[Federal Register Volume 86, Number 167 (Wednesday, September 1, 2021)]
[Rules and Regulations]
[Pages 48887-48900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18606]



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 Rules and Regulations
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  Federal Register / Vol. 86, No. 167 / Wednesday, September 1, 2021 / 
Rules and Regulations  

[[Page 48887]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 1146 and 1147

[Doc. No. AMS-DA-21-0013]
RIN 0581-AE00


Establishment of a Dairy Donation Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule; request for comments.

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SUMMARY: This rule establishes the Dairy Donation Program as required 
by the Consolidated Appropriations Act of 2021. Under the program, 
eligible dairy organizations that account to a Federal milk marketing 
order and incur a qualified expense related to certain dairy product 
donations may apply for and receive reimbursements for those donations. 
The program is intended to facilitate donation of eligible dairy 
products and prevent and minimize food waste.

DATES: 
    Effective Date: This interim final rule is effective September 2, 
2021 and expires September 1, 2023, unless extended by notification in 
the Federal Register.
    Public Comment Date: Public comments on this interim final rule 
must be submitted on or before November 1, 2021.
    Information Collection Comment Date: Pursuant to the Paperwork 
Reduction Act, comments on the information collection burden must be 
received by November 1, 2021.

ADDRESSES: Comments can be submitted online at www.regulations.gov. 
Comments received will be posted without change, including any 
personally identifying information provided. Comments will be made 
available via the internet at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Erin Taylor, Director, Order 
Formulation and Enforcement, AMS Dairy Program, USDA; 1400 Independence 
Avenue SW, Room 2973-S, Washington, DC 20250; telephone: (202) 720-
4392; email: [email protected]; web address: www.ams.usda.gov/ddp.

SUPPLEMENTARY INFORMATION: Section 762 of the Consolidated 
Appropriations Act of 2021 (CAA) (Pub. L. 116-260) authorizes the 
Secretary of Agriculture (Secretary) to establish a program to 
reimburse dairy organizations for donated dairy products to non-profit 
organizations for distribution to recipient individuals and families. 
The Secretary delegated authority to establish and administer this 
program to the Agricultural Marketing Service (AMS). This rule outlines 
the provisions of the new Dairy Donation Program (DDP) codified at 7 
CFR part 1147. Program provisions are intended to encourage the 
donation of dairy products and to prevent and minimize food waste. The 
DDP is an additional dairy donation program that overlays on existing 
USDA dairy milk donation activities such as the Milk Donation 
Reimbursement Program (MDRP). The MDRP was established as part of the 
2018 Farm Bill to facilitate the donation of fluid milk products and 
avoid food waste. The program was funded for $9 million in fiscal year 
2019, and $5 million per fiscal year thereafter. DDP and MDRP are 
separate from USDA purchase programs. The donation program provides for 
reimbursement of certain costs for donations made between two private 
entities. USDA's TEFAP and Section 32 are done through a bid process 
where USDA purchases the product and arranges for delivery to the 
distribution point.
    This rule also amends provisions of the MDRP (codified at 7 CFR 
part 1146), where appropriate, to gain administrative efficiencies and 
lessen the burden for entities participating in the two programs. DDP 
and MDRP are separate and distinct from the USDA safety net program 
(Dairy Margin Coverage), indemnity and disaster assistance programs, 
risk management tools through the public-private partnership of the 
Federal Crop Insurance Program, or USDA purchases of commodities, which 
may include dairy products depending on the market conditions and 
demand from school lunch or nutrition programs.

Background

    In 2020, the COVID-19 pandemic disrupted dairy supply chains and 
displaced significant volumes of milk normally used in food service 
channels. This led to milk being dumped or fed to animals across the 
United States; AMS estimates that the volume of milk dumped due to 
pandemic-related supply chain issues was almost triple what is 
typically observed during normal market conditions.\1\ At the same 
time, amidst surging unemployment and economic hardship nationwide, an 
increasing number of individuals have been in need of nutrient-dense 
foods such as dairy products. Throughout 2020 and 2021, milk and dairy 
products have been in food donations authorized under the Coronavirus 
Aid, Relief, and Economic Security Act (CARES) and through the 
Commodity Credit Corporation (CCC). In December 2020, Congress also 
authorized an additional $400 million until expended to establish the 
DDP, designed to encourage the timely and efficient distribution of 
dairy products to families and individuals while reducing food waste.
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    \1\ USDA Federal Milk Marketing Order Statistics, Other Use 
Volumes, March and April, 2015 through 2021.
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    While the DDP is intended to assist in balancing the supply chain 
during the pandemic recovery, it also will provide the benefit of 
creating an incentive to donate dairy products during the normal spring 
flush of milk production. During normal marketing years (pre-pandemic), 
daily milk production in the spring averaged 6 to 7 percent more than 
in the lower production months of the fall.\2\ Economic Research 
Service (ERS) 2019 food security data estimates that 10.5 percent of 
U.S. households were food insecure at some time during 2019.\3\ ERS 
2020 data has not been released, but it is reasonable to assume food 
insecurity was higher in 2020 because of high unemployment and 
nationwide economic hardship. The United States remains in the midst of 
the recovery, and even when

[[Page 48888]]

employment returns to more normal levels there will continue to be food 
insecurity. The persistent need for nutrient-dense foods such as dairy 
products can be met, in part, through donations encouraged by the DDP.
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    \2\ USDA, National Agricultural Statistics Service, Monthly Milk 
Production data, 2012 through 2020.
    \3\ Trends in U.S. Food Security, 2019; Update for September 9, 
2020. https://www.ers.usda.gov/topics/food-nutrition-assistance/food-security-in-the-us/interactive-charts-and-highlights/#childtrends, accessed August 23, 2021.
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    As detailed later in this rule, the normal rulemaking process would 
be impracticable, unnecessary, and contrary to the public interest in 
light of the importance of distributing donated dairy products as 
quickly as possible to individuals and families. Therefore, AMS finds 
that there is good cause to forgo the notice and comment requirements 
in the Administrative Procedure Act (APA) for this rulemaking.
    The following paragraphs give a general overview of how the DDP 
will operate. Detailed explanations of program provisions can be found 
later in the Program Provisions section.

Who is eligible to participate?

    Program eligibility is open to eligible dairy organizations (EDOs), 
defined as dairy farmers (either individually or as part of a 
cooperative) or dairy processors that meet the following conditions: 
(1) Account to a Federal milk marketing order (FMMO) marketwide pool; 
and (2) incur a qualified expense. Although the definition of EDO 
includes individual dairy farmers, many such farmers might not meet the 
other specified conditions to qualify as EDOs. For example, many such 
farmers would not incur qualified expenses because they do not donate 
eligible dairy products, since they do not have the infrastructure to 
process raw milk into such products. Those individual farmers who do 
meet the required conditions, however, would qualify as EDOs under 
statutes and this rule for both the DDP and MDRP.
    As explained below, the DDP and MDRP refer to the same statutory 
EDO definition; therefore, this rule amends the MDRP to reflect the 
statutory interpretation explained below.
(1) Account to a FMMO Marketwide Pool
    The DDP authorizing statute \4\ adopts the EDO definition contained 
in the statute establishing the MDRP.\5\ When AMS issued the final rule 
for the MDRP, it interpreted the statutory language, ``account to a 
FMMO marketwide pool'', to apply to entities that are regulated by, and 
therefore file reports with, a FMMO. Participation in the MDRP has been 
limited, partly due to the requirement to be regulated.
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    \4\ Sec. 762(a)(1) of the Consolidated Appropriations Act of 
2021.
    \5\ Sec. 1431 of the Agricultural Act of 2014 (7 U.S.C. 
9071(a)). Implementing regulations are codified at 7 CFR part 1147.
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    The COVID-19 pandemic and its impacts affected the entire United 
States. Supply chain disruptions described earlier were not limited to 
only those participating in a FMMO. Consequently, Congress authorized 
the DPP through a broad relief package. In reviewing Congress's intent 
to encourage dairy product donation across the country, AMS has 
determined the interpretation of ``account to'' requiring regulation by 
a FMMO is too narrow; instead, an EDO could ``account to'' a FMMO 
marketwide pool by filing a report with a FMMO office. Consequently, 
this rule revises the definition of ``eligible dairy organization'' for 
MDRP by removing the requirement that the EDO be regulated under a 
FMMO. It also adopts the same definition for the DDP.
    The report the EDO files to ``account to'' a FMMO marketwide pool 
will list the fresh fluid products and/or bulk dairy commodity products 
purchased and how they were utilized to produce donated eligible dairy 
products. EDOs can contact their local FMMO office or access the DDP 
website to determine the applicable FMMO office where the report should 
be filed. Since EDOs may not know they will be donating product during 
the production month, reports may be filed retroactively. Filing of 
this report for the purpose of participating in the DDP will not cause 
the EDO to become regulated by the FMMO.
(2) Incur a Qualified Expense
    The statute further specifies that an EDO must incur a qualified 
expense. Since only Class I fluid products are donated through the MDRP 
and most Class I processors are regulated by a FMMO, incurring a 
qualified expense in the MDRP is currently interpreted as paying 
minimum classified values into a FMMO pool because that is the 
requirement for processors regulated by a FMMO. As explained above, an 
EDO no longer needs to be regulated under a FMMO. This rule adds a 
definition of ``qualified expense'' to MDRP regulations to specify that 
a qualified expense is not tied to the FMMO regulatory requirement of 
paying minimum classified values. The same definition also applies to 
the DDP.
    EDOs incur a qualified expense by either purchasing fresh fluid 
milk product (raw milk, skim milk, cream, or concentrated fluid milk 
products) for processing into an eligible dairy product or purchasing 
bulk dairy commodity product for further processing into an eligible 
dairy product.
    Dairy processors are often associated with buying fresh fluid milk 
products for processing into dairy products. The structure of the dairy 
industry is such that processors are also purchasing bulk dairy 
commodity products for further processing into retail packaging. For 
example, a processor buys 40-pound cheese blocks to further process and 
package into 8-ounce blocks or bags of shredded cheese typically 
preferred by consumers and eligible distributors alike. The DDP is 
intended to facilitate these types of product donations. Therefore, in 
addition to processors who buy fresh fluid milk for processing, the DDP 
will allow processors who purchase and further process bulk commodities 
for donation to qualify as an EDO. To be considered an EDO, a secondary 
processor will also need to account to a FMMO marketwide pool as 
described earlier.
    Once these two above conditions--accounting to a FMMO and incurring 
a qualified expense--are met, EDOs participate in the program by 
forming partnerships with eligible distributors and then submitting a 
Dairy Donation and Distribution Plan (Plan) to AMS for approval. If an 
EDO or eligible distributor is looking for a partner, they may contact 
DDP Office for assistance.
    Because regulations now include a definition of ``qualified 
expense'', the definition of ``eligible dairy organization'' is further 
revised to cite that definition when referring to the requirement that 
an EDO must incur a qualified expense.

