[Federal Register Volume 80, Number 204 (Thursday, October 22, 2015)]
[Rules and Regulations]
[Pages 63890-63909]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26766]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 789

RIN 0560-AH68


Agriculture Priorities and Allocations System

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: The Farm Service Agency (FSA) is establishing the regulation 
for the Agriculture Priorities and Allocations System (APAS). Food is a 
critical commodity essential to the national defense (including civil 
emergency preparedness and response). To avoid civilian hardship during 
national defense emergencies, it may be necessary to regulate the 
production, processing, storage, and wholesale distribution of food. 
Through the APAS rule, the U.S. Department of Agriculture (USDA) will 
respond to requests to place priority ratings on contracts or orders 
(establishing priority on which contracts or orders are filled first) 
for agriculture commodities up through the wholesale levels, including 
agriculture production equipment, and allocate resources, as specified 
in the Defense Production Act (DPA) of 1950, as amended, if the 
necessity arises. FSA is implementing this rule as a way to redirect 
the agriculture commodities and resources to areas of hardship or 
potential hardship due to national emergencies. In most cases, there is 
likely to be no economic impact in filling priority orders because it 
would generally just be changing the timing in which orders are 
completed.

DATES: Effective December 21, 2015.

FOR FURTHER INFORMATION CONTACT: Robert Haughton, telephone (202) 702-
0135. Persons with disabilities who require alternative means for 
communication (Braille, large print, audiotape, etc.) should contact 
the USDA Target Center at (202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Executive Summary

    APAS is a USDA program that supports not only national defense 
needs (such as food for combat rations), but also emergency 
preparedness initiatives by addressing essential civilian needs (food 
and food resources) through the placing of priorities on contracts for 
items and services or allocating resources, as necessary. Although a 
specific Presidential disaster designation is not required, the ability 
to prioritize or allocate items or services can be triggered by a 
determination by the President or designated entities that this action 
is necessary or appropriate to promote national defense including the 
imminent need for emergency preparedness. Under DPA (50 U.S.C. App. 
2061 to 2170, 2171, and 2172), the term ``national defense'' includes 
emergency preparedness, response, and critical infrastructure 
protection and restoration. Authority for priorities and allocations is 
specified in DPA and further defined in Executive Order 13603, 
``National Defense Resources Preparedness,'' dated March 16, 2012. 
Executive Order 13603 replaced Executive Order 12919 (referenced in the 
proposed rule) and further defined jurisdictional areas and national 
defense preparedness roles and responsibilities for specific 
Departments. Executive Order 13603 did not change the intent of DPA as 
it applies to USDA's functions in national defense, including emergency 
preparedness; instead it gave additional jurisdiction to USDA for 
livestock, veterinary, and plant health resources.
    For the final rule, only those sections in the ``Supplementary 
Information'' part of the proposed rule preamble that required 
modifications due to Executive Order 13603 or for other reasons are 
further discussed in the ``Supplementary Information'' section of this 
final rule. A more thorough explanation along with examples of APAS 
applicability was provided in the proposed rule that was published on 
May 19, 2011 (76 FR 29084-29106). References in those examples to 
Executive Order 12919 should be read to mean Executive Order 13603. 
Also contained in this summary are descriptions of comments received 
and responses developed on the proposed rule. We are not reiterating 
the ``Section by Section Discussion of Rule'' section of the proposed 
rule preamble in this document. Any changes to those sections are 
discussed in this document.

Jurisdiction

    Title I of DPA and Executive Order 13603 authorize jurisdictional 
areas for each Department that is involved in national defense 
including emergency preparedness. USDA has jurisdiction for items that 
fall under the categories of:

    (1) Food resources (including potable water packaged in 
commercially marketable containers) and food resource facilities;
    (2) Livestock resources, veterinary resources, and plant health 
resources; and
    (3) Domestic distribution of farm equipment and commercial 
fertilizer.

    USDA cannot use its DPA authority for items or services not in its

[[Page 63891]]

jurisdiction. Those persons \1\ in need of items or services that do 
not fall under the jurisdiction of USDA will request priorities or 
allocations assistance from the applicable resource agency.\2\ USDA 
will direct the requesters to the appropriate resource agency if the 
request comes to USDA.
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    \1\ The term ``person'' as used here refers to the requester of 
the priority rating. A person includes an individual, corporation, 
partnership, association, or any other organized group of persons, 
or legal successor or representative thereof, or any State or local 
government or agency thereof, or any Federal agency.
    \2\ The term ``resource agency'' as used here refers to any 
Federal agency that is delegated priorities and allocations 
authority as specified in Sec.  789.2 of this final rule.
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    USDA intends to work with other resource agencies to address 
instances where USDA does not have jurisdiction for all of the items 
necessary to complete the order. For example, if an order for the 
delivery of milk needs to be prioritized, USDA would have jurisdiction 
over the milk as a food resource, but it would not have jurisdiction 
over the truck or fuel for the vehicle. Therefore, USDA intends to work 
with the other resource agencies to receive delegations to prioritize 
contracts or orders for other items or services necessary for use in 
support of programs approved for use by USDA (see next section). Until 
such delegations are received, USDA will follow the procedure described 
in the previous paragraph.
    USDA also plans to provide delegations to other resource agencies 
to ensure they can respond timely to emergency events.

APAS Programs Approved for Use by USDA

    USDA has three approved programs for priorities and allocations 
support under section 202 of Executive Order 13603. Items or services 
for which USDA may provide priorities or allocations support must fall 
under one of the following programs:

    (1) Food and food resources (civilian): Programs involving food 
and food resources processing and storage in support of emergency 
preparedness activities conducted pursuant to Title VI of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act (Stafford 
Act, 42 U.S.C. 5195-5197h).
    (2) Agriculture and food critical infrastructure protection and 
restoration (civilian): Programs to protect or restore the 
agriculture and food system from terrorist attacks, major disasters, 
and other emergencies.
    (3) Military food rations: Programs to provide the Department of 
Defense with food resources for combat rations.

    For all other requests for items under USDA's jurisdiction that are 
not covered by these three programs, USDA will request concurrence from 
the Secretary of Homeland Security before placing a priority rating on 
the items.

Scope

    APAS covers only those government and private entities that have 
national defense, or emergency preparedness, response, and recovery 
responsibilities. This small realm strictly limits the participants 
eligible to request assistance through APAS. Also, the vendors that 
supply agriculture related items (food, food resources) and in the 
quantity that is expected to be requested is inherently limited in 
scope. Only a limited number of vendors are able to produce or deliver 
the large quantities of items required for emergency preparedness 
activities that would fall under the authority of Title I of DPA. For 
example, for preparations in advance of Hurricane Ike hitting the Texas 
Coast in 2008, one Federal agency considered requesting 1 million 
meals-ready-to-eat. In this example, it is clear that there would be 
limited companies that would be able to quickly supply 1 million meals-
ready-to-eat. This is a representative example of the type of needs for 
which a priority rating would be requested through APAS. As a result, 
this program has a very limited customer base of large manufacturers 
and suppliers as well as those Government and public agencies (for 
example, the Red Cross), having national defense, or emergency 
preparedness, response, and recovery responsibilities.
    Government organizations may request priority ratings through APAS 
to ensure that they are able to obtain critical resources during or in 
anticipation of an emergency to lessen the effects of the hazard on 
civilian populations.
    As an example of how the Department of Commerce (DOC) has needed to 
use its Defense Priorities and Allocations System (DPAS) (15 CFR part 
700), during the aftermath of Hurricane Katrina, after the request was 
endorsed by the Federal Emergency Management Agency (FEMA), DOC 
authorized a railroad to place a priority rated order with Company X 
for equipment to repair the damages to the railroad system supporting 
commodity movements in and around the New Orleans area. This rated 
order allowed the vendor responsible for repairing the railroad 
infrastructure around the New Orleans area to complete repairs in the 
fastest time possible. This allowed the response organizations to 
quickly receive items in bulk quantities needed to support the mass 
care and housing of those displaced by the hurricane and its aftermath. 
When the railroad placed the rated order for equipment, Company X was 
required to fill the railroad's order first, before any other orders, 
unless Company X had a legal basis for rejecting the rated order. In 
addition, all customers currently under contract obligations from 
Company X would not have breach-of-contract cause of action against 
Company X if their orders could not be filled by the original agreed-to 
time due to unplanned delays due to filling the rated order.

DPA Priorities and Allocations Authority

    Section 101 of DPA (50 U.S.C. App. 2071) establishes the broad 
authority for the President to require the acceptance and priority 
performance of contracts or orders (other than contracts of employment) 
to support or promote the national defense over performance of any 
other contracts or orders, and to allocate materials, services, and 
facilities as deemed necessary or appropriate to promote the national 
defense. This is commonly referred to as ``priorities and allocations'' 
authority. Through Executive Order 13603 the President delegated the 
DPA section 101 priorities and allocations authority to the following 
agency heads:

     The Secretary of Agriculture with respect to food 
resources (including potable water packaged in commercially 
marketable containers), food resource facilities, livestock 
resources, veterinary resources, plant health resources, and the 
domestic distribution of farm equipment and commercial fertilizer.
     The Secretary of Energy with respect to all forms of 
energy.
     The Secretary of Health and Human Services with respect 
to health resources.
     The Secretary of Transportation with respect to all 
forms of civil transportation.
     The Secretary of Defense with respect to water 
resources.
     The Secretary of Commerce with respect to all other 
materials, services, and facilities, including construction 
materials.

    Since the initial enactment, Congress has continued to reauthorize 
DPA. On September 30, 2009, Congress enacted the Defense Production Act 
Reauthorization (DPAR) of 2009 (Pub. L.111-67). A significant 
difference in that reauthorization was the requirement for Departments 
other than DOC to initiate rulemaking to implement their 
responsibilities under DPA. Specifically, section 101(d) of DPA (50 
U.S.C. App. 2071(d)), as added by DPAR, directed the head of each 
Federal agency to issue final rules that establish standards and 
procedures to use the authority of section 101 to promote the national 
defense under both emergency and nonemergency

[[Page 63892]]

conditions and, as appropriate and to the extent necessary, consult 
with the heads of other Federal agencies to develop a consistent and 
unified Federal Priorities and Allocations System (FPAS).
    DPA was extended again through September 30, 2019, by Pub. L. 113-
172 (Sept. 26, 2014). In the most recent reauthorization, Congress 
retained the requirement in section 101(d) (50 U.S.C. App. 2071(d)) to 
issue final rules but also added a requirement to annually review and 
update those regulations whenever appropriate.
    FEMA in the Department of Homeland Security (DHS) is responsible 
for coordinating priorities and allocations rulemaking efforts among 
the six Federal agencies that have been delegated DPA section 101 
authority (referred to as ``resource agencies'') to ensure consistency 
and uniformity of rule language and provisions across resource agency 
jurisdictions. Together, the priorities and allocations system 
regulations of each resource agency will constitute FPAS.
    USDA is working with FEMA and the other Departments that have DPA 
authority to have common rules for the implementation of priorities and 
allocations. Those Departments are in various stages of developing and 
publishing their own rules covering the jurisdictional areas outlined 
in Executive Order 13603. DOC published a final rule revising its DPAS 
regulation on August 14, 2014 (79 FR 47560). The Department of Energy 
published the rule for the Energy Priorities and Allocations System on 
June 9, 2011 (76 FR 33615); the Department of Transportation published 
the rule for the Transportation Priorities and Allocations System on 
October 1, 2012 (77 FR 59793); and the Department of Health and Human 
Services published the rule for the Health Resources Priority and 
Allocations System on July 17, 2015 (80 FR 42408-42423).
    Within USDA, authority to administer APAS has been delegated to the 
FSA Administrator. FSA will manage APAS for all USDA.
    This rule establishes APAS, one-part of the FPAS, to implement 
USDA's administration of its delegated authority under DPA section 101 
and other related statutes such as the priorities provisions of the 
Military Selective Service Act \3\ (50 U.S.C. App. 468) (see Executive 
Order 12742, ``National Security Industrial Responsiveness,'' dated 
Jan. 8, 1991). APAS is consistent with the existing DPAS regulation (15 
CFR part 700) implemented by DOC to provide continuity with long-
established priorities system procedures and to make use of a proven 
foundation for a consistent and unified FPAS, as appropriate and to the 
extent practicable.\4\
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    \3\ References to the Military Selective Service Act apply to 
those required deliveries to the Government exclusively for the use 
of the armed forces or for the use of the Atomic Energy Commission.
    \4\ DPAS regulations provided the starting point for development 
of the common rule language discussed above.
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APAS Description

    APAS provides guidance and procedures for use of DPA priorities and 
allocations authority with respect to the resource areas delegated by 
the President to the Secretary of Agriculture as specified in Executive 
Order 13603: Food resources; food resource facilities; livestock, 
veterinary, and plant health resources; and the domestic distribution 
of farm equipment and commercial fertilizer. As specified in Executive 
Order 13603, section 202, priorities and allocations may be used only 
to support programs that have been determined in writing ``as necessary 
or appropriate to promote the national defense'' by:

    (a) The Secretary of Defense with respect to military production 
and construction, military assistance to foreign nations, military 
use of civil transportation, stockpiles managed by the Department of 
Defense, space, and directly related activities;
    (b) The Secretary of Energy with respect to energy production 
and construction, distribution and use, and directly related 
activities; or
    (c) The Secretary of Homeland Security, with respect to all 
other national defense programs, including civil defense and 
continuity of Government.

