[Federal Register Volume 61, Number 50 (Wednesday, March 13, 1996)]
[Proposed Rules]
[Pages 10289-10292]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-5868]



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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation

7 CFR Part 1427

RIN 0506-AE51


Upland Cotton User Marketing Certificate Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule amends the regulations to set the payment 
rate for exporters under the user marketing certificate program on the 
date it is determined by the Commodity Credit Corporation the cotton is 
shipped. The new method for rate-setting would be effective on the day 
the final rule is published. Comments are requested on this change.

DATES: Comments on the proposed rule, as well as comments on 
alternatives to this proposal, must be received on or before April 12, 
1996 to be assured of consideration.

ADDRESSES: Submit comments on the proposed rule to: Director, Fibers 
Analysis Division (FAD), Farm Service Agency (FSA), U.S. Department of 
Agriculture (USDA), room 3758-S, Ag Code 0515, P.O. Box 2415, 
Washington, DC 20013-2415. Comments on the information collection must 
be sent to the Office of Management and Budget (OMB) at the address 
listed in the Paperwork Reduction Act section of this preamble. A copy 
of these comments may also be sent to the Department representative at 
the address shown following the OMB address.

FOR FURTHER INFORMATION CONTACT: Wayne Bjorlie, Director, FAD, FSA, 
USDA, room 3758-S, Ag Code 0515, P.O. Box 2415, Washington, DC 20013-
2415 or call (202) 720-6734. A cost benefit analysis of this rule is 
available on request.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant and was 
reviewed by OMB under Executive Order 12866.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule because the Commodity Credit 
Corporation (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 environmental evaluation that this action 
will have no 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 titles and numbers of the Federal Assistance Programs, as found 
in the catalog of Federal Domestic Assistance, to which this proposed 
rule applies are: Commodity Loans and Purchases--10.051 and Cotton 
Production Stabilization--10.052.

Executive Order 12778

    This rule has been reviewed in accordance with Executive Order 
12778. The provisions of the 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).

Background

    Since the user marketing certificate (Step 2) program began, the 
payment rate for exporters has been the subject of discussion and 
controversy, particularly with regard to the bunching of export sales 
registrations during a week following a period of zero payment rates or 
a week when the continuing availability of the payments is particularly 
uncertain. All segments of the cotton industry have expressed interest 
in making changes. Whereas Step 2 may have been conceived as a program 
to provide regular payments to exporters based on actual sales made 
according to historical timing patterns, in reality the existence of 
the payments has changed the timing of the sales. Bunching of 
registrations refers to the practice of registering large volumes of 
cotton export sales with CCC whenever there is a reasonable expectation 
that such action will capture a larger than average payment rate or a 
rate which may be available for only a short time. Bunching has 
occurred because the payment rate has been fixed for the exporter as of 
the date the sale is registered with CCC. The proposed rule would amend 
the regulations to set the payment rate for exporters under the user 
marketing certificate program on the date on which it is determined by 
CCC that the cotton is shipped, rather than the date on which the sale 
is registered with CCC. Thus, there would no longer be an incentive to 
sell large volumes of cotton in advance solely in order to register the 
sales with CCC and capture a larger payment rate. Under the proposed 
rule, the rate could not be captured in that way.
    Regulations covering payment rate determinations for cotton 
contracted by exporters for shipment before the final rule is published 
in the Federal Register and for cotton consumed by domestic users are 
not changed by this proposed rule. Payment rates for such cotton will 
be determined in accordance with existing regulations and under the 
terms and conditions of the Upland Cotton Domestic User/Exporter 
Agreement, CCC-1045, (4-15-94), Revision 2 (existing agreement), 
through the day the final rule is published in the Federal Register. 
Publication of the final rule in the Federal Register and the effective 
date of the revised agreement will be coordinated so that the existing 
agreement will remain in effect until the revised agreement goes into 
effect. To continue to participate in the Step 2 program, exporters and 
domestic users must sign and return the revised agreement to CCC.

[[Page 10290]]

     This proposed rule also updates the address of the Kansas City 
Commodity Office shown in 7 CFR 1427.105, abbreviates several terms 
used to describe price quotations used in the calculation of the Step 2 
payment rate, and updates the ending date for the Step 2 program to 
July 31, 1998, in accordance with current legislation.
    Alternative policies to address problems with the Step 2 program 
such as rules similar to those in effect under the Export Enhancement 
Program for exports of agricultural commodities have been suggested for 
cotton exports under the Step 2 program. Such rules could include a 
requirement to provide evidence of a bona fide export sales contract, 
required identification of the end user of cotton sold under a covered 
contract, required reporting of contract terms, including the amount of 
the Step 2 payment applied to the sales price, and prohibition of sales 
through third parties or sales through foreign affiliates of a 
participating exporter. Comments on these alternative policies, as well 
as other policies affecting the Step 2 program which may be of interest 
to the public, will be considered along with comments on the proposed 
rule.

