Rules and Procedures Applicable to Commodity Transactions Financed by USAID: Inspection and Price Provisions

INTERNATIONAL DEVELOPMENT COOPERATION AGENCY

Agency for International Development

22 CFR Part 201

[AID Reg. 1]

RIN 0412-AA-34

Rules and Procedures Applicable to Commodity Transactions

Financed by USAID: Inspection and Price Provisions

AGENCY: Agency for International Development, IDCA.

ACTION: Proposed rule.

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SUMMARY: The U.S. Agency for International Development (USAID) proposes

to amend the regulation to implement the requirement for preshipment

inspection of commodities and to simplify the current rules on maximum

prices for commodities. USAID previously employed post-audit procedures

to assure that commodities and related services financed under its

programs were not over priced by suppliers. The purpose of preshipment

inspection is to complete the price review prior to shipment, rather

than after the fact, and when determined necessary, to complete a

physical inspection of the commodities being financed. The purpose of

the proposed amendment to the price rules for commodities is to make it

easier for suppliers to understand and bring it into line with

commercial practices used by preshipment inspection firms that will be

contracted to carry out the preshipment inspection program.

DATES: Comment Deadline: October 7, 1997.

ADDRESSES: Send comments to Kathleen J. O'Hara, Office of Procurement

Policy Division (M/OP/PP), USAID, Room 1600 A, Washington, DC 20523-

1435.

FOR FURTHER INFORMATION CONTACT: Kathleen J. O'Hara, Office of

Procurement, Procurement Policy Division (M/OP/PP), USAID, Room 1600 A,

Washington, DC 20523-1435. Telephone (703) 875-1534, facsimile (703)

875-1243.

SUPPLEMENTARY INFORMATION: As part of USAID's re-engineering process, a

decision has been taken to revise the procedure it uses to assure that

the prices paid to suppliers under transactions financed by Commodity

Import Programs are fair and reasonable. Currently, this is being done

through a post-audit function within USAID. The purpose of this

proposed amendment is to implement a preshipment inspection program

which would essentially replace the post-audit function. The

preshipment inspection services will be carried out by a private

contractor, under a contract with USAID.

The specific changes being proposed would add a definition for

``preshipment inspection,'' amend the coverage on responsibilities of

importers and suppliers to add requirements concerning preshipment

inspection, add a new Sec. 201.48 establishing the requirement for

preshipment inspection, and add the requirement for a ``clean''

inspection report to the list of documents that the supplier must

furnish in order to receive payment from USAID in Sec. 201.52(a).

Preshipment inspection will include a price review, and USAID

proposes to revise its rules on maximum prices for commodities to be

more in line with the commercial practices used by the preshipment

inspection firms. The basic prevailing market price test would be

reformulated; the method for constructing an allowable price in the

absence of comparable sales in Sec. 201.63(e) would be removed since it

does not agree with commercial practices established between

preshipment inspection firms and the World Trade Organization; and the

supplier's comparable export price test in Sec. 201.63 (c) would also

be removed. Various changes in subpart G, Price Provisions, implement

the new rules.

USAID has determined that this proposed rule is not a significant

regulatory action under Executive Order 12866. The rule has been

reviewed in accordance with the requirement of the Regulatory

Flexibility Act. USAID has determined that the proposed rule will not

have a significant economic impact on a substantial number of small

entities, and, therefore, a Regulatory Flexibility Analysis is not

required. The additional documentation requirement will be submitted to

OMB for approval as required by the Paperwork Reduction Act.

List of Subjects in 22 CFR Part 201

Administrative practice and procedure, Commodity procurement--

foreign relations.

For the reasons set out in the preamble, 22 CFR part 201 is

proposed to be amended as follows:

1. The authority citation continues to read as follows:

Authority: 22 U.S.C. 2381.

2. Section 201.01 is amended to add a new paragraph (dd) as

follows:

Sec. 201.01 Definition.

* * * * *

(dd) Preshipment inspection means a review by the designated USAID

contractor of all costs associated with a transaction and, where

applicable, a physical inspection of the commodity, including packaging

and packing.

3. Section 201.21 is amended by removing ``and, where

appropriate,'' from the end of paragraph (c); by removing the period

from the end of paragraph (d) and adding ``; and'' in its place; and by

adding a new paragraph (e) as follows:

Sec. 201.21 Notice to supplier.

* * * * *

(e) The USAID requirement in Sec. 201.31(j) for preshipment

inspection, when applicable.

4. Section 201.31 is amended to add a new paragraph (j) as follows:

Sec. 201.31 Suppliers of commodities.