    Under DPA, the term ``national defense'' specifically includes 
emergency preparedness activities conducted pursuant to title VI of the 
Stafford Act.\5\ The Stafford Act, in section 602(b) of title VI, also 
cross-references DPA by stating that ``[t]he terms `national defense' 
and `defense', as used in [DPA], includes [sic] emergency preparedness 
activities conducted pursuant to this title.'' (See 42 U.S.C. 
5195a(b).) Emergency preparedness activities include a broad range of 
measures to be taken in preparation for, during, and in response to 
natural disasters or accidental or man-caused events (that is, 
hazards).\6\ Priority ratings are expected to be used most for:
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    \5\ The term ``national defense'' is defined in section 702(14) 
of DPA as ``programs for military and energy production or 
construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any 
directly related activity. Such term includes emergency preparedness 
activities conducted pursuant to title VI of the [Stafford Act] and 
critical infrastructure protection and restoration.'' See 50 U.S.C. 
App. 2152(14).
    \6\ The term ``emergency preparedness'' is defined in section 
602(a) of the Stafford Act as ``all those activities and measures 
designed or undertaken to prepare for or minimize the effects of a 
hazard upon the civilian population, to deal with the immediate 
emergency conditions which would be created by the hazard, and to 
effectuate emergency repairs to, or the emergency restoration of, 
vital utilities and facilities destroyed or damaged by the hazard.'' 
(See 42 U.S.C. 5195a(a).) Section 602(a) also provides a non-
exhaustive list of specific measures that constitute emergency 
preparedness.

    (1) Preparedness, including actions taken before an event occurs 
to lessen the severity of hardships to civilians,
    (2) Response, including actions taken immediately after the 
event happens, but before any recovery actions are taken, to relieve 
the effects on civilians; response includes both the anticipation of 
the event and the immediate response to it; and
    (3) Recovery, including actions taken to restore critical 
infrastructure and key resources to normal operations.

    USDA expects the requests for priority ratings will predominately 
be from Federal government agencies, and the State and local 
governments with a responsibility in emergency preparedness. USDA 
expects that a request from a private entity will be for the purpose of 
fulfilling a government contract; however, USDA will act on other 
requests that are appropriate for the regulation.
    According to Executive Order 13603 the priorities and allocations 
authority of DPA may be used by the Secretary of Agriculture only to 
support programs that have been determined in writing as necessary or 
appropriate to promote the national defense. USDA has coordinated with 
the Secretary of Homeland Security and the Secretary of Defense to 
identify and approve programs that will cover everything for which we 
expect to need to provide priorities and allocations as covered in this 
regulation.
    USDA has two programs that have been approved by the Secretary of 
Homeland Security for priorities and allocations support pursuant to 
the authority of the Secretary of Homeland Security as currently 
reflected in section 202(c) of Executive Order 13603:
    (1) Food and food resources (civilian): Programs involving food and 
food resources processing and storage in support of emergency 
preparedness activities conducted pursuant to Title VI of the Stafford 
Act. Such programs involve activities and measures designed or 
undertaken to prepare for or minimize the effects of a hazard upon the 
civilian population, to handle immediate emergency conditions that 
would be created by the hazard, and to

[[Page 63893]]

make emergency repairs to, or the emergency restoration of, vital 
utilities and food resource facilities destroyed or damaged by the 
hazard.
    (2) Agricultural and food critical infrastructure protection and 
restoration: Programs to protect or restore the agriculture and food 
system from terrorist attacks, major disasters, and other emergencies. 
In Homeland Security Presidential Directive HSPD-9, ``Defense of United 
States Agriculture and Food,'' dated January 30, 2004, such programs 
involve activities and measures to:

     Identify and prioritize critical infrastructure and key 
resources in the agriculture and food system for establishing 
protection requirements;
     Develop awareness and early warning capabilities to 
recognize threats;
     Mitigate vulnerabilities at critical production and 
processing nodes;
     Enhance screening procedures for domestic and imported 
products; and
     Enhance response and recovery procedures.

    These programs support the national defense by providing for 
essential civilian needs to ensure a viable food and agriculture sector 
during an emergency preparedness event or a military conflict. Both 
programs involve emergency preparedness activities and the maintenance 
and restoration of the critical infrastructure and key resources.
    USDA has one program, Food Resources (combat rations), that has 
been approved by the Secretary of Defense for priorities and 
allocations support pursuant to the authority of the Secretary of 
Defense as currently reflected in section 202(a) of Executive Order 
13603. USDA delegated implementation authority of the agricultural 
portion of DPA to DOC. DOC in turn delegated authority to the 
Department of Defense to administer a ``priorities'' program for combat 
rations to meet troop requirements (an agreement between DOC and USDA, 
dated January 28, 1991, and approved by FEMA on February 1, 1991). USDA 
is rescinding the delegation of authority with DOC and delegating 
authority directly to the Department of Defense to administer the 
combat rations programs.
    The approved programs are listed in Schedule I of the APAS 
regulation (see Schedule I at the end of this document for a complete 
list of approved programs).
    Before USDA can exercise its priorities or allocations authority 
for any requirements not covered under the approved programs, as 
specified in section 202 of Executive Order 13603, the Secretaries of 
Defense, Energy, or Homeland Security, as appropriate, would have to 
concur, in writing, with USDA that use of priorities or allocations 
authority by USDA would be necessary or appropriate to promote the 
national defense.
    Commodities covered under the APAS regulation include those items 
required for production of agriculture commodities (including 
fertilizer, agriculture seed, and livestock feed), raw and processed 
agriculture products for wholesale distribution, and agriculture 
production equipment.

Priorities and Allocations

    APAS has two principal components: Priorities and allocations.

Priorities

    In the ``priorities'' component of APAS, certain contracts between 
the government and private parties, or contracts between private 
parties, would be required to be given priority (priority rating) over 
other respective contracts to ensure timely delivery of an item needed 
for an ``approved program.'' ``Approved program'' is defined in 7 CFR 
789.8 as a program determined by the Secretary of Defense, the 
Secretary of Energy, or the Secretary of Homeland Security to be 
necessary or appropriate to promote the national defense, as specified 
in section 202 of Executive Order 13603. As stated above, certain USDA 
programs have been approved by the Secretary of Homeland Security and 
by the Secretary of Defense as necessary or appropriate to promote the 
national defense. Other programs could be approved in the future.

Use of Priority Ratings

    If you (as a vendor) receive a rated order, you must give it 
preferential treatment as required by subpart C, Sec. Sec.  789.10 
through 789.18 (see the proposed rule for the section by section 
discussion of the regulation). This means that you must accept and fill 
rated orders for items that you normally supply and consistent with 
regularly established terms of sale (see Sec.  789.13(a)). Failure to 
comply with the provisions of the rated order may result in legal 
actions and fines against the recipient of the rated order. However, 
certain grounds for mandatory rejection or optional rejection of the 
rated order may apply (see Sec.  789.13(b) and (c)). Rated orders must 
be accepted or rejected within specified time frames (see Sec. Sec.  
789.13(d) and 789.13(e)).
    All rated orders must be scheduled in a manner and to the extent 
possible to ensure timely delivery by the required delivery date 
contained in each order (see Sec.  789.14(a)).
    The existence of previously accepted unrated orders or contracts or 
lower rated orders is not sufficient reason for rejecting a rated 
order. In fact, you (as a supplier or vendor) are required to displace 
or defer lower rated or unrated orders if they conflict with your 
performance against a higher rated order (see Sec.  789.14(b)). When 
you receive multiple rated orders for specific goods or services and 
the orders have the same rating level and scheduled date, you must give 
precedence to the conflicting order in the sequence in which they are 
to be delivered or performed (not to the receipt dates). If the 
conflicting orders are scheduled to be delivered or performed on the 
same day, the person must give precedence to those orders that have the 
earliest receipt dates (see Sec.  789.14(c)).
    To ensure that contracts and orders for authorized programs are 
completed in a timely fashion, you (as a supplier or vendor) must 
place, as necessary, a priority rating on all the contracts and orders 
you issue with suppliers for items needed to fill rated orders you have 
received (see Sec.  789.15). This requirement ensures that priority 
treatment will be afforded your orders by your suppliers and from 
vendor to vendor throughout the supply chain. Other requirements apply 
to changes or cancellations of priority ratings and rated orders (see 
Sec.  789.16) and use of rated orders for certain items (see Sec.  
789.17).
    You may place a priority rating on your contracts or orders only if 
you are in receipt of a rated order or if you have been otherwise 
explicitly authorized to do so by USDA or a delegate agency (see Sec.  
789.18 for other limitations on placing rated orders).

Allocations

    An ``allocation'' is defined in Sec.  789.8 as the control of the 
distribution of materials, services, or facilities for a purpose deemed 
necessary or appropriate to promote the national defense. As specified 
in the allocations component of the APAS regulation (see subpart E, 
Sec. Sec.  789.30 through 789.37), USDA has the authority to allocate 
specified items to promote the national defense.
    Allocations authority would be used only when there is insufficient 
supply of a material, service, or facility to satisfy national defense 
supply requirements through the use of priorities authority or when the 
use of the priorities authority would cause a severe and prolonged 
disruption in the supply of materials, services, or facilities 
available to support normal U.S. economic activities (see

[[Page 63894]]

Sec.  789.30(a)). Under no circumstances would allocations be used to 
ration materials or services at the retail level (see Sec.  789.30(a)). 
Allocations orders would be distributed equitably among the suppliers 
of the resource(s) being allocated and would not require any person to 
relinquish a disproportionate share of the civilian market (see Sec.  
789.30(b)).
    Additionally, as specified in DPA section 101(b) and section 201(e) 
of Executive Order 13603, USDA may not use an allocation to control the 
general distribution of a material in the civilian market unless:

     The Secretary has made a written finding that such 
material is a scarce and critical material essential to the national 
defense and the requirements of the national defense for such 
material cannot otherwise be met without a significant dislocation 
of the normal distribution of such material in the civilian market 
to such a degree as to create appreciable hardship;
     The Secretary has submitted the finding for the 
President's approval through the Assistant to the President and 
National Security Advisor and the Assistant to the President for 
Homeland Security and Counterterrorism; and
     The President has approved the finding (see Sec.  
789.33).

    DOC has extensive experience using its priorities authority (under 
its DPAS regulation), but has not used its allocations authority in 
more than 50 years. Much like DPAS, APAS is expected to primarily be 
used for prioritizing contracts and to a much lesser extent for making 
allocations. However, USDA is including allocations in the regulation 
to have the option ready, if needed. The allocations standards and 
procedures provide strong assurance that allocations would only be used 
in situations where the circumstances justify such orders.
    For example, in a situation where dairy operations are brought to a 
standstill due to a detected presence of Foot and Mouth disease. The 
output of milk produced in the United States is curtailed by 80 percent 
as a result of reduced herd numbers in response to the outbreak. Prices 
for processed and unprocessed milk would skyrocket. In such an example, 
when USDA determines that allocating milk commodities to processors or 
wholesalers is necessary to promote the national defense, namely, as an 
emergency response action under Title VI of the Stafford Act (which is 
an approved program by the Secretary of Homeland Security under section 
202(c) of Executive Order 13603). Because allocating this commodity 
would involve controlling its general distribution in the market, USDA 
then makes the required finding as specified in DPA section 101(b) for 
allocating this food commodity and forwards that finding to the 
President through the National Security Advisor. After Presidential 
concurrence with the determination, per Executive Order 13603, USDA may 
allocate this commodity on a pre-determined basis to processors or 
wholesalers. The purpose of this allocation would be to control the 
distribution of milk to ensure civilian hardships are minimized. USDA 
would allocate existing and new milk sources to redistribute milk 
products in a way that ensures previously established priorities for 
this food product (for example, school food programs and nutritional 
programs for mothers and infant children to continue to provide some 
level of resources for those already enrolled in such programs) are met 
and would continue implementing allocation policies until USDA 
determines that this food source shortfall no longer meets the 
requirements for allocation programs.

Proposed Rule Comments

    FSA's proposed rule had a 60-day comment period that ended on July 
18, 2011. This final rule addresses the comments received on the 
proposed rule; and makes minor revisions to address the public comments 
and the recently published Executive Order 13603. As explained above, 
Executive Order 13603 added new categories to USDA's jurisdiction. 
These additional categories did not require substantive changes to the 
regulation; therefore, additional comments are not being requested.
    FSA received two comments; one comment was from a pet food 
association and the other comment was submitted jointly by a grain and 
feed association (representing all sectors of the grain and feed 
industry--not limited to food) and a trade association. The comments 
raised the same set of concerns about APAS, including concerns on how 
APAS will be initiated or triggered, and how APAS will affect the 
agricultural sectors in potential cases of market disturbances or 
disruptions. The following summarizes each issue raised by the 
commenters and FSA's response to each issue.
    Comment: Improper use of APAS authority poses a risk of undermining 
the United States' hard-fought reputation as a reliable supplier of 
agricultural products to domestic and foreign markets.
    Response: APAS authority is granted to USDA by DPA and Executive 
Order 13603. APAS provides the ability to expedite the provision of 
agricultural resources to areas affected by a disaster, and is only 
authorized for times when the normal market channels cannot provide the 
resources to the disaster areas in a timely manner. If normal market 
channels are capable of providing the resources, APAS will not be used 
to expedite delivery of the resources. Further, with respect to 
allocations, FSA expects that the allocations section of this 
regulation would be used only in worst case scenarios, relying first on 
priorities authority to respond to emergency conditions. This is 
evident by the fact that DOC has the same allocations authority under 
DPA and has not used the allocations authority in over 50 years. 
Additionally, even if allocations orders were issued, the regulation 
has strict parameters in place. As stated in Sec.  789.30(b), 
allocation orders, when used, will be distributed equitably among the 
suppliers of the materials, services, or facilities being allocated and 
not require any person to relinquish a disproportionate share of the 
civilian market. As a result, FSA expects that if APAS were used in the 
event of an emergency, domestic and foreign markets would not be 
adversely affected, including the United States' ability to readily 
supply agricultural products to domestic and foreign markets. 
Therefore, no change was made to the regulation in response to this 
comment.
    Comment: USDA should fully investigate whether it has sufficient 
existing authority under the Commodity Credit Corporation (CCC) Charter 
Act or other laws to execute orders to prioritize and reallocate the 
distribution of food resources.
    Response: The CCC Charter Act (15 U.S.C. 714-714p) was established 
with the intent to stabilize commodity market prices for agricultural 
producers during volatile economic periods through price support and 
disaster programs. The intent of the CCC Charter Act was never to 
provide immediate food and food resource assistance to a civilian 
population that has been impacted by a disaster. As a result, the CCC 
has no jurisdiction in this area of national defense and emergency 
preparedness. Therefore, no change was made to the regulation in 
response to this comment.
    Comment: Craft language in the regulation itself specifying the 
triggering events(s) under which USDA would activate APAS, and more 
clearly define the `national defense' aspects of APAS, differentiating 
those from a limited regional or local natural disaster for which the 
ability to respond effectively already exists.

