DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

######## 7 CFR Part 1486

RIN 0551-AA62

Emerging Markets Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

SUMMARY: This final rule establishes regulations applicable to the
Emerging Markets Program (EMP). The regulations provide details
concerning program administration, including participant eligibility,
application requirements, review and allocation process, reimbursement
rules and procedures, financial reporting and project evaluation
requirements, appeal procedures, and program controls.

EFFECTIVE DATE: February 3, 2005.

Applicability date: This rule does not apply to projects approved prior
to the effective date.

ADDRESSES: Denise Huttenlocker, Director, Marketing Operations Staff,
Foreign Agricultural Service, United States Department of Agriculture,
1400 Independence Avenue SW, Ag Box 1042, Room 4932-S, Washington, DC
20250-1042. Fax: (202) 720-9361; e-mail: mosadmin@fas.usda.gov.

FOR FURTHER INFORMATION CONTACT: Douglas Freeman by phone at (202)
720-4327, by fax at (202) 720-9361, or by e-mail at emo@fas.usda.gov.

SUPPLEMENTARY INFORMATION:

# Executive Order 12866

This rule is issued in conformance with Executive Order 12866. It has
been determined that this final rule will not have an annual economic
effect in excess of \$100 million; will not cause a major cost increase
in costs to consumers, individual industries, Federal, State or local
government agencies, or geographic regions; and will not have an adverse
effect on competition, employment, investment, productivity, innovation,
or the ability of U.S.-based enterprises to compete with foreign-based
enterprises in domestic or foreign markets.

# Executive Order 12988

This rule has been reviewed in accordance with Executive Order 12988,
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;
would not have retroactive effect; and would require administrative
proceedings before suit may be filed.

# Executive Order 12372

This program is not subject to the provisions of Executive Order 12372,
which requires intergovernmental consultation with State and local
officials (see the Notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115).

# Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not
applicable to this rule because the Commodity Credit Corporation (CCC)
is not required by any provision of law to publish a notice of proposed
rulemaking with respect to the subject matter of this rule.

# The Unfunded Mandates Reform Act of 1995

This rule contains no Federal mandates under the regulatory provisions
of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 204 of the
UMRA.

# Executive Order 13132

It has been determined that this rule does not have sufficient
Federalism implications to warrant the preparation of a Federalism
impact statement. The provisions contained in this rule will not have a
substantial direct effect on States or their political subdivisions, or
on the distribution of power and responsibilities among the various
levels of government.

# 

# Paperwork Reduction Act of 1995 

In accordance with provisions of the Paperwork Reduction Act of 1995,
the Foreign Agricultural Service (FAS) submitted an information
collection package to the Office of Management and Budget (OMB). OMB
assigned control number 0551-0043 to the information collection and
record keeping requirements. Copies of the information collection may be
obtained from Kimberly Chisley, the Agency Information Collection
Coordinator, on (202) 720-2568 or by email to
[**Kimberly.Chisley@fas.usda.gov**](mailto:Kimberly.Chisley@fas.usda.gov).

# Government Paperwork Elimination Act

The Foreign Agricultural Service is committed to compliance with the
Government Paperwork Elimination Act (GPEA), which requires Government
agencies, in general, to provide the public the option of submitting
information or transacting business electronically to the maximum extent
possible. Accordingly, applications for participation in the Emerging
Markets Program may be submitted online. Payment transactions will be
handled both electronically and in paper form.

# Background

The EMP is authorized by Section 1542(d) of the Food, Agriculture,
Conservation, and Trade Act of 1990. The Act directs the Secretary to
make available to emerging markets the expertise of the United States to
"identify and carry out specific opportunities and projects," including
potential reductions in trade barriers, "in order to develop, maintain,
or expand markets for United States agricultural exports." The EMP
provides funding for technical assistance activities that develop,
maintain, or expand the export of U.S. agricultural commodities to
overseas emerging markets, and which benefit primarily U.S. industry as
a whole.

The EMP is administered by personnel of the Foreign Agricultural
Service. FAS implements this provision by providing CCC funds for
specific projects to various entities, including government agencies and
U.S. private entities, representing a wide range of agricultural
commodities and products.

# 

# Summary and Analysis of Contents

On June 22, 2004, CCC published a rule in the Federal Register (69 FR
34616) proposing to establish regulations for the Emerging Markets
Program. That rule also requested interested parties to submit comments
by July 22, 2004. CCC received 10 comments on the proposed rule.
Following is a summary of the comments that specifically address the
proposed rule and CCC's responses to these comments. General comments
relating to the value of the program, editorial suggestions, and
non-substantive comments have been omitted.

# 

# Discussion of Comments

## General Information

Comment: Does the Emerging Markets Program support both public and
private applications equally?

Response: While the EMP is available to assist both public and private
entities, its primary purpose is to support the market development
efforts of the U.S. private sector. CCC has clarified this point in
section 1486.100.

*Eligibility, Applications and Funding*

Comment: Under what conditions may "profit-making" entities (section
1486.200) apply for program funding? Section 1486.201 references
research and consulting firms, but does not discuss other for-profits.

Response: CCC has revised section 1486.201 to include other for-profit
entities. CCC also clarified that such entities must justify the use and
need for federal funding assistance and that the use of program funds to
supplement the costs of normal day-to-day operations is prohibited.

Comment: If the basic objective of the EMP is the expanded export of
value-added foods, why does section 1468.100 refer to agricultural
commodities which is more inclusive?

Response: CCC assumes reference is to section 1486.100, not 1468.100.

The first sentence under section 1486.100 clearly states that the EMP is
not limited to value-added products, but to assist in the export of all
U.S. agricultural commodities and products except tobacco.

