Value-Added Producer Grant Program, 10090-10134 [2011-3036]

Agencies

• DEPARTMENT OF AGRICULTURE
• Rural Business-Cooperative Service
• Rural Utilities Service

[Federal Register Volume 76, Number 36 (Wednesday, February 23, 2011)]
[Rules and Regulations]
[Pages 10090-10134]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-3036]



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Vol. 76

Wednesday,

No. 36

February 23, 2011

Part II





Department of Agriculture





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Rural Business--Cooperative Service



Rural Utilities Service



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7 CFR Part 4284



Value-Added Producer Grant Program Interim Rule

Federal Register / Vol. 76, No. 36 / Wednesday, February 23, 2011 / 
Rules and Regulations

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DEPARTMENT OF AGRICULTURE

Rural Business--Cooperative Service

Rural Utilities Service

7 CFR Part 4284

RIN 0570-AA79


Value-Added Producer Grant Program

AGENCY: Rural Business--Cooperative Service and Rural Utilities 
Service, USDA.

ACTION: Interim rule.

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SUMMARY: The Food, Conservation, and Energy Act of 2008 (the Act), 
amends section 231 of the Agricultural Risk Protection Act of 2000, 
which established the Value-Added Producer Grant Program. This program 
will be administered by the Rural Business-Cooperative Service. Under 
the interim rule, grants will be made to help eligible producers of 
agricultural commodities enter into or expand value-added activities 
including the development of feasibility studies, business plans, and 
marketing strategies. The program will also provide working capital for 
expenses such as implementing an existing viable marketing strategy. 
The Agency will implement the program to meet the goals and 
requirements of the Act.
    The program provides a priority for funding for projects that 
contribute to opportunities for beginning farmers or ranchers, socially 
disadvantaged farmers or ranchers, and operators of small- and medium-
sized family farms and ranches. Further, it creates two reserved funds 
each of which will include 10 percent of program funds each year to 
support applications that support opportunities for beginning and 
socially disadvantaged farmers and ranchers and for proposed projects 
that develop mid-tier value marketing chains.

DATES: This interim rule is effective March 25, 2011. Written comments 
on this interim rule must be received on or before April 25, 2011.

ADDRESSES: You may submit comments to this interim rule by any of the 
following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the instructions for submitting comments 
electronically.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, Stop 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express mail, or other courier service requiring a street address, to 
the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.
    All written comments will be available for public inspection during 
regular work hours at the 300 7th Street, SW., 7th Floor address listed 
above.

FOR FURTHER INFORMATION CONTACT: Andrew Jermolowicz, USDA, Rural 
Development, Rural Business-Cooperative Service, Room 4016, South 
Agriculture Building, Stop 3250, 1400 Independence Avenue, SW., 
Washington, DC 20250-3250, Telephone: (202) 720-7558, E-mail 
CPGrants@wdc.usda.gov.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This interim rule has been reviewed under Executive Order (EO) 
12866 and has been determined not significant by the Office of 
Management and Budget. The EO defines a ``significant regulatory 
action'' as one that is likely to result in a rule that may: (1) Have 
an annual effect on the economy of $100 million or more or adversely 
affect, in a material way, the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal governments or communities; (2) 
create a serious inconsistency or otherwise interfere with an action 
taken or planned by another agency; (3) materially alter the budgetary 
impact of entitlements, grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raise novel legal 
or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in this EO.
    The Agency conducted a cost-benefit analysis to fulfill the 
requirements of Executive Order 12866. The Agency has identified 
potential benefits to prospective program participants and the Agency 
that are associated with improving the availability of funds to help 
producers (farmers and harvesters) expand their customer base for the 
products or commodities that they produce. This results in a greater 
portion of the revenues derived from the value-added activity being 
made available to the producer of the product. These benefits are vital 
to the success of individual producers, farmer or rancher cooperatives, 
agriculture producer groups, and majority-controlled producer based 
business ventures.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) of 
Public Law 104-4 establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
tribal governments and the private sector. Under section 202 of the 
UMRA, Rural Development must prepare, to the extent practicable, a 
written statement, including a cost-benefit analysis, for proposed and 
final rules with ``Federal mandates'' that may result in expenditures 
to State, local, or tribal governments, in the aggregate, or to the 
private sector, of $100 million or more in any one year. With certain 
exceptions, section 205 of the UMRA requires Rural Development to 
identify and consider a reasonable number of regulatory alternatives 
and adopt the least costly, most cost-effective, or least burdensome 
alternative that achieves the objectives of the rule.
    This interim rule contains no Federal mandates (under the 
regulatory provisions of Title II of the 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.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' Rural Development has determined 
that this action does not constitute a major Federal action 
significantly affecting the quality of the human environment and, in 
accordance with the National Environmental Policy Act (NEPA) of 1969, 
42 U.S.C. 4321 et seq., an Environmental Impact Statement is not 
required.

Executive Order 12988, Civil Justice Reform

    This interim rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Except where specified, all State and local laws 
and regulations that are in direct conflict with this rule will be 
preempted. Federal funds carry Federal requirements. No person is 
required to apply for funding under this program, but if they do apply 
and are selected for funding, they must comply with the requirements 
applicable to the Federal program funds. This rule is not retroactive. 
It will not affect agreements entered into prior to the effective date 
of the rule. Before any judicial action may be brought regarding the 
provisions of this rule, the administrative appeal provisions of 7 CFR 
parts 11 and 780 must be exhausted.

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Executive Order 13132, Federalism

    It has been determined, under Executive Order 13132, Federalism, 
that this interim rule does not have sufficient Federalism implications 
to warrant the preparation of a Federalism Assessment. The provisions 
contained in the 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 government levels.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601-602) generally 
requires an agency to prepare a regulatory flexibility analysis of any 
rule subject to notice and comment rulemaking requirements under the 
Administrative Procedure Act or any other statute unless the agency 
certifies that the rule will not have an economically significant 
impact on a substantial number of small entities. Small entities 
include small businesses, small organizations, and small governmental 
jurisdictions.
    In compliance with the RFA, Rural Development has determined that 
this action will not have an economically significant impact on a 
substantial number of small entities for the reasons discussed below. 
While, the majority of producers of agricultural commodities expected 
to participate in this Program will be small businesses, the average 
cost to participants is estimated to be approximately 20 percent of the 
total mandatory funding available to the program in fiscal years 2009 
through 2012. Further, this regulation only affects producers that 
choose to participate in the program. Lastly, small entity applicants 
will not be affected to a greater extent than large entity applicants.

