[Federal Register Volume 60, Number 7 (Wednesday, January 11, 1995)]
[Rules and Regulations]
[Pages 2680-2683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-560]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1425

RIN 0560-AD70


Cooperative Marketing Associations; Eligibility Requirements for 
Price Support

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This final rule adopts, without change, the proposed rule 
published in the Federal Register at 59 FR 44947-44952 on August 31, 
1994. This rule amends the regulations governing the participation of 
cooperative marketing associations (CMA) in Commodity Credit 
Corporation (CCC) price support programs to ensure: the equitable 
treatment of CMA members and individual producers; the Government does 
not accept undue risk in providing CMA price support program benefits; 
and the efficient delivery of CMA price support program benefits. This 
rule: changes CMA bylaw requirements to reflect current CMA 
organizational and operational procedures; requires approved cotton CMA 
retention of services provided by servicing agent banks; requires 
approved CMA monitoring of payment they receive on behalf of their 
members to ensure that member payments do not exceed payment limits; 
and makes other administrative changes.

EFFECTIVE DATE: January 11, 1995.

FOR FURTHER INFORMATION CONTACT: Richard M. Ackley, Chief, Cooperative 
and Analysis Branch; Cotton, Grain, and Rice Price Support Division, 
Consolidated Farm Service Agency, USDA, P.O. Box 2415, Washington, DC 
20013-2415.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be not significant for 
purposes of Executive Order 12866 and, therefore, has not been reviewed 
by Office of Management and Budget (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 have no 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, 
into Federal Register at 48 FR 29115 (June 24, 1983).

Executive Order 12778

    This final 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. Prior to any judicial action in a court of 
competent jurisdiction, administrative review under 7 CFR part 780 must 
be exhausted.

Paperwork Reduction Act

    Public reporting burden for all collections is estimated to average 
from 1 to 2 hours per response, including time for reviewing 
instructions, searching existing data sources, gathering and 
maintaining the data needed, and competing and reviewing the collection 
of information. The information collections have previously been 
cleared under the current regulations by OMB, and assigned OMB No. 
0560-0040.

Comments

    No comments were received during the comment period which ended on 
September 30, 1994.

List of Subjects in 7 CFR Part 1425

    Cooperatives, Price support programs, Reporting and recordkeeping 
requirements.

    Accordingly, 7 CFR part 1425 is amended as follows:

PART 1425--COOPERATIVE MARKETING ASSOCIATIONS

    1. The authority citation for 7 CFR part 1425 is revised to read as 
follows:

    Authority: 7 U.S.C. 1421(a), 1441, 1444(a), 1446(d), and 1447; 
15 U.S.C. 714b, 714c, and 714j.

    2. Section 1425.3 is amended.
    A. Revising paragraph (d),
    B. Redesignating paragraphs (i) and (j) as paragraphs (j) and (k) 
respectively,
    C. Adding a new paragraph (i), and
    D. Revising redesignated newly redesignated paragraphs (j) and (k):


Sec. 1425.3  Definitions.

* * * * *
    (d) Authorized commodity means those commodities for which an 
approved cooperative may apply for price support, including barley, 
canola, corn, cotton, flaxseed, honey, shorn mohair, mustard seed, 
oats, rapeseed, rice, rye, safflower, seed cotton, shorn wool, sorghum, 
soybeans, sunflower seed, and wheat.
* * * * *
    (i) Participate in a Price Support Program means the pledging, on 
behalf of members, of an eligible commodity as collateral for CCC price 
support loans, entering into purchase agreements, and, when applicable, 
obtaining loan deficiency payments.
    (j) Person means an individual, joint stock company, corporation, 
estate or

[[Page 2681]]

trust, association, or other legal entity, except that two or more 
entities shall be combined as one person in accordance with:
    (1) The regulations found at part 1497 of this chapter for the 
purpose of administering maximum payment limitation provisions of the 
Food Security Act of 1985;
    (2) The regulations found at part 796 of this title for the purpose 
of administering the provisions of the Food Security Act of 1985 with 
respect to the production of controlled substances; and
    (3) The regulations found at part 12 of this title pertaining to 
the highly erodible land and wetland provisions (commonly know as 
``sodbuster and swampbuster'' provisions) of the Food Security Act of 
1985.
    (k) Producer means a person who, as owner, landlord, tenant, or 
sharecropper, shares in the risk of producing the crop, and is entitled 
to share in the crops available for marketing from the farm, or would 
have shared had the crops been produced.
    3. In Sec. 1425.4, paragraphs (a), (b)(7), and paragraph (c) 
introductory text are revised and paragraphs (e) and (f) are added to 
read as follows:


Sec. 1425.4  Approval.