Paperwork Reduction Act

    The amendments to 7 CFR part 1427 set forth in this proposed rule 
involve a change in the existing information collection requirements 
which were previously cleared by OMB under the provisions of 44 U.S.C. 
35. In accordance with the Paperwork Reduction Act of 1995, CCC has 
submitted a request to OMB for a revision to an information collection 
currently approved in support of the upland cotton user marketing 
certificate program and related reporting and recordkeeping 
requirements.
    Title: Upland Cotton Domestic User/Exporter Agreement and Payment 
Program.
    OMB Control Number: 0560-0136.
    Expiration Date of Approval: April 30, 1997.
    Type of Request: Revision of a Currently-Approved Information 
Collection.
    Abstract: Section 103B(a)(5)(E) authorizes payments to eligible 
U.S. mills and exporters under the upland cotton user marketing 
certificate program if, for 4 consecutive weeks, (1) the U.S. Northern 
Europe price exceeds the Northern Europe price by more than 1.25 cents 
per pound, and (2) the upland cotton adjusted world price is less than 
130 percent of the current-crop base quality loan rate. Currently, to 
participate in the program, mills and exporters must sign an agreement 
with CCC (CCC-1045) and agree to report weekly to CCC their sales 
contracts (in the case of exporters) and their consumption of cotton 
(in the case of domestic mills) as a basis for making payments. The 
proposal would change the requirement for exporters who would report 
their weekly exports instead of their weekly sales, necessitating a 
revision in the exporter application for payment (CCC-1045-1). Although 
the change does not affect domestic users, to continue in the program, 
all program participants will be required to sign a new agreement which 
incorporates the changes for exporters.
    Certain information collections for both exporters and domestic 
users have been required since the beginning of the program but were 
included in the last burden statement under the general category 
``Normal Business Records.'' To more accurately assess the paperwork 
burden, the individual reports have been identified. CCC provides a 
suggested format for the reports but program participants may submit 
the same information to CCC in a format that is convenient for them.
    Estimate of Burden: Public reporting burden for this information 
collection is estimated to average 14 minutes per response.
    Respondents: U.S. cotton exporters and U.S. cotton mills.
    Estimated Number of Respondents: 300.
    Estimated Number of Responses per Respondent: 65.
    Estimated Total Annual Burden on Respondents: 4,675 hours.
    Comments are requested regarding (a) whether the collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information will have practical 
utility; (b) the accuracy of the agency's estimate of burden including 
the validity of the methodology and assumptions used; (c) ways to 
enhance the quality, utility and clarity of the information to be 
collected; (d) ways to minimize the burden of the collection of 
information on those who are to respond, including through the use of 
appropriate automated, electronic, mechanical, or other technological 
collection techniques or other forms of information technology. Copies 
of the information collection may be obtained from Janise Zygmont at 
the above address.
    Submit comments on the information collection to: Desk Officer for 
Agriculture, Office of Information and Regulatory Affairs, Office of 
Management and Budget, Washington, D.C. 20503 and to Janise Zygmont, 
FAD, FSA, USDA, room 3756-S, Ag Code 0515, P.O. Box 2415, Washington, 
DC 20013-2415. All comments regarding this information collection will 
be summarized and included in the request for OMB approval. All 
comments will also become a matter of public record.
    OMB is required to make a decision concerning the collection(s) of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to the Department on the 
proposed regulations.

List of Subjects in 7 CFR Part 1427

    Cotton, Loan programs/agriculture, Marketing certificate programs, 
Price support programs, Warehouses.

    Accordingly, 7 CFR part 1427 is proposed to be 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 1427.100 is amended by revising the first sentence of 
paragraph (a) and revising paragraphs (b)(1) introductory text, 
(b)(1)(i) and (b)(2) to read as follows:


Sec. 1427.100  Applicability.

