[Federal Register Volume 84, Number 120 (Friday, June 21, 2019)]
[Rules and Regulations]
[Pages 29030-29033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13089]


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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: Final rule.

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SUMMARY: This rule amends the regulations that specify the storage and 
handling of cotton at warehouses approved by the Commodity Credit 
Corporation (CCC). The amendment modifies the weekly accounting and 
reporting for cotton bales made available for shipment to assure 
compliance with CCC requirements. This rule also revises the 
regulations to reflect transfer of administrative oversight of 
warehouse programs and activities from the Farm Service Agency (FSA) to 
the Agricultural Marketing Service (AMS).

DATES: Effective June 24, 2019.

FOR FURTHER INFORMATION CONTACT: Dan Schofer, Cotton Program Manager, 
Warehouse Commodity Management Division, AMS Fair Trade Practices 
Program, USDA, 1400 Independence Ave. SW, Stop 3061, Room 2555-South, 
Washington, DC 20250-3061; email: [email protected], or 
telephone: 202-690-2434.

SUPPLEMENTARY INFORMATION: The Commodity Credit Corporation Charter Act 
(15 U.S.C. 714) authorizes CCC to enter into storage agreements with 
private individuals and companies to allow warehouse operators to store 
commodities owned by CCC or pledged as security to CCC for marketing 
assistance loans. Warehouse operators who enter into these agreements 
must comply with regulations established by the United States 
Department of Agriculture (USDA) at 7 CFR part 1423--Commodity Credit 
Corporation Approved Warehouses. Section 1423.11 specifies delivery and 
shipping standards for cotton warehouses. Under Sec.  1423.11, cotton 
warehouse operators are required to deliver stored cotton

[[Page 29031]]

without unnecessary delay. To assure delivery without unnecessary 
delay, warehouse operators are required to maintain an inventory of 
bales made available for shipment (BMAS) of at least 4.5 percent of the 
warehouse's storage capacity in effect during the relevant week of 
shipment. Warehouse operators are required to report the number of BMAS 
to CCC on a weekly basis.
    Previously, Sec.  1423.11 of the regulations allowed bales 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 rule 
revises the definition of BMAS in Sec.  1423.11(b) by allowing BNPU to 
be counted for only one week, with BMAS to include only bales actually 
shipped or not picked up for that reporting week. Under the revised 
regulations, the warehouse operator can meet the 4.5% cotton flow 
requirement by averaging the BMAS for the current reporting week with 
either the BMAS for the previous week or the BMAS for following week. 
Under revised Sec.  1423.11(a), CCC will 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. This change is 
intended to give cotton warehouse operators the flexibility to address 
real-time scheduling changes and market demands faced by cotton 
merchants and shippers.
    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 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, 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 can 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 rule continues to require warehouse operators to report their 
BMAS each week based upon the revised definition of BMAS. CCC will 
determine compliance on the basis of an individual reporting week, or 
if needed, use one of the optional rolling average calculations of BMAS 
for two consecutive reporting weeks. If CCC uses the average of the 
applicable week and the immediately succeeding week, CCC will determine 
compliance for the applicable week after it receives the data from the 
immediately succeeding week. These options 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.
    Finally, this rule revises Sec.  1423.2 to reflect the transfer of 
responsibility for administration of CCC warehouse programs and 
activities from FSA to AMS in 2018. Corresponding changes are made to 
Sec.  1423.3, removing the definition for the Kansas City Commodity 
Office (KCCO) from the list of definitions, and to Sec. Sec.  
1423.7(d), 1423.8(b), and 1423.13, replacing references to FSA and KCCO 
with references to AMS.
    A proposed rule concerning this action was published in the Federal 
Register on April 5, 2019 (84 FR 13562), and a 30-day comment period 
ending May 6, 2019, was provided to allow interested persons to respond 
to the proposal. Three comments were received.
    All three comments, including one comment submitted on behalf of 
eight cotton industry associations, expressed support for the proposed 
changes. Commenters explained that the proposed changes to BMAS 
accounting should have a positive effect on the flow of U.S. cotton 
into the market and improve shipping and tracking efficiency.
    One commenter asked why other recommendations from the industry at 
a National Cotton Council meeting were not addressed in the proposed 
rule. One recommendation pertained to the revision of the Cotton 
Storage Agreement (Form CCC-823) (CSA), which must be signed and 
complied with by warehouses storing CCC-interest cotton. The other 
recommendation pertained to changes to the licensing agreement between 
USDA and EWR, Inc., the licensed provider of electronic warehouse 
receipts for cotton.
    The proposed rule explained that conforming changes to the CSA 
would be made to reflect the regulatory revisions in the proposed rule, 
meaning the change in reporting BMAS. The other recommendations noted 
by the commenter refer to actions outside the scope of this final rule. 
Additional changes to the CSA are being made to reflect the transfer of 
administrative oversight for the program from FSA to AMS. Additionally, 
AMS has been working closely with the National Cotton Council to 
address industry recommendations regarding staging orders, shipping 
orders, and shipping update files contained within EWR provider 
services. AMS addresses compliance in the Cotton Storage Agreement 
between CCC and individual warehouse operators. AMS and the National 
Cotton Council have agreed to provide notices to all cotton warehouses, 
shippers, and merchants regarding the regulatory changes in this final 
rule and the conforming changes to the CSA. EWR will notify its 
customers

[[Page 29032]]

separately of any EWR programming changes and new requirements.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments received.

