McGovern-Dole International Food for Education and Child Nutrition Program, 64971-64984 [2019-24894]

Agencies

• DEPARTMENT OF AGRICULTURE
• Foreign Agricultural Service

[Federal Register Volume 84, Number 228 (Tuesday, November 26, 2019)]
[Rules and Regulations]
[Pages 64971-64984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-24894]


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DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

7 CFR Part 1599

RIN 0551-AA93


McGovern-Dole International Food for Education and Child 
Nutrition Program

AGENCY: Foreign Agricultural Service, USDA.

ACTION: Final rule with request for comments.

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SUMMARY: The Foreign Agricultural Service (FAS) is revising the 
regulations governing the McGovern-Dole International Food for 
Education and Child Nutrition (McGovern-Dole) Program to add provisions 
related to the local and regional procurement of commodities under the 
program, and to

[[Page 64972]]

make other minor changes. The Agriculture Improvement Act of 2018 
amended the statute authorizing the McGovern-Dole Program to provide 
that not more than ten percent of the funds made available to carry out 
the program shall be used to purchase agricultural commodities through 
local and regional procurement. This revision implements this statutory 
change by setting forth requirements applicable to the local or 
regional procurement of commodities by an award recipient under the 
McGovern-Dole Program, and it makes other technical changes to update 
the regulations.

DATES: This rule is effective November 26, 2019. Written comments must 
be received by FAS or carry a postmark or equivalent no later than 
December 26, 2019.

ADDRESSES: Comments, identified by Regulatory Information Number (RIN) 
0551-AA93, may be sent by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for sending comments.
     Email: [email protected]. Include RIN 0551-AA93 in the 
subject line of the message.
     Mail: Senior Director, International Food Assistance 
Division, Global Programs, Foreign Agricultural Service, 1400 
Independence Ave. SW, STOP 1034, Washington, DC 20250.
    Instructions: All submissions received must include the agency name 
and RIN 0551-AA93.

FOR FURTHER INFORMATION CONTACT: Ingrid Ardjosoediro, Deputy Director, 
International Food Assistance Division, Global Programs, Foreign 
Agricultural Service, 1400 Independence Ave. SW, STOP 1034, Washington, 
DC 20250. Telephone: (202) 720-2637; Fax: (202) 690-0251; Email: 
[email protected].

SUPPLEMENTARY INFORMATION:

Background

    The McGovern-Dole International Food for Education and Child 
Nutrition Program helps support food security, child development, and 
education in low-income, food-deficit countries around the world. The 
program provides for the donation of U.S. agricultural commodities, as 
well as financial and technical assistance, to support school feeding 
and maternal and child health and nutrition projects. The McGovern-Dole 
Program is authorized in section 3107 of the Farm Security and Rural 
Investment Act of 2002 (7 U.S.C. 1736o-1).
    FAS uses the regulations in 7 CFR part 1599, McGovern-Dole 
International Food for Education and Child Nutrition Program, in the 
administration of the McGovern-Dole Program. The previous version of 
the regulations was published as a final rule on September 12, 2016 (81 
FR 62614).

Revision of Regulations

    FAS is revising the McGovern-Dole Program regulations in 7 CFR part 
1599 through this final rule to implement a change made by the 
Agriculture Improvement Act of 2018 (Pub. L. 115-334) to section 3107 
of the Farm Security and Rural Investment Act of 2002 to provide that 
not more than ten percent of the funds made available to carry out the 
McGovern-Dole Program shall be used to purchase agricultural 
commodities through local and regional procurement. FAS is adding 
definitions related to local and regional procurement in Sec.  1599.2; 
adding a new Sec.  1599.6, entitled ``Local and regional procurement of 
commodities,'' and re-numbering subsequent sections; and revising other 
sections within 7 CFR part 1599 to incorporate requirements applicable 
to the local or regional procurement of agricultural commodities by an 
award recipient under the McGovern-Dole Program.
    In addition, FAS is revising the regulations to make changes that 
are technical in nature and intended to improve the efficiency and 
effectiveness of the McGovern-Dole Program, including the following:
    (1) Clarifying that provisions specified by FAS during the 
negotiation of an agreement, which are in addition to provisions 
required by the regulations, will be included in the agreement but will 
not necessarily be in the plan of operation component of the agreement 
(7 CFR 1599.5(d)(6)).
    (2) Clarifying that the required assertion by a recipient that 
adequate transportation and storage facilities will be available in the 
target country refers to the time of arrival of the commodities in the 
target country (7 CFR 1599.5(e)(6)).
    (3) Modifying references to economic sanction programs to allow for 
situations in which a U.S. Government economic sanction program is not 
country-specific (7 CFR 1599.12(e) and 1599.15(b)(2)).
    (4) Replacing the specific reference to a percentage of the ``Grand 
Total Costs'' in the agreement budget with a more general reference to 
the amount specified in the agreement, which would allow FAS to make a 
change to the budget format if it determines that it would be 
beneficial (7 CFR 1599.12(h)(1)).
    (5) Allowing FAS to specify in the agreement the circumstances in 
which a recipient must submit to FAS a contract with a provider of 
goods, services, or construction work (7 CFR 1599.12(k)).
    (6) Allowing for the possibility that there might not be any 
closeout and post-closeout provisions specified in an agreement and 
that only those provisions in 2 CFR 200.343 and 200.344 would apply (7 
CFR 1599.17(b)(3)).

Notice and Comment

    This rule is being issued as a final rule without prior notice and 
opportunity for comment. The Administrative Procedure Act exempts rules 
``relating to agency management or personnel or to public property, 
loans, grants, benefits, or contracts'' from the statutory requirement 
for prior notice and opportunity for comment (5 U.S.C. 553(a)(2)). 
Accordingly, this rule may be made effective less than 30 days after 
publication in the Federal Register. However, members of the public may 
participate in this rulemaking by submitting written comments, data, or 
views. FAS will consider the comments received and may conduct 
additional rulemaking based on the comments. Written comments must be 
received by FAS or carry a postmark or equivalent no later than 
December 26, 2019.

Catalog of Federal Domestic Assistance

    The program covered by this regulation is listed in the Catalog of 
Federal Domestic Assistance (CFDA) under the following FAS CFDA number: 
10.608, Food for Education.

E-Government Act Compliance

    FAS is committed to complying with the E-Government Act of 2002 (44 
U.S.C. chapter 36), to promote the use of the internet and other 
information technologies to provide increased opportunities for 
citizens' access to Government information and services, and for other 
purposes.

