Procurement of Commodities for Foreign Donation, 6450-6456 [07-619]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 72, Number 28 (Monday, February 12, 2007)]
[Rules and Regulations]
[Pages 6450-6456]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-619]


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

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1496

RIN 0560-AH39


Procurement of Commodities for Foreign Donation

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: This rule adopts new procedures to be used by the Commodity 
Credit Corporation (CCC) in the evaluation of bids in connection with 
the procurement of commodities for foreign donation. CCC is amending 
the existing regulations to provide for the simultaneous review of 
commodity and ocean freight offers when evaluating lowest-landed cost 
options in connection with the procurement of commodities for foreign 
donation. This rule will enhance bidding opportunities for potential 
vendors while allowing CCC to more efficiently acquire commodities.

DATES: Effective Date: February 12, 2007.

FOR FURTHER INFORMATION CONTACT: Richard J. Chavez, United States 
Department of Agriculture (USDA), Farm Service Agency (FSA), Commodity 
Procurement Policy & Analysis Division (CPPAD), Room 5741-S, 1400 
Independence Avenue, SW., Washington, DC 20250; Telephone: (202) 690-
0194; Facsimile: (202) 690-2221; E Mail: Richard.Chavez@USDA.gov.

SUPPLEMENTARY INFORMATION:

Background

    CCC procures agricultural commodities for donation overseas under 
various food aid authorities. These authorities include Title II of the 
Agricultural Trade Development and

[[Page 6451]]

Assistance Act of 1954 (Pub. L. 480), which is administered by the U.S. 
Agency for International Development (AID), and the Food for Progress 
and the McGovern-Dole International Food for Education and Child 
Nutrition Programs, which are administered by the Foreign Agricultural 
Service (FAS) within USDA.
    Currently, CCC follows a two-step ocean freight bid evaluation 
process in connection with the procurement of commodities for foreign 
donations. First, CCC issues a public invitation soliciting bids for 
the sale of commodities and requests that ocean carriers provide 
indications of available freight rates to CCC. These ``indications'' of 
rates are not offers to CCC. In fact, CCC does not contract for ocean 
transportation for the donated commodities. Ocean transportation 
contracting is done by the Cooperating Sponsors (grantee organizations 
or foreign governments receiving the commodities) or by AID in the case 
of some Title II, Pub. L. 480 shipments.
    At this point, CCC evaluates commodity bids together with the 
freight rate indications to identify the combination which would most 
likely result in the lowest-landed cost, i.e., the lowest combined cost 
of commodities and freight to destination. CCC will purchase the 
commodities to be donated overseas on that basis. Lowest-landed cost is 
calculated on the basis of U.S.-flag rates for that quantity of the 
commodities being purchased that is determined necessary and practical 
to meet cargo preference requirements, i.e., the tonnage to be shipped 
on U.S.-flag vessels. Although CCC does not contract for freight, the 
freight costs are borne by the U.S. Government from the same accounts 
as the commodity costs. Therefore, purchasing on the basis of lowest-
landed cost will reduce outlays and maximize the use of funds.
    CCC's commodity purchase determines the point at which the 
commodity is delivered to the carriers. However, as stated above, the 
freight rates used for this lowest-landed cost evaluation are not firm, 
fixed offers. Therefore, a second step is necessary that involves the 
Cooperating Sponsor or AID issuing invitations for firm freight offers. 
CCC will notify the Cooperating Sponsor(s) or AID of the location of 
the commodity as determined in its commodity bid evaluation and the 
Cooperating Sponsor or AID will issue ocean freight invitations that 
will lead to actual freight bookings by the Cooperating Sponsor or AID 
on firm, fixed ocean rates.
    This two-step process has been in place for many years and was 
designed at the time that processed commodities were shipped at ocean 
carrier tariff rates that could be readily identified. Now, as rates 
are ``submitted rates'' and not tied to tariffs the process is 
exceedingly cumbersome and time-consuming, typically requiring 80 hours 
each month to analyze the first-step indications. Additionally, the 
process does not guarantee that commodities will be actually purchased 
and shipped on the basis of lowest-landed cost. One reason for this is 
that the U.S. Maritime Administration (MARAD), within the Department of 
Transportation, prioritizes U.S.-flag ocean service for purposes of 
cargo preference and assigns a higher priority to service that uses 
only U.S.-flag vessels to the final discharge point.
    The current two-step process often results in commodities being 
purchased at locations based upon indications of service available from 
U.S.-flag carriers that have a lower priority. These port locations may 
not be cost-effective for the higher priority vessels, which can then 
displace the lower priority vessels and secure the cargo, often at a 
higher rate.
    This rule will add clarity to the commodity bid evaluation process 
by eliminating the two-step process. A major constraint to revising 
this two-step process has been that computer resources available to CCC 
have been unable to analyze the large number of variables that comprise 
modern government commodity procurements and the complexities of cargo 
preference compliance. These include the many contract priorities that 
are mandated by law as well as the volume of possible commodity and 
freight cost variables that result from a national bidding system. CCC 
is now updating its computer bid-evaluation system to be able to 
accommodate a more unified one-step bid evaluation. The procurement for 
commodities using firm, fixed ocean rates to determine lowest-landed 
cost would be the most efficient method of procurement. Under such a 
system, the cargo preference requirements would be determined initially 
and not subject to a change of carriers. This should reduce the ocean 
freight costs considerably because the tonnage would be consolidated by 
the carriers' bids and by allowing lowest-landed cost and cargo 
preference requirements to determine the U.S. delivery points. The 
delivery time from call forward issuance to delivery abroad could be 
reduced because the current freight evaluation process would be 
streamlined.
    The new procedures would apply to processed and bulk commodities 
and cover the assistance programs identified above. Under the one-step 
process, CCC would issue invitations for commodity bids and Cooperating 
Sponsors or AID would issue separate invitations for freight offers at 
approximately the same time. Freight invitations may call for bids to 
be submitted to the donee organization or AID via an Internet-based bid 
entry system maintained by CCC approximately 3 days prior to the time 
for receipt of commodity bids. Such a process would speed data input 
and evaluation as compared to the transmittal of written offers. Offers 
of commodities and freight would be invited on a ``bid-point'' basis, 
i.e., a point where the transfer of care and custody of the commodity 
from the vendor to the ocean carrier takes place. This point of 
transfer may include one or more terminals included under the specific 
bid point designation. CCC believes this specificity is desirable 
because a more general offer that designates a port area can have 
additional transfer costs once a specific terminal is named. CCC should 
be able to identify these extra costs at the time the bids are 
evaluated as it may impact on true lowest-landed cost calculations. The 
submitted freight offers will be reviewed by the donee organization, 
AID, and/or USDA prior to bid evaluation in order to determine the 
availability of service for commodities and destinations. Furthermore, 
the one-step bid evaluation process will be more efficient because 
ocean carriers are expected to offer quantity increments that are the 
most economical for them.
    After commodity offers are received, CCC would evaluate the offers 
on the basis of lowest-landed cost by a comparison with offered freight 
rates. CCC would award the commodity bid on that basis and notify the 
Cooperating Sponsor of the bid accepted. The Cooperating Sponsor would 
be required to book freight at the rate CCC used for the lowest-landed 
cost determination, or a lower rate, except in circumstances where, in 
the opinion of the Contracting Officer and the applicable program 
agency's representative, extenuating circumstances (such as internal 
strife at the foreign destination or urgent humanitarian conditions 
threatening the lives of persons at the foreign destination) preclude 
such awards, or efficiencies and cost-savings lead to the use of 
different types of ocean services such as multi-trip voyage charters, 
indefinite delivery/indefinite quantity (IDIQ), delivery Cost and 
Freight (C &

