Agreements for the Development of Foreign Markets for Agricultural Commodities

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1485

Agreements for the Development of Foreign Markets for

Agricultural Commodities

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This final rule amends the regulations applicable to the

Market Access Program (MAP) authorized by section 203 of the

Agricultural Trade Act of 1978. This rule incorporates into the MAP

allocation process the level of export contributions, including brand

promotion cost-share contributions, made by U.S. industry participants;

authorizes reimbursement of certain travel expenses for brand

participants and certain necessary packaging and labeling design

expenses; extends the activity payment deadline following the end of an

activity plan year; establishes a 5-year limit, per country, on CCC

assistance for brand promotion by single companies, and permits

reimbursement to participants based upon issuance of a credit memo as

an alternative to a transfer of funds.

EFFECTIVE DATE: June 2, 1998. See Supplementary Information.

FOR FURTHER INFORMATION CONTACT:

Kent Sisson or Denise Fetters at (202) 720-4327.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule is issued in conformance with Executive Order

12866. It has been determined that this final rule will not have an

annual economic effect in excess of $100 million; will not cause a

major increase in costs to consumers, individual industries, Federal,

State, or local government agencies, or geographic regions; and will

not have an adverse effect on competition, employment, investment,

productivity, innovation, or the ability of U.S.-based enterprises to

compete with foreign-based enterprises in domestic or foreign markets.

Executive Order 12988

This final rule has been reviewed in accordance with Executive

Order 12988, Civil Justice Reform. This 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; does not have retroactive effect; and does not

require administrative proceedings before suit may be filed.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372 which requires intergovernmental consultation with State and

local officials (see the Notice related to 7 CFR Part 3015, subpart V,

published at 48 FR 29115).

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable to this final rule because CCC is not required by any other

provision of law to publish a notice of rulemaking with respect to the

subject matter of this rule.

Paperwork Reduction Act

The information collection requirements for participating in the

MAP were approved for use by the Office of Management and Budget (OMB)

through April 30, 2000, and assigned OMB No. 0551-0027. This final rule

does not impose new information collection requirements.

Background

The MAP is authorized by section 203 of the Agricultural Trade Act

of 1978, as amended (7 U.S.C. 5623), which directs the Commodity Credit

Corporation (CCC) to establish ``a program to encourage the

development, maintenance, and expansion of commercial markets for

agricultural commodities through cost-share assistance to eligible

trade organizations.'' CCC implements this provision by entering into

agreements with non-profit trade associations, private organizations,

State agencies, and cooperatives. These agreements provide for sharing

the costs of overseas advertising, technical assistance, and other

export promotion activities, and may include either generic or brand

promotions.

Summary and Analysis of Comments

On February 25, 1998, CCC published a rule in the Federal Register

(63 FR 9451) proposing several changes to the regulations which govern

the operations of the MAP. That rule also requested interested parties

to submit comments by March 27, 1998. CCC received 17 comments on the

proposed rule. Following is a summary of the comments which

specifically address the proposed rule and CCC's responses to these

comments. General comments relating to the value of the program,

editorial suggestions, and non-substantive comments have been omitted.

State and Industry Contributions

CCC received 14 comments on this issue. None of these opposed the

inclusion of state and industry contributions in the allocation

process.

Comment: Matching funds provided by companies for brand promotion

should be included as industry contributions, and, in turn, be

considered in the MAP allocation process.

Response: CCC agrees with the commenters that company expenditures

on brand promotion should be included as industry contributions. The

focus of this program has shifted somewhat, with more emphasis being

placed on market entry and access for agricultural cooperatives and

small companies. For the first time, the 1998 MAP will include

reimbursement for brand promotion undertaken by only cooperatives and

small companies; large companies are no longer eligible to participate.

By recognizing the contributions to the program made by such entities,

and including those contributions in the allocation process, CCC

expects that a greater number of cooperatives and small businesses will

receive assistance through the MAP. Therefore, CCC is amending the

final rule by removing Sec. 1485.13(c)(3)(i), which disallows all non-

administrative brand promotion expenditures as eligible contributions.

We also agree that these non-administrative costs should be included in

the allocation process in order to reflect the true industry

contribution to the market development effort.

