[Federal Register Volume 59, Number 73 (Friday, April 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-9183]


[[Page Unknown]]

[Federal Register: April 15, 1994]


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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation

7 CFR Part 1427

RIN 0560-AD58

 

Revisions to the Upland Cotton User Marketing Certificate Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: Concerns have been raised about the cost of the upland cotton 
user marketing certificate program and the way in which it has been 
administered. Although the Step 2 program, in place since August 1991, 
has accomplished some of its intended objectives, it has distorted 
normal export sales patterns, disadvantaged small-scale cotton 
exporters, and placed U.S. mills at a price disadvantage vis-a-vis 
foreign mills. A proposed rule regarding the program was published in 
the Federal Register on March 1, 1994, at 59 FR 9674. Comments were 
solicited with respect to proposed changes in the formula for 
determining the user marketing payment rate; whether export contracts 
that specify shipment after September 30 of the next marketing year 
should be eligible for payments beginning the week that includes 
October 1, and, if so, whether the maximum payment rate should be 2.5 
cents per pound until such time as the payment rate calculation is 
based entirely on northern Europe forward prices; and whether a 
destination should be required to be declared for export sales 
contracts. This final rule sets forth changes with respect to these 
issues.

EFFECTIVE DATE: April 12, 1994.

FOR FURTHER INFORMATION CONTACT: Wayne Bjorlie, Fibers and Rice 
Analysis Division, Agricultural Stabilization and Conservation Service, 
United States Department of Agriculture (USDA), room 3754-S, PO Box 
2415, Washington, DC 20013-2415 or call 202-720-7954.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule is issued in conformance with Executive Order 
12866. Based on information compiled by USDA, it has been determined 
that this final rule is economically significant because it will 
materially alter the budgetary impacts of entitlements. A change in the 
method of determining the payment rate under the program could raise 
payment rates for domestic textile mills and lower payment rates for 
exporters of U.S.-grown cotton, reducing budgetary expenditures. The 
ability of exporters to earn a payment on forward-crop sales beginning 
earlier in the marketing year could afford them greater benefits under 
the program and result in more price competition.
    These program changes are projected to increase the average rate at 
which domestic mills are being paid by about 0.25 cent per pound and to 
decrease the average rate at which exporters are being paid by about 
1.0 cent per pound. These changes are not significant enough to have 
any impact on acreage reduction programs, supply, offtake, prices, or 
farm income. Government outlays for Step-2 payments are projected to be 
reduced by an average of about $20 million per year.
    Other than the impacts indicated above, this action:
    (1) Will not have an annual effect on the economy of $100 million 
or more or adversely affect in a material way the economy, a sector of 
the economy, productivity, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities,
    (2) Will not create a serious inconsistency or otherwise interfere 
with an action taken or planned by another agency,
    (3) Will not materially alter the budgetary impacts of user fees or 
loan programs, and
    (4) Will not raise novel legal or policy issues arising out of 
legal mandates, the President's priorities, or the principles set forth 
in Executive Order 12866.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule since the Commodity Credit Corporation is 
not required by 5 U.S.C. 553 or any other provision of law to publish a 
notice of proposed rulemaking with respect to the subject matter of 
these determinations.

Environmental Evaluation

    It has been determined by an environmental evaluation that this 
action will not have a significant impact on the quality of the human 
environment. Therefore, neither an Environmental Assessment nor an 
Environmental Impact Statement is needed.

Federal Assistance Program

    The title and number of the Federal Assistance Program, as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies 
are: Cotton Production Stabilization--10.052.

Executive Order 12778

    This final rule has been reviewed in accordance with Executive 
Order 12778. The provisions of this final rule do not preempt State 
laws, are not retroactive, and do not involve administrative appeals.

Executive Order 12372

    This program/activity 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).

Paperwork Reduction Act

    The information collection requirements contained in the current 
regulations have been approved by the Office of Management and Budget 
(OMB), under the provisions of 44 U.S.C. chapter 35, through August 31, 
1994 (OMB No. 0560-0136). Changes made to the Upland Cotton Domestic 
User/Exporter Agreement as a result of this final rule have been 
submitted to OMB for approval.

Final Regulatory Impact Analysis

    The Final Regulatory Impact Analysis describing the options 
considered in developing this final rule and the impact of the 
implementation of each option is available on request from the above-
named individual.