Executive Order 12372, Intergovernmental Review of Federal Programs

    This program is subject to Executive Order 12372, which requires 
intergovernmental consultation with State and local officials. 
Intergovernmental consultation will occur for the assistance to 
producers of agricultural commodities in accordance with the process 
and procedures outlined in 7 CFR part 3015, subpart V.
    Rural Development will conduct intergovernmental consultation using 
RD Instruction 1940-J, ``Intergovernmental Review of Rural Development 
Programs and Activities,'' available in any Rural Development office, 
on the Internet at https://www.rurdev.usda.gov/regs, and in 7 CFR part 
3015, subpart V. Note that not all States have chosen to participate in 
the intergovernmental review process. A list of participating States is 
available at the following Web site: https://www.whitehouse.gov/omb/grants/spoc.html.

Executive Order 13175, Consultation and Coordination With Indian Tribal 
Governments

    USDA will undertake, within 6 months after this rule becomes 
effective, a series of Tribal consultation sessions to gain input by 
elected Tribal officials or their designees concerning the impact of 
this rule on Tribal governments, communities and individuals. These 
sessions will establish a baseline of consultation for future actions, 
should any be necessary, regarding this rule. Reports from these 
sessions for consultation will be made part of the USDA annual 
reporting on Tribal Consultation and Collaboration. USDA will respond 
in a timely and meaningful manner to all Tribal government requests for 
consultation concerning this rule and will provide additional venues, 
such as webinars and teleconferences, to periodically host 
collaborative conversations with Tribal leaders and their 
representatives concerning ways to improve this rule in Indian country.
    The policies contained in this rule would not have Tribal 
implications that preempt Tribal law.

Programs Affected

    The Value-Added Producer Grant program is listed in the Catalog of 
Federal Domestic Assistance under Number 10.352.

Paperwork Reduction Act

    The collection of information requirements contained in this 
interim rule have been submitted to the Office of Management and Budget 
(OMB) for clearance. In accordance with the Paperwork Reduction Act of 
1995, the Agency will seek standard OMB approval of the reporting 
requirements contained in this interim rule. In the publication of the 
proposed rule on May 28, 2010, the Agency solicited comments on the 
estimated burden. The Agency received one public comment in response to 
this solicitation. This information collection requirement will not 
become effective until approved by OMB. Upon approval of this 
information collection, the Agency will publish a rule in the Federal 
Register.
    Title: Value-Added Producer Grant Program.
    OMB Number: 0570-XXXX.
    Type of Request: New collection.
    Expiration Date: Three years from the date of approval.
    Abstract: The collection of information is vital to the Agency to 
make decisions regarding the eligibility of grant recipients in order 
to ensure compliance with the regulations and to ensure that the funds 
obtained from the Government are being used for the purposes for which 
they were awarded. Entities seeking funding under this program will 
have to submit applications that include information on the entity's 
eligibility, information on each of the evaluation criteria, 
certification of matching funds, verification of cost-share matching 
funds, a business plan, and a feasibility study. This information will 
be used to determine applicant eligibility and to ensure that funds are 
used for authorized purposes.
    Once an entity has been approved and their application accepted for 
funding, the entity would be required to sign a Letter of Conditions 
and a Grant Agreement. The Grant Agreement outlines the approved use of 
funds and actions, as well as the restrictions and applicable laws and 
regulations that apply to the award. Grantees must maintain a financial 
system and, in accordance with Departmental regulations, property and 
procurement standards. Grantees must submit semi-annual financial 
performance reports that include a comparison of accomplishments with 
the objectives stated in the application and a final performance 
report. Finally, grantees must provide copies of supporting 
documentation and/or project deliverables for completed tasks (e.g., 
feasibility studies, business plans, marketing plans, success stories, 
best practices).
    The estimated information collection burden hours has increased 
from the proposed rule by 1,239 hours from 67,943 to 69,235 for the 
interim rule. The increase is attributable to reporting requirements 
that were inadvertently omitted from the proposed rule.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 11 hours per response.
    Respondents: Producers of agricultural commodities.
    Estimated Number of Respondents: 600.
    Estimated Number of Responses per Respondent: 10.
    Estimated Number of Responses: 6,239.
    Estimated Total Annual Burden on Respondents: 69,235.

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E-Government Act Compliance

    The Agency is committed to complying with the E-Government Act of 
2002 (Pub. L. 107-347, December 17, 2002) to promote the use of the 
Internet and other information technologies to provide increased 
opportunities for citizen access to government information and 
services, and for other purposes.