[[Page 63895]]

    Response: The term ``national defense'' is defined in DPA. In 
implementing DPA, Executive Order 13603 also uses that definition. The 
Federal Departments that collaborated on developing a priorities and 
allocations common regulation use the definition found in Executive 
Order 13603 in their respective regulation. FEMA and other Federal 
agencies responsible for emergency response and recovery by law cannot 
enter a disaster impacted zone unless specific protocols have been met. 
The protocols are to ensure that first response is the responsibility 
of State, local, and Tribal authorities, and only when those State, 
local, and Tribal authorities are overwhelmed and national security is 
at risk, then the Federal agencies begin to play a role. If the 
disaster or event is of such a magnitude that the State, local, and 
Tribal authorities cannot meet the needs of the public, then APAS could 
be used by Federal Departments with response functions to request 
priority ratings to support the efforts of first responders in national 
defense (including emergency preparedness) initiatives. Under DPA and 
Executive Order 13603, Federal Departments do not need a Stafford Act 
declaration to use their priorities and allocations authorities. 
Therefore, no change was made to the regulation in response to this 
comment.
    Comment: The proposed regulation, if finalized, should vest in the 
President the sole power to activate the use of APAS's priority-ranking 
and allocations-order authority. Further, the Secretary of Agriculture 
should have sole power to authorize the actual issuance of any order 
under APAS.
    Response: Executive Order 13603 delegates the President's 
priorities and allocations authorities under DPA to the heads of 
specific Federal agencies. This includes the authority to require 
acceptance and priority performance of contracts or orders to promote 
the national defense over performance of any other contracts or orders, 
as well as authority to allocate materials, services, and facilities as 
deemed necessary or appropriate to promote the national defense. 
Subject to the Executive Order's limitation that the priorities and 
allocations authority be used only to support programs that have been 
determined in writing (by the Secretaries of Defense, Energy, or 
Homeland Security, depending on the activity) as necessary or 
appropriate to promote the national defense, the agency heads have 
broad discretion in determining the circumstances in which the 
priorities or allocations authority will be used. The President has 
delegated these authorities to the Secretary of Agriculture in 
Executive Order 13603 with respect to certain resource areas (and 
previously in Executive Order 12919). The Secretary of Agriculture has 
re-delegated DPA authority to the FSA Administrator through the Under 
Secretary for Farm and Foreign Agricultural Services (see 7 CFR 
2.16(a)(6); 2.42(a)(5)). Therefore, no change was made to the 
regulation in response to this comment; however, minor changes were 
made in this rule as a result of the release of Executive Order 13603 
to include a revised definition of ``food resources.''
    Comment: The proposed rule dismisses and fails to accurately assess 
the economic cost of APAS to the agriculture industry and other 
sectors, including transporters, if USDA uses its authority to issue 
orders that circumvent existing commercial and governmental contracts.
    Response: As noted above, there is a limited group of participants 
eligible for participation in the APAS program; therefore, there were 
limited data available to analyze the economic costs. DOC's use of 
DPAS, which has been used for similar priority ratings using its 
delegation of authority from the Secretary of Agriculture, has not 
resulted in known economic hardships to participants involved in the 
agricultural industry and other sectors. USDA and other Federal 
agencies will not use APAS to circumvent existing commercial and 
government contracts. Instead, they will use APAS to speed up delivery 
of items under contract or increase amounts procured under contract. 
Therefore, no change was made to the regulation in response to this 
comment.
    Comment: As proposed, APAS requires that parties accept or reject 
priority orders received in response to emergency preparedness 
conditions within 6 to 12 hours, as opposed to the 15 days generally 
provided under the DPAS. Such a requirement may be unreasonably short 
to make such a management-level decision.
    Response: The requirement for acceptance or rejection of a rated 
order for certain emergency preparedness conditions within 6 hours 
(where the order is issued in response to a hazard that has occurred) 
or the greater of 12 hours or the time specified in the order (where 
the order is issued to prepare for an imminent hazard) was based on the 
principle that food and drinking water are critical elements to sustain 
human life and any delays after this timeframe can cause life-
threatening hardships. The 15 days requirement for DO-rated orders 
pertains to other conditions, when time is not as critical to provide 
food resources to the population. If a vendor cannot meet the 
requirement of the 6 to 12 hours to accept a rated order, it must 
reject the order on the basis that it cannot meet the required 
timeframe. Vendors should not accept rated orders if they are unsure of 
their capacity to fill the order. Therefore, no change was made to the 
regulation in response to this comment.
    Comment: The FSA Administrator should not be authorized to reject a 
request for an informal hearing to appeal a rated order, particularly 
since the agency would continue to require that contract performance 
under the order not be stayed pending the outcome of the appeal.
    Response: Due to the nature of this regulation and the potential 
life and death situations that warrant use of priority ratings, we 
cannot grant every request for an informal hearing during an appeal. 
The FSA Administrator will address each request on a case by case 
basis. Therefore, no change was made to the regulation in response to 
this comment.
    Comment: If USDA proceeds to finalize an APAS rule, it needs to 
reexamine and improve upon the proposed language currently found in 
Sec.  789.70, which provides legal protection to private-sector 
companies that find it necessary to cancel or delay their performance 
on other commercial contracts so they can fulfill any APAS-related 
orders prioritized by USDA.
    Response: The text of 7 CFR 789.70 restates the liability 
protection provisions of DPA (50 U.S.C. app. 2157). USDA believes that 
the DPA liability protection from damages or penalties for actions 
resulting directly or indirectly from compliance with APAS extends to 
legal actions brought by private parties and covers not only the 
vendor(s) receiving a rated order or subject to an allocations order, 
but also to other vendors whose contracts are affected as a result of 
the other vendor's compliance with the rated order or allocation. 
Therefore, no change was made to the regulation in response to this 
comment.

Other Rule Changes

    As explained above, the jurisdiction delegated by the President to 
the Secretary of Agriculture as specified in Executive Order 13603 was 
expanded to include livestock, veterinary, and plant health resources, 
in addition to the previous delegations for food resources, food 
resource facilities, and the domestic distribution of farm equipment 
and commercial fertilizer. Therefore, nondiscretionary changes were 
made

[[Page 63896]]

throughout the regulation to include livestock, veterinary, and plant 
health resources in the following places:

     Sec.  789.1, ``Purpose;''
     Section 789.2, ``Priorities and Allocations 
Authority,'' which summarizes the delegations of priorities and 
allocations authority; and
     Section 789.8, ``Definitions.''

    USDA's Animal and Plant Health Inspection Service developed the 
definitions that were added for the new jurisdiction for livestock, 
veterinary, and plant health resources. These new definitions are:

     ``Animal'' means any member of the animal kingdom 
(except a human).\7\
---------------------------------------------------------------------------

    \7\ Definition of ``animal'' from the Animal Health Protection 
Act (Pub. L. 107-171, Title X, Subtitle E).
---------------------------------------------------------------------------

     ``Livestock'' means all farm-raised animals.\8\
---------------------------------------------------------------------------

    \8\ Definition of ``livestock'' from the Animal Health 
Protection Act (Pub. L. 107-171, Title X, Subtitle E).
---------------------------------------------------------------------------

     ``Livestock resources'' means materials, facilities, 
vehicles, health supplies, services, and equipment required for the 
production and distribution of livestock.
     ``Plant health resources'' means biological products, 
materials, facilities, vehicles, supplies, services, and equipment 
required to prevent the impairment of, improve, or restore plant 
health conditions.
     ``Veterinary resources'' means drugs, biological 
products, medical devices, materials, facilities, vehicles, health 
supplies, services, and equipment required to diagnose, mitigate or 
prevent the impairment of, improve, treat, cure, or restore the 
health conditions of the animal population.

    Executive Order 13603 modifies the following definitions: ``Civil 
transportation,'' ``energy,'' ``food resources,'' ``food resource 
facilities,'' ``health resources,'' and ``water resources.'' The most 
significant changes are in the definitions of ``food resources'' and 
``water resources,'' which establish that the jurisdiction for potable 
water packaged in commercially marketable containers belongs to the 
Secretary of Agriculture. All other modifications clarify existing 
definitions.
    In addition, several non-substantive changes were made for 
consistency with the related regulations being implemented by other 
agencies. For example, minor edits were made to this rule to parallel 
edits made to the final DPA rule published by the Department of 
Transportation on October 1, 2012 (77 FR 59793-59818). The nature of 
all of these changes was minor clarifying changes, for example:

     Updated the Executive Order number from 12919 to 13603 
and updated the citation,
     Updated the references to the authorizing jurisdictions 
throughout for consistency with the changes made by Executive Order 
13603,
     Revised the definitions for ``civil transportation,'' 
``energy,'' ``food resources,'' ``food resource facilities,'' 
``health resources,'' and ``water resources'' for consistency with 
Executive Order 13603,
     Removed, to avoid confusion, the reference to the 
Federal Priorities and Allocations System because it is only the 
concept of the combination of all of the priorities and allocations 
rules being implemented by each of the agencies required to 
implement DPA,
     Added a citation to the DOC regulation, and
     Updated titles for clearances required for the 
President's approval, and
     Corrected minor typographical errors.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
significant under Executive Order 12866, ``Regulatory Planning and 
Review,'' and has reviewed this rule. A summary of the cost benefit 
analysis is provided below; the cost benefit analysis is available at 
www.regulations.gov with the supporting materials for this rule.

Summary of Cost Benefit Analysis

    DPA requires the head of each Federal agency to which the President 
delegates authority to prioritize contracts and orders to meet the 
needs of national defense. In Executive Order 13603 the President 
delegated DPA authority with respect to food resources; food resource 
facilities; livestock, veterinary, and plant health resources; and the 
domestic distribution of farm equipment and commercial fertilizer to 
the Secretary of Agriculture. To implement DPA, FSA is implementing the 
APAS regulation, which is modeled after DPAS.
    Food is essential to national defense including civil emergency 
response. APAS is designed to use the DPA authority to help ensure that 
food is available when and where it is needed most, such as after a 
hurricane or an earthquake. The authority under DPA extends beyond 
emergency conditions to also cover nonemergency conditions. Under DPA, 
USDA may develop plans and programs to expedite and expand the supply 
of critical resources from the private sector for the production, 
processing, storage, and distribution of agricultural commodities to 
promote national defense and to prevent civilian hardship in the food 
marketplace. In addition, DPA enables USDA to further support domestic 
emergency preparedness, response, and recovery activities, critical 
infrastructure protection and restoration, and homeland security 
activities.
    The impact of APAS on private companies receiving priority orders 
is expected to vary depending on economic factors. In most cases, there 
is likely to be no economic impact in filling priority orders because 
it would generally just be changing the timing in which orders are 
completed. No data were provided by the commenters to change this 
analysis, anecdotally, the comments stated that ``manufacturing and 
distribution processes . . . would be altered by allocation orders . . 
. will have a negative economic impact.''
    APAS is expected to primarily be used for prioritizing contracts 
and to a lesser extent for determining allocations. USDA does not 
expect any program outlays under APAS for prioritizing contracts and 
potentially determining allocations. USDA will likely incur 
administrative expenses associated with assessing priorities and 
allocations requests and providing oversight for approved requests. The 
administrative expenses are expected to be marginal as APAS will 
presumably be administered using existing USDA personnel.
    APAS is expected to have an overall positive impact on the U.S. 
public and industry by maintaining and restoring the production, 
processing, storage, and distribution of agricultural commodities 
during times of both emergency and nonemergency conditions to promote 
national defense and to prevent civilian hardship in the food 
marketplace. While USDA has not yet administered APAS under DPA 
authority, the continued use of the Department of Commerce's DPAS by 
the Department of Defense proves the usefulness of a priorities and 
allocations system.
    As discussed above, FSA received one comment about the analysis, as 
follows:
    Comment: The proposed rule dismisses and fails to accurately assess 
the economic cost of APAS to the agriculture industry and other 
sectors, including transporters, if USDA uses its authority to issue 
orders that circumvent existing commercial and governmental contracts.
    Response: As noted above, there are a limited group of participants 
eligible for participation in the APAS program; therefore, there were 
limited data available to analyze the economic costs. DOC's use of 
DPAS, which has been used for similar priority ratings using its 
delegation of authority from the Secretary of Agriculture, has not 
resulted in any known economic hardships to participants involved in 
the agricultural industry and other sectors. USDA and other Federal

