[Federal Register Volume 60, Number 21 (Wednesday, February 1, 1995)]
[Rules and Regulations]
[Pages 6352-6372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-2477]




[[Page 6351]]

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Part II





Department of Agriculture





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Commodity Credit Corporation



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7 CFR Part 1485



Agreements for the Development of Foreign Markets for Agricultural 
Commodities; Final Rule



Market Promotion Program FY 1995; Notice

  Federal Register / Vol. 60, No. 21 / Wednesday, February 1, 1995 / 
Rules and Regulations   
[[Page 6352]]

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1485


Agreements for the Development of Foreign Markets for 
Agricultural Commodities

AGENCY: Commodity Credit Corporation (CCC).

ACTION: Final rule.

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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