Foreign Market Development Cooperator ProgramFY 1998 Program Announcement

DEPARTMENT OF AGRICULTURE

Foreign Agricultural Service

Foreign Market Development Cooperator Program--FY 1998 Program

Announcement

AGENCY: Foreign Agricultural Service, USDA.

ACTION: Notice.

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SUMMARY: This notice announces the availability of funds for the Fiscal

Year 1998 Foreign Market Development Cooperator (Cooperator) Program.

DATES: All applications must be received by 5:00 p.m. Eastern Daylight

Savings Time, August 13, 1997.

ADDRESSES: U.S. Department of Agriculture, Foreign Agricultural

Service, Marketing Operations Staff, STOP 1042, 1400 Independence Ave.,

S.W., Washington, D.C. 20250-1042.

FOR FURTHER INFORMATION CONTACT:

The Marketing Operations Staff at (202) 720-4327.

SUPPLEMENTARY INFORMATION:

Introduction

The Foreign Agricultural Service (FAS) announces that applications

are being accepted for participation in the Fiscal Year 1998 Cooperator

Program. The Program is intended to create, expand and maintain foreign

markets for United States agricultural commodities and products. The

Foreign Agricultural Service (FAS) administers the Cooperator Program

and provides cost share assistance to eligible trade organizations to

carry out approved market development activities. Financial assistance

under this program will be made available on a competitive

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basis and applications will be reviewed against the evaluation criteria

contained in this announcement.

On May 16, 1997, FAS published a notice in the Federal Register

requesting comments on the proposed method and criteria for evaluating

proposals and allocating funds among applicants. FAS received 10

letters from various U.S. trade association in response to the notice.

Following is a summary of the comments and FAS' responses to these

comments. General comments relating to the value of a competitive

process and non-substantive comments have been omitted.

Comment: We question how Past Demand Expansion Performance will be

used in the criteria. Our understanding of this criteria is that a U.S.

commodity that accounted for 100% of the world market for that

commodity would receive a higher weighting in the funding formula than

a commodity that accounted for only 40%. This seems to make little

sense. A very high existing market share would suggest relatively less

need for aggressive market development since competition does not exist

or has been largely eliminated. At the other extreme, a low market

share may suggest that the U.S. cannot be competitive and may warrant

limited or no market development efforts. The midrange of market

shares, 25%-75%, most likely would occur for those commodity markets

which are extremely competitive (but where the U.S. is having some

success) and would benefit most from market development investments.

Comment: In calculating past export performance and past demand

expansion performance, Cooperators will be awarded for activities

carried out in targeted markets that are steady, reliable customers

(where market development may not be as critical) rather than in

markets that are just beginning to develop for U.S. suppliers or in

markets that are declining and market development is being used to try

to keep the market viable. Program funds should be available to help

Cooperators leverage their market development activities in targeted

markets that may not be at their peak.

Comment: In the discussion of past export performance, reference is

made to the ``share of the value of exports.'' How is this calculated?

Comment: In the discussion of the contribution level criteria,

reference is made to ``share of contributions.'' What does this mean?

Comment: Throughout the description of the allocation criteria,

reference is made to ``shares'' instead of actual values. We found this

confusing and request that FAS take another look at the proposed

methodology for making the calculations for each of the criteria.

Response: From the above comments it appears that there is some

confusion and perhaps, in some cases, misunderstanding of how and why

some of the allocation criteria will be calculated and used in the

allocation process. The following should help to clarify these issues.

First, the general philosophy behind selecting and using these criteria

is to balance export performance and market potential with the limited

amount of program resources that are available. It is our expectation

that in using these objective criteria--combined with the other factors

identified under the Review Process section of this notice--that this

overall objective will be met. Second, the criteria and the manner in

which they will be used as designed to ensure that the appropriate

level of resources are allocated for both market maintenance and market

potential, or growth objectives. Third, will regard to the meaning of

the word ``share'' as used in several of the allocation criteria, this

term refers to a percent, not market share. Using the past export

performance criterion as an example, ``share'' refers to the

applicant's percent of the total export value of products promoted by

all applicants under the program compared to the applicant's percent of

total available Cooperator Program resources.

Comment: Why did FAS decide to ask for six years of data for

calculating the allocation criteria? By asking for so many years, FAS

is complicating the process of developing proposals and encouraging

applicants to spend time on data generation and presentation that could

more profitably be used by developing that part of the proposal that

explains the link between activities and the applicant's marketing

strategy.