What will be reimbursed?

    Upon Plan approval, EDOs can submit a Reimbursement Claim Form 
(Claim Form) to receive reimbursement for donations made. DDP will 
reimburse EDOs for the all or part of the following: (1) Input costs--
fresh fluid milk or bulk dairy commodity product milk equivalent used 
in the eligible dairy product; (2) manufacturing costs; and (3) 
transportation costs.
(3) Input Costs--Fresh Fluid Milk or Bulk Dairy Commodity Product Milk 
Equivalent
    In the FMMO system, milk is priced based on its end use. FMMO 
classifications are generally: Class I--traditionally the highest class 
price--for beverage fluid milk products such as whole, skim, nonfat, 
and flavored milks; Class II for soft products such as yogurt, ice 
cream, and packaged fluid cream; Class III for spreadable and hard 
cheeses; and Class IV for butter and milk products in dried form. 
Announced monthly, FMMO-minimum classified prices reflect surveyed end-

[[Page 48889]]

product wholesale market prices. Under a FMMO, regulated processors are 
required to pay at least minimum classified values for how they use 
their milk.
    For processors purchasing and processing fresh fluid milk products 
(raw milk, skim milk, cream, or concentrated fluid products), the DDP 
will reimburse for the FMMO-minimum classified value applicable on the 
date of production for fresh fluid milk products used to make the 
donated eligible dairy product. FMMO prices are a good approximation of 
what the processor paid for the fresh fluid milk products because they 
represent observed market values paid for product at the time of 
purchase. The DDP will not reimburse for powders and other dry dairy 
products used as an ingredient in eligible dairy products (for example, 
powder used to fortify cheeses or ice cream).
    Reimbursement is not extended to these ingredients because the DDP 
is designed to encourage the use of excess fresh fluid milk for 
donation, rather than being dumped. Dry milk powders in retail 
packaging, such as 10-ounce containers of nonfat dry milk, which are 
made directly from fresh fluid milk, are considered eligible dairy 
products under this program as it is likely surplus fresh fluid milk 
was manufactured into dry milk powder as opposed to being dumped.
    Since FMMO-minimum classified prices are on a hundredweight basis, 
the EDO will report its donation in the quantity and size of the 
donated product, which will be converted to hundredweights with a yield 
factor (how much product can be made from 100 pounds of milk). 
Applicable announced minimum class skim and butterfat prices will be 
used in determining the input cost of the donated dairy product. The 
EDO will have the ability to provide its actual product yield factor or 
the EDO can use a standard yield factor. Standard yield factors will be 
posted on the Dairy Donation Program website.
    Processors buying bulk dairy commodity products for further 
processing and donation, as described earlier, will be reimbursed at 
the classified use value applicable for the month the eligible dairy 
product was processed in the consumer-type package. The reimbursed 
value will represent the milk-equivalent market price of the bulk dairy 
product at the time of conversion into an eligible dairy product.
(4) Manufacturing Costs
    Processors incur expenses beyond input costs to make dairy 
products. To encourage dairy product donations, the DDP will reimburse 
for some of the costs to convert fresh fluid milk product into an 
eligible dairy product.
    Manufacturing costs will be reimbursed at the make (manufacturing) 
allowance levels in the FMMO system, which are generally accepted by 
the industry as representative costs of manufacturing dairy products 
from raw milk. For Class I and II, the Class IV make allowance 
contained in the Class IV price formula will be applied. AMS lacks data 
on manufacturing costs for Class I and II products and therefore 
selects the lower of the two FMMO make allowances to ensure processors 
are not reimbursed for more than their actual manufacturing costs. As 
Class I and II products require different processing, the actual 
manufacturing costs could be higher than the Class IV manufacturing 
allowance. This rule seeks public comment and supporting data related 
to actual manufacturing costs for Class I and II products. For Class 
III and IV products, the manufacturing allowances in the respective 
class price formulas will be applied.
    Currently, the Class III and Class IV FMMO makes allowances are 
$3.17 and $2.16 per hundredweight, respectively, for milk containing 
3.5 percent butterfat. If the FMMO make allowances are updated in the 
future, the DDP will be automatically adjusted to reflect these 
changes.
(5) Transportation Costs
    Transportation costs from the processor to distribution outlet are 
often cost prohibitive. Absent reimbursement, processors may not be 
willing to incur additional transportation costs and feeding 
organizations may lack the funding to cover these costs to facilitate 
the donation. DDP aims to facilitate timely donations and reduce food 
waste. Therefore, this program will cover part of the transportation 
costs from the EDO to the eligible distributor. This may be especially 
beneficial to rural communities whose donation sites are often far from 
plants serving them and who may not receive assistance from other 
government feeding programs with distribution points closer to urban 
centers.
    As the reimbursement value will be paid to the EDO, the DDP will 
only reimburse for transportation if the EDO incurred the expense. If 
donated eligible dairy products are picked up from the plant by the 
eligible distributor, no transportation reimbursement will be paid. The 
transportation cost reimbursement rate is defined later in this rule.
(6) Total Reimbursement Value
    Section 762(d)(2)(A) of the CAA specifies the total reimbursement--
the sum of input, manufacturing, and transportation costs--must be set 
neither too high (such that it would ``interfere with the commercial 
marketing of milk or dairy products'') nor too low (such that it would 
fail to ``be sufficient to avoid food waste''). The statute further 
requires total reimbursement to be between the highest and lowest of 
the classified milk values. To ensure costs can be sufficiently covered 
for most donations, total reimbursement payment, on a per hundredweight 
basis, will be capped at the Class I value for the highest FMMO 
differential zone (Dade County, Florida). Capping at the higher FMMO 
zone will allow for Class I handlers to obtain some reimbursement for 
manufacturing and transportation costs.
    Section 762(d)(2)(B)(iv) of the CAA further allows the Secretary to 
maintain traditional price relationships--Class I being the highest, 
followed in sequence by II, III and IV--in setting the reimbursement 
rate. In 2020, dairy markets experienced pronounced class price 
inversions, where the Class III price was significantly higher than the 
Class I price in many areas of the country. However, the Class III 
price has been above the Class I price in Dade County, Florida only 
three times since the current pricing system was adopted on January 1, 
2000.\6\ Such extreme inversions are not anticipated in the foreseeable 
future, as both short-term COVID-19-related disruptions and long-term 
production capacity issues are beginning to ease. While the DDP does 
not directly determine classified prices and price relationships, the 
program rules should not exacerbate price inversions if they occur. 
Therefore, in times of price inversion, where the Class I price is not 
the highest class price, total reimbursements will continue to be 
capped at the Class I price for Dade County, Florida.
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    \6\ USDA, Federal Milk Marketing Order Statistics, Final Class 
and Component Prices by Order.
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When do plans and reimbursement claims need to be submitted?

    Entities must submit Plan and Eligible Distributor Certification 
Forms (Certification Forms) to AMS for approval before they can submit 
Claim Forms for reimbursement. AMS will approve or disapprove 
Certification

[[Page 48890]]

Forms within 15 business days of receipt. Reimbursements claims, along 
with supporting documentation, can be filed any time after the Plan is 
approved and the donation is made. AMS will use the supporting 
documentation to verify program requirements were met. Plans only need 
to be submitted once for approval. The DDP does not require annual Plan 
renewal.

How will AMS handle both the DDP and MDRP?

    Although program funds for the DDP and MDRP are statutorily 
prohibited from being consolidated, the two programs will operate as 
one from a stakeholder standpoint. EDOs making Class I fluid milk 
product donations--which are covered by both programs--will be 
reimbursed through MDRP funds at the difference between the Class I and 
lowest classified price and receive a supplemental reimbursement of the 
lowest classified price plus the manufacturing and transportation cost 
reimbursement through DDP funds. Total combined reimbursement will be 
capped at the Class I price in Dade County, Florida.
    EDOs already enrolled in MDRP will automatically be enrolled in the 
DDP and qualify to receive supplementary payments for fluid milk 
products donated under their currently approved MDRP Plans. To lessen 
the burden on applicants and gain administrative efficiencies, new Plan 
and Claim Forms will be used for both the DDP and MDRP. AMS will ensure 
program funds are paid according to the provisions of both programs. 
Finally, this interim final rule simultaneously amends the MDRP 
regulations, where applicable, reflecting the new Plan, Certification 
Form, Report of Receipts and Utilization, and Claim Forms that will be 
used to administer the program.

