[Federal Register Volume 64, Number 194 (Thursday, October 7, 1999)]
[Rules and Regulations]
[Pages 54508-54511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26167]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 735

RIN 0560-AE60


Amendments to the Regulations for Cotton Warehouses--Electronic 
Warehouse Receipts, and Other Provisions

AGENCY: Farm Service Agency, USDA.

ACTION: Final rule.

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SUMMARY: This final rule adopts, with minor changes, a proposed rule 
that was published in the November 2, 1996, Federal Register (61 FR 
60637) regarding cotton warehouses that are operating under the United 
States Warehouse Act (USWA). This rule makes a number of clarifying and 
technical changes to existing warehouse regulations, but also removes 
the requirement that all electronic warehouse receipts for cotton must 
be issued as single bale receipts. The rule will thereby allow 
warehouse operators to issue single and multiple bale warehouse 
receipts as either paper or electronic warehouse receipts. Portions of 
the proposed rule were already adopted in a final rule that was

[[Page 54509]]

published in the June 20, 1997, Federal Register (62 FR 33539).

EFFECTIVE DATE: October 7, 1999.

FOR FURTHER INFORMATION CONTACT: Steve Mikkelsen, Deputy Director, 
Warehouse and Inventory Division, Farm Service Agency, STOP 0553, 1400 
Independence Avenue, SW, Washington, DC, 20250-0553; telephone 202-720-
2121 or FAX 202-690-3123,
e-mail: Steve__M[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget (OMB) has reviewed this final 
rule and determined the rule to be significant for the purposes of 
Executive Order 12866. A Cost-Benefit Assessment (CBA) was prepared. 
The CBA summarized the cost and benefit impact of this final rule as 
follows:
    The costs associated with the implementation of the final rule will 
be minimal to all parties involved.
    This final rule will benefit warehouse operators because it allows 
for the issuance of a single electronic cotton warehouse receipt for 
more than one bale of cotton. Presently, the regulations require 
warehouse operators who elect to use electronic warehouse receipts to 
issue receipts in a single-bale format.
    Warehouse operators who elect to continue to issue single-bale 
electronic warehouse receipts or to issue multiple bale receipts as 
paper receipts can continue to do so under these regulations, and thus 
will be unaffected by this final rule.
    The Cost-Benefit Assessment is available for public inspection in 
Room 5968, South Agriculture Building, U.S. Department of Agriculture, 
1400 Independence Avenue, SW, Washington, DC, between 8:00 a.m. and 
4:30 p.m., Monday through Friday, except holidays.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this final rule do not preempt State 
laws, are not retroactive, and do not involve administrative appeals.

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.

Executive Order 12612

    It has been determined that this rule is consistent with the 
Federalism principles espoused in Executive Order 12612, and does not 
warrant the preparation of a Federalism Assessment.

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 the Notice related to 7 CFR part 3015, subpart 
V, published at 48 FR 29115 (June 24, 1983).

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 
205 of the UMRA.

Paperwork Reduction Act of 1995

    The amendments set forth in this final rule do not generate any new 
or revised information collection or record keeping requirements on the 
public. The existing information collections were previously cleared by 
OMB and assigned OMB control number 0560-0120.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule, because it has been determined that this 
rule will not have a significant effect on a substantial number of 
small businesses. The decision to request a license under the USWA is a 
voluntary decision made by the warehouse operator.

Background

    The USWA, as amended (7 U.S.C. 241 et seq.) provides the Secretary 
of Agriculture the authority to license public warehouse operators that 
store cotton. As part of this licensing authority, the Secretary 
regulates the issuance of warehouse receipts by the cotton warehouse 
operators it licenses (7 U.S.C. 260). The USWA was amended in 1990 and 
1992, and regulations were issued on March 31, 1994, (59 FR 15033), to 
permit warehouse operators to issue electronic warehouse receipts for 
cotton. Currently, the regulations require that all electronic 
warehouse receipts issued by warehouse operators must be single bale 
receipts. Some warehouse operators have requested permission to issue 
electronic warehouse receipts for cotton using a multiple bale format 
to accommodate differences in the manner cotton is handled throughout 
the United States.
    This final rule (l) modifies the method to identify and weigh each 
bale of cotton in a multiple bale lot, while still requiring an 
identification for each bale and lot, (2) deletes obsolete provisions 
regarding the issuance and printing of warehouse receipts; (3) removes 
masculine pronouns; (4) removes the requirement that all multiple bale 
receipts must represent between 25 and 200 bales of cotton, and as 
amended allows for the storage and tagging of such bales to be 
conducted as efficiency dictates; (5) clarifies the section relating to 
the system of accounts; (6) modifies the means by which a warehouse 
operator may notify the Administrator in the event of a fire; (7) 
clarifies the contents of complaints; (8) removes the requirement that 
all electronic cotton warehouse receipts must be issued as single bale 
receipts, and as amended specifically allows for the issuance of 
multiple bale electronic receipts; and (9) makes other clarifications 
and nomenclature changes.

