[Federal Register Volume 67, Number 90 (Thursday, May 9, 2002)]
[Proposed Rules]
[Pages 31151-31157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-11352]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 90 / Thursday, May 9, 2002 / Proposed 
Rules  

[[Page 31151]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1427

RIN 0560-AG47


Non-Recourse Cotton Loan and Loan Deficiency Payment Programs; 
Upland Cotton First Handler Marketing Certificate Program; Seed Cotton 
Loan Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: Changes are proposed to regulations for the upland cotton non-
recourse loan and loan deficiency payment programs and the seed cotton 
loan program. Specifically, the proposed changes would: require that 
lists of cotton bales provided to the Commodity Credit Corporation 
(CCC) as the basis for loan deficiency payments be submitted in an 
electronic format provided by CCC; require that cotton classification 
information be provided to CCC as a condition of eligibility for a 
marketing assistance loan or loan deficiency payment for such cotton; 
change the effective time of the announced world market price for 
upland cotton from 5 p.m. eastern time each Thursday to 12:01 a.m. 
eastern time each Friday; provide for CCC to use Electronic Agent 
Designations when authorized by a producer as the basis for loan 
redemptions and release of loan collateral; establish that any quantity 
of cotton for which a seed cotton loan is requested cannot be subject 
at the same time to a request for a loan deficiency payment or lock-in 
of the adjusted world price; establish that for a bale of cotton to be 
eligible for a loan or loan deficiency payment it shall not be 
compressed to a density defined as a flat or modified flat bale by the 
Joint Cotton Industry Bale Packaging Committee; and, remove and reserve 
all regulations that provide for the Upland Cotton First Handler 
Marketing Certificate Program. Additionally, a number of editorial 
changes are incorporated to improve the precision of the regulations.

DATES: Submit comments on this regulation on or before July 8, 2002 to 
be assured of consideration. Comments on the information collection 
must be received on or before July 8, 2002 to be assured of 
consideration.

ADDRESSES: Address all comments concerning this proposed rule to Gene 
S. Rosera, USDA/Farm Service Agency, 1400 Independence Avenue, SW, STOP 
0512; Washington, DC 20250-0512. Comments may be submitted by e-mail 
to: [email protected]. All comments received in connection 
with this rule will be available for public inspection 7:30 a.m.-4:00 
p.m., eastern time, except holidays, at 1400 Independence Avenue, SW., 
Room 4089, Washington, DC 20250.

FOR FURTHER INFORMATION CONTACT: Gene S. Rosera at (202) 720-8481 or e-
mail at [email protected].

SUPPLEMENTARY INFORMATION

Executive Order 12866

    This rule is issued in conformance with Executive Order 12866 and 
has been determined to be significant and has been reviewed by the 
Office of Management and Budget (OMB).

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this rule because the Farm Service Agency (FSA) 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 
this rule.

Environmental Evaluation

    It has been determined by an environmental evaluation that this 
program, as a whole, will have no significant impact on the quality of 
the human environment. Therefore, neither an environmental assessment 
nor an environmental impact statement for the program is needed.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. The provisions of this rule preempt State laws to the extent 
such laws are inconsistent with the provisions of this rule. Before any 
legal action may be brought regarding determinations of this rule, the 
administrative appeal provisions set forth at 7 CFR part 780 must be 
exhausted.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which require intergovernmental consultation with State and 
local officials. See the notice related to 7 CFR part 3014, subpart V, 
published at 48 FR 29115 (June 24, 1983).

The 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.

Executive Order 12612

    It has been determined that this rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. The provisions contained in this rule will not have a 
substantial direct effect on States or their political subdivisions, or 
on the distribution of power and responsibilities among the various 
levels of government.

Paperwork Reduction Act

    This proposed rule would require that cotton bale identity and 
classification information currently provided in support of 
applications for loans and loan deficiency payments be provided by 
electronic media (diskette or electronic submission) in the format 
established by CCC. Currently, this required information is submitted 
electronically by virtually all cotton ginners or providers of 
warehouse receipts. However, a few submissions of this information 
still occur by paper copy. CCC proposes, starting with the 2002 crop, 
that all such bale identity and classification information be submitted 
electronically. This rule further proposes establishment and use of an 
industry-maintained electronic record as an alternative to the use of 
the CCC-605, Designation of Agent-Cotton. Therefore, the Farm Service 
Agency is proposing to revise the information collections currently 
approved in support of the cotton loan and loan deficiency payment 
programs under the

[[Page 31152]]

