McGovern-Dole International Food for Education and Child Nutrition Program

 
CONTENT
Federal Register, Volume 84 Issue 228 (Tuesday, November 26, 2019)
[Federal Register Volume 84, Number 228 (Tuesday, November 26, 2019)]
[Rules and Regulations]
[Pages 64971-64984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24894]
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DEPARTMENT OF AGRICULTURE
Foreign Agricultural Service
7 CFR Part 1599
RIN 0551-AA93
McGovern-Dole International Food for Education and Child
Nutrition Program
AGENCY: Foreign Agricultural Service, USDA.
ACTION: Final rule with request for comments.
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SUMMARY: The Foreign Agricultural Service (FAS) is revising the
regulations governing the McGovern-Dole International Food for
Education and Child Nutrition (McGovern-Dole) Program to add provisions
related to the local and regional procurement of commodities under the
program, and to
[[Page 64972]]
make other minor changes. The Agriculture Improvement Act of 2018
amended the statute authorizing the McGovern-Dole Program to provide
that not more than ten percent of the funds made available to carry out
the program shall be used to purchase agricultural commodities through
local and regional procurement. This revision implements this statutory
change by setting forth requirements applicable to the local or
regional procurement of commodities by an award recipient under the
McGovern-Dole Program, and it makes other technical changes to update
the regulations.
DATES: This rule is effective November 26, 2019. Written comments must
be received by FAS or carry a postmark or equivalent no later than
December 26, 2019.
ADDRESSES: Comments, identified by Regulatory Information Number (RIN)
0551-AA93, may be sent by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for sending comments.
     Email: [email protected]. Include RIN 0551-AA93 in the
subject line of the message.
     Mail: Senior Director, International Food Assistance
Division, Global Programs, Foreign Agricultural Service, 1400
Independence Ave. SW, STOP 1034, Washington, DC 20250.
    Instructions: All submissions received must include the agency name
and RIN 0551-AA93.
FOR FURTHER INFORMATION CONTACT: Ingrid Ardjosoediro, Deputy Director,
International Food Assistance Division, Global Programs, Foreign
Agricultural Service, 1400 Independence Ave. SW, STOP 1034, Washington,
DC 20250. Telephone: (202) 720-2637; Fax: (202) 690-0251; Email:
[email protected].
SUPPLEMENTARY INFORMATION:
Background
    The McGovern-Dole International Food for Education and Child
Nutrition Program helps support food security, child development, and
education in low-income, food-deficit countries around the world. The
program provides for the donation of U.S. agricultural commodities, as
well as financial and technical assistance, to support school feeding
and maternal and child health and nutrition projects. The McGovern-Dole
Program is authorized in section 3107 of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 1736o-1).
    FAS uses the regulations in 7 CFR part 1599, McGovern-Dole
International Food for Education and Child Nutrition Program, in the
administration of the McGovern-Dole Program. The previous version of
the regulations was published as a final rule on September 12, 2016 (81
FR 62614).
Revision of Regulations
    FAS is revising the McGovern-Dole Program regulations in 7 CFR part
1599 through this final rule to implement a change made by the
Agriculture Improvement Act of 2018 (Pub. L. 115-334) to section 3107
of the Farm Security and Rural Investment Act of 2002 to provide that
not more than ten percent of the funds made available to carry out the
McGovern-Dole Program shall be used to purchase agricultural
commodities through local and regional procurement. FAS is adding
definitions related to local and regional procurement in Sec.  1599.2;
adding a new Sec.  1599.6, entitled ``Local and regional procurement of
commodities,'' and re-numbering subsequent sections; and revising other
sections within 7 CFR part 1599 to incorporate requirements applicable
to the local or regional procurement of agricultural commodities by an
award recipient under the McGovern-Dole Program.
    In addition, FAS is revising the regulations to make changes that
are technical in nature and intended to improve the efficiency and
effectiveness of the McGovern-Dole Program, including the following:
    (1) Clarifying that provisions specified by FAS during the
negotiation of an agreement, which are in addition to provisions
required by the regulations, will be included in the agreement but will
not necessarily be in the plan of operation component of the agreement
(7 CFR 1599.5(d)(6)).
    (2) Clarifying that the required assertion by a recipient that
adequate transportation and storage facilities will be available in the
target country refers to the time of arrival of the commodities in the
target country (7 CFR 1599.5(e)(6)).
    (3) Modifying references to economic sanction programs to allow for
situations in which a U.S. Government economic sanction program is not
country-specific (7 CFR 1599.12(e) and 1599.15(b)(2)).
    (4) Replacing the specific reference to a percentage of the ``Grand
Total Costs'' in the agreement budget with a more general reference to
the amount specified in the agreement, which would allow FAS to make a
change to the budget format if it determines that it would be
beneficial (7 CFR 1599.12(h)(1)).
    (5) Allowing FAS to specify in the agreement the circumstances in
which a recipient must submit to FAS a contract with a provider of
goods, services, or construction work (7 CFR 1599.12(k)).
    (6) Allowing for the possibility that there might not be any
closeout and post-closeout provisions specified in an agreement and
that only those provisions in 2 CFR 200.343 and 200.344 would apply (7
CFR 1599.17(b)(3)).
Notice and Comment
    This rule is being issued as a final rule without prior notice and
opportunity for comment. The Administrative Procedure Act exempts rules
``relating to agency management or personnel or to public property,
loans, grants, benefits, or contracts'' from the statutory requirement
for prior notice and opportunity for comment (5 U.S.C. 553(a)(2)).
Accordingly, this rule may be made effective less than 30 days after
publication in the Federal Register. However, members of the public may
participate in this rulemaking by submitting written comments, data, or
views. FAS will consider the comments received and may conduct
additional rulemaking based on the comments. Written comments must be
received by FAS or carry a postmark or equivalent no later than
December 26, 2019.
Catalog of Federal Domestic Assistance
    The program covered by this regulation is listed in the Catalog of
Federal Domestic Assistance (CFDA) under the following FAS CFDA number:
10.608, Food for Education.
E-Government Act Compliance
    FAS is committed to complying with the E-Government Act of 2002 (44
U.S.C. chapter 36), to promote the use of the internet and other
information technologies to provide increased opportunities for
citizens' access to Government information and services, and for other
purposes.
Executive Order 12866
    This rule is issued in conformance with Executive Order 12866,
``Regulatory Planning and Review.'' It has been determined to be not
significant for the purposes of Executive Order 12866 and, therefore,
was not reviewed by the Office of Management and Budget.
Executive Order 12988
    This rule has been reviewed in accordance with Executive Order
12988, ``Civil Justice Reform.'' This rule does not preempt State or
local laws, regulations, or policies unless they
[[Page 64973]]
present an irreconcilable conflict with this rule. This rule will not
be retroactive.
Executive Order 12372
    Executive Order 12372, ``Intergovernmental Review of Federal
Programs,'' requires consultation with officials of State and local
governments that would be directly affected by the proposed Federal
financial assistance. The objectives of the Executive Order are to
foster an intergovernmental partnership and a strengthened federalism
by relying on State and local processes for the State and local
government coordination and review of proposed Federal financial
assistance and direct Federal development. This rule will not directly
affect State or local officials and, for this reason, it is excluded
from the scope of Executive Order 12372.
Regulatory Flexibility Act
    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by
the Small Business Regulatory Enforcement Fairness Act of 1996,
generally requires an agency to prepare a regulatory flexibility
analysis of any rule that is subject to notice and comment rulemaking
under the Administrative Procedure Act (APA) or any other law, unless
the agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. The Regulatory
Flexibility Act does not apply to this rule because FAS is not required
by the APA or any other law to publish a notice of proposed rulemaking
with respect to the subject matter of the rule.
Executive Order 13132
    This rule has been reviewed under Executive Order 13132,
``Federalism.'' This rule will not have any substantial direct effect
on States, on the relationship between the Federal Government and the
States, or on the distribution of power and responsibilities among the
various levels of government, except as required by law. This rule does
not impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States was not required.
Executive Order 13175
    This rule has been reviewed in accordance with the requirements of
Executive Order 13175, ``Consultation and Coordination with Indian
Tribal Governments.'' Executive Order 13175 requires Federal agencies
to consult and coordinate with tribes on a government-to-government
basis on policies that have tribal implications, including regulations,
legislative comments or proposed legislation, and other policy
statements or actions that have substantial direct effects on one or
more Indian tribes, on the relationship between the Federal Government
and Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes. FAS does not expect
this rule to have any effect on Indian tribes.
Unfunded Mandates
    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does
not apply to this rule because it does not impose any enforceable duty
or contain any unfunded mandate as described under the UMRA.
List of Subjects in 7 CFR Part 1599
    Agricultural commodities, Cooperative agreements, Exports, Food
assistance programs, Foreign aid, Grant programs-agriculture, Technical
assistance.
0
For the reasons stated in the preamble, the Foreign Agricultural
Service revises 7 CFR part 1599 to read as follows:
PART 1599--McGOVERN-DOLE INTERNATIONAL FOOD FOR EDUCATION AND CHILD
NUTRITION PROGRAM
Sec.