    (a) The regulations in this subpart are applicable during the 
period beginning August 1, 1991, and ending July 31, 1998. * * *
    (b)(1) During the period beginning August 1, 1991, and ending July 
31, 1998, CCC shall issue marketing certificates or cash payments to 
domestic users and exporters in accordance with this subpart in a week 
following a consecutive 4-week period in which--
    (i) The Friday through Thursday average price quotation for the 
lowest-priced United States growth, as quoted for Middling one and 
three thirty-seconds inch (``M 1\3/32\ inch'') cotton, delivered C.I.F. 
(cost, insurance and freight) northern Europe (``U.S. Northern Europe 
(USNE) price'') exceeds the Friday through Thursday average price 
quotation for the five lowest-priced growths, as quoted for M 1\3/32\ 
inch cotton, delivered C.I.F. northern Europe (``Northern Europe (NE) 
price'') by more than 1.25 cents per pound; and
    (ii) * * *
    
[[Page 10291]]

    (2) Notwithstanding the provisions of paragraph (b)(1) of this 
section, CCC shall not issue marketing certificates or cash payments 
if, for the immediately preceding consecutive 10-week period, the USNE 
price, adjusted for the value of any certificates or cash payments 
issued under paragraph (b)(1) of this section, exceeds the NE price by 
more than 1.25 cents per pound.
* * * * *
    3. Section 1427.103 is amended by revising paragraphs (a)(1) and 
(a)(2) to read as follows:


Sec. 1427.103  Eligible upland cotton.

    (a) * * *
    (1) Opened by an eligible domestic user on or after August 1, 1991, 
and on or before July 31, 1998, or, excluding cotton covered under 
paragraph (a)(2) of this section, exported by an eligible exporter on 
or after [date on which final rule is published in the Federal 
Register] and on or before July 31, 1998, during a Friday through 
Thursday period in which a payment rate, determined in accordance with 
Sec. 1427.107, is in effect, and which meets the requirements of 
paragraphs (b) and (c) of this section;
    (2) Sold for export by an eligible exporter under a written 
contract entered into on or after August 1, 1991, and on or before 
[date immediately following date on which the final rule is published 
in the Federal Register] during a Friday through Thursday period in 
which a payment rate, determined in accordance with Sec. 1427.107, is 
in effect and which is exported by the eligible exporter by not later 
than July 31, 1998, and which meets the requirements of paragraphs (b) 
and (c) of this section.
* * * * *
    4. Section 1427.105 is amended by revising the first sentence of 
paragraph (b) to read as follows:


Sec. 1427.105  Upland Cotton Domestic User/Exporter Agreement.

* * * * *
    (b) Upland Cotton Domestic User/Exporter Agreements may be obtained 
from Cotton and Rice Inventory Branch, Cotton and Rice Division, Kansas 
City Commodity Office, P. O. Box 419205, Kansas City, Missouri 64141-
6205. * * *
* * * * *
    5. Section 1427.107 is amended by revising paragraphs (a)(1) 
introductory text, (a)(1)(i), (a)(1)(ii), (a)(2) introductory text, 
(b), (c), (d) introductory text, (e) introductory text, (f)(1) 
introductory text, (f)(1)(ii), and (f)(2), and adding a new paragraph 
(f)(1)(iii) to read as follows:


Sec. 1427.107  Payment rate.

