[Federal Register Volume 84, Number 66 (Friday, April 5, 2019)]
[Proposed Rules]
[Pages 13562-13565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-06699]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1423

[Doc. No. AMS-FTPP-18-0085]


Delivery and Shipping Standards for Cotton Warehouses

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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SUMMARY: The U.S. Department of Agriculture's (USDA) Commodity Credit

[[Page 13563]]

Corporation (CCC) proposes to amend the regulations that specify the 
requirements for CCC-approved warehouses storing and handling cotton. 
The amendment would change how warehouse operators account for bales 
made available for shipment (BMAS) and how CCC determines BMAS 
compliance. The current regulation allows bales that are made available 
for shipment by the warehouse operator but not picked up (BNPU) by the 
shipper to count for up to two reporting weeks when calculating and 
reporting BMAS for the reporting week. This amendment proposes to limit 
BNPU to be counted for one week, with BMAS to include only bales 
actually shipped or not picked up for that reporting week. CCC also 
proposes to allow two additional options for the warehouse operator to 
meet the 4.5% cotton flow requirement by averaging either the BMAS for 
the reporting week and the week prior to the reporting week, or by 
averaging the BMAS for the reporting week and the week after the 
reporting week. In addition, CCC proposes to amend the regulations to 
reflect the transfer of warehouse programs and activities from USDA's 
Farm Service Agency to AMS in 2018.

DATES: Comments must be received by May 6, 2019.

ADDRESSES: Comments should be submitted electronically at 
www.regulations.gov. Comments may also be submitted to: Dan Schofer, 
AMS, 1400 Independence Ave. SW, Stop 3061, Room 2555 South Building, 
Washington, DC 20250-3061. Comments will be made available for public 
inspection at Room 2530-S of the above address during regular business 
hours or electronically at www.regulations.gov. Comments received will 
be posted without change, including any personal information provided. 
All comments should reference the docket number AMS-FTPP-18-0085, the 
date of submission, and the page number of this issue of the Federal 
Register.

FOR FURTHER INFORMATION CONTACT: Dan Schofer at 
[email protected] or 202-690-2434.

SUPPLEMENTARY INFORMATION: In order to provide cotton warehouse 
operators the flexibility to address real-time scheduling changes and 
market demands faced by cotton merchants and shippers, CCC would use a 
two-week rolling average of BMAS to determine a warehouse operator's 
compliance with the minimum cotton flow rate of 4.5% of applicable 
storage capacity.
    For example, a cotton warehouse operator has scheduled 4.5% of the 
warehouse's applicable storage capacity to be available for shipment 
for several consecutive weeks. The week before a load is scheduled to 
be picked-up, a shipper requests to change its load out date to an 
earlier load out date in the preceding week, for an amount representing 
0.25% of the warehouse's applicable storage capacity. If the warehouse 
operator has that specific load (0.25% of licensed capacity) already 
staged for a scheduled delivery the following week, that load could be 
picked up earlier, in the week preceding the original load out date. 
Without using a two-week rolling average and without making any 
additional bale adjustments, the warehouse operator would be considered 
to have delivered cotton without unnecessary delay for the first week 
because its BMAS is 4.75%, which is greater than the required 4.5%. 
However, the warehouse operator would not be considered to have 
delivered cotton without unnecessary delay during the second week 
because its BMAS is 4.25%, which is less than he required 4.5%. In this 
example, the option to calculate BMAS compliance using the rolling 
average of the reporting week and the week preceding the reporting week 
would result in a determination by CCC that the cotton warehouse 
operator is in compliance with a BMAS of 4.5% for the reporting week.
    In another example, one that illustrates the third option of 
meeting the cotton flow requirement, a cotton warehouse operator 
schedules 4.5% of the applicable storage capacity for delivery in each 
of three consecutive weeks. During the first week, the cotton warehouse 
operator actually makes available for shipment 6.0% of the applicable 
storage capacity. During the second week, the cotton warehouse operator 
only makes 2.0% of applicable storage capacity available for shipment. 
During the third week, the cotton warehouse operator makes 7.0% of 
applicable storage capacity available for shipment. In this example, 
the cotton warehouse operator is considered to have delivered cotton 
without unnecessary delay during the first and the third weeks. During 
the second week however, the CCC will use the two-week rolling average 
of either the applicable week and the immediately preceding week, which 
results in an average BMAS of 4.0%, or the two-week rolling average of 
the applicable week and the immediately succeeding week, which results 
in an average BMAS of 4.5% to make its compliance determination for the 
second week. Using the two-week rolling average of the second and third 
week to calculate the BMAS for the second week allows the CCC to 
consider the cotton warehouse operator to have delivered cotton without 
unnecessary delay for that second week because the 4.5% average met the 
cotton flow requirement.
    This proposed rule change would continue to require warehouse 
operators to report their BMAS each week based upon the revised 
definition of BMAS. CCC would determine compliance on an individual 
reporting week, or if needed, use an option of one of the rolling 
average calculations of BMAS for two consecutive reporting weeks. In 
the event that CCC uses the average of the applicable week and the 
immediately succeeding week, CCC would determine compliance for the 
applicable week after it receives the data from the immediately 
succeeding week. These options would allow cotton warehouse operators 
to meet the cotton flow requirements of the regulation while being 
flexible to the needs of the shipping and merchant industries.

