[Federal Register Volume 59, Number 147 (Tuesday, August 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18694]


[[Page Unknown]]

[Federal Register: August 2, 1994]


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DEPARTMENT OF AGRICULTURE
7 CFR Part 1427

RIN 0560-AD82

 

1994 Cotton Loan and LDP Provisions

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Interim rule.

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SUMMARY: This interim rule amends the regulations with respect to the 
upland and extra long staple cotton loans and loan deficiency payments 
(LDP) made by the Commodity Credit Corporation (CCC) in accordance with 
The Agricultural Act of 1949 (the 1949 Act), as amended. The amendments 
made by this interim rule will provide: greater clarity; enhance the 
administration of CCC programs by providing uniformity between CCC 
price support programs; eliminate obsolete provisions; provide more 
authority to State and county committees in administering the programs; 
lessen administrative actions CCC imposes on producers who violate the 
loan and LDP agreements; and correct errors.

DATES: Interim rule effective August 2, 1994. Comments must be received 
on or before September 1, 1994 in order to be assured of consideration.

ADDRESSES: Submit comment to Director, Cotton, Grain, and Rice Price 
Support Division, Agricultural Stabilization and Conservation Service, 
United States Department of Agriculture (USDA), P.O. Box 2415, 
Washington, DC 20013-2415; telephone 202-720-7641. Comments received 
may be inspected between 9 a.m. and 4:30 p.m., Monday through Friday, 
except holidays, in room 3623, South Agriculture Building, USDA, 14th 
Street and Independence Avenue, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Philip Sharp, Program Specialist, 
Cotton, Grain, and Rice Price Support Division, Agricultural 
Stabilization and Conservation Service, USDA, P.O. Box 2415, 
Washington, DC 20013-2415; telephone 202-720-7988.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not-significant for purposes of 
Executive Order 12866 and therefore has not been reviewed by OMB.

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: Commodity Loans and Purchases--10.051.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable because CCC 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 human 
environment.

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 (June 24, 1983).

Executive Order 12778

    This rule has been reviewed pursuant to Executive Order 12778. To 
the extent State and local laws are in conflict with these regulatory 
provisions, it is the intent of CCC that the terms of the regulations 
prevail. The provisions of this rule are not retroactive. Prior to any 
judicial action in a court of jurisdiction, administrative review under 
7 CFR part 780 must be exhausted.

Paperwork Reduction Act

    Public reporting burden for the information collections contained 
in this regulation with respect to price support programs is estimated 
to average 15 minutes per response, including the time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information. The information collections have previously 
been cleared under the current regulations by OMB, and assigned OMB 
Nos. 0560-0087 and 0560-0129. The content and format of the information 
collections have not changed as a result of this amendment to 7 CFR 
part 1427; however, the frequency of reporting has been reduced. ASCS 
will submit a burden correction worksheet to OMB for review.

Comments

    Since producers are currently making decisions regarding upland and 
extra long staple cotton which may be pledged as collateral for CCC 
price support loans, it has been determined that it is impractical and 
contrary to the public interest for CCC to engage in proposed 
rulemaking requirements with respect to the provisions of this rule. 
Accordingly, the provisions of this interim rule are effective upon 
publication in the Federal Register. Comments are requested, however, 
and will be taken into consideration when developing the final rule. 
This interim rule will be scheduled for review so that a final document 
discussing comments received and any amendments required can be 
published in the Federal Register as soon as possible.

