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: Proposed rule.

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SUMMARY: This rule proposes to amend the regulations applicable to the

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

Agricultural Trade Act of 1978. This proposed rule would incorporate

into the MAP allocation process the level of export contributions made

by U.S. industry participants; authorize reimbursement of certain

travel expenses for brand participants and certain necessary packaging

and labeling design expenses; extend the activity payment deadline

following the end of an activity plan year; establish a 5-year limit,

per country, on CCC assistance for brand promotion by single companies;

and permit reimbursement to participants based upon issuance of a

credit memo as an alternative to a transfer of funds.

DATES: Written comments must be received by March 27, 1998 to be

assured of consideration.

ADDRESSES: Comments should be submitted to: Kent Sisson, Director,

Marketing Operations Staff, Foreign Agricultural Service, United States

Department of Agriculture, 1400 Independence Avenue, SW., Ag Box 1042,

Room 4932S, Washington, DC 20250-1042. Fax: (202) 720-9361.

FOR FURTHER INFORMATION CONTACT: Kent Sisson or Denise Fetters at (202)

720-4327.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule is issued in conformance with Executive Order

12866. It has been determined that this proposed rule would not have an

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

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

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

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 proposed 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 proposed rule because CCC is not required by any

other provision of law to publish a notice of proposed rulemaking with

respect to the subject matter of this proposed 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 proposed

rule would 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.

On February 1, 1995, CCC published a final rule in the Federal

Register (60 FR 6352) governing the operations of the MAP. Since

publication of that rule, CCC has had ongoing discussions with program

participants concerning program improvements. Some of the changes

proposed herein are based on these discussions.

CCC proposes to take State and industry contributions into

consideration during the MAP allocation process. Currently, such

contributions are not considered in the allocation process. This

approach does not recognize the value and significance of contributions

made by the States and industries in support of foreign market

development efforts. Therefore, CCC is proposing to amend

Sec. 1485.14(c)(4) to include State and industry export promotion

contributions in the MAP allocation process. In order to protect the

integrity of the allocation process, CCC also proposes to amend

Sec. 1485.21 to make the participant responsible to CCC for the full

contribution upon which the allocation would be based. In other words,

the regulations would require the participant to pay to CCC the

difference between the amount actually contributed and the amount

specified in the allocation approval letter.

Section 1485.16(d)(3) currently disallows reimbursement for costs

associated with the design and production of packaging, labeling, and

origin identification. However, CCC believes that when changes in

packaging, labeling, or origin identification are necessary to meet

another country's importing requirements, reimbursement is appropriate.

Therefore, this rule proposes to amend Sec. 1485.16(d)(3) and to add a

Sec. 1485.16(b)(11) which specifically authorizes reimbursement of

necessary costs associated with the design and production of packaging,

[[Page 9452]]

labeling, and origin identification. The participant will be

responsible for demonstrating that the change was necessitated by

foreign importing requirements. CCC will not reimburse any cost for

creative artwork and design.

MAP participants currently must transfer payment for expenditures

within 4 months of the completion of the activity plan year in order to

be reimbursed. For activities which occur near the end of he activity

plan year, some participants occasionally fail to meet the 4-month

deadline due to delays in receiving the necessary paperwork, such as

invoices or purchase orders, from their overseas counterparts.

Extending the period of time for payment to 6 months would facilitate

participant compliance and still allow for efficient program

management. Because reimbursement for these approved activities

effectuates the goals of the program, CCC believes that extending the

deadline to 6 months is justifiable and proposes such amendment to

Sec. 1485.16(h)(3).

CCC currently will not reimburse brand participants for any travel

expenses. CCC believes that company participation in a trade show is a

crucial step for entering new export markets. Because international

travel can be expensive, small firms sometimes must forego attending

trade shows which could greatly increase their chances for successful

market entry and result in actual sales. To encourage trade show

participation by brand participants, CCC is proposing to amend section

1485.16 to authorize reimbursement for the air travel and per diem

associated with participation in foreign trade shows. Other travel

costs would not be reimbursed. Reimbursement would be limited to travel

and per diem expenses for no more than two representatives of the brand

participant. Travel and per diem expenses would not be reimbursed

unless the participant is an exhibitor.

The MAP currently limits any company to five years of CCC

assistance per country per product for brand promotion. CCC believes,

however, that it can expand export opportunities more effectively by

limiting each company to five years of brand promotion in any country.

In other words, after five years of receiving assistance from CCC for

brand promotion in a given country, a company would ``graduate'' from

the program in that country. Such company would remain eligible to

participate in any other country in which it had received brand

promotion assistance for less than five years. This would allow CCC to

share its limited resources with a wider variety of American exporters

and in a wider variety of markets. After five years of assistance in a

country, a company should have established itself in that country and

be able to finance 100 percent of its costs. CCC proposes to amend

Sec. 1485.14(d)(2) accordingly. CCC will calculate this five-year

period as is done under the current rule.

Finally, another participant suggestion is to accept credit memos

as documentation for participant reimbursement claims. Credit memos are

widely used in business transactions throughout the world; however, CCC

does not currently accept such memos as proof of eligible promotion

expenditures. CCC had been concerned that monitoring compliance might

be difficult if credit memos were allowed. After careful examination

and review, including consultation with the Office of Inspector

General, CCC believes it can adopt and implement audit controls to

permit the use of credit memos while adequately protecting CCC's

interests.

CCC believes this policy regarding credit memos prevents some

participants, in particular small businesses who would prefer to pay

for certain promotional activities using credit memos, from deriving

the full benefits of the program. Therefore, CCC proposes to amend

Sec. 1485.20(a)(3)(vi) to accept credit memos as supporting

documentation for reimbursement and auditing purposes. CCC proposes to

add a definition of ``credit memo'' as a notice that a vendor has

decreased an amount owed for promotional expenditures at the time the

credit memo is issued. CCC also proposes to add a definition of

``expenditure,'' in Sec. 1485.11, to clarify that an expenditure can be

either a transfer of funds or a payment via a credit memo in lieu of a

transfer of funds. This rule also proposes conforming changes to

accompany the six proposed substantive changes discussed herein.

List of Subjects in 7 CFR Part 1485

Agricultural commodities, Exports.

In consideration of the foregoing, the Commodity Credit Corporation

proposes to amend 7 CFR part 1485 as follows:

PART 1485--[AMENDED]

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 Promotion Program

2. Section 1485.11 is amended by deleting the paragraph

designations and adding the following two new definitions in

alphabetical order:

Sec. 1485.11 Definitions.

* * * * *

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

for promotional expenditures at the time the credit memo is issued.

* * * * *

Expenditure--the transfer of funds or payment via a credit memo in

lieu of a transfer of funds.

* * * * *

3. 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. * * *

* * * * *

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

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

(b)(11) and (12); and revising paragraphs (a)(1), (b)(9), (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) * * *

(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, if necessary to meet the importing requirements in a

foreign country; and

(12) Air travel not to exceed the full fare economy rate 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

participants to participate as trade show exhibitors.

* * * * *

(d) * * *

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

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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.

5. 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

* * * * *

6. 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 in the amount of contribution to be furnished

by the applicant and other sources as indicated in the participant's

application. The MAP participant shall pay to 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 February 9, 1998.

Lon Hatamiya,

Administrator, Foreign Agricultural Service and Vice President,

Commodity Credit Corporation.

[FR Doc. 98-4706 Filed 2-24-98; 8:45 am]

BILLING CODE 3410-10-M