[Federal Register Volume 62, Number 29 (Wednesday, February 12, 1997)]
[Proposed Rules]
[Pages 6497-6499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3370]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 62, No. 29 / Wednesday, February 12, 1997 /
Proposed Rules
[[Page 6497]]
DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1496
RIN 0560-AF09
Procurement of Processed Agricultural Commodities for Donation
Under Title II, Pub. L. 480
AGENCY: Commodity Credit Corporation, USDA
ACTION: Proposed Rule.
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SUMMARY: This proposed regulation would revise Commodity Credit
Corporation's (``CCC'') procedures for purchasing processed
agricultural commodities for donation overseas under Title II of the
Agricultural Trade Development and Assistance Act of 1954, as amended,
(``Pub. L. 480''). This proposal would implement recent statutory
changes and adopt a simpler and more efficient procurement process.
DATES: Written comments concerning this proposed rule must be submitted
by April 14, 1997.
ADDRESSES: Comments must be sent to USDA/FSA, Procurement and Donations
Division, Export Operations Branch, Rm. 5755-S, Mail Stop 0551, P.O.
Box 2415, Washington DC 20013-2415.
FOR FURTHER INFORMATION CONTACT: Jeff Jackson, (202) 720-3995.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant for the
purposes of Executive Order 12866 and therefore has not been reviewed
by the Office of Management and Budget (OMB).
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this final rule since CCC is not required by 5 U.S.C. 553
or any other provision of law to publish a notice of rulemaking with
respect to the subject matter of this rule.
Paperwork Reduction Act
The amendments to 7 CFR part 1496 set forth in this proposed rule
do not contain additional information collections that require
clearance by OMB under the provisions of 44 U.S.C. 35.
Executive Order 12372
This rule is not subject to the provisions of Executive Order
12372, which requires intergovernmental consultation with state and
local officials. See the Notice related to 7 CFR part 3015, subpart V,
published at 46 FR 29115 (June 24, 1983).
Executive Order 12988
This rule has been reviewed under the Executive Order 12988, Civil
Justice Reform. The rule would have pre-emptive effect with respect to
any state or local laws, regulations, or policies which conflict with
such provisions or which otherwise impede their full implementation.
The rule would not have retroactive effect. Administrative proceedings
are not required before parties may seek judicial review.
Background
General
Pursuant to Title II, Pub. L. 480, the United States donates
agricultural commodities overseas to meet famine or other relief
requirements, combat malnutrition, and promote economic development.
This program is administered by the Agency for International
Development (``A.I.D.''). A.I.D. donates commodities to foreign
governments, intergovernmental organizations, or private relief
agencies, commonly referred to as ``cooperating sponsors'' for the
above purposes through agreements between A.I.D. and a cooperating
sponsor.
CCC has the responsibility to acquire and make available the
agricultural commodities needed to carry out agreements under Title II,
Pub L. 480. CCC will either provide these commodities from its
inventory or by purchases in the market. In addition to bearing the
cost of the donated commodities, CCC is authorized to pay other related
costs including packaging, processing, surveys, fumigation,
transportation to ports of export, and ocean transportation costs. CCC
does not contract for the ocean transportation services to ship the
commodities. Cooperating sponsors or A.I.D. are responsible for
contracting for ocean transportation of the commodities. Generally,
A.I.D. will pay for the ocean freight charges incurred by it or a
cooperating sponsor from funds advanced to A.I.D. from CCC.
Commodity Procurement
CCC will procure packaged commodities requested for Title II, Pub.
L. 480 through a public solicitation for bids requesting offers to sell
on an f.a.s. vessel or intermodal basis. CCC evaluates offers to sell
commodities submitted pursuant to an invitation for bids on the general
principle of ``lowest landed cost.'' This simply means that, in
deciding which commodity offer to accept, CCC will consider both the
price it would have to pay to acquire the commodity and the anticipated
freight costs to ship the commodity to foreign destination. Regulations
governing the bid evaluation process for the procurement of processed
agricultural commodities for Title II, Pub. L. 480 appear at 7 CFR part
1496. In making a lowest landed cost analysis, CCC relies upon
published tariff rates on file with the Federal Maritime Commission and
current rate information furnished to the Kansas City Commodity Office
by the ocean freight carriers. The most economical combination of
commodity price and transportation rate will determine the commodity
offer CCC accepts.
