Agreements for the Development of Foreign Markets for Agricultural Commodities

SUMMARY: This final rule adopts the substantive provisions of the

Interim Rules published August 16, 1991, (56 FR 40747) and November 17,

1993, (58 FR 60550) regarding implementation of the Market Promotion

Program with changes to reflect public comments and recent legislative

changes to the authorizing statute. The interim rule was also edited to

present a more logical and understandable regulation.

EFFECTIVE DATE: February 1, 1995.

FOR FURTHER INFORMATION CONTACT: Sharon L. McClure, Director, Marketing

Operations Staff, Foreign Agricultural Service, United States

Department of Agriculture, 14th and Independence Avenue, SW.,

Washington, DC, 20250-1042. Telephone: (202) 720-5521. The Final

Regulatory Impact Analysis concerning this rule is available on request

from the Director, Marketing Operations Staff, Foreign Agricultural

Service, United States Department of Agriculture, 14th and Independence

Avenue, SW., Washington, DC, 20250-1000. Telephone: (202) 720-5521. The

United States Department of Agriculture (USDA) prohibits discrimination

in its programs on the basis of race, color, national origin, sex,

religion, age, disability, political beliefs and marital or familial

status. Persons with disabilities who require alternative means for

communication of program information (braille, large print, audiotape,

etc.) should contact the USDA Office of Communications at (202) 720-

5881 (voice) or (202) 720-7808 (TDD).

SUPPLEMENTARY INFORMATION: This rule is issued in conformance with

Executive Order 12866. Based on information compiled by USDA it has

been determined that this rule is ``economically significant'' and has

been reviewed by the Office of Management and Budget.

This final rule amends the existing information collection as

approved by the Office of Management and Budget (OMB) pursuant to the

Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.), under OMB

control numbers 0563-0001, 0563-0003, and 0563-0029. Due to the time

constraints of implementing the rule immediately, the agency has

requested emergency clearance of this addendum from OMB. Comments on

the information collection may be sent to the Office of Information and

Regulatory Affairs, Office of Management and Budget, room 10202, NEOB,

Washington, DC 20503. Attention: Desk Officer for USDA.

It has been determined that the Regulatory Flexibility Act is not

applicable to the 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.

This program is not subject to the provisions of Executive Order

12372, which requires intergovernmental consultation with State and

local officials. See notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115 (June 24, 1983).

This rule has been reviewed under the Executive Order 12778, Civil

Justice Reform. The rule would have preemptive 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. The rule requires that

certain administrative remedies be exhausted before suit may be filed.

The Department of Agriculture is committed to carrying out its

statutory and regulatory mandates in a manner that best serves the

public interest. Therefore, where legal discretion permits, the

Department actively seeks to promulgate regulations that promote

economic growth, create jobs, are minimally burdensome and are easy for

the public to understand, use or comply with. In short, the Department

is committed to issuing regulations that maximize net benefits to

society and minimize costs imposed by those regulations.

Background

Section 203 of the Agricultural Trade Act of 1978, as amended,

directs the CCC to carry out a program to encourage the development,

maintenance and expansion of commercial export markets for agricultural

commodities through cost-share assistance to eligible trade

organizations. Such assistance may be provided in the form of CCC funds

or CCC owned commodities.

Since the inception of the MPP, CCC has monitored the program

closely, strengthened program controls and implemented changes to

improve the effectiveness of the program. In administering the program,

CCC is committed to ensuring efficient and effective use of public

funds. In this regard, CCC considers an applicant's need for Federal

financial assistance, an applicant's use of rigorous performance

measurements in its plans, and increasing contribution levels from

participants as important factors in the overall management of the MPP.

Summary and Analysis of General Comments

On August 16, 1991 (56 FR 40747), and November 17, 1993 (58 FR

60550), interim rules were published governing the operations of the

Market Promotion Program authorized by Section 203 of the Agricultural

Trade Act of 1978, as amended by Section 1531 of the Food, Agriculture,

Conservation, and Trade Act of 1990 (Pub. L. 101-624) and the Omnibus

Budget Reconciliation Act of 1993 (Pub. L. 103-66).

Following is a summary of the comments which specifically address

the provisions of the interim rules and CCC's responses to these

comments. The discussion addresses each interim rule separately and,

therefore, may not follow the sequence of the interim rules. General

comments relating to the value and success of the program, editorial

suggestions, and non-substantive comments have been omitted.

CCC received 46 letters containing nearly 200 comments from

nonprofit U.S. trade associations, U.S. companies, state organizations,

regional trade associations, cooperatives and consulting firms in

response to the interim rule published on August 16, 1991 (56 FR

40747).

Definitions

CCC received 42 comments on this section.

Comment: Revise the definition of ``foreign third party'' to

include individuals.

Response: CCC agrees with the commenter and has expanded the

definition to encompass ``foreign entity'', thereby including

individuals.

Comment: Include a definition for ``foreign third party

contribution''.

Response: CCC defined ``contribution'' in Sec. 1485.11(i) to refer

to costs incurred in support of an approved activity. The rule contains

detailed provisions as to the expenditures that may be counted as

contributions.

Comment: Define the term ``allowances'' as used in Sec. 1485.20(b).

Response: The term ``allowances'' refers to the cost of housing and

educational tuition and cost of living adjustments. Further

clarification is provided in Sec. 1485.16(c). [[Page 6353]]

Comment: Clarify the term ``fiscal year''.

Response: CCC deleted all references to the term ``fiscal year'' in

the final rule since it had no significant bearing on the

administrative operations of the program.

Comment: Revise the definition of ``trade servicing'' to include

processors.

Response: CCC did not intend to exclude activities directed at

processors. Therefore, CCC deleted the definition of ``trade

servicing'' in favor of its ordinary and customary meaning.

Comment: CCC's definitions for ``brand product or brand commodity''

and ``brand promotion'' restrict or prevent the use of brand names in

worthwhile promotional activities. Furthermore, the definitions do not

account for the way in which high value products are marketed. These

definitions should be amended so that if all brands within an industry

sector are included on an advertising copy, then it would be considered

a generic promotion.

Response: CCC recognizes the merit of this suggestion and amended

the definition of ``brand promotion'' in Sec. 1485.11(g).

Comment: Print or media advertising containing the name of a retail

outlet should be considered a generic promotion rather than a brand

promotion since a retailer's name is not a private label.

Response: CCC adopted the concept that print or media advertising

containing the name of a retail outlet is a generic promotion rather

than a brand promotion.

Comment: Include ``private label products'' in the definition of

``brand promotion.''

Response: The revised definition of brand promotion would encompass

promotion of private label products.

Comment: Clarify the difference between the terms ``U.S. commercial

entity'' and ``U.S. entity''.

Response: CCC deleted all references to the term ``U.S. entity'' in

the final rule. The term ``U.S. commercial entity'' is defined at

Sec. 1485.11(ff).

Comment: Clarify the term ``incurred expense''. A strict

interpretation of this term could pose serious problems for non-

refundable deposits. For example, an MPP participant makes a non-

refundable deposit in October for an advertisement which will air in

January. Is the expense ``incurred'' on the date the space is reserved

and a deposit is made (October) or on the date the advertisement

actually airs (January)?

Response: CCC defines ``incurred'' as the date a participant or

third party transfers funds to pay for an expenditure. In this example,

the expense is incurred when the deposit is made.

Comment: Define the terms ``market'' and ``functions''.

Response: The term ``market'' is defined as ``a country'' in the

final rule. CCC also deleted all references to the term ``functions''.

Comment: Define the term ``sales expenses''.

Response: CCC did not define the term ``sales expenses'' since it

has an ordinary and customary meaning. The term ``sales expenditures''

appears in Sec. 1485.13(c)(3)(x) and Sec. 1485.16(d)(6).

Comment: Define the term ``permanent display''. On what basis is

something determined to be ``permanent''--time used, material used,

level of use?

Response: The term ``permanent'' as used in Sec. 1485.16(d)(7)

means enduring or lasting beyond one activity plan year.

Comment: Expand the definition of ``agricultural commodity or

commodity'' to include high value items such as beverages, pet foods,

vitamin and mineral supplements, flowers, ornamental plants, seeds, and

mineral water.

Response: CCC revised the definition of ``agricultural commodity''

at Sec. 1485.11(d) to match the statutory definition applicable to the

MPP. This definition includes ``products'' thereby covering many of the

items listed by the commenter. Mineral water, however, does not fall

within this statutory definition.

CCC added definitions for ``eligible commodity'', ``exported

commodity'' and ``promoted commodity'' in Sec. 1485.11(o),

Sec. 1485.11(p) and Sec. 1485.11(x), respectively, because a

description of each of these is required for each application. This

information is necessary for determining appropriate reimbursement

rates and for evaluating MPP and EIP/MPP proposals.

Slotting Fees and Display Space Rental Fees

CCC received 14 comments on this issue.

Comment: The interim rule should clearly distinguish between

slotting fees and display space rental fees since they are not one and

the same. Slotting fees--the cost of getting a new product into the

warehouse or obtaining shelf space in the store--should not be

reimbursable under the MPP. Display space fees, on the other hand, are

promotional expenses associated with using store space for end-aisle

displays, case stack displays, demonstrations, etc., and should be

eligible for reimbursement. Temporary off-shelf display space is one of

the most effective promotional tools available because it stimulates

impulse purchases and provides high in-store visibility.

Response: CCC agrees with the commenters that display space fees

are appropriate promotional expenditures. Therefore, CCC amended the

final rule to allow participants to seek reimbursement for display

space fees. Slotting fees, however, are not eligible for reimbursement.

Contributions

CCC received ten comments on this issue.

Comment: What is meant by the phrase ``to be eligible as a

participant's contribution, an expense must be directly incurred by the

MPP participant. . .''? For example, can contributions made by regional

or product associations which are members of an MPP participant count

as a participant contribution?

Comment: Expenses incurred and time spent by employees of state

departments of agriculture involved in the design and execution of the

MPP should be considered eligible participant contributions.

Response: An MPP participant may count, as part of its participant

contribution, time and expenses incurred by member organizations

provided the costs incurred are for the overall administration or

management of the participant's entire MPP.

Comment: CCC should not require MPP participants to enter into

written agreements with foreign third parties in order to count the

expenses incurred as contributions. When pressed on the issue of

entering into written agreements, foreign third parties often withdraw

their support and participation in promotional activities.

Response: A participant is no longer required to enter into a

written agreement with a third party if the expenses incurred by the

third party are claimed solely as contributions. However, to the extent

that the U.S. industry or a foreign third party participates in an

activity, the expenses incurred by the contributing party must be

documented and available for audit. The final rule is adopted in this

regard.

Comment: Expenses incurred by target audiences should be considered

eligible contributions. Their willingness to bear costs such as travel

expenses and registration fees indicates a strong support for a

participant's program.

Response: CCC agrees with the commenter and considers costs

incurred by a target audience, other than any portion of salary or

compensation, as [[Page 6354]] eligible contributions. This change is

reflected in Sec. 1485.13(c)(3)(ii).

Comment: Sections 1485.16(a)(7) and (8) of the interim rule should

be revised to permit expenditures that are incurred prior to CCC's

approval of the activity plan to be eligible contributions.

Response: The MPP is a cost-share program designed to develop,

maintain and expand commercial export markets for U.S. agricultural

commodities. Allowing unauthorized expenditures to be claimed as

contributions would eliminate this basic principle of the MPP.

Comment: Why does CCC consider all expenditures on brand promotions

to be ineligible contributions? In some cases the contributions made by

brand participants are considerably higher than the minimum 50 percent

and such contributions are essential for achieving overall goals in the

target markets.

Response: It is not necessary to consider contributions in

connection with brand promotion activities since CCC reimburses these

activities on a set cost-share basis. However, expenditures incurred by

an MPP participant in administering its brand program are eligible

contributions. This point is clarified in Sec. 1485.13(c)(3)(i).

Brand Promotion Program Operations

CCC received 22 comments on this issue.

Comment: CCC should not require an applicant to provide plans and

budgets for its brand program as part of the application. This

requirement is both excessive and redundant since the same information

is provided in the activity plan.

Response: CCC allocates MPP resources on the basis of several

specific criteria, one of which is the adequacy of the applicant's

proposed strategic plan. In order to make this determination, CCC

evaluates the applicant's proposed program in its entirety which

includes plans for both generic and brand promotion activities and

corresponding budgets. CCC also establishes budget ceilings (maximum

funding levels) by country and program type--generic versus brand--

based on the strategic plan. Accordingly, this aspect of the interim

rule is adopted.

Comment: CCC should not require an MPP participant to reannounce

the availability of unexpended brand promotion funds nor should

redistribution of such funds require prior CCC approval. These

requirements are inefficient, time-consuming and counterproductive

since in many cases brand participants are funded at lower than

justified levels due to budgetary constraints.

Response: CCC agrees with much of this comment. An MPP participant

is no longer required to reannounce the availability of unexpended

brand promotion funds. However, redistribution of brand promotion funds

must be made in accordance with the MPP participant's approved budget

ceilings and activity plans. If, for example, a redistribution of brand

promotion funds will increase a country budget ceiling or add a new

brand participant to the activity plan, then the MPP participant must

submit an activity plan amendment request (APAR) to CCC for approval

prior to redistribution. CCC omitted the substance of

Sec. 1485.14(e)(5) from the final rule.

Comment: CCC should allow advance payments under EIP/MPP agreements

and MPP brand promotion programs. Advertising agencies and suppliers

working on brand promotions should not have to wait longer for payment

than similar organizations working on generic promotions. Furthermore,

advance billing and payment is standard practice in the broadcast and

print media business. Advances allow participants to negotiate lower

rates and ensure better positioning and placement of advertising in the

media.

Response: CCC expects brand participants to have sufficient working

capital to cover the total cost of promotional activities since they

are expected to directly profit from such activities.

Comment: EIP/MPP participants and brand participants should only be

required to maintain receipts for expenditures on brand promotions

which exceed $25.00, as is the case with generic promotions.

Response: CCC adopted the suggestion to only require receipts for

program related expenditures, other than STRE, which exceed $25.00.

This change is reflected in Sec. 1485.20(a)(3)(i) and (ii).