1599.1 Purpose and applicability.
1599.2 Definitions.
1599.3 Eligibility and conflicts of interest.
1599.4 Application process.
1599.5 Agreements.
1599.6 Local and regional procurement of commodities.
1599.7 Payments.
1599.8 Transportation of donated or procured commodities.
1599.9 Entry, handling, and labeling of donated or procured
commodities and notification requirements.
1599.10 Damage to or loss of donated or procured commodities.
1599.11 Claims for damage to or loss of donated or procured
commodities.
1599.12 Use of donated or procured commodities, sale proceeds, FAS-
provided funds, and program income.
1599.13 Monitoring and evaluation requirements.
1599.14 Reporting and recordkeeping requirements.
1599.15 Subrecipients.
1599.16 Noncompliance with an agreement.
1599.17 Suspension and termination of agreements.
1599.18 Opportunities to object and appeals.
1599.19 Audit requirements.
1599.20 Paperwork Reduction Act.
    Authority: 7 U.S.C. 1736o-1.
Sec.  1599.1  Purpose and applicability.
    (a) This part sets forth the general terms and conditions governing
the award of donated commodities and funds by the Foreign Agricultural
Service (FAS) to recipients under the McGovern-Dole International Food
for Education and Child Nutrition Program (McGovern-Dole Program).
Under the McGovern-Dole Program, recipients use the donated
commodities, proceeds from any sale of such commodities, FAS-provided
funds, and program income to implement a project in a foreign country
pursuant to an agreement with FAS. When authorized by an agreement, a
recipient may use FAS-provided funds to make a local or regional
procurement of qualified commodities to implement such a project.
    (b)(1) The Office of Management and Budget (OMB) issued guidance on
Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards in 2 CFR part 200. In 2 CFR 400.1, the
United States Department of Agriculture (USDA) adopted OMB's guidance
in subparts A through F of 2 CFR part 200, as supplemented by 2 CFR
part 400, as USDA policies and procedures for uniform administrative
requirements, cost principles, and audit requirements for Federal
awards.
    (2) The OMB guidance at 2 CFR part 200, as supplemented by 2 CFR
part 400 and this part, applies to the McGovern-Dole Program, except as
provided in paragraphs (e), (f), and (g) of this section.
    (c) Except as otherwise provided in this part, other regulations
that are generally applicable to grants and cooperative agreements of
USDA, including the applicable regulations set forth in 2 CFR chapters
I, II, and IV, also apply to the McGovern-Dole Program.
    (d) In accordance with 7 U.S.C. 1736o-1(e), assistance under the
McGovern-Dole Program may be provided to private voluntary
organizations, cooperatives, intergovernmental organizations,
governments of developing countries and their agencies, and other
organizations.
    (e) The OMB guidance at 2 CFR part 200, and the provisions of 2 CFR
part 400 and of this part, do not apply to an award by FAS under the
McGovern-Dole Program to a recipient that is a foreign public entity,
as defined in 2 CFR 200.46, and, therefore, they do not apply to a
foreign government or its agency or an intergovernmental organization.
    (f)(1) The OMB guidance at subparts A through E of 2 CFR part 200,
as
[[Page 64974]]
supplemented by 2 CFR part 400 and this part, applies to all awards by
FAS under the McGovern-Dole Program to all recipients that are private
voluntary organizations, including a private voluntary organization
that is a foreign organization, as defined in 2 CFR 200.47;
cooperatives, including a cooperative that is a for-profit entity or a
foreign organization; or other organizations, including organizations
that are for-profit entities or foreign organizations, but not
including intergovernmental organizations.
    (2) The OMB guidance at subparts A through E of 2 CFR part 200, as
supplemented by 2 CFR part 400 and this part, applies to all subawards
to all subrecipients under this part, except in cases:
    (i) Where the subrecipient is a foreign public entity; or
    (ii) Where FAS determines that the application of the provisions in
this part to a subaward to a subrecipient that is a foreign
organization would be inconsistent with the international obligations
of the United States or the statutes or regulations of a foreign
government or would not be in the best interest of the United States.
    (g)(1) The OMB guidance at subpart F of 2 CFR part 200, as
supplemented by 2 CFR part 400 and this part, applies only to awards by
FAS to recipients that are private voluntary organizations,
cooperatives, or other organizations, but that are not for-profit
entities or foreign organizations.
    (2) The OMB guidance at subpart F of 2 CFR part 200, as
supplemented by 2 CFR part 400 and this part, applies to subawards to
subrecipients under this part, except where the subrecipient is a for-
profit entity, foreign public entity, or foreign organization.
    (3) Audit requirements for recipients and subrecipients that are
for-profit entities or foreign organizations are set forth in Sec.
1599.19.
Sec.  1599.2  Definitions.
    These are definitions for terms used in this part. The definitions
in 2 CFR part 200, as supplemented in 2 CFR part 400, are also
applicable to this part, with the exception that, if a term that is
defined in this section is defined differently in 2 CFR part 200 or
400, the definition in this section will apply to such term as used in
this part.
    Activity means a discrete undertaking within a project to be
carried out by a recipient, directly or through a subrecipient, that is
specified in an agreement and is intended to fulfill a specific
objective of the agreement.
    Agreement means a legally binding grant or cooperative agreement
entered into between FAS and a recipient to implement a project under
the McGovern-Dole Program.
    Commodities means agricultural commodities, or products of
agricultural commodities, that:
    (1) Are produced in the United States; or
    (2)(i) Are produced in and procured from:
    (A) A developing country that is a target country; or
    (B) A developing country in the target region; and
    (ii) At a minimum, meet each nutritional, quality, and labeling
standard of the target country, as determined by the Secretary of
Agriculture.
    Cooperative means a private sector organization whose members own
and control the organization and share in its services and its profits
and that provides business services and outreach in cooperative
development for its membership.
    Cost sharing or matching means the portion of project expenses, or
necessary goods and services provided to carry out a project, not paid
or acquired with Federal funds. The term may include cash or in-kind
contributions provided by recipients, subrecipients, foreign public
entities, foreign organizations, or private donors.
    Country of origin means the country in which procured commodities
were produced.
    Developing country means a country that has a shortage of foreign
exchange earnings and has difficulty meeting all of its food needs
through commercial channels.
    Disburse means to make a payment to liquidate an obligation.
    Donated commodities means the commodities produced in the United
States that are donated by FAS to a recipient under an agreement. The
term may include donated commodities that are used to produce a further
processed product for use under the agreement.
    FAS means the Foreign Agricultural Service of the United States
Department of Agriculture.
    FAS-provided funds means U.S. dollars provided under an agreement
to a recipient, or through a subagreement to a subrecipient, for
expenses authorized in the agreement, such as expenses for the purchase
of qualified commodities; any ocean transportation of the procured
commodities; overland transportation, storage, and handling of the
donated commodities or procured commodities; expenses involved in the
administration, monitoring, and evaluation of the activities under the
agreement; and the costs of activities conducted in the target country
that would enhance the effectiveness of the activities implemented
under the McGovern-Dole Program.
    Food assistance means assistance that is provided to members of a
targeted vulnerable group to meet their food needs.
    Local procurement means the procurement of qualified commodities by
a recipient, directly or through a subrecipient, in the target country
to assist beneficiaries within that same country.
    McGovern-Dole Program means the McGovern-Dole International Food
for Education and Child Nutrition Program.
    Overland transportation means any transportation other than ocean
transportation. It includes internal transportation within the target
country and regional transportation within the target region.
    Private voluntary organization means a not-for-profit,
nongovernmental organization (in the case of a United States
organization, an organization that is exempt from Federal income taxes
under section 501(c)(3) of the Internal Revenue Code of 1986) that
receives funds from private sources, voluntary contributions of money,
staff time, or in-kind support from the public, and that is engaged in
or is planning to engage in voluntary, charitable, or development
assistance activities (other than religious activities).
    Procured commodities means the qualified commodities that are
procured by a recipient, directly or through a subrecipient, under an
agreement.
    Program income means interest earned on proceeds from the sale of
donated commodities, as well as funds received by a recipient or
subrecipient as a direct result of carrying out an approved activity
under an agreement. The term includes but is not limited to income from
fees for services performed, the use or rental of real or personal
property acquired under a Federal award, the sale of items fabricated
under a Federal award, license fees and royalties on patents and
copyrights, and principal and interest on loans made with Federal award
funds. Program income does not include proceeds from; FAS-provided
funds or interest earned on such funds; or funds provided for cost
sharing or matching contributions, refunds or rebates, credits,
discounts, or interest earned on any of them.
    Project means the totality of the activities to be carried out by a
recipient, directly or through a subrecipient, to fulfill the
objectives of an agreement.
[[Page 64975]]
    Purchase country means a developing country in which procured
commodities are purchased.
    Qualified commodities means commodities that are produced in a
developing country that is the target country or in the target region
under an agreement, and that meet each nutritional, quality, and
labeling standard of the target country, as determined by the Secretary
of Agriculture, as well as any other criteria specified in Sec.
1599.6(b).
    Recipient means an entity that enters into an agreement with FAS
and receives donated commodities, FAS-provided funds, or both to carry
out activities under the agreement. The term recipient does not include
a subrecipient.
