[Federal Register Volume 84, Number 172 (Thursday, September 5, 2019)]
[Rules and Regulations]
[Pages 46653-46661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19090]



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 Rules and Regulations
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  Federal Register / Vol. 84, No. 172 / Thursday, September 5, 2019 / 
Rules and Regulations  

[[Page 46653]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1146

RIN 0581-AD87
[Doc. No. AMS-DA-19-0001]


Establishment of a Milk Donation Reimbursement Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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

SUMMARY: This rule establishes the Milk Donation Reimbursement Program. 
Under the program, eligible dairy organizations that account to a 
Federal milk marketing order marketwide pool and incur qualified 
expenses related to certain fluid milk product donations may apply for 
and receive limited reimbursements to cover those expenses. A provision 
of the 2018 Farm Bill requires establishment of this program. The 
program is intended to reduce food waste and provide nutrition 
assistance to individuals in low-income groups.

DATES: Effective: September 16, 2019.

FOR FURTHER INFORMATION CONTACT: Emily DeBord, Marketing Specialist, 
AMS Dairy Program, USDA; 1400 Independence Avenue SW, Room 2958-S, 
Washington, DC 20250; telephone: (202) 720-5567; email: [email protected].

SUPPLEMENTARY INFORMATION: A provision of the Agricultural Improvement 
Act of 2018 (Pub. L. 115-334) (2018 Farm Bill) repealed the Dairy 
Product Donation Program specified in Section 1431 of the Agricultural 
Act of 2014 (Pub. L. 113-79) (2014 Farm Bill) and amended title I, 
subtitle D, part III of the 2014 Farm Bill to require establishment of 
the Milk Donation Program.
    Section 1601(c)(2)(A) of the 2014 Farm Bill provides for the 
promulgation of the regulations to implement the Dairy Product Donation 
Program to be made without regard to the notice and comment 
requirements of the Administrative Procedure Act (APA), 5 U.S.C. 553. 
Section 1701 of the 2018 Farm Bill extends that Congressional direction 
to the establishment of a milk donation program to replace the Dairy 
Product Donation Program. AMS, therefore, is issuing this final rule 
without prior notice or public comment.
    Amended section 1431 of the 2014 Farm Bill (amended statute) 
authorizes the Secretary of Agriculture (Secretary) to establish a 
program to reimburse eligible dairy organizations for a portion of the 
value of fluid milk products they donate to eligible non-profit 
organizations for distribution to individuals in low-income groups. The 
Secretary delegated authority to establish and administer this program 
to the Agricultural Marketing Service (AMS). This rule outlines the 
provisions of the new Milk Donation Reimbursement Program (MDRP) 
codified at 7 CFR part 1146. Program provisions are intended to 
encourage the donation of fluid milk products to provide nutrition 
assistance to individuals in low-income groups and to reduce food 
waste.

Background

    Under Federal milk marketing orders (FMMOs), regulated milk 
handlers receiving dairy farmers' milk account to a marketwide pool on 
their end-use classification of the milk. FMMO milk end-use 
classifications are generally as follows: Class I for beverage fluid 
milk products such as whole, skim, nonfat, and flavored milks; Class II 
for soft products such as yogurt and ice cream; Class III for 
spreadable and hard cheeses; and Class IV for butter and evaporated, 
condensed, and non-fat dried milk. Class I milk products typically 
carry the highest value in the marketplace. Monthly FMMO classified 
prices reflect surveyed end-product wholesale market prices. An FMMO 
generally requires that classified values for pooled milk be accounted 
for and paid to individual farmers or cooperative associations of 
farmers on the basis of a uniform, or average, price. Thus, all 
eligible dairy farmers whose milk is pooled share in the marketwide 
use-values of milk by regulated handlers.
    FMMOs consider all packaged milk product deliveries to be 
commercial transactions and require regulated handlers to account to 
the FMMO pool at the Class I value for milk in all unreturned 
deliveries of packaged fluid milk products. Regulated handlers who 
elect to donate packaged fluid milk are required to account to a pool 
for milk contained in donated fluid milk products at Class I values. 
Thus, handlers may have found dumping surplus milk a more financially 
sound alternative than donation because they would avoid an FMMO pool 
obligation. Under the MDRP outlined in this rule, eligible handlers who 
account to FMMO pools and donate packaged fluid milk products to 
eligible non-profit organizations may claim reimbursements for all or 
part of the FMMO cost difference between the Class I value at the 
plant, and the lowest classified value for the month. Under the 
provisions of the MDRP, handlers may not claim reimbursements for other 
costs related to donating fluid milk products, such as the costs for 
processing, bottling, and transporting donated milk. The intent of the 
MDRP is to encourage handlers to make donations to food assistance 
programs and reduce food waste.
    As provided by the amended statute (Sec. 1431(j)), total program 
funding in fiscal year 2019 is $9 million, and $5 million for each 
fiscal year thereafter. Using 2018 average FMMO classified prices and 
the weighted average FMMO Class I differential, AMS estimates that, had 
the program been in place in fiscal year 2018, $9 million could have 
reimbursed eligible distributors for milk donations of approximately 28 
million gallons of fresh fluid milk (assuming a reimbursement rate of 
100 percent of the difference between the Class I price and the lowest 
classified price). AMS further estimates that 28 million gallons of 
fresh fluid milk represented less than 0.6 percent of all FMMO Class I 
sales during 2018.

Program Provisions

    This rule outlines the provisions of the MDRP established as 
required by the amended statute.