Will there be a retroactive period for reimbursement?

    Section 762(h) of the CAA requires supplementary payments be made 
to EDOs participating in the MDRP for donations made on or after 
January 1, 2020. Since the statute allows for retroactive reimbursement 
to those participating in DDP, a retroactive date of January 1, 2020, 
also applies to the DDP to better streamline administration of the two 
programs. To ensure adequate availability of funds for donations made 
before enactment of the CAA, total program expenditures for eligible 
dairy product donations made from January 1, 2020 to December 27, 2020, 
will be limited to no more than $50 million.\7\ An EDO seeking 
retroactive reimbursement must include in its Plan information on the 
volume of these donations from January 1, 2020, through December 27, 
2020. A deadline for requesting retroactive reimbursement will be 
posted on the AMS web page for DDP. If total reimbursement requests 
exceed $50 million, reimbursements will be prorated.
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    \7\ As indicated in the Economic Analysis, USDA expects the DDP 
to expend $68 million annually. In determining funds available for 
this retroactive period, USDA is limiting expenditures to 
approximately 80 percent ($50 million), consistent with other USDA 
COVID-19 recovery programs (7 CFR part 9--Coronavirus Food 
Assistance Program).
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Program Provisions

    The following details the DDP provisions and amendments to the 
MDRP, where applicable.

Definitions

    The statute includes definitions for terms used. Section 1147.1 
provides definitions of those terms as they are used in the new 
program. Key terms are ``eligible dairy organization,'' ``eligible 
dairy product,'' ``eligible distributor,'' ``eligible partnership,'' 
and ``qualified expense.''
    Eligible dairy organization. As explained in the Background 
section, section 762(a)(1) of the CAA adopts the same EDO definition 
contained in the statute establishing the MDRP. See Sec. 1431(a) and 
(b) of the Agricultural Act of 2014 (7 U.S.C. 9071(a)). The regulatory 
definition matches the statutory definition, which 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: (1) Accounts to a FMMO marketwide pool; and (2) incurs 
qualified expenses. See id.
    Eligible dairy product. Section 762(a)(2) of the CAA specifies that 
only dairy products primarily made from cow's milk, including fluid 
milk, that are produced and processed in the United States are eligible 
for donation and reimbursement under the DDP. Accordingly, Sec.  1147.1 
defines ``eligible dairy product'' as a dairy product meeting the 
commodity specifications referenced in Sec.  1147.3. Currently, other 
than cow's milk, there is not a surplus of milk or any other form of 
milk being dumped at the farm. Given that the program is designed to 
prevent surplus milk from being dumped at the farm, it is the 
Secretary's discretion to limit to cow's milk.
    Eligible distributor. Section 762(a)(3) of the CAA defines 
``eligible distributor'' as ``a public or private nonprofit 
organization that distributes donated eligible dairy products to 
recipient individuals and families.'' Section 1147.1 likewise defines 
``eligible distributor'' as a public or private non-profit feeding 
organization that distributes, or coordinates the distribution of, 
donated eligible dairy products to recipient individuals and families. 
Eligible distributors such as food banks, shelters, kitchens, and other 
food distribution organizations would be eligible so long as they are a 
nonprofit entity. Under this new program, participating eligible 
distributors will fill out an Eligible Distributor Certification Form 
to verify their non-profit status and affirm they have appropriate 
facilities and processes for distributing donated dairy products to 
recipient individuals and families.
    Eligible partnership. Section 762(c) of the CAA requires that an 
EDO and eligible distributor form a partnership to participate in the 
DDP. Each partnership is required to submit a Plan and a Certification 
Form, to AMS containing information about their respective roles. 
Requiring the parties to apply as a partnership ensures that all 
program provisions will be met and an agreed-upon structure will be in 
place when eligible dairy products are available for donation and 
distribution. Section 762(a)(4) of the CAA defines ``eligible 
partnership'' as ``a partnership between an eligible dairy organization 
and an eligible distributor'' and this rule adopts the same definition.
    AMS recognizes some EDOs may have processing plants in multiple 
locations that may report to different FMMOs. Similarly, eligible 
distributors may have multiple distribution sites; for example, several 
food pantries are operated by one umbrella organization. Thus, under 
Sec.  1147.102(a), the eligible partnership can submit one Plan to 
cover multiple plants and/or distribution points as long as only one 
EDO and one eligible distributor are represented. Individual EDOs and 
eligible distributors can also form other partnerships, but they are 
required to submit separate Plans for each partnership.
    Qualified expense. The statute does not define ``qualified 
expense,'' but does specify that one needs to be incurred to be 
eligible for program participation. Section 1147.1 defines ``qualified 
expense'' as the cost incurred to purchase fresh fluid milk for 
processing into eligible dairy products or the cost incurred to 
purchase bulk dairy commodity products for further processing into 
eligible dairy products. Qualified expense is different than the

[[Page 48891]]

reimbursement rate, which is defined later in this rule.
    Because defining ``qualified expense'' is fundamental to 
determining program eligibility and the MDRP and DDP reference the same 
``eligible dairy organization'' statutory definition, the ``qualified 
expense'' definition is also added to the MDRP regulation.
    Additional terms necessary for administration of the program are 
defined in Sec.  1147.1. ``Program'' is defined as the Dairy Donation 
Program and ``Secretary'' is defined as the Secretary of the United 
States Department of Agriculture or a representative authorized to act 
in the Secretary's stead.

Commodity Specifications

    The DDP is intended to reimburse eligible dairy organizations for 
timely donations of eligible dairy products and minimize food waste. It 
is therefore reasonable for AMS to ensure that eligible dairy products 
donated under the DDP meet minimum food safety and quality standards 
and in package sizes desired by eligible distributors, consistent with 
the intent of the program to minimize food waste that might otherwise 
result. Section 1147.3 defines the commodity specifications that must 
be met. Eligible dairy organizations must comply with all applicable 
Federal, State, and local laws, executive orders, and rules and 
regulations related to its performance under this program. In addition, 
to qualify under the program eligible dairy products must:
    1. Be made primarily from cow's (bovine) milk produced in the 
United States;
    2. Be packaged in consumer-sized packaging;
    3. Meet the applicable provisions for dairy products in the Federal 
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), as amended. Grade 
`A' dairy products shall meet the applicable provisions of the current 
edition of the Pasteurized Milk ordinance; and
    4. Have a sell-by, best-by, or use-by date no sooner than 12 days 
from the date the eligible dairy product is delivered to the eligible 
distributor.
    Program provisions specify donated dairy products mut be in 
consumer-sized packaging. This provision should be interpreted by the 
eligible partnership as to whatever consumer-sized package format is 
agreeable to both entities. Examples of consumer-sized packaging 
include, but are not limited to, gallons of milk, 8-ounce blocks of 
cheese, single serve containers of yogurt, 1-pound packages of butter, 
or large bags of milk if the eligible distributor has the ability to 
dispense (i.e., a soup kitchen). When submitting Plans for approval, 
the EDO is required to list what types of products it will be donating. 
AMS will check that information against distributor process provided by 
the eligible distributor to ensure it has the ability to distribute 
that types of products to be donated.

Program Eligibility and Participation

    Section 1147.100 provides that an eligible dairy organization must 
be a member of a partnership whose Plan has been approved by AMS to be 
eligible for reimbursements under the DDP.
    Section 1147.102 outlines requirements for Plan submission in order 
to be considered for the program. Plans submitted to AMS for program 
approval must include a signed affirmation regarding the type of 
product to be donated and the EDO's ability to process and transport 
eligible dairy products consistent with the requirements in the 
commodity specifications under Sec.  1147.3. Along with the Plan 
submission, eligible distributors are required to submit a signed 
Certification Form, which includes a description of the eligible 
distributor's distribution process, contact information, and a tax 
identification number to ensure compliance with program provisions. As 
specified in Sec.  1147.208, 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 1147.104 specifies the process AMS will use to review 
program applications and determine whether to approve Plans submitted 
by eligible partnerships. Within 15 business days of application 
submission, AMS will review the Plan and Certification Form, determine 
whether to approve or disapprove, and notify the eligible partnership 
of the determination. Under Sec.  1147.104(a)(1), 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, storage, and distribution of eligible 
dairy products until they are distributed. Under Sec.  1147.104(a)(2), 
AMS will consider the extent to which the Plan would advance the 
statutory purposes of the DDP, namely, whether the Plan would 
facilitate the timely donation of eligible dairy products and prevent 
and minimize food waste. See Sec. 762(b) of the CAA.
    Finally, section 762(c)(2)(B)(i) of the CAA specifies that priority 
review will be given to submitted Plans where an emergency or disaster 
was a substantial factor, including a declared or renewed public health 
emergency under section 319 of the Public Health Service Act (42 U.S.C. 
247(d)) or a disaster designated by the Secretary. In reviewing a Plan, 
AMS will determine if an emergency or disaster was a substantial factor 
in the Plan's submission. In this case, ``substantial factor'' means 
that a supply and/or demand disruption caused by the emergency or 
disaster event is a main reason for the partnership submitting the 
Plan. For example, the COVID-19 public health emergency--which caused a 
significant decrease in school and restaurant dairy demand, leading to 
large volumes of displaced milk and many people in need of food 
assistance--could be considered a justification for priority review. If 
an emergency or disaster is deemed a substantial factor, AMS will 
prioritize review of that Plan to facilitate donations and meet an 
immediate need. Section 1147.104(a)(3) incorporates those factors for 
Plan prioritization.
    Once approved, Plans do not need to be resubmitted in subsequent 
fiscal years, unless changes are made. Eligible partnerships that 
received reimbursement from the MDRP will be automatically enrolled in 
the DDP to receive the supplemental reimbursement as defined in Sec.  
1147.109.