Comment: MAP participants should not be held responsible for

shortfalls in industry or State contributions. Under certain economic

situations (e.g., crop failure) it is prudent for an industry to scale

back its promotional efforts, and penalizing a participant for its

industry's wisdom would be illogical.

Response: MAP applicants compete against each other for funds

based, in part, on the contributions promised in their MAP

applications. To maintain the integrity of the competitive process, the

level of contributions specified in each participant's MAP application

must be met, regardless of the source of the contributions. Because it

is the participant which applies for funding and enters into the

program agreement with CCC, the participant must be held responsible

for reaching the contribution level specified in the application.

Comment: Contribution levels are proposed in conjunction with

allocation

[[Page 29939]]

requests. When funds are allocated at less than requested levels, the

proposed contribution levels should not be considered commitments. CCC

should use a contribution rate rather than an absolute level.

Response: Each applicant has the option of submitting in the

application its contribution level in the form of a percentage of CCC

resources expended or an absolute dollar value. When an applicant

chooses to submit a contribution level as a percentage of CCC resources

expended, the applicant is not required to spend an absolute dollar

amount, but a specified percentage of the resources reimbursed by CCC.

When an applicant chooses to submit an absolute dollar value in its

application, the absolute dollar value prevails irrespective of the

amount reimbursed by CCC. If a participant is not able to meet its

percentage contribution requirement, it has two options available. The

first is to curtail expenditures of CCC resources in order to maintain

the specified ratio of contributions to expenditures. The second option

is to repay CCC the difference between the amount it has contributed

and the amount specified. Therefore, CCC is adopting the rule as

proposed.

Packaging, Labeling, and Origin Identification

CCC received 10 comments on this issue.

Comment: If market-specific labels are required and developed, can

the company claim production costs in perpetuity for all reprints?

Response: No, companies can claim only costs for production of

labels to be used during the activity plan year in which the

expenditure is made. CCC has revised the final rule to clarify this

point.

Comment: Where package and label design changes are implemented to

comply with local laws, it is difficult to isolate those costs

attributable solely to regulation compliance from those attributed to

``creative artwork and design''.

Response: Because other comments indicated that isolating such

costs was possible and no evidence was provided in this comment to show

otherwise, the proposed rule is adopted in this regard. To clarify,

this rule allows for reimbursement of costs associated with the design

and production of packaging, labeling, and origin identification when

changes are necessary to meet another country's importing requirements.

Any costs of design and production which are not necessary to meet such

requirements are not reimbursable.

Comment: A written statement from an importer detailing packaging,

labeling, or origin identification requirements, rather than copies of

actual laws or regulations, should be considered sufficient

documentation of a foreign country's import requirements.

Response: In order to keep reimbursement of these expenses

auditable, participants will need to maintain copies of foreign

government documents detailing packaging, labeling, or origin

identification requirements. Other comments indicated that acquiring

such documentation would be possible. A written statement from an

importer may be helpful in understanding the requirements, but such a

statement cannot be considered adequate documentation to support a

reimbursement claim.

Comment: Importers sometimes reimburse costs of this type. It is

inappropriate for this program to reimburse costs that importers

already cover.

Response: If an importer reimburses or will reimburse such a cost,

requesting reimbursement from CCC would violate Sec. 1485.16(a)(3),

which provides that a participant may seek reimbursement for

expenditures on activities if there has not been and will not be

reimbursement from another source. Also, Sec. 1485.13(a)(2)(i)(G)

requires participants to certify that MAP funds will not be used to

supplant any other contributions to program activities. Consequently,

this provision only applies to situations in which a participant would

not be reimbursed by any other source and the funds would not supplant

any other contributions to program activities.

Extension of Deadline for Transferring Payments After Completion of

Activity Plan Year

CCC received 6 comments on this issue, all of which favored the

proposed change.

Comment: Does this extension apply to both generic and brand

promotion?

Response: Yes; unless otherwise specified, the reimbursement rules

apply to both generic and brand promotion activities. The rule is

adopted as proposed.

Trade Show Travel for Brand Participants

CCC received 11 comments on this issue, all of which favored the

proposed change.