[[Page 63897]]

agencies will not use APAS to circumvent existing commercial and 
government contracts. Instead, they will use APAS to speed up delivery 
of items under contract or increase procurement of items under 
contract. Therefore, no change was made to the analysis in response to 
this comment.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to the notice and comment 
rulemaking requirements under the Administrative Procedure Act (5 
U.S.C. 553) or any other statute, unless the agency certifies that the 
rule will not have a significant economic impact on a substantial 
number of small entities. FSA has determined that this rule will not 
have a significant impact on a substantial number of small entities for 
the reasons explained below. Consequently, FSA has not prepared a 
regulatory flexibility analysis.
    Small entities include small businesses, small organizations, and 
small governmental jurisdictions. For purposes of assessing the impacts 
of this rule on small entities, a small business, as described in the 
Small Business Administration's Table of Small Business Size Standards 
Matched to North American Industry Classification System Codes (August 
2008 Edition), has a maximum annual revenue of $33.5 million and a 
maximum of 1,500 employees (for some business categories, these numbers 
are lower). Due to the scope of this rule and for consistency with DPAS 
and other regulations implementing DPA, these general size standards 
were used for this analysis. The range of small business size standards 
varies. For example, SBA classifies a small business for Food 
Manufacturing as one that has a maximum annual revenue of $750,000 and 
for Crop or Animal Production a maximum of 500 employees. Due to the 
wide variety of businesses that could be involved in APAS, and that the 
potential impacts are expected to be minor, the more narrow categories 
were not used for this analysis. A small governmental jurisdiction is a 
government of a city, town, school district or special district with a 
population of less than 50,000. A small organization is any not-for-
profit enterprise that is independently owned and operated and is not 
dominant in its field.
    This rule establishes criteria under which USDA (or agencies to 
which USDA delegates authority) will authorize prioritization of 
certain orders or contracts as well as criteria under which USDA would 
issue orders allocating resources or production facilities. Because the 
rule affects commercial transactions, USDA believes that small 
organizations and small governmental jurisdictions are unlikely to be 
affected by this rule. However, FSA has no basis on which to estimate 
the number of small businesses that are likely to be affected by this 
rule.
    FSA believes that any impact that this rule might have on small 
businesses would be minor. The rule has two principal components: 
Prioritization and allocation. Prioritization is the process that is, 
by far, more likely to be used. Under prioritization, USDA designates 
certain orders, which may be placed by Government or by private 
entities, and assigned under one of two possible priority levels. Once 
so designated, such orders are referred to as ``rated orders.'' The 
recipient of a rated order must give it priority over an unrated order. 
The recipient of a rated order with a higher priority rating must give 
that order priority over any rated orders with the lower priority 
rating and over unrated orders as necessary to meet the delivery 
requirements of each rated order. A recipient of a rated order may 
place more than one order at the same priority level with suppliers and 
subcontractors for supplies and services necessary to fulfill the 
recipient's rated order and the suppliers and subcontractors must treat 
the request from the rated order recipient as a rated order with the 
same priority level as the original rated order. The rule does not 
require recipients to fulfill rated orders if the price or terms of 
sale are not consistent with the price or terms of sale of similar non-
rated orders. The rule provides a defense from any liability for 
damages or penalties for actions or inactions made in compliance with 
the rule.
    Although rated orders could require a recipient to fill one order 
prior to filling another, they would not require a reduction in the 
total volume of orders nor would they require the recipient to reduce 
prices or provide rated orders with more favorable terms than a similar 
non-rated order. Under these circumstances, the economic effects on the 
rated order recipient of substituting one order for another are likely 
to be mutually offsetting, resulting in no net loss.
    Allocations could be used to control the general distribution of 
materials or services in the civilian market. Specific allocations 
actions that FSA might take are set-asides, allocations directives, and 
allotments. Any allocations actions would be used only in extraordinary 
circumstances. As required by section 101(b) of DPA (50 U.S.C. App. 
2071) and by section 201(e) of Executive Order 13603, allocations may 
be implemented only if the Secretary of Agriculture made, and the 
President approved, a finding: (1) That the material [or service] is a 
scarce and critical material [or service] essential to the national 
defense, and (2) that the requirements of the national defense for such 
material [or service] cannot otherwise be met without creating a 
significant dislocation of the normal distribution of such material [or 
service] in the civilian market to such a degree as to create 
appreciable hardship.
    Any allocations actions would also have to comply with section 
701(e) of DPA (50 U.S.C. app. sec. 2151(e)), which provides that small 
business be included. To the extent practicable, a fair share of the 
material, including services, will be provided to small business in 
proportion to the share received by such business concerns under normal 
conditions. Although FSA cannot determine precisely the number of small 
entities that would be affected by this rule, FSA believes that the 
overall impact on such entities would not be significant. In most 
instances, rated contracts would be in addition to other (unrated) 
contracts and would not reduce the total amount of business the firm 
receives. Because allocations can be imposed only after a determination 
by the President, and there have been no allocations actions under DPA 
authority in more than 50 years, allocations are expected to be a rare 
occurrence. Therefore, estimating the impact of an allocation, should 
one occur, is difficult. FSA believes that the requirement for a 
Presidential determination and the provisions of section 701 of the DPA 
provide reasonable assurance that any impact on small business will not 
be significant.
    Therefore, for the reasons set forth above, FSA certifies that this 
action would not have a significant impact on a substantial number of 
small entities.

Environmental Review

    The environmental impacts of this rule have been considered in a 
manner consistent with the provisions of the National Environmental 
Policy Act (NEPA, 42 U.S.C. 4321-4347), the regulations of the Council 
on Environmental Quality (40 CFR parts 1500 through 1508), and the FSA 
regulation for compliance with NEPA (7 CFR part 799). The provisions of 
this rule are specifically related to acquisition and are considered 
solely

[[Page 63898]]

administrative in nature. Therefore, FSA has determined that NEPA does 
not apply to this rule and no environmental assessment or environmental 
impact statement will be prepared.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials. The 
objectives of the Executive Order are to foster an intergovernmental 
partnership and a strengthened Federalism, by relying on State and 
local processes for State and local government coordination and review 
of proposed Federal Financial assistance and direct Federal 
development. This rule does not provide Federal financial assistance, 
direct Federal development, grants, or cooperative agreements. 
Therefore, this program is not subject to Executive Order 12372.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, ``Civil 
Justice Reform.'' This rule would not preempt State and or local laws, 
and regulations, or policies unless they present an irreconcilable 
conflict with this rule. Before any judicial action may be brought 
concerning the provisions of this rule, appeal provisions of 7 CFR 
parts 11 and 780 would need to be exhausted.

Executive Order 13132

    This final rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule do not have any 
substantial direct effect on States, the relationship between the 
Federal government and the States, or the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    This final rule has been reviewed for compliance with Executive 
Order 13175, ``Consultation and Coordination with Indian Tribal 
Governments.'' The policies contained in this rule do not have Tribal 
implications that preempt Tribal law. FSA continues to consult with 
Tribal officials to have a meaningful consultation and collaboration on 
the development and strengthening of FSA regulations.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, or tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including a cost benefit analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local, or tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
rule contains no Federal mandates as defined by Title II of UMRA for 
State, local, or tribal governments or for the private sector. 
Therefore, this rule is not subject to the requirements of sections 202 
and 205 of UMRA.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501-3520), FSA described the new information collection activities in 
the request for public comment in the proposed rule. No comments 
related to the Paperwork Reduction Act were received, and no change to 
the information collection was required. The currently approved 
information collection is covered under OMB control number 0560-0280.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 789

    Administrative practice and procedure, Business and industry, 
Government contracts, National defense, Reporting and recordkeeping 
requirements.


0
For the reasons discussed in the preamble, FSA adds 7 CFR part 789 to 
read as follows:

PART 789--AGRICULTURE PRIORITIES AND ALLOCATIONS SYSTEM (APAS)

Subpart A--General
Sec.
789.1 Purpose.
789.2 Priorities and allocations authority.
789.3 Program eligibility.
Subpart B--Definitions
789.8 Definitions.
Subpart C--Placement of Rated Orders
789.10 Delegations of authority.
789.11 Priority ratings.
789.12 Elements of a rated order.
789.13 Acceptance and rejection of rated orders.
789.14 Preferential scheduling.
789.15 Extension of priority ratings.
789.16 Changes or cancellations of priority ratings and rated 
orders.
789.17 Use of rated orders.
789.18 Limitations on placing rated orders.
Subpart D--Special Priorities Assistance
789.20 General provisions.
789.21 Requests for priority rating authority.
789.22 Examples of assistance.
789.23 Criteria for assistance.
789.24 Instances where assistance must not be provided.
Subpart E--Allocations Actions
789.30 Policy.
789.31 General procedures.
789.32 Precedence over priority rated orders.
789.33 Controlling the general distribution of a material in the 
civilian market.
789.34 Types of allocations orders.
789.35 Elements of an allocations order.
789.36 Mandatory acceptance of allocations orders.
789.37 Changes or cancellations of allocations orders.
Subpart F--Official Actions
789.40 General provisions.
789.41 Rating authorizations.
789.42 Directives.
789.43 Letters of understanding.
Subpart G--Compliance
789.50 General provisions.
789.51 Audits and investigations.
789.52 Compulsory process.
789.53 Notification of failure to comply.
789.54 Violations, penalties, and remedies.
789.55 Compliance conflicts.
Subpart H--Adjustments, Exceptions, and Appeals
789.60 Adjustments or exceptions.
789.61 Appeals.
Subpart I--Miscellaneous Provisions
789.70 Protection against claims.
789.71 Records and reports.
789.72 Applicability of this part and official actions.
789.73 Communications.

    Schedule I to Part 789--Approved Programs and Delegate Agencies

    Authority: 50 U.S.C. App. 2061-2170, 2171, and 2172; 42 U.S.C. 
5195-5197h.

Subpart A--General


Sec.  789.1  Purpose.

    This part provides guidance and procedures for use of the Defense 
Production Act priorities and allocations authority by the United 
States Department of Agriculture (USDA) with respect to food resources,

[[Page 63899]]

food resource facilities, livestock resources, veterinary resources, 
plant health resources, and the domestic distribution of farm equipment 
and commercial fertilizer in this part. (The guidance and procedures in 
this part are consistent with the guidance and procedures provided in 
other regulations issued under Executive Order 13603. Guidance and 
procedures for use of the Defense Production Act priorities and 
allocations authority with respect to other types of resources are as 
follows: For all forms of energy, refer to the Department of Energy's 
Energy Priorities and Allocations System (EPAS) regulation in 10 CFR 
part 217; for all forms of civil transportation, refer to the 
Department of Transportation's Transportation Priorities and 
Allocations System (TPAS) regulation in 49 CFR part 33; for water 
resources, refer to the Department of Defense; for health resources, 
refer to the Department of Health and Human Services' Health Resources 
Priorities and Allocations System in 45 CFR part 101; and for all other 
materials, services, and facilities, including construction materials, 
refer to the Department of Commerce's Defense Priorities and 
Allocations System (DPAS) regulation in 15 CFR part 700.)


Sec.  789.2  Priorities and allocations authority.

    (a) Section 201 of Executive Order 13603 (3 CFR, 2012 Comp., p. 
225) delegates the President's authority under section 101 of the 
Defense Production Act to require acceptance and priority performance 
of contracts and orders (other than contracts of employment) to promote 
the national defense over performance of any other contracts or orders, 
and to allocate materials, services, and facilities as deemed necessary 
or appropriate to promote the national defense to the following 
agencies. Essentially, this allows the following agencies to place 
priority on the performance of contracts for items and materials under 
their jurisdiction as required for national defense initiatives 
including emergency preparedness activities:
    (1) The Secretary of Agriculture with respect to food resources, 
food resource facilities, livestock resources, veterinary resources, 
plant health resources, and the domestic distribution of farm equipment 
and commercial fertilizer;
    (2) The Secretary of Energy with respect to all forms of energy;
    (3) The Secretary of Health and Human Services with respect to 
health resources;
    (4) The Secretary of Transportation with respect to all forms of 
civil transportation;
    (5) The Secretary of Defense with respect to water resources; and
    (6) The Secretary of Commerce with respect to all other materials, 
services, and facilities, including construction materials.
    (b) Section 202 of Executive Order 13603 specifies that the 
priorities and allocations authority may be used only to support 
programs that have been determined in writing as necessary or 
appropriate to promote the national defense by:
    (1) The Secretary of Defense with respect to military production 
and construction, military assistance to foreign nations, military use 
of civil transportation, stockpiles managed by the Department of 
Defense, space, and directly related activities;
    (2) The Secretary of Energy with respect to energy production and 
construction, distribution and use, and directly related activities; or
    (3) The Secretary of Homeland Security with respect to all other 
national defense programs, including civil defense and continuity of 
Government.


Sec.  789.3  Program eligibility.

    Certain programs that promote the national defense are eligible for 
priorities and allocations support. These include programs for military 
and energy production or construction, military or critical 
infrastructure assistance to any foreign nation, homeland security, 
stockpiling, space, and any directly related activity. Other eligible 
programs include emergency preparedness activities conducted pursuant 
to Title VI of the Stafford Act and critical infrastructure protection 
and restoration.

Subpart B--Definitions


Sec.  789.8  Definitions.

