1994 Cotton Loan and LDP Provisions

DEPARTMENT OF AGRICULTURE

7 CFR Part 1427

RIN 0560-AD82

1994 Cotton Loan and LDP Provisions

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Interim rule.

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SUMMARY: This interim rule amends the regulations with respect to the

upland and extra long staple cotton loans and loan deficiency payments

(LDP) made by the Commodity Credit Corporation (CCC) in accordance with

The Agricultural Act of 1949 (the 1949 Act), as amended. The amendments

made by this interim rule will provide: greater clarity; enhance the

administration of CCC programs by providing uniformity between CCC

price support programs; eliminate obsolete provisions; provide more

authority to State and county committees in administering the programs;

lessen administrative actions CCC imposes on producers who violate the

loan and LDP agreements; and correct errors.

DATES: Interim rule effective August 2, 1994. Comments must be received

on or before September 1, 1994 in order to be assured of consideration.

ADDRESSES: Submit comment to Director, Cotton, Grain, and Rice Price

Support Division, Agricultural Stabilization and Conservation Service,

United States Department of Agriculture (USDA), P.O. Box 2415,

Washington, DC 20013-2415; telephone 202-720-7641. Comments received

may be inspected between 9 a.m. and 4:30 p.m., Monday through Friday,

except holidays, in room 3623, South Agriculture Building, USDA, 14th

Street and Independence Avenue, Washington, DC.

FOR FURTHER INFORMATION CONTACT: Philip Sharp, Program Specialist,

Cotton, Grain, and Rice Price Support Division, Agricultural

Stabilization and Conservation Service, USDA, P.O. Box 2415,

Washington, DC 20013-2415; telephone 202-720-7988.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be not-significant for purposes of

Executive Order 12866 and therefore has not been reviewed by OMB.

Federal Assistance Program

The title and number of the Federal Assistance Program, as found in

the Catalog of Federal Domestic Assistance, to which this rule applies

are: Commodity Loans and Purchases--10.051.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not

applicable because CCC is not required by 5 U.S.C. 553 or any other

provision of law to publish a notice of proposed rulemaking with

respect to the subject matter of these determinations.

Environmental Evaluation

It has been determined by an environmental evaluation that this

action will not have a significant impact on the quality of human

environment.

Executive Order 12372

This program is not subject to the provisions of Executive Order

12372, which requires intergovernmental consultation with State and

local officials. See the Notice related to 7 CFR part 3015, subpart V,

published at 48 FR 29115 (June 24, 1983).

Executive Order 12778

This rule has been reviewed pursuant to Executive Order 12778. To

the extent State and local laws are in conflict with these regulatory

provisions, it is the intent of CCC that the terms of the regulations

prevail. The provisions of this rule are not retroactive. Prior to any

judicial action in a court of jurisdiction, administrative review under

7 CFR part 780 must be exhausted.

Paperwork Reduction Act

Public reporting burden for the information collections contained

in this regulation with respect to price support programs is estimated

to average 15 minutes per response, including the time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and completing and reviewing the

collection of information. The information collections have previously

been cleared under the current regulations by OMB, and assigned OMB

Nos. 0560-0087 and 0560-0129. The content and format of the information

collections have not changed as a result of this amendment to 7 CFR

part 1427; however, the frequency of reporting has been reduced. ASCS

will submit a burden correction worksheet to OMB for review.

Comments

Since producers are currently making decisions regarding upland and

extra long staple cotton which may be pledged as collateral for CCC

price support loans, it has been determined that it is impractical and

contrary to the public interest for CCC to engage in proposed

rulemaking requirements with respect to the provisions of this rule.

Accordingly, the provisions of this interim rule are effective upon

publication in the Federal Register. Comments are requested, however,

and will be taken into consideration when developing the final rule.

This interim rule will be scheduled for review so that a final document

discussing comments received and any amendments required can be

published in the Federal Register as soon as possible.

Background

The 1949 Act sets forth the statutory authority for CCC price

support programs. CCC price support programs are intended to stabilize

market prices and provide interim financing and assistance to producers

in the orderly marketing of eligible commodities.

This interim rule amends regulations found at 7 CFR part 1427 to

provide rules for administering CCC price support programs for the 1994

and subsequent crop years.

Section 1427.1 (b) is amended to clarify what information is

available in State and county Agricultural Stabilization and

Conservation Service offices.