Comment: New brand participants should not be limited to a maximum

reimbursement rate of 50 percent when former participants in the

Targeted Export Assistance program are eligible to receive

reimbursement rates that exceed 50 percent. This rule precludes funds

from being distributed equitably throughout the agricultural sector. It

also violates the Robinson-Patman and Clayton Antitrust acts because it

restrains trade by providing an advantage to one company over another.

Response: This provision is specifically mandated by Congress in

section 203(g)(2) and (3) of the Agricultural Trade Act of 1978, as

amended by section 1531 of the Food, Agriculture, Conservation, and

Trade (FACT) Act of 1990. New participants are only eligible for a

higher reimbursement rate if, as described in Sec. 1485.16(g)(1) and

(2), there has been an affirmative action by the U.S. Trade

Representative under section 301 of the Trade Act of 1974 with respect

to the unfair trade practice cited and U.S. market share of the

agricultural commodity concerned has decreased. In such case, CCC shall

determine the appropriate rate of reimbursement.

Comment: Are fees charged by a contracted firm eligible

expenditures under the MPP brand promotion program? For example, ``a

contracted firm, either domestic or international, is hired by a MPP

brand participant. The contracted firm is hired to make and manage all

arrangements for the company's participation in a trade show--order the

booth space, rent the tables and A-V equipment, hire the booth

attendants --* * * The contracted firm charges a fee for their [sic]

services to coordinate the details for the company's participation in

the trade show.''

Response: CCC will reimburse an MPP participant or EIP/MPP

participant for fees charged by a contractor to implement a brand

promotion activity. This point is clarified in Sec. 1485.16(b)(9).

Comment: Why are MPP participants required to announce the

availability of the MPP to U.S. commercial entities when the

participant chooses to conduct brand promotions solely with foreign

firms? CCC should establish different procedures for administering

brand programs with U.S. and foreign commercial entities.

Response: It appears that Sec. 1485.14(e)(3) of the interim rule

has been misinterpreted by the commenter. An MPP participant may

request approval to conduct brand promotion activities with either U.S.

commercial entities or foreign firms or both. If an MPP participant

requests approval to conduct brand promotion activities exclusively

with foreign firms, then the MPP participant is not required to

announce the program to U.S. commercial entities. CCC is unable to

respond to the second comment concerning different procedures for

administering brand programs with U.S. commercial entities and foreign

firms since the commenter failed to indicate why or how this should be

done.

U.S. Origin Identification

CCC received two similar comments on this issue.

Comment: CCC should waive the requirement that ``all product

labels, promotional material and advertising identify the origin of the

agricultural [[Page 6355]] commodity or products* * *'' in those

instances where U.S. identification would adversely affect the

marketability or acceptability of a promotional campaign.

Response: The goal of the MPP is to increase U.S. agricultural

exports and establish a reputation for the U.S. as a supplier of

quality products. The origin identification helps to distinguish U.S.

products from other competing foreign products. CCC recognizes the

commenters' concern that in some countries the ``U.S.A'' origin

identification may hinder a participant's promotional efforts.

Therefore, a participant may request an exemption to the ``U.S.A''

labelling requirement. The Deputy Administrator will determine, on a

case by case basis, whether sufficient justification exists to grant

such an exemption. CCC also recognizes that one could interpret the

phrase in the interim rule, ``the origin of the agricultural * * *

products'', as the place where a product is processed, packaged or

manufactured. This, however, does not emphasize the source of the

commodities and, therefore, necessarily further the market development

goals of the MPP. CCC clarified this issue in Sec. 1485.23(e)(6) and

(f) of the final rule by: 1) Listing those specific terms which are

acceptable for U.S. origin identification; 2) allowing other U.S.

regional designations if approved in advance by CCC; and 3) adopting a

size standard for such origin identification.

Consumer-oriented Shows and Advertising

CCC received 10 similar comments on this issue.

Comment: CCC should reimburse participants for promotional costs

associated with consumer shows. Consumer shows are an extremely cost-

effective means for reaching a target audience and offer the best

opportunity to reach the greatest number of people in a short amount of

time with a low per person cost. Consumer shows are also particularly

important for introducing new products into a market because they help

build brand awareness. Limiting reimbursement to trade-only shows fails

to recognize the power of the consumer in the buying decision of

retailers and importers.

Response: CCC agrees that consumer-oriented shows and consumer

advertising can be effective market development activities by

stimulating demand for U.S. agricultural commodities. CCC amended

Sec. 1485.16(b)(6) to include ``consumer exhibits and shows''.

Compensation/Allowances for U.S. Citizens and U.S. Contractors

CCC received six comments on this issue.

Comment: Increase the limit on payment of salary and allowances for

U.S. citizens stationed overseas.

Response: CCC recognizes that compensation levels may need to be

adjusted periodically to attract and retain qualified individuals to

manage overseas offices. Therefore, CCC will reimburse, in whole or in

part, the cost of compensation and allowances for each U.S. citizen

stationed overseas not to exceed 125 percent of the level of a GS-15

Step 10 salary for U.S. Government employees. This change is reflected

in Sec. 1485.16(c)(1) of the final rule.

Comment: Give MPP participants the flexibility to establish a

``pool of funds'' to pay U.S. citizen salaries and allowances. The

maximum amount authorized for this ``pool'' would be based on the

actual number of U.S. citizens stationed overseas multiplied by the GS-

15 Step 10 salary. MPP participants should also have the flexibility to

pay only salary or allowances or a combination of the two.

Response: CCC disagrees with this suggestion. Congress has given

CCC discretion to operate and manage the MPP. In doing so, CCC must

balance benefits to program participants against limited financial

resources. CCC has established maximum compensation levels for which it

will reimburse to ensure the efficient use of public funds and to

preserve consistency across all commodity programs. An MPP participant

may use its own funds to pay compensation and allowance expenses which

exceed the prescribed maximum level and count the difference as a

contribution, provided that such compensation adjustments are included

in the MPP participant's approved activity plan.

Compensation Levels for Foreign Nationals

CCC received five similar comments on this issue.

Comment: The limitation on salary levels for foreign national

employees is too restrictive, particularly in those countries where

there is a shortage of qualified personnel. In those cases where the

Foreign Service National (FSN) compensation schedule is too low, MPP

participants should be allowed to establish salary ranges or

alternative compensation systems for foreign nationals based on in-

country surveys.

Response: Congress has given CCC discretion to operate and manage

the MPP. In doing so, CCC must balance benefits to program participants

against limited financial resources. CCC has established a maximum

level for compensation of a non-U.S. employee or non-U.S. contractor

for which it will reimburse to ensure the efficient use of public funds

and to preserve consistency across all commodity programs. An MPP

participant may use its own funds to pay compensation that exceeds the

prescribed maximum level and count the difference as a contribution,

provided that such salary adjustment is included in the MPP

participant's approved activity plan.

Comment: The rule does not provide guidance for those instances

where there is no FSN salary plan in the local embassy.

Response: In countries where an FSN salary plan does not exist, CCC

will not reimburse any portion of compensation that exceeds locally

prevailing levels. The MPP participant is responsible for documenting

such compensation levels by a salary survey or other means. A

justification for the compensation levels must be presented in the MPP

participant's activity plan. This point is clarified in

Sec. 1485.16(c)(3)(ii).

Comment: Once established, salary levels of supergrades should not

be reduced unless the top grade of the local FSN salary plan is

reduced.

Response: An MPP participant is only required to reduce the

compensation levels for supergrades when the FSN salary plan is

reduced. However, an MPP participant may reduce the compensation levels

for supergrades at other times if deemed appropriate by the MPP

participant.

Fees Paid to Consultants and Contractors

CCC received three similar comments on this issue.

Comment: Define the terms ``consultant'' and ``contractor''.

Comment: The limitation on fees paid to consultants is too

restrictive. The final rule should permit participants to pay

prevailing local rates.

Response: CCC recognizes that the terms ``consultant'' and

``contractor'' are not clearly defined and in some instances may not be

discernibly different. Therefore, to eliminate this ambiguity, CCC has

deleted all references to the term ``consultant'' and replaced it with

the term ``contractor''. CCC has established a maximum level for

contractor fees for which it will reimburse to ensure the efficient use

of public funds and to preserve consistency across all commodity

programs. CCC will not reimburse any portion of a daily contractor fee

that [[Page 6356]] exceeds the daily gross salary of a GS-15 Step 10

for U.S. Government employees in effect on the date the fee is earned.

A participant may use its own funds to pay contractor fees which exceed

the prescribed maximum level and count the difference as a

contribution, provided that the fee adjustment is included in the

participant's approved activity plan.

Contracting Standards

CCC received two similar comments on this issue.

Comment: The final rule should contain additional guidance in the

area of contracting. Specifically, CCC should provide language relating

to contracting standards.

Response: CCC requires all participating organizations to have the

resources and ability to effectively manage the program. CCC also

expects participants to have either a solid understanding of

contracting principles and practices or the resources to obtain this

expertise. In general, participants must ensure that all fees for goods

and services reimbursed in any part by CCC are adequately documented by

a purchase order, invoice or contract. Participants must also maintain

records with regard to the competitive bidding process used to acquire

the goods or services. To assist participants, CCC has included

contracting procedures in Sec. 1485.23(c).

Payment of Foreign National Salaries in Local Currencies

CCC received six similar comments on this section.

Comment: Why are MPP participants required to pay salaries of

foreign nationals in the local currency and salaries of U.S. citizens

stationed overseas in U.S. dollars? MPP participants should be

permitted to pay FSN salaries in any currency so long as it does not

violate local laws. This would alleviate problems arising from foreign

nationals employed in countries other than their country of origin.

Response: CCC agrees with the commenters and amended

Sec. 1485.19(c) to allow participants to pay salaries and fees in any

currency if approved by the Attache/Counselor. However, participants

are cautioned to consult local laws and ordinances governing this

issue.

Use of Part-time Contractors for Services

CCC received one comment on this issue.

Comment: Can fees paid to translators or demonstrators for

promotional activities be reimbursed by CCC?

Response: CCC will reimburse a participant for the cost of part-

time contractors such as translators and demonstrators if such costs

are included in a participant's approved activity plan.

Overseas Administrative Expenses

CCC received three comments on this issue.

Comment: Participants should not be solely liable for all forward

financial obligations, i.e., severance payments, rental agreements and

contracts, as stipulated in Sec. 1485.19(c)(2) and Sec. 1485.21(d)(6)

of the interim rule.

Response: CCC disagrees with this comment. The availability of new

MPP resources may be limited annually by Congress. Therefore, CCC is

unable to prepare for forward year obligations beyond the period of

availability of funds specified in a participant's program agreement.

CCC funding of forward year obligations would unduly hinder promotional

efforts by tying up MPP resources that may otherwise be used for actual

activities. Accordingly, the substance of the interim rule is adopted.

Comment: Are EIP/MPP participants prohibited from sharing

administrative expenses, i.e., salaries, utilities and travel, with

foreign third parties to conduct joint promotional activities?

Response: An EIP/MPP participant may share administrative expenses

with a foreign third party to conduct a joint promotion. However, such

expenses will not be reimbursed by CCC under an EIP/MPP agreement.

Application Process and Strategic Plan

CCC received four comments on this issue.

Comment: The initial EIP/MPP participant should not be required to

include a strategic plan in its application for program funding, but

rather the strategic plan should be included in the activity plan. The

initial application for program funding should be a ``generic''

application which describes the worldwide marketing situation for the

U.S. industry as a whole.

Response: CCC disagrees with this comment. The strategic plan

describes the overall situation for the agricultural commodity and the

applicant's plans, projections, targeted markets and budget for the

activity plan year. The strategic plan is essential for determining

appropriate funding levels and program activities. Accordingly, the

substance of the interim rule is adopted.

Comment: The final rule should contain provisions which protect

proprietary and confidential information of individual companies from

public disclosure.

Response: CCC's policy is to treat all program documents with the

utmost respect for any proprietary information. CCC does not release

information which could cause substantial competitive harm to the

submitter of the information. If the information submitted is not

readily identifiable as privileged or business confidential, CCC will

obtain and consider the views of the submitter of the information. If

CCC disagrees with the arguments presented by the submitter, CCC will

give the submitter sufficient time to pursue legal action to prevent

the release of the information.

Activity Plans

CCC received 10 comments on this section.

Comment: Activity plans should not be required for each year within

a multiyear program, particularly when there are no changes to the

original proposal. The time it takes to submit annual activity plans

and receive approval from CCC causes undue delays in the construction

of demonstration structures and risks continued third party

participation.

Response: CCC agrees that timing for large-scale, multiyear

projects is extremely important. However, CCC requires separate

activity plans for each year covered by a multiyear agreement to ensure

proper management of limited CCC resources. The annual activity plans

also assist CCC in determining whether program design requires

modification to improve cost effectiveness or impact. The final rule is

adopted as written.

Comment: The final rule should contain a provision which

accommodates immediate or unanticipated changes to activity plans. This

could be accomplished by: (1) allowing retroactive approval of APARs,

(2) establishing a same-day or immediate approval process for APARs,

(3) allowing a 10 percent budget overrun for each activity, (4)

allowing a 10 percent budget shift at the end of the plan year, or (5)

allowing a participant to verbally notify the Division Director prior

to implementation of the activity.

Response: Past experience has proven that retroactive approval

authority creates unnecessary administrative burdens and that ``after-

the-fact'' change becomes the norm rather than the exception.

Adjustments to activity plans can be made with CCC approval in an

expeditious manner using existing policies and procedures. Accordingly,

the final rule is adopted in this regard. [[Page 6357]]

Comment: Activity plan years should correspond to the U.S.

Government's fiscal year.

Response: CCC would prefer to have a single activity plan year for

all participants. However, CCC recognizes that factors such as varying

crop seasons and the Federal budget process make this illogical.

Comment: Will CCC consider approval of individual activities prior

to the approval of an entire activity plan?

Response: Program planning is a primary tool used to guide the

implementation and successful completion of market development

activities. CCC will not grant approval for activities prior to the

announcement of program allocations nor prior to the start of a

participant's activity plan. However, CCC may grant approval for

individual activities on a case-by-case basis before approving a

participant's entire activity plan.