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866, 
``Regulatory Planning and Review.'' It has been determined to be not 
significant for the purposes of Executive Order 12866 and, therefore, 
was not reviewed by the Office of Management and Budget.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988, ``Civil Justice Reform.'' This rule does not preempt State or 
local laws, regulations, or policies unless they

[[Page 64973]]

present an irreconcilable conflict with this rule. This rule will not 
be retroactive.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with officials of State and local 
governments that would be directly affected by the proposed Federal 
financial assistance. The objectives of the Executive Order are to 
foster an intergovernmental partnership and a strengthened federalism 
by relying on State and local processes for the State and local 
government coordination and review of proposed Federal financial 
assistance and direct Federal development. This rule will not directly 
affect State or local officials and, for this reason, it is excluded 
from the scope of Executive Order 12372.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996, 
generally requires an agency to prepare a regulatory flexibility 
analysis of any rule that is subject to notice and comment rulemaking 
under the Administrative Procedure Act (APA) or any other law, unless 
the agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. The Regulatory 
Flexibility Act does not apply to this rule because FAS is not required 
by the APA or any other law to publish a notice of proposed rulemaking 
with respect to the subject matter of the rule.

Executive Order 13132

    This rule has been reviewed under Executive Order 13132, 
``Federalism.'' This rule will not have any substantial direct effect 
on States, on the relationship between the Federal Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, except as required by law. This rule does 
not impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States was not required.

Executive Order 13175

    This rule has been reviewed in accordance with the requirements of 
Executive Order 13175, ``Consultation and Coordination with Indian 
Tribal Governments.'' Executive Order 13175 requires Federal agencies 
to consult and coordinate with tribes on a government-to-government 
basis on policies that have tribal implications, including regulations, 
legislative comments or proposed legislation, and other policy 
statements or actions that have substantial direct effects on one or 
more Indian tribes, on the relationship between the Federal Government 
and Indian tribes, or on the distribution of power and responsibilities 
between the Federal Government and Indian tribes. FAS does not expect 
this rule to have any effect on Indian tribes.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because it does not impose any enforceable duty 
or contain any unfunded mandate as described under the UMRA.

List of Subjects in 7 CFR Part 1599

    Agricultural commodities, Cooperative agreements, Exports, Food 
assistance programs, Foreign aid, Grant programs-agriculture, Technical 
assistance.

0
For the reasons stated in the preamble, the Foreign Agricultural 
Service revises 7 CFR part 1599 to read as follows:

PART 1599--McGOVERN-DOLE INTERNATIONAL FOOD FOR EDUCATION AND CHILD 
NUTRITION PROGRAM

Sec.
1599.1 Purpose and applicability.
1599.2 Definitions.
1599.3 Eligibility and conflicts of interest.
1599.4 Application process.
1599.5 Agreements.
1599.6 Local and regional procurement of commodities.
1599.7 Payments.
1599.8 Transportation of donated or procured commodities.
1599.9 Entry, handling, and labeling of donated or procured 
commodities and notification requirements.
1599.10 Damage to or loss of donated or procured commodities.
1599.11 Claims for damage to or loss of donated or procured 
commodities.
1599.12 Use of donated or procured commodities, sale proceeds, FAS-
provided funds, and program income.
1599.13 Monitoring and evaluation requirements.
1599.14 Reporting and recordkeeping requirements.
1599.15 Subrecipients.
1599.16 Noncompliance with an agreement.
1599.17 Suspension and termination of agreements.
1599.18 Opportunities to object and appeals.
1599.19 Audit requirements.
1599.20 Paperwork Reduction Act.

    Authority: 7 U.S.C. 1736o-1.


Sec.  1599.1  Purpose and applicability.

    (a) This part sets forth the general terms and conditions governing 
the award of donated commodities and funds by the Foreign Agricultural 
Service (FAS) to recipients under the McGovern-Dole International Food 
for Education and Child Nutrition Program (McGovern-Dole Program). 
Under the McGovern-Dole Program, recipients use the donated 
commodities, proceeds from any sale of such commodities, FAS-provided 
funds, and program income to implement a project in a foreign country 
pursuant to an agreement with FAS. When authorized by an agreement, a 
recipient may use FAS-provided funds to make a local or regional 
procurement of qualified commodities to implement such a project.
    (b)(1) The Office of Management and Budget (OMB) issued guidance on 
Uniform Administrative Requirements, Cost Principles, and Audit 
Requirements for Federal Awards in 2 CFR part 200. In 2 CFR 400.1, the 
United States Department of Agriculture (USDA) adopted OMB's guidance 
in subparts A through F of 2 CFR part 200, as supplemented by 2 CFR 
part 400, as USDA policies and procedures for uniform administrative 
requirements, cost principles, and audit requirements for Federal 
awards.
    (2) The OMB guidance at 2 CFR part 200, as supplemented by 2 CFR 
part 400 and this part, applies to the McGovern-Dole Program, except as 
provided in paragraphs (e), (f), and (g) of this section.
    (c) Except as otherwise provided in this part, other regulations 
that are generally applicable to grants and cooperative agreements of 
USDA, including the applicable regulations set forth in 2 CFR chapters 
I, II, and IV, also apply to the McGovern-Dole Program.
    (d) In accordance with 7 U.S.C. 1736o-1(e), assistance under the 
McGovern-Dole Program may be provided to private voluntary 
organizations, cooperatives, intergovernmental organizations, 
governments of developing countries and their agencies, and other 
organizations.
    (e) The OMB guidance at 2 CFR part 200, and the provisions of 2 CFR 
part 400 and of this part, do not apply to an award by FAS under the 
McGovern-Dole Program to a recipient that is a foreign public entity, 
as defined in 2 CFR 200.46, and, therefore, they do not apply to a 
foreign government or its agency or an intergovernmental organization.
    (f)(1) The OMB guidance at subparts A through E of 2 CFR part 200, 
as

[[Page 64974]]

supplemented by 2 CFR part 400 and this part, applies to all awards by 
FAS under the McGovern-Dole Program to all recipients that are private 
voluntary organizations, including a private voluntary organization 
that is a foreign organization, as defined in 2 CFR 200.47; 
cooperatives, including a cooperative that is a for-profit entity or a 
foreign organization; or other organizations, including organizations 
that are for-profit entities or foreign organizations, but not 
including intergovernmental organizations.
    (2) The OMB guidance at subparts A through E of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies to all subawards 
to all subrecipients under this part, except in cases:
    (i) Where the subrecipient is a foreign public entity; or
    (ii) Where FAS determines that the application of the provisions in 
this part to a subaward to a subrecipient that is a foreign 
organization would be inconsistent with the international obligations 
of the United States or the statutes or regulations of a foreign 
government or would not be in the best interest of the United States.
    (g)(1) The OMB guidance at subpart F of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies only to awards by 
FAS to recipients that are private voluntary organizations, 
cooperatives, or other organizations, but that are not for-profit 
entities or foreign organizations.
    (2) The OMB guidance at subpart F of 2 CFR part 200, as 
supplemented by 2 CFR part 400 and this part, applies to subawards to 
subrecipients under this part, except where the subrecipient is a for-
profit entity, foreign public entity, or foreign organization.
    (3) Audit requirements for recipients and subrecipients that are 
for-profit entities or foreign organizations are set forth in Sec.  
1599.19.