Background

    The 1949 Act sets forth the statutory authority for CCC price 
support programs. CCC price support programs are intended to stabilize 
market prices and provide interim financing and assistance to producers 
in the orderly marketing of eligible commodities.
    This interim rule amends regulations found at 7 CFR part 1427 to 
provide rules for administering CCC price support programs for the 1994 
and subsequent crop years.
    Section 1427.1 (b) is amended to clarify what information is 
available in State and county Agricultural Stabilization and 
Conservation Service offices.
    Section 1427.3 is amended to: (a) correct a typographical error; 
and (b) add the definition of ``warehouse receipt''.
    This interim rule amends Sec. 1427.4(b) to add references to 
receivers, guardians, or trustees which were inadvertently omitted.
    This interim rule amends Sec. 1427.5(b)(1)(v)(B)(4) to clarify that 
certain extra long staple cotton is ineligible for CCC price support 
loans.
    This interim rule amends Sec. 1427.5(c)(2)(ii) by removing the 
reference to incentive payments and thereby allow purchases of cotton 
to make such payments to a producer without affecting the ability of 
the producer to obtain a price support loan with respect to such 
cotton.
    This interim rule amends Sec. 1427.6(b) to clarify who may disburse 
loan proceeds to approved cooperative marketing associations.
    Section 1427.11 refers to warehouse receipts that may be used as 
collateral for CCC price support loans. This section has been revised 
to recognize the existence of electronic receipts by removing specific 
statements such as ``stamped'' and ``initialed''.
    Provisions for taking administrative offsets are provided in part 3 
of this title and part 1403 of this chapter. Accordingly, this interim 
rule removes and reserves Secs. 1427.14 and 1427.168.
    CCC has determined that the liquidated damages can be reduced 
without affecting the administration of the cotton price support 
programs. Accordingly, this interim rule amends Sec. 1427.18 and 
Sec. 1427.175 to: (a) decrease the liquidated damages amounts; and (b) 
add provisions that provide that any or all of the liquidated damages 
may be waived under certain conditions.
    Section 1427.23 is amended by removing paragraph (f) and 
redesignating paragraph (g) as paragraph (f). The removed provision was 
originally included to allow upland cotton producers who lost 
beneficial interest at the time of ginning an opportunity to file for a 
LDP on the day such upland cotton was ginned. This required producers 
to report ginning to the county office on a weekly basis. Since this 
provision was implemented, CCC developed a more workable procedure that 
allows producers to request LDP's in advance of ginning with the LDP 
rate based on the loan repayment rate announced and in effect on the 
day the upland cotton is ginned in accordance with redesignated 
Sec. 1427.23(f).
    Section 1427.171 is amended to clarify provisions relating to 
locations that are approved for the storage of CCC loan collateral by 
removing the reference to commercial warehouse houses.
    Section 1427.174 is amended to correct a spelling error.

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 1427.1 is amended by revising paragraph (b)(3) to read 
as follows:


Sec. 1427.1  Applicability.

* * * * *
    (b) * * *
    (3) For ELS cotton, the schedules of discounts for micronaire.
* * * * *
    3. Section 1427.3 is amended by:
    A. Revising the definition of ``Authorized loan servicing agent 
(LSA)'', and
    B. Adding the definition of ``warehouse receipt'' in alphabetical 
order.


Sec. 1427.3  Definitions.

* * * * *
    Authorized loan servicing agent (LSA) means a legal entity that 
enters into a written agreement with CCC to act as a loan servicing 
agent for CCC in making and servicing Form A cotton loans. The 
authorized LSA may perform, on behalf of CCC, only those services which 
are specifically prescribed by CCC including, but not limited to, the 
following:
    (1) Preparing and executing loan and loan deficiency payment 
documents;
    (2) Disbursing loan and loan deficiency payment proceeds;
    (3) Handling the extension of loans as authorized by CCC;
    (4) Accepting cotton loan repayments;
    (5) Handling documents involved with forfeiture of cotton loan 
collateral to CCC; and
    (6) Providing loan, loan deficiency payment, and accounting data to 
CCC for statistical purposes;
* * * * *
    Warehouse receipt means a receipt issued with respect to a bale of 
cotton by a warehouse with an existing cotton storage agreement, 
approved by CCC, in accordance with Secs. 1427.1081 through 1427.1089, 
that is:
    (1) A negotiable, machine card type warehouse receipt that is pre-
numbered and pre-punched;
    (2) An electronic warehouse receipt record issued by such warehouse 
recorded in a central filing system or systems maintained in one or 
more locations which are approved by ASCS or CCC to operate such 
system; or,
    (3) Other such acceptable evidence of title, as determined by CCC.
    4. Section 1427.4 is amended by revising paragraph (b) to read as 
follows:


Sec. 1427.4  Eligible producer.

* * * * *
    (b) A receiver or trustee of an insolvent or bankrupt debtor's 
estate, an executor or an administrator of a deceased person's estate, 
a guardian of an estate of a ward or an incompetent person, and 
trustees of a trust estate shall be considered to represent the 
insolvent or bankrupt debtor, the deceased person, the ward or 
incompetent, and the beneficiaries of a trust, respectively, and the 
production of the receiver, executor, administrator, guardian, or 
trustee shall be considered to be the production of the person or 
estate represented by the receiver, executor, administrator, guardian, 
or trust. Loan and loan deficiency payment documents executed by any 
such person will be accepted by CCC only if they are legally valid and 
such person has the authority to sign the applicable documents.
* * * * *
    5. Section 1427.5 is amended by:
    A. Revising paragraph (b)(1)(v)(B)(4) and
    B. Revising paragraph (c)(2)(ii) to read as follows


Sec. 1427.5   General eligibility requirements.