Comment: CCC should provide more detailed information about

deadlines for submission of activity plans.

Response: The rule does not contain a deadline for the submission

of activity plans; however, MPP participants should submit activity

plans at least 45 business days prior to the start of the proposed

activities in order to ensure adequate time for review and approval by

CCC.

Comment: CCC should be required to approve or disapprove APARs

within two weeks of receipt.

Response: CCC's policy is to review activity plans and APARs in an

expeditious manner. A specific time period is not practical. However,

participants should allow adequate time for review and approval of

APARs.

Allocation of CCC Resources

CCC received one comment on this issue.

Comment: CCC should not consider, as one criterion for allocating

resources, the applicant's ability to monitor and evaluate the

activities proposed in the strategic plan since this information was

not specifically solicited as part of the application.

Response: The rule explicitly states that CCC takes into account

the applicant's provisions for monitoring and evaluating activities

proposed in the strategic plan when reviewing applications for program

funding. Evaluation is an integral part of the MPP and serves as a

basis for continuing, altering or eliminating activities proposed in

the strategic plan. The application approval criteria and allocation

factors are provided in Sec. 1485.14(b) and (c) of the final rule.

Product Samples, Product Development, Packaging and Labeling

CCC received nine comments on these issues.

Comment: Packaging and design expenses should be eligible for

reimbursement by CCC.

Comment: CCC should amend Sec. 1485.17(d)(14) of the interim rule

to read ``Labeling, packaging and associated design expenses, except

when the MPP participant's logo or generic symbol is made part of the

packaging for the branded promotion activity. In that case, a pro-rated

expense based on the size of the logo or symbol in relation to the

entire package surface area will be reimbursed.''

Response: Congress has given CCC discretion to operate and manage

the MPP. In doing so, CCC must balance benefits to program participants

against limited financial resources. CCC will not provide reimbursement

for packaging, labeling and other design expenditures because these

costs are associated with the production of the final product rather

than the promotion. CCC also considers origin identification stickers

to be a type of label and, therefore, not reimbursable by CCC. This

change is reflected in Sec. 1485.16(d)(3). The suggestion that CCC

calculate a pro-rata reimbursement is not practical to administer.

Comment: The Deputy Administrator should have the authority to

approve the use of MPP funds for the purchase of commodity samples,

particularly in those instances where the participant does not own the

commodity or product.

Response: Congress has given CCC discretion to operate and manage

the MPP. In doing so, CCC must balance benefits to program participants

against limited financial resources. CCC will not provide reimbursement

for product samples because products samples are of minimal cost to the

industry involved and could easily be contributed towards the program.

Comment: Does the exclusion of product development expenses from

reimbursement by CCC pertain only to new products? In other words, can

participants be reimbursed by CCC for expenses related to the

modification of an existing product?

Response: CCC will not reimburse participants for the cost of

product development, product modification or product research. This

prohibition applies to all products for the reasons identified in

previous responses.

Comment: Product development and design expenses should be eligible

for reimbursement by CCC because such expenses are included in the

example in the MPP handbook.

Response: The particular example cited by the commenter refers to a

consultant's work in introducing a new product to the market (a

promotional activity), not in the actual development or design of the

product. The substance of the interim rule is adopted.

Financial Policies and Procedures, Reimbursement Claims and Advances

CCC received 24 comments on these issues.

Comment: Why are reimbursement claims limited to no less than

$10,000?

Response: CCC requires participants to consolidate their

reimbursement claims to ensure a more effective use of resources and to

accelerate the reimbursement process. Accordingly, the final rule is

adopted in this regard.

Comment: Why does CCC charge reimbursement claims against the

oldest unexpended program agreement balance?

Response: This is simply a procedure used by CCC to ensure

efficient use and accurate accounting of MPP funds. Since

Sec. 1485.17(h) of the interim rule had no significant bearing on a

participant, CCC omitted this subsection from the final rule.

Comment: Why do the regulations make reference to reimbursement

with CCC commodity certificates?

Response: Although all MPP claims are currently reimbursed by CCC

in cash, circumstances could change where it might become necessary to

return to the use of certificates.

Comment: CCC should revise Sec. 1485.17(k)(2) of the interim rule

so that participants are not precluded from claiming previously billed

amounts which had been erroneously disallowed by CCC.

Response: CCC agrees with the commenter and amended the final rule

in Sec. 1485.17(a)(8) to include any amount previously claimed that has

not been reimbursed.

Comment: CCC should extend the deadline for submitting

reimbursement claims to CCC.

Response: The 180-day period is reasonable based upon the standard

business practice for submitting reports and expense claims. For

administrative ease, CCC replaced the phrase ``180 calendar days'' with

``6 months''. This change is reflected in Sec. 1485.17(d).

Comment: Participants operating brand programs should be allowed to

receive advances.

Comment: Brand participants should be allowed to receive advances

for electronic media advertising since this [[Page 6358]] type of

advertising is normally contracted one year in advance.

Response: CCC expects participating firms to have sufficient

working capital to cover the total cost of promotional activities since

they are expected to directly profit from the activities. Furthermore,

CCC has determined that reimbursement, rather than advance payment,

ensures the most efficient use of MPP funds. The substance of the

interim rule is adopted.

Comment: CCC should amend Sec. 1485.18(b)(1) of the interim rule

which limits advances to no more than 40 percent of a participant's

annual generic budget approved by CCC. For example, CCC could: (1)

provide a ``working advance'' of up to 15 percent of a participant's

annual budget with additional special advances for large expenditures,

(2) calculate the 40 percent advance on the basis of the total approved

budget and eliminate the 90-day expenditure rule, (3) increase the

percentage, or (4) replace the 40 percent advance limit with the

special advance payment request system used in the Cooperator program.

Response: Since CCC is given limited resources by Congress to

administer the MPP, CCC must balance benefits to program participants

with efforts to reduce operating costs of the program. The limitation

on authorized advance payments reduces the amount of money CCC borrows

from the U.S. Treasury. CCC's policy is to reimburse participants for

expenditures incurred rather than finance initial costs. Accordingly,

the final rule is adopted in this regard.

Comment: Extend the time period that MPP participants have to fully

expend their advances from 90 to 180 days.

Response: The 90-day period is sufficient time to expend any

advance. The final rule is adopted in this regard.

Comment: Does Sec. 1485.17(l)(3) of the interim rule which provides

that ``activity expenses incurred up to 30 days beyond the end of an

activity plan year may be charged back to the budget for that activity

plan year'' apply to MPP participants?

Response: This provision applies to MPP and EIP/MPP participants.

CCC has provided additional clarification in Sec. 1485.16(h) of the

final rule.

Travel Expenses

CCC received 18 comments on this issue.

Comment: CCC should amend the regulations to permit reimbursement

for ``business class'' travel.

Response: CCC recognizes that participants may be able to obtain a

particular class of air travel at a lower rate than full fare economy.

Since CCC's policy is to ensure the efficient use of public funds, CCC

will not preclude business class travel, but will not reimburse any

portion of air travel in excess of the full fare economy rate. This

change is reflected in Sec. 1485.16(c)(8) of the final rule.

Comment: Travel expenditures should be reimbursable under an EIP/

MPP agreement.

Response: Congress has given CCC discretion to operate and manage

the MPP. In doing so, CCC must balance benefits to program participants

against limited financial resources. Private entities engaged in brand

promotion activities should bear their own travel expenses. The

substance of the interim rule is adopted.

Comment: Participants should be permitted to develop their own in-

house travel guidelines.

Response: Congress has given CCC discretion to operate and manage

the MPP. CCC has established limits on the amount and type of travel

expenditures that will be reimbursed by CCC to ensure the efficient use

of public funds and to preserve consistency across all commodity

programs. Accordingly, the final rule is adopted in this regard.

Comment: Are participants allowed to calculate per diem at a rate

lower than that permitted under the U.S. Federal Travel Regulations

(USFTR)?

Response: CCC established a maximum reimbursement rate for per diem

which is no more than the rate specified under the USFTR. Consequently,

a lower rate of reimbursement is permissible.

Comment: Eliminate Sec. 1485.22(b) of the interim rule which

requires participants to notify the Attache/Counselor in writing in

advance of proposed travel to that country. This provision is more

restrictive than the former Targeted Export Assistance program

guidelines and is inconsistent with the Paperwork Reduction Act.

Response: The Attache/Counselor must be notified prior to any

travel in order to effectively supervise and support program activities

in his or her country of responsibility. Accordingly, the final rule is

adopted in this regard.

Comment: Participants should be permitted to choose one of two

reimbursement options for travel expenses--either per diem or living

expenses.

Response: Congress has given CCC discretion to operate and manage

the MPP. CCC has adopted the USFTR to ensure uniformity in

administering the program and accounting for travel expenditures.

Accordingly, the final rule is adopted in this regard.

Comment: Participants should be permitted to use MPP funds to lease

vehicles when it can be shown that the lease cost would be lower than

the cost associated with the use of a privately owned vehicle.

Response: CCC's policy is to ensure the most efficient use of

limited resources. It would be virtually impossible for a participant

to provide an accurate number of miles to be travelled for project

business during the term of a leasing agreement. Consequently, CCC

would not be able to compare the cost of leasing a vehicle for an

extended time period to the cost of using a privately owned vehicle.

Accordingly, the substance of the interim rule is adopted.

Comment: CCC should amend Sec. 1485.22(d) of the interim rule which

states that reimbursement for the use of privately owned automobiles

will be calculated on the basis of the local U.S. Embassy's fixed rate

per mile. Participants should be reimbursed by CCC for costs based on

prevailing local practices rather than the Embassy rate, particularly

in those instances where the U.S. Embassy does not have a fixed rate

per mile or where U.S. Embassy personnel can buy gas from a Post

Exchange.

Response: Congress has given CCC discretion to operate and manage

the MPP. CCC's policy is to ensure the efficient use of limited

resources and to preserve consistency across all commodity programs. In

support of this policy, CCC has established a maximum reimbursement

rate for the authorized use of a privately owned automobile equal to

the U.S. Embassy's fixed rate per mile. This uniform policy also

simplifies administration and program compliance requirements. A

participant may expend an amount in excess of the amount reimbursed by

CCC and count the difference as a contribution, provided that the

adjustment is included in the participant's approved activity plan.

Accordingly, the final rule is adopted in this regard.

Promotional Items and Token Gifts

CCC received nine similar comments on this issue.

Comment: CCC should either reimburse participants for the total

cost of giveaways, awards and prizes or establish a maximum allowable

amount for these items.

Response: CCC agrees that inexpensive promotional items such as

giveaways, awards and prizes can be useful market development tools.

CCC will reimburse the cost of giveaways, awards, prizes, gifts and

other similar promotional materials up to $1.00 per

[[Page 6359]] promotional item This change is reflected in

Sec. 1485.16(b)(10) and (d)(11) of the final rule.

Comment: The term ``token gift'' is not defined and, therefore,

should be deleted from the rule.

Comment: CCC should define ``token gift'' as ``any promotional item

costing under $5.00''.

Response: CCC deleted the word ``token'' from the final rule. The

term ``gift'' has ordinary and customary meaning and does not require

further definition. CCC will reimburse a participant for the cost of

gifts subject to the limitation that CCC will not reimburse more than

$1.00 per item.

Activities in the United States

CCC received one comment on this issue.

Comment: All MPP participants should be permitted to claim

reimbursement for market development activities conducted in the United

States. Foreign market development programs have typically allowed

travel expenditures in the United States for foreign trade teams when

part of an international trip and participation fees for foreign

participants in grain grading seminars in the United States.

Response: CCC agrees that certain activities conducted in the

United States may be valuable and appropriate for specific foreign

market development programs. Consequently, CCC will reimburse an MPP

participant for the cost of trade shows, seminars and educational

training conducted in the United States. This change is reflected in

Sec. 1485.16(c)(25).

Participation Fees

CCC received one comment on this issue.

Comment: Clarify Sec. 1485.17(d)(7) of the interim rule which

states that participation fees for United States Government-sponsored

activities will not be reimbursed by CCC.

Response: CCC will not reimburse the cost of fees for participating

in United States Government sponsored activities, other than trade

fairs and exhibits, because in these instances the United States

Government finances most of the activity expenses. Although

participation fees for United States government-sponsored activities,

other than trade fairs and exhibits, are not reimbursable by CCC, they

may be counted as a contribution.

Export Availability

CCC received one comment on this issue.

Comment: Why are MPP applicants required to describe the export

availability of the agricultural commodity, product, or brand product

over the duration of the proposed agreement? Some agricultural products

are always in sufficient supply.

Response: The primary objective of the MPP is to increase U.S.

agricultural exports by stimulating demand in foreign markets. The

development and maintenance of new export markets for U.S. agricultural

commodities are dependent, in part, upon knowledge of the U.S. supply

situation. Accordingly, the final rule is adopted in this regard.

Reimbursement for Demonstration or Training Activities

CCC received four comments on this section.

Comment: What is meant by the phrase ``training activities'' in

Sec. 1485.17(c) of the interim rule? Does this refer to the

construction of training facilities or technical training activities in

general?

Response: CCC recognizes that the term ``training activities'' is

ambiguous. To clarify this issue, CCC replaced the phrase

``demonstration and training activities'' with ``demonstration

projects'' in the final rule. ``Demonstration projects'' is defined in

Sec. 1485.11(j) and does not include technical training activities.

Comment: CCC should not impose a limit of no more than one

demonstration or training activity under each MPP agreement for each

market.

Comment: Does the limitation on demonstration and training

activities apply to the annual activity plan or any successive year in

the market?

Response: CCC recognizes that more than one demonstration project

may be appropriate to overcome different constraints within a

particular market. Therefore, CCC will consider proposals for

demonstration projects provided that: (1) no more than one such

demonstration project per constraint is undertaken in a market; (2) the

constraint to be addressed in the market is a lack of technical

knowledge or expertise; (3) the demonstration project is a practical

and cost effective method of overcoming the constraint; and (4) a

foreign third party participates in the demonstration project through a

written agreement.

Significant Program Provisions

CCC received one comment on this section.

