B02 Attachment 3 Changes in Operational CLOC Procedures SY90-91.pdf

Changes in Operational CLOC Procedures SY00-91

Prepared for:

Office of Analysis and Evaluation

Food and Nutrition Service U. S. Department of Agriculture

Prepared by:

VA TECH

SPEOIAL PROJECTS OFFICE

181 Elden Street, Sulte 314 Herndon, VA 22070

(800) 836-3342 W A TS

(70S) 7SS-2828 Local

Ann Hallawell Oberle Root

May 29, 1900

VA TECH

OFFICE OF SPONSORED PROGRAMS

810 BumJM Hall Bl&ebburg, VA 24061 Principal Inve8tiptor: Jim Fortune

CHANGES IN OPERATIONAL CLOC PROCEDURES SY90-91

TABLE OF CONTENTS

Section

Level of Specificity

Refusal/ Rollover /Trade Changes

Full Credit Lists

Partial Credit

Timing of CLOC Purchases and Deliveries

Domestic Origin Requirements

Bonus Commodities

LEVEL OF SPECIFICITY

DescriPtion of Change - USDA will decide on a case-by- case basis the degree of specificity for each CLOC issued depending on the nature of the particular market and the particular surplus . In effect this means that some of the broad commodity categories that currently exist for CLOCs may be tightened. Unless a specific commodity market is targeted for removal the CLOCs will remain generic. It is anticipated that OPEN ORDER CLOCs will remain generic.

Rationale for Change - There is a concern that the level of specificity used in the old CLOC program was not restrictive enough to remove some of the commodity markets targeted for surplus removal or price support. Secretary Clayton Yeutter has asked for a redesign of the CLOC program in such a way as to continue to provide flexibility to the school districts while simultaneously responding to the surplus removal desires of agricultural groups.

Operational Procedures - USDA shall determine the specificity of USDA markets and corresponding CLOCs. This determination shall be made in consultation with agricultural experts knowledgeable of the commodities expected to be candidates for inclusion as USDA purchases. This determination should be made before CLOC Alerts are sent to CLOC sites, i.e., before Regional Office announcements are sent.

If USDA purchases are determined not to target a particular sector of a commodity market, the CLOCs issued will remain generic thus continuing to allow as much flexibility as possible to CLOC school districts.

EXAMPLE : USDA enters the market to purchase peaches. They announce that they will accept bids for canned clingstones , canned freestones, and frozen freestones . The CLOC issued may be for PEACHES.

If USDA determines that a specific spot market is targeted, a more specific CLOC may be issued.

EXAMPLE: USDA enters the market to purchase fresh winter pears. The CLOC issued will be for FRESH WINTER PEARS.

EXAMPLE: USDA enters the market to help dairy farmers who are selling their culled cows. A CLOC which would be issued for GROUND BEEF would target that market more closely than a generic BEEF CLOC . The list of full and partial credit items would be specific to the culle d cattle market.

Procedures governing school district purchasing will be the same as previous years. Purchases must be for products listed on the CLOC and purchases must be made during the purchase period specified on the CLOC.

If a school district is unable to purchase eligible products on a CLOC issued for a specific commodity, it must send (or fax~ a written statement to VA Tech prior to the expiration of the CLOC indicating that its vendors have been unable to supply qualifying products. Upon receipt of the letter, VA Tech will remove the issued CLOC from the school account and the moneys will revert to the CLOC pool of unissued entitlement dollars. VA Tech will document all such instances for the CLOC evaluation.

Below is a list of some CLOCs that have been issued during previous school years and an estimate of areas where more specificity may be required during SY90/91 .

