[Federal Register Volume 67, Number 165 (Monday, August 26, 2002)]
[Rules and Regulations]
[Pages 54926-54939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21363]



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Part V





Department of Agriculture





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Commodity Credit Corporation



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7 CFR Parts 1435 and 1436



2002 Farm Security and Rural Investment Act of 2002 Sugar Programs and 
Farm Facility Storage Loan Program; Final Rule

  Federal Register / Vol. 67 , No. 165 / Monday, August 26, 2002 / 
Rules and Regulations  

[[Page 54926]]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Parts 1435 and 1436

RIN 0560-AG73


2002 Farm Security and Rural Investment Act of 2002 Sugar 
Programs and Farm Facility Storage Loan Program

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements the provisions of Title I of the Farm 
Security and Rural Investment Act of 2002 (the 2002 Act) relating to 
the various activities affecting sugar beet and sugar cane producers 
and processors and the marketing of sugar. Generally, these regulations 
are applicable through Fiscal Year (FY) 2007. Major provisions of the 
2002 Act terminate marketing assessments; make in-process sugar 
eligible for loans; authorize the establishment of a payment-in-kind 
program; cap the minimum payment requirement for sugar beet growers; 
eliminate a loan forfeiture penalty; provide for storage facility 
loans; and establish flexible marketing allotments.

EFFECTIVE DATE: August 22, 2002.

FOR FURTHER INFORMATION CONTACT: Dan Colacicco, Economic and Policy 
Analysis Staff, Farm Service Agency (FSA), United States Department of 
Agriculture (USDA), Stop 0540, 1400 Independence Ave, SW, Washington, 
DC 20250-0540. Phone: (202) 720-6733. E-mail: 
[email protected]. Persons with disabilities who require 
alternative means for communication (Braille, large print, audio tape, 
etc.) should contact the USDA Target Center at (202) 720-2600 (voice 
and TDD).

SUPPLEMENTARY INFORMATION:

Notice and Comment

    Section 1601(c) of the 2002 Act requires that the regulations 
needed to implement Title I of the 2002 Act which includes the Sugar 
Program are to be promulgated without regard to the notice and comment 
provisions of 5 U.S.C. 553 or the Statement of Policy of the Secretary 
of Agriculture effective July 24, 1971, (36 FR 13804) relating to 
notices of proposed rulemaking and public participation in rulemaking. 
These regulations are thus issued as final.

Executive Order 12866

    This final rule has been determined to be economically significant 
under Executive Order 12866 and has been reviewed by the Office of 
Management and Budget (OMB). A cost-benefit assessment was completed 
and is summarized after the background section explaining the rule.

Federal Assistance Programs

    The title and number of the Federal assistance program found in the 
Catalog of Federal Domestic Assistance to which this final rule applies 
is Commodity Loans and Loan Deficiency Payments, 10.051.

Regulatory Flexibility Act

    The Regulatory Flexibility Act is not applicable to this rule 
because the Commodity Credit Corporation (CCC) is not required by 5 
U.S.C. 553 or any other law to publish a notice of proposed rulemaking 
for the subject matter of this rule.

Environmental Assessment

    The environmental impacts of this final rule have been considered 
under the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 
4321 et seq., the regulations of the Council on Environmental Quality 
(40 CFR parts 1500-1508), and FSA's regulations for compliance with 
NEPA, 7 CFR part 799. FSA has completed a final environmental 
assessment and concluded that the proposed action will have no 
significant impacts upon the human environment as documented through 
the completion of a Finding of No Significant Impact (FONSI). A copy of 
the final environmental assessment and FONSI are available for review 
at http://www.fsa.usda.gov/dafp/cepd/environmental/default.htm.

Executive Order 12778

    The final rule has been reviewed under Executive Order 12778. This 
rule preempts State laws that are inconsistent with it, however, this 
rule is not retroactive. Before judicial action may be brought 
concerning this rule, all administrative remedies 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 3015, subpart V, 
published at 48 FR 29115 (June 24, 1983).

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) does 
not apply to this rule because CCC is not required by 5 U.S.C. 553 or 
any other law to publish a notice of proposed rulemaking about this 
rule. Also, this rule contains no mandates as defined in sections 202 
and 205 of UMRA.

Small Business Regulatory Enforcement Fairness Act of 1996

    Section 1601(c) of the 2002 Act requires that the regulations 
necessary to implement Title I of the 2002 Act must be issued within 90 
days of enactment and that such regulations shall be issued without 
regard to the notice and comment provisions of 5 U.S.C. 553. Section 
1601(c) also requires that the Secretary use the authority in section 
808 of the Small Business Regulatory Enforcement Fairness Act of 1996, 
Public Law 104-121 (SBREFA), which allows an agency to forgo SBREFA's 
usual 60-day Congressional review delay of the effective date of a 
major regulation if the agency finds that there is a good cause to do 
so. These regulations affect the planting and marketing decisions of a 
large number of agricultural producers. Accordingly, this rule is 
effective upon the date of filing for public inspection by the Office 
of the Federal Register.

Paperwork Reduction Act

    Section 1601(c) of the 2002 Act provides that the promulgation of 
regulations and the administration of Title I of the 2002 Act shall be 
done without regard to chapter 5 of title 44 of the United States Code 
(the Paperwork Reduction Act). Accordingly, these regulations and the 
forms and other information collection activities needed to administer 
the program authorized by these regulations are not subject to review 
by the Office of Management and Budget under the Paperwork Reduction 
Act.

Background

Sugar Program

    This rule completely replaces the existing Sugar Program 
regulations at 7 CFR part 1435. Implementation of the 2002 Act requires 
substantial modification or elimination of existing subparts and the 
addition of 2 new subparts.
    Subpart A, General Provisions, is updated to reflect the new crop 
years (2002 through 2007), elimination of marketing assessments, and 
the addition of a sugar marketing allotment program and a processor 
Payment-In-Kind (PIK) program. Definitions are expanded to reflect new 
provisions such as sugar marketing allotments.
    Subpart B, Sugar Loan Program, is expanded to include loans for in-
process sugar, which are set at 80

[[Page 54927]]

percent of the raw cane sugar or beet sugar loan rate, as applicable. 
To be eligible for loans, sugar now must be stored in CCC-approved 
warehouses to ensure the quality of CCC's loan collateral or assets. 
CCC will use temporary approvals as required to ensure this requirement 
does not interrupt loan making. Loan settlement will be based on a 
schedule of premiums and discounts available in county offices. The 
previous 30-day notification of intent to forfeit sugar loan collateral 
is eliminated.
    Loan maintenance provisions in the rule now require that sugar beet 
grower minimum payments not exceed the amount specified in the grower/
processor contract. The 2002 Act eliminates the requirement that CCC 
add 1 percentage point to the interest rate as calculated by the 
procedure in place in 1996 but does not establish a sugar loan interest 
rate. CCC has decided to use the rates required for other commodity 
loans. The 2002 Act also eliminated the forfeiture penalty.
    The loan settlement and foreclosure sections in the rule now 
address in-process sugars. Forfeiture of such sugars, pledged as 
collateral, will be accepted as payment in full of principal and 
interest if the processor converts them into raw cane sugar or refined 
beet sugar of acceptable grade and quality for sugar eligible for loans 
within 1 month after loan maturity. If forfeited in-process sugars are 
not converted into raw cane sugar or refined beet sugar of suitable 
quality and transferred to CCC within 1 month, CCC may charge 
liquidated damages. If the processor does not forfeit the collateral, 
but instead further processes the in-process sugar into raw cane sugar 
or refined beet sugar and repays the loan, the processor may obtain a 
loan at the higher rate for the raw cane sugar or refined beet sugar.
    Loan collateral forfeited on September 30, the last day of the crop 
year, will become property of CCC on October 1 of the next crop year. 
Therefore, forfeitures made on the last day of the crop year will be 
considered as marketings made during the following crop year and count 
against the following year's marketing allotments, unless allotments 
are suspended.
    Subpart C, Information Reporting and Recordkeeping Requirements, is 
expanded to include reporting of sugarcane production and imports. 
Sugarcane producers located in Louisiana must report sugarcane yields 
and planted acres. Importers of sugars, syrups, or molasses to be used 
for domestic human consumption or to be used for the extraction of 
sugar for domestic human consumption shall report the quantities of 
products imported and the sugar content or equivalent of the products. 
The requirement does not apply to sugars, syrups, or molasses within 
tariff-rate quota quantities subject to the lower rate of duties.
    Subpart D, Flexible Sugar Marketing Allotments, is added to part 
1435 to clarify administration of the sugar marketing allotment program 
established by the 2002 Act. The 2002 Act restores and modifies the 
sugar marketing allotment program that was suspended by the 
Agricultural Market Transition Act (7 U.S.C. 7201 note). The new 
flexible sugar marketing allotments are always established before the 
crop year. Allotments and the processor allocations will be suspended 
if sugar imports for human consumption exceed 1,532,000 short tons, raw 
value, and CCC reduces the overall allotment quantity in response to 
the imports. The suspension is lifted if imports are reduced to a level 
at or below 1,532,000 tons. Thus, processors will always have an 
allocation, but at times the allocations may be suspended due to 
imports exceeding the trigger level and the overall allotment quantity 
being reduced.
    Estimates of beginning stocks, production, imports, exports, and 
consumption used to administer the sugar marketing allotment program 
will come from the World Agricultural Supply and Demand Estimates 
published monthly by USDA's World Board. CCC will set the reasonable 
ending stocks estimate at a level expected to preclude sugar loan 
collateral forfeitures.
    Several types of sugar marketings will not be counted against a 
processor's allocation. Sugar marketings for export and nonhuman 
consumption (e.g., feed and ethanol uses) will not be counted against a 
processor's allocation. The 2002 Act also specifically excludes from 
the definition of prohibited sugar marketing activity a sale of sugar 
from a processor who has more sugar than allocation to a processor who 
has more allocation than sugar. CCC excluded sugar sales for nonhuman 
consumption from allotments because the law excludes sugar imports for 
nonhuman consumption from the import trigger level and excluding 
nonhuman uses should not encourage forfeitures since these uses do not 
generate revenue consistent with the loan forfeiture level.
    The 2002 Act instructs CCC to periodically determine whether a 
processor has more allocation than sugar supply and then reassign the 
deficit according to a very specific hierarchy. Thus, CCC can limit 
these sales by reducing the allocation of the processor buying over-
allocation sugar. CCC will permit these transactions until May 1 of 
each crop year, which is expected to leave enough time in the crop year 
to permit CCC to reassign the unused allocation. CCC must be notified 
of sales from a processor with more sugar than allocation to a 
processor with more allocation than sugar within 5 days of the sale. 
These sales are not permitted between cane processors in different 
States because the 2002 Act specifically requires that only cane sugar 
produced in a State may be used to fulfill the State's cane sugar 
allotment.
    The 2002 Act provides limited CCC discretion in establishing sugar 
beet processor allocations and has no provision for collecting industry 
comments through the hearing process. If a processor had an aggregate 
quality loss exceeding 20 percent, the loss threshold under CCC's 
Quality Loss Program, on stored sugar beets during the 1998 through 
2000 crop years, CCC will apply the beet sugar production history by 
1.25 percent as the 2002 Act mandates.
    The 2002 Act provides wide discretion to CCC in establishing 
sugarcane State allotments and sugarcane processor allocations of those 
allotments. CCC will conduct a hearing in August of each year, if 
requested by interested sugarcane growers or processors by July 15, 
beginning with the 2003 crop. CCC will put the most weight, 50 percent, 
on the ``ability to market the current crop'' factor and weights of 25 
percent each on the ``past marketings'' and ``past processings'' 
factors. The 2002 Act defines past marketings and past processings in 
terms of past sugar production history. CCC's experience with sugar 
marketing allotments in the mid-1990's resulted in CCC changing from 
equal weights to a 50/25/25 weighting system. CCC determined that the 
equal weighting system put a disproportionate share of the negative 
impacts of marketing allotments on a relatively few efficient 
processors.
    Allotments will be suspended if (1) sugar imports for human 
consumption exceed 1,532,000 short tons, raw value, and (2) CCC reduces 
the overall allotment quantity in response to the imports.
    CCC will require processors receiving allocations to provide 
assurances that they will divide their allocation fairly and equitably 
among producers they serve in a manner that adequately reflects the 
producers' production history.

