, or operators of 
Small-and Medium-sized Family Farms and Ranches) in accordance with the 
VAPG program regulation and any additional guidance provided in the 
annual solicitation for the program.
    3. Scoring applications. The Agency will score applications based 
upon the VAPG program regulation and any additional guidance provided 
in the annual solicitation for the program. Priority points will be 
awarded based on the applicant's qualification as one of the identified 
priority categories. Additional priority points will be awarded to 
Agricultural Producer Groups, Farmer or Rancher Cooperatives, and 
Majority-Controlled Producer-Based Business Ventures who can 
demonstrate, based on their current and projected composition of 
owners/membership, how their project ``best contributes'' to creating 
or increasing marketing opportunities for Beginning Farmers and 
Ranchers, Veteran Farmers and Ranchers, Socially-Disadvantaged Farmers 
and Ranchers, and operators of Small- and Medium-sized Family Farms and 
Ranches. Any reserve funds not

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obligated by June 30th will roll into the general program fund. 
Applications will be awarded in rank order until funds are expended or 
the minimum score threshold under the annual solicitation is reached.

III. Costs and Benefits

    The Agency estimates the cost to complete an application to be 
approximately $2,405, with changes resulting from this action estimated 
to amount to $70. The Agency has identified potential offsetting 
benefits to prospective program participants and the Agency that are 
associated with this action. The primary benefit of this action is 
improving the availability of funds to help agricultural producer 
applicants in general, and priority category applicants in particular, 
to expand their customer base for the products or commodities that they 
produce.
    Comments: While comments on the interim rule have been considered, 
we are issuing this final rule without opportunity for prior notice and 
comment on the changes made to implement the 2014 Farm Bill. The 
Administrative Procedure Act exempts rules ``relating to agency 
management or personnel or to public property, loans, grants, benefits, 
or contracts'' from the statutory requirement for prior notice and 
opportunity for comment. 5 U.S.C. 553(a)(2). However, we invite you to 
participate in this rulemaking by submitting written comments, data, or 
views before the noted deadline. We will consider the comments we 
receive and may conduct additional rulemaking based on the comments.

Executive Order 12866

    This final rule has been reviewed under Executive Order (EO) 12866 
and has been determined not significant by the Office of Management and 
Budget (OMB).

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act 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, 
Rural Development 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 Rural Development 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 final rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus, this rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

    This final rule has been reviewed in accordance with 7 CFR part 
1940, subpart G, ``Environmental Program.'' Rural Development has 
determined that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment, and in 
accordance with NEPA of 1969, 42 U.S.C. 4321 et seq., an Environmental 
Impact Statement is not required.

Executive Order 12988, Civil Justice Reform

    This final rule has been reviewed under EO 12988, Civil Justice 
Reform. In accordance with this rule: (1) All State and local laws and 
regulations that are in conflict with this rule will be preempted; (2) 
no retroactive effect will be given to this rule; and (3) 
administrative proceedings in accordance with the regulations of the 
Department of Agriculture's National Appeals Division (7 CFR part 11) 
must be exhausted before bringing suit in court challenging action 
taken under this rule unless those regulations specifically allow 
bringing suit at an earlier time.

Executive Order 13132, Federalism

    It has been determined, under EO 13132, Federalism, that this final 
rule does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment. The provisions contained in the 
rule will not have a substantial direct effect on States or their 
political subdivisions or on the distribution of power and 
responsibilities among the various government levels.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612) (RFA) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the Agency 
certifies that the rule will not have an economically significant 
impact on a substantial number of small entities. Small entities 
include small businesses, small organizations, and small governmental 
jurisdictions.
    Under section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Agency certifies, that this action, while mostly affecting 
small entities, will not have a significant economic impact on a 
substantial number of these small entities for the reasons discussed 
below. This regulation only affects agricultural producers that choose 
to participate in the program. The Agency estimates that approximately 
75 percent of the agricultural producers (operators of Family Farms and 
beginning and Socially-Disadvantaged applicants) that utilize the 
program are considered small entities, as defined by the Regulatory 
Flexibility Act. Therefore, the Agency has determined that this final 
rule will have an impact on a substantial number of small entities.
    However, the economic impact of this final rule on small entities 
will not be significant. Many of the changes being implemented in the 
rule are in response to efforts to make the program more accessible to 
applicants in general and to smaller applicants in particular, as well 
as to clarify and simplify program requirements. In addition, a number 
of changes are in response to comments and concerns voiced by 
applicants and other stakeholders during listening sessions and public 
comment periods for the proposed and interim rules. The most 
significant changes in the rule that affects small producers are the 
addition of Veteran Farmer or Rancher applicants as a priority category 
and the additional priority points available for Agricultural Producer 
Groups, Farmer or Rancher Cooperatives, and Majority-Controlled 
Producer-Based Business Ventures whose projects meet the ``best 
contribute'' provision from the 2014 Farm Bill. These changes do not 
have a significant economic impact on small entities because the cost 
to applicants as estimated by the Agency in the Paperwork Reduction Act 
(PRA) burden package is approximately $70 per applicant impacted by the 
changes. Of these applicants, those addressing the ``best contributes'' 
priority are expected to be comprised of larger entities. This is based 
on determining which of the estimated costs in the PRA burden package 
would be incurred by the applicants impacted by the incorporation of 
the 2014 Farm Bill provisions and the percentage of those considered 
``small entities.

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Executive Order 13211, Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use

    The regulatory impact analysis conducted for this final rule meets 
the requirements for EO 13211, which states that an agency undertaking 
regulatory actions related to energy supply, distribution, or use is to 
prepare a Statement of Energy Effects. This analysis finds that this 
rule will not have any adverse impacts on energy supply, distribution, 
or use.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. 
Intergovernmental consultation will occur for the assistance to 
producers of agricultural commodities in accordance with the process 
and procedures outlined in 7 CFR part 3015, subpart V. Note that not 
all States have chosen to participate in the intergovernmental review 
process. A list of participating States is available at the following 
Web site: http://www.whitehouse.gov/omb/grants/spoc.html.

Executive Order 13175, Consultation and Coordination With Indian Tribes

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Rural Development 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes.
    In response to the 2008 Farm Bill USDA participated in a series of 
formal Tribal consultation sessions to gain input by elected Tribal 
officials, or their designees, concerning the impact of the Interim 
rule on Tribal governments, Tribal producers and Tribal members. These 
sessions were intended to establish a baseline of consultation for 
future actions and informed USDA's policy development within the VAPG 
program.
    As a result of these consultations, USDA developed and issued 
guidance on the eligibility of Tribes and Tribal entities, incorporated 
this guidance into application materials, and provided updated guidance 
to USDA field staff, Tribes and the general public on required 
documentation.
    As the 2014 Farm Bill contained no additional requirements that had 
Tribal implications or substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal Government and Indian 
tribes or on the distribution of power and responsibilities between the 
Federal Government and Indian tribes, USDA has determined that no 
further Tribal consultation is necessary. However, USDA will continue 
to work directly with Tribes and Tribal applicants to improve access to 
this program. The policies contained in this rule do not have Tribal 
implications that preempt Tribal law. For further information on USDA 
Rural Development's Tribal consultation efforts, please contact the 
Agency's Native American Coordinator at [email protected] or 720-544-
2911.

Programs Affected

    VAPG is listed in the Catalog of Federal Domestic Assistance under 
Number 10.352.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act, the paperwork 
burden associated with this Notice has been approved by the Office of 
Management and Budget (OMB) under the currently approved OMB Control 
Number 0570-0039. The Agency has determined that changes contained in 
this regulatory action do not substantially change current data 
collection.

E-Government Act Compliance

    The Agency 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.

I. Background

    On February 23, 2011 (76 FR 10090-10122), the Agency published an 
interim rule for the VAPG program. The interim rule addressed comments 
that the Agency received on the VAPG proposed rule, which was published 
in the Federal Register on May 28, 2010 (75 FR 29920), and clarified 
proposed provisions. Changes were made throughout the rule, with many 
of the changes addressing definitions and how awards are made, 
including assigning priority. The interim rule became effective on 
March 25, 2011, and the Agency provided a 60-day comment period for the 
public to submit comments on the interim rule.
    On February 7, 2014, the Agricultural Act of 2014 (referred to 
herein as the 2014 Farm Bill) was signed into law. Among its many 
provisions were two that affected the VAPG program. Section 6203 of the 
2014 Farm Bill authorized the Secretary of Agriculture to give priority 
to:
     Veteran Farmers and Ranchers and
     Agricultural Producer Groups, Farmer or Rancher 
Cooperatives, and Majority-Controlled Producer-Based Business Ventures 
whose projects best contribute to creating or increasing marketing 
opportunities for operators of Small- and Medium-sized Farms and 
Ranches that are structured as Family Farms, Beginning Farmers and 
Ranchers, Socially-Disadvantaged Farmers and Ranchers, and Veteran 
Farmers and Ranchers.
    The Agency held a listening session on April 25, 2014, to receive 
input from interested stakeholders on how to best implement these two 
provisions. There were a total of two participants who provided 
comments and suggestions.
    All of the comments received on the interim rule and during the 
listening session are summarized in Section III of this final rule. 
Most of the interim rule's provisions have been carried forward into 
the final rule, although there have been some additional changes. A 
summary of major changes to the interim rule are summarized below in 
Section II.

II. Summary of Changes to the Final Rule

    This section presents the major changes to the VAPG final rule. 
Most of the changes were the result of the Agency's consideration of 
public comments on the interim rule, during the listening session (see 
Section III below for specifics on comments received), and on its own 
experience with the program in order to improve the implementation and 
administration. The Agency is also making changes to the rule due to 
statutory changes resulting from the enactment of the 2014 Farm Bill 
(see Section IV below).

A. Definitions (Sec.  4284.902)

    1. The following definitions have been added:
     ``Harvester'' is defined to clarify that Harvesters must 
be able to document their legal right to access and harvest the 
Agricultural Commodity that is the subject of the value-added project. 
It further conveys that individuals or entities that merely glean, 
gather, or

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collect residual commodities that result from an initial harvesting or 
production of a primary Agricultural Commodity are not considered 
Harvesters. This clarification is necessary because the definition in 
Interim Rule did not contain sufficient information to guide potential 
applicants in this category.
     ``Steering committee''--as a subset of the Independent 
Producer definition--is defined to clarify that Steering Committees 
must be comprised wholly of Independent Producers. This clarification 
is necessary because there was confusion among potential applicants 
about the required structure for this applicant type.
     ``Veteran farmer or rancher'' was added to conform to the 
2014 Farm Bill definition that refers to 7 U.S.C. 2279(e).
    2. The definitions of ``financial feasibility'' and ``branding'' 
have been removed because the terms are no longer included in the 
regulation.
    3. The following definitions have been revised:
     ``Agricultural food product'' was revised to include 
seafood products customarily sold or consumed live, to remedy the 
inadvertent exclusion of producers of these products from applying 
under the Locally-Produced Value-Added Agricultural Product 
methodology.
     ``Agricultural producer'' was revised in response to 
public comments, to clarify that individuals and entities that may have 
ownership and/or financial control without being engaged in the day-to-
day labor and management will not be eligible for a value-added 
producer grant. Agricultural Producer was also revised to clarify that 
the eligibility of Tribes and Tribal entities, due to their unique 
structures, will be determined by the Agency without regard to day-to-
day labor, management, and field operation and right to harvest status.
     ``Agricultural producer group'' was revised to clarify 
that this type of applicant must be a non-profit, to alleviate on-going 
confusion about the structure of this applicant type and to conform to 
long-used examples.
     ``Beginning farmer or rancher'' was revised to clarify the 
required composition for reserved fund applicants (100 percent of owner 
members must be beginning farmers or ranchers) and priority point 
applicants (more than 50 percent must be beginning farmers or 
ranchers).
     ``Family farm'' was revised to remove the reference to the 
FSA definition of family farm.
     ``Farm- or Ranch-based renewable energy'' was revised to 
clarify how generated energy must be utilized to meet the requirement 
to demonstrate expanded customer base and increased revenue returned to 
producers.
     ``Feasibility study'' was revised to limit the definition 
to a description of the document, rather than the means by which the 
document is developed by eliminating reference to qualified consultant.
     ``Independent producer'' was revised to clarify that a 
``majority'' of raw commodity owned by the applicant is defined as more 
than 50 percent. The definition was also revised to clarify that 
Steering Committees must apply as an Independent Producer and that a 
program-eligible legal entity must be established by the Steering 
Committee prior to Agency approval of the grant agreement. Further, it 
clarifies that Harvesters must apply as an Independent Producer and the 
eligibility requirements for Harvesters with regards to priority points 
and reserved funding. Independent Producer was also revised to clarify 
the eligibility of Tribes and Tribal entities, with regard to raw 
commodity ownership.
     ``Marketing plan'' was revised to eliminate an unnecessary 
reference to Qualified Consultant.
     ``Medium-sized farm or ranch'' was revised to conform to 
the Economic Research Service's more commonly used gross sales 
threshold of $1,000,000 for operators of medium-sized farms or ranches.
     ``Mid-tier value chain'' was revised in response to public 
comments to include consumers as participants of an eligible project.
     ``Planning grant'' was revised to limit the definition to 
a description of this type of grant, rather than the means by which it 
is developed, by eliminating reference to qualified consultant.
     ``Product segregation'' was revised to ``physical 
segregation'' to be consistent with the statutory language within the 
value-added agricultural product. In addition, an example of a physical 
segregated product was provided.
     ``Small-sized farm or ranch'' was revised to conform to 
the Economic Research Service's more commonly used gross sales 
threshold of $500,000 for operators of small-sized farms or ranches.
     ``Socially-disadvantaged farmer or rancher'' was revised 
to clarify eligibility requirements for individuals and entities in 
regards to priority points and reserved funding as per the statute.
     ``Value-added agricultural product'' was revised to 
clarify that the agricultural commodity (raw commodity) must be 
produced in the United States (including the Republic of Palau, the 
Federated States of Micronesia, the Republic of the Marshall Islands, 
or American Samoa).

B. Environmental Review (Sec.  4284.907)

    The language of this section was modified to indicate that working 
capital awards are generally excluded from the documentation 
requirements in 7 CFR part 1940, subpart G.

C. Applicant Eligibility (Sec.  4284.920)

    1. Type of applicant. Since information regarding the eligibility 
of Tribes and Tribal entities had previously been provided only in 
Agency guidance through an Administrative Notice, the Agency added 
language indicating that Tribes and Tribal entities may be eligible for 
the program if they meet all requirements. In addition, the 
availability of additional guidance from the Agency is noted.
    2. Citizenship. Language providing an exemption to the requirement 
that applicants be comprised of at least 50 percent U.S. citizens or 
legally-admitted permanent residents was deleted to ensure that awards 
are not made to non-U.S. citizens or entities.
    3. Multiple applications. Since information regarding the 
limitation on application submissions by affiliated entities was 
previously included only in the annual solicitation, the Agency added 
language more specifically defining ``affiliated'' entities and the 
limitations on submission of multiple applications.

D. Project Eligibility (Sec.  4284.922)

    1. Purpose eligibility. While the Interim Rule indicates that 
applications containing ineligible costs totaling more than 10 percent 
of Total Project Costs will be deemed ineligible, it does not discuss 
the status of applications containing less than 10 percent ineligible 
costs. Therefore, the Agency is clarifying that applications containing 
ineligible expenses totaling less than 10 percent of Total Project 
Costs must have those expenses removed from the project budget or 
replaced with eligible expenses if selected for an award.
    2. Working Capital. While the Interim Rule provides requirements 
for working capital grants, it does not include the requirement of 
specific quantification of the amount of commodity necessary for the 
project. This information instead was included in an Agency-developed 
application template. The Agency, therefore, is adding in this final 
rule the requirement that applicants quantify and document within their 
applications, the amount of commodity required for the project, as well 
as the amount they

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will produce, and the amount to be procured from third-parties. This 
change will assist the Agency in determining whether applicants meet 
the eligibility requirement to supply a majority of the raw commodity 
needed for the project.

E. Reserved Fund Eligibility (Sec.  4284.923)

    1. A separate section was created for Reserved fund eligibility to 
delineate between it and Priority point eligibility, and for ease in 
navigating the requirements.
    2. Clarification regarding the eligibility of Independent Producer 
Harvesters was included.