Generic CLOCs Under New Level of Specificity Rules

FLOUR

CHICKEN

TURKEY

BEEF

BEEF

PORK

PORK

PINEAPPLE

APRICOTS

OPEN ORDER

PEARS

PEARS

MIXED FRUIT

TART CHERRIES

PEACHES

GREEN BEANS

TOMATOES

SWEET CORN

GREEN PEAS

POTATOES

SWEET POTATOES

APPLES

APPLES

PLUMS

DRY BEANS

BLUEBERRIES

PRUNES

EGGS

TUNA

GRAPES

FLOUR

CHICKEN

TURKEY

GROUND BEEF

BEEF

PORK

HAM

PINEAPPLE

APRICOTS

OPEN ORDER

PEARS

FRESH WINTER PEARS

MIXED FRUIT

TART CHERRIES

PEACHES

GREEN BEANS

TOMATOES

SWEET CORN

GREEN PEAS

POTATOES

SWEET POTATOES

APPLES

FRESH APPLES

PLUMS

DRY BEANS

BLUEBERRIES

PRUNES

EGGS

TUNA

RAISINS

REFUSAL/ROLLOVER/TRADE CHANGES

Description of Change - CLOC school districts will no longer be able to receive substitute CLOCs or consolidate unused portions of CLOCs into roll-over CLOCs. CLOC sites may trade CLOCs of unequal value .

Rationale for Change - The old CLOC system allowed school districts the option of refusing a CLOC within 15 days of issuance and replacing it with a CLOC for a commodity purchased under Section 32 bonus procurements. During the fourth quarter districts could consolidate unused portions of CLOCs in to ''roll over" CLOCs.

Under the commodity distribution system, specified amounts are removed from the market. If a school district refuses all or part of its fair share of a commodity, State Agencies have the capability of reallocating the commodities to other schools.

To ensure that a specified value of commodity is removed from the market, all CLOC sites must keep their fair share of the commodity value. If refusals were allowed and Group A bonus commodities substituted, more Group A bonus commodity would be removed from the market and less of the refused CLOC. This difference from the commodity system could confound the evaluation of how well the CLOC program addresses the spot removal issues. Trading among CLOC sites is comparable to the reallocation process accomplished at the state level .

Operational Procedures - If a school district elects not to use a given CLOC, the unused portion will be deducted from its entitlement for the quarter following the due date for submission of the CLOC Reporting Form . Moneys left at the end of fourth quarter will be deducted from the second quarter check of the next year.

VA Tech will act as a clearinghouse for trades. School districts may notify VA Tech of CLOCs which they wish to trade away or receive. VA Tech will keep a list of school district requests and attempt to facilitate trading if possible. The actual negotiation of the trade will occur between the school districts.

VA Tech will compile a list of phone and Fax numbers for school district use. Trades will be made according to previous operational procedures. These procedures are: School districts notify VA Tech of the trade within the purchase period of the CLOC. The district must report the number and value of the CLOC to be traded away. The trading partner must also notify VA Tech of the CLOC number and value of the CLOC to be received. The initial notification may be by telephone to facilitate CLOC issuance by VA Tech. CLOC sites must then send written notification to establish an appropriate audit trail.

VA Tech will draw down the various accounts and issue new CLOCs.

The purchase and delivery periods of these new CLOCs will remain the same as the original CLOCs.

EXAMPLE:

School District A may trade a PINEAPPLE CLOC which specifies that the pineapple must be pur chased within the period May 25 through August 15 with School B for a TART CHERRY CLOC with a purchase period of July 15 through September 12. School A will receive a TART CHERRY CLOC with a purchase period of July 15 through September 12 and School B will receive a PINEAPPLE CLOC with a purchase period of May 25 through August 15 .

School distri cts may trade equal or unequal amounts of CLOCs.

VA Tech will notify USDA of any trades of unequal value .

Adjustments to check values for unequal trades will be made by USDA in the quarter following notification of the trade by VA Tech.

EXAMPLE :

School District A has received a CLOC for $500 for SWEET POTATOES . The school food director knows that the children will not eat sweet potatoes in any form . Rat her than contribute to plate waste t he director d ecides to lose $500 of ent i t lement .

Schoo l District B is willing to take $500 of SWEET POTATOES but is not willing to trade equally. It is willing to give up $250 of OPEN ORDER. School District A will recei ve a new CLOC for $250 for OPEN ORDER and give up $500 of SWEET POTATOES. School District B will receive a CLOC for $500 for SWEET POTATOES and give up $250 of OPEN ORDER .

