Foreign Donation of Agricultural Commodities

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1499

Foreign Donation of Agricultural Commodities

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: These regulations govern the provision of agricultural

commodities by Commodity Credit Corporation pursuant to section 416(b)

of the Agricultural Act of 1949 or the Food for Progress Act of 1985

for distribution in foreign countries.

EFFECTIVE DATE: December 30, 1996.

FOR FURTHER INFORMATION CONTACT: Director/CCCPSD, Foreign Agricultural

Service, United States Department of Agriculture, 1400 Independence

Ave., S.W., Stop 1031; Washington, D.C. 20250-1031; telephone (202)

720-3573.

SUPPLEMENTARY INFORMATION: This rule is issued in conformance with

Executive Order 12866. Based on information compiled by the Department,

it has been determined that this rule:

(1) Would have an annual effect on the economy of less than $100

million;

(2) Would not adversely affect in a material way the economy, a

sector of the economy, productivity, competition, jobs, the

environment, public health or safety, or State, local, or tribal

governments or communities;

(3) Would not create a serious inconsistency or otherwise interfere

with an action taken or planned by another agency;

(4) Would not alter the budgetary impact of entitlements, grants,

user fees, or loan programs or rights and obligations of recipients

thereof; and

(5) Would not raise novel legal or policy issues arising out of

legal mandates, the President's priorities, or principles set forth in

Executive Order 12866.

Regulatory Flexibility Act

This rule deals primarily with requirements imposed upon foreign

governments and non-profit entities distributing humanitarian grant

food supplies overseas. Therefore, the rule does not have a significant

impact upon a substantial number of small business

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entities and a Regulatory Impact Statement was not prepared. A copy of

this rule has been sent to the Chief Counsel, Office of Advocacy, U.S.

Small Business Administration.

Paperwork Reduction Act

The information collection requirements imposed by this final rule

have been previously submitted to the Office of Management and Budget

(OMB) under the Paperwork Reduction Act of 1980 (44 U.S.C. Chapter 35).

OMB has assigned control number 0051-0035 for this information

collection. This regulation does not change any of the information

collection requirements. A submission to extend this approval will be

submitted to OMB.

Executive Order 12372

This rule is not subject to the provisions of Executive Order 12372

which requires intergovernmental consultation with state and local

officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 46 FR 29115 (June 24, 1983).

Executive Order 12988

This rule has been reviewed under the Executive Order 12988, Civil

Justice Reform. The rule would have pre-emptive effect with respect to

any state or local laws, regulations, or policies which conflict with

such provisions or which otherwise impede their full implementation.

The rule would not have retroactive effect. Administrative proceedings

are not required before parties may seek judicial review.

Background

On February 14, 1994, the Commodity Credit Corporation (CCC)

published a proposed rule (59 FR 6916) to govern its donation of

agricultural commodities for distribution in foreign countries pursuant

to section 416(b) of the Agricultural Act of 1949 (section 416(b)) or

the Food for Progress Act of 1985. Comments on the proposed rule were

received from private entities which are most affected by these

regulations: private voluntary organizations (PVOs), shippers, and

freight forwarders. Their comments are discussed below, except for

those dealing with issues outside of the scope of the proposed rule,

making editorial suggestions, or simply expressing support for the

proposed rule.

Commodity Availability

Comment: The PVO community requested that the CCC make a commodity

availability determination for the Food for Progress Program (FFP)

similar to the one required for the section 416(b) program.

Response: As a general matter, only commodities in CCC uncommitted

inventory are available for donation under section 416(b).

Consequently, CCC annually reviews its inventory to determine commodity

availability and publicizes the results to assist PVO's in planning

donation activities. By contrast, FFP donations are not limited to CCC

inventory; CCC may purchase commodities for FFP donations to meet

justified needs. Therefore, there is no reason to announce yearly

availability of commodities in connection with the FFP or to establish

a specific list of eligible commodities.

Method of Payment to PVOs

Comment: PVOs requested that CCC delete the requirement in section

1499.7 of the proposed rule that a portion of the funds provided PVOs

be paid on a reimbursement basis. The PVO's stated that they were

unable to finance many expenses out-of-pocket.

Response: In CCC's experience, this requirement has not constrained

PVO participation in CCC grant food aid programs. CCC has determined

that, to maintain adequate program management, it is necessary to

maintain a minimal 15% reimbursement requirement.

Recipient Agency Agreements

Comment: PVOs requested that section 1499.10 of the proposed rule

be revised to delete the requirement that agreements with local

recipient agencies include by reference the terms of these regulations.

The PVOs suggested that such agreements need only be consistent with

these regulations.

Response: CCC agrees. The final rule, therefore, has been revised

to require that recipient agency agreements be consistent with these

rules.

Private sector involvement

Comment: PVOs suggested that the requirement in

Sec. 1499.5(b)(6)(d) of the proposed rule that PVOs use private sector

channels to sell commodities provided under section 416(b) is

inappropriate because section 416(b) unlike FFP, does not specify

support for the private sector.

Response: CCC will maintain this requirement because economic

development is one of the goals of section 416(b). Development of

private sector selling mechanisms is an element of economic

development.

Other comments from PVOs

Comment: The PVO community proposed a number of changes which it

asserted would ease its administrative burden without affecting CCC's

ability to review and monitor the programs. The PVOs suggested that:

the plan of operations be submitted to the Agricultural Counselor or

Attache only if the Counselor or Attache is resident in the country

targeted for assistance; the priorities governing decisions to enter

into section 416(b) and FFP agreements be refined to better reflect the

different purposes of each program; CCC allow flexibility in shifting

funds among approved expenditure categories within the total CCC-

approved commodity distribution budget in order to facilitate

management of the programs by the PVOs; and a quarterly, rather than

monthly, financial statement from the PVO will provide CCC sufficient

and timely information with which to monitor the programs.

Response: CCC agrees with these suggestions and the final rule has

been revised accordingly.

Commissions

Comment: Shippers and shipping agents expressed concern regarding

section 1499.8(e)(1) of the proposed rule which allows commissions to

be paid only on the ocean portion of any transportation arranged for

the commodities even if the movement of the commodities involves inland

transportation after discharge. A number of freight forwarders noted

that they were section 8(a) qualified small businesses and that this

proposed rule would have an adverse impact on their businesses as a

result of reducing the amount of commissions that they could receive.

Comments also noted that the Shipping Act of 1984 mandates that

conference carriers pay to shipping agents a commission based on the

aggregate of all rates and charges for a movement which would include

both ocean and inland charges. Finally, they suggested that this

proposal was unreasonable because it ignored the fact that shipping

agents did a considerable amount of work with shipments after cargo is

discharged and moves inland.

Response: CCC has determined that the complexity of arranging

inland transportation warrants continued financing of commissions for

that service when CCC is financing this movement.

Comment: Section 1499.8(e)(2) proposed a limit on the amount of

commission payable to a shipping agent. The limit proposed was 2/3 of

the maximum commission payable (2 1/2 percent of the total freight). A

number of comments characterized the proposed change as arbitrary and

unduly

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restrictive and argued that it would not result in overall savings for

CCC.

Response: In view of the issues raised by these comments, CCC has

concluded not to proceed with the proposed 2/3's limitation.

Freight payments

Comments: Several parties suggested that CCC make full freight

payment upon loading, stating this would be consistent with standard

commercial practice.

Response: In CCC's experience, payment upon discharge is necessary

to assure proper handling and discharge of the commodities provided and

to protect CCC's programmatic interests. These programs are not

commercial; they often provide commodities that would not otherwise be

moved in normal international trade to recipients facing emergency food

needs.

Agents

Comment: Section 1499.8(c) of the proposed rule extends conflict of

interest requirements currently applicable to title I, P.L. 480 and

section 416(b) to the FFP. Comments argued that this provision would

punish status rather than address any actual conflict of interest, and

would reduce competition and increase costs.

Response: The provisions complained of are legislatively required

in connection with shipments under title I and section 416(b). CCC has

determined to extend the conflict of interest provisions to the FFP in

order to maintain consistency between these food donation programs.