Response: The Cooperator Program is a long-term market development

program designed to address long-term foreign import constraints such

as infra-structural market impediments and limited processing

capabilities. Given these types of constraints, it typically takes

several years before any returns on investment are realized. For this

reason, FAS believes it is necessary to analyze data spanning a longer

time period in order to obtain an accurate assessment of a long-term

strategic marketing plan. Also, by using data spanning several years,

we are able to mitigate the impact of year-to-year fluctuations in

trade caused by factors external to the program, e.g., changes in price

and production levels.

Comment: In the discussion of past demand expansion performance,

reference is made to the ``total value of world imports.'' Why did FAS

decide to base this calculation on import rather than export

statistics.

Response: FAS chose to use imports rather than exports for this

factor because a primary objective of the Cooperator Program is to

increase worldwide demand for U.S. agricultural commodities.

Comment: Please explain the choice of the year 2003 as the basis

for the future demand expansion goals criterion.

Response: The calculations for contribution levels, past export

performance, past demand expansion performance and future demand

expansion goals are based on 6 years of data, to the extent such data

is available. The first year for which data will be available for the

future demand expansion goals criterion will be 1998, followed by 6

years of projections to the year 2003.

Comment: Since the weight factor will almost always be less than

1.00, the implication of this formula is that FMD applicants will

always receive something less than the commodity division recommends.

This gives the commodity division incentive to inflate its funding

recommendation.

Response: While the sum of all the factor weights is 1.00, the

position, or scoring, of one applicant relative to all other applicants

is more important. The ability of the commodity divisions to inflate

the recommendations is constrained by the amount of available funds.

The ability to `game' this process is quite limited because allocations

are ultimately based on contribution levels and performance.

Comment: We believe that the weighting factors for two of the

proposed allocation criteria should be revised. We believe that the

overall formula is weighted too heavily toward an applicant's

contribution level. The 40 percent weighting, we believe, would have a

tendency to reward larger well-financed participants and unfairly limit

or punish the small-to-medium sized applicants. Conversely, we feel

that the proposed weighting percentage given for past export

performance (20 percent) is too low. To better reflect the efforts of

an applicant, we recommend that the percentage weighting for these two

criteria be reversed or at least equalized. We feel that our members

should be rewarded for the volume and value of their exports which make

a sizable contribution to the positive agricultural trade balance.

[[Page 37541]]

Response: FAS assigned a 40 percent weight to the contribution

criterion because we believe that the contribution level reflects an

industry's commitment to its international marketing efforts. The

formula does not necessarily disadvantage smaller applicants with fewer

resources to contribute to the program because each applicant's

contribution level is compared to its Cooperator marketing plan budget,

i.e. a ratio is established. FAS also places importance on export

performance and demand expansion when evaluating applications as

reflected in four of the five allocation criteria. Collectively, this

criteria account for 60 percent of the allocation formula.

Comment: The wording of the last sentence in the draft notice is

unclear to us. Reference is made to a ``total weight factor,'' but we

can find no earlier reference to this factor in the text of the notice.

Response: The total weight factor is simply the sum of the

percentage weight factors of the four allocation criteria which will be

used for each applicant this year.

Comment: Under the proposed weighting described in section (b) past

export performance, we are concerned about how the foreign overhead

provided for co-location within a U.S. agricultural trade office will

be calculated. In a number of cases, the FMD cooperator has not had a

choice in whether or not to co-locate within an ATO in a target market,

and does not have direct control over the level of expenditure used to

support that ATO.

Response: FAS will calculate the dollar value of space provided for

co-location within a U.S. agricultural trade office. This value will be

based on the square footage occupied by the applicant in the office and

the actual rent cost paid by FAS. Since the value represents a level of

resources being provided by the U.S. Government, it should be included

in the allocation formula.

Comment: In calculating proposed contribution levels, past export

performance, and past demand expansion performance, the collection of

targeted markets over the six year time period should remain unchanged

in order to obtain accurate data. Under our limited budget, for

example, targeted markets move in and out of each year's marketing plan

based on expected or forecast export activity and availability of

program funds.

Response: The accuracy of the data collected will not be impacted

by changes in the targeted markets. For any given year that Cooperator

funds are spent in a market, the applicant will be required to provide

six years of data. Again, FAS believes it is necessary to analyze data

spanning a longer time period in order to obtain an accurate assessment

of a long-term strategic marketing plan.