F. Priority Point Scoring Eligibility (Sec.  4284.924)

    1. A separate section was created for Priority point eligibility to 
delineate between it and Reserved fund eligibility, and for ease in 
navigating the requirements.
    2. Priority point eligibility status of Harvesters was included.
    3. Documentation requirements for Veteran Farmers and Ranchers was 
included.
    4. The gross sales dollar threshold was changed to conform to the 
Economic Research Service's more commonly used definition.
    5. Priority point eligibility was changed to include a new Farm 
Bill requirement providing points to Agricultural Producer Groups, 
Farmer or Rancher Cooperatives, and Majority-Controlled Producer-Based 
Business Ventures whose projects best contribute to creating or 
increasing marketing opportunities for operators of Small- and Medium-
sized Farms and Ranches that are structure as Family Farms, Beginning 
Farmers and Ranchers, Socially-Disadvantaged Farmers and Ranchers, and 
Veteran Farmers and Ranchers.
    6. Administrator Priority Categories was amended to give State 
Director discretion to award priority points in the event that the VAPG 
program is State-allocated in accordance with 7 CFR 1940.593.

G. Ineligible Uses of Grant and Matching Funds (Sec.  4284.926)

    1. Use of funds for agricultural production expenses. Based on 
applications received and inquiries from applicants, current language 
on the prohibition of use of grant or matching funds for expenses 
related to the production of the raw commodity does not include enough 
specific information to fully inform prospective applicants. Therefore, 
the Agency is adding language to clarify that production planning, 
purchase of production inputs, and delivery of raw commodity is 
explicitly prohibited.
    2. Use of funds to pay for applicant-supplied raw commodity. While 
the Interim Rule is clear that applicants may use grant funds to 
purchase raw commodity (49 percent or less of the total necessary) from 
third-parties, it does not contain specific language prohibiting the 
use of grant funds to purchase commodity from the applicant itself. It 
is the long-held position of the Agency that applicants cannot use 
grant funds to purchase raw commodities from themselves. Thus, the 
Agency is adding language to indicate that applicants or applicant 
entities cannot use grant funds to purchase raw commodity from 
themselves, from applicant-owned or affiliated entities, or from member 
producers.
    3. Use of funds to pay salaries for applicant or applicant family 
member was deleted from this section as it only applied to use of grant 
funds. This section refers to ineligible uses of both grant AND 
matching funds. The prohibition on use of grant funds for this purpose 
and an explanation of the allowability of use of applicant or family 
member time as an in-kind matching contribution is detailed in Sec.  
4284.925 and in Sec.  4284.931.

H. Application Package (Sec.  4284.931)

    1. System for Awards Management (SAM) Registration. This 
registration requirement became mandatory after publication of the 
Interim Rule and the Agency has only included it in the annual 
solicitation. Therefore, language is being added to clarify that all 
applicants must be registered in SAM.
    2. Use of Grant and Matching Funds. The Interim Rule indicates that 
grant funds and matching funds are subject to the same use 
restrictions. However, there are two exceptions in Sec.  4284.925(a) 
and (b). For both planning and working capital grants, grant funds 
cannot be used to pay applicants or family members for their time spent 
on the project. But, appropriately-valued applicant or family member 
time up to a maximum of 25 percent of Total Project Costs can be used 
as an in-kind matching contribution. Similarly, for working capital 
grants, grant funds cannot be used to pay the applicant or affiliated 
parties for raw commodity to be used in project. However, the raw 
commodity can be used as in-kind match. Therefore the Agency has 
revised this section to reflect this change.
    3. Performance Evaluation Criteria. Required Performance evaluation 
criteria were modified to respond to program metrics requirements in 
Section 6209 of the 2014 Farm Bill and also to ensure that data 
collected for program outcome and evaluation purposes is consistent, 
robust, and relevant to both the stated program purposes and ongoing 
evaluation efforts. Corresponding changes were made to Sec.  4284.960 
(Monitoring and reporting program performance) to specify that 
performance reports would include required data related to achieving 
programmatic objectives and a comparison of accomplishments with the 
objectives stated in the application. At a minimum, this would include 
information on: (i) Expansion of customer base as a result of the 
project; (ii) Increased revenue returned to the producer as a result of 
the project; (iii) Jobs created or saved as a result of the project; 
and (iv) Evidence of receipt of matching funds, if included or provided 
for in the project. The Agency also may request any additional project 
and/or performance data for the project for which grant funds have been 
received, for example, information that would promote greater 
understanding of the determinants of success of individual projects, 
inform program administration and evaluation, or that would enable the 
use of data for program administration or evaluation purposes.
    Until such time as the Agency determines that additional data may 
be necessary to further inform program performance, the Agency will 
continue to utilize the data associated with the current Office of 
Management and Budget approved information collection requirements for 
the program. If and when the Agency determines that additional data is 
necessary, it will submit a new information collection package to OMB 
for review and approval prior to publication in the Federal Register 
for public review and input.

I. Filing Instructions (Sec.  4284.933)

    Submission requirements provide information on completeness of 
applications, but do not explicitly state that because the program is a 
nationally-competitive program, no revisions or additional information 
will be accepted after the application deadline. Therefore, the Agency 
is clarifying that no revisions or additional information will be 
accepted after the application deadline.

J. Proposal Evaluation Criteria and Scoring Applications (Sec.  
4284.942)

    The priority point criterion (Criterion 5) was reconfigured to 
accommodate awarding of points to projects that ``best contribute'' to 
the creation of or increase

[[Page 26793]]

in marketing opportunities for members of specified priority groups, 
per the 2014 Farm Bill language.

III. Summary of Comments and Responses

    The Interim Rule was published in the Federal Register on February 
23, 2011 (76 FR 10090), with a 60-day comment period that ended April 
25, 2011. The Agency also conducted a listening session on April 25, 
2014, to receive comments on the VAPG provisions in the 2014 Farm Bill.
    Comments on the Interim Rule were received from 11 commenters, and 
comments on the VAPG provisions in the 2014 Farm Bill were received 
from 2 commenters. Combined, these commenters provided approximately 14 
similar comments. Commenters included industry and trade associations 
and individuals. As a result of some of the comments, the Agency made 
changes in the rule. The Agency sincerely appreciates the time and 
effort of all commenters.
    Responses to the comments on the interim rule and those received 
during the listening session are discussed below. Comments are grouped 
by category and rule section.

A. General

Timing of Final Rule
    Comment: Two commenters stated that some of the shortfalls in the 
Interim Rule are quite serious and deserve to be addressed shortly 
after conclusion of the 2010/11 grant round. The commenters urged the 
Agency not to leave this Interim Rule in place for more than this 
upcoming grant cycle and recommended that the Agency issue a second 
Interim Rule or a Final Rule by the time the 2012 NOSA is issued.
    Response: While the Agency appreciates the fact that the commenters 
are concerned about certain provisions in the Interim Rule published in 
2011, the Agency has had to continue implementing the VAPG program 
under the Interim Rule until it had the opportunity to consider fully 
all of the comments received on the Interim Rule and now to also be 
able to incorporate new provisions associated with the 2014 Farm Bill. 
Hence, the Agency is publishing this Final Rule to address all of the 
comments received on the Interim Rule.
Review Panels
    Comment: One commenter stated that they understand the Agency chose 
not to put information in the Interim Rule about who will do the review 
and evaluation of project proposals. This information has instead 
appeared in the annual NOSA. The commenter stated that they can 
appreciate the Agency's hesitancy in placing this type of information 
in the rule. The iterative NOSA process allows for the evolution of the 
program in a more flexible manner. The commenter stated that they 
believe the Agency should reflect on the experience of the program over 
time, especially with respect to the 2009 and 2010/11 process, and 
should include in either a second Interim Rule or in the Final Rule the 
broad outlines of the review process which could then still be adjusted 
within those broad parameters on a year-by-year basis.
    As part of the review, the commenter strongly encourages the Agency 
to explore the experiences of sister agencies at USDA that also operate 
review panels. The program would be improved by insertion of a section 
in the rule on review panels, provided that it is not as specific and 
rigid as to not allow positive program evolution over time.
    Response: The Agency disagrees with the recommendation to 
incorporate into the rule even a broad outline of the review process 
because of the ensuing loss of flexibility. The Agency also disagrees 
with the suggestion to include a section in the rule concerning review 
panels. Compared to some programs that use a review panel process, the 
VAPG program has a much higher volume of applications and applications 
that are more diverse in nature. Because of these two characteristics, 
a set review panel process, in the Agency's estimation, does not offer 
any benefits compared to the current process in which applications are 
scored by both Rural Development state office personnel and assigned, 
qualified, non-federal independent reviewers. Therefore, the Agency has 
not incorporated either of the commenter's suggestions in the Final 
Rule.

B. Purpose (Sec.  4284.901)

    Comment: One commenter stated that the ``Purpose'' section of the 
rule speaks to the major activities of the program--``to develop 
businesses that produce and market value-added agricultural 
products''--but does not actually address the underlying purpose of the 
program. The commenter recommended the addition of language that speaks 
to the purpose of the program, namely to ``create expanded marketing 
opportunities, increase producer income, and enhance community economic 
development.''
    Response: In consideration of this comment, the Agency has included 
reference to creating marketing opportunities for businesses in the 
Purpose section.

C. Definitions (Sec.  4284.902)

Agricultural Producer
    Comment: Two commenters noted that the definition of ``agricultural 
producer'' has been expanded from individuals and entities actively 
engaged in production to also include those who maintain ownership and 
financial control of an operation without being actively engaged in 
labor and management.
    The commenters claimed that this change could ``open the 
floodgates'' to non-farm passive investors and landlords to reap the 
benefits of a program clearly intended to raise incomes for producers. 
The commenters urge USDA to amend the definition of ``agricultural 
producer'' to read as follows:
    ``Agricultural producer''. An individual or entity directly engaged 
in the production of an agricultural commodity, or that has the legal 
right to harvest an agricultural commodity, that is the subject of the 
value-added project. Agricultural producers may ``directly engage'' 
through substantially participating in the labor, management, and field 
operations.''
    Response: The Agency agrees with the basic concerns expressed by 
the commenters and has revised the definition by removing reference to 
agricultural producers who only maintain ownership and financial 
control of the agricultural operation.
Beginning Farmer or Rancher
    Comment: Two commenters expressed concern over the definition of 
beginning farmer or rancher.
    One of the commenters stated that a citation for a very lengthy 
statutory definition (4 pages) is provided in the Interim Rule as part 
of this VAPG program definition for ``beginning farmer or rancher,'' 
even though the majority of the requirements in the statutory 
definition apply only to FSA loan programs and do not appear applicable 
to RD grant programs.
    The commenter recommended that the Agency drop the statutory 
citation in the Interim Rule and simply specify the eligibility 
requirements that are applicable to beginning farmers and ranchers. The 
other commenter stated that the ``beginning farmer or rancher'' 
definition, as well as the related language in Sec.  4284.922(c)(1)(i), 
must be fixed to make its meaning clear and precise. According to the 
commenter, the definition in the Interim Rule is extremely convoluted, 
could be difficult

[[Page 26794]]

for users, administrators, and review panels to interpret in its 
current form, and thus needs to be clearer and cleaner.
    Response: The Agency agrees with both commenters that the 
definition needs to be both simpler and clearer. The Agency has removed 
the statutory citation and added reference to Independent Producer to 
address the ``substantial participation'' concern. In addition, we have 
reformatted the definition to make clearer the definitional requirement 
to be eligible for priority points and for the reserved funding pool 
that includes beginning farmers and ranchers. The following table 
illustrates the application of the definition for determining whether 
the applicant qualifies as a beginning farmer or rancher for priority 
points or the above mentioned reserved funding pool.

----------------------------------------------------------------------------------------------------------------
                                                                                          Is the applicant a
                                                                                          beginning farmer or
                                                                                       rancher  eligible for . .
            If the applicant is . . .                    and has the following                     .
                                                            characteristics          ---------------------------
                                                                                        Priority      Reserved
                                                                                         points?      funding?
----------------------------------------------------------------------------------------------------------------
An Independent Producer Individual..............   More than 10 years of               No            No
                                                   experience.                                Yes           Yes
                                                   10 years or less of
                                                   experience.
An eligible entity (agricultural producer, a       50 percent or less of the           No            No
 farmer/rancher cooperative, or an independent     members have 10 years or.          ............  ............
 producer other than a harvester).                 less of experience...............          Yes            No
                                                   More than 50 percent of
                                                   the members have 10 years or less
                                                   of experience.
                                                   100 percent of the                 Yes           Yes
                                                   members have 10 years or less of
                                                   experience.
----------------------------------------------------------------------------------------------------------------

Farm- or Ranch-Based Renewable Energy
    Comment: Two commenters stated that USDA should clarify that an 
accepted new added value of an agricultural commodity is its use in 
qualifying for a tradable carbon credit if the production of renewable 
energy destroys, reduces or mitigates the production of green-house 
gases (GHG), or possibly for a renewable energy credit. If this new 
added value of an agricultural commodity is accepted, then the Agency 
needs to clarify in the rule, where appropriate, that equipment used to 
measure and monitor greenhouse gases for trading purposes is a 
legitimate expense covered by the program.
    Response: The Agency is not revising the rule as suggested by the 
commenter because the Agency is bound by the authorizing statute to 
consider only the following, whether the agricultural product: (1) Has 
undergone a change in physical state, (2) was produced in a manner that 
enhances the value of the agricultural commodity, (3) is physically 
segregated in a manner that results in the enhancement of the value-
added agricultural commodity, (4) is a source of farm- or ranch-based 
renewable energy, including E-85 fuel, and (5) is aggregated and 
marketed as a locally produced agricultural food product.
    Comment: One commenter stated that this definition requires on-farm 
generation of renewable energy by an Independent Producer that produces 
the agricultural commodity used to generate the renewable energy on-
farm as a value-added product. The commenter then stated that the 
Agency needs to clarify its policy regarding whether these projects 
fulfill the statutory eligibility requirement that all VAPG projects 
demonstrate an increase in customer base and an increase in revenues 
returning to the producers as a result of the VA project. Specifically, 
the Agency needs to clarify whether on-farm energy savings that result 
from bio-based net metering of electricity, or utilizing methane for 
thermal energy, or utilizing liquid fuels for farm machinery operations 
will qualify (in other words, whether a farmer can use his own value-
added products to reduce his own operating costs to demonstrate 
increased customer base and revenues).
    Response: The Agency agrees with the commenter that all VAPG 
projects must demonstrate an increase in customer base and an increase 
in revenues returning to the producers as a result of the value-added 
project. A farmer that uses a value-added product to simply reduce the 
farm's operating costs does not meet the intent of these two conditions 
and would not qualify (see Scenario 3 below). Thus, there is no 
``perk'' as characterized by the commenter and as such there is no 
effect on the other product eligibility categories to put them at a 
disadvantage.
    The Agency acknowledges, however, that there are situations where 
making such determinations with regards to renewable energy are not 
necessarily clear. To help understand the application of this 
definition with regard to determining project eligibility, consider the 
following scenarios.
    Scenario 1. A farmer installs an anaerobic digester to use cow 
manure to produce electricity and sells that electricity to the local 
utility. The electricity generated by the digester qualifies as 
renewable energy. The local utility represents an increase in the 
customer base and the farmer sees a direct increase in revenues from 
the sale of the electricity to the utility. Thus, this project 
qualifies as a value-added project eligible for consideration for a 
grant.
    Scenario 2. Same scenario as Scenario 1, except that, instead of 
selling the electricity to the local utility, the farmer uses it to 
generate heat and power for a hydroponics facility on the farm from 
which a value-added product is produced. In this second example, the 
renewable energy project also qualifies. By producing the value-added 
product, the farmer is expanding his customers to those customers 
buying the value-added product. The farmer is seeing an increase in his 
revenue either directly as the result of sales of the new value-added 
product or indirectly as a reduction in operating costs of the farm. 
Thus, this project also qualifies as a value-added project eligible for 
consideration for a grant.
    Scenario 3. Same scenario as Scenario 1, except under Scenario 3 
the farmer uses all of the electricity generated by the anaerobic 
digester to replace electricity purchased from the local utility to 
help power current farm operations. While the farmer sees an indirect 
increase in revenues through a reduction in operating costs (as in 
Scenario 2), there is no increase in the customer base for the farmer. 
Therefore, both conditions are not met and the project would not be 
eligible for a VAPG grant.