Other Changes to Proposed Rule

The final rule also incorporates the changes to the section 416(b)

and Food for Progress (FFP) programs mandated by the Federal

Agriculture Improvement and Reform Act of 1996, Pub. L. 104-127. That

Act allows the use of generated local currency in section 416(b) for

administrative expenses, extends the time period to expend such

currency; authorizes the participation of international organizations

in the FFP; expands CCC's authority to provide commodities on credit

terms under the FFP; and to fund technical assistance for monetization

programs in the FFP. Finally, the final rule makes a number of

editorial and organizational changes to the text of the proposed rule.

List of Subjects in 7 CFR Part 1499

Agricultural commodities, Exports, Foreign aid.

Accordingly, title 7 of the Code of Federal Regulations is amended

by adding a new Part 1499 to read as follows:

PART 1499--FOREIGN DONATION PROGRAMS

Sec.

1499.1 Definitions.

1499.2 General purpose and scope.

1499.3 Eligibility requirements for Cooperating Sponsors.

1499.4 Availability of commodities from CCC inventory.

1499.5 Program Agreements and Plans of Operation.

1499.6 Usual marketing requirements.

1499.7 Apportionment of costs and advances.

1499.8 Ocean transportation.

1499.9 Arrangements for entry and handling in the foreign country.

1499.10 Restrictions on commodity use and distribution.

1499.11 Agreement between Cooperating Sponsor and Recipient

Agencies.

1499.12 Sales and barter of commodities provided and use of

proceeds.

1499.13 Processing, packaging and labeling of section 416(b)

commodities in the foreign country.

1499.14 Disposition of commodities unfit for authorized use.

1499.15 Liability for loss, damage, or improper distribution of

commodities--claims and procedures.

1499.16 Records and reporting requirements.

1499.17 Audits.

1499.18 Suspension of the program.

1499.19 Sample documents and guidelines for developing proposals

and reports.

1499.20 Paperwork reduction requirement.

Authority: 7 U.S.C. 1431(b); 7 U.S.C. 1736o; E.O. 12752.

Sec. 1499.1 Definitions.

Activity--a Cooperating Sponsor's use of agricultural commodities

provided under Program Agreements or use of sale proceeds.

Agricultural Counselor or Attache--the United States Foreign

Agricultural Service representative stationed abroad, who has been

assigned responsibilities with regard to the country into which the

commodities provided are imported, or such representative's designee.

CCC--the Commodity Credit Corporation.

Commodities--agricultural commodities or products.

Director, P.L. 480-OD--the Director, Pub. L. 480 Operations

Division, Foreign Agricultural Service, USDA.

Director, CCCPSD--the Director, CCC Program Support Division,

Foreign Agricultural Service, USDA.

Director, PDD--the Director, Program Development Division, Foreign

Agricultural Service, USDA.

Deputy Administrator--Deputy Administrator for Export Credits,

Foreign Agricultural Service, USDA.

Force Majeure--damage caused by perils of the sea or other waters;

collisions; wrecks; standing without the fault of the carrier;

jettison; fire from any cause; Act of God; public enemies or pirates;

arrest or restraint of princes, princesses, rulers of peoples without

the fault of the carrier; wars; public disorders; captures; or

detention by public authority in the interest of public safety.

General Sales Manager--General Sales Manager and Associate

Administrator, Foreign Agricultural Service, USDA, who is a Vice

President, CCC.

KCCO--Kansas City Commodity Office, Farm Services Agency, USDA,

P.O. Box 419205, Kansas City, Missouri, 64141-6205.

KCFMO--Kansas City Financial Management Office, Farm Services

Agency, USDA, P.O. Box 419205, Kansas City, Missouri, 64141-6205.

Ocean freight differential--the amount, as determined by CCC, by

which the cost of ocean transportation is higher than would otherwise

be the case by reason of the requirement that the commodities be

transported on U.S.-flag vessels.

Program Agreement--an agreement entered into between CCC and

Cooperating Sponsors.

Program income--interest on sale proceeds and money received by the

Cooperating Sponsor, other than sales proceeds, as a result of carrying

out approved activities.

Recipient agency--an entity located in the importing country which

receives commodities or commodity sale proceeds from a Cooperating

Sponsor for the purpose of implementing activities.

Sale proceeds--money received by a Cooperating Sponsor from the

sale of commodities.

Section 416(b)--Section 416(b) of the Agricultural Act of 1949.

USDA--the United States Department of Agriculture.

Sec. 1499.2 General purpose and scope.

This part establishes the general terms and conditions governing

CCC's donation of commodities to Cooperating Sponsors under the section

416(b) and Food for Progress programs. This does not apply to donations

to intergovernmental agencies or organizations (such as the World Food

Program) unless CCC and such intergovernmental agency or organization

enters into an agreement incorporating this part.

Sec. 1499.3 Eligibility requirements for Cooperating Sponsor.

A Cooperating Sponsor may be either:

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(a) A foreign government;

(b) An entity registered with the Agency for International

Development (AID) in accordance with AID regulations; or

(c) An entity that demonstrates to CCC's satisfaction:

(1) Organizational experience and resources available to implement

and manage the type of program proposed, i.e., targeted food assistance

or sale of commodities for economic development activities;

(2) Experience working in the targeted country; and

(3) Experience and knowledge on the part of personnel who will be

responsible for implementing and managing the program. CCC may require

that an entity submit a financial statement demonstrating that it has

the financial means to implement an effective donation program.

Sec. 1499.4 Availability of commodities from CCC inventory.

CCC will periodically announce the types and quantities of

agricultural commodities available for donation from CCC inventory for

the section 416(b) program.

Sec. 1499.5 Program Agreements and Plans of Operation.

(a) Plan of Operation. (1) Prior to entering into a section 416(b)

Program Agreement, a Cooperating Sponsor shall submit a Plan of

Operation to the Director, PDD and to the Agricultural Counselor or

Attache, if an Agricultural Counselor or Attache is resident in the

country where activities are to be implemented. After approval by CCC,

the Plan of Operation will be incorporated into the section 416(b)

Program Agreement as ``Attachment A.''

(2) CCC may require Cooperating Sponsors to submit a Plan of

Operation in connection with the Food for Progress program.

(3) A Plan of Operation shall be in the following format and

provide the following information:

1. Name and Address of Applicant:

2. Country of Donation:

3. Kind and Quantity of Commodities Requested:

4. Delivery Schedule:

5. Program Description:

Provide the following information:

(a) Activity objectives, including a description of any problems

anticipated in achieving the activities' objectives;

(b) Method for choosing beneficiaries of activities;

(c) Program administration including, as appropriate, plans for

administering the distribution or sale of commodities and the

expenditure of sale proceeds, and identification of the

administrative or technical personnel who will implement the

activities;

(d) Activity budgets, including costs that will be borne by the

Cooperating Sponsor, other organizations or local governments;

(e) The recipient agency, if any, that will be involved in the

program and a description of each recipient agency's capability to

perform its responsibilities as stated in the Plan of Operation;

(f) Governmental or nongovernmental entities involved in the

program and the extent to which the program will strengthen or

increase the capabilities of such entities to further economic

development in the recipient country;

(g) Method of educating consumers as to the source of the

provided commodities and, where appropriate, preparation and use of

the commodity; and

(h) Criteria for measuring progress towards achieving the

objectives of activities and evaluating program outcome.

6. Use of Funds or Goods and Services Generated:

When the activity involves the use of sale proceeds, the receipt

of goods or services from the barter of commodities, or the use of

program income, the following information must be provided:

(a) the quantity and type of commodities to be sold or bartered;

(b) extent to which any sale or barter of the agricultural

commodities provided would displace or interfere with any sales that

may otherwise be made;

(c) the amount of sale proceeds anticipated to be generated from

the sale, the value of the goods or services anticipated to be

generated from the barter of the agricultural commodities provided,

or the amount of program income expected to be generated;

(d) the steps taken to use, to the extent possible, the private

sector in the process of selling commodities;

(e) the specific uses of sale proceeds or program income and a

timetable for their expenditure; and

(f) procedures for assuring the receipt and deposit of sale

proceeds and program income into a separate special account and

procedures for the disbursement of the proceeds and program income

from such special account.

7. Distribution Methods:

(a) a description of the transportation and storage system which

will be used to move the agricultural commodities from the receiving

port to the point at which distribution is made to the recipient;

(b) a description of any reprocessing or repackaging of the

commodities that will take place; and

(c) a logistics plan that demonstrates the adequacy of port,

transportation, storage, and warehouse facilities to handle the flow

of commodities to recipients without undue spoilage or waste.