I. Background

    This interim rule contains the provisions and procedures by which 
the Agency will administer the Value-Added Producer Grant (VAPG) 
Program. The primary objective of this grant program is to help 
Independent Producers of Agricultural Commodities, Agriculture Producer 
Groups, Farmer and Rancher Cooperatives, and Majority-Controlled 
Producer-Based Business Ventures develop strategies to create marketing 
opportunities and to help develop Business Plans for viable marketing 
opportunities regarding production of bio-based products from 
agricultural commodities. As with all value-added efforts, generating 
new products, creating expanded marketing opportunities, and increasing 
producer income are the end goal.
    Eligible applicants are independent agricultural producers, farmer 
and rancher cooperatives, agricultural producer groups, and majority-
controlled producer-based business ventures.
    Rural Development is soliciting comments regarding the 
participation of tribal entities including tribal governments in the 
VAPG Program. Specifically, we are seeking comment on ways to improve 
the ability of tribal entities participation in the VAPG Program and 
ways to overcome existing barriers to tribal entities' participation in 
the VAPG Program.
    The program includes priorities for projects that contribute to 
opportunities for beginning farmers or ranchers, socially disadvantaged 
farmers or ranchers, and operators of small- and medium-sized family 
farms and ranches that are structured as Family Farms. Applications 
from these priority groups will receive additional points in the 
scoring of applications. In the case of equally ranked proposals, 
preference will be given to applications that more significantly 
contribute to opportunities for beginning farmers and ranchers, 
socially disadvantaged farmers and ranchers, and operators of small- 
and medium-sized farms and ranches that are structured as Family Farms.
    Grant funds cannot be used for planning, repairing, rehabilitating, 
acquiring, or constructing a building or facility (including a 
processing facility). They also cannot be used to purchase, rent, or 
install fixed equipment.
    This program requires matching funds equal to or greater than the 
amount of grant funds requested. The Act provides for both mandatory 
and discretionary funding for the program, as may be appropriated. 
Further, the program includes two reserved funds each of which will 
include ten percent of program funds each year to support applications 
that support projects that benefit beginning and socially disadvantaged 
farmers and ranchers and that develop mid-tier value marketing chains.
    The number of grants awarded will vary from year to year, based on 
availability of funds and the quality of applications. The maximum 
grant amount that may be awarded is $500,000. However, the Agency may 
reduce that amount depending on the total funds appropriated for the 
program in a given fiscal year. This policy allows more grants to be 
awarded under reduced funding.
    The Agency notes, pursuant to general Federal directives providing 
guidance on grant usage, that the matching funds requirement described 
in the Agricultural Risk Protection Act of 2000 may include a limited 
and specified in-kind contribution amount for the value of the time of 
the applicant/producer or the applicant/producer's family members only 
for their involvement in the development of the business and marketing 
plans associated with a planning grant project. Please see Sec.  
4284.902 definitions for Conflict of Interest, and Matching Funds; and 
Sec.  4284.923(a) for applicant in-kind implementation protocol.
    Interim Rule. The Agency is issuing this regulation as an interim 
rule, with an effective date of March 25, 2011. All provisions of this 
regulation are adopted on an interim final basis, are subject to a 60-
day comment period, and will remain in effect until the Agency adopts 
final rules. The provisions of this subpart constitute the entire 
provisions applicable to this Program; the provisions of subpart A of 
this title do not apply to this subpart.

II. Summary of Changes to the Proposed Rule

    This section presents changes from the May 28, 2010, proposed rule. 
Most of the changes were the result of the Agency's consideration of 
public comments on the proposed rule. Some changes, however, are being 
made to clarify proposed provisions. Unless otherwise indicated, rule 
citations refer to those in the interim rule.

A. Definitions

    Numerous changes were made to the definitions, including revising, 
adding, and deleting definitions.
    1. Revised definitions. Definitions that were revised included:
     Agricultural commodity. Incorporated the concept of 
agricultural product.
     Agricultural producer. Expanded the definition to 
incorporate concept of having legal right to harvest an agricultural 
commodity and how the term ``directly engage'' may be satisfied.
     Agricultural producer group. Added that independent 
producers, on whose behalf the value-added work will be done, must be 
confirmed as eligible and identified by name or class.
     Conflict of interest. Significant changes were made to 
ensure clarity between conflict of interest, in-kind contributions, and 
matching funds.
     Emerging market. Added the concept of ``geographic 
market'' and a two-year limitation.
     Farmer or rancher cooperative. Revised ``independent 
agricultural producers'' to read ``independent producers'' and added 
that independent producers must be confirmed as eligible and identified 
by name or class.
     Independent producers. Revised steering committee 
requirements and added harvesters as a new paragraph (3) to the 
definition.
     Local or regional supply network. Added ``aggregators'' to 
list of example entities that may participate in a supply network and 
added reference to ``provide facilitation of services.''
     Majority-controlled producer-based business venture. Added 
that Independent Producer members must be confirmed as eligible and 
must be identified by name or class, along with their percentage of 
ownership.
     Matching funds. Significant changes were made to ensure 
clarity between matching funds, in-kind contributions, and conflict of 
interest.
     Medium-sized farm. Increased the upper limit defining a 
medium-sized farm to $1 million.
     Product segregation. Removed reference to ``product'' 
because of the change in the definition for agricultural commodity.
     Pro forma financial statement. Added a minimum three year 
requirement for the projections included in the statement.
     Project. Added ``eligible'' so that the definition now 
refers to ``eligible activities.''
     Qualified consultant. Added the concept of no conflict of 
interest.

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     Value-added agricultural product. Removed reference to 
``product'' because of the change in the definition for agricultural 
commodity and reinstated text from the authorizing statute.
     Venture. Added ``and its value-added undertakings'' to the 
definition.
    2. Added definitions. The following definitions were added:
     Agricultural food product. This term was added to help 
clarify what constitutes a ``Locally-produced agricultural food 
product.''
     Applicant. This term was added to emphasize applicant 
eligibility requirements.
     Branding. This term was added to clarify the 
implementation of the program with regard to branding activities.
     Change in physical state. This term is used in the Value-
Added Agricultural Product definition and is being defined to increase 
understanding and Agency intention for this category and to mitigate 
problems that have presented during the history of the program.
     Produced in a manner that enhances the value of the 
agricultural commodity. This term is used in the Value-Added 
Agricultural Product definition and is being defined to increase 
understanding and implementation for this important product eligibility 
category in order to mitigate product eligibility problems and 
interpretations that have presented during the history of the program.
    3. Deleted definitions. The following definitions were deleted:
     Agricultural product. The term is now incorporated into 
the definition of agricultural product.
     Anticipate award date. The term is not used in the rule.
     Day. Unnecessary to define.
     Rural or rural area. With the removal of the scoring 
criterion for being located in a rural or rural area, the term is not 
used in the rule.

B. Environmental Requirements

    The Agency corrected this section by replacing the reference to 
Form 1940-22, ``Environmental Checklist for Categorical Exclusions,'' 
with ``Form RD 1940-20, Request for Environmental Information.''

C. Applicant Eligibility

    In addition to edits to clarify this section, changes included:
     Replacing ``demonstrate'' with ``certify'' in Sec.  
4280.920(c)(1) and (c)(2).
     Replacing reference to ``immediate family members'' with 
``entity owners'' in Sec.  4284.920(c)(2) to clarify the provision.
     Adding a requirement to evidence good standing as part of 
legal authority and responsibility (Sec.  4284.920(d)).
     Clarifying that ``within 90 days'' for closing out the 
currently active grant is based on the application submission deadline 
(Sec.  4284.920(f)).

