[Federal Register Volume 81, Number 176 (Monday, September 12, 2016)]
[Rules and Regulations]
[Pages 62614-62626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21347]


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DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR Part 1599

RIN 0551-AA88


McGovern-Dole International Food for Education and Child 
Nutrition Program

AGENCY: Foreign Agricultural Service, USDA.

ACTION: Final rule with request for comments.

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SUMMARY: The Foreign Agricultural Service (FAS) revises the regulations 
governing the award of agricultural commodities and financial and 
technical assistance to recipients under the McGovern-Dole 
International Food for Education and Child Nutrition (McGovern-Dole) 
Program. This revision is necessary to clarify requirements for 
applicants for, and recipients of, awards under the McGovern-Dole 
Program and to inform interested parties that the OMB guidance on 
Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards, as supplemented by USDA regulations, 
applies to awards under the McGovern-Dole Program other than awards to 
foreign public entities. The revised regulations will enable applicants 
and recipients to better understand program requirements and FAS to 
more effectively implement the McGovern-Dole Program.

DATES: This rule is effective September 12, 2016. Written comments must 
be received by FAS or carry a postmark or equivalent no later than 
October 12, 2016.

ADDRESSES: Submit comments to Director, Food Assistance Division, 
Office of Capacity Building and Development, Foreign Agricultural 
Service, 1400 Independence Ave. SW., STOP 1034, Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: Benjamin Muskovitz, Director, Food 
Assistance Division, Office of Capacity Building and Development, 
Foreign Agricultural Service, 1400 Independence Ave. SW., STOP 1034, 
Washington, DC 20250. Telephone: (202) 720-4221; Fax: (202) 690-0251; 
Email: [email protected].

SUPPLEMENTARY INFORMATION:

Background

    The McGovern-Dole International Food for Education and Child 
Nutrition Program helps support food security, child development, and 
education in low-income, food-deficit countries around the world. The 
program

[[Page 62615]]

provides for the donation of U.S. agricultural commodities, as well as 
financial and technical assistance, to support school feeding and 
maternal and child health and nutrition projects. The McGovern-Dole 
Program is authorized in section 3107 of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 1736o-1).
    FAS uses the regulations in 7 CFR part 1599, McGovern-Dole 
International Food for Education and Child Nutrition Program, in the 
administration of the McGovern-Dole Program. The previous version of 
the regulations was published as a final rule on March 26, 2009 (74 FR 
13062).
    On December 26, 2013, the Office of Management and Budget (OMB) 
issued guidance on Uniform Administrative Requirements, Cost 
Principles, and Audit Requirements for Federal Awards in 2 CFR part 200 
(78 FR 78608). In 2 CFR 400.1, the United States Department of 
Agriculture (USDA) adopted OMB's guidance in subparts A through F of 2 
CFR part 200, as supplemented by 2 CFR part 400, as USDA policies and 
procedures for uniform administrative requirements, cost principles, 
and audit requirements for Federal awards (79 FR 75982, December 19, 
2014).

Revision of Regulations

    FAS is revising the McGovern-Dole Program regulations in 7 CFR part 
1599 through this final rule. Many of the changes to the regulations 
are technical in nature and intended to improve the efficiency and 
effectiveness of the McGovern-Dole Program. Some of the detail that was 
previously included in the program regulations will now be included in 
the applicable notice of funding opportunity.
    The more significant changes to 7 CFR part 1599 include:
    (1) Updating 7 CFR part 1599 to make it clear that the guidance in 
2 CFR part 200, as supplemented by 2 CFR part 400 and 7 CFR part 1599, 
applies to awards under the McGovern-Dole Program other than awards to 
foreign public entities. Applicants for, and recipients of, awards 
under the McGovern-Dole Program must consult all three parts to be 
informed of all regulatory requirements. Because 7 CFR part 1599 deals 
specifically with the McGovern-Dole Program, the provisions of 7 CFR 
part 1599 will apply if they differ from the provisions of 2 CFR part 
200 or part 400.
    (2) Clarifying the types of entities eligible for awards under the 
McGovern-Dole Program and the applicability of the regulations in 7 CFR 
part 1599 to each type of eligible entity (7 CFR 1599.1(d)-(g) and 
1599.3(a)).
    In accordance with 7 U.S.C. 1736o-1(e), assistance under the 
McGovern-Dole Program may be provided to private voluntary 
organizations, cooperatives, intergovernmental organizations, 
governments of developing countries and their agencies, and other 
organizations. However, the regulations do not apply to all of these 
entities. The guidance in 2 CFR part 200 does not generally apply to 
for-profit entities, foreign public entities, or foreign organizations. 
According to 2 CFR 200.101(c), Federal awarding agencies may apply 
subparts A through E of 2 CFR part 200 to for-profit entities, foreign 
public entities, or foreign organizations, except where the Federal 
awarding agency determines that the application of these subparts would 
be inconsistent with the international obligations of the United States 
or the statutes or regulations of a foreign government.
    FAS has determined not to apply 2 CFR parts 200 and 400 and 7 CFR 
part 1599 to foreign public entities. Therefore, they do not apply to 
foreign governments or their agencies or to intergovernmental 
organizations (such as the World Food Program), because these entities 
are included within the definition of a foreign public entity in 2 CFR 
200.46.
    FAS has determined to apply subparts A through E of 2 CFR part 200, 
as supplemented by 2 CFR part 400 and 7 CFR part 1599, to for-profit 
entities and foreign organizations. Accordingly, they apply to 
applicants for, and recipients of, awards under the McGovern-Dole 
Program that are private voluntary organizations, including those that 
are foreign organizations; cooperatives, including those that are for-
profit entities or foreign organizations; and other organizations, 
including those that are for-profit entities or foreign organizations, 
but not including intergovernmental organizations.
    FAS has determined to apply subparts A through E of 2 CFR part 200, 
as supplemented by 2 CFR part 400 and 7 CFR part 1599, to all subawards 
to all subrecipients under this part, except where the subrecipient is 
a foreign public entity or where FAS determines that the application of 
these provisions to a subrecipient that is a foreign organization would 
be inconsistent with the international obligations of the United States 
or the statutes or regulations of a foreign government or would not be 
in the best interest of the United States.
    Subpart F of 2 CFR part 200, as supplemented by 2 CFR part 400 and 
7 CFR part 1599, applies only to awards by FAS to recipients that are 
private voluntary organizations, cooperatives or other organizations, 
but that are not for-profit entities or foreign organizations. Subpart 
F of 2 CFR part 200, as supplemented by 2 CFR part 400 and 7 CFR part 
1499, applies to subawards to subrecipients, except where the 
subrecipient is a for-profit entity, foreign public entity, or foreign 
organization. In 7 CFR part 1599, FAS sets forth other audit 
requirements that apply to recipients and subrecipients that are for-
profit entities or foreign organizations (7 CFR 1599.18).
    (3) Adding and updating definitions of terms used in the 
regulations and removing definitions of terms that are no longer needed 
(7 CFR 1599.2).
    (4) Including a requirement for an applicant to include in its 
application the amount of funding that will be provided to each 
proposed subrecipient under the agreement (7 CFR 1599.4(b)(4)(iii)).
    (5) Adding new and modifying existing provisions relating to cash 
advances and reimbursements for expenses (7 CFR 1599.6(f)).
    (6) Adding new and modifying existing labeling and notification 
requirements applicable to the packaging, identification, source, 
funding, and use of the donated commodities, while allowing for the 
waiver of these labeling and notification requirements in exceptional 
circumstances (7 CFR 1599.8(d)-(h)).
    (7) Updating and clarifying language requiring recipients to report 
on the loss of or damage to donated commodities and pursue claims in 
the event of loss or damage (7 CFR 1599.9 and 1599.10).
    (8) Incorporating new performance monitoring and evaluation 
requirements (7 CFR 1599.12).
    (9) Updating reporting requirements (7 CFR 1599.13).
    (10) Adding a section setting forth audit requirements for 
recipients and subrecipients (7 CFR 1599.18). Although the audit 
requirements in subpart F of 2 CFR part 200 do not apply to recipients 
or subrecipients that are for-profit entities or foreign organizations, 
FAS has determined to require such recipients and subrecipients to 
obtain an audit, provided that they expend, during the fiscal year, a 
total of at least the audit requirement threshold in 2 CFR 200.501 in 
Federal awards. The regulations lay out two options for satisfying this 
audit requirement.