Definitions

    The amended statute includes definitions for terms used in the 
statute. Similarly, Sec.  1146.1 of the rule provides definitions of 
those terms as they are used in the new program. Key terms are 
``eligible dairy organization,'' ``eligible

[[Page 46654]]

distributor,'' ``eligible milk,'' ``eligible partnership,'' and 
``participating partnership.''
    Eligible dairy organization. The amended statute specifies that a 
dairy organization eligible to participate in the program is a dairy 
farmer, either individually or as part of a cooperative, or a dairy 
processor, that accounts to an FMMO pool and incurs qualified expenses 
by accounting to the pool for fluid milk product donations. See Sec. 
1431(a)(1)(A) and (B). Under FMMOs, only producer cooperatives acting 
as handlers by receiving the milk of dairy farmers and delivering it to 
regulated processing plants and handlers who operate regulated dairy 
processing plants must account to the marketwide pools. See 7 CFR 
1000.9. Only handlers regulated under an FMMO are required to account 
to the pool at FMMO classified prices for all their Class I (fluid 
milk) purchases. Therefore, to ensure reimbursements requested under 
the program are properly applied only to qualified expenses, Sec.  
1146.1 defines ``eligible dairy organization'' as a dairy farmer 
cooperative or a dairy processor that accounts to the FMMO marketwide 
pool and incurs qualified expenses described in Sec.  1146.108.
    Eligible distributor. The amended statute specifies a distributor 
eligible to receive donated milk under the program must be a public or 
private non-profit organization able to distribute donated milk. See 
Sec. 1431(a)(2). Section 1146.1 of the rule likewise defines ``eligible 
distributor'' as a public or private non-profit organization that 
distributes donated eligible milk. Under the new program, participating 
non-profit organizations are required to verify their non-profit status 
and affirm they have appropriate facilities and processes for 
distributing donated milk to individuals in low-income groups.
    Eligible milk. The amended statute specifies only Class I fluid 
milk products produced and processed in the United States are eligible 
for donation to eligible distributors and reimbursements under the 
program. See Sec. 1431(a)(3). As explained earlier, ``Class I'' is the 
FMMO classification for fluid milk products intended for use as 
beverages, such as whole, skim, nonfat, and flavored milks. See 7 CFR 
1000.15. The amended statute requires eligible milk under the program 
be produced and processed in the United States. See Sec. 1431(a)(3). 
For use under the program, eligible milk must meet the commodity 
specifications and processing and packaging standards as provided in 
the commodity specification documents maintained on the AMS website, as 
required in Sec.  1146.3 of the rule and discussed later in this 
document. Section 1146.1 of the rule defines ``eligible milk'' as Class 
I fluid milk products produced and processed in the United States 
meeting the commodity specifications referenced in Sec.  1146.3.
    Eligible partnership. The amended statute specifies participation 
in the MDRP requires application for the program by a partnership 
between an eligible dairy organization and an eligible distributor. See 
Sec. 1431(a)(4). Each partnership is required to submit a joint Milk 
Donation and Distribution Plan (Plan) containing information about 
their respective roles to AMS. Requiring the parties to apply as a 
partnership ensures that all aspects of the program requirements will 
be met, and an agreed-upon structure will be in place when eligible 
milk is available for donation and distribution. Thus, Sec.  1146.1 of 
the rule defines ``eligible partnership'' as a partnership between an 
eligible dairy organization and an eligible distributor.
    AMS recognizes some eligible dairy organizations may have 
processing plants in more than one location and each may be regulated 
under different FMMOs. As well, eligible distributors may have more 
than one distribution site, for example, several food pantries operated 
by one umbrella organization. Thus, under Sec.  1146.102(a) of the 
rule, the eligible partnership can submit one Plan to cover multiple 
plants and/or distribution points as long as only one eligible dairy 
organization and one eligible distributor are represented. Individual 
eligible dairy organizations and eligible distributors can also form 
other partnerships, but they are required to submit separate Plans for 
each partnership.
    Participating partnership. The amended statute specifies that a 
participating partnership is one whose Plan has been approved by AMS. 
See Sec. 1431(a)(5). Once an eligible partnership's Plan has been 
approved by AMS pursuant to Sec.  1146.104 of the rule, the partnership 
is considered a participant in the MDRP. Documentation from both 
partners will be necessary to validate claims by the eligible dairy 
organization for reimbursement under the program, as specified in Sec.  
1146.106. Thus, Sec.  1146.1 of the rule defines ``participating 
partnership'' as an eligible partnership for which AMS has approved a 
Milk Donation and Distribution Plan for eligible milk under Sec.  
1146.104.
    Additional terms necessary for administration of the program are 
defined in Sec.  1146.1.

Commodity Specifications

    As with AMS programs related to commodity purchases, the commodity 
specifications for fluid milk products under the MDRP are contained in 
a separate document available on the AMS website. Maintaining the 
specifications as an online document allows AMS to keep the 
specifications current and provide updated links to other relevant 
industry references, such as AMS's current Commercial Item Description 
for fluid milk products,\1\ the U.S. Food and Drug Administration's 
(FDA) Grade A Pasteurized Milk Ordinance,\2\ and FDA's Interstate Milk 
Shippers List.\3\ These references provide guidance pertaining to the 
proper identification, manufacture, packaging, transportation, and 
storage of fluid milk products. The dairy industry is familiar with 
these references and the frequency with which they can be revised, 
sometimes several times each year. Therefore, Sec.  1146.3(a) of the 
rule provides that eligible milk donations must meet the commodity 
specifications in effect on the date the milk is shipped from the 
processor to the eligible distributor, and Sec.  1146.3(b) requires AMS 
to maintain current commodity specifications for donated milk on its 
website.
---------------------------------------------------------------------------

    \1\ https://www.ams.usda.gov/sites/default/files/media/CIDMilkFluid.pdf, accessed August 29, 2019.
    \2\ https://www.fda.gov/downloads/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/Milk/UCM612027.pdf; accessed 
August 29, 2019.
    \3\ https://www.fda.gov/Food/GuidanceRegulation/FederalStateFoodPrograms/ucm2007965.htm#sld, accessed August 29, 
2019.
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Program Eligibility and Participation