    Regional procurement means the procurement of qualified commodities
by a recipient, directly or through a subrecipient, in a developing
country in the target region, other than the target country, to assist
beneficiaries within the target country.
    Sale proceeds means funds received by a recipient from the sale of
donated commodities.
    Subrecipient means an entity that enters into a subagreement with a
recipient for the purpose of implementing in the target country
activities described in an agreement. The term does not include an
individual that is a beneficiary under the agreement.
    Target country means the foreign country in which activities are
implemented under an agreement.
    Target region means the continent on which the target country is
located.
    USDA means the United States Department of Agriculture.
    Voluntary committed cost sharing or matching contributions means
cost sharing or matching contributions specifically pledged on a
voluntary basis by an applicant or recipient, which become binding as
part of an agreement. Voluntary committed cost sharing or matching
contributions may be provided in the form of cash or in-kind
contributions.
Sec.  1599.3  Eligibility and conflicts of interest.
    (a) A private voluntary organization, a cooperative, or another
organization that is not an intergovernmental organization is eligible
to submit an application under this part to become a recipient under
the McGovern-Dole Program. FAS will set forth specific eligibility
information, including any factors or priorities that will affect the
eligibility of an applicant or application for selection, in the full
text of the applicable notice of funding opportunity posted on the U.S.
Government website for grant opportunities.
    (b) Applicants, recipients, and subrecipients must comply with
policies established by FAS pursuant to 2 CFR 400.2(a), and with the
requirements in 2 CFR 400.2(b), regarding conflicts of interest.
Sec.  1599.4  Application process.
    (a) An applicant seeking to enter into an agreement with FAS must
submit an application, in accordance with this section, that sets forth
its proposal to carry out activities under the McGovern-Dole Program in
a proposed target country(ies). An application must contain the items
specified in paragraph (b) of this section and any other items required
by the notice of funding opportunity and must be submitted
electronically to FAS at the address set forth in the notice of funding
opportunity.
    (b) An applicant must include the following items in its
application:
    (1) A completed Form SF-424, which is a standard application for
Federal assistance;
    (2) An introduction and a strategic analysis, which includes an
impact analysis, as specified in the notice of funding opportunity;
    (3) A plan of operation that contains the elements specified in the
notice of funding opportunity;
    (4) A summary line item budget and a budget narrative that
indicate:
    (i) The amounts of any sale proceeds, FAS-provided funds, interest,
program income, and voluntary committed cost sharing or matching
contributions that the applicant proposes to use to fund:
    (A) Administrative costs;
    (B) Commodity procurement costs, where applicable, for qualified
commodities obtained through local or regional procurement;
    (C) Overland transportation, storage, and handling costs; and
    (D) Activity costs;
    (ii) Where applicable, how the applicant's indirect cost rate will
be applied to each type of expense; and
    (iii) The amount of funding that will be provided to each proposed
subrecipient under the agreement;
    (5) A project-level results framework that outlines the changes
that the applicant expects to accomplish through the proposed project
and is based on the McGovern-Dole Program-level results framework, as
set forth in the notice of funding opportunity;
    (6) Unless otherwise specified in the notice of funding
opportunity, an evaluation plan that describes the proposed design,
methodology, and time frame of the project's evaluation activities, and
how the applicant intends to manage these activities, and that will
include a baseline study, interim evaluation, final evaluation, and any
applicable special studies; and
    (7) Any additional required items set forth in the notice of
funding opportunity.
    (c) Each applicant (unless the applicant has an exception approved
by FAS under 2 CFR 25.110(d)) is required to:
    (1) Be registered in the System for Award Management (SAM) before
submitting its application;
    (2) Provide a valid unique entity identifier in its application;
and
    (3) Continue to maintain an active SAM registration with current
information at all times during which it has an active Federal award or
an application or plan under consideration by a Federal awarding
agency.
Sec.  1599.5  Agreements.
    (a) After FAS approves an application by an applicant, FAS will
negotiate an agreement with the applicant. The agreement will set forth
the obligations of FAS and the recipient.
    (b) The agreement will specify the general information required in
2 CFR 200.210(a), as applicable.
    (c) The agreement will incorporate general terms and conditions,
pursuant to 2 CFR 200.210(b), as applicable.
    (d) To the extent that this information is not already included in
the agreement pursuant to paragraphs (b) and (c) of this section, the
agreement will also include the following:
    (1) The kind, quantity, and use of the donated commodities and an
estimated commodity call forward schedule, with the month and year
indicated for each expected commodity shipment;
    (2) A plan of operation, which will include the following:
    (i) The objectives to be accomplished under the project;
    (ii) A detailed description of each activity to be implemented;
    (iii) The target country(ies) and the areas of the target
country(ies) in which the activities will be implemented;
    (iv) The methods and criteria for selecting the beneficiaries of
the activities;
    (v) Any contributions for cost sharing or matching, including cash
and non-cash contributions, that the recipient expects to receive from
non-FAS sources that:
    (A) Are critical to the implementation of the activities; or
    (B) Enhance the implementation of the activities;
[[Page 64976]]
    (vi) Any subrecipient that will be involved in the implementation
of the activities, and the criteria for selecting a subrecipient that
has not yet been identified;
    (vii) Any other governmental or nongovernmental entities that will
be involved in the implementation of the activities; and
    (viii) Any processing, packaging, or repackaging of the donated
commodities or procured commodities that will take place prior to the
distribution, sale, or barter of the donated commodities, or the
distribution of the procured commodities, by the recipient;
    (3) A budget, which will set forth the maximum amounts of sale
proceeds, FAS-provided funds, interest, program income, and voluntary
committed cost sharing or matching contributions that may be used for
each line item, as well as other applicable budget requirements;
    (4) Performance goals for the agreement, including a list of
results, with long-term benefits where applicable, to be achieved by
the activities and corresponding indicators, targets, and time frames;
    (5) Requirements relating to any local or regional procurement of
qualified commodities authorized in the agreement, as set forth in
Sec.  1599.6; and
    (6) Any additional provisions specified by FAS during the
negotiation of the agreement.
    (e) The agreement will also include specific terms and conditions,
and certifications and representations, including the following:
    (1) The agreement will prohibit the sale, resale, or transshipment
of the donated commodities or procured commodities by the recipient to
a country not specified in the agreement, or the use of the donated
commodities for other than domestic purposes, for as long as the
recipient has title to such donated commodities or procured
commodities;
    (2) The agreement will prohibit the use of procured commodities, if
applicable, for any purpose other than food assistance;
    (3) The recipient will assert that it has taken action to ensure
that any donated commodities that will be distributed to beneficiaries,
and any qualified commodities that will be obtained through regional
procurement, will be imported free from all customs, duties, tolls, and
taxes; and all donated commodities and procured commodities will be
distributed free from all customs, duties, tolls, and taxes. The
recipient must submit information to FAS to support this assertion;
    (4) The recipient will assert that, to the best of its knowledge,
the importation, if applicable, and distribution of the donated
commodities or procured commodities in the target country will not
result in a substantial disincentive to or interference with domestic
production or marketing in that country. The recipient must submit
information to FAS to support this assertion;
    (5) The recipient will assert that, to the best of its knowledge,
any sale or barter of the donated commodities will not displace or
interfere with any sales of United States commodities that may
otherwise be made to or within the target country. The recipient must
submit information to FAS to support this assertion; and
    (6) The recipient will assert that adequate transportation and
storage facilities will be available in the target country at the time
of the arrival of the donated commodities, or any procured commodities
obtained through regional procurement, to prevent spoilage or waste of
the donated commodities or procured commodities. The recipient must
submit information to FAS to support this assertion.
    (f) FAS may enter into a multicountry agreement in which donated
commodities are delivered to one country and activities are carried out
in another.
    (g) FAS may provide donated commodities and FAS-provided funds
under a multiyear agreement contingent upon the availability of
commodities and funds.
Sec.  1599.6  Local and regional procurement of commodities.
    (a)(1) An agreement may authorize a recipient to use FAS-provided
funds to procure qualified commodities, through a local or regional
procurement or both, to implement a project. The provisions of this
section will apply in such a situation.
    (2) The agreement will specify the types of qualified commodities
approved for procurement; the approved purchase country(ies); and the
approved method(s) of procurement (local procurement, regional
procurement, or a combination of these methods). The agreement will
prohibit the recipient from procuring qualified commodities from any
country not specified in the agreement or utilizing methods of
procurement that differ from those approved in the agreement.
    (b) In carrying out an agreement, the recipient must comply with
the following requirements, as applicable, relating to the procurement
of qualified commodities under the agreement:
    (1) The recipient must procure qualified commodities at a
reasonable market price with respect to the economy of the purchase
country, as determined by FAS.
    (2) If the recipient procures qualified commodities that are
grains, legumes, or pulses, the commodities must meet the food safety
standards of the target country; provided, however, that if the target
country does not have food safety standards for grains, legumes, or
pulses, as applicable, then the recipient must ensure that such
commodities meet the food safety standards specified in the agreement.