* * * * *

(j) Preshipment inspection. As applicable, the supplier shall be

responsible for coordinating the preshipment inspection of the

[[Page 42713]]

commodity with the contractor designated by USAID. In the case of a

physical inspection of the commodity, the supplier shall make the

commodity available to the contractor's inspector and, when applicable,

in a condition for operational testing. The supplier shall provide

reasonable assistance to the inspector in completing the inspection, to

include, but not limited to, unpacking, packing, weighing, etc. Any

costs associated with making the commodity available for inspection

will be for the account of the supplier.

5. Section 201.48 is added to read as follows:

Sec. 201.48 Preshipment inspection of commodities.

For each shipment under a purchase contract with an f.o.b. value in

excess of $100,000, a preshipment documentary inspection is required.

For each shipment under a purchase contract with an f.o.b. value in

excess of $1,000,000, a full preshipment inspection, to include a

physical inspection, is required unless USAID determines in writing to

limit the inspection to a review of the documentation for the

transaction. USAID may also require documentary and/or physical

inspections in other situations.

6. Section 201.52 is amended to remove ``(8)'' in paragraph (a),

introductory text, and add ``(9)'' in its place and to add a new

paragraph (a)(9) to read as follows:

Sec. 201.52 Required documents.

(a) * * *

(9) Pre-shipment inspection report. When required in the letter of

credit, direct letter of commitment, or other payment document, one

signed original of the ``clean'' inspection report, issued by the

inspection firm designated by USAID to undertake preshipment

inspections.

* * * * *

7. Section 201.60 is amended by revising paragraph (c) as follows:

Sec. 201.60 Purpose and applicability of this subpart.

* * * * *

(c) Compliance. Compliance with this subpart G and with any

additional price requirement contained in the implementing document

shall be a condition to the financing by USAID of procurement

transactions under this part. Preshipment inspection of the commodities

will include a price review for compliance. Additionally, USAID may

post-audit transactions to determine that there has been compliance.

8. Section 201.63 is amended by removing paragraphs (c), (d) and

(e); by redesignating paragraphs (f) and (g) as paragraphs (c) and (d),

respectively; by removing ``(f)(1)'' from the newly redesignated

paragraph (c)(2) and adding ``(c)(1)'' in its place, and by revising

paragraphs (a) and (b) as follows:

Sec. 201.63 Maximum prices for commodities.

(a) Prevailing export market price. (1) The purchase price of a

commodity shall not exceed the prevailing export price range in the

country of supply for comparable goods sold under comparable terms of

sale. If there are no export sales of comparable goods, then the

purchase price shall not exceed the prevailing domestic price range in

the country of supply for comparable goods, adjusted upward or downward

by the appropriate export differential. The prevailing price range,

whether export or domestic, shall be determined through analysis of

prices during a reference period prior to the date the purchase price

for the USAID-financed transaction was fixed. The analysis identifies

the applicable range of prices which the ex-factory or f.o.b. price of

the commodity shall not exceed.

(2) The purchase price of a commodity from a source outside the

United States shall also not exceed the prevailing export price range

in the United States for comparable goods sold under comparable terms

of sale, as determined in paragraph (a)(1) of this section, adjusted

for differences in the cost of transportation to destination when

applicable.

(b) Paragraph (a) of this section shall not apply to the purchase

price:

(1) In any sale under formal competitive bid procedures; or

(2) In any sale of a commodity generally traded on an organized

commodity exchange.

* * * * *

9. In Sec. 201.64, paragraph (a) is revised to read as follows:

Sec. 201.64 Application of the price rules to commodities.

(a) Calculation of commodity prices on a common basis. In testing

whether the purchase price of a commodity complies with the

requirements of Sec. 201.63(a) it is necessary to insure that the price

being tested as well as the prices being used as a test or measurement

are calculated on the basis of delivery alongside or on board the

vessel or other export conveyance. Therefore, in addition to the price

of the commodity at an internal point in the source country, prices

will include transportation from that point to the port of export in

the source country and, to the extent not already included in the price

at the internal point, inspection, export packing, forwarder's fees at

customary rates, the cost of placing the commodities on board the

vessel or export conveyance (unless this cost is covered in the export

freight), and other necessary costs customary in the trade.

Sec. 201.64 [Added]

9. In Sec. 201.64, paragraph (b)(1) is amended by removing ``(c),

(d) and (e),'' and paragraph (c) is amended by removing ``(f)(1)'',

``(f)(1)(i)'' and ``(f)(2)'' from wherever they appear in and adding

``(c)(1)'', ``(c)(1)(i)'' and ``(c)(2)'', respectively, in their

places.

Dated: June 26, 1997.

Marcus L. Stevenson,

Procurement Executive.

[FR Doc. 97-20718 Filed 8-7-97; 8:45 am]

BILLING CODE 6116-71-M