[[Page 54928]]

    The rule permits producers who delivered to a factory that later 
closed to apply to CCC to move the allocation commensurate with their 
sugar beet or sugarcane production to a factory willing to take their 
production. All allocation transfers stemming from the transfer of 
title of processing companies or their assets will be subject to the 
above conditions.
    Subpart E, Processor Sugar Payment-In-Kind (PIK) Program, covers 
the requirements for sugar beet and sugarcane processors to participate 
in a PIK program and provisions for the implementation of a PIK 
program. Participating processors must act in conjunction with 
producers, that is, the acreage to be reduced must have been under 
contract with the processor during the applicable crop year and the 
land left fallow during the crop year the PIK program is implemented. 
CCC may permit processors to bid, in lieu of acreage, desugarizing 
capacity or other measures of sugar production as CCC may approve. 
Distribution of sugar from CCC inventory will occur as CCC determines 
appropriate. CCC will stop storage payments on sugar when title to the 
sugar is transferred to a participating processor or assignee.

Storage Facility Loans

    Section 1402 of the 2002 Act provides that CCC shall amend its 
existing storage facility loan program to include loans for processors 
of sugar. Accordingly, the regulations of 7 CFR part 1436 are amended 
to include sugar processors as eligible borrowers. This rule also 
amends 7 CFR 1436.3 to change the definition of facility loan 
commodities to include dry peas, lentils, small chickpeas, and peanuts 
to provide a consistent CCC policy to make loans available for 
producers of all crops eligible for marketing assistance loans.

Cost/Benefit Assessment

    An assessment of the sugar program's costs and benefits concluded 
that the 2002 Act changes, principally the establishment of sugar 
marketing allotments and the elimination of the loan forfeiture 
penalty, will increase farm income, increase consumer/user sugar 
expenditures, and slightly decrease federal expenditures. The 
elimination of the sugar loan forfeiture penalty increases the 
likelihood and cost of forfeitures because it increases the price, by 
about a cent per pound, a processor must achieve in the market to be 
deterred from forfeiting sugar loan collateral to CCC.
    The cost/benefit analysis (CBA) assumes the current oversupply 
conditions will exist throughout the next decade and be acerbated by 
Mexican imports. The forecast of the economic impacts is very sensitive 
to the imposition of sugar marketing allotments. Sugar marketing 
allotments shift the burden of surplus sugar storage from CCC to the 
sugar beet and sugarcane processors and increases sugar prices. 
Marketing allotments are dependent on the level of Mexican sugar 
imports, and to a lesser degree, sugar (or products for the extraction 
of sugar) imports from other nations not under the sugar tariff rate 
quota (TRQ). Sugar marketing allotments are likely to be suspended if 
these imports exceed 276,000 short tons, raw value, because this is the 
difference between the required World Trade Organization minimum TRQ 
and the import level in the allotment suspension trigger. The cost/
benefit assessment assumed that sugar marketing allotments would be 
suspended in five of the next 10 years.
    The CBA concluded that the 2002 Act sugar program changes will 
result in a slight decrease in domestic sugar production. The sugar 
program changes are expected to decrease the annual average available 
stocks-to-use ratio by 26 percent, increase sugar prices about 9 
percent, increase sugar loan collateral forfeitures by 15 percent, 
decrease average CCC sugar inventory by 67 percent, and slightly 
reduce, by $13 million per year, CCC expenditures on the sugar program.
    The Cost/Benefit Assessment of the sugar program and is available 
from Thomas Bickerton, Economic and Policy Analysis Staff, United 
States Department of Agriculture (USDA), Stop 0516, 1400 Independence 
Ave, SW., Washington, DC 20250-0540. Phone: (202) 720-6733. E-mail: 
[email protected].

List of Subjects

7 CFR Part 1435

    Loan programs/agriculture, Price support programs, Reporting and 
record keeping requirements, and Sugar.

7 CFR Part 1436

    Grains, Loan programs/agriculture, Oilseeds, Reporting and record 
keeping requirements, and Sugar.

    For the reasons set out in the preamble, 7 CFR parts 1435 and 1436 
are amended as set forth below.

PART 1435--SUGAR PROGRAM

    1. 7 CFR part 1435 is revised to read as follows:

PART 1435--SUGAR PROGRAM

Subpart A--General Provisions
Sec.
1435.1  Applicability.
1435.2  Definitions.
1435.3  Maintenance and inspection of records.
1435.4  Administration.
1435.5  Other regulations.
Subpart B--Loan Program
1435.100  Applicability.
1435.101  Loan rates.
1435.102  Eligibility requirements.
1435.103  Availability, disbursement, and maturity of loans.
1435.104  Loan maintenance.
1435.105  Loan settlement and foreclosure.
1435.106  Miscellaneous provisions.
Subpart C--Information Reporting and Recordkeeping Requirements
1435.200  Information reporting.
1435.201  Civil penalties.
Subpart D--Flexible Marketing Allotments For Sugar
1435.300  Applicability.
1435.301  Annual estimates and quarterly re-estimates.
1435.302  Establishment and suspension of allotments.
1435.303  Overall allotment quantity.
1435.304  Adjustment of overall allotment quantity.
1435.305  Beet sugar and cane sugar allotments.
1435.306  State cane sugar allotment.
1435.307  Allocation of marketing allotments to processors.
1435.308  Transfer of allocations, new entrants.
1435.309  Reassignment of deficits.
1435.310  Sharing processors' allocations with producers.
1435.311  Proportionate shares for sugarcane producers.
1435.312  Establishment of acreage bases under proportionate shares.
1435.313  Permanent transfer of acreage base histories under 
proportionate shares.
1435.314  Temporary transfer of proportionate share due to 
disasters.
1435.315  Adjustments to proportionate shares.
1435.316  Acreage reports for purposes of proportionate shares.
1435.317  Revision of allocations and proportion shares.
1435.318  Penalties and assessments.
1435.319  Appeals and arbitration.
Subpart E--Processor Sugar Payment-In-Kind (PIK) Program
1435.400  General statement.
1435.401  Bid submission procedures.
1435.402  Bid selection procedures.
1435.403  In-kind payments.
1435.404  Timing of distribution of CCC-owned sugar.
1435.405  Miscellaneous provisions.

    Authority: 7 U.S.C. 1359aa-1359jj and 7272 et seq.; 15 U.S.C. 
714b and 714c.

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Subpart A--General Provisions


Sec. 1435.1  Applicability.

    These regulations set forth the terms and conditions for the 2002-
2007 crop years under which the Commodity Credit Corporation (CCC) 
will:
    (a) Make loans and enter agreements with eligible processors,
    (b) Collect data from sugarcane processors, sugar beet processors, 
cane refiners, and importers of sugar, syrup, and molasses,
    (c) Administer sugar marketing allotments, and
    (d) Administer an inventory disposition program to exchange CCC 
inventory for processor reductions in production.


Sec. 1435.2  Definitions.