Comment: How will CCC apply the 50 percent reimbursement rule when

a brand product is not entirely 100 percent U.S. origin?

Response: Each MPP or EIP/MPP applicant must declare, in its

application, the percentage of U.S. origin of the promoted agricultural

commodity by weight, exclusive of added water. For any promoted brand

product, the reimbursement rate generally equals the lesser of the

percentage of U.S. origin in the brand product or 50 percent. Each

participant must be able to prove the percentage of U.S. origin it

declares. Failure to document this percentage will result in repayment

to CCC.

Business Confidentiality

CCC received seven similar comments on this issue.

Comment: The final regulation should contain language which

protects the contents of a participant's application and activity

plans.

Response: CCC's policy is to treat all program documents with the

utmost respect for proprietary information. CCC does not release

information which could cause substantial competitive harm to the

submitter of the information. If the information submitted is not

readily identifiable as privileged or business confidential, CCC will

obtain and consider the views of the submitter of the information. If

CCC disagrees with the arguments presented by the submitter, CCC will

give the submitter sufficient time to pursue legal action to prevent

the release of the information. The release of information is governed

by the Freedom of Information Act (FOIA), 5 U.S.C. 552, and 7 CFR Part

1, Subpart A--Official Records, specifically 7 CFR 1.11, Handling

Information from a Private Business. CCC added Sec. 1485.23(a) to the

final rule relating to this issue.

Appeals

CCC received one comment on this issue.

Comment: Amend Sec. 1485.27(b) of the interim rule to include

procedures for appealing compliance findings.

Response: CCC has included specific provisions and procedures in

the final rule for the resolution of disputes that involve the

remittance of resources to CCC. The appeal procedure is designed to

ensure prompt and reasonable evaluation and resolution of program

disputes. Most compliance findings are minor infractions of program

rules which, when brought to the attention of participants, are

routinely resolved. Participants will be notified promptly when program

discrepancies are found and given an opportunity to remit resources to

CCC or, where there is a disagreement, present additional information

in support of the participant's position. See Sec. 1485.20(d) of the

final rule. [[Page 6360]]

Export Incentive Program

CCC received three comments on this section.

Comment: CCC should not differentiate MPP participants from EIP/MPP

participants because generic promotions simply create demand for

foreign products.

Response: Congress has directed CCC to make certain distinctions

between brand and generic promotions in recognition of the benefit that

private companies receive from brand promotion. For example, the FACT

Act of 1990 provides that assistance for brand activities shall not

exceed 50 percent of the cost of implementing the plans. CCC also makes

minor distinctions between brand and generic promotions to ensure the

efficient use of limited resources.

CCC received 38 letters containing nearly 200 comments from

nonprofit trade associations, U.S. companies, state organizations,

state regional trade groups, cooperatives, professional associations

and consulting firms in response to the interim rule published on

November 17, 1993, (58 FR 60550).

Independent Audits

CCC received 14 comments on this issue.

Comment: CCC should not have the authority to require independent

audits of program activities.

Comment: If the provision for independent audits is necessary, then

CCC should develop specific criteria to avoid arbitrary implementation

and to keep costs reasonable for MPP participants.

Comment: The Compliance Review Staff and the General Accounting

Office are in the best position to conduct audits of the MPP because of

their familiarity with federal regulations.

Comment: The current system used for compliance reviews is

thorough, rigorous, professional and nonpartial, and fulfills the audit

needs of the program.

Comment: This provision should be clarified so as not to preclude

the use of CCC resources for other types of program evaluations.

Comment: CCC should only require independent audits in extreme

cases of mismanagement or fraud.

Comment: CCC's sole discretion to require independent audits poses

a jeopardy.

Comment: In the absence of confirmed non-compliance with program

regulations, CCC should pay for any independent audits it requires.

Comment: CCC should amend the final rule to allow a participant to

document its compliance with program requirements.

Comment: Independent audits could be beneficial in those instances

where compliance reviews reveal the need for such audits.

Comment: Each participant in the program should be required to have

an annual independent audit of its own accounting system.

Response: CCC's authority to require independent audits was

legislated by Congress in section 1302(b)(2)(E) of the Omnibus Budget

Reconciliation Act of 1993. CCC will only use this authority when it

determines that further review is necessary in order to ensure

compliance with program requirements. This provision is contained in

Sec. 1485.20(c)(5).

Definitions

CCC received 63 comments on this section.

Comment: CCC should clearly define the term ``U.S. entities'' and

limit participation in the MPP to U.S. entities.

Response: CCC limits direct participation in the MPP to U.S.

agricultural trade organizations, nonprofit state regional trade

groups, agricultural cooperatives and State agencies. Participation by

foreign entities only occurs through third party arrangements. The term

``U.S. commercial entity'' is defined at Sec. 1485.11(ff) of the final

rule.

Comment: The definition of ``market'' as ``a single country'' is

too narrow and rigid. The definition should be modified to take into

account the different types of market segments within a country such as

discrete geographic regions, audiences and distribution outlets.

Comment: Defining ``market'' as anything other than ``a single

country'' would create more uncertainty.

Comment: If participants defined markets in terms of geographic

regions, it would likely be perceived by the public as an attempt to

circumvent the graduation requirement.

Response: CCC recognizes that many market segments can exist within

a single country. Depending on the particular agricultural commodity

promoted, a market could be defined by a geographic region, target

audience or demographic group. Because numerous market segments could

exist within a country, CCC decided to define ``market'' as ``a single

country''. This eliminates the need for interpretation and reduces the

administrative burden on both the participant and CCC. Accordingly, the

final rule is adopted in this regard.

Comment: The term ``U.S. firm'' should be defined as ``any firm

that is incorporated in the U.S. and has a physical entity located

within the U.S.''

Response: CCC did not define the term ``U.S. firm'' in the final

rule because a definition is not necessary in the context of the final

regulation.

Comment: CCC should define the terms ``supplement'' and

``supplant''.

Response: ``Supplement'' and ``supplant'' are statutory terms for

which Congress did not assign any special meaning. CCC has determined

that these terms have ordinary and customary meanings and, therefore,

do not require further definitions in the final rule.

Unfair Trade Practices

CCC received comments regarding the requirement that assistance

under the MPP only address unfair trade practices. Recent legislation

implementing the Uruguay Round negotiations of the General Agreement on

Tariffs and Trade deleted this requirement. Accordingly, CCC has

revised the final rule to delete this requirement from the regulation.

However, an unfair trade practice is still relevant in determining

reimbursement rates for brand promotions. See Sec. 1485.16(g).

Graduation

CCC received 31 comments on this issue.

Comment: CCC should retain the provision which limits promotional

assistance for brand products to no more than five years in a single

market.

Comment: Does the five-year limit on promotional assistance apply

to individual products or product lines?

Comment: CCC should retain the provision which allows for continued

promotional assistance beyond the five-year limit based on the

continued existence of an unfair trade practice or identification of a

new unfair trade practice.

Comment: The final rule should contain a provision which allows for

exceptions to the five-year limit in unusual or unexpected

circumstances. For example, in the event of market disruptions or new

trade barriers which restrict market access, the affected years should

not count toward the five-year limit.

Comment: CCC should consider providing assistance for more than

five years in a market when there is ``the obvious threat of unfair

foreign trade practices'' or when industries have successfully expanded

exports to that market.

Comment: ``When significant changes in restrictive laws or in

distribution channels effectively create a new market, these countries

should be [[Page 6361]] considered for funding beyond five years.''

Comment: The five-year limitation on promotional assistance for a

specific brand product in a single market does not take into account

the dynamic nature of the international marketplace and diminishes the

flexibility and impact of the program. The limitation on promotional

assistance should be based on factors such as return on investment,

product life cycle and market share.

Comment: CCC should continue to provide assistance to all

commercial entities in a market until the unfair trade practice is

eliminated.

Comment: ``The interim regulations unnecessarily limit the

Secretary's authority to waive the five-year limit.''

Response: CCC recognizes that circumstances other than the

continued existence of an unfair trade practice or identification of a

new unfair trade practice may warrant consideration for assistance to

promote a specific brand product in a single market for more than five

years. Therefore, CCC eliminated this requirement from the final rule.

CCC may provide assistance to promote a specific product in a single

market for more than five years when CCC determines that further

assistance is necessary to meet the objectives of the program. CCC will

apply the five-year limitation to single brand products in a market,

not to product lines. However, the Deputy Administrator shall

determine, at the Deputy Administrator's discretion, whether two or

more brand products in any given country are substantially the same

product. These changes are reflected in Sec. 1485.14(d) (2) and (3).

Comment: Generic programs should not be subject to the five-year

limit on promotional assistance.

Response: Section 1302(b)(2)(B) of the Omnibus Budget

Reconciliation Act of 1993 and, therefore, this final rule, establish a

five-year limit on promotional assistance for brand products, not

generic products or programs.

Contributions

CCC received four comments on this issue.

Comment: Although it is extremely important for MPP participants to

commit their own resources to the program, a strict 10 percent minimum

contribution for nonbrand promotion may be a burden to some

participants. The regulations should contain a provision which allows

CCC to grant exceptions to the 10 percent contribution level.

Response: This contribution requirement is statutorily mandated by

section 1302(b)(2)(C) of the Omnibus Budget Reconciliation Act of 1993.

CCC cannot change the language of this statute through regulations.

Accordingly, the final rule is adopted in this regard.

Comment: State groups should be allowed to count ``in-kind

expenses'', i.e., staff time of member State Departments of

Agriculture, toward their MPP participant contribution.

Response: Any MPP participant may count, as part of its

contribution, time and expenses incurred by member organizations

provided such contributions are for the overall administration or

management of the participant's entire MPP.

Comment: Clarify the sentence ``CCC may increase the required

contribution level in any subsequent year that an eligible trade

organization receives assistance for nonbrand promotion.'' What

criteria or standards will be used for increasing a participant's

contribution level?

Response: This provision is statutorily mandated by section

1302(b)(2)(C) of the Omnibus Budget Reconciliation Act of 1993.

Therefore, in deciding whether to increase the required contribution,

CCC will consider the participant's ability to increase its

contribution above the minimum level. This is explicitly stated in the

rule and requires no further clarification.

Comment: Is the 10 percent minimum contribution level calculated on

an individual activity basis or on an aggregate basis?

Response: An MPP participant is required to contribute an amount

which is not less than 10 percent of total CCC resources expended for

nonbrand promotions during the approved activity plan year.

Comment: Does the minimum 10 percent contribution requirement apply

to multiyear proposals?

Response: Yes. This requirement applies to single and multiyear

funded proposals.

Size Standards and Size Determinations

CCC received 13 comments on this issue.

Comment: CCC should retain the definitions and criteria established

by the Small Business Administration (SBA) for size determinations.

Comment: Does the term ``small-sized entity'' apply to both U.S.

and foreign entities?

Comment: ``Small'' should be defined as any non-multinational

corporation.

Comment: Personnel and sales are not accurate measurements of a

company's size.

Comment: What are the criteria for determining the number of

employees of an entity?

Comment: CCC should not use SBA's criteria and size standards

because the issue of affiliation is complex, difficult to understand,

and time-consuming. ``Small-sized entity'' should be defined as ``a

business which has less than 500 full-time employees, excluding

employees of subsidiaries and affiliates''.

Comment: CCC should not consider a business' affiliation when

determining company size. Combining affiliated corporate entities would

frustrate the intent of the legislation.

Comment: The regulations should provide flexibility ``to

accommodate industries that are `small' in terms of revenues and total

employees [as compared with] their direct industry competitors.''

Comment: Application of the SBA criteria would ``require an

inordinate amount of investigation which when completed, [would] still

be largely inaccurate in many cases.'' Therefore, CCC should establish

standard definitions for ``large'' and ``small'' entities.

Response: The term ``small-sized entity'' applies only to U.S.

entities. Use of SBA size standards is an efficient and effective

method to resolve business size issues since it relies upon a set of

existing standards promulgated by the agency with expertise in this

area.

Comment: CCC should not use the size standards and criteria

established by the SBA to define ``small-sized entity'' because they do

not account for the unique characteristics of farmer cooperatives.

Comment: Member-growers of cooperatives should not be considered

affiliates for purposes of size determination unless a member-grower

owns a majority share of the cooperative or has a majority voting right

in the cooperative.

Comment: Member-growers of cooperatives should not be included in

the employee count for purposes of size determination.

Response: The SBA is solely responsible for establishing size

standards and determining which concerns qualify as ``small''. However,

SBA size standards may not always be appropriate for programs. If a

Federal agency decides that the SBA size standard is not appropriate

for the program involved, the agency may request SBA approval to

establish a more appropriate size standard. CCC [[Page 6362]] submitted

a proposal to the SBA requesting that all agricultural cooperatives be

considered ``small-sized entities'' for purposes of the MPP. However,

the SBA did not accept this proposal. Consequently, existing SBA rules

govern whether a particular cooperative will be considered a small-

sized entity. In this regard, SBA considers a cooperative as a single

entity.

Priority Assistance

CCC received 22 comments on this issue.

Comment: How will CCC establish ``priorities'' among small-sized

entities?

Comment: When establishing priorities, CCC should not penalize

industries or sectors that either have no small entities or that have

only generic programs.

Comment: The allocation of MPP funds solely on the basis of size is

not consistent with normal business practice and discriminates against

larger entities. Resources should be allocated to companies based on

several criteria including performance, viability of marketing plans

and proposals, the ability of applicants to execute plans, and past

performance in MPP activities.

Comment: CCC should give priority to small-sized entities based on

factors such as the entity's level of production, its level of export

resources, its compliance record, and the expected impact of its

strategic and activity plan.

Comment: Small-sized entities should be given priority through the

reimbursement process.

Comment: CCC should allocate funds to deserving small-sized

entities first, with any remaining funds going to ``large'' entities.

Comment: ``Priority'' should not mean a fixed percentage or amount

given to small-sized entities, but rather a goal within the industry.

Comment: CCC should not interpret ``priority'' in a way that would

set aside a portion of funds for small-sized entities because there may

not be a sufficient number of these companies to use the funds.

