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February 13, 2003 Commodity
Financing and Purchasing





Title I of the Agricultural Trade Development and Assistance Act of 1954, as amended, (Public Law 480, 83rd Congress) provides for U.S. government financing of sales of U.S. agricultural commodities to developing countries and private entities (hereafter called "participants") on concessional credit terms. Sales are made by private business firms on a bid basis in response to Invitations for Bids or "IFB's" issued in the United States by the participant. Sales are made at competitive U.S. market prices. The agreement's concessionality results from its extended credit periods and low rates of interest charged for the financing.

A developing country shall be considered eligible for P.L. 480 Title I financing if it has a shortage of foreign exchange earnings and has difficulty meeting all of its food needs through commercial channels.

All agricultural commodities and products, other than alcoholic beverages, are eligible for consideration in programming unless the Secretary of Agriculture determines that the use of a commodity would reduce the domestic supply lower than that needed to meet domestic requirements and provide an adequate carryover. Commodities will not be made available unless there are adequate storage facilities in the recipient country and the distribution will not interfere with domestic production or marketing.

The Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture (USDA) is the agency responsible for administering agreements made under Title I.

In accordance with the Federal Agriculture Improvement and Reform Act of 1996, a Public Law 480, Title I agreement may now be signed with either a nongovernmental "private entity" or with a foreign government.

Negotiation of Agreements

Title I agreements are negotiated with foreign governments or private entities. In most cases, negotiations are conducted overseas by U.S. agricultural counselors or attaches. The Secretary of Agriculture determines the kinds and quantities of commodities to be included in agreements.

An agreement may require the government of the importing country to maintain normal imports of agricultural commodities from commercial sources in the United States and other free world countries. These "usual marketing requirements" (UMR's) are required, when applicable, in order to insure that Title I sales will not unduly disrupt world agricultural commodity prices and normal patterns of commercial trade. Agreements prohibit the resale or transshipment of Title I commodities ("export restrictions") and may prohibit or limit the export of similar commodities ("export limitations") in order to insure that Title I commodities are not used to increase the commercial exports of the importing country.

The U.S. government consults governments of other countries which export commodities included in the agreement to insure that Title I sales do not unduly disrupt normal world commercial trade.

Eligibility of Commodity Suppliers

U.S. commodity suppliers interested in selling commodities under P.L. 480, Title I, must submit the following information to USDA, which will determine their eligibility:

1. A current financial statement (preferably audited) of the person or firm wishing to become eligible, as evidence of financial responsibility.

2. A statement containing general background information about the firm, with particular reference to the firm's experience as an exporter of U.S. agricultural commodities, and any other information available relating to whether the person or firm is a responsible party and able to perform its obligations under the P.L. 480, Title I regulations and the purchase authorization.

Financing and Purchasing Procedures (Commodity)

After an agreement has been signed, the participant applies to FAS for one or more purchase authorizations (PA's) to be issued by USDA. Each PA includes such details as the particular grade or type of commodity to be purchased, the approximate quantity of the commodity and the maximum dollar amount authorized, the period during which contracts may be entered into, the period during which deliveries must be made, the conditions under which financing will be made available for the commodity sales, and any authorized ocean transportation costs. Normally, the earliest date that contracts may be entered into is seven days after the date the PA is issued. Further purchasing information can usually be obtained from the Washington Embassy of the importing country or its shipping agent.

The purchase authorization provides for commodity financing by the Commodity Credit Corporation (CCC), a U.S. government agency within USDA.

The commodity supplier will present documents to CCC, which will pay the supplier directly after the documents are found to be complete and in good order. CCC will also pay the supplier of ocean transportation directly for the ocean freight differential on U.S.-flag vessels and for any other ocean freight costs which are financed by CCC. However, when CCC pays only the ocean freight differential on a U.S.-flag voyage, the buyer must open a letter of credit for the balance of the ocean freight.

The following is an outline of commodity financing and purchasing procedures:

1. The P.L. 480, Title I regulations require that all purchases of commodities be made on the basis of an invitation for bids (IFB) which has been reviewed and approved by USDA before issuance. The IFB must be publicly advertised in the United States, and offers must conform to the terms of the IFB and must be received and publicly opened in the United States. Suppliers may offer for any portion of an IFB; also, an IFB may not establish minimum acceptable quantities. All offers received, regardless of size, must be considered, and all awards must be made in conformance with the terms of the IFB.

2. As a prerequisite for CCC financing, the successful supplier(s) must register the sale with USDA and obtain approval of the contract terms, including price. Sales are registered with the P.L. 480 Operations Division, telephone (202) 720-5780.

3. The U.S. supplier delivers the commodities to the named U.S. port and receives a bill of lading as a receipt for the commodities loaded on board. The supplier presents the bill of lading, weight and inspection certificates, and any other documents required by the regulations and the IFB, to CCC.