    The definitions set forth in this section are applicable for all 
purposes of program administration. Terms defined in part 718 of this 
title are also applicable.
    Ability to market means the estimated quantity of sugar, raw value, 
as CCC determines, that will be produced in the cane State or by the 
sugarcane processor, as appropriate, during the applicable crop year.
    Allocation means the division of the beet sugar allotment among the 
sugar beet processors in the United States and the division of each 
State's cane sugar allotment among the State's sugarcane processors.
    Beet sugar means sugar that is processed directly or indirectly 
from sugar beets or sugar beet molasses.
    Beet sugar allotment means that portion of the overall allotment 
quantity allocated to sugar beet processors.
    Cane sugar means sugar derived directly or indirectly from 
sugarcane produced in the United States, including sugar produced from 
sugarcane molasses.
    Cane sugar allotment means that portion of the overall allotment 
quantity allocated to sugarcane processors.
    Cane sugar refiner means a person who processes raw sugar into 
refined crystalline sugar or liquid sugar.
    Carry-in stocks means inventories of sugar owned by sugar beet 
processors, sugarcane processors, cane sugar refiners, and CCC and 
physically located in the United States at the beginning of the fiscal 
year.
    Crop year means the period from October 1 through September 30, 
inclusive, and is identified by the year in which the crop year begins. 
For example, the 2002 crop year begins on October 1, 2002. The 2002 
crop of sugar beets or sugar cane means domestically grown sugar beets 
or sugar cane processed during the 2002 crop year. The 2002 crop of 
sugar means sugar processed from domestically-grown sugar beets or 
sugarcane during the 2002 crop year. Sugar from de-sugaring molasses is 
considered to be from the crop year the de-sugaring occurred.
    Deputy Administrator means the Deputy Administrator, Farm Programs, 
FSA, or designee.
    Deficit means the quantity of sugar covered by an allocation of an 
allotment that CCC estimates a sugar beet processor or sugarcane 
processor will be unable to market during the crop year in which 
marketing allotments are in effect.
    Edible molasses means molasses that is not to be further refined or 
improved in quality and that is to be distributed for human 
consumption, either directly or in molasses-containing products.
    Edible syrups means syrups that are not to be further refined or 
improved in quality and that are to be distributed for human 
consumption, either directly or in syrup-containing products.
    Executive Vice President, CCC, means the Executive Vice President, 
CCC, or designee.
    Farm means that entity as defined in Sec. 718 of this title, except 
that when a State is subject to proportionate shares, producers will 
not be allowed to have farms reconstituted across State lines even if 
the farm land is adjoining.
    Fiscal year means that year beginning October 1 and ending the 
following September 30.
    FSA means Farm Service Agency.
    Imports means sugar originating in foreign countries or areas and 
entered, or to be entered, into the United States customs territory.
    In-process sugar means the intermediate sugar containing products, 
as CCC determines, produced in the processing of domestic sugar beets 
and sugarcane. It does not include raw sugar, liquid sugar, invert 
sugar, invert syrup, or other finished products that are otherwise 
eligible for a loan.
    Market or marketing means the transfer of title associated with the 
sale or other disposition of sugar in United States commerce, including 
the forfeiture of sugar loan collateral under Subpart B, and for any 
integrated processor and refiner, the movement of raw cane sugar into 
the refining process. Marketings do not include sales for nondomestic 
or nonhuman consumption, or sales of sugar to enable another processor 
to fulfill an allocation established for such processor.
    Nonrecourse loan means a loan for which eligible sugar offered as 
loan collateral may be forfeited to CCC, at loan maturity, in 
satisfaction of loan indebtedness.
    Overall allotment quantity means, on a national basis, the total 
quantity of sugar, raw value, processed from domestically produced 
sugarcane or domestically produced sugar from sugar beets, and the raw 
value equivalent of sugar in sugar products, that is permitted to be 
marketed by processors, during a crop year or other period in which 
marketing allotments are in effect.
    Past marketings means, for purposes of determining State cane sugar 
allotments and sugarcane processor allocations for States other than 
Louisiana, the average of the 2 highest years of sugar production 
during the 1996 through 2000 crop years; for Louisiana sugarcane 
processor allocations, the average of the 2 highest years of sugar 
production during the 1997 through 2001 crop years.
    Past processing means, for determining Hawaii and Puerto Rico's 
allotments, the 3-year average of the 1998 through 2000 crop years; and 
for determining the remaining cane State allotments, the 3 crop years 
with the greatest production (in the States collectively) during the 
1991 through 2000 crop years. Past processing, for determining the 
sugarcane processor allocation for States other than Louisiana, means 
the average of the 3 highest years of production during the 1996 
through 2000 crop years; and, for determining sugarcane processor 
allocations in Louisiana, the average of the 2 highest years of sugar 
production during the 1997 through 2001 crop years.
    Per-acre yield goal means a State's yield level that is established 
at not less than the State's two highest average per-acre yield years 
from among the 1999 through 2001 crop years as CCC determines to ensure 
an adequate net return per pound to State producers.
    Proportionate share means the total acreage from which a producer 
may harvest sugarcane for sugar or seed during any crop year or other 
period in which marketing allotments are in effect.
    Raw sugar means any sugar that is to be further refined or improved 
in quality other than in-process sugar.
    Raw value of any quantity of sugar means its equivalent in terms of 
raw sugar testing 96 sugar degrees, as determined by a polarimetric 
test performed under procedures recognized by the International 
Commission for Uniform Methods of Sugar Analysis (ICUMSA). Direct-
consumption sugar derived from sugar beets and testing 92 or more sugar 
degrees by the

[[Page 54930]]

polariscope shall be translated into terms of raw value by multiplying 
the actual number of pounds of such sugar by 1.07. Sugar derived from 
sugarcane and testing 92 sugar degrees or more by the polariscope shall 
be translated into terms of raw value in the following manner: raw 
value = {[lsqb](actual degree of polarization - 92) x 0.0175[rsqb] + 
0.93{time}  x actual weight. For sugar testing less than 92 sugar 
degrees by the polariscope, derive raw value by dividing the number of 
pounds of the ``total sugar content'' (i.e., the sum of the sucrose and 
invert sugars) thereof by 0.972.
    Reasonable carryover stocks means desirable inventories of sugar 
owned by sugar beet processors, sugarcane processors, cane sugar 
refiners, and CCC and on hand in the United States at the end of the 
fiscal year, as CCC determines.
    State means any of the 50 States, the District of Columbia, or the 
Commonwealth of Puerto Rico.
    Sugar means any grade or type of saccharine product derived, 
directly or indirectly, from sugarcane or sugar beets and consisting 
of, or containing, sucrose or invert sugar, including raw sugar, 
refined crystalline sugar, liquid sugar, edible molasses, and edible 
cane syrup. For allotments, sugar means any grade or type of saccharine 
product processed, directly or indirectly, from sugarcane or sugar 
beets (including sugar produced from sugar beet or sugarcane molasses), 
produced for human consumption, and consisting of, or containing, 
sucrose or invert sugar, including raw sugar, refined crystalline 
sugar, edible molasses, edible cane syrup, and liquid sugar.
    Sugar beet processor means a person who commercially produces 
sugar, directly or indirectly, from sugar beets (including sugar 
produced from sugar beet molasses), has a viable processing facility, 
and a supply of sugar beets for the applicable allotment year.
    Sugar products means products for human consumption, other than 
sugar, that contain 50 percent or more of sucrose, on a dry weight 
basis, and that are marketed by a sugar beet processor or sugarcane 
processor. In determining sugar subject to marketing allocations, only 
the sugar content of such products will be counted against the 
allocation.
    Sugarcane processor means a person who commercially produces sugar, 
directly or indirectly, from sugarcane, has a viable processing 
facility, and a supply of sugarcane for the applicable allotment year.
    Ton means a short ton or 2,000 pounds.
    United States means the 50 States, the District of Columbia, and 
the Commonwealth of Puerto Rico.
    U.S. market value means, for sugarcane, the daily New York Board of 
Trade No. 14 contract price for raw sugar, or other price, as 
determined by CCC; for sugar beets, the Midwest refined beet sugar 
price published in Milling and Baking News, or other price, as 
determined by CCC.
    USDA means the United States Department of Agriculture.


Sec. 1435.3  Maintenance and inspection of records.

    (a) CCC, as well as any other U.S. Government agency, has the right 
of access to the premises of any sugar beet processor, sugarcane 
processor, cane sugar refiner, importer of sugars, syrups, and 
molasses, or of any other person having custody of records that the 
examining agency deems necessary to verify compliance with this part's 
requirements. The examining agency has the right to inspect, examine, 
and make copies of such books, records, accounts, and other written or 
electronic data as the examining agency deems relevant.
    (b) Each sugar beet processor, sugarcane processor, importer of 
sugars, syrups and molasses, and cane sugar refiner or any person 
having custody of the records shall retain such books, records, 
accounts, and other written or electronic data for not less than 3 
years from the date:
    (1) A loan is disbursed under subpart B;
    (2) Market data are reported to CCC under subpart C of this part; 
and
    (3) Marketings are conducted under marketing allotments under 
subpart D of this part.


Sec. 1435.4  Administration.

    (a) This program shall be administered under the general 
supervision of the Executive Vice President, CCC, and may be carried 
out in the field by FSA State and county committees.
    (b) State and county committees, and representatives and employees 
thereof, may not modify or waive any of the provisions of part 1435.
    (c) The State committee shall take any action required by this part 
that the county committee has not taken. The State committee shall 
also:
    (1) Correct, or require a county committee to correct, a county 
committee action not under this part; or
    (2) Require a county committee to withhold taking any action not 
under this part.
    (d) No provision or delegation herein to a State or county 
committee shall preclude the Executive Vice President, CCC, from 
determining any question arising under the program or from reversing or 
modifying any State or county committee determination.
    (e) The Deputy Administrator may authorize State and county 
committees to waive or modify deadlines and other program requirements 
in cases where lateness or failure to meet such requirements do not 
adversely affect program operation.
    (f) A CCC representative may execute loans and related documents 
only under the terms and conditions CCC determines and announces. Any 
such document not executed under such terms and conditions, including 
any purported execution before the CCC-authorized date, shall be null 
and void.


Sec. 1435.5  Other regulations

    The following are applicable to this part:
    (a) Part 707--Payments due persons who have died, disappeared, or 
have been declared incompetent.
    (b) Part 718--Provisions applicable to multiple programs.
    (c) Part 780--Appeal regulations.
    (d) Part 1403--Debt settlement policies and procedures.
    (e) Part 1405--Loans, purchases, and other operations.

Subpart B--Loan Program


Sec. 1435.100  Applicability.

    (a) The regulations of this subpart set forth the terms and 
conditions under which CCC will make nonrecourse loans available to 
eligible processors. Additional terms and conditions are set forth in 
the loan application and note and security agreement that a processor 
must execute to receive a loan.
    (b) Loan rates used in administering the loan program are available 
in FSA State and county offices.
    (c) Loans shall not be available for sugar produced from imported 
sugar beets, sugarcane, molasses, syrups and in-process sugar.


Sec. 1435.101  Loan rates.

    (a) The national average loan rate for raw cane sugar produced from 
domestically-grown sugarcane is 18 cents per pound.
    (b) The national average loan rate for refined beet sugar from 
domestically-grown sugar beets is 22.90 cents per pound.
    (c) Loan rates for eligible sugar are adjusted to reflect the 
processing location of the sugar offered as loan collateral.
    (d) Loan rates for eligible in-process sugar shall equal 80 percent 
of the loan

[[Page 54931]]

rate applicable to raw cane sugar or beet sugar on the basis of the 
expected production of raw sugar or beet sugar from the in-process 
sugar or syrups.


Sec. 1435.102  Eligibility requirements.

    (a) An eligible producer is the owner of a portion or all of the 
domestically-grown sugar beets or sugarcane, including share rent 
landowners, at both the time of harvest and the time of delivery to the 
processor, except those producers determined to be ineligible as a 
result of the regulations governing highly erodible land and wetland 
conservation found at 7 CFR part 12, regulations governing crop 
insurance at 7 CFR part 400, or regulations governing controlled 
substance violations at 7 CFR part 718.
    (b) In addition to all other provisions of this part, a sugar beet 
or sugarcane processor is eligible for loans only if the processor has 
agreed to all the terms and conditions in the loan application, and has 
executed a note and security agreement, and storage agreement with CCC. 
No loan proceeds will be distributed by CCC before CCC's approval of 
the note and security agreement and the CCC storage agreement.
    (c) Sugar pledged as collateral during the crop year:
    (1) May not exceed the quantity derived from processing 
domestically-grown sugar beets or sugarcane from eligible producers 
during the applicable crop year;
    (2) Must be processed and owned by the eligible processor and 
stored in a CCC-approved warehouse;
    (3) May not have been processed from imported sugarcane, sugar 
beets, or molasses;
    (4) Must have been processed in the United States; and
    (5) Must have processor certification in the loan application that 
the sugar or in-process sugar syrups are eligible and available to be 
pledged as collateral.
    (d) Sugar and in-process sugar must meet the following minimum 
quality requirements to be eligible to be pledged as loan collateral:
    (1) Refined beet sugar to be pledged as loan collateral must be:
    (i) Dry and free flowing;
    (ii) Free of excessive sediment; and
    (iii) Free of any objectionable color, flavor, odor, or other 
characteristic that would impair its merchantability or that would 
impair or prevent its use for normal commercial purposes.
    (2) Raw cane sugar to be pledged as loan collateral must be:
    (i) Of reasonable grain size; and
    (ii) Free of objectionable color, flavor, odor, moisture or other 
characteristic that would impair its merchantability or that would 
impair or prevent its use for normal refining and commercial purposes.
    (3) Edible sugarcane syrup or edible molasses must be free from any 
objectionable color, flavor, odor, or other characteristic that would 
impair the merchantability of such syrup or molasses or would impair or 
prevent the use of such syrup or molasses for normal commercial 
purposes.
    (4) In-process sugar must be of at least the minimum quality 
expected to commercially yield raw cane sugar or refined beet sugar, as 
determined by CCC.
    (e) The loan collateral must be stored in a CCC-approved warehouse 
as described in 7 CFR part 1423.