Comment: No foreign involvement should be tolerated.

Response: Foreign organizations, government or private, may participate
as third parties in activities carried out by U.S. entities. Their
participation is often critical to the success of a given project.
Foreign entities are not, however, eligible for funding assistance from
the program.

*Contributions and Reimbursements*

Comment: Will the Emerging Markets Program pay for the cost of commodity
samples for an Emerging Markets funded project?

Response: The EMP will reimburse the cost of commodity samples for an
approved project assuming that the expense is reasonable and it is
included in the application budget. However, the shipping costs for
commodity samples are not eligible for reimbursement, but can be
included as a contribution to the project. CCC has revised section
1486.403 by adding paragraph (b) (8) to clarify this point.

Comment: There should never be advance payments.

Response: The EMP is primarily intended to assist small- and
medium-sized agricultural entities that may not have the available funds
to implement a project without assistance from the EMP. Therefore, while
the majority of the program's funds are disbursed on a reimbursement
basis, the program allows advances on a limited basis and for short
periods of time. CCC is adopting the rule as proposed.

## Reporting, Evaluation and Compliance

Comment: There is a need for a repository for the conclusions and
outcome of these completed projects.

Response: Reporting is required for each project, and final performance
reports must contain a description of the findings and evaluations
resulting from completed projects. Final reports are made available to
the public on the program\'s website accessed through
[**www.fas.usda.gov**](http://www.fas.usda.gov/).

Comment: Performance reports should be closely monitored. Reports last
audited by Government Accountability Office (GAO) show severe fraud
irregularities. GAO should audit this program every three (3) months for
several years.

Response: Approved projects are monitored regularly by EMP staff for the
full duration. In addition, the Foreign Agricultural Service's
Compliance Review Staff conducts regular reviews of EMP-funded projects
to ensure compliance with all applicable federal regulations,
requirements and terms of the agreements including financial integrity
and accountability. CCC is not aware of any GAO report that cites
findings related to fraud or other irregularities under the EMP.
Therefore, CCC is adopting the rule as proposed.

This rule includes other clarifying changes to accompany the substantive
changes discussed herein.

# 

# List of Subjects in 7 CFR Part 1486

Agricultural Commodities, Exports, Grant Programs -- Agriculture,
Technical Assistance.

Title 7 of the Code of Federal Regulations is amended by adding a new
part 1486 to read as follows:

# PART 1486 -- EMERGING MARKETS PROGRAM

# 

# Subpart A -- General Information

Sec.

100. What is the Emerging Markets Program?

1486.101 What special definitions apply to this program?

1486.102 Is there a list of eligible emerging market countries?

1486.103 Are regional projects possible under the program?

**Subpart B -- Eligibility, Applications, and Funding**

[1486.200]{.smallcaps} What entities are eligible to participate in the
program?

201. Under what conditions may research and consultant organizations,
     individuals, or any other for-profit entity apply to the program?

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202. Are there any ineligible entities?

203. Which commodities/products are eligible for consideration under the
     program?

1486.204 Are multi-year proposals eligible for funding?

1486.205 What types of funding are available under the program?

1486.206 What is the Quick Response Marketing Fund?

207. What is the Technical Issues Resolution Fund?

208. How does an entity apply to the program?

209. How are program applications evaluated and approved?

210. Are there any limits on the funding of proposals?

# Subpart C -- Program Operations

1486.300 How are applicants notified of decisions on their applications?

1486.301 How is the working relationship established between CCC and the
Recipient of program funding?

1486.302 Can changes be made to a project once it has been approved?

1486.303 What specific contracting procedures must be adhered to?

# Subpart D -- Contributions and Reimbursements

1486.400 What are the rules on cost sharing?

[1486.401]{.smallcaps} What cost share contributions are eligible?

[1486.402]{.smallcaps} What are ineligible contributions?

1486.403 What expenditures may CCC reimburse under the program?

1486.404 What expenditures are not eligible for program funding?

1486.405 How are Recipients reimbursed for project expenditures?

1486.406 Will CCC make advance payments to Recipients?

Subpart E -- Reporting, Evaluation, and Compliance

500. What are the reporting requirements of the program?

501. What is the rule on notifying field offices of international
     travel?

1486.502 How is project effectiveness measured?

1486.503 How is program compliance monitored?

1486.504 How does a Recipient respond to a compliance report?

[1486.505]{.smallcaps} Can a Recipient appeal the determinations of the
Director, CRS?

1486.506 When will a project be reviewed?

1486.507 What is the effect of failing to make required contributions?

1486.508 How long must Recipients maintain original project records?

509. Are Recipients allowed to charge fees for specific activities in
     approved projects?

1486.510 What is the policy regarding disclosure of program information?

1486.511 What is the general policy regarding ethical conduct?

1486.512 Has the Office of Management and Budget reviewed the paperwork
and record keeping requirements contained in this part?

Authority: 7 U.S.C. 5622 note.

###### Subpart A - General Information

§1486.100 What is the Emerging Markets Program?

\(a\) The principal purpose of the EMP is to assist U.S. entities in
developing, maintaining, or expanding the exports of U.S. agricultural
commodities and products by providing partial funding for technical
assistance activities that promote U.S. agricultural exports to emerging
markets, consistent with U.S. foreign policy interests. The Program is
intended primarily to support export market development efforts of the
private sector, but the Program's resources may also be used to assist
public agricultural organizations as well. Technical assistance may
include activities such as feasibility studies, market research, sector
assessments, orientation visits, specialized training, business
workshops, and similar undertakings.