Office of Management and Budget (OMB) control numbers 0560-0074 and 
0560-0129.
    Title: Loan Deficiency Payments.
    OMB Control Number: 0560-0129.
    Expiration Date of Approval: March 31, 2004.
    Type of Request: Revision of Currently Approved Information 
Collection.
    Abstract: The information collection under OMB Control Number 0560-
0129 includes requirements for processing applications for cotton loan 
deficiency payments. Some of this information identifies the cotton by 
ginner or warehouse receipt numbers, location, and weight and 
classification information. This proposal does not add to any current 
information collection requirements but would establish a requirement 
that, starting with the 2002 crop, the identifying and classification 
information be provided solely by electronic media (diskette or 
electronic submission) in a format prescribed by CCC. For the 2000 
crop, about 99 percent of all 970 cotton ginners used CCC's prescribed 
electronic format to submit this required bale information (commonly 
referred to as gin-tag lists) on behalf of producers. The adoption of 
electronic media by the few remaining ginners is occurring due to 
industry demands for improved records management and recent 
developments of electronic trading of cotton. This proposal for CCC to 
accept only electronic bale information complements this industry trend 
and will greatly increase the speed and accuracy of CCC's benefits 
delivery. For the 1998 through 2000 crops, the average number of loan 
deficiency payment requests was about 74,100 per year, but those 
applications required the entry of bale-specific information for an 
average 5.7 million bales each year. Depending on the marketing 
position of their cotton, producers submit applications using either 
CCC-Cotton AA, Upland Cotton Producer's Loan Deficiency Payment 
Application and Certification, or CCC-709, Direct Loan Deficiency 
Payment Agreement.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 0.25 hours per response.
    Respondents: Cotton producers and designated agents of cotton 
producers.
    Estimated Number of Respondents: 2,035,000.
    Estimated Number of Responses: 6,105,000.
    Estimated Total Annual Burden on Respondents: 4,198,750 hours.
    Title: Regulations Governing CCC Nonrecourse Cotton Loan Program 
for 1996 and Subsequent Crops.
    OMB Control Number: 0560-0074.
    Expiration Date of Approval: January 31, 2005.
    Type of Request: Revision of Currently Approved Information 
Collection.
    Abstract: The information collection under OMB Control Number 0560-
0074 addresses a number of application and other forms related to loans 
for seed and lint cotton. This proposed revision would establish an 
electronic alternative to the use of CCC-605, Designation of Agent--
Cotton. Producers use the CCC-605 to authorize and designate an entity 
to redeem all or a portion of the collateral of a specified loan on 
behalf of the producer. This CCC-605 is subsequently presented by the 
agent to CCC in order to redeem and receive any loan collateral. 
Starting with the 2002 crop, CCC expects to accept requests to exchange 
commodity certificates for cotton loan collateral through the Cotton 
Online Processing System (COPS). This process will be nearly paperless 
except that the producer's agent must still present the CCC-605 to the 
appropriate county FSA office for verification. To eliminate the delay 
created by the delivery of the paper CCC-605, FSA proposes to establish 
use of an Electronic Agent Designation (EAD). An EAD is an electronic 
record that: (1) Designates the entity authorized by a producer to 
redeem all of the cotton pledged as collateral for a specified loan, 
(2) is maintained by providers of electronic warehouse receipts, and 
(3) a producer may authorize CCC to use as the basis for the redemption 
and release of loan collateral. Use of the EAD by any producer will be 
optional but it is proposed that CCC must have the producer's written 
request and authorization to use this electronic record as the basis 
for accepting repayment from an agent and releasing the loan 
collateral. The designated agents of producers who provide CCC with 
such authorizations will not need to present paper CCC-605's for 
verification. The agent-designation in the EAD will be established or 
revised according to provisions established by each provider of cotton 
warehouse receipts. Because use of the EAD eliminates use of the CCC-
605 by the producers' agents, CCC estimates substantial reductions to 
the information collection estimate of OMB Control Number 0560-0074.
    Estimate of Burden: The Public reporting burden for this collection 
of information is estimated to average 0.036 hours per response.
    Respondents: Cotton producers and designated agents of cotton 
producers.
    Estimated Number of Respondents: 85,000.
    Estimated Number of Responses: 306,282.
    Estimated Total Annual Burden on Respondents: 11,002 hours.
    Comments are sought on these revisions to currently approved 
information collections including: (a) The accuracy of the agency's 
estimate of burden including the validity of the assumptions used; (b) 
whether requiring electronic submission of bale information will 
generate improvements in the speed and accuracy of delivering loans and 
loan deficiency payments to cotton producers; (c) whether this proposal 
generates any additional or unreasonable burden on the respondents 
compared with the existing option of submitting the required 
information by a paper record; and (d) any comments regarding the 
appropriateness and use of the EAD.
    These comments should be sent to the Desk Officer for Agriculture, 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Washington, DC 20503, and to Gene S. Rosera, USDA/Farm Service 
Agency, 1400 Independence Avenue, SW., STOP 0512; Washington, DC 20250-
0512. Comments may be submitted by e-mail to: 
[email protected]. Comments regarding paperwork burden will 
be summarized and included in the request for OMB approval of the 
information collection.