    (3) If the recipient procures qualified commodities that are food
products other than grains, legumes or pulses, such as processed foods,
fortified blended foods, and enriched foods, the commodities must
comply, in terms of raw materials, composition, or manufacture, with
the food safety standards specified in the agreement.
    (4) If the recipient procures qualified commodities that are
cereals, groundnuts, or tree nuts, or food products derived from or
containing cereals, groundnuts, or tree nuts, the commodities must be
tested for aflatoxin and have their moisture content certified. The
maximum acceptable total aflatoxin level is 20 parts per billion, the
U.S. Food and Drug Administration action level for aflatoxin in human
foods.
    (5) If the recipient procures an unprocessed commodity, it must
ensure that the commodity has been produced either in the target
country or in another developing country within the target region.
    (6) If the recipient procures a processed commodity, it must ensure
that the processing took place, and the primary ingredient has been
produced, either in the target country or in another developing country
within the target region. The primary ingredient is determined on the
basis of weight in the case of solid foods, or volume in the case of
liquids.
    (7) If the recipient procures qualified commodities through a
competitive tender, the recipient must specify the minimally acceptable
commodity specifications and food safety and quality assurance
standards in the tender. Purchases that are made from commercial
wholesalers in a local or regional market must meet the food safety and
quality assurance standards specified in paragraphs (b)(2), (3), and
(4) of this section.
    (8) The recipient must enter into a contract that complies with
this paragraph (b) for every local or regional procurement of qualified
commodities from a commodity vendor. The recipient must ensure that the
contract between
[[Page 64977]]
the recipient and the commodity vendor clearly specifies the country of
origin and the specific market(s) in which the procurement will take
place, commodity safety and quality assurance standards, product
specifications, price per metric ton, and delivery terms. The recipient
will be required to make such contract available to FAS upon request.
    (9) The recipient must enter into a contract with an established
inspection service to survey and report on the safety, quality, and
condition of all procured commodities, prior to their shipment and
distribution. The recipient will be required to submit any survey
reports or certificates issued by such inspection service to FAS upon
request.
    (c) The agreement will require the recipient to submit a
procurement plan for FAS's approval within the time period specified in
the agreement. The procurement plan will include time periods, broken
down by month, for commodity procurement, delivery, and distribution.
The agreement will require the recipient to comply with the procurement
plan, as approved by FAS, and will prohibit the recipient from making
any changes to the procurement plan without obtaining the prior written
approval of FAS.
Sec.  1599.7  Payments.
    (a) If a recipient arranges for transportation in accordance with
Sec.  1599.8(b)(2), FAS will, as specified in the agreement, pay the
costs of such transportation to the ocean carrier or to the recipient.
The recipient must, as specified in the agreement, submit to FAS,
arrange to be submitted to FAS, or maintain on file and make available
to FAS, the following documents:
    (1) The original, or a true copy, of each on board bill of lading
indicating the freight rate and signed by the originating ocean
carrier;
    (2) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS)
Official Stowage Examination Certificate;
    (ii) A signed copy of the National Cargo Bureau Certificate of
Readiness; and
    (iii) A signed copy of the Certificate of Loading issued by the
National Cargo Bureau or a similar qualified independent surveyor;
    (3) For all containerized cargoes, a copy of the FGIS Container
Condition Inspection Certificate;
    (4) A signed copy of the U.S. Food Aid Booking Note or charter
party covering ocean transportation of the cargo;
    (5) In the case of charter shipments, a signed notice of arrival at
the first discharge port, unless FAS has determined that circumstances
that could not have been reasonably anticipated or controlled (force
majeure) have prevented the ocean carrier's arrival at the first port
of discharge; and
    (6) A request for payment of freight, survey costs other than at
load port, and other expenses approved by FAS.
    (b) If the agreement specifies that some or all of the documents
listed in paragraph (a) of this section will be submitted to FAS, then
FAS will not render payment for transportation services until it has
received all of the specified documents.
    (c) If a recipient arranges for transportation in accordance with
Sec.  1599.8(b)(2), and the recipient uses a freight forwarder, the
recipient must ensure that the freight forwarder is registered in the
SAM and require the freight forwarder to submit the documents specified
in paragraph (a) of this section. The recipient will ensure that the
total commission or fees paid to intermediaries in the transportation
procurement process will not exceed two and a half percent of the total
transportation costs.
    (d) In no case will FAS provide payment to a recipient for
demurrage costs or pay demurrage to any other entity.
    (e) If FAS has agreed to be responsible for the costs of
transporting, storing, and distributing the donated commodities from
the designated discharge port or point of entry, and if the recipient
will bear or has borne any of these costs, in accordance with the
agreement, FAS will either provide an advance payment or a
reimbursement to the recipient in the amount of such costs, in the
manner set forth in the agreement.
    (f) If the agreement authorizes the payment of FAS-provided funds,
FAS will generally provide the funds to the recipient on an advance
payment basis, in accordance with 2 CFR 200.305(b). In addition, the
following procedures will apply to advance payments:
    (1) A recipient may request advance payments of FAS-provided funds,
up to the total amount specified in the agreement. When making an
advance payment request, a recipient must provide, for each agreement
for which it is requesting an advance, total expenditures to date; an
estimate of expenses to be covered by the advance; total advances
previously requested, if any; the amount of cash on hand from the
preceding advance; and, if necessary, a request to roll over any unused
funds from the preceding advance to the current request period. The
advance payment request must take into account any program income
earned since the preceding advance.
    (2) Whenever possible, a recipient should consolidate advance
payment requests to cover anticipated cash needs for all food
assistance program awards made by FAS to the recipient. A recipient may
request advance payments with no minimum time required between
requests.
    (3) A recipient must minimize the amount of time that elapses
between the transfer of funds by FAS and the disbursement of funds by
the recipient. A recipient must fully disburse funds from the preceding
advance before it submits a new advance request for the same agreement,
with the exception that the recipient may request to retain a
reasonable (minimal) balance of any funds that have not been disbursed
and roll it over into a new advance request if the new advance request
is made within 90 days after the preceding advance was made.
    (4) FAS will review all requests to roll over funds from the
preceding advance that have not been disbursed and make a decision
based on the merits of the request. FAS will consider factors such as
the amount of funding that a recipient is requesting to roll over, the
length of time that the recipient has been in possession of the funds,
any unforeseen or extenuating circumstances, the recipient's history of
performance, and findings from recent financial audits or compliance
reviews.
    (5) FAS will not approve any request for an advance or rollover of
funds if the most recent financial report, as specified in the
agreement, is past due, or if any required report, as specified in any
open agreement between the recipient and FAS or the Commodity Credit
Corporation (CCC), is more than three months in arrears.
    (6)(i) A recipient must return to FAS any funds advanced by FAS
that have not been disbursed as of the 91st day after the advance was
made; provided, however, that paragraphs (f)(6)(ii) and (iii) of this
section will apply if the recipient submits a request to FAS before
that date to roll over the funds into a new advance.
    (ii) If a recipient submits a request to roll over funds into a new
advance, and FAS approves the rollover of funds, such funds will be
considered to have been advanced on the date that the recipient
receives the approval notice from FAS, for the purposes of complying
with the requirement in paragraph (f)(6)(i) of this section.
    (iii) If a recipient submits a request to roll over funds into a
new advance, and FAS does not approve the rollover of
[[Page 64978]]
some or all of the funds, such funds must be returned to FAS.
    (iv) If a recipient must return funds to FAS in accordance with
paragraph (f)(6) of this section, the recipient must return the funds
by the later of five business days after the 91st day after the funds
were advanced, or five business days after the date on which the
recipient receives notice from FAS that it has denied the recipient's
request to roll over the funds; provided, however, that FAS may specify
a different date for the return of funds in a written communication to
the recipient.
    (7) Except as may otherwise be provided in the agreement, a
recipient must deposit and maintain in an insured bank account located
in the United States all funds advanced by FAS. The account must be
interest-bearing, unless one of the exceptions in 2 CFR 200.305(b)(8)
applies or FAS determines that the requirement in this paragraph (f)(7)
would constitute an undue burden. A recipient will not be required to
maintain a separate bank account for advance payments of FAS-provided
funds. However, a recipient must be able to separately account for the
receipt, obligation, and expenditure of funds under each agreement.
    (8) A recipient may retain, for administrative expenses, up to $500
per Federal fiscal year of any interest earned on funds advanced under
an agreement. The recipient must remit to the U.S. Department of Health
and Human Services, Payment Management System, any additional interest
earned during a Federal fiscal year on such funds, in accordance with
the procedures in 2 CFR 200.305(b)(9).
    (g) If a recipient is required to pay funds to FAS in connection
with an agreement, the recipient must make such payment in U.S.
dollars, unless otherwise approved in advance by FAS.
Sec.  1599.8  Transportation of donated or procured commodities.
    (a) Shipments of donated commodities and procured commodities
requiring ocean transportation are subject to the requirements of 46
U.S.C. 55305, regarding carriage on U.S.-flag vessels.