Sec.  1599.2  Definitions.

    These are definitions for terms used in this part. The definitions 
in 2 CFR part 200, as supplemented in 2 CFR part 400, are also 
applicable to this part, with the exception that, if a term that is 
defined in this section is defined differently in 2 CFR part 200 or 
400, the definition in this section will apply to such term as used in 
this part.
    Activity means a discrete undertaking within a project to be 
carried out by a recipient, directly or through a subrecipient, that is 
specified in an agreement and is intended to fulfill a specific 
objective of the agreement.
    Agreement means a legally binding grant or cooperative agreement 
entered into between FAS and a recipient to implement a project under 
the McGovern-Dole Program.
    Commodities means agricultural commodities, or products of 
agricultural commodities, that:
    (1) Are produced in the United States; or
    (2)(i) Are produced in and procured from:
    (A) A developing country that is a target country; or
    (B) A developing country in the target region; and
    (ii) At a minimum, meet each nutritional, quality, and labeling 
standard of the target country, as determined by the Secretary of 
Agriculture.
    Cooperative means a private sector organization whose members own 
and control the organization and share in its services and its profits 
and that provides business services and outreach in cooperative 
development for its membership.
    Cost sharing or matching means the portion of project expenses, or 
necessary goods and services provided to carry out a project, not paid 
or acquired with Federal funds. The term may include cash or in-kind 
contributions provided by recipients, subrecipients, foreign public 
entities, foreign organizations, or private donors.
    Country of origin means the country in which procured commodities 
were produced.
    Developing country means a country that has a shortage of foreign 
exchange earnings and has difficulty meeting all of its food needs 
through commercial channels.
    Disburse means to make a payment to liquidate an obligation.
    Donated commodities means the commodities produced in the United 
States that are donated by FAS to a recipient under an agreement. The 
term may include donated commodities that are used to produce a further 
processed product for use under the agreement.
    FAS means the Foreign Agricultural Service of the United States 
Department of Agriculture.
    FAS-provided funds means U.S. dollars provided under an agreement 
to a recipient, or through a subagreement to a subrecipient, for 
expenses authorized in the agreement, such as expenses for the purchase 
of qualified commodities; any ocean transportation of the procured 
commodities; overland transportation, storage, and handling of the 
donated commodities or procured commodities; expenses involved in the 
administration, monitoring, and evaluation of the activities under the 
agreement; and the costs of activities conducted in the target country 
that would enhance the effectiveness of the activities implemented 
under the McGovern-Dole Program.
    Food assistance means assistance that is provided to members of a 
targeted vulnerable group to meet their food needs.
    Local procurement means the procurement of qualified commodities by 
a recipient, directly or through a subrecipient, in the target country 
to assist beneficiaries within that same country.
    McGovern-Dole Program means the McGovern-Dole International Food 
for Education and Child Nutrition Program.
    Overland transportation means any transportation other than ocean 
transportation. It includes internal transportation within the target 
country and regional transportation within the target region.
    Private voluntary organization means a not-for-profit, 
nongovernmental organization (in the case of a United States 
organization, an organization that is exempt from Federal income taxes 
under section 501(c)(3) of the Internal Revenue Code of 1986) that 
receives funds from private sources, voluntary contributions of money, 
staff time, or in-kind support from the public, and that is engaged in 
or is planning to engage in voluntary, charitable, or development 
assistance activities (other than religious activities).
    Procured commodities means the qualified commodities that are 
procured by a recipient, directly or through a subrecipient, under an 
agreement.
    Program income means interest earned on proceeds from the sale of 
donated commodities, as well as funds received by a recipient or 
subrecipient as a direct result of carrying out an approved activity 
under an agreement. The term includes but is not limited to income from 
fees for services performed, the use or rental of real or personal 
property acquired under a Federal award, the sale of items fabricated 
under a Federal award, license fees and royalties on patents and 
copyrights, and principal and interest on loans made with Federal award 
funds. Program income does not include proceeds from; FAS-provided 
funds or interest earned on such funds; or funds provided for cost 
sharing or matching contributions, refunds or rebates, credits, 
discounts, or interest earned on any of them.
    Project means the totality of the activities to be carried out by a 
recipient, directly or through a subrecipient, to fulfill the 
objectives of an agreement.

[[Page 64975]]

    Purchase country means a developing country in which procured 
commodities are purchased.
    Qualified commodities means commodities that are produced in a 
developing country that is the target country or in the target region 
under an agreement, and that meet each nutritional, quality, and 
labeling standard of the target country, as determined by the Secretary 
of Agriculture, as well as any other criteria specified in Sec.  
1599.6(b).
    Recipient means an entity that enters into an agreement with FAS 
and receives donated commodities, FAS-provided funds, or both to carry 
out activities under the agreement. The term recipient does not include 
a subrecipient.
    Regional procurement means the procurement of qualified commodities 
by a recipient, directly or through a subrecipient, in a developing 
country in the target region, other than the target country, to assist 
beneficiaries within the target country.
    Sale proceeds means funds received by a recipient from the sale of 
donated commodities.
    Subrecipient means an entity that enters into a subagreement with a 
recipient for the purpose of implementing in the target country 
activities described in an agreement. The term does not include an 
individual that is a beneficiary under the agreement.
    Target country means the foreign country in which activities are 
implemented under an agreement.
    Target region means the continent on which the target country is 
located.
    USDA means the United States Department of Agriculture.
    Voluntary committed cost sharing or matching contributions means 
cost sharing or matching contributions specifically pledged on a 
voluntary basis by an applicant or recipient, which become binding as 
part of an agreement. Voluntary committed cost sharing or matching 
contributions may be provided in the form of cash or in-kind 
contributions.


Sec.  1599.3  Eligibility and conflicts of interest.

