Table of Contents

I. INTRODUCTION

II. OVERVIEW

A. Adherence to the Reporting Obligations

B. Monitoring Transactions

C. Issues Arising from Specific Transactions

UMR Calculations

Prior Consultation

D. Improving Notification, Consultation and Reporting Procedures

Review of the Principles

Decline of UMRs

III. OTHER RELATED ISSUES

CSSD Location, Membership and Attendance

I. INTRODUCTION

1. The CSSD was established by the FAO in 1954 to monitor international shipments of surplus agricultural commodities used as food aid in order to minimize the harmful impact of these shipments on commercial trade and agricultural production. Over the years, members of the CSSD have developed a comprehensive set of rules and procedures designed to assist aid-supplying countries to account for and identify the flow of food aid shipments. These rules, endorsed by the major suppliers of commodity assistance, are embodied in a handbook entitled: Principles of Surplus Disposal and Consultative Obligations of Member Nations.¹ This report of the Consultative Subcommittee of Surplus Disposal (CSSD) covers activities for the period from November 1996 to the end of October 1998 (419^th to the 428^th meetings).
2. The Principles set out detailed procedures for reporting food aid to the CSSD by aid-supplying countries including notification of the various categories of food aid, prior consultation with other exporters and the establishment of usual marketing requirements (UMRs). The reporting obligations of aid-supplying countries vary according to the type of food aid supplied and whether governments, private charitable organizations or multilateral agencies are the vehicles for distribution. Meetings of the Subcommittee are held on a regular basis to keep track of the continual flow of food aid reported to the CSSD. Meetings were held less frequently in 1997 and 1998, partly due to the decrease in notifications, but also as a cost-cutting measure. The CSSD is located in Washington DC and is serviced by the staff of FAO's liaison office.²

3. Officers elected during the review period:

For November 1996 to March 1998

Chairperson: Mr. Arnold Parzer (Netherlands)
Vice-chairperson: Mr. Natigor Siagian (Indonesia)

For March 1998 to present

Chairperson: Mr. Natigor Siagian (Indonesia)
Vice-chairperson: Ms. Amy Winton (United States)

II. OVERVIEW

4. From 1 November 1996 to 1 October 1998, CSSD members reviewed 427 notifications of food aid transactions and World Food Programme project proposals. During CSSD meetings, questions were raised about consultation and notification obligations, the level of UMRs and other matters related to the reporting procedures for food aid. Early in the present reporting period members continued to be involved in finalizing the major overhaul of the Principles through a working group which was set up to examine the list of transactions, the catalogue and the related question of grey area transactions. This review was initially carried out in response to a recommendation made by the 60^th Session of the CCP. The review carried over into the present reporting period recommendations made during the CCP's 61^st session. Since the last CCP meeting CSSD members also studied in some depth, the issues of CSSD location and operating procedures.

A. ADHERENCE TO THE REPORTING OBLIGATIONS

5. The reporting procedures of the Subcommittee, formulated and revised over the past 44 years, rely on transparency. This is achieved through the notification process whereby aid-supplying countries which adhere to the Principles, report to CSSD with information about their food aid transactions with recipient countries. For some types of transactions, aid suppliers are obliged to consult with other CSSD members in advance. The different types of transactions are listed in a Register of Transactions and comprise the more common kinds of assistance such as government-to-government grants for free distribution, grants for sale in the open market, concessional assistance and monetary grants. In order to ensure that the commodity supplied does not displace normal commercial trade, the consultative process involves the establishment by the aid-supplying country of a benchmark import level known as the usual marketing requirement (UMR). The UMR is a commitment by the recipient country to maintain its normal intake of commercial imports, in addition to the food supplies as a grant or concessional shipment. The UMR is based on average commercial imports over the most recent five-year period for which statistics are available. In certain circumstances, the UMR can be waived or reduced to take into consideration unusual situations such as severe drought, floods, balance of payments difficulties or the absence of reliable import data.

6. While aid-suppliers are enjoined by the CSSD rules to engage in prior consultation, notification and the establishment of UMRs for a broad list of concessional transactions, there are instances where an official notification of transactions is sufficient. When food aid is shipped to meet an emergency situation, for example, or when the shipment is of a relatively small size or is distributed through a private charitable organization or a multilateral body such as the World Food Programme, the supplier need only provide a notification on an ex post facto basis. The CSSD reviews these notifications at its regular meetings, allowing other members, particularly those that are not part of the consultative process, to participate in the review process.