Background

    In this notice, a number of changes are proposed to 7 CFR part 
1427, which provides for the administration of the upland cotton non-
recourse loan and loan deficiency payment programs. Many of the 
proposed changes are of an editorial nature to improve the precision of 
the regulations and, as such, do not affect information collection, 
producer eligibility or benefit levels, or program outlays.
    There are three proposals to amend regulations in Subpart A that 
would affect the benefit application process. These changes are being 
proposed to improve the accuracy and timeliness of producer 
transactions, to reduce delays associated with loan collateral release, 
and to reduce costs associated with loan redemptions borne by the 
Commodity Credit Corporation (CCC) and the cotton industry.
    The first of these proposals would provide that all lists of cotton 
bales delivered to CCC must be presented in the CCC-designated 
electronic format.

[[Page 31153]]

CCC proposes to implement this requirement starting with the 2002 crop.
    Bale lists are usually provided to CCC by ginners on behalf of the 
producer and are the production evidence upon which loan deficiency 
payments are calculated. Virtually all ginners currently provide such 
lists on a diskette or by e-mail in a format defined by CCC. However, 
out of an estimated 970 ginners for the 2000 crop, about 30 submitted 
lists that were not in the CCC electronic format. Such non-formatted 
lists must be manually entered into the CCC computer system before 
benefits can be computed. This manual entry process is prone to error 
compared with use of electronic lists, and the time needed to enter 
such lists delays payments to the producer of that cotton as well as 
others.
    CCC calculated loan and repayment rates, or loan deficiency 
payments, for about 17.3 million individual bales of 2000-crop cotton. 
During the post-harvest period, the administrative burden associated 
with loan and loan deficiency payments ordinarily delays benefits 
delivery, in some counties for weeks, even when bale lists are received 
electronically. The manual entry of a bale list during this period 
further delays payments to many producers. CCC proposes to require all 
gins to submit bale lists using the CCC electronic format to reducing 
these delays. To comply with this requirement, the few ginners that are 
not using the electronic format may need additional software, or have 
electronic bale lists transmitted by other entities. Comments are 
specifically requested as to the reasonableness of this proposal to 
require bale lists in electronic format.
    The second proposal would amend 7 CFR 1427.5, general eligibility 
requirements, to require cotton to be represented by classification 
information provided by the producer, in a format provided by CCC, for 
the cotton to be eligible for either a loan or loan deficiency payment. 
The requirement for classification information for loan deficiency 
payments is already included in 7 CFR 1427.23(b)(5), but is not 
explicitly stated as an eligibility requirement for loans. CCC proposes 
to implement this change starting with the 2002 crop.
    Classification information is generated in an electronic format by 
the Agricultural Marketing Service (AMS) and is available to producers 
by several means, including a printed record or diskette. Most 
commonly, the data are obtained by the producer's ginner or warehouse 
as an electronic file from the central AMS database and then entered 
onto either the warehouse receipt or bale list presented to CCC for a 
loan or loan deficiency payment. Although this information is commonly 
transferred electronically, it is available to producers in printed 
form from either AMS, the ginner, or from CCC. When such information is 
omitted from a warehouse receipt or a bale list, CCC's process for 
providing the requested benefit is significantly delayed by the time 
required to obtain the information from AMS and to make manual entries. 
The manual process increases data entry errors and erroneous payments. 
To speed the delivery of benefits to all producers and to reduce 
errors, CCC proposes that all loan and loan deficiency payment 
applications be supported by bale identification and classing 
information in an electronic format. Because the use and transfer of 
electronic records is a common cotton industry practice, the use of 
electronic records for CCC benefits applications seems appropriate and 
not burdensome to producers or ginners. Extending this requirement for 
classification information to all cotton is also consistent with CCC's 
policy of requiring grading information for warehouse-stored wheat, 
feed grains, rice, and oilseeds. Comments are requested as to any 
particular burdens for cotton producers or ginners that may result from 
establishing this requirement for electronic identity and 
classification information for all cotton presented to CCC for either a 
loan or loan deficiency payment.
    The third proposal would change the effective time of the adjusted 
world price (AWP) from 5 p.m. eastern time each Thursday to 12:01 a.m. 
eastern time each Friday. The announcement time of the AWP would remain 
unchanged at 5 p.m. each Thursday but a single cotton AWP would be 
effective from start of business each Friday through the close of 
business each Thursday. CCC proposes to implement this proposal upon 
publication of a final rule change, meaning that this proposal would be 
implemented during the 2002-crop marketing year.
    This change in effective time is being proposed due to the benefits 
to CCC and the cotton industry of having only one price effective each 
day of the week. Under existing rules for upland cotton, two different 
world prices are effective each Thursday, one for business hours up to 
3:59 p.m. eastern time and the second price beginning at 5 p.m. eastern 
time for the remainder of the day. Current rules further provide that 
loan repayments or requests for loan deficiency payments are not 
accepted by CCC during the hour preceding the AWP announcement. This 
practice was originally established in 1992 as an effort to reduce 
administrative pressures that occurred at county Farm Service Agency 
offices after the AWP increases. Over time, as cotton producers have 
become informed of daily changes to the world price level, those 
pressures have largely been eliminated, but the inefficiencies that 
result from having two prices effective on a single day remain.
    Under the current rules, merchants must arrange for all Thursday 
loan repayments to be delivered by the midday deadline that varies by 
time zone. Pacific-time transactions are subject to a 1 p.m. deadline 
and bankers' hours may further restrict transactions. Cooperatives 
unable to transfer payments during morning hours are now required to 
separately submit notifications of pending loan redemptions to FSA. 
These submissions should be reduced if not eliminated under this 
proposal and merchants repaying loans in multiple counties should 
benefit from having a full work day for such transactions. The current 
policy of having identical announcement and effective times for the AWP 
was partly based on the concern that unfair advantages might result for 
businesses in western time zones if the announcement and effective 
times were different or if the AWP were based on the discretionary 
``Step 1'' adjustment that could not be anticipated. These concerns 
should be resolved with the advent of centralized certificate 
redemptions through the Cotton Online Processing System(COPS) that will 
become available before this proposal to change the effective AWP time 
would be implemented. COPS will be available during uniform hours 
regardless of time zones. This proposed change in the effective time of 
the AWP is not estimated to change program outlays. Comments are 
requested as to whether this proposal should be implemented and as to 
an appropriate period of time for advance notification of such change.
    This proposed rule would also define and establish regulations for 
use of an Electronic Agent Designation (EAD). An EAD is an electronic 
record established and maintained by providers of electronic warehouse 
receipts that identifies the agent designated by a producer to have 
authority to redeem specific loan collateral on behalf of the producer. 
This proposed regulation would provide the basis for a producer to 
authorize CCC to use this electronic record as the basis for accepting 
loan repayments from their agents. It is proposed that CCC would 
implement