Background

    This final rule amends 7 CFR part 1427 to set forth changes with 
respect to the upland cotton user marketing certificate program. A 
proposed rule with respect to these changes was published on March 1, 
1994, at 59 FR 9674. A total of 46 comments was received. Twenty-nine 
respondents specifically commented on the Step 2 formula calculation. 
Of these, thirteen respondents favored a 4-week moving average of the 
U.S. Northern Europe price minus the Northern Europe price minus 1.25 
cents per pound for both current and forward payment rate calculations. 
Seven respondents favored changing only the forward Step-2 payment rate 
to be equal to the lower of: The difference between the U.S. Northern 
Europe forward price minus 1.25 cents per pound and the Northern Europe 
forward price in the preceding week; or 25 percent of the difference 
between the U.S. Northern Europe forward price minus 1.25 cents per 
pound and the Northern Europe forward price in the preceding week plus 
the payment rate for which such contracts were eligible in the 
preceding week. Six respondents favored blending the current and 
forward prices over a 6-week period to make the transition from current 
to forward price quotations. Two respondents suggested that there was 
no need to change the Step-2 payment rate calculation. One respondent 
recommended paying forward sales the lower of the current Step-2 
payment rate or the forward Step-2 payment rate.
    Eight respondents commented on the proposal of allowing forward 
sales to be eligible for payments beginning October 1 of the previous 
year up to the time the forward payment rate is available, with a 
maximum rate of 2.5 cents per pound. Seven respondents were in favor of 
this proposal. One respondent questioned whether this proposal would be 
effective, but did not oppose it.
    Thirty-eight respondents commented on the proposed requirement to 
require the country of destination be specified in order to set the 
Step-2 payment rate. Thirty-four respondents opposed the country of 
destination requirement. Four respondents favored the requirement.
    After considering these comments, the following changes will be 
made with respect to the regulations governing the upland cotton user 
marketing certificate program:
    (1) Allow export contracts that specify delivery after September 30 
to qualify for payments beginning the Friday through Thursday week that 
includes October 1 of the previous year. Such contracts would earn the 
lower of the rate in effect for a given week or 2.5 cents per pound 
until such time as the payment rate is based entirely on Northern 
Europe forward prices; and
    (2) Change the rate applicable to forward export sales, beginning 4 
weeks after the northern Europe prices become available until the 
Thursday following July 31, to be the lower of: The difference between 
the U.S. Northern Europe forward price minus 1.25 cents per pound and 
the Northern Europe forward price in the preceding week; or 20 percent 
of the difference between the U.S. Northern Europe forward price minus 
1.25 cents per pound and the Northern Europe forward price in the 
preceding week plus the payment rate for which such contracts were 
eligible in the preceding week.

Reasons for Selection of Options

    Allowing forward sales to be registered early using the current 
rate with a 2.5-cent maximum will permit more orderly marketing and 
encourage competition prior to the availability of forward payment 
rates. The selected payment rate formula was the option deemed most 
likely to prevent sudden spikes in the forward export payment rate. The 
proposal to require a country of destination will not be implemented 
now because it is expected that the change in the payment rate formula 
will eliminate peak payment rates. If problems persist, the destination 
requirement could be implemented at a later date.

List of Subjects in 7 CFR Part 1427

    Cotton, Loan programs/agriculture, Packaging and containers, Price 
support programs, Reporting and recordkeeping requirements, Surety 
bonds, Warehouses.

    Accordingly, 7 CFR part 1427 is amended as follows:

PART 1427--COTTON

    1. The authority citation for 7 CFR part 1427 continues to read as 
follows:

    Authority: 7 U.S.C. 1421, 1423, 1425, 1444, and 1444-2; 15 
U.S.C. 714b and 714c.

    2. Section 1427.107 is amended by:
    A. Revising paragraphs (a)(1)(i) and (a)(1)(ii) to read as follows,
    B. Revising paragraphs (a)(2)(i) through (a)(2)(iv) to read as 
follows,
    C. Redesignating paragraph (a)(2)(v) as paragraph (a)(2)(viii),
    D. Adding new paragraphs (a)(2)(v), (a)(2)(vi), and (a)(2)(vii) to 
read as follows, and
    E. Revising paragraph references in paragraph (c)(2) to read 
``(a)(1)(ii), (a)(2)(ii), and (a)(2)(v)''.


Sec. 1427.107 Payment rate.