School A will have $250 deducted from i t s next quarter check and School District B will have $250 added to its check.

FULL CREDIT LISTS

Description of Change - Full credit lists for qualifying CLOC purchases will be redesigned by USDA. Decisions as to what products will receive full credit will be determined on a CLOC-by-CLOC basis by USDA.

Rationale for Change - There are a number of products under the old CLOC system which received full credit and did not remove as much commodity from the market per dollar spent as USDA procurements. In an attempt to strengthen the agricultural effect of the CLOC program the ful l credit lists will be revised so that products will have maximum farm-level impact.

Operational Procedures - Crediting of CLOC purchases will be based on farm-level equivalent of commodity removed per dollar spent. Full credit will be given to purchases which remove approximately the same amount of a commodity from the market, per dollar spent, as the form of USDA commodity purchases. Fresh products will receive full credit, even though for some commodities, the fresh market is different from the processed market. The magnitude of fresh produce submitted on CLOCs will be examined in the evaluation.

USDA shall determine the products qualifying for full credit on corresponding CLOCs. This determination shall be made in consultation with agricultural experts knowledgeable of the commodities expected to be candidates for inclusion as USDA purchases . This determination should be made before CLOCs are issued to CLOC sites, i .e., before USDA offers to buy. It will be imperative for CLOC school districts to carefully read the listing of full credit products given for each CLOC. These lists may differ a great deal from full credit lists of previous years, and may vary from one issuance to the next.

EXAMPLE: Pie fillings will no longer qualify as full credit on any of the fruit CLOCs as they do not remove as much commodity per dollar as canned fruits.

EXAMPLE: It is possible that cooked boneless turkey breasts will not qualify for full credit on the TURKEY CLOC (even though they are 100% turkey) because the per pound price is so high due to processing that compared to purchases of whole turkeys or turkey rolls less turkey is being removed from the market per dollar spent.

In terms of CLOC purchasing, the same operating procedures as in previous years will apply with CLOC sites purchasing qualifying products within the time periods specified on each CLOC. Full credit products will be listed on each CLOC issued.

Draft versions of full credit lists are presented below for for some coMmodities expected to be purchased. The lists are "' presented only as examples of what new full credit lists may look like .

COMMODITY

GROUND BEEF

CHICKEN

TURKEY

APPLES

PINEAPPLE

PEACHES

MIXED FRUIT

PEARS

PLUMS

FULL CREDIT

raw bulk ground beef cooked bulk ground beef raw 100% beef patties cooked 100% beef patties raw patties with up to 20% VPP cooked patties with up to 20% VPP canned beef whole cut-up chicken raw chicken parts cooked unbreaded parts chicken hot dogs boneless raw chicken whole turkey raw turkey parts unbreaded turkey patties turkey rolls turkey roasts turkey hot dogs turkey bologna turkey salami fresh apples canned apples apple juice single strength apple juice concentrate apple cider applesauce fresh pineapple canned pineapple pineapple juice single strength pineapple juice concentrate fresh peaches canned peaches frozen peaches canned mixed fruit fresh pears canned pears fresh plums canned plums

TART CHERRIES

GREEN BEANS

GREEN PEAS

TOMATOES

SWEET CORN

SWEET POTATOES

DRY BEANS

POTATOES

FLOUR

(If applicable to state decision) fresh tart cherries canned tart c t erries frozen tart cherries fresh green beans canned green beans frozen green beans fresh green peas canned green peas frozen green peas fresh tomatoes canned tomatoes tomato sauce tomato puree tomato paste tomato juice catsup canned whole kernel corn frozen whole kernel corn fresh sweet potatoes canned sweet potatoes, whole, cut, mashed frozen,unbreaded sweet potato patties vegetarian beans pork and beans refried beans any fresh dry beans, canned or bagged dry or c.anned split peas dry or canned lentils dry or canned black- eyed peas fresh raw potatoes canned potatoes frozen whole potatoes frozen formed potatoes frozen french fries dried potato flakes all purpose flour whole wheat flour cake flour cracked wheat flour rolled wheat

OPEN ORDER brown rice white rice soybean o i l soybean shortening

VPP

rolled wheat rolled oats corn oil corn oil margarine spaghetti macaroni lasagna noodles other pasta shapes (seashells, etc .)

peanuts peanut butter peanut oil wheat germ bulgar vegetable oil vegetable shortening mozzarella cheese corn grits corn meal all purpose flour* whole wheat flour* cake flour* cracked wheat flour* oat flour*

*Not allowed as purchases on OPEN ORDER CLOCs in bonus FLOUR states.