[[Page 31154]]

use of the EAD for the 2002 crop of cotton pending finalization of 
needed software and training.
    It is common practice for agents authorized by producers to repay 
cotton loans on behalf of those producers. Current regulations allow 
producers to voluntarily designate agents using CCC-605, Designation of 
Agent-Cotton. This form must be presented to the County FSA Service 
Center for the designated agent to repay the loan. For the EAD to be 
used, cotton producers would authorize CCC to use the EAD as the basis 
for accepting loan repayments from the producer's agent. Producers 
would be able to cancel this authorization by providing written notice 
to CCC.
    FSA has developed a web-based process within COPS that will greatly 
streamline loan repayments starting with the 2002 crop. Under this 
system, and with the use of EAD's, agents will be able to redeem loan 
collateral without having to physically deliver funds and copies of the 
CCC-605 to multiple FSA offices. The authorization to use EAD's will 
allow CCC to speed loan redemptions and collateral release. The speed 
of fund transfers and release of loan collateral will be greatly 
increased, and county FSA offices will have fewer loan repayment 
transactions to manually process. The value of cotton marketed under 
this procedure may be enhanced due to the speed of collateral release 
by CCC compared to current procedures. Over time, the loan redemption 
process within COPS by agents is expected to become the preferred 
process for loan redemptions because of its reduced administrative 
costs to merchants and the quicker release of loan collateral compared 
to current repayment procedures.
    The designation of agents and the use of the EAD will be entirely 
voluntary. Producers who elect to designate agents but who do not want 
to authorize use of the EAD will continue to have the option of using 
the CCC-605 for that purpose. In such cases, as under current 
procedures, the CCC-605 will have to be returned to CCC before the loan 
can be repaid by an agent.
    Implementing the EAD will not affect the level of loans or net loan 
outlays. FSA will benefit due to the reduced county-office workload 
associated with loan redemptions. Comments are requested on the 
implementation of the EAD. Specifically, comments are requested as to 
any problems that may arise if its use becomes available after the 
start of the 2002 cotton marketing year.
    This proposed rule would delete regulations at 7 CFR part 1427, 
subpart B, because regulations of this subpart no longer apply to the 
cotton program. When the cotton marketing loan program started, the 
minimum loan repayment rate was initially established at no less than 
70 percent of the loan level. If the world price fell below that 
minimum level, then the difference between the world price and the 
minimum loan repayment level was payable by the first handler marketing 
certificates provided by regulations at subpart B. There is no longer 
any statutory minimum to the loan repayment rate and, accordingly, the 
regulations at 7 CFR part 1427, subpart B can be removed. Comments are 
requested regarding the removal of these regulations.
    This proposed rule would establish in subpart D an additional 
requirement for eligibility for the seed cotton loan program. The 
proposed rule would establish that cotton for which a loan deficiency 
payment has been requested would be ineligible for a seed cotton loan. 
This proposal is consistent with the eligibility requirements of other 
cotton and commodity programs to assure that duplicate benefits are not 
provided for an eligible commodity. CCC proposes to make this change 
effective upon publication of a final regulation during the 2002 cotton 
marketing year. Comments are requested regarding this additional 
eligibility requirement for the seed cotton loan.
    This proposed rule would establish as a condition of eligibility 
for a loan or loan deficiency payment that cotton not be compressed to 
a density defined as a ``flat'' or ``modified flat'' bale by the Joint 
Cotton Industry Bale Packaging Committee. Such bales are generally not 
acceptable to most cotton buyers and ordinarily must be re-compressed 
to standard dimensions and densities to be marketable. As a result, CCC 
bears the expense of moving, re-compressing, and re-identifying such 
cotton to make it merchantable if it is delivered to CCC in 
satisfaction of a loan obligation. Because such bales are not commonly 
merchantable ``as is'', it is appropriate that any such bales are not 
provided loan eligibility. Comments are requested regarding 
discontinuing loan eligibility for flat and modified flat bales.