    Allocations means the control of the distribution of materials, 
services, or facilities for a purpose deemed necessary or appropriate 
to promote the national defense.
    Allocations order means an official action to control the 
distribution of materials, services, or facilities for a purpose deemed 
necessary or appropriate to promote the national defense.
    Allotment means an official action that specifies the maximum 
quantity for a specific use of a material, service, or facility 
authorized to promote the national defense.
    Animal means any member of the animal kingdom (except a human).
    APAS means the Agriculture Priorities and Allocations System 
established by this part.
    Applicant means the person applying for assistance under APAS. (See 
definition of ``person.'')
    Approved program means a program determined by the Secretary of 
Defense, the Secretary of Energy, or the Secretary of Homeland Security 
to be necessary or appropriate to promote the national defense, as 
specified in section 202 of Executive Order 13603.
    Civil transportation includes movement of persons and property by 
all modes of transportation in interstate, intrastate, or foreign 
commerce within the United States, its territories and possessions, and 
the District of Columbia, and related public storage and warehousing, 
ports, services, equipment and facilities, such as transportation 
carrier shop and repair facilities. ``Civil transportation'' also 
includes direction, control, and coordination of civil transportation 
capacity regardless of ownership. ``Civil transportation'' does not 
include transportation owned or controlled by the Department of 
Defense, use of petroleum and gas pipelines, and coal slurry pipelines 
used only to supply energy production facilities directly.
    Construction means the erection, addition, extension, or alteration 
of any building, structure, or project, using materials or products 
that are to be an integral and permanent part of the building, 
structure, or project. Construction does not include maintenance and 
repair.
    Critical infrastructure means any systems and assets, whether 
physical or cyber-based, so vital to the United States that the 
degradation or destruction of such systems and assets would have a 
debilitating impact on national security, including, but not limited 
to, national economic security and national public health or safety.
    Defense Production Act means the Defense Production Act of 1950, as 
amended (50 U.S.C. App. 2061 to 2170, 2171, and 2172).
    Delegate agency means a government agency authorized by delegation 
from USDA to place priority ratings on contracts or orders needed to 
support approved programs.
    Directive means an official action that requires a person to take 
or refrain from taking certain actions in accordance with the 
provisions.
    Emergency preparedness means all those activities and measures 
designed or undertaken to prepare for or minimize the effects of a 
hazard upon the civilian population, to deal with the immediate 
emergency conditions that would be created by the hazard, and to make 
emergency repairs to, or the emergency restoration of, vital utilities

[[Page 63900]]

and facilities destroyed or damaged by the hazard. Emergency 
preparedness includes the following:
    (1) Measures to be undertaken in preparation for anticipated 
hazards (including the establishment of appropriate organizations, 
operational plans, and supporting agreements, the recruitment and 
training of personnel, the conduct of research, the procurement and 
stockpiling of necessary materials and supplies, the provision of 
suitable warning systems, the construction or preparation of shelters, 
shelter areas, and control centers, and, when appropriate, the non-
military evacuation of the civilian population).
    (2) Measures to be undertaken during a hazard (including the 
enforcement of passive defense regulations prescribed by duly 
established military or civil authorities, the evacuation of personnel 
to shelter areas, the control of traffic and panic, and the control and 
use of lighting and civil communications).
    (3) Measures to be undertaken following a hazard (including 
activities for fire fighting, rescue, emergency medical, health and 
sanitation services, monitoring for specific dangers of special 
weapons, unexploded bomb reconnaissance, essential debris clearance, 
emergency welfare measures, and immediately essential emergency repair 
or restoration of damaged vital facilities).
    Energy means all forms of energy including petroleum, gas (both 
natural and manufactured), electricity, solid fuels (including all 
forms of coal, coke, coal chemicals, coal liquefaction and coal 
gasification), solar, wind, other types of renewable energy, atomic 
energy, and the production, conservation, use, control, and 
distribution (including pipelines) of all of these forms of energy.
    Facilities includes all types of buildings, structures, or other 
improvements to real property (but excluding farms, churches or other 
places of worship, and private dwelling houses), and services relating 
to the use of any such building, structure, or other improvement.
    Farm equipment means equipment, machinery, and repair parts 
manufactured for use on farms in connection with the production or 
preparation for market use of food resources.
    Feed is a nutritionally adequate manufactured food for animals 
(livestock and poultry raised for agriculture production); and by 
specific formula is compounded to be fed as the sole ration and is 
capable of maintaining life and promoting production without any 
additional substance being consumed except water.
    Fertilizer means any product or combination of products that 
contain one or more of the elements--nitrogen, phosphorus, and 
potassium--for use as a plant nutrient.
    Food resources means all commodities and products (simple, mixed, 
or compound), or complements to such commodities or products, that are 
capable of being ingested by either human beings or animals, 
irrespective of other uses to which such commodities or products may be 
put, at all stages of processing from the raw commodity to the products 
suitable for sale for human or animal consumption. Food resources also 
means potable water packaged in commercially marketable containers, all 
starches, sugars, vegetable and animal or marine fats and oils, seed, 
cotton, hemp, and flax fiber, but does not mean any such material after 
it loses its identity as an agricultural commodity or agricultural 
product.
    Food resource facilities means plants, machinery, vehicles 
(including on-farm), and other facilities required for the production, 
processing, distribution, and storage (including cold storage) of food 
resources, and for the domestic distribution of farm equipment and 
fertilizer (excluding transportation for that distribution).
    Hazard means an emergency or disaster resulting from a natural 
disaster; or from an accidental or man-caused event.
    Health resources means drugs, biological products, medical devices, 
materials, facilities, health supplies, services, and equipment 
required to diagnose, mitigate, or prevent the impairment of, improve, 
treat, cure, or restore the physical or mental health conditions of the 
population.
    Homeland security includes efforts:
    (1) To prevent terrorist attacks within the United States;
    (2) To reduce the vulnerability of the United States to terrorism;
    (3) To minimize damage from a terrorist attack in the United 
States; and
    (4) To recover from a terrorist attack in the United States.
    Industrial resources means all materials, services, and facilities, 
including construction materials, but not including: Food resources, 
food resource facilities, livestock resources, veterinary resources, 
plant health resources, and the domestic distribution of farm equipment 
and commercial fertilizer; all forms of energy; health resources; all 
forms of civil transportation; and water resources.
    Item means any raw, in process, or manufactured material, article, 
commodity, supply, equipment, component, accessory, part, assembly, or 
product of any kind, technical information, process, or service.
    Letter of understanding means an official action that may be issued 
in resolving special priorities assistance cases to reflect an 
agreement reached by all parties (USDA, the Department of Commerce (if 
applicable), a delegate agency (if applicable), the supplier, and the 
customer).
    Livestock means all farm-raised animals.
    Livestock resources means materials, facilities, vehicles, health 
supplies, services, and equipment required for the production and 
distribution of livestock.
    Maintenance and repair and operating supplies (MRO) means:
    (1) Maintenance is the upkeep necessary to continue any plant, 
facility, or equipment in working condition.
    (2) Repair is the restoration of any plant, facility, or equipment 
to working condition when it has been rendered unsafe or unfit for 
service by wear and tear, damage, or failure of parts.
    (3) Operating supplies are any resources carried as operating 
supplies according to a person's established accounting practice. 
Operating supplies may include hand tools and expendable tools, jigs, 
dies, fixtures used on production equipment, lubricants, cleaners, 
chemicals, and other expendable items.
    (4) MRO does not include items produced or obtained for sale to 
other persons or for installation upon or attachment to the property of 
another person, or items required for the production of such items; 
items needed for the replacement of any plant, facility, or equipment; 
or items for the improvement of any plant, facility, or equipment by 
replacing items that are still in working condition with items of a new 
or different kind, quality, or design.
    Materials includes:
    (1) Any raw materials (including minerals, metals, and advanced 
processed materials), commodities, articles, components (including 
critical components), products, and items of supply; and
    (2) Any technical information or services ancillary to the use of 
any such materials, commodities, articles, components, products, or 
items.
    National defense means programs for military and energy production 
or construction, military or critical infrastructure assistance to any 
foreign nation, homeland security, stockpiling, space, and any directly 
related activity. Such term includes emergency preparedness activities 
conducted

[[Page 63901]]

pursuant to Title VI of the Stafford Act and critical infrastructure 
protection and restoration.
    Official action means an action taken by USDA or another resource 
agency under the authority of the Defense Production Act, Executive 
Order 13603, or this part. Such actions include the issuance of rating 
authorizations, directives, set-asides, allotments, letters of 
understanding, demands for information, inspection authorizations, and 
administrative subpoenas.
    Person includes an individual, corporation, partnership, 
association, or any other organized group of persons, or legal 
successor or representative thereof, or any State or local government 
or agency thereof, or any Federal agency.
    Plant health resources means biological products, materials, 
facilities, vehicles, supplies, services, and equipment required to 
prevent the impairment of, improve, or restore plant health conditions.
    Rated order means a prime contract, a subcontract, or a purchase 
order in support of an approved program issued as specified in the 
provisions of this part. Persons may request an order (contract) be 
rated in response to a need that is defined in this part. However, an 
order does not become rated until the request is approved by USDA. USDA 
will assign a rating priority for each rating request approved that 
designates the priority of that order over other orders that have 
similar order specifics.
    Resource agency means any agency that is delegated priorities and 
allocations authority as specified in Sec.  789.2.
    Secretary means the Secretary of Agriculture.
    Seed is used with its commonly understood meaning and includes all 
seed grown for and customarily sold to users for planting for the 
production of agriculture crops.
    Services includes any effort that is needed for or incidental to:
    (1) The development, production, processing, distribution, 
delivery, or use of an industrial resource or a critical technology 
item;
    (2) The construction of facilities;
    (3) The movement of individuals and property by all modes of civil 
transportation; or
    (4) Other national defense programs and activities.
    Set-aside means an official action that requires a person to 
reserve materials, services, or facilities capacity in anticipation of 
the receipt of rated orders.
    Stafford Act means the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, as amended (42 U.S.C. 5195-5197h).
    USDA means the U.S. Department of Agriculture.
    Veterinary resources means drugs, biological products, medical 
devices, materials, facilities, vehicles, health supplies, services, 
and equipment required to diagnose, mitigate or prevent the impairment 
of, improve, treat, cure, or restore the health conditions of the 
animal population.
    Water resources means all usable water, from all sources, within 
the jurisdiction of the United States, that can be managed, controlled, 
and allocated to meet emergency requirements, except water resources 
does not include usable water that qualifies as food resources.

Subpart C--Placement of Rated Orders


Sec.  789.10  Delegations of authority.

    (a) [Reserved]
    (b) Within USDA, authority to administer APAS has been delegated to 
the Administrator, Farm Service Agency, through the Under Secretary for 
Farm and Foreign Agricultural Services. (See Sec. Sec.  2.16(a)(6) and 
2.42(a)(5) of this title.) The Farm Service Agency Administrator will 
coordinate APAS implementation and administration through the Director, 
USDA Office of Homeland Security and Emergency Coordination, as 
delegated by the Assistant Secretary for Administration. (See 
Sec. Sec.  2.24(a)(8)(ii)(A) and 2.24(a)(8)(v); 2.95(b)(1)(i) and 
2.95(b)(4) of this title.)


Sec.  789.11  Priority ratings.

    (a) Levels of priority. Priority levels designate differences 
between orders based on national defense including emergency 
preparedness requirements.
    (1) There are two levels of priority established by APAS, 
identified by the rating symbols ``DO'' and ``DX.''
    (2) All DO-rated orders have equal priority with each other and 
take precedence over unrated orders. All DX-rated orders have equal 
priority with each other and take precedence over DO-rated orders and 
unrated orders. (For resolution of conflicts among rated orders of 
equal priority, see Sec.  789.14(c).)
    (3) In addition, a directive regarding priority treatment for a 
given item issued by the resource agency with priorities jurisdiction 
for that item takes precedence over any DX-rated order, DO-rated order, 
or unrated order, as stipulated in the directive. (For more information 
on directives, see Sec.  789.42.)
    (b) Program identification symbols. Program identification symbols 
indicate which approved program is being supported by a rated order. 
The list of currently approved programs and their identification 
symbols are listed in Schedule I. For example, P1 identifies a program 
involving food and food resources processing and storage. Program 
identification symbols, in themselves, do not connote any priority. 
Additional programs may be approved under the procedures of Executive 
Order 13603 at any time.
    (c) Priority ratings. A priority rating consists of the rating 
symbol DO or DX followed by the program identification symbol, such as 
P1 or P2. Thus, a contract for the supply of livestock feed will 
contain a DO-P1 or DX-P1 priority rating.


Sec.  789.12  Elements of a rated order.

    (a) Each rated order must include:
    (1) The appropriate priority rating (for example, DO-P1 for food 
and food resources processing and storage);
    (2) A required delivery date or dates. The words ``immediately'' or 
``as soon as possible'' do not constitute a delivery date. Some 
purchase orders, such as a ``requirements contract,'' ``basic ordering 
agreement,'' ``prime vendor contract,'' or similar procurement 
document, bearing a priority rating may contain no specific delivery 
date or dates if it provides for the furnishing of items or services 
from time-to-time or within a stated period against specific purchase 
orders, such as calls, requisitions, and delivery orders. Specific 
purchase orders must specify a required delivery date or dates and are 
to be considered as rated as of the date of their receipt by the 
supplier and not as of the date of the original procurement document;
    (3) The written signature on a manually placed order, or the 
digital signature or name on an electronically placed order, of an 
individual authorized to sign rated orders for the person placing the 
order. The signature or use of the name certifies that the rated order 
is authorized under this part and that the requirements of this part 
are being followed; and
    (4) A statement as follows:
    (i) A statement that reads:

    This is a rated order certified for national defense use, and 
you are required to follow all the provisions of the Agriculture 
Priorities and Allocations System regulation in 7 CFR part 789.

    (ii) If the rated order is placed in support of emergency 
preparedness requirements and expedited action is necessary and 
appropriate to meet these requirements, the following sentences should 
be added following the

[[Page 63902]]

statement specified in paragraph (a)(4)(i) of this section:

    This rated order is placed for the purpose of emergency 
preparedness. It must be accepted or rejected within six (6) hours 
after receipt of the order if the order is issued in response to a 
hazard that has occurred; or within the greater of twelve (12) hours 
or the time specified in the order, if the order is issued to 
prepare for an imminent hazard, in accordance with 7 CFR 789.13(e).