PARTIAL CREDIT

Description of Change - Partial requirements will be modified.

a percentage of the cost of the value per pound.

credit (recipe) reporting Credited amounts will be based on product as opposed to a commodity

Rationale for Change - Partial credit was given by calculating a commodity value based on the weight of the commodity in the processed product. School districts or VA Tech, in order to calculate partial credit, needed to know the weight of the product , the percentage of the commodity in the finished product, and the current market value of the commodity. These pieces of information were difficult to obtain and made the reporting process unnecessarily cumbersome from an administrative point of view. Allowing CLOC sites to claim a percentage of the purchase price is more administratively feasible than the existing system.

Operational Procedures - Products which are not designated as full-credit will receive partial credit. The proportion of credit given will be the ratio of: (1) the weight of commodity removed from the market by the SFA dollar spent on the product, and (2) the weight of the commodity removed from the market by USDA purchases, per dollar spent by USDA . Thus a predetermined percentage of the total dollar of the product would be allowed against a specific CLOC. The partial credit list will allow credit for commonly purchased processed products. The list for SY90/91 may also include some products which have in the past been full credit, i.e., saltines, chicken nuggets, cherry pie filling . The lists will be as flexible as the present system in that CLOC school districts will be able to purchase as partial credit any product which a commodity site is able to purchase under a state, regional, or national processing agreement .

VA Tech, under the direction of USDA, will compile additional notebook pages for each CLOC site listing the products eligible for full and partial credit. In the case of partial credit items, the list will include the percentage of the value of the purchased product eligible for CLOC credit. The list will be compiled using the USDA Commodity Conversion System, current industry formulations and prices, and data from the SY89/90 CLOC reports.

Notebook pages will be sent to CLOC sites prior to or at the time of CLOC issuance. It is hoped that full/partial credit lists can be compiled and distributed before July 1. Full and partial credit lists for CLOCs issued before July 1 will be sent with the

CLOC .

EXAMPLE: POSSIBLE FULL CREDIT LIST FOR TURKEY

Whole Turkeys Raw turkey parts Unbreaded turkey patties Turkey rolls

Turkey roasts Turkey hot dogs Turkey bologna Turkey salami

POSSIBLE PARTIAL CREDIT LIST FOR TURKEY WITH PERCENT

OF TOTAL COST ALLOWED FOR CREDIT

Boneless ckd turkey Turkey corn dog Turkey pastrami

80% 60% 90%

Turkey hot dogs and some lunchmeat would be allowed as full credit because per dollar spent they remove as much turkey from the market as whole turkeys. Cooked boned turkey breasts would not be allowed as full credit because the amount of turkey removed per dollar is less than the amount removed by USDA when it purchases either whole turkeys or turkey rolls. Turkey pastrami would receive partial credit because it is more expensive than the other turkey lunchmeat and thus removes less turkey from the market.

If school districts wish to purchase a product which is not on the list supplied and which they feel should be given partial credit, they may request that the product be added to the partial credit list . For the request to be g r anted, the district must supply the following information: the pounds of commodity removed from the market by the product and the cost of the product .

School districts will report partial credit purchases on the CLOC Reporting Form. In the case of partial credit, they will fill out the bottom two lines of the form indicating the pr~determined percentage of the value they are claiming and the total dollar value claimed (the percentage X total value of the product).