The ocean carriage of Title II, Pub. L. 480 commodities is subject
to sections 901(b) and 901b of the Merchant Marine Act, 1936, 46 U.S.C.
App. sections 1241(b) and 1241f, commonly referred to as the ``cargo
preference laws.'' These provisions generally require that agencies
involved in certain export programs, including Title II, Pub. L. 480,
must assure that at least 75 percent of such ocean shipments are
carried on U.S.-flag vessels to the extent they are available at fair
and reasonable rates. CCC will decide if the commodity purchased is to
be shipped on a U.S.-flag vessel after reviewing the various lowest
landed cost options indicating the most economical means to achieve
cargo preference requirements. This involves the use of only U.S.-flag
vessel rates in the lowest landed cost analyses for that portion of the
cargo to be shipped on U.S.-flag vessels.
[[Page 6498]]
As indicated above, CCC procures packaged commodities on a free
along side (f.a.s.) vessel, or intermodal basis. These delivery terms
do not include costs of ocean transportation. Since CCC does not
contract for ocean transportation, CCC will notify the cooperating
sponsor or A.I.D of the commodity offer accepted based upon its lowest
landed cost analysis. The cooperating sponsor or A.I.D then issues its
own invitation for bids for the procurement of transportation for
commodities to which interested ocean carriers must respond. The
cooperating sponsor or A.I.D must contract with a vessel to carry the
commodity purchased at the rate used by CCC in making its lowest landed
cost determination, or a lower rate. If CCC has determined that a
quantity of cargo must be shipped on a U.S.-flag vessel to meet cargo
preference requirements, the cooperating sponsor or A.I.D must contract
with a U.S.-flag vessel carrier.
Maritime Security Act of 1996 (MSA)
Section 17 of the Maritime Security Act of 1996 (``MSA'') amended
section 901b(c) of the Merchant Marine Act, 1936 (46 App. 1241f(c)) to
mandate that CCC follow certain procedures in its purchasing process
for packaged commodities. The new procedures are intended to correct a
perceived unfairness to Great Lakes ports stemming from cargo
preference requirements. Currently no U.S.-flag or foreign-flag
carriers offer service at Great Lakes ports for this type of cargo. It
is argued that CCC's purchase of commodities on the basis of lowest
landed cost utilizing U.S.-flag vessel rates for the purpose of meeting
cargo preference requirements in the most economical manner has the
effect of drawing cargo away from Great Lakes ports because commodity
offers for delivery to Great Lakes ports would not be considered at
that point in the procurement process. In an effort to place Great
Lakes ports on an equal footing with other coastal ranges, yet
maintaining cargo preference requirements, section 17 of the MSA
mandates a change in our purchasing process. Generally, CCC will now be
required to initially evaluate all commodity offers received in
response to a particular invitation on a lowest landed cost basis
without regard to the flag of the vessels offering service. If that
evaluation demonstrates that commodities offered for delivery at a
particular Great Lakes port represents the lowest landed cost, CCC must
purchase such commodities for delivery at that Great Lakes port. This
purchasing requirement is applicable to up to 25 percent of the total
annual tonnage of bagged, processed or fortified commodities furnished
under Title II, Pub. L. 480.
CCC is still required to assure that, annually, at least 75 percent
of the Title II cargo is shipped on U.S.-flag vessels. In implementing
this requirement, CCC is free to purchase commodities on a lowest
landed cost U.S.-flag vessel basis for cargo offered for delivery to
any port or port range after the 25 percent Great Lakes quantity is
reached.
The new provision requires that a number of issues be addressed.
First, since CCC generally purchases Title II commodities on a monthly
basis and it is impossible to determine in advance the quantity of
commodities to be actually purchased, CCC cannot know, at any point in
the year, when the 25 percent Great Lakes tonnage point is reached.
Consequently, CCC proposes to administer the 25 percent requirement on
a annual basis. In other words, beginning with the first purchase in
each cargo preference year (April 1--March 31), 25 percent or more of
the total monthly purchase may be allocated to Great Lakes port range
on an overall lowest landed basis. This would allow CCC the flexibility
to take advantage of seasonal and other surges in service offered
through the Great Lakes ports during the course of the year.