    (a) A private voluntary organization, a cooperative, or another 
organization that is not an intergovernmental organization is eligible 
to submit an application under this part to become a recipient under 
the McGovern-Dole Program. FAS will set forth specific eligibility 
information, including any factors or priorities that will affect the 
eligibility of an applicant or application for selection, in the full 
text of the applicable notice of funding opportunity posted on the U.S. 
Government website for grant opportunities.
    (b) Applicants, recipients, and subrecipients must comply with 
policies established by FAS pursuant to 2 CFR 400.2(a), and with the 
requirements in 2 CFR 400.2(b), regarding conflicts of interest.


Sec.  1599.4  Application process.

    (a) An applicant seeking to enter into an agreement with FAS must 
submit an application, in accordance with this section, that sets forth 
its proposal to carry out activities under the McGovern-Dole Program in 
a proposed target country(ies). An application must contain the items 
specified in paragraph (b) of this section and any other items required 
by the notice of funding opportunity and must be submitted 
electronically to FAS at the address set forth in the notice of funding 
opportunity.
    (b) An applicant must include the following items in its 
application:
    (1) A completed Form SF-424, which is a standard application for 
Federal assistance;
    (2) An introduction and a strategic analysis, which includes an 
impact analysis, as specified in the notice of funding opportunity;
    (3) A plan of operation that contains the elements specified in the 
notice of funding opportunity;
    (4) A summary line item budget and a budget narrative that 
indicate:
    (i) The amounts of any sale proceeds, FAS-provided funds, interest, 
program income, and voluntary committed cost sharing or matching 
contributions that the applicant proposes to use to fund:
    (A) Administrative costs;
    (B) Commodity procurement costs, where applicable, for qualified 
commodities obtained through local or regional procurement;
    (C) Overland transportation, storage, and handling costs; and
    (D) Activity costs;
    (ii) Where applicable, how the applicant's indirect cost rate will 
be applied to each type of expense; and
    (iii) The amount of funding that will be provided to each proposed 
subrecipient under the agreement;
    (5) A project-level results framework that outlines the changes 
that the applicant expects to accomplish through the proposed project 
and is based on the McGovern-Dole Program-level results framework, as 
set forth in the notice of funding opportunity;
    (6) Unless otherwise specified in the notice of funding 
opportunity, an evaluation plan that describes the proposed design, 
methodology, and time frame of the project's evaluation activities, and 
how the applicant intends to manage these activities, and that will 
include a baseline study, interim evaluation, final evaluation, and any 
applicable special studies; and
    (7) Any additional required items set forth in the notice of 
funding opportunity.
    (c) Each applicant (unless the applicant has an exception approved 
by FAS under 2 CFR 25.110(d)) is required to:
    (1) Be registered in the System for Award Management (SAM) before 
submitting its application;
    (2) Provide a valid unique entity identifier in its application; 
and
    (3) Continue to maintain an active SAM registration with current 
information at all times during which it has an active Federal award or 
an application or plan under consideration by a Federal awarding 
agency.


Sec.  1599.5  Agreements.

    (a) After FAS approves an application by an applicant, FAS will 
negotiate an agreement with the applicant. The agreement will set forth 
the obligations of FAS and the recipient.
    (b) The agreement will specify the general information required in 
2 CFR 200.210(a), as applicable.
    (c) The agreement will incorporate general terms and conditions, 
pursuant to 2 CFR 200.210(b), as applicable.
    (d) To the extent that this information is not already included in 
the agreement pursuant to paragraphs (b) and (c) of this section, the 
agreement will also include the following:
    (1) The kind, quantity, and use of the donated commodities and an 
estimated commodity call forward schedule, with the month and year 
indicated for each expected commodity shipment;
    (2) A plan of operation, which will include the following:
    (i) The objectives to be accomplished under the project;
    (ii) A detailed description of each activity to be implemented;
    (iii) The target country(ies) and the areas of the target 
country(ies) in which the activities will be implemented;
    (iv) The methods and criteria for selecting the beneficiaries of 
the activities;
    (v) Any contributions for cost sharing or matching, including cash 
and non-cash contributions, that the recipient expects to receive from 
non-FAS sources that:
    (A) Are critical to the implementation of the activities; or
    (B) Enhance the implementation of the activities;

[[Page 64976]]

    (vi) Any subrecipient that will be involved in the implementation 
of the activities, and the criteria for selecting a subrecipient that 
has not yet been identified;
    (vii) Any other governmental or nongovernmental entities that will 
be involved in the implementation of the activities; and
    (viii) Any processing, packaging, or repackaging of the donated 
commodities or procured commodities that will take place prior to the 
distribution, sale, or barter of the donated commodities, or the 
distribution of the procured commodities, by the recipient;
    (3) A budget, which will set forth the maximum amounts of sale 
proceeds, FAS-provided funds, interest, program income, and voluntary 
committed cost sharing or matching contributions that may be used for 
each line item, as well as other applicable budget requirements;
    (4) Performance goals for the agreement, including a list of 
results, with long-term benefits where applicable, to be achieved by 
the activities and corresponding indicators, targets, and time frames;
    (5) Requirements relating to any local or regional procurement of 
qualified commodities authorized in the agreement, as set forth in 
Sec.  1599.6; and
    (6) Any additional provisions specified by FAS during the 
negotiation of the agreement.
    (e) The agreement will also include specific terms and conditions, 
and certifications and representations, including the following:
    (1) The agreement will prohibit the sale, resale, or transshipment 
of the donated commodities or procured commodities by the recipient to 
a country not specified in the agreement, or the use of the donated 
commodities for other than domestic purposes, for as long as the 
recipient has title to such donated commodities or procured 
commodities;
    (2) The agreement will prohibit the use of procured commodities, if 
applicable, for any purpose other than food assistance;
    (3) The recipient will assert that it has taken action to ensure 
that any donated commodities that will be distributed to beneficiaries, 
and any qualified commodities that will be obtained through regional 
procurement, will be imported free from all customs, duties, tolls, and 
taxes; and all donated commodities and procured commodities will be 
distributed free from all customs, duties, tolls, and taxes. The 
recipient must submit information to FAS to support this assertion;
    (4) The recipient will assert that, to the best of its knowledge, 
the importation, if applicable, and distribution of the donated 
commodities or procured commodities in the target country will not 
result in a substantial disincentive to or interference with domestic 
production or marketing in that country. The recipient must submit 
information to FAS to support this assertion;
    (5) The recipient will assert that, to the best of its knowledge, 
any sale or barter of the donated commodities will not displace or 
interfere with any sales of United States commodities that may 
otherwise be made to or within the target country. The recipient must 
submit information to FAS to support this assertion; and
    (6) The recipient will assert that adequate transportation and 
storage facilities will be available in the target country at the time 
of the arrival of the donated commodities, or any procured commodities 
obtained through regional procurement, to prevent spoilage or waste of 
the donated commodities or procured commodities. The recipient must 
submit information to FAS to support this assertion.
    (f) FAS may enter into a multicountry agreement in which donated 
commodities are delivered to one country and activities are carried out 
in another.
    (g) FAS may provide donated commodities and FAS-provided funds 
under a multiyear agreement contingent upon the availability of 
commodities and funds.