[[Page 26795]]

    The Agency revised the subject definition in order to clarify how 
the definition is to be applied.
    Comment: One commenter, as a marketer of photovoltaic solar 
systems, believes that the elimination of grants for renewable energy 
systems is not a step we can take if we want to move forward as a 
nation.
    Response: The definition for ``Farm- or Ranch-based renewable 
energy'' states, in part, that on-farm generation of energy from wind, 
solar, geothermal, or hydro sources are not eligible. The project 
eligibility category related to renewable energy was set by the 2008 
Farm Bill and states that a Value-Added Agricultural Product is ``a 
source of farm- or ranch-based renewable energy, including E-85 fuel.'' 
Notwithstanding the virtues of solar systems as described by the 
commenter, it is the Agency's position that solar is not an 
agricultural commodity or a Value-Added agricultural product. The 
Agency notes that agricultural producers and rural small businesses may 
apply for grants under the Rural Energy for America Program for solar 
projects as described by the applicant.
Feasibility Study, Marketing Plan, and Planning Grant
    Comment: Two commenters recommended adding a sentence cross-
referencing the up to 25 percent in-kind match option in Sec.  
4284.923(a) and (b), as is already done for the ``conflict of 
interest'' definition and the ``matching grant'' definition. According 
to the commenters, the addition of the cross reference will remove 
confusion that is otherwise created as to whether the definitions 
override the exception.
    One of the commenters stated that another viable option with 
respect to the feasibility study, marketing plan, and planning grant 
definitions is to simply describe the study, plan or grant, without 
reference to the qualified consultant as has been done in the case of 
``business plan.'' The commenter further stated that they would support 
either option.
    Response: The Agency has decided to adopt the second suggestion in 
order to minimize the confusion identified by the commenters and thus 
has revised the three definitions by removing reference to ``qualified 
consultant.''
Independent Producers
    Comment: Three commenters were concerned that the definition of 
``harvester'' within the Independent Producer definition needed 
clarification.
    Two of the commenters stated that clarifications may be in order to 
ensure that third-party entities used to build, manage and operate 
anaerobic digesters are considered to be ``harvesters of an 
agricultural commodity'' (e.g., animal manure) and eligible for 
participation in the VAPG Program as an ``Independent Producer.''
    The third commenter stated that the Interim Rule lacks sufficient 
detail to demonstrate ``what and who'' qualifies as a ``harvester.'' 
Because the definition is limited to an Independent Producer 
Agricultural Producer who has the ``legal right to harvest an 
agricultural commodity,'' it raises a potential, yet unintended, 
conflict with the primary program purpose that all Independent 
Producers ``currently own and produce the agricultural commodity to 
which value will be added.''
    This commenter recommended that the Agency clarify ``what and who'' 
qualifies in the ``harvester'' category, and specifically state whether 
or not a simple collection or gathering of any agricultural commodity 
suffices. According to the commenter, simple collection of an 
agricultural commodity by a non-agricultural producer would not meet 
the stated intention of the program. The commenter provided the 
following examples: (1) A logger who has the legal right to harvest 
logs from a land owner would be eligible, but a non-logger wanting to 
simply collect unwanted slash from the landing of a land-owner or 
logger would not be eligible, and (2) a non-agricultural producer 
business simply wanting to collect dairy manure from various farming 
operations to convert it to renewable energy would not be eligible. The 
commenter stated that, for these reasons, the Interim Rule needs to 
clarify these eligibility distinctions.
    Response: The Agency agrees with the commenters that the meaning of 
``Harvester'' needs to be clarified and strengthened and has done so 
(including adding a definition for Harvester).
    The Agency disagrees, however, with the two commenters that the 
third-party entities collecting animal manure for use in anaerobic 
digesters, as described by the two commenters, are eligible for the 
program. The Agency agrees with the examples provided by the third 
commenter as to which ``Harvesters'' would or would not be eligible to 
participate in the VAPG program.
    For the purposes of the VAPG program, the Agency has determined 
that entities and individuals, such as those described by the 
commenter, that merely glean, gather or collect residual commodities 
that result from an initial harvesting or production of a primary 
agricultural commodity are not considered ``Harvesters'' and are not 
eligible for this program. For example, see the 2014 NOFA for the 
program (78 FR 70261, November 25, 2013). In the added definition, the 
Agency has clarified that the entity's (or individual's) harvest must 
be a ``primary'' agricultural commodity in order to be eligible; a 
harvester cannot merely glean, gather, or collect residual commodities. 
So for example, a logger who has a legal right to access and harvest 
logs from the forest that are then converted into boards would be an 
eligible applicant, as would a fisherman that has the legal right to 
access and harvest fish from the ocean or river that are then 
processed.
    Comment: One commenter recommended revising the definition of 
``Independent Producers'' and elsewhere as appropriate to clarify 
whether ``harvesters'' are eligible for priority points and reserved 
funds for certain applicant types. Specifically, one or more 
definitions need to clarify whether ``harvesters'' are the equivalent 
of ``farmers'' and, if so, the Interim Rule needs to specify their 
eligibility for both priority points and reserved funds in applicable 
categories.
    Response: As indicated by the commenter, harvesters may only apply 
as an Independent Producer applicant type in order to be eligible for 
the VAPG program. However, harvester operations do not meet the 
definition requirements for a Farm or Ranch and, as such, harvesters 
are not equivalent to farmers or ranchers. Harvester applicants, 
therefore, are not eligible to receive reserve funds for a Beginning 
Farmer or Rancher or a Socially-Disadvantaged Farmer or Rancher; and 
are not eligible to receive Priority Points for a Beginning Farmer or 
Rancher, a Socially-Disadvantaged Farmer or Rancher, Operator of a 
Small or Medium-sized Farm or Ranch structured as a Family Farm, or a 
Farmer or Rancher Cooperative.
    However, if the harvester is proposing a mid-tier value chain 
project, then the harvester would be eligible for priority points and 
for competing for mid-tier value chain reserve funding. The Agency has 
revised the rule to clarify who is eligible for priority points (see 
Sec.  4284.924) and who is eligible for reserved funding (see Sec.  
4284.923).
Medium-Sized Farm
    Comment: One commenter supported the increase from $700,000 to $1 
million in the annual gross sales-based definition of medium-sized farm 
or ranch. The commenter believes this will more adequately reflect 
commodity, enterprise, and regional differences, while ensuring program 
funds are

[[Page 26796]]

targeted to the ``disappearing middle'' of agriculture.
    Response: The Agency thanks the commenter for supporting the change 
made to this definition in the Interim Rule and has retained the $1 
million ceiling in the Final Rule.
Mid-Tier Value Chain
    Comment: Four commenters recommended expanding the definition of a 
Mid-Tier to include direct sales to consumers as well as to businesses 
and cooperatives.
    Response: The Agency agrees with the recommendation and has added 
reference to ``consumers'' to the definition in the rule.

D. Applicant Eligibility (7 CFR 4284.920)

    Comment: One commenter recommended that, because many local food 
initiatives have been created as community based non-profits, non-
profit entities that are benefitting small and medium producer or 
ranchers be included as a fifth type of eligible applicant type for the 
reserve funds for the Mid-Tier Value Chain.
    Response: The Agency has not revised the rule as requested by the 
commenter because the authorizing statute identifies the applicant 
types that are eligible for the VAPG program and the Agency cannot add 
another applicant type without statutory authority.

E. Project Eligibility (Sec.  4284.922)

Branding
    Comment: Three commenters oppose the removal of limitations on 
branding activity costs. One of the commenters stated that the VAPG 
program should not promote advertising as a primary project function.
    One of the commenters agreed that, though branding is an essential 
part of developing a new product, it should not be the sole focus of a 
VAPG project. Even a complete marketing plan (of which branding is just 
one part) is only a fraction of what's needed for any good VAPG 
project--one which helps farmers develop new value-added products.
    The commenter recommended that the Final Rule stress Sec.  
4284.922(a)(1) in stating that projects that are primarily branding 
projects do not meet the criteria of VAPG. The commenter suggested that 
one way this could be done is to include relevant language from the 
past NOSAs. The 2009 NOFA under the section titled ``Other Eligibility 
Requirements'' and from the Proposed Rule, under Sec.  4284.922(c): 
``Applications that propose only branding, packaging, or other similar 
means of product differentiation are not eligible in any category. 
However, applications may propose branding, packaging, or other product 
differentiation activities as a component of a value-added strategy for 
products otherwise eligible in one of the above categories.''
    One of the commenters stated that, by eliminating this section, the 
Agency gives the impression that it is endorsing projects that are 100 
percent for branding. This is in direct contradiction to the 
requirement under Sec.  4284.222(a)(1) that the project must focus on 
adding value to a product in one of five defined ways. The commenter 
stated that, by permitting all grant funds to be used for branding, the 
Agency would be opening the floodgates to becoming a program to support 
the advertising and branding budgets as if it were a domestic 
equivalent of the Market Access Program.
    Response: As stated in the response to comments on branding in the 
Interim Rule, the Agency recognizes that branding and packaging are 
important components of value-added marketing strategies. The program's 
authorizing statute is clear that creation of marketing opportunities 
is an important component of the program. The use of funds to develop 
plans and strategies to create marketing opportunities necessarily 
includes product differentiation and promotional activities, without 
which, there would be no ability to accomplish two key program 
requirements: Expansion of customer base and increased revenue returned 
to the producers of the value-added product. All applicants, including 
those with significant branding or advertising components must still 
meet all other program eligibility requirements, including meeting one 
of the five value-added project methodology categories. Therefore, no 
changes related to branding have been made.
Purpose Eligibility
    Comment: Two commenters noted that, in Sec.  4284.922(b)(6)(i) of 
the Interim Rule, a new provision exempts Independent Producers with 
existing products from applying for working capital grants of $50,000 
or more from providing feasibility studies. The commenters stated that 
they recognize that in theory this modification to the rule could serve 
individual farmers in need of marketing assistance for their value-
added products. However, the commenters worry that, without 
limitations, VAPG could easily become a program for marketing rather 
than predominantly for developing value-added products. One of the 
commenters encouraged the Agency to comprehensively track applications 
and awards for this subset of the program and to monitor the extent to 
which it modifies the current success of VAPG.
    The other commenter stated that this new provision seems to open a 
loophole for any old products that need a new advertising campaign.
    Response: The program's authorizing statute provides that only 
Agricultural Producer Groups, Farmer or Rancher Cooperatives, and 
Majority Controlled Producer-Based Business Ventures are subject to the 
`emerging market' requirement. That leaves otherwise qualified 
Independent Producer applicants free to propose projects that expand 
markets for existing value-added products. As such, the Agency deems 
the long-standing requirement of a business or marketing plan in lieu 
of a feasibility study as sufficient and plans no changes in rule. In 
addition, as stated in response to the comments above regarding 
branding and advertising, it is the Agencies position that the use of 
grant funds to create marketing opportunities through product 
differentiation and promotional campaigns are important components in 
accomplishing program objectives.
Reserved Funds Eligibility
    Comment: One commenter stated that a problem occurs in Sec.  
4284.922(c)(1)(i) (as found in the Interim Rule) in the last sentence 
of that paragraph. According to the commenter, the sentence appears to 
mean that any independent farm, in order to qualify for the beginning 
farmer set-aside or priority, must be a farm in which all owners are 
beginning farmers. The way the sentence is stated, however, it could 
also mean that any applicant entity, made up of multiple farms, must be 
entirely made up of beginning farmers.
    In support, the commenter pointed out that Sec.  4284.922(c)(1)(i) 
says ``For applicant entities with multiple owners, all owners must be 
eligible beginning farmers or ranchers'' while (d)(1) says ``For 
entities with multiple owners or members, 51 percent of owners or 
members must be eligible beginning farmers or ranchers.'' This is 
contradictory and requires a simple clarification of terms to 
distinguish between eligible farms and eligible entities under the 
beginning farmer priority and set-aside.
    Response: While the commenter is correct in identifying the 
differences between the paragraphs, the differences are not in error. 
As stated earlier in response to a comment on the definition of 
``Beginning Farmer or Rancher,'' there

[[Page 26797]]

is an eligibility distinction with regard to priority points versus 
reserved funding. Specifically, to be eligible for priority points, at 
least 51 percent of the farmers in an entity composed of multiple 
farmers must each have no more than 10 years of experience. (Note: In 
the Final Rule, ``at least 51 percent'' has been changed to ``more than 
50 percent''.) However, to be eligible for the reserved funding that 
includes beginning farmers and ranchers, all of the farmers (100 
percent) in an entity composed of multiple farmers must have no more 
than 10 years of experience. This is based on the differences contained 
in the authorizing language in the Food, Conservation, and Energy Act 
of 2008 (2008 Farm Bill), resulting in two separate priority 
categories. The Food, Conservation, and Energy Act of 2008 in section 
6002(6) stated that the Secretary shall give priority to projects that 
``contribute to opportunities'' for beginning and socially 
disadvantaged farmers and ranchers, while subparagraph (7)(C) stated 
that the Secretary shall reserve 10 percent of the amounts made 
available for each fiscal year under this paragraph to fund projects 
``that benefit: beginning farmers or ranchers or socially-disadvantaged 
farmers or ranchers.'' While the Agricultural Act of 2014 does not 
contain the ``contribute to opportunities'' language, it still contains 
separate language in paragraph (6) that gives ``priority'' to beginning 
farmers or ranchers and socially-disadvantaged farmers or ranchers. The 
Agency has revised the rule to clarify this.
    Comment: Four commenters who recommended that the definition of a 
Mid-Tier be expanded to include direct sales to consumers, recommended 
the following change to Sec.  4284.922(c)(2)(ii) (as found in the 
Interim Rule): Describe at least two alliances, linkages, or 
partnerships within the value chain that link independent producers 
with businesses, cooperatives or consumers directly that market value-
added agricultural commodities or value added products in a manner that 
benefits small or medium-sized farms and ranches that are structured as 
a family farm, including the names of the parties and the nature of 
their collaboration.
    Response: The Agency agrees with the commenters and has revised the 
rule accordingly.
    Comment: Four commenters stated that they recognize the 
requirements in Sec.  4284.922(c)(2)(v) (as found in the Interim Rule) 
and the critical importance of the raw agricultural product being 
utilized for the value-added product comes from the project 
participants. However, in the case of the Mid-Tier Value Chain, the 
commenters feel that 50 percent ownership of the product should not be 
required of the applicant organization because this organization is not 
an agricultural producer. Rather, the benefiting agricultural farmers 
and ranchers of the applicant organization should be required to adhere 
to this rule. The commenters proposed the following change to the 
Interim Rule for this section: Demonstrate that the benefiting small or 
medium sized farms or ranches that are structured as a family farm of 
the applicant organization currently owns and produces more than 50 
percent of the raw agricultural commodity that will be used for the 
value added product that is the subject of the proposal.
    Response: The Agency agrees with the commenter and applies this 
provision in the Final Rule as described by the commenter. As a 
reminder, however, the applicant organization must be a producer-based 
organization. So for example, if an applicant organization is composed 
of wheat growers and rice growers and that organization is proposing a 
VAPG project that benefits only the wheat growers, the Agency applies 
this provision by looking at whether the wheat growers own and produce 
more than 50 percent of the raw agricultural commodity that will be 
used for the VAPG project. To clarify this, the Agency has revised this 
paragraph to indicate that the members of the applicant organization 
that are benefiting from the proposed project must currently own and 
produce more than 50 percent of the raw agricultural commodity that 
will be used for the value added product that is the subject of the 
proposal.

F. Eligible Uses of Grant and Matching Funds (Sec.  4284.923)

    Comment: One commenter suggested that, in order to keep business 
and enterprise planning of VAPG projects farmer-centered, farmers and 
ranchers directly participate in the development of VAPG projects and 
be allowed to count their time as an in-kind contribution toward the 
program's matching requirements. The Interim Rule responded to this 
suggestion by allowing time to count as an in-kind contribution up to 
25 percent of the total project costs.
    The commenter applauded the Agency for this decision and believes 
it is a step in the right direction. The commenter urged the Agency to 
do a detailed assessment of the 25 percent cap, including a survey of 
applicants after the next grant round to get detailed reactions to the 
25 percent cap. If the assessment, including the survey, reveals the 25 
percent cap is a barrier to the program meeting its objectives, 
including participation by the statutory priority groups, they would 
then urge the Agency to raise the cap.
    Response: The Agency appreciates the commenter's support of the 
change, which is retained in the Final Rule. The Agency will take under 
advisement the commenter's suggestion for an assessment of the 25 
percent cap.

G. Simplified Application (Sec.  4284.932)

    Comment: One commenter commended the Agency's commitment to 
developing a simplified application form, as required by statute, in 
the annual Notice of Solicitation of Applications (NOSA) for the 
program. The commenter stated that they trust it will appear in the 
NOSA for FY 2010/11 funding and thereafter and further stated that they 
will comment on the simplified application when it appears in the NOSA.
    Response: The Agency acknowledges the comment and looks forward to 
continuing to help improve the simplified application for the program.