[[Page 6452]]

F), delivery Cost Insurance and Freight (CIF), and indexed ocean 
freight costs.

Summary of Public Comments

    On December 16, 2005, CCC published a proposed rule, Procurement of 
Commodities for Foreign Donation, in the Federal Register (70 FR 74717-
74721). The proposed rule proposed new procedures to be used by CCC in 
the evaluation of bids in connection with the procurement of 
commodities for foreign donation. The rule provided a 30-day public 
comment period ending January 17, 2006.
    In response to public requests, CCC reopened and extended the 
comment period for 45 days to March 9, 2006, via a document published 
in the Federal Register January 23, 2006 (71 FR 3442). Further, CCC 
determined that a public meeting would be held at USDA on February 21, 
2006, to provide for open discussion on the proposed rule. The notice 
of a public meeting was published in the Federal Register on February 
8, 2006 (71 FR 6399-6400).
    On April 7, 2006, a supplemental to the proposed rule was published 
in the Federal Register to clarify two points (71 FR 17767-17768). 
First, CCC specifically recognized its obligations under the cargo 
preference legislation of the Merchant Marine Act, 1936. Secondly, CCC 
clarified the ``extenuating circumstances'' that may preclude awards on 
the basis of lowest landed cost. CCC also reopened and extended the 
comment period to May 8, 2006, to accord interested parties to comment 
thereon.
    CCC received a total of 46 responses on the proposed rule, 
including the supplemental to the proposed rule. Among the respondents 
were steamship lines or their legal representatives, ports, vendors of 
commodities, and trade and industry groups. A few of the respondents 
submitted more than one response, reiterating their points made from an 
earlier submission or addressing new points. Many of the responses 
received addressed multiple points; therefore, the number of comments 
discussed in this rule exceeds the number of actual responses received.
    The public comments received in response to the proposed rule, and 
CCC's response, are discussed below. While we considered the comments 
and suggestions received and understand the concerns and opinions 
expressed by the respondents, CCC did not change the final rule. This 
rule gives CCC necessary flexibility and is consistent with statutory 
requirements. Therefore, the proposed rule, including the supplemental 
to the proposed rule, is adopted as final, without change.