    (a) Application. In order for a cooperative to participate in a 
price support program with respect to the 1994 and subsequent crops of 
authorized commodities, a cooperative must submit an application for 
approval with respect to such authorized commodities to CCC.
    (b) * * *
    (7) A detailed description of the method by which proceeds from a 
pool of eligible commodities for which price support is obtained will 
be distributed as provided for in Sec. 1425.18.
* * * * *
    (c) Annual recertification. An approved cooperative must submit, on 
an annual basis, the following information to CCC:
* * * * *
    (e) Reapplication. Approved cooperatives must submit revised 
applications as required by this section instead of an annual 
recertification every 5 years, or more often if CCC determines that 
such application is necessary to determine if a cooperative has 
implemented an organizational or operational change that would affect 
compliance with the provisions of this part.
    (f) Form CCC-Cotton G. Cooperative marketing associations applying 
for approval to participate in the price support program for cotton 
shall execute Form CCC-Cotton G, Cotton Cooperative Loan Agreement, 
with CCC.
    4. Section 1425.6 (b)(2) is revised to read as follows:


Sec. 1425.6  Approved cooperatives.

* * * * *
    (b) * * *
    (2) Conditionally approved. (i) A cooperative may be conditionally 
approved if CCC determines that it has substantially met all the 
requirements of this part, and the failure to meet the remaining 
requirements is due to reasons beyond the control of the cooperative 
and not due to the cooperative's negligence; and
    (ii) Such cooperative must agree in writing to meet all 
requirements for approval set forth in this part within the time period 
specified by CCC. When a cooperative can only comply with the 
regulations by amending its articles of incorporation or bylaws at a 
membership meeting, CCC may accept a board of directors' resolution 
agreeing to recommend to the members at the next meeting of the members 
the required changes to the articles of incorporation or bylaws as 
compliance with the requirements for approval for purposes of this 
section.
    Board resolutions in which the cooperative agrees to comply with 
other provisions of this part may be accepted by CCC as compliance with 
the requirements for approval for purposes of this section.
* * * * *
    5. Section 1425.7 (a) is revised to read as follows:


Sec. 1425.7  Suspension and termination of approval.

    (a) Suspension. An approved cooperative may be suspended by CCC 
from further participation in a price support program if CCC determines 
that the cooperative or a member cooperative, as specified in 
Sec. 1425.19:
    (1) Has not operated in accordance with the conditions specified in 
such cooperative's application for approval;
    (2) Has not complied with applicable regulations; or
    (3) Has failed to correct deficiencies noted during an 
administrative review or an audit of the cooperative's operations with 
respect to a price support program. Such suspension may be lifted upon 
the receipt of documents indicating that the cooperative has complied 
with all requirements for approval. If such documents are not received 
within one year from the date of the suspension, the cooperative's 
approval for participation in a price support program shall be 
terminated.
* * * * *
    6. In Sec. 1425.8, paragraphs (b)(2) and (e) are revised to read as 
follows:


Sec. 1425.8  Ownership and control.

* * * * *
    (b) * * *
    (2) The allocated equity of any active member that has acquired 
equity as a result of a loan from the cooperative unless such member is 
obligated to repay the loan within one year.
* * * * *
    (e) Approved plan. An applicant or an approved cooperative not 
under the ownership or control, or both, of its active members, may be 
approved by CCC to participate in a price support program if the 
cooperative is able to establish that, by retiring the equity of its 
inactive members or by obtaining new members, the cooperative can vest 
ownership and control in its active members, as required by this 
section, by a date specified by CCC.
    7. Section 1425.9 is amended by revising the introductory text and 
paragraphs (d) and (g) to read as follows:


Sec. 1425.9  Charter and bylaw provisions.

