[Federal Register Volume 73, Number 215 (Wednesday, November 5, 2008)]
[Rules and Regulations]
[Pages 65715-65724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26343]



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  Federal Register / Vol. 73, No. 215 / Wednesday, November 5, 2008 / 
Rules and Regulations  

[[Page 65715]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1427

RIN 0560-AH81


Cotton Program Changes for Loans, Loan Deficiency Payments, 
Upland Cotton, and Extra Long Staple Cotton

AGENCY: Farm Service Agency and Commodity Credit Corporation, USDA.

ACTION: Final rule.

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

SUMMARY: The Commodity Credit Corporation (CCC) is revising regulations 
as required by the Food, Conservation, and Energy Act of 2008 (the 2008 
Farm Bill) to administer loan and payment programs for upland cotton 
and extra-long staple (ELS) cotton producers and establishing new 
regulations to specify payment provisions for domestic users of upland 
cotton. The 2008 Farm Bill generally extends the existing upland cotton 
and ELS cotton programs with some changes in calculations of the 
adjusted world price (AWP) and loan schedules for upland cotton. The 
new program for economic adjustment assistance for domestic users of 
upland cotton will pay a statutorily specified rate per pound and 
provides that such payments may only be used for capital investments 
(for example, plant, equipment, land, machinery).

DATES: Effective Date: October 31, 2008. Note: Certain provisions start 
based on crop years or effective dates specified in the 2008 Farm Bill; 
see the table detailing start dates in the discussion below.

FOR FURTHER INFORMATION CONTACT: Gene Rosera, Cotton Program Manager, 
Price Support Division, USDA, FSA, Stop 0512, 1400 Independence Ave., 
SW., Washington, DC 20250-0512; phone: (202) 720-8481; e-mail: 
[email protected]; or fax: (202) 690-1536. Persons with 
disabilities who require alternative means for communication (Braille, 
large print, audiotape, etc.) should contact the USDA Target Center at 
(202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    This rule implements provisions in the 2008 Farm Bill (Pub. L. 110-
246) for cotton programs administered by CCC. The cotton programs are: 
(1) Recourse seed-cotton loans for upland and ELS cotton, (2) non-
recourse marketing assistance loans that may be repaid at a statutorily 
set repayment rate and loan deficiency payments for upland cotton, (3) 
non-recourse marketing assistance loans for ELS cotton that are to be 
repaid at principal plus interest, and (4) the ELS competitiveness 
payment program providing payments to domestic users and exporters of 
ELS cotton. This rule also includes regulations for the new Economic 
Adjustment Assistance to Users of Upland Cotton Program that provides 
payments to domestic users of upland cotton.
    The regulations in 7 CFR part 1427 specify eligibility and 
application requirements for cotton program applicants, methods for 
establishing and announcing upland cotton loan repayment rates, and 
rates for loan deficiency payments. The loan programs for cotton 
provide short term financing and improve farm-price stability.
    The basic structure of the existing programs is not changing, but 
the 2008 Farm Bill requires some substantive changes in the 
regulations, including a change in the way AWP for upland cotton is 
calculated and a reduction in the rates used for calculating warehouse 
storage credits. This rule also makes minor changes to the regulations 
for clarity and to reflect current industry practice, to update the 
crop years as required by the 2008 Farm Bill, and to remove expired 
sections that only applied to certain previous crop years. The changes 
are discussed below.
    In general, this rule implements changes in the regulations that 
are explicitly required by the 2008 Farm Bill. Under the 2008 Farm 
Bill, for example:
     A new program is required for economic assistance for 
users of upland cotton. Through this new program, CCC will make 
payments to domestic cotton mills for capital investments (to acquire, 
construct, install, modernize, develop, convert, or expand land, plant, 
buildings, equipment, facilities, or machinery). The maximum payment 
rate is 4 cents per pound for all cotton consumed by domestic mills 
beginning August 1, 2008; the rate will be 3 cents per pound beginning 
August 1, 2012. The new program pays on both domestic and foreign 
cotton.
     Storage credits to upland cotton loan repayment values are 
allowed for the 2008 through 2012 crop years, but reduced by 10 percent 
from the 2006 rate for the 2008 through 2011 crop years and reduced by 
20 percent from the 2006 rate beginning with the 2012 crop year. 
(Storage is credited when AWP is less than the total of the loan rate 
plus interest plus storage, which is consistent with the existing 
repayment provisions.)
     The upland cotton loan schedule is revised to ensure that 
premiums and discounts are more accurately aligned with prevailing 
market valuations and facilitate movement of cotton into the market.
    In general, the regulatory changes address requirements for (1) the 
new program for economic adjustment assistance for domestic users of 
upland cotton, (2) storage and loan rate adjustments, (3) termination 
of commodity certificates and payment limitations, (4) AWP calculation 
changes, (5) eligibility, (6) fraud or unauthorized disposition, (7) 
warehouse receipts, collateral, and storage, and (8) updates and 
miscellaneous corrections. The regulatory changes are described below 
by these categories.

Economic Adjustment Assistance for Domestic Users of Upland Cotton

    This rule adds a new Subpart C, ``Economic Adjustment Assistance to 
Users of Upland Cotton'' (as discussed below, this rule also removes 
the existing Subpart C, ``Upland Cotton User Marketing Certificates''). 
Section 1207(c) of Subtitle B of Title I of the 2008 Farm Bill requires 
this new assistance. Eligible domestic users of upland cotton include 
persons who open bales of upland cotton for spinning, making paper, and 
processing non-woven cotton fabric in the United States. CCC will pay 4 
cents per pound for all cotton consumed by domestic

[[Page 65716]]

mills beginning August 1, 2008; the rate will be 3 cents per pound 
beginning August 1, 2012. Payments may only be used for capital 
investments (to acquire, construct, install, modernize, develop, 
convert, or expand land, plant, buildings, equipment, facilities, or 
machinery). Further, such capital expenditures must be directly 
attributable to the purpose of manufacturing upland cotton into 
eligible cotton products in the United States.
    The new program payments apply to both domestic and foreign cotton 
and will be made without regard to world or domestic cotton prices.

Storage and Loan Rate Adjustments

    The 2008 Farm Bill requires CCC to adjust upland cotton loan rates 
so that the resulting loan rates more accurately reflect relative 
market valuations. Specifically, starting with the 2008 crop, CCC will 
no longer adjust upland cotton loan rates for location. This provision 
eliminates premiums previously provided to production near domestic 
mills. For example, cotton at some South Carolina locations had 
previously been provided a location premium of 1.9 cents per pound over 
the base-quality loan rate of 52 cents per pound. To eliminate the 
location adjustment, this rule removes the mention of ``county'' in the 
definition of loan deficiency payment in section 1427.3 and removes the 
reference to loan rate location adjustment in section 1427.160. These 
changes are consistent with current marketing of cotton because most 
domestic cotton is priced based on export price considerations.
    Also, section 1204(e) of the 2008 Farm Bill specifically provides 
for fine count and transportation adjustments to the AWP. This rule has 
provisions regarding both and to the extent they differ from previous 
policies for the 2007 crop those new provisions will be applied to 
outstanding 2007 crop loans. That is, the AWP calculations under this 
rule for 2009 and 2007 crops will be the same. Provisions of the 2002 
legislation that covers the 2007 crop, namely the Farm Security and 
Rural Investment Act of 2002 (Pub. L. 107-110) is broad enough to allow 
the 2007 crop adjustments.
    The 2008 Farm Bill requires CCC to credit loan repayment values by 
a portion of warehouse storage charges that accrue during the loan 
period when AWP is sufficiently low. Under this new authority, the 
maximum warehouse storage rates established by CCC for calculating 
storage credits for upland cotton will, as provided in the 2008 Farm 
Bill, be reduced from the 2006 maximum rate by 10 percent for the 2008 
through 2011 crops and by 20 percent beginning with the 2012 crop. This 
rule changes section 1427.19, ``Repayment of Loans,'' accordingly. The 
storage payment reduction provisions do not apply to the 2007 crop.
    The 2008 Farm Bill requires that a loan deficiency payment (LDP) 
rate be the rate effective on the date the producer requested the 
payment. Some cotton users purchase cotton on a ``gin-direct'' basis 
that provides for the cotton to be priced and shipped directly after 
the date of ginning. Under such contracts, any LDP rate is established 
as the rate effective on the date the cotton is ginned even though the 
exact date of ginning and any LDP rate may be unknown to both parties 
at the time the contract is made. To accommodate the sale of cotton 
under such commercial contracts, if a producer who meets other LDP 
eligibility and application requirements requests an LDP on ``gin-
direct'' terms, CCC will consider the date the cotton is ginned to be 
the date of the LDP request.
    This final rule implements a provision of the new Average Crop 
Revenue Election (ACRE) program established by the 2008 Farm Bill. 
Under that program, during each of the 2009 through 2012 crop years, 
the loan rate for upland cotton will be reduced by 30 percent for 
producers who elect to participate in ACRE. This rule amends sections 
1427.8, ``Amount of loan,'' and 1427.160, ``Applicability,'' 
accordingly.