    (b) Transportation of donated commodities and other goods such as
bags that may be provided by FAS under the McGovern-Dole Program will
be arranged for under a specific agreement in the manner determined by
FAS. Such transportation will be arranged for by:
    (1) FAS in accordance with the Federal Acquisition Regulation (FAR)
in 48 CFR chapter 1, the Agriculture Acquisition Regulation (AGAR) in
48 CFR chapter 4, and directives issued by the Director, Office of
Procurement and Property Management, USDA; or
    (2) The recipient, with payment by FAS, in the manner specified in
the agreement.
    (c) A recipient must arrange for all transportation of procured
commodities. FAS will pay for the transportation, as provided for in
the agreement, through an advance payment or reimbursement to the
recipient.
    (d) A recipient that is responsible for arranging for the
transportation of donated commodities or procured commodities must
declare in the transportation contract the point at which the ocean
carrier or overland transportation company will take custody of the
donated commodities or procured commodities to be transported.
    (e) A recipient may only use the services of a transportation
company that is legally operating in the country in which it will be
transporting the donated commodities or procured commodities and that
would not have a conflict of interest in transporting such donated
commodities or procured commodities.
    (f) A recipient that arranges for transportation in accordance with
paragraph (b)(2) of this section may only use the services of a freight
forwarder that is licensed by the Federal Maritime Commission and that
would not have a conflict of interest in carrying out the freight
forwarder duties. To assist FAS in determining whether there is a
potential conflict of interest, the recipient must submit to FAS a
certification indicating that the freight forwarder:
    (1) Is not engaged in, and will not engage in, supplying
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under any McGovern-Dole
Program agreement to which the recipient is a party; and
    (2) Is not affiliated with the recipient and has not made
arrangements to give or receive any payment, kickback, or illegal
benefit in connection with its selection as an agent of the recipient.
Sec.  1599.9  Entry, handling, and labeling of donated or procured
commodities and notification requirements.
    (a) A recipient must make all necessary arrangements for receiving
in the target country the donated commodities and any procured
commodities obtained through regional procurement, including obtaining
appropriate approvals for entry and transit. The recipient must make
arrangements with the target country government for all donated
commodities that will be distributed to beneficiaries, and all procured
commodities, to be imported and distributed free from all customs
duties, tolls, and taxes. A recipient is encouraged to make similar
arrangements, where possible, with the government of a country where
donated commodities to be sold or bartered are delivered.
    (b) A recipient must, as provided in the agreement, arrange for
transporting, storing, and distributing the donated commodities or
procured commodities from the designated point and time where title to
the donated commodities or procured commodities passes to the
recipient.
    (c)(1) A recipient must store and maintain the donated commodities
in good condition from the time of delivery at the port of entry or the
point of receipt from the originating carrier until their distribution,
sale, or barter.
    (2) A recipient must store and maintain the procured commodities in
good condition from the time of delivery at the port of entry or the
point of receipt from the commodity vendor(s) until their distribution.
    (d)(1) If a recipient arranges for the packaging or repackaging of
donated commodities that are to be distributed, the recipient must
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities
are furnished by the United States Department of Agriculture; and
    (iv) Includes a statement indicating that the donated commodities
must not be sold, exchanged, or bartered.
    (2) If a recipient arranges for the processing and repackaging of
donated commodities that are to be distributed, the recipient must
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the processed product;
    (iii) Includes a statement indicating that the processed product
was made with commodities furnished by the United States Department of
Agriculture; and
    (iv) Includes a statement indicating that the processed product
must not be sold, exchanged, or bartered.
    (3) If a recipient arranges for the packaging or repackaging of
procured commodities, the recipient must ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
[[Page 64979]]
    (ii) Contains the name of the procured commodities;
    (iii) Contains the name of the country of origin;
    (iv) Includes a statement indicating that the procured commodities
are furnished through a project funded by the United States Department
of Agriculture; and
    (v) Includes a statement indicating that the procured commodities
must not be sold, bartered, or exchanged.
    (4)(i) If a recipient distributes donated commodities that are not
packaged, the recipient must display a sign at the distribution site
that includes the name of the donated commodities, a statement
indicating that the commodities are being furnished by the United
States Department of Agriculture, and a statement indicating that the
donated commodities must not be sold, bartered, or exchanged.
    (ii) If a recipient distributes procured commodities that are
prepackaged or not packaged, the recipient must display a sign at the
distribution site that includes the name of the procured commodities,
the country of origin, a statement indicating that the procured
commodities are being furnished through a project funded by the United
States Department of Agriculture, and a statement indicating that the
procured commodities must not be sold, bartered, or exchanged.
    (e) A recipient must ensure that signs are displayed at all
activity implementation and commodity distribution sites to inform
beneficiaries that funding for the project was provided by the United
States Department of Agriculture.
    (f) A recipient must also ensure that all public communications
relating to the project, the activities, or the donated commodities or
procured commodities, whether made through print, broadcast, digital,
or other media, include a statement acknowledging that funding was
provided by the United States Department of Agriculture.
    (g) FAS may waive compliance with one or more of the labeling and
notification requirements in paragraphs (d), (e), and (f) of this
section if a recipient demonstrates to FAS that the requirement
presents a safety or security risk in the target country. If a
recipient determines that compliance with a labeling or notification
requirement poses an imminent threat of destruction of property,
injury, or loss of life, the recipient must submit a waiver request to
FAS as soon as possible. The recipient will not have to comply with
such requirement during the period prior to the issuance of a waiver
determination by FAS. A recipient may submit a written request for a
waiver at any time after the agreement has been signed.
    (h) In exceptional circumstances, FAS may, on its own initiative,
waive one or more of the labeling and notification requirements in
paragraphs (d), (e), and (f) of this section for programmatic reasons.
Sec.  1599.10  Damage to or loss of donated or procured commodities.
    (a)(1) FAS will be responsible for the donated commodities prior to
the transfer of title to the donated commodities to the recipient. The
recipient will be responsible for the donated commodities following the
transfer of title to the donated commodities to the recipient. The
title will transfer as specified in the agreement.
    (2) A recipient will be responsible for the procured commodities
following the transfer of title to the procured commodities from the
commodity vendor(s) to the recipient. FAS may require the recipient to
purchase transportation insurance against commodity loss or damage.
    (b) A recipient must inform FAS, in the manner and within the time
period set forth in the agreement, of any damage to or loss of the
donated commodities or procured commodities that occurs following the
transfer of title to the donated commodities or procured commodities to
the recipient. The recipient must take all steps necessary to protect
its interests and the interests of FAS with respect to any damage to or
loss of the donated commodities or procured commodities that occurs
after title has been transferred to the recipient.
    (c) A recipient will be responsible for arranging for an
independent cargo surveyor to inspect the donated commodities, and any
procured commodities transported by ocean, upon discharge from the
ocean carrier and to prepare a survey or outturn report. The report
must show the quantity and condition of the donated commodities or
procured commodities discharged from the ocean carrier and must
indicate the most likely cause of any damage noted in the report. The
report must also indicate the time and place when the survey took
place. All discharge surveys must be conducted contemporaneously with
the discharge of the ocean carrier, unless FAS determines that failure
to do so was justified under the circumstances. For donated commodities
or procured commodities shipped on a through bill of lading, the
recipient must also obtain a delivery survey. All surveys obtained by
the recipient must, to the extent practicable, be conducted jointly by
the surveyor, the recipient, and the carrier, and the survey report
must be signed by all three parties. The recipient must obtain a copy
of each discharge or delivery survey report within 45 days after the
completion of the survey. The recipient must make each such report
available to FAS upon request, or in the manner specified in the
agreement. FAS will reimburse the recipient for the reasonable costs of
these services, as determined by FAS, in the manner specified in the
agreement.
    (d) When procured commodities are transported overland, the
recipient will ensure that the overland transportation contract
includes a requirement that a loading and offloading report be prepared
and provided to the recipient. The report must show the quantity and
condition of the procured commodities loaded on the overland
conveyance, as well as the time and place that the loading and
offloading occurred. The recipient must obtain a copy of the report
from the overland transportation company within 45 days after the
completion of the commodity delivery. The recipient must make each such
report available to FAS upon request, or in the manner specified in the
agreement. FAS will reimburse the recipient for the reasonable costs of
these services, as determined by FAS, in the manner specified in the
agreement.
    (e) If donated commodities or procured commodities are damaged or
lost during the time that they are in the care of the ocean carrier or
overland transportation company:
    (1) The recipient must ensure that any reports, narrative
chronology, or other commentary prepared by the independent cargo
surveyor, and any such documentation prepared by a port authority,
stevedoring service, or customs official, or an official of the transit
or target country government or the transportation company, are
provided to FAS;
    (2) The recipient must provide to FAS the names and addresses of
any individuals known to be present at the time of discharge or
unloading, or during the survey, who can verify the quantity of damaged
or lost donated commodities or procured commodities;
    (3) If the damage or loss occurred with respect to a bulk shipment
on an ocean carrier, the recipient must ensure that the independent
cargo surveyor:
    (i) Observes the discharge of the cargo;
    (ii) Reports on discharging methods, including scale type,
calibrations, and any other factors that may affect the accuracy of
scale weights, and, if scales
[[Page 64980]]
are not used, states the reason therefor and describes the actual
method used to determine weight;
    (iii) Estimates the quantity of cargo, if any, lost during
discharge through carrier negligence;
    (iv) Advises on the quality of sweepings;
    (v) Obtains copies of port or ocean carrier records, if possible,
showing the quantity discharged; and
    (vi) Notifies the recipient immediately if the surveyor has reason
to believe that the correct quantity was not discharged or if
additional services are necessary to protect the cargo; and
    (4) If the damage or loss occurred with respect to a container
shipment on an ocean carrier, the recipient must ensure that the
independent cargo surveyor lists the container numbers and seal numbers
shown on the containers, indicates whether the seals were intact at the
time the containers were opened, and notes whether the containers were
in any way damaged.