H. Priority Points (Sec.  4284.942)

    The 2014 Farm Bill added Veteran Farmers and Ranchers as an 
additional priority group. The Agency is including this group in the 
Final Rule as a priority group and is implementing provisions 
consistent with the provisions identified in the March 24, 2014 notice 
published in the Federal Register (79 FR 16277) that extended the 
application deadline and added priority for Veteran Farmers and 
Ranchers.
    The Agency also received the comments concerning scoring associated 
with priority groups as presented below.
Priority Groups
    Comment: One commenter opposed the changes in point scoring that 
appear to reduce the priority awarded to statutory priority groups, 
which is important to meeting the goals of the VAPG program.
    A second commenter stated that they had recommended that the Agency 
increase the percentage of total proposal evaluation ranking points for 
projects that foster the program's statutory priority for small and 
medium-sized family farms and beginning and Socially-Disadvantaged 
farmers, from 15 to 25 out of a total of 100 points. They further 
stated that the Interim Rule, however, moves in the exactly the 
opposite direction, decreasing those ranking points from 15 to 10 
points.

[[Page 26798]]

    The commenter stated that it strains the meaning of the word 
``priority'' to assign it a ten percent factor. Ten percent might be 
appropriate in a ``bonus'' situation in which the factor might be 
considered a minor distinguishing item, but it certainly does not come 
close to being a priority factor.
    The commenter stated that they are deeply concerned that, if this 
decision is not reversed, non-priority applicants will push aside 
priority applicants and one of the intended goals of the program will 
not be realized. The commenter strongly urged the Agency to issue a 
Final Rule that provides a real priority to the statutory priority 
classes. The commenter recommended that 25 percent of the total point 
value be assigned to statutory priorities, with review panels then 
assessing which projects best foster the priority for small and mid-
sized family farms and beginning and Socially-Disadvantaged farmers and 
ranchers and providing evaluative ranking points accordingly.
    Response: Through the 2008 Farm Bill, the Agency was instructed to 
give priority to certain categories of applicants. Giving priority does 
not mean that the program should only fund applications submitted by 
those groups, but rather, all things being equal, the applications from 
such groups should receive priority. The Final Rule does just that--
making the priority groups eligible for points that are not available 
to applicants in non-priority groups. The distribution of points during 
application scoring process from the last few application rounds, since 
the Interim Rule was implemented, has resulted in the majority of 
awards being made to applicants from the priority categories. Thus, the 
Agency has not revised the distribution of points in response to this 
comment.
Rural Areas
    Comment: Two commenters were concerned over the elimination in the 
Interim Rule of the potential for applicants to receive 10 points for 
being located in a rural area. While the commenters agree that VAPG 
projects cannot be strictly limited to rural areas, they disagree that 
the program should not prioritize rural projects.
    Commenters indicated that there are good reasons to assign ranking 
points to projects that are located in rural areas, even if the markets 
they serve are both rural and urban. A key purpose of the program is to 
raise farm income and improve the economy in farming communities. This 
purpose can be legitimately advanced by providing some amount of 
ranking points to projects located in rural areas. Furthermore, when 
compared to urban agricultural producers, rural farmers and ranchers 
face heightened challenges in accessing markets for their products. The 
commenter recommended reinstating 10 points for rural projects, thus 
demonstrating a continued commitment to rural economic development.
    A third commenter also opposed removing the priority points for 
rural projects, which is important, according to the commenter, to 
meeting the goals of the VAPG program.
    Response: The statute does not include a rural area requirement for 
this program and it is the opinion of the agency that priority points 
for rural areas was not practical in the implementation of this 
program. Therefore, a rural requirement has never been implemented. And 
therefore, this provision does not provide priority points for rural 
projects.

I. Award Process (Sec.  4284.950)

    The 2014 Farm Bill includes a provision that requires the Agency to 
give priority to Agricultural Producer Groups, Farmer or Rancher 
Cooperatives, and Majority-Controlled Producer-Based Business Ventures 
whose projects (including farmer or rancher cooperative projects) best 
contribute to creating or increasing marketing opportunities for 
operators of Small- and Medium-size Farms and Ranches that are 
structured as Family Farms, Beginning Farmers and Ranchers, Socially-
Disadvantaged Farmers and Ranchers, and Veteran Farmers and Ranchers. 
The Agency received comments from stakeholders on this provision during 
the April 25th listening session. In addition, the Agency received 
comments on very similar language the Agency included in the preamble 
to the Interim Rule. The following summarizes the comments on this 
provision and then presents the Agency's response as to how this 
provision is implemented in the Final Rule.
    Comment: In commenting on the Interim Rule, one commenter stated 
that they had recommended that, when proposals are equally ranked, 
those targeting the VAPG priority groups--small and medium-sized family 
farms, beginning farmers and ranchers, and Socially-Disadvantaged 
farmers and ranchers--receive priority and commended its inclusion in 
the preamble to the Interim Rule. Without it also appearing in the rule 
itself, however, they fear it will be overlooked by review panels in 
the future. The commenter, therefore, recommended that the Agency 
incorporate language as a new subsection (b) in Sec.  4284.942 and as a 
revision to subsection (a) in Sec.  4284.950, as follows.
    Response: The Agency has not revised the rule in response to these 
comments. The Administrator has the final authority and discretion in 
assigning points to any application based upon unserved or underserved 
areas; geographic diversity; emergency conditions and priority mission 
area plans, goals, and objectives. Based upon this authority, there 
would never be a need for breaking a tie in the manner suggested.

IV. 2014 Farm Bill Implementation

    The 2014 Farm Bill required the Agency to make changes to the VAPG 
program in two areas regarding priority:
     Priority to Veteran Farmers and Ranchers
     Priority to Agricultural Producer Groups, Farmer or 
Rancher Cooperatives, and Majority-Controlled Producer-Based Business 
Ventures for projects that `best contribute' to new or expanded 
marketing opportunities for Beginning Farmers and Ranchers, Socially-
Disadvantaged Farmers and Ranchers, or operators of Small- and Medium-
sized Family Farms and Ranches) The following paragraphs discuss how 
the Agency is implementing these priorities in the Final Rule.

A. Veteran Farmer or Rancher Priority

    The 2014 Farm Bill added a new priority for Veteran Farmers and 
Ranchers. The definition of a Veteran Farmer or Rancher, as provided by 
the 2014 Farm Bill, is a farmer or rancher who has served in the Armed 
Forces, as defined in section 101(10) of title 38 United States Code, 
and who either has not operated a farm or ranch or has operated a farm 
or ranch for not more than 10 years.
    To qualify for priority points for projects that contribute to 
increasing opportunities for Veteran Farmers and Ranchers, applicants 
must submit form DD-214, Report of Separation from the U.S. Military 
and meet the requirements for Beginning Farmers or Ranchers at 7 CFR 
4284.922(d) and in the application guides, as well as all other program 
requirements.

B. Best Contributing Priority

    The 2014 Farm Bill added a new priority for Agricultural Producer 
Groups, Farmer and Rancher Cooperatives, and Majority-Controlled 
Producer-Based Business Ventures (applicant group) whose projects 
``best contribute to creating or increasing marketing opportunities'' 
for operators

[[Page 26799]]

of Small- and Medium-sized Farms and Ranches that are structured as 
Family Farms, Beginning Farmers and Ranchers, Socially-Disadvantaged 
Farmers and Ranchers, and Veteran Farmers and Ranchers (priority 
groups). Applications must contain sufficient information as described 
in the annual solicitation and application package to enable the Agency 
to make the appropriate determinations for awarding points for this 
priority. If the application does not contain sufficient information, 
the Agency will not award points accordingly.
    The Agency is implementing this priority by awarding up to 5 
additional points based on documentation of the composition of the 
applicant's existing membership and anticipated expansion of membership 
as a way to assess creating or increasing marketing opportunities for 
the four priority groups. The Agency will use the following three 
criteria to award up to five points for this new priority.
    1. If the existing membership of the applicant group is comprised 
of either more than 75 percent of any one of the four priority groups 
or more than 75 percent of any combination of the four priority groups, 
the application is eligible for two points.
    2. If the existing membership of the applicant group is comprised 
of two or more of the priority groups, the application is eligible to 
receive one point. One point is awarded regardless of whether a group's 
membership is comprised of two, three, or all of the four priority 
groups.
    3. If the proposed project in the applicant group's application 
will increase the number of priority groups that comprise the applicant 
group's membership by one or more priority group, the application is 
eligible to receive two points. However, if an applicant group's 
membership is already comprised of all four priority groups, such an 
applicant would not be eligible for points under this criterion because 
there is no opportunity to increase the number of priority groups. Note 
also that this criterion does not consider either the percentage of the 
existing membership that is comprised of the four priority groups or 
the number of priority groups currently comprising the applicant 
group's membership.

List of Subjects in 7 CFR Part 4284

    Agricultural commodities, Grant programs, Housing and community 
development, Rural areas, Rural development, Value-added activities.

    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301 and 7 U.S.C. 1989, chapter XLII of title 7 of the Code of 
Federal Regulations (CFR) is amended as follows:

CHAPTER XLII--RURAL BUSINESS-COOPERATIVE SERVICE AND RURAL UTILITIES 
SERVICE, U.S. DEPARTMENT OF AGRICULTURE

PART 4284--GRANTS

0
1. The authority citation for part 4284 is revised to read as follows:

    Authority:  5 U.S.C. 301 and 7 U.S.C. 1989.
    Subpart F also issued under 7 U.S.C 1932(e). Subpart G also 
issued under 7 U.S.C 1926(a)(11). Subpart J also issued under 7 
U.S.C. 1632(a). Subpart K also issued under 7 U.S.C. 1621 note.

0
2. Part 4284 is amended by revising subpart J to read as follows:
Subpart J--Value-Added Producer Grant Program

General

Sec.
4284.901 Purpose.
4284.902 Definitions.
4284.903 Review or appeal rights.
4284.904 Exception authority.
4284.905 Nondiscrimination and compliance with other Federal laws.
4284.906 State laws, local laws, regulatory commission regulations.
4284.907 Environmental requirements.
4284.908 Compliance with other regulations.
4284.909 Forms, regulations, and instructions.
4284.910-4284.914 [Reserved]

Funding and Programmatic Change Notifications

4284.915 Notifications.
4284.916-4284.919 [Reserved]

Eligibility

4284.920 Applicant eligibility.
4284.921 Ineligible applicants.
4284.922 Project eligibility.
4284.923 Reserved funds eligibility.
4284.924 Priority scoring eligibility.
4284.925 Eligible uses of grant and matching funds.
4284.926 Ineligible uses of grant and matching funds.
4284.927 Funding limitations.
4284.928-4284.929 [Reserved]

Applying for a Grant

4284.930 Preliminary review.
4284.931 Application package.
4284.932 Simplified application.
4284.933 Filing instructions.
4284.934-4284.939 [Reserved]

Processing and Scoring Applications

4284.940 Processing applications.
4284.941 Application withdrawal.
4284.942 Proposal evaluation criteria and scoring applications.
4284.943-4284.949 [Reserved]

Grant Awards and Agreement

4284.950 Award process.
4284.951 Obligate and award funds.
4284.952-4284.959 [Reserved]

Post Award Activities and Requirements

4284.960 Monitoring and reporting program performance.
4284.961 Grant servicing.
4284.962 Transfer of obligations.
4284.963 Grant close out and related activities.
4284.964-4284.999 [Reserved]

General

Sec.  4284.901 Purpose.
    This subpart implements the Value-Added Agricultural Product Market 
Development grant program (Value-Added Producer Grants (VAPG)) 
administered by the Rural Business-Cooperative Service whereby grants 
are made to enable viable Agricultural Producers (those who are 
prepared to progress to the next business level of planning for, or 
engaging in, Value-Added Agricultural Production) to develop businesses 
that produce and market Value-Added Agricultural Products and to create 
marketing opportunities for such businesses. The provisions of this 
subpart constitute the entire provisions applicable to this Program; 
the provisions of subpart A of this part do not apply to this subpart.


Sec.  4284.902  Definitions.

    The following definitions apply to this subpart:
    Administrator. The Administrator of the Rural Business-Cooperative 
Service or designees or successors.
    Agency. The Rural Business-Cooperative Service or successor for the 
programs it administers.
    Agricultural commodity. An unprocessed product of farms, ranches, 
nurseries, and forests and natural and man-made bodies of water, that 
the Independent Producer has cultivated, raised, or harvested with 
legal access rights. Agricultural commodities include plant and animal 
products and their by-products, such as crops, forestry products, 
hydroponics, nursery stock, aquaculture, meat, on-farm generated 
manure, and fish and seafood products. Agricultural commodities do not 
include horses or other animals raised or sold as pets, such as cats, 
dogs, and ferrets.
    Agricultural food product. Agricultural food products can be raw, 
cooked, or processed edible substances, beverages, or ingredients 
intended for human consumption. These products cannot be animal feed, 
live animals (except for seafood products customarily sold and/or 
consumed live), non-harvested plants, fiber, medicinal products, 
cosmetics, tobacco products, or narcotics.

[[Page 26800]]

    Agricultural producer. (1) An individual or entity that produces an 
Agricultural Commodity through participation in the day-to-day labor, 
management, and field operations; or that has the legal right to 
harvest an Agricultural Commodity that is the subject of the VAPG 
project.
    (2) The Agency shall determine the Agricultural producer status of 
Tribes and Tribal entities without regard to day-to-day labor, 
management, and field operation and right to harvest status.
    Agricultural producer group. A non-profit membership organization 
that represents Independent Producers and whose mission includes 
working on behalf of Independent Producers and the majority of whose 
membership and board of directors is comprised of Independent 
Producers. The Independent Producers, on whose behalf the value-added 
work will be done, must be confirmed as eligible and identified by name 
or class.
    Applicant. The legal entity submitting an application to 
participate in the competition for program funding. The Applicant must 
be legally structured to meet one of the four eligible Applicant types: 
Independent Producer, Agricultural Producer Group, Farmer or Rancher 
Cooperative, or Majority-Controlled Producer-Based Business Venture.
    Beginning farmer or rancher. (1) For the purposes of determining 
eligibility to receive priority points under Sec.  4284.924, a 
Beginning Farmer or Rancher is either:
    (i) An individual Independent Producer (other than a Harvester) 
that has operated a Farm or Ranch for no more than 10 years or
    (ii) An eligible Applicant entity, other than a Harvester, that has 
an Applicant ownership or membership of more than 50 percent farmers or 
ranchers each of whom have operated a Farm or Ranch for no more than 10 
years.
    (2) For the purposes of determining eligibility to receive funding 
reserved for Beginning Farmers and Ranchers under Sec.  4284.923, a 
Beginning Farmer or Rancher is either:
    (i) An individual Independent Producer (other than a Harvester) 
that has operated a Farm or Ranch for no more than 10 years or
    (ii) An eligible Applicant entity, other than a Harvester, that has 
an Applicant ownership or membership comprised entirely of (i.e., 100 
percent) farmers or ranchers that have operated a Farm or Ranch for no 
more than 10 years.
    Business plan. A formal statement of a set of business goals, the 
reasons why they are believed attainable, and the plan for reaching 
those goals, including Pro Forma Financial Statements appropriate to 
the term and scope of the Project and sufficient to evidence the 
viability of the Venture. It may also contain background information 
about the organization or team attempting to reach those goals.
    Change in physical state. An irreversible processing activity that 
alters the raw Agricultural Commodity into a marketable Value-Added 
Agricultural Product. This processing activity must be something other 
than a post-harvest process that primarily acts to preserve the 
commodity for later sale. Examples of eligible Value-Added Agricultural 
Products in this category include, but are not limited to, fish 
fillets, diced tomatoes, bio-diesel fuel, cheese, jam, and wool rugs. 
Examples of ineligible products include, but are not limited to, 
pressure-ripened produce; raw bottled milk; container grown trees; 
young plants, seedlings or plugs; and cut flowers.
    Conflict of interest. A situation in which a person or entity has 
competing personal, professional, or financial interests that make it 
difficult for the person or business to act impartially. Regarding use 
of both grant and Matching Funds, Federal procurement standards apply 
to the use of grant funds for purchases and hires, and prohibit 
transactions that involve a real or apparent Conflict of Interest for 
owners, employees, officers, agents, or their Immediate Family members 
having a financial or other interest in the outcome of the Project; or 
that restrict open and free competition for unrestrained trade. 
Specifically, grant and Matching Funds may not be used to support costs 
for services or goods going to, or coming from, a person or entity with 
a real or apparent Conflict of Interest, including, but not limited to, 
owner(s) and their Immediate Family members. See Sec.  4284.925(a) and 
(b) for limited exceptions to this definition and practice for VAPG.
    Departmental regulations. The regulations of the Department of 
Agriculture's Office of Chief Financial Officer (or successor office) 
as codified in 2 CFR parts 200 and 400 and any successor regulations to 
these parts.
    Emerging market. A new or developing, geographic or demographic 
market that is new to the Applicant or the Applicant's product. To 
qualify as new, the Applicant cannot have supplied this product, 
geographic, or demographic market for more than two years at time of 
application submission.
    Family farm. A Farm (or Ranch) that produces agricultural 
commodities for sale in sufficient quantity to be recognized as a farm 
and not a rural residence; whose owners are primarily responsible for 
daily physical labor and strategic management; whose hired help only 
supplements family labor; and, whose owners are related by blood or 
marriage or are Immediate Family.
    Farm or ranch. Any place from which $1,000 or more of agricultural 
products were raised and sold or would have been raised and sold during 
the previous year, but for an event beyond the control of the farmer or 
rancher.
    Farm- or Ranch-based renewable energy. An Agricultural Commodity 
that is used to generate renewable energy on a Farm or Ranch owned or 
leased by the Independent Producer Applicant that produces the 
Agricultural Commodity, such that the generated renewable energy, is 
utilized in such a way that the applicant can demonstrate expanded 
customer base and increased revenues returning to the producers of the 
agricultural commodity as a result of the project. On-farm generation 
of energy from wind, solar, geothermal or hydro sources is not eligible 
for this program.
    Farmer or rancher cooperative. A business owned and controlled by 
Independent Producers that is incorporated, or otherwise identified by 
the state in which it operates, as a cooperatively operated business. 
The Independent Producers, on whose behalf the value-added work will be 
done, must be confirmed as eligible and identified by name or class.
    Feasibility study. An analysis of the economic, market, technical, 
financial, and management capabilities of a proposed Project or 
business in terms of the Project's expectation for success.
    Fiscal year. The Federal government's fiscal year.
    Harvester. An Independent Producer of an Agricultural Commodity 
that is an individual or entity that can document that it has a legal 
right to access and harvest the majority of a primary Agricultural 
Commodity that will be used for the Value-Added Agricultural Product. 
Individuals and entities that merely glean, gather, or collect residual 
commodities that result from an initial harvesting or production of a 
primary Agricultural Commodity are not considered Harvesters and are 
not eligible for this program.
    Immediate family. Individuals who are closely related by blood, 
marriage, or adoption, or live within the same household, such as a 
spouse, domestic partner, parent, child, brother, sister, aunt, uncle, 
grandparent, grandchild, niece, or nephew.
    Independent Producer. (1) Individual Agricultural Producers or 
entities that are solely owned and controlled by Agricultural 
Producers. Independent