8. Duty Free Entry:

Documentation indicating that any commodities to be distributed

to recipients, rather than sold, will be imported and distributed

free from all customs, duties, tolls, and taxes.

9. Economic Impact:

Information indicating that the commodities can be imported and

distributed without a disruptive impact upon production, prices and

marketing of the same or like products within the importing country.

(b) Agreements. CCC and the Cooperating Sponsor will enter into a

written Program Agreement which will incorporate the terms and

conditions set forth in this part. The commodities provided by CCC, and

any packaging, will meet the specifications set forth in such Program

Agreement. A Program Agreement may contain special terms or conditions,

in addition to or in lieu of, the terms and conditions set forth in the

regulations in this part when CCC determines that such special terms or

conditions are necessary to effectively carry out the particular

Program Agreement.

Sec. 1499.6 Usual marketing requirements.

(a) A foreign government Cooperating Sponsor shall provide to the

Director, PDD, data showing commercial and non-commercial imports of

the types of agricultural commodities requested during the prior five

years, by country of origin, and an estimate of imports of such

commodities during the current year.

(b) CCC may require that a Program Agreement with a foreign

government include a ``usual marketing requirement'' that establishes a

specific level of imports for a specified period. The Program Agreement

may also include a prohibition on the export of provided commodities,

as well as of other similar commodities specified in the Program

Agreement.

Sec. 1499.7 Apportionment of costs and advances.

(a) CCC will bear the costs of processing, packaging,

transportation, handling and other incidental charges incurred in

delivering commodities to Cooperating Sponsors. CCC will deliver bulk

grain shipments f.o.b. vessel, and shipments of all other commodities

f.a.s. vessel or intermodal points. CCC will choose the point of

delivery based on lowest cost to CCC.

(b) When the General Sales Manager approves in advance and in

writing, CCC may agree to bear all or a portion of reasonable costs

associated with:

(1) Transportation from U.S. ports to designated ports or points of

entry abroad, maritime survey costs, and in cases of urgent and

extraordinary relief requirements, transportation from designated ports

or points of entry abroad to designated storage and distribution sites;

(2) In cases of urgent and extraordinary relief requirements,

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reasonable storage and distribution costs; and

(3) Under the Food for Progress Program, administration or

monitoring of food assistance programs, or technical assistance

regarding sales of commodities provided by CCC.

(c) CCC will not pay any costs incurred by the Cooperating Sponsor

prior to the date of the Program Agreement.

(d) Except as provided in paragraph (b) of this section, the

Cooperating Sponsor shall ordinarily bear all costs incurred subsequent

to CCC's delivery of commodities at U.S. ports or intermodal points.

(e) A Cooperating Sponsor seeking agreement by CCC to bear the

costs identified in paragraphs (b)(2) or (b)(3) of this section shall

submit to the Director, PDD, a Program Operation Budget detailing such

costs. If approved, the Program Operation Budget shall become part of

the Program Agreement. The Cooperating Sponsor may make adjustments

between line items of an approved Program Operation Budget up to 20

percent of the total amount approved or $1,000, whichever is less,

without any further approval. Adjustments beyond these limits must be

specifically approved by the Controller and the General Sales Manager.

(f) The Cooperating Sponsor may request advance of up to 85 percent

of the amount of an approved Program Operating Budget. However, CCC

will not approve any request for an advance received earlier than 60

days after the date of a previous advance made in connection with the

same Program Agreement.

(g) Funds advanced shall be deposited in an interest bearing

account until expended. Interest earned may be used only for the

purposes for which the funds were advanced.

(h) The Cooperating Sponsor shall return to CCC any funds not

obligated as of the 180th day after being advanced, together with any

interest earned on such unexpended funds. Funds and interest shall be

returned within 30 days of such date.

(i) The Cooperating Sponsor shall, not later than 10 days after the

end of each calendar quarter, submit a financial statement to the

Director, CCCPSD, accounting for all funds advanced and all interest

earned.

(j) CCC will pay all other costs for which it is obligated under

the Program Agreement by reimbursement. However, CCC will not pay any

cost incurred after the final date specified in the Program Agreement.

Sec. 1499.8 Ocean transportation.

(a) Cargo preference. Shipments of commodities provided under

either the section 416(b) or Food for Progress programs are subject to

the requirements of sections 901(b) and 901b of the Merchant Marine

Act, 1936, regarding carriage on U.S.-flag vessels. CCC will endeavor

to meet these requirements separately for each program for each 12-

month compliance period. A Cooperating Sponsor shall comply with the

instructions of CCC regarding the quantity of commodities that must be

carried on U.S. flag vessels.

(b) Freight procurement requirements. In all cases where the

Cooperating Sponsor arranges ocean transportation, whether by U.S. or

non-U.S. flag vessel and CCC is financing any portion of the ocean

freight:

(1) The Cooperating Sponsor shall arrange ocean transportation

through competitive bidding and shall obtain approval of all

invitations for bids from the offices specified in the Program

Agreement prior to issuance.

(2) Invitations for bids shall be issued through the Transportation

News Ticker (TNT), New York, and at least one other comparable means of

trade communication.

(3) Freight invitations for bids shall include specified procedures

for payment of freight, including the party responsible for the freight

payments, and expressly require that:

(i) Offers include a contract canceling date no later than the last

contract layday specified in the invitation for bids;

(ii) Offered rates be quoted in U.S. dollars per metric ton;

(iii) If destination bagging or transportation to a point beyond

the discharge port is required, the offer separately state the total

rate and the portion thereof attributable to the ocean segment of the

movement;

(iv) Any non-liner U.S. flag vessel 15 years or older offer, in

addition to any other offered rate, a one-way rate applicable in the

event the vessel is scrapped or transferred to foreign flag registry

prior to the end of the return voyage to the United States;

(v) In the case of packaged commodities, U.S. flag carriers specify

whether delivery will be direct breakbulk shipment, container shipment,

or breakbulk transshipment and identify whether transshipment

(including container relays) will be via U.S. or foreign flag vessel;

(vi) Vessels offered subject to Maritime Administration approval

will not be accepted; and

(vii) Offers be received by a specified closing time, which must be

the same for both U.S. and non-U.S. flag vessels.

(4) In the case of shipments of bulk commodities and non-liner

shipments of packaged commodities, the Cooperating Sponsor shall open

offers in public in the United States at the time and place specified

in the invitation for bids and consider only offers that are responsive

to the invitation for bids without negotiation, clarification, or

submission of additional information. Late offers shall not be

considered or accepted.

(5) All responsive offers received for both U.S. flag and foreign

flag service shall be presented to KCCO which will determine the extent

to which U.S.-flag vessels will be used.

(6) The Cooperating Sponsor shall promptly furnish the Director,

Public Law 480-OD, or other official specified in the Program

Agreement, copies of all offers received with the time of receipt

indicated thereon. The Director, Public Law 480-OD, or other official

specified in the Program Agreement, will approve all vessel fixtures.

The Cooperating Sponsor may fix vessels subject to the required

approval; however, the Cooperating Sponsor shall not confirm a vessel

fixture until advised of the required approval and the results of the

Maritime Administration's guideline rate review. The Cooperating

Sponsor shall not request guideline rate advice from the Maritime

Administration. The Cooperating Sponsor will, promptly after receipt of

vessel approval, issue a public notice of the fixture details on the

TNT or other means of communication approved by the Director, Public

Law 480-OD.

(7) Non-Vessel Operating Common Carriers may not be employed to

carry shipments on either U.S. or foreign-flag vessels.

(8) The Cooperating Sponsor shall promptly furnish the Director

Public Law 480-OD, a copy of the signed laytime statement and statement

of facts at the discharge port.

(c) Shipping agents. (1) The Cooperating Sponsor may appoint a

shipping agent to assist in the procurement of ocean transportation.

The Cooperating Sponsor shall nominate the shipping agent in writing to

the Deputy Administrator, Room 4077-S, Foreign Agricultural Service,

U.S. Department of Agriculture, Washington, DC 20250-1031, and include

a copy of the proposed agency agreement. The Cooperating Sponsor shall

specify the time period of the nomination.