Termination of Commodity Certificates and Payment Limitations

    As required by the 2008 Farm Bill, this rule also amends the cotton 
program regulations to end the availability of commodity certificates 
and the applicability of payment limitation to gains from marketing 
assistance loans and loan deficiency payments.
    Beginning with the 2010 crop, as provided in section 1607 of the 
2008 Farm Bill, CCC will no longer provide commodity certificates for 
the purpose of exchange for cotton loan collateral. Accordingly, this 
rule is removing Subpart C from 7 CFR part 1427, which concerns 
marketing certificates, and revising the references to marketing 
certificates in other sections of part 1427 so that the provisions are 
no longer effective after the 2009 crop year.
    Starting with the 2009 cotton crop year, CCC will no longer limit 
the gains from marketing assistance loans and loan deficiency payments. 
These changes will be implemented in broader, multi-commodity 
regulations to be issued later.

AWP Calculation Changes

    This rule amends section 1427.25, ``Determination of the prevailing 
world market price and the adjusted world price for upland cotton,'' to 
be consistent with provisions of the 2008 Farm Bill. This rule amends 
the regulations to establish a new fine count adjustment, a new method 
for calculating the AWP transportation adjustment, and a new process 
for AWP calculations during the transition between crop years. The fine 
count adjustment to the upland cotton AWP will apply to any CCC-
established loan rate premium factor for a quality higher than Middling 
1\3/32\-inch. The transportation adjustment to the weekly AWP is 
simplified by this rule to use values provided to CCC from its survey 
of domestic cotton merchandisers. CCC's process for determining AWP 
during the transition period between crop years has previously been a 
process of blending current and forward prices over a six-week period. 
The revised regulation, consistent with the 2008 Farm Bill, provides 
for use of forward-crop price quotations prior to July 31 of a 
marketing year if there are insufficient current-crop prices and the 
forward-crop price is the lowest available price quotation. 
Additionally, this rule amends the AWP announcement time from 5 p.m. to 
4 p.m. eastern time each Thursday. This rule also amends section 
1427.3, ``Definitions,'' to modify the definitions of terms used in the 
price determination formula, consistent with the AWP changes. 
Previously, in a rule published May 27, 2008 (73 FR 30274-30277) CCC 
shifted to the use of Far East prices for setting loan repayment 
rates.)

Eligibility

    This rule amends section 1427.4, ``Eligible Producer.'' As required 
by section 1603 of the 2008 Farm Bill, States or political subdivisions 
or their agencies are no longer eligible for loans or loan deficiency 
payments.
    This rule amends section 1427.5, ``General eligibility 
requirements,'' to provide that effective with the 2009 crop, flat 
bales are not eligible to be tendered as loan collateral. This 
amendment is consistent with current industry practice as flat bales 
are not marketable in normal trade.

Fraud or Unauthorized Disposition

    In section, 1427.18, ``Liability of the Producer,'' this rule 
amends the way CCC values the loan collateral in circumstances of fraud 
or unauthorized disposition. CCC will value loan

[[Page 65717]]

collateral at its loan value rather than its sales price in 
circumstances of fraud or unauthorized disposition. This amendment is 
not specifically required by the 2008 Farm Bill; it is being made for 
clarity and consistency with overall CCC loan settlement and inventory 
policy. Rather than requiring the relocation of loan collateral, CCC 
will accelerate the maturity date of cotton if relocation is not 
accomplished by the producer. Commonly, this provision is used 
following warehouse closings or storm damage.

Warehouse Receipts, Collateral, and Storage

    This rule revises the definition in section 1427.3 of a ``warehouse 
receipt'' for cotton as loan collateral. Effective starting with the 
2009 crop of cotton, CCC will require warehouse receipts to be 
submitted to CCC in an electronic format; paper warehouse receipts will 
not be accepted. Paper warehouse receipts are rarely used for modern 
commercial transactions and, therefore, are considered unmarketable by 
CCC. This rule revises the definitions of ``warehouse receipt'' and 
``transfer'' to include a reference to receipts that are certificated 
for delivery of a futures pricing contract and revises the definition 
of ``transfer'' to include the exchange of electronic warehouse 
receipts without physically relocating the cotton. This rule updates 
section 1427.10, ``Approved Storage,'' accordingly.
    This rule amends section 1427.21, ``Settlement.'' Traditionally, 
CCC settled cotton loans for which collateral was delivered to CCC 
based on the weight and quality indicated on the original warehouse 
receipt. However, for bales that are relocated during the loan period 
and subsequently delivered to CCC, the original warehouse receipt is 
cancelled and a subsequent receipt is delivered to CCC in satisfaction 
of the loan obligation. For such cases, this rule specifies that CCC 
may elect to calculate settlement values based on the weight, 
condition, and classification as reflected on the receipt delivered to 
CCC rather than based on the original receipt information. CCC will use 
this new settlement option only when there is significant variation in 
weights or quality between the original and subsequent bale receipts. 
This change will ensure that a fair and accurate settlement is made 
based on the most current and accurate weight and quality.
    In addition, clarifying changes are being made to section 1427.21 
to identify charges payable by the producer if cotton loan collateral 
is delivered to CCC to satisfy the loan obligation. These charges 
include warehouse receiving charges, new bale ties, unpaid warehouse 
compression, storage charges for any period of yard storage, storage 
surcharges that apply during or within three months following the 
period of the loans, and other associated charges that may be levied by 
the warehouse specific to forfeited cotton. This is an improved 
statement of existing policy and is not required by the Farm Bill.
    This rule adds a provision to section 1427.7, ``Maturity of 
Loans,'' to allow CCC to accelerate the maturity date of the cotton 
stored as collateral in certain situations, such as when the cotton is 
improperly warehoused and subject to damage. A producer may still 
transfer cotton loan collateral as provided under section 1427.16, 
``Movement and Protection of Warehouse-stored Cotton,'' but CCC will no 
longer relocate loan bales at its expense from one CCC-approved 
warehouse to another. For consistency, therefore, this rule removes 
language regarding CCC transfer of cotton from section 1427.16.
    This rule removes all references to reconcentration of cotton from 
7 CFR part 1427. Reconcentration involves the process of moving CCC-
owned cotton from one approved warehouse to another, which is a CCC 
inventory issue that is not relevant to cotton loan regulations.
    This rule revises section 1427.5(b)(2) to clarify that cotton 
submitted for loan deficiency payments (LDP) is not required to be 
stored in a warehouse that meet the approved storage requirements of 
CCC cotton loan collateral. This revision is for clarity and does not 
imply any change in CCC storage policies. Cotton presented for LDPs has 
not been required to be receipted by an approved cotton storage 
warehouse because such cotton is usually shipped from the gin to the 
user and avoids the warehousing process.
    This rule amends section 1427.10(c) to provide that warehouses 
approved to store CCC cotton loan collateral outside are required to 
report location indicators and effective dates for any loan bale stored 
outside. CCC uses such information to compute any denied storage 
credits. This revision simply states how the information is currently 
obtained from warehouses through their electronic warehouse receipt 
providers; the reporting requirement was first established by 
regulations in 2006.