\(b\) The EMP may be used to support exports of U.S. agricultural
commodities and products only through generic activities.

\(c\) Only initiatives that support the export of U.S. agricultural
commodities and products are eligible for assistance from the program.
The program's resources may not be used to support the export of another
country's products to the United States, or to promote the development
of a foreign economy as a primary objective.

\(d\) The program is administered by personnel of USDA's Foreign
Agricultural Service.

§1486.1[01]{.smallcaps} What special definitions apply to this
program[?]{.smallcaps}

For purposes of this subpart, the following definitions apply:

*Activities* \-- components of a project which, when implemented
collectively, are intended to achieve a specific market development
objective.

*Administrator* \-- the Administrator of FAS, or designee.

*Advisory Committee* \-- a group of representatives from the private
sector appointed by the Secretary of Agriculture whose primary mission
is to review proposals requesting funding under the EMP and make
recommendations on projects and programs that can enhance exports
through the use of program funds.

*Agreement* \-- a written assistance agreement under this part*.*

*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.

*Attache/Counselor* \-- the Foreign Agricultural Service employee
representing United States Department of Agriculture interests in the
foreign country in which promotional activities are conducted.

*CCC* \-- Commodity Credit Corporation.

*Compliance Review Staff* \-- the office within the Foreign Agricultural
Service responsible for performing reviews of Recipients to ensure
compliance under this part.

*Constraint* \-- a condition in a particular country or region which
inhibits the development, expansion, or maintenance of exports of a
specific U.S. agricultural commodity or product.

*Cost Share/Contribution* \-- the amount of funding (cash and in-kind)
U.S. entities are willing to commit from their own resources in support
of an approved project.

*Deputy Administrator* \-- the Deputy Administrator, Commodity and
Marketing Programs, Foreign Agricultural Service, or designee.

*Emerging Market* \-- any country or regional grouping that is taking
steps toward a market-oriented economy through the food, agriculture, or
rural business sectors of the economy of the country; has the potential
to provide a viable and significant market for United States
agricultural commodities or products; a population greater than 1
million; and a per capita income level below the level for upper
middle-income countries as determined by the World Bank.

*EMP* \-- Emerging Markets Program.

*FAS* \-- Foreign Agricultural Service.

#  *Generic Promotion \--* an activity that does not involve or promote the exclusive or predominant use of an individual company name or logo or brand name.

*Project* \-- an approach or undertaking made up of one or more
activities which, taken together, are intended to achieve a specific
market development objective.

*Project Funds* \-- the funds made available to a Recipient by the
Commodity Credit Corporation under an agreement, and authorized for
expenditure in accordance with this part.

*Proposal* \-- an application for funding.

*Recipient* -- a U.S. entity receiving financial assistance directly
from the Commodity Credit Corporation or Foreign Agricultural Service to
carry out a project.

#####  *SRTG* \-- State Regional Trade Group.

## 

## STRE \-- sales and trade relations expenses including meals, receptions, refreshments, checkroom fees, tips, and dining decorations.

#######  *UES* \-- Unified Export Strategy.

*USDA* \-- United States Department of Agriculture.

§1486.[102]{.smallcaps} Is there a list of eligible emerging market
countries[?]{.smallcaps}

The World Bank periodically redefines the income limits on upper
middle-income economies. Consequently, an absolute list of "emerging
market" countries has not been established. However, CCC will provide
general guidance on country eligibility in each program announcement.

§1486.[103]{.smallcaps} Are regional projects possible under the
program[?]{.smallcaps}

Projects that focus on regions, such as the Caribbean Basin, rather than
individual countries, are eligible for consideration provided such
projects target qualifying emerging markets in the specified region. CCC
may consider activities which target qualified emerging markets in a
specific region, but are conducted in a non-emerging market because of
its importance as a central location and ease of access to that region.

#### Subpart B -- Eligibility, Applications, and Funding

§1486.[200]{.smallcaps} What entities are eligible to participate in the
program[?]{.smallcaps}

To participate in the EMP, U.S. private or government entities must
demonstrate a role or interest in the exports of U.S. agricultural
commodities or products. Government organizations consist of federal,
state, and local agencies. Private entities include non-profit trade
associations, universities, agricultural cooperatives, state regional
trade groups, and profit-making entities and consulting businesses.

**§1486.[201]{.smallcaps} Under what conditions may research and
consultant organizations, individuals, or any other for-profit entity
apply to the program[?]{.smallcaps}**

\(a\) Proposals from research and consulting entities will be considered
for funding assistance only with evidence of substantial participation
in and financial support by U.S. industry to a proposed project. Such
support most credibly is provided in the form of actual monetary
contributions to the cost of a project.

\(b\) For-profit entities shall not use program funds to conduct private
business or to promote private self-interests. For-profit entities may
not use program funds to supplement the costs of normal day-to-day
operations or to promote their own products or services beyond specific
uses approved in a given project.

§1486.[202]{.smallcaps} Are there any ineligible entities?

Foreign organizations, whether government or private, may participate as
third parties in activities carried out by U.S. entities, but are not
eligible for funding assistance from the program.

§1486.203 Which commodities/products are eligible for consideration
under the program?

All U.S. agricultural commodities/products except tobacco are eligible
for consideration. Agricultural product(s) should be comprised of at
least 50 percent U.S. origin content by weight, exclusive of added
water, to be eligible for funding. Projects which seek support for
multiple commodities are also eligible.

§1486.[204]{.smallcaps} Are multi-year proposals eligible for
funding[?]{.smallcaps}

Proposals for projects exceeding 1 year in duration may be considered.
If approved, funding for multi-year projects is normally provided 1 year
at a time, with commitments beyond the first year subject to interim
evaluations intended to assess the progress of the project toward
meeting its intended objectives.