General Comments

    Fourteen of the comments received requested an extension of the 
original 30-day public comment period. CCC believed that the requests 
for additional time to comment on the proposed rule were reasonable and 
therefore on January 23, 2006, reopened and extended the comment period 
to March 9, 2006 (71 FR 3442). Two of the comments received after 
January 23, 2006, supported the extended comment period. Another 
comment was grateful for the extension in that it permitted time for a 
public meeting to discuss the proposed rule. On April 7, 2006, CCC 
again reopened and extended the comment period to May 8, 2006 (71 FR 
17767-17768).
    Nine of the comments received supported the proposed rule. Many of 
these agreed that the one-step procurement process, using firm, fixed 
freight rates, would streamline CCC's procurement process making the 
actual purchases more cost efficient. CCC agrees.
    One respondent noted that they were very pleased with the outcome 
of an interagency meeting on the proposed rule and that a consensus 
would be reached among the agencies before publication of the final 
rule. The agencies involved have met and have agreed that the one-step 
process will work efficiently for all interested parties.
    Three comments stated that the proposed rule warranted a 
significant designation under Executive Order (EO) 12866 due to the 
expected economic impacts. However, the proposed rule was issued in 
conformance with EO 12866 and was determined to be not significant; 
therefore, it was not reviewed by the Office of Management and Budget 
(OMB). The projected economic impact from the implementation of a one-
step bid evaluation process will arise, in part, from the savings that 
are derived from a truly ``lowest landed'' cost solution to commodity 
procurement. Under the current two-step process, as described in the 
background section of the rule, the indicative rates provided by the 
carriers are not firm--and the actual rates offered firm once the 
commodity is already purchased at a location, may bring into that 
procurement entirely different economics. This usually results in 
higher overall costs in the combination of freight and commodity. A 
one-step process should result in freight savings, derived in a more 
efficient manner in which ocean carriers are selected, but not, 
however, in avoidance of cargo preference. In addition, while the 
proposed rule was designated not significant under EO 12866, this final 
rule was designated significant and was reviewed by OMB.
    Two comments stated that the Regulatory Flexibility Act was 
applicable to the proposed rule. The Regulatory Flexibility Act (5 
U.S.C. 603) only requires regulatory flexibility analysis when an 
agency is required to publish a proposed rule by the public notice and 
comment provisions of the Administrative Procedure Act (5 U.S.C. 553). 
Section 553(a)(2) of the Act provides an exemption for matters relating 
to contracts. Therefore, by law, CCC was exempt from the Regulatory 
Flexibility Act provisions. Although not required by the APA to publish 
a proposed rule, CCC published the proposed rule because it is USDA 
policy under a memorandum published by the Secretary of Agriculture on 
July 24, 1971 (36 FR 13804) to give notice of proposed rulemaking and 
invite the public to participate in rulemaking even where not required 
by law. In addition, CCC did conduct a Regulatory Flexibility Analysis 
for this final rule and it is available with the cost-benefit analysis 
from the contact person indicated above.
    One comment stated that the proposed rule would significantly alter 
the administration of small business and Javits-Wagner-O'Day programs 
in the Department. Commodity procurements under this rule will comply 
with Federal Acquisition Regulation (FAR) and Small Business 
Utilization requirements.
    One comment recommended that CCC incorporate Incoterms and other 
industry-standard terminology in food aid programs. The contract terms 
for ocean freight are determined by the booking agreement with the 
cooperating sponsor and not within the scope of this rule.
    Five comments requested that a working session and/or meeting be 
convened as soon as possible with member U.S. ship operating companies 
and other interested parties to learn more and share ideas about the 
proposed rule and its impact on the maritime industry. Two other 
comments added that the proposed rule and the Freight Bid Entry System 
(FBES) should be made part of a cooperative effort that involves all 
interested parties, including AID and MARAD. Over the past few years as 
the one-step procurement process was under development, USDA held 
numerous public meetings to share information on the one-step 
procurement process, including FBES.