Notice and Comment

    This rule is being issued as a final rule without prior notice and 
opportunity for comment. The

[[Page 62616]]

Administrative Procedure Act exempts rules ``relating to agency 
management or personnel or to public property, loans, grants, benefits, 
or contracts'' from the statutory requirement for prior notice and 
opportunity for comment (5 U.S.C. 553(a)(2)). Accordingly, this rule 
may be made effective less than 30 days after publication in the 
Federal Register. However, members of the public may participate in 
this rulemaking by submitting written comments, data, or views. FAS 
will consider the comments received and may conduct additional 
rulemaking based on the comments. Written comments must be received by 
FAS or carry a postmark or equivalent no later than October 12, 2016.

Catalog of Federal Domestic Assistance

    The program covered by this regulation is listed in the Catalog of 
Federal Domestic Assistance (CFDA) under the following FAS CFDA number: 
10.608, Food for Education.

E-Government Act Compliance

    FAS is committed to complying with the E-Government Act of 2002 (44 
U.S.C. chapter 36), to promote the use of the Internet and other 
information technologies to provide increased opportunities for 
citizens' access to Government information and services, and for other 
purposes.

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866, 
``Regulatory Planning and Review.'' It has been determined to be not 
significant for the purposes of Executive Order 12866 and, therefore, 
was not reviewed by OMB.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' This rule does not preempt State or 
local laws, regulations, or policies unless they present an 
irreconcilable conflict with this rule. This rule will not be 
retroactive.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with officials of State and local 
governments that would be directly affected by the proposed Federal 
financial assistance. The objectives of the Executive Order are to 
foster an intergovernmental partnership and a strengthened federalism 
by relying on State and local processes for the State and local 
government coordination and review of proposed Federal financial 
assistance and direct Federal development. This rule will not directly 
affect State or local officials and, for this reason, it is excluded 
from the scope of Executive Order 12372.

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, 
generally requires an agency to prepare a regulatory flexibility 
analysis of any rule that is subject to notice and comment rulemaking 
under the Administrative Procedure Act (APA) or any other law, unless 
the agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. The Regulatory 
Flexibility Act does not apply to this rule because FAS is not required 
by the APA or any other law to publish a notice of proposed rulemaking 
with respect to the subject matter of the rule.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' This rule will not have any substantial direct effect 
on States, on the relationship between the Federal government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, except as required by law. This rule does 
not impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States was not required.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes. FAS does not expect 
this rule to have any effect on Indian tribes.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because it does not impose any enforceable duty 
or contain any unfunded mandate as described under the UMRA.

List of Subjects in 7 CFR Part 1599

    Agricultural commodities, Cooperative agreements, Exports, Food 
assistance programs, Foreign aid, Grant programs-agriculture, Technical 
assistance.

0
For the reasons stated in the preamble, the Foreign Agricultural 
Service revises 7 CFR part 1599 to read as follows:

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

Sec.
1599.1 Purpose and applicability.
1599.2 Definitions.
1599.3 Eligibility and conflicts of interest.
1599.4 Application process.
1599.5 Agreements.
1599.6 Payments.
1599.7 Transportation of donated commodities.
1599.8 Entry, handling, and labeling of donated commodities and 
notification requirements.
1599.9 Damage to or loss of donated commodities.
1599.10 Claims for damage to or loss of donated commodities.
1599.11 Use of donated commodities, sale proceeds, FAS-provided 
funds, and program income.
1599.12 Monitoring and evaluation requirements.
1599.13 Reporting and record keeping requirements.
1599.14 Subrecipients.
1599.15 Noncompliance with an agreement.
1599.16 Suspension and termination of agreements.
1599.17 Opportunities to object and appeals.
1599.18 Audit requirements.
1599.19 Paperwork Reduction Act.

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


Sec.  1599.1  Purpose and applicability.

    (a) This part sets forth the general terms and conditions governing 
the award of donated commodities and funds by the Foreign Agricultural 
Service (FAS) to recipients under the McGovern-Dole International Food 
for Education and Child Nutrition Program (McGovern-Dole Program). 
Under the McGovern-Dole Program, recipients use the donated 
commodities, proceeds from any sale of such commodities, FAS-provided 
funds, and program income to implement a project in a foreign country 
pursuant to an agreement with FAS.
    (b)(1) The Office of Management and Budget (OMB) issued guidance on 
Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards in 2

[[Page 62617]]

CFR part 200. In 2 CFR 400.1, the United States Department of 
Agriculture (USDA) adopted OMB's guidance in subparts A through F of 2 
CFR part 200, as supplemented by 2 CFR part 400, as USDA policies and 
procedures for uniform administrative requirements, cost principles, 
and audit requirements for Federal awards.
    (2) The OMB guidance at 2 CFR part 200, as supplemented by 2 CFR 
part 400 and this part, applies to the McGovern-Dole Program, except as 
provided in paragraphs (e), (f) and (g) of this section.
    (c) Except as otherwise provided in this part, other regulations 
that are generally applicable to grants and cooperative agreements of 
USDA, including the applicable regulations set forth in 2 CFR chapters 
I, II, and IV, also apply to the McGovern-Dole Program.
    (d) In accordance with 7 U.S.C. 1736o-1(e), assistance under the 
McGovern-Dole Program may be provided to private voluntary 
organizations, cooperatives, intergovernmental organizations, 
governments of developing countries and their agencies, and other 
organizations.
    (e) The OMB guidance at 2 CFR part 200, and the provisions of 2 CFR 
part 400 and of this part, do not apply to an award by FAS under the 
McGovern-Dole Program to a recipient that is a foreign public entity, 
as defined in 2 CFR 200.46, and, therefore, they do not apply to a 
foreign government or its agency or an intergovernmental organization.
    (f)(1) The OMB guidance at subparts A through E of 2 CFR part 200, 
as supplemented by 2 CFR part 400 and this part, applies to all awards 
by FAS under the McGovern-Dole Program to all recipients that are 
private voluntary organizations, including a private voluntary 
organization that is a foreign organization, as defined in 2 CFR 
200.47; cooperatives, including a cooperative that is a for-profit 
entity or a foreign organization; or other organizations, including 
organizations that are for-profit entities or foreign organizations, 
but not including intergovernmental organizations.
    (2) The OMB guidance at subparts A through E of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies to all subawards 
to all subrecipients under this part, except in cases:
    (i) Where the subrecipient is a foreign public entity; or
    (ii) Where FAS determines that the application of these provisions 
to a subaward to a subrecipient that is a foreign organization would be 
inconsistent with the international obligations of the United States or 
the statutes or regulations of a foreign government or would not be in 
the best interest of the United States.
    (g)(1) The OMB guidance at subpart F of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies only to awards by 
FAS to recipients that are private voluntary organizations, 
cooperatives, or other organizations, but that are not for-profit 
entities or foreign organizations.
    (2) The OMB guidance at subpart F of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies to subawards to 
subrecipients under this part, except where the subrecipient is a for-
profit entity, foreign public entity, or foreign organization.
    (3) Audit requirements for recipients and subrecipients that are 
for-profit entities or foreign organizations are set forth in Sec.  
1599.18.


Sec.  1599.2  Definitions.