Comment: CCC should set ``a maximum brand allocation'' per company,

irrespective of company size. Evaluations of brand proposals should be

based on the merits of the proposal, not on the size of the company

seeking funds. Furthermore, funds should not be used for large

advertising campaigns due to the limited amount of resources available.

Response: Priority for small-sized entities conducting brand

promotions is statutorily mandated by section 1302(b)(2)(A) of the

Omnibus Budget Reconciliation Act of 1993. Congress does not define

``priority'' in the law and, therefore, leaves this interpretation to

the discretion of CCC. The legislation also does not specifically

prohibit participation by medium- and large-sized companies, nor does

it preclude the use of criteria, other than size, for allocating

resources to private entities. CCC gives priority to small-sized

entities by setting aside funds for such entities in the allocation

process. An MPP participant who administers a brand program may also

establish criteria for recommending priority funding to small-sized

entities.

Comment: The regulations should clearly state that ``foreign

entities with no U.S. place of business are not eligible for priority

funding.''

Response: This is the way in which CCC has interpreted the rule.

This operating practice is expressly set forth in the final rule.

Comment: Participants should not be held to the ``anticipated

percentage of CCC resources to be made available to small-sized

entities for brand promotion'' cited in their MPP applications.

Response: The percentage estimated by an organization in its MPP

application is an important factor because, without this information,

CCC would not be able to comply with the requirements of the

legislation.

Additionality

CCC received 26 comments on this issue.

Comment: CCC should retain the provision requiring MPP participants

to certify that MPP funds will supplement but not supplant any private

or third party funds or other contributions. However, because of market

dynamics and the need to adjust marketing activities, participants

should not be held to a rigid standard based on prior-year

expenditures.

Comment: The rule does not enumerate specific criteria or

documentation requirements that would substantiate a participant's

certification of additionality. How will CCC audit this provision?

Comment: In order to determine whether CCC resources received

actually supplement or supplant private or third party funds or other

contributions to program activities, specific objective criteria must

be established and the applicable professional standards must be

specified. ``Under professional standards independent accountants may

not certify the accuracy of management's representation.''

Comment: Current and continuing participants in the MPP should be

required to provide evidence of increased competitiveness of U.S.

exporters.

Comment: The regulations should allow brand participants to

demonstrate success by showing increases in sales after participating

in the program over a finite period.

Comment: Brand participants should be required to demonstrate an

increase in the ratio between their total expenditures and government

funding in each successive year of the program's life. The ratio should

be applied on a market and individual product line basis.

Comment: The additionality requirement ``. . . could hinder

[smaller companies in] their effectiveness as they rely on the program

for cost sharing (50/50) to further their own marketing budgets.''

Comment: The additionality requirement, although good in its

intent, poses major challenges and difficulties in the area of

compliance.

Response: The additionality provision is statutorily mandated by

section 1302(b)(2)(D) of the Omnibus Budget Reconciliation Act of 1993.

CCC cannot eliminate this requirement from the rule. In determining

whether federal funds received supplement or supplant private or third

party funds or contributions, CCC will consider the participant's

overall marketing budget from year to year, variations in promotional

strategies within a country and new markets. It will be each

participant's responsibility to maintain appropriate records or

documentation which substantiate its certification that any CCC

resources received supplement, but do not supplant, any private or

third party funds or other contributions to program activities.

Comment: When will the additionality provision be audited.

Response: The audit will occur during the normal compliance review

process.

Applicability Date

This rule is effective February 1, 1995, but it applies no sooner

than the beginning of each participant's 1995 program and corresponding

activity plan year. Therefore, present participants will not be

required to revise previously approved activity plans in order to

comply with the new rules and should have sufficient time to take the

new rules into consideration in the planning of future activities.

List of Subjects in 7 CFR Part 1485

Agricultural commodities, Exports.

[[Page 6363]] Accordingly, Part 1485 of Title 7 of the Code of

Federal Regulations is revised to read as follows:

PART 1485--COOPERATIVE AGREEMENTS FOR THE DEVELOPMENT OF FOREIGN

MARKETS FOR AGRICULTURAL COMMODITIES

Subpart A--[Reserved]

Subpart B--Market Promotion Program

Sec.

1485.10 General purpose and scope.

1485.11 Definitions.

1485.12 Participation eligibility.

1485.13 Application process and strategic plan.

1485.14 Application approval and formation of agreements.

1485.15 Activity plan.

1485.16 Reimbursement rules.

1485.17 Reimbursement procedures.

1485.18 Advances.

1485.19 Employment practices.

1485.20 Financial management, reports, evaluations and appeals.

1485.21 Failure to make required contribution.

1485.22 Submissions.

1485.23 Miscellaneous provisions.

1485.24 Applicability date.

1485.25 Paperwork reduction requirement.

Authority: 7 U.S.C. 5623, 5662-5664 and sec. 1302, Pub. L. 103-

66, 107 Stat. 330.

Subpart A--[Reserved]

Subpart B--Market Promotion Program

Sec. 1485.10 General purpose and scope.

(a) This Subpart sets forth the policies underlying the Commodity

Credit Corporation's (CCC) operation of the Market Promotion Program

(MPP), and a subcomponent of that program, the Export Incentive

Program/Market Promotion Program (EIP/MPP). It also establishes the

general terms and conditions applicable to MPP and EIP/MPP agreements.

(b) Under the MPP, CCC enters into agreements with nonprofit trade

organizations to share the costs of certain overseas marketing and

promotion activities that are intended to develop, maintain or expand

commercial export markets for U.S. agricultural commodities and

products. MPP participants may receive assistance for either generic or

brand promotion activities. EIP/MPP participants are U.S. commercial

entities that receive assistance for brand promotion activities.

(c) The MPP and EIP/MPP generally operate on a reimbursement basis,

and CCC may, at its option, provide such reimbursement either in cash

or in CCC commodity certificates.

(d) CCC's policy is to ensure that benefits generated by MPP and

EIP/MPP agreements are broadly available throughout the relevant

agricultural sector and no one entity gains an undue advantage. The MPP

and EIP/MPP are administered by personnel of the Foreign Agricultural

Service.

Sec. 1485.11 Definitions.

For purposes of this Subpart the following definitions apply:

(a) Activity--a specific market development effort undertaken by a

participant.

(b) Activity plan--a document which details a participant's

proposed activities and budget. (``Activity Plan'' is used in lieu of

the term ``Marketing Plan'' to avoid administrative confusion with

plans submitted under the Cooperator Foreign Market Development

Program.)

(c) Administrator--the Administrator, FAS, USDA, or designee.

(d) Agricultural commodity--an agricultural commodity, food, feed,

fiber, wood, livestock or insect, and any product thereof; and fish

harvested from a U.S. aquaculture farm, or harvested by a vessel as

defined in title 46, United States Code, in waters that are not waters

(including the territorial sea) of a foreign country.

(e) APAR--activity plan amendment request.

(f) Attache/Counselor--the FAS employee representing USDA interests

in the foreign country in which promotional activities are conducted.

(g) Brand promotion--an activity that involves the exclusive or

predominant use of a single company name or logo(s) or brand name(s) of

a single company.

(h) CCC--the Commodity Credit Corporation.

(i) Contribution--the cost-share incurred in support of an approved

activity.

(j) Demonstration projects--activities involving the erection or

construction of a structure or facility or the installation of

equipment.

(k) Deputy Administrator--the Deputy Administrator, Commodity and

Marketing Programs, FAS, USDA, or designee.

(l) Division Director--the director of a commodity division,

Commodity and Marketing Programs, FAS, USDA.

(m) EIP/MPP--the Export Incentive Program/Market Promotion Program.

(n) EIP/MPP participant--a U.S. commercial entity which has entered

into an EIP/MPP agreement with CCC.

(o) Eligible commodity--the agricultural commodity that is

represented by an applicant.

(p) Exported commodity--an agricultural commodity that is sold to

buyers in, or is donated to, a foreign country.

(q) FAS--Foreign Agricultural Service, USDA.

(r) Foreign third party--a foreign entity that assists, in

accordance with an approved activity plan, in promoting the export of a

U.S. agricultural commodity.

(s) Generic promotion--a promotion that is not a brand promotion.

(t) Market--a country in which an activity is conducted.

(u) MPP--the Market Promotion Program.

(v) MPP participant--an entity which has entered into an MPP

agreement with CCC.

(w) Participant--a entity which has entered into an agreement with

CCC.

(x) Promoted commodity--an agricultural commodity whose sale is the

intended result of a promotion activity.

(y) Sales team--a group of individuals engaged in an approved

activity intended to result in specific sales.

(z) Small-sized entity--a U.S. commercial entity which meets the

small business size standards published at 13 CFR part 121, Small

Business Size Regulations.

(aa) SRTG--an association of State Departments of Agriculture

referred to as State Regional Trade Group(s).

(bb) STRE--sales and trade relations expenditures.

(cc) Supergrade--a salary level designation that is applicable to

certain non-U.S. employees who direct participants' overseas offices.

(dd) Trade team--a group of individuals engaged in an approved

activity intended to promote the interests of an entire agricultural

sector rather than to result in specific sales by any of its members.

(ee) Unfair trade practice--an act, policy, or practice of a

foreign government that:

(1) violates, is inconsistent with, or otherwise denies benefits to

the United States under, any trade agreement to which the United States

is a party; or

(2) is unjustifiable, unreasonable, or discriminatory and burdens

or restricts United States commerce.

(ff) U.S. commercial entity--an agricultural cooperative or for-

profit firm located and doing business in the United States, and

engaged in the export or sale of an agricultural commodity.

(gg) U.S. industry contribution--the cost incurred by the U.S

industry in support of an approved activity.

(hh) USDA--the United States Department of Agriculture.

Sec. 1485.12 Participation Eligibility.

(a) To participate in the MPP, an entity: [[Page 6364]]

(1) Shall be:

(i) A nonprofit U.S agricultural trade organization;

(ii) A nonprofit state regional trade group;

(iii) A U.S. agricultural cooperative; or

(iv) A State agency; and

(2) Shall contribute:

(i) In the case of generic promotion, at least 10 percent of the

value of resources provided by CCC for such generic promotion; or

(ii) In the case of brand promotion, at least 50 percent of the

total cost of such brand promotions.

(b) To participate in the EIP/MPP, an entity:

(1) Shall be a U.S. commercial entity that either owns the brand(s)

of the agricultural commodity(s) to be promoted or has the exclusive

rights to use such brand(s); and

(2) Shall contribute at least 50 percent of the total cost of the

brand promotion.

(c) CCC may require a contribution level greater than that

specified in paragraphs (a) and (b) of this section. In requiring a

higher contribution level, CCC will take into account such factors as

past participant contributions, previous MPP funding levels, the length

of time an entity participates in the program and the entity's ability

to increase its contribution.

(d) CCC may require an EIP/MPP applicant to participate through an

MPP participant.

(e) CCC will enter into MPP or EIP/MPP agreements only where the

eligible agricultural commodity is comprised of at least 50 percent

U.S. origin content by weight, exclusive of added water.

(f) CCC will not enter into an MPP or EIP/MPP agreement for the

promotion of tobacco or tobacco products.

Sec. 1485.13 Application process and strategic plan.

(a) General application requirements.

CCC will periodically publish a Notice in the Federal Register that

it is accepting applications for participation in MPP and EIP/MPP.

Applications shall be submitted in accordance with the terms and

requirements specified in the Notice. An application shall contain

basic information about the applicant and the proposed program, a

program justification and a strategic plan.

(1) Basic applicant and program information.

(i) All MPP and EIP/MPP applications shall contain:

(A) The name and address of the applicant;

(B) The name of the Chief Executive Officer;

(C) The name and telephone number of the applicant's primary

contact person;

(D) The name(s) of the person(s) responsible for managing the

program;

(E) Type of organization--see Sec. 1485.12(a)(1);

(F) Tax exempt identification number, if applicable;

(G) Activity plan year (mm/dd/yy-mm/dd/yy);

(H) Dollar amount of CCC resources requested for generic

activities;

(I) Dollar amount of CCC resources requested for brand activities;

(J) Percentage of CCC resources requested for brand activities that

will be made available to small-sized entities;

(K) Total dollar amount of CCC resources requested;

(L) Percentage of CCC resources requested for general

administrative costs and overhead; and

(M) Estimated cumulative carryover--i.e., the estimated amount of

unexpended funds allocated to the applicant in any prior year;

(ii) Applications submitted by nonprofit entities shall also

contain:

(A) A description of the organization;

(B) A description of the organization's membership and membership

criteria;

(C) A list of affiliated organizations;

(D) A description of management and administrative capability;

(E) A description of prior export promotion experience;

(F) Value, in dollars, that the applicant will contribute;

(G) Applicant's contribution stated as a percent of 1(i)(K) above;

(H) Value, in dollar, of contributions from other sources;

(2) Program justification.

(i) All MPP and EIP/MPP applications shall contain:

(A) A description of the eligible agricultural commodity(s), its

harmonized system code, the commodity aggregate code and the percentage

of U.S. origin content by weight, exclusive of added water;

(B) A description of the exported agricultural commodity(s), its

harmonized system code, the commodity aggregate code and the percentage

of U.S. origin content by weight, exclusive of added water;

(C) A description of the promoted agricultural commodity(s), its

harmonized system code, the commodity aggregate code and the percentage

of U.S. origin content by weight, exclusive of added water;

(D) A description of the anticipated supply and demand situation

for the exported agricultural commodity(s);

(E) The volume and value of the exported agricultural commodity(s)

for the most recent 3-year period;

(F) If the proposal is for two or more years, an explanation why

the proposal should be funded on a multiyear basis; and

(G) A certification and, if requested by the Deputy Administrator,

a written explanation supporting the certification, that any funds

received will supplement, but not supplant, any private or third party

funds or other contributions to program activities. The justification

shall indicate why the participant is unlikely to carry out the

activities without Federal financial assistance. In determining whether

federal funds received supplemented or supplanted private or third

party funds or contributions, CCC will consider the participant's

overall marketing budget from year to year, variations in promotional

strategies within a country and new markets.

(ii) Applications submitted by a small-sized entity seeking funds

under an EIP/MPP agreement shall contain a certification that it is a

small business within the standards established by 13 CFR part 121. For

purposes of determining size, a cooperative will be considered a single

entity.