Sec. 1435.103  Availability, disbursement, and maturity of loans.

    (a) Before obtaining a loan, a processor must:
    (1) File a loan application, as CCC prescribes, no earlier than 
October 1 and no later than September 30 of the applicable crop year, 
with the State committee of the State where such processor is 
headquartered, or with a county committee designated by the State 
committee.
    (2) Execute a note and security agreement, and storage agreement 
with CCC;
    (3) Provide quantity and quality information as prescribed by CCC 
of the commodity to be pledged as collateral;
    (4) Pay CCC a loan service fee, as determined by CCC, for the 
disbursement of each loan.
    (5) If there are any liens or encumbrances on sugar or in-process 
sugar pledged as loan collateral, obtain waivers that fully protect 
CCC's interest even though the liens or encumbrances are satisfied from 
the loan proceeds. No additional liens or encumbrances shall be placed 
on the sugar after loan approval; and
    (6) Agree to reimburse CCC for any costs incurred as a result of 
the failure of the processor to obtain the waivers specified in 
subparagraph (5).
    (b) No loan proceeds may be disbursed until the sugar and in-
process sugar have actually been produced and are otherwise established 
as being eligible to be pledged as loan collateral.
    (c)(1) A processor may, within the loan availability period, 
repledge as collateral sugar that previously served as loan collateral 
for a repaid loan. In making application for such a loan, the processor 
shall:
    (i) Specify that the loan collateral should be treated as a 
quantity of eligible sugar that previously served as loan collateral 
for a repaid loan; and
    (ii) Designate the loan to which the reoffered loan collateral was 
originally pledged.
    (2) The subsequent loan shall have the same maturity date as the 
original loan.
    (3) Loan collateral repledged that was previously redeemed from CCC 
is not included in determining the total quantity of sugar on which 
loans have been obtained for purposes of Sec. 1435.102.
    (d) Raw cane sugar loan disbursements shall be made without regard 
to the actual polarity or quality factors of the sugar pledged as loan 
collateral but shall be made on the assumption that the polarity of 
such sugar is 96 degrees by the polariscope.
    (e)(1) Loans will mature at the earlier of:
    (i) the end of the 9-month period beginning on the 1st day of the 
first month after the month in which the loan is made; or
    (ii) September 30 following disbursement of the loan.
    (2) CCC may accelerate loan maturity dates under Sec. 1435.105(h).
    (f) Processors receiving loans in July, August, or September may 
repledge the sugar as collateral for a supplemental loan. Such 
supplemental loan shall:
    (1) Be requested by the processor during the following October;
    (2) Be made at the loan rate in effect at the time the supplemental 
loan is made; and
    (3) Mature in 9 months minus the number of whole months that the 
initial loan was in effect.


Sec. 1435.104  Loan maintenance.

    (a) All processors receiving loans shall:
    (1) Abide by the terms and conditions of the loan application, note 
and security agreement and storage agreement;
    (2) Pay interest on the principal at a rate determined in part 1405 
of this chapter.
    (b) The security interests CCC obtains as a result of the execution 
of security agreements by sugarcane and sugar beet processors shall be 
superior to all statutory and common law liens on raw cane sugar, 
refined beet sugar, and in-process sugar for the producers of sugarcane 
and sugar beets and all prior recorded and unrecorded liens on the 
crops of sugarcane and sugar beets from which the sugar was derived.
    (c) A processor receiving a loan under this part shall pay all 
eligible producers who have delivered or will deliver sugar beets or 
sugarcane to such processors for processing not less than the minimum 
payment levels CCC specifies for the applicable crop year.

[[Page 54932]]

    (1) In the case of sugar beets, the minimum payment shall not 
exceed the rate of payment provided for under the applicable contract 
between a sugar beet producer and a sugar beet processor.
    (2) CCC will not reject a loan application from a beet sugar 
processor from eligibility to obtain a loan under this section solely 
because of the failure of the processor to provide the appropriate 
minimum payment established under this subsection if the failure:
    (i) Occurred during a crop year before the date of enactment of the 
Farm Security and Rural Investment Act of 2002; and
    (ii) Was related, at least in part, to the effects of a natural 
disaster, including freeze damage.
    (3) In the case of sugarcane, CCC will annually determine and 
announce the annual grower minimum payment.
    (4) Processors are ineligible for loans for the crop year following 
their failure to meet the required minimum grower payment.
    (d)(1) A processor shall maintain eligible sugar or in-process 
sugar of sufficient quality and quantity as collateral to satisfy the 
processor's loan indebtedness to CCC. CCC shall not assume any loss in 
quantity or quality of the loan collateral.
    (2) The processor is responsible for storage costs through the loan 
maturity date or title transfer to CCC, whichever occurs later.
    (3) Sugar and in-process sugar pledged as loan collateral need not 
be stored identity preserved.
    (4) When the proceeds of the sale of loan collateral are needed to 
repay all or part of a sugar loan, the processor may request and obtain 
prior written approval from the loan making office by executing a loan 
collateral release request, as prescribed by CCC, to remove a specified 
quantity of the loan collateral from storage for the purpose of 
delivering it to a buyer before loan repayment. Any such approval shall 
be subject to the terms and conditions set forth in the applicable 
form. The loan making office shall not approve such a request unless 
the buyer of the sugar agrees to pay CCC an amount necessary to satisfy 
the processor's loan indebtedness regarding collateral being sold. Any 
such approval shall not:
    (i) Constitute a release of CCC's security interest in the loan 
collateral; or
    (ii) Relieve the processor of liability for the full amount of the 
loan indebtedness, including interest.


Sec. 1435.105  Loan settlement and foreclosure.

    (a) A processor may, any time before loan maturity, redeem all or 
any part of the loan collateral by paying CCC the applicable principal 
and interest.
    (b) Forfeiture of sugar loan collateral will be accepted as payment 
in full of the principal and interest due under a nonrecourse loan, 
applicable to the quality and quantity of sugar delivered, subject to 
applicable premiums and discounts.
    (c)(1) Forfeiture of in-process sugar serving as loan collateral 
will be accepted as payment in full of principal and interest if the 
processor converts the in-process sugar into raw cane sugar or refined 
beet sugar of acceptable grade and quality for sugar eligible for loans 
within 1 month of loan maturity.
    (2) The in-process sugar must be fully processed into raw cane 
sugar or refined beet sugar, the processor shall transfer the sugar to 
CCC.
    (3) On transfer of the sugar, CCC shall make a payment to the 
processor in an amount equal to the amount obtained by multiplying the 
difference between the loan rate for raw cane sugar or refined beet 
sugar, as appropriate, and the in-process loan rate the processor 
received by the quantity of sugar transferred to CCC. The loan 
agreement shall specify the quantity of sugar that can be forfeited to 
CCC.
    (d) If the processor does not forfeit the collateral, but instead 
further processes the in-process sugar into raw cane sugar or refined 
beet sugar and repays the loan on the in-process sugar;
    (1) the processor may obtain a loan for the raw cane sugar or 
refined beet sugar, as appropriate, and
    (2) the term of a loan made under this subsection for a quantity of 
in-process sugar, when combined with the term of a loan made for the 
raw cane sugar or refined beet sugar derived from the in-process sugar, 
may not exceed 9 months.
    (e) CCC shall not accept delivery of sugar in settlement of a 
nonrecourse loan in excess of the quantity of sugar that is shown on 
the note and security agreement minus any quantity that was redeemed or 
released for removal under this section.
    (f) If the processor does not redeem any of the nonrecourse loan 
collateral, title to the unredeemed nonrecourse loan collateral as 
described in the note and security agreement will, without further CCC 
or processor action transfer to CCC in-store at the CCC-approved 
warehouse at 12 a.m. the day following the maturity date of the loan. 
Title, all rights, and interest to such sugar shall immediately vest in 
CCC.
    (g) The value of the settlement of loans shall be made by CCC 
according to the CCC schedule of premiums and discounts.
    (h) CCC may, at any time, accelerate the date for loan repayment 
including interest. CCC will give the processor notice of such 
acceleration at least 15 days in advance of the accelerated loan 
maturity date.
    (i) If a processor's nonrecourse loan indebtedness is not satisfied 
under the provisions of this section or if forfeited in-process sugar 
is not converted to raw or refined sugar within the prescribed time:
    (1) Interest on the processor's indebtedness shall accrue as 
specified in part 1403 of this title and shall accrue until the debt is 
paid;
    (2) CCC may, upon notice, with or without removing the collateral 
from storage, sell such collateral at either a public or private sale;
    (3) The processor shall be liable for the deficiency if the net 
proceeds are less than the amount of principal, interest, and any other 
charges CCC incurs; and
    (4) If the processor forfeits the in-process sugar loan collateral 
but does not transfer raw or refined sugar of suitable quality to CCC 
within 1 month, CCC will charge liquidated damages, as provided in the 
loan agreement.


Sec. 1435.106  Miscellaneous provisions.

    (a) The regulations governing setoffs and withholding set forth at 
parts 3 and 1403 of this title are applicable to the program set forth 
in this subpart.
    (b) A producer or processor may obtain reconsideration and review 
of determinations made under this subpart under the regulations at 
parts 11 and 780 of this title.
    (c) Any false certification, including those made for the purpose 
of enabling a processor to obtain a loan to which it is not entitled, 
will subject the person making such certification to liability under 
applicable Federal civil and criminal statutes.

Subpart C--Information Reporting and Recordkeeping Requirements


Sec. 1435.200  Information reporting.