7. Issues discussed in the Subcommittee are generally resolved by consensus. Several questions that are raised in committee are referred back to capitals and may be subject to additional bilateral discussion by the parties concerned. In general, most suppliers of food aid and commodity assistance follow the rules and procedures set out in the Principles. Adherence to the CSSD procedures has proven to be effective in the past and it is believed that the recent overhaul of the reporting procedures can improve the future operations of the Subcommittee.

B. MONITORING TRANSACTIONS

8. A total of eleven aid-suppliers participated in the notification process in 1996. CANADA was absent from the donor list for the first time in many years. ITALY and GREECE became more active donors. In 1997, ten countries reported transactions, with CANADA returning to the fold, and with BRAZIL reporting as a donor for the first time. Traditional donors AUSTRALIA, GERMANY, the NETHERLANDS and the UNITED KINGDOM did not report transactions through CSSD in 1997. Through the end of September 1998, ten donor countries have reported transactions, including SPAIN as an active participant with a number of multi-commodity donations. These suppliers provided the CSSD with 187 food aid notifications in 1997 and 189 notifications in the first nine months of 1998. This was considerably lower than the peak period at the end of the 1980s and early 1990s. A slight upswing in the number of notifications is occurring as 1998 comes to a close. In 1997 the commodities supplied as food aid averaged 17 400 metric tonnes per notification. This has decreased to 11 800 metric tonnes per notification for January-September, 1998, significantly behind the average of 41 800 tonnes per notification average during the previous five-year period.

9. The overall amount of commodities reported to the CSSD amounted to 3 255 000 tonnes in 1997 while 2.23 million tonnes were reported over the period January-September, 1998. There were declines in all commodities in 1997; wheat and rice are leading an increasing trend in 1998. Wheat and wheat flour continue to be the major commodity in the notifications, followed by rice and other grains (Appendix II).

10. The CSSD Register of Transactions, as revised and approved in the 113th Session of the FAO Council, now includes 16 types of food aid transactions which are to be reported. In 1997, direct government donations for free distribution (Type 1) and donations for sale in the open market (Type 2) comprised over half of the notifications, by number (126 of 187), and the largest portion of (42 percent) when considered by volume (Appendix III). Type 10a transactions, based on credit sales at non-commercial rates of interest were relatively small in number in 1997 but represented 25 percent of the total volume. Other transactions reported included triangular transactions involving monetary grants from governments to third party suppliers (Type 4) and monetary grants to private institutions or multilateral organizations or (Types 5 & 6). In the review period, 6 projects were also notified to the CSSD by the WFP.

C. ISSUES ARISING FROM SPECIFIC TRANSACTIONS

11. During the ten CSSD meetings held in the reporting period, there was very little discussion or debate about issues arising from specific food aid transactions and CSSD notifications. On only three occasions were references made to individual transactions.

UMR Calculations

12. At the 421^st meeting of CSSD the delegation from AUSTRALIA expressed concern about the bases used for determining UMRs in transactions between FRANCE and both EGYPT and SIERRA LEONE. The queries were resolved through a subsequent bilateral exchange of information, and were brought to the attention of CSSD only as matters for the record. During the 424^th meeting, AUSTRALIA queried ITALY, which was a donor/supplier to UGANDA, NIGERIA and ZAMBIA. Australia was interested to learn why no UMRs had been established for these transactions. The Italian delegation pledged to revert to Rome on this matter, which was not subsequently raised in CSSD.

Prior Consultation

13. At the 423^rd meeting, the US delegation expressed concern over the lack of prior consultation on a transaction between CANADA and SRI LANKA. CANADA subsequently reported to CSSD that the omission was an oversight that occurred during a personnel change in Ottawa. The UNITED STATES delegation indicated its satisfaction with the explanation.

D. IMPROVING NOTIFICATION, CONSULTATION AND REPORTING PROCEDURES

Review of the Principles

14. A review of the CSSD Principles had been requested during the 60^th Session of the CCP. This request was further refined and mandated during CCP's 61^st Session. The review of the Principles was completed prior to FAO's 113^th Council, which fully endorsed the revised set of Principles as resubmitted by the CSSD Working Group. The revised Principles, including the new Register of Transactions, should be incorporated in booklet form, updating and superseding the 1992 edition.