4. CCC examines the documents and pays the supplier in dollars.

5. The participant then repays dollars or local currency to CCC, with interest, in accordance with the repayment terms specified in the agreement.

Small Business

This program is conducted on a non-discriminatory basis as are all USDA export programs.

In order to insure that small business firms have an equal opportunity to participate, the P.L. 480, Title I financing regulations prohibit buyers from establishing minimum quantities to be offered. All offers, regardless of size, must be considered (Section 17.5(c)(2)(v) of the Title I regulations).

In addition, the invitations for bids issued by importing countries cannot limit the right to submit offers to any specified group or class of suppliers; IFB's must permit submission of offers by any supplier who meets the requirements of the regulations (Section 17.5(c)(2)(iii) of the Title I regulations).

Ocean Transportation

In accordance with the cargo preference provisions of the Merchant Marine Act, 1936, as amended, at least 75 percent of the gross tonnage of commodities exported under Title I, P.L. 480, must be shipped on privately owned U.S. flag commercial vessels to the extent such vessels are available at fair and reasonable rates.

The participants or their appointed agents arrange for the ocean transportation of commodities purchased under Title I. The Director, P.L. 480 Operations Division, will determine the quantity of the commodity to be shipped on U.S.-flag commercial vessels. Open public freight invitations for bids (IFB's) are required for both U.S. and non-U.S. flag vessels when CCC is financing any portion of the ocean freight. Unless otherwise authorized by the USDA, IFB's are also required for non-U.S. flag vessels even though CCC is not financing any portion of the ocean freight.

The pertinent terms of all proposed charters or liner bookings, regardless of whether any portion of ocean freight is financed by CCC, must be sent to USDA for review and approval prior to fixture of the vessels. Approvals are obtained from the Director, P.L. 480 Operations Division, FAS, U.S. Department of Agriculture, Washington, DC 20250-1033.

Under a Title I agreement, CCC responsibility for ocean freight is generally limited to payment of the ocean freight differential, if any, which exists between the cost of U.S. flag and non-U.S. flag shipments. In certain exceptional cases, CCC may also finance on credit terms the balance of freight costs on U.S. flag vessels, as well as foreign flag freight charges to selected countries, when specifically provided for in the applicable agreement and related purchase authorization. Ocean freight differential is determined by the Director, P.L. 480 Operations Division, FAS.


Each commodity sales agreement contains specific provisions described under "Negotiations of Agreements," above, as usual marketing requirements (UMR's); export restrictions on P.L. 480 commodities; and export limitations on commodities the same as, or similar to, those imported under P.L. 480.

USDA has established procedures designed to monitor the importing country's compliance with these requirements. If the country fails to comply, agreement signings and purchase authorizations could be withheld; the failure to comply would also be taken into account in considering any future P.L. 480 agreements. The compliance function also addresses arrivals and reconciliation of P.L. 480 shipments, P.L. 480 commodity use, publicity requirements for P.L. 480 sales agreements, deposit and payment requirements for P.L. 480 sales agreements, and development plans associated with agreements.

The Act requires compliance reporting by importing countries. U.S. embassies and agricultural attaches will help the importing countries meet the statutory requirements of the Act. To inquire about compliance reporting, contact the Program Evaluation Branch, CCC Program Support Division, Foreign Agricultural Service, U.S. Department of Agriculture, 1400 Independence Avenue, S.W., Washington, DC 20250-1031.

Reporting Requirements

Commodity suppliers in the P.L. 480, Title I program may have a reporting responsibility under Section 602 of the Agricultural Trade Act of 1978. This is a mandatory program involving the reporting of export sales and exports of the major grains, oilseeds and products, cotton, rice, and cattle hides and skins.

To obtain information on reporting requirements or to inquire about your reporting status, contact the Export Sales Reporting Branch, Foreign Agricultural Service, U.S. Department of Agriculture, Washington, DC 20250-1025. Telephone: (202) 720-3273.

Further Information and Press Releases

All FAS news releases issued each day are available online at http://www.fas.usda.gov/scriptsw/PressRelease/pressrel_frm.asp.

If you wish to be placed on the mailing list to receive copies of purchase authorizations, state specific commodity interest and write to:

P.L. 480 Operations Division
Foreign Agricultural Service
U.S. Department of Agriculture
Washington, DC 20250-1033

Copies of the Title I, P.L. 480 financing regulations and related forms are also available from the P.L. 480 Operations Division, FAS, at the above address. In the event of any inconsistency between the regulations and this explanation, the regulations will control.

Recordings are available which provide information on agreements signed and purchase authorizations issued. Updated information is available after 3:30 p.m. Washington, DC time each business day by calling (202) 690-1621 for information on agreements signed and (202) 720-5938 for information on purchase authorizations issued. 

Hearing-impaired or speech-impaired individuals may connect with any of the above phone numbers by calling the Federal Information Relay System at (800) 877-8339.

Last modified: Monday, April 14, 2008 PM