[[Page 26801]]

Producers must produce and own more than 50 percent of the Agricultural 
Commodity to which value will be added as the subject of the Project 
proposal. Independent Producers must maintain ownership of the 
Agricultural Commodity or product from its raw state through the 
production and marketing of the Value-Added Agricultural Product. 
Producers who produce the Agricultural Commodity under contract for 
another entity, but do not own the Agricultural Commodity or Value-
Added Agricultural Product produced, are not considered Independent 
Producers. Entities that contract out the production of an Agricultural 
Commodity are not considered Independent Producers. Independent 
Producer entities must confirm their owner members as eligible and must 
identify them by name or class.
    (2) A Steering Committee must apply as an Independent Producer and 
form a program-eligible legal entity prior to execution of the grant 
agreement by the Agency. The Steering Committee and entity subsequently 
formed must meet all other program eligibility requirements.
    (3) A Harvester must apply as an Independent Producer because 
harvester operations do not meet the definition requirements for a Farm 
or Ranch. Harvester applicants are therefore not eligible to receive 
Reserved Funds and/or Priority Points for a Beginning Farmer or 
Rancher, Socially-Disadvantaged Farmer or Rancher, operator of a Small- 
or Medium-sized farm or ranch that is structured as a Family Farm, or a 
Farmer or Rancher Cooperative, but may request Reserved Funds and/or 
Priority Points for qualified Mid-Tier Value Chain projects.
    (4) The Agency shall determine the Independent Producer status of 
Tribes or Tribal entities without regard to ownership of the commodity 
to which value will be added so long as the tribal member participant, 
tribal entity and/or Tribe own and control at least 50 percent of the 
raw commodity necessary for the project, per the definition of 
Independent Producer in Sec.  4284.902.
    Local or regional supply network. An interconnected group of 
individuals and/or entities through which agricultural based products 
move from production through consumption in a local or regional area of 
the United States. Examples of participants in a supply network may 
include Agricultural Producers, aggregators, processors, distributors, 
wholesalers, retailers, consumers, and entities that organize or 
provide facilitation services and technical assistance for development 
of such networks.
    Locally-produced Agricultural Food Product. Any Agricultural Food 
Product, as defined in this subpart, that is raised, produced, and 
distributed in:
    (1) The locality or region in which the final product is marketed, 
so that the total distance that the product is transported is less than 
400 miles from the origin of the product; or
    (2) The State in which the product is produced.
    Majority-controlled producer-based business venture. An entity 
(except Farmer or Rancher Cooperatives) in which more than 50 percent 
of the financial ownership and voting control is held by Independent 
Producers. Independent Producer members must be confirmed as eligible 
and must be identified by name or class, along with their percentage of 
ownership.
    Marketing plan. A plan for the project that identifies a market 
window, potential buyers, a description of the distribution system and 
possible promotional campaigns.
    Matching funds. A cost-sharing contribution to the project via 
confirmed cash or funding commitments from eligible sources without a 
real or apparent Conflict of Interest, that are used for eligible 
project purposes during the grant funding period. Matching Funds must 
be at least equal to the grant amount, and combined grant and Matching 
Funds must equal 100 percent of the Total Project Costs. All Matching 
Funds must be provided for in the approved budget, must be necessary 
and reasonable for accomplishment of project or program objectives and 
can be verified by authentic documentation from the source as part of 
the application. Matching Funds must be provided in the form of 
confirmed Applicant cash, loan, or line of credit, or provided in the 
form of a confirmed Applicant or family member in-kind contribution 
that meets the requirements and limitations in Sec.  4284.925(a) and 
(b); or confirmed third-party cash or eligible third-party in-kind 
contribution; or confirmed non-federal grant sources (unless otherwise 
provided by law). Matching funds cannot be paid by the Federal 
Government under another Federal award and are not included as 
contributions for any other Federal Award. See examples of ineligible 
Matching Funds and Matching Funds verification requirements in 
Sec. Sec.  4284.926 and 4284.931.
    Medium-sized farm or ranch. A Farm or Ranch that is structured as a 
Family Farm that has averaged $500,001 to $1,000,000 in annual gross 
sales of agricultural commodities in the previous three years.
    Mid-tier value chain. Local and regional supply networks that link 
Independent Producers with businesses, cooperatives, or consumers that 
market Value-Added Agricultural Products in a manner that:
    (1) Targets and strengthens the profitability and competitiveness 
of Small- and Medium-sized Farms or Ranches that are structured as a 
Family Farm; and
    (2) Obtains agreement from an eligible Agricultural Producer Group, 
Farmer or Rancher Cooperative, or Majority-Controlled Producer-Based 
Business Venture that is engaged in the value chain on a marketing 
strategy.
    (3) For Mid-tier Value Chain projects, the Agency recognizes that, 
in a supply chain network, a variety of raw Agricultural Commodity and 
Value-Added Agricultural Product ownership and transfer arrangements 
may be necessary. Consequently, Applicant ownership of the raw 
Agricultural Commodity and Value-Added Agricultural Product from raw 
through value-added stages is not necessarily required, as long as the 
Mid-tier Value Chain application can demonstrate an increase in 
customer base and an increase in revenue returns to the Applicant 
producers supplying the majority of the raw Agricultural Commodity for 
the project.
    Planning grant. A grant to facilitate the development of a defined 
program of economic planning activities to determine the viability of a 
potential value-added Venture, and specifically for the purpose of 
paying for conducting and developing a Feasibility Study, Business 
Plan, and/or Marketing Plan associated with the processing and/or 
marketing of a Value-Added Agricultural Product.
    Produced in a manner that enhances the value of the Agricultural 
Commodity. The use of a recognizably coherent set of agricultural 
production practices in the growing or raising of the raw commodity, 
such that a differentiated market identity is created for the resulting 
product. Examples of eligible products in this category include, but 
are not limited to, sustainably grown apples, eggs produced from free-
range chickens, or organically grown carrots.
    Physical segregation. Separating an Agricultural Commodity or 
product on the same farm from other varieties of the same commodity or 
product on the same farm during production and harvesting, with 
assurance of continued separation from similar commodities during 
processing and marketing in a

[[Page 26802]]

manner that results in the enhancement of the value of the separated 
commodity or product. An example of a segregated product is non-GMO 
corn separated from GMO corn.
    Pro forma financial statement. A financial statement that projects 
the future financial position of a company. The statement is part of 
the Business Plan and includes an explanation of all assumptions, such 
as input prices, finished product prices, and other economic factors 
used to generate the financial statements. The statement must include 
projections for a minimum of three years in the form of cash flow 
statements, income statements, and balance sheets.
    Project. All of the eligible activities to be funded by the grant 
under this subpart and Matching Funds.
    Qualified consultant. An independent, third-party, without a 
Conflict of Interest, possessing the knowledge, expertise, and 
experience to perform the specific task required in an efficient, 
effective, and authoritative manner.
    Rural Development. A mission area of the Under Secretary for Rural 
Development within the U.S. Department of Agriculture (USDA), which 
includes Rural Housing Service, Rural Utilities Service, and Rural 
Business-Cooperative Service and their successors.
    Small-sized farm or ranch. A Farm or Ranch that is structured as a 
Family Farm that has averaged $500,000 or less in annual gross sales of 
agricultural products in the previous three years.
    Socially-disadvantaged farmer or rancher. This term has the meaning 
given in section 355(e) of the Consolidated Farm and Rural Development 
Act (7 U.S.C. 2003(e)): Socially-Disadvantaged Farmer or Rancher means 
a farmer or rancher who is a member of a ``Socially-Disadvantaged 
Group.''
    (1) For the purposes of determining eligibility to receive priority 
points under Sec.  4284.924, if there are multiple farmer or rancher 
owners of the Applicant organization, more than 50 percent of the 
ownership must be held by members of a Socially-Disadvantaged Group.
    (2) For the purposes of determining eligibility to received funding 
reserved for Socially-Disadvantaged Farmers and Ranchers under Sec.  
4284.923, if there are multiple farmer or rancher owners of the 
Applicant organization, all farmer and rancher owners (i.e., 100 
percent) must be members of a Socially-Disadvantaged Group.
    Socially-Disadvantaged group. A group whose members have been 
subjected to racial, ethnic, or gender prejudice because of their 
identity as members of a group without regard to their individual 
qualities.
    State. Any of the 50 States of the United States, the Commonwealth 
of Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, the 
Commonwealth of the Northern Mariana Islands, the Republic of Palau, 
the Federated States of Micronesia, and the Republic of the Marshall 
Islands.
    State office. USDA Rural Development offices located in each State.
    Steering committee. An unincorporated group comprised wholly of 
specifically identified Independent Producers in the process of 
organizing one of the four program eligible entity types (Independent 
Producer, Agricultural Producer Group, Farmer or Rancher Cooperative or 
Majority-Controlled Producer-Based Business Venture.
    Total project cost. The sum of all grant and Matching Funds in the 
project budget that reflects the eligible project tasks associated with 
the work plan.
    Value-added agricultural product. Any Agricultural Commodity 
produced in the U.S. (including the Republic of Palau, the Federated 
States of Micronesia, the Republic of the Marshall Islands, or American 
Samoa), that meets the requirements specified in paragraphs (1) and (2) 
of this definition.
    (1) The Agricultural Commodity must meet one of the following five 
value-added methodologies:
    (i) Has undergone a Change in Physical State;
    (ii) Was Produced in a Manner that Enhances the Value of the 
Agricultural Commodity;
    (iii) Is Physically Segregated in a manner that results in the 
enhancement of the value of the Agricultural Commodity;
    (iv) Is a source of Farm- or Ranch-based Renewable Energy, 
including E-85 fuel; or
    (v) Is aggregated and marketed as a Locally-Produced Agricultural 
Food Product.
    (2) As a result of the Change in Physical State or the manner in 
which the Agricultural Commodity was produced, marketed, or segregated:
    (i) The customer base for the Agricultural Commodity is expanded 
and
    (ii) A greater portion of the revenue derived from the marketing, 
processing, or physical segregation of the Agricultural Commodity is 
available to the producer of the commodity.
    Venture. The business and its value-added undertakings, including 
the project and other related activities.
    Veteran farmer or rancher. A farmer or rancher who has served in 
the Armed Forces, as defined in section 101(10) of title 38 United 
States Code, and who either has not operated a Farm or Ranch or has 
operated a Farm or Ranch for not more than 10 years.
    (1) For the purposes of determining eligibility to receive priority 
points under Sec.  4284.924, a Veteran Farmer or Rancher is either:
    (i) An individual Independent Producer (other than a Harvester) 
that has either never operated a Farm or Ranch or has operated a Farm 
or Ranch for no more than 10 years or
    (ii) An eligible Applicant entity, other than a Harvester, that has 
an Applicant ownership or membership of more than 50 percent Veteran 
Farmers or Ranchers each of whom have either never operated a Farm or 
Ranch or operated a Farm or Ranch for no more than 10 years.
    (2) [Reserved]
    Working capital grant. A grant to provide funds to operate a value-
added project, specifically to pay the eligible project expenses 
related to the processing and/or marketing of the Value-Added 
Agricultural Product that are eligible uses of grant funds.


Sec.  4284.903  Review or appeal rights.

    A person may seek a review of an Agency decision under this subpart 
from the appropriate Agency official that oversees the program in 
question or appeal to the National Appeals Division in accordance with 
7 CFR part 11.


Sec.  4284.904  Exception authority.

    Except as specified in paragraphs (a) and (b) of this section, the 
Administrator may make exceptions to any requirement or provision of 
this subpart, if such exception is necessary to implement the intent of 
the authorizing statute in a time of national emergency or in 
accordance with a Presidentially-declared disaster, or, on a case-by-
case basis, when such an exception is in the best financial interests 
of the Federal Government and is otherwise not in conflict with 
applicable laws.
    (a) Applicant eligibility. No exception to Applicant eligibility 
can be made.
    (b) Project eligibility. No exception to project eligibility can be 
made.


Sec.  4284.905  Nondiscrimination and compliance with other Federal 
laws.

    (a) Other Federal laws. Applicants must comply with other 
applicable Federal laws, including the Equal

[[Page 26803]]

Employment Opportunities Act of 1972, the Americans with
    Disabilities Act, the Equal Credit Opportunity Act, Title VI of the 
Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 
1973, the Age Discrimination Act of 1975, and 7 CFR part 1901, subpart 
E.
    (b) Nondiscrimination. The U.S. Department of Agriculture (USDA) 
prohibits discrimination in all its programs and activities on the 
basis of race, color, national origin, age, disability, and where 
applicable, sex, marital status, familial status, parental status, 
religion, sexual orientation, genetic information, political beliefs, 
reprisal, or because all or part of an individual's income is derived 
from any public assistance program. (Not all prohibited bases apply to 
all programs.) Persons with disabilities who require alternative means 
for communication of program information (Braille, large print, 
audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 
(voice and TDD). Any Applicant that believes it has been discriminated 
against as a result of applying for funds under this program should 
contact: USDA, Director, Office of Adjudication and Compliance, 1400 
Independence Avenue SW., Washington, DC 20250-9410, or call (800) 795-
3272 (voice) or (202) 720-6382 (TDD) for information and instructions 
regarding the filing of a Civil Rights complaint. USDA is an equal 
opportunity provider, employer, and lender.
    (c) Civil rights compliance. Recipients of grants must comply with 
Title VI of the Civil Rights Act of 1964, and Section 504 of the 
Rehabilitation Act of 1973. This includes collection and maintenance of 
data on the basis of race, sex and national origin of the recipient's 
membership/ownership and employees. These data must be available to 
conduct compliance reviews in accordance with 7 CFR part 1901, subpart 
E. For grants, compliance reviews will be conducted after the grantee 
signs the applicable Assurance Agreement, and after the last 
disbursement of grant funds have been made and the facility or program 
has been in full operations for 90 days.
    (d) Executive Order 12898. When a project is proposed and financial 
assistance is requested, the Agency will conduct a Civil Rights Impact 
Analysis (CRIA) with regards to environmental justice. Civil Rights 
certification must be done prior to grant approval, obligation of 
funds, or other commitments of Agency resources, including issuance of 
a Letter of Conditions, whichever occurs first.


Sec.  4284.906  State laws, local laws, regulatory commission 
regulations.