    (b) [Reserved]


Sec.  789.13  Acceptance and rejection of rated orders.

    (a) Mandatory acceptance. A person must accept a rated order in 
accordance with the following requirements:
    (1) Except as otherwise specified in this section, a person must 
accept every rated order received and must fill such orders regardless 
of any other rated or unrated orders that have been accepted.
    (2) A person must not discriminate against rated orders in any 
manner such as by charging higher prices or by imposing different terms 
and conditions than for comparable unrated orders.
    (b) Mandatory rejection. Unless otherwise directed by USDA for a 
rated order involving food resources, food resource facilities, 
livestock resources, veterinary resources, plant health resources, or 
the domestic distribution of farm equipment and commercial fertilizer:
    (1) A person must not accept a rated order for delivery on a 
specific date if unable to fill the order by that date. However, the 
person must inform the customer of the earliest date on which delivery 
can be made and offer to accept the order on the basis of that date. 
Scheduling conflicts with previously accepted lower rated or unrated 
orders are not sufficient reason for rejection in this section.
    (2) A person must not accept a DO-rated order for delivery on a 
date that would interfere with delivery of any previously accepted DO- 
or DX-rated orders. However, the person must offer to accept the order 
based on the earliest delivery date otherwise possible.
    (3) A person must not accept a DX-rated order for delivery on a 
date that would interfere with delivery of any previously accepted DX-
rated orders, but must offer to accept the order based on the earliest 
delivery date otherwise possible.
    (4) If a person is unable to fill all of the rated orders of equal 
priority status received on the same day, the person must accept, based 
upon the earliest delivery dates, only those orders that can be filled, 
and reject the other orders. For example, a person must accept order A 
requiring delivery on December 15 before accepting order B requiring 
delivery on December 31. However, the person must offer to accept the 
rejected orders based on the earliest delivery dates otherwise 
possible.
    (5) A person must reject the rated order if the person is 
prohibited by Federal law from meeting the terms of the order.
    (c) Optional rejection. Unless otherwise directed by USDA for a 
rated order involving food resources, food resource facilities, 
livestock resources, veterinary resources, plant health resources, or 
the domestic distribution of farm equipment and commercial fertilizer, 
rated orders may be rejected in any of the following cases as long as a 
supplier does not discriminate among customers:
    (1) If the person placing the order is unwilling or unable to meet 
regularly established terms of sale or payment;
    (2) If the order is for an item not supplied or for a service not 
capable of being performed;
    (3) If the order is for an item or service produced, acquired, or 
provided only for the supplier's own use for which no orders have been 
filled for 2 years prior to the date of receipt of the rated order. If, 
however, a supplier has sold some of these items or provided similar 
services, the supplier is obligated to accept rated orders up to that 
quantity or portion of production or service, whichever is greater, 
sold or provided within the past 2 years;
    (4) If the person placing the rated order, other than the Federal 
Government, makes the item or performs the service being ordered;
    (5) If acceptance of a rated order or performance against a rated 
order would violate any other regulation, official action, or order of 
USDA, issued under the authority of the Defense Production Act or 
another relevant law.
    (d) Customer notification requirements. A person in receipt of a 
rated order is required to provide to the customer placing the order 
written or electronic notification of acceptance or rejection of the 
order.
    (1) Except as provided in paragraph (e) of this section, a person 
must accept or reject a rated order in writing or electronically within 
fifteen (15) working days after receipt of a DO-rated order and within 
ten (10) working days after receipt of a DX-rated order. If the order 
is rejected, the person must give reasons in writing or electronically 
for the rejection.
    (2) If a person has accepted a rated order and subsequently finds 
that shipment or performance will be delayed, the person must notify 
the customer immediately, give the reasons for the delay, and advise of 
a new shipment or performance date. If notification is given verbally, 
written or electronic confirmation must be provided within 5 working 
days.
    (e) Exception for emergency preparedness conditions. If the rated 
order is placed for the purpose of emergency preparedness and includes 
the additional statement as specified in Sec.  789.12(a)(4)(ii), a 
person must accept or reject a rated order and send the acceptance or 
rejection in writing or in an electronic format:
    (1) Within 6 hours after receipt of the order if the order is 
issued in response to a hazard that has occurred; or
    (2) Within the greater of 12 hours or the time specified in the 
order, if the order is issued to prepare for an imminent hazard.


Sec.  789.14  Preferential scheduling.

    (a) A person must schedule operations, including the acquisition of 
all needed production items or services, in a timely manner to satisfy 
the delivery requirements of each rated order. Modifying production or 
delivery schedules is necessary only when required delivery dates for 
rated orders cannot otherwise be met.
    (b) DO-rated orders must be given production preference over 
unrated orders, if necessary to meet required delivery dates, even if 
this requires the diversion of items being processed or ready for 
delivery or services being performed against unrated orders. Similarly, 
DX-rated orders must be given preference over DO-rated orders and 
unrated orders. (Examples: If a person receives a DO-rated order with a 
delivery date of June 3 and if meeting that date would mean delaying 
production or delivery of an item for an unrated order, the unrated 
order must be delayed. If a DX-rated order is received calling for 
delivery on July 15 and a person has a DO-rated order requiring 
delivery on June 2 and operations can be scheduled to meet both 
deliveries, there is no need to alter production schedules to give any 
additional preference to the DX-rated order.)
    (c) For conflicting rated orders:
    (1) If a person finds that delivery or performance against any 
accepted rated orders conflicts with the delivery or performance 
against other accepted rated orders of equal priority status, the 
person must give precedence to the conflicting orders in the sequence 
in which they are to be delivered or performed (not to the receipt 
dates). If the conflicting orders are scheduled to be delivered or 
performed on the same day, the person must give precedence to

[[Page 63903]]

those orders that have the earliest receipt dates.
    (2) If a person is unable to resolve rated order delivery or 
performance conflicts as specified in this section, the person should 
promptly seek special priorities assistance as provided in Sec. Sec.  
789.20 through 789.24. If the person's customer objects to the 
rescheduling of delivery or performance of a rated order, the customer 
should promptly seek special priorities assistance as specified in 
Sec. Sec.  789.20 through 789.24. For any rated order against which 
delivery or performance will be delayed, the person must notify the 
customer as provided in Sec.  789.13(d)(2).
    (d) If a person is unable to purchase needed production items in 
time to fill a rated order by its required delivery date, the person 
must fill the rated order by using inventoried production items. A 
person who uses inventoried items to fill a rated order may replace 
those items with the use of a rated order as provided in Sec.  
789.17(b).


Sec.  789.15  Extension of priority ratings.

    (a) A person must use rated orders as necessary with suppliers to 
obtain items or services needed to fill a rated order. The person must 
use the priority rating indicated on the customer's rated order, except 
as otherwise provided in this part or as directed by USDA.
    (b) The priority rating must be included as necessary on each 
successive order placed to obtain items or services needed to fill a 
customer's rated order. This continues from contractor to subcontractor 
to supplier throughout the entire procurement chain.


Sec.  789.16  Changes or cancellations of priority ratings and rated 
orders.

    (a) The priority rating on a rated order may be changed or canceled 
by:
    (1) An official action of USDA; or
    (2) Written notification from the person who placed the rated 
order.
    (b) If an unrated order is amended so as to make it a rated order, 
or a DO rating is changed to a DX rating, the supplier must give the 
appropriate preferential treatment to the order as of the date the 
change is received by the supplier.
    (c) An amendment to a rated order that significantly alters a 
supplier's original production or delivery schedule constitutes a new 
rated order as of the date of its receipt. The supplier must accept or 
reject the amended order according to the provisions of Sec.  789.13.
    (d) The following amendments do not constitute a new rated order:
    (1) A change in shipping destination;
    (2) A reduction in the total amount of the order;
    (3) An increase in the total amount of the order that has a 
negligible impact upon deliveries;
    (4) A minor variation in size or design; or
    (5) A change that is agreed upon between the supplier and the 
customer.
    (e) If a person no longer needs items or services to fill a rated 
order, any rated orders placed with suppliers for the items or 
services, or the priority rating on those orders, must be canceled.
    (f) When a priority rating is added to an unrated order, or is 
changed or canceled, all suppliers must be promptly notified in 
writing.


Sec.  789.17  Use of rated orders.

    (a) A person must use rated orders as necessary to obtain:
    (1) Items that will be physically incorporated into other items to 
fill rated orders, including that portion of such items normally 
consumed or converted into scrap or by-products in the course of 
processing;
    (2) Containers or other packaging materials required to make 
delivery of the finished items against rated orders;
    (3) Services, other than contracts of employment, needed to fill 
rated orders; and
    (4) MRO needed to produce the finished items to fill rated orders.
    (b) A person may use a rated order to replace inventoried items 
(including finished items) if such items were used to fill rated 
orders, as follows:
    (1) The order must be placed within 90 days of the date of use of 
the inventory.
    (2) A DO rating and the program identification symbol indicated on 
the customer's rated order must be used on the order. A DX rating must 
not be used even if the inventory was used to fill a DX-rated order.
    (3) If the priority ratings on rated orders from one customer or 
several customers contain different program identification symbols, the 
rated orders may be combined. In this case, the program identification 
symbol P4 must be used (that is DO-P4).
    (c) A person may combine DX- and DO-rated orders from one customer 
or several customers if the items or services covered by each level of 
priority are identified separately and clearly. If different program 
identification symbols are indicated on those rated orders of equal 
priority, the person must use the program identification symbol P4 
(that is DO-P4 or DX-P4).
    (d) For combining rated and unrated orders:
    (1) A person may combine rated and unrated order quantities on one 
purchase order provided that:
    (i) The rated quantities are separately and clearly identified; and
    (ii) The four elements of a rated order, as required by Sec.  
789.12, are included on the order with the statement required in Sec.  
789.12(a)(4)(i) modified to read:

    This purchase order contains rated order quantities certified 
for national defense use, and you are required to follow all the 
provisions of the Agriculture Priorities and Allocations System 
regulation in 7 CFR part 789 only as it pertains to the rated 
quantities.

    (2) A supplier must accept or reject the rated portion of the 
purchase order as provided in Sec.  789.13 and give preferential 
treatment only to the rated quantities as required by this part. This 
part must not be used to require preferential treatment for the unrated 
portion of the order.
    (3) Any supplier who believes that rated and unrated orders are 
being combined in a manner contrary to the intent of this part or in a 
fashion that causes undue or exceptional hardship may submit a request 
for adjustment or exception as specified in Sec.  789.60.
    (e) A person may place a rated order for the minimum commercially 
procurable quantity even if the quantity needed to fill a rated order 
is less than that minimum. However, a person must combine rated orders 
as provided in paragraph (c) of this section, if possible, to obtain 
minimum procurable quantities.
    (f) A person is not required to place a priority rating on an order 
for less than $75,000 or one-half of the Simplified Acquisition 
Threshold (as established in the Federal Acquisition Regulation (FAR) 
(see 48 CFR 2.101) or in other authorized acquisition regulatory or 
management systems) whichever amount is greater, provided that delivery 
can be obtained in a timely fashion without the use of the priority 
rating.


Sec.  789.18  Limitations on placing rated orders.

    (a) General limitations. Rated orders may be placed only by persons 
with the proper authority for items and services that are needed to 
support approved programs.
    (1) A person must not place a DO- or DX-rated order unless 
authorized by USDA to do so under this part.
    (2) Rated orders must not be used to obtain:
    (i) Delivery on a date earlier than needed;
    (ii) A greater quantity of the item or services than needed, except 
to obtain a minimum procurable quantity. Separate rated orders must not 
be placed solely for the purpose of obtaining minimum procurable 
quantities on each order;

[[Page 63904]]

    (iii) Items or services in advance of the receipt of a rated order, 
except as specifically authorized by USDA (see Sec.  789.21(c) for 
information on obtaining authorization for a priority rating in advance 
of a rated order);
    (iv) Items that are not needed to fill a rated order, except as 
specifically authorized by USDA or as otherwise permitted by this part;
    (v) Any of the following items unless specific priority rating 
authority has been obtained from USDA or the Department of Commerce, as 
appropriate:
    (A) Items for plant improvement, expansion, or construction, unless 
they will be physically incorporated into a construction project 
covered by a rated order; and
    (B) Production or construction equipment or items to be used for 
the manufacture of production equipment. For information on requesting 
priority rating authority, see Sec.  789.21; or
    (vi) Any items related to the development of chemical or biological 
warfare capabilities or the production of chemical or biological 
weapons, unless such development or production has been authorized by 
the President or the Secretary of Defense.
    (b) Jurisdictional limitations. (1) Unless authorized by the 
resource agency with jurisdiction (see Sec.  789.10), the provisions of 
this part are not applicable to the following resources:
    (i) All forms of energy (Resource agency with jurisdiction--
Department of Energy);
    (ii) Health resources (Resource agency with jurisdiction--
Department of Health and Human Services);
    (iii) All forms of civil transportation (Resource agency with 
jurisdiction--Department of Transportation);
    (iv) Water resources (Resource agency with jurisdiction--Department 
of Defense, U.S. Army Corps of Engineers);
    (v) All materials, services, and facilities, including construction 
materials for which the authority has not been delegated to other 
agencies under Executive Order 13603 (Resource agency with 
jurisdiction--Department of Commerce); and
    (2) The priorities and allocations authority in this part may not 
be applied to communications services subject to Executive Order 13618 
of July 6, 2012 (3 CFR, 2012 Comp., p. 273).

Subpart D--Special Priorities Assistance


Sec.  789.20  General provisions.