§1486.[205]{.smallcaps} What types of funding are available under the
program?

CCC has established three pools of funding within the EMP -- the Central
Fund, the Quick Response Marketing Fund, and the Technical Issues
Resolution Fund. Each year CCC will inform the public of the process by
which interested eligible entities may submit proposals for funding
under the Central Fund. Because of the time sensitive nature of issues
intended to be addressed, the Quick Response Marketing Fund and the
Technical Issues Resolution Fund will be available continuously with no
application deadline.

§1486.[206]{.smallcaps} What is the Quick Response Marketing
Fund[?]{.smallcaps}

\(a\) This fund was established to address priority constraints to
market access that arise because of unforeseen events; market conditions
in emerging markets are often less predictable than in more developed
countries. It allows responsiveness to time-sensitive marketing problems
or opportunities, such as a change in an import regime or the removal of
a trade embargo; an unexpected or unusual change in the political or
financial situation in a country; or a significant change in crop
conditions\--any of which may have an immediate impact on the access of
particular commodities or products to specific markets.

\(b\) Proposals for the Quick Response Marketing Fund must identify
specific market access issues that also face time constraints.
Application content, evaluation, and reporting requirements are the same
as for the Central Fund.

§1486.207 What is the Technical Issues Resolution Fund?

\(a\) This fund was established to address technical barriers to trade
in emerging markets worldwide by providing technical assistance,
training, and exchange of expertise. These include plant quarantine,
animal health, food safety, and other technical barriers to U.S. exports
based on unsound or incomplete scientific information.

\(b\) Funding priorities are principally those issues that are time
sensitive and are strategic areas of longer term interest. Funding
decisions are determined primarily through a review process that
includes FAS and relevant regulatory agencies. The review is based upon
the following criteria:

\(1\) The activity occurs in an eligible country or region of market
priority;

\(2\) The trade constraint warrants intervention;

\(3\) The proposed activity is likely to achieve an impact in the short-
or long-term;

\(4\) The Recipient is qualified to undertake the proposed activity;

\(5\) The budget requested is reasonable and includes leveraged
resources;

\(6\) If applicable, a U.S. domestic constraint or trade issue can be
resolved in support of a proposed activity; and

\(7\) The activity has support from USDA field offices.

\(c\) Because of the time sensitive nature of the issues intended to be
addressed by these funds, proposals, whether private or government, may
be submitted at any time during the year. Reviews of proposals are
scheduled on a monthly basis. An expedited review may be requested but
must be justified.

\(d\) Application content, evaluation, and reporting requirements are
the same as for the Central Fund.

§1486.[208]{.smallcaps} How does an entity apply to the
program[?]{.smallcaps}

CCC will periodically announce that it is accepting proposals for
participation in the EMP. All relevant information, including
application deadlines (for the Central Fund) and proposal content, will
be noted in the announcement, and proposals must be submitted in
accordance with the terms and requirements specified in the
announcement. CCC may request any additional information it deems
necessary from any applicant in order to evaluate properly any proposal.

§1486.[209]{.smallcaps} How are program applications evaluated and
approved?

\(a\) *General*. Proposals received by the application deadline stated
in the announcement for the Central Fund undergo a multi-phase review by
FAS staff and the EMP Advisory Committee to determine qualifications,
quality and appropriateness of projects, and reasonableness of project
budgets.

\(b\) *Evaluation criteria*. FAS will consider a number of factors when
reviewing proposals, including:

\(1\) The ability of the entity to provide an experienced U.S.‑based
staff with knowledge and expertise to ensure adequate development,
supervision, and execution of the proposed project;

\(2\) The entity\'s willingness to contribute resources, including cash
and goods and services of the U.S. industry, with greater weight given
to cash contributions (for private sector proposals only);

\(3\) The conditions or constraints affecting the level of U.S. exports
and market share for the agricultural commodity/product;

\(4\) The degree to which the proposed project is likely to contribute
to the development, maintenance, or expansion of U.S. agricultural
exports to emerging markets;

\(5\) Demonstration of how a proposed project will benefit a particular
industry as a whole; and

\(6\) Past program results and evaluations, if applicable.

\(7\) The following priority technical assistance activities:

\(i\) Projects and activities which use technical assistance designed
specifically to improve market access in emerging markets such as
activities intended to mitigate the impact of sudden political events or
economic and currency crises in order to maintain U.S. market share;

\(ii\) Marketing and distribution of value-added products, including new
products or new uses. Examples include food service development, market
research on potential for consumer-ready foods or new uses of a product,
and export feasibility studies.

\(iii\) Studies of food distribution channels in emerging markets,
including infrastructural impediments to U.S. exports; such studies may
include cross-commodity activities which focus on problems which affect
more than one industry, e.g., grain storage handling and inventory
systems development;

\(iv\) Projects that specifically address various constraints to U.S.
exports, including sanitary and phytosanitary issues and other
non-tariff barriers;

\(v\) Assessments and follow-up activities designed to improve
country-wide food and business systems, to reduce trade barriers, to
increase prospects for U.S. trade and investment in emerging markets, or
to determine the potential use for general export credit guarantees;

\(vi\) Projects that help foreign governments collect and use market
information and develop free trade policies that benefit American
exporters as well as the target country or countries; and

\(vii\) Short-term training in agriculture and agribusiness trade that
will benefit U.S. exporters, including seminars and training at trade
shows designed to expand the potential for U.S. agricultural exports by
focusing on the trading system.