(iii) Applicants seeking funds for brand promotion shall contain

the information required by Sec. 1485.16(g)(1) and (2) in order to

justify a rate of reimbursement higher than specified therein.

(3) Strategic plan.

(i) All MPP and EIP/MPP applications shall contain:

(A) A summary of proposed budgets by country and commodity

aggregate code;

(B) A description of the world market situation for the exported

agricultural commodity;

(C) A description of competition from other exporters, including

U.S. firms, where applicable;

(D) A statement of goals and the applicant's plans for monitoring

and evaluating performance towards achieving these goals.

(E) For each country, if applicable, five years of:

(1) historical U.S. export data;

(2) U.S. market share; and

(3) MPP funds received;

(F) For each country, three years of projected U.S. export data and

U.S. market share;

(G) Country strategy, including constraint(s) impeding U.S.

exports, strategy to overcome constraints, previous activities in the

country, the projected impact of the proposed program on U.S. exports;

(H) A justification for any new overseas office;

(I) A description of any demonstration projects, if applicable (see

Sec. 1485.13(d)(1) through (4)); [[Page 6365]]

(J) Data summarizing historical and projected exports, market share

and MPP budgets for the world; and

(K) A description of overall program goals for the ensuing 3-5

years; (ii) MPP applications for brand promotion assistance shall also

contain:

(A) A description of how the brand promotion program will be

publicized to U.S. and foreign commercial entities;

(B) The criteria that will be used to allocate funds to U.S. and

foreign commercial entities; and

(C) A justification for conducting a brand promotion program with

foreign commercial entities, if applicable.

(b) CCC may request any additional information which it deems

necessary to evaluate an MPP or EIP/MPP application. In particular, CCC

may require additional performance measurement, as required by the

Government Performance and Results Act of 1993.

(c) Eligible contributions.

(1) In calculating the amount of contributions that it will make,

and the contributions it will receive from a U.S. industry, a foreign

third party or a State agency, the MPP applicant may include the costs

(or such prorated costs) listed under paragraph (c)(2) of this section

if:

(i) Such costs will be incurred as part of an approved activity,

and

(ii) The contributor has not been or will not be reimbursed by any

other source for such costs.

(2) Subject to paragraph (c)(1) of this section, eligible

contributions are:

(i) Cash;

(ii) Compensation paid to personnel;

(iii) The cost of acquiring materials, supplies or services;

(iv) The cost of office space;

(v) A reasonable and justifiable proportion of general

administrative costs and overhead;

(vi) Payments for indemnity and fidelity bond expenses;

(vii) The cost of business cards;

(viii) The cost of seasonal greeting cards;

(ix) Fees for office parking;

(x) The cost of subscriptions to publications;

(xi) The cost of activities conducted overseas;

(xii) Credit card fees;

(xiii) The cost of any independent evaluation or audit that is not

required by CCC to ensure compliance with program requirements;

(xiv) The cost of giveaways, awards, prizes and gifts;

(xv) The cost of product samples;

(xvi) Fees for participating in U.S. government activities;

(xvii) The cost of air and local travel in the United States;

(xviii) Payment of employee's or contractor's share of personal

taxes; and

(xix) The cost associated with trade shows, seminars, entertainment

and STRE conducted in the United States.

(3) The following are not eligible contributions:

(i) Any expenditure on brand promotion, except for expenditures

incurred by the MPP participant in administering its brand promotion

program;

(ii) Any portion of salary or compensation of an individual who is

the target of an approved promotional activity;

(iii) Any expenditure, including that portion of salary and time

spent in promoting membership in the participant organization or in

promoting the MPP among its members (sometimes referred to in the

industry as ``backsell'');

(iv) Any land costs other than allowable costs for office space;

(v) Depreciation;

(vi) The cost of refreshments and related equipment provided to

office staff;

(vii) The cost of insuring articles owned by private individuals;

(viii) The cost of any arrangement which has the effect of reducing

the selling price of an agricultural commodity;

(ix) The cost of product development, product modifications, or

product research;

(x) Slotting fees or similar sales expenditures;

(xi) Membership fees in clubs and social organizations; and

(xii) Any expenditure for an activity prior to CCC's approval of

that activity or amendment.

(4) The Deputy Administrator shall determine, at the Deputy

Administrator's discretion, whether any cost not expressly listed in

this section may be included by the participant as an eligible

contribution.

(d) Special rules governing demonstration projects funded with CCC

resources. CCC will consider proposals for demonstration projects

provided:

(1) No more than one such demonstration project per constraint is

undertaken within a market;

(2) The constraint to be addressed in the market is a lack of

technical knowledge or expertise;

(3) The demonstration project is a practical and cost effective

method of overcoming the constraint;

(4) A third party participates in such project through a written

agreement which provides that title to the structure, facility or

equipment may transfer to the third party and that the MPP participant

may use the structure, facility or equipment for a period specified in

the agreement for the purpose of removing the constraint.

Sec. 1485.14 Application approval and formation of agreements.

(a) General. CCC will, consistent with available resources, approve

those applications which it considers to present the best opportunity

for developing or expanding export markets for U.S. agricultural

commodities. The selection process, by its nature, involves the

exercise of judgment. CCC's choice of participants and proposed

promotion projects requires that it consider and weigh a number of

factors that cannot be mathematically measured--i.e., market

opportunity, market strategy and management capability.

(b) Approval criteria.

In assessing the applications it receives and determining which it

will approve, CCC considers the following criteria:

(1) The effectiveness of program management;

(2) Soundness of accounting procedures;

(3) The nature of the applicant organization, with greater weight

given to those organizations with the broadest base of producer

representation;

(4) Prior export promotion or direct export experience;

(5) Previous MPP funding;

(6) Adequacy of the applicant's strategic plan in the following

categories:

(i) Description of market conditions;

(ii) Description of, and plan for addressing, market constraints;

(iii) Reasonable likelihood of plan success;

(iv) Export volume and value and market share goals in each

country;

(v) Description of evaluation plan and suitability of the plan for

performance measurement; and

(vi) Past program results and evaluations, if applicable.

(c) Allocation factors.

After determining which applications to approve, CCC determines how

it will allocate resources among participants based on the following

factors, in addition to those in paragraph (b) of this section:

(1) Size of the budget request in relation to projected value of

exports;

(2) Where applicable, size of the budget request in relation to

actual value of exports in prior years;

(3) Where applicable, participant's past projections of exports

compared with actual exports;

(4) Level of participant's contribution; [[Page 6366]]

(5) Market share goals in target country(ies);

(6) The degree to which the product to be exported consists of U.S.

grown agricultural commodities;

(7) The degree of value-added processing in the U.S.; and

(8) General administrative and overhead costs compared to direct

promotional costs.

(9) In the case of a brand promotion program, the percentage of the

budget that will be made available to small-sized entities as a means

of providing priority assistance to such entities.

(d) Approval decision.

(1) CCC will approve those applications which it determines best

satisfy the criteria and factors specified above. In addition, CCC will

only approve applications for EIP/MPP when there is sufficient U.S.

industry need for a brand promotion and there is no eligible MPP

participant interested in or capable of undertaking the brand

promotion.

(2) CCC will not provide assistance to promote a specific brand

product in a single country for more than five years. This five year

period shall not begin prior to the 1994 program or the participant's

first activity plan year, whichever is later. In limited circumstances,

the five year limitation may be waived if the Deputy Administrator

determines that further assistance is necessary in order to meet the

objectives of the program.

(3) The Deputy Administrator shall determine, at the Deputy

Administrator's discretion, whether two or more brand products in any

given country are substantially the same product.

(e) Formation of agreements.

CCC will notify each applicant in writing of the final disposition

of its application. CCC will send a program agreement, allocation

approval letter and a signature card to each approved applicant. The

allocation approval letter will specify any special terms and

conditions applicable to a participant's program, including the

required level of participant contribution. An applicant that decides

to accept the terms and conditions contained in the program agreement

and allocation approval letter should so indicate by having its Chief

Executive Officer sign the program agreement and by submitting the

signed agreement to the Director, Marketing Operations Staff, FAS,

USDA. Final agreement shall occur when the Administrator signs the

agreement on behalf of CCC. The application, the program agreement, the

allocation approval letter and these regulations shall establish the

terms and conditions of an MPP or EIP/MPP agreement between CCC and the

approved applicant.

(f) Signature cards.

The participant shall designate at least two individuals in its

organization to sign program agreements, reimbursement claims and

advance requests. The participant shall submit the signature card

signed by those designated individuals and by the participant's Chief

Executive Officer to the Director, Marketing Operations Staff, FAS,

USDA, and shall immediately notify the Director of any changes in

signatories and shall submit a revised signature card accordingly.

Sec. 1485.15 Activity plan.

(a) General.

A participant shall develop a specific activity plan(s) based on

its strategic plan and the allocation approval letter and shall submit

an activity plan for each year in which it engages in program

activities. An activity plan handbook, available from the Division

Director, provides suggested formats and codes for activity plans and

amendments.

(b) An activity plan shall contain:

(1) A written presentation of all proposed activities including:

(i) A short description of the relevant constraint;

(ii) A description of any changes in strategy from the strategic

plan;

(iii) A budget for each proposed activity, identifying the source

of funds;

(iv) Specific goals and benchmarks to be used to measure the

effectiveness of each activity. This will assist CCC in carrying out

its responsibilities under the Government Performance and Results Act

of 1993 that requires performance measurement of Federal programs,

including the MPP. Evaluation of MPP's effectiveness will depend on a

clear statement by participants of goals, method of achievement, and

results of activities at regular intervals. The overall goal of the MPP

and of individual participants' activities is to achieve additional

exports of U.S. agricultural products, that is, sales that would not

have occurred in the absence of MPP funding.

(2) A staffing plan for any overseas office, including a listing of

job titles, position descriptions, salary ranges and any request for

approval of supergrade salaries; and

(3) An itemized administrative budget for any overseas office.

(c) Activity plans for small-sized entities operating through an

SRTG shall contain a certification that it is a small-sized entity

within the standards established by 13 CFR Part 121.

(d) Requests for approval of ``supergrades''.

(1) Ordinarily, CCC will not reimburse any portion of a non-U.S.

citizen employees compensation that exceeds the highest salary level in

the Foreign Service National (FSN) salary plan applicable to the

country in which the employee works. However, a participant may seek a

higher level of reimbursement for a non-U.S. citizen who will be

employed as a country director or regional director by requesting that

CCC approve that employee as a ``supergrade''.

(2) To request approval of a ``supergrade'', the participant shall

include in its activity plan a detailed description of both the duties

and responsibilities of the position, and of the qualifications and

background of the employee concerned. The participant shall also

justify why the highest FSN salary level is insufficient.

(3) Where a non-U.S. citizen will be employed as a country

director, the MPP participant may request approval for a ``Supergrade

I'' salary level, equivalent to a grade increase over the existing top

grade of the FSN salary plan. The ``supergrade'' and its step increases

are calculated as the percentage difference between the second highest

and the highest grade in the FSN salary plan with that percentage

applied to each of the steps in the top grade. Where the non-U.S.

citizen will be employed as a regional director, with responsibility

for activities and/or offices in more than one country, the MPP

participant may request approval for a ``Supergrade II'' salary level

which is calculated relative to a ``Supergrade I'' in the same way the

latter is calculated relative to the highest grade in the FSN salary

plan.

(e) Submission of the activity plan.

A participant shall submit three copies of an activity plan to the

Division Director and a copy of the relevant country section(s) to the

Attache/Counselor(s) concerned.

(f) Activity plan approval.

CCC shall indicate in an activity plan approval letter which

activities and budgets are approved or disapproved, and shall indicate

any special terms and conditions that apply to the participant

including any requirements with respect to contributions and program

evaluations. A participant may undertake promotional activities

directly or through a foreign third party; however, the participant

shall be responsible and accountable to CCC for all such promotional

activities and related expenditures.

(g) Activity plan changes. [[Page 6367]]

(1) A participant may request changes to an activity plan by

submitting one copy of an APAR to each of the Division Director and the

Attache/Counselor(s) concerned.

(2) An APAR for a new activity shall contain the information

required in paragraph (b) of this section. All other APAR's shall

contain the activity description, the proposed budget and a

justification for transfer of funds, if applicable.

Sec. 1485.16 Reimbursement rules.

(a) A participant may seek reimbursement for an expenditure if:

(1) An expenditure has been made in furtherance of an approved

activity;

(2) The participant has transferred funds to pay for the

expenditure; and

(3) The participant has not been or will not be reimbursed for such

expenditure by any other source.

(b) Subject to paragraph (a) of this section, CCC will reimburse,

in whole or in part, the cost of:

(1) Production and placement of advertising in print or electronic

media or on billboards or posters;

(2) Production and distribution of banners, recipe cards, table

tents, shelf talkers and other similar point of sale materials;

(3) Direct mail advertising;

(4) In-store and food service promotions, product demonstrations to

the trade and to consumers, and distribution of promotional samples;

(5) Temporary displays and rental of space for temporary displays;

(6) Fees for participation in retail, trade, and consumer exhibits

and shows and booth construction and transportation of related

materials to such shows;

(7) Trade seminars including space, equipment rental and

duplication of seminar materials;

(8) Publications;

(9) Part-time contractors such as demonstrators, interpreters,

translators and receptionists to help with the implementation of

promotional activities such as trade shows, in-store promotions, food

service promotions, and trade seminars; and

(10) Giveaways, awards, prizes, gifts and other similar promotional

materials subject to the limitation that CCC will not reimburse more

than $1.00 per item;

(c) Subject to paragraph (a) of this section, but for generic

promotion activities only, CCC will also reimburse, in whole or in

part, the cost of:

(1) Compensation and allowances for housing, educational tuition,

and cost of living adjustments paid to a U.S. citizen employee or a

U.S. citizen contractor stationed overseas subject to the limitation

that CCC shall not reimburse that portion of:

(i) The total of compensation and allowances that exceed 125

percent of the level of a GS-15 Step 10 salary for U.S. Government

employees, and

(ii) Allowances that exceed the rate authorized for U.S. Embassy

personnel;

(2) Approved ``supergrade'' salaries for non-U.S. citizens and non-

U.S. contractors;

(3) Compensation of a non-U.S. citizen staff employee or non-U.S.

contractor subject to the following limitations:

(i) Where there is a local U.S. Embassy Foreign Service National

(FSN) salary plan, CCC shall not reimburse any portion of such

compensation that exceeds the compensation prescribed for the most

comparable position in the FSN salary plan, or

(ii) Where an FSN salary plan does not exist, CCC will not

reimburse any portion of such compensation that exceeds locally

prevailing levels which the MPP participant shall document by a salary

survey or other means.