* * * * *
    (b)(1) * * *
    (v) * * *
    (B) * * *
    (4) Must not have noted on the classing record the presence of 
spindle twist, preparation, grass, oil, and/or other extraneous matter;
* * * * *
    (c) * * *
    (2) * * *
    (ii) Enters into a contract to sell the cotton if the producer 
retains title, risk of loss, and beneficial interest in the commodity 
and the purchaser does not pay to the producer any advance payment 
amount to enter into such contract, except as provided in part 1425 of 
this chapter.
* * * * *
    6. Section 1427.6 is amended by revising paragraph (b) to read as 
follows:


Sec. 1427.6   Disbursement of price support loans.

* * * * *
    (b) Loan proceeds may be disbursed by CCC or by an approved 
servicing agent bank to approved cooperative marketing associations.
* * * * *
    7. Section 1427.11 is amended by:
    A. Revising paragraph (a)(1),
    B. Revising introductory text of paragraph (e),
    C. Revising paragraphs (f)(2) and (f)(3),
    D. Revising introductory text of paragraph (g) and revising 
paragraph (g)(2),
    E. Removing paragraph (h), and
    F. Redesignating paragraph (i) as paragraph (h) and revising 
redesignated paragraph (h) to read as follows:


Sec. 1427.11   Warehouse receipt and insurance.

    (a) * * *
    (1) Meet the definition of a warehouse receipt,
* * * * *
    (e) Warehouse receipts, in accordance with Sec. 1427.3, when issued 
as block warehouse receipts will be accepted when authorized by CCC 
only under the following conditions:
* * * * *
    (f) * * *
    (2) The tare shown on the receipt shall be the tare furnished to 
the warehouse by the ginner or entered by the ginner on the gin bale 
tag. A machine card type warehouse receipt reflecting an alteration in 
gross, tare, or net weight will not be accepted by CCC unless it bears, 
on the face of the receipt, the following legend or similar wording 
approved by CCC, duly executed by the warehouse or an authorized 
representative of the warehouse:

Corrected (gross, tare, or net) weight
(Name of warehouse)
By (Signature or initials)
Date

    (3) Alterations in other inserted data on a machine card type 
warehouse receipt must be initialed by an authorized representative of 
the warehouse.
    (g) If warehouse storage charges have been paid, the receipt must 
show that date through which the storage charges have been paid.
* * * * *
    (2) If warehouse receiving charges have been paid or waived, the 
receipt must show such fact.
* * * * *
    (h) The warehouse receipt must show the compression status of the 
bale, i.e., flat, modified flat, standard, gin standard, gin universal, 
or warehouse universal density. The receipt must show if the 
compression charge has been paid, or if the warehouse claims no lien 
for such compression.


Sec. 1427.14   [Removed and Reserved]

    8. Section 1427.14 is removed and reserved.
    9. Section 1427.18 is amended by:
    A. Revising paragraph (e),
    B. Revising paragraph (f)(2),
    C. Adding paragraph (f)(3),
    D. Revising paragraph (g)(2), and
    E. Adding paragraph (j) to read as follows:


Sec. 1427.18   Liability of the producer.

* * * * *
    (e) The producer and CCC agree that it will be difficult, if not 
impossible, to prove the amount of damages to CCC if a producer makes 
any fraudulent representation in obtaining a loan or loan deficiency 
payment or in maintaining, or settling a loan or disposing of or moving 
the loan collateral without the prior written approval of CCC. 
Accordingly, if the county committee determines that the producer has 
violated the terms or conditions of Form CCC-Cotton A, Form CCC-Cotton 
AA, or Form CCC-709, as applicable, liquidated damages shall be 
assessed on the quantity of the commodity which is involved in the 
violation. If CCC determines the producer:
    (1) Acted in good faith when the violation occurred, liquidated 
damages will be assessed by multiplying the quantity involved in the 
violation by:
    (i) 10 percent of the loan rate applicable to the loan note or the 
loan deficiency payment rate for the first offense; or
    (ii) 25 percent of the loan rate applicable the loan note or the 
loan deficiency payment rate for the second offense; or
    (2) Did not act in good faith with regard to the violation, or for 
cases other than first or second offense, liquidated damages will be 
assessed by multiplying the quantity involved in the violation by 25 
percent of the loan rate applicable to the loan note or the loan 
deficiency payment rate.
    (f) * * *
    (2) Assess liquidated damages in accordance with paragraph (e) of 
this section.
    (3) If the producer fails to pay such amounts within 30 calendar 
days from the date of notification, the county committee shall call the 
applicable loan involved in the violation and require repayment of any 
market gain previously realized for the applicable loan, or for loan 
deficiency payment, require repayment of the loan deficiency payment 
and charges plus interest.
    (g) * * *
    (2) Call the applicable loan involved in the violation and require 
repayment of any market gain previously realized for the applicable 
loan, and with respect to a loan deficiency payment, require repayment 
of the loan deficiency payment and charges plus interest.
* * * * *
    (j) Any or all of the liquidated damages assessed in accordance 
with the provisions of paragraph (e) of this section may be waived as 
determined by CCC.
    10. Section 1427.23 is amended by:
    A. Removing paragraph (f)
    B. Redesignating paragraph (g) as paragraph (f), and revising 
redesignated paragraph (f), and
    C. Redesignating paragraph (h) as paragraph (g) and revising 
redesignated paragraph (g) to read as follows:


Sec. 1427.23   Cotton loan deficiency payments.