(2) The shipping agent so nominated shall submit the information

and

[[Page 60518]]

certifications required by 7 CFR 17.5 to the Deputy Administrator.

(3) A person may not act as a shipping agent for a Cooperating

Sponsor unless the Deputy Administrator has notified the Cooperating

Sponsor in writing that the nomination is accepted.

(d) Commissions. (1) When any portion of the ocean freight is paid

by CCC, total commissions earned on U.S. and foreign flag bookings by

all parties arranging vessel fixtures, shall not exceed 2\1/2\ percent

of the total freight costs.

(2) Address commissions are prohibited.

(e) Contract terms. When CCC is paying any portion of the ocean

freight, charter parties and liner booking contracts must conform to

the following requirements, as applicable:

(1) Packaged commodities on liner vessels shall be shipped on the

basis of full berth terms with no demurrage or despatch;

(2) Shipments of bulk liquid commodities may be contracted in

accordance with trade custom. Other bulk commodities, including

shipments that require bagging or stacking for the account of the

vessel, shall be shipped on the basis of vessel load, free out, with

demurrage and despatch applicable at load and discharge ports; except

that, if bulk commodities require further inland distribution, they

shall be shipped on the basis of vessel load with demurrage and

despatch at load and berth terms discharge, i.e., no demurrage,

despatch, or detention at discharge. Demurrage and despatch shall be

settled between the ocean carrier and commodity suppliers at load port

and between the ocean carrier and charterers at discharge ports. CCC is

not responsible for resolving disputes involving the calculation of

laytime or the payment of demurrage or despatch.

(3) If the Program Agreement requires the Cooperating Sponsor to

arrange an irrevocable letter of credit for ocean freight, the

Cooperating Sponsor shall be liable for detention of the vessel for

loading delays attributable solely to the decision of the ocean carrier

not to commence loading because of the failure of the Cooperating

Sponsor to establish such letter of credit. Charter parties and liner

booking contracts may not contain a specified detention rate. The ocean

carrier shall be entitled to reimbursement, as damages for detention

for all time so lost, for each calendar day or any part of the calendar

day, including Saturdays, Sundays and holidays. The period of such

delay shall not commence earlier than upon presentation of the vessel

at the designated loading port within the laydays specified in the

charter party or liner booking contract, and upon notification of the

vessel's readiness to load in accordance with the terms of the

applicable charter party or liner booking contract. The period of such

delay shall end at the time that operable irrevocable letters of credit

have been established for ocean freight or the time the vessel begins

loading, whichever is earlier. Time calculated as detention shall not

count as laytime. Reimbursement for such detention shall be payable no

later than upon the vessel's arrival at the first port of discharge.

(4) Charges including, but not limited to charges for inspection,

fumigation, and carrying charges, attributable to the failure of the

vessel to present before the canceling date will be for the account of

the ocean carrier.

(5) Ocean freight is earned under a charter party when the vessel

and cargo arrive at the first port of discharge, Provided, That if a

force majeure prevents the vessel's arrival at the first port of

discharge, 100% of the ocean freight is payable or, if the charter

party provides for completing additional requirements after discharge

such as bagging, stacking, or inland transportation, not more than 85%

of the ocean freight is payable, at the time the General Sales Manager

determines that such force majeure was the cause of nonarrival; and

(6) When the ocean carrier offers delivery to destination ports on

U.S.-flag vessels, but foreign-flag vessels are used for any part of

the voyage to the destination port without first obtaining the approval

of the Cooperating Sponsor, KCCO, and any other approval that may be

required by the Program Agreement, the ocean freight rate will be

reduced to the lowest responsive foreign-flag vessel rate offered in

response to the same invitation for bids and the carrier agrees to pay

CCC the difference between the contracted ocean freight rate and the

freight rate offered by such foreign-flag vessel.

(f) Coordination between CCC and the Cooperating Sponsor. When a

Program Agreement specifies that the Cooperating Sponsor will arrange

ocean transportation:

(1) KCCO will furnish the Cooperating Sponsor, or its agent, with a

Notice of Commodity Availability (Form CCC-512) which will specify the

receiving country, commodity, quantity, and date at U.S. port or

intermodal delivery point.

(2) The Cooperating Sponsor shall complete the Form CCC-512

indicating name of steamship company, vessel name, vessel flag and

estimated time of arrival at U.S. port; and shall sign and return the

completed form to KCCO, with a copy to the Director, P.L. 480-OD. If

CCC agrees to pay any part of the ocean transportation for liner

cargoes, the Cooperating Sponsor shall also indicate on the Form CCC-

512 the applicable Federal Maritime Commission tariff rate, and tariff

identification.

(3) KCCO will issue instructions to have the commodity delivered

f.a.s. or f.o.b. vessel, U.S. port of export or intermodal delivery

point, consigned to the Cooperating Sponsor.

(g) Documents required for payment of freight--(1) General rule. To

receive payment for ocean freight, the following documents shall be

submitted to the Director, CCCPSD:

(i) One copy of completed Form CCC-512;

(ii) Four copies of the original on-board bills of lading

indicating the freight rate and signed by the originating carrier;

(iii) For all non-containerized grain cargoes,

(A) One copy of the Federal Grain Inspection Service (FGIS)

Official Stowage Examination Certificate (Vessel Hold Certificate);

(B) One copy of the National Cargo Bureau Certificate of Readiness

(Vessel Hold Inspection Certificate); and

(C) One copy of the National Cargo Bureau Certificate of Loading;

(iv) For all containerized grain and grain product cargoes, one

copy of the FGIS Container Condition Inspection Certificate;

(v) One signed copy of liner booking note or charter party covering

ocean transportation of cargo;

(vi) For charter shipments, a notice of arrival at first discharge

port submitted by the Cooperating Sponsor;

(vii) Four copies of either:

(A) A request by the Cooperating Sponsor for reimbursement of ocean

freight or ocean freight differential indicating the amount due, and

accompanied by a certification from the ocean carrier that payment has

been received from the Cooperating Sponsor; or

(B) A request for direct payment to the ocean carrier, indicating

amount due; or

(C) A request for direct payment of ocean freight differential to

the ocean carrier accompanied by a certification from the carrier that

payment of the Cooperating Sponsor's portion of the ocean freight has

been received.

(2) In cases of force majeure. To receive payment in cases where

the General Sales Manager determines that circumstances of force

majeure have prevented the vessel's arrival at the first port of

discharge, the Cooperating

[[Page 60519]]

Sponsor shall submit all documents required by paragraph (g)(1) of this

section except for the notice of arrival required by paragraph

(g)(1)(vi) of this section.

(h) CCC payment of ocean freight or ocean freight differential--(1)

General rule. CCC will pay, not later than 30 days after receipt in

good order of the required documentation, 100 percent of either the

ocean freight or the ocean freight differential, whichever is specified

in the Program Agreement.

(2) Additional requirements after discharge. Where the charter

party or liner booking note provide for the completion of additional

services after discharge, such as bagging, stacking or inland

transportation, CCC will pay, not later than 30 days after receipt in

good order of the required documentation, either not more than 85

percent of the total freight charges or 100 percent of the ocean

freight differential, whichever is specified in the Program Agreement.

CCC will pay the remaining balance, if any, of the freight charges not

later than 30 days after receipt of notification from the Cooperating

Sponsor that such additional services have been provided; except that

CCC will not pay any remaining balance where the GSM determines that

the vessel's arrival at first port of discharge was prevented by force

majeure.

(3) No demurrage. CCC will not pay demurrage. Sec. 1499.9

Arrangements for entry and handling in the foreign country.

(a) The Cooperating Sponsor shall make all necessary arrangements

for receiving the commodities in the recipient country, including

obtaining appropriate approvals for entry and transit. The Cooperating

Sponsor shall store and maintain the commodities from time of delivery

at port of entry or point of receipt from originating carrier in good

condition until their distribution, sale or barter.

(b) When CCC has agreed to pay costs of transporting, storing, and

distributing commodities from designated points of entry or ports of

entry, the Cooperating Sponsor shall arrange for such services, by

through bill of lading, or by contracting directly with suppliers of

services, as CCC may approve. If the Cooperating Sponsor contracts

directly with the suppliers of such services, the Cooperating Sponsor

may seek reimbursement by submitting documentation to CCC indicating

actual costs incurred. All supporting documentation must be sent to the

Director, CCCPSD. CCC, at its option, will reimburse the Cooperating

Sponsor for the cost of such services in U.S. dollars at the exchange

rate in effect on the date of payment by CCC, or in foreign currency.