\(c\) *Approval decision*. CCC will approve those applications that it
determines best satisfy the criteria and factors specified in paragraph
(b) of this section. All decisions regarding the disposition of an
application are final.

§1486.[210]{.smallcaps} Are there any limits on the funding of
proposals?

\(a\) The EMP is a relatively small program intended primarily to
promote access to qualified emerging markets. Its funds are intended for
focused projects with specific activities, rather than expansive concept
papers which contain only broad ideas. Large, overly expensive projects
(e.g., in excess of approximately \$500,000) are rarely appropriate for
the program.

\(b\) CCC will not reimburse 100 percent of the cost of any project
undertaken by the private sector. The program is intended to provide
appropriate assistance to projects which also have a significant amount
of financial contributions from other sources, especially U.S. private
industry.

\(c\) Funding for continuing and substantially similar projects is
generally limited to 3 years. After that time, the project is assumed to
have proven its viability and, if necessary, should be continued by the
Recipient with its own or with alternative sources of funding.

Subpart C - Program Operations

§1486.300 How are applicants notified of decisions on their
applications[?]{.smallcaps}

FAS will notify each applicant in writing of the final decision on its
application. For approvals, letters will contain the notice of approval
and any required qualifications or adjustments to the original proposal.
For rejections, letters will explain reasons why the proposals were not
approved for funding.

§1486.[301]{.smallcaps} How is the working relationship established
between CCC and the Recipient of program funding[?]{.smallcaps}

\(a\) FAS will send an approval letter followed by a project agreement
to each approved applicant. The approval letter and agreement will
specify the terms and conditions applicable to the project, including
the levels of EMP funding and cost-share contribution requirements. The
applicant is authorized to begin implementation of the project as of the
date of the approval letter, unless otherwise indicated.

\(b\) An applicant who accepts the terms and conditions contained in the
agreement should so indicate by having the appropriate authorizing
official sign the agreement and submit it to the Director, Marketing
Operations Staff, FAS, USDA. The applicant may not be reimbursed for
approved project expenses until the Recipient's authorizing official and
CCC have signed the agreement.

§1486.[302]{.smallcaps} Can changes be made to a project once it has
been approved[?]{.smallcaps}

\(a\) Approved projects may be modified if circumstances change in such
a way that they would likely affect the progress and ultimate success of
a project. All requests for project modifications must be made in
writing to FAS and must include:

\(1\) A justification as to why changes to the project as originally
designed are needed;

\(2\) An explanation of the necessary adjustments in approach or
strategy;

\(3\) A description of necessary changes in the project's time line(s);
and

\(4\) Necessary changes to the project's budget (e.g., shifting of
budgetary resources from one line item to another in order to
accommodate the changes).

\(b\) Extensions of project time lines must be approved and made by FAS.

§1486.[303]{.smallcaps} What specific contracting procedures must be
adhered to[?]{.smallcaps}

\(a\) The Recipient has full and sole responsibility for the legal
sufficiency of all contracts it may enter into with one or more third
parties in order to carry out an approved project and shall assume
financial liability for any costs or claims resulting from suits,
challenges, or other disputes based on contracts entered into by the
Recipient. Neither CCC nor any other agency of the United States
Government or any official or employee of CCC or the United States
Government has any obligation or responsibility with respect to
Recipient contracts with third parties.

\(b\) Recipients are responsible for ensuring to the extent possible
that the terms, conditions, and costs of contracts constitute the most
economical and effective use of project funds.

\(c\) All fees for professional and consulting services paid to third
parties in any part with project funds must be covered by written
contracts.

\(d\) A Recipient shall:

\(1\) Ensure that all expenditures for goods and services in excess of
\$25 reimbursed by CCC are documented by a purchase order, invoice, or
contract;

\(2\) Ensure that no employee or officer participates in the selection
or award of a contract in which such employee or officer, or the
employee\'s or officer\'s family or partners has a financial interest or
gains a financial benefit;

\(3\) Conduct all contracting in an open manner. Individuals who develop
or draft specifications, requirements, statements of work, invitations
for bids, or requests for proposals for procurement of any goods or
services shall be excluded from competition for such procurement;

\(4\) Base each solicitation for professional or consulting services on
a clear and accurate description of the requirements for the services to
be procured;

\(5\) Perform some form of fee, price, or cost analysis, such as a
comparison of price quotations to market prices or other price indicia,
to determine the reasonableness of the offered fees or prices; and

\(6\) Document the decision-making process.

Subpart D - Contributions and Reimbursements

§1486.[400]{.smallcaps} What are the rules on cost
sharing[?]{.smallcaps}

\(a\) The EMP is intended to complement, not supplant, the efforts of
the U.S. private sector. Therefore, no private sector proposal will be
considered without the element of cost-share from the participant and/or
U.S. partners.

\(b\) There is no minimum or maximum amount of cost share. The degree of
commitment to a proposed project represented by the amount and type of
private funding are both used in determining which proposals will be
approved. The type of cost share is also not specified, though some
contributions are ineligible (§1486.402 below). Cost-share may be actual
cash invested or professional time of staff assigned to the project.
Proposals in which the private sector is willing to commit funds, rather
than in-kind items such as staff resources, and those with higher
amounts of cost-share, will be given priority consideration.

\(c\) Cost-sharing is not required for proposals from federal, state, or
local government agencies. It is mandatory from all other eligible
entities, even when they are party to a joint proposal with a government
agency.

\(d\) Contributions from federal, state, or local government agencies or
programs may not be counted toward the cost share requirement.
Similarly, contributions from foreign (non-U.S.) organizations may not
be counted toward the cost share requirement, but may be included in the
total cost of the project.