    Section 1146.100 of the rule provides that an eligible dairy 
organization must be a member of a participating partnership to be 
eligible for reimbursements under the MDRP. As explained in the 
Definitions section above, a participating partnership is one whose 
Plan has been approved by AMS. Program reimbursements cannot exceed 100 
percent of the eligible dairy organization's qualified expenses.
    The amended statute requires the Secretary to review Plans at least 
annually and determine whether to approve those Plans. See Sec. 
1431(c)(2). Further, the amended statute requires the Secretary to, at 
least annually, preapprove an amount for reimbursement of qualified 
expenses under each Plan based on an assessment of the Plan's 
feasibility and the extent to which the Plan advances the purposes of 
the program. See Sec. 1431(f)(1). Finally, Sec. 1431(c)(1) of the 
amended statute specifies the information that

[[Page 46655]]

eligible partnerships must supply with their Plans. Sections 1146.102 
and 1146.104 of the rule address these statutory requirements and are 
described in detail below.
    Section 1146.102 of the rule outlines requirements for submission 
of Plans to AMS in order to be considered for the program. Eligible 
partnerships must apply or reapply for program participation each 
fiscal year by the deadline announced by AMS to be assured of 
consideration. Eligible partnerships must estimate the amount of 
eligible milk the dairy organization partner will donate to the 
distributor partner for distribution to persons in low-income groups. 
Such amounts should include planned milk donations that a dairy 
organization might make on an anticipated schedule, as well as plans 
for contingency donations the dairy organization might make under 
certain situations, such as when the distributor partner identifies a 
specific need for additional milk donations. Plans submitted to AMS for 
program approval must include a signed affirmation regarding the 
partnership's ability to supply, transport, store, and distribute 
eligible donated milk products consistent with the requirements in the 
commodity specifications under Sec.  1146.3 of the rule. Finally, the 
eligible partnership is required to propose the rate at which qualified 
expenses under the program will be reimbursed to the eligible dairy 
organization member. Such information will enable AMS to determine 
whether each partnership's Plan is feasible and likely to fulfill the 
statutory purposes of the program. As specified in Sec.  1146.208 of 
the rule, AMS will only collect information deemed necessary to 
determine whether an eligible partnership's Plan should be approved. 
All proprietary business information submitted will be used only for 
the purposes of the program and will be kept confidential by AMS.
    Section 1146.104 of the rule specifies the process AMS will use to 
review applications to the program and determine whether to approve 
Plans submitted by eligible partnerships. Within 45 days of the 
application deadline, AMS will review the Plans, determine whether to 
approve or disapprove them, and notify the eligible partnership of 
AMS's determination. In making determinations, AMS will consider under 
Sec.  1146.104(a)(1) the total amount of funding available for the 
program each fiscal year. The amended statute specifies that the 
Secretary shall use $9 million dollars to carry out the provisions of 
the program for fiscal year 2019, and $5 million dollars for each 
fiscal year thereafter. See Sec. 1431(j). Under Sec.  1146.104(a)(2), 
AMS will consider the feasibility of each Plan by determining whether 
available funding will cover the total amount of donations at the 
reimbursement rate proposed by the partnership. As well, AMS will 
review the information submitted by the partnership, including the 
signed confirmation that the partnership can meet the requirements 
related to proper processing, transport, and storage of donated milk 
products until they are distributed. Under Sec.  1146.104(a)(3), AMS 
will consider the extent to which the Plan would advance the statutory 
purposes of the MDRP, namely whether it would encourage the donation of 
eligible milk, provide nutrition assistance to individuals in low-
income groups, and reduce food waste. See amended statute at Sec. 
1431(f)(B)(ii). Finally, the amended statute specifies that preference 
will be given to eligible partnerships where the dairy organization 
provides funding and in-kind contributions in addition to the eligible 
milk donations for which the dairy organization will seek 
reimbursement. See Sec. 1431(f)(2). Section 1146.104(a)(4) incorporates 
that factor for Plan consideration.
    Under Sec.  1146.104(b) of the rule, participating partnerships can 
apply for continued program participation in subsequent fiscal years 
and can either notify AMS that there are no changes to the previous 
fiscal year's Plan, or they can submit a revised Plan for 
consideration. Section 1431(f)(2) of the amended statute specifies that 
preference will be given to eligible partnerships who provide funding 
and in-kind contributions in addition to the donations for which they 
are reimbursed. Accordingly, Sec.  1146.104(b) of the rule allows for 
participating partnerships desiring to continue in the program to 
submit additional information about funding and in-kind donations the 
dairy organization partner made during the previous fiscal year.
    Section 1146.104(c) of the rule provides that AMS will determine 
whether to approve new or continuing Plans for all or a portion of each 
Plan's proposed donations and reimbursements, depending on the amount 
of funds available for allocation to all participating partnerships 
during the fiscal year. In their Plans, partnerships will include a 
rate at which they propose to be reimbursed for milk donations. For 
example, the Plan may request reimbursement at a rate of 75 percent of 
the difference between Class I and the lowest class price for eligible 
milk in each month they make donations. Upon Plan approval, AMS will 
specify the approved rate, as well as the total amount the partnership 
can receive in reimbursements during the fiscal year. The approved 
total amount will be dependent upon the number of approved program 
partnerships and available funding. The partnership may submit 
reimbursement claims any time during the fiscal year or up to 90 days 
after the close of the fiscal year. Once the partnership's 
reimbursements for the year reach the total dollar amount approved for 
that partnership, reimbursements under their Plan will not be approved 
for the remainder of the fiscal year, unless an adjustment or increase 
is provided as described below.
    The amended statute specifies that the Secretary shall adjust or 
increase amounts approved for reimbursement based on performance and 
demand. See Sec. 1431(f)(3)(A). Section 1146.104(d) of the rule 
provides that AMS will review the status of each approved Plan during 
the applicable fiscal year. AMS may adjust the amount of reimbursements 
available under a participating partnership's Plan based on the 
partnership's performance under their Plan to date, the availability of 
program funds, or changes in demand for fluid milk donations. For 
example, in the aftermath of a hurricane that displaces numerous 
people, AMS could determine that demand for milk donations may increase 
in that area and AMS could make adjustments to the Plans of 
participating partnerships in the affected area to allow for additional 
reimbursements to support increased milk donations, if the partnerships 
are willing to do so. In another example, during its routine review of 
approved Plans, AMS might observe that one partnership has been unable 
to donate the amount of eligible milk it originally estimated because 
the distributor partner's food pantry closed. Under Sec.  
1146.104(d)(2) of the rule, AMS could reduce that partnership's 
approved reimbursement amount and reassign the unused funds to another 
participating partnership who has indicated it is interested in making 
additional donations. AMS will provide affected participating 
partnerships 30 days' notice prior to adjusting their approved Plans.
    The amended statute further requires the Secretary to establish a 
procedure for participating partnerships to request increases to the 
amount approved for reimbursement under their Plans based on changes in 
conditions. See Sec. 1431(f)(3)(B). Section 1146.104(e) of the rule 
establishes the process for making such requests. To support requests 
for increases in reimbursement amounts, participating partnerships are 
required