Executive Orders 12866 and 13771, and Initial Regulatory Flexibility 
Analysis

    This rule does not meet the definition of a significant regulatory 
action contained in section 3(f) of Executive Order 12866 and is not 
subject to review by the Office of Management and Budget (OMB). 
Additionally, because this rule does not meet the definition of a 
significant regulatory action it does not trigger the requirements 
contained in Executive Order 13771. See OMB's Memorandum titled 
``Interim Guidance Implementing Section 2 of the Executive Order of 
January 30, 2017, titled `Reducing Regulation and Controlling 
Regulatory Costs' '' (February 2, 2017).
    Pursuant to the requirements set forth in the Regulatory 
Flexibility Act (RFA) [5 U.S.C. 601 et seq.], CCC has considered the 
economic effect of this action on small entities and has determined 
that this proposed rule would not have a significant economic impact on 
a substantial number of small business entities. The purpose of the RFA 
is to fit regulatory actions to the scale of businesses subject to such 
actions in order that small businesses will not be unduly burdened.
    Currently, there are 326 CCC-approved warehouses that store cotton. 
The U.S. Small Business Administration's Table of Small Business Size 
Standards matched to the North American Industry Classification System 
(NAICS) Codes identifies small business size by average annual receipts 
or by the average number of employees at a firm. This information can 
be found

[[Page 13564]]

at 13 CFR parts 121.104, 121.106, and 121.201. CCC estimates that 50 
CCC-approved warehouses that store cotton would be considered small 
businesses according to SBA standards.
    Sizes of cotton warehouses vary in size as well as business type, 
including small, independent country warehouses, small to large sized 
warehouses owned by cooperatives of producers, and small to large sized 
warehouses owned by corporate shippers/merchants. The effects of this 
proposed rule are not expected to be disproportionately greater or 
lesser for small businesses than for large businesses.
    USDA is committed to complying with the E-Government Act of 2002 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. Accordingly, CCC 
developed options for companies requesting service to do so 
electronically.