[[Page 6453]]

These included five meetings in 2005, starting with two in March, 
followed by a meeting in April, May and June. On February, 21, 2006, 
CCC held a public meeting to discuss the proposed rule with all 
interested parties. Additionally, a prototype of FBES was presented at 
the International Food Aid Conference (IFAC) held in Kansas City in 
March, 2006. During that time, all interested parties were given the 
opportunity to view the system and ask questions. CCC and AID have had 
numerous meetings with MARAD over the past several years as they have 
moved toward a one-step procurement process. These meetings have 
focused in great detail on how the software would work. Meetings are 
scheduled and agencies are working cohesively to achieve consensus on 
the new system implementation.
    One comment stated that the proposed rule change had not been 
analyzed and/or explained in enough detail to allow stakeholders to 
assess the impact on their business, including changes in commodity 
port distribution and overall program cost benefits. Five other 
comments stated that not enough information was provided on the one-
step procurement process, including but not limited to mechanical, 
programmatic and administrative changes and limitations, making it 
difficult to provide meaningful comments. Another comment, while 
supportive of a modernized system, stated that the proposed change in 
the procurement process deserves a full and open review by all 
interested parties prior to its implementation. This was shared and 
supported by another comment.
    CCC has held numerous public meetings to share information on the 
one-step procurement process, including FBES, and has received 
extensive comments and recommendations from industry. Also, CCC intends 
to conduct FBES training for steamship lines and vendors in Washington, 
DC, and Kansas City, respectively. Training will be held to accommodate 
these parties during the testing period.
    One comment expressed concern that implementation of the FBES 
system could result in programmatic errors and procedural problems. 
Another comment added that the FBES system will need to be highly 
dependable. One other comment added that they were uncertain as to when 
FBES testing would take place and suggested that a working group be 
established to develop a protocol for the testing. CCC recognizes the 
importance of a highly dependable system. To help identify, resolve and 
prevent programmatic errors and procedural problems, CCC will continue 
to conduct system testing prior to implementation of the one-step 
procurement process. FBES testing is underway and will continue through 
late-2006. CCC is conducting system testing on small, medium, and large 
invitations.
    Four comments urged that a side-by-side comparison of the current 
two-step procurement process versus the proposed one-step procurement 
process be run with results made available to the industry for 
evaluation and input prior to implementation. During agency meetings, 
it was agreed that CCC would conduct extensive internal testing 
followed by a period of training and opportunities for the external 
users of the system to gain experience using the system prior to 
implementation.
    One comment stated that it would be very helpful for the industry 
to view some kind of sensitivity analysis or report which addresses how 
the constraints placed in the transportation part of the bids impacted 
the solution. The constraints that will be entered by the commodity 
vendors in the commodity bids, by the ocean carriers in ocean freight 
bids, the ports for port capacity, and KCCO for small business 
utilization or the MSA-17 (Great Lakes) requirements are absolute. All 
of these constraints will likely affect the contract and ocean freight 
awards as the system reviews literally billions of calculations.
    One comment stated that FBES did not address two major concerns 
raised by cooperating sponsors. The first concern was the length of 
time required from the time the commodity is requested until it is 
available for shipment. The second concern was that the procurement 
process is built around a broad production schedule rather than the 
needs of the program for a timely arrival of the commodities in-
country. The implementation of the one-step procurement process will 
immediately reduce the commodity time-line by two weeks. Additional 
improvements may be realized as we are able to take advantage of the 
system's capabilities. The issue of production schedules is a reality 
the Agency acknowledges. The new system will allow requests for food 
aid commodities to be handled more efficiently, both for domestic 
operations and for transit to the destination.
    One comment stated that it was not clear how a forwarding agent 
would be able to access FBES, generate reports, download data, or 
determine if all offers submitted were reviewed for responsiveness. The 
system will be accessible to forwarding agents and information can be 
downloaded. An opportunity for training on the new system will be 
offered to freight forwarders.
    One comment stated that it would be improper for CCC to superimpose 
a new set of rules on the procurement process without identifying the 
terms and substance of the rule, its operational relationship to 
related regulations, and its impact on stakeholders. The preamble 
outlines the process and explains the efficiencies that are expected to 
be realized with the implementation of the rule. The desire to identify 
the impact on the stakeholders and to receive input on the design of 
the system was the impetus to hold the open meetings outlined in the 
preamble. The majority of suggestions and concerns expressed in these 
meetings were incorporated into the system, or are planned to be 
incorporated in future releases.
    One comment addressed the software development and testing process, 
recommending that a MARAD originated cargo preference flow chart be 
incorporated; MARAD be designated as sole authority to validate cargo 
preference requirements and to authorize related system software 
changes; linear programs provide the optimal solution and a sensitivity 
report; and system testing be open and transparent to all interested 
parties. All agencies involved will reach consensus prior to 
implementing the system. Further, all interested parties will have the 
opportunity to be trained and experiment with the system prior to 
implementation.
    Two comments noted that the proposed rule was only a piece of a 
much broader and complicated mosaic of statutes and regulations and 
must be considered in conjunction with these statutes and regulations. 
CCC intends to administer any new procurement system in a manner 
consistent with its obligations under the current laws and regulations 
governing the procurement of commodities for foreign donation, 
including meeting cargo preference requirements.
    One comment stated that the proposed rule did not explain how it 
would add clarity to the process, the basis for new incentives to 
consolidation of the carriers' bids, the rationale behind the one-step 
process being more efficient due to ocean carriers expected to offer 
quantity increments most economical for them, and how elimination of 
one of the monthly load periods will reduce delivery times. The 
proposed rule adds clarity to the commodity bid evaluation process by 
allowing for the simultaneous review of commodity and ocean freight 
offers when evaluating