Comment: Our organization seems to qualify for all usual and

customary factors used by FAS when reviewing proposed projects, e.g,

U.S.-based staff, contributions, etc. However, the calculations--6 year

averages--for contributions, past export performance, past demand

expansion performance, future demand expansion goals and accuracy of

past demand expansion projections seem to be intertwined with existing

MAP provisions and performance. Our organization has no MAP history.

Does this therefore disqualify our organization from FMD consideration?

Response: An applicant need not have previously participated in the

MAP or Cooperator Program to receive consideration for funding. For

those applicants that have no MAP history, calculations for the

allocation criteria will be based on Cooperator Program data, as

available.

Comment: We believe that in developing a method to evaluate the

relative merits of different proposals for the purpose of determining

appropriate funding levels, an exemption or different method of

evaluation should be given to small cooperators. Time and resources

available to applicants to prepare ``meritorious proposals'' will be a

significant factor. Special consideration should be given to

cooperators whose proposed marketing plan budgets fall within a ``de

minimis'' range or less than 0.5%, 1%, or 2% of all Cooperator

marketing plan budgets.

Response: FAS does not intend to exempt or apply a different method

of evaluation to any applicant as this would undermine the competitive

nature of the allocation process. FAS has also considered the time and

resources needed to prepare an application for the Cooperator Program

and we do not believe this competitive process will impose any

additional burden on applicants.

Comment: We request that any proposed program regulation

acknowledge that due to the diverse makeup of the applicants in terms

of membership that the allocation of FMD funding take into

consideration the nature of the industry. That is, any calculation of

an industry's ability to develop contributions, and the wherewithal to

collect industry contributions, should be counterbalanced by that

industry's contribution to the economy, in particular, the export

economy.

Response: FAS recognizes that not all applicants have the same

ability to generate industry funding and contributions to the program.

FAS also recognizes that an industry's contribution to the economy as a

whole is very important. However, for this allocation process, it would

be too difficult and too time consuming to identify, quantify, and

verify the appropriate variables for measuring the benefits to the

economy.

Background

Under the Cooperator Program, FAS enters into Market Development

Project Agreements with nonprofit U.S. trade organizations or

associations of State Departments of Agriculture. FAS enters into

agreements with those nonprofit U.S. trade organizations that have the

broadest possible producer representation of the commodity being

promoted and gives priority to those organizations that are nationwide

in membership and scope. Program participants may not, during the term

of their agreement with FAS, make export sales of the agricultural

commodity being promoted or charge fees for facilitating an export sale

if promotional activities designed to result in that specific sale are

supported by Cooperator Program funds.

Market Development Project Agreements involve the promotion of

agricultural commodities on a generic basis and, therefore, do not

involve activities targeted directly toward individual consumers.

Approved activities contribute to the maintenance or growth of demand

for the agricultural commodities and generally address long-term

foreign import constraints by focusing on matters such as:

--Reducing infra-structural or historical market impediments;

--Improving processing capabilities;

--Modifying codes and standards; and

--Identifying new markets or new applications or uses for the

agricultural commodity or product in the foreign market.

Authority

The Cooperator Program is authorized by Title VII of the

Agricultural Trade Act of 1978, 7 U.S.C. 5721, et seq. Program

regulations appear at 7 CFR part 1550.

Application Process

To be considered, an applicant must submit to FAS information

related to the allocation criteria considered by FAS as described in

this notice. All applications must be submitted in

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triplicate from (an original and two copies). Handbooks are available

to assist applicants in developing an application and marketing plan.

To receive a handbook, contact the Marketing Operations Staff at (202)

720-4327 or visit the FAS home page at http://www.fas.usda.gov.

Review Process

FAS allocates funds in a manner that effectively supports the

strategic decision-making initiatives of the Government Performance and

Results Act (GPRA) of 1993. In deciding whether a proposed project will

contribute to the effective creation, expansion or maintenance of

foreign markets, FAS seeks to identify a clear, long-term agricultural

trade strategy by market or product and a program effectiveness time

line against which results can be measured at specific intervals using

quantifiable product or country goals. These performance indictors are

part of FAS' resource allocation strategy to fund applicants which can

demonstrate performance based on a long-term strategic plan, consistent

with the strategic objectives of the United States Department of

Agriculture's Long-term Agricultural Trade Strategy, and address the

performance measurement objectives of the GPRA.

FAS considers a number of factors when reviewing proposed projects.

