(a)

1. (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. (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.

(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. (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. (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. (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:

   1. (i) Observes the discharge of the cargo;
   2. (ii) Reports on discharging methods, including scale type, calibrations, and any other factors that may affect the accuracy of scale weights, and, if scales are not used, states the reason therefor and describes the actual method used to determine weight;
   3. (iii) Estimates the quantity of cargo, if any, lost during discharge through carrier negligence;
   4. (iv) Advises on the quality of sweepings;
   5. (v) Obtains copies of port or ocean carrier records, if possible, showing the quantity discharged; and
   6. (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. (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. (1) Fit for the use authorized in the agreement and, if so, whether there has been a diminution in quality; or
2. (2) Unfit for the use authorized in the agreement.

(g)

1. (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:

   1. (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;
   2. (ii) Donation to a governmental or charitable organization for use as animal feed or another non-food use; or
   3. (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. (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.