Sec. 1499.10 Restrictions on commodity use and distribution.

(a) The Cooperating Sponsor may use the commodities provided only

in accordance with the terms of the Program Agreement.

(b) Commodities shall not be distributed within the importing

country on the basis of political affiliation, geographic location, or

the ethnic, tribal or religious identity or affiliations of the

potential consumers or recipients.

(c) Commodities shall not be distributed, handled or allocated by

military forces without specific CCC authorization.

Sec. 1499.11 Agreement between cooperating sponsor and recipient

agencies.

(a) The Cooperating Sponsor shall enter into a written agreement

with a recipient agency prior to the transfer of any commodities, sale

proceeds or program income to the recipient agency. Copies of such

agreements shall be provided to the Agricultural Counselor or Attache,

and the Director, PDD. Such agreements shall require the recipient

agency to pay the Cooperating Sponsor the value of any commodities,

sale proceeds or program income that are used for purposes not

expressly permitted under the Program Agreement, or that are lost,

damaged, or misused as result of the recipient agency's failure to

exercise reasonable care;

(b) CCC may waive the requirements of paragraph (a) of this section

where it determines that such an agreement is not feasible or

appropriate.

Sec. 1499.12 Sales and barter of commodities provided and use of

proceeds.

(a) Commodities may be sold or bartered without the prior approval

of CCC where damage has rendered the commodities unfit for intended

program purposes and sale or barter is necessary to mitigate loss of

value.

(b) A Cooperating Sponsor may, but is not required to, negotiate an

agreement with the host government under which the commodities imported

for a sale or barter may be imported, sold, or bartered without

assessment of duties or taxes. In such cases and where the commodities

are sold, they shall be sold at prices reflecting prevailing local

market value.

(c) The Cooperating Sponsor shall deposit all sale proceeds into an

interest-bearing account unless prohibited by the laws or customs of

the importing country or CCC determines that to do so would constitute

an undue burden. Interest earned on such deposits shall only be used

for approved activities.

(d) Except as otherwise provided in this part the Cooperating

Sponsor may use sale proceeds and resulting interest only for those

purposes approved in the applicable Plan of Operation.

(e) CCC will approve the use of sale proceeds and interest to

purchase real and personal property where local law permits the

Cooperating Sponsor to retain title to such property, but will not

approve the use of sale proceeds or interest to pay for the

acquisition, development, construction, alteration or upgrade of real

property that is;

(1) Owned or managed by a church or other organization engaged

exclusively in religious activity, or

(2) Used in whole or in part for sectarian purposes; except that, a

Cooperating Sponsor may use such sale proceeds or interest to pay for

repairs or rehabilitation of a structure located on such real property

to the extent necessary to avoid spoilage or loss of provided

commodities but only if such structure is not used in whole or in part

for any religious or sectarian purposes while the provided commodities

are stored in such structure. When not approved in the Plan of

Operation, such use may be approved by the Agricultural Counsellor or

Attache.

(f) The Cooperating Sponsor shall follow commercially reasonable

practices in procuring goods and services and when engaging in

construction activity in accordance with the approved Plan of

Operation. Such practices shall include procedures to prevent fraud,

self-dealing and conflicts of interest, and shall foster free and open

competition to the maximum extent practicable.

(g) To the extent required by the Program Agreement, the

Cooperating Sponsor shall submit to the Controller, CCC, and to the

Director, PDD, an inventory of all assets acquired with sale proceeds

or interest or program income. In the event that its participation in

the program terminates, the Cooperating Sponsor shall dispose, at the

direction of the Director, PDD, of any property, real or personal, so

acquired.

Sec. 1499.13 Processing, packaging and labeling of section 416(b)

commodities in the foreign country.

(a) Cooperating Sponsors may arrange for the processing of

commodities provided under a section 416(b) Program Agreement, or for

packaging or repackaging prior to distribution. When a third party

provides such processing, packaging or repackaging, the

[[Page 60520]]

Cooperating Sponsor shall enter into a written agreement requiring that

the provider of such services maintain adequate records to account for

all commodities delivered and submit periodic reports to the

Cooperating Sponsor. The Cooperating Sponsor shall submit a copy of the

executed agreement to the Agricultural Counselor or Attache.

(b) If, prior to distribution, the Cooperating Sponsor arranges for

packaging or repackaging commodities provided under section 416(b), the

packaging shall be plainly labeled in the language of the country in

which the commodities are to be distributed with the name of the

commodity and, except where the commodities are to be sold or bartered

after processing, packaging or repackaging, to indicate that the

commodity is furnished by the people of the United States of America

and not to be sold or exchanged. If the commodities are not packaged,

the Cooperating Sponsor shall, to the extent practicable, display

banners, posters or other media containing the information prescribed

in this paragraph.

(c) CCC will reimburse Cooperating Sponsors that are nonprofit

private voluntary organizations or cooperatives for expenses incurred

for repackaging if the packages of commodities provided under section

416(b) are discharged from the vessel in damaged condition, and are

repackaged to ensure that the commodities arrive at the distribution

point in wholesome condition. No prior approval is required for such

expenses equaling $500 or less. If such expense is estimated to exceed

$500, the authority to repackage and incur such expense must be

approved by the Agricultural Counselor or Attache in advance of

repackaging.

Sec. 1499.14 Disposition of commodities unfit for authorized use.

(a) Prior to delivery to Cooperating Sponsor at discharge port or

point of entry. If the commodity is damaged prior to delivery to a

governmental Cooperating Sponsor at discharge port or point of entry

overseas, the Agricultural Counselor or Attache will immediately

arrange for inspection by a public health official or other competent

authority. If the commodity is damaged prior to delivery to a

nongovernmental Cooperating Sponsor at the discharge port or point of

entry, the nongovernmental Cooperating Sponsor shall arrange for such

inspection. If inspection discloses the commodity to be unfit for the

use authorized in the Program Agreement, the Agricultural Counselor or

Attache or the nongovernmental Cooperating Sponsor shall dispose of the

commodities in accordance with the priority set forth in paragraph (b)

of this section. Expenses incidental to the handling and disposition of

the damaged commodity will be paid by CCC from the sale proceeds or

from an appropriate CCC account designated by CCC. The net proceeds of

sales shall be deposited with the U.S. Disbursing Officer, American

Embassy, for the credit of CCC in an appropriate CCC account designated

by CCC; however, if the commodities are provided for a sales program,

the net sale proceeds, net of expenses incidental to handling and

disposition of the damaged commodity, shall be deposited to the special

account established for sale proceeds. The Cooperating Sponsor shall

consult with CCC regarding the inspection and disposition of

commodities and accounting for sale proceeds in the event the

Cooperating Sponsor executed a sales agreement under which title passed

to the purchaser prior to delivery to the Cooperating Sponsor.

(b) After delivery to Cooperating Sponsor. (1) If after arrival in

a foreign country and after delivery to a Cooperating Sponsor, it

appears that the commodity, or any part thereof, may be unfit for the

use authorized in the Program Agreement, the Cooperating Sponsor shall

immediately arrange for inspection of the commodity by a public health

official or other competent authority approved by the Agricultural

Counselor or Attache. If no competent local authority is available, the

Agricultural Counselor or Attache may determine whether the commodities

are unfit for the use authorized in the Program Agreement and, if so,

may direct disposal in accordance with this paragraph (b) of this

section. The Cooperating Sponsor shall arrange for the recovery of that

portion of the commodities designated during the inspection as suitable

for authorized use. If, upon inspection, the commodity (or any part

thereof) is determined to be unfit for the authorized use, the

Cooperating Sponsor shall notify the Agricultural Counselor or Attache

of the circumstances pertaining to the loss or damage. With the

concurrence of the Agricultural Counselor or Attache, the commodity

determined to be unfit for authorized use shall be disposed of in the

following order of priority:

(i) By transfer to an approved section 416(b) program for use as

livestock feed. CCC shall be advised promptly of any such transfer so

that shipments from the United States to the livestock feeding program

can be reduced by an equivalent amount;

(ii) Sale for the most appropriate use, i.e., animal feed,

fertilizer, or industrial use, at the highest obtainable price. When

the commodity is sold, all U.S. Government markings shall be

obliterated or removed;

(iii) By donation to a governmental or charitable organization for

use as animal feed or for other non-food use; or

(iv) If the commodity is unfit for any use or if disposal in

accordance with paragraph (b)(1) (i), (ii) or (iii) of this section is

not possible, the commodity shall be destroyed under the observation of

a representative of the Agricultural Counselor or Attache, if

practicable, in such manner as to prevent its use for any purpose.