    The articles of incorporation, articles of association, or the 
bylaws of the cooperative shall comply with each of the following 
requirements:
* * * * *
    (d) Nominations. (1) Nominations for election of delegates and 
directors shall be made by members.
    (2) Nominations for officers shall be made by elected directors or 
by members when nomination by members is authorized in the 
cooperative's articles of incorporation or bylaws.
    (3) Nominations may be made by balloting, nominating committee, 
petition of members, or from the floor, provided that nominations from 
the floor shall be requested in addition to nominations made by a 
nominating committee or by petition.
* * * * *
    (g) Proxy. (1) Except as provided in paragraph (g)(2) of this 
section, voting by proxy shall be prohibited.
    (2) Voting by proxy may be permitted if a cooperative:
    (i) Determines that it is necessary to amend the cooperative's 
articles of incorporation, articles of association, or bylaws, and
    (ii) Establishes to the satisfaction of CCC that the law of the 
State in which the cooperative is incorporated permits voting by proxy, 
but does not permit members to vote by mail, with respect to such 
issue.
* * * * *

[[Page 2682]]

    8. In Sec. 1425.10, paragraph (b)(3) is revised to read as follows:


Sec. 1425.10  Financial condition.

* * * * *
    (b) * * *
    (3)(i) The net worth of the cooperative. The cooperative shall be 
considered to have a sufficient net worth if such net worth is equal to 
the product of an amount per unit for a commodity (as set forth in 
table 1) multiplied by the total number of such units of commodity for 
which the cooperative is approved, or requesting approval, to 
participate in price support and handled by the cooperative during the 
preceding marketing year, or, if the cooperative is in its first full 
marketing year of operations, the estimated quantity of such commodity 
that it will handle during such year.
    (ii) (A) If the amount of the net worth of the cooperative is 
between 34 and 99 percent of the amount computed in accordance with 
paragraph (b)(3)(i) of this section and the cooperative is determined 
by CCC to be otherwise financially sound, CCC may determine that such 
cooperative meets the requirements of this section. Such a 
determination by CCC may be made if:
    (1) The board of directors of the cooperative agrees to make a 
capital retain in the amount set forth in table 2 with respect to each 
unit of the commodity delivered to the cooperative until the net worth 
of the cooperative is at least equal to the amount computed in 
accordance with paragraph (b)(3)(i) of this section, and
    (2) The cooperative agrees to deduct from pool proceeds the full 
amount of the estimated expenses of handling the commodities received 
by the cooperative.
    (B) The failure to carry out such agreements shall be grounds for 
suspending a cooperative's approval.

                                 Table 1                                
------------------------------------------------------------------------
                                                                  Amount
              Commodity                          Unit              per  
                                                                   unit 
------------------------------------------------------------------------
Barley...............................  Bushel..................     0.13
Canola...............................  Hundredweight...........     0.62
Corn.................................  Bushel..................     0.13
Cotton...............................  Bale....................     6.40
Flaxseed.............................  Hundredweight...........     0.62
Honey................................  Hundredweight...........     1.90
Mustard Seed.........................  Hundredweight...........     0.62
Oats.................................  Bushel..................     0.13
Rapeseed.............................  Hundredweight...........     0.62
Rice.................................  Hundredweight...........     0.52
Rye..................................  Bushel..................     0.13
Safflower............................  Hundredweight...........     0.62
Seed Cotton (lint basis).............  Pound...................    0.008
Shorn Mohair.........................  Pound...................     0.16
Shorn Wool...........................  Pound...................     0.38
Sorghum..............................  Hundredweight...........     0.19
Soybeans.............................  Bushel..................     0.43
Sunflower Seed.......................  Hundredweight...........     0.62
Wheat................................  Bushel..................     0.15
------------------------------------------------------------------------