Summary of Comments

    A proposed rule was published in the Federal Register (61 FR 60637) 
on November 29, 1996, to change the regulations governing cotton 
warehouses.
    Comments on the proposed rule were received from two cotton 
associations, one bank, one U.S. Department of Agriculture employee, 
one electronic warehouse receipt provider, one merchant, and four 
warehouse operators. All of the comments related to the use of 
electronic receipts for multiple bale lots.
    In general comments supported the issuance of multiple bale 
warehouse receipts in electronic format, however, five comments 
indicated that multiple bale warehouse receipts should not be required 
to contain individual bale tags and weights. These comments indicated 
that individual bale tags and weights for each bale included on a 
multiple bale receipt should be kept on file at the warehouse, and 
should not be part of the multiple bale warehouse receipt data 
forwarded to the central filing system.
    One commenter indicated they would like to have for each warehouse 
the number of multiple bale receipts, number of bales covered by each 
multiple bale warehouse receipt, and the receipt number for each 
electronic receipt. This commenter went on to indicate that this 
information should enable interested parties to obtain a tag list of 
the bales covered by each

[[Page 54510]]

multiple bale warehouse receipt from the issuing warehouse for 
identification purposes.
    Four comments indicated that tag numbers and individual bale 
weights should be part of each multiple bale warehouse receipt because 
requiring such information would provide proper identification and 
preserve the information for each multiple bale lot of cotton stored 
under a multiple bale warehouse receipt. Three comments expressed no 
opinion on this issue.
    The commenters that suggested bale tag numbers and individual bale 
weights should not be included on the warehouse receipt indicated they 
could contact the warehouse and obtain the information via another 
method. However, none of the commenters addressed the issue as to why 
this information, which is needed for normal commerce, should not also 
be required on the electronic warehouse receipt.
    The Department has reviewed these comments and has determined that 
section 18(f) of the USWA (7 U.S.C. 260) requires each warehouse 
receipt issued to contain the following: ``* * * a description of such 
bales or packages by marks, numbers, or other means of identification 
and the weight of such bales or packages, * * *'' Accordingly, the 
governing statute requires that this information be included on all 
receipts, including multiple bale receipts. Therefore, comments to the 
contrary were not adopted.

List of Subjects in 7 CFR Part 735

    Administrative practice and procedure, Cotton, Reporting and 
recordkeeping requirements, Surety bonds, Warehouses.

    Accordingly, the provisions of 7 CFR part 735 are amended as 
follows:

PART 735--COTTON WAREHOUSES

    1. The authority citation for part 735 continues to read as 
follows:

    Authority: 7 U.S.C. 241 et seq.

    2. Section 735.16 is amended by revising paragraphs (a)(5), (a)(9), 
(b), and (e) to read as follows:


Sec. 735.16  Form.

    (a) * * *
    (5) The tag identifier given to each bale of cotton in accordance 
with Sec. 735.31;
* * * * *
    (9) A statement indicating that the weight was determined by a 
weigher licensed under the U.S. Warehouse Act, except that if at the 
request of the depositor, the weight is not so determined or if the 
point of origin weight was determined as permitted in Sec. 735.38, the 
receipt shall contain a statement to that effect.
    (b) Except when an expiration date authorized by the Department is 
shown on the face of the receipt, every negotiable receipt issued for 
cotton stored in a licensed warehouse shall be effective until 
surrendered for delivery of the cotton, and every non-negotiable 
receipt shall be effective until surrendered for delivery of the cotton 
or until all cotton covered by the receipt has been delivered in 
response to proper delivery orders of the person rightfully entitled to 
the cotton: Provided, that nothing contained in this section shall 
prohibit a warehouseman from legally selling the cotton when the 
accrued storage and other charges approach the current market value of 
the cotton.
* * * * *
    (e) If, at the request of the depositor, a warehouseman issues a 
receipt omitting the statement of grade and/or weight, such receipt 
shall have clearly and conspicuously stamped or written on the face 
thereof, or included as part of the electronic warehouse receipt 
record, either one or both of the following: ``Not graded on request of 
the depositor'' or ``Not weighed on request of the depositor,'' as 
applicable.
* * * * *
    3. Section 735.19 is revised to read as follows:


Sec. 735.19  Printing of receipts.