Section 1427.3 is amended to: (a) correct a typographical error;

and (b) add the definition of ``warehouse receipt''.

This interim rule amends Sec. 1427.4(b) to add references to

receivers, guardians, or trustees which were inadvertently omitted.

This interim rule amends Sec. 1427.5(b)(1)(v)(B)(4) to clarify that

certain extra long staple cotton is ineligible for CCC price support

loans.

This interim rule amends Sec. 1427.5(c)(2)(ii) by removing the

reference to incentive payments and thereby allow purchases of cotton

to make such payments to a producer without affecting the ability of

the producer to obtain a price support loan with respect to such

cotton.

This interim rule amends Sec. 1427.6(b) to clarify who may disburse

loan proceeds to approved cooperative marketing associations.

Section 1427.11 refers to warehouse receipts that may be used as

collateral for CCC price support loans. This section has been revised

to recognize the existence of electronic receipts by removing specific

statements such as ``stamped'' and ``initialed''.

Provisions for taking administrative offsets are provided in part 3

of this title and part 1403 of this chapter. Accordingly, this interim

rule removes and reserves Secs. 1427.14 and 1427.168.

CCC has determined that the liquidated damages can be reduced

without affecting the administration of the cotton price support

programs. Accordingly, this interim rule amends Sec. 1427.18 and

Sec. 1427.175 to: (a) decrease the liquidated damages amounts; and (b)

add provisions that provide that any or all of the liquidated damages

may be waived under certain conditions.

Section 1427.23 is amended by removing paragraph (f) and

redesignating paragraph (g) as paragraph (f). The removed provision was

originally included to allow upland cotton producers who lost

beneficial interest at the time of ginning an opportunity to file for a

LDP on the day such upland cotton was ginned. This required producers

to report ginning to the county office on a weekly basis. Since this

provision was implemented, CCC developed a more workable procedure that

allows producers to request LDP's in advance of ginning with the LDP

rate based on the loan repayment rate announced and in effect on the

day the upland cotton is ginned in accordance with redesignated

Sec. 1427.23(f).

Section 1427.171 is amended to clarify provisions relating to

locations that are approved for the storage of CCC loan collateral by

removing the reference to commercial warehouse houses.

Section 1427.174 is amended to correct a spelling error.

List of Subjects in 7 CFR Part 1427

Cotton, Loan programs--agriculture, Packaging and containers, Price

support programs, Reporting and recordkeeping requirements, Surety

bonds, Warehouses.

Accordingly, 7 CFR part 1427 is amended as follows:

PART 1427--COTTON

1. The authority citation for 7 CFR part 1427 continues to read as

follows:

Authority: 7 U.S.C. 1421, 1423, 1425, 1444, and 1444-2; 15

U.S.C. 714b and 714c.

2. Section 1427.1 is amended by revising paragraph (b)(3) to read

as follows:

Sec. 1427.1 Applicability.

* * * * *

(b) * * *

(3) For ELS cotton, the schedules of discounts for micronaire.

* * * * *

3. Section 1427.3 is amended by:

A. Revising the definition of ``Authorized loan servicing agent

(LSA)'', and

B. Adding the definition of ``warehouse receipt'' in alphabetical

order.

Sec. 1427.3 Definitions.

* * * * *

Authorized loan servicing agent (LSA) means a legal entity that

enters into a written agreement with CCC to act as a loan servicing

agent for CCC in making and servicing Form A cotton loans. The

authorized LSA may perform, on behalf of CCC, only those services which

are specifically prescribed by CCC including, but not limited to, the

following:

(1) Preparing and executing loan and loan deficiency payment

documents;

(2) Disbursing loan and loan deficiency payment proceeds;

(3) Handling the extension of loans as authorized by CCC;

(4) Accepting cotton loan repayments;

(5) Handling documents involved with forfeiture of cotton loan

collateral to CCC; and

(6) Providing loan, loan deficiency payment, and accounting data to

CCC for statistical purposes;

* * * * *

Warehouse receipt means a receipt issued with respect to a bale of

cotton by a warehouse with an existing cotton storage agreement,

approved by CCC, in accordance with Secs. 1427.1081 through 1427.1089,

that is:

(1) A negotiable, machine card type warehouse receipt that is pre-

numbered and pre-punched;

(2) An electronic warehouse receipt record issued by such warehouse

recorded in a central filing system or systems maintained in one or

more locations which are approved by ASCS or CCC to operate such

system; or,

(3) Other such acceptable evidence of title, as determined by CCC.