Start Dates for Various Provisions

    This final rule becomes effective when filed for public inspection 
by the Office of the Federal Register. A number of provisions included 
in these regulatory changes start based on a crop year or date 
specified in the 2008 Farm Bill.
    The following table shows the start times for these provisions:

------------------------------------------------------------------------
      Regulatory section                       Provision
------------------------------------------------------------------------
1427.25(f)(1)(i).............  The fine count adjustment will be
                                effective for 2007 and 2008-crop loan
                                redemptions effective October 31, 2008.
1427.19(h)(1)................  The 10 percent reduction from 2006 rates
                                in warehouse storage credits will be
                                effective for the 2008-crop loan
                                redemptions effective as soon as
                                practicable after October 31, 2008.
1427.19(h)(2)................  The 20 percent reduction from 2006 rates
                                in warehouse storage credits will be
                                effective for 2012-crop loan
                                redemptions.
1427.5(b)(5).................  Ineligibility of flat bales for loan or
                                LDP will be effective for 2009 and
                                subsequent crops of cotton.
1427.3.......................  Ineligibility of bales represented by
                                paper warehouse receipts will be
                                effective for 2009 and subsequent crops
                                of cotton.
1427.8(e)....................  The 30 percent reduction of loan rates
                                for upland cotton for producers enrolled
                                in ACRE will be effective for 2009 and
                                subsequent crops of cotton.
1427.22(a)...................  The termination of use of commodity
                                certificates for redeeming upland cotton
                                marketing assistance loans will be
                                effective August 1, 2010 for loans of
                                any crop year.
1400.1(g)....................  Payment limitation applicable to loan
                                gains and loan deficiency payments will
                                not apply to loans and LDPs for 2009 and
                                subsequent crops of cotton.
1427.101(a)..................  The Economic Adjustment Assistance to
                                Users of Upland cotton is applicable to
                                quantities of cotton used starting
                                August 1, 2008.
Subpart G, 1427.101(a).......  The 2008 Farm Bill provides that
                                eligibility for payments is provided to
                                bales marketed as of June 18, 2008 for
                                The ELS Competitiveness Payment Program.
------------------------------------------------------------------------


[[Page 65718]]

Updates and Miscellaneous Corrections

    While changing and updating the regulations as required by the 2008 
Farm Bill, CCC is also making a number of ``housekeeping'' changes to 
clean up the regulations. In general, CCC is making changes to add 
clarity, make administrative improvements, correct typographical 
errors, add consistency with current CCC and industry practices, remove 
expired regulations, and improve organization. These changes do not 
represent substantive policy or administrative changes.
    This rule amends regulations regarding the classification of cotton 
to require that all cotton tendered for loan or LDP must be classed by 
the Agricultural Marketing Service (AMS). Previously, the regulations 
in 7 CFR part 1427 provided that CCC could approve other entities to 
provide classification information. CCC does not currently perform this 
function or delegate it to others; current classification is always 
done by AMS. This rule amends the regulation to be consistent with 
actual CCC practice. This change is implemented in several sections of 
the regulations, including the ``Definitions'' section and the 
``General Eligibility Requirements'' section as well as the 
``Classification of cotton'' section (1427.3, 1427.5, and 1427.9, 
respectively). Additionally, this rule provides that, for purposes of 
loan and loan deficiency payment calculations, CCC will only use the 
classification information received directly from AMS rather than any 
classification information transmitted by another entity. This policy 
has reduced transaction errors and delays.
    This rule makes several changes to the regulations in 7 CFR part 
1427 Subpart D, ``Recourse Seed Cotton Loans.'' This rule deletes a 
reference to Cooperative Marketing Associations (CMA) requesting seed 
cotton loans at a central county office. This revision is being made 
because CCC authorizes seed cotton loans to be made to producer members 
of a CMA but not directly to a CMA. This change reflects existing CCC 
policy. The 2008 Farm Bill requires changes in the way that payments 
are attributed to legal entities. This rule also amends this section of 
the regulations to update the crop years
    This rule adds a provision to section 1427.12, ``Liens,'' to allow 
CCC to waive lien requirements for loans having a principal value of 
less than $50,000. This change will make the regulations consistent 
with current CCC practice.
    This regulation deletes from section 1427.5, in paragraphs (f)(4) 
and (g)(4), the requirement that a person applying for a cotton loan or 
LDP not have received any payment from any party with respect to the 
cotton. These deletions are made because the prohibition against 
receipt of a payment is inconsistent with CCC policies regarding 
beneficial interest (under which a payment may be received as long as 
it is not for title or control of the cotton) or receipt of loan 
proceeds from approved cooperative marketing associations.
    This rule removes Subpart F, ``2004 Cottonseed Payment Program'' 
and Subpart H, ``2005 Cottonseed Payment Program,'' because the 
authorization for these subparts has expired.

Notice and Comment

    These regulations are exempt from the notice and comment 
requirements of the Administrative Procedures Act (5 U.S.C. 553), as 
specified in section 1601(c) of the 2008 Farm Bill, which requires that 
the regulations and administration of Title I of the 2008 Farm Bill be 
promulgated and administered without regard to the notice and comment 
provisions of section 553 of title 5 of the United States Code 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.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this rule as 
significant under Executive Order 12866. A cost-benefit assessment of 
this rule is summarized below and is available from the contact listed 
above.

Summary of Economic Impacts

    Payments made under the Economic Adjustment Assistance to Users of 
Upland Cotton Program will be made to domestic users of upland cotton 
without regard to world or domestic cotton prices. These payments may 
only be used for statutorily specified capital investments. It is 
anticipated that these payments will directly assist the domestic 
spinning and textile manufacturing sector in limiting further market 
losses, plant closures, and employment declines. For crop year 2008 
through 2012, undiscounted net CCC outlays for the Economic Assistance 
to Users of Upland Cotton program are estimated to be $360 to 400 
million (with an average undiscounted impact of approximately $76 
million per crop year).

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act since 
CCC is not required to publish a notice of proposed rulemaking for this 
rule.

Environmental Review

    The environmental impacts of this rule were considered in a manner 
consistent with the provisions of the National Environmental Policy Act 
(NEPA), 42 U.S.C. 4321-4347, the regulations of the Council on 
Environmental Quality (40 CFR parts 1500-1508), and FSA regulations for 
compliance with NEPA (7 CFR part 799). The changes to the Cotton 
program, required by the 2008 Farm Bill that are identified in this 
final rule are non-discretionary. Therefore, FSA has determined that 
NEPA does not apply to this final rule and no environmental assessment 
or environmental impact statement will be prepared.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published in the Federal 
Register on June 24, 1983 (48 FR 29115).