    (f) If a recipient has title to the donated commodities or procured
commodities, and commodities valued in excess of $5,000 are damaged at
any time prior to their distribution or sale under the agreement,
regardless of the party at fault, the recipient must immediately
arrange for an inspection by a public health official or other
competent authority approved by FAS and provide to FAS a certification
by such public health official or other competent authority regarding
the exact quantity and condition of the damaged donated commodities or
procured commodities. The value of damaged donated commodities must be
determined on the basis of the commodity acquisition, transportation,
and related costs incurred by FAS with respect to such commodities, as
well as such costs incurred by the recipient and paid by FAS. The value
of damaged procured commodities must be determined on the basis of the
commodity acquisition, transportation, and related costs incurred by
the recipient and paid by FAS with respect to such commodities. The
recipient must inform FAS of the results of the inspection and indicate
whether the damaged donated commodities or procured commodities are:
    (1) Fit for the use authorized in the agreement and, if so, whether
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (g)(1) If a recipient has title to the donated commodities or
procured commodities, the recipient must arrange for the recovery of
that portion of the donated commodities or procured commodities
designated as fit for the use authorized in the agreement. The
recipient must dispose of donated commodities or procured commodities
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed,
fertilizer, industrial use, or another use approved by FAS, at the
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use
as animal feed or another non-food use; or
    (iii) Destruction of the donated commodities or procured
commodities if they are unfit for any use, in such manner as to prevent
their use for any purpose.
    (2) A recipient must arrange for all U.S. Government markings to be
obliterated or removed before the donated commodities or procured
commodities are transferred by sale or donation under paragraph (g)(1)
of this section.
    (h) A recipient may retain any proceeds generated by the disposal
of the donated commodities or procured commodities in accordance with
paragraph (g)(1) of this section and must use the retained proceeds for
expenses related to the disposal of the donated commodities or procured
commodities and for activities specified in the agreement.
    (i) A recipient must notify FAS immediately and provide detailed
information about the actions taken in accordance with paragraph (g) of
this section, including the quantities, values, and dispositions of
donated commodities or procured commodities determined to be unfit.
Sec.  1599.11  Claims for damage to or loss of donated or procured
commodities.
    (a)(1) FAS will be responsible for claims arising out of damage to
or loss of a quantity of the donated commodities prior to the transfer
of title to the donated commodities to the recipient. The recipient
will be responsible for claims arising out of damage to or loss of a
quantity of the donated commodities after the transfer of title to the
donated commodities.
    (2) The recipient will be responsible for claims arising out of
damage to or loss of a quantity of the procured commodities after the
transfer of title to the procured commodities from the commodity
vendor(s) to the recipient.
    (b) If a recipient has title to donated commodities or procured
commodities that have been damaged or lost, and the value of the
damaged or lost commodities is estimated to be in excess of $20,000,
the recipient must:
    (1) Notify FAS immediately and provide detailed information about
the circumstances surrounding such damage or loss, the quantity of
damaged or lost commodities, and the value of the damage or loss;
    (2) Promptly upon discovery of the damage or loss, initiate a claim
arising out of such damage or loss, including, if appropriate,
initiating an action to collect pursuant to a commercial insurance
contract;
    (3) Take all necessary action to pursue the claim diligently and
within any applicable periods of limitations; and
    (4) Provide to FAS copies of all documentation relating to the
claim.
    (c) If a recipient has title to donated commodities or procured
commodities that have been damaged or lost, and the value of the
damaged or lost commodities is estimated to be $20,000 or less, the
recipient must notify FAS in accordance with the agreement and provide
detailed information about the damage or loss in the next report
required to be filed under Sec.  1599.14(f)(1) or (2).
    (d)(1) The value of a claim for lost donated commodities will be
determined on the basis of the commodity acquisition, transportation,
and related costs incurred by FAS with respect to such commodities, as
well as such costs incurred by the recipient and paid by FAS. The value
of a claim for lost procured commodities will be determined on the
basis of the commodity acquisition, transportation, and related costs
incurred by the recipient and paid by FAS with respect to such
commodities.
    (2) The value of a claim for damaged donated commodities will be
determined on the basis of the commodity acquisition, transportation,
and related costs incurred by FAS with respect to such commodities, as
well as such costs incurred by the recipient and paid by FAS, less any
funds generated if such commodities are sold in accordance with Sec.
1599.10(g)(1). The value of a claim for damaged procured commodities
will be determined on the basis of the commodity acquisition,
transportation, and related costs incurred by the recipient and paid by
FAS with respect to such commodities, less any funds generated if such
commodities are sold in accordance with Sec.  1599.10(g)(1).
    (e) If FAS determines that a recipient has not initiated a claim or
is not exercising due diligence in the pursuit of a claim, FAS may
require the recipient to assign its rights to initiate or pursue the
claim to FAS. Failure by the recipient to initiate a claim or exercise
due diligence in the pursuit of
[[Page 64981]]
a claim will be considered by FAS during the review of applications for
subsequent food assistance awards.
    (f)(1) A recipient may retain any funds obtained as a result of a
claims collection action initiated by it in accordance with this
section, or recovered pursuant to any insurance policy or other similar
form of indemnification, but such funds must be expended in accordance
with the agreement or for other purposes approved in advance by FAS.
    (2) FAS will retain any funds obtained as a result of a claims
collection action initiated by it under this section; provided,
however, that if the recipient paid for the transportation of the
donated commodities or procured commodities or a portion thereof, FAS
will use a portion of such funds to reimburse the recipient for such
expense on a prorated basis.
Sec.  1599.12  Use of donated or procured commodities, sale proceeds,
FAS-provided funds, and program income.
    (a) A recipient must use the donated commodities or procured
commodities, any sale proceeds, FAS-provided funds, interest, and
program income in accordance with the agreement.
    (b) A recipient must not use donated commodities or procured
commodities, sale proceeds, FAS-provided funds, interest, or program
income for any activity or any expense incurred by the recipient or a
subrecipient prior to the start date of the period of performance of
the agreement or after the agreement is suspended or terminated,
without the prior written approval of FAS.
    (c) A recipient must not permit the distribution, handling, or
allocation of donated commodities or procured commodities on the basis
of political affiliation, geographic location, or the ethnic, tribal,
or religious identity or affiliation of the potential consumers or
beneficiaries.
    (d) A recipient must not permit the distribution, handling, or
allocation of donated commodities or procured commodities by the
military forces of any government or insurgent group without the
specific authorization of FAS.
    (e) A recipient must not use sale proceeds, FAS-provided funds,
interest, or program income to acquire goods and services, either
directly or indirectly through another party, in a manner that violates
a U.S. Government economic sanction program, as specified in the
agreement.
    (f)(1) A recipient may sell or barter donated commodities only if
such sale or barter is provided for in the agreement or the recipient
is disposing of damaged donated commodities as specified in Sec.
1599.10(g). The recipient must sell donated commodities at a reasonable
market price. The recipient must obtain approval of its proposed sale
price from FAS before selling donated commodities. The recipient must
use any sale proceeds, interest, program income, or goods or services
derived from the sale or barter of the donated commodities only as
provided in the agreement.
    (2) A recipient may sell procured commodities only if the recipient
is disposing of damaged procured commodities as specified in Sec.
1599.10(g).
    (g) A recipient must deposit and maintain all sale proceeds, FAS-
provided funds, and program income in a bank account until they are
used for a purpose authorized under the agreement or the FAS-provided
funds are returned to FAS in accordance with Sec.  1599.7(f)(6). The
account must be insured unless it is in a country where insurance is
unavailable. The account must be interest-bearing, unless one of the
exceptions in 2 CFR 200.305(b)(8) applies or FAS determines that the
requirement in this paragraph (g) would constitute an undue burden. The
recipient must comply with the requirements in Sec.  1599.7(f)(7) with
regard to the deposit of advance payments by FAS.
    (h)(1) Except as provided in paragraph (h)(2) of this section, a
recipient may make adjustments within the agreement budget between
direct cost line items without further approval, provided that the
total amount of adjustments does not exceed the amount specified in the
agreement. Adjustments beyond the limits in this paragraph (h) require
the prior approval of FAS.
    (2) A recipient must not transfer any funds budgeted for
participant support costs, as defined in 2 CFR 200.75, to other
categories of expense without the prior approval of FAS.