TIMI NG OF CLOC PURCHASES AND DELIVERIES

Description of Change - CLOC purchase and delivery periods will be altered so that they are more in line with actual USDA purchase and delivery periods. CLOC Alerts will be issued when USDA surveys their FNS Regional Offices for preferences and allocation information. CLOCs will be issued when USDA announces that they are entering the market (in the past that was the CLOC Alert date) . Expiration dates for CLOCs will be the date on which USDA expects to actually make purchases (in the past actual purchase dates became the CLOC issue dates). Delivery periods for CLOC purchases will extend through the last shipping date for USDA deliveries of the commodity to State drop-off points (in the past that was the CLOC expiration date). Some quarterly CLOCs (i .e. OPEN ORDER, meats and poultry) will still exist, as well as the yearly FLOUR CLOC, if applicable.

Rationale for Change - CLOC purchasing in some instances was not congruent with USDA purchasing and may not have been sensitive to the seasonality of perishable commodities. The timing of CLOC purchasing and delivery periods will be altered so that CLOC school districts will be in the market simultaneously with USDA.

Theoretically , if USDA is entering the market at an optimum time to support prices or remove surpluses, better prices should be available to school districts at that time and the agricultural impact created by the CLOC purchases should more closely correspond to the perceived agricultural need. The length of time allowed for CLOC purchasing will depend on the type of market, with purchas ing periods shortest for time sensitive perishable commodities.

Operational Procedures - There are no new requirements for CLOC school districts with these timing alterations . As always, CLOC school districts will be expected to purchase between the date the CLOC is issued and the expiration date specified on each CLOC. These time frames will be shortened somewhat and moved to earlier in the year, especially for fruits and vegetables. Some purchasing may be required over the summer months. The minimum purchase period for any CLOC will be 30 days .

EXAMPLE :

USDA

Procedures

USDA regional surveys enters the market by putting out bid offers contract award last delivery to States estimated last delivery date to schools by states

CLOC Procedures

SY82-SY90 SY91

none CLOC Alert

CLOC Alert CLOC Issue

CLOC Issue CLOC Expires

CLOC Expires CLOC Delivery

CLOC Delivery none

VA Tech will send a CLOC Alert by mail to CLOC sites within two business days of notification by USDA. In the case of an unexpected purchase intent , e . g., red raspberries, VA Tech will fax CLOC Alerts to equipped school districts in order to enable sites as much time as possible to generate bid specifications and locate potential vendors. Other sites will be telephoned.

VA Tech will send CLOCs to all days of notification by USDA .

facsimile to sites who express by mail for all others.

CLOC sites within two business CLOCs will be transmitted by a desire for such transmittal and

Specifics by commodity category follow:

- For fruits and vegetables, CLOCs will be issued at the time USDA announces their request for bids. School districts must commit to purchase commodity items between the time of the bid announcement and the time of the contract award. School districts will be given a minimum of 30 days to make these commitments to purchase. Delivery of these products will mirror the commodity distribution program, by allowing delivery of the CLOC purchases up until the last scheduled date of USDA delivery to the States.

- For meats and poultry, CLOCs will be issued at the time USDA announces it is entering the market, and for subsequent quarters until USDA leaves the market. Beef and poultry products are generally purchased in two-week intervals beginning in July and extending through February. If SY90/91 purchase patterns follow previous years, three CLOCs would be issued for these commodities: the first at the time of announcement of the intent to purchase these commodities; the second on October 1st; and the third on January 1st. If USDA purchasing is scheduled to end in the middle of a quarter, the expiration date on the CLOC will reflect that ending date.

-For 416 (OPEN ORDER) commodities, CLOCs will continue to be issued on a quarterly basis, with each CLOC valued at roughly one-fourth of the anticipated yearly percentage. FLOUR CLOCs will continue to be issued on a yearly basis for school districts located in states that are participating in the bonus flour program. For these sites the value of the OPEN ORDER CLOC will be reduced by the value of a flour threshold calculated by multiplying the state flour threshold by the school district entitlement.

If USDA makes an unexpected purchase for a commodity that might not normally appear on a school district's bid specifications (e.g. red raspberries), a school district may request a 2-3 week extension of the purchase period by notifying VA Tech in writing within the specified purchase period. such extensions will only be granted for commodities not normally purchased.