    These are definitions for terms used in this part. The definitions 
in 2 CFR part 200, as supplemented in 2 CFR part 400, are also 
applicable to this part, with the exception that, if a term that is 
defined in this section is defined differently in 2 CFR part 200 or 
part 400, the definition in this section will apply to such term as 
used in this part.
    Activity means a discrete undertaking within a project to be 
carried out by a recipient, directly or through a subrecipient, that is 
specified in an agreement and is intended to fulfill a specific 
objective of the agreement.
    Agreement means a legally binding grant or cooperative agreement 
entered into between FAS and a recipient to implement a project under 
the McGovern-Dole Program.
    Commodities mean agricultural commodities, or products of 
agricultural commodities, that are produced in the United States.
    Cooperative means a private sector organization whose members own 
and control the organization and share in its services and its profits 
and that provides business services and outreach in cooperative 
development for its membership.
    Cost sharing or matching means the portion of project expenses, or 
necessary goods and services provided to carry out a project, not paid 
or acquired with Federal funds. The term may include cash or in-kind 
contributions provided by recipients, subrecipients, foreign public 
entities, foreign organizations, or private donors.
    Disburse means to make a payment to liquidate an obligation.
    Donated commodities means the commodities donated by FAS to a 
recipient under an agreement. The term may include donated commodities 
that are used to produce a further processed product for use under the 
agreement.
    FAS means the Foreign Agricultural Service of the United States 
Department of Agriculture.
    FAS-provided funds means U.S. dollars provided under an agreement 
to a recipient, or through a subagreement to a subrecipient, for 
expenses authorized in the agreement, such as expenses for the internal 
transportation, storage and handling of the donated commodities; 
expenses involved in the administration, monitoring, and evaluation of 
the activities under the agreement; and the costs of activities 
conducted in the target country that would enhance the effectiveness of 
the activities implemented under the McGovern-Dole Program.
    McGovern-Dole Program means the McGovern-Dole International Food 
for Education and Child Nutrition Program.
    Private voluntary organization means a not-for-profit, 
nongovernmental organization (in the case of a United States 
organization, an organization that is exempt from Federal income taxes 
under section 501(c)(3) of the Internal Revenue Code of 1986) that 
receives funds from private sources, voluntary contributions of money, 
staff time, or in-kind support from the public, and that is engaged in 
or is planning to engage in voluntary, charitable, or development 
assistance activities (other than religious activities).
    Program income means interest earned on proceeds from the sale of 
donated commodities, as well as funds received by a recipient or 
subrecipient as a direct result of carrying out an approved activity 
under an agreement. The term includes but is not limited to income from 
fees for services performed, the use or rental of real or personal 
property acquired under a Federal award, the sale of items fabricated 
under a Federal award, license fees and royalties on patents and 
copyrights, and principal and interest on loans made with Federal award 
funds. Program income does not include proceeds from the sale of 
donated commodities; FAS-provided funds or interest earned on such 
funds; or funds provided for cost sharing or matching contributions, 
refunds or rebates, credits, discounts, or interest earned on any of 
them.
    Project means the totality of the activities to be carried out by a 
recipient, directly or through a subrecipient, to fulfill the 
objectives of an agreement.
    Recipient means an entity that enters into an agreement with FAS 
and

[[Page 62618]]

receives donated commodities and FAS-provided funds to carry out 
activities under the agreement. The term recipient does not include a 
subrecipient.
    Sale proceeds means funds received by a recipient from the sale of 
donated commodities.
    Subrecipient means an entity that enters into a subagreement with a 
recipient for the purpose of implementing in the target country 
activities described in an agreement. The term does not include an 
individual that is a beneficiary under the agreement.
    Target country means the foreign country in which activities are 
implemented under an agreement.
    USDA means the United States Department of Agriculture.
    Voluntary committed cost sharing or matching contributions means 
cost sharing or matching contributions specifically pledged on a 
voluntary basis by an applicant or recipient, which become binding as 
part of an agreement. Voluntary committed cost sharing or matching 
contributions may be provided in the form of cash or in-kind 
contributions.


Sec.  1599.3  Eligibility and conflicts of interest.

    (a) A private voluntary organization, a cooperative, or another 
organization that is not an intergovernmental organization is eligible 
to submit an application under this part to become a recipient under 
the McGovern-Dole Program. FAS will set forth specific eligibility 
information, including any factors or priorities that will affect the 
eligibility of an applicant or application for selection, in the full 
text of the applicable notice of funding opportunity posted on the U.S. 
Government Web site for grant opportunities.
    (b) Applicants, recipients, and subrecipients must comply with 
policies established by FAS pursuant to 2 CFR 400.2(a), and with the 
requirements in 2 CFR 400.2(b), regarding conflicts of interest.


Sec.  1599.4  Application process.

    (a) An applicant seeking to enter into an agreement with FAS must 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under the McGovern-Dole Program in 
a proposed target country(ies). An application must contain the items 
specified in paragraph (b) of this section and any other items required 
by the notice of funding opportunity and must be submitted 
electronically to FAS at the address set forth in the notice of funding 
opportunity.
    (b) An applicant must include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction and a strategic analysis, which includes an 
impact analysis, as specified in the notice of funding opportunity;
    (3) A plan of operation that contains the elements specified in the 
notice of funding opportunity;
    (4) A summary line item budget and a budget narrative that 
indicate:
    (i) The amounts of any sale proceeds, FAS-provided funds, interest, 
program income, and voluntary committed cost sharing or matching 
contributions that the applicant proposes to use to fund:
    (A) Administrative costs;
    (B) Inland and internal transportation, storage and handling (ITSH) 
costs; and
    (C) Activity costs;
    (ii) Where applicable, how the applicant's indirect cost rate will 
be applied to each type of expense; and
    (iii) The amount of funding that will be provided to each proposed 
subrecipient under the agreement;
    (5) A project-level results framework that outlines the changes 
that the applicant expects to accomplish through the proposed project 
and is based on the McGovern-Dole Program-level results framework, as 
set forth in the notice of funding opportunity;
    (6) Unless otherwise specified in the notice of funding 
opportunity, an evaluation plan that describes the proposed design, 
methodology, and time frame of the project's evaluation activities, and 
how the applicant intends to manage these activities, and that will 
include a baseline study, interim evaluation, final evaluation, and any 
applicable special studies; and
    (7) Any additional required items set forth in the notice of 
funding opportunity.
    (c) Each applicant (unless the applicant has an exception approved 
by FAS under 2 CFR 25.110(d)) is required to:
    (1) Be registered in the System for Award Management (SAM) before 
submitting its application;
    (2) Provide a valid unique entity identifier in its application; 
and
    (3) Continue to maintain an active SAM registration with current 
information at all times during which it has an active Federal award or 
an application or plan under consideration by a Federal awarding 
agency.


Sec.  1599.5  Agreements.

    (a) After FAS approves an application by an applicant, FAS will 
negotiate an agreement with the applicant. The agreement will set forth 
the obligations of FAS and the recipient.
    (b) The agreement will specify the general information required in 
2 CFR 200.210(a), as applicable.
    (c) The agreement will incorporate general terms and conditions, 
pursuant to 2 CFR 200.210(b), as applicable.
    (d) To the extent that this information is not already included in 
the agreement pursuant to paragraphs (b) and (c) of this section, the 
agreement will also include the following:
    (1) The kind, quantity, and use of the donated commodities and an 
estimated commodity call forward schedule, with the month and year 
indicated for each expected commodity shipment;
    (2) A plan of operation, which will include the following:
    (i) The objectives to be accomplished under the project;
    (ii) A detailed description of each activity to be implemented;
    (iii) The target country(ies) and the areas of the target 
country(ies) in which the activities will be implemented;
    (iv) The methods and criteria for selecting the beneficiaries of 
the activities;
    (v) Any contributions for cost sharing or matching, including cash 
and non-cash contributions, that the recipient expects to receive from 
non-FAS sources that:
    (A) Are critical to the implementation of the activities; or
    (B) Enhance the implementation of the activities;
    (vi) Any subrecipient that will be involved in the implementation 
of the activities, and the criteria for selecting a subrecipient that 
has not yet been identified;
    (vii) Any other governmental or nongovernmental entities that will 
be involved in the implementation of the activities;
    (viii) Any processing, packaging or repackaging of the donated 
commodities that will take place prior to their distribution, sale or 
barter by the recipient; and
    (ix) Any additional provisions specified by FAS during the 
negotiation of the agreement;
    (3) A budget, which will set forth the maximum amounts of sale 
proceeds, FAS-provided funds, interest, program income, and voluntary 
committed cost sharing or matching contributions that may be used for 
each line item, as well as other applicable budget requirements; and
    (4) Performance goals for the agreement, including a list of 
results, with long-term benefits where applicable, to be achieved by 
the