(4) A retroactive salary adjustment that conforms to a change in

FSN salary plans, effective as of the date of such change;

(5) Accrued annual leave at such time when employment is terminated

or when required by local law;

(6) Overtime paid to clerical staff;

(7) Daily contractor fees subject to the limitation that CCC will

not reimburse any portion of such fee that exceeds the daily gross

salary of a GS-15, Step 10 for U.S. Government employees in effect on

the date the fee is earned;

(8) Air travel plus passports, visas and inoculations subject to

the limitation that CCC will not reimburse any portion of air travel in

excess of the full fare economy rate or when the participant fails to

notify the Attache/Counselor in the destination country in advance of

the travel unless the Deputy Administrator determines it was

impractical to provide such notification;

(9) Per diem subject to the limitation that CCC will not reimburse

per diem in excess of the rates allowed under the U.S. Federal Travel

Regulations (41 CFR parts 301 through 304);

(10) Automobile mileage at the local U.S. Embassy rate or rental

cars while in travel status;

(11) Other allowable expenditures while in travel status as

authorized by the U.S. Federal Travel Regulations (41 CFR parts 301

through 304);

(12) An overseas office, including rent, utilities, communications

originating overseas, office supplies, accident liability insurance

premiums and legal and accounting services;

(13) The purchase, lease, or repair of, or insurance premiums for,

capital goods that have an expected useful life of at least one year

such as furniture, equipment, machinery, removable fixtures, draperies,

blinds, floor coverings, computer hardware and software;

(14) Premiums for health or accident insurance or other benefits

for foreign national employees that the employer is required by law to

pay;

(15) Accident liability insurance premiums for facilities used

jointly with third party participants for MPP activities or for travel

of non-MPP participant personnel;

(16) Market research;

(17) Evaluations, if not required by CCC to ensure compliance with

program requirements;

(18) Legal fees to obtain advice on the host country's labor laws;

(19) Employment agency fees;

(20) STRE including breakfast, lunch, dinner, receptions and

refreshments at approved activities; miscellaneous courtesies such as

checkroom fees, taxi fares and tips; and decorations for a special

promotional occasion;

(21) Educational travel of dependent children, visitation travel,

rest and recuperation travel, home leave travel, emergency visitation

travel for U.S. overseas employees allowed under the Foreign Affairs

Manual, Foreign Affairs Manual, OIS/RA/PSG, Room B-264 Main State,

Washington, D.C. 20520, Telephone: 202-736-4881, FAX: 202-736-7214.

(22) Evacuation payments (safe haven), shipment and storage of

household goods and motor vehicles;

(23) Domestic administrative support expenses for the National

Association of State Departments of Agriculture and the SRTGs;

(24) Generic commodity promotions (see Sec. 1485.13(e));

(25) Expenditures associated with trade shows, seminars, and

educational training conducted in the United States; and

(26) Demonstration projects.

(d) CCC will not reimburse any cost of:

(1) Forward year financial obligations, such as severance pay,

attributable to employment of foreign nationals;

(2) Expenses, fines, settlements or claims resulting from suits,

challenges or disputes emanating from employment terms, conditions,

contract provisions and related formalities;

(3) The design and production of packaging, labeling or origin

identification stickers;

(4) Product development, product modification or product research;

[[Page 6368]]

(5) Product samples;

(6) Slotting fees or similar sales expenditures;

(7) The purchase, construction or lease of space for permanent

displays, i.e., displays lasting beyond one activity plan year;

(8) Rental, lease or purchase of warehouse space;

(9) Coupon redemption or price discounts;

(10) Refundable deposits or advances;

(11) Giveaways, awards, prizes, gifts and other similar promotional

materials in excess of $1.00 per item;

(12) Alcoholic beverages that are not an integral part of an

approved promotional activity;

(13) The purchase, lease (except for use in authorized travel

status) or repair of motor vehicles;

(14) Travel of applicants for employment interviews;

(15) Unused non-refundable airline tickets or associated penalty

fees except where travel is restricted by U.S. government action or

advisory;

(16) Independent evaluation or audit, including activities of the

subcontractor if CCC determines that such a review is needed in order

to ensure program compliance;

(17) Any arrangement which has the effect of reducing the selling

price of an agricultural commodity;

(18) Goods and services and salaries of personnel provided by U.S.

industry or foreign third party;

(19) Membership fees in clubs and social organizations;

(20) Indemnity and fidelity bonds;

(21) Fees for participating in U.S. Government sponsored

activities, other than trade fairs and exhibits;

(22) Business cards;

(23) Seasonal greeting cards;

(24) Office parking fees;

(25) Subscriptions to publications;

(26) Home office domestic administrative expenses, including

communication costs;

(27) Travel in the United States unless in transit to or from a

foreign country in which travel is not restricted;

(28) Payment of U.S. and foreign employees or contractors share of

personal taxes, except as legally required in a foreign country, and;

(29) Any expenditure incurred for an activity prior to CCC's

approval of that activity or amendment.

(e) The Deputy Administrator may determine, at the Deputy

Administrator's discretion, whether any cost not expressly listed in

this section will be reimbursed.

(f) For a generic promotion activity involving the use of company

names, logos or brand names, the MPP participant must ensure that all

companies seeking to promote U.S. agricultural commodities have an

equal opportunity to participate in the activity.

(g) For a brand promotion activity, CCC will reimburse at a rate

equal to the percentage of U.S. origin content of the promoted

agricultural commodity or at a rate of 50 percent, whichever is the

lesser, except that CCC may reimburse for a higher rate if:

(1) There has been an affirmative action by the U.S. Trade

Representative under Section 301 of the Trade Act of 1974 with respect

to the unfair trade practice cited and there has been no final

resolution of the case; and

(2) The participant shows, in comparison to the year such Section

301 case was initiated, that U.S. market share of the agricultural

commodity concerned has decreased; and

(3) In such case, CCC shall determine the appropriate rate of

reimbursement.

(h) CCC will reimburse for expenditures, other than administrative

expenditures, made after the conclusion of participant's activity plan

year provided:

(1) The activity was approved prior to the end of the activity plan

year;

(2) Funds were transferred to pay for a portion of the

expenditure(s) prior to the end of the activity plan year; and

(3) Expenditures were incurred not more than 30 calendar days

beyond the end of an activity plan year.

Sec. 1485.17 Reimbursement procedures.

(a) A format for reimbursement claims is available from the

Division Director. Claims for reimbursement shall contain the following

information:

(1) Activity type--brand or generic;

(2) Activity number;

(3) Commodity aggregate code;

(4) Country code;

(5) Cost category;

(6) Amount to be reimbursed;

(7) If applicable, any reduction in the amount of reimbursement

claimed to offset CCC demand for refund of amounts previously

reimbursed, and reference to the relevant Compliance Report; and

(8) If applicable, any amount previously claimed that has not been

reimbursed.

(b) All claims for reimbursement shall be submitted by the

participant's U.S. office to the Director, Marketing Operations Staff,

FAS, USDA.

(c) In general, CCC will not reimburse a claim for less than

$10,000 except that CCC will reimburse a final claim for a

participant's activity plan year for a lesser amount.

(d) CCC will not reimburse claims submitted later than 6 months

after the end of a participant's activity plan year.

(e) If CCC reimburses a claim with commodity certificates, CCC will

issue commodity certificates with a face value equivalent to the amount

of the claim which shall be in full accord and satisfaction of such

claim.

(f) If CCC overpays a reimbursement claim, the participant shall

repay CCC within 30 days the amount of the overpayment either by

submitting a check payable to CCC or by offsetting its next

reimbursement claim.

(g) If a participant receives a reimbursement or offsets an

advanced payment which is later disallowed, the participant shall

within 30 days of such disallowance repay CCC the amount owed either by

submitting a check payable to CCC or by offsetting its next

reimbursement claim.

(h) The participant shall report any actions having a bearing on

the propriety of any claims for reimbursement to the Attache/Counselor

and its U.S. office shall report such actions in writing to the

Division Director(s).

Sec. 1485.18 Advances.

(a) Policy.

In general, CCC operates MPP and EIP/MPP on a reimbursable basis.

CCC will not advance funds to an EIP/MPP participant or to an MPP

participant for brand promotion activities.

(b) Exception.

Upon request, CCC may advance payments to an MPP participant for

generic promotion activities. Prior to making an advance, CCC may

require the participant to submit security in a form and amount

acceptable to CCC to protect CCC's financial interests. Total payments

advanced shall not exceed 40 percent of a participant's approved annual

generic activity budget. However, CCC will not make any advance to an

MPP participant where an advance is outstanding from a prior activity

plan year.

(c) Refunds due CCC.

A participant shall expend the advance on approved generic

promotion activities within 90 calendar days after the date of

disbursement by CCC. A participant shall return any unexpended portion

of the advance, plus a prorated share of all proceeds generated (i.e.,

premiums generated from certificate sales and interest earned), either

by submitting a check payable to CCC or by offsetting its next

reimbursement claim. All checks shall be mailed to the Director,

Marketing Operations Staff, FAS, USDA. [[Page 6369]]

Sec. 1485.19 Employment practices.

(a) An MPP participant shall enter into written contracts with all

employees and shall ensure that all terms, conditions, and related

formalities of such contracts conform to governing local law.

(b) An MPP participant shall, in its overseas office, conform its

office hours, work week and holidays to local law and to the custom

generally observed by U.S. commercial entities in the local business

community.

(c) An MPP participant may pay salaries or fees in any currency

(U.S. or foreign) if approved by the Attache/Counselor. However,

participants are cautioned to consult local laws regarding currency

restrictions.

1485.20 Financial management, reports, evaluations and appeals.

(a) Financial Management.

(1) An MPP participant shall implement and maintain a financial

management system that conforms to generally accepted principles and

standards of accounting.

(2) An MPP participant shall institute internal controls and

provide written guidance to commercial entities participating in its

activities to ensure their compliance with these provisions. Each

participant shall maintain all original records and documents relating

to program activities for five calendar years following the end of the

applicable activity plan year and shall make such records and documents

available upon request to authorized officials of the U.S. Government.

An MPP participant shall also maintain all documents related to

employment such as employment applications, contracts, position

descriptions, leave records and salary changes, and all records

pertaining to contractors.

(3) A participant shall maintain its records of expenditures and

contributions in a manner that allows it to provide information by

activity plan, country, activity number and cost category. Such records

shall include:

(i) Receipts for all STRE (actual vendor invoices or restaurant

checks, rather than credit card receipts);

(ii) Original receipts for any other program related expenditure in

excess of $25.00;

(iii) The exchange rate used to calculate the dollar equivalent of

expenditures incurred in a foreign currency and the basis for such

calculation;

(iv) Copies of reimbursement claims;

(v) An itemized list of claims charged to each of the participant's

CCC resources accounts;

(vi) Documentation with accompanying English translation supporting

each reimbursement claim, including original evidence to support the

financial transactions such as canceled checks, receipted paid bills,

contracts or purchase orders, per diem calculations and travel

vouchers. (Credit memos are not acceptable types of documentation for

participant reimbursement claims); and

(vii) Documentation supporting contributions must include: the

dates, purpose and location of the activity for which the cash or in-

kind items were claimed as a contribution; who conducted the activity;

the participating groups or individuals; and, the method of computing

the claimed contributions. MPP participants must retain and make

available for audit documentation related to claimed contributions.

(4) Upon request, a participant shall provide to CCC originals of

documents supporting reimbursement claims.

(b) Reports.

(1) End-of-Year Contribution Report.

Not later than 6 months after the end of its activity plan year, a

participant shall submit two copies of a report which identifies, by

activity and cost category and in U.S. dollar equivalent, contributions

made by the participant, the U.S. industry and foreign third parties

during that activity plan year. A suggested format of a contribution

report is available from the Division Director.

(2) Trip Reports.

Not later than 45 days after completion of travel (other than local

travel), an MPP participant shall submit a trip report. The report must

include the name(s) of the traveler(s), purpose of travel, itinerary,

names and affiliations of contacts, and a brief summary of findings,

conclusions, recommendations or specific accomplishments.

(3) Research Reports.

Not later than 6 months after the end of its activity plan year, an

MPP participant shall submit a report on any research conducted in

accordance with the activity plan.

(4) A participant shall submit the reports required by this

subsection to the appropriate Division Director. Trip reports and

research reports shall also be submitted to the Attache/Counselor

concerned. All reports shall be in English and include the

participant's agreement number, the countries covered, date of the

report and the period covered in the report.

(5) CCC may require the submission of additional reports.

(6) A participant shall provide to the FAS Compliance Review Staff

upon request any audit reports by independent public accountants.

(c) Evaluation.

(1) Policy.

(i) The Government Performance and Results Act (GPRA) of 1993 (5

U.S.C. 306; 31 U.S.C. 1105, 1115-1119, 3515, 9703-9704) requires

performance measurement of Federal programs, including MPP. Evaluation

of MPP's effectiveness will depend on a clear statement by participants

of goals to be met within a specified time, schedule of measurable

milestones for gauging success, plan for achievement, and results of

activities at regular intervals. The overall goal of the MPP and of

individual participants' activities is to achieve additional exports of

U.S. agricultural products, that is, sales that would not have occurred

in the absence of MPP funding. A participant that can demonstrate

additional sales compared to a representative base period, taking into

account extenuating factors beyond the participant's control, will have

met the overall objective of the GPRA and the need for evaluation.

(ii) Evaluation is an integral element of program planning and

implementation, providing the basis for the strategic plan and activity

plan. The evaluation results guide the development and scope of a

participant's program, contributing to program accountability and

providing evidence of program effectiveness.