    (a) APAS is designed to be largely self-executing. However, if 
production or delivery problems arise, a person should immediately 
contact the Farm Service Agency Administrator for special priorities 
assistance pursuant to Sec. Sec.  789.20 through 789.24 and as directed 
by Sec.  789.73. If the Farm Service Agency is unable to resolve the 
problem or to authorize the use of a priority rating and believes 
additional assistance is warranted, USDA may forward the request to 
another resource agency, as appropriate, for action. Special priorities 
assistance is a service provided to alleviate problems.
    (b) Special priorities assistance is available for any reason 
consistent with this part. Generally, special priorities assistance is 
provided to expedite deliveries, resolve delivery conflicts, place 
rated orders, locate suppliers, or verify information supplied by 
customers and vendors. Special priorities assistance may also be used 
to request rating authority for items that are not normally eligible 
for priority treatment.
    (c) A request for special priorities assistance or priority rating 
authority must be submitted on Form AD-2102 (OMB Control Number 0560-
0280) to the Farm Service Agency as provided in paragraph (a) of this 
section. Form AD-2102 may be obtained from USDA by downloading the form 
and instructions from http://forms.sc.egov.usda.gov/eForms/welcomeAction.do?Home or by contacting the Administrator of the Farm 
Service Agency as specified in Sec.  789.73. Either mail or fax the 
form to USDA, using the address or fax number shown on the form.


Sec.  789.21  Requests for priority rating authority.

    (a) Rating authority for items or services not normally rated. If a 
rated order is likely to be delayed because a person is unable to 
obtain items or services not normally rated under this part, the person 
may request the authority to use a priority rating in ordering the 
needed items or services.
    (b) Rating authority for production or construction equipment. For 
a rated order for production or construction equipment not under the 
resource jurisdiction of USDA, follow the regulation in 15 CFR part 
700.
    (1) A request for priority rating authority for production or 
construction equipment must be submitted to the U.S. Department of 
Commerce on Form BIS-999 (see 15 CFR 700.51). Form BIS-999 may be 
obtained from USDA as specified in Sec.  789.20(c) or from the 
Department of Commerce as specified in 15 CFR 700.50.
    (2) When the use of a priority rating is authorized for the 
procurement of production or construction equipment, a rated order may 
be used either to purchase or to lease such equipment. However, in the 
latter case, the equipment may be leased only from a person engaged in 
the business of leasing such equipment or from a person willing to 
lease rather than sell.
    (c) For rating authority in advance of a rated prime contract:
    (1) In certain cases and upon specific request, USDA, in order to 
promote the national defense, may authorize a person to place a 
priority rating on an order to a supplier in advance of the issuance of 
a rated prime contract. In these instances, the person requesting 
advance rating authority must obtain sponsorship of the request from 
USDA. The person assumes any business risk associated with the placing 
of a rated order if the order has to be canceled in the event the rated 
prime contract is not issued.
    (2) The person must state the following in the request:

    It is understood that the authorization of a priority rating in 
advance of our receiving a rated prime contract from USDA and our 
use of that priority rating with our suppliers in no way commits 
USDA or any other government agency to enter into a contract or 
order or to expend funds. Further, we understand that the Federal 
Government will not be liable for any cancellation charges, 
termination costs, or other damages that may accrue if a rated prime 
contract is not eventually placed and, as a result, we must 
subsequently cancel orders placed with the use of the priority 
rating authorized as a result of this request.

    (3) In reviewing requests for rating authority in advance of a 
rated prime contract, USDA will consider, among other things, the 
following criteria:
    (i) The probability that the prime contract will be awarded;
    (ii) The impact of the resulting rated orders on suppliers and on 
other authorized programs;
    (iii) Whether the contractor is the sole source;
    (iv) Whether the item being produced has a long lead time; and
    (v) The time period for which the rating is being requested.
    (4) USDA may require periodic reports on the use of the rating 
authority granted through paragraph (c) of this section.
    (5) If a rated prime contract is not issued, the person will 
promptly notify each supplier who has received any rated order related 
to the advanced rating authority that the priority rating on the order 
is canceled.


Sec.  789.22  Examples of assistance.

    (a) While special priorities assistance may be provided for any 
reason in

[[Page 63905]]

support of this part, it is usually provided in situations in which:
    (1) A person is experiencing difficulty in obtaining delivery 
against a rated order by the required delivery date; or
    (2) A person cannot locate a supplier for an item or service needed 
to fill a rated order.
    (b) Other examples of special priorities assistance include:
    (1) Ensuring that rated orders receive preferential treatment by 
suppliers;
    (2) Resolving production or delivery conflicts between various 
rated orders;
    (3) Assisting in placing rated orders with suppliers;
    (4) Verifying the urgency of rated orders; and
    (5) Determining the validity of rated orders.


Sec.  789.23  Criteria for assistance.

    (a) Requests for special priorities assistance should be timely 
(for example, the request has been submitted promptly and enough time 
exists for USDA to meaningfully resolve the problem), and must 
establish that:
    (1) There is an urgent need for the item; and
    (2) The applicant has made a reasonable effort to resolve the 
problem.
    (b) [Reserved]


Sec.  789.24  Instances in which assistance must not be provided.

    (a) Special priorities assistance is provided at the discretion of 
USDA when it is determined that such assistance is warranted to meet 
the objectives of this part. Examples in which assistance must not be 
provided include situations in which a person is attempting to:
    (1) Secure a price advantage;
    (2) Obtain delivery prior to the time required to fill a rated 
order;
    (3) Gain competitive advantage;
    (4) Disrupt an industry apportionment program in a manner designed 
to provide a person with an unwarranted share of scarce items; or
    (5) Overcome a supplier's regularly established terms of sale or 
conditions of doing business.
    (b) [Reserved]

Subpart E--Allocations Actions


Sec.  789.30  Policy.

    (a) It is the policy of the Federal Government that the allocations 
authority under Title I of the Defense Production Act may:
    (1) Only be used when there is insufficient supply of a material, 
service, or facility to satisfy national defense supply requirements 
through the use of the priorities authority or when the use of the 
priorities authority would cause a severe and prolonged disruption in 
the supply of materials, services, or facilities available to support 
normal U.S. economic activities; and
    (2) Not be used to ration materials or services at the retail 
level.
    (b) Allocations orders, when used, will be distributed equitably 
among the suppliers of the materials, services, or facilities being 
allocated and not require any person to relinquish a disproportionate 
share of the civilian market.


Sec.  789.31  General procedures.

    (a) When USDA plans to execute its allocations authority to address 
a supply problem within its resource jurisdiction, USDA will develop a 
plan that includes the following information:
    (1) A copy of the written determination made in accordance with 
section 202 of Executive Order 13603, that the program or programs that 
would be supported by the allocations action are necessary or 
appropriate to promote the national defense;
    (2) A detailed description of the situation to include any unusual 
events or circumstances that have created the requirement for an 
allocations action;
    (3) A statement of the specific objective(s) of the allocations 
action;
    (4) A list of the materials, services, or facilities to be 
allocated;
    (5) A list of the sources of the materials, services, or facilities 
that will be subject to the allocations action;
    (6) A detailed description of the provisions that will be included 
in the allocations orders, including the type(s) of allocations orders, 
the percentages or quantity of capacity or output to be allocated for 
each purpose, and the duration of the allocations action (for example, 
anticipated start and end dates);
    (7) An evaluation of the impact of the proposed allocations action 
on the civilian market; and
    (8) Proposed actions, if any, to mitigate disruptions to civilian 
market operations.
    (b) [Reserved]


Sec.  789.32  Precedence over priority rated orders.

    If a conflict occurs between an allocations order and an unrelated 
rated order or priorities directive, the allocations order takes 
precedence.


Sec.  789.33  Controlling the general distribution of a material in the 
civilian market.

    (a) No allocations by USDA may be used to control the general 
distribution of a material in the civilian market, unless the Secretary 
has:
    (1) Made a written finding that:
    (i) Such material is a scarce and critical material essential to 
the national defense; and
    (ii) The requirements of the national defense for such material 
cannot otherwise be met without creating a significant dislocation of 
the normal distribution of such material in the civilian market to such 
a degree as to create appreciable hardship;
    (2) Submitted the finding for the President's approval through the 
Assistant to the President and National Security Advisor and the 
Assistant to the President for Homeland Security and Counterterrorism; 
and
    (3) The President has approved the finding.
    (b) [Reserved]


Sec.  789.34  Types of allocations orders.

    (a) The three types of allocations orders that may be used for 
allocations actions are:
    (1) Set-asides;
    (2) Directives; and
    (3) Allotments.
    (b) [Reserved]


Sec.  789.35  Elements of an allocations order.

    (a) Each allocations order will include:
    (1) A detailed description of the required allocations action(s);
    (2) Specific start and end calendar dates for each required 
allocations action;
    (3) The Secretary's written signature on a manually placed order, 
or the digital signature or name on an electronically placed order, of 
the Secretary. The signature or use of the name certifies that the 
order is authorized as specified in this part and that the requirements 
of this part are being followed;
    (4) A statement that reads: ``This is an allocations order 
certified for national defense use. [Insert the legal name of the 
person receiving the order] is required to comply with this order, in 
accordance with the provisions of 7 CFR part 789;'' and
    (5) A current copy of the APAS regulation (7 CFR part 789).
    (b) [Reserved]


Sec.  789.36  Mandatory acceptance of allocations orders.

    (a) A person must accept every allocations order received that the 
person is capable of fulfilling, and must comply with such orders 
regardless of any rated order that the person may be in receipt of or 
other commitments involving the resource(s) covered by the allocations 
order.
    (b) A person must not discriminate against an allocations order in 
any

[[Page 63906]]

manner such as by charging higher prices for resources covered by the 
order or by imposing terms and conditions for contracts and orders 
involving allocated resources(s) that differ from the person's terms 
and conditions for contracts and orders for the resource(s) prior to 
receiving the allocations order.
    (c) If circumstances prevent a person from being able to accept an 
allocations order, the person must comply with the provisions specified 
in Sec.  789.60 upon realization of the inability to accept the order.


Sec.  789.37  Changes or cancellations of allocations orders.

    An allocations order may be changed or canceled by an official 
action of USDA.

Subpart F--Official Actions


Sec.  789.40  General provisions.

    (a) USDA may take specific official actions to implement the 
provisions of this part.
    (b) Several of these official actions (rating authorizations, 
directives, and letters of understanding) are discussed in this 
subpart. Other official actions that pertain to compliance 
(administrative subpoenas, demands for information, and inspection 
authorizations) are discussed in Sec.  789.51(c).


Sec.  789.41  Rating authorizations.

    (a) A rating authorization is an official action granting specific 
priority rating authority that:
    (1) Permits a person to place a priority rating on an order for an 
item or service not normally ratable under this part; or
    (2) Authorizes a person to modify a priority rating on a specific 
order or series of contracts or orders.
    (b) To request priority rating authority, see section Sec.  789.21.


Sec.  789.42  Directives.

    (a) A directive is an official action that requires a person to 
take or refrain from taking certain actions in accordance with the 
provisions of the directive.
    (b) A person must comply with each directive issued. However, a 
person may not use or extend a directive to obtain any items from a 
supplier, unless expressly authorized to do so in the directive.
    (c) A priorities directive takes precedence over all DX-rated 
orders, DO-rated orders, and unrated orders previously or subsequently 
received, unless a contrary instruction appears in the directive.
    (d) An allocations directive takes precedence over all priorities 
directives, DX-rated orders, DO-rated orders, and unrated orders 
previously or subsequently received, unless a contrary instruction 
appears in the directive.


Sec.  789.43  Letters of understanding.

    (a) A letter of understanding is an official action that may be 
issued in resolving special priorities assistance cases to reflect an 
agreement reached by all parties (USDA, the Department of Commerce (if 
applicable), a delegate agency (if applicable), the supplier, and the 
customer).
    (b) A letter of understanding is not used to alter scheduling 
between rated orders, to authorize the use of priority ratings, to 
impose restrictions under this part, or to take other official actions. 
Rather, letters of understanding are used to confirm production or 
shipping schedules that do not require modifications to other rated 
orders.

Subpart G--Compliance


Sec.  789.50  General provisions.

    (a) USDA may take specific official actions for any reason 
necessary or appropriate to the enforcement or the administration of 
the Defense Production Act and other applicable statutes, this part, or 
an official action. Such actions include administrative subpoenas, 
demands for information, and inspection authorizations.
    (b) Any person who places or receives a rated order or an 
allocations order must comply with the provisions of this part.
    (c) Willful violation of the provisions of Title I or section 705 
of the Defense Production Act and other applicable statutes, this part, 
or an official action of USDA, is a criminal act, punishable as 
provided in the Defense Production Act and other applicable statutes, 
and as specified in Sec.  789.54.


Sec.  789.51  Audits and investigations.