    If there are conflicts between this subpart and State or local laws 
or regulatory commission regulations, the provisions of this subpart 
will control.


Sec.  4284.907  Environmental requirements.

    All grants awarded under this subpart are subject to the 
environmental requirements in subpart G of 7 CFR part 1940. 
Applications for both Planning and Working Capital grants are generally 
excluded from the environmental review process by 7 CFR 1940.333.


Sec.  4284.908  Compliance with other regulations.

    (a) Departmental regulations. Applicants must comply with all 
applicable Departmental regulations and Office of Management and Budget 
regulations concerning grants in 2 CFR chapter IV.
    (b) Cost principles. Applicants must comply with the cost 
principles found in 2 CFR parts 200, subpart E, 2 CFR part 400, and in 
48 CFR subpart 31.2.
    (c) Definitions. If a term is defined differently in the 
Departmental Regulations, 2 CFR parts 200 through 400 or 48 CFR subpart 
31.2 and in this subpart, such term shall have the meaning as found in 
this subpart.


Sec.  4284.909  Forms, regulations, and instructions.

    Copies of all forms, regulations, instructions, and other materials 
related to the program referenced in this subpart may be obtained 
through the Agency's Web site and at any Rural Development office.


Sec. Sec.  4284.910-4284.914  [Reserved]

Funding and Programmatic Change Notifications


Sec.  4284.915  Notifications.

    In implementing this subpart, the Agency will issue public 
notifications addressing funding and programmatic changes, as specified 
in paragraphs (a) and (b) of this section, respectively. The methods 
that the Agency will use in making these notifications is specified in 
paragraph (c) of this section, and the timing of these notifications is 
specified in paragraph (d) of this section.
    (a) Funding and simplified applications. The Agency will issue 
notifications concerning:
    (1) The funding level, the minimum and maximum grant amounts, and 
any additional funding information as determined by the Agency; and
    (2) The contents of simplified applications, as provided for in 
Sec.  4284.932.
    (b) Programmatic changes. The Agency will issue notifications of 
any programmatic changes specified in paragraphs (b)(1) through (4) of 
this section.
    (1) Priority categories to be used for awarding Administrator or 
State Director points, which may include any of the following:
    (i) Unserved or underserved areas.
    (ii) Geographic diversity.
    (iii) Emergency conditions.
    (iv) Priority mission area plans, goals, and objectives.
    (2) Additional reports that are generally applicable across 
projects within a program associated with the monitoring of and 
reporting on project performance.
    (3) Any application filing instructions specified in Sec.  
4284.933.
    (c) Notification methods. The Agency will issue the information 
specified in paragraphs (a) and (b) of this section in one or more 
Federal Register notices. If a funding level is not known at the time 
of notification, it will be posted to the program Web site once an 
appropriation is enacted. In addition, all information will be 
available at any Rural Development office.
    (d) Timing. The Agency will issue notices under this section as 
follows:
    (1) The Agency will make the information specified in paragraph (a) 
of this section available each Fiscal Year.
    (2) The Agency will make the information specified in paragraph 
(b)(1) of this section available at least 60 days prior to the 
application deadline, as applicable.
    (3) The Agency will make the information specified in paragraphs 
(b)(2) through (4) of this section available on an as needed basis.


Sec. Sec.  4284.916-4284.919  [Reserved]

Eligibility


Sec.  4284.920  Applicant eligibility.

    To be eligible for a grant under this subpart, an Applicant must 
demonstrate that they meet the requirements specified in paragraphs (a) 
through (d) of this section, as applicable, and are subject to the 
limitations specified in paragraphs (e) and (f) of this section.
    (a) Type of Applicant. The Applicant, including any Federally-
recognized Tribes and tribal entities (Rural Development State Offices 
and posted application guidelines will provide additional information 
on Tribal eligibility), must demonstrate that they meet all definition 
requirements for one of the following Applicant types:
    (1) An Independent Producer;
    (2) An Agricultural Producer Group;
    (3) A Farmer or Rancher Cooperative; or

[[Page 26804]]

    (4) A Majority-Controlled Producer-Based Business Venture.
    (b) Emerging market. An applicant that is an agricultural producer 
group, a farmer or rancher cooperative, or a majority-controlled 
producer-based business venture must demonstrate that they are entering 
into an emerging market as a result of the proposed project.
    (c) Citizenship. (1) Individual Applicants must certify that they:
    (i) Are citizens or nationals of the United States (U.S.), the 
Republic of Palau, the Federated States of Micronesia, the Republic of 
the Marshall Islands, or American Samoa; or
    (ii) Reside in the U.S. after legal admittance for permanent 
residence.
    (2) Entities other than individuals must certify that they are more 
than 50 percent owned by individuals who are either citizens as 
identified under paragraph (c)(1)(i) of this section or legally 
admitted permanent residents residing in the U.S.
    (d) Legal authority and responsibility. Each Applicant must 
demonstrate that they have, or can obtain, the legal authority 
necessary to carry out the purpose of the grant, and they must evidence 
good standing from the appropriate State agency or equivalent.
    (e) Multiple grant eligibility. An Applicant may submit only one 
application in response to a solicitation, and must explicitly direct 
that it compete in either the general funds competition or in one of 
the named reserved funds competitions. Multiple applications from 
separate entities with identical or greater than 75 percent common 
ownership, or from a parent, subsidiary or affiliated organization 
(with ``affiliation'' defined by Small Business Administration 
regulation 13 CFR 121.103, or successor regulation) are not permitted. 
Further, Applicants who have already received a Planning Grant for the 
proposed project cannot receive another Planning Grant for the same 
project. Applicants who have already received a Working Capital Grant 
for the proposed project cannot receive any additional grants for that 
project.
    (f) Active VAPG grant. If an Applicant has an active value-added 
grant at the time of a subsequent application, the currently active 
grant must be closed out within 90 days of the application submission 
deadline for the subsequent competition, as published in the annual 
solicitation.


Sec.  4284.921  Ineligible Applicants.

    (a) Consistent with the Departmental Regulations, an Applicant is 
ineligible if the Applicant is debarred or suspended or is otherwise 
excluded from, or ineligible for participation in, Federal assistance 
programs under Executive Order 12549, ``Debarment and Suspension.''
    (b) An Applicant will be considered ineligible for a grant due to 
an outstanding judgment obtained by the U.S. in a Federal Court (other 
than U.S. Tax Court), is delinquent on the payment of Federal income 
taxes, or is delinquent on Federal debt.


Sec.  4284.922  Project eligibility.

    To be eligible for a VAPG grant, the application must demonstrate 
that the project meets the requirements specified in paragraphs (a) 
through (c) of this section, as applicable.
    (a) Product eligibility. Each product that is the subject of the 
proposed project must meet the definition of a Value-Added Agricultural 
Product
    (b) Purpose eligibility. (1) The grant funds requested must not 
exceed any maximum amounts specified in the annual solicitation for 
Planning and Working Capital Grant requests, per Sec.  4284.915.
    (2) The Matching Funds required for the project budget must be 
eligible and without a real or apparent Conflict of Interest, available 
during the project period, and source verified in the application.
    (3) The proposed project must be limited to eligible planning or 
working capital activities as defined at Sec.  4284.925, as applicable, 
with eligible tasks directly related to the processing and/or marketing 
of the subject Value-Added Agricultural Product, to be demonstrated in 
the required work plan and budget as described at Sec.  4284.922(b)(5).
    (4) Applications that propose ineligible expenses in excess of 10 
percent of Total Project Costs will be deemed ineligible to compete for 
funds. Applicants who submit applications containing ineligible 
expenses totaling less than 10 percent of Total Project Costs must 
remove those expenses from the project budget or replace with eligible 
expenses, if selected for an award.
    (5) The project work plan and budget must demonstrate eligible 
sources and uses of funds and must:
    (i) Present a detailed narrative description of the eligible 
activities and tasks related to the processing and/or marketing of the 
Value-Added Agricultural Product along with a detailed breakdown of all 
estimated costs allocated to those activities and tasks;
    (ii) Identify the key personnel that will be responsible for 
overseeing and/or conducting the activities or tasks and provide 
reasonable and specific timeframes for completion of the activities and 
tasks;
    (iii) Identify the sources and uses of grant and Matching Funds for 
all activities and tasks specified in the budget; and indicate that 
Matching Funds will be spent at a rate equal to or in advance of grant 
funds; and
    (iv) Present a project budget period that commences within the 
start date range specified in the annual solicitation, concludes not 
later than 36 months after the proposed start date, and is scaled to 
the complexity of the project.
    (6) Except as noted in paragraphs (b)(6)(i) and (ii) of this 
section, working capital applications must include a Feasibility Study 
and Business Plan completed specifically for the proposed value-added 
project by a Qualified Consultant. The Agency must concur in the 
acceptability or adequacy of the Feasibility Study and Business Plan 
for eligibility purposes.
    (i) An Independent Producer Applicant seeking a Working Capital 
Grant of $50,000 or more, who can demonstrate that they are proposing 
market expansion for an existing Value-Added Agricultural Product(s) 
that they currently own and produce from at least 50 percent of their 
own Agricultural Commodity and that they have produced and marketed for 
at least 2 years at time of application submission, may submit a 
Business Plan or Marketing Plan for the value-added project in lieu of 
a Feasibility Study. The Applicant must still adequately document 
increased customer base and increased revenues returning to the 
Applicant producers as a result of the project in their application, 
and meet all other eligibility requirements. Further, the waiver of the 
independent Feasibility Study does not change the proposal evaluation 
or scoring elements that pertain to issues that might be supported by 
an independent Feasibility Study, so Applicants are encouraged to well-
document their project plans and expectations for success in their 
proposals.
    (ii) All four Applicant types that submit a Simplified Application 
for Working Capital Grant funds of less than $50,000 are not required 
to provide an independent Feasibility Study or Business Plan for the 
Project/Venture, but must provide adequate documentation to demonstrate 
the expected increases in customer base and revenues resulting from the 
project that will benefit the producer Applicants

[[Page 26805]]

supplying the majority of the Agricultural Commodity for the project. 
All other eligibility requirements remain the same. The waiver of the 
requirement to submit a Feasibility Study and Business Plan does not 
change the proposal evaluation or scoring elements that pertain to 
issues that might be supported by a Feasibility Study or Business Plan, 
so Applicants are encouraged to well-document their project plans and 
expectations for success in their proposals.
    (7) All applicants applying for Working Capital Grant funds must 
document the quantity of the raw Agricultural Commodity that will be 
used for the Value-Added Agricultural Product, expressed in an 
appropriate unit of measure (pounds, tons, bushels, etc.) to 
demonstrate the scale of the applicant's project. This quantification 
must include an estimated total quantity of the Agricultural Commodity 
needed for the project, the quantity that will be provided (produced 
and owned) by the Agricultural Producers of the applicant organization, 
and the quantity that will be purchased or donated from third-party 
sources.
    (8) All Applicants requesting Working Capital grant funds must 
either be currently marketing each Value-added Agricultural Product 
that is the subject of the grant application, or be ready to implement 
the working capital activities in accord with the budget and work plan 
timeline proposed.


Sec.  4284.923  Reserved funds eligibility.

    The Applicant must meet the requirements specified in this section, 
as applicable, if the Applicant chooses to compete for reserved funds. 
A Harvester is not eligible to compete for reserved funds under 
paragraph (a) of this section, but is eligible to compete for reserved 
funds under paragraph (b) of this section. In accordance with 
application deadlines, all eligible, but unfunded reserved funds 
applications will be eligible to compete for general funds in that same 
Fiscal Year, as funding levels permit.
    (a) If the Applicant is applying for Beginning Farmer or Rancher or 
Socially-Disadvantaged Farmer or Rancher reserved funds, the Applicant 
must provide the following documentation to demonstrate that the 
applicant meets all of the requirements for the applicable definition 
found in Sec.  4284.902.
    (1) For beginning farmers and ranchers (including veterans), 
documentation must include a description from each of the individual 
owner(s) of the applicant farm or ranch organization, addressing the 
qualifying elements in the beginning farmer or rancher definition, 
including the length and nature of their individual owner/operator 
experience at any farm in the previous 10 years, along with one IRS 
income tax form from the previous 10 years showing that each of the 
individual owner(s) did not file farm income; or a detailed letter from 
a certified public accountant or attorney certifying that each owner 
meets the reserved funds beginning farmer or rancher eligibility 
requirements. For applicant entities with multiple owners, all owners 
must be eligible beginning farmers or ranchers.
    (2) For Socially-Disadvantaged farmers and ranchers, documentation 
must include a description of the applicant's farm or ranch ownership 
structure and demographic profile that indicates the owner(s)' 
membership in a Socially-Disadvantaged group that has been subjected to 
racial, ethnic or gender prejudice; including identifying the total 
number of owners of the applicant organization; along with a self-
certification statement from the individual owner(s) evidencing their 
membership in a Socially-Disadvantaged group. All farmer and rancher 
owners must be members of a Socially-Disadvantaged group.
    (b) If the Applicant is applying for Mid-Tier Value Chain reserved 
funds, the Applicant must be one of the four VAPG Applicant types. The 
application must:
    (1) Provide documentation demonstrating that the project meets the 
definition of Mid-Tier Value Chain;
    (2) Demonstrate that the project proposes development of a Local or 
Regional Supply Network of an interconnected group of entities 
(including nonprofit organizations, as appropriate) through which 
agricultural commodities and Value-Added Agricultural Products move 
from production through consumption in a local or regional area of the 
United States, including a description of the network, its component 
members, either by name or by class, and its purpose;
    (3) Describe at least two alliances, linkages, or partnerships 
within the value chain that link Independent Producers with businesses, 
cooperatives, or consumers that market value-added agricultural 
commodities or Value-Added Agricultural Products in a manner that 
benefits Small- or Medium-sized Farms and Ranches that are structured 
as a Family Farm, including the names of the parties and the nature of 
their collaboration;
    (4) Demonstrate how the project, due to the manner in which the 
Value-Added Agricultural Product is marketed, will increase the 
profitability and competitiveness of at least two, eligible, Small- or 
Medium-sized Farms or Ranches that are structured as a Family Farm, 
including documentation to confirm that the participating Small- or 
Medium-sized Farms or Ranches are structured as a Family Farm and meet 
these program definitions. A description of the two farms or ranches 
confirming they meet the Family Farm requirements, and IRS income tax 
forms or appropriate certifications evidencing eligible farm income is 
sufficient.
    (5) Document that the eligible Agricultural Producer Group/Farmer 
or Rancher Cooperative/Majority-Controlled Producer-Based Business 
Venture Applicant organization has obtained at least one agreement with 
another member of the supply network that is engaged in the value chain 
on a marketing strategy; or that the eligible Independent Producer 
Applicant has obtained at least one agreement from an eligible 
Agricultural Producer Group/Farmer or Rancher Cooperative/Majority-
Controlled Producer-Based Business Venture engaged in the value-chain 
on a marketing strategy;
    (i) For Planning Grants, agreements may include letters of 
commitment or intent to partner on marketing, distribution or 
processing; and should include the names of the parties with a 
description of the nature of their collaboration. For Working Capital 
grants, demonstration of the actual existence of the executed 
agreements is required.
    (ii) Independent Producer Applicants must provide documentation to 
confirm that the non-applicant Agricultural Producer Group/Farmer or 
Rancher Cooperative/majority-controlled partnering entity meets program 
eligibility definitions, except that, in this context, the partnering 
entity does not need to supply any of the raw Agricultural Commodity 
for the project;
    (6) Demonstrate that the members of the Applicant organization that 
are benefiting from the proposed project currently own and produce more 
than 50 percent of the raw Agricultural Commodity that will be used for 
the Value-Added Agricultural Product that is the subject of the 
proposal; and
    (7) Demonstrate that the project will result in an increase in 
customer base and an increase in revenue returns to the Applicant 
producers supplying the majority of the raw Agricultural Commodity for 
the project.


Sec.  4284.924  Priority scoring eligibility.