[[Page 6454]]

lowest-landed cost options in connection with the procurement of 
commodities for foreign donation. The consolidation of cargo will 
inherently achieve improved efficiencies due to economies of scale. 
There is the potential to reduce the delivery time by two weeks due to 
the elimination of the need for a second round of ocean freight 
solicitation, offering, and bid evaluation.
    Three comments concluded that the rule would not seem to 
accommodate the flexibility and transparency required by carriers to 
refine their bids. The new system, as with any procurement system that 
awards based on firm fixed offers, will require participants to make 
the offers as competitive as possible, and will maintain a firm 
equitable environment with all information stated in the solicitation 
stages.
    One comment expressed concerns that the new procedures may permit 
the return of negative business practices such as ``blocking rates.'' 
Further, the respondent suggested that a provision be adopted whereby 
only competitive rates, not cost constructed rates, be evaluated. The 
new system will evaluate ocean carrier offers based on the priority of 
service. Priority 1 carriers will compete with priority 1 carriers for 
such cargoes as necessary in order to obtain compliance with cargo 
preference requirements. This procurement method will eliminate the 
negative business practices.
    Another comment expressed concern that the new process would not 
permit U.S.-flag ocean carriers to link discharge ranges utilizing 
multiple Kansas City Commodity Office (KCCO) trade routes. Ocean 
carriers will be able to offer multiple discharge port ranges on one 
bid. Multiple bids may be entered if needed.
    Two comments express concern over the one-step procurement process 
and its impact on the Great Lakes set-aside. The one-step procurement 
process will comply with the Great Lakes mandate that up to 25 percent 
of commodities purchased for Title II will be considered for delivery 
to the Great Lakes. The new system will evaluate the same as the 
previous system with regard to the MSA-17 provisions for the Great 
Lakes. The bid evaluation system will calculate the lowest-landed cost 
without cargo preference consideration, and up to the 25 percent 
maximum of the commodities purchased in the Great Lakes will be awarded 
to the Great Lakes.
    One comment noted that references in the proposed rule to the 
possible use of alternative procurement procedures was confusing. On 
April 7, 2006, a supplemental to the proposed rule was published in the 
Federal Register (71 FR 17767-17768). The supplemental to the proposed 
rule clarified the meaning of alternative procurement procedures and 
when they would be utilized. The supplemental to the proposed rule 
provided examples for utilizing other than ``lowest-landed cost'' to 
award contracts for the procurement of commodities. The examples were 
internal strife at the foreign destination, or urgent humanitarian 
conditions threatening the lives of persons at the foreign destination.
    One comment recommended that all factors be accommodated in the 
determination of courses of action, including a single bid process that 
may impose excessive bid submission windows. The new system will 
require ocean carriers to offer service in the future because of the 
transit times required to move the commodities from inland locations to 
the domestic delivery points.
    Several comments addressed specific sections of the proposed rule.