[[Page 46656]]

to submit information about the change in conditions that would warrant 
increases. The partnership is required to indicate whether it is 
seeking a long-term increase to address a permanent change in 
conditions, such as the addition of a second food pantry by the 
distributor partner, or whether it is seeking only a short-term 
increase to address a temporary change in conditions. Examples of 
temporary changes in conditions might include a plant receiving excess 
milk during the spring flush or a plant being temporarily shut down. 
AMS will notify the requester within 30 days of its determination 
regarding the requested increase, which will be based on AMS's 
evaluation of the reported change in conditions and the availability of 
funds.
    Additionally, if a natural disaster or other unforeseen event 
occurs during the fiscal year, AMS may accept new Plan applications in 
order to facilitate donations to meet an immediate need. In this case, 
AMS may choose to publish the opportunity to accept new Plans, or a 
partnership can request AMS review a new Plan. New Plans must meet the 
criteria under Sec.  1146.102 of the rule, and approval is subject to 
available remaining program fiscal year funds.
    Under Sec.  1146.104(e)(3) of the rule, AMS can give interim 
approval of the requested increase and approve incremental increases to 
the approved reimbursement amount prior to making a final determination 
regarding the increase, as authorized under Section 1431(f)(3)(B)(ii) 
of the amended statute.

Reimbursements and Qualified Expenses

    Section 1431(d) of the amended statute specifies that the Secretary 
shall reimburse the eligible dairy organization member of a 
participating partnership for qualified expenses under the program on 
receipt of appropriate documentation. Section 1146.106(a) of the rule 
provides the process and describes the necessary information and 
documentation AMS will require to verify the dairy organization's 
claims for reimbursement. For each month in which the dairy 
organization makes donations and submits claims for reimbursement, the 
dairy organization must report the amount of eligible milk donated to 
the eligible distributor, the location of the plant where the milk was 
processed, the dates the donated milk was shipped to and received by 
the eligible distributor, and the applicable FMMO milk prices for that 
location for the month the milk was pooled on an FMMO. The dairy 
organization must also provide adequate documentation to verify the 
eligible distributor received the donated milk. Such documentation 
could include, but is not limited to, processing and shipping records, 
bills of lading, storage records, and receiving records from the 
eligible distributor. As specified in Sec.  1146.208 of the rule, AMS 
will only collect the information and documentation needed to verify 
the dairy organization's claims for reimbursement. Under FMMOs, the 
United States Department of Agriculture (USDA) is required to keep all 
proprietary business information, confidential.\4\ Confidentiality of 
such information is extended to its use in administering the MDRP.
---------------------------------------------------------------------------

    \4\ See 7 U.S.C. 608d(2).
---------------------------------------------------------------------------

    Section 1146.106(b) of the rule specifies that a participating 
partnership can submit reimbursement requests anytime up to 90 days 
after the close of the fiscal year. Under Sec.  1146.106(c), AMS will 
review, process, and issue payments for reimbursement claims on a 
quarterly basis. Under Sec.  1146.106(d), AMS will return incomplete 
claims to the submitter so they can be completed and resubmitted. As 
authorized by the amended statute (Sec. 1431(d)(2)(B)), AMS may verify 
the accuracy of documentation submitted with reimbursement claims with 
spot checks and audits under Sec.  1146.206 of the rule.
    Section 1431(e) of the amended statute specifies the amount of 
reimbursement that can be claimed for qualified expenses under the 
program. As explained in the Background section of this document, only 
the dairy organization's expenses related to its FMMO pool obligation 
can be reimbursed under the MDRP. Reimbursement rates are limited to no 
more than 100 percent of the difference between the Class I milk price 
at the plant location where the donated milk was processed and the 
lowest classified milk price for the applicable month (either Class III 
or Class IV). Section 1146.108(a) of the rule provides that 
reimbursements will be determined by multiplying the following: [the 
amount of eligible milk donated] times [the approved rate for 
reimbursement determined pursuant to Sec. Sec.  1146.102(d) and 
1146.104(c)] times [the difference in the Class I price at the 
processing plant location and the lowest FMMO classified price (either 
Class III or Class IV) for the month the donation occurred]. Total 
reimbursements for a fiscal year cannot exceed the amount approved by 
AMS for each participating partnership.