(2) Actual expenses incurred, including third party costs, in

effecting any sale may be deducted from the sale proceeds and, if the

commodities were intended for direct distribution, the Cooperating

Sponsor shall deposit the net proceeds with the U.S. Disbursing

Officer, American Embassy, with instructions to credit the deposit to

an appropriate CCC account as designated by CCC. If the commodities

were intended to be sold, the Cooperating Sponsor shall deposit the

gross proceeds into the special interest bearing account and, after

approved costs related to the handling and disposition of damaged

commodities are paid, shall use the remaining funds for purposes of the

approved program. The Cooperating Sponsor shall promptly furnish to the

Agricultural Counselor or Attache a written report of all circumstances

relating to the loss and damage on any commodity loss in excess of

$5,000; quarterly reports shall be made on all other losses. If the

commodity was inspected by a public health official or other competent

authority, the report and any supplemental report shall include a

certification by such public health official or other competent

authority as to the condition of the commodity and the exact quantity

of the damaged commodity disposed. Such certification shall be obtained

as soon as possible after the discharge of the cargo. A report must

also be provided to the Chief, Debt Management Division, KCFMO, of

action taken to dispose of commodities unfit for authorized use.

Sec. 1499.15 Liability for loss, damage, or improper distribution of

commodities--claims and procedures.

(a) Fault of Cooperating Sponsor prior to loading on ocean vessel.

The Cooperating Sponsor shall immediately notify KCCO, Chief, Export

Operations Division if the Cooperating Sponsor will not have a vessel

for loading at the U.S. port of export in accordance with the

[[Page 60521]]

agreed shipping schedule. CCC will determine whether the commodity will

be: moved to another available outlet; stored at the port for delivery

to the Cooperating Sponsor when a vessel is available for loading; or

disposed of as CCC may deem proper. The Cooperating Sponsor shall take

such action as directed by CCC and shall reimburse CCC for expenses

incurred if CCC determines that the expenses were incurred because of

the fault or negligence of the Cooperating Sponsor.

(b) Fault of others prior to loading on ocean vessel. The

Cooperating Sponsor shall immediately notify the Chief, Debt Management

Office, KCFMO, when any damage or loss to the commodity occurs that is

attributable to a warehouseman, carrier, or other person between the

time title is transferred to a Cooperating Sponsor and the time the

commodity is loaded on board vessel at the designated port of export.

The Cooperating Sponsor shall promptly assign to CCC any rights to

claims which may arise as a result of such loss or damage and shall

promptly forward to CCC all documents pertaining thereto. CCC shall

have the right to initiate claims, and retain the proceeds of all

claims, for such loss or damage.

(c) Survey and outturn reports related to claims against ocean

carriers. (1) If the Program Agreement provides that CCC will arrange

for an independent cargo surveyor to attend the discharge of the cargo,

CCC will require the surveyor to provide a copy of the report to the

Cooperating Sponsor.

(2)(i) If the Cooperating Sponsor arranges for an independent cargo

surveyor, the Cooperating Sponsor shall forward to the Chief, Debt

Management Office, KCFMO, any narrative chronology or other commentary

it can provide to assist in the adjudication of ocean transportation

claims and shall prepare such a narrative in any case where the loss is

estimated to be in excess of $5,000.00. The Cooperating Sponsor may, at

its option, also engage the independent surveyor to supervise clearance

and delivery of the cargo from customs or port areas to the Cooperating

Sponsor or its agent and to issue delivery survey reports thereon.

(ii) In the event of cargo loss and damage, the Cooperating Sponsor

shall provide to the Chief, Debt Management Office, KCFMO, the names

and addresses of individuals who were present at the time of discharge

and during survey and who can verify the quantity lost or damaged. For

bulk grain shipments, in those cases where the Cooperating Sponsor is

responsible for survey and outturn reports, the Cooperating Sponsor

shall obtain the services of an independent surveyor to:

(A) Observe the discharge of the cargo;

(B) Report on discharging methods including scale type,

calibrations and any other factor which may affect the accuracy of

scale weights, and, if scales are not used, state the reason therefore

and describe the actual method used to determine weights;

(C) Estimate the quantity of cargo, if any, lost during discharge

through carrier negligence;

(D) Advise on the quality of sweepings;

(E) Obtain copies of port or vessel records, if possible, showing

quantity discharged;

(F) Provide immediate notification to the Cooperating Sponsor if

additional services are necessary to protect cargo interests or if the

surveyor has reason to believe that the correct quantity was not

discharged; and

(G) In the case of shipments arriving in container vans, list the

container van numbers and seal numbers shown on the container vans, and

indicate whether the seals were intact at the time the container vans

were opened, and whether the container vans were in any way damaged. To

the extent possible, the independent surveyor should observe discharge

of container vans from the vessel to ascertain whether any damage to

the container van occurred and arrange for surveying as container vans

are opened.

(iii) Cooperating Sponsors shall send copies to KCFMO, Chief, Debt

Management Office of all reports and documents pertaining to the

discharge of commodities.

(iv) CCC will reimburse the Cooperating Sponsor for costs incurred

upon receipt of the survey report and the surveyor's invoice or other

documents that establish the survey cost. CCC will not reimburse a

Cooperating Sponsor for the costs of a delivery survey unless the

surveyor also prepares a discharge survey, or for any other survey not

taken contemporaneously with the discharge of the vessel, unless CCC

determines that such action was justified in the circumstances.

(3) Survey contracts shall be let on a competitive bid basis unless

CCC determines that the use of competitive bids would not be

practicable. CCC may preclude the use of certain surveyors because of

conflicts of interest or lack of demonstrated capability to properly

carry out surveying responsibilities.

(4) If practicable, all surveys shall be conducted jointly by the

surveyor, the consignee, and the ocean carrier, and the survey report

shall be signed by all parties.

(d) Ocean carrier loss and damage. (1) Notwithstanding transfer of

title, CCC shall have the right to file, pursue, and retain the

proceeds of collection from claims arising from ocean transportation

cargo loss and damage arising out of shipments of commodities provided

to governmental Cooperating Sponsors; however, when the Cooperating

Sponsor pays the ocean freight or a portion thereof, it shall be

entitled to pro rata reimbursement received from any claims related to

ocean freight charged. CCC will pay general average contributions for

all valid general average incidents which may arise from the movement

of commodity to the destination ports. CCC shall receive and retain all

allowances in general average.

(2) Nongovernmental Cooperating Sponsors shall: file notice with

the ocean carrier immediately upon discovery of any cargo loss or

damage; promptly initiate claims against the ocean carriers for such

loss and damage; take all necessary action to obtain restitution for

losses, and (iv) provide CCC copies of all such claims. Notwithstanding

the preceding sentence the nongovernmental Cooperating Sponsor need not

file a claim when the cargo loss is less than $100, or in any case when

the loss is between $100 and $300 and the nongovernmental Cooperating

Sponsor determines that the cost of filing and collecting the claim

will exceed the amount of the claim. The nongovernmental Cooperating

Sponsor shall transmit to KCFMO, Chief, Debt Management Office

information and documentation on such lost or damaged shipments when no

claim is to be filed. When General Average has been declared,

Cooperating Sponsors need not file or collect claims for loss of, or

damage to, commodities.

(3) Amounts collected by nongovernmental Cooperating Sponsors on

claims against ocean carriers which are less than $200 may be retained

by the nongovernmental Cooperating Sponsor. On claims involving loss or

damage of $200 or more, nongovernmental Cooperating Sponsors may retain

from collections received by them, either $200 plus 10 percent of the

difference between $200 and the total amount collected on the claim, up

to a maximum of $500; or the actual administrative expenses incurred in

collection of the claim, provided retention of such administrative

expenses is approved by CCC. Allowable collection costs shall not

include attorneys fees, fees of collection agencies, and similar costs.