    No receipt shall be issued by a licensed warehouseman unless it is:
    (a) In a form prescribed by the Administrator;
    (b) Upon distinctive paper or card stock specified by the 
Administrator;
    (c) Printed by a printer with whom the United States has a 
subsisting agreement and bond for such printing; and
    (d) On paper and/or card stock tinted with ink in the manner 
prescribed by the agreement under paragraph (c) of this section.
    4. Section 735.21 is revised to read as follows:


Sec. 735.21  Return of receipts before delivery of cotton.

    Except as permitted by law or by the regulations in this part, a 
warehouseman shall not deliver cotton for which a negotiable receipt 
has been issued under the Act until such receipt has been returned and 
canceled; and shall not deliver cotton for which a non-negotiable 
receipt has been issued until such receipt has been returned or until 
the warehouseman has obtained from the person lawfully entitled to such 
delivery or their authorized agent, a written delivery order that is 
properly signed, specifying by bale or tag number, mark, or identifier 
each bale to be delivered from any receipt or receipts. * * *
    5. Section 735.31 is revised to read as follows:


Sec. 735.31  Tags to be attached to bales.

    Except as provided in Sec. 735.32, each warehouseman shall, upon 
acceptance of any bale of cotton for storage, immediately attach 
thereto an identification tag of good quality which shall identify the 
bale. Such tag either shall be made of reasonably heavy waterproof 
paper or linen, with reinforced eyelet or eyelets, and be attached to 
the bale with a flexible, rustproof wire, or shall be made of such 
other material and attached by such other means as shall be approved by 
the Administrator. These tags will contain a number, mark, or 
identifier and shall be attached in an orderly systematic sequence, 
clearly distinguishable from each other.
    6. Section 735.32 is amended by revising paragraphs (b) and the 
first two sentences of (c) to read as follows:


Sec. 735.32  Arrangement of stored cotton.

* * * * *
    (b) If cotton is tendered to a licensed warehouseman for storage 
and the cotton is of the same grade and staple and is tendered in such 
quantity by any one depositor that efficiency of operation dictates 
that such cotton should be stored in a lot or lots without regard to 
visibility of all tags on all bales within any lot, the warehouseman 
may store such cotton if each lot originally contained two or more 
bales: Provided, however, that each bale entering into a lot must bear 
an individual bale identification, and must be stored so that the 
number of bales within the lot may be accurately determined.
    (c) An individual lot identification tag showing the lot number and 
the number of bales in the lot shall be affixed by the warehouseman to 
each lot of cotton. The warehouseman shall also maintain an office 
record showing the bale or tag number, mark, or identifier of each bale 
in the lot and the location of the lot in the warehouse. * * *
    7. Section 735.33 is revised to read as follows:


Sec. 735.33  System of accounts.

    Each warehouseman shall use a system of accounts which is approved 
by the Service. The system of accounts shall show the following for 
each bale of cotton: the tag number, mark, or identifier as specified 
in Sec. 735.31; its weight; its class when required or

[[Page 54511]]

ascertained; its location; the dates received for, and delivered out 
of, storage; and the receipts issued and canceled. All systems of 
accounts shall include a detailed record of all moneys received and 
disbursed and of all effective insurance policies.
    8. Section 735.38 is amended by revising paragraph (a) to read as 
follows:


Sec. 735.38  Weighing of cotton; weighing apparatus.

    (a) Before being stored in a licensed warehouse, all cotton shall 
be weighed at the warehouse by a licensed weigher, and the weight so 
determined shall be stated on the warehouse receipt. Point of origin 
weights may be used for single bale or lot stored cotton by agreement 
with the depositor. Any point of origin weights shown on a warehouse 
receipt will be the official warehouse bale or lot weight. Lot cotton 
tendered for storage on which a multiple bale warehouse receipt is 
issued must be maintained so as to preserve its individual and 
collective identity during storage and shipment, provided that if such 
lot is broken at the warehouse, for the issuance of new receipts, each 
bale shall be weighed at the warehouse by a licensed weigher before 
single bale warehouse receipts are issued.
* * * * *
    9. Section 735.40 is amended by revising paragraph (b) (3) to read 
as follows:


Sec. 735.40  Excess storage.