Executive Order 12988

    This rule has been reviewed under Executive Order 12988. This rule 
is not retroactive and it does not preempt State or local laws, 
regulations, or policies unless they present an irreconcilable conflict 
with this rule. Before any judicial action may be brought regarding the 
provisions of this rule the administrative appeal provisions of 7 CFR 
parts 11 and 780 must be exhausted.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Unfunded Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local, and tribal governments, or the private sector. 
In addition, CCC was not required to publish a notice of proposed 
rulemaking for this rule. Therefore, this rule is not subject to the 
requirements of sections 202 and 205 of UMRA.

[[Page 65719]]

Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA)

    Section 1601(c)(3) of the 2008 Farm Bill requires that the 
Secretary use the authority in section 808 of title 5, United States 
Code, 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. Accordingly, 
this rule is effective upon filing for public inspection by the Office 
of the Federal Register.

Paperwork Reduction Act

    The regulations in this rule are exempt from the requirements of 
the Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in 
section 1601(c)(2) of the 2008 Farm Bill, which provides that these 
regulations be promulgated and the programs administered without regard 
to the Paperwork Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in 7 CFR Part 1427

    Cotton, Loan programs-agriculture, Price support programs, 
Reporting and recordkeeping requirements, Warehouses.

0
For the reasons discussed above, this rule amends 7 CFR part 1427 as 
follows:

PART 1427--COTTON

0
1. Revise the authority for part 1427 to read as follows:

    Authority: 7 U.S.C. 7231-7236; 15 U.S.C. 714b, 714c; and Pub L. 
110-246.


0
2. Amend Sec.  1427.1 as follows:
0
a. Amend paragraphs (a) and (e) by removing the words ``2002 through 
2007'' and adding, in their place, the words ``2008 through 2012'' and 
adding two new sentences between the first and second sentences in 
paragraph (a) to read as set forth below.
0
b. Amend paragraph (b), in the first sentence, by removing the word 
``rates'' and adding, in its place, the word ``rate.''


Sec.  1427.1  Applicability.

    (a) * * * Rules codified in this part which are issued after 
October 1, 2008, will not affect the 2007 and prior crops except that 
changes in the calculation of loan repayment rates that apply to the 
2008 crop also apply to 2007 crop loans outstanding at the time of the 
changes in 2008 crop calculations. Other adjustments for the 2008 crop, 
such as storage rate adjustments will not apply. * * *


Sec.  1427.2  [Amended]

0
3. Amend Sec.  1427.2 as follows:
0
a. Remove paragraph (c)(1).
0
b. Redesignate paragraphs (c)(2) and (c)(3) as paragraphs (c)(1) and 
(c)(2), respectively.
0
c. Amend paragraph (f) by removing the word ``Loan'' and adding, in its 
place, the word ``loan.''

0
4. Amend Sec.  1427.3 as follows:
0
a. In the introductory text, amend the second sentence by removing the 
words ``1425 and'' and adding, in their place, the words ``1423, 1425, 
and.''
0
b. Add new definitions, in alphabetical order, for the terms 
``Classification'' and ``Loan rate'' to read as set forth below.
0
c. Amend the definition of ``Cotton storage deficit area'' by adding 
the words ``less carry-in stocks,'' immediately before the words ``of 
warehouses.''
0
d. Remove the definitions of ``Current Northern Europe shipment,'' 
``Far East current price,'' ``Far East forward price,'' ``Far East 
price,'' ``Forward Far East shipment price,'' ``Forward northern Europe 
shipment,'' ``Reconcentration,'' ``U.S. Far East current price,'' 
``U.S. Far East forward price,'' ``U.S. Far East price,'' ``U.S. 
Northern Europe current price,'' ``U.S. Northern Europe forward 
price,'' and ``U.S. Northern Europe price.''
0
e. Amend the definition of ``False packed cotton'' by removing the word 
``indiction'' and adding, in its place, the word ``indication''.
0
f. Amend the definition of ``Loan deficiency payment'' by removing the 
word ``county.''
0
g. Amend the definition of ``Loan servicing agent'' by removing 
paragraph (3) and by redesignating paragraphs (4), (5), and (6) as (3), 
(4), and (5), respectively.
0
h. Revise the definition of ``Transfer'' to read as set forth below.
0
i. Amend the definition of ``Upland cotton'' by adding the word ``in'' 
immediately after the words ``variety of cotton.''
0
j. Revise the definition of ``Warehouse receipt'' to read as set forth 
below.


Sec.  1427.3  Definitions.

* * * * *
    Base quality upland cotton means Strict Low Middling (SLM) 1\1/16\ 
inch; leaf 4; micronaire 3.5 through 3.6 and 4.3 through 4.9; strength 
25/5/ through 29.4 grams per tex; and length uniformity 79.5 through 
82.4 percent.
* * * * *
    Classification means the measurement results provided by the 
Agricultural Marketing Service (AMS) of color grade, leaf, staple, 
strength, extraneous matter and micronaire, and for upland cotton, 
length uniformity.
* * * * *
    Loan rate is the national loan rate for base quality upland cotton 
and the national average rate for ELS cotton adjusted by any premiums 
and discounts determined by CCC.
* * * * *
    Transfer means, depending on the context, the process for a 
producer or an authorized agent of the producer to:
    (1) Physically relocate cotton loan collateral from one CCC-
approved warehouse to another CCC-approved warehouse, (2) Exchange an 
electronic warehouse receipt for a receipt certificated by a warehouse 
for delivery under a futures contract without physically relocating the 
cotton, or
    (3) Do both of the above.
* * * * *
    Warehouse receipt means a receipt containing the required 
information prescribed in this part that may or may not be certificated 
for delivery for a futures-pricing contract, and is:
    (1) For 2008-crop cotton only, a pre-numbered, pre-punched 
negotiable warehouse receipt issued under the authority of the U.S. 
Warehouse Act, a state licensing authority, or by an approved CCC 
warehouse in such format authorized and approved, in advance, by CCC; 
or
    (2) For 2008 through 2012-crop cotton, an electronic warehouse 
receipt record issued by such warehouse recorded in a central filing 
system or systems maintained in one or more locations that are approved 
by FSA to operate such system.
* * * * *

0
5. Amend Sec.  1427.4 paragraph (a)(1) by removing the words ``State or 
political subdivision or agency thereof,''.

0
6. Amend Sec.  1427.5 as follows:
0
a. Revise paragraph (b)(2) to read as set forth below.
0
b. Amend paragraph (b)(5) by adding the words ``and effective for the 
2009 crop, not be a flat or modified flat bale;'' at the end of the 
paragraph.
0
c. Amend paragraph (b)(9) by adding the words ``net weight'' 
immediately after the words ``600 pounds.''
0
d. Amend paragraph (b)(10) removing the phrase ``of 2003 and subsequent 
crops.''
0
e. Amend paragraphs (b)(10) and (b)(11), introductory text, by removing

[[Page 65720]]

the word ``which'' each time it appears and adding, in its place, the 
word ``that.''
0
f. Remove paragraphs (f)(4) and (g)(4).
0
g. Redesignate paragraph (g)(5) as (g)(4).
0
h. Amend paragraph (n) by removing the word ``unlicensed'' and adding, 
in its place, the word ``unapproved.''


Sec.  1427.5  General eligibility requirements.

* * * * *
    (b) * * *
    (2) Be in existence and good condition and be covered by fire 
insurance. Bales pledged as collateral for a CCC loan, must be stored 
inside an approved storage warehouse unless, as determined under Sec.  
1427.10, CCC has approved the warehouse to use outside storage for 
cotton loan collateral for the period of the loan. Bales submitted to 
CCC for a loan deficiency payment are not subject to the approved 
storage requirements contained in Sec.  1423.10.
* * * * *

0
7. In Sec.  1427.6, amend paragraphs (a), introductory text, and (a)(1) 
to read as follows:


Sec.  1427.6  Disbursement of loans.