    (i) A recipient may use sale proceeds, FAS-provided funds, or
program income to purchase real or personal property only if local law
permits the recipient to retain title to such property. However, a
recipient must not use sale proceeds, FAS-provided funds, or program
income to pay for the acquisition, development, construction,
alteration or upgrade of real property that is:
    (1) Owned or managed by a church or other organization engaged
exclusively in religious pursuits; or
    (2) Used in whole or in part for sectarian purposes, except that a
recipient may use sale proceeds, FAS-provided funds, or program income
to pay for repairs to or rehabilitation of a structure located on such
real property to the extent necessary to avoid spoilage or loss of
donated commodities or procured commodities, but only if the structure
is not used in whole or in part for any religious or sectarian purposes
while the donated commodities or procured commodities are stored in it.
If the use of sale proceeds, FAS-provided funds, or program income to
pay for repairs to or rehabilitation of such a structure is not
specifically provided for in the agreement, the recipient must not use
the sale proceeds, FAS-provided funds, or program income for this
purpose until it receives written approval from FAS.
    (j) A recipient must comply with 2 CFR 200.321 when procuring goods
and services in the United States. When procuring goods and services
outside of the United States, a recipient should endeavor to comply
with 2 CFR 200.321 where practicable.
    (k) A recipient must enter into a written contract with each
provider of goods, services, or construction work that is valued at or
above the Simplified Acquisition Threshold. Each such contract must
require the provider to maintain adequate records to account for all
donated commodities, funds, or both furnished to the provider by the
recipient and to comply with any other applicable requirements that may
be specified by FAS in the agreement. The recipient must submit a copy
of each signed contract to FAS, as specified in the agreement.
Sec.  1599.13  Monitoring and evaluation requirements.
    (a) A recipient will be responsible for designing a performance
monitoring plan for the project, obtaining written approval of the plan
from FAS before putting it into effect, and managing and implementing
the plan, unless otherwise specified in the agreement.
    (b) A recipient must establish baseline values, annual targets, and
life of activity targets for each performance indicator included in the
recipient's approved performance monitoring plan, unless otherwise
specified in the agreement.
    (c) A recipient must inform FAS, in the manner and within the time
period specified in the agreement, of any problems, delays, or adverse
conditions that materially impair the recipient's ability to meet the
objectives of the agreement. This notification must include a statement
of any corrective actions taken or contemplated by the recipient, and
any additional assistance requested from FAS to resolve the situation.
[[Page 64982]]
    (d) A recipient will be responsible for designing an evaluation
plan for the project, obtaining written approval of the plan from FAS
before putting it into effect, and arranging for an independent third
party to implement the evaluation, unless otherwise specified in the
agreement. This evaluation plan will detail the evaluation purpose and
scope, key evaluation questions, evaluation methodology, time frame,
evaluation management, and cost. This plan will generally be based upon
the evaluation plan that the recipient submitted to FAS as part of its
application, pursuant to Sec.  1599.4(b)(6), unless the notice of
funding opportunity specified that an evaluation plan was not required
to be included in the application. The recipient must ensure that the
evaluation plan:
    (1) Is designed using the most rigorous methodology that is
appropriate and feasible, taking into account available resources,
strategy, current knowledge and evaluation practices in the sector, and
the implementing environment;
    (2) Is designed to inform management, activity implementation, and
strategic decision-making;
    (3) Utilizes analytical approaches and methodologies, based on the
questions to be addressed, project design, budgetary resources
available, and level of rigor and evidence required, which may be
implemented through methods such as case studies, surveys, quasi-
experimental designs, randomized field experiments, cost-effectiveness
analyses, implementation reviews, or a combination of methods;
    (4) Adheres to generally accepted evaluation standards and
principles;
    (5) Uses participatory approaches that seek to include the
perspectives of diverse parties and all relevant stakeholders; and
    (6) Where possible, utilizes local consultants and seeks to build
local capacity in evaluation.
    (e)(1) Unless otherwise provided in the agreement, a recipient must
arrange for evaluations of the project to be conducted by an
independent third party that:
    (i) Is financially and legally separate from the recipient's
organization; and
    (ii) Has staff with demonstrated methodological, cultural, and
language competencies, and specialized experience in conducting
evaluations of international development programs involving
agriculture, trade, education, and nutrition, provided that FAS may
determine that, for a particular agreement, the staff of the
independent third party evaluator is not required to have specialized
experience in conducting evaluations of programs involving one or more
of these four areas.
    (2) A recipient must provide a written certification to FAS that
there is no real or apparent conflict of interest on the part of any
recipient staff member or third party entity designated or hired to
play a substantive role in the evaluation of activities under the
agreement.
    (f) FAS will be considered a key stakeholder in all evaluations
conducted as part of the agreement.
    (g)(1) A recipient is responsible for establishing the required
financial and human capital resources for monitoring and evaluation of
activities under the agreement. The recipient must maintain a separate
budget for monitoring and evaluation, with separate budget line items
for dedicated recipient monitoring and evaluation staff and independent
third party evaluation contracts.
    (2) Personnel at the recipient's headquarters offices and field
offices with specialized expertise and experience in monitoring and
evaluation may be used by the recipient for dedicated monitoring and
evaluation. Unless otherwise specified in the agreement or approved
evaluation plan, all evaluations must be managed by the recipient's
evaluation experts outside of the recipient's line management for the
activities.
    (h) FAS may independently conduct or commission an evaluation of a
single agreement or an evaluation that includes multiple agreements. A
recipient must cooperate, and comply with any demands for information
or materials made in connection, with any evaluation conducted or
commissioned by FAS. Such evaluations may be conducted by FAS
internally or by an FAS-hired external evaluation contractor.
Sec.  1599.14  Reporting and record keeping requirements.
    (a) A recipient must comply with the performance and financial
monitoring and reporting requirements in the agreement and 2 CFR
200.327 through 200.329.
    (b) A recipient must submit financial reports to FAS, by the dates
and for the reporting periods specified in the agreement. Such reports
must provide an accurate accounting of sale proceeds, FAS-provided
funds, interest, program income, and voluntary committed cost sharing
or matching contributions.
    (c)(1) A recipient must submit performance reports to FAS, by the
dates and for the reporting periods specified in the agreement. These
reports must include the information required in 2 CFR 200.328(b)(2),
including additional pertinent information regarding the recipient's
progress, measured against established indicators, baselines, and
targets, towards achieving the expected results specified in the
agreement. This reporting must include, for each performance indicator,
a comparison of actual accomplishments with the baseline and the
targets established for the period. When actual accomplishments deviate
significantly from targeted goals, the recipient must provide an
explanation in the report.
    (2) A recipient must ensure the accuracy and reliability of the
performance data submitted to FAS in performance reports. At any time
during the period of performance of the agreement, FAS may review the
recipient's performance data to determine whether it is accurate and
reliable. The recipient must comply with all requests made by FAS or an
entity designated by FAS in relation to such reviews.
    (d) Baseline, interim, and final evaluation reports are required
for all agreements, unless otherwise specified in the agreement. The
reports must be submitted in accordance with the timeline provided in
the FAS-approved evaluation plan. Evaluation reports submitted to FAS
may be made public in an effort to increase accountability and
transparency and share lessons learned and best practices.
    (e)(1) A recipient must, within 30 days after export of all or a
portion of the donated commodities, submit evidence of such export to
FAS, in the manner set forth in the agreement. The evidence may be
submitted through an electronic media approved by FAS or by providing
the carrier's on board bill of lading. The evidence of export must show
the kind and quantity of commodities exported, the date of export, and
the country where the commodities will be delivered. The date of export
is the date that the ocean carrier carrying the donated commodities
sails from the final U.S. load port.
    (2) A recipient must, if it has obtained procured commodities
requiring ocean transportation, within 30 days after export of all or a
portion of the procured commodities, submit evidence of such export to
FAS, in the manner set forth in the agreement. The evidence may be
submitted through an electronic media approved by FAS or by providing
the carrier's on board bill of lading. The evidence of export must show
the kind and quantity of commodities exported, the date of export, and
the country where the commodities will be delivered. The date of export
is the date
[[Page 64983]]
that the ocean carrier carrying the procured commodities sails from the
load port in the target region.
    (f)(1) A recipient must submit reports to FAS, using a form
prescribed by FAS, covering the receipt, handling, and disposition of
the donated commodities or procured commodities. Such reports must be
submitted to FAS, by the dates and for the reporting periods specified
in the agreement, until all of the donated commodities or procured
commodities have been distributed, sold or bartered and such
disposition has been reported to FAS.
    (2) If the agreement authorizes the sale or barter of donated
commodities, the recipient must submit to FAS, using a form prescribed
by FAS, reports covering the receipt and use of the sale proceeds when
the donated commodities were sold, the goods and services derived from
barter when the donated commodities were bartered, and program income.
Such reports must be submitted to FAS, by the dates and for the
reporting periods specified in the agreement, until all of the sale
proceeds and program income have been disbursed and reported to FAS.
When reporting financial information, the recipient must include the
amounts in U.S. dollars and the exchange rate if proceeds are held in
local currency.
    (g) If requested by FAS, a recipient must provide to FAS additional
information or reports relating to the agreement.