Comment: CCC needs to be cautious that companies don't claim trade

show travel that would have been performed with or without assistance.

Response: Again, Sec. 1485.13(a)(2)(i)(G) requires participants to

certify that MAP funds will not be used to supplant any other

contributions to program activities. However, many small companies have

said that the high costs associated with international travel have

prevented their participation in foreign trade shows. For such

companies, this rule change facilitates market access.

Comment: Requirements such as trip reports, keeping original

tickets, and mandatory use of U.S. carriers should be eliminated

because they would be burdensome on small companies. Also, trip reports

would contain business confidential information.

Response: Trip reports are essential to maintaining sufficient

records for program evaluation. CCC believes it is in the best interest

of the program as a whole to file a report of activities during trade

show participation. CCC will protect business confidential information

to the extent permitted by law. Travel would not be so frequent, or

records so voluminous, as to constitute a burden on small business. CCC

applies the U.S. Federal Travel Regulations and the Fly America Act,

which generally require the use of U.S. carriers. Thus, the rule is

adopted as proposed.

Comment: What must brand representatives do at a foreign trade show

for their travel expenses to qualify for reimbursement?

Response: CCC intends to reimburse travel and per diem costs only

for those company representatives (maximum of two) who devote their

time and efforts to exhibiting their company's products at a booth at

the trade show. The booth could be for the company alone or for a group

including the company, but the representatives must be exhibiting their

own products, not the products of other companies. CCC will not

reimburse company representatives who attend trade shows as visitors.

CCC has revised the final rule to clarify this point.

Comment: CCC should allow for reimbursement of overland

transportation costs to trade shows, not just airfare. Sometimes it is

easier and less expensive to get to a trade show by other means.

Response: CCC agrees with this comment and will amend the proposed

regulation to provide for reimbursement, consistent with the U.S.

Federal Travel Regulations, of other means of transportation to

international trade shows. For consistency, CCC will also amend

Sec. 1485.16(c)(8) to provide reimbursement for other means of

international travel for generic promotion activities.

[[Page 29940]]

Five Year Brand Graduation

CCC received 9 comments on this issue. Eight of these opposed the

rule.

Comment: The rule proposes to limit brand promotion assistance to a

company in a country to five years. Does ``assistance'' refer to

reimbursements or allocations?

Response: Assistance refers to the MAP as a whole. CCC will not

approve or reimburse activities for the same company for brand

promotions in the same country for more than five years. No further

clarification is required in the final rule.

Comment: Because market entry and growth cannot always be achieved

in five years, particularly for companies with multiple products, the

proposal to move to a five year assistance limit per company should be

rejected.

Response: CCC recognizes that individual companies may not achieve

market entry or growth for all products in a country within five years.

However, CCC must operate and manage this program with limited

resources. In order to provide the opportunity for the greatest number

of companies to reap the benefits of the MAP, it is necessary to

graduate companies from countries after five years of assistance.

Comment: Some branded participants have formulated their marketing

strategies and plans believing that their companies would be able to

remain in their current markets by switching their promoted products

after five years. Thus, promotional activities which occurred prior to

the 1998 activity plan year should not be counted toward the five year

company limit.

Response: The MAP is administered on a year-to-year basis. Funding

and program commitments are made on a program year basis. Although some

participants may make plans assuming a continuing program, CCC has not

made commitments beyond one program year. Companies may, of course,

continue to promote their products in the country after five years;

however, such activities must be supported with their own resources.

Therefore, CCC is adopting the rule as proposed.

Use of Credit Memos as Proof of Eligible Promotion Expenditures

CCC received 9 comments on this issue, all of which favor the

proposed change. The final rule is adopted accordingly.

This rule includes other conforming and clarifying changes to

accompany the substantive changes discussed herein.

Effective Date

This rule is effective June 2, 1998 but it only applies to

authorized activities beginning with the 1998 program. Therefore,

present participants will not be required to revise previously approved

activity plans in order to comply with the new rules.

List of Subjects in 7 CFR Part 1485

Agricultural commodities, Exports.