    (a) Individual producers may request loans from:
    (1) FSA County Service Centers;
* * * * *

0
8. Amend Sec.  1427.7 by adding new paragraph (c) as follows.


Sec.  1427.7   Maturity of loans.

* * * * *
    (c) Following written notice by CCC to the producer and warehouse 
operator, CCC may advance the maturity date of cotton pledged as 
collateral for a marketing assistance loan if:
    (1) CCC determines such loan cotton collateral is improperly 
warehoused and subject to damage,
    (2) Any term of the producer's loan agreement is violated, or
    (3) Carrying charges are substantially in excess of the average of 
carrying charges available elsewhere and the storing warehouse, after 
notice, declines to reduce such charges.

0
9. Amend Sec.  1427.8 by adding new paragraph (e) to read as follows.


Sec.  1427.8   Amount of loan.

* * * * *
    (e) The loan rate as determined under paragraph (a) of this section 
adjusted for applicable premiums and discounts will be reduced by 30 
percent during each of the 2009 through 2012 crop years for producers 
who make an irrevocable election to receive ``Average Crop Revenue 
Election'' program payments as provided in Sec.  1412 of this title or 
elsewhere in this title.

0
10. Amend Sec.  1427.9 by revising paragraphs (a), (b), (c), (e), and 
(f) to read as follows.


Sec.  1427.9   Classification of cotton.

    (a) All cotton tendered for loan and loan deficiency payment must 
be classed by an AMS Cotton Classing Office or other entity approved by 
AMS.
    (b) An AMS cotton classification must be based upon a 
representative sample drawn from the bale by samplers under AMS 
procedures and instructions.
    (c) If the producer's cotton has not been classed or sampled in a 
manner acceptable by CCC, the warehouse must sample such cotton and 
forward the samples to the AMS Cotton Classing Office or other entity 
approved by AMS. Such warehouse must be licensed by AMS or be approved 
by CCC to draw samples for submission to the AMS Cotton Classing 
Office.
* * * * *
    (e) Where review classification is not involved:
    (1) If through error or otherwise two or more samples from the same 
bale are submitted for classification, the loan rate will be based on 
the classification having the lower loan value;
    (2) CCC will use classification information received directly from 
AMS rather than AMS classification information received from the 
producer.
    (f) CCC will base any cotton loan rate or loan deficiency payment 
rate on the most recent classification information available before the 
loan or loan deficiency payment has been calculated. CCC will not 
adjust such rates based on review classification information submitted 
subsequent to the original benefit calculation.

0
11. Amend Sec.  1427.10 as follows:
0
a. Amend paragraphs (a), introductory text, by adding the words ``, 
unless the producer agrees to provisions of 1427.5(n)'' immediately 
after the word ``CCC''
0
b. Amend paragraph (a)(1) by adding the words ``Beacon Facility-Mail 
Stop 8748,'' immediately after the word ``Office,''.
0
c. Amend paragraph (b) by removing the words ``by CCC'' the first time 
they appear.
0
d. Revise paragraph (c)(1) to read as set forth below.
0
e. Revise paragraph (c)(5) to read as set forth below.
0
f. Amend paragraph (f) by removing the words ``2003 and subsequent.''
0
g. Revise paragraph (f)(1) by removing the words ``loan collateral;'' 
and adding, in their place, the words ``ELS loan collateral; and.''
0
h. Revise paragraph (f)(2) by removing the semicolon and the word 
``and'' at the end of the paragraph and adding a period in their place.
0
i. Remove paragraph (f)(3).


Sec.  1427.10   Approved Storage.

* * * * *
    (c) * * *
    (1) The warehouse submits a request for approval of outside storage 
in a format prescribed by CCC. * * *
    (5) The warehouse operator provides CCC:
    (i) A weekly report in a format prescribed by CCC identifying 
individual bales of cotton pledged as collateral for a CCC loan that 
are stored outside, and
    (ii) Through their electronic warehouse receipt provider, on a 
current basis, location indicators and effective dates for any loan 
bale stored outside.
* * * * *

0
12. Amend Sec.  1427.11 as follows:
0
a. Revise paragraph (c) to read as set forth below.
0
b. Amend paragraph (e) by removing the second and third sentences.
0
c. Remove paragraph (f).
0
d. Redesignate paragraph (g) as paragraph (f).


Sec.  1427.11   Warehouse receipts.

* * * * *
    (c)(1) Each receipt must set out in its terms the tare and the net 
weight of the bale represented by the receipt. The net weight shown on 
the warehouse receipt must be the difference between the gross weight 
as determined by the warehouse at the warehouse site and the tare 
weight. The warehouse receipt may show the net weight established at a 
gin if gin weights are permitted by the licensing authority for the 
warehouse.
    (2) The tare weight shown on the receipt must be the tare weight 
furnished to the warehouse by the ginner or entered by the ginner on 
the gin bale tag. A machine card type warehouse receipt reflecting an 
alteration in gross, tare weight, or net weight will not be accepted by 
CCC unless it bears, on the face of the receipt, the following legend 
or similar wording approved by CCC, duly executed by the warehouse or 
an authorized representative of the warehouse:
    Corrected (gross, tare, or net) weight,
    (Name of warehouse),
    By (Signature or initials),
    Date.
* * * * *

[[Page 65721]]

Sec.  1427.12   [Amended]

0
13. In Sec.  1427.12, amend paragraph (a) by adding the words ``, 
except that CCC may elect to waive such lien requirements for loans 
having a principal value of less than $50,000'' at the end of the 
paragraph.

0
14. Amend Sec.  1427.13 as follows:
0
a. Revise paragraph (e)(3) to read as set forth below.
0
b. Add a new paragraph (e)(4) to read as set forth below.


Sec.  1427.13  Fees, charges and interest.

* * * * *
    (e)(3) Any warehouse storage charges associated with the forfeited 
cotton that accrued during the period of the loan and paid by CCC to 
the warehouse that:
    (i) Exceed CCC's maximum storage credit rate for the warehouse 
established in Sec.  1427.19 and
    (ii) Were paid by CCC for periods subject to denied storage credits 
due to the cotton being stored outside as specified in Sec.  
1427.19(h)(2)(ii).
    (4) Unpaid warehouse compression charges.

0
15. Amend Sec.  1427.16 as follows:
0
a. Remove paragraphs (b), (d), and (e).
0
b. Redesignate paragraph (c) as paragraph (b) and revise newly 
designated paragraph (b) to read as set forth below.
0
c. Redesignate paragraph (f) as paragraph (c) and redesignate former 
paragraphs (f)(3) through (f)(5) as paragraphs (c)(2)(i) through 
(c)(2)(iii), respectively.
0
d. Revise newly designated paragraph (c) to read as set forth below.


Sec.  1427.16   Movement and protection of warehouse-stored cotton.

* * * * *
    (b) A producer may transfer cotton loan collateral subject to the 
following conditions:
    (1) The cotton is represented by an electronic warehouse receipt;
    (2) The request is submitted by a producer or a properly designated 
agent of the producer;
    (3) The transfer is agreed to by the receiving warehouse operator;
    (4) The CCC marketing assistance loan that is secured by such 
cotton matures at least 30 days after the date on which the request for 
the transfer is submitted to CCC; and
    (5) Any charges, fees, costs, or expenses incident to the transfer 
of cotton loan collateral under this paragraph must be paid by the 
requestor of the transfer.
    (c) CCC will exclude from the calculation of any storage credits 
payable under Sec.  1427.19 the following periods:
    (1) The period during which the cotton is in transit between 
warehouses; and
    (2) Any period beyond 75 days starting from the date of transfer 
from the shipping warehouse, unless the shipping warehouse is:
    (i) Not in compliance with any of the terms of its Cotton Storage 
Agreement, (ii) Storing cotton loan collateral outside, or
    (iii) Under common ownership with the receiving warehouse.