Section 901b(c) of the Merchant Marine Act, 1936, as amended, now
requires that CCC allocate to Great Lakes ports ``any cargoes for which
it has'' the overall lowest landed cost, but does not define what may
be considered as a Great Lakes port offer. Clearly, the lowest f.a.s.
vessel offer for export from Great Lakes ports would qualify. A more
difficult question involves intermodal-bridge-point (bridge-point)
offers. In bridge-point movements, the commodity supplier is
responsible for the transportation and related costs to deliver the
commodity to the designated U.S. bridge-point location. The ocean
transportation carrier becomes responsible for the cargo at the bridge-
point location and must transport the commodities from that point and
pay all related costs to deliver the commodity onboard the vessel. Such
costs include car unloading, container stuffing (where applicable),
etc. The bridge-point may not be within the confines of a port
operation and the commodities may be loaded on a vessel at a port that
is in a different part of the country than the bridge-point. This
raises the issue of how bridge-point service should be considered when
determining what are Great Lakes port offers.
Certain interests have suggested that the purpose of the recent
amendment was to make-up for potential revenue and employment
opportunities lost to the Great Lakes by virtue of the cargo preference
requirements and that bridge-point-service that includes cargo
handling; i.e., stuffing containers at Great Lakes ports contributes to
this goal even if the cargo is ultimately exported from other ports.
For this reason, it is suggested that any commodity offers for this
type of service that represent the lowest landed cost should be viewed
as Great Lakes cargo. On the other hand, if the commodities are not
stuffed into transportation conveyances at the intermodal bridge-point
at Great Lakes ports and the carrier merely takes risk of loss to the
cargo, these interests suggest that the commodity offer should not be
considered as a Great Lakes port range offer.
While there is certainly some merit to this analysis, the
suggestion raises some administrative problems. If CCC were to adopt
this suggestion, it appears that it would have to make some rather
arbitrary decisions as to what constitutes a port area in order to
determine whether a particular service facility is geographically part
of a Great Lakes port. Also, the more inclusive definition could
disrupt normal trade practices of an ocean transportation carrier. For
example, a carrier that normally takes possession of the cargo at
bridge-point (not within the confines of the port) because of certain
economies would be forced to utilize a less favored facility.
Furthermore, this interpretation could counteract efforts to generate
more vessel calls at Great Lakes ports, because once the 25 percent
annual cargo level is reached by considering service facilities as
representing Great Lakes ports, CCC could begin to consider lowest
landed costs on a U.S.-flag vessel basis. This could eliminate
utilization of f.a.s. vessel offers in the Great Lakes.
For the above reasons, the proposed rule defines Great Lakes cargo
as cargo offered for delivery f.a.s. vessel. However, CCC is
particularly interested in receiving comments from all interested
parties concerning this problem and will take them into consideration
when formulating a final rule.
In addition to the above changes, CCC is proposing to clarify
Sec. 1496.5(b)(1) without any substantive change.
List of Subjects in 7 CFR Part 1496
Agricultural commodities; exports.
Accordingly, it is proposed that 7 CFR part 1496 be revised as
follows:
[[Page 6499]]
PART 1496--PROCUREMENT OF PROCESSED AGRICULTURAL COMMODITIES FOR
DONATION UNDER TITLE II, PUB. L. 480
1. The authority citation for part 1496 is revised to read as
follows:
Authority: 7 U.S.C. 1721-1726a; 1731-1736g-2; 46 U.S.C. App.
1241(b), and 1241(f).
2. In Sec. 1496.5, paragraphs (b)(1) and (f) are proposed to be
revised to read as follows:
Sec. 1496.5 Consideration of bids.
* * * * *
(b)(1) Availability of ocean service. Prior to receipt of offers
from commodity suppliers, CCC will review ocean freight information
from available sources including but not limited to, trade journal
newspapers, port publications, steamship publications in order to
determine the availability of appropriate ocean service.
* * * * *
(f) Great Lakes ports. Commodities offered for delivery f.a.s.
vessel Great Lakes port range that represent the overall (foreign and
U.S. flag) lowest landed cost will be awarded on that basis and will
not be evaluated on a lowest landed cost U.S.-flag basis unless CCC
determines that 25 percent of the total annual tonnage of bagged,
processed or fortified commodities furnished under Title II of Public
Law 480 has been, or will be, transported from the Great Lakes port
range during that fiscal year.
Signed at Washington, DC, on February 3, 1997.
Bruce R. Weber,
Acting Executive Vice President,Commodity Credit Corporation.
[FR Doc. 97-3370 Filed 2-11-97; 8:45 am]
BILLING CODE 3410-05-P