[[Page 62619]]

activities and corresponding indicators, targets, and time frames.
    (e) The agreement will also include specific terms and conditions, 
and certifications and representations, including the following:
    (1) The agreement will prohibit the sale or transshipment of the 
donated commodities by the recipient to a country not specified in the 
agreement for as long as the recipient has title to such donated 
commodities;
    (2) The recipient will assert that it has taken action to ensure 
that any donated commodities that will be distributed to beneficiaries 
will be imported and distributed free from all customs, duties, tolls, 
and taxes. The recipient must submit information to FAS to support this 
assertion;
    (3) The recipient will assert that, to the best of its knowledge, 
the importation and distribution of the donated commodities in the 
target country will not result in a substantial disincentive to or 
interference with domestic production or marketing in that country. The 
recipient must submit information to FAS to support this assertion;
    (4) The recipient will assert that, to the best of its knowledge, 
any sale or barter of the donated commodities will not displace or 
interfere with any sales of like commodities that may otherwise be made 
within the target country. The recipient must submit information to FAS 
to support this assertion; and
    (5) The recipient will assert that adequate transportation and 
storage facilities will be available in the target country to prevent 
spoilage or waste of the donated commodities. The recipient must submit 
information to FAS to support this assertion.
    (f) FAS may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (g) FAS may provide donated commodities and FAS-provided funds 
under a multiyear agreement contingent upon the availability of 
commodities and funds.


Sec.  1599.6  Payments.

    (a) If a recipient arranges for transportation in accordance with 
Sec.  1599.7(b)(2), FAS will, as specified in the agreement, pay the 
costs of such transportation to the ocean carrier or to the recipient. 
The recipient must, as specified in the agreement, submit to FAS, 
arrange to be submitted to FAS, or maintain on file and make available 
to FAS, the following documents:
    (1) The original, or a true copy, of each on board bill of lading 
indicating the freight rate and signed by the originating ocean 
carrier;
    (2) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate;
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness; and
    (iii) A signed copy of the Certificate of Loading issued by the 
National Cargo Bureau or a similar qualified independent surveyor;
    (3) For all containerized cargoes, a copy of the FGIS Container 
Condition Inspection Certificate;
    (4) A signed copy of the U.S. Food Aid Booking Note or charter 
party covering ocean transportation of the cargo;
    (5) In the case of charter shipments, a signed notice of arrival at 
the first discharge port, unless FAS has determined that circumstances 
that could not have been reasonably anticipated or controlled (force 
majeure) have prevented the ocean carrier's arrival at the first port 
of discharge; and
    (6) A request for payment of freight, survey costs other than at 
load port, and other expenses approved by FAS.
    (b) If the agreement specifies that some or all of the documents 
listed in paragraph (a) of this section will be submitted to FAS, then 
FAS will not render payment for transportation services until it has 
received all of the specified documents.
    (c) If a recipient arranges for transportation in accordance with 
Sec.  1599.7(b)(2), and the recipient uses a freight forwarder, the 
recipient must ensure that the freight forwarder is registered in the 
SAM and require the freight forwarder to submit the documents specified 
in paragraph (a) of this section. The recipient will ensure that the 
total commission or fees paid to intermediaries in the transportation 
procurement process will not exceed two and a half percent of the total 
transportation costs.
    (d) In no case will FAS provide payment to a recipient for 
demurrage costs or pay demurrage to any other entity.
    (e) If FAS has agreed to be responsible for the costs of 
transporting, storing, and distributing the donated commodities from 
the designated discharge port or point of entry, and if the recipient 
will bear or has borne any of these costs, in accordance with the 
agreement, FAS will either provide an advance payment or a 
reimbursement to the recipient in the amount of such costs, in the 
manner set forth in the agreement.
    (f) If the agreement authorizes the payment of FAS-provided funds, 
FAS will generally provide the funds to the recipient on an advance 
payment basis, in accordance with 2 CFR 200.305(b). In addition, the 
following procedures will apply to advance payments:
    (1) A recipient may request advance payments of FAS-provided funds, 
up to the total amount specified in the agreement. When making an 
advance payment request, a recipient must provide, for each agreement 
for which it is requesting an advance, total expenditures to date; an 
estimate of expenses to be covered by the advance; total advances 
previously requested, if any; the amount of cash on hand from the 
preceding advance; and, if necessary, a request to roll over any unused 
funds from the preceding advance to the current request period. The 
advance payment request must take into account any program income 
earned since the preceding advance.
    (2) Whenever possible, a recipient should consolidate advance 
payment requests to cover anticipated cash needs for all food 
assistance program awards made by FAS to the recipient. A recipient may 
request advance payments with no minimum time required between 
requests.
    (3) A recipient must minimize the amount of time that elapses 
between the transfer of funds by FAS and the disbursement of funds by 
the recipient. A recipient must fully disburse funds from the preceding 
advance before it submits a new advance request for the same agreement, 
with the exception that the recipient may request to retain the balance 
of any funds that have not been disbursed and roll it over into a new 
advance request if the new advance request is made within 90 days after 
the preceding advance was made.
    (4) FAS will review all requests to roll over funds from the 
preceding advance that have not been disbursed and make a decision 
based on the merits of the request. FAS will consider factors such as 
the amount of funding that a recipient is requesting to roll over, the 
length of time that the recipient has been in possession of the funds, 
any unforeseen or extenuating circumstances, the recipient's history of 
performance, and findings from recent financial audits or compliance 
reviews.
    (5) FAS will not approve any request for an advance or rollover of 
funds if the most recent financial report, as specified in the 
agreement, is past due, or if any required report, as specified in any 
open agreement between the recipient and FAS or the Commodity Credit 
Corporation (CCC), is more than three months in arrears.
    (6)(i) A recipient must return to FAS any funds advanced by FAS 
that have

[[Page 62620]]

not been disbursed as of the 91st day after the advance was made; 
provided, however, that paragraphs (f)(6)(ii) and (iii) of this section 
will apply if the recipient submits a request to FAS before that date 
to roll over the funds into a new advance.
    (ii) If a recipient submits a request to roll over funds into a new 
advance, and FAS approves the rollover of funds, such funds will be 
considered to have been advanced on the date that the recipient 
receives the approval notice from FAS, for the purposes of complying 
with the requirement in paragraph (f)(6)(i) of this section.
    (iii) If a recipient submits a request to roll over funds into a 
new advance, and FAS does not approve the rollover of some or all of 
the funds, such funds must be returned to FAS.
    (iv) If a recipient must return funds to FAS in accordance with 
paragraph (e)(6) of this section, the recipient must return the funds 
by the later of five business days after the 91st day after the funds 
were advanced, or five business days after the date on which the 
recipient receives notice from FAS that it has denied the recipient's 
request to roll over the funds; provided, however, that FAS may specify 
a different date for the return of funds in a written communication to 
the recipient.
    (7) Except as may otherwise be provided in the agreement, a 
recipient must deposit and maintain in an insured bank account located 
in the United States all funds advanced by FAS. The account must be 
interest-bearing, unless one of the exceptions in 2 CFR 200.305(b)(8) 
applies or FAS determines that this requirement would constitute an 
undue burden. A recipient will not be required to maintain a separate 
bank account for advance payments of FAS-provided funds. However, a 
recipient must be able to separately account for the receipt, 
obligation, and expenditure of funds under each agreement.
    (8) A recipient may retain, for administrative expenses, up to $500 
per Federal fiscal year of any interest earned on funds advanced under 
an agreement. The recipient must remit to the U.S. Department of Health 
and Human Services, Payment Management System, any additional interest 
earned during a Federal fiscal year on such funds, in accordance with 
the procedures in 2 CFR 200.305(b)(9).
    (g) If a recipient is required to pay funds to FAS in connection 
with an agreement, the recipient must make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.


Sec.  1599.7  Transportation of donated commodities.