Sec.  1427.17   [Removed and Reserved]

0
16. Remove and reserve Sec.  1427.17.
0
17. Amend Sec.  1427.18 as follows:
0
a. Revise paragraph (a)(2) to read as set forth below.
0
b. Amend paragraph (h)(2)(i) by removing the words ``If the marketing 
assistance loan is called'' and adding in their place the words ``If 
CCC accelerates the maturity date for a loan.''
0
c. Amend paragraphs (k)(1) and (k)(2) by removing the reference ``Sec.  
1427.10(e)'' and adding, in its place each time it appears, the 
reference ``Sec.  1427.10(f).''


Sec.  1427.18   Liability of the producer.

    (a) * * *
    (2) If a producer makes a fraudulent representation or if the 
producer has disposed of, or moved the loan collateral without prior 
written approval from CCC, the value of such collateral will be equal 
to its loan value, plus accrued interest, plus warehouse charges, and 
liquidated damages, as determined by CCC.
* * * * *

0
18. Amend Sec.  1427.19 as follows:
0
a. Amend paragraph (a) by adding the words ``pledged as collateral for 
a CCC loan'' after the word ``receipts.''
0
b. Revise paragraphs (h), (i), and (j) to read as set forth below.
0
c. Add paragraph (k) to read as set forth below.


Sec.  1427.19   Repayment of loans.

* * * * *
    (h) For purposes of calculating loan-period accrued storage charges 
that CCC may credit to the loan repayment amount under paragraph (i) of 
this section:
    (1) The warehouse storage rates to be used for the 2008 through 
2011 crops will be the lower of:
    (i) The tariff storage rate for the warehouse for the 2005 crop or, 
for any warehouse not in existence in 2005, a CCC-assigned average 2005 
crop tariff rate for the county or area; or
    (ii) For warehouses located in Arizona and California $3.93 per 
bale per month and for warehouses located in all States other than 
Arizona and California $2.39 per bale per month.
    (2) The warehouse storage rates to be used for the 2012 and 
subsequent crops will be the lower of:
    (i) The tariff storage rate for the warehouse for the 2005 crop or, 
for any warehouse not in existence in 2005, a CCC-assigned average 2005 
crop tariff rate for the county or area; or
    (ii) For warehouses located in Arizona and California $3.50 per 
bale per month and for warehouses located in all States other than 
Arizona and California $2.13 per bale per month.
    (3) CCC will not credit the loan repayment amount for a bale for 
any storage charges that accrued while the cotton was stored outside, 
except that storage may be credited for up to 15-days of outside 
storage beginning on the day the warehouse was notified that the bale 
is under loan if the bale was inside on the 15th day from the date of 
notification.
    (4) The loan period will be determined by CCC to begin:
    (i) For loan disbursed by the Farm Service Agency, on the date all 
loan documents, as determined and announced by CCC, have been received 
or
    (ii) For a loan disbursed by a Cooperative Marketing Association or 
an authorized loan servicing agent, on the date the loan was disbursed 
by CCC.
    (i)(1) An upland cotton loan repayment rate will not exceed the 
loan principal plus accrued interest for the period provided in Sec.  
1427.19(j).
    (2) When the prevailing adjusted world price of upland cotton, as 
determined under Sec.  1427.25, is less than the combined value of the 
loan principal, accrued interest, and warehouse storage that accrued 
during the period of the loan, CCC will permit the loan to be repaid at 
the adjusted world price less the storage charges that accrued during 
the period of the loan.
    (j) For purposes of calculating interest charges on upland and 
extra long staple cotton loan principal, the loan period will be the 
period starting the date after the disbursement of the loan amount to, 
and including, the loan repayment date, except that interest is not 
charged for a loan that is disbursed and repaid on the same date.
    (k) Repayment of loans will not be accepted after CCC acquires 
title to the cotton in accordance with Sec.  1427.7.

0
19. Amend Sec.  1427.21 as follows:
0
a. Revise paragraphs (a) and (b) to read as set forth below.
0
b. Amend paragraph (d) by removing the reference ``Sec.  1427.10(e)'' 
and adding, in its place, the reference ``Sec.  1427.10(f).''

[[Page 65722]]

0
c. Add paragraph (f) to read as set forth below.


Sec.  1427.21  Settlement.

    (a) The settlement of cotton loans will be made by CCC on the basis 
of the quality and quantity of the cotton delivered to CCC by the 
producer or acquired by CCC subject to the producer being responsible 
for, if applicable, warehouse receiving charges, new bale ties, unpaid 
warehouse compression, charges for and related to the certification of 
a bale and for any subsequent exchange of certificated receipts, 
storage charges for any period of yard storage, and storage charges in 
excess of any maximum storage credit rates as determined and announced 
by CCC.
    (b) For purposes of settlements for cotton delivered to CCC in 
satisfaction of a loan obligation, CCC may elect to calculate such 
settlement values based on the net weight, condition, and 
classification as reflected on the warehouse receipt delivered to CCC, 
whether such receipt is the receipt issued by the original storing 
warehouse and presented for calculating the loan amount or a receipt 
issued by a subsequent warehouse due to the transfer of such bale while 
pledged as collateral for a CCC loan.
* * * * *
    (f) CCC will pay to the warehouse any unpaid storage or receiving 
charges for forfeited loan collateral, not to exceed the amount that 
accrued from the date that all necessary documents were received by CCC 
to the loan maturity date, as soon as practicable after the cotton is 
forfeited.

0
20. Amend Sec.  1427.22 to revise paragraph (a) to read as follows.


Sec.  1427.22  Commodity certificate exchanges.

    (a) For any outstanding marketing assistance loan provided for 
upland cotton, a producer may purchase a commodity certificate and 
exchange that commodity certificate for the marketing assistance loan 
collateral. This provision terminates effective ending with the 2009 
crop and will not be available for subsequent crops.
* * * * *

0
21. Amend Sec.  1427.23 as follows:
0
a. Revise paragraphs (a)(3) and (e)(1) to read as set forth below.
0
b. Amend paragraph (f) by removing the word ``Standard.''
0
c. Remove paragraph (g).


Sec.  1427.23  Cotton loan deficiency payments.

    (a) * * *
    (3) Submit, on a form prescribed by CCC, to the FSA Service Center 
on or before beneficial interest is lost in such quantity and before 
the final loan availability date for the commodity:
    (i) An indication of their intentions to receive a loan deficiency 
payment on the identified commodity or
    (ii) A completed request for a loan deficiency payment for a 
quantity of eligible cotton under Sec.  1427.5(a).
* * * * *
    (e) * * *
    (1) Based on the date the cotton was ginned, which CCC will 
consider to be the date of the LDP request, if payment application is 
made in the manner prescribed by CCC for obtaining such rate;
* * * * *

0
22. Revise Sec.  1427.25 to read as follows:


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

    (a) CCC will determine the world market price for upland cotton as 
follows:
    (1) During the period when only one daily price quotation is 
available for each growth quoted for Middling one and three-thirty-
second inch (M 1\3/32\-inch) cotton, CFR (cost and freight) Far East, 
the prevailing world market price for upland cotton will be based on 
the average of the quotations for the preceding Friday through Thursday 
for the 5 lowest-priced growths of the growths quoted for M 1\3/32\-
inch cotton, CFR Far East.
    (2) During the period when both a price quotation for cotton for 
shipment no later than August/September of the current calendar year 
(current Far East shipment price) and a price quotation for cotton for 
shipment no earlier than October/November of the current calendar year 
(forward Far East shipment price) are available for growths quoted for 
M 1\3/32\-inch cotton, CFR Far East, the prevailing world market price 
for upland cotton will be based on the average of the current Far East 
shipment prices for the preceding Friday through Thursday for the 5 
lowest-priced growths of the growths quoted for M 1\3/32\-inch cotton, 
CFR Far East, except as may be determined by the Secretary as specified 
in paragraph (c)(3)(iv) of this section.
    (3) The upland cotton prevailing world market price determined as 
specified in paragraphs (a)(1) or (a)(2) of this section is referred to 
as the ``Far East price'' (FE).
    (4) If quotes are not available for 1 or more days in the 5-day 
period, the available quotes during the period will be used. If no 
quotes are available during the Friday through Thursday period, the 
prevailing world market price will be based on the best available world 
price information, as CCC determines.
    (b) The upland cotton prevailing world market price, adjusted as 
specified in paragraph (c) of this section (adjusted world price 
(AWP)), will apply to the 2008 through 2012 crops of upland cotton and 
to the 2007 crop to the extent provided in Sec.  1427.1.
    (c) The upland cotton AWP will equal the FE determined as specified 
in paragraph (a) of this section, adjusted as follows:
    (1) FE will be adjusted to U.S. location by deducting the average 
costs to market, including average transportation costs, as determined 
by the Secretary.
    (2) The price determined as specified in paragraph (c)(1) of this 
section will be adjusted to reflect the price of base quality upland 
cotton by deducting the difference, as CCC announces, between the 
applicable loan rate for an upland cotton crop for M 1 3/32-inch, leaf 
3, (micronaire 3.5 through 3.6 and 4.3 through 4.9, strength 25.5 
through 29.4 grams per tex, length uniformity 79.5 through 82.4 
percent) cotton and the loan rate for base quality upland cotton.
    (3) The prevailing world market price, adjusted as specified in 
paragraphs (c)(1) and (c)(2) of this section, may be further adjusted 
if it is determined that the adjustment is necessary to:
    (i) Minimize potential loan forfeitures;
    (ii) Minimize the accumulation of stocks of upland cotton by the 
Federal Government;
    (iii) Ensure that upland cotton produced in the United States can 
be marketed freely and competitively, both domestically and 
internationally; and
    (iv) Ensure an appropriate transition between current-crop and 
forward-crop price quotations, except that forward-crop price 
quotations may be used prior to July 31 of a marketing year only if 
there are insufficient current crop quotations and the forward-crop 
price quotation is the lowest such quotation available.
    (d) The upland cotton AWP, determined as specified in paragraph (c) 
of this section, and the amount of the additional adjustment determined 
as specified in paragraphs (e) and (f) of this section, will be 
announced, to the extent practicable, at 4 p.m. eastern time each 
Thursday continuing through the last Thursday of March 2014 (March 27, 
2014). In the event that Thursday is a non-workday, the determination 
will be

[[Page 65723]]

announced, to the extent practicable, at 8 a.m. eastern time the next 
work day.
    (e)(1)(i) AWP, determined as specified in paragraph (c) of this 
section, will be subject to a further coarse count adjustment as 
provided in this section regarding all qualities of upland cotton 
eligible for loan except the following upland cotton grades with a 
staple length of 1\1/16\-inch or longer:
    (A) White Grades--Strict Middling and better, leaf 1 through leaf 
6; Middling, leaf 1 through leaf 6; Strict Low Middling, leaf 1 through 
leaf 6; and Low Middling, leaf 1 through leaf 5;
    (B) Light Spotted Grades--Strict Middling and better, leaf 1 
through leaf 5; Middling, leaf 1 through leaf 5; and Strict Low 
Middling, leaf 1 through leaf 4; and
    (C) Spotted Grades--Strict Middling and better, leaf 1 through leaf 
2; and
    (ii) Grade, leaf, and staple length must be determined as specified 
in Sec.  1427.9. If no such official classification is presented, the 
coarse count adjustment will not be made.
    (2) The adjustment for upland cotton specified in paragraph (e)(1) 
of this section will be determined by deducting from AWP:
    (i) The difference between FE, and
    (A) During the period when only one daily price quotation for each 
growth quoted for ``coarse count'' cotton, CFR Far East, is available, 
the average of the quotations for the corresponding Friday through 
Thursday for the three lowest-priced growths of the growths quoted for 
``coarse count'' cotton, CFR Far East (Far East coarse count price); or
    (B) During the period when both current Far East shipment prices 
and forward Far East shipment prices are available for the growths 
quoted for ``coarse count'' cotton, CFR Far East, the result calculated 
by the average of the current Far East shipment prices for the 
preceding Friday through Thursday for the three lowest-priced growths 
of the growths quoted for ``coarse count'' cotton, CFR Far East (Far 
East coarse count price) minus
    (ii) The difference between the applicable loan rate for an upland 
cotton crop for M 1\3/32\-inch, leaf 3, (micronaire 3.5 through 3.6 and 
4.3 through 4.9, strength 25.5 through 29.4 grams per tex, length 
uniformity 80 through 82 percent) cotton and the loan rate for an 
upland cotton crop for SLM 1\1/32\-inch, leaf 4, (micronaire 3.5 
through 3.6 and 4.3 through 4.9, strength 25.5 through 29.4 grams per 
tex, length uniformity 79.5 through 82.4 percent) cotton.
    (3) Regarding the determination of the Far East coarse count price 
specified in paragraph (e)(2)(i) of this section:
    (i) If no quotes are available for one or more days of the 5-day 
period, the available quotes will be used;
    (ii) If quotes for three growths are not available for any day in 
the 5-day period, that day will not be considered; and
    (iii) If quotes for three growths are not available for at least 3 
days in the 5-day period, that week will not be considered, in which 
case the adjustment determined as specified in paragraph (e)(2) of this 
section for the latest available week will continue to be applicable.
    (f)(1)(i) AWP, determined as specified in paragraph (c) of this 
section, will be subject to a further fine count adjustment as provided 
in this section regarding all upland cotton having a loan schedule 
premium or discount exceeding that for Middling, leaf 3, staple length 
1\3/32\-inch upland cotton, and
    (ii) Grade, staple length, and leaf must be determined as specified 
in Sec.  1427.9. If no such official classification is presented, the 
fine count adjustment will not be made.
    (2) The adjustment for upland cotton specified in paragraph (f)(1) 
of this section will be determined by deducting from AWP:
    (i) The difference between FE, and
    (A) During the period when only one daily price quotation for each 
growth quoted for ``fine count'' cotton, CFR Far East, is available the 
average of the quotations for the corresponding Friday through Thursday 
for the three lowest-priced growths of the growths quoted for ``fine 
count'' cotton, CFR Far East (Far East fine count price) or
    (B) During the period when both current Far East shipment prices 
and forward Far East shipment prices are available for the growths 
quoted for ``fine count'' cotton, CFR Far East, the result calculated 
by the average of the current Far East shipment prices for the 
preceding Friday through Thursday for the three lowest-priced growths 
of the growths quoted for ``fine count'' cotton, CFR Far East (Far East 
fine count price) minus
    (ii) The difference between the applicable loan rate for an upland 
cotton crop for M 1\3/32\-inch, leaf 3, (micronaire 3.5 through 3.6 and 
4.3 through 4.9, strength 25.5 through 29.4 grams per tex, length 
uniformity 79.5 through 82.4 percent) cotton and the loan rate for an 
upland cotton crop for SM 1\1/8\-inch, leaf 2, (micronaire 3.5 through 
3.6 and 4.3 through 4.9, strength 25.5 through 29.4 grams per tex, 
length uniformity 79.5 through 82.4 percent) cotton.
    (3) Regarding the determination of the Far East fine count price 
under paragraph (f)(2)(i) of this section:
    (i) If no quotes are available for one or more days of the 5-day 
period, the available quotes will be used;
    (ii) If quotes for three growths are not available for any day in 
the 5-day period, that day will not be considered; and
    (iii) If quotes for three growths are not available for at least 3 
days in the 5-day period, that week will not be considered, in which 
case the adjustment determined as specified in paragraph (f)(2) of this 
section for the latest available week will continue to be applicable.
    (g) In the determination of FE as specified in paragraph (a)(2) of 
this section, the Far East coarse count price specified in paragraph 
(e)(2)(i)(B) of this section, and the Far East fine count price as 
specified in paragraph (f)(2)(i)(B) of this section, CCC will use 
either current Far East shipment prices, forward Far East shipment 
prices, or any combination thereof to determine FE or the Far East 
coarse count price or the Far East fine count price used in the 
determination of the adjustment for upland cotton specified in 
paragraphs (e)(1) and (f)(1) of this section and determined as 
specified in paragraphs (e)(2) and (f)(2) of this section to prevent 
distortions in such adjustment.
    (h) For particular bales, the AWP determined as specified in 
paragraph (c) of this section, will be subject to further adjustments 
to a value no less than zero, as CCC determines, based on the Schedule 
of Premiums and Discounts as announced for the loan program for an 
upland cotton crop.