    (a) Every sugar beet processor, sugarcane processor, cane sugar 
refiner, and importer of sugar, syrup, and molasses shall report, on a 
monthly basis on CCC required forms, its imports and receipts, 
processing inputs, production, distribution, stocks, and other 
information necessary to administer sugar programs.
    (b) Any processor must, upon CCC's request, provide such 
information as CCC deems appropriate for determining regional loan 
rates.
    (c) Any processor must, upon CCC's request, provide such 
information as

[[Page 54933]]

CCC deems appropriate for determining whether processors of sugarcane 
or sugar beets will be able to market their respective sugar 
allocations.
    (d) Each sugarcane producer located in Louisiana shall report, in 
the manner CCC prescribes, sugarcane yields and sugarcane planted 
acres.
    (e) Importers of sugars, syrups, or molasses to be used for 
domestic human consumption or to be used for the extraction of sugar 
for domestic human consumption shall report, in the manner CCC 
prescribes, the quantities of the products imported and the sugar 
content or equivalent of the products. This requirement shall not apply 
to sugars, syrups, or molasses within the quantities of tariff-rate 
quotas subject to the lower rate of duties.
    (f) Based on the information received under this subsection, the 
Secretary shall publish on a monthly basis composite data on sugar 
production, imports, distribution, and stock levels.
    (g) The sugar information reporting and recordkeeping requirements 
of this subpart are administered under the general supervision of the 
Executive Vice President, CCC.


Sec. 1435.201  Civil penalties.

    (a) Any processor, refiner, or importer of sugar, syrup, and 
molasses who willfully fails or refuses to furnish the information, or 
who willfully furnishes false data required under Sec. 1435.200, is 
subject to a civil penalty of no more than $10,000 for each such 
violation.
    (b) The Controller, CCC, shall assess civil penalties and interest.
    (c) Affected processors, refiners, and importers of sugar, syrup, 
and molasses may request reconsideration of civil penalties by filing a 
request, within 30 days of receipt of certified written notification 
from the Controller, CCC, of such assessment of civil penalties, with 
the Executive Vice President, CCC, Stop 0501, 1400 Independence Ave. 
SW., Washington, DC 20250-0501.
    (d) After reconsideration, affected processors, refiners, or 
importers of sugar, syrup, and molasses may appeal civil penalties by 
filing a notice of appeal, within 30 calendar days of receipt of 
certified written notification from the Executive Vice President, CCC, 
of an affirmation of the assessment of civil penalties, with the 
National Appeals Division under part 780 of this title.

Subpart D--Flexible Marketing Allotments For Sugar


Sec. 1435.300  Applicability.

    (a) This subpart applies to the establishment and allocation of 
marketing allotments for:
    (1) Processor marketings of sugar domestically processed from sugar 
beets,
    (2) Processor marketings of sugar processed from domestically 
produced sugarcane,
    (3) Distribution of a processor's allocation to producers in 
proportionate share States, and
    (4) Harvesting sugarcane by producers subject to proportionate 
shares.
    (b) This subpart does not apply to:
    (1) Marketing sugar for nondomestic or nonhuman consumption,
    (2) Marketing imported raw or refined sugar,
    (3) Exportation of sugar from the United States customs territory.
    (c) This subpart applies throughout the United States and Puerto 
Rico.


Sec. 1435.301  Annual estimates and quarterly re-estimates.

    (a) Not later than August 1 before the beginning of the crop year, 
CCC will estimate, and make re-estimates as necessary but not later 
than the beginning of each quarter of such crop year, the:
    (1) Quantity of sugar that will be consumed in the United States 
(other than sugar imported for the production of polyhydric alcohol or 
to be refined and re-exported in refined form or in sugar-containing 
products);
    (2) Quantity of sugar that will provide for reasonable carryover 
stocks;
    (3) Quantity of sugar that will be available for consumption from 
carry-in stocks;
    (4) Quantity of sugar that will be available for consumption from 
domestic processing of sugarcane and sugar beets; and
    (5) Quantity of sugars, syrups, and molasses that will be imported 
for human consumption or for the extraction of sugar for human 
consumption in the United States and Puerto Rico (other than sugar 
imported for the production of polyhydric alcohol or to be refined and 
re-exported in refined form or in sugar-containing products), whether 
such articles are included in a tariff-rate quota or not.
    (b) Calculation of all allotments, allocations, estimates, and re-
estimates in this subpart will use available USDA statistics and 
estimates of production, consumption, and stocks, taking into account, 
where appropriate, data supplied in reports submitted pursuant to the 
reporting requirements set forth in Sec. 1435.200.


Sec. 1435.302  Establishment and suspension of allotments.

    (a) By the beginning of the crop year, CCC will establish the 
overall allotment quantity, beet sugar and cane sugar allotments, State 
cane sugar allotments, and allocations for processors marketing sugar 
domestically processed from sugar beets and domestically produced 
sugarcane at a level estimated to result in no sugar loan collateral 
forfeitures to CCC.
    (b) Marketing allotments will be suspended whenever CCC determines 
that imports of sugars, syrups, and molasses for domestic human 
consumption or to be used for the extraction of sugar for domestic 
human consumption, whether under a tariff-rate quota or not, will 
exceed 1,532,000 short tons, raw value, excluding any imports 
attributable to a reassignment of allotments, and that the imports 
would lead to a reduction in the overall allotment quantity. The 
suspension of marketing allotments will be lifted if CCC subsequently 
determines that imports are estimated to be no higher than 1,532,000 
short tons, raw value.
    (c) Each determination under this section to establish or suspend 
marketing allotments will be published in the Federal Register and 
accompanied by a statement of the reasons for the determination.


Sec. 1435.303  Overall allotment quantity.

    The overall allotment quantity for the crop year will be calculated 
by deducting from the sum of estimated sugar consumption and reasonable 
carryover stocks:
    (a) 1,532,000 short tons, raw value; and
    (b) Carry-in stocks.


Sec. 1435.304  Adjustment of the overall allotment quantity.

    (a) The overall allotment quantity will be adjusted, as CCC 
determines appropriate,
    (1) To avoid forfeiture of sugar loan collateral to CCC, and
    (2) To reflect changes in estimated consumption, stocks, 
production, or imports based on re-estimates under Sec. 1435.301.
    (b) Each determination to adjust the overall allotment quantity 
will be published in the Federal Register and accompanied by a 
statement of the reasons for the determination.
    (c) The beet sugar allotment, cane sugar allotment, State cane 
sugar allotments, proportionate shares, and allocations to each sugar 
beet processor and sugarcane processor will be increased or decreased, 
as appropriate, to reflect an overall allotment quantity adjustment.
    (d) If the overall allotment quantity is reduced under paragraph 
(a) of this section and the quantity of sugar and

[[Page 54934]]

sugar products any individual processor marketed by the time of the 
reduction exceeds the processor's reduced allocation, the quantity of 
excess sugar or sugar products marketed will be deducted from the 
processor's allocation under an allotment next established.


Sec. 1435.305  Beet and cane sugar allotments.

    (a) The allotment for beet sugar will be 54.35 percent of the 
overall allotment quantity.
    (b) The allotment for cane sugar will be 45.65 percent of the 
overall allotment quantity.
    (c) A sugar beet processor allocated a share of the beet sugar 
allotment may use only beet sugar to fill such allocation. A sugarcane 
processor allocated a share of the cane sugar allotment may use only 
cane sugar to fill such allocation.


Sec. 1435.306  State cane sugar allotments.

    (a) Hawaii and Puerto Rico will be allotted a total of 325,000 
short tons, raw value, of the cane sugar allotment.
    (b) A new entrant cane State will receive an allotment to 
accommodate a new processor's allocation under 1435.308(f).
    (c) Subject to paragraphs (a) and (b) of this section, the 
remaining cane States will be allotted, in aggregate, the remaining 
cane sugar allotment.
    (d) The individual cane State allotments, other than a new entrant 
cane State, will be based on:
    (1) Past marketings of cane sugar,
    (2) Past processing of cane sugar, and
    (3) The ability to market the sugar covered under the allotment 
assigned to the State.
    (e) Past marketings and past processings will each be weighted by 
0.25 and the ability to market will be weighted by 0.50 in determining 
the States' respective cane sugar allotments. The weights may be 
adjusted, as CCC deems appropriate, for the crop year.
    (f) Except when deficits are reassigned as provided in 
Sec. 1435.309, a processor may fill an allocation of a cane sugar 
allotment only with sugar processed from sugarcane grown in the State 
for which the allotment was established.


Sec. 1435.307  Allocation of marketing allotments to processors.

    (a) Each sugar beet processor's allocation of the beet allotment 
will be calculated as the beet processor's share times the beet sector 
allotment:
    (1) A beet processor's share is calculated as the beet processor's 
adjusted weighted average sugar production divided by the sum of all 
beet processors' adjusted weighted average sugar production.
    (2) A beet processor's weighted average sugar production equals 
0.25 times its 1998-crop sugar production plus 0.35 times its 1999-crop 
sugar production plus 0.40 times its 2000-crop sugar production, with 
the 2000 sugar PIK payments added to its 2000-crop sugar production.
    (3) A beet processor's weighted average sugar production shall be 
adjusted by the following, as CCC determines:
    (i) Increased 1.25 percent of the sum of all beet processors' 
weighted average sugar production for opening a sugar factory during 
the 1996 through 2000 crop years;
    (ii) Decreased 1.25 percent of the sum of all beet processors' 
weighted average sugar production for closing a sugar factory during 
the 1998 through 2000 crops years;
    (iii) Increased 0.25 percent of the sum of all beet processors' 
weighted average sugar production for opening a molasses desugarization 
facility during the 1998 through 2000 crop years; and
    (iv) Increased 1.25 percent of the sum of all beet processors' 
weighted average sugar production for suffering a substantial quality 
loss on stored beets, as CCC determines, during the 1998 through 2000 
crop years.
    (b) Each sugarcane processors' allocation from a State cane sugar 
allotment will be calculated as the cane processor's share times the 
State cane sector allotment.
    (1) Each cane processor's share, other than a new entrant, will be 
calculated as the processor's production base divided by the sum of the 
State's processor production bases.
    (2) A processor's production base, other than a new entrants, is 
the sum of 0.50 times its ability to market plus 0.25 times its past 
processings plus 0.25 times its past marketings. These weights may be 
adjusted as CCC deems appropriate for the crop year.
    (3) CCC will calculate an allocation for the Talisman processing 
facility, based on paragraph (b)(2) of this section and distribute the 
allocation among Florida processors according to the agreements between 
cane processors and the Secretary of the Interior dated March 25, and 
March 26, 1999.
    (c) An informal hearing will be held in August of each year, if 
requested by affected sugarcane processors and growers by July 15th, to 
afford all interested persons the opportunity to comment on the next 
crop year's marketing allotments and allocations. After consideration 
of comments obtained at the hearing, a final determination on cane 
State allotments and processor allocations will be announced.
    (d) During any crop year in which marketing allotments are in 
effect and allocated to processors, the quantity of sugar and sugar 
products that a processor markets shall not exceed the quantity of the 
processor's allocation.
    (e) Paragraph (d) of this section shall not apply to:
    (1) Any sugar marketings to facilitate the export of sugar or 
sugar-containing products,
    (2) Any sugar marketings for nonhuman consumption, and
    (3) Any processor marketings of sugar to another processor made to 
enable the purchasing processor to fulfill its allocation if such 
sales:
    (i) Are made before May 1, and
    (ii) Reported to CCC within 5 days of the date of sale.
    (f) CCC may charge liquidated damages as specified in a surplus 
allocation survey and agreement on such sales made after May 1 if the 
purchasing processor had surplus allocation after May 1 because the 
purchasing processor provided incomplete or erroneous information to 
CCC.