\(e\) An activity that is initiated by FAS, and undertaken by an entity
at the request of FAS, may be exempted from the contribution
requirement. This determination is made at the discretion of FAS.

§1486.401 What cost share contributions are eligible[?]{.smallcaps}

\(a\) Eligible contributions are those expenses that:

\(1\) Have not been or will not be reimbursed by any other source
outside of the Recipient or other participating U.S. entity;

(2) Are incurred during the period covered by the project agreement;

(3) Are directly related to activities necessary to implement an
    approved project; and

(4) Are not proscribed under §1486.402.

\(b\) Contributions must be included in a project's line item budget.

§1486.[402]{.smallcaps} What are ineligible contributions[?]{.smallcaps}

\(a\) The following are not eligible as contributions:

\(1\) Normal operating expenses and other costs not directly related to
the project;

\(2\) Any portion of salary or compensation of an individual who is the
focus of a promotional activity;

\(3\) Depreciation, e.g., office equipment;

\(4\) The cost of insuring articles owned by private individuals;

\(5\) The cost of product development or product modifications;

\(6\) Slotting fees or similar sales expenditures;

\(7\) Funds, services, capital goods, or personnel provided by any U.S.
government agency;

\(8\) Capital investments made by a third party, such as permanent
structures, real estate, and the purchase of office equipment and
furniture;

\(9\) The value of any services generated by a third party which involve
no expenditure by the Recipient or third party, e.g., free publicity;

\(10\) The cost of developing any application/proposal for EMP funding;

\(11\) Costs included as contributions for any other federally-assisted
project or program;

\(12\) Membership fees in clubs and social or professional
organizations; and

\(13\) Any expenditure made prior to approval of an EMP-funded project.

\(b\) The Deputy Administrator shall determine, at his or her
discretion, whether any cost not expressly listed in this section may be
included as an eligible contribution.

§1486.[403]{.smallcaps} What expenditures may CCC reimburse under the
program?

\(a\) A Recipient may seek reimbursement for an expenditure if:

\(1\) The expenditure is reasonable and is specified in the project
budget in furtherance of an approved activity; and

\(2\) The Recipient 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:

\(1\) Salaries and benefits of the Recipient's existing personnel or any
other participating entity that are assigned to EMP-funded projects;
however, reimbursement is limited to:

\(i\) The actual daily rate paid by the Recipient for the employee's
salary or the daily rate of a General Schedule U.S. Government employee,
GS-15/Step 10 in effect during the calendar year in which the project or
activity is approved for funding, whichever is less;

\(ii\) The actual assigned time of the employee to the project; and

\(iii\) Benefits at a maximum rate of 30 percent of the existing salary
of the employee, prorated to the time assigned to the project. In
addition, reimbursement for an employee's time spent on an EMP-funded
project must be in lieu of compensation from the Recipient or any other
participating entity.

\(2\) Consulting fees for professional services; however, reimbursement
for consulting fees is limited to the daily rate of a General Schedule
U.S. Government employee, GS-15/Step 10 in effect during the calendar
year in which the project or activity is approved for funding.
Reimbursement is authorized only for actual days worked and is not
authorized for travel and rest days. Benefits are not reimbursable.

\(3\) STRE, including breakfast, lunch, dinner, and refreshments when
part of an approved overseas trade activity; miscellaneous courtesies
such as checkroom fees, taxi fares, and tips; and representation
expenses such as the costs of social events or receptions that are
primarily attended by foreign officials, and which are held at foreign
venues. Such expenses must conform to the American Embassy
representational funding guidelines as the standard for judging the
appropriateness of STRE event costs. STRE incurred in the United States
is not authorized for reimbursement, but may be counted as a cost-share
contribution to the project.

(4) Travel expenses, subject to the following:

\(i\) Air travel, limited to the full-fare economy class rate and must
comply with the Fly America Act, 49 U.S.C. App. 1517. The 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 Counselor/Attache in
the destination country in advance of the travel unless the Deputy
Administrator determines it was impractical to provide such
notification.

\(ii\) Per diem, limited to the allowable rate for each domestic or
foreign locale (41 CFR Chapter 301). Expenses in excess of the
authorized per diem rates may be allowed in special or unusual
circumstances (41 CFR Chapter 301, subpart D), and must be approved in
advance.

\(iii\) All other expenses while in travel status must conform to U.S.
Federal Travel Regulations (41 CFR Chapters 301 and 304).

\(5\) Direct administrative costs.

\(6\) Indirect costs not identified as direct costs but which are
necessary to the implementation of a project. Indirect costs must be
specified to be eligible for reimbursement. Indirect costs incurred by
private entities (other than those identified below) may be reimbursed
up to a maximum of 10 percent of the EMP funded portion of the project
budget, excluding indirect costs. Market development cooperators, state
regional trade groups, for-profit entities, and government Recipients
(excluding FAS) may not be reimbursed for indirect costs. Indirect costs
are not reimbursable for any project funded under the Technical Issues
Resolution Fund or the Quick Response Marketing Fund.

\(7\) Rental costs for equipment necessary to carry out approved
projects. Equipment rentals must be returned by the Recipient to the
supplier in accordance with the lease agreements, but in no case later
than 90 calendar days from the completion date of the project.

\(8\) Procuring samples of specific commodities or agricultural
products, which are appropriate and necessary to the success of a
technical assistance activity.

§1486.[404]{.smallcaps} What expenditures are not eligible for program
funding?