Reimbursement and Reimbursement Price

    Section 762(d) of the statute requires the Secretary to reimburse 
EDOs with approved Plans. Section 1147.106(a) provides the process and 
describes the necessary information and documentation AMS will require 
to verify the EDO's donation and calculate its reimbursement. To 
receive reimbursement, the EDO must complete and submit a Reimbursement 
Claim Form (Claim Form) that includes: The type, volume, and 
manufactured date of the eligible dairy products donated; the entity 
type (processor or eligible distributor); the location(s) of the 
plant(s) that processed the eligible dairy product(s) and where donated 
dairy products were distributed; the universal product code(s) (UPCs) 
for donated product(s); the sell-by, best-by, or use-by date(s) for 
donated product(s) and the dates the donated dairy products were 
processed and shipped to the eligible distributor.
    There is no requirement dictating the frequency of Claim Form 
submissions; therefore, any time after its Plan is approved, the EDO 
can submit Claim

[[Page 48892]]

Forms for donations made. However, there is limited funding for this 
program so prompt submission may be beneficial to EDOs. The EDO also 
must provide adequate documentation, which should be available through 
its normal business records, to verify the eligible distributor 
received the donated eligible dairy products. Such documentation could 
include, but is not limited to, processing and shipping records, bills 
of lading, storage records, or receiving records from the eligible 
distributor. As specified in Sec.  1147.208, AMS will only collect the 
information and documentation needed to verify the EDO's reimbursement 
claim.
    Section 762(d)(4) of the CAA allows the Secretary to make 
retroactive reimbursements to EDOs that donated eligible dairy products 
before their Plans are approved. Eligible dairy products donated 
through the MDRP are eligible for supplemental reimbursement through 
DDP for donations made on or after January 1, 2020. The statute also 
provides for retroactive reimbursement for donations made through DDP 
prior to Plan approval, though a specific retroactive date is not 
provided. To gain administrative efficiencies and streamline the two 
programs, donations of eligible dairy products through DDP beginning on 
the same date also will be eligible for reimbursement. Partnerships 
will need to submit Plan and Certification Forms for approval prior to 
submitting a Reimbursement Form for donations made prior to Plan 
approval. Accordingly, Sec.  1147.106(a)(3) provides for donations of 
eligible dairy products beginning on January 1, 2020, to be eligible 
for reimbursement under this program. As described above, total 
reimbursement for donations made from January 1, 2020 through December 
27, 2020, is capped at $50 million.
    As authorized by section 762(d)(3)(B) of the CAA, AMS may verify 
the accuracy of supporting documentation with spot checks and audits 
under Sec.  1147.206.
    Under section 762(d)(2)(A) of the CAA, the Secretary shall set a 
reimbursement price that reflects the cost of the milk required to make 
the donated eligible dairy product, is between the FMMO Class I and 
Class IV minimum prices for the month of production, is sufficient to 
avoid food waste, and does not interfere with the commercial marketing 
of milk or dairy products. Section 1147.108 provides for reimbursement 
of three separate cost factors: (1) Input cost--fresh fluid milk or 
bulk dairy commodity product milk-equivalent cost; (2) manufacturing 
cost of converting fluid milk into a product; and (3) transportation 
cost from the processing plant to the eligible distributor. Section 
1147.108(a) provides that reimbursements will be the sum of the three 
cost factors.
    For the first of these factors, input cost, processors purchasing 
and processing fresh fluid milk products (raw milk, skim milk, cream, 
or concentrated fluid products), will be reimbursed at the applicable 
FMMO minimum classified skim and butterfat values. Processors 
purchasing bulk dairy commodity products for further processing into 
eligible dairy products will be reimbursed at the applicable FMMO 
minimum classified skim and butterfat values for the fluid milk 
equivalent contained in the bulk product.
    That value will be determined by the milk's end use (Class I for 
fluid milk products, Class II for soft products such as yogurt, Class 
III for cheese products, and Class IV for butter and powder products) 
pursuant to 7 CFR 1000.40 and the applicable classified price in effect 
for the month of production pursuant to 7 CFR 1000.50.
    The manufacturing cost for processing fluid milk is represented by 
the applicable FMMO make allowances contained in 7 CFR 1000.50. The DDP 
will use the FMMO make allowances in the Class III and IV price 
formulas to reflect manufacturing costs for Class III and IV products, 
as they are based on surveyed cost data of wholesale Class III and IV 
products and are generally accepted by industry stakeholders as 
appropriate cost estimates. For Class I and II products, however, the 
Department lacks data on manufacturing costs. As such, the lowest make 
allowance, Class IV, will be the representative manufacturing cost for 
Class I and II products. It is reasonable to expect that Class I and II 
products have different manufacturing costs than Class IV products due 
to different processing requirements. USDA is seeking comments on 
manufacturing costs for these classes of products. If submitted data 
demonstrates that actual Class I and II manufacturing costs differ 
significantly from the Class IV make allowance, then the Class I and II 
manufacturing costs could be amended in the final rule. If the public 
comment period results in updated make allowances for Class I and Class 
II products, the amended make allowances will not be retroactive to the 
effective date of this rule.
    As explained in the Background section, the program will not 
reimburse additional processing costs for bulk products purchased and 
further processed. Processors purchasing bulk dairy commodity products 
for further processing will receive the same manufacturing cost 
reimbursement as described above. When these processors buy bulk 
product, it is on a per-pound basis. It is reasonable to assume the 
price they paid for the bulk product represented both the fluid milk 
value (which they are being reimbursed for as described earlier) and 
the cost to convert the fluid milk into the bulk commodity. Therefore, 
eligible dairy products made from bulk dairy commodity products also 
will be eligible for manufacturing cost reimbursement.
    The transportation cost reimbursement will be based on the U.S. 
monthly average diesel fuel price \8\ for the month the donation was 
made, a fuel economy factor of 6.1 miles per gallon,\9\ and the 
shortest hard-surface distance from the plant that processed the 
donated eligible dairy product to the eligible distributor's physical 
distribution location. These factors are based on relevant government 
transportation statistics which are similar to those used in FMMOs with 
transportation credits, the Appalachian \10\ and Southeast \11\ Orders 
Transportation reimbursement will only be paid if the EDO incurred the 
transportation cost, which will be verified on audit.
---------------------------------------------------------------------------

    \8\ U.S. Energy Information Administration (EIA), 2021; Gasoline 
and Diesel Fuel Update for August 16, 2021. https://www.eia.gov/petroleum/gasdiesel/, accessed August 23, 2021.
    \9\ United States Department of Transportation, 2021; 
Combination Truck Fuel Consumption Data. https://www.bts.gov/browse-statistical-products-and-data/freight-facts-and-figures/combination-truck-fuel-consumption, accessed August 23, 2021.
    \10\ 7 CFR 1005.82 and 1005.83.
    \11\ 7 CFR 1007.82 and 1007.83.
---------------------------------------------------------------------------

    Section 762(h) of the CAA requires the Secretary to make 
supplemental reimbursements to EDOs receiving reimbursements under the 
MDRP from January 1, 2020, to the date when DDP program funds are no 
longer available. AMS recognizes an EDO under MDRP will also be 
eligible under DDP. Further, eligible dairy products under MDRP also 
qualify as eligible dairy products under DDP (notably, fluid milk 
products). Since DDP reimburses at a higher rate than MDRP, a 
supplemental reimbursement is needed to properly use funds for and 
fulfill the purposes of both programs. Section 1147.109 provides the 
process AMS will follow to make a supplemental reimbursement to EDOs 
receiving reimbursement under MDRP. An EDO with an already approved 
Plan under MDRP does not need to apply to DDP. AMS will automatically 
reimburse the eligible

[[Page 48893]]

dairy organization the difference between the reimbursement it received 
under MDRP and the reimbursement it is eligible to receive for the same 
product under DDP, calculated in Sec.  1147.108. New applicants to the 
DDP that donate fluid milk products will be automatically enrolled in 
MDRP. Upon approval, AMS will make reimbursements under the MDRP 
provisions and then supplemental reimbursements under the DDP 
provisions.

Administrative Provisions

    Section 762(g) of the CAA requires AMS to publish donation activity 
for the program. Accordingly, Sec.  1147.200 provides that AMS will 
periodically report on its publicly accessible website the aggregated 
donation activity under this program. Such information will include 
types and volume of product donated, as well as remaining available 
funds. AMS also will post on its publicly accessible website the Plan 
and Claim Form templates to be submitted for program participation.
    Section 762(e) of the CAA prohibits the sale of eligible dairy 
products donated under the DDP back into commercial markets and 
specifies that eligible distributors who violate that prohibition will 
not be eligible for future participation in the DDP. Section 1147.204 
implements the statutory prohibition and penalty for violation. In 
addition, the program prohibits reimbursement for donated eligible 
dairy products made in conjunction with marketing or promotional 
events.
    Section 762(f) of the CAA directs the Secretary to conduct 
appropriate reviews or audits to ensure the integrity of the DDP. Under 
section 762(d)(3)(B) of the CAA, the Secretary is further authorized to 
verify the accuracy of submitted documentation through spot checks and 
audits. Section 1147.206 provides that AMS will verify the proper 
delivery of and payment for donated eligible dairy products. 
Specifically, AMS will ensure the donated eligible dairy products were 
delivered to the eligible distributor and the accuracy of the 
reimbursed value paid to the EDO. The section further provides for the 
review, audit, and spot checks of information submitted.
    As mentioned in the above discussions, Sec.  1147.208 requires AMS 
to maintain confidentiality regarding information collected to 
administer the program and to use the information only for program 
purposes.
    A books and records provision is included in Sec.  1147.209 to 
ensure the EDO maintains necessary records to be made available to AMS 
upon request in conjunction with an audit.
    Section 1147.210 specifies that dairy products sold or donated 
under any other USDA commodity purchase or donation program, other than 
the MDRP, are not eligible for reimbursement under the DDP. From time 
to time, USDA may purchase dairy products for use in nutrition 
assistance programs or other uses, but vendors are compensated for 
those purchases through funding under those program provisions. One of 
the main purposes of the DDP is to reduce food waste by encouraging the 
donation of additional dairy products through eligible distributors. 
Thus, eligible dairy organizations who have received compensation for 
dairy product purchases under other USDA programs may not receive 
reimbursements for the same dairy products under the DDP.