Sec. 1435.308  Transfer of allocation, new entrants

    (a) If a sugar beet or sugarcane processing facility is closed and 
the growers that delivered their crops to the closed facility elect to 
deliver their crops to another processor, the growers may petition the 
Executive Vice President, CCC, to transfer the share of allocation 
commensurate with the growers' production history from the processor 
that closed the facility to their new processor. CCC may grant the 
request to transfer the allocation upon:
    (1) Written approval of the processing company that will accept the 
additional deliveries, and
    (2) Evidence satisfactory to CCC that the new processor has the 
capacity to accommodate the production of petitioning growers.
    (3) Subject to paragraph (a) of this section, CCC will eliminate 
the allocation of the processor who has been dissolved or liquidated in 
a bankruptcy proceeding and the allocation will be distributed to all 
other processors on a pro-rata basis.
    (4) If the purchasing processor is not a new entrant, then the 
purchased plants must operate for the initial season and the following 
crop year for the purchasing processor to permanently obtain the 
allocation. CCC shall reassign the allocation on a pro rata basis if 
the purchased plants do not operate for the required 2 crop years.

[[Page 54935]]

    (5) If the purchasing processor is a new entrant, then CCC shall 
immediately transfer allocation commensurate with the purchased 
factories' production history with no requirement on operating the 
facility for 2 crop years.
    (b) Allocations, equal to the number of acres of proportionate 
shares being transferred times the State's per-acre yield goal, will be 
transferred between mills in proportionate share States, if the 
transfers are based on:
    (1) Written consent of the crop-share owners, or their 
representative representatives,
    (2) Written consent of the processing company holding the 
allocation for the subject proportionate shares,
    (3) Written consent of the processing company that will accept the 
additional sugarcane deliveries, and
    (4) Evidence, satisfactory to CCC, that the additional sugarcane 
deliveries will not exceed the processing capacity of the receiving 
company.
    (c) New entrants, not acquiring existing facilities, may apply to 
the Executive Vice President, CCC, for an allocation.
    (1) Applicants must demonstrate their ability to process, produce, 
and market sugar for the applicable crop year.
    (2) CCC will consider adverse effects of the allocation upon 
existing processors and producers.
    (3) New entrant cane processors are limited to 50,000 short tons, 
raw value, the first crop year.
    (4) New entrant cane processors will be provided, as determined by 
CCC,
    (i) A share of their State's cane allotment if the processor is 
located in Hawaii, Puerto Rico, Florida, Louisiana, or Texas, or
    (ii) A share of the overall cane allotment if the processor is 
located in any state not listed in paragraph (f)(4)(i) of this section.
    (5) If a new entrant acquires and reopens a factory that previously 
produced beet sugar from sugar beets and sugar beet molasses, but the 
factory last operated during the 1997 crop year, CCC will:
    (i) Assign an allocation to the new entrant not less than the 
greater of 1.67 percent of the adjusted weighted average quantities of 
beet sugar produced by all processors during the 1998 through 2000 crop 
years, as determined under Sec. 1435.307, or 1,500,000 hundredweight.
    (ii) Reduce all other beet processor allocations on a pro rata 
basis.


Sec. 1435.309  Reassignment of deficits.

    (a) CCC will determine, by May 1, whether sugar beet or sugarcane 
processors will be able to market their respective allocations.
    (b) Sugarbeet and sugarcane processors will report to CCC, by April 
15, current inventories, estimated production, expected marketings, and 
any other pertinent factors CCC deems appropriate to determine a 
processor's ability to market its allocation.
    (c) If CCC determines a sugarcane processor will be unable to 
market its full allocation for the crop year in which an allotment is 
in effect, the deficit will:
    (1) First, be reassigned proportionately to allocations of other 
sugarcane processors within that State, depending on the capacity of 
each other processor to fill the portion of the deficit to be 
reassigned to it, and accounting for interests of associated producers;
    (2) If the deficit cannot be eliminated after reassignment within 
the same State, be reassigned to the other cane States based on the 
ability of processors in such States to market the deficit to be 
reassigned to such States, with the reassigned quantity to each State 
being allocated among its processors in proportion to initial processor 
allocations;
    (3) If the deficit cannot be eliminated by paragraphs (c)(1) and 
(c)(2) of this section, be reassigned to CCC. CCC shall sell such 
quantity from inventory unless CCC determines such sales would have a 
significant effect on the sugar price.
    (4) If any portion of the deficit remains after paragraphs (c)(1), 
(c)(2), and (c)(3) of this section have been implemented, be reassigned 
to imports.
    (d) If CCC determines that a sugar beet processor is unable to 
market its full allocation for the crop year in which an allotment is 
in effect, the deficit will:
    (1) First, be reassigned proportionately to allocations of other 
sugar beet processors, depending on the capacity of other processors to 
fill the portion of the deficit to be reassigned to them, accounting 
for the interests of associated producers.
    (2) If the deficit cannot be eliminated by paragraph (d)(1) of this 
section, be reassigned to CCC. CCC shall sell such quantity from 
inventory unless CCC determines such sales would have a significant 
effect on the sugar price.
    (3) If any portion of the deficit remains after paragraphs (d)(1) 
and (d)(2) of this section have been implemented, be reassigned to 
imports.
    (e) The crop year allocation of each sugar beet or sugarcane 
processor who receives a reassignment will be increased accordingly for 
that year.


Sec. 1435.310  Sharing processors' allocations with producers.

    (a) Every sugar beet and sugarcane processor must provide CCC a 
certification that:
    (1) The processor intends to share its allocation among its 
producers fairly and equitably, and in a manner adequately reflecting 
each producer's production history, and
    (2) The processor has, in the previous allotment year, shared its 
allocation among producers fairly and equitably, reflecting each 
producer's production history. If a processor is unable to provide such 
certification, CCC may reduce or eliminate its marketing allocation.
    (b) Any producer or processor may request arbitration of a dispute 
regarding the sharing of the processor's allocation among the 
producers. Arbitration will be available on behalf of CCC at the State 
FSA office for the State in which the processor is located. Subsequent 
review of the arbitration decision is available at the discretion of 
the Executive Vice President, CCC. Any arbitration is subject to appeal 
to the Office of the Administrative Law Judge, USDA.


Sec. 1435.311  Proportionate shares for sugarcane producers.

    (a) Proportionate shares and the provisions of this section and 
Secs. 1435.312 through 1435.316 apply only to Louisiana sugarcane 
farms.
    (b) CCC will determine whether Louisiana sugar production, in the 
absence of proportionate shares, will exceed the quantity needed to 
enable processors to fill the State cane sugar allotment and provide a 
normal carryover inventory. If the determination is made that the 
quantity of sugar produced in Louisiana, plus a normal carryover 
inventory, will exceed the State's allotment, CCC will establish for 
each sugarcane producing farm a proportionate share that limits the 
sugarcane acreage that may be harvested on the farm for sugar or seed.
    (c) For purposes of determining proportionate shares CCC will:
    (1) Establish the State's per-acre yield goal at a level not less 
than the average per-acre yield in the State for the 2 highest years 
from among the 1999 through 2001 crop years;
    (2) Adjust the per-acre yield goal by the State average recovery 
rate;
    (3) Convert the State cane sugar allotment into a State acreage 
allotment by dividing the State allotment by the adjusted per-acre 
yield goal;
    (4) Establish a uniform reduction percentage for the crop by 
dividing the State acreage allotment by the sum of all

[[Page 54936]]

adjusted acreage bases in the State as determined under Sec. 1435.312; 
and
    (5) Apply the uniform reduction percentage to the acreage base 
established for each sugarcane producing farm in the State to determine 
the farm's proportionate share of sugarcane acreage that may be 
harvested for sugar or seed.


Sec. 1435.312  Establishment of acreage bases under proportionate 
shares.

    (a) CCC will establish a sugarcane crop acreage base for each farm 
subject to proportionate shares as the simple average of the acreage 
planted and considered planted for harvest for sugar or seed on the 
farm in the 2 highest of the 1999 through 2001 crop years. Acreage 
considered planted shall be determined under Sec. 1435.315.
    (b) In establishing crop acreage bases, CCC will:
    (1) Not consider acreage prevented from planting, and
    (2) Consider acreage planted to sugarcane that fails.
    (c) In establishing crop acreage bases, CCC will allow producers 
who have not previously reported their sugarcane acreage to do so by a 
date CCC determines and announces. Late-filed acreage reports will be 
accepted as the Deputy Administrator determines appropriate.
    (d) The farm's crop acreage base shall be used to determine the 
farm's proportionate share.
    (e) The regulations at part 718 of this title shall apply to this 
subpart, except reconstitution of farms with a sugar crop acreage base 
shall not be allowed across State lines.


Sec. 1435.313  Permanent transfer of acreage base histories under 
proportionate shares.

    (a) A sugarcane producer on a farm may transfer all or a portion of 
the producer's acreage base history of land owned, operated, or 
controlled to any other farm in the State that the producer owns, 
operates, or controls under the Deputy Administrator-issued 
instructions. The transfer will reduce permanently the transferring 
farm's sugarcane acreage base history and increase the receiving farm's 
crop acreage base.
    (b) All farm owners must agree in writing to the transfer.
    (c) Producers may transfer sugarcane acreage base histories under 
this section by the date the State FSA committee establishes annually.


Sec. 1435.314  Temporary transfer of proportionate share due to 
disasters.

    (a) If, for reasons beyond the control of a producer on a farm, 
such producer is unable to harvest sugarcane acreage relative to all or 
a portion of the proportionate share established for the farm, the 
Secretary may preserve, on producer application and written consent of 
all owners of the farm, for a period of not more than 5 consecutive 
years, the acreage base history of the farm to the extent of the 
proportionate share involved.
    (b) Such proportionate share may be transferred, with the written 
consent of all owners of the farm, for 1 crop year to other farm owners 
or operators subject to the following conditions:
    (1) The acreage base history of the transferring farm will be 
preserved for a period from 1 to 5 years; and
    (2) Acreage base history will not be increased on the receiving 
farm.
    (c) Producers who transfer a proportionate share under this section 
will be required to:
    (1) Initiate the transfer in the county FSA office where the 
proportionate shares are established; and
    (2) Obtain approval from the transferring county FSA committee.
    (d) All transfers made under this section must be completed by the 
date the State FSA committee establishes.