    (a) Shipments of donated commodities are subject to the 
requirements of 46 U.S.C. 55305, regarding carriage on U.S.-flag 
vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by FAS under the McGovern-Dole Program will 
be arranged for under a specific agreement in the manner determined by 
FAS. Such transportation will be arranged for by:
    (1) FAS in accordance with the Federal Acquisition Regulation (FAR) 
in chapter 1 of title 48, the Agriculture Acquisition Regulation (AGAR) 
in chapter 4 of title 48, and directives issued by the Director, Office 
of Procurement and Property Management, USDA; or
    (2) The recipient, with payment by FAS, in the manner specified in 
the agreement.
    (c) A recipient that is responsible for transportation under 
paragraph (b)(2) of this section must declare in the transportation 
contract the point at which the ocean carrier will take custody of 
donated commodities to be transported.
    (d) A recipient that arranges for transportation in accordance with 
paragraph (b)(2) of this section may only use the services of a freight 
forwarder that is licensed by the Federal Maritime Commission and that 
would not have a conflict of interest in carrying out the freight 
forwarder duties. To assist FAS in determining whether there is a 
potential conflict of interest, the recipient must submit to FAS a 
certification indicating that the freight forwarder:
    (1) Is not engaged in, and will not engage in, supplying 
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under any McGovern-Dole 
Program agreement to which the recipient is a party; and
    (2) Is not affiliated with the recipient and has not made 
arrangements to give or receive any payment, kickback, or illegal 
benefit in connection with its selection as an agent of the recipient.


Sec.  1599.8  Entry, handling, and labeling of donated commodities and 
notification requirements.

    (a) A recipient must make all necessary arrangements for receiving 
the donated commodities in the target country, including obtaining 
appropriate approvals for entry and transit. The recipient must make 
arrangements with the target country government for all donated 
commodities that will be distributed to beneficiaries to be imported 
and distributed free from all customs duties, tolls, and taxes. A 
recipient is encouraged to make similar arrangements, where possible, 
with the government of a country where donated commodities to be sold 
or bartered are delivered.
    (b) A recipient must, as provided in the agreement, arrange for 
transporting, storing, and distributing the donated commodities from 
the designated point and time where title to the donated commodities 
passes to the recipient.
    (c) A recipient must store and maintain the donated commodities in 
good condition from the time of delivery at the port of entry or the 
point of receipt from the originating carrier until their distribution, 
sale or barter.
    (d)(1) If a recipient arranges for the packaging or repackaging of 
donated commodities that are to be distributed, the recipient must 
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the United States Department of Agriculture; and
    (iv) Includes a statement indicating that the donated commodities 
must not be sold, exchanged or bartered.
    (2) If a recipient arranges for the processing and repackaging of 
donated commodities that are to be distributed, the recipient must 
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the processed product;
    (iii) Includes a statement indicating that the processed product 
was made with commodities furnished by the United States Department of 
Agriculture; and
    (iv) Includes a statement indicating that the processed product 
must not be sold, exchanged or bartered.
    (3) If a recipient distributes donated commodities that are not 
packaged, the recipient must display a sign at the distribution site 
that includes the name of the donated commodities, a statement 
indicating that the donated commodities are being furnished by the 
United States Department of Agriculture, and a statement indicating 
that the donated commodities must not be sold, exchanged, or bartered.
    (e) A recipient must ensure that signs are displayed at all 
activity implementation and commodity distribution sites to inform 
beneficiaries that funding for the project was

[[Page 62621]]

provided by the United States Department of Agriculture.
    (f) A recipient must also ensure that all public communications 
relating to the project, the activities, or the donated commodities, 
whether made through print, broadcast, digital, or other media, include 
a statement acknowledging that funding was provided by the United 
States Department of Agriculture.
    (g) FAS may waive compliance with one or more of the labeling and 
notification requirements in paragraphs (d), (e) and (f) of this 
section if a recipient demonstrates to FAS that the requirement 
presents a safety or security risk in the target country. If a 
recipient determines that compliance with a labeling or notification 
requirement poses an imminent threat of destruction of property, 
injury, or loss of life, the recipient must submit a waiver request to 
FAS as soon as possible. The recipient will not have to comply with 
such requirement during the period prior to the issuance of a waiver 
determination by FAS. A recipient may submit a written request for a 
waiver at any time after the agreement has been signed.
    (h) In exceptional circumstances, FAS may, on its own initiative, 
waive one or more of the labeling and notification requirements in 
paragraphs (d), (e) and (f) of this section for programmatic reasons.


Sec.  1599.9  Damage to or loss of donated commodities.

    (a) FAS will be responsible for the donated commodities prior to 
the transfer of title to the commodities to the recipient. The 
recipient will be responsible for the donated commodities following the 
transfer of title to the donated commodities to the recipient. The 
title will transfer as specified in the agreement.
    (b) A recipient must inform FAS, in the manner and within the time 
period set forth in the agreement, of any damage to or loss of the 
donated commodities that occurs following the transfer of title to the 
donated commodities to the recipient. The recipient must take all steps 
necessary to protect its interests and the interests of FAS with 
respect to any damage to or loss of the donated commodities that occurs 
after title has been transferred to the recipient.
    (c) A recipient will be responsible for arranging for an 
independent cargo surveyor to inspect the donated commodities upon 
discharge from the ocean carrier and prepare a survey or outturn 
report. The report must show the quantity and condition of the donated 
commodities discharged from the ocean carrier and must indicate the 
most likely cause of any damage noted in the report. The report must 
also indicate the time and place when the survey took place. All 
discharge surveys must be conducted contemporaneously with the 
discharge of the ocean carrier, unless FAS determines that failure to 
do so was justified under the circumstances. For donated commodities 
shipped on a through bill of lading, the recipient must also obtain a 
delivery survey. All surveys obtained by the recipient must, to the 
extent practicable, be conducted jointly by the surveyor, the 
recipient, and the carrier, and the survey report must be signed by all 
three parties. The recipient must obtain a copy of each discharge or 
delivery survey report within 45 days after the completion of the 
survey. The recipient must make each such report available to FAS upon 
request, or in the manner specified in the agreement. FAS will 
reimburse the recipient for the reasonable costs of these services, as 
determined by FAS, in the manner specified in the agreement.
    (d) If donated commodities are damaged or lost during the time that 
they are in the care of the ocean carrier:
    (1) The recipient must ensure that any reports, narrative 
chronology, or other commentary prepared by the independent cargo 
surveyor, and any such documentation prepared by a port authority, 
stevedoring service, or customs official, or an official of the transit 
or target country government or the transportation company, are 
provided to FAS;
    (2) The recipient must provide to FAS the names and addresses of 
any individuals known to be present at the time of discharge or 
unloading, or during the survey, who can verify the quantity of damaged 
or lost donated commodities;
    (3) If the damage or loss occurred with respect to a bulk shipment 
on an ocean carrier, the recipient must ensure that the independent 
cargo surveyor:
    (i) Observes the discharge of the cargo;
    (ii) Reports on discharging methods, including scale type, 
calibrations, and any other factors that may affect the accuracy of 
scale weights, and, if scales are not used, states the reason therefor 
and describes the actual method used to determine weight;
    (iii) Estimates the quantity of cargo, if any, lost during 
discharge through carrier negligence;
    (iv) Advises on the quality of sweepings;
    (v) Obtains copies of port or ocean carrier records, if possible, 
showing the quantity discharged; and
    (vi) Notifies the recipient immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and
    (4) If the damage or loss occurred with respect to a container 
shipment on an ocean carrier, the recipient must ensure that the 
independent cargo surveyor lists the container numbers and seal numbers 
shown on the containers, indicates whether the seals were intact at the 
time the containers were opened, and notes whether the containers were 
in any way damaged.
    (e) If a recipient has title to the donated commodities, and 
donated commodities valued in excess of $5,000 are damaged at any time 
prior to their distribution or sale under the agreement, regardless of 
the party at fault, the recipient must immediately arrange for an 
inspection by a public health official or other competent authority 
approved by FAS and provide to FAS a certification by such public 
health official or other competent authority regarding the exact 
quantity and condition of the damaged donated commodities. The value of 
damaged donated commodities must be determined on the basis of the 
commodity acquisition, transportation, and related costs incurred by 
FAS with respect to such commodities, as well as such costs incurred by 
the recipient and paid by FAS. The recipient must inform FAS of the 
results of the inspection and indicate whether the damaged donated 
commodities are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (f)(1) If a recipient has title to the donated commodities, the 
recipient must arrange for the recovery of that portion of the donated 
commodities designated as fit for the use authorized in the agreement. 
The recipient must dispose of donated commodities that are unfit for 
such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or another non-food use; or
    (iii) Destruction of the donated commodities if they are unfit for 
any use, in such manner as to prevent their use for any purpose.
    (2) A recipient must arrange for all U.S. Government markings to be 
obliterated or removed before the donated commodities are transferred 
by

[[Page 62622]]

sale or donation under paragraph (f)(1) of this section.
    (g) A recipient may retain any proceeds generated by the disposal 
of the donated commodities in accordance with paragraph (f)(1) of this 
section and must use the retained proceeds for expenses related to the 
disposal of the donated commodities and for activities specified in the 
agreement.
    (h) A recipient must notify FAS immediately and provide detailed 
information about the actions taken in accordance with paragraph (f) of 
this section, including the quantities, values, and dispositions of 
donated commodities determined to be unfit.