List of Subjects in 7 CFR Part 1427

    Cotton, Loan program-agriculture, Packaging and containers, Price 
support programs, Reporting and recordkeeping requirements.
    Accordingly, FSA proposes to amend 7 CFR part 1427 as follows.

PART 1427--COTTON

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

    Authority: 7 U.S.C. 7231-7237; and 15 U.S.C. 714b and 714c.

    2. Revise Sec. 1427.3 to read as follows:


Sec. 1427.3  Definitions.

    The definitions set forth in this section shall be applicable for 
all purposes of program administration regarding the cotton loan and 
loan deficiency payment programs. The terms defined in parts 718 of 
this title and 1412 of this chapter shall also be applicable.
    Approved cooperative marketing association (CMA) means a 
cooperative marketing association approved in accordance with part 1425 
of this chapter and which has executed Form CCC-Cotton G, Cotton 
Cooperative Loan Agreement.
    Charges means all fees, costs, and expenses incurred by CCC in 
insuring, carrying, handling, storing, conditioning, and marketing the 
cotton tendered to CCC for loan. Charges also include any other 
expenses incurred by CCC in protecting CCC's or the producer's interest 
in such cotton.
    Cotton means upland cotton and extra loan staple cotton meeting the 
definition set forth in the definitions of ``upland cotton'' and 
``extra long staple (ELS) cotton'' in this section, respectively, and 
excludes cotton not meeting such definitions.
    Cotton clerk means a person approved by CCC to assist producers in 
preparing loan and loan deficiency documents.
    Cotton commercial bank means the bank designated as the financial 
institution for a CMA or loan servicing agent.
    Electronic Agent Designation is an electronic record that: (1) 
Designates the entity authorized by a producer to redeem all of the 
cotton pledged as collateral for a specified loan, (2) Is maintained by 
providers of electronic warehouse receipts, and (3) A producer may 
authorize CCC to use as the basis for the redemption and release of 
loan collateral.
    Extra long staple cotton (ELS) means any of the following varieties 
of cotton which is produced in the United States and is ginned on a 
roller gin:
    (1) American-Pima;
    (2) All other varieties of the Barbadense species of cotton, and 
any hybrid thereof; and
    (3) Any other variety of cotton in which one or more of these 
varieties predominates.
    False Packed Cotton means cotton in a bale: Containing substances 
entirely

[[Page 31155]]