                                 Table 2                                
------------------------------------------------------------------------
                                                                  Amount
              Commodity                          Unit              per  
                                                                   unit 
------------------------------------------------------------------------
Barley...............................  Bushel..................     0.07
Canola...............................  Hundredweight...........     0.32
Corn.................................  Bushel..................     0.07
Cotton...............................  Bale....................     3.20
Flaxseed.............................  Hundredweight...........     0.32
Honey................................  Hundredweight...........     0.95
Mustard Seed.........................  Hundredweight...........     0.32
Oats.................................  Bushel..................     0.07
Rapeseed.............................  Hundredweight...........     0.32
Rice.................................  Hundredweight...........     0.26
Rye..................................  Bushel..................     0.07
Safflower............................  Hundredweight...........     0.32
Seed Cotton (lint basis).............  Pound...................    0.004
Shorn Mohair.........................  Pound...................     0.08
Shorn Wool...........................  Pound...................     0.19
Sorghum..............................  Hundredweight...........     0.10
Soybeans.............................  Bushel..................     0.22
Sunflower Seed.......................  Hundredweight...........     0.32
Wheat................................  Bushel..................     0.08
------------------------------------------------------------------------

* * * * *
    9. In Sec. 1425.11, paragraph (c)(3) is revised to read as follows:


Sec. 1425.11  Operations.

* * * * *
    (c) * * *
    (3) Require that all proceeds from the marketing operation be 
distributed as provided in Sec. 1425.18.
    10. In Sec. 1425.14, paragraph (c) is revised to read as follows:


Sec. 1425.14  Member business.

* * * * *
    (c) The cooperative has a plan, approved by CCC, which CCC 
determines to be in the cooperative members' best interest and will 
bring the cooperative into compliance with the provisions of this 
section. Commodities purchased or acquired from CCC and processed 
products acquired from other processors or merchandisers shall not be 
considered in determining the volume of member or nonmember business.


Secs. 1425.16-1425.21, 1425.22, 1425.23  [Redesignated as 
Secs. 1425.17-1425.22, 1425.24, 1425.25]

    11. Sections 1425.16 through 1425.21 and Secs. 1425.22 and 1425.23 
are redesignated as Secs. 1425.17 through 1425.22 and Secs. 1425.24 and 
1425.25, respectively, and a new Sec. 1425.16 is added to read as 
follows:


Sec. 1425.16  Payment limitation.

    Approved cooperatives shall monitor marketing loan gains, loan 
deficiency payments, and other payments they receive from CCC on behalf 
of their members and ensure that the sum of the amounts received for 
each member does not exceed the member's payment limitation determined 
in accordance with part 1497 of this title that, for purposes of 
administering such part, is assigned by CCC to the cooperative.
    12. Redesignated Sec. 1425.17 is amended by revising paragraphs 
(a)(2), (b)(1)(i), (b)(1)(ii), (b)(1)(iii), (b)(2), (c)(2), and adding 
paragraph (c)(5) to read as follows:


Sec. 1425.17  Eligible commodity and pooling.

    (a)  * * *
    (2) Price support will be made available to approved cooperatives 
with respect to a quantity of an eligible commodity included in an 
eligible pool as provided in paragraph (c) of this section and the 
beneficial interest provisions of parts 1421, 1427, 1435, and 1468 of 
this chapter.
    (b)  * * *
    (1)  * * *
    (i) All of the commodity included in the pool is eligible for price 
support, except as provided in paragraph (b)(2) of this section;
    (ii) The eligible commodity in such pool was:
    (A) Delivered to the cooperative for marketing for the benefit of 
the members of the cooperative, and
    (B) Delivered by members who retain the right to share in the 
proceeds from the marketing of the commodity in accordance with 
Sec. 1425.18.
    (iii) Except with respect to a quantity of a commodity pledged as 
collateral for a price support loan and which is redeemed within 15 
work days from the date the cooperative receives the proceeds from CCC, 
all of the commodity placed in such pool was delivered by members who 
have agreed to accept a payment of the initial advances made available 
to such producers by the cooperative with respect to such commodity in 
accordance with Sec. 1425.18(a).
    (2) If CCC determines that a cooperative has inadvertently included 
in a pool a quantity of commodity which is ineligible for price support 
because of grade, quality, bale weight or repacking in the case of 
cotton, or other factors, the remaining quantity of commodity shall 
remain eligible for price support.
    (c)  * * *
    (2) Price support will be available to the cooperative for the 
quantity of a farm-stored commodity that is, pursuant