Executive Order 13175

    This action has been reviewed in accordance with the requirements 
of Executive Order 13175, Consultation and Coordination with Indian 
Tribal Governments. The review reveals that this regulation would not 
have substantial and direct effects on Tribal governments and would not 
have significant Tribal implications.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This proposed rule is not intended to have 
retroactive effect. The USDA has not identified any relevant Federal 
rules that duplicate, overlap, or conflict with this proposed rule.
    The warehouse operator may resolve any claim for noncompliance from 
any entity, such as a merchant or shipper, other than CCC with the 
cotton shipping standard in a court of competent jurisdiction or 
through mutually agreed upon arbitration procedures. CCC does not have 
authority to limit an entity from filing suit in a court of law against 
another entity.
    The warehouse operator may request that CCC reconsider adverse 
actions when the warehouse operator establishes that the reasons for 
the action have been remedied or requests reconsideration of the 
action.

Paperwork Reduction Act

    The cotton information covered in this proposed rule is the weekly 
reporting of BMAS by cotton warehouses. BMAS is reported through the 
Electronic Warehouse Receipt Inc. (EWR Inc.) system, to which AMS has 
access. EWR Inc. is a USDA licensed provider company and generally 
contains information that is exempt from the Paperwork Reduction Act 
(44 U.S.C. Chapter 35) because it is usual and customary business 
information. The proposed change in the regulation would not change the 
burden associated with reporting BMAS, which is required to be reported 
weekly.

Background and Proposed Revisions

    AMS administers the CCC-approved warehouse program for CCC. This 
responsibility includes entering into contracts for the storage and 
handling of CCC-interest commodities with warehouses. The operators of 
those approved warehouses are required to comply with CCC regulations, 
which include reporting information about the stored commodities to 
CCC. The specific requirements that operators of approved warehouses 
must meet are specified in the regulations at Sec.  7 CFR 1423 
``Commodity Credit Corporation Approved Warehouses'' and in the signed 
storage agreement between CCC and the warehouse operator for each type 
of commodity.
    Operators of CCC-approved cotton warehouses are currently required 
to report BMAS, among other data, to the CCC on a weekly basis. Under 
the current rule at Sec.  7 CFR 1423.11(b)(1)(ii), bales that were 
scheduled and ready for delivery in a previous week, but not picked up 
by the shipper, remained available for loading and for which another 
shipping date had not been established could be counted toward BMAS for 
up to two weeks. This proposed rule would clarify that bales scheduled 
and ready for delivery during a week but not picked up by the end of 
that reporting week can only be reported as BMAS for that one week that 
such bales were made available for shipment. The National Cotton 
Council, on behalf of the U.S. cotton industry, requested this change 
in order to increase the cotton flow rate to domestic and foreign 
manufacturers, to more quickly respond to domestic and international 
market needs, and to optimize performance by approved cotton warehouse 
operators. This change is being made to simplify the calculation of 
BMAS so that certain bales do not need to be accounted for beyond the 
applicable reporting week. The proposed rule would change how BNPU are 
counted in the weekly report to CCC. It would not change any warehouse 
tariffs or fees.
    A conforming change would also be made to CCC's Cotton Storage 
Agreement (Form CCC-823). The storage agreement is the agreement 
between CCC and the cotton warehouse operator on the requirements that 
the warehouse operator must meet for storing and handling CCC-interest 
cotton. The standard cotton storage agreement form and the subsequent 
amendments are available on the USDA website at: https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/CCC823.PDF.
    There is no expected cost to warehouses or CCC of reporting BMAS as 
specified in this proposed rule. The proposed rule would only change 
how bales made available but not picked up by the shipper or merchant 
are reported by the warehouse operator to CCC in the weekly report. It 
does not change warehouse tariffs or restocking fees.
    This change is intended to improve the efficiency of cotton flow 
from U.S. producers and cotton warehouses to shippers, and ultimately 
to cotton manufacturers, by more accurately reporting cotton that is 
available for shipment. Under the current rule, it has become apparent 
that certain bales may have been scheduled and ready for shipment but 
were never picked up for two weeks or more, potentially inflating BMAS 
calculations. This proposed rule change is meant to more accurately 
reflect how the cotton industry actually makes bales available for 
shipment during that one week. Availability and consistent supply of 
cotton are crucial for the U.S. cotton industry in order to compete 
with other cotton producing nations and having accurate information 
about bales made available for shipment contributes to more efficient 
and effective marketing of U.S. cotton.