Exemption From Notice and Comment

    Rules ``relating to public property, loans, grants, benefits, or 
contracts'' are not subject to the rulemaking requirement of the 
Administrative Procedure Act at 5 U.S.C. 553. See 5 U.S.C. 553(a)(2). 
Thus, AMS is publishing this interim final rule without previously 
publishing a proposed rule because this rule relates to a benefit. 
Additionally, AMS finds it has good cause to do so because providing 
prior notice and an opportunity for comment are impracticable, 
unnecessary, or contrary to the public interest under 5 U.S.C. 
553(b)(B).
    In determining whether a program is a ``benefits'' program, courts 
consider whether ``benefits'' are clearly and directly involved in the 
agency action. Humana of South Carolina, Inc. v. Califano, 590 F.2d 
1070 at 1083-84 (D.C. Cir. 1978). The purpose of the DDP is to 
facilitate timely donation of eligible dairy products and to prevent 
and minimize food waste by enabling dairy organizations to partner with 
public or private non-profit organizations. The overall purpose of the 
DDP is similar to other federal programs that provide food and 
nutrition assistance to individuals and families in need. Furthermore, 
the DDP fulfills two needs: (1) The donated dairy products can provide 
food and nutrition to eligible recipients, as determined by eligible 
distributors (public or private non-profit organizations); and (2) the 
eligible dairy organizations are able to participate in a program where 
they can receive reimbursement for donating dairy products to those 
determined to be in need. In addition, under the DDP, the public or 
private non-profit organization determines whether the recipients 
qualify for the donated dairy products based on their established 
criteria. As such, individuals and families in need of dairy products 
are able to receive these dairy products through donation. AMS is 
issuing regulations to establish and administer the DDP, a program that 
is clearly and directly involved in the disbursement of benefits, and 
thus is exempt under section 553(a)(2) from the notice and comment 
requirements of the APA.
    Furthermore, the APA provides that an agency is not required to 
conduct notice-and-comment rulemaking when the agency, for good cause, 
finds that notice and comment is impracticable, unnecessary, or 
contrary to the public interest. 5 U.S.C. 553(b)(B). As part of the 
government's pandemic response, USDA began the Farmers to Families Food 
Box Program as an emergency relief effort to respond to severe market 
disruptions and increased food insecurity caused by the pandemic. The 
program lasted from May 15, 2020, through May 31, 2021, during which 
time it distributed dairy products equivalent to more than 2.5 billion 
pounds of milk to those in need. The end of the Food Box program means 
there is an unmet demand for dairy products in feeding organizations 
previously met by government purchases through the Food Box Program. 
The DDP is designed to encourage the donation of dairy products to meet 
that demand through private partnerships between EDOs and Eligible 
Distributors. Due to the recent end of the Food Box program, there is 
an immediate need to implement the DDP so that donations can begin and 
meet that demand.
    In addition, Section 762 of the statute provides for emergencies or 
disaster declarations to be considered as a substantial factor in 
donation Plan submissions. As the 2021 hurricane and wildfire season 
has already begun, the DDP could facilitate donations in the possible 
event of upcoming emergencies or natural disasters that could create an 
immediate need to provide food assistance to impacted individuals and 
families.
    Additionally, Congress mandated that the Secretary establish and 
administer the DDP no later than 60 days after enactment of the CAA. In 
light of this mandated time frame and the importance of distributing 
donated dairy products as quickly as possible to individuals and 
families, the normal rulemaking process would be impracticable 
unnecessary, and contrary to the public interest. Therefore, AMS finds 
there is good cause to forgo the

[[Page 48894]]

notice-and-comment requirements in the APA for this rulemaking.
    As a rule relating to a benefit, the APA requirement that 
regulations be published at least 30 days before the effective date 
does not apply. Additionally, this requirement also does not apply when 
an agency finds good cause not to delay the effective date. See 5 
U.S.C. 553(d)(3). The same reasons why there is good cause to dispense 
with notice and comment are applicable to AMS's decision to make this 
rule effective one day after publication.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA) of 1995 (44 
U.S.C. Chapter 35), AMS has requested approval of new information 
collection and recordkeeping requirements for the DDP and comments are 
invited on this new information collection. All comments received on 
this information collection will be summarized and included in the 
final request for Office of Management and Budget (OMB) approval.
    Title: Establishment of a Dairy Donation Program.
    OMB Number: 0581-NEW.
    Expiration Date of Approval: This is a NEW collection.
    Type of Request: Approval of New Information Collection.
    Abstract: The Consolidated Appropriations Act of 2021 mandated 
establishment of a Dairy Donation Program to reimburse EDOs for milk 
used to make eligible dairy products donated to non-profit groups for 
distribution to recipient individuals and families. Under the program, 
EDOs account to a Federal milk marketing order (FMMO) by filling a 
report reflecting the eligible dairy products manufactured. Entities 
not already filing FMMO report will be required to submit a Report of 
Receipts and Utilization. All partnerships must submit a Dairy Donation 
and Distribution Plan and Eligible Distributor Certification Form 
describing the process the partnership would use to process, transport, 
store, and distribute eligible product to an eligible distributor. Once 
approved, the EDO can file a Reimbursement Claim Form to receive 
reimbursement for the donated eligible dairy products.

Dairy Donation and Distribution Plan

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1 hour per response.
    Respondents: Eligible dairy organizations.
    Estimated Number of Respondents: 150.
    Estimated Number of Responses: 300.
    Estimated Number of Responses per Respondent: 2.
    Estimated Total Annual Burden on Respondents: 300 hours.

Eligible Distributor Certification Form

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 15 minutes per response.
    Respondents: Eligible distributors.
    Estimated Number of Respondents: 300.
    Estimated Number of Responses: 300.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Burden on Respondents: 75 minutes.

Reimbursement Claim Form

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 2 hours per response.
    Respondents: Eligible dairy organizations.
    Estimated Number of Respondents: 150.
    Estimated Number of Responses: 1,200.
    Estimated Number of Responses per Respondent: 8.
    Estimated Total Annual Burden on Respondents: 2,400 hours.

Report of Receipts and Utilization

    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 1 hour per response.
    Respondents: Eligible dairy organizations.
    Estimated Number of Respondents: 15.
    Estimated Number of Responses: 90.
    Estimated Number of Responses per Respondent: 6.
    Estimated Total Annual Burden on Respondents: 90 hours.
    Comments: Comments are invited on: (1) Whether the proposed 
collection of the information is necessary for the proper performance 
of the functions of the agency, including whether the information will 
have practical utility; (2) the accuracy of the agency's estimate of 
the burden of the proposed collection of information; (3) ways to 
enhance the quality, utility and clarity of the information to be 
collected; and (4) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology.
    AMS estimates 150 respondents will form a total of 300 
partnerships. Each participating partnership will be required to submit 
a Dairy Donation and Reimbursement Plan and Eligible Distributor 
Certification Form once, there will not be an annual renewal 
requirement. AMS estimates 1 hour to complete a Dairy Donation and 
Distribution Plan. Accompanying the Plan, the eligible distributor will 
be required to submit and sign an Eligible Distributor Certification 
Form, which AMS anticipates will take 15 minutes.
    AMS estimates ten percent of the 150 EDO participants do not 
already account to a FMMO by filing a report. Therefore, approximately 
15 respondents will need to account to a FMMO by filing a Report of 
Receipts and Utilization Form. All other EDOs will have already 
accounted to a Federal Order through their normal report filing through 
its existing association with a Federal milk marketing order. AMS 
estimates 1 hour to complete the form. Filing of this form will not 
cause an EDO to become regulated by a Federal milk marketing order.
    Reimbursement Claim Forms can be submitted any time after Plan 
approval and will be processed on a quarterly basis. AMS estimated that 
to capture efficiencies respondents will submit Reimbursement Claim 
Forms no more than once per quarter and it will take 2 hours to 
complete the form per quarter. Assuming the reporting burden will be 
completed by an administrative assistant employee, at an hourly salary 
rate of $21, AMS estimates the following annual reporting costs per 
participating partnership: For the first year of participation, the 
annualized cost is $196.10 (the Plan, Certification Form, and four 
Claim Forms); for the subsequent years of participation, the annualized 
cost is $169.60 (four Claim Forms). Entities needing to account to a 
Federal Order by filing a Report of Receipts and Utilization Form will 
experience an additional annual burden of $127.20 (6 responses per 
year). EDOs also are required to maintain books and records, for a 
period of 3 years, to be made available to AMS upon request in 
conjunction with an audit to verify the donations for which the EDO 
received reimbursement were in fact made. These records are part of 
normal business records and do not require additional records to be 
created. Such records include production records to verify yield 
computations and product code dates for donated manufactured products, 
or delivery documentation to verify EDO incurred a transportation 
expense.