* * * * *
    (f) If the producer enters into an agreement with CCC on or before 
the date of ginning a quantity of eligible cotton, and the producer has 
the beneficial interest in such quantity as specified in accordance 
with Sec. 1427.5(c) on the date the cotton was ginned, the loan 
deficiency payment rate applicable to such cotton will be the loan 
deficiency payment rate based on the date the cotton was ginned. In 
such cases, the producer must meet all the other requirements in 
paragraph (b) of this section on or before the final date to apply for 
a loan deficiency payment in accordance with Sec. 1427.5.
    (g) Notwithstanding any other provision of this section, CCC will 
not accept applications for loan deficiency payments that specify the 
payment rate beginning at 4 p.m. eastern time each Thursday until an 
announcement of the adjusted world price for the succeeding weekly 
period has been made in accordance with Sec. 1427.25(e). In the event 
that Thursday is a nonworkday, such applications for loan deficiency 
payments will not be accepted beginning at 7 a.m. eastern time the next 
workday until an announcement of the adjusted world price for the 
succeeding weekly period has been made in accordance with 
Sec. 1427.25(e).


Sec. 1427.168   [Removed and Reserved]

    11. Section 1427.168 is removed and reserved.
    12. Section 1427.171 is amended by revising the first sentence to 
read as follows:


Sec. 1427.171   Approved storage.

    Approved storage shall consist of storage located on or off the 
producer's farm (excluding public warehouses) which is determined by a 
county committee representative to afford adequate protection against 
loss or damage and which is located within a reasonable distance, as 
determined by CCC, of an approved gin. * * *
    13. Section 1427.174 is revised to read as follows:


Sec. 1427.174   Maturity of loans.

    Seed cotton loans mature on demand by CCC but no later than May 31 
following the calendar year in which such crop is normally harvested.
    14. Section 1427.175 is amended by:
    A. Revising paragraph (a)(1),
    B. Revising paragraph (e),
    C. Revising paragraph (f)(2),
    D. Adding paragraph (f)(3), and
    E. Adding paragraph (i) to read as follows:


Sec. 1427.175   Liability of the producer.

* * * * *
    (a)(1) If a producer makes any fraudulent representation in 
obtaining a loan, maintaining a loan, or settling a loan or if the 
producer disposes of or moves the loan collateral without the prior 
approval of CCC, such loan shall be refunded upon demand by CCC.
* * * * *
    (e) The producer and CCC agree that it will be difficult, if not 
impossible, to prove the amount of damages to CCC for if a producer 
makes any fraudulent representation in obtaining a loan or in 
maintaining, or settling a loan or disposing of or moving the loan 
collateral without the prior approval of CCC. Accordingly, if the 
county committee determines that the producer has violated the terms or 
conditions of the note and security agreement, liquidated damages shall 
be assessed on the quantity of the commodity which is involved in the 
violation. If CCC determines the producer:
    (1) Acted in good faith when the violation occurred, liquidated 
damages will be assessed by multiplying the quantity involved in the 
violation by:
    (i) 10 percent of the loan rate applicable to the loan note for the 
first offense;
    (ii) 25 percent of the loan rate applicable to the loan note for 
the second offense; or
    (2) Did not act in good faith with regard to the violation, or for 
cases other than first or second offense, liquidated damages will be 
assessed by multiplying the quantity involved in the violation by 25 
percent of the loan rate applicable to the loan note.
    (f) * * *
    (2) Assess liquidated damages in accordance with paragraph (e) of 
this section.
    (3) If the producer fails to pay such amount within 30 calendar 
days from the date of notification, the county committee shall call the 
applicable loan involved in the violation.
* * * * *
    (i) Any or all of the liquidated damages assessed in accordance 
with the provision of paragraph (e) of this section may be waived as 
determined by CCC.

    Signed in Washington, DC, on July 25, 1994.
Alan King,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. 94-18694 Filed 8-1-94; 8:45 am]
BILLING CODE 3410-05-P