    Applicants that demonstrate eligibility may apply for priority 
points if their applications: Propose projects

[[Page 26806]]

that contribute to increasing opportunities for Beginning Farmers or 
Ranchers, Socially-Disadvantaged Farmers or Ranchers, Veteran Farmers 
or Ranchers, or Operators of Small- or Medium-sized Farms or Ranches 
that are structured as a Family Farm; or propose Mid-Tier Value Chain 
projects; or are a Farmer or Rancher Cooperative. A Harvester is 
eligible for priority points only if the Harvester is proposing a Mid-
Tier Value Chain project.
    (a) Applicants seeking priority points as Beginning Farmers or 
Ranchers or as Socially Disadvantaged Farmers or Ranchers must provide 
the documentation specified in Sec.  4284.923(a)(1) or (2), as 
applicable.
    (b) Applicants seeking priority points as Veteran Farmers or 
Ranchers must provide the documentation specified in Sec.  
4284.923(a)(1) or (2), as applicable, and must submit form DD-214, 
``Report of Separation from the U.S. Military,'' or subsequent form.
    (c) Applicants seeking priority points as Operators of Small- or 
Medium-sized Farms or Ranches that are structured as a Family Farm 
must:
    (1) Be structured as a Family Farm;
    (2) Meet all requirements in the associated definitions; and
    (3) Provide the following documentation:
    (i) A description from the individual owner(s) of the Applicant 
organization addressing each qualifying element in the definitions, 
including identification of the average annual gross sales of 
agricultural commodities from the farm or ranch in the previous three 
years, not to exceed $500,000 for operators of small-sized farms or 
ranches or $1,000,000 for operators of medium-sized farms or ranches;
    (ii) The names and identification of the blood or marriage 
relationships of all Applicant/owners of the farm; and
    (iii) A statement that the Applicant/owners are primarily 
responsible for the daily physical labor and management of the farm 
with hired help merely supplementing the family labor.
    (d) Applicants seeking priority points for Mid-Tier Value Chain 
proposals must be one of the four eligible Applicant types and provide 
the documentation specified in Sec.  4284.923(b)(1) through (7), 
demonstrating that the project meets the Mid-Tier Value Chain 
definition.
    (e) Applicants seeking priority points for a Farmer or Rancher 
Cooperative must:
    (1) Demonstrate that it is a business owned and controlled by 
Independent Producers that is legally incorporated as a Cooperative; or 
that it is a business owned and controlled by Independent Producers 
that is not legally incorporated as a Cooperative, but is identified by 
the State in which it operates as a cooperatively operated business;
    (2) Identify, by name or class, and confirm that the Independent 
Producers on whose behalf the value-added work will be done meet the 
definition requirements for an Independent Producer, including that 
each member is an individual Agricultural Producer, or an entity that 
is solely owned and controlled by Agricultural Producers, that 
substantially participates in the production of the majority of the 
Agricultural Commodity to which value will be added; and
    (3) Provide evidence of ``good standing'' as a cooperatively 
operated business in the State of incorporation or operations, as 
applicable.
    (f) Applicants applying as Agricultural Producer Groups, Farmer and 
Rancher Cooperatives, or Majority-Controlled Producer-Based Business 
Ventures (group Applicants) may request additional priority points for 
projects that ``best contribute to creating or increasing marketing 
opportunities'' for operators of Small- and Medium-sized Farms and 
Ranches that are structured as Family Farms, Beginning Farmers and 
Ranchers, Socially-Disadvantaged Farmers and Ranchers, and Veteran 
Farmers and Ranchers. The annual solicitation and Agency application 
package will provide instructions and documentation requirements for 
group Applicants to apply for these additional priority points.


Sec.  4284.925  Eligible uses of grant and Matching Funds.

    In general, grant and cost-share Matching Funds have the same use 
restrictions and must be used to fund only the costs for eligible 
purposes as defined in paragraphs (a) and (b) of this section.
    (a) Planning Grant funds may be used to pay for a Qualified 
Consultant to conduct and develop a Feasibility Study, Business Plan, 
and/or Marketing Plan associated with the processing and/or marketing 
of a Value-added Agricultural Product.
    (1) Planning Grant funds may not be used to compensate Applicants 
or family members for participation in Feasibility Studies.
    (2) In-kind contribution of Matching Funds to cover Applicant or 
family member participation in planning activities is allowed so long 
as the value of such contribution does not exceed a maximum of 25 
percent of the Total Project Costs and an adequate explanation of the 
basis for the valuation, referencing comparable market values, salary 
and wage data, expertise or experience of the contributor, per unit 
costs, industry norms, etc., is provided. Final valuation for Applicant 
or family member in-kind contributions is at the discretion of the 
Agency. Planning funds may not be used to evaluate the agricultural 
production of the commodity itself, other than to determine the 
project's input costs related to the feasibility of processing and 
marketing the Value-Added Agricultural Product.
    (b) Working capital funds may be used to pay the project's 
operational costs directly related to the processing and/or marketing 
of the Value-Added Agricultural Product.
    (1) Examples of eligible working capital expenses include designing 
or purchasing a financial accounting system for the project, paying 
salaries of employees without ownership or Immediate Family interest to 
process and/or market and deliver the Value-Added Agricultural Product 
to consumers, paying for raw commodity inventory (less than 50 percent 
of the amount required for the project) from an unaffiliated third 
party, necessary to produce the Value-Added Agricultural Product, and 
paying for a marketing campaign for the Value-Added Agricultural 
Product.
    (2) In-kind contributions may include appropriately valued 
inventory of raw commodity to be used in the project. In-kind 
contributions of Matching Funds may also include contributions of time 
spent on eligible tasks by Applicants or Applicant family members so 
long as the value of such contribution does not exceed a maximum of 25 
percent of the Total Project Costs and an adequate explanation of the 
basis for the valuation, referencing comparable market values, salary 
and wage data, expertise or experience of the contributor, per unit 
costs, industry norms, etc. is provided. Final valuation for Applicant 
or family member in-kind contributions is at the discretion of the 
Agency.


Sec.  4284.926  Ineligible uses of grant and Matching Funds.

    Federal procurement standards prohibit transactions that involve a 
real or apparent Conflict of Interest for owners, employees, officers, 
agents, or their Immediate Family members having a personal, 
professional, financial or other interest in the outcome of the 
project; including organizational conflicts, and conflicts that 
restrict open and free competition for unrestrained trade. In addition, 
the use of funds is

[[Page 26807]]

limited to only the eligible activities identified in Sec.  4284.925 
and prohibits other uses of funds. Ineligible uses of grant and 
Matching Funds awarded under this subpart include, but are not limited 
to:
    (a) Support costs for services or goods going to or coming from a 
person or entity with a real or apparent Conflict of Interest, except 
as specifically noted for limited in-kind Matching Funds in Sec.  
4284.925(a) and (b);
    (b) Pay costs for scenarios with noncompetitive trade practices;
    (c) Plan, repair, rehabilitate, acquire, or construct a building or 
facility (including a processing facility);
    (d) Purchase, lease purchase, or install fixed equipment, including 
processing equipment;
    (e) Purchase or repair vehicles, including boats;
    (f) Pay for the preparation of the grant application;
    (g) Pay expenses not directly related to the funded project for the 
processing and marketing of the Value-Added Agricultural Product;
    (h) Fund research and development;
    (i) Fund political or lobbying activities;
    (j) Fund any activities prohibited by 2 CFR parts 200 through 400, 
and 48 CFR subpart 31.2;
    (k) Fund architectural or engineering design work;
    (l) Fund expenses related to the production of any Agricultural 
Commodity or product, including, but not limited to production 
planning, purchase of seed or rootstock or other production inputs, 
labor for cultivation or harvesting crops, and delivery of raw 
commodity to a processing facility;
    (m) Conduct activities on behalf of anyone other than a 
specifically identified Independent Producer or group of Independent 
Producers, as identified by name or class. The Agency considers 
conducting industry-level feasibility studies or business plans, that 
are also known as feasibility study templates or guides or business 
plan templates or guides, to be ineligible because the assistance is 
not provided to a specific group of Independent Producers;
    (n) Pay for goods or services from a person or entity that employs 
the owner or an Immediate Family member;
    (o) Duplicate current services or replace or substitute support 
previously provided;
    (p) Pay any costs of the project incurred prior to the date of 
grant approval, including legal or other expenses needed to incorporate 
or organize a business;
    (q) Pay any judgment or debt owed to the United States;
    (r) Purchase land;
    (s) Pay for costs associated with illegal activities; or
    (t) Purchase the Agricultural Commodity to which value will be 
added (raw commodity) from the applicant entity; applicant-owned or 
related entity, or members of the applicant entity.


Sec.  4284.927  Funding limitations.

    (a) Grant funds may be used to pay up to 50 percent of the Total 
Project Costs, subject to the limitations established for maximum total 
grant amount.
    (b) The maximum total grant amount provided to a grantee in any one 
year shall not exceed the amount announced in an annual notice issued 
pursuant to Sec.  4284.915, but in no event may the total amount of 
grant funds provided to a grant recipient exceed $500,000.
    (c) A grant shall have a term that does not exceed 3 years, and a 
project start date within 90 days of the date of award, unless 
otherwise specified in a notice pursuant to Sec.  4284.915. Grant 
project periods should be scaled to the complexity of the objectives 
for the project. The Agency may extend the term of the grant period, 
not to exceed the 3-year maximum.
    (d) The aggregate amount of awards to Majority-Controlled Producer-
Based Business Ventures may not exceed 10 percent of the total funds 
obligated under this subpart during any Fiscal Year.
    (e) Not more than 5 percent of funds appropriated each year may be 
used to fund the Agricultural Marketing Resource Center, to support 
electronic capabilities to provide information regarding research, 
business, legal, financial, or logistical assistance to Independent 
Producers and processors.
    (f) Each Fiscal Year, the following amounts of reserved funds will 
be made available:
    (1) 10 percent of total program funding to fund projects that 
benefit Beginning Farmers or Ranchers or Socially-Disadvantaged Farmers 
or Ranchers; and
    (2) 10 percent of total program funding to fund projects that 
propose development of Mid-tier Value Chains.
    (3) Funds not obligated by June 30 of each Fiscal Year shall be 
available to the Secretary to make grants under this subpart to 
eligible applicants in the general funds competition.


Sec. Sec.  4284.928-4284.929  [Reserved]

Applying for a Grant


Sec.  4284.930  Preliminary review.

    The Agency encourages Applicants to contact their State Office well 
in advance of the application submission deadline, to ask questions and 
to discuss Applicant and Project eligibility potential. At its option, 
the Agency may establish a preliminary review deadline in accordance 
with Sec.  4284.915, so that it may informally assess the eligibility 
of the application and its completeness. The result of the preliminary 
review is not binding on the Agency.


Sec.  4284.931  Application package.

    All Applicants are required to submit a complete application 
package that is comprised of all of the elements in this section.
    (a) Application forms. The application must include all forms 
listed in the annually published notice for the program. The following 
application forms (or their successor forms) must be completed when 
applying for a grant under this subpart.
    (1) ``Application for Federal Assistance.''
    (2) ``Budget Information-Non-Construction Programs.''
    (3) ``Assurances--Non-Construction Programs.''
    (4) All Applicants (including individuals and sole proprietorships) 
are required to have a DUNS number and maintain registration with the 
System for Award Management (SAM).
    (b) Application content. The following content items must be 
completed when applying for a grant under this subpart:
    (1) Eligibility discussion. The Applicant must demonstrate in 
detail how the:
    (i) Applicant eligibility requirements in Sec. Sec.  4284.920 and 
4284.921 are met;
    (ii) Project eligibility requirements in Sec.  4284.922 are met;
    (iii) Eligible use of grant and Matching Funds requirements in 
Sec. Sec.  4284.925 and 4284.926 are met; and
    (iv) Funding limitation requirements in Sec.  4284.927 are met.
    (2) Evaluation criteria. Using the format prescribed by the 
application package, the Applicant must address each evaluation 
criterion identified below.
    (i) Performance Evaluation Criteria. The overall goal of this 
program and the projects it supports is to create and serve new 
markets, with a resulting increase in jobs, customer base and revenues 
returning to the producer. Applicants must provide specific information 
about plans to track and evaluate progress toward these outcomes as a 
way for the Agency to ascertain whether or not the primary program 
goals and project goals proposed in the work plan are likely to be 
accomplished during the project

[[Page 26808]]

period. The application package will provide additional instruction to 
assist Applicants when responding to this criterion. The required data, 
including accomplishments as outlined in Sec.  4284.960 and Applicant-
suggested performance criteria, will be incorporated into the 
Applicant's semi-annual and final reporting requirements if selected 
for award, and will be specified in the grant agreement associated with 
each award. At a minimum, data included in each application submission 
must include both target outcomes and timeframes for achieving results:
    (A) The number of jobs anticipated to be created or saved as a 
direct result of the project.
    (B) The current baseline number of customers.
    (C) The estimated expansion of customer base as a direct result of 
the project.
    (D) The current baseline of revenue.
    (E) The estimated increase in revenue as a direct result of the 
project.
    (F) Applicants for both Working Capital and Planning Grants are 
invited to suggest additional benchmarks for evaluation that are 
specific to proposed project activities or outcomes and the 
corresponding timeframes for accomplishing them; these should be 
informed by the program objectives, stated above, related to new 
markets, expansion of customer base, and revenues returning to producer 
Applicants; as well as to the practical and/or logistical activities 
and tasks to be accomplished during the project period.
    (ii) Proposal evaluation criteria. Applicants for both Planning and 
Working Capital Grants must address each proposal evaluation criterion 
identified in Sec.  4284.942 in narrative form, in the application 
package.
    (3) Certification of Matching Funds. Using the format prescribed by 
the application package, Applicants must certify that:
    (i) Cost-share Matching Funds will be spent in advance of grant 
funding, such that for every dollar of grant funds disbursed, not less 
than an equal amount of Matching Funds will have been expended prior to 
submitting the request for reimbursement; and
    (ii) If Matching Funds are proposed in an amount exceeding the 
grant amount, those Matching Funds must be spent at a proportional rate 
equal to the match-to-grant ratio identified in the proposed budget.
    (4) Verification of cost-share Matching Funds. Using the format 
prescribed by the application package, the Applicant must demonstrate 
and provide authentic documentation from the source to confirm the 
eligibility and availability of both cash and in-kind contributions 
that meet the definition requirements for Matching Funds and Conflict 
of Interest in Sec.  4284.902, as well as the following criteria:
    (i) Except as provided at Sec.  4284.925(a) and (b), Matching Funds 
are subject to the same use restrictions as grant funds, and must be 
spent on eligible project expenses during the grant funding period.
    (ii) Matching Funds must be from eligible sources without a real or 
apparent Conflict of Interest.
    (iii) Matching Funds must be at least equal to the amount of grant 
funds requested, and combined grant and Matching Funds must equal 100 
percent of the Total Project Costs.
    (iv) Unless provided by other authorizing legislation, other 
Federal grant funds cannot be used as Matching Funds.
    (v) Matching Funds must be provided in the form of confirmed 
Applicant cash, loan, or line of credit; or provided in the form of a 
confirmed Applicant or family member in-kind contribution that meets 
the requirements and limitations specified in Sec.  4284.925(a) and 
(b); or provided in the form of confirmed third-party cash or eligible 
third-party in-kind contribution; or non-federal grant sources (unless 
otherwise provided by law).
    (vi) Examples of ineligible Matching Funds include funds used for 
an ineligible purpose, contributions donated outside the proposed grant 
funding period, applicant and third-party in-kind contributions that 
are over-valued, or are without substantive documentation for an 
independent reviewer to confirm a valuation, conducting activities on 
behalf of anyone other than a specific Independent Producer or group of 
Independent Producers, expected program income at time of application, 
or instances where a real or apparent Conflict of Interest exists, 
except as detailed in Sec.  4284.925(a) and (b).
    (5) Business plan. For Working Capital Grant applications, 
Applicants must provide a copy of the Business Plan that was completed 
for the proposed value-added Venture, except as provided for in 
Sec. Sec.  4284.922(b)(6) and 4284.932. The Agency must concur in the 
acceptability or adequacy of the Business Plan. For all planning grant 
applications including those proposing product eligibility under 
``Produced in a Manner that Enhances the Value of the Agricultural 
Commodity,'' a Business Plan is not required as part of the grant 
application.
    (6) Feasibility study. As part of the application package, 
Applicants for Working Capital Grants must provide a copy of the third-
party Feasibility Study that was completed for the proposed value-added 
project, except as provided for at Sec. Sec.  4284.922(b)(6) and 
4284.932. The Agency must concur in the acceptability or adequacy of 
the Feasibility Study.


Sec.  4284.932  Simplified application.

    Applicants requesting less than $50,000 will be allowed to submit a 
simplified application, the contents of which will be announced in an 
annual solicitation issued pursuant to Sec.  4284.915. Applicants 
requesting Working Capital Grants of less than $50,000 are not required 
to provide Feasibility Studies or Business Plans, but must provide 
information demonstrating increases in customer base and revenue 
returns to the producers supplying the majority of the Agricultural 
Commodity as a result of the project. See Sec.  4284.922(b)(6)(ii).


Sec.  4284.933  Filing instructions.