[[Page 48895]]

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. 
Forms can be found at http://www.ams.usda.gov/ddp and filed through 
email at [email protected].

Statutory and Regulatory Authority

    Section 762 of the Consolidated Appropriations Act of 2021 mandates 
that AMS establish and administer a Dairy Donation Program (7 CFR part 
1147). The program is intended to facilitate the timely donation of 
eligible dairy products and prevent and minimize food waste.

Executive Orders 12866 and 13563

    USDA is issuing this rule in conformance with Executive Orders 
12866 and 13563, which direct agencies to assess all costs and benefits 
of available regulatory alternatives and, if regulation is necessary, 
to select regulatory approaches that maximizes net benefits (including 
potential economic, environmental, public health, and safety effects; 
distributive impacts; and equity). Executive Order 13563 emphasizes the 
importance of quantifying both costs and benefits, reducing costs, 
harmonizing rules, and promoting flexibility. AMS has determined this 
action, mandated by Congress, meets the requirements set forth in the 
Consolidated Appropriations Act of 2021 to facilitate donation of 
eligible dairy products and prevent and minimize food waste.
    AMS is seeking comments on the economic impacts of this action on 
the industry, including availability of information or data that may 
demonstrate if and how DDP reimbursements affect the market.
    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 or to target 
specific regions in need of milk donations. Ultimately, AMS determined 
that because the program's primary purpose is to reduce waste 
associated with the disposition of surplus milk, the industry would be 
best served by allowing those with the capacity to process surplus milk 
and who are in a position to make donations to apply for the program 
without consideration of geographic location.
    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          %               Period covered
----------------------------------------------------------------------------------------------------------------
Benefits:
    Annualized Monetized ($millions/              0            2021               7  FY 2021-2026.
     year).
                                                  0            2021               3
Costs:
    Annualized Monetized ($millions/              0            2021               7  FY 2021-2026.
     year).
                                                  0            2021               3
Transfers--From the Federal
 Government to an eligible
 partnership:
    Annualized Monetized ($millions/         $71.91            2021               7  FY 2021-2026.
     year).
                                              68.92            2021               3
----------------------------------------------------------------------------------------------------------------

    As the program is voluntary, eligible partnerships are expected to 
only participate if they deem it beneficial depending on their 
individual circumstances. The transfers will be reimbursements in the 
form of Federal payments to program participants to help offset costs 
associated with eligible dairy product donations.
    In the normal course of transporting, delivering, and processing 
milk, a small volume of milk is ``lost'' each month. In the FMMO 
system, ``normal losses'' are estimated to be 0.25 percent of the total 
participating milk annually. Under certain conditions, an additional 
volume of milk cannot make it to market due to extraordinary 
circumstances, such as extreme weather, plant capacity issues, and 
market disruptions. This volume above ``normal losses'' is identified 
as ``excess losses'' in this analysis. According to FMMO statistics, 
``excess losses'' averaged 0.12 percent of the annual volume of milk 
participating in the FMMO program from 2016 through 2020. In 2020, the 
COVID-19 pandemic resulted in higher levels of milk that could not make 
it to market, amounting to 0.32 percent of the milk that participated 
in the FMMO program. In conducting an economic analysis, AMS assumed 
that milk classified as ``excess losses'' could be made into eligible 
dairy products and donated under the DDP.
    To estimate the volume of excess milk that may be donated under the 
program, the 5-year average rate of 0.12 percent was applied to the 
projected 2021 U.S. milk production volume. Thus, it is assumed that 
approximately 273.2 million pounds of milk would be available for dairy 
processors to make into eligible dairy products for donation to 
eligible distributors. No data exits from which AMS could estimate how 
much bulk commodity product could be available for secondary processors 
to purchase and further process into eligible dairy products for 
donation to eligible distributors, so that scenario was not considered 
in the economic analysis. AMS is seeking public comment on data from 
which to estimate how much bulk commodity product could be available 
for secondary processors to purchase and further process for donation.
    AMS estimated the amounts of butterfat and skim solids in the 
forecasted product volumes available for donation. The product mix 
included fluid milk, soft products, cheese, butter, and nonfat dry milk 
powder volumes, based on the volume of available dairy farmer milk. The 
set of products utilizes approximately all the butterfat and skim 
solids present in the milk available for donation. In the case of 
butter and nonfat dry milk powder, both products can be made from a 
given amount of milk. Butter requires a large amount of butterfat, 
while powder utilizes very little butterfat but a large amount of the 
nonfat solids.
    The DDP will reimburse EDOs for eligible dairy product donations 
for the input cost paid for the fluid milk or bulk dairy commodity 
product, manufacturing cost, and transportation cost. Total 
reimbursement must be between the highest FMMO Class I value (Dade 
county, Florida) and the

[[Page 48896]]

Class IV value (assumed the lowest classified value). This analysis 
projected 2021 class prices based on USDA's March 2021 World Supply and 
Demand Estimates (WASDE), using the FMMO price formulas. Under those 
assumptions, AMS estimates the program could expend between $52.1 
million and $68.7 million annually.
    Furthermore, eligible dairy product donations made under the MDRP 
are eligible to receive a supplemental reimbursement for donations made 
starting on January 1, 2020, onward. Supplemental reimbursement is 
calculated at the difference between the DDP and MDRP reimbursement 
values. The net value of these retroactive reimbursements is estimated 
at $0.5 million, assuming the highest FMMO minimum Class I value at the 
time the milk for the donation was purchased.
    Total 2021 U.S. milk production was estimated to be 227.3 billion 
pounds (WASDE, March 2021). As described above, AMS estimates that 
273.2 million pounds (0.12 percent) of excess milk (additional supply) 
would be available to be processed and donated through the DDP. 
Consequently, AMS does not anticipate this small additional processing 
volume will impact milk prices. It is likely there will be instances 
where dairy processors already donating dairy products to non-profit 
feeding organizations become eligible for reimbursement through DDP. 
However, those donations are not new production volume to be priced. 
That is, they would represent dairy products already processed and 
priced accordingly somewhere in the dairy supply chain. Furthermore, 
the DDP does not intend to reimburse for the full cost of processing 
and delivering donated dairy products but rather encourages excess milk 
to be used and not wasted.
    This program is expected to have a negligible impact on retail 
dairy product sales. Typically, populations that receive dairy products 
from non-profit feeding organizations do so when they cannot buy dairy 
products at retail outlets. Additionally, the DDP reimbursement rate 
does not cover all processing and transportation costs; therefore, it 
would not be a financially prudent decision to divert milk from retail 
outlets to donations. The following table provides examples of costs 
included and excluded from reimbursement under the DDP. This is not an 
all-inclusive listing but is intended to demonstrate how dairy product 
donations through this program are not expected to be a substitute for 
retail dairy product sales.

            Table 2--Examples of Costs Included and Excluded
------------------------------------------------------------------------
         Cost factor                Includes          Does NOT Include
------------------------------------------------------------------------
Input.......................   Minimum       Any
                               classified price of   contractually
                               milk used in the      obligated monies,
                               donated eligible      over the minimum
                               dairy product.        classified value,
                                                     due to producers.
                                                     Assessments
                                                     for promotion and
                                                     research programs,
                                                     if applicable.
Manufacturing...............   Applicable    Additional
                               FMMO manufacturing    ingredient costs
                               make allowance,       (i.e., fruit for
                               representative of     fruit-flavored
                               the following         yogurt).
                               costs:
                              [cir] Processing       Storage and
                               Labor.                inventory costs.
                              [cir] Utilities.....   Costs of
                              [cir] Non-Labor.....   participating in
                                                     the mandatory Dairy
                                                     Product Mandatory
                                                     Reporting Program.
                              [cir] General and
                               Administrative.
                              [cir] Packaging into
                               a commodity volume.
Transportation..............   Fuel:         Vehicle
                               Shortest hard         maintenance.
                               surface mileage *     Vehicle
                               monthly diesel        depreciation.
                               price * 6.1 miles     Licensing
                               per gallon.           and other
                                                     administrative
                                                     fees.
------------------------------------------------------------------------

    In addition, DDP is a voluntary program and reimbursements occur 
after donations are made. Donations made through this program will be 
done privately without donation volumes being announced in advance. 
Therefore, AMS has determined the impact on dairy markets will not be 
as significant on the markets when compared to making advanced 
announcements on expected donation volume.