Sec.  1599.6  Local and regional procurement of commodities.

    (a)(1) An agreement may authorize a recipient to use FAS-provided 
funds to procure qualified commodities, through a local or regional 
procurement or both, to implement a project. The provisions of this 
section will apply in such a situation.
    (2) The agreement will specify the types of qualified commodities 
approved for procurement; the approved purchase country(ies); and the 
approved method(s) of procurement (local procurement, regional 
procurement, or a combination of these methods). The agreement will 
prohibit the recipient from procuring qualified commodities from any 
country not specified in the agreement or utilizing methods of 
procurement that differ from those approved in the agreement.
    (b) In carrying out an agreement, the recipient must comply with 
the following requirements, as applicable, relating to the procurement 
of qualified commodities under the agreement:
    (1) The recipient must procure qualified commodities at a 
reasonable market price with respect to the economy of the purchase 
country, as determined by FAS.
    (2) If the recipient procures qualified commodities that are 
grains, legumes, or pulses, the commodities must meet the food safety 
standards of the target country; provided, however, that if the target 
country does not have food safety standards for grains, legumes, or 
pulses, as applicable, then the recipient must ensure that such 
commodities meet the food safety standards specified in the agreement.
    (3) If the recipient procures qualified commodities that are food 
products other than grains, legumes or pulses, such as processed foods, 
fortified blended foods, and enriched foods, the commodities must 
comply, in terms of raw materials, composition, or manufacture, with 
the food safety standards specified in the agreement.
    (4) If the recipient procures qualified commodities that are 
cereals, groundnuts, or tree nuts, or food products derived from or 
containing cereals, groundnuts, or tree nuts, the commodities must be 
tested for aflatoxin and have their moisture content certified. The 
maximum acceptable total aflatoxin level is 20 parts per billion, the 
U.S. Food and Drug Administration action level for aflatoxin in human 
foods.
    (5) If the recipient procures an unprocessed commodity, it must 
ensure that the commodity has been produced either in the target 
country or in another developing country within the target region.
    (6) If the recipient procures a processed commodity, it must ensure 
that the processing took place, and the primary ingredient has been 
produced, either in the target country or in another developing country 
within the target region. The primary ingredient is determined on the 
basis of weight in the case of solid foods, or volume in the case of 
liquids.
    (7) If the recipient procures qualified commodities through a 
competitive tender, the recipient must specify the minimally acceptable 
commodity specifications and food safety and quality assurance 
standards in the tender. Purchases that are made from commercial 
wholesalers in a local or regional market must meet the food safety and 
quality assurance standards specified in paragraphs (b)(2), (3), and 
(4) of this section.
    (8) The recipient must enter into a contract that complies with 
this paragraph (b) for every local or regional procurement of qualified 
commodities from a commodity vendor. The recipient must ensure that the 
contract between

[[Page 64977]]

the recipient and the commodity vendor clearly specifies the country of 
origin and the specific market(s) in which the procurement will take 
place, commodity safety and quality assurance standards, product 
specifications, price per metric ton, and delivery terms. The recipient 
will be required to make such contract available to FAS upon request.
    (9) The recipient must enter into a contract with an established 
inspection service to survey and report on the safety, quality, and 
condition of all procured commodities, prior to their shipment and 
distribution. The recipient will be required to submit any survey 
reports or certificates issued by such inspection service to FAS upon 
request.
    (c) The agreement will require the recipient to submit a 
procurement plan for FAS's approval within the time period specified in 
the agreement. The procurement plan will include time periods, broken 
down by month, for commodity procurement, delivery, and distribution. 
The agreement will require the recipient to comply with the procurement 
plan, as approved by FAS, and will prohibit the recipient from making 
any changes to the procurement plan without obtaining the prior written 
approval of FAS.


Sec.  1599.7  Payments.