    Unless otherwise specified in a notification issued under Sec.  
4284.915, the requirements specified in paragraphs (a) through (e) of 
this section apply to all applications.
    (a) When to submit. Complete applications must be received by the 
Agency on or before the application deadline established for a Fiscal 
Year to be considered for funding for that Fiscal Year. Applications 
received by the Agency after the application deadline established for a 
Fiscal Year will not be considered. Revisions or additional information 
will not be accepted after the application deadline.
    (b) Incomplete applications. Incomplete applications will be 
rejected. Applicants will be informed of the elements that made the 
application incomplete. If a resubmitted application is received by the 
applicable application deadline, the Agency will reconsider the 
application.
    (c) Where to submit. All applications must be submitted to the 
State Office of Rural Development in the State where the project 
primarily takes place, or on-line through grants.gov.
    (d) Format. Applications may be submitted as paper copy, or 
electronically via grants.gov. If submitted as paper copy, only one 
original copy should be submitted. An application submission must 
contain all required components in their entirety. Emailed or faxed 
submissions will not be acknowledged, accepted or processed by the 
Agency.

[[Page 26809]]

    (e) Other forms and instructions. Upon request, the Agency will 
make available to the public the necessary forms and instructions for 
filing applications. These forms and instructions may be obtained from 
any State Office of Rural Development, or the Agency's Value-Added 
Producer Grant program Web site in http://www.rurdev.usda.gov/BCP_VAPG.html.


Sec. Sec.  4284.934-4284.939   [Reserved]

Processing and Scoring Applications


Sec.  4284.940  Processing applications.

    (a) Initial review. Upon receipt of an application on or before the 
application submission deadline for each Fiscal Year, the Agency will 
conduct a review to determine if the Applicant and project are 
eligible, and if the application is complete and sufficiently 
responsive to program requirements.
    (b) Notifications. After the review in paragraph (a) of this 
section has been conducted, if the Agency has determined that either 
the Applicant or project is ineligible or that the application is not 
complete to allow evaluation of the application or sufficiently 
responsive to program requirements, the Agency will notify the 
Applicant in writing and will include in the notification the reason(s) 
for its determination(s).
    (c) Resubmittal by Applicants. Applicants may submit revised 
applications to the Agency in response to the notification received 
under paragraph (b) of this section. If a revised grant application is 
received on or before the application deadline, it will be processed by 
the Agency. If a revised application is not received by the specified 
application deadline, the Agency will not process the application and 
will inform the Applicant that their application was not reviewed due 
to tardiness.
    (d) Subsequent ineligibility determinations. If at any time an 
application is determined to be ineligible, the Agency will notify the 
Applicant in writing of its determination.


Sec.  4284.941  Application withdrawal.

    During the period between the submission of an application and the 
execution of award documents, the Applicant must notify the Agency in 
writing if the project is no longer viable or the Applicant no longer 
is requesting financial assistance for the project. When the Applicant 
notifies the Agency, the selection will be rescinded or the application 
withdrawn.


Sec.  4284.942  Proposal evaluation criteria and scoring applications.

    (a) General. The Agency will only score applications for which it 
has determined that the Applicant and project are eligible, the 
application is complete and sufficiently responsive to program 
requirements. Any Applicant whose application will not be reviewed 
because the Agency has determined it fails to meet the preceding 
criteria will be notified of appeal rights pursuant to Sec.  4284.903. 
Each such viable application the Agency receives on or before the 
application deadline in a Fiscal Year will be scored in the Fiscal Year 
in which it was received. Each application will be scored based on the 
information provided and adequately referenced in the scoring section 
of the application at the time the Applicant submits the application to 
the Agency. Scoring information must be readily identifiable in the 
application or it will not be considered.
    (b) Scoring Applications. The criteria specified in paragraphs 
(b)(1) through (6) of this section will be used to score all 
applications. For each criterion, Applicants must demonstrate how the 
project has merit, and provide rationale for the likelihood of project 
success. Responses that do not address all aspects of the criterion, or 
that do not comprehensively convey pertinent project information will 
receive lower scores. The maximum number of points that will be awarded 
to an application is 100. Points may be awarded lump sum or on a 
graduated basis. The Agency application package will provide additional 
instruction to assist Applicants when responding to the criteria below.
    (1) Nature of the Proposed Venture (graduated score 0-30 points). 
Describe the technological feasibility of the project, as well as the 
operational efficiency, profitability, and overall economic 
sustainability resulting from the project. In addition, demonstrate the 
potential for expanding the customer base for the Value-Added 
Agricultural Product, and the expected increase in revenue returns to 
the producer-owners providing the majority of the raw Agricultural 
Commodity to the project. Applications that demonstrate high likelihood 
of success in these areas will receive more points than those that 
demonstrate less potential in these areas.
    (2) Qualifications of Project Personnel (graduated score 0-20 
points). Identify the individuals who will be responsible for 
completing the proposed tasks in the work plan, including the roles and 
activities that owners, staff, contractors, consultants or new hires 
may perform; and demonstrate that these individuals have the necessary 
qualifications and expertise, including those hired to do market or 
feasibility analyses, or to develop a business operations plan for the 
value-added venture. Include the qualifications of those individuals 
responsible to lead or manage the total project (Applicant owners or 
project managers), as well as those individuals responsible for 
actually conducting the various individual tasks in the work plan (such 
as consultants, contractors, staff or new hires). Demonstrate the 
commitment and the availability of any consultants or other 
professionals to be hired for the project. If staff or consultants have 
not been selected at the time of application, provide specific 
descriptions of the qualifications required for the positions to be 
filled. Applications that demonstrate the strong credentials, 
education, capabilities, experience and availability of project 
personnel that will contribute to a high likelihood of project success 
will receive more points than those that demonstrate less potential for 
success in these areas.
    (3) Commitments and Support (graduated score 0-10 points). Producer 
commitments to the project will be evaluated based on the number of 
Independent Producers currently involved in the project; and the 
nature, level and quality of their contributions. End-user commitments 
will be evaluated on the basis of potential or identified markets and 
the potential amount of output to be purchased, as evidenced by letters 
of intent or contracts from potential buyers referenced within the 
application. Other Third-Party commitments to the project will be 
evaluated based on the critical and tangible nature of the contribution 
to the project, such as technical assistance, storage, processing, 
marketing, or distribution arrangements that are necessary for the 
project to proceed; and the level and quality of these contributions. 
Applications that demonstrate the project has strong direct financial, 
technical and logistical support to successfully complete the project 
will receive more points than those that demonstrate less potential for 
success in these areas.
    (4) Work Plan and Budget (graduated score 0-20 points). In accord 
with Sec.  4284.922(b)(5), Applicants must submit a comprehensive work 
plan and budget. The work plan must provide specific and detailed 
narrative descriptions of the tasks and the key project personnel that 
will accomplish the project's goals. The budget must present a detailed 
breakdown of all estimated costs associated with the

[[Page 26810]]

activities and allocate those costs among the listed tasks. The source 
and use of both grant and Matching Funds must be specified for all 
tasks. An eligible start and end date for the project itself and for 
individual project tasks must be clearly indicated and may not exceed 
Agency specified timeframes for the grant period. Points may not be 
awarded unless sufficient detail is provided to determine that both 
grant and Matching Funds are being used for qualified purposes and are 
from eligible sources without a Conflict of Interest. It is recommended 
that Applicants utilize the budget format templates provided in the 
Agency's application package.
    (5) Priority Points (up to 10 points). Priority points may be 
awarded in both the General Funds competition and the Reserved Funds 
competitions. Qualifying applications may be awarded priority points 
under paragraphs (b)(5)(i) and (ii) of this section, for up to a total 
of 10 points.
    (i) Priority categories (lump sum score of 0 or 5 points). 
Qualifying Applicants may request priority points under this paragraph 
if they meet the requirements for one of the following categories and 
provide the documentation specified in Sec.  4284.924, as applicable. 
Priority categories are: Beginning Farmer or Rancher, Socially-
Disadvantaged Farmer or Rancher, Veteran Farmer or Rancher, Operator of 
a Small- or Medium-sized Farm or Ranch that is structured as a Family 
Farm, Mid-Tier Value Chain proposals, and Farmer or Rancher 
Cooperative. It is recommended that Applicants utilize the Agency 
application package when documenting for priority points and refer to 
the documentation requirements specified in Sec.  4284.924. 
Applications from qualifying priority categories will be awarded 5 
points. Applicants will not be awarded more than 5 points even if they 
qualify for more than one of the priority categories.
    (ii) Best contributing (up to 5 points). Applications from 
Agricultural Producer Groups, Farmer or Rancher Cooperatives, and 
Majority-Controlled Producer-Based Business Ventures (applicant groups) 
may be awarded up to 5 additional points for contributing to the 
creation of or increase in marketing opportunities for Beginning 
Farmers or Ranchers, Socially-Disadvantaged Farmers or Ranchers, 
Veteran Farmers or Ranchers, or Operators of a Small- or Medium-sized 
Farm or Ranch that are structured as a Family Farm (priority groups). 
Applicant groups must submit documentation on the percentage of 
existing membership that is comprised of one or a combination of the 
above priority groups and on the anticipated expansion of membership to 
one or more additional priority groups. Applications must contain 
sufficient information as described in the annual solicitation and 
application package to enable the Agency to make the appropriate 
determinations for awarding points. If the application does not contain 
sufficient information, the Agency will not award points accordingly.
    (6) Priority Categories (graduated score 0-10 points). Unless 
otherwise specified in a notification issued under Sec.  
4284.915(b)(1), the Administrator or State Director has discretion to 
award up to 10 points to an application to improve the geographic 
diversity of awardees in a Fiscal Year. In the event of a National 
competition, the Administrator will award points and for a State-
allocated competition, the State Director will award points.


Sec. Sec.  4284.943-4284.949   [Reserved]

Grant Awards and Agreement


Sec.  4284.950  Award process.

    (a) Selection of applications for funding and for potential 
funding. The Agency will select and rank applications for funding based 
on the score an application has received in response to the proposal 
evaluation criteria, compared to the scores of other value-added 
applications received in the same Fiscal Year. Higher scoring 
applications will receive first consideration for funding. The Agency 
may set a minimally acceptable score for funding, which will be noted 
in the published program notice. The Agency will notify Applicants, in 
writing, whether or not they have been selected for funding. For those 
Applicants not selected for funding, the Agency will provide a brief 
explanation for why they were not selected.
    (b) Ranked applications not funded. A ranked application that is 
not funded in the Fiscal Year in which it was submitted will not be 
carried forward into the next Fiscal Year. The Agency will notify the 
Applicant in writing.
    (c) Intergovernmental review. If State or local governments raise 
objections to a proposed project under the intergovernmental review 
process that are not resolved within 90 days of the Agency's award 
announcement date, the Agency will rescind the award and will provide 
the Applicant with a written notice to that effect. This is prior to 
the signing of a Grant Agreement. The Agency, in its sole discretion, 
may extend the 90-day period if it appears resolution is imminent.


Sec.  4284.951  Obligate and award funds.

    (a) Letter of conditions. When an application is selected subject 
to conditions established by the Agency, the Agency will notify the 
Applicant using a Letter of Conditions, which defines the conditions 
under which the grant will be made. Each grantee will be required to 
meet all terms and conditions of the award within 90 days of receiving 
a Letter of Conditions unless otherwise specified by the Agency at the 
time of the award. If the Applicant agrees with the conditions, the 
Applicant must complete, an applicable Letter of Intent to Meet 
Conditions. If the Applicant believes that certain conditions cannot be 
met, the Applicant may propose alternate conditions to the Agency. The 
Agency must concur with any proposed changes to the Letter of 
Conditions by the Applicant before the application will be further 
processed. If the Agency agrees to any proposed changes, the Agency 
will issue a revised or amended Letter of Conditions that defines the 
final conditions under which the grant will be made.
    (b) Grant agreement and conditions. Each grantee will be required 
to sign a grant agreement that outlines the approved use of funds and 
actions under the award, as well as the restrictions and applicable 
laws and regulations that pertain to the award.
    (c) Other documentation. The grantee will execute additional 
documentation in order to obligate the award of funds; including, but 
not limited to:
    (1) ``Request for Obligation of Funds;''
    (2) ``Certification Regarding Debarment, Suspension, and Other 
Responsibility Matters-Primary Covered Transaction;''
    (3) ``Certification Regarding Drug-Free Workplace Requirements;''
    (4) ``Assurance Agreement (under Title VI, Civil Rights Act of 
1964);''
    (5) ``ACH Vendor/Miscellaneous Payment Enrollment Form;'' or
    (6) ``Disclosure of Lobbying Activities.''
    (d) Grant disbursements. Grant disbursements will be made in 
accordance with the Letter of Conditions, and/or the grant agreement, 
as applicable.


Sec. Sec.  4284.952-4284.959   [Reserved]

Post Award Activities and Requirements


Sec.  4284.960  Monitoring and reporting program performance.

    The requirements specified in this section shall apply to grants 
made under this subpart.

[[Page 26811]]

    (a) Grantees must complete the project per the terms and conditions 
specified in the approved work plan and budget, and in the grant 
agreement and letter of conditions. Grantees will expend funds only for 
eligible purposes and will be monitored by Agency staff for compliance. 
Grantees must maintain a financial management system, and property and 
procurement standards in accordance with Departmental Regulations.
    (b) Grantees must submit narrative and financial performance 
reports, as prescribed by the Agency in the grant agreement, that 
include required data elements related to achieving programmatic 
objectives and a comparison of accomplishments with the objectives 
stated in the application. At a minimum, these include comparisons of 
anticipated activies and outcomes and timeframes for achieving:
    (1) Expansion of customer base as a result of the project;
    (2) Increased revenue returned to the producer as a result of the 
project;
    (3) Jobs created or saved as a result of the project;
    (4) Evidence of receipt of matching funds, if included or provided 
for in project.
    (i) Semi-annual performance reports shall be submitted within 45 
days following March 31 and September 30 each Fiscal Year. A final 
performance report shall be submitted to the Agency within 90 days of 
project completion. Failure to submit a performance report within the 
specified timeframes may result in the Agency withholding grant funds.
    (ii) Additional reports shall be submitted as specified in the 
grant agreement or Letter of Conditions, or as otherwise provided in a 
notification issued under Sec.  4284.915.
    (iii) Copies of supporting documentation and/or project 
deliverables for completed tasks must be provided to the Agency in a 
timely manner in accord with the development or completion of materials 
and in conjunction with the budget and project timeline. Examples 
include, but are not limited to, a Feasibility Study, Marketing Plan, 
Business Plan, success story, distribution network study, or best 
practice.
    (iv) The Agency may request any additional project and/or 
performance data for the project for which grant funds have been 
received, including but not limited to:
    (A) Information that will enable evaluation of the economic impact 
of program awards, such as:
    (1) Business starts and clients served;
    (2) Data associated with producer market expansion, new market 
penetration, and changes in customer base or revenues.
    (B) Information that would promote greater understanding of the key 
determinants of the success of individual projects or inform program 
administration and evaluation, such as:
    (1) The producer's experience related to financial management, 
budgeting, and running a business enterprise.
    (2) The nature of, and advantages or disadvantages of, supply chain 
arrangements or equitable distribution of rewards and responsibilities 
for Mid-tier Value Chain projects; and
    (3) Recommendations from Beginning Farmers or Ranchers, Socially-
Disadvantaged Farmers or Ranchers, or Veteran Farmers or Ranchers.
    (C) Information that would inform or enable the aggregation of data 
for program administration or evaluation purposes.
    (v) The Agency may terminate or suspend the grant for lack of 
adequate or timely progress, reporting, or documentation, or for 
failure to comply with Agency requirements.


Sec.  4284.961  Grant servicing.

    All grants awarded under this subpart shall be serviced in 
accordance with 7 CFR part 1951, subparts E and O, and the Departmental 
Regulations with the exception that delegation of the post-award 
servicing of the program does not require the prior approval of the 
Administrator.


Sec.  4284.962  Transfer of obligations.

    At the discretion of the Agency and on a case-by-case basis, an 
obligation of funds established for an Applicant may be transferred to 
a different (substituted) Applicant provided:
    (a) The substituted Applicant:
    (1) Is eligible;
    (2) Has a close and genuine relationship with the original 
Applicant; and
    (3) Has the authority to receive the assistance approved for the 
original Applicant; and
    (b) The project continues to meet all product, purpose, and 
reserved funds eligibility requirements so that the need, purpose(s), 
and scope of the project for which the Agency funds will be used remain 
substantially unchanged.


Sec. Sec.  4284.963-4284.999  [Reserved]

    Dated: April 28, 2015.
Lisa Mensah,
Under Secretary, Rural Development.
[FR Doc. 2015-10441 Filed 5-7-15; 8:45 am]
 BILLING CODE 3410-XY-P