D. Project Eligibility

    Numerous changes were made throughout this section, including:
     Clarifying the conflict of interest provision in Sec.  
4284.922(b)(2).
     Adding exception to the requirement for submitting a 
feasibility study for applicants who can demonstrate that they are 
proposing market expansion for existing value-added products (see Sec.  
4284.922(b)(5)(i)).
     Adding an exception to the requirement for submitting a 
feasibility study and a business plan for working capital applicants 
requesting $50,000 or less and submitting simplified applications (see 
Sec.  4284.922(b)(5)(ii)).
     Added reference to an emerging market ``unserved by the 
applicant in the two previous years'' to conform to change made in the 
definition of emerging market (see Sec.  4284.922(b)(6)).
     Removing proposed paragraph Sec.  4284.922(c), which 
results in removing the proposed limitations on branding activities.
     Revising reserved funds eligibility significantly to 
identify the type of documentation being requested (see Sec.  
4284.922(c)(1)(i) and (ii), Sec.  4284.922(c)(2)(i) and (ii), and Sec.  
4284.922(c)(2)(iv)(A) and (B)).
     Adding a new paragraph (d) addressing requirements for 
applicants seeking priority points if they propose projects that 
contribute to increasing opportunities for beginning farmers or 
ranchers, socially disadvantaged farmer or ranchers, or operators of 
small- and medium-sized farms and ranches that are structured as a 
family farm.

E. Eligible Uses of Grant Funds

    The Agency revised this section by including provisions to clearly 
allow the use of in-kind contributions and limiting in-kind 
contributions to 25 percent of total project costs.

F. Ineligible Uses of Grants and Matching Funds

    In addition to adding new introductory text to this section to 
address conflict of interest and to clarify that use of funds is 
limited to only the eligible activities identified in Sec.  4284.923, 
changes made include:
     Adding a new paragraph prohibiting paying for support 
costs for services or goods going to or coming from a person or entity 
with a real or apparent conflict of interest, except as specifically 
noted for limited in-kind matching funds in Sec.  4284.923(a) and (b).
     Adding a new paragraph prohibiting paying for costs for 
scenarios with noncompetitive trade practices.
     Adding ``for the processing and marketing of the value-
added product'' to the paragraph prohibiting paying expenses not 
directly related to the funded project.
     Adding ``as identified by name or class'' to the paragraph 
prohibiting paying for conducting activities on behalf of anyone other 
than a specifically identified independent producer or group of 
independent producers.
     Adding a new paragraph prohibiting paying owner or 
immediate family member salaries or wages.
     Adding a new paragraph prohibiting paying for goods or 
services from a person or entity that employs the owner or an immediate 
family member;
     Deleting proposed Sec.  4284.924(p).

G. Preliminary Review

    The Agency added text to reference applicant eligibility as part of 
the preliminary review conducted by the Agency.

H. Application Package

    Substantive changes to this section include:
     Deleting the requirement to submit Form RD 400-1, Equal 
Opportunity Agreement.
     Adding the requirement to submit Form RD 1940-20.
     Adding that the performance criteria in the applicant's 
semi-annual and final reporting requirements can be requested by either 
the applicant or the Agency and will be detailed in either the grant 
agreement or the letter of conditions.
     Adding that the applicant must demonstrate the eligibility 
and availability of both cash and in-kind contributions (not just 
provide authentic documentation from the source as was proposed).
     Adding as acceptable matching funds a confirmed applicant 
or family member in-kind contribution that meets the requirements and 
limitations specified in Sec.  4284.923(a) and (b) and non-federal 
grant sources (unless otherwise provided by law).
     Providing additional examples of ineligible matching 
funds.
     Providing exceptions as to when a business plan and a 
feasibility study are required.
     Changing the language in the product eligibility category 
``produced

[[Page 10094]]

in a manner that enhances the value of the agricultural commodity,'' to 
allow for the inclusion of planning grant applications in this 
category.

I. Filing Instructions

    Changes to this section include:
     Replacing the fixed application deadline of March 15 each 
fiscal year with identification in an annual Federal Register notice of 
the application deadline, which will allow at least 60 days for 
applicants to submit their applications.
     Adding text to indicate that applications must contain all 
required components in their entirety.
     Adding text to indicate that emailed or faxed applications 
will not be accepted.

J. Processing Applications

    The Agency revised Sec.  4284.940(b) by limiting the Agency 
notifications under to applicants whose applications are found to be 
ineligible.

K. Proposal Evaluation Criteria and Scoring

    Several changes were made to this section including:
     Adding text to indicate that applications whose scoring 
information is not readily identifiable will not be considered.
     Increasing the points to be awarded for the nature of the 
proposed project from 25 to 30.
     Decreasing the points to be awarded for the type of 
applicant from 15 to 10.
     Including points (10) to be awarded if the applicant is a 
cooperative.
     Deleting the rural or rural area location criterion.

L. Obligate and Award Funds (Grant Agreement at Proposal)

    Two major revisions were made to this section as follows:
     Adding a new paragraph (c) detailing additional 
documentation that a grantee will need to execute in order for the 
Agency to obligate the award of funds.
     Adding details for the submittal of disbursement requests 
by the grantee (Sec.  4284.951(d)).

M. Monitoring and Reporting Program Performance

    The Agency made several changes to this section, as follows:
     Adding text to Sec.  4284.960(a) to indicate that grantees 
must complete the project per the terms and conditions specified in the 
approved work plan and budget, and in the grant agreement and letter of 
conditions.
     Revising the time allowed for submitting semi-annual 
performance reports from 30 to 45 days following March 31 and September 
30 (see Sec.  4284.960(b)(1)).
     Adding distribution network supply as an example of 
supporting documentation under Sec.  4284.960(b)(3).
     Adding examples of the types of project and performance 
data that the Agency may request under Sec.  4284.960(b)(4).
     Adding a new paragraph (Sec.  4284.960(b)(5)) identifying 
conditions under which the Agency may terminate or suspend the grant.

N. Transfer of Obligations

    The Agency made two revisions to this section as follows:
     Adding to the introductory text that the transfer of 
obligation of funds is at the discretion of the Agency and will be made 
on a case-by-case basis.
     Revising Sec.  4284.962(b) to condition the approval of a 
transfer of obligation of funds on the project continuing to meet ``all 
product, purpose, and reserved funds eligibility requirements.''

O. Grant Servicing

    The Agency has revised this section to allow for an extension 
process that would not require the approval of the Administrator. 
Originally, the change was going to be made to 7 CFR part 1951 subpart 
E, however, the Agency decided that the information was a better fit 
under Sec.  4284.961.