    (a) Audits and investigations are official examinations of books, 
records, documents, other writings, and information to ensure that the 
provisions of the Defense Production Act and other applicable statutes, 
this part, and official actions have been properly followed. An audit 
or investigation may also include interviews and a systems evaluation 
to detect problems or failures in the implementation of this part.
    (b) When undertaking an audit, investigation, or other inquiry, 
USDA will:
    (1) Scope and purpose. Define the scope and purpose in the official 
action given to the person under investigation; and
    (2) Information not available. Have ascertained that the 
information sought or other adequate and authoritative data are not 
available from any Federal or other responsible agency.
    (c) In administering this part, USDA may issue the following 
documents that constitute official actions:
    (1) Administrative subpoenas. An administrative subpoena requires a 
person to appear as a witness before an official designated by USDA to 
testify under oath on matters of which that person has knowledge 
relating to the enforcement or the administration of the Defense 
Production Act and other applicable laws, this part, or official 
actions. An administrative subpoena may also require the production of 
books, papers, records, documents, and physical objects or property.
    (2) Demands for information. A demand for information requires a 
person to furnish to a duly authorized representative of USDA any 
information necessary or appropriate to the enforcement or the 
administration of the Defense Production Act and other applicable 
statutes, this part, or official actions.
    (3) Inspection authorizations. An inspection authorization requires 
a person to permit a duly authorized representative of USDA to 
interview the person's employees or agents, to inspect books, records, 
documents, other writings, and information, including electronically-
stored information, in the person's possession or control at the place 
where that person usually keeps them or otherwise, and to inspect a 
person's property when such interviews and inspections are necessary or 
appropriate to the enforcement or the administration of the Defense 
Production Act and other related laws, this part, or official actions.
    (d) The production of books, records, documents, other writings, 
and information will not be required at any place other than where they 
are usually kept if, prior to the return date specified in the 
administrative subpoena or demand for information, a duly authorized 
official of USDA is furnished with copies of such material that are 
certified under oath to be true copies. As an alternative, a person may 
enter into a stipulation with a duly authorized official of USDA as to 
the content of the material.
    (e) An administrative subpoena, demand for information, or 
inspection authorization will include the name, title, or official 
position of the person to be served, the evidence sought, and its 
general relevance to the scope and purpose of the audit, investigation, 
or other inquiry. If employees or agents are to be interviewed; if 
books, records, documents, other writings, or

[[Page 63907]]

information are to be produced; or if property is to be inspected; the 
administrative subpoena, demand for information, or inspection 
authorization will describe the requirements.
    (f) Service of documents will be made in the following manner:
    (1) In person. Service of a demand for information or inspection 
authorization will be made personally, or by certified mail-return 
receipt requested at the person's last known address. Service of an 
administrative subpoena will be made personally. Personal service may 
also be made by leaving a copy of the document with someone at least 18 
years old at the person's last known dwelling or place of business.
    (2) Other than to the named individual. Service upon other than an 
individual may be made by serving a partner, corporate officer, or a 
managing or general agent authorized by appointment or by law to accept 
service of process. If an agent is served, a copy of the document will 
be mailed to the person named in the document.
    (3) Delivering individual and documentation. Any individual 18 
years of age or over may serve an administrative subpoena, demand for 
information, or inspection authorization. When personal service is 
made, the individual making the service must prepare an affidavit 
specifying the manner in which service was made and the identity of the 
person served, and return the affidavit, and in the case of subpoenas, 
the original document, to the issuing officer. In case of failure to 
make service, the reasons for the failure will be stated on the 
original document.


Sec.  789.52  Compulsory process.

    (a) If a person refuses to permit a duly authorized representative 
of USDA to have access to any premises or source of information 
necessary to the administration or the enforcement of the Defense 
Production Act and other applicable laws, this part, or official 
actions, the USDA representative may seek compulsory process. 
Compulsory process is the institution of appropriate legal action, 
including ex parte application for an inspection warrant or its 
equivalent, in any forum of appropriate jurisdiction.
    (b) Compulsory process may be sought in advance of an audit, 
investigation, or other inquiry, if, in the judgment of USDA, there is 
reason to believe that a person will refuse to permit an audit, 
investigation, or other inquiry, or that other circumstances exist that 
make such process desirable or necessary.


Sec.  789.53  Notification of failure to comply.

    (a) At the conclusion of an audit, investigation, or other inquiry, 
or at any other time, USDA may inform the person in writing when 
compliance with the requirements of the Defense Production Act and 
other applicable laws, this part, or an official action was not met.
    (b) In cases in which USDA determines that failure to comply with 
the provisions of the Defense Production Act and other applicable laws, 
this part, or an official action was inadvertent, the person may be 
informed in writing of the particulars involved and the corrective 
action to be taken. Failure to take corrective action may then be 
construed as a willful violation of the Defense Production Act and 
other applicable laws, this part, or an official action.


Sec.  789.54  Violations, penalties, and remedies.

    (a) Willful violation of the Defense Production Act, the priorities 
provisions of the Military Selective Service Act (50 U.S.C. App. 468), 
this part, or an official action, is a crime and upon conviction, a 
person may be punished by fine or imprisonment, or both. The maximum 
penalty provided by the Defense Production Act is a $10,000 fine, or 1 
year in prison, or both. The maximum penalty provided by the Military 
Selective Service Act is a $50,000 fine, or 3 years in prison, or both.
    (b) The Government may also seek an injunction from a court of 
appropriate jurisdiction to prohibit the continuance of any violation 
of, or to enforce compliance with, the Defense Production Act, this 
part, or an official action.
    (c) In order to secure the effective enforcement of the Defense 
Production Act and other applicable laws, this part, and official 
actions, certain actions as follows are prohibited:
    (1) Soliciting, influencing, or permitting another person to 
perform any act prohibited by, or to omit any act required by, the 
Defense Production Act and other applicable laws, this part, or an 
official action.
    (2) Conspiring or acting in concert with any other person to 
perform any act prohibited by, or to omit any act required by, the 
Defense Production Act and other applicable laws, this part, or an 
official action.
    (3) Delivering any item if the person knows or has reason to 
believe that the item will be accepted, redelivered, held, or used in 
violation of the Defense Production Act and other applicable laws, this 
part, or an official action. In such instances, the person must 
immediately notify USDA that, in accordance with this provision, 
delivery has not been made.


Sec.  789.55  Compliance conflicts.

    If compliance with any provision of the Defense Production Act and 
other applicable laws, this part, or an official action would prevent a 
person from filling a rated order or from complying with another 
provision of the Defense Production Act and other applicable laws, this 
part, or an official action, the person must immediately notify USDA 
for resolution of the conflict.

Subpart H--Adjustments, Exceptions, and Appeals


Sec.  789.60  Adjustments or exceptions.

    (a) A person may submit a request to the Farm Service Agency Deputy 
Administrator for Management, as directed in Sec.  789.73, for an 
adjustment or exception on the ground that:
    (1) A provision of this part or an official action results in an 
undue or exceptional hardship on that person not suffered generally by 
others in similar situations and circumstances; or
    (2) The consequences of following a provision of this part or an 
official action is contrary to the intent of the Defense Production Act 
and other applicable laws, or this part.
    (b) Each request for adjustment or exception must be in writing and 
contain a complete statement of all the facts and circumstances related 
to the provision of this part or official action from which adjustment 
is sought and a full and precise statement of the reasons why relief 
should be provided.
    (c) The submission of a request for adjustment or exception will 
not relieve any person from the obligation of complying with the 
provision of this part or official action in question while the request 
is being considered unless such interim relief is granted in writing by 
the Farm Service Agency Deputy Administrator for Management.
    (d) A decision of the Farm Service Agency Deputy Administrator for 
Management under this section may be appealed to the Farm Service 
Agency Administrator. (For information on the appeal procedure, see 
Sec.  789.61.)


Sec.  789.61  Appeals.

    (a) Any person whose request for adjustment or exception has been 
denied by the Farm Service Agency Deputy Administrator for Management 
as specified in Sec.  789.60, may appeal to the Farm Service Agency 
Administrator who will review and reconsider the denial.

[[Page 63908]]

    (b) A person must submit the appeal in writing to the Farm Service 
Agency Administrator as follows:
    (1) Except as provided in paragraph (b)(2) of this section, an 
appeal must be received by the Farm Service Agency Administrator no 
later than 45 days after receipt of a written notice of denial from the 
Farm Service Agency Deputy Administrator for Management. After the 45-
day period, an appeal may be accepted at the discretion of the Farm 
Service Agency Administrator if the person shows good cause.
    (2) For requests for adjustment or exception involving rated orders 
placed for the purpose of emergency preparedness (see Sec.  789.13(e)), 
an appeal must be received by the Farm Service Agency Administrator no 
later than 15 days after receipt of a written notice of denial from the 
Farm Service Agency Deputy Administrator for Management.
    (c) Contract performance under the order may not be stayed pending 
resolution of the appeal.
    (d) Each appeal must be in writing and contain a complete statement 
of all the facts and circumstances related to the appealed action and a 
full and precise statement of the reasons the decision should be 
modified or reversed.
    (e) In addition to the written materials submitted in support of an 
appeal, an appellant may request, in writing, an opportunity for an 
informal hearing. This request may be granted or denied at the 
discretion of the Farm Service Agency Administrator.
    (f) When a hearing is granted, the Farm Service Agency 
Administrator may designate an employee of the Farm Service Agency to 
conduct the hearing and to prepare a report. The hearing officer will 
determine all procedural questions and impose such time or other 
limitations deemed reasonable. If the hearing officer decides that a 
printed transcript is necessary, the transcript expenses must be paid 
by the appellant.
    (g) When determining an appeal, the Farm Service Agency 
Administrator may consider all information submitted during the appeal 
as well as any recommendations, reports, or other relevant information 
and documents available to USDA, or consult with any other person or 
group.
    (h) The submission of an appeal under this section will not relieve 
any person from the obligation of complying with the provision of this 
part or official action in question while the appeal is being 
considered unless such relief is granted in writing by the Farm Service 
Agency Administrator.
    (i) The decision of the Farm Service Agency Administrator will be 
made within 5 days after receipt of the appeal, or within 1 day for 
appeals pertaining to emergency preparedness, and will be the final 
administrative action. The Administrator will issue a written statement 
of the reasons for the decision to the appellant.

Subpart I--Miscellaneous Provisions


Sec.  789.70  Protection against claims.

    A person will not be held liable for damages or penalties for any 
act or failure to act resulting directly or indirectly from compliance 
with any provision of this part, or an official action, even if such 
provision or action is subsequently declared invalid by judicial or 
other competent authority.


Sec.  789.71  Records and reports.

    (a) Persons are required to make and preserve for at least 3 years, 
accurate and complete records of any transaction covered by this part 
or an official action.
    (b) Records must be maintained in sufficient detail to permit the 
determination, upon examination, of whether each transaction complies 
with the provisions of this part or any official action. However, this 
part does not specify any particular method or system to be used.
    (c) Records required to be maintained by this part must be made 
available for examination on demand by duly authorized representatives 
of USDA as provided in Sec.  789.51.
    (d) In addition, persons must develop, maintain, and submit any 
other records and reports to USDA that may be required for the 
administration of the Defense Production Act and other applicable 
statutes, and this part.
    (e) Section 705(d) of the Defense Production Act, as implemented by 
Executive Order 13603, provides that information obtained under that 
section which the Secretary deems confidential, or with reference to 
which a request for confidential treatment is made by the person 
furnishing such information, will not be published or disclosed unless 
the Secretary determines that the withholding of this information is 
contrary to the interest of the national defense. Information required 
to be submitted to USDA in connection with the enforcement or 
administration of the Defense Production Act, this part, or an official 
action, is deemed to be confidential under section 705(d) of the 
Defense Production Act and will be handled in accordance with 
applicable Federal law.


Sec.  789.72  Applicability of this part and official actions.

    (a) This part and all official actions, unless specifically stated 
otherwise, apply to transactions in any State, territory, or possession 
of the United States and the District of Columbia.
    (b) This part and all official actions apply not only to deliveries 
to other persons but also include deliveries to affiliates and 
subsidiaries of a person and deliveries from one branch, division, or 
section of a single entity to another branch, division, or section 
under common ownership or control.
    (c) This part and its schedules will not be construed to affect any 
administrative actions taken by USDA, or any outstanding contracts or 
orders placed based on any of the regulations, orders, schedules, or 
delegations of authority previously issued by USDA based on authority 
granted to the President in the Defense Production Act. Such actions, 
contracts, or orders will continue in full force and effect under this 
part unless modified or terminated by proper authority.


Sec.  789.73  Communications.

    Except as otherwise provided, all communications concerning this 
part, including requests for copies of this part and explanatory 
information, requests for guidance or clarification, and submission of 
appeals as specified in Sec.  789.61 will be addressed to the 
Administrator, Farm Service Agency, Room 4752, Mail Stop 0512, USDA, 
1400 Independence Ave. SW., Washington, DC 20250-0512 or email: 
[email protected]. This address is also to be used for requests for 
adjustments or exceptions to the Farm Service Agency Deputy 
Administrator for Management as specified in Sec.  789.60.

SCHEDULE I TO PART 789--APPROVED PROGRAMS AND DELEGATE AGENCIES

    The programs listed in this schedule have been approved for 
priorities and allocations support under this part by the Department of 
Defense, Department of Energy, or Department of Homeland Security as 
required by section 202 of Executive Order 13603. They have equal 
preferential status. USDA has authorized the delegate agencies to use 
the authorities in this part in support of those programs assigned to 
them, as indicated below.

[[Page 63909]]



------------------------------------------------------------------------
   Program identification                            Authorized delegate
           symbol               Approved program           agency
------------------------------------------------------------------------
Agriculture programs:
    P1......................  Food and food         USDA, Department of
                               resources             Homeland Security,
                               (civilian).           Federal Emergency
                                                     Management Agency
    P2......................  Agriculture and food  USDA
                               critical
                               infrastructure
                               protection and
                               restoration.
    P3......................  Food resources        Department of
                               (combat rations).     Defense \1\
    P4......................  Certain combined      USDA
                               orders (see Sec.
                               789.17).
------------------------------------------------------------------------
\1\ Department of Defense includes: The Office of the Secretary of
  Defense, the Military Departments, the Joint Staff, the Combatant
  Commands, the Defense Agencies, the Defense Field Activities, all
  other organizational entities in the Department of Defense, and for
  purpose of this part, the Central Intelligence Agency, and the
  National Aeronautics and Space Administration as Associated Agencies.


Val Dolcini,
Administrator, Farm Service Agency.
[FR Doc. 2015-26766 Filed 10-21-15; 8:45 am]
BILLING CODE 3410-05-P