0
23. Revise Subpart C to read as follows.

Subpart C--Economic Adjustment Assistance to Users of Upland Cotton

Sec.  1427.100 Applicability.
Sec.  1427.101 Eligible upland cotton.
Sec.  1427.102 Eligible domestic users.
Sec.  1427.103 Upland cotton Domestic User Agreement.
Sec.  1427.104 Payment rate.
Sec.  1427.105 Payment.

Subpart C--Economic Adjustment Assistance to Users of Upland Cotton


Sec.  1427.100  Applicability.

    (a) Regulations in this subpart are applicable beginning August 1, 
2008. These regulations specify the terms and conditions under which 
CCC will make payments to eligible domestic users who entered into an 
Upland Cotton Domestic User Agreement with CCC to participate in the 
upland cotton domestic user

[[Page 65724]]

program under section 1207 of the Food, Conservation, and Energy Act of 
2008 (Pub. L. 110-246, referred to commonly as the ``2008 Farm Bill'').
    (b) CCC will prescribe forms used in administering Economic 
Adjustment Assistance to Users of Upland Cotton.


Sec.  1427.101  Eligible upland cotton.

    (a) For purposes of this subpart, eligible upland cotton is baled 
upland cotton, regardless of origin, that is opened by an eligible 
domestic user on or after August 1, 2008, and is either:
    (1) Baled lint, including baled lint classified by USDA's 
Agricultural Marketing Service as Below Grade;
    (2) Loose samples removed from upland cotton bales for 
classification purposes that have been rebaled;
    (3) Semi-processed motes that are of a quality suitable, without 
further processing, for spinning, papermaking, or production of non-
woven fabric; or
    (4) Re-ginned (processed) motes.
    (b) Eligible upland cotton must not be:
    (1) Cotton for which a payment, under the provisions of this 
subpart, has been made available;
    (2) Raw (unprocessed) motes, pills, linters, or other derivatives 
of the lint cleaning process; or
    (3) Textile mill wastes.


Sec.  1427.102  Eligible domestic users.

    (a) For purposes of this subpart, a person regularly engaged in the 
business of opening bales of eligible upland cotton for the purpose of 
spinning, papermaking, or processing of non-woven cotton fabric in the 
United States, who has entered into an agreement with CCC to 
participate in the upland cotton user program, will be considered an 
eligible domestic user.
    (b) Applications for payment under this subpart must contain 
documentation required by the provisions of the Upland Cotton Domestic 
User Agreement and other instructions that CCC issues.


Sec.  1427.103  Upland cotton Domestic User Agreement.

    (a) Payments specified in this subpart will be made available to 
eligible domestic users who have entered into an Upland Cotton Domestic 
User Agreement with CCC and who have complied with the terms and 
conditions in this subpart, the Upland Cotton Domestic User Agreement, 
and instructions issued by CCC.
    (b) Upland Cotton Domestic User Agreements may be obtained from 
Contract Reconciliation Division, Kansas City Commodity Office (KCCO), 
P.O. Box 419205, Stop 8758, Kansas City, Missouri 64141-6205. In order 
to participate in the program authorized by this subpart, domestic 
users must execute the Upland Cotton Domestic User Agreement and 
forward the original and one copy to KCCO.


Sec.  1427.104  Payment rate.

    (a) Beginning August 1, 2008 and ending July 31, 2012, the payment 
rate for purposes of calculating payments as specified in this subpart 
will be 4 cents per pound.
    (b) Beginning August 1, 2012, the payment rate for purposes of 
calculating payments as specified in this subpart will be 3 cents per 
pound.


Sec.  1427.105  Payment.

    (a) Payments specified in this subpart will be determined by 
multiplying:
    (1) The payment rate, determined as specified in Sec.  1427.104, by
    (2) The net weight (gross weight minus the weight of bagging and 
ties), determined as specified in paragraph (b) of this section, of 
eligible upland cotton bales an eligible domestic user opens during the 
immediately preceding calendar month.
    (b) For the purposes of this subpart, the net weight will be 
determined based on the net weight of the cotton used, but not to 
exceed the last available certified weight;
    (c) For the purposes of this subpart, eligible upland cotton will 
be considered consumed by the domestic user on the date the bale is 
opened for consumption.
    (d) Payments specified in this subpart will be made available upon 
application for payment and submission of supporting documentation, as 
required by the CCC-issued provisions of the Upland Cotton Domestic 
User Agreement.
    (e) All payments received by the agreement holder must be used for 
purposes as specified in section 1207 of the Food, Conservation, and 
Energy Act of 2008 (Pub. L. 110-246, referred to commonly as the 2008 
Farm Bill). Authorized expenditures include acquisition, construction, 
installation, modernization, development, conversion, or expansion of 
land, plant, buildings, equipment, facilities, or machinery. Such 
capital expenditures must be directly attributable and certified as 
such by the user for the purpose of manufacturing upland cotton into 
eligible cotton products in the United States.

0
24. Amend Sec.  1427.160 as follows:
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a. Amend paragraph (a) by removing the words ``2002 through 2007'' and 
adding, in their place, ``2008 through 2012.''
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b. Revise paragraph (b) to read as set forth below.
0
c. Amend paragraph (c) by removing the second sentence.


Sec.  1427.160  Applicability.

* * * * *
    (b) Loan rates and the forms that are used in administering the 
recourse seed cotton loan program for a crop of cotton are available in 
FSA State and county offices. Loan rates will be based on the base 
quality loan rate for upland cotton and the national average loan rate 
for extra long staple cotton.
* * * * *

Subpart F--[Removed and Reserved]

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25. Remove and reserve Subpart F.

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26. Amend Sec.  1427.1203 as follows:
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a. Amend paragraphs (a)(1) and (a)(2) by removing the date ``October 1, 
1999'' and adding, in its place, the date ``June 18, 2008.''

Subpart H--[Removed]

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27. Remove Subpart H.

    Signed at Washington, DC, on October 30, 2008.
Thomas B. Hofeller,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. E8-26343 Filed 10-31-08; 4:15 pm]
BILLING CODE 3410-05-P