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

    (a) FAS will be responsible for claims arising out of damage to or 
loss of a quantity of the donated commodities prior to the transfer of 
title to the donated commodities to the recipient. The recipient will 
be responsible for claims arising out of damage to or loss of a 
quantity of the donated commodities after the transfer of title to the 
donated commodities.
    (b) If a recipient has title to donated commodities that have been 
damaged or lost, and the value of the damaged or lost donated 
commodities is estimated to be in excess of $20,000, the recipient 
must:
    (1) Notify FAS immediately and provide detailed information about 
the circumstances surrounding such damage or loss, the quantity of 
damaged or lost donated commodities, and the value of the damage or 
loss;
    (2) Promptly upon discovery of the damage or loss, initiate a claim 
arising out of such damage or loss, including, if appropriate, 
initiating an action to collect pursuant to a commercial insurance 
contract;
    (3) Take all necessary action to pursue the claim diligently and 
within any applicable periods of limitations; and
    (4) Provide to FAS copies of all documentation relating to the 
claim.
    (c) If a recipient has title to donated commodities that have been 
damaged or lost, and the value of the damaged or lost donated 
commodities is estimated to be $20,000 or less, the recipient must 
notify FAS in accordance with the agreement and provide detailed 
information about the damage or loss in the next report required to be 
filed under Sec.  1599.13(f)(1) or (2).
    (d)(1) The value of a claim for lost donated commodities will be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, as 
well as such costs incurred by the recipient and paid by FAS.
    (2) The value of a claim for damaged donated commodities will be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, as 
well as such costs incurred by the recipient and paid by FAS, less any 
funds generated if such commodities are sold in accordance with Sec.  
1599.9(f)(1).
    (e) If FAS determines that a recipient has not initiated a claim or 
is not exercising due diligence in the pursuit of a claim, FAS may 
require the recipient to assign its rights to initiate or pursue the 
claim to FAS. Failure by the recipient to initiate a claim or exercise 
due diligence in the pursuit of a claim will be considered by FAS 
during the review of applications for subsequent food assistance 
awards.
    (f)(1) A recipient may retain any funds obtained as a result of a 
claims collection action initiated by it in accordance with this 
section, or recovered pursuant to any insurance policy or other similar 
form of indemnification, but such funds must be expended in accordance 
with the agreement or for other purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims 
collection action initiated by it under this section; provided, 
however, that if the recipient paid for the transportation of the 
donated commodities or a portion thereof, FAS will use a portion of 
such funds to reimburse the recipient for such expense on a prorated 
basis.


Sec.  1599.11  Use of donated commodities, sale proceeds, FAS-provided 
funds, and program income.

    (a) A recipient must use the donated commodities, any sale 
proceeds, FAS-provided funds, interest, and program income in 
accordance with the agreement.
    (b) A recipient must not use donated commodities, sale proceeds, 
FAS-provided funds, interest, or program income for any activity or any 
expense incurred by the recipient or a subrecipient prior to the start 
date of the period of performance of the agreement or after the 
agreement is suspended or terminated, without the prior written 
approval of FAS.
    (c) A recipient must not permit the distribution, handling, or 
allocation of donated commodities on the basis of political 
affiliation, geographic location, or the ethnic, tribal or religious 
identity or affiliation of the potential consumers or beneficiaries.
    (d) A recipient must not permit the distribution, handling, or 
allocation of donated commodities by the military forces of any 
government or insurgent group without the specific authorization of 
FAS.
    (e) A recipient must not use sale proceeds, FAS-provided funds, 
interest, or program income to acquire goods and services, either 
directly or indirectly through another party, in a manner that violates 
country-specific economic sanction programs, as specified in the 
agreement.
    (f) A recipient may sell or barter donated commodities only if such 
sale or barter is provided for in the agreement or the recipient is 
disposing of damaged donated commodities as specified in Sec.  
1599.9(f). The recipient must sell donated commodities at a reasonable 
market price. The recipient must obtain approval of its proposed sale 
price from FAS before selling donated commodities. The recipient must 
use any sale proceeds, interest, program income, or goods or services 
derived from the sale or barter of the donated commodities only as 
provided in the agreement.
    (g) A recipient must deposit and maintain all sale proceeds, FAS-
provided funds, and program income in a bank account until they are 
used for a purpose authorized under the agreement or the FAS-provided 
funds are returned to FAS in accordance with Sec.  1599.6(f)(6). The 
account must be insured unless it is in a country where insurance is 
unavailable. The account must be interest-bearing, unless one of the 
exceptions in 2 CFR 200.305(b)(8) applies or FAS determines that this 
requirement would constitute an undue burden. The recipient must comply 
with the requirements in Sec.  1599.6(f)(7) with regard to the deposit 
of advance payments by FAS.
    (h)(1) Except as provided in paragraph (h)(2) of this section, a 
recipient may make adjustments within the agreement budget between 
direct cost line items without further approval, provided that the 
total amount of adjustments does not exceed ten percent of the Grand 
Total Costs, excluding any voluntary committed cost sharing or matching 
contributions, in the agreement budget. Adjustments beyond these limits 
require the prior approval of FAS.
    (2) A recipient must not transfer any funds budgeted for 
participant support costs, as defined in 2 CFR 200.75, to other 
categories of expense without the prior approval of FAS.
    (i) A recipient may use sale proceeds, FAS-provided funds, or 
program income to purchase real or personal property only if local law 
permits the recipient to

[[Page 62623]]

retain title to such property. However, a recipient must not use sale 
proceeds, FAS-provided funds, or program income to pay for the 
acquisition, development, construction, alteration or upgrade of real 
property that is:
    (1) Owned or managed by a church or other organization engaged 
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a 
recipient may use sale proceeds, FAS-provided funds, or program income 
to pay for repairs to or rehabilitation of a structure located on such 
real property to the extent necessary to avoid spoilage or loss of 
donated commodities, but only if the structure is not used in whole or 
in part for any religious or sectarian purposes while the donated 
commodities are stored in it. If the use of sale proceeds, FAS-provided 
funds, or program income to pay for repairs to or rehabilitation of 
such a structure is not specifically provided for in the agreement, the 
recipient must not use the sale proceeds, FAS-provided funds, or 
program income for this purpose until it receives written approval from 
FAS.
    (j) A recipient must comply with 2 CFR 200.321 when procuring goods 
and services in the United States. When procuring goods and services 
outside of the United States, a recipient should endeavor to comply 
with 2 CFR 200.321 where practicable.
    (k) A recipient must enter into a written contract with each 
provider of goods, services, or construction work that is valued at or 
above the Simplified Acquisition Threshold. Each such contract must 
require the provider to maintain adequate records to account for all 
donated commodities, funds, or both furnished to the provider by the 
recipient and to comply with any other applicable requirements that may 
be specified by FAS in the agreement. The recipient must submit a copy 
of the signed contracts to FAS upon request.


Sec.  1599.12  Monitoring and evaluation requirements.