    (a) * * *
    (1) * * *
    (i) For bales opened beginning the Friday following August 1 and 
ending the week in which the Northern Europe current price and the 
Northern Europe forward price first become available, the payment rate 
shall be the difference between the U.S. Northern Europe price minus 
1.25 cents per pound, and the Northern Europe price in the fourth week 
of a consecutive 4-week period in which the U.S. Northern Europe price 
exceeded the Northern Europe price each week by more than 1.25 cents 
per pound, and the adjusted world price (AWP) did not exceed the 
current crop-year loan level for the base quality of upland cotton by 
more than 130 percent in any week of the 4-week period.
    (ii) For bales opened during the period beginning the Friday 
through Thursday week after the week in which the Northern Europe 
current price and the Northern Europe forward price first become 
available and ending the Thursday following July 31, the payment rate 
shall be the difference between the U.S. Northern Europe current price 
minus 1.25 cents per pound and the Northern Europe current price in the 
fourth week of a consecutive 4-week period in which the U.S. Northern 
Europe current price exceeded the Northern Europe current price each 
week by more than 1.25 cents per pound, and the AWP did not exceed the 
current crop-year loan level for the base quality of upland cotton by 
more than 130 percent in any week of the 4-week period.
* * * * *
    (2) * * *
    (i) For contracts entered into beginning the Friday following 
August 1 and ending the week in which the Northern Europe current price 
and the Northern Europe forward price first become available which 
specify shipment of the cotton by not later than September 30 of the 
following marketing year, the payment rate shall be the difference 
between the U.S. Northern Europe price minus 1.25 cents per pound, and 
the Northern Europe price in the fourth week of a consecutive 4-week 
period in which the U.S. Northern Europe price exceeded the Northern 
Europe price each week by more than 1.25 cents per pound, and the AWP 
did not exceed the current crop-year loan level for the base quality of 
upland cotton by more than 130 percent in any week of the 4-week 
period.
    (ii) For contracts entered into during the period beginning the 
Friday through Thursday week after the week in which the Northern 
Europe current price and the Northern Europe forward price first become 
available and ending the Thursday following July 31 which specify 
shipment of the cotton by not later than September 30 of such year, the 
payment rate shall be the difference between the U.S. Northern Europe 
current price minus 1.25 cents per pound and the Northern Europe 
current price in the fourth week of a consecutive 4-week period in 
which the U.S. Northern Europe current price exceeded the Northern 
Europe current price each week by more than 1.25 cents per pound, and 
the AWP did not exceed the current crop-year loan level for the base 
quality of upland cotton by more than 130 percent in any week of the 4-
week period.
    (iii) For contracts entered into prior to the Friday through 
Thursday week that includes October 1 which specify shipment after 
September 30 of the year following such contract period, the payment 
rate shall be zero.
    (iv) For contracts entered into during the period beginning the 
Friday through Thursday week that includes October 1 until the Friday 
through Thursday week after the week in which the Northern Europe 
current price and the Northern Europe forward price first become 
available which specify shipment of the cotton after September 30 
following such contract period, payments shall be made whenever the 
U.S. Northern Europe price exceeds the Northern Europe price by more 
than 1.25 cents per pound for the preceding consecutive 4-week period 
and the AWP did not exceed the current crop year loan level for the 
base quality of upland cotton by more than 130 percent in any week of 
such 4-week period. The payment rate shall be the lower of:
    (A) The difference between the U.S. Northern Europe price minus 
1.25 cents per pound and the Northern Europe price in the fourth week 
of such 4-week period; or
    (B) 2.5 cents per pound.
    (v) For contracts entered into beginning the Friday through 
Thursday week after the week in which the Northern Europe current price 
and the Northern Europe forward price first become available through 
the third Friday through Thursday week after the Northern Europe 
current price and the Northern Europe forward price first become 
available which specify shipment of the cotton after September 30 
following such contract period, payments shall be made whenever the 
U.S. Northern Europe current price exceeds the Northern Europe current 
price by more than 1.25 cents per pound for the preceding consecutive 
4-week period and the AWP did not exceed the current crop year loan 
level for the base quality of upland cotton by more than 130 percent in 
any week of such 4-week period. The payment rate shall be the lower of:
    (A) The difference between the U.S. Northern Europe current price 
minus 1.25 cents per pound and the Northern Europe current price in the 
fourth week of such 4-week period; or
    (B) 2.5 cents per pound.
    (vi) Notwithstanding the provisions of paragraphs (a)(2)(iv) and 
(a)(2)(v) of this section, with respect to contracts which specify 
shipment of the cotton after September 30, 1994, but before September 
30, 1995, no payments will be made on contracts made prior to the 
fourth Friday through Thursday week after the Northern Europe current 
price and the Northern Europe forward price first become available 
during calendar year 1994.
    (vii) For contracts entered into during the period beginning the 
fourth Friday through Thursday week after the Northern Europe current 
price and the Northern Europe forward price first become available and 
ending the Thursday following July 31 which specify shipment of the 
cotton after September 30 following such contract period, payments 
shall be made whenever the U.S. Northern Europe forward price exceeds 
the Northern Europe forward price by more than 1.25 cents per pound for 
the preceding consecutive 4-week period and the AWP did not exceed the 
loan level for the upcoming marketing year for the base quality of 
upland cotton by more than 130 percent in any week of such 4-week 
period. The payment rate shall be the lower of:
    (A) The difference between the U.S. Northern Europe forward price 
minus 1.25 cents per pound and the Northern Europe forward price in the 
fourth week of such 4-week period; or
    (B) 20 percent of the difference between the U.S. Northern Europe 
forward price minus 1.25 cents per pound and the Northern Europe 
forward price in the fourth week of such 4-week period plus the payment 
rate for which such contracts were eligible in the preceding week.
* * * * *
    Signed at Washington, DC, on April 12, 1994.
Grant Buntrock,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 94-9183 Filed 4-12-94; 3:10 pm]
BILLING CODE 3410-05-P