\(a\) CCC will not reimburse expenditures made prior to approval of a
Recipient's proposal, unreasonable expenditures, or any cost of:

(1) Branded product promotions -- in-store, restaurant advertising,
    labeling, etc.;

\(2\) Administrative and operational expenses for trade shows;

\(3\) Advertising;

\(4\) Preparation and printing of magazines, brochures, flyers, posters,
etc., except in connection with specific approved activities such as
training;

\(5\) Design, development, and maintenance of Internet web sites;

\(6\) Purchase and depreciation of equipment, e.g. office equipment or
other fixed assets;

\(7\) Subsidizing or otherwise providing funds for graduate programs at
colleges and/or universities (salaries or fees for individual students
who are directly assigned to specific project activities appropriate to
their backgrounds may be covered on a pro-rated basis);

\(8\) Subsidizing normal, day-to-day operating costs of an entity;
exception: indirect costs incurred during implementation of an approved
project;

\(9\) Honoraria for speakers;

\(10\) Costs of product research or new product development;

\(11\) Costs of developing technical assistance proposals submitted to
the

program;

\(12\) Refundable deposits or advances;

\(13\) STRE expenses within the United States;

\(14\) All costs related to the shipping, over land and sea, of
commodity samples;

\(15\) Expenses, fees, fines, settlements, or claims resulting from
suits, challenges, or disputes emanating from contractual terms,
conditions, provisions, and related formalities;

\(16\) Legal fees, including fees and costs associated with trade
disputes;

\(17\) Real estate costs other than allowable costs for office space
whose use is assigned specifically to a project funded by the EMP; and

\(18\) Any expenditure that has been or will be reimbursed by any other
source.

\(b\) The Deputy Administrator may determine whether any cost not
expressly listed in this section will be reimbursed.

§1486.405 How are Recipients reimbursed for project expenditures?

\(a\) After implementation of an EMP project for which CCC has agreed to
provide funding, Recipients may submit claims for reimbursement of the
expenses incurred to the extent CCC has agreed to pay for such costs.
Reimbursement for approved project expenses is limited to 85 percent of
the amount specified in the project agreement. The Recipient may be
reimbursed for the remaining 15 percent of the funds after the final
performance report containing the information required by the agreement
is submitted to and approved by FAS.

\(b\) A format for reimbursement claims is available from the Marketing
Operations Staff, FAS, USDA.

\(c\) Final reimbursement claims must be made no later than 90 days
after the completion date of the project, and are subject to a complete
final performance report acceptable to FAS.

\(d\) Any duplicate payment or overpayment made by CCC shall be returned
by the Recipient promptly after discovery of the overpayment by the
Recipient or within 30 days after notification by FAS, either by
submitting a check made payable to the Commodity Credit Corporation and
referencing the applicable project, or by offsetting as a credit on the
next reimbursement claim. All checks shall be mailed to the Director,
Marketing Operations Staff, FAS, USDA.

§1486.[406]{.smallcaps} Will CCC make advance payments to
Recipients[?]{.smallcaps}

\(a\) *Policy.* In general, CCC operates the EMP on a cost reimbursable
basis.

\(b\) *Exception*. Upon request, CCC may make advance payments to a
Recipient against an approved project budget. Up to 40 percent of the
approved project budget may be provided as an advance, either at one
time or in incremental payments. Advances should be limited to the
minimum amounts needed and requested as close as is administratively
feasible to the actual time of disbursement by the Recipient.
Reimbursement claims will be used to offset advances. Recipients shall
deposit and maintain advances in insured, interest-bearing accounts.

\(c\) *Refunds due CCC.* A Recipient shall expend all advances within 90
calendar days after the date of disbursement by CCC. A Recipient shall
return all interest earned by advances plus any unexpended portion of
the advance within 90 calendar days after the date of disbursement by
CCC by submitting a check payable to CCC. All checks shall be mailed to
the Director, Marketing Operations Staff, FAS, USDA.

Subpart E - Reporting, Evaluation, and Compliance

§1486.[500]{.smallcaps} What are the reporting requirements of the
program[?]{.smallcaps}

\(a\) *Performance Reports.*

\(1\) Recipients are required to submit regular progress reports in
accordance with the project agreement. Quarterly progress reports are
required for all projects with a duration of 1 year or longer. Projects
of less than 1 year in duration generally require a mid-term report.

\(2\) Final performance reports must be submitted no later than 90 days
after completion of the project, both electronically (preferably in PDF
format) and in hard copy.

\(3\) Reporting requirements and formats for both quarterly progress
reports and final performance reports are specified in the project
agreement between CCC and the Recipient entity.

\(4\) All final performance reports will be made available to the
public[.]{.smallcaps}

\(b\) *Financial Reports.* Final financial reports must be submitted no
later than 90 days after completion of the project. Such reports must
provide a final accounting of all project expenditures by cost category,
and include the accounting of actual contributions made to the project
by the Recipient and all other participating entity or entities.

§1486.[501]{.smallcaps} What is the rule on notifying field offices of
international travel?

The Recipient must advise the Agricultural Counselor(s) or Attache(s) in
the country or countries of any planned visits by the Recipient or its
consultants or other participants to such country or countries under
terms of its agreement. Failure to notify the Counselor/Attache may
result in disallowance of the travel expenditures.

§1486.[502]{.smallcaps} How is project effectiveness
measured[?]{.smallcaps}

Project evaluations may be carried out by FAS at its option with or
without Recipients. FAS may also seek outside expertise to conduct or
participate in evaluations.

§1486.503 How is program compliance monitored[?]{.smallcaps}

\(a\) The CRS, FAS, performs periodic on-site reviews of Recipients to
ensure compliance with this part, applicable federal regulations, and
the terms of the project agreements. Program funds spent inappropriately
or on unapproved activities must be returned to CCC. The CRS will review
contributions from Recipients for compliance with project budgets as
approved and specified in the agreements.