    (a) A recipient will be responsible for designing a performance 
monitoring plan for the project, obtaining written approval of the plan 
from FAS before putting it into effect, and managing and implementing 
the plan, unless otherwise specified in the agreement.
    (b) A recipient must establish baseline values, annual targets, and 
life of activity targets for each performance indicator included in the 
recipient's approved performance monitoring plan, unless otherwise 
specified in the agreement.
    (c) A recipient must inform FAS, in the manner and within the time 
period specified in the agreement, of any problems, delays, or adverse 
conditions that materially impair the recipient's ability to meet the 
objectives of the agreement. This notification must include a statement 
of any corrective actions taken or contemplated by the recipient, and 
any additional assistance requested from FAS to resolve the situation.
    (d) A recipient will be responsible for designing an evaluation 
plan for the project, obtaining written approval of the plan from FAS 
before putting it into effect, and arranging for an independent third 
party to implement the evaluation, unless otherwise specified in the 
agreement. This evaluation plan will detail the evaluation purpose and 
scope, key evaluation questions, evaluation methodology, time frame, 
evaluation management, and cost. This plan will generally be based upon 
the evaluation plan that the recipient submitted to FAS as part of its 
application, pursuant to Sec.  1599.4(b)(6), unless the notice of 
funding opportunity specified that an evaluation plan was not required 
to be included in the application. The recipient must ensure that the 
evaluation plan:
    (1) Is designed using the most rigorous methodology that is 
appropriate and feasible, taking into account available resources, 
strategy, current knowledge and evaluation practices in the sector, and 
the implementing environment;
    (2) Is designed to inform management, activity implementation, and 
strategic decision-making;
    (3) Utilizes analytical approaches and methodologies, based on the 
questions to be addressed, project design, budgetary resources 
available, and level of rigor and evidence required, which may be 
implemented through methods such as case studies, surveys, quasi-
experimental designs, randomized field experiments, cost-effectiveness 
analyses, implementation reviews, or a combination of methods;
    (4) Adheres to generally accepted evaluation standards and 
principles;
    (5) Uses participatory approaches that seek to include the 
perspectives of diverse parties and all relevant stakeholders; and
    (6) Where possible, utilizes local consultants and seeks to build 
local capacity in evaluation.
    (e)(1) Unless otherwise provided in the agreement, a recipient must 
arrange for evaluations of the project to be conducted by an 
independent third party that:
    (i) Is financially and legally separate from the recipient's 
organization; and
    (ii) Has staff with demonstrated methodological, cultural and 
language competencies, and specialized experience in conducting 
evaluations of international development programs involving 
agriculture, trade, education, and nutrition, provided that FAS may 
determine that, for a particular agreement, the staff of the 
independent third party evaluator is not required to have specialized 
experience in conducting evaluations of programs involving one or more 
of these four areas.
    (2) A recipient must provide a written certification to FAS that 
there is no real or apparent conflict of interest on the part of any 
recipient staff member or third party entity designated or hired to 
play a substantive role in the evaluation of activities under the 
agreement.
    (f) FAS will be considered a key stakeholder in all evaluations 
conducted as part of the agreement.
    (g)(1) A recipient is responsible for establishing the required 
financial and human capital resources for monitoring and evaluation of 
activities under the agreement. The recipient must maintain a separate 
budget for monitoring and evaluation, with separate budget line items 
for dedicated recipient monitoring and evaluation staff and independent 
third-party evaluation contracts.
    (2) Personnel at a recipient's headquarters offices and field 
offices with specialized expertise and experience in monitoring and 
evaluation may be used by the recipient for dedicated monitoring and 
evaluation. Unless otherwise specified in the agreement or approved 
evaluation plan, all evaluations must be managed by the recipient's 
evaluation experts outside of the recipient's line management for the 
activities.
    (h) FAS may independently conduct or commission an evaluation of a 
single agreement or an evaluation that includes multiple agreements. A 
recipient must cooperate, and comply with any demands for information 
or materials made in connection, with any evaluation conducted or 
commissioned by FAS. Such evaluations may be conducted by FAS 
internally or by an FAS-hired external evaluation contractor.


Sec.  1599.13  Reporting and record keeping requirements.

    (a) A recipient must comply with the performance and financial 
monitoring and reporting requirements in the agreement and 2 CFR 
200.327 through 200.329.

[[Page 62624]]

    (b) A recipient must submit financial reports to FAS, by the dates 
and for the reporting periods specified in the agreement. Such reports 
must provide an accurate accounting of sale proceeds, FAS-provided 
funds, interest, program income, and voluntary committed cost sharing 
or matching contributions.
    (c)(1) A recipient must submit performance reports to FAS, by the 
dates and for the reporting periods specified in the agreement. These 
reports must include the information required in 2 CFR 200.328(b)(2), 
including additional pertinent information regarding the recipient's 
progress, measured against established indicators, baselines, and 
targets, towards achieving the expected results specified in the 
agreement. This reporting must include, for each performance indicator, 
a comparison of actual accomplishments with the baseline and the 
targets established for the period. When actual accomplishments deviate 
significantly from targeted goals, the recipient must provide an 
explanation in the report.
    (2) A recipient must ensure the accuracy and reliability of the 
performance data submitted to FAS in performance reports. At any time 
during the period of performance of the agreement, FAS may review the 
recipient's performance data to determine whether it is accurate and 
reliable. The recipient must comply with all requests made by FAS or an 
entity designated by FAS in relation to such reviews.
    (d) Baseline, interim, and final evaluation reports are required 
for all agreements, unless otherwise specified in the agreement. The 
reports must be submitted in accordance with the timeline in the FAS-
approved evaluation plan. Evaluation reports submitted to FAS may be 
made public in an effort to increase accountability and transparency 
and share lessons learned and best practices.
    (e) A recipient must, within 30 days after export of all or a 
portion of the donated commodities, submit evidence of such export to 
FAS, in the manner set forth in the agreement. The evidence may be 
submitted through an electronic media approved by FAS or by providing 
the carrier's on board bill of lading. The evidence of export must show 
the kind and quantity of commodities exported, the date of export, and 
the country where the commodities will be delivered. The date of export 
is the date that the ocean carrier carrying the donated commodities 
sails from the final U.S. load port.
    (f)(1) A recipient must submit reports to FAS, using a form 
prescribed by FAS, covering the receipt, handling, and disposition of 
the donated commodities. Such reports must be submitted to FAS, by the 
dates and for the reporting periods specified in the agreement, until 
all of the donated commodities have been distributed, sold or bartered 
and such disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated 
commodities, the recipient must submit to FAS, using a form prescribed 
by FAS, reports covering the receipt and use of the sale proceeds when 
the donated commodities were sold, the goods and services derived from 
barter when the donated commodities were bartered, and program income. 
Such reports must be submitted to FAS, by the dates and for the 
reporting periods specified in the agreement, until all of the sale 
proceeds and program income have been disbursed and reported to FAS. 
When reporting financial information, the recipient must include the 
amounts in U.S. dollars and the exchange rate if proceeds are held in 
local currency.
    (g) If requested by FAS, a recipient must provide to FAS additional 
information or reports relating to the agreement.
    (h) If a recipient requires an extension of a reporting deadline, 
it must ensure that FAS receives an extension request at least five 
business days prior to the reporting deadline. FAS may decline to 
consider a request for an extension that it receives after this time 
period. FAS will consider requests for reporting deadline extensions on 
a case by case basis and make a decision based on the merits of each 
request. FAS will consider factors such as unforeseen or extenuating 
circumstances and past performance history when evaluating requests for 
extensions.
    (i) A recipient must retain records and permit access to records in 
accordance with the requirements of 2 CFR 200.333 through 200.337. The 
date of submission of the final expenditure report, as referenced in 2 
CFR 200.333, will be the final date of submission of the reports 
required by paragraphs (f)(1) and (2) of this section, as prescribed by 
FAS. The recipient must retain copies of and make available to FAS all 
sales receipts, contracts, or other documents related to the sale or 
barter of donated commodities and any goods or services derived from 
such barter, as well as records of dispatch received from ocean 
carriers.


Sec.  1599.14  Subrecipients.