    (a) * * *
    (1) For exporters for cotton shipped after (date of publication of 
final rule in the Federal Register) (excluding cotton covered under 
paragraph (a)(2) of this section) and for domestic users for bales 
opened during the period--
    (i) Beginning the Friday following August 1 and ending the week in 
which the Northern Europe current (NEc) price and the Northern Europe 
forward (NEf) price first become available, the payment rate shall be 
the difference between the USNE price, minus 1.25 cents per pound, and 
the NE price in the fourth week of a consecutive 4-week period in which 
the USNE price exceeded the NE 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.
    (ii) Beginning the Friday through Thursday week after the week in 
which the NEc price and the NEf price first become available and ending 
the Thursday following July 31, the payment rate shall be the 
difference between the USNEc price, minus 1.25 cents per pound, and the 
NEc price in the fourth week of a consecutive 4-week period in which 
the USNE price exceeded the NEc 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.
    (iii) * * *
    (2) For exporters, prior to [date of publication of final rule in 
the Federal Register]--
* * * * *
    (b) Notwithstanding the provisions of paragraph (a) of this 
section, no payment rate shall be established in a week following a 
consecutive 10-week period in which the USNE price, or as the case may 
be, the USNEc price or the USNEf price, adjusted for the value of any 
certificate or cash payment issued in accordance with paragraph (a) of 
this section, exceeds the NE price, or as the case may be, the NEc 
price or the NEf price, by more than 1.25 cents per pound.
    (c) Notwithstanding the provisions of paragraph (a) of this 
section, whenever a 4-week period contains a combination of NE prices 
only for one to three weeks and NEc prices and NEf prices only for one 
to three weeks such as occurs in the spring when the NE price is 
succeeded by the NEc price and the NEf price (``spring transition 
period'') and at the start of a new marketing year when the NEc price 
and the NEf price are succeeded by the NE price (marketing year 
transition):
    (1) Under paragraphs (a)(1)(i) and (a)(2)(i) of this section, 
during the marketing year transition, the NEf price and the USNEf price 
in combination with the NE price and the USNE price shall be taken into 
consideration during such 4-week periods to determine if a payment is 
to be issued.
    (2) Under paragraphs (a)(1)(ii), (a)(2)(ii), and (a)(2)(v) of this 
section, during the spring transition period, the NEc price and the 
USNEc price in combination with the NE price and the USNE price shall 
be taken into consideration during such 4-week periods to determine if 
a payment is to be issued.
    (d) Notwithstanding any other provision of this section, for 
contracts made by exporters prior to [date of publication of final rule 
in the Federal Register], that specify shipment of the cotton by not 
later than September 30--
* * * * *
    (e) For U.S. cotton sold by the exporter under an optional origin 
contract prior to [date following date of publication of final rule in 
the Federal Register], the payment rate * * *
    (f) * * *
    (1) With respect to the determination of the USNE price, the USNEc 
price, the USNEf price, the NE price, the NEc price and the NEf price--
    (i) * * *
    (ii) If no daily quotes are available for the entire 5-day period 
for either or both the USNE price and the NE price during the period 
when only one daily price quotation is available for each growth quoted 
for M 1\3/32\ inch cotton, delivered C.I.F. northern Europe; or the 
USNEc price and the NEc price; or the USNEf price and the NEf price, 
that week will not be taken into consideration, in which case, CCC may 
establish a payment rate at a level it determines appropriate, taking 
into consideration the payment rate determined in accordance with 
paragraph (a) of this section for the latest available week.
    (iii) Beginning [date of publication of final rule in the Federal 
Register], if no daily quotes are available for the entire 5-day period 
for either or both the USNEc price and the NEc price, the marketing 
year transition shall be implemented immediately as provided for in 
paragraph (c)(1) of this section.
    (2) With respect to the determination of the USNE price, the USNEc 
price and the USNEf price, if a quote for either the U.S. Memphis 
territory or the California/Arizona territory as quoted for M 1\3/32\ 
inch cotton, delivered C.I.F.

[[Page 10292]]
northern Europe, is not available for each or any day of the 5-day 
period, the available quote will be used.
* * * * *
    6. Section 1427.108 is amended by revising paragraphs (a)(2), 
(c)(1), and (c)(2), and adding a new paragraph (c)(3) to read as 
follows:


Sec. 1427.108  Payment.

    (a) * * *
    (1) * * *
    (2) The net weight (gross weight minus the weight of bagging and 
ties) as determined in accordance with paragraph (b) of this section, 
of eligible upland cotton as determined in accordance with paragraph 
(c) of this section.
* * * * *
    (c) * * *
    (1) Purchased by the domestic users on the date the bale is opened 
in preparation for consumption;
    (2) From August 1, 1991, through [date immediately following date 
on which the final rule is published in the Federal Register], sold by 
the exporter on the date the contract for sale is confirmed in writing; 
and
    (3) Excluding cotton covered under paragraph (c)(2) of this 
section, through July 31, 1998, exported by the exporter on the date 
that CCC determines is the date on which the cotton is shipped.
* * * * *
    7. Section 1427.109 is amended by revising paragraphs (a)(1) 
through (a)(3) to read as follows:


Sec. 1427.109  Contract cancellations.

    (a) * * *
    (1) All undelivered (open) export contracts (including optional 
origin export contracts) outstanding as of the later of the date the 
Agreement (CCC-1045, 8-1-91) was executed by the exporter or August 29, 
1991;
    (2) Any export contracts that were canceled, or amended to reduce 
the contract quantity, between the later of June 18, 1991, or 75 days 
prior to the date the Agreement (CCC-1045, 8-1-91) was executed by the 
exporter and the later of the date the Agreement (CCC-1045, 8-1-91) was 
executed by the exporter, or August 29, 1991, which are not replaced by 
the later of the date the Agreement (CCC-1045, 8-1-91) was executed by 
the exporter or August 29, 1991; and
    (3) All new export contracts entered into by the exporter on or 
after August 30, 1991, and on or before [date immediately following 
date on which the final rule is published in the Federal Register].

    Signed at Washington, D.C., on March 6, 1996.
Grant Buntrock,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 96-5868 Filed 3-12-96; 8:45 am]
BILLING CODE 3410-05-P