    (a) If a recipient arranges for transportation in accordance with 
Sec.  1599.8(b)(2), FAS will, as specified in the agreement, pay the 
costs of such transportation to the ocean carrier or to the recipient. 
The recipient must, as specified in the agreement, submit to FAS, 
arrange to be submitted to FAS, or maintain on file and make available 
to FAS, the following documents:
    (1) The original, or a true copy, of each on board bill of lading 
indicating the freight rate and signed by the originating ocean 
carrier;
    (2) For all non-containerized cargoes:
    (i) A signed copy of the Federal Grain Inspection Service (FGIS) 
Official Stowage Examination Certificate;
    (ii) A signed copy of the National Cargo Bureau Certificate of 
Readiness; and
    (iii) A signed copy of the Certificate of Loading issued by the 
National Cargo Bureau or a similar qualified independent surveyor;
    (3) For all containerized cargoes, a copy of the FGIS Container 
Condition Inspection Certificate;
    (4) A signed copy of the U.S. Food Aid Booking Note or charter 
party covering ocean transportation of the cargo;
    (5) In the case of charter shipments, a signed notice of arrival at 
the first discharge port, unless FAS has determined that circumstances 
that could not have been reasonably anticipated or controlled (force 
majeure) have prevented the ocean carrier's arrival at the first port 
of discharge; and
    (6) A request for payment of freight, survey costs other than at 
load port, and other expenses approved by FAS.
    (b) If the agreement specifies that some or all of the documents 
listed in paragraph (a) of this section will be submitted to FAS, then 
FAS will not render payment for transportation services until it has 
received all of the specified documents.
    (c) If a recipient arranges for transportation in accordance with 
Sec.  1599.8(b)(2), and the recipient uses a freight forwarder, the 
recipient must ensure that the freight forwarder is registered in the 
SAM and require the freight forwarder to submit the documents specified 
in paragraph (a) of this section. The recipient will ensure that the 
total commission or fees paid to intermediaries in the transportation 
procurement process will not exceed two and a half percent of the total 
transportation costs.
    (d) In no case will FAS provide payment to a recipient for 
demurrage costs or pay demurrage to any other entity.
    (e) If FAS has agreed to be responsible for the costs of 
transporting, storing, and distributing the donated commodities from 
the designated discharge port or point of entry, and if the recipient 
will bear or has borne any of these costs, in accordance with the 
agreement, FAS will either provide an advance payment or a 
reimbursement to the recipient in the amount of such costs, in the 
manner set forth in the agreement.
    (f) If the agreement authorizes the payment of FAS-provided funds, 
FAS will generally provide the funds to the recipient on an advance 
payment basis, in accordance with 2 CFR 200.305(b). In addition, the 
following procedures will apply to advance payments:
    (1) A recipient may request advance payments of FAS-provided funds, 
up to the total amount specified in the agreement. When making an 
advance payment request, a recipient must provide, for each agreement 
for which it is requesting an advance, total expenditures to date; an 
estimate of expenses to be covered by the advance; total advances 
previously requested, if any; the amount of cash on hand from the 
preceding advance; and, if necessary, a request to roll over any unused 
funds from the preceding advance to the current request period. The 
advance payment request must take into account any program income 
earned since the preceding advance.
    (2) Whenever possible, a recipient should consolidate advance 
payment requests to cover anticipated cash needs for all food 
assistance program awards made by FAS to the recipient. A recipient may 
request advance payments with no minimum time required between 
requests.
    (3) A recipient must minimize the amount of time that elapses 
between the transfer of funds by FAS and the disbursement of funds by 
the recipient. A recipient must fully disburse funds from the preceding 
advance before it submits a new advance request for the same agreement, 
with the exception that the recipient may request to retain a 
reasonable (minimal) balance of any funds that have not been disbursed 
and roll it over into a new advance request if the new advance request 
is made within 90 days after the preceding advance was made.
    (4) FAS will review all requests to roll over funds from the 
preceding advance that have not been disbursed and make a decision 
based on the merits of the request. FAS will consider factors such as 
the amount of funding that a recipient is requesting to roll over, the 
length of time that the recipient has been in possession of the funds, 
any unforeseen or extenuating circumstances, the recipient's history of 
performance, and findings from recent financial audits or compliance 
reviews.
    (5) FAS will not approve any request for an advance or rollover of 
funds if the most recent financial report, as specified in the 
agreement, is past due, or if any required report, as specified in any 
open agreement between the recipient and FAS or the Commodity Credit 
Corporation (CCC), is more than three months in arrears.
    (6)(i) A recipient must return to FAS any funds advanced by FAS 
that have not been disbursed as of the 91st day after the advance was 
made; provided, however, that paragraphs (f)(6)(ii) and (iii) of this 
section will apply if the recipient submits a request to FAS before 
that date to roll over the funds into a new advance.
    (ii) If a recipient submits a request to roll over funds into a new 
advance, and FAS approves the rollover of funds, such funds will be 
considered to have been advanced on the date that the recipient 
receives the approval notice from FAS, for the purposes of complying 
with the requirement in paragraph (f)(6)(i) of this section.
    (iii) If a recipient submits a request to roll over funds into a 
new advance, and FAS does not approve the rollover of

[[Page 64978]]

some or all of the funds, such funds must be returned to FAS.
    (iv) If a recipient must return funds to FAS in accordance with 
paragraph (f)(6) of this section, the recipient must return the funds 
by the later of five business days after the 91st day after the funds 
were advanced, or five business days after the date on which the 
recipient receives notice from FAS that it has denied the recipient's 
request to roll over the funds; provided, however, that FAS may specify 
a different date for the return of funds in a written communication to 
the recipient.
    (7) Except as may otherwise be provided in the agreement, a 
recipient must deposit and maintain in an insured bank account located 
in the United States all funds advanced by FAS. The account must be 
interest-bearing, unless one of the exceptions in 2 CFR 200.305(b)(8) 
applies or FAS determines that the requirement in this paragraph (f)(7) 
would constitute an undue burden. A recipient will not be required to 
maintain a separate bank account for advance payments of FAS-provided 
funds. However, a recipient must be able to separately account for the 
receipt, obligation, and expenditure of funds under each agreement.
    (8) A recipient may retain, for administrative expenses, up to $500 
per Federal fiscal year of any interest earned on funds advanced under 
an agreement. The recipient must remit to the U.S. Department of Health 
and Human Services, Payment Management System, any additional interest 
earned during a Federal fiscal year on such funds, in accordance with 
the procedures in 2 CFR 200.305(b)(9).
    (g) If a recipient is required to pay funds to FAS in connection 
with an agreement, the recipient must make such payment in U.S. 
dollars, unless otherwise approved in advance by FAS.


Sec.  1599.8  Transportation of donated or procured commodities.

    (a) Shipments of donated commodities and procured commodities 
requiring ocean transportation are subject to the requirements of 46 
U.S.C. 55305, regarding carriage on U.S.-flag vessels.
    (b) Transportation of donated commodities and other goods such as 
bags that may be provided by FAS under the McGovern-Dole Program will 
be arranged for under a specific agreement in the manner determined by 
FAS. Such transportation will be arranged for by:
    (1) FAS in accordance with the Federal Acquisition Regulation (FAR) 
in 48 CFR chapter 1, the Agriculture Acquisition Regulation (AGAR) in 
48 CFR chapter 4, and directives issued by the Director, Office of 
Procurement and Property Management, USDA; or
    (2) The recipient, with payment by FAS, in the manner specified in 
the agreement.
    (c) A recipient must arrange for all transportation of procured 
commodities. FAS will pay for the transportation, as provided for in 
the agreement, through an advance payment or reimbursement to the 
recipient.
    (d) A recipient that is responsible for arranging for the 
transportation of donated commodities or procured commodities must 
declare in the transportation contract the point at which the ocean 
carrier or overland transportation company will take custody of the 
donated commodities or procured commodities to be transported.
    (e) A recipient may only use the services of a transportation 
company that is legally operating in the country in which it will be 
transporting the donated commodities or procured commodities and that 
would not have a conflict of interest in transporting such donated 
commodities or procured commodities.
    (f) A recipient that arranges for transportation in accordance with 
paragraph (b)(2) of this section may only use the services of a freight 
forwarder that is licensed by the Federal Maritime Commission and that 
would not have a conflict of interest in carrying out the freight 
forwarder duties. To assist FAS in determining whether there is a 
potential conflict of interest, the recipient must submit to FAS a 
certification indicating that the freight forwarder:
    (1) Is not engaged in, and will not engage in, supplying 
commodities or furnishing ocean transportation or ocean transportation-
related services for commodities provided under any McGovern-Dole 
Program agreement to which the recipient is a party; and
    (2) Is not affiliated with the recipient and has not made 
arrangements to give or receive any payment, kickback, or illegal 
benefit in connection with its selection as an agent of the recipient.