Section 1496.5 Consideration of Bids

    One comment noted that CCC must require that all vessel carriers 
specify the maximum cargo that they can transport under a specific 
invitation for bid. Additionally, vessels must be required to offer 
freight rates for all bid points from which they can provide service 
and when a properly offered cargo preference freight rate is used to 
establish the lowest-landed cost for a particular cargo transport, the 
procedures must require that the cargo be shipped using the carrier 
that offered the applied rate. The FBES system will allow ocean 
carriers to enter minimum and maximum tonnage constraints to their 
bids.
    One comment expressed concern that port designations under the 
proposed one-step bid evaluation process would include ports that could 
not handle both containerized and bulk cargoes thereby urging USDA to 
only designate ports that could handle and load both types of cargo. No 
carrier will be required to move cargo out of a port for which they do 
not bid. Carriers bid the port they wish to use.
    One comment added that CCC should continue to require commodity 
suppliers to include bid-points within ocean ports. Under the proposed 
one-step process, offers of commodities and freight would be invited on 
a bid-point basis, which may include one or more ocean ``port'' 
terminals under the specific bid point designation. CCC will be using 
the same approved ports and terminals that we currently use.

Section 1496.7 Final Contract Determinations

Section 1496.7(b) Combination of Bids
    One of the comments received noted that the proposed rule included 
an unexplained reference to the use of other types of ocean services. 
On April 7, 2006, a supplemental to the proposed rule was published in 
the Federal Register to clarify ``extenuating circumstances'' and, in 
which case, the Contracting Officer may determine that such 
circumstances preclude awards on the basis of lowest-landed cost, or 
efficiency and cost savings justify the use of types of ocean service 
that would not involve an analysis of freight bids for each of CCC's 
commodity purchases (71 FR 17767-17768). Other types of services may 
include, but are not limited to, multi-trip voyage charters, indefinite 
delivery/indefinite quantity (IDIQ), delivery Cost and Freight (C&F), 
delivery Cost Insurance and Freight (CIF), and indexed ocean freight 
costs.
    One of the comments stated that only American ships should deliver 
American goods. Four other comments received found the proposed rule 
unclear as to CCC's adherence to existing cargo preference 
requirements. Another comment added that the rule should be part of an 
effort that looks at all pieces of cargo preference requirements as 
well as the procurement of commodities for foreign donation. CCC will, 
of course, comply with cargo preference requirements, including the use 
of U.S.-flag ships, and administer any new procurement system in a 
manner consistent with its obligations under the cargo preference 
legislation of the Merchant Marine Act, 1936.
    Three other comments stated that CCC needed to explain how cargo 
preference requirements will be applied and complied with under the 
proposed system before a final rule is published. Another comment was 
not quite sure how lowest-landed cost and cargo preference mix. The 
proposed system is about improving efficiencies in the commodity 
procurement process to realize saving and not about cargo preference. 
All CCC is proposing is that vessels actually bid and that CCC base its 
lowest landed-cost calculation on that bid. The cargo preference 
legislation requires that CCC use a certain percentage of U.S.-flag 
vessels to the ``extent such vessels are available at fair and 
reasonable rates * * *.'' CCC consults with MARAD as to ``fair and 
reasonable rates'' after we have vessel and offers and a tentative 
vessel fixture. This will not change. The proposed rule addresses only 
the process of

[[Page 6455]]

procurement up to a determination of ``lowest-landed cost.''
Section 1496.7(c) Notification of Awards
    One of the comments stated that the new CCC procedures should 
require that commodity prices and freight rates for each invitation be 
made publicly available within seven days after the bid award and 
freight fixtures. The party submitting the accepted commodity 
procurement bid will be notified of the acceptance of the bid by CCC. 
Also, CCC's Purchase Contract Awards (PCAs) for foreign food aid 
donations are published within seven days of an award on the Internet 
at https://www.fsa.usda.gov/daco/. AID or the grantee organization, or 
its shipping agent, will be notified of the vessel freight rate used in 
determining the commodity contract award. Both FAS and AID publish 
freight awards for foreign food aid donations at https://
www.fas.usda.gov/food-aid.asp and https://www.AID.gov/business/ocean/ 
solicitation.logon.html, respectively.

Executive Order 12866

    This final rule was issued in conformance with Executive Order 
12866. This final rule was determined to be significant under Executive 
Order 12866 and was reviewed by OMB. A cost-benefit analysis was 
completed and is available from the contact person shown above.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because CCC is not required by 5 U.S.C. 553 or 
any other provision of law to publish a notice of proposed rulemaking 
with respect to the subject matter of this rule. Nonetheless, a 
Regulatory Flexibility Analysis was completed and is available from the 
contact person shown above.

Environmental Evaluation

    The environmental impacts of this rule have been determined to be 
consistent with the provisions of the National Environmental Policy Act 
of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council 
on Environmental Quality (40 CFR parts 1500-1508), and the FSA 
regulations for compliance with NEPA, 7 CFR part 799. FSA concluded 
that the rule requires no further environmental review because it is 
categorically excluded. No extraordinary circumstances or other 
unforeseeable factors exist which would require preparation of an 
environmental assessment or environmental impact statement.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this rule preempt State laws to the 
extent such laws are inconsistent with the provisions of this final 
rule.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates Reform Act of 1995

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local, and tribal governments or the private sector. 
Thus, this rule is not subject to the requirements of sections 202 and 
205 of the UMRA.