foreign to cotton; containing damaged cotton in the interior with or 
without any indication of the damage on the exterior; composed of good 
cotton on the exterior and decidedly inferior cotton in the interior, 
but not detectable by customary examination; or, containing pickings or 
linters worked into the bale.
    Financial institution means:
    (1) A bank in the United States which accepts demand deposits; and
    (2) An association organized pursuant to Federal or State law and 
supervised by Federal or State banking authorities.
    Form A loan means a non-recourse loan executed on Form CCC--Cotton 
A, Cotton Producer's Note and Security Agreement.
    Form G loan means a non-recourse loan to a CMA on eligible cotton 
delivered to the CMA by eligible members of the CMA.
    Lint cotton means cotton that has passed through the ginning 
process.
    Loan servicing agent 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 loan servicing agent 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 re-concentration of cotton in accordance with 
Sec. 1427.16;
    (4) Accepting loan repayments;
    (5) Handling documents involved with forfeiture of loan collateral 
to CCC; and
    (6) Providing loan, loan deficiency payment, and accounting data to 
CCC for statistical purposes.
    Seed cotton means cotton which has not passed through the ginning 
process.
    Upland cotton means planted and stub cotton which is produced in 
the United States from other than pure strain varieties of the 
Barbadense species, any hybrid thereof, or any other variety of cotton 
in which one or more of these varieties predominates.
    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, 
which 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 FSA or CCC to operate such system; 
or
    (3) Other such acceptable evidence of title, as determined by CCC.
    3. Amend Sec. 1427.5 by revising paragraphs (a)(1), (b)(5), (b)(6), 
(b)(9), (b)(10)(i), (b)(11)(ii), (b)(12), (c), (d), (e)(2)(iii)(E), 
(e)(2)(iii)(F), and adding paragraph (b)(13) to read as follows:


Sec. 1427.5  General eligibility requirements.

    (a) * * *
    (1) Form A loan documents or loan deficiency payment applications 
must be signed by the producer and delivered with acceptable production 
evidence to applicable county office or loan servicing agent. Such 
delivery, in the case of submissions by cotton clerks, must occur 
within 15 calendar days after the producer signs such documents and 
within the period of loan availability. A producer must request loans 
and loan deficiency payments:
* * * * *
    (b) * * *
    (5) Not be compressed to a density defined as a ``flat'' or 
``modified flat'' bale by the Joint Cotton Industry Bale Packaging 
Committee;
* * * * *
    (9) Weigh at least 325 pounds net weight; bales of more than 600 
pounds may be pledged for loan at 600 pounds;
* * * * *
    (10) * * *
    (i) Copies of the applicable crop year specifications for cotton 
bale packaging materials published by the Joint Cotton Industry Bale 
Packaging Committee are available upon request at the county office and 
at the following address: Joint Cotton Industry Bale Packaging 
Committee, National Cotton Council of America, P.O. Box 12285, Memphis, 
Tennessee 38112. Copies may be inspected at the South Agriculture 
Building, Room 4089 A, 1400 Independence Avenue SW., Washington, DC, 
between 8 a.m. and 4:30 p.m., Monday through Friday, and at an internet 
website announced by CCC.
* * * * *
    (11) * * *
    (ii) Who has entered into CCC-809, Cooperating Ginners' Bagging and 
Bale Ties Certification and Agreement, or certified that the bale is 
wrapped with bagging and bale ties meeting the requirements of 
paragraph (b)(10) of this section;
    (12) Be production from acreage that has been reported timely in 
accordance with part 718 of this title, and
    (13) Be represented by identity and classification information 
provided by the producer by electronic media, in a format provided by 
CCC, at the time a loan or loan deficiency payment is requested.
    (c) In addition to the requirements of paragraph (b) of this 
section, for ELS cotton the bale must:
    (1) Be a color grade, staple length, and leaf specified in the 
schedule of loan rates for ELS cotton and of a staple length of not 
less than 44/32 inch, and
    (2) Not have a micronaire reading of 2.6 or less.
    (d) In addition to the requirements of paragraph (b) of this 
section, for upland cotton the bale must:
    (1) Have been produced on a farm with a production flexibility 
contract in accordance with part 1412 of this chapter;
    (2) Have been graded by using a High Volume Instrument;
    (3) Be a grade, staple length, strength, micronaire and leaf 
specified in the schedules of premiums and discounts for grade, staple 
length, strength, micronaire and leaf for upland cotton; and
    (4) Have a level of extraneous matter specified in the schedule of 
discounts for extraneous matter for upland cotton.
* * * * *
    (e) * * *
    (2) * * *
    (iii) * * *
    (E) Must be presented with any request to redeem loan collateral at 
the county office or loan servicing agent where the loan originated, if 
the agent or subsequent agent exercises any authority granted by the 
producer, unless the producer provides authorization to CCC to use, in 
place of the original CCC-605, an electronic agent designation as the 
basis for accepting redemption of some or all bales of the specified 
loan; and
    (F) May be canceled by the producer by providing the custodial 
office a written request signed and dated by the producer showing the 
name of the agent, the loan number, and the bales applicable to the 
Form CCC-605. The effective date of the cancellation shall be the date 
the request is received by the custodial office. If CCC has been 
authorized by a producer to use an electronic agent designation, the 
producer's cancellation of his authorization for CCC to use such 
electronic designation of agent shall be effective when CCC receives 
verification from the provider of the warehouse receipts maintaining 
the electronic agent designation record that such record has been 
voided.
* * * * *
    4. Amend Sec. 1427.6 by revising paragraph (b) to read as follows:

[[Page 31156]]

Sec. 1427.6  Disbursement of loans.