P. Grant Close Out and Related Activities

    The Agency has revised this section to identify these activities 
more explicitly.

III. Summary of Comments and Responses

Purpose--(Sec.  4284.901)

    Comment: One commenter recommends that ``viable agricultural 
producers'' be added to this language to clarify that the limited grant 
funds available in this discretionary funding program are intended to 
assist viable agricultural businesses that are financially prepared to 
progress to the next business level of planning for, or engaging in, 
value-added production.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Definitions--(Sec.  4284.902)

    Comment: One commenter states that, in addition to the need for 
several new definitions related to program concepts, many of the 
current definitions in the proposed rule need revision for 
clarification and to ensure that the eligibility requirements dependent 
upon these definitions are included in the rule. Eligibility 
requirements depend upon and refer to the definitions, so the 
definitions must be comprehensive.
    Response: The Agency agrees with the commenter and has revised 
definitions and provided additional definitions, as described in the 
following paragraphs.

Agricultural Commodity

    Comment: One commenter states that there is no need to distinguish 
between ``Agricultural Product'' and ``Agricultural Commodity,'' and 
recommends combining the definitions to read as follows:
    Agricultural commodity. An unprocessed product of farms, ranches, 
nurseries, forests, and natural and man-made bodies of water, that the 
independent producer has cultivated, raised, or harvested with legal 
access rights. Agricultural commodities include plant and animal 
products and their by-products, such as crops, forestry products, 
hydroponics, nursery stock, aquaculture, meat, on-farm generated 
manure, and fish and seafood products. Agricultural commodities do not 
include horses or other animals raised or sold as pets, such as cats, 
dogs, and ferrets.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Agricultural Food Product

    Comment: One commenter states that the definition for ``Locally-
produced agricultural food product'' does not describe what an 
agricultural food product can and cannot be; it only describes the 
distance and geographic requirements for local foods. Thus, a 
definition consistent with the definition found in the Rural Business-
Cooperative Service Business and Industry program is needed. The 
commenter recommends the following definition:
    Agricultural food product. Agricul-tural food products can be a 
raw, cooked, or processed edible substance, beverage, or ingredient 
intended for human consumption. These products cannot be animal feed, 
live animals, non-harvested plants, fiber, medicinal products, 
cosmetics, tobacco products, or narcotics.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Agricultural Producer

    Comment: One commenter recommends revising this definition to 
address ``harvesters'' as eligible agricultural producers, and to 
clarify past program conflicts of what it means to ``directly engage'' 
in production to strengthen the definition. The

[[Page 10095]]

commenter recommends the following definition:
    Agricultural producer. An individual or entity directly engaged in 
the production of an agricultural commodity, or that has the legal 
right to harvest an agricultural commodity, that is the subject of the 
value-added project. Agricultural producers may ``directly engage'' 
either through substantially participating in the labor, management, 
and field operations themselves; or by maintaining ownership and 
financial control of the agricultural operation.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Agricultural Producer Group

    Comment: One commenter recommends softening, for Mid-Tier Value 
Chain (MTVC) projects only, the definition of an Agricultural Producer 
Group (APG). Expand the APG definition to include nonprofits that have 
a mission to help promote farmer income through MTVC strategies, and 
reduce any requirement that the nonprofit be controlled by farmers. It 
is not necessary for a nonprofit with a MTVC to be controlled by 
farmers for it to be genuinely representative and committed to farmers 
and the MTVC. Such nonprofits are frequently the most likely to play a 
pivotal role in convening and organizing a complex web of entities 
along the value chain, and they should not be included as an eligible 
MTVC-APG.
    Response: The Agency does not agree that it is necessary to change 
the definition of Agricultural Producer Group to allow for the 
participation of other entities. The Agency recognizes that nonprofit 
entities may provide valuable assistance within the supply chain and 
has added ``nonprofit organizations'' to the Reserved Fund Eligibility 
Requirements for MTVC.
    Comment: One commenter suggests the following revised definition:
    Agricultural producer group. A membership organization that 
represents independent producers and whose mission includes working on 
behalf of independent producers and the majority of whose membership 
and board of directors is comprised of independent producers. The 
independent producers, on whose behalf the value-added work will be 
done, must be confirmed as eligible and identified by name or class.
    The commenter states that the added language instructs on the 
eligibility requirement that, for agricultural producer group, the 
Independent Producers must be identified. The commenter prefers to 
expand the definition by allowing identification by name or class. 
Because the regulation refers to the definitions for instruction on 
applicant eligibility, all eligibility requirements must be stated in 
the definition.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Agricultural Product

    Comment: One commenter states that this definition is not needed 
and should be deleted. The commenter recommends combining this language 
with the ``Agricultural Commodity'' definition.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Beginning Farmer or Rancher