If market conditions change after USDA has entered the market resulting in no USDA procurements or purchases that are substantially less than anticipated, school districts will be given the option of spending their CLOC as issued or reducing the amount of the CLOC value. This reduction will only occur if the USDA change is known in time for sites to be notified of adjustment options, probably the last week of the purchase period . VA Tech will document all such reductions for the CLOC evaluation.

If market conditions change after USDA has entered the market resulting in an unexpected increase in commodity procurement, an additional CLOC will be issued if the additional purchase equals or exceeds one-half percent of the purchase plan . The purchase and delivery dates of the new CLOC will be determined by USDA at the time of issuance.

School districts will be given the option of providing purchase orders or invoices as documentation that the purchase occurred during the specified time period. Those school districts which elect to use purchase orders as documentation will be required to provide subsequent invoices to document receipt of the products ordered. Purchase orders and invoices used as documentation of purchases is due to VA Tech no later that 25 business days following the expiration date on each CLOC. If invoices are sent supporting a purchase order purchase, the invoices must be received within 25 business days following the final delivery date on the CLOC. If appropriate documentation is not received within the specified period of time, the school districts may suffer a loss of entitlement.

VA Tech will continue to approve or disapprove CLOC purchases within three business days.

DOMESTIC ORIGIN REQUIREMENT

Description of Change - The domestic origin requirement will be more tightly enforced and monitored. School districts will be required to certify that they have, to the best of their knowledge, purchased American products and that they have received certification from their distributors that the domestic origin requirements were met. In addition, USDA will make random spot checks to ensure that both schools and distributors are complying with these requirements.

Rationale for Change - USDA, through its on-site graders and inspectors, absorbs the responsibilities and overhead costs to guarantee the domestic origin of products in the commodity distribution system. The agricultural groups believe that the CLOC program must ensure domestic support because of congressional intent of the law.

It is very difficult to establish a monitoring system which will guarantee 100 per cent compliance with the domestic origin requirement. School districts often cannot tell the origin of the product from the labels or invoices. This modification attempts to place some of the burden of the domestic origin requirement on the distributor. At a minimum, these random spot checks may provide some insight into the magnitude of foreign purchases by school districts and the commodities that are most likely to be foreign products.

Operational Procedures - VA Tech will supply a form for CLOC districts to use with distributors and producers. The form, which ideally should be signed by distributors at the beginning of the school year, will certify that products supplied by that vendor which are designated by the school district as CLOC purchases were grown and produced in the United States . A copy of this signed form will be forwarded to VA Tech. VA Tech will not approve CLOC purchases from a vendor unless a domestic certification form is on file for that vendor. Each CLOC Reporting Form submitted by school district personnel will certify that the products claimed for CLOC credit are, to the best of their knowledge, American products.

School districts who receive imported products after good faith efforts have been made to ensure domestic origin shall be given a time extension by VA Tech in which to purchase domestic products.

School districts who are unable to purchase domestic products must notify VA Tech in writing of the unavailability of domestic products before the expiration date of the CLOC.

Upon receipt of the ietters, VA Tech will remove the issued CLOC from the school account and the moneys will revert to the CLOC pool of unissued entitlement moneys . VA Tech will document all such instances for the CLOC evaluation.

If a spot check of school purchasing reveals what is determined to be bad faith use of CLOC funds for non- domestic products, school districts shall lose entitlement eqPal to the value of the imported products purchased. The decision to deduct entitlement for this purpose shall be made by designated personnel at

USDA/FNS .

PLEASE REPLACE PAGES 16 AND 17 IN YOUR CLOC NOTEBOOK UNDER

CHANGES IN OPERATIONAL CLOC PROCEDURES SY90-91 WITH THE

FOLLOWING:

Bonus commodity policy for SY90/91 will be as follows:

Section 32 Bonus Commodities CLOC districts will be eligible to receive Section 32 (Group A) bonus commodities, i.e., dates, raisins, from their State Distribution Agencies. They may also receive products containing such commodities processed under State processing agreements.