In no event

[[Page 60522]]

will CCC pay collection costs in excess of the amount collected on the

claim.

(4) A nongovernmental Cooperating Sponsor also may retain from

claim recoveries remaining after allowable deductions for

administrative expenses of collection, the amount of any special

charges, such as handling and packing costs, which the nongovernmental

Cooperating Sponsor has incurred on the lost or damaged commodity and

which are included in the claims and paid by the liable party.

(5) A nongovernmental Cooperating Sponsor may redetermine claims on

the basis of additional documentation or information not considered

when the claims were originally filed when such documentation or

information clearly changes the ocean carrier's liability. Approval of

such changes by CCC is not required regardless of amount. However,

copies of redetermined claims and supporting documentation or

information shall be furnished to CCC.

(6) A nongovernmental Cooperating Sponsor may negotiate compromise

settlements of claims of any amount, provided that proposed compromise

settlements of claims having a value of $5,000 or more shall require

prior approval in writing by CCC. When a claim is compromised, a

nongovernmental Cooperating Sponsor may retain from the amount

collected, the amounts authorized in paragraph (d)(3) of this section,

and in addition, an amount representing such percentage of the special

charges described in paragraph (d)(4) of this section as compromised

amount is to the full amount of the claim. When a claim is less than

$600, a nongovernmental Cooperating Sponsor may terminate collection

activity when it is determined that pursuit of such claims will not be

economically sound. Approval for such termination by CCC is not

required; however, the nongovernmental Cooperating Sponsor shall notify

KCFMO, Chief, Debt Management Division when collection activity on a

claim is terminated.

(7) All amounts collected in excess of the amounts authorized in

this section to be retained shall be remitted to CCC. For the purpose

of determining the amount to be retained by a nongovernmental

Cooperating Sponsor from the proceeds of claims filed against ocean

carriers, the word ``claim'' shall refer to the loss and damage to

commodities which are shipped on the same voyage of the same vessel to

the same port destination, irrespective of the kinds of commodities

shipped or the number of different bills of lading issued by the

carrier.

(8) If a nongovernmental Cooperating Sponsor is unable to effect

collection of a claim or negotiate an acceptable compromise settlement

within the applicable period of limitation or any extension thereof

granted in writing by the party alleged responsible for the damage, the

nongovernmental Cooperating Sponsor shall assign its rights to the

claim to CCC in sufficient time to permit the filing of legal action

prior to the expiration of the period of limitation or any extension

thereof. Generally, a nongovernmental Cooperating Sponsor should assign

claim rights to CCC no later than 60 days prior to the expiration of

the period of limitation or any extension thereof. In all cases, a

nongovernmental Cooperating Sponsor shall keep CCC informed of the

progress of its collection efforts and shall promptly assign their

claim rights to CCC upon request. Subsequently, if CCC collects on or

settles the claim, CCC shall, except as indicated in this paragraph pay

to a nongovernmental Cooperating Sponsor the amount to which it would

have been entitled had it collected on the claim. The additional 10

percent on amounts collected in excess of $200 will be payable,

however, only if CCC determines that reasonable efforts were made to

collect the claim prior to the assignment, or if payment is determined

to be commensurate with the extra efforts exerted in further

documenting the claim. If documentation requirements have not been

fulfilled and the lack of such documentation has not been justified to

the satisfaction of CCC, CCC will deny payment of all allowances to the

nongovernmental Cooperating Sponsor.

(9) When a nongovernmental Cooperating Sponsor permits a claim to

become time-barred, or fails to take timely actions to insure the right

of CCC to assert such claims, and CCC determines that the

nongovernmental Cooperating Sponsor failed to properly exercise its

responsibilities under the Agreement, the nongovernmental Cooperating

Sponsor shall be liable to the United States for the cost and freight

value of the commodities lost to the program.

(e) Fault of Cooperating Sponsor in country of distribution. If a

commodity, sale proceeds or program income is used for a purpose not

permitted by the Program Agreement, or if a Cooperating Sponsor causes

loss or damage to a commodity, sale proceeds, or program income through

any act or omission or failure to provide proper storage, care and

handling, the cooperating sponsor shall pay to the United States the

value of the commodities, sale proceeds or program income lost, damaged

or misused. CCC will consider normal commercial practices in the

country of distribution in determining whether there was a proper

exercise of the Cooperating Sponsor's responsibility. Payment by the

Cooperating Sponsor shall be made in accordance with paragraph (g) of

this section.

(f) Fault of others in country of distribution and in intermediate

country. (1) In addition to survey or outturn reports to determine

ocean carrier loss and damage, the Cooperating Sponsor shall, in the

case of landlocked countries, arrange for an independent survey at the

point of entry into the recipient country and make a report as set

forth in paragraph (c)(1) of this section. CCC will reimburse the

Cooperating Sponsor for the costs of survey as set forth in paragraph

(c)(2)(iv) of this section.

(2) Where any damage to or loss of the commodity or any loss of

sale proceeds or program income is attributable to a warehouseman,

carrier or other person, the Cooperating Sponsor shall make every

reasonable effort to pursue collection of claims for such loss or

damage. The Cooperating Sponsor shall furnish a copy of the claim and

related documents to the Agricultural Counselor or Attache. Cooperating

Sponsors who fail to file or pursue such claims shall be liable to CCC

for the value of the commodities or sale proceeds or program income

lost, damaged, or misused: Provided, however, that the Cooperating

Sponsor may elect not to file a claim if the loss is less than $500.

The Cooperating Sponsor may retain $150 of any amount collected on an

individual claim. In addition, Cooperating Sponsors may, with the

written approval of the Agricultural Counselor or Attache, retain

amounts to cover special costs of collection such as legal fees, or pay

such collection costs with sale proceeds or program income. Any

proposed settlement for less than the full amount of the claim requires

prior approval by the Agricultural Counselor or Attache. When the

Cooperating Sponsor has exhausted all reasonable attempts to collect a

claim, it shall request the Agricultural Counselor or Attache to

provide further instructions.

(3) The Cooperating Sponsor shall pursue any claim by initial

billings and at least three subsequent demands at not more than 30 day

intervals. If these efforts fail to elicit a satisfactory response, the

Cooperating Sponsor shall pursue legal action in the judicial system of

country unless otherwise agreed by the Agricultural Counselor or

Attache. The Cooperating Sponsors

[[Page 60523]]

must inform the Agricultural Counselor or Attache in writing of the

reasons for not pursuing legal action; and the Agricultural Counselor

or Attache may require the Cooperating Sponsor to obtain the opinion of

competent legal counsel to support its decision prior to granting

approval. If the Agricultural Counselor or Attache approves a

Cooperating Sponsor's decision not to take further action on the claim,

the Cooperating Sponsor shall assign the claim to CCC and shall provide

to CCC all documentation relating to the claim.

(4) As an alternative to legal action in the judicial system of the

country with regard to claims against a public entity of the government

of the cooperating country, the Cooperating Sponsor and the cooperating

country may agree in writing to settle disputed claims by an

appropriate administrative procedure or arbitration.

(g) Determination of value. The Cooperating Sponsor shall determine

the value of commodities misused, lost or damaged on the basis of the

domestic market price at the time and place the misuse, loss or damage

occurred. When it is not feasible to determine such market price, the

value shall be the f.o.b. or f.a.s. commercial export price of the

commodity at the time and place of export, plus ocean freight charges

and other costs incurred by the U.S. Government in making delivery to

the Cooperating Sponsor. When the value is determined on a cost basis,

the Cooperating Sponsor may add to the value any provable costs it has

incurred prior to delivery by the ocean carrier. In preparing the claim

statement, these costs shall be clearly segregated from costs incurred

by the Government of the United States. With respect to claims other

than ocean carrier loss or damage claims, the Cooperating Sponsor may

request the Agricultural Counselor or Attache to approve a commercially

reasonable alternative basis to value the claim.