Administrative Provisions

    The amended statute requires the Secretary to publicize 
opportunities to participate in the MDRP. See Sec. 1431(h). 
Accordingly, Sec.  1146.200 of the rule requires AMS to publish notices 
inviting interested parties to apply for program participation on the 
AMS website. AMS will announce the total amount of funding available 
for each fiscal year and will specify the format for submitting 
applications for new or continuing program participation. If, after its 
review and approval of the applications submitted, AMS determines that 
additional funds are available for the fiscal year, it will publicize 
further announcements and invitations on its website.
    Section 1431 (j) of the amended statute specifies that program 
funds are to remain available until expended. Under Sec.  1146.202 of 
the rule, if reimbursement monies remain after all fiscal year 
reimbursement claims have been approved and distributed, the remaining 
monies will remain available to fund reimbursement claims in subsequent 
fiscal years.
    The amended statute prohibits the sale of eligible milk products 
donated under the MDRP back into commercial markets and specifies that 
eligible distributors who violate that prohibition will not be eligible 
for future participation in the program. See Sec. 1431(g). Section 
1146.204 of the rule implements the statutory prohibition and penalty 
for violation.
    Section 1431(i) of the amended statute directs the Secretary to 
conduct appropriate reviews or audits to ensure the integrity of the 
MDRP. Section 1431(d)(2)(B) of the amended statute further authorizes 
the Secretary to verify the accuracy of documentation submitted with 
claims for reimbursement through spot checks and audits. Section 
1146.206 of the rule provides that AMS will verify that the donated 
milk for which reimbursement is being sought was pooled on an FMMO. The 
section further provides for the review, audit, and spot checks of 
information submitted.
    As mentioned in the above discussions, Sec.  1146.208 of the rule 
requires AMS to maintain confidentiality regarding information it 
collects to administer the program, and to use the information only for 
program purposes.
    Finally, Sec.  1146.210 of the rule specifies that milk products 
sold or donated under any other USDA commodity purchase or donation 
program are not eligible for reimbursement under the MDRP. From time to 
time, USDA may purchase fluid milk products for use in nutrition 
assistance programs or other uses, but vendors are compensated for 
those

[[Page 46657]]

purchases through funding under those program provisions. One of the 
main purposes of the MDRP is to reduce food waste by encouraging the 
donation of additional milk to similar outlets. Thus, eligible dairy 
organizations who have received compensation for milk purchases under 
other USDA programs may not receive reimbursements for the same milk 
under the MDRP.

Paperwork Reduction Act

    Section 1601(c)(2)(B) of the 2014 Farm Bill provides that the 
administration of the Dairy Product Donation Program shall be made 
without regard to the Paperwork Reduction Act (PRA), 44 U.S.C. Chapter 
35. Section 1701 of the 2018 Farm Bill extends that Congressional 
direction to the establishment of the MDRP replacing the Dairy Product 
Donation Program. Thus, any information collection conducted for the 
MDRP is not subject to the PRA.
    Implementation of this program will place information collection 
requirements on participating entities. AMS estimates twenty 
partnerships will be involved in the program during each fiscal year. 
Each participating partnership will be required to submit a Milk 
Donation and Reimbursement Plan. Claims will be processed quarterly, 
thus participating partnerships can submit four Reimbursement Claim 
Forms per year. AMS estimates it will take participating partnerships 2 
hours per year to complete a Milk Donation and Reimbursement Plan Form, 
and 6 hours per year to complete the Reimbursement Claim Form (1.5 
hours each reporting quarter). Assuming the reporting burden will be 
completed by an administrative assistant employee, at an hourly salary 
rate of $20, AMS estimates an annual reporting cost of $160 per 
participating partnership, for a total annual program reporting cost of 
$3,200 (assuming 20 participating partnerships).

E-Government Act

    USDA is committed to complying with the E-Government Act (44 U.S.C. 
3601, et seq.) by promoting the use of the internet and other 
information technologies to provide increased opportunities for citizen 
access to Government information and services, and for other purposes. 
The application and reimbursements can be filed though 
www.ams.usda.gov/mdrp.

Executive Orders 12866 and 13771

    AMS is issuing this rule in conformance with Executive Order 
12866--Regulatory Planning and Review, which directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits, including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity.
    AMS considered alternative methods for allocating available funds 
under the program, including whether to allocate reimbursements equally 
across all the geographic areas of the United States covered by FMMOs 
or to target specific regions in need of milk donations. Ultimately AMS 
determined that because the primary purpose of the program is to reduce 
waste associated with the disposition of surplus milk, the industry 
would be best served by allowing those who are more likely to have 
surplus milk and who are in a position to make donations to apply for 
the program without consideration of geographic location.
    This rule has been designated a significant regulatory action under 
Executive Order 12866. This rule is not expected to have any quantified 
cost or benefits, rather the rule is expected to result in transfers 
consistent with the following table:

                                          Table 1--Accounting Statement
----------------------------------------------------------------------------------------------------------------
                                          Primary                      Discount rate
                                         estimate       Year dollar      (percent)          Period covered
----------------------------------------------------------------------------------------------------------------
Benefits--
Annualized Monetized ($millions/                   0            2019               7  FY 2019-2023
 year).
                                                   0            2019               3
Costs--
Annualized Monetized ($millions/                   0            2019               7  FY 2019-2023
 year).
                                                   0            2019               3
Transfers--From the Federal
 Government to an eligible
 partnership
Annualized Monetized ($millions/               $6.33            2019               7  FY 2019-2023
 year).
                                               $6.02            2019               3
----------------------------------------------------------------------------------------------------------------

    As the program is voluntary, eligible partnerships are expected to 
only participate if their individual circumstances deem it beneficial. 
The transfers will be reimbursements in the form of Federal payments to 
program participants to help offset costs associated with eligible milk 
donations.
    This rule is not subject to the requirements of E.O. 13771 because 
this rule results in no more than de minimis costs.
    AMS does not anticipate this program will impact milk prices. Milk 
donated to non-profit organizations to feed needy people is already 
priced under the FMMO system. Implementation of this program will not 
change FMMO milk prices as it relates to donated milk. Furthermore, 
this program is expected to have a negligible impact on retail milk 
sales. Typically, needy populations that receive nutrition assistance 
from non-profit organizations do not buy milk at retail outlets. 
Consequently, fluid milk donations through this program are not 
expected to become a substitution for retail milk sales.
    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this rule 
as not a major rule as defined by 5 U.S.C. 804(2).

Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601, et seq.), AMS considered the 
economic impact of the action on small entities. Accordingly, AMS has 
prepared this final Regulatory Flexibility Analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions so that small businesses will not be 
unduly or disproportionately burdened. Small dairy farm businesses have 
been defined by the Small Business Administration (SBA) (13 CFR 
121.601) as those businesses having annual gross receipts of less than 
$750,000. The SBA's definition of small agricultural service firms, 
which includes handlers that are regulated under FMMOs, varies 
depending on the product manufactured. Small fluid beverage

[[Page 46658]]

milk product manufacturers are defined as having 1,000 or fewer 
employees.
    The milk of 31,435 U.S. dairy farms was pooled on an FMMO for the 
month of December 2018. AMS estimates that 28,920 dairy farms, or 92 
percent, would be considered small businesses. Dairy farmers of all 
sizes whose milk is pooled on an FMMO may benefit from the program 
because it will encourage donations of milk which will be pooled on an 
FMMO at its Class I value.
    During December 2018 there were 233 regulated fluid milk processing 
plants (distributing plants) pooling Class I milk on an FMMO. AMS 
estimates 18 percent were operated by dairy-farmer cooperatives, while 
the remaining were independently owned. AMS assumes that fluid milk 
processing plants, whether cooperative or independently owned, are the 
entities most likely to qualify as eligible dairy organizations under 
the MDRP, as they are regulated and typically have FMMO pool 
obligations. AMS estimates 120 different entities operated the 233 
fluid milk processing plants pooling milk in December 2018. AMS 
believes 120 to be the universe of fluid milk processing plants 
eligible to participate in the MDRP. Of the 120, 63 percent would be 
considered small businesses, based on their numbers of employees.
    Participating in the MDRP will not unduly or disproportionately 
burden small fluid milk processing plants. All entities, regardless of 
size, can apply for the program if they incur qualified expenses as 
defined by program provisions. Program provisions are administered 
without regard for business size. Small fluid milk processing plants 
not accounting to an FMMO pool have no obligations that would qualify 
as reimbursable expenses under the MDRP and are not eligible to 
participate.
    The definition of an eligible distributor is a public or non-profit 
organization that distributes donated milk. AMS was unable to obtain 
reliable data regarding the size of public or private non-profit 
organizations distributing food for nutrition assistance. Therefore, 
the business sizes of eligible distributors could not be estimated. 
Eligible distributors, regardless of size, can voluntarily participate 
in the MDRP if they are able to form a partnership with an eligible 
dairy organization. The voluntary nature of the program allows any 
eligible distributor to stop participating if they find the program 
causes an undue or disproportionate burden.
    AMS has determined establishment of this program will not have a 
significant economic impact on a substantial number of small entities. 
Program provisions will be applied uniformly to both large and small 
businesses and are not expected to unduly or disproportionately burden 
small entities.

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: (1) 
Policies that have tribal implications, including regulations, 
legislative comments, or proposed legislation; and (2) 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.
    The Office of Tribal Relations (OTR) has reviewed this rule and 
determined that consultation is not required at this time. If a tribe 
requests consultation AMS will work with the OTR to ensure meaningful 
consultation is provided where changes, additions, and modifications 
identified herein are not expressly mandated by Congress.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988--Civil 
Justice Reform. This final rule may have retroactive effect because 
milk donations made during fiscal year 2019 prior to the effective date 
of the rule may be eligible for reimbursement if the eligible 
partnership's fiscal year 2019 Plan is approved for reimbursements and 
if the partnership meets all other program requirements. Fiscal year 
2019 extends from October 1, 2018, to September 30, 2019. Milk 
donations made prior to October 1, 2018, are not eligible for 
reimbursement under the program. There are no administrative procedures 
that must be exhausted prior to judicial challenges to the provisions 
of this rule.

Effective Date

    The APA requires the publication of a substantive rule 30 days 
before its effective date, unless the rule grants or recognizes an 
exemption or relieves a restriction (5 U.S.C. 553(d)(1)), or the agency 
finds good cause for excepting the rule from the 30-day notice 
requirement (5 U.S.C. 553(d)(3).) AMS finds that it is unnecessary and 
contrary to the public interest to postpone the effective date of this 
rule for 30 days after publication in the Federal Register. The 
Congressional mandate to establish the program specifies funding for 
the 2019 fiscal year, which began October 1, 2018. To take full 
advantage of the program, participants will need as much time as 
possible to submit Plans and receive approval from AMS. Furthermore, 
participation in the program is intended to reduce food waste by 
offering milk handlers alternative outlets for excess milk, which is 
produced primarily in the spring and summer months due to the normal 
seasonal variations in milk production. It would be contrary to the 
public interest to delay implementation of the MDRP, thereby 
potentially delaying donations of milk to food assistance programs and 
prolonging food waste. Moreover, postponing the effective date of the 
final rule for 30 days is unnecessary to allow for adjustment of 
behavior because participation in the program is voluntary. Therefore, 
good cause exists for making this rule effective 10 days after 
publication in the Federal Register.

List of Subjects in 7 CFR Part 1146

    Milk, Donations, Reporting and recordkeeping requirements.

0
For the reasons set forth in the preamble, 7 CFR Subtitle B Chapter X 
is amended by adding part 1146 to read as follows:

PART 1146--MILK DONATION REIMBURSEMENT PROGRAM

Subpart A--General Provisions
Sec.
1146.1 Definitions.
1146.3 Commodity specifications.
Subpart B--Program Participation
1146.100 Program eligibility.
1146.102 Milk donation and distribution plans.
1146.104 Review and approval.
1146.106 Reimbursement claims.
1146.108 Reimbursement calculation.
Subpart C--Administrative Provisions
1146.200 Opportunities to participate.
1146.202 Rollover of fiscal year funds.
1146.204 Prohibition on resale of products.
1146.206 Enforcement.
1146.208 Confidentiality.
1146.210 Milk for other programs.

    Authority: Sec. 1431, Pub. L. 113-79, 128 Stat. 695, as amended.

Subpart A--General Provisions


Sec.  1146.1  Definitions.

    AMS means the Agricultural Marketing Service of the United States 
Department of Agriculture.