(iii) An MPP participant shall conduct periodic evaluations of its

program and activities and may contract with an independent evaluator

to satisfy this requirement. CCC reserves the right to have direct

input and control over design, scope and methodology of any such

evaluation, including direct contact with and provision of guidance to

the independent evaluator.

(2) Types of evaluation.

(i) An activity evaluation is a review of an activity to determine

whether such activity achieved the goals specified in the activity

plan. Unless specifically exempted in the activity plan, all activity

evaluations shall be completed within 90 days following the end of the

MPP participant's activity plan year.

(ii) A brand promotion evaluation is a review of the U.S. and

foreign commercial entities' export sales to determine whether the

activity achieved the goals specified in the activity plan. These

evaluations shall be completed within 90 days following the end of the

participant's activity plan year.

(iii) A program evaluation is a review of the MPP participant's

entire program or any appropriate portion of the program to determine

the effectiveness of the participant's strategy in meeting specified

goals. An MPP participant shall complete at least one program

evaluation each year. Actual scope and [[Page 6370]] timing of the

program evaluation shall be determined by the MPP participant and the

Division Director and specified in the MPP participant's activity plan

approval letter.

(3) Contents of program evaluation.

A program evaluation shall contain:

(i) The name of the party conducting the evaluation;

(ii) The activities covered by the evaluation (including the

activity numbers);

(iii) A concise statement of the constraint(s) and the goals

specified in the activity plan;

(iv) A description of the evaluation methodology;

(v) A description of additional export sales achieved, including

the ratio of additional export sales in relation to MPP funding

received;

(vi) A summary of the findings, including an analysis of the

strengths and weaknesses of the program(s); and

(vii) Recommendations for future programs.

(4) An MPP participant shall submit via a cover letter to the

Division Director, an executive summary which provides assessment of

the program evaluation's findings and recommendations and proposed

changes in program strategy or design as a result of the evaluation.

(5) If as a result of an evaluation or audit of activities of a

participant under the program, CCC determines that further review is

needed in order to ensure compliance with the requirements of the

program, CCC may require the participant to contract for an independent

audit of the program activities,

(d) Appeals.

(1) The Director, Compliance Review Staff (Director, CRS) will

notify a participant through a compliance report when it appears that

CCC may be entitled to recover funds from that participant. The

compliance report will state the basis for this action.

(2) A participant may, within 60 days of the date of the compliance

report, submit a response to the Director, CRS. The Director, CRS, at

the Director's discretion, may extend the period for response up to an

additional 30 days. If the participant does not respond to the

compliance report within the required time period or, if after review

of the participant's response, the Director, CRS, determines that CCC

may be entitled to recover funds from the participant, the Director,

CRS, will refer the compliance report to the Deputy Administrator.

(3) If after review of the compliance report and response, the

Deputy Administrator determines that the participant owes any money to

CCC he will so inform the participant and provide the basis for the

decision. The Deputy Administrator may initiate action to collect such

amount pursuant to 7 C.F.R. Part 1403, Debt Settlement Policies and

Procedures. Determinations of the Deputy Administrator will be in

writing and in sufficient detail to inform the participant of the basis

for the determination. The participant may request reconsideration

within 30 days of the date of the Deputy Administrator's initial

determination.

(4) The Participant may appeal determinations of the Deputy

Administrator to the Administrator. An appeal must be in writing and be

submitted to the office of the Deputy Administrator within 30 days

following the date of the initial determination by the Deputy

Administrator or the determination on reconsideration. The participant

may request a hearing.

(5) If the participant submits its appeal and requests a hearing,

the Administrator, or the Administrator's designee, will set a date and

time, generally within 60 days. The hearing will be an informal

proceeding. A transcript will not ordinarily be prepared unless the

participant bears the cost of a transcript; however, the Administrator

may have a transcript prepared at CCC's expense.

(6) The Administrator will base the determination on appeal upon

information contained in the administrative record and will endeavor to

make a determination within 60 days after submission of the appeal,

hearing or receipt of any transcript, whichever is later. The

determination of the Administrator will be the final determination of

CCC. The participant must exhaust all administrative remedies contained

in this subsection before pursuing judicial review of a determination

by the Administrator.

Sec. 1485.21 Failure to make required contribution.

An MPP participant's contribution requirement will be specified in

the MPP allocation letter and the activity plan approval letter. If an

MPP participant fails to contribute the amount specified in its

allocation approval letter, the MPP participant shall pay to CCC in

U.S. dollars the difference between the amount it has contributed and

the amount specified in the allocation approval letter. An MPP

participant shall remit such payment within 90 days after the end of

its activity plan year.

Sec. 1485.22 Submissions.

The participant may make any submissions required by this

regulation either by hand delivery to the Director, Marketing

Operations Staff, FAS, USDA or by commercial service delivery or U.S.

mail. If delivery occurs by commercial ``next-day'' mail service or

U.S. regular mail, first class prepaid, the material shall be deemed

submitted as of the date of the commercial service or U.S. registered

mail receipt. For all other permissible methods of delivery, the

material shall be deemed submitted as of the date received by the

Director, Marketing Operations Staff, FAS, USDA.

Sec. 1485.23 Miscellaneous provisions.

(a) Disclosure of Program Information.

(1) Documents submitted to CCC by participants are subject to the

provisions of the Freedom of Information Act (FOIA), 5 U.S.C. 552, 7

CFR Part 1, Subpart A--Official Records, and specifically 7 C.F.R.

1.11, Handling Information from a Private Business.

(2) If requested by a person located in the United States, a

participant shall provide a copy of any document in its possession or

control containing market information developed and produced under the

terms of its agreement. The participant may charge a fee not to exceed

the costs incurred in assembling, duplicating and distributing the

materials.

(3) The results of any research conducted by a participant under an

agreement, shall be the property of the U.S. Government.

(b) Ethical Conduct.

(1) A participant shall conduct its business in accordance with the

laws and regulations of the country in which an activity is carried

out.

(2) Neither an MPP participant nor its affiliates shall make export

sales of agricultural commodities and products covered under the terms

of the agreement. Neither an MPP participant nor its affiliates shall

charge a fee for facilitating an export sale. A participant may,

however, collect check-off funds and membership fees that are required

for membership in the participating organization. For the purposes of

this paragraph, ``affiliate'' means any partnership, association,

company, corporation, trust, or any other such party in which the

participant has an investment other than in a mutual fund.

(3) An MPP participant shall not limit participation to members of

its organization. The MPP participant shall publicize its program and

make participation possible for commercial entities throughout the

participant's industry or, in the case of SRTGs, throughout the

corresponding region. [[Page 6371]]

(4) A participant shall select U.S. agricultural industry

representatives to participate in activities such as trade teams, sales

teams, and trade fairs based on criteria that ensure participation on

an equitable basis by a broad cross section of the U.S. industry. If

requested, a participant shall submit such selection criteria to CCC

for approval.

(5) All participants should endeavor to ensure fair and accurate

fact-based advertising. Deceptive or misleading promotions may result

in cancellation or termination of an agreement.

(6) The participant must report any actions or circumstances that

have a bearing on the propriety of the program to the Attache/Counselor

and its U.S. office shall report such actions in writing to the

Division Director.

(c) Contracting Procedures.

(1) Neither the Commodity Credit Corporation (CCC) nor any other

agency of the United States Government or any official or employee of

the CCC or the United States Government has any obligation or

responsibility with respect to participant contracts with third

parties.

(2) A participant shall:

(i) Ensure that all expenditures for goods and services reimbursed,

in excess of $25.00, by CCC are documented by a purchase order,

invoice, or contract and that such documentation demonstrates

competition in acquiring the goods or services;

(ii) Ensure that no employee or officer participates in the

selection or award of a contract in which such employee or official, or

the employee's or officer's family or partners has a financial

interest;

(iii) Conduct all contracting in an openly competitive manner.

Individuals who develop or draft specifications, requirements,

statements of work, invitations for bids and requests for proposals for

procurement of any goods or services shall be excluded from competition

for such procurement;

(iv) Base solicitations for professional and technical services on

a clear and accurate description of the requirements for the services

to be procured;

(v) Perform a price or cost analysis for each contract;

(vi) Maintain the following procurement records:

(A) A written justification for each contractor selection or

procurement award;

(B) Documentation to demonstrate:

(1) If the procurement is for less than $2,500, that the

participant has solicited two or more quotations via telephone or

advertised to obtain competitive bids;

(2) If the procurement is for more than $2,500 but less than

$25,000, that the participant has actively solicited competitive bids

through normal commercial channels and has received at least three bids

or advertised to obtain competitive bids;

(3) If the procurement is for more than $25,000, that the

participant has advertised to obtain competitive bids. Procurement for

goods and services shall not be split in an effort to avoid specified

advertising requirements.

(d) Disposable Capital Goods.

(1) Capital goods purchased by the MPP participant and reimbursed

by CCC that are unusable, unserviceable, or no longer needed for

project purposes shall be disposed of in one of the following ways:

(i) The participant may exchange or sell the goods provided that it

applies any exchange allowance, insurance proceeds or sales proceeds

toward the purchase of other property needed in the project;

(ii) The participant may, with CCC approval, transfer the goods to

other MPP participants and activities, or to a foreign third party; or

(iii) The participant may, upon Attache'/Counselor approval, donate

the goods to a local charity, or convey the goods to the Attache/

Counselor, along with an itemized inventory list and any documents of

title.

(2) A participant shall maintain an inventory of all capital goods

with a value of $100 acquired in furtherance of program activities. The

inventory shall list and number each item and include the date of

purchase or acquisition, cost of purchase, replacement value, serial

number, make, model, and electrical requirements.

(3) The participant shall insure all capital goods acquired in

furtherance of program activities and safeguard such goods against

theft, damage and unauthorized use. The participant shall promptly

report any loss, theft, or damage of property to the insurance company.

(e) Contracts between MPP participants and brand participants.

Where CCC approves an application for brand promotion, the MPP

participant shall enter into an agreement with each approved brand

participant which shall:

(1) Specify a time period for such brand promotion, and require

that all brand promotion expenditures be made within the MPP

participant's approved activity plan period;

(2 Make no allowance for extension or renewal;

(3) Limit reimbursable expenditures to those made in countries and

for activities approved in the activity plan;

(4) Specify the percentage of promotion expenditures that will be

reimbursed, reimbursement procedures and documentation requirements;

(5) Include a written certification that the brand participant

either owns the brand of the product it will promote or has exclusive

rights to promote the brand in each of the countries in which promotion

activities will occur;

(6) Require that all product labels, promotional material and

advertising will identify the origin of the agricultural commodity as

``Product of the U.S.'', ``Product of the U.S.A.'', ``Grown in the

U.S.'', ``Grown in the U.S.A.'', ``Made in America'' or other U.S.

regional designation if approved in advance by CCC; that such origin

identification will be conspicuously displayed, in a manner that is

easily observed; and that such origin identification will conform, to

the extent possible, to the U.S. standard of 1/6'' (.42 centimeters) in

height based on the lower case letter ``o''. A participant may request

an exemption from this requirement. All such requests shall be in

writing and include justification satisfactory to the Deputy

Administrator that this labelling requirement would hinder a

participant's promotional efforts. The Deputy Administrator will

determine, on a case by case basis, whether sufficient justification

exists to grant an exemption from the labelling requirement;

(7) Specify documentation requirements for a U.S. brand applicant

seeking priority consideration for assistance based on eligibility as a

small-sized entity;

(8) Require that the U.S. brand participant submit to the MPP

participant a statement certifying that any Federal funds received will

supplement, but not supplant, any private or third party funds or other

contributions to program activities; and

(9) The participant shall require the brand participant to maintain

all original records and documents relating to program activities for

five calendar years following the end of the applicable activity plan

year and shall make such records and documents available upon request

to authorized officials of the U.S. Government.

(f) EIP/MPP participants shall ensure that all product labels,

promotional material and advertising will identify the origin of the

agricultural commodity as ``Product of the U.S.'', ``Product of the

U.S.A.'', ``Grown in the U.S.'', ``Grown in the U.S.A.'', ``Made in

America'' or other U.S. regional designation if [[Page 6372]] approved

in advance by CCC; such origin identification is conspicuously

displayed in a manner that is easily observed, and that, to the fullest

extent possible, the origin identification conforms to the U.S.

standard of 1/6'' (.42 centimeters) in height based on the lower case

letter ``o''. An EIP/MPP participant may request an exemption from this

requirement. All such requests shall be in writing and include

justification satisfactory to the Deputy Administrator that this

labelling requirement would hinder a participant's promotional efforts.

The Deputy Administrator will determine, on a case by case basis,

whether sufficient justification exists to grant an exemption from the

labelling requirement;

(g) Travel shall conform to U.S. Federal Travel Regulations (41 CFR

parts 301 through 304) and air travel shall conform to the requirements

of the ``Fly America Act (49 U.S.C. 1517).'' The MPP participant shall

notify the Attache/Counselor in the destination countries in writing in

advance of any proposed travel.

(h) Proceeds.

Any income or refunds generated from an activity, i.e.,

participation fees, proceeds of sales, refunds of value added taxes

(VAT), the expenditures for which have been wholly or partially

reimbursed, shall be repaid by submitting a check payable to CCC or

offsetting the participant's next reimbursement claim. However, where

CCC reimburses a participant with CCC commodity certificates, such

participant may retain any income generated by the sale of such

certificates.

Sec. 1485.24 Applicability date.

This Subpart applies to activities that are approved in accordance

with the participant's 1995 program and corresponding activity plan

year.

Sec. 1485.25 Paperwork reduction requirements.

The paperwork and record keeping requirements imposed by this final

rule have been submitted to the Office of Management and Budget (OMB)

for review under the Paperwork Reduction Act of 1980. OMB has assigned

control number 05510027 for this information collection.

Signed at Washington, D.C. on January 27, 1995.

Christopher E. Goldthwait,

General Sales Manager and Vice President, Commodity Credit Corporation.

[FR Doc. 95-2477 Filed 1-30-95; 10:09 am]

BILLING CODE 3410-10-P