In consideration of the foregoing, 7 CFR part 1485 is amended as

follows:

PART 1485--COOPERATIVE AGREEMENTS FOR THE DEVELOPMENT OF FOREIGN

MARKETS FOR AGRICULTURAL COMMODITIES

1. The authority citation for 7 CFR 1485 continues to read as

follows:

Authority: 7 U.S.C. 5623; 7 U.S.C. 5662-5663 and sec. 1302, Pub.

L. 103-66, 107 Stat. 330.

Subpart B--Market Access Program

2. Section 1485.11 is amended by deleting the paragraph

designations and adding the following two new definitions in

alphabetical order:

Sec. 1485 Definitions.

* * * * *

Credit memo--a notice that a vendor has decreased an amount owned

for promotional expenditures at the time the notice is issued.

* * * * *

Expenditure--either the transfer of funds, or payment via a credit

memo in lieu of a transfer of funds.

* * * * *

3. In section 1485.13, paragraph (c)(3)(i) is removed and

paragraphs (c)(3)(ii) through (c)(3)(xii) are redesignated as

paragraphs (c)(3)(i) through (c)(3)(xi) respectively.

4. Section 1485.14 is amended by removing paragraph (d)(3) and

revising paragraphs (c)(4) and the first sentence of (d)(2) to read as

follows:

Sec. 1485.14 Application approval and formation of agreements.

* * * * *

(c) * * *

(4) Level of participant's, State's, and industry's contributions;

* * * * *

(d) * * *

(2) CCC will not provide assistance to a single company for brand

promotion in a single country for more than five years. * * *

* * * * *

Section 1485.16 is amended by removing paragraph (a)(2);

redesignating paragraph (a)(3) as paragraph (a)(2); adding paragraph

(b)(11); and revising paragraphs (a)(1), (b)(6), (b)(7), (b)(9),

(c)(8), (c)(25), (d)(3), and (h)(3) to read as follows:

Sec. 1485.16 Reimbursement rules.

(a) * * *

(1) The expenditure was made in furtherance of an approved

activity; and

* * * * *

(b) * * *

(b) Expenditures, other than travel expenditures, associated with

retail, trade, and consumer exhibits and shows; seminars; and

educational training; including participation fees, booth construction,

transportation of related materials, rental of space and equipment, and

duplication of related printed materials;

(7) International air travel, not to exceed the full fare economy

rate, or other means of international transportation, and per diem, as

allowed under the U.S. Federal Travel Regulations (41 CFR parts 301

through 304) for no more than two representatives of a single brand

participant to exhibit their company's products at a foreign trade

show.

* * * * *

(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;

* * * * *

(11) The design and production of packaging, labeling or origin

identification, to be used during the activity plan in which the

expenditure is made, if such packaging, labeling or origin

identification are necessary to meet the importing requirements in a

foreign country; and

(c) * * *

(8) International travel expenses 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 its was impractical to provide such

notification;

* * * * *

(25) Travel expenditures associated with trade shows, seminars, and

educational training conducted in the United States; and

* * * * *

(d) * * *

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(3) The design and production of packaging, labeling or origin

identification, except as described in paragraph (b)(11) of this

section.

* * * * *

(h) * * *

(3) All expenditures were made for the activity within 6 months

following the end of the activity plan year.

6. Section 1485.20 is amended by revising paragraph (a)(3)(vi) to

read as follows:

Sec. 1485.20 Financial management, reports, evaluations and appeals.

(a) * * *

(3) * * *

(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, travel vouchers,

and credit memos; and

* * * * *

7. Section 1485.21 is revised to read as follows:

Sec. 1485.21 Failure to make required contribution.

An MAP participant's contribution requirement will be specified in

the MAP allocation letter and the activity plan approval letter. The

amount specified will be the amount of contribution to be furnished by

the applicant and other sources as directed in the participant's

application. The MAP participants shall pay CCC in dollars the

difference between the amount actually contributed and the amount

specified in the allocation approval letter. An MAP participant shall

remit such payment within 90 days after the end of its activity plan

year.

Signed at Washington, DC, on May 11, 1998.

Lon Hatamiya,

Adminstrator, Foreign Agricultural Service and Vice President,

Commodity Credit Corporation.

[FR Doc. 98-14522 Filed 6-1-98; 8:45 am]

BILLING CODE 3410-01-M