* * * * *
    (b) Loan proceeds may be disbursed by CCC or a cotton commercial 
bank.
* * * * *
    5. Amend Sec. 1427.9 by revising paragraph (a) to read as follows:


Sec. 1427.9  Classification of cotton.

    (a) References made to ``classification'' in this subpart shall 
include color grade, staple length, leaf, extraneous matter, and 
micronaire, and for upland cotton, strength readings. All cotton 
tendered for loan must be classed by an Agricultural Marketing Service 
(AMS) Cotton Classing Office or other entity approved by CCC and 
tendered on the basis of such classification.
* * * * *
    6. Amend Sec. 1427.11 as follows:
    a. By adding paragraph (a)(4);
    b. Revising paragraphs (c)(1);
    c. Removing paragraph (c)(2);
    d. Redesignating paragraph (c)(3) as paragraph (c)(2); and
    e. Revising paragraph (f).
    The addition and revisions read as follows:


Sec. 1427.11  Warehouse receipts.

    (a) * * *
    (4) Contain classification information for the bale.
* * * * *
    (c)(1) Each receipt in its written or printed terms may contain the 
tare weight and must contain the net weight of the bale represented 
thereby. The net weight shown on the warehouse receipt shall be the 
difference between the gross weight as determined by the warehouse at 
the warehouse site and the tare weight. The warehouse receipt may show 
the net weight established at a gin if:
    (i) The gin is in the immediate vicinity of the warehouse and is 
operated under common ownership with such warehouse, or in any other 
case in which the showing of gin weights on the warehouse receipts is 
approved by CCC; and
    (ii) Gin weights are permitted by the licensing authority for the 
warehouse.
* * * * *
    (f) In any case where loan collateral is forfeited, any unpaid 
storage or receiving charges, not to exceed the amount that accrued 
from the date that all necessary documents were received by CCC to the 
maturity date, will be paid to the warehouse by CCC after loan maturity 
or as soon as practicable after the cotton is ordered shipped by CCC.
* * * * *
    7. Amend Sec. 1427.13 by revising paragraph (e)(1) to read as 
follows:


Sec. 1427.13  Charges and interest.

* * * * *
    (e) * * *
    (1) All warehouse storage charges associated with the forfeited 
cotton that accrued before the date that all required documents are 
provided to CCC; and
    (2) Any accrued warehouse receiving charges associated with the 
forfeited cotton, including, if applicable, charges for new ties as 
specified in Sec. 1427.11.
* * * * *
    8. Section 1427.19 is revised to read as follows:


Sec. 1427.19  Repayment of loans and certificate exchanges.

    (a) Warehouse receipts will not be released except as provided in 
this section.
    (b) A producer or agent or subsequent agent authorized on Form CCC-
605 or otherwise may redeem one or more bales of cotton pledged as 
collateral for a loan by payment to CCC of an amount applicable to the 
bales of cotton being redeemed determined in accordance with this 
section. CCC, upon proper payment for the amount due, shall release the 
warehouse receipts applicable to such cotton.
    (c) An agent or subsequent agent whose authorization by a producer 
to redeem loan collateral is recorded in an Electronic Agent 
Designation may redeem all bales of cotton pledged as collateral for a 
loan by payment to CCC of an amount applicable to the bales of cotton 
being redeemed determined in accordance with this section.
    (d) A producer or agent or subsequent agent authorized on Form CCC-
605 or whose authorization is recorded in an Electronic Agent 
Designation, may repay the loan amount for one or more bales of cotton 
pledged as collateral for a loan:
    (1) For upland cotton, at a level that is the lesser of:
    (i) The loan level and charges, plus interest determined for such 
bales; or
    (ii) The adjusted world price, as determined by CCC in accordance 
with Sec. 1427.25, in effect on the day the repayment is received by 
the county office, loan servicing agent, or servicing agent bank that 
disbursed the loan.
    (2) For ELS cotton, by repaying the loan amount and charges, plus 
interest determined for such bales.
    (e) CCC shall determine and publicly announce the adjusted world 
price for each crop of upland cotton on a weekly basis.
    (f) The difference between the loan level, excluding charges and 
interest, and the loan repayment level is the market gain. The total 
amount of any market gain realized by a person is subject to the 
payment limitation provided in part 1400 of this chapter.
    (g) Repayment of loans will not be accepted after CCC acquires 
title to the cotton in accordance with Sec. 1427.7.
    (h) If the upland cotton pledged as collateral is eligible to be 
repaid at a rate less than the loan level and charges, plus interest, 
and the adjusted world price determined in accordance with Sec. 1427.25 
is:
    (1) Below the national average loan rate for upland cotton, CCC 
will pay at the time of loan repayment to the producer or agent or 
subsequent agent authorized on Form CCC-605 the warehouse storage 
charges which have accrued, with respect to the cotton pledged as 
collateral for such loan, during the period the cotton was pledged for 
loan;
    (2) Above the national average loan rate by less than the sum of 
the accrued interest and warehouse storage charges, that accrued during 
the period the cotton was pledged for loan, CCC will pay at the time of 
loan repayment to the producer or agent or subsequent agent authorized 
on Form CCC-605, that portion of the warehouse storage charges, that 
accrued during the period the cotton was pledged for loan, that are 
determined to be necessary to permit the loan to be repaid at the 
adjusted world price without regard to any warehouse charges that 
accrued before the cotton was pledged for loan; or
    (3) Above the national average loan rate by as much as or more than 
the sum of the accrued interest and warehouse storage charges that 
accrued during the period the cotton was pledged for loan, CCC shall 
not pay any of the accrued warehouse storage charges.
    9. Section 1427.23 is amended by revising paragraphs (b)(2), 
(b)(4), (b)(5), (c), and (f) and by removing paragraph (g), to read as 
follows:


Sec. 1427.23  Cotton loan deficiency payments.

* * * * *
    (b) * * *
    (2) Agree to forgo obtaining such loans unless denied a loan 
deficiency payment due to payment limitation;
* * * * *
    (4) Provide warehouse receipts or, as determined by CCC, a list in 
an electronic format prescribed by CCC of gin bale numbers for such 
cotton showing, for each bale, the net weight established at the gin 
and classing information for such quantity in accordance with 
Sec. 1427.9;
    (5) For loan deficiency payment requests and requests for locking-
in the adjusted world price for seed cotton prior to ginning, provide 
identifying

[[Page 31157]]

numbers for cotton modules or other storage units that will correspond 
to the gin-assigned bale numbers for which the loan deficiency payments 
are requested; and
* * * * *
    (c) Subject to the availability of funds and limitations on 
payments set out elsewhere, the loan deficiency payment applicable to a 
crop of cotton shall be computed by multiplying the applicable loan 
deficiency payment rate, as determined in accordance with paragraph (d) 
of this section, by the quantity of the crop the producer is otherwise 
eligible to pledge as collateral for a loan in accordance with 
Sec. 1427.8(b).
* * * * *
    (f) If the producer enters into an agreement with CCC on or before 
the date of ginning a quantity of eligible upland cotton, and the 
producer has the beneficial interest in such quantity as determined 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:
    (1) Based on the date the cotton was ginned if payment application 
is made using CCC-709;
    (2) Based on the date a complete payment request including 
production evidence is submitted, if the request is made after ginning 
using CCC-Cotton AA;
    (3) Based on the date of request for lock-in of the adjusted world 
price if the request is made before ginning of the cotton that is 
identified by gin-supplied module or other storage unit number using 
CCC-Cotton AA. In such cases, the producer must meet all the other 
requirements in paragraph (b) on or before the final date to apply for 
a loan deficiency payment in accordance with Sec. 1427.5.
    10. Amend Sec. 1427.25 by revising paragraph (e) to read as 
follows:


Sec. 1427.25  Determination of the prevailing world market price and 
the adjusted world price for upland cotton.

* * * * *
    (e) The adjusted world price for upland cotton as determined in 
accordance with paragraph (c) of this section, and the amount of the 
additional adjustment as determined in accordance with paragraph (f) of 
this section, shall be announced, to the extent practicable, at 5 p.m. 
eastern time each Thursday continuing through the last Thursday of July 
2003. The adjusted world price and the amount of the additional 
adjustment will be effective at 12:01 a.m. eastern time each Friday and 
will remain in effect for a period as announced by CCC. In the event 
that Thursday is a non-workday, the determination will be announced and 
will be effective, to the extent practicable, at 8 a.m. eastern time 
the next workday.


Secs. 1427.50-1427.58  [Removed and reserved]

    11. Remove and reserve subpart B consisting of Sec. 1427.50 through 
Sec. 1427.58.
    12. Amend Sec. 1427.165 by adding new paragraph (a)(8) to read as 
follows:


Sec. 1427.165  Eligible seed cotton.

    (a) * * *
    (8) Not be cotton for which a loan deficiency payment or a lock-in 
of the adjusted world price has been requested.
* * * * *

    Signed at Washington, DC, on April 30, 2002.
James R. Little,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 02-11352 Filed 5-8-02; 8:45 am]
BILLING CODE 3410-05-P