Regulatory Flexibility Analysis

    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (5 U.S.C. 601-612), AMS has considered the economic 
impact of the action on small entities. Accordingly, AMS has prepared 
this 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 farms are 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 
dairy processors, varies based on the type of dairy product 
manufactured. Small dairy processors are defined as having between 750 
and 1,250 or fewer employees, depending on the product made.
    According to the 2017 USDA National Agricultural Statistics Service 
(NASS) Census Report, there were 39,303 farms with milk sales. AMS 
estimates that 36,158 farms, or 92 percent, would be considered small 
businesses. Dairy farmers of all sizes may benefit from the program as 
it will encourage donations of dairy products, which contain milk 
purchased from them. DDP is designed to reduce food waste by providing 
alternative outlets for milk to be utilized in donated products instead 
of being dumped due to oversupply. Often, milk is dumped from smaller 
dairy farms that are more costly to service because their pickups may 
be less than a full tanker load and/or they may be located farther from 
major trucking routes. By providing cost reimbursement for donated 
products, the DDP incentivizes processors to pick up and process the 
milk into products for donation rather than having it dumped.
    AMS estimates that approximately 3,000 plants manufacture dairy 
products in the United States, owned by approximately 1,500 entities. 
According to AMS calculations, about 10 percent are operated by dairy 
farmer cooperatives, while the remaining are independently owned. AMS 
believes 1,500 to be the universe of EDOs that could participate in the 
DDP. Of this universe of potential EDOs, 90 percent would be considered 
small businesses, based on total employee numbers.
    Participating in the DDP will not unduly or disproportionately 
burden small dairy processing entities. All entities, regardless of 
size, can apply for

[[Page 48897]]

the program if they file a report with a Federal milk marketing order 
and incur a qualified expense as defined by program provisions. Program 
provisions are administered without regard for business size. The 
paperwork required to participate asks for information that is part of 
normal business records.
    The definition of an eligible distributor is a public or private 
non-profit feeding organization that distributes or coordinates 
distribution of donated eligible dairy products to recipient 
individuals and families. Eligible distributors, regardless of size, 
can voluntarily participate in the DDP if they form a partnership with 
an eligible dairy organization. The information collection burden for 
eligible distributors is minimal as they must only compete the Plan 
form with the partnering EDO. 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 small entities. Program provisions will 
be applied uniformly to both large and small businesses and are not 
expected to burden small entities unduly or disproportionately.

Executive Order 13175

    This interim final rule has been reviewed under 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 implication, including regulation, 
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.
    Tribal governments operating non-profit organizations feeding 
recipient individuals and families could qualify as eligible 
distributors and thus benefit from participation in the DDP. The 
regulatory burden from participating would be minimal, estimated at 15 
minutes for completing an Eligible Distributor Certification Form.
    AMS has assessed the impact of this proposed rule on Indian tribes 
and determined that this rule would not have tribal implications that 
require consultation under Executive Order 13175. AMS hosts a quarterly 
teleconference with tribal leaders where matters of mutual interest 
regarding the marketing of agricultural products are discussed. 
Information about the DDP will be shared during an upcoming quarterly 
call, and tribal leaders will be informed about the interim final rule 
and the opportunity to submit comments. AMS will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided as needed with regards to the DDP.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988--Civil 
Justice Reform. This final rule may have retroactive effect. Dairy 
donations made starting January 1, 2020, prior to the effective date of 
the rule may be eligible for reimbursement if the eligible 
partnership's Donation and Distribution Plan is approved and if the 
partnership meets all other program requirements. Dairy donations made 
prior to 2020 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. The DDP will not 
preempt any state or local laws, regulations, or policies, unless they 
present an irreconcilable conflict with this rule.

Civil Rights Review

    AMS has considered the potential civil rights implications of this 
rule on minorities, women, and persons with disabilities to ensure that 
no person or group shall be discriminated against on the basis of race, 
color, national origin, gender, religion, age, disability, sexual 
orientation, marital or family status, political beliefs, parental 
status, or protected genetic information. This review included persons 
that are employees of the entities who are subject to these 
regulations. This interim final rule does not require affected entities 
to relocate or alter their operations in ways that could adversely 
affect such persons or groups. Further, this rule does not deny any 
persons or groups the benefits of the program or subject any persons or 
groups to discrimination.
    AMS found no evidence this voluntary program and the associated 
interim final rule will cause adverse or disproportionate impacts on 
minorities, women, and persons with disabilities. AMS's analysis found 
no evidence that a potential impact will affect dairy farmers or 
processors in any protected groups, or that these impacts will be 
different than any participating general population of dairy farmers 
and processors.

Executive Order 13132

    AMS has examined the effects of provisions in this interim final 
rule on the relationship between the Federal Government and the States, 
as required by Executive Order 13132 on ``Federalism.'' The DDP will 
reimburse EDOs for eligible dairy products donated to eligible 
distributors. The DDP will not preempt any State or local laws, 
regulations, or policies pertaining to the sale, manufacturing or 
distribution of milk or dairy products within States.

List of Subjects

7 CFR Part 1146

    Milk, Donations, Reporting and recordkeeping requirements.

7 CFR Part 1147

    Dairy, Donations, Food waste, Emergency, Reporting and 
recordkeeping requirements.

    For reasons set forth in the preamble, AMS is amending 7 CFR 
Chapter X as follows:

PART 1146--MILK DONATION REIMBURSEMENT PROGRAM

0
1. The authority for part 1146 continues to read as follows:

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


0
2. In part 1146, revise all references to ``Milk Donation and 
Distribution Plan'' to read ``Dairy Donation and Distribution Plan''.

0
3. Amend Sec.  1146.1 by revising the term ``eligible dairy 
organization'' and adding the term ``qualified expense'' in 
alphabetical order to read as follows:


Sec.  1146.1  Definitions.

* * * * *
    Eligible dairy organization means a dairy farmer, either 
individually or as part of a cooperative, or a dairy processor that:
    (1) Accounts to a Federal Milk Marketing Order; and
    (2) Incurs a qualified expense described in Sec.  1146.1.
* * * * *
    Qualified expense means the cost incurred to purchase fresh fluid 
milk product or bulk dairy commodity product for processing into 
eligible dairy products.
* * * * *

0
4. Revise Sec.  1146.102 to read as follows:


Sec.  1146.102  Dairy donation and distribution plans.

    Eligible partnerships must submit a completed Dairy Donation and

[[Page 48898]]

Distribution Plan to AMS in the form and manner established by AMS to 
be eligible for program consideration. The completed Dairy Donation and 
Distribution Plan must include: (a) The physical location(s) of the 
eligible dairy organization's processing plant(s) and the eligible 
distributor's distribution site(s);
    (b) The entity type and contact information for the eligible dairy 
organization;
    (c) Banking information and tax identification number for the 
eligible dairy organization;
    (d) An affirmation signed by the eligible dairy organization 
regarding the type(s) of products to be donated and its ability to 
process and transport eligible dairy products consistent with the 
commodity specifications under Sec.  1146.3; and
    (e) An Eligible Distributor Certification Form signed by the 
eligible distributor regarding its ability to store and distribute 
donated eligible dairy products to recipient individuals and families.

0
5. Revise Sec.  1146.106 to read as follows:


Sec.  1146.106  Reimbursement Claims.

    (a) In order for the eligible dairy organization to receive 
reimbursement pursuant to Sec.  1146.108, the eligible partnership must 
submit a Reimbursement Claim Form and appropriate supporting 
documentation to AMS.
    (1) Required information. Each Reimbursement Claim Form associated 
with an approved Dairy Donation and Distribution Plan must include:
    (i) The type and amount of eligible dairy products donated to the 
eligible distributor;
    (ii) The physical location(s) of the plant(s) that processed the 
donated dairy products;
    (iii) The date the eligible dairy products were processed;
    (iv) The date the eligible dairy products were shipped to the 
eligible distributor;
    (v) The respective sell-by, best-by, or use-by date(s) for the 
donated dairy products; and
    (vi) Other information as needed on the Reimbursement Claim Form to 
calculate reimbursement.
    (2) Appropriate verifying documentation. Each Reimbursement Claim 
Form must be accompanied by documents verifying that the donation(s) 
reported in the form were made. Such documentation may include, but is 
not limited to, copies of processing records, shipping records, bills 
of lading, warehouse receipts, distribution records, or other documents 
demonstrating the reported amount of eligible dairy products were 
processed, donated, and distributed in accordance with the approved 
Dairy Donation and Distribution Plan and Eligible Distributor 
Certification Form and as reported on the Reimbursement Claim Form.
    (3) Deadline for funding. To be considered for reimbursement, 
eligible dairy products must be donated from January 1, 2020, until 
program funds are expended.
    (b) Incomplete reimbursement requests will be returned to the 
submitter for revision or completion and resubmission as necessary.

0
6. Add part 1147 to read as follows:

PART 1147--DAIRY DONATION PROGRAM

Subpart A--General Provisions
Sec.
1147.1 Definitions
1147.3 Commodity specifications
Subpart B--Program Participation
Sec.
1147.100 Program eligibility
1147.102 Dairy donation and distribution plans
1147.104 Review and approval
1147.106 Reimbursement claims
1147.108 Reimbursement calculation
1147.109 Supplemental reimbursements
Subpart C--Administrative Provisions
Sec.
1147.200 Program announcement
1147.204 Prohibitions
1147.206 Enforcement
1147.208 Confidentiality
1147.209 Books and records
1147.210 Milk for other programs
1147.212 Expiration of this part

    Authority:  Sec. 762, Pub. L. 116-260, 134 Stat. 1182.

Subpart A--General Provisions


Sec.  1147.1  Definitions.

    AMS means the Agricultural Marketing Service of the United States 
Department of Agriculture.
    Eligible dairy organization means a dairy farmer, either 
individually or as part of a cooperative, or a dairy processor that:
    (1) Accounts to a Federal Milk Marketing Order; and
    (2) Incurs a qualified expense described in Sec.  1147.1.
    Eligible dairy product means a dairy product primarily made from 
milk, including fluid milk, produced and processed in the United States 
and meeting the specifications referenced in Sec.  1147.3.
    Eligible distributor means a public or private non-profit feeding 
organization distributing or coordinating distribution of donated 
eligible dairy products to recipient individuals and families.
    Eligible partnership means a partnership between an eligible dairy 
organization and an eligible distributor.
    Program means the Dairy Donation Program established in this part.
    Qualified expense means the cost incurred to purchase fresh fluid 
milk product or bulk dairy commodity product for processing into 
eligible dairy products.
    Secretary means the Secretary of the United States Department of 
Agriculture or a representative authorized to act in the Secretary's 
stead.


Sec.  1147.3  Commodity specifications.