Decline of UMRs

15. The lack of debate over specific or individual CSSD notifications and transactions, as referred to in paragraph 11 above, can be seen to indicate a general level of satisfaction among CSSD delegations with the existing process. It is however suggested that two inter-related trends in food aid transactions and CSSD notifications may be just cause for reconsideration of certain CSSD functions and processes. First, there has been a reduction in the proportion of food aid that is officially notified to CSSD. In 1997, only 50 percent of food aid was reported through the CSSD (Appendix IV). This is considerably below earlier levels, and is the first time in the last ten years that the proportion is as low as one half. Second, the proportion of reported food aid that involves the establishment of a UMR has also declined rapidly in recent years. This second trend is a reflection of two factors: i) the relatively small size of most transactions and, ii) the vastly increased proportion of food aid which is channelled through private voluntary organizations/multilateral agencies, or provided in response to emergency situations. As noted in the previous report to CCP, the list of CSSD transactions, issued annually by the CSSD, reveals an increasing number of notifications where UMRs were waived entirely in order to relieve any potential burden on recipient countries that are in difficult economic situations. These trends, together, are entirely consistent with the lack of debate within the CSSD over specific transactions. These trends may be interpreted to indicate that there is the opportunity to further streamline CSSD operations, stressing the timely exchange of information and encouraging the continuation of bilateral communications, but possibly further reducing the need to adhere to traditional processes and formalities. Further pursuance of innovations however could mean a fundamental change in the operating procedures of CSSD, and imply the need for an investment on the part of CSSD member countries, for example to standardize electronic communications.

III. OTHER RELATED ISSUES

CSSD Location, Membership and Attendance

16. The 61^st Session of CCP requested that the Secretariat "...prepare a report reviewing the question of the CSSD location, its operational procedures, ways to improve participation by developing countries and to report to its 62^nd session." CSSD members in meetings 424 through 427 addressed the subject of CSSD location. A report on the overall issue of CSSD location was submitted to the CCP Secretariat in June 1998. This report also addressed certain operational matters, which were referred to briefly in the preceding paragraph. Appendix I of the present report provides the latest information available on CSSD membership. Participation in CSSD meetings has remained stable, and indeed has increased slightly during the reporting period.

APPENDIX I

MEMBERS, OBSERVERS AND OBSERVER ORGANIZATIONS
(As of October 1998)

Members (41)

Argentina Ghana New Zealand
Australia Greece Pakistan
Austria Guyana Paraguay
Bangladesh India Peru
Belgium Indonesia Spain
Bolivia Iraq Sri Lanka
Brazil Ireland Thailand
Canada Italy Turkey
Costa Rica Jamaica United Kingdom
Cuba Japan United States
Ecuador Lebanon Uruguay
EEC Malawi
Egypt Mexico
France Myanmar
Germany Netherlands

Observers (16)

Chile Guatemala Malta
Denmark Honduras Norway
Dominican Republic Islamic Republic of Iran Panama
El Salvador Jordan Philippines
Finland Republic of Korea Sweden
Switzerland

International Organizations (7)

International Bank for Reconstruction and Development (IBRD)
International Cotton Advisory Committee (ICAC)
International Federation of Agricultural Producers (IFAP)
International Monetary Fund (IMF)
Organization of Economic Cooperation and Development (OECD)
Organization of American States (OAS)
United Nations Economic Commission for Latin America and the Caribbean (ECLAC)

APPENDIX II
COMMODITY TRANSACTIONS REPORTED TO THE CSSD, BY COMMODITY GROUP
1988 to OCTOBER 1998

APPENDIX III

CSSD NOTIFICATION, BY SUPPLIER, RECIPIENT AND BY TRANSACTION TYPE

FOR EACH COMMODITY, 1988 to 1 OCTOBER 1998

APPENDIX IV

CSSD NOTIFICATIONS AS COMPARED TO GLOBAL FOOD AID DELIVERIES

'000 MT

			1988	1989	1990	1991	1992	1993	1994	1995	1996	1997
Total Food Aid Shipments according to WFP a/ (all commodities)			14.85	11.73	13.64	13.2	15.22	16.85	12.64	9.73	7.03	6.55
Value of Food Aid reported through CSSD (all commodities)			8.22	6.21	8.46	10.41	10.52	14.19	6.74	5.19	4.56	3.26
% which has been reported through CSSD			55.4%	52.9%	62.0%	78.9%	69.1%	84.2%	53.3%	53.3%	64.9%	49.8%
a/ Source: Food Aid Monitor, WFP (INTERFAIS), www.wfp.org/reports/faf/97 - October 1998

¹ This handbook, which is available in English, Spanish and French, was last updated in 1992.

² The current Secretary of the Subcommittee is Mr Robert Patterson.