These factors include:

--The ability of the organization to provide an experienced U.S.-based

staff with technical and international trade expertise to ensure

adequate development, supervision and execution of the proposed

project;

--The organization's willingness to contribute resources including cash

and goods and services of the U.S. industry and foreign third parties;

The conditions or constraints affecting the level of U.S. exports

and market share for the agricultural commodities and products;

--The degree to which the proposed project is likely to contribute to

the creation, expansion, or maintenance of foreign markets; and

--The degree to which the strategic plan is coordinated with other

private or U.S. government-funded market development projects.

(1) Phase I--Sufficiency Committee Review

Applications received by the closing date will be reviewed by FAS

to determine the eligibility of the applicants and the completeness of

the applications.

(2) Phase 2--FAS Divisional Review

Applications which meet the application procedures will then be

further evaluated by the applicable FAS Commodity Division. The

Divisions will recommend funding levels for each applicant based on a

review of the applications and marketing plans against the factors

described above. The purpose of this review is to identify meritorious

proposals and to suggest an appropriate funding level for each

application based upon these factors.

(3) Phase 3--Competitive Review

Meritorious applications will then be passed on to the office of

the Deputy Administrator, Commodity and Marketing Programs, for the

purpose of allocating available funds among the applicants.

Applications which pass the Divisional Review will compete for funds on

the basis of the following evaluation criteria (the number in

parentheses represents a percentage weight factor). Data used in the

calculation for contribution levels, past export performance and past

demand expansion performance will cover not more than a 6 year period,

to the extent such data is available.

Allocation Criteria

Meritorious proposals will compete for funds on the basis of the

following allocation criteria (the numbers in parentheses represent a

percentage weight factor). Data used in the calculations for

contribution levels, past expert performance and past demand expansion

performance will cover not more than a 6-year period, to the extent

such data is available.

(a) Contribution Level (40)

The applicant's 6-year average share of all contributions

(contributions may include cash and goods and services provided by U.S.

entities in support of foreign market development activities) compared

to

The applicant's 6-year average share of all Cooperator

marketing plan budgets.

(b) Past Export Performance (20)

The 6-year average share of the value of exports promoted

by the applicant across Cooperator Program targeted markets compared to

The applicant's 6-year average share of all Cooperator

marketing plan budgets plus a 6-year average share of Market Access

Program (MAP) program ceiling levels and a 6-year average share of

foreign overhead provided for co-location within a U.S. agricultural

trade office in those targeted markets.

(c) Past Demand Expansion Performance (20)

The 6-year average share of the total value of world

imports of the commodities promoted by the applicant across Cooperator

Program targeted markets compared to

The applicant's 6-year average share of all Cooperator

marketing plan budgets plus a 6-year average share of MAP program

ceiling levels and a 6-year average share of foreign overhead provided

for co-location within a U.S. agricultural trade office in those

targeted markets.

(d) Future Demand Expansion Goals (20)

(The criterion will receive a weight of 10 beginning with the year

2000 program.)

The total dollar value of the applicant's projected

increase in world imports of the commodities being promoted by the

applicant for the year 2003 across all Cooperator Program targeted

markets compared to

The applicant's requested funding level.

(e) Accuracy of Past Demand Expansion Projections

(Since the information is not currently available, this criterion

will be used beginning with the year 2000 program and will receive a

weight of 10).

The actual dollar value share of world imports of the

commodities being promoted by the applicant for the year 1998 across

all Cooperator Program targeted markets compared to

The applicant's past projected share of world imports of

the commodities being promoted by the applicant for the year 1998, as

specified in the 1998 Cooperator Program application.

The Commodity Divisions' recommended program levels for each

applicant are converted to a percent of the total Cooperator Program

funds available and multiplied by the total weight factor to determine

the amount of funds allocated to each applicant.

Closing Date for Applications

Applications must be received by 5:00 p.m. Eastern Daylight Savings

Time August 13, 1997, at the following address:

Hand Delivery (including Federal Express, DHL, etc.): U.S. Department

of Agriculture, Foreign Agricultural Service, Marketing Operations

Staff, Room 4932-S, 14th and Independence Ave., S.W., Washington, D.C.

20250-1042.

U.S. Postal Delivery: Marketing Operations Staff, STOP 1042, 1400

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Independence Ave., S.W., Washington, D.C. 20250-1042.

Dated: July 7, 1997.

August Schumacher, Jr.,

Administrator, Foreign Agricultural Service.

[FR Doc. 97-18383 Filed 7-11-97; 8:45 am]

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