Sec. 1435.315  Adjustments to proportionate shares.

    Whenever CCC determines that, because of a natural disaster or 
other condition beyond the control of producers adversely affecting a 
sugarcane crop, the amount of sugarcane produced by producers subject 
to proportionate shares will not be sufficient to enable state 
processors to produce sufficient sugar to meet the State's cane sugar 
allotment and provide a normal carryover of sugar, CCC may uniformly 
allow producers to harvest sugarcane in excess of their proportionate 
shares, or suspend proportionate shares entirely.


Sec. 1435.316  Acreage reports for purposes of proportionate shares.

    (a) A report of planted and failed acreage shall be required on 
farms that produce sugarcane for sugar or seed. Such report shall also 
specify the total acreage intended for harvest for sugar and seed.
    (b) The reports required under paragraph (a) of this section shall 
be on forms prescribed by CCC and shall be filed annually with the 
county FSA committee by the applicable final reporting date CCC 
establishes. The farm operator or farm owner shall file such reports.
    (c) Acreage reports will be used to determine compliance with 
proportionate shares and acreage bases for future proportionate shares.
    (d) An acreage report may be accepted after the established date 
for reporting if physical evidence is still available for inspection 
that may be used to make a determination relative to:
    (1) Existence of the crop;
    (2) Use made of the crop;
    (3) Lack of crop; or
    (4) Disaster condition affecting the crop.
    (e) The farm operator shall pay the cost of a farm visit by an 
authorized FSA employee unless the county FSA committee has determined 
that failure to report in a timely manner was beyond the producer's 
control.
    (f) The farm operator may revise an acreage report. Revised reports 
shall be filed in accordance with CCC instructions and shall be 
accepted at any time if:
    (1) Evidence exists for inspection and determination of:
    (i) Existence of the crop;
    (ii) Use made of the crop;
    (iii) Lack of crop; or
    (iv) Disaster condition affecting the crops.
    (2) The farm has not already been inspected and the acreage already 
determined or harvesting of sugarcane already begun.
    (g) Provisions of part 718 of this chapter will apply for field 
inspections, tolerance, and variance. Assessments for false acreage 
reporting will be applied under Sec. 1435.318.


Sec. 1435.317  Revisions of allocations and proportionate shares.

    The Executive Vice President, CCC, may modify any processor's 
allocation or any producer's proportionate share on the same basis as 
the initial allocation or proportionate share was required to be 
established.


Sec. 1435.318  Penalties and assessments.

    (a) Under Sec. 359b(c)(3) of the Agricultural Adjustment Act of 
1938, as amended, any sugar beet or sugarcane processor who knowingly 
markets sugar or sugar products in excess of the processor's allocation 
in violation of Sec. 1435.307 shall be liable to CCC for a civil 
penalty in an amount equal to 3 times the U.S. market value, at the 
time the violation was committed, of that quantity of sugar involved in 
the violation.
    (b) Under Sec. 359f(c)(5) of the Agricultural Adjustment Act of 
1938, as amended, any producer of sugarcane whose farm has a 
proportionate share, and who knowingly harvests or allows to be 
harvested an acreage of sugarcane for sugar or seed in excess of the 
farm's proportionate share shall pay to CCC a civil penalty in an 
amount equal to 1.5

[[Page 54937]]

times the U.S. market value of the quantity of sugar that is marketed 
by the processor of such sugarcane in excess of the allocation of such 
processor, for the year in which the violation was committed. However, 
civil penalties will not be assessed when the producer harvests acreage 
for sugar or seed in excess of the farm's proportionate share, if the 
excess sugarcane harvested is:
    (1) Processed by a sugarcane processor that does not exceed its 
marketing allocation; or
    (2) Diverted to a use other than sugar or seed if:
    (i) The sugarcane producer requests and pays for a CCC field 
inspection, and
    (ii) CCC verifies the disposition of the excess harvest is not for 
sugar or seed.
    (c) Any penalty assessed under paragraph (b) of this section shall 
be prorated among the producers of all sugarcane acquired by the 
processor from excess acres.
    (d) Any person filing a false acreage report that exceeds tolerance 
will be subject to an assessment not to exceed $10,000. Whenever the 
failure of a producer to comply fully with the terms and conditions 
applicable to proportionate shares would result in an assessment, the 
Deputy Administrator may authorize the waiver or reduction of the 
assessment in such amounts as determined to be equitable about the 
seriousness of the failure, the producer's good-faith effort to comply 
fully with such terms and conditions, and the producer's substantial 
performance.
    (e) Any person who knowingly violates any provision of this subpart 
other than paragraph (d) of this section is subject to the assessment 
of a civil penalty by CCC of not more than $5,000 for each violation.


Sec. 1435.319  Appeals and arbitration.

    (a) A person adversely affected by any determination made under 
this subpart may request reconsideration of such determination by 
filing a written request with the Executive Vice President, CCC, 
detailing the basis of the request within 10 days of such 
determination. Such a request must be submitted at: Executive Vice 
President, CCC, Stop 0501, 1400 Independence Ave., SW, Washington, DC 
20250-0501.
    (b) For issues arising under Secs. 359d, 359f(b) and (c), and 
359(i) of the Agricultural Adjustment Act of 1938, as amended, after 
completion of the process provided in paragraph (a) of this section, a 
person adversely affected by a reconsidered determination may appeal 
such determination by filing a written notice of appeal within 20 days 
of the issuance of the reconsidered determination with the Hearing 
Clerk, USDA. The notice of appeal must be submitted at: Hearing Clerk, 
USDA, Room 1081, South Building, 1400 Independence Ave., SW., 
Washington, DC, 20250-9200. Any hearing conducted under this paragraph 
shall be by the Judicial Officer.
    (c) For issues arising under Secs. 359a-359c, 359e, and 359g of the 
Agricultural Adjustment Act of 1938, as amended, after completion of 
the process provided in paragraph (a) of this section, a person 
adversely affected by the reconsidered determination may appeal such 
determination by filing a written notice of appeal with the Director, 
National Appeals Division, USDA, as provided in part 11 of this title.
    For issues arising under Sec. 359f(a) of the Agricultural 
Adjustment Act of 1938, as amended, such disputes shall be resolved 
through arbitration under the direction of the Executive Vice 
President, CCC. A request for arbitration must be filed in writing at 
the address specified in paragraph (a) of this section.

Subpart E--Processor Sugar Payment-In-Kind (PIK) Program


Sec. 1435.400  General statement.

    This subpart shall be applicable to sugar beet and sugarcane 
processors throughout the United States who, acting in conjunction with 
the producers of the sugarcane or sugar beets processed by the 
processors, reduce sugar production in return for a payment of sugar 
from CCC when CCC determines that such action will reduce forfeitures 
of sugar pledged as collateral for a CCC loan.


Sec. 1435.401  Bid submission procedures.

    (a) After announcement by CCC that a program authorized by this 
subpart is in effect, processors who desire to participate in the 
program must submit a bid to CCC, on a form prescribed by CCC, that 
specifies:
    (1) For a program involving acreage diversion, the amount of 
acreage to be reduced by producers who have contracts for delivery of 
sugar beets or sugar cane to the processor and contains the information 
CCC determines necessary to conduct the program and includes but is not 
limited to:
    (i) The number of acres that the processor, acting in conjunction 
with the producers, will divert;
    (ii) The previous consecutive 3-year simple average sugar beet or 
sugarcane yield on that acreage while under contract (years with no 
production contracted with a producer will not be considered (for 
first-time producers, however, the previous consecutive 3-year simple 
average sugar beet or sugarcane yield for all the producers under 
contract who delivered to the applicable factory will be used);
    (iii) The previous 3-year simple average sugar content of the 
producer's beets or sugarcane (for first-time producers, the previous 
3-year simple average sugar content for all beets or cane delivered to 
that factory will be used);
    (iv) The processor's previous 3-year simple average recovery rate 
(for processors that have not been fully operational during the last 3 
years, the simple average for those years that they were fully 
operational);
    (v) The value of CCC sugar to be received as payment; and
    (vi) Other information CCC deems necessary for program 
administration; or
    (2) The sugar production capacity to be removed from production by 
the processor.
    (b) The following acreage is ineligible for enrollment in the PIK 
program:
    (1) If planted, acreage not currently under contract for delivery 
of sugar beets to a sugar beet processor or sugarcane to a sugarcane 
processor for sugar production.
    (2) If planted, acreage that is not harvestable,
    (3) Acreage devoted to roads or other non-producing areas, or
    (4) If planted, acreage on which a crop insurance indemnity or 
replant payment was received for the current crop or for which a claim 
has been, or will be, filed to receive a crop insurance indemnity or 
replant payment for the current crop, except for replant payments for 
acreage actually replanted before the end of the normal planting 
period.
    (c) If planted, the diverted acres cannot be grazed until after the 
sugar beets or sugarcane are destroyed by disking, plowing, or other 
means of mechanical destruction. In addition, the sugar beets or 
sugarcane on the diverted acres may not be used for any commercial 
purpose.
    (d) The acreage offered must meet the following requirements:
    (1) If less than or equal to 15 acres, then the acreage bid must 
consist of one of the following:
    (i) One contiguous area of land,
    (ii) One or more entire permanent fields, or
    (iii) One or more entire permanent fields and one contiguous area 
of land to complete the balance;
    (2) If more than 15 acres, then the acreage bid must consist of one 
of the following:
    (i) One or more areas of land of at least 15 contiguous acres each 
with one remaining area of land of less than 15

[[Page 54938]]

contiguous acres to complete the balance,
    (ii) One or more entire permanent fields, or
    (iii) One or more entire permanent fields and one area of 
contiguous land to complete the balance.
    (3) Contiguous areas of land must have a minimum width of 3 chains 
(198 feet).
    (e) For a program involving desugaring capacity, or other measures 
of sugar production, not involving acreage diversion, the bid must 
contain the information CCC determine necessary to conduct the program.


Sec. 1435.402  Bid selection procedures.