    Eligible dairy organizations must comply with all applicable 
Federal, State, and local laws, executive orders, and rules and 
regulations related to its performance under this program. To qualify 
under the program eligible dairy products must meet the following 
requirements:
    (a) Made primarily from cow's (bovine) milk produced in the United 
States;
    (b) Packaged in consumer-sized packaging;
    (c) Meet the applicable provisions for dairy products in the 
Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.), as 
amended. Grade `A' dairy products shall meet the applicable provisions 
of the current edition of the Pasteurized Milk ordinance; and
    (d) Have a sell-by, best-by, or use-by date no sooner than 12 days 
from the date the eligible dairy product is delivered to the eligible 
distributor.

Subpart B--Program Participation


Sec.  1147.100  Program eligibility.

    An eligible dairy organization must be a member of an approved 
eligible partnership pursuant to Sec.  1147.1 to be eligible to receive 
reimbursement related to eligible dairy product donations, subject to 
the requirements and limitations specified in Sec. Sec.  1147.102 and 
1147.104.


Sec.  1147.102  Dairy donation and distribution plans.

    Eligible partnerships must submit a completed Dairy Donation and 
Distribution Plan to AMS in the form and manner established by AMS to 
be eligible for program consideration. The completed Dairy Donation and 
Distribution Plan must include: (a) The physical location(s) of the 
eligible dairy organization's processing plant(s) and the eligible 
distributor's distribution site(s);

[[Page 48899]]

    (b) The entity type and contact information for the eligible dairy 
organization;
    (c) Banking information and tax identification number for the 
eligible dairy organization;
    (d) An affirmation signed by the eligible dairy organization 
regarding the type(s) of product to be donated and its ability to 
process and transport eligible dairy products consistent with the 
commodity specifications under Sec.  1147.3; and
    (e) An Eligible Distributor Certification Form signed by the 
eligible distributor regarding its ability to store and distribute 
donated eligible dairy products to recipient individuals and families.


Sec.  1147.104  Review and approval.

    (a) Program application and review. Within 15 business days of the 
submitted Dairy Donation and Distribution Plan and Eligible Distributor 
Certification Form, AMS will review the submitted application and 
notify the applicant regarding approval or disapproval for program 
participation.
    (1) The review will include the following considerations:
    (i) The process the eligible partnership will use for donation, 
processing, transportation, temporary storage, and distribution of 
eligible dairy products;
    (ii) The extent to which the Dairy Donation and Distribution Plan 
promotes the donation of eligible dairy products and prevents and 
minimizes food waste.
    (2) AMS will prioritize approval or disapproval of a Plan for which 
AMS determines a public health emergency or disaster to be a 
substantial factor in its submission.
    (b) Plan approval. Subject to the provisions in paragraph (a) of 
this section, AMS will determine whether to approve or disapprove Dairy 
Donation and Distribution Plans for eligible dairy products donated 
from January 1, 2020, until program funds are expended.


Sec.  1147.106  Reimbursement claims.

    (a) In order for the eligible dairy organization to receive 
reimbursement pursuant to Sec.  1147.108, the eligible partnership must 
submit a Reimbursement Claim Form and appropriate supporting 
documentation to AMS.
    (1) Required information. Each Reimbursement Claim Form associated 
with an approved Dairy Donation and Distribution Plan must include:
    (i) The type and amount of eligible dairy products donated to the 
eligible distributor;
    (ii) The physical location(s) of the plant(s) that processed the 
donated dairy products;
    (iii) The date the eligible dairy products were processed;
    (iv) The date the eligible dairy products were shipped to the 
eligible distributor;
    (v) The respective sell-by, best-by, or use-by date(s) for the 
donated dairy products; and
    (vi) Other information as needed on the Reimbursement Claim Form to 
calculate reimbursement.
    (2) Appropriate verifying documentation. Each Reimbursement Claim 
Form must be accompanied by documents verifying that the donation(s) 
reported in the form were made. Such documentation may include, but is 
not limited to, copies of processing records, shipping records, bills 
of lading, warehouse receipts, distribution records, or other documents 
demonstrating the reported amount of eligible dairy products were 
processed, donated, and distributed in accordance with the approved 
Dairy Donation and Distribution Plan and Eligible Distributor 
Certification Form and as reported on the Reimbursement Claim Form.
    (3) Eligibility period. To be considered for reimbursement, 
eligible dairy products must have been donated on or after January 1, 
2020, until program funds are expended.
    (b) Incomplete reimbursement requests will be returned to the 
submitter for revision or completion and resubmission as necessary.


Sec.  1147.108  Reimbursement calculation.

    (a) For each eligible dairy product donated by an eligible dairy 
organization with an approved Dairy Donation and Distribution Plan, the 
amount of reimbursement under Sec.  1147.106 for the donated eligible 
dairy product shall be the sum of the values of the input cost, the 
manufacturing cost, and the transportation cost.
    (1) The input cost shall be the monthly Federal Milk Marketing 
Order minimum classified value pursuant to 7 CFR 1000.50 of the fresh 
fluid milk product (raw milk, skim milk, cream, or concentrate fluid 
product) or fluid milk equivalent of the bulk dairy commodity product 
used to make the donated eligible dairy product pursuant to 7 CFR 
1000.40 for the month of processing.
    (2) The manufacturing cost shall be the manufacturing allowance, on 
a hundredweight basis, pursuant to 7 CFR 1000.50 for the milk used to 
produce the donated eligible dairy product pursuant to 7 CFR 1000.40 --
    (i) If a Class I product, the Class IV manufacturing allowance 
applies;
    (ii) If a Class II product, the Class IV manufacturing allowance 
applies;
    (iii) If a Class III product, the Class III manufacturing 
allowances applies; or
    (iv) If a Class IV product, the Class IV manufacturing allowances 
applies.
    (3) The transportation cost shall be determined by the following:
    (i) The published average U.S. Energy Information Administration 
average U.S. diesel fuel price for the month the donation was made;
    (ii) The shortest hard-surface distance, in miles, from the plant 
processing the donated eligible dairy product to the eligible 
distributor; and
    (iii) The fuel economy rate of 5.5 miles per gallon.
    (b) Reimbursement, on a per hundredweight basis, made pursuant to 
paragraph (a) of this section may not exceed the Class I price pursuant 
to 7 CFR 1000.50, 1000.52, and 1006.51 for Dade County, Florida.


Sec.  1147.109  Supplemental reimbursements.

    (a) The Secretary shall make a supplemental reimbursement to an 
eligible dairy organization reimbursed under the Milk Donation 
Reimbursement Program (7 CFR 1146.108) during the period beginning on 
January 1, 2020, and ending on the date on which funds under Sec.  
1147.202 are no longer available.
    (b) A supplemental reimbursement described in paragraph (a) shall 
be the difference between:
    (1) The reimbursement for eligible dairy products calculated under 
Sec.  1147.108, and
    (2) The reimbursement for eligible milk under the Milk Donation 
Reimbursement Program (7 CFR 1146.108).

Subpart C--Administrative Provisions


Sec.  1147.200  Program announcement.

    (a) AMS will announce the opportunity to participate in the Dairy 
Donation Program on the AMS website. The announcement will specify the 
manner and form in which program applications should be submitted. AMS 
will periodically announce on its website a report describing the 
donation activity under this program.
    (b) There is no deadline for eligible parties to submit a Dairy 
Donation and Distribution Plan. AMS will accept and consider Plans on a 
continuing basis.


Sec.  1147.204  Prohibitions.

    (a) Prohibition in general. An eligible distributor receiving 
eligible dairy products donated under the Dairy

[[Page 48900]]

Donation Program may not sell the donated dairy products back into 
commercial markets.
    (b) Prohibition on marketing or promotional event. Dairy products 
donated in conjunction with a marketing or promotional event are 
prohibited from reimbursement.
    (c) Prohibition on profit-making. An eligible dairy organization 
cannot make a profit from reimbursements received from the Dairy 
Donation Program.
    (d) Prohibition on future participation. An eligible partnership 
that AMS determines has violated the prohibition in paragraph (a), (b), 
or (c) shall not be eligible for any future participation in the Dairy 
Donation Program.


Sec.  1147.206  Enforcement.

    Where applicable, AMS will verify an eligible dairy organization's 
payment of the input cost. AMS will also conduct spot checks, reviews, 
and audits of the reports and documentation submitted pursuant to Sec.  
1147.106(a) to verify accuracy and to ensure the integrity of the Dairy 
Donation Program.


Sec.  1147.208  Confidentiality.

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


Sec.  1147.209  Books and records.

    Each eligible dairy organization shall maintain and retain records 
of its operations and make such records and its facilities available to 
AMS as necessary to ensure the integrity of the Dairy Donation Program.
    (a) Records to be maintained and made available. Each eligible 
dairy organization must maintain and make available records of its 
operations (including, but not limited to, records of donations, 
processing, packaging, and disposition of donated eligible dairy 
products) that are necessary to verify whether it met program 
requirements.
    (b) Retention of records. All records required under the paragraph 
(a) shall be retained by the eligible dairy organization for a period 
of 3 years to begin at the end of the month to which such records 
pertain.


Sec.  1147.210  Milk for other programs.

    Eligible dairy products sold or donated under other commodity or 
food assistance programs administered by the United States Department 
of Agriculture, except as pursuant to 7 CFR 1146, is not eligible for 
reimbursement under the Dairy Donation Program in this part.


Sec.  1147.212  Expiration of this part.

    This part expires September 1, 2023, unless extended by 
notification in the Federal Register.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2021-18606 Filed 8-31-21; 8:45 am]
BILLING CODE P