[[Page 2683]]

to such cooperative's marketing agreement with a member, part of the 
cooperative's pool.
* * * * *
    (5) Commodities pledged as collateral for CCC price support loans 
shall be free and clear of all liens and encumbrances based on an 
approved cooperative's financial agreements or the cooperative shall 
obtain a completed Form CCC-679, Lien Waiver. Approved cooperatives 
shall not take any action to cause a lien or encumbrance to be placed 
on a commodity after a loan is approved.
* * * * *
    13. Redesignated Sec. 1425.18 is amended by revising paragraphs (a) 
and (a)(1) and adding paragraph (b)(5) to read as follows:


Sec. 1425.18  Distribution of proceeds.

    (a) CCC loans, purchases, and loan deficiency payments. (1) If CCC 
makes available price support loans, purchases, or loan deficiency 
payments with respect to any quantity of the eligible commodity in a 
pool, the proceeds from such loans, purchases, or loan deficiency 
payments shall be distributed to members participating in such pool on 
the basis of the quantity and quality of the commodity delivered by 
each member which is included in the pool less any authorized charges 
for services performed or paid by the cooperative which are necessary 
to condition the commodity or otherwise make the commodity eligible for 
price support. Except with respect to commodities which are pledged as 
collateral for a price support loan and which are redeemed within 15 
work days from the date the cooperative receives the loan proceeds from 
CCC, such proceeds shall be distributed within 15 work days from such 
date. Loan deficiency payments received from CCC shall be distributed 
within 15 work days of receipt from CCC.
* * * * *
    (b)  * * *
    (5) When notified by CCC that pool distributions to a member of any 
eligible pool must be reduced for a program year, farm, or crop, 
cooperatives shall refrain from making such pool distributions and 
shall, if appropriate, reimburse CCC for such distributions.
* * * * *
    14. Redesignated Sec. 1425.20 is revised to read as follows:


Sec. 1425.20  Nondiscrimination.

    The cooperative shall not, on the basis of race, color, age, sex, 
religion, marital status, national origin, physical disability, or 
mental disability, deny any producer participation in, or otherwise 
subject any producer to discrimination with respect to any benefits 
resulting from its approval to obtain price support and shall comply 
with the provisions of Title VI of the Civil Rights Act of 1964 and the 
Secretary's regulations issued thereunder, appearing in Secs. 15.1 
through 15.12 of this title; section 504 of the Rehabilitation Act of 
1973, as amended by the Rehabilitation Comprehensive Services and 
Developmental Disabilities Amendments of 1978; and provisions of the 
Age Discrimination Act of 1975, as amended. The cooperative shall not 
discriminate against employees under Title VII of the Civil Rights Act 
of 1964, as amended, or the Equal Pay Act of 1963 or Title VI of the 
Civil Rights Act of 1964 as administered by the Equal Employment 
Opportunity Commission, and shall handle employee discrimination 
complaints as provided for in 28 CFR part 42 and 29 CFR part 1691. The 
United States shall have the right to enforce compliance with such 
statutes and regulations by suit or by any other action authorized by 
law. The cooperative shall submit a certification with its application 
that the regulations cited in this section have been read and 
understood and that the cooperative will abide by them.
    15. A new Sec. 1425.23 is added to read as follows:


Sec. 1425.23  Reports.

    (a) Approved cooperatives shall annually provide CCC with a PSL-86R 
report to applicable county Consolidated Farm Service Agency offices. 
The report shall include all eligible and ineligible commodity receipts 
by Farm Service Agency farm number for each member.
    (b) Approved cooperatives shall at least annually report by 
commodity and by crop the marketing loan gains, loan deficiency 
payments, and any other CCC program payments received on behalf of each 
producer member.

    Signed in Washington, DC, on December 23, 1994.
Bruce R. Weber,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. 95-560 Filed 1-10-95; 8:45 am]
BILLING CODE 3410-05-P