    (a) For bids in which the processor offers to remove acreage of 
sugar beets or sugarcane from production, CCC will rank bids on the 
basis of the bid amount as a percentage of the expected sugar produced 
from the retired acreage. Bids with the lowest of such percentages will 
be selected first. In the case of identical bids, selection may be 
based on random selection or pro rata shares, as CCC deems appropriate.
    (b) CCC will reject bids for which the bid amounts exceed the 
expected sugar produced from the retired acreage.
    (c) For bids in which the processor offers to remove sugar 
production capacity from production, CCC will rank the bids on the 
basis of the capacity to be removed from production.
    (d) All acceptable bids specified in paragraphs (a) and (c) of this 
section will be further reviewed by CCC and ranked in order of the 
greatest reduction in sugar program that can be achieved at the lowest 
cost to CCC.


Sec. 1435.403  In-kind payments.

    (a) CCC will, through such methods as CCC deems appropriate, make 
payments in the form of sugar held in CCC inventory.
    (b) To the maximum extent practicable, CCC will use its inventory 
in making an in-kind payment based on the following priority:
    (1) CCC-owned sugar held in storage by the processor;
    (2) CCC-owned sugar held in storage by any other processor in the 
same region as the producer;
    (3) CCC-owned sugar held in storage by any other processor that is 
not in the same region as the producer; and
    (4) CCC-owned sugar held in storage anywhere in the United States, 
if CCC determines that such sugar is eligible to be used for in-kind 
payments.
    (c) The value of CCC-owned inventory is dependent upon the storage 
location of the sugar and the type of sugar (raw or refined). CCC will 
announce the value of its inventory before bid solicitation. 
Accordingly, the quantity of sugar CCC will provide in terms of an in-
kind payment to a processor will be determined by dividing:
    (1) The total of the processor's bid amount that CCC accepts, by
    (2) The value of CCC's inventory at the storage location at which 
title will transfer from CCC to the processor.


Sec. 1435.404  Timing of distribution of CCC-owned sugar.

    Distribution of sugar from CCC inventory will occur in such manner 
as CCC determines appropriate.


Sec. 1435.405  Miscellaneous provisions.

    (a) CCC may permit processors to bid, in lieu of acreage, 
desugarizing capacity or other measures of sugar production as CCC 
determines.
    (b) The contract shall provide for the payment of liquidated 
damages if a processor fails to comply with the obligations specified 
in the CCC production diversion contract.
    (c) CCC will transfer title of the sugar to the processor by 
notifying the processor or assignee that the sugar is available. CCC 
will stop storage payments on this sugar on the date of transfer.

PART 1436--FARM STORAGE FACILITY LOAN PROGRAM

    2. The authority citation for part 1436 is revised to read as 
follows:

    Authority: 7 U.S.C. 7971;15 U.S.C. 714 et seq.

    3. Section 1436.3 is amended by revising the definitions of 
``facility loan commodity'' and ``storage need requirement'' to read as 
follows:


Sec. 1436.3  Definitions.

* * * * *
    Facility loan commodity means wheat, rice, raw or refined sugar, 
soybeans, sunflower seed, canola, rapeseed, safflower, flaxseed, 
mustard seed, other oilseeds as determined and announced by CCC, dry 
peas, lentils, small chickpeas, harvested as whole grain and including 
peanuts, except that corn, grain sorghum, oats, wheat, or barley shall 
be included whether harvested as whole grain or other than whole grain.
* * * * *
    Storage need requirement means:
    (1) The average of the most recent 3 years available, the 
applicant's share of the acres farmed for each facility loan commodity 
requiring storage at the proposed facility multiplied by a yield 
determined reasonable by the county committee, multiplied by two, less 
existing storage capacity. If acreage data is not available, including 
prevented planted acres, or the data is not applicable to the storage 
need, a reasonable acreage projection may be made for newly acquired 
farms, changes in cropping operations, or for facility loan commodity 
crops being grown for the first time.
    (2) For sugar-related loans, a projection from the processor of the 
processing volume, available storage capacity, volume not to be 
marketed due to marketing allotments, and other factors affecting the 
processor's storage need, as appropriate. CCC shall determine if the 
storage need is reasonable using data such as past processing volume 
and marketing allotments.
* * * * *

    4. Section 1436.4 is amended by removing the term ``Producers'' 
where it appears in paragraph (b) and adding in its place 
``Borrowers'', and by adding a new paragraph (c) to read as follows:


Sec. 1436.4  Availability of loans.

* * * * *
    (c) For sugar-related loans, a loan application shall be submitted 
to the county FSA office that maintains the applicant's records. If no 
such records exist, loan applications shall be submitted to the county 
office serving the headquarters' location of the sugar processor.

    5. Section 1436.5 is amended by revising the introductory text of 
paragraph (a) and adding a paragraph (b) to read as follows:


Sec. 1436.5  Eligible borrowers.

    (a) ``Borrower'' means a person who, as landowner, landlord, 
operator, producer, tenant, leaseholder, sharecropper, or processor of 
domestically produced sugarcane or sugar beets:
* * * * *
    (b) For sugar related facility loans:
    (1) Paragraphs (a)(4), (6), and (7) of this section do not apply.
    (2) Sugar processors must be approved by CCC to store sugar owned 
by CCC or pledged as security to CCC for non-recourse loans.

    6. Section 1436.6 is amended by adding a new paragraph (f) to read 
as follows:


Sec. 1436.6  Eligible storage or handling equipment.

* * * * *
    (f)(1) Paragraphs (a) and (b) of this section shall not apply to 
sugar-related loans made under this part.
    (2) For sugar-related loans, the loan amount may include costs 
associated with the purchase, installation,

[[Page 54939]]

building, improving, remodeling or renovating an eligible storage or 
handling facility. Eligible facilities include the following:
    (i) New conventional-type bins or silos designed for and used to 
store raw or refined sugar, having a useful life of at least 15 years;
    (ii) New flat-type storage structures including a permanent 
concrete floor, designed for and used to store raw or refined sugar, 
having a useful life of at least 15 years;
    (iii) New storage structures designed for and used to store in-
process sugar, having a useful life of at least 15 years.
    (iv) Permanently affixed sugar handling equipment determined by the 
CCC to be needed and essential to the proper functioning of the sugar 
storage system;
    (v) Safety equipment CCC requires such as lighting, and inside and 
outside ladders;
    (vi) Equipment to improve, maintain, or monitor the quality of 
stored sugar, such as moisture testers, and heat detectors;
    (vii) Electrical equipment, including labor and materials for 
installation, such as lighting, motors, and wiring integral to the 
proper operation of the sugar storage and handling equipment; and
    (viii) Concrete foundations, aprons, pits, and pads (including site 
preparation, labor and materials) essential to the proper operation of 
the sugar storage and handling equipment.
    (3) For sugar-related loans, storage and handling equipment that is 
not eligible for loans, includes:
    (i) Portable handling equipment and portable augers;
    (ii) Structures of a temporary natures that require the weight or 
bulk of the stored commodity to maintain its shape (such as fences or 
bags);
    (iii) Used or pre-owned structures or handling equipment;
    (iv) Structures that are not suitable for storing raw or refined 
sugar;
    (v) Weigh scales.
    (4) For sugar-related loans, loans may be approved for financing 
additions to or modifications of an existing storage facility with an 
expected useful life of at least 15 years if CCC determines there is a 
need for the capacity of the structure.

    7. Section 1436.7 is revised to read as follows:


Sec. 1436.7  Loan term.

    The maximum term of the loan shall be 7 years from the date a 
promissory note and security agreement are executed, except in the case 
of a sugar-related loan in which case CCC, at its discretion, may 
authorize a loan of 15 years. The minimum term of a sugar-related loan 
is 7 years. No extensions of the loan term will be granted. The loan 
balance and all related costs are due 7 years from the date of the 
execution of the promissory note and security agreement, except in the 
cast of a sugar-related loan, in which case such balance and costs are 
due 15 years from the date of the promissory note and security 
agreement are executed.
    8. Amend Sec. 1436.8 by adding paragraphs (h) and (i) to read as 
follows:


Sec. 1436.8  Security for loan.

* * * * *
    (h) For sugar-related facility loans, in addition to the above 
requirements, additional security, including real estate, chattels, 
crops in storage, and other assets owned by the applicant, is required 
if necessary to adequately secure the loan. A sugar-related loan will 
be considered to be adequately secured when the CCC determined value of 
security for the loan is at least equal to 125 percent of the loan 
amount.
    (i) For sugar-related facility loans, paragraph (g) is not 
applicable. The borrower shall pay all loan making fees and closing 
costs. This includes, but is not limited to, attorney fees for loan 
closings, environmental assessments and studies, chattel and real 
estate appraisals, title opinions, title insurance, title searches, 
filing and recording all real estate liens, fixture filings, 
subordinations, credit reports, collateral lien searches, and filing 
and recording financing statements for the collateral.

    9. Amend Sec. 1436.9 by revising paragraph (h) and adding 
paragraphs (j) and (k) to read as follows:


Sec. 1436.9  Loan amount and loan application approvals.

* * * * *
    (h) Farm storage facility loan approvals will expire in 4 months 
after the date of approval unless extended in writing for an additional 
4 months by the FSA State Committee. Sugar storage facility loan 
approvals will expire in 8 months after the date of approval unless 
extended in writing for an additional 4 months by the FSA State 
Committee.
    (j) For sugar-related facility loans, paragraphs (c) and (d) and 
(g) do not apply.
    (k) For sugar-related facility loans, the Agency approval officials 
may only approve loans, subject to available funds.

    10. Amend Sec. 1436.12 by adding paragraph (d) to read as follows:


Sec. 1436.12  Interest and fees.

* * * * *
    (d) For sugar-related facility loans, paragraph (c) does not apply.
    11. Amend Sec. 1436.15 by adding a paragraph (f) to read as 
follows:


Sec. 1436.15  Maintenance, liability, insurance and inspections.

* * * * *
    (f) For sugar-related loans, in addition to the requirements of 
paragraph (d) of this section, sugar processors shall also insure the 
contents of storage structures used as collateral for a sugar-related 
facility loan against all perils.

    13. Section 1436.19 is added to read as follows:


Sec. 1436.37  Equal Opportunity and Non-discrimination requirements.

    (a) No recipient of a Storage Facility loan shall directly, or 
through contractual or other arrangement, subject any person or cause 
any person to be subjected to discrimination on the basis of race, 
religion, color, national origin, gender, or other prohibited basis. 
Borrowers must comply with all applicable Federal laws and regulations 
regarding equal opportunity in hiring, procurement, and related 
matters.
    (b) With respect to any aspect of a credit transaction, CCC will 
not discriminate against any applicant on the basis of race, color, 
religion, national origin, sex, marital status, or age, provided the 
applicant can execute a legal contract. Nor will CCC discriminate on 
the basis of whether all or a part of the applicant's income derives 
from any public assistance program, or whether the applicant in good 
faith, exercises any rights under the Consumer Protection Act.

    Signed in Washington, DC, on August 7, 2002.
James R. Little,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 02-21363 Filed 8-22-02; 10:34 am]
BILLING CODE 3410-05-P