Agreements for the Development of Foreign Markets for Agricultural Commodities

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,

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

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