\(b\) The Director, CRS, will notify a Recipient through a compliance
report when, in the opinion of the Director, CRS, it appears that CCC is
entitled to recover funds from that Recipient. The report will state the
basis for this action.

§1486.[504]{.smallcaps} How does a Recipient respond to a compliance
report[?]{.smallcaps}

\(a\) A Recipient shall, within 60 days of the date of the compliance
report, submit a written response to the Director, CRS. The Director,
CRS, at his or her discretion, may extend the period for response up to
an additional 30 days. The response shall include : (1) repayment of any
funds determined to be due to CCC; (2) submission of documentation or
evidence of any other required action; or (3) a request for
reconsideration of any finding and the supporting justification.

\(b\) If after review of the compliance report and response, the
Director, CRS determines that the Recipient owes money to CCC, the
Director, CRS, will so inform the Recipient and provide a detailed basis
for the decision. The Recipient has 30 days from the date of the
Director\'s, CRS, determination to submit any money owed to CCC or to
request reconsideration.

\(c\) If the Recipient does not respond to the compliance report within
the required time period, the Director, CRS, may initiate action to
collect any amount owed to CCC pursuant to 7 CFR Part 1403, Debt
Settlement Policies.

§1486.505 Can a Recipient appeal the determinations of the Director,
CRS[?]{.smallcaps}

\(a\) A Recipient may appeal the determinations of the Director, CRS, to
the Deputy Administrator, CMP. The request must be in writing and be
submitted to the Office of the Deputy Administrator, CMP, within 30 days
following the date of the original determination. The Recipient may
request a hearing.

\(b\) If the Recipient submits its appeal and requests a hearing, the
Deputy Administrator, or the Deputy 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
Recipient bears the cost of the transcript; however, the Deputy
Administrator or designee may have a transcript prepared at FAS's
expense.

\(c\) The Deputy Administrator or the Deputy Administrator\'s designee
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 Deputy
Administrator will be the final determination of FAS. The Recipient must
exhaust all administrative remedies contained in this section before
pursuing judicial review of a determination by the Deputy Administrator.

§1486.[506]{.smallcaps} When will a project be reviewed[?]{.smallcaps}

Any project or activity funded under the program is subject to review or
audit at any time during the course of implementation or after the
completion of the project.

**§1486.507 What is the effect of failing to make required
contributions[?]{.smallcaps}**

A Recipient's contribution requirement is specified in the project
agreement. If a Recipient fails to contribute the total specified in the
agreement, the difference between the amount contributed and the total
must be repaid to the CCC in U.S. dollars. If a Recipient is reimbursed
by CCC for less than the amount of funds approved in the agreement, then
the final cost share shall equal, on a percentage basis, the original
ratio of private contributions to the authorized EMP funding level.

§1486.[508]{.smallcaps} How long must Recipients maintain original
project records[?]{.smallcaps}

Each Recipient shall maintain all original records and documents
relating to the project for 3 calendar years following the end of the
project's completion. All documents and records related to the project,
including records pertaining to contractors, shall be made available
upon request.

§1486.[509]{.smallcaps} Are Recipients allowed to charge fees for
specific activities in approved projects?

Reasonable activity fees or registration fees, if identified as such in
a project budget, may be charged for projects approved for program
funding. Income or refunds generated from an activity, however, for
which the expenditures have been wholly or partially reimbursed, shall
be repaid by submitting a check payable to CCC or offsetting the
Recipient's reimbursement claim. Any activity fees charged must be used
to offset activity expenses. Such fees may not be used as profit or
counted as cost-share. The intent to charge a fee must be part of the
original proposal, along with an explanation of how such fees are to be
used.

**§1486.[510]{.smallcaps} What is the policy regarding disclosure of
program information?**

\(a\) Documents submitted to CCC by Recipients 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 CFR 1.11,
Handling Information from a Private Business.

\(b\) Progress reports, final performance reports, and the results of
any research or other activity conducted by a Recipient under an
agreement, shall be the property of the U.S. Government.

**§1486.[511]{.smallcaps} What is the general policy regarding ethical
conduct?**

\(a\) The Recipient shall maintain written standards of conduct
governing the performance of its employees engaged in the award and
administration of contracts. No employee, officer, or agent shall
participate in the selection, award, or administration of a contract
supported by Federal funds if a real or apparent conflict of interest
would be involved. Such a conflict would arise when the employee,
officer, or agent and any member of his or her immediate family, his or
her partner, or an entity which employs or is about to employ any of the
parties indicated herein, has a financial or other interest in the firm
selected for an award. The officers, employees, and agents of the
Recipient shall neither solicit nor accept gratuities, favors, or
anything of monetary value from contractors, or parties to
sub-agreements. However, Recipients may set standards for situations in
which the financial interest is not substantial or the gift is an
unsolicited item of nominal value. The standards of conduct shall
provide for disciplinary actions to be applied for violations of such
standards by officers, employees, or agents of the Recipient.

\(b\) A Recipient shall conduct its business in accordance with the laws
and regulations of the country in which an activity is carried out.

1486.512 Has the Office of Management and Budget reviewed the paperwork
and record keeping requirements contained in this part?

The paperwork and record keeping requirements imposed by this part have
been submitted to the Office of Management and Budget (OMB) for review
and under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et
seq*.). OMB has assigned control number 0551-0043 for this information
collection.

Dated: December 1, 2004.

A. Ellen Terpstra ,

######## *Administrator, Foreign Agricultural Service and*

######## *Vice President, Commodity Credit Corporation*