Group B Bonus Commodities CLOC districts will be eligible to receive Group B bonus commodities, i.e., butter, cornmeal, honey, from their State Distribution Agencies. They may also receive products containing such commodities processed under State or National processing agreements.

Flour Two flour options will be available to states in SY90/91. CLOC districts in states choosing not to participate in the bonus flour threshold system (Option 1} will receive an OPEN, ORDER CLOC with which they may purchase any item in the Group B category including flour. They will not receive a FLOUR CLOC and 1,may not purchase National commodity Processing products containing flour if that program is reauthorized by Congress.

CLOC districts will be eligible to receive bonus FLOUR if their state has chosen to participate in the bonus flour threshold system (Option 2). Districts in Option 2 states will receive a FLOUR CLOC and the amount of that CLOC will be deducted from the Group B CLOC , i.e.,OPEN ORDER. Such CLOC districts will be immediately eligible for bonus commodity flour from their State Distributing Agencies, through direct shipment, State processing, and National processing sales.

VA Tech will notify CLOC districts of their state's option;

calculate FLOUR CLOC amounts and issue FLOUR CLOCs, where appropriate; and modify full and partial credit lists to match di~trict eligibility for products based on state option. USDA will notify regional and state offices of policy changes in bonus commodities as they affect CLOC districts.

JUNE 21 , 1990

BONUS COMMODITIES

Description of Change - Bonus CLOCs will be issued for those bonus commodities not currently stored by the Commodity credit Corporation. CLOCs for Section 32 bonus commodities, i.e., Group A bonus commodities, will be issued at the time USDA is in the market to make the spot removal. These bonus commodities are usually commodities such as figs, dates, walnuts, etc.

Rationale for Change - The efficiency of the commodity distribution system is in part due to the volume of commodities (including bonus commodities) that can be distributed to numerous programs. If a national CLOC system were implemented only for entitlement commodities, the efficiency of the distribution of bonus commodities to school districts , as well as donated commodities to other programs, could be seriously impaired.

Given the decline in dairy products made available to schools in recent years, the focus of bonus commodities should be on those commodities which are purchased rather than removed from storage.

By issuing CLOCs for these purchased commodities, USDA may gain a better insight into the ability of the CLOC system to handle spot removal purchases. The CLOC system, including both bonus and entitlement CLOCs, will also be examined as part of the whole commodity system.

Operational Procedures - The value of bonus CLOCs will be based on a cents per meal subsidy. The estimated dollar value of the USDA purchase will be divided by the estimated number of total NSLP meals served in the United States . This per meal amount will be multiplied by the number of meals served by each CLOC school district the previous year. The .resulting dollar amount will be the bonus CLOC value.

The timing of bonus CLOCs will be the same as entitlement CLOCs, i.e., CLOC Alerts will be issued when regions are notified; CLOCs will be issued when USDA goes out for bids; and purchases must be made by the time USDA accepts the bids.

School districts may trade their bonus CLOCs. The trades may be for equal or unequal amounts as long as the amounts are approved by both parties . The trades may involve either entitlement or bonus CLOCs. The procedures for trading CLOCs are detailed in the Refusal/Rollover/Trade Section of this document.

Because of the difficulty of estimating the total amount of money necessary to fund Section 32 bonus purchases , USDA will begin issuing checks for bonus CLOCs as soon as the offer to buy goes out. It is anticipated that the school districts will receive the money to cover bonus purchases before the bonus CLOC expires.

If the moneys have not arrived before the expiration date, school districts may be granted a time extension in which to make the bonus purchases until the moneys arrive at the school district .

USDA will notify Regional Offices of the eligibility requirements

1 6 of CLOC sites for bonus commodities . School distr icts will not be el igible to receive Group A bonus commodities from their states or receive processe d products containing these bonus commodities.

Sites wil l b e allowed to receive Group B bonus commodities, e.g., honey, butter, from their states. Sites will be a llowed to receive state des i gnated bonus items for which no bonus CLOCs have bee n issued. Flour regulations will remain unchanged .