Paperwork Reduction Act

    The information collection required by this rule has been approved 
by OMB under the Paperwork Reduction Act of 1995 and assigned control 
number 0560-0258.

Government Paperwork Elimination Act

    FSA is committed to compliance with the Government Paperwork 
Elimination Act, which requires Federal Government agencies to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. CCC is updating its 
computer bid-evaluation system that would accommodate a more unified 
one-step bid evaluation. Freight invitations would call for bids to be 
submitted through a web-based entry system.
    Most of the information collections required by this rule are fully 
implemented for the public to conduct business with FSA electronically. 
However, a few may be completed and saved on a computer, but must be 
printed, signed and submitted to FSA in paper form.

Executive Order 12612

    This rule does not have sufficient federalism implications to 
warrant the preparation of a Federalism Assessment. The provisions 
contained in this rule will not have a substantial direct effect on 
States or their political subdivisions, or on the distribution of power 
and responsibilities among the various levels of government.

List of Subjects in 7 CFR Part 1496

    Agricultural commodities, Exports, Food Assistance Programs, 
Foreign aid, Government procurement.

0
Accordingly, CCC amends 7 CFR part 1496 as follows:

PART 1496--PROCUREMENT OF COMMODITIES FOR FOREIGN DONATION

0
1. The authority citation for part 1496 is revised to read as follows:

    Authority: 7 U.S.C. 1431(b), 1721-1726a, 1731-1736g-2, 1736o, 
1736o-1; 15 U.S.C. 714b and 714c; 46 U.S.C. 55305 and 55314.


0
2. The heading for part 1496 is revised to read as set forth above.

0
3. Section 1496.1 is revised to read as follows:


Sec.  1496.1  General statement.

    This subpart sets forth the policies, procedures and requirements 
governing the procurement of agricultural commodities by CCC to be 
donated for assistance overseas under Title II of the Agricultural 
Trade Development and Assistance Act of 1954 (Pub. L. 480); the Food 
for Progress Act of 1985; the McGovern-Dole International Food for 
Education and Child Nutrition Program; and any other program under 
which CCC is authorized to provide agricultural commodities for 
assistance overseas.

0
4. In Sec.  1496.2, paragraph (a) is amended by removing the last 
sentence and paragraph (b) is revised to read as follows:


Sec.  1496.2  Administration.

* * * * *
    (b) Purchases are made to fulfill commodity requests received from 
AID in the administration of Public Law 480 and from a grantee 
organization receiving commodities under the other authorities set 
forth in Sec.  1496.1 of this part.

0
5. In Sec.  1496.4, the first sentence is revised to read as follows:


Sec.  1496.4  Issuance of invitations.

    From time to time, CCC will issue invitations to purchase or 
process agricultural products for utilization in the foreign assistance 
programs enumerated in Sec.  1496.1 of this part. * * *

0
6. In Sec.  1496.5, paragraph (b) is revised, paragraph (c) is removed 
and reserved, and paragraph (d) is revised to read as follows:


Sec.  1496.5  Consideration of bids.

* * * * *
    (b) Availability of ocean service. (1) In determining lowest-landed 
cost as

[[Page 6456]]