Sec.  1599.9  Entry, handling, and labeling of donated or procured 
commodities and notification requirements.

    (a) A recipient must make all necessary arrangements for receiving 
in the target country the donated commodities and any procured 
commodities obtained through regional procurement, including obtaining 
appropriate approvals for entry and transit. The recipient must make 
arrangements with the target country government for all donated 
commodities that will be distributed to beneficiaries, and all procured 
commodities, to be imported and distributed free from all customs 
duties, tolls, and taxes. A recipient is encouraged to make similar 
arrangements, where possible, with the government of a country where 
donated commodities to be sold or bartered are delivered.
    (b) A recipient must, as provided in the agreement, arrange for 
transporting, storing, and distributing the donated commodities or 
procured commodities from the designated point and time where title to 
the donated commodities or procured commodities passes to the 
recipient.
    (c)(1) A recipient must store and maintain the donated commodities 
in good condition from the time of delivery at the port of entry or the 
point of receipt from the originating carrier until their distribution, 
sale, or barter.
    (2) A recipient must store and maintain the procured commodities in 
good condition from the time of delivery at the port of entry or the 
point of receipt from the commodity vendor(s) until their distribution.
    (d)(1) If a recipient arranges for the packaging or repackaging of 
donated commodities that are to be distributed, the recipient must 
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the donated commodities;
    (iii) Includes a statement indicating that the donated commodities 
are furnished by the United States Department of Agriculture; and
    (iv) Includes a statement indicating that the donated commodities 
must not be sold, exchanged, or bartered.
    (2) If a recipient arranges for the processing and repackaging of 
donated commodities that are to be distributed, the recipient must 
ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;
    (ii) Contains the name of the processed product;
    (iii) Includes a statement indicating that the processed product 
was made with commodities furnished by the United States Department of 
Agriculture; and
    (iv) Includes a statement indicating that the processed product 
must not be sold, exchanged, or bartered.
    (3) If a recipient arranges for the packaging or repackaging of 
procured commodities, the recipient must ensure that the packaging:
    (i) Is plainly labeled in the language of the target country;

[[Page 64979]]

    (ii) Contains the name of the procured commodities;
    (iii) Contains the name of the country of origin;
    (iv) Includes a statement indicating that the procured commodities 
are furnished through a project funded by the United States Department 
of Agriculture; and
    (v) Includes a statement indicating that the procured commodities 
must not be sold, bartered, or exchanged.
    (4)(i) If a recipient distributes donated commodities that are not 
packaged, the recipient must display a sign at the distribution site 
that includes the name of the donated commodities, a statement 
indicating that the commodities are being furnished by the United 
States Department of Agriculture, and a statement indicating that the 
donated commodities must not be sold, bartered, or exchanged.
    (ii) If a recipient distributes procured commodities that are 
prepackaged or not packaged, the recipient must display a sign at the 
distribution site that includes the name of the procured commodities, 
the country of origin, a statement indicating that the procured 
commodities are being furnished through a project funded by the United 
States Department of Agriculture, and a statement indicating that the 
procured commodities must not be sold, bartered, or exchanged.
    (e) A recipient must ensure that signs are displayed at all 
activity implementation and commodity distribution sites to inform 
beneficiaries that funding for the project was provided by the United 
States Department of Agriculture.
    (f) A recipient must also ensure that all public communications 
relating to the project, the activities, or the donated commodities or 
procured commodities, whether made through print, broadcast, digital, 
or other media, include a statement acknowledging that funding was 
provided by the United States Department of Agriculture.
    (g) FAS may waive compliance with one or more of the labeling and 
notification requirements in paragraphs (d), (e), and (f) of this 
section if a recipient demonstrates to FAS that the requirement 
presents a safety or security risk in the target country. If a 
recipient determines that compliance with a labeling or notification 
requirement poses an imminent threat of destruction of property, 
injury, or loss of life, the recipient must submit a waiver request to 
FAS as soon as possible. The recipient will not have to comply with 
such requirement during the period prior to the issuance of a waiver 
determination by FAS. A recipient may submit a written request for a 
waiver at any time after the agreement has been signed.
    (h) In exceptional circumstances, FAS may, on its own initiative, 
waive one or more of the labeling and notification requirements in 
paragraphs (d), (e), and (f) of this section for programmatic reasons.


Sec.  1599.10  Damage to or loss of donated or procured commodities.

    (a)(1) FAS will be responsible for the donated commodities prior to 
the transfer of title to the donated commodities to the recipient. The 
recipient will be responsible for the donated commodities following the 
transfer of title to the donated commodities to the recipient. The 
title will transfer as specified in the agreement.
    (2) A recipient will be responsible for the procured commodities 
following the transfer of title to the procured commodities from the 
commodity vendor(s) to the recipient. FAS may require the recipient to 
purchase transportation insurance against commodity loss or damage.
    (b) A recipient must inform FAS, in the manner and within the time 
period set forth in the agreement, of any damage to or loss of the 
donated commodities or procured commodities that occurs following the 
transfer of title to the donated commodities or procured commodities to 
the recipient. The recipient must take all steps necessary to protect 
its interests and the interests of FAS with respect to any damage to or 
loss of the donated commodities or procured commodities that occurs 
after title has been transferred to the recipient.
    (c) A recipient will be responsible for arranging for an 
independent cargo surveyor to inspect the donated commodities, and any 
procured commodities transported by ocean, upon discharge from the 
ocean carrier and to prepare a survey or outturn report. The report 
must show the quantity and condition of the donated commodities or 
procured commodities discharged from the ocean carrier and must 
indicate the most likely cause of any damage noted in the report. The 
report must also indicate the time and place when the survey took 
place. All discharge surveys must be conducted contemporaneously with 
the discharge of the ocean carrier, unless FAS determines that failure 
to do so was justified under the circumstances. For donated commodities 
or procured commodities shipped on a through bill of lading, the 
recipient must also obtain a delivery survey. All surveys obtained by 
the recipient must, to the extent practicable, be conducted jointly by 
the surveyor, the recipient, and the carrier, and the survey report 
must be signed by all three parties. The recipient must obtain a copy 
of each discharge or delivery survey report within 45 days after the 
completion of the survey. The recipient must make each such report 
available to FAS upon request, or in the manner specified in the 
agreement. FAS will reimburse the recipient for the reasonable costs of 
these services, as determined by FAS, in the manner specified in the 
agreement.
    (d) When procured commodities are transported overland, the 
recipient will ensure that the overland transportation contract 
includes a requirement that a loading and offloading report be prepared 
and provided to the recipient. The report must show the quantity and 
condition of the procured commodities loaded on the overland 
conveyance, as well as the time and place that the loading and 
offloading occurred. The recipient must obtain a copy of the report 
from the overland transportation company within 45 days after the 
completion of the commodity delivery. The recipient must make each such 
report available to FAS upon request, or in the manner specified in the 
agreement. FAS will reimburse the recipient for the reasonable costs of 
these services, as determined by FAS, in the manner specified in the 
agreement.
    (e) If donated commodities or procured commodities are damaged or 
lost during the time that they are in the care of the ocean carrier or 
overland transportation company:
    (1) The recipient must ensure that any reports, narrative 
chronology, or other commentary prepared by the independent cargo 
surveyor, and any such documentation prepared by a port authority, 
stevedoring service, or customs official, or an official of the transit 
or target country government or the transportation company, are 
provided to FAS;
    (2) The recipient must provide to FAS the names and addresses of 
any individuals known to be present at the time of discharge or 
unloading, or during the survey, who can verify the quantity of damaged 
or lost donated commodities or procured commodities;
    (3) If the damage or loss occurred with respect to a bulk shipment 
on an ocean carrier, the recipient must ensure that the independent 
cargo surveyor:
    (i) Observes the discharge of the cargo;
    (ii) Reports on discharging methods, including scale type, 
calibrations, and any other factors that may affect the accuracy of 
scale weights, and, if scales