Executive Orders 12866 and 13771, and Final 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 rule does 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. 
CCC estimates that approximately 50 CCC-approved warehouses would be 
considered small businesses, according to standards established by the 
U.S. Small Business Administration (13 CFR part 121), which identifies 
small business size by average annual receipts or by the average number 
of employees at a firm.
    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 requirements that 
warehouse operators must deliver stored cotton without unnecessary 
delay and make at least 4.5 percent of their applicable storage 
capacity available for shipment apply to all sizes of warehouses. Thus, 
the effects of this rule are not disproportionately greater or lesser 
for small businesses than for large businesses.

E-Gov

    USDA 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. Accordingly, CCC offers 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 rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
USDA has not identified any relevant Federal rules that duplicate, 
overlap, or conflict with this rule.
    A warehouse operator may resolve any claim regarding noncompliance 
with the shipping standards by any entity other than CCC, such as a 
merchant or shipper, in a court of competent jurisdiction or through 
mutually agreed upon arbitration procedures. CCC does not have 
authority to prohibit one entity from filing suit against another in a 
court of law.
    When addressing compliance matters with CCC, the warehouse operator 
may seek reconsideration of enforcement decisions after demonstrating 
that corrective actions have been taken.

Paperwork Reduction Act

    The cotton warehouse information collection required in this final 
rule is the weekly reporting of BMAS by cotton warehouses. BMAS is 
reported through the EWR system, to which AMS has access. Authority to 
collect the information gathered by EWR, Inc., is provided in Public 
Law 107-171, the Farm Security and Rural Investment Act of 2002, which 
also exempts the information collection from the Paperwork Reduction 
Act (44 U.S.C. Chapter 35). The regulatory changes in this final rule 
will not change the burden associated with reporting BMAS, which must 
be reported weekly. This rule only changes the way CCC accounts for the 
information collected and uses it to determine compliance with cotton 
delivery and shipping requirements.

Background

    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 7 CFR part 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 CCC on a weekly basis. Prior to 
the revisions in this rule, bales that were scheduled and ready for 
delivery in a previous week, but not picked up by the shipper, and for 
which another shipping date had not been established, remained 
available for loading and could be counted toward BMAS for up to two 
weeks. This rule clarifies that bales scheduled and ready for delivery 
during a specific week but not picked up by the end of that reporting 
week can only be reported as BMAS for the 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 rule revises the accounting for BNPU in the weekly 
report to CCC. It does not change any warehouse tariffs or fees.
    A corresponding change is also made to CCC's Cotton Storage 
Agreement (Form CCC-823). The storage agreement between CCC and the 
cotton warehouse operator specifies the requirements the warehouse 
operator must meet for storing and handling CCC-interest cotton. The 
standard cotton storage agreement form is available on the USDA website 
at: https://forms.sc.egov.usda.gov//efcommon/eFileServices/eForms/CCC823.PDF. Additional changes to the regulations reflect the transfer 
of administrative responsibility for warehouse management from FSA to 
AMS.
    The revisions in this rule are intended to improve the efficiency 
of cotton flow from U.S. producers and cotton

[[Page 29033]]

warehouses to shippers, and ultimately to cotton manufacturers, by more 
accurately reporting cotton that is available for shipment. Before the 
revisions in this final rule, accounting for certain bales that may 
have been scheduled and ready for shipment but were not picked up for 
two weeks or more, potentially inflated BMAS calculations. This rule 
change is meant to more accurately reflect how the cotton industry 
actually makes bales available for shipment each week. Availability and 
consistent supply of cotton are crucial for the U.S. cotton industry in 
order to compete with other cotton producing nations. Having accurate 
information about bales made available for shipment contributes to more 
efficient and effective marketing of U.S. cotton.

Effective Date

    The Administrative Procedure Act (5 U.S.C. 553) requires the 
publication of a substantive rule 30 days before its effective date, 
unless the rule grants or recognizes an exemption or relieves a 
restriction (5 U.S.C. 553(d)(1)), or the agency finds good cause for 
excepting the rule from the 30-day notice requirement (5 U.S.C. 
553(d)(3)). USDA finds that it is unnecessary and contrary to the 
public interest to postpone the effective date of this rule for 30 days 
after publication in the Federal Register. The revisions herein 
represent a relaxation of the regulations and provide additional 
flexibilities to the cotton industry, which recommended the changes. 
The revisions are necessary prior to the beginning of the 2019 cotton 
shipping season, which begins July 1 in south Texas. Interested parties 
were invited to comment on the proposed rule, and three comments were 
received, all of which supported the proposed actions. A comment in 
behalf of eight cotton industry associations of producers, ginners, 
warehouse operators, shippers, marketers, and textile manufacturers 
urged USDA to finalize the revision in time for the 2019 shipping 
season. It would be contrary to the public interest to unnecessarily 
delay implementation of this final rule, thereby potentially disrupting 
the orderly shipping of cotton as required by CCC. Moreover, postponing 
the effective date of the final rule for 30 days is unnecessary to 
allow for adjustment of behavior because none is required of regulated 
entities, who will continue to file the same weekly BMAS reports they 
have in the past. Therefore, good cause exists for making this rule 
effective 1 day after publication in the Federal Register.

List of Subjects in 7 CFR Part 1423

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

    For the reasons set forth in the preamble, 7 CFR part 1423 is 
amended 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. Revise Sec.  1423.2 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.


Sec.  1423.3   [Amended]

0
3. Amend Sec.  1423.3 by removing the definition for ``KCCO.''

0
4. Amend Sec.  1423.7 by removing ``, or'' at the end of paragraph (c) 
and adding ``; or'' in its place and 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 bales made available for shipment (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) 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: June 14, 2019.
Robert Stephenson,
Executive Vice President, Commodity Credit Corporation.
[FR Doc. 2019-13089 Filed 6-20-19; 8:45 am]
 BILLING CODE 3410-02-P