    (a) A recipient may utilize the services of a subrecipient to 
implement activities under the agreement if this is provided for in the 
agreement. The subrecipient may receive donated commodities, sale 
proceeds, FAS-provided funds, program income, or other resources from 
the recipient for this purpose. The recipient must enter into a written 
subagreement with the subrecipient and comply with the applicable 
provisions of 2 CFR 200.331. The recipient must provide a copy of such 
subagreement to FAS, in the manner set forth in the agreement, prior to 
the transfer of any donated commodities, sale proceeds, FAS-provided 
funds, or program income to the subrecipient.
    (b) A recipient must include the following requirements in a 
subagreement:
    (1) The subrecipient is required to comply with the applicable 
provisions of this part and 2 CFR parts 200 and 400. The applicable 
provisions are those that relate specifically to subrecipients, as well 
as those relating to non-Federal entities that impose requirements that 
would be reasonable to pass through to a subrecipient because they 
directly concern the implementation by the subrecipient of one or more 
activities under the agreement. If there is a question about whether a 
particular provision is applicable, FAS will make the determination.
    (2) The subrecipient is prohibited from using sale proceeds, FAS-
provided funds, interest, or program income to acquire goods and 
services, either directly or indirectly through another party, in a 
manner that violates country-specific economic sanction programs, as 
specified in the agreement.
    (3) The subrecipient must pay to the recipient the value of any 
donated commodities, sale proceeds, FAS-provided funds, interest, or 
program income that are not used in accordance with the subagreement, 
or that are lost, damaged, or misused as a result of the subrecipient's 
failure to exercise reasonable care.
    (4) In accordance with Sec.  1599.18 and 2 CFR 200.501(h), a 
description of the applicable compliance requirements and the 
subrecipient's compliance responsibility. Methods to ensure compliance 
may include pre-award audits, monitoring during the agreement, and 
post-award audits.
    (c) A recipient must monitor the actions of a subrecipient as 
necessary to ensure that donated commodities, sale proceeds, FAS-
provided funds, and program income provided to the subrecipient are 
used for authorized purposes in compliance with applicable U.S. Federal 
laws and regulations and the subagreement and that performance 
indicator targets are achieved for both

[[Page 62625]]

activities and results under the agreement.


Sec.  1599.15  Noncompliance with an agreement.

    If a recipient fails to comply with a Federal statute or regulation 
or the terms and conditions of the agreement, and FAS determines that 
the noncompliance cannot be remedied by imposing additional conditions, 
FAS may take one or more of the actions set forth in 2 CFR 200.338, 
including initiating a claim as a remedy. FAS may also initiate a claim 
against a recipient if the donated commodities are damaged or lost, or 
the sale proceeds, goods received through barter, FAS-provided funds, 
interest, or program income are misused or lost, due to an action or 
omission of the recipient.


Sec.  1599.16  Suspension and termination of agreements.

    (a) An agreement or subagreement may be suspended or terminated in 
accordance with 2 CFR 200.338 or 200.339. FAS may suspend or terminate 
an agreement if it determines that:
    (1) One of the bases in 2 CFR 200.338 or 200.339 for termination or 
suspension by FAS has been satisfied;
    (2) The continuation of the assistance provided under the agreement 
is no longer necessary or desirable; or
    (3) Storage facilities are inadequate to prevent spoilage or waste, 
or distribution of the donated commodities will result in substantial 
disincentive to, or interference with, domestic production or marketing 
in the target country.
    (b) If an agreement is terminated, the recipient:
    (1) Is responsible for the security and integrity of any 
undistributed donated commodities and must dispose of such commodities 
only as agreed to by FAS;
    (2) Is responsible for any sale proceeds, FAS-provided funds, 
interest, or program income that have not been disbursed and must use 
or return them only as agreed to by FAS; and
    (3) Must comply with the closeout and post-closeout provisions 
specified in the agreement and 2 CFR 200.343 and 200.344.


Sec.  1599.17  Opportunities to object and appeals.

    (a) FAS will provide an opportunity to a recipient to object to, 
and provide information and documentation challenging, any action taken 
by FAS pursuant to Sec.  1599.15. FAS will comply with any requirements 
for hearings, appeals, or other administrative proceedings to which the 
recipient is entitled under any other statute or regulation applicable 
to the action involved. For example, if the action taken by FAS 
pursuant to Sec.  1599.15 is to initiate suspension or debarment 
proceedings as authorized under 2 CFR parts 180 and 417, then the 
requirements in 2 CFR parts 180 and 417 will apply instead of the 
requirements in this section. In the absence of other applicable 
statutory or regulatory requirements, the requirements set forth in 
this section will apply.
    (b) The recipient must submit its objection in writing, along with 
any documentation, to the FAS official specified in the agreement 
within 30 days after the date of FAS's written notification to the 
recipient of the FAS action being challenged. This official will 
endeavor to notify the recipient of his or her determination within 60 
days after the date that FAS received the recipient's written 
objection.
    (c) The recipient may appeal the determination of the official to 
the Administrator, FAS. An appeal must be in writing and be submitted 
to the Office of the Administrator within 30 days after the date of the 
initial determination by the FAS official. The recipient may submit 
additional documentation with its appeal.
    (d) The Administrator will base the determination on appeal upon 
information contained in the administrative record and will endeavor to 
make a determination within 60 days after the date that FAS received 
the appeal. The determination of the Administrator will be the final 
determination of FAS. The recipient must exhaust all administrative 
remedies contained in this section before pursuing judicial review of a 
determination by the Administrator.


Sec.  1599.18  Audit requirements.

    (a) Subpart F, Audit Requirements, of 2 CFR part 200 applies to 
recipients and subrecipients under this part other than those that are 
for-profit entities, foreign public entities, or foreign organizations.
    (b) A recipient or subrecipient that is a for-profit entity or a 
foreign organization, and that expends, during its fiscal year, a total 
of at least the audit requirement threshold in 2 CFR 200.501 in Federal 
awards, is required to obtain an audit. Such a recipient or 
subrecipient has the following two options to satisfy this requirement:
    (1)(i) A financial audit of the agreement or subagreement, in 
accordance with the Government Auditing Standards issued by the United 
States Government Accountability Office (GAO), if the recipient or 
subrecipient expends Federal awards under only one FAS program during 
such fiscal year; or
    (ii) A financial audit of all Federal awards from FAS, in 
accordance with GAO's Government Auditing Standards, if the recipient 
or subrecipient expends Federal awards under multiple FAS programs 
during such fiscal year; or
    (2) An audit that meets the requirements contained in subpart F of 
2 CFR part 200.
    (c) A recipient or subrecipient that is a for-profit entity or a 
foreign organization, and that expends, during its fiscal year, a total 
that is less than the audit requirement threshold in 2 CFR 200.501 in 
Federal awards, is exempt from requirements under this section for an 
audit for that year, except as provided in paragraphs (d) and (f) of 
this section, but it must make records available for review by 
appropriate officials of Federal agencies.
    (d) FAS may require an annual financial audit of an agreement or 
subagreement when the audit requirement threshold in 2 CFR 200.501 is 
not met. In that case, FAS must provide funds under the agreement for 
this purpose, and the recipient or subrecipient, as applicable, must 
arrange for such audit and submit it to FAS.
    (e) When a recipient or subrecipient that is a for-profit entity or 
a foreign organization is required to obtain a financial audit under 
this section, it must provide a copy of the audit to FAS within 60 days 
after the end of its fiscal year.
    (f) FAS, the USDA Office of Inspector General, or GAO may conduct 
or arrange for additional audits of any recipients or subrecipients, 
including for-profit entities and foreign organizations. Recipients and 
subrecipients must promptly comply with all requests related to such 
audits. If FAS conducts or arranges for an additional audit, such as an 
audit with respect to a particular agreement, FAS will fund the full 
cost of such an audit, in accordance with 2 CFR 200.503(d).


Sec.  1599.19  Paperwork Reduction Act.

    The information collection requirements contained in this 
regulation have been approved by OMB under the Paperwork Reduction Act 
of 1995, 44 U.S.C. Chapter 35, and have been assigned OMB control 
number 0551-0035. A person is not required to respond to a collection 
of information unless it displays a currently valid OMB control number.


[[Page 62626]]


    Dated: July 29, 2016.
Suzanne Palmieri,
Acting Administrator, Foreign Agricultural Service.
[FR Doc. 2016-21347 Filed 9-9-16; 8:45 am]
BILLING CODE 3410-10-P