(h) Reporting losses to the Agricultural Counselor or Attache or

CCC designated representative. (1) The Cooperating Sponsor shall

promptly notify the Agricultural Counselor or Attache or CCC designated

representative, in writing, of the circumstances pertaining to any

loss, damage, or misuse of commodities valued at $500 or more occurring

within the country of distribution or intermediate country. The report

shall be made as soon as the Cooperating Sponsor has adequately

investigated the circumstances, but in no event more than ninety days

from the date the loss became known to the Cooperating Sponsor. The

report shall identify the party in possession of the commodities and

the party responsible for the loss, damage or misuse; the kind and

quantities of commodities; the size and type of containers; the time

and place of misuse, loss, or damage; the current location of the

commodity; the Program Agreement number, the CCC contract numbers, or

if unknown, other identifying numbers printed on the commodity

containers; the action taken by the Cooperating Sponsor with respect to

recovery or disposal; and the estimated value of the commodity. The

report shall explain why any of the information required by this

paragraph cannot be provided. The Cooperating Sponsor shall also report

the details regarding any loss or misuse of sale proceeds or program

income.

(2) The Cooperating Sponsor shall report quarterly to the

Agricultural Counselor or Attache any loss, damage to or misuse of

commodities resulting in loss of less than $500. The Cooperating

Sponsor shall inform the Agricultural Counselor or Attache or CCC

designated representative if it has reason to believe there is a

pattern or trend in the loss, damage, or misuse of such commodities and

submit a report as described in paragraph (h)(1) of this section,

together with any other relevant information the Cooperating Sponsor

has available to it. The Agricultural Counselor or Attache may require

additional information about any commodities lost, damaged or misused.

(i) Handling claims proceeds. Claims against ocean carriers shall

be collected in U.S. dollars (or in the currency in which freight is

paid) and shall be remitted (less amounts authorized to be retained) by

Cooperating Sponsors to CCC. Claims against Cooperating Sponsors shall

be paid to CCC in U.S. dollars. With respect to commodities lost,

damaged or misused, amounts paid by Cooperating Sponsors and third

parties in the country of distribution shall be deposited with the U.S.

Disbursing Officer, American Embassy, preferably in U.S. dollars with

instructions to credit the deposit to an appropriate CCC account as

determined by CCC, or in local currency at the highest rate of exchange

legally obtainable on the date of deposit with instructions to credit

the deposit to an appropriate CCC account as determined by CCC. With

respect to sale proceeds and program income, amounts recovered may be

deposited in the same account as the sale proceeds and may be used for

purposes of the program.

Sec. 1499.16 Records and reporting requirements.

(a) Records and reports--general requirements. The Cooperating

Sponsor shall maintain records for a period of three (3) years from the

date of export of the commodities that accurately reflect the receipt

and use of the commodities and any proceeds realized from the sale of

commodities. The Government of the Exporting Country may, at reasonable

times, inspect the Cooperating Sponsor's records pertaining to the

receipt and use of the commodities and proceeds realized from the sale

of the commodities, and have access to the Cooperating Sponsor's

commodity storage and distribution sites and to locations of activities

supported with proceeds realized from the sale of the commodities.

(b) Evidence of export. The Cooperating Sponsor's freight forwarder

shall, within thirty (30) days after export, submit evidence of export

of the agricultural commodities to the Chief, Export Operations

Division, KCCO. If export is by sea or air, the Cooperating Sponsor's

freight forwarder shall submit five copies of the carrier's on board

bill of lading or consignee's receipt authenticated by a representative

of the U.S. Customs Service. The evidence of export must show the kind

and quantity of agricultural commodities exported, the date of export,

and the destination country.

(c) Reports. (1) The Cooperating Sponsor shall submit a semiannual

logistics report to the Agricultural Counselor or Attache and to the

Director, CCC Program Support Division, FAS/USDA, Washington, DC 20250-

1031, covering the receipt of commodities. The first report shall be

submitted by the date specified in the Program Agreement, and cover the

time period specified in the Program Agreement. Reports thereafter will

cover each subsequent six (6) month period until all commodities have

been distributed or sold. The report must contain the following data:

(i) Receipts of agricultural commodities including the name of each

vessel, discharge port(s) or point(s) of entry, the date discharge was

completed, the condition of the commodities on arrival, any significant

loss or damage in transit; advice of any claim for, or recovery of, or

reduction of freight charges due to loss or damage in transit on U.S.

flag vessels;

(ii) Estimated commodity inventory at the end of the reporting

period;

(iii) Quantity of commodity on order during the reporting period;

[[Page 60524]]

(iv) Status of claims for commodity losses both resolved and

unresolved during the reporting period;

(v) Quantity of commodity damaged or declared unfit during the

reporting period; and

(vi) Quantity and type of the commodity that has been directly

distributed by the Cooperating Sponsor, distribution date, region of

distribution, and estimated number of individuals benefiting from the

distribution.

(2) If the Program Agreement authorizes the sale or barter of

commodities by the Cooperating Sponsor, the Cooperating Sponsor shall

also submit a semiannual monetization report to the Agricultural

Counselor or Attache and to the Director, CCC Program Support Division,

FAS/USDA, Washington, DC 20250-1031, a monetization report covering the

deposits into and disbursements from the special account for the

purposes specified in the Program Agreement. The first report shall be

submitted by the date specified in the Program Agreement, and cover the

time period specified in the Program Agreement. Reports thereafter will

cover each subsequent six (6) month period until all commodities have

been distributed, bartered, or sale proceeds disbursed. The report must

contain the following information and include both local currency

amounts and U.S. dollar equivalents:

(i) Quantity and type of commodities sold;

(ii) Proceeds generated from the sale;

(iii) Proceeds deposited to the special account including the date

of deposit;

(iv) Interest earned on the special account;

(v) Disbursements from the special account, including date, amount

and purpose of the disbursement;

(vi) Any balance carried forward in the special account from the

previous reporting period; and

(vii) In connection with a section 416(b) Program Agreement only, a

description of the effectiveness of sales and barter provisions in

facilitating the distribution of commodities and products to targeted

recipients, and a description of the extent, if any, that sales, barter

or use of commodities:

(A) Affected the usual marketings of the United States;

(B) Displaced or interfered with commercial sales of the United

States;

(C) Disrupted world commodity prices or normal patterns of trade

with friendly countries;

(D) Discouraged local production and marketing of commodities in

the recipient country;

(E) Achieved the objectives of the Program Agreement; and

(F) Could be improved in future agreements.

(3) The Cooperating Sponsor shall furnish the Government of the

Exporting Country such additional information and reports relating to

the agreement as the Government of the Exporting Country may reasonably

request.

Sec. 1499.17 Audits.

Nongovernmental Cooperating Sponsors shall assure that audits are

performed to assure compliance with Program Agreements and the

provisions of this part. An audit undertaken in accordance with OMB

Circular A-133, shall fulfill the audit requirements of this section.

Audits shall be performed at least annually until all commodities have

been distributed and sale proceeds expended. Both the auditor and the

auditing standards to be used by the Cooperating Sponsor must be

acceptable to CCC. The Cooperating Sponsor is also responsible for

auditing the activities of recipient agencies that receive more than

$25,000 of provided commodities or sale proceeds. This responsibility

may be satisfied by relying upon independent audits of the recipient

agency or upon a review conducted by the Cooperating Sponsor.

Sec. 1499.18 Suspension of the program.

All or any part of the assistance provided under a Program

Agreement, including commodities in transit, may be suspended by CCC

if:

(a) The Cooperating Sponsor fails to comply with the provisions of

the Program Agreement or this part;

(b) CCC determines that the continuation of such assistance is no

longer necessary or desirable; or

(c) CCC determines that storage facilities are inadequate to

prevent spoilage or waste, or that distribution of commodities will

result in substantial disincentive to, or interference with, domestic

production or marketing in the recipient country.

Sec. 1499.19 Sample documents and guidelines for developing proposals

and reports.

CCC has developed guidelines to assist the Cooperating Sponsors in

developing proposals and reporting on program logistics and commodity

sales. Cooperating Sponsors may obtain these guidelines from the

Director, PDD.

Sec. 1499.20 Paperwork reduction requirement.

The paperwork and record keeping requirements imposed by this part

have been previously submitted to the Office of Management and Budget

(OMB) for review under the Paperwork Reduction Act of 1995. OMB has

assigned control number 0551-0035 for this information collection.

Signed this November 18, 1996, in Washington, D.C.

Christopher E. Goldthwait,

General Sales Manager, FAS, and Vice President, Commodity Credit

Corporation.

[FR Doc. 96-30032 Filed 11-27-96; 8:45 am]

BILLING CODE 3410-10-P