List of Subjects in 7 CFR Part 1423

    Agricultural commodities, Cotton, Honey, Oilseeds, Reporting and 
recordkeeping requirements, Surety bonds, Warehouses.

    For the reasons stated in the preamble, the Commodity Credit 
Corporation proposes to amend 7 CFR part 1423 as follows:

PART 1423--COMMODITY CREDIT CORPORATION APPROVED WAREHOUSES

0
1. The authority citation for part 1423 continues to read as follows:

    Authority:  15 U.S.C. 714b and 714c.

0
2. Amend Sec.  1423.2 by revising it to read as follows:


Sec.  1423.2   Administration.

    On behalf of CCC, the Agricultural Marketing Service (AMS) will 
administer this part under the supervision of the AMS Administrator.

[[Page 13565]]

0
3. Amend Sec.  1423.3 by removing the definition for ``KCCO.''
0
4. Amend Sec.  1423.7 by revising paragraph (d) to read as follows:


Sec.  1423.7   Net Worth Alternatives.

* * * * *
    (d) Other alternative instruments and forms of financial assurance 
as the AMS Administrator determines appropriate to secure the warehouse 
operator's compliance with this section.
0
 5. Amend Sec.  1423.8 by revising paragraph (b) to read as follows:


Sec.  1423.8   Approval or rejection.

* * * * *
    (b) CCC will notify the warehouse operator of rejection under this 
part in writing. The notification will state the causes for rejection. 
CCC will reconsider a warehouse for approval when the warehouse 
operator establishes that the reasons for rejection have been remedied 
or requests reconsideration of the action and presents to the Director, 
Warehouse and Commodity Management Division, AMS, in writing, 
information in support of such request. The warehouse operator may, if 
dissatisfied with the Director's determination, obtain a review of the 
determination and an informal hearing by submitting a request with the 
AMS Administrator. Appeals shall be as prescribed in part 780 of this 
title.
0
 6. Amend Sec.  1423.11 by revising paragraphs (a)(2) and (b)(1) to 
read as follows:


Sec.  1423.11   Delivery and shipping standards for cotton warehouses.

    (a) * * *
    (2) Be considered to have delivered cotton without unnecessary 
delay if the warehouse operator has made available for shipment at 
least 4.5 percent of its applicable storage capacity in effect, 
measured as the BMAS:
    (i) During the relevant week of shipment, or
    (ii) Calculated as the two-week, rolling average of the BMAS for 
the relevant week of shipment and the BMAS for the immediately 
preceding week, or
    (iii) Calculated as the two-week, rolling average of the BMAS for 
the relevant week of shipment and the BMAS for the immediately 
succeeding week.
    (b) * * *
    (1) Bales made available for shipment (BMAS) during such week is 
defined as any cotton bales that have been delivered or are scheduled 
and ready for delivery but not picked up during such week.
* * * * *
0
7. Amend Sec.  1423.13 by revising paragraph (a) to read as follows:


Sec.  1423.13  Appeals, suspensions, and debarment.

    (a) After initial approval, warehouse operators may request that 
CCC reconsider adverse actions when the warehouse operator establishes 
that the reasons for the action have been remedied or requests 
reconsideration of the action and presents to the Director, Warehouse 
and Commodity Management Division, AMS, in writing, information in 
support of such request. The warehouse operator may, if dissatisfied 
with the Director's determination, obtain a review of the determination 
and an informal hearing by submitting a request to the AMS 
Administrator. Appeals shall be as prescribed in part 780 of this 
title, and under such regulations the warehouse operator shall be 
considered as a ``participant.''
* * * * *

    Dated: April 2, 2019.
Robert Stephenson,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 2019-06699 Filed 4-4-19; 8:45 am]
 BILLING CODE 3410-02-P