    Comment: One commenter states that the final rule should facilitate 
applications from projects benefiting beginning farmers and ranchers. 
Supporting these projects is a statutory priority for the VAPG program. 
The statute also provides for a 10 percent reserved fund set-aside for 
projects that benefit beginning farmers or ranchers or socially 
disadvantaged farmers or ranchers. The specific wording of these two 
statutory provisions is very important.
    The Agency is to give priority to projects that contribute to 
farming opportunities for beginning farmers and is to reserve funds for 
projects that benefit beginning farmers. Nowhere does the statute say 
that such priority projects must exclusively benefit beginning farmers 
and no one else. By statute, it is sufficient that the priority 
projects contribute to new farming opportunities and benefit beginning 
farmers. In implementing the intent of Congress, the Agency needs to 
provide guidance in regulations and/or in guidance to grant reviewers 
as to what constitutes a significant enough contribution or benefit to 
beginning farmers as to qualify a proposal as meeting the program 
priority or access to the reserved fund.
    Stipulating the criteria in the rule has the negative effect of 
locking the criteria in place for all the years the rule remains in 
place. The alternative--dealing with the issue in the annual NOFA and/
or grant review criteria--has the benefit of allowing for an iterative 
process to refine and fine tune the criteria based on actual 
experience.
    The commenter prefers providing for iterative annual adjustments as 
needed to ensure the intent of Congress in creating the beginning 
farmer priority is actually achieved in the reality of program 
implementation. If, however, it is going to be stipulated in the rule, 
it is important that the rule is correct and clear as it is difficult 
and time consuming to change a final rule. In the case of individual 
farmer/rancher grants, there is no problem. The individual farmer or 
rancher is either a beginner or not. However, group proposals are an 
entirely different matter.
    The proposed rule's beginning farmer definition dictates that all 
members of the farmer group, co-op, business, or other entity must be 
beginning farmers or ranchers, an extremely unlikely situation in the 
real world. The commenter believes the proposed rule negates the 
express will of Congress in creating the priority and reserved fund in 
the first place by creating a stipulation that renders the directive 
effectively null and void. Even if a 100 percent beginning farmer 
member co-op or business or farm group existed somewhere in the real 
world, requiring a new farm business made up of multiple farmers to be 
100 percent beginners will preclude mentoring opportunities with more 
experienced farmers and increase risk of failure.
    Hence, it would tend to defeat the purpose of the program. There 
are two operative provisions in the proposed rule related to beginning 
farmers and ranchers. The first is in reference to the reserved funds 
(proposed Sec.  4284.922(d)(1)) and states: ``If the applicant is 
applying for beginning farmer or rancher, or socially-disadvantaged 
farmer or rancher reserved funds, the applicant must provide 
documentation demonstrating that the applicant meets one of these 
definitions.''
    The second is a very indirect reference in the evaluation criteria 
and scoring of applications section, where up to 15 points are awarded 
for ``Type of applicant.'' In the final analysis, therefore, everything 
in the rule hinges on the definition of beginning farmer or rancher in 
the definition section of the rule.
    The commenter contends that this language indicates that proposals 
from individual beginning farmers or ranchers as well as applications 
from an agricultural producer group, co-op, and business must include 
exclusively beginning farmers or ranchers to qualify for the beginning 
farmer or rancher category. As it applies to group proposals, this 
definition flies in the face of the statutory language that projects 
simply contribute to beginning farmer opportunities and benefit 
beginning farmers.
    The commenter states there are two remedies. One would be to change 
the

[[Page 10096]]

definition. The other would be to leave the definition as is, but add 
an operative provision elsewhere in the rule to ensure the rule 
complies with the law and common sense.
    If the first alternative is chosen, the commenter recommends the 
definition of beginning farmer and rancher be amended as follows: 
``Beginning farmer or rancher. This term has the meaning given it in 
section 343(a) of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1991(a)) and is an entity in which none of the individual owners 
have operated a farm or a ranch for more than 10 years. In the event 
that there are multiple farmer or rancher owners of the applicant 
group, at least 25 percent of the ownership must be held by beginning 
farmers or ranchers. For the purposes of this subpart, a beginning 
farmer or rancher must currently own and produce the agricultural 
commodity to which value will be added.''
    Another commenter states the rule must not create barriers for 
beginning farmers and ranchers that are part of a producer group or 
entity seeking to establish a value added market. The proposed rule 
suggests that BFR entities must have a 100 percent of the membership 
meeting the beginning farmer definition to qualify for the set-aside 
funds and priority status. This is difficult at best and most 
operations they have worked with do not include 100 percent beginning 
farmers. This requirement must be changed to be less restrictive or 
they will lose the opportunity to enable beginning farmers to enter 
existing operations and be provided mentoring and new market 
opportunities. The commenter believes a 25 percent ownership/membership 
test would be appropriate.
    Response: The Agency disagrees with the commenters. The definition 
of beginning farmer or rancher is stipulated by statute, which also 
stipulates that projects must `benefit' beginning farmers or ranchers. 
It is the position of the Agency that Reserved funds are to benefit 
this priority category exclusively. The statute indicates that priority 
points are to be awarded to projects that ``provide opportunities'' to 
beginning farmers or ranchers. It is the position of the Agency that 
priority points may be awarded to entities or groups in which Beginning 
Farmers or Ranchers comprise at least 51 percent membership.
    Comment: One commenter suggests revising this definition and adding 
language clarifying that the beginning farmer or rancher must first be 
an eligible independent producer that is currently producing the 
majority of the agricultural product to which value will be added. 
Nonproduction of product, even for a beginning farmer or rancher, would 
not be an eligible application. The suggested revised definition is as 
follows:
    Beginning farmer or rancher. This term has the meaning given it in 
section 343(a) of the Consolidated Farm and Rural Development Act (7 
U.S.C. 1991(a)) and is an entity in which none of the individual owners 
have operated a farm or a ranch for more than 10 years. For the 
purposes of this subpart, a beginning farmer or rancher must be an 
Independent Producer that, at time of application submission, currently 
owns and produces more than 50 percent of the agricultural commodity to 
which value will be added.
    Response: The Agency disagrees with the suggested revision. A 
change in definition is not required to accomplish this goal. All 
program applicants must meet the criteria of one of the four applicant 
eligibility categories. The beginning farmer or rancher definition is 
statutory.

Change in Physical State

    Comment: One commenter recommends adding a definition for ``change 
in physical state.'' This terminology is used in the Value-Added 
agricultural product definition and should be defined to increase 
understanding and Agency intention for this category and to mitigate 
problems that have presented during the history of the program 
(pressure-ripened peaches, dehydrated corn: part of previous 
applications that were deemed ineligible by the program due to 
ineligible change in physical state).
    Response: The Agency agrees with the recommendation and has added a 
definition for this term.