[[Page 64980]]

are not used, states the reason therefor and describes the actual 
method used to determine weight;
    (iii) Estimates the quantity of cargo, if any, lost during 
discharge through carrier negligence;
    (iv) Advises on the quality of sweepings;
    (v) Obtains copies of port or ocean carrier records, if possible, 
showing the quantity discharged; and
    (vi) Notifies the recipient immediately if the surveyor has reason 
to believe that the correct quantity was not discharged or if 
additional services are necessary to protect the cargo; and
    (4) If the damage or loss occurred with respect to a container 
shipment on an ocean carrier, the recipient must ensure that the 
independent cargo surveyor lists the container numbers and seal numbers 
shown on the containers, indicates whether the seals were intact at the 
time the containers were opened, and notes whether the containers were 
in any way damaged.
    (f) If a recipient has title to the donated commodities or procured 
commodities, and commodities valued in excess of $5,000 are damaged at 
any time prior to their distribution or sale under the agreement, 
regardless of the party at fault, the recipient must immediately 
arrange for an inspection by a public health official or other 
competent authority approved by FAS and provide to FAS a certification 
by such public health official or other competent authority regarding 
the exact quantity and condition of the damaged donated commodities or 
procured commodities. The value of damaged donated commodities must be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, as 
well as such costs incurred by the recipient and paid by FAS. The value 
of damaged procured commodities must be determined on the basis of the 
commodity acquisition, transportation, and related costs incurred by 
the recipient and paid by FAS with respect to such commodities. The 
recipient must inform FAS of the results of the inspection and indicate 
whether the damaged donated commodities or procured commodities are:
    (1) Fit for the use authorized in the agreement and, if so, whether 
there has been a diminution in quality; or
    (2) Unfit for the use authorized in the agreement.
    (g)(1) If a recipient has title to the donated commodities or 
procured commodities, the recipient must arrange for the recovery of 
that portion of the donated commodities or procured commodities 
designated as fit for the use authorized in the agreement. The 
recipient must dispose of donated commodities or procured commodities 
that are unfit for such use in the following order of priority:
    (i) Sale for the most appropriate use, i.e., animal feed, 
fertilizer, industrial use, or another use approved by FAS, at the 
highest obtainable price;
    (ii) Donation to a governmental or charitable organization for use 
as animal feed or another non-food use; or
    (iii) Destruction of the donated commodities or procured 
commodities if they are unfit for any use, in such manner as to prevent 
their use for any purpose.
    (2) A recipient must arrange for all U.S. Government markings to be 
obliterated or removed before the donated commodities or procured 
commodities are transferred by sale or donation under paragraph (g)(1) 
of this section.
    (h) A recipient may retain any proceeds generated by the disposal 
of the donated commodities or procured commodities in accordance with 
paragraph (g)(1) of this section and must use the retained proceeds for 
expenses related to the disposal of the donated commodities or procured 
commodities and for activities specified in the agreement.
    (i) A recipient must notify FAS immediately and provide detailed 
information about the actions taken in accordance with paragraph (g) of 
this section, including the quantities, values, and dispositions of 
donated commodities or procured commodities determined to be unfit.


Sec.  1599.11  Claims for damage to or loss of donated or procured 
commodities.

    (a)(1) FAS will be responsible for claims arising out of damage to 
or loss of a quantity of the donated commodities prior to the transfer 
of title to the donated commodities to the recipient. The recipient 
will be responsible for claims arising out of damage to or loss of a 
quantity of the donated commodities after the transfer of title to the 
donated commodities.
    (2) The recipient will be responsible for claims arising out of 
damage to or loss of a quantity of the procured commodities after the 
transfer of title to the procured commodities from the commodity 
vendor(s) to the recipient.
    (b) If a recipient has title to donated commodities or procured 
commodities that have been damaged or lost, and the value of the 
damaged or lost commodities is estimated to be in excess of $20,000, 
the recipient must:
    (1) Notify FAS immediately and provide detailed information about 
the circumstances surrounding such damage or loss, the quantity of 
damaged or lost commodities, and the value of the damage or loss;
    (2) Promptly upon discovery of the damage or loss, initiate a claim 
arising out of such damage or loss, including, if appropriate, 
initiating an action to collect pursuant to a commercial insurance 
contract;
    (3) Take all necessary action to pursue the claim diligently and 
within any applicable periods of limitations; and
    (4) Provide to FAS copies of all documentation relating to the 
claim.
    (c) If a recipient has title to donated commodities or procured 
commodities that have been damaged or lost, and the value of the 
damaged or lost commodities is estimated to be $20,000 or less, the 
recipient must notify FAS in accordance with the agreement and provide 
detailed information about the damage or loss in the next report 
required to be filed under Sec.  1599.14(f)(1) or (2).
    (d)(1) The value of a claim for lost donated commodities will be 
determined on the basis of the commodity acquisition, transportation, 
and related costs incurred by FAS with respect to such commodities, as 
well as such costs incurred b