    (h) If a recipient requires an extension of a reporting deadline,
it must ensure that FAS receives an extension request at least five
business days prior to the reporting deadline. FAS may decline to
consider a request for an extension that it receives after this time
period. FAS will consider requests for reporting deadline extensions on
a case by case basis and make a decision based on the merits of each
request. FAS will consider factors such as unforeseen or extenuating
circumstances and past performance history when evaluating requests for
extensions.
    (i) A recipient must retain records and permit access to records in
accordance with the requirements of 2 CFR 200.333 through 200.337. The
date of submission of the final expenditure report, as referenced in 2
CFR 200.333, will be the final date of submission of the reports
required by paragraphs (f)(1) and (2) of this section, as prescribed by
FAS. The recipient must retain copies of and make available to FAS all
sales receipts, contracts, or other documents related to the
procurement of qualified commodities, the sale or barter of donated
commodities, and any goods or services derived from such barter, as
well as records of dispatch received from ocean carriers or overland
transportation companies.
Sec.  1599.15  Subrecipients.
    (a) A recipient may utilize the services of a subrecipient to
implement activities under the agreement if this is provided for in the
agreement. The subrecipient may receive donated commodities or procured
commodities, sale proceeds, FAS-provided funds, program income, or
other resources from the recipient for this purpose. The recipient must
enter into a written subagreement with the subrecipient and comply with
the applicable provisions of 2 CFR 200.331. The recipient must provide
a copy of such subagreement to FAS, in the manner set forth in the
agreement, prior to the transfer of any donated commodities or procured
commodities, sale proceeds, FAS-provided funds, or program income to
the subrecipient.
    (b) A recipient must include the following requirements in a
subagreement:
    (1) The subrecipient is required to comply with the applicable
provisions of this part and 2 CFR parts 200 and 400. The applicable
provisions are those that relate specifically to subrecipients, as well
as those relating to non-Federal entities that impose requirements that
would be reasonable to pass through to a subrecipient because they
directly concern the implementation by the subrecipient of one or more
activities under the agreement. If there is a question about whether a
particular provision is applicable, FAS will make the determination.
    (2) The subrecipient is prohibited from using sale proceeds, FAS-
provided funds, interest, or program income to acquire goods and
services, either directly or indirectly through another party, in a
manner that violates a U.S. Government economic sanction program, as
specified in the agreement.
    (3) The subrecipient must pay to the recipient the value of any
donated commodities or procured commodities, sale proceeds, FAS-
provided funds, interest, or program income that are not used in
accordance with the subagreement, or that are lost, damaged, or misused
as a result of the subrecipient's failure to exercise reasonable care.
    (4) In accordance with Sec.  1599.19 and 2 CFR 200.501(h), a
description of the applicable compliance requirements and the
subrecipient's compliance responsibility. Methods to ensure compliance
may include pre-award audits, monitoring during the agreement, and
post-award audits.
    (c) A recipient must monitor the actions of a subrecipient as
necessary to ensure that donated commodities or procured commodities,
sale proceeds, FAS-provided funds, and program income provided to the
subrecipient are used for authorized purposes in compliance with
applicable U.S. Federal laws and regulations and the subagreement and
that performance indicator targets are achieved for both activities and
results under the agreement.
Sec.  1599.16  Noncompliance with an agreement.
    If a recipient fails to comply with a Federal statute or regulation
or the terms and conditions of the agreement, and FAS determines that
the noncompliance cannot be remedied by imposing additional conditions,
FAS may take one or more of the actions set forth in 2 CFR 200.338,
including initiating a claim as a remedy. FAS may also initiate a claim
against a recipient if the donated commodities or procured commodities
are damaged or lost, or the sale proceeds, goods received through
barter, FAS-provided funds, interest, or program income are misused or
lost, due to an action or omission of the recipient.
Sec.  1599.17  Suspension and termination of agreements.
    (a) An agreement or subagreement may be suspended or terminated in
accordance with 2 CFR 200.338 or 200.339. FAS may suspend or terminate
an agreement if it determines that:
    (1) One of the bases in 2 CFR 200.338 or 200.339 for termination or
suspension by FAS has been satisfied;
    (2) The continuation of the assistance provided under the agreement
is no longer necessary or desirable; or
    (3) Storage facilities are inadequate to prevent spoilage or waste,
or distribution of the donated commodities or procured commodities will
result in substantial disincentive to, or interference with, domestic
production or marketing in the target country.
    (b) If an agreement is terminated, the recipient:
    (1) Is responsible for the security and integrity of any
undistributed donated commodities or procured commodities and must
dispose of such commodities only as agreed to by FAS;
    (2) Is responsible for any sale proceeds, FAS-provided funds,
interest, or program income that have not been disbursed and must use
or return them only as agreed to by FAS; and
    (3) Must comply with any closeout and post-closeout procedures
specified in the agreement and 2 CFR 200.343 and 200.344.
[[Page 64984]]
Sec.  1599.18  Opportunities to object and appeals.
    (a) FAS will provide an opportunity to a recipient to object to,
and provide information and documentation challenging, any action taken
by FAS pursuant to Sec.  1599.16. FAS will comply with any requirements
for hearings, appeals, or other administrative proceedings to which the
recipient is entitled under any other statute or regulation applicable
to the action involved. For example, if the action taken by FAS
pursuant to Sec.  1599.16 is to initiate suspension or debarment
proceedings as authorized under 2 CFR parts 180 and 417, then the
requirements in 2 CFR parts 180 and 417 will apply instead of the
requirements in this section. In the absence of other applicable
statutory or regulatory requirements, the requirements set forth in
this section will apply.
    (b) The recipient must submit its objection in writing, along with
any documentation, to the official specified in the agreement within 30
days after the date of FAS's written notification to the recipient of
the FAS action being challenged. This official will endeavor to notify
the recipient of his or her determination (the initial determination)
within 60 days after the date that FAS received the recipient's written
objection.
    (c) The recipient may appeal the initial determination to the
Administrator, FAS. An appeal must be in writing and be submitted to
the Office of the Administrator within 30 days after the date of the
initial determination. The recipient may submit additional
documentation with its appeal.
    (d) The Administrator will base the determination on appeal upon
information contained in the administrative record and will endeavor to
make a determination within 60 days after the date that FAS received
the appeal. The determination of the Administrator will be the final
determination of FAS. The recipient must exhaust all administrative
remedies contained in this section before pursuing judicial review of a
determination by the Administrator.
Sec.  1599.19  Audit requirements.
    (a) The audit requirements in subpart F of 2 CFR part 200 apply to
recipients and subrecipients under this part other than those that are
for-profit entities, foreign public entities, or foreign organizations.
    (b) A recipient or subrecipient that is a for-profit entity or a
foreign organization, and that expends, during its fiscal year, a total
of at least the audit requirement threshold in 2 CFR 200.501 in Federal
awards, is required to obtain an audit. Such a recipient or
subrecipient has the following two options to satisfy the requirement
in this paragraph (b):
    (1)(i) A financial audit of the agreement or subagreement, in
accordance with the Government Auditing Standards issued by the United
States Government Accountability Office (GAO), if the recipient or
subrecipient expends Federal awards under only one FAS program during
such fiscal year; or
    (ii) A financial audit of all Federal awards from FAS, in
accordance with GAO's Government Auditing Standards, if the recipient
or subrecipient expends Federal awards under multiple FAS programs
during such fiscal year; or
    (2) An audit that meets the requirements contained in subpart F of
2 CFR part 200.
    (c) A recipient or subrecipient that is a for-profit entity or a
foreign organization, and that expends, during its fiscal year, a total
that is less than the audit requirement threshold in 2 CFR 200.501 in
Federal awards, is exempt from requirements under this section for an
audit for that year, except as provided in paragraphs (d) and (f) of
this section, but it must make records available for review by
appropriate officials of Federal agencies.
    (d) FAS may require an annual financial audit of an agreement or
subagreement when the audit requirement threshold in 2 CFR 200.501 is
not met. In that case, FAS must provide funds under the agreement for
this purpose, and the recipient or subrecipient, as applicable, must
arrange for such audit and submit it to FAS.
    (e) When a recipient or subrecipient that is a for-profit entity or
a foreign organization is required to obtain a financial audit under
this section, it must provide a copy of the audit to FAS within 60 days
after the end of its fiscal year.
    (f) FAS, the USDA Office of Inspector General, or GAO may conduct
or arrange for additional audits of any recipients or subrecipients,
including for-profit entities and foreign organizations. Recipients and
subrecipients must promptly comply with all requests related to such
audits. If FAS conducts or arranges for an additional audit, such as an
audit with respect to a particular agreement, FAS will fund the full
cost of such an audit, in accordance with 2 CFR 200.503(d).
Sec.  1599.20  Paperwork Reduction Act.
    The information collection requirements contained in this part have
been approved by OMB under the Paperwork Reduction Act of 1995, 44
U.S.C. Chapter 35, and have been assigned OMB control number 0551-0035.
A person is not required to respond to a collection of information
unless it displays a currently valid OMB control number.
    Dated: October 29, 2019.
Ken Isley,
Administrator, Foreign Agricultural Service.
[FR Doc. 2019-24894 Filed 11-25-19; 8:45 am]
BILLING CODE 3410-10-P