specified in paragraph (a) of this section, CCC will use vessel rates 
offered in response to invitations issued by AID or grantee 
organizations receiving commodities under the authorities set forth in 
Sec.  1496.1 of this part. If CCC or AID, in the case of Title II, 
Public Law 480, determines that it is not practicable to evaluate 
lowest-landed cost on the basis of a competitive ocean freight bid 
process, CCC may use other methods of soliciting freight rates that 
USDA or AID may approve for the foreign assistance programs that they 
respectively administer.
    (2) In order to be considered in lowest-landed cost commodity bid 
evaluations, ocean freight rates must be submitted to grantee 
organizations or AID in response to an invitation for bids issued by 
grantee organizations or AID. All such freight invitations for bids 
must:
    (i) Specify a closing time for the receipt of written freight 
offers and state that late written freight offers will not be 
considered;
    (ii) Provide that written freight offers are required to have a 
canceling date no later than the last contract lay day specified in the 
invitation for bids;
    (iii) Provide the same deadline for receipt of written freight 
offers from both U.S. flag vessel and non-U.S. flag vessels; and
    (iv) Must be received and opened prior to receipt of written 
freight offers for the sale of commodities to CCC. The extent to which 
offered rates may be made public will depend upon regulations or 
guidelines applicable to the specific foreign assistance program 
involved.
    (3) CCC may require donee organizations or AID to specify in their 
freight invitations that the ocean carriers submit bids electronically 
through a web-based system maintained by CCC. In the event of any 
discrepancy between information furnished to CCC electronically and the 
written offers submitted to grantee organizations or AID, the offers 
submitted to the grantee organization or AID will prevail. Copies of 
all written freight offers received in response to invitations for bids 
must be promptly furnished to CCC and CCC may require the grantee 
organization or its shipping agent to submit a written certification 
that all non-electronic offers received were transmitted to CCC.
    (c) [Reserved].
    (d) Port performance. (1) CCC may contact any port prior to bid 
evaluation to determine the port's cargo handling capabilities, 
including the adequacy of the port to receive, accumulate, handle, 
store, and protect the cargo. Factors which will be considered in this 
determination will include, but not be limited to, the adequacy of 
building structures, proper ventilation, freedom from insects and 
rodents, cleanliness, and overall good housekeeping and warehousing 
practices. CCC will require that capacity information be submitted 
electronically by the port and or the terminal prior to bid evaluation.
    (2) If CCC determines that: A port is congested; facilities are 
overloaded; a vessel would not be able to dock and load cargo without 
delay; labor disputes or lack of labor may prohibit the loading of the 
cargo onboard a vessel in a timely manner; or other similar situation 
exists that may adversely affect the ability of CCC to have the 
commodity delivered in a timely manner, CCC may consider the use of 
another coastal range or port. In considering another combination of 
commodity offers and vessel rate offers, CCC will adhere as closely as 
possible to the principal of lowest-landed cost.
* * * * *

0
7. Section 1496.7 is revised to read as follows:


Sec.  1496.7  Final contract determinations.

    (a) Commodity awards. (1) Invitations for the procurement of 
commodities and the evaluation of bids submitted in response to such 
invitations shall be performed as provided in the Federal Acquisition 
Regulations (FAR) and Department of Agriculture's procurement 
regulations set forth in chapter 4 of title 48 of the Code of Federal 
Regulations (the AGAR).
    (2) If more than one bid for the sale of commodities is received 
and more than one delivery point has been designated in such bids, in 
order to achieve a combination of a freight rate and commodity award 
that produces the lowest-landed cost for the delivery of the commodity 
to the foreign destination, CCC may evaluate bids submitted for the 
sale of commodities on a delivery point-by-delivery point basis. In 
such cases, all bids submitted with respect to a specific delivery 
point will be evaluated under the provisions of the FAR, AGAR, and the 
solicitation, and CCC will determine the lowest bid for each delivery 
point.
    (b) Combination of bids. CCC will determine which combination of 
commodity bids and bids for ocean freight rates result in the lowest-
landed cost of delivery of the commodity to the foreign destination. 
CCC will award the contract for the purchase of the commodity that 
results in the lowest-landed cost and would be transported in 
compliance with cargo preference requirements under regulations 
prescribed by the Secretary of Transportation. The Contracting Officer 
may determine that extenuating circumstances preclude awards on the 
basis of lowest-landed cost, or efficiency and cost-savings justify use 
of types of ocean service that would not involve an analysis of freight 
bids for each of CCC's commodity purchases; however, in all such cases, 
commodities would be transported in compliance with cargo preference 
requirements under regulations prescribed by the Secretary of 
Transportation. Examples of extenuating circumstances are events such 
as internal strife at the foreign destination or urgent humanitarian 
conditions threatening the lives of persons at the foreign destination. 
Other types of services may include, but are not limited to, multi-trip 
voyage charters, indefinite delivery/indefinite quantity (IDIQ), 
delivery Cost and Freight (C & F), delivery Cost Insurance and Freight 
(CIF), and indexed ocean freight costs. Before contracts are awarded 
for other than a lowest-landed cost, the Contracting Officer shall 
consult with the applicable program agencies, and set forth, in 
writing, the reasons the contracts should be awarded on other than a 
lowest-landed cost.
    (c) Notification of awards. (1) The party submitting the accepted 
commodity procurement bid will be notified of the acceptance of the bid 
by CCC.
    (2) AID or the grantee organization, or its shipping agent, will be 
notified of the vessel freight rate used in determining the commodity 
contract award. The grantee organization or AID will be responsible for 
finalizing the charter or booking contract with the vessel representing 
the freight rate so used.

    Signed at Washington, DC, on February 6, 2007.
Glen L. Keppy,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. 07-619 Filed 2-7-07; 4:13 pm]
BILLING CODE 3410-05-P