* * * * *
    (b) * * *
    (3) The shipping warehouseman must transfer all identity-preserved 
cotton in lots and must list on a Bill of Lading all forwarded bales by 
receipt number and weight. The receiving warehouseman shall promptly 
issue a non-negotiable warehouse receipt for each lot of cotton stored 
and shall attach a copy of the corresponding Bill of Lading to each 
receipt and return the receipt promptly to the shipping warehouseman. 
The receiving warehouseman will store each such lot intact, and will 
attach a header card to the lot showing the receipt number, number of 
bales, and a copy of the Bill of Lading with the individual tag 
numbers, marks, or identifiers to the stored lot. Such non-negotiable 
warehouse receipts issued for forwarded cotton shall have printed or 
stamped diagonally in large bold outline letters across the face of the 
receipt the words: ``NOT NEGOTIABLE.''
* * * * *
    10. Section 735.44 is revised to read as follows:


Sec. 735.44  Fire loss to be reported.

    If at any time a fire occurs at or within any licensed warehouse, 
it shall be the duty of the warehouseman to report immediately the 
occurrence of such fire and the extent of damage to the Administrator.
    11. Section 735.47 is revised to read as follows:


Sec. 735.47  Certificates to be filed with warehouseman.

    When a grade or weight certificate has been issued by a licensed 
grader or weigher, a copy of such certificate shall be filed with the 
warehouseman in whose warehouse the cotton covered by such certificate 
is stored, and such certificates shall become a part of the records of 
the licensed warehouseman. All certificates and supporting 
documentation that form the basis for any receipt issued by the 
warehouseman shall be retained in the records of the warehouseman for a 
period of 1 year after December 31 of the year in which the receipt 
based on such certificates or supporting documentation is canceled.
    12. Section 735.49 is revised to read as follows:


Sec. 735.49  Methods for drawing and marking samples.

    Each sample shall be appropriately marked to show the tag number, 
mark, or identifier of the bale of cotton from which it was drawn and 
the date of sampling.
    13. Section 735.77 is revised to read as follows:


Sec. 735.77  Contents of complaint.

    (a) Complaints shall be in English and shall state:
    (1) The name and post office address of the complainant;
    (2) The nature of the complainant's interest in the cotton;
    (3) The name and post office address of the holder of the receipt, 
if someone other than the complainant;
    (4) The name and post office address of any other interested party;
    (5) The name and location of the licensed warehouse in which the 
cotton is stored, and the tag number, mark, or identifier assigned to 
each bale of cotton involved in the appeal, the grade or other class 
assigned to such cotton by the licensed warehouseman, and the date of 
the receipt issued therefor;
    (6) The grade or other class assigned by the licensed classifier, 
if any;
    (7 ) The grade or other class, different from that assigned by the 
licensed warehouseman, which is contended for by any interested party;
    (8) Whether, within complainant's knowledge, any appeal involving 
the same cotton previously has been taken, and if so, an appropriate 
identification of such other appeal; and
    (9) If samples have been agreed upon and submitted in accordance 
with Sec. 735.79(b).
    (b) When practicable, the complainant shall file with the 
complaint, the warehouse receipt or class certificate, if any, covering 
the cotton involved in the appeal. When such receipt or certificate is 
not filed before the issuance of the cotton appeal certificate, a 
definite statement indicating why such papers are not produced shall be 
filed with the complaint.
    14. Section 735.101 is amended by removing paragraph (b) and 
redesignating paragraphs (c) through (p) as paragraphs (b) through (o).
    15. Section 735.102 is amended by revising paragraphs (d) (4), and 
(f) to read as follows:


Sec. 735.102  Provider requirements and standards for applicants.

* * * * *
    (d) * * *
    (4) The provider or the Service may terminate the provider 
agreement without cause solely by giving the other party written notice 
60 calendar days prior to termination.
* * * * *
    (f) Application form. Application for a provider agreement shall be 
made to the Secretary on forms prescribed and furnished by the Service.

    Signed at Washington, DC, on October 1, 1999.
Parks Shackelford,
Acting Administrator, Farm Service Agency.
[FR Doc. 99-26167 Filed 10-6-99; 8:45 am]
BILLING CODE 3410-05-P