Conflict of Interest

    Comment: One commenter states that the conflict of interest 
definition should be eliminated as it is confusing and inconsistent in 
application. First, the very receipt of a grant directly benefits the 
producer applicant(s) and could be considered a conflict. Secondly, 
what is the rationale for allowance of some activities by the producer 
applicant(s) while others are classified as having a conflict of 
interest? Application of the rule appears to be somewhat arbitrary in 
its current form.
    The commenter also notes that this definition is confusing and 
misleading because applicant in-kind for the development of business 
plans and/or marketing plans is ruled to be an eligible match.
    The commenter states that, if the term cannot be eliminated, 
further clarification of the definition is required. All exceptions to 
the rule must be clearly stated. As it stands now, applicant time 
contributed to the completion of a business and/or marketing plan is 
allowable (See Sec.  4284.923, 75 FR 29929), but there is much 
confusion as to whether this would constitute a conflict of interest. 
The suggestion is to state more emphatically the ability of applicants 
to contribute time towards a business and/or marketing plan without 
incurring a conflict of interest.
    The commenter further states that, for Working Capital 
applications, grant funds cannot pay the salaries of employees with an 
ownership interest to process and/or market and deliver the value-added 
product to consumers (as stated in proposed Sec.  4284.923(b)) and asks 
why one payment is allowed and the other is not? Does this relate to 
conflict of interest? Clarification would aid in reader interpretation.
    Response: The Agency agrees that guidance and clarification 
regarding Conflict of Interest is necessary.
    The Agency considers the use of grant funds for direct personal 
financial gain to be a conflict of interest and will continue to 
prohibit use of grant funds to pay applicant/applicant family member 
salaries. However, the Agency recognizes the value of producer 
participation in planning activities, as well as the necessity of 
participating in eligible marketing activities. Therefore, both 
Planning and Working Capital applicants (and applicant family members, 
as necessary) may contribute time spent on eligible activities as in-
kind match amounting to up to 25 percent of total project cost, 
provided that a realistic and relevant valuation of their time can be 
documented, as provided for at Sec.  4284.923.
    Comment: Numerous commenters urge the Agency to reconsider the 
definition for conflict of interest to include an exception to allow 
applicants to contribute time (e.g. in-kind match) towards the 
development of business and/or marketing plans. The commenters believe 
it is in the applicant's best interest to be intimately involved in 
this part of the process. Furthermore, for small, beginning farmers or 
ranchers, and/or disadvantaged farmers or ranchers especially, 
allowable in-kind match of this nature is of critical importance 
because the project is still at the planning stage and revenues from 
the project have yet to be realized. As such, the applicant's ability 
to match the grant with 100 percent cash is often limited.

[[Page 10097]]

    Numerous commenters recommend keeping business and enterprise 
planning of VAPG projects farmer-centered. Farmers and ranchers should 
directly participate in the development of VAPG projects and be allowed 
to count their time as a contribution toward the program's matching 
requirements.
    Several commenters state that, as agricultural producers and past 
recipients of VAPGs to conduct planning and feasibility studies, they 
believe strongly in this program and have received first-hand benefits. 
As a beginning farmer, the ability to contribute in-kind match towards 
the completion of planning grant was crucial in making the project 
affordable. Moreover, being personally involved in the completion of 
the business and marketing plan was critically important as the owners 
of the new value-added businesses and the persons who would bear 
primary responsibility for implementing these plans.
    One commenter states that concern over conflicts of interest began 
to emerge in VAPG NOFAs several years ago and has now led to an overly 
restrictive definition. Specifically, the example provided in the 
definition of conflict of interest implies that farmers and ranchers 
have an inherent bias in favor of their project ideas that trumps an 
equally compelling interest in not investing their resources in an idea 
that will not work. The commenter states that its members' experience, 
in contrast, shows that successful businesses are those in which 
participating farmers and ranchers are intimately engaged in all of the 
planning stages.
    Given the example included as part of the definition, the continued 
references to conflict of interest in the proposed rule give the clear 
impression that participation by the producer, their family members, 
and/or staff creates huge problems and is prohibited. This undermines 
the fundamental principle of the VAPG program: that farmers and 
ranchers should be empowered through these grants to explore creative 
new businesses that will increase farm income and create or expand 
rural wealth. This broad definition of conflict of interest could 
easily lead to an interpretation that would prohibit farmer or rancher 
participation in any of the work necessary for planning grants and 
result in VAPG evolving into a grant program that benefits consultants 
rather than producers.
    The commenter agrees that feasibility studies generally should be 
written by third party professionals, but disagrees that a conflict of 
interest exists that should preclude producers from being integral to 
the research and information collection necessary for a successful 
feasibility study. The economic realities of the farmer and rancher 
communities the VAPG program was created to help ameliorate require 
that the program allow producers' time and expenses be permitted as an 
allowable match for grant funds.
    The businesses most likely to succeed are those in which producers 
are most actively engaged in the enterprise's planning. Their 
involvement should be encouraged and counted as an equally important 
contribution as cash to the project. The inclusion of the example in 
the second sentence of the proposed rule's definition of conflict of 
interest, when applied to sections of the rule that refer back to the 
conflict of interest definition, contradicts the statute at 7 U.S.C. 
1621(b)(1)(A) and (b)(3)(A) as well as the allowance made in proposed 
Sec.  4284.923(a) and must be fixed to provide consistency and clarity. 
The commenter, therefore, recommends that the example be eliminated 
from the definition as follows:
    ``A situation in which a person or entity has competing 
professional or personal interests that make it difficult for the 
person or business to act impartially.''
    Response: The Agency agrees that the definition and application of 
``Conflict of Interest'' needs clarification. The Agency also 
recognizes the value of producer participation in Planning activities, 
while, at the same time acknowledging that an unbiased, third party is 
necessary for the evaluative portions of these activities. Therefore, 
the Agency will retain its requirement that feasibility studies be 
performed by independent third-parties. However, applicants (and 
applicant family members, as necessary) are encouraged to participate 
in the non-evaluative portions of Planning grants and may contribute 
time as in-kind match amounting to up to 25 percent of total project 
cost, provided that a realistic and relevant valuation of their time 
can be documented, as described at Sec.  4284.923.
    Comment: One commenter recommends clearing up the confusion 
surrounding ``conflict of interest.'' The proposed rule makes strides 
in addressing producer participation, however, it is confusing at best 
as to many areas regarding producer involvement. The most troublesome 
involves ``conflict of interest'' as it appears in several places 
throughout the rule and often times directly contradicts other areas of 
the rule.
    The commenter recommends eliminating the inclusion of the example 
within the conflict of interest definition. The very nature of this 
program serving farmers and ranchers should indicate that their 
involvement would not be considered a ``conflict of interest''. The 
grant is for their purposes and their involvement is critical to the 
success of the project. Therefore, the rule must clear up this 
confusion and can begin by eliminating the example provided within the 
definition of conflict of interest.
    The rule must also clear up all the inconsistencies where they 
appear regarding conflict of interest, producer involvement and 
direction indicating certain aspects must be through a third-party 
consultant.
    Response: The Agency agrees and the example has been removed from 
the conflict of interest definition. In addition, the Agency has added 
language at Sec.  4284.923(a) and (b) that clarifies that applicants 
(and applicant family members, as necessary) may participate in the 
non-evaluative portions of Planning grants and may contribute time as 
in-kind match amounting to up to 25 percent of total project cost, 
provided that a realistic and relevant valuation of their time can be 
documented.
    Comment: One commenter recommends revising this definition and 
[deleting the line ``An example is a grant recipient or an employee of 
a recipient that conducts or significantly participates in conducting a 
feasibility study for the recipient.''
    According to the commenter, conflict of interest has been a major 
problem in the program for years, and is largely responsible for the 
high volume of ineligible applications received annually. The conflict 
of interest definition and its implementation parameters need to be 
very clear in the regulation. The commenter suggested that the 
definition of ``conflict of interest'' read as follows:
    ``A situation in which a person or entity has competing personal, 
professional or financial interests that make it difficult for the 
person or business to act impartially. Regarding use of both grant and 
matching funds, Federal procurement standards prohibit transactions 
that involve a real or apparent conflict of interest for owners, 
employees, officers, agents, or their immediate family members having a 
financial or other interest in the outcome of the project; or that 
restrict open and free competition for unrestrained trade. Examples of 
conflicts of interest include, but are not limited to, organizational 
conflicts,