[[Page 46659]]

    Eligible dairy organization means a dairy farmer cooperative or a 
dairy processor that
    (1) Is regulated under a Federal milk marketing order (FMMO);
    (2) Accounts to the FMMO marketwide pool; and
    (3) Incurs qualified expenses described in Sec.  1146.108.
    Eligible distributor means a public or private non-profit 
organization that distributes donated eligible milk.
    Eligible milk means Class I fluid milk products produced and 
processed in the United States that meet the specifications referenced 
in Sec.  1146.3.
    Eligible partnership means a partnership between an eligible dairy 
organization and an eligible distributor.
    Fiscal year means the twelve-month period beginning October 1 of 
any year and ending September 30 of the following year.
    Participating partnership means an eligible partnership for which 
AMS has approved a Milk Donation and Distribution Plan (Plan) for 
eligible milk under Sec.  1146.104.
    Program means the Milk Donation Reimbursement Program established 
in this part.
    Secretary means the Secretary of the United States Department of 
Agriculture or a representative authorized to act in the Secretary's 
stead.


Sec.  1146.3  Commodity specifications.

    (a) Eligible milk donations must meet the commodity specifications 
pursuant to (b) in effect on the date the milk products are shipped 
from the plant.
    (b) AMS shall maintain on its website current commodity 
specifications for fluid milk products eligible for donation and 
reimbursement under the Milk Donation Reimbursement Program.

Subpart B--Program Participation


Sec.  1146.100  Program eligibility.

    An eligible dairy organization must be a member of a participating 
partnership pursuant to Sec.  1146.1 to be eligible to receive 
reimbursements for qualified expenses related to voluntary fluid milk 
donations, subject to the requirements and limitations specified in 
Sec. Sec.  1146.102 and 1146.104.


Sec.  1146.102  Milk donation and distribution plans.

    New and continuing program participants must submit completed Milk 
Donation and Distribution Plans to AMS in the form and manner 
established by AMS prior to the published deadline to be eligible for 
program consideration. The completed Milk Donation and Distribution 
Plans must -
    (a) Include the physical location(s) of the eligible dairy 
organization's processing plant(s) and the eligible distributor's 
distribution site(s);
    (b) Include an affirmation signed by both eligible partners 
regarding the partnership's ability to supply, transport, store, and 
distribute donated milk products consistent with the commodity 
specifications under Sec.  1146.3;
    (c) Include an estimate of the quantity of eligible milk that the 
eligible dairy organization plans to donate each year, based on -
    (1) Preplanned donations and
    (2) Contingency plans to address unanticipated donations; and
    (d) Describe the rate at which the eligible dairy organization will 
be reimbursed, not to exceed 100 percent of qualified expenses pursuant 
to Sec.  1146.108.


Sec.  1146.104  Review and approval.

    (a) Program application and review. Within 45 days of the announced 
application deadline, AMS will review all timely submitted applications 
and notify applicants regarding approval or disapproval for program 
participation during the applicable fiscal year. AMS's review will 
include the following considerations:
    (1) Total annual funds available for program administration, 
including an appropriate reserve to cover costs related to increases in 
milk prices and emergencies including, but not limited to, natural 
disasters;
    (2) The feasibility of the Milk Donation and Distribution Plan;
    (3) The extent to which the Milk Donation and Distribution Plan -
    (i) Promotes the donation of eligible milk,
    (ii) Provides nutrition assistance to individuals in low-income 
groups, and
    (iii) Reduces food waste; and
    (4) The amount of funding and in-kind contributions the eligible 
dairy organization plans to provide to the eligible distributor in 
addition to the donations for which it will seek reimbursements.
    (b) Continued program participation. Within 45 days of the 
announced application deadline, AMS will review and notify applicants 
regarding approval or disapproval of all timely submitted requests for 
continued program participation. AMS's review of requests for continued 
program participation will be based on consideration of the factors in 
paragraphs (a) and (b)(1) through (3) of this section:
    (1) Eligible partnerships requesting continued program 
participation for a subsequent fiscal year can include information 
about the extent to which they provided funding and in-kind 
contributions in addition to eligible milk donations for which they 
were reimbursed through the program for the previous fiscal year.
    (2) If there are no changes to the eligible partnership's approved 
Milk Donation and Distribution Plan from the previous fiscal year, the 
eligible partnership must request that AMS consider the partnership's 
previously approved Plan and provide the additional information 
described in paragraph (b)(1) of this sectoin, if applicable.
    (3) If there are changes to the eligible partnership's approved 
Milk Donation and Distribution Plan from the previous fiscal year, the 
eligible partnership must submit a new Plan as described in paragraph 
(a) and provide the additional information described in paragraph 
(b)(1) of this section, if applicable.
    (c) Plan approval. Subject to the provisions in paragraph (a) of 
this section, AMS will determine whether to approve new and continuing 
Milk Donation and Distribution Plans for all or a proportion of each 
Plan's proposed donations and reimbursements. For each approved Plan, 
AMS will determine:
    (1) A reimbursement rate applicable to each claim for reimbursement 
during the fiscal year, and
    (2) A total dollar amount available for reimbursement during the 
fiscal year.
    (d) Adjustments. AMS will review the activity of approved Milk 
Donation and Distribution Plans during the fiscal year to determine 
whether adjustments should be made to the reimbursement amounts 
approved under paragraph (c) of this section.
    (1) Determinations about adjustments will be based on -
    (i) The participating partnership's performance,
    (ii) Availability of program funds, and
    (iii) Demand for eligible milk donations.
    (2) AMS will provide 30 days' notice to participating partnerships 
prior to adjusting reimbursement amounts in their respective approved 
Milk Donation and Distribution Plans.
    (e) Request for increase. Eligible partnerships with approved Milk 
Donation and Distribution Plans during any fiscal year may request an 
increase in the amount of reimbursement approved under paragraph (c) of 
this section based on changes in conditions.
    (1) Requests for an increase must be submitted to AMS in the manner 
and form established by AMS, and must -

[[Page 46660]]

    (i) Describe the change in conditions that would warrant an 
increase in reimbursement,
    (ii) Indicate whether the requested increase is intended to be a 
long-term revision to the eligible partnership's approved Milk Donation 
and Distribution Plan or a short-term increase to respond to temporary 
conditions, and
    (iii) Specify the amount of increased reimbursement requested.
    (2) Within 30 days of receipt, AMS will review the request for an 
increase and will notify the requester regarding approval or 
disapproval of the request. AMS's determination about whether such an 
increase is feasible will be based on its evaluation of the factors 
described in paragraph (e)(1) of this section and the availability of 
funds.
    (3) Based on the change in conditions identified by the requester, 
AMS will determine whether to provide interim approval of an increase 
requested under paragraph (e)(1) of this section and an incremental 
increase to the amount of reimbursement approved under paragraph (c) of 
this section prior to making a final determination regarding approval 
of the requested increase.