[[Page 10098]]

noncompetitive practices, and support of costs for goods or services 
provided by a person or entity with a conflict of interest. 
Specifically, grant and matching funds may not be used to support costs 
for services or goods going to, or coming from, a person or entity with 
a real or apparent conflict of interest, including, but not limited to, 
owner(s) and their immediate family members. See Sec.  4284.923(a) for 
one limited exception to this definition and practice for VAPG.''
    According to the commenter, the suggested definition is consistent 
with Federal procurement standards that apply to VAPG, including 7 CFR 
part 3019 and 2 CFR part 230. An exception to the rule for limited 
applicant in-kind on BP and MP tasks is detailed in proposed Sec.  
4284.923(a), but the exception is not the rule, and conflict of 
interest should be clearly defined in the regulation.
    Response: The Agency agrees and the definition has been revised for 
clarity, to remove the example, and to reference Sec.  4284.923(a) and 
(b), which contain two limited exceptions to its implementation.

Day

    Comment: One commenter asks why day needs to be defined.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Emerging Market

    Comment: One commenter recommends the following revised definition:
    Emerging market. A new or developing product, geographic, or 
demographic market that is new to the applicant or the applicant's 
product. To qualify as new, the applicant cannot have supplied this 
product, geographic or demographic market for more than two years at 
time of application submission.
    The commenter states that the added clarification for ``new'' is 
necessary so that its interpretation is universal and it is not left 
open to subjectivity. The emerging market criterion only applies to 
agricultural producer groups, cooperatives, and majority controlled 
producer-based business venture type applicants as part of Project 
Purpose eligibility requirements.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Farm- or Ranch-based Renewable Energy

    Comment: One commenter states that the definition for Value-Added 
Agricultural Product refers to ``farm or ranch based renewable 
energy,'' but does not offer a definition. The following definition 
clarifies what is eligible and ineligible renewable energy in this 
program. Although, given the new definition for agricultural commodity, 
(bodies of water), the commenter now questions whether hydro energy 
would be an eligible renewable energy product.
    Farm- or Ranch-based Renewable Energy. An agricultural commodity 
that is used to generate renewable energy on a farm or ranch owned or 
leased by the independent producer applicant that produces the 
agricultural commodity. On-farm generation of energy from wind, solar, 
geothermal, or hydro sources are not eligible.
    Response: The Agency agrees with the commenter and has added a 
definition to the rule.

Farmer or Ranch Cooperative

    Comment: One commenter recommends the following revised definition:
    Farmer or rancher cooperative. A business owned and controlled by 
independent producers that is incorporated, or otherwise identified by 
the state in which it operates as a cooperatively operated business. 
The independent producers, on whose behalf the value-added work will be 
done, must be confirmed as eligible and identified by name or class.
    The commenter stated that the added language instructs on the 
eligibility requirements that include: (1) The cooperative must be 
comprised of Independent producers (and not simply agricultural 
producers), a definition wherein lies primary applicant eligibility 
requirements for all four applicant types; and (2) the independent 
producers on whose behalf the work will be done must be identified. 
Because the regulation refers to the definitions for instruction on 
applicant eligibility requirements, all eligibility requirements must 
be stated in the definitions.
    Response: The Agency agrees with the commenter and has revised the 
rule accordingly.

Feasibility Study

    Comment: One commenter states that the rule's definition of 
``feasibility study'' contradicts the statute at 7 U.S.C. 1621(b)(3)(A) 
and would also contradict the proposed rule in Sec.  4284.923(a), if 
modified as the commenter suggests. The commenter recommends the 
following conforming language be added to that definition to provide 
consistency and clarity:
    Feasibility study: An analysis of the economic, market, technical, 
financial, and management capabilities of a proposed project or 
business in terms of the project's expectation for success. Applicants 
may use a qualified consultant to perform the feasibility study, in 
which case applicants and family members of applicants may participate 
in collecting data and providing input required by the qualified 
consultant in the development of a feasibility study and may either 
receive payment for their time or may count their time as an in-kind 
contribution of matching funds to the extent that the value of such 
work can be appropriately valued.
    Response: The Agency disagrees with the commenter. The Agency's 
definition of Feasibility Study does not contradict the statute at 7 
U.S.C. 1621(b)(3)(A) or the eligible uses of grant and matching funds 
in Sec.  4284.923(a).
    Comment: One commenter states that, in the past, the qualified 
consultant has been an independent, third party without a conflict of 
interest. If that is still the intent, it would be helpful if that was 
listed in the definition.
    Response: The Agency agrees with the commenter and the definition 
of Qualified Consultant has been revised to add reference to ``without 
a conflict of interest.''

Independent Producers

    Comment: One commenter states that requiring the producer retain 
ownership through the entire value-added process is often legally 
difficult to accomplish and may be undesirable for a number of reasons, 
such as the creation of legal liability during transportation, 
processing, etc. An agricultural producer should be free to part with 
ownership of the commodity at any stage during the value-chain provided 
the end result is an increase in profits and market share. The logic of 
this is recognized in an allowance of this kind of flexibility with 
handling MTV