Sec.  1146.106  Reimbursement claims.

    (a) In order for the eligible dairy organization partner to receive 
reimbursements for qualified expenses pursuant to Sec.  1146.108, the 
participating partnership must submit a report and appropriate 
supporting documentation to AMS.
    (1) For each month of the fiscal year pertaining to an approved 
Milk Donation and Distribution Plan (including the months prior to 
AMS's review and approval of the Plan), the report must include:
    (i) The amount of eligible milk donated to the eligible 
distributor;
    (ii) The location of the plant where the donated milk was 
processed;
    (iii) The date the donated milk was shipped from the plant where 
the milk was processed;
    (iv) The date the donated milk was received by the eligible 
distributor; and
    (v) The applicable announced Federal milk marketing order prices 
for the month the milk was pooled:
    (A) The Class I price at the plant location where the milk was 
processed; and
    (B) The lowest classified price (either Class III or Class IV).
    (2) Appropriate documentation to support the report required in 
paragraph (a)(1) of this section may include, but is not limited to, 
copies of processing records, shipping records, bills of lading, 
warehouse receipts, distribution records, or other documents that 
demonstrate the reported amount of eligible milk was processed, 
donated, and distributed in accordance to the approved Milk Donation 
and Distribution Plan and as reported in the eligible dairy 
organization's report.
    (b) Reimbursement requests may be submitted to AMS at any time 
during the fiscal year and for up to 90 days after the close of the 
fiscal year.
    (c) AMS will review and process reimbursement requests on a 
quarterly basis, including those submitted by the last day of the month 
following the end of each quarter of the fiscal year.
    (d) Incomplete reimbursement requests will be returned to the 
submitter for revision or completion and resubmission as necessary.


Sec.  1146.108  Reimbursement calculation.

    (a) For each reimbursement claim submitted by a participating 
partnership, the amount of reimbursement under Sec.  1146.106 shall be 
the product of:
    (1) The quantity of eligible milk donated by the eligible dairy 
organization to the eligible distributor member of the participating 
partnership;
    (2) The rate described in the approved Milk Donation and 
Distribution Plan under Sec.  1146.102(d); and
    (3) The difference between the FMMO Class I price at the plant 
location and the lowest classified price (either Class III or Class 
IV), for the month in which the donation was pooled on a Federal Milk 
Marketing Order.
    (b) Expenses eligible for reimbursement under Sec.  1146.106 shall 
not exceed the value that an eligible dairy organization incurred by 
accounting to the Federal milk marketing order pool at the difference 
between the announced Class I milk price at the location of the plant 
where the milk was processed and the lower of the Class III or Class IV 
milk price for the applicable month.
    (c) Claim reimbursements are subject to the limitations specified 
in paragraph (b) of this section.
    (d) Total plan reimbursements are subject to the limitations 
specified in Sec.  1146.104(c)(2).

Subpart C--Administrative Provisions


Sec.  1146.200  Opportunities to participate.

    (a) AMS will announce opportunities to participate in the Milk 
Donation Reimbursement Program and the amount of program funding 
available for each fiscal year on the AMS website. The announcements 
will include invitations for interested parties to submit new or 
revised Milk Donation and Distribution Plans and will specify the 
manner and form in which program applications should be submitted.
    (b) If, after making approval determinations for the fiscal year 
about each submitted program application, AMS determines that 
additional reimbursement funds are available, AMS will publish an 
announcement to that effect and invite further requests for Plan 
approvals pursuant to Sec.  1146.104(a) through (c) or for increases in 
reimbursement amounts pursuant Sec.  1146.104(e).


Sec.  1146.202  Rollover of fiscal year funds.

    If reimbursement monies remain after all fiscal year reimbursement 
claims have been approved and distributed, the remaining monies will be 
available to fund reimbursement claims in subsequent fiscal years.


Sec.  1146.204  Prohibition on resale of products.

    (a) Prohibition in general. An eligible distributor that receives 
eligible milk products donated under the Milk Donation Reimbursement 
Program may not sell the donated milk products back into commercial 
markets.
    (b) Prohibition on future participation. An eligible distributor 
that AMS determines has violated the prohibition in paragraph (a) of 
this section shall not be eligible for any future participation in the 
Milk Donation Reimbursement Program.


Sec.  1146.206  Enforcement.

    AMS will verify the donated milk for which reimbursement is sought 
was pooled on a FMMO. AMS will also conduct spot checks, reviews, and 
audits of the reports and documentation submitted pursuant to Sec.  
1146.106(a) to verify their accuracy and to ensure the integrity of the 
Milk Donation Reimbursement Program.


Sec.  1146.208  Confidentiality.

    AMS will collect only that information deemed necessary to 
administer the Milk Donation Reimbursement Program and will use the 
information only for that purpose. AMS will keep all proprietary 
business information collected under the program confidential.


Sec.  1146.210  Milk for other programs.

    Milk sold or donated under other commodity or food assistance 
programs administered by the United States Department of Agriculture is 
not eligible for reimbursement under the Milk Donation Reimbursement 
Program in this part.


[[Page 46661]]


    Dated: August 29, 2019.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2019-19090 Filed 9-4-19; 8:45 am]
BILLING CODE 3410-02-P