4. Section 1427.4 is amended by revising paragraph (b) to read as

follows:

Sec. 1427.4 Eligible producer.

* * * * *

(b) A receiver or trustee of an insolvent or bankrupt debtor's

estate, an executor or an administrator of a deceased person's estate,

a guardian of an estate of a ward or an incompetent person, and

trustees of a trust estate shall be considered to represent the

insolvent or bankrupt debtor, the deceased person, the ward or

incompetent, and the beneficiaries of a trust, respectively, and the

production of the receiver, executor, administrator, guardian, or

trustee shall be considered to be the production of the person or

estate represented by the receiver, executor, administrator, guardian,

or trust. Loan and loan deficiency payment documents executed by any

such person will be accepted by CCC only if they are legally valid and

such person has the authority to sign the applicable documents.

* * * * *

5. Section 1427.5 is amended by:

A. Revising paragraph (b)(1)(v)(B)(4) and

B. Revising paragraph (c)(2)(ii) to read as follows

Sec. 1427.5 General eligibility requirements.

* * * * *

(b)(1) * * *

(v) * * *

(B) * * *

(4) Must not have noted on the classing record the presence of

spindle twist, preparation, grass, oil, and/or other extraneous matter;

* * * * *

(c) * * *

(2) * * *

(ii) Enters into a contract to sell the cotton if the producer

retains title, risk of loss, and beneficial interest in the commodity

and the purchaser does not pay to the producer any advance payment

amount to enter into such contract, except as provided in part 1425 of

this chapter.

* * * * *

6. Section 1427.6 is amended by revising paragraph (b) to read as

follows:

Sec. 1427.6 Disbursement of price support loans.

* * * * *

(b) Loan proceeds may be disbursed by CCC or by an approved

servicing agent bank to approved cooperative marketing associations.

* * * * *

7. Section 1427.11 is amended by:

A. Revising paragraph (a)(1),

B. Revising introductory text of paragraph (e),

C. Revising paragraphs (f)(2) and (f)(3),

D. Revising introductory text of paragraph (g) and revising

paragraph (g)(2),

E. Removing paragraph (h), and

F. Redesignating paragraph (i) as paragraph (h) and revising

redesignated paragraph (h) to read as follows:

Sec. 1427.11 Warehouse receipt and insurance.

(a) * * *

(1) Meet the definition of a warehouse receipt,

* * * * *

(e) Warehouse receipts, in accordance with Sec. 1427.3, when issued

as block warehouse receipts will be accepted when authorized by CCC

only under the following conditions:

* * * * *

(f) * * *

(2) The tare shown on the receipt shall be the tare 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, 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

(3) Alterations in other inserted data on a machine card type

warehouse receipt must be initialed by an authorized representative of

the warehouse.

(g) If warehouse storage charges have been paid, the receipt must

show that date through which the storage charges have been paid.

* * * * *

(2) If warehouse receiving charges have been paid or waived, the

receipt must show such fact.

* * * * *

(h) The warehouse receipt must show the compression status of the

bale, i.e., flat, modified flat, standard, gin standard, gin universal,

or warehouse universal density. The receipt must show if the

compression charge has been paid, or if the warehouse claims no lien

for such compression.

Sec. 1427.14 [Removed and Reserved]

8. Section 1427.14 is removed and reserved.

9. Section 1427.18 is amended by:

A. Revising paragraph (e),

B. Revising paragraph (f)(2),

C. Adding paragraph (f)(3),

D. Revising paragraph (g)(2), and

E. Adding paragraph (j) to read as follows:

Sec. 1427.18 Liability of the producer.

* * * * *

(e) The producer and CCC agree that it will be difficult, if not

impossible, to prove the amount of damages to CCC if a producer makes

any fraudulent representation in obtaining a loan or loan deficiency

payment or in maintaining, or settling a loan or disposing of or moving

the loan collateral without the prior written approval of CCC.

Accordingly, if the county committee determines that the producer has

violated the terms or conditions of Form CCC-Cotton A, Form CCC-Cotton

AA, or Form CCC-709, as applicable, liquidated damages shall be

assessed on the quantity of the commodity which is involved in the

violation. If CCC determines the producer:

(1) Acted in good faith when the violation occurred, liquidated

damages will be assessed by multiplying the quantity involved in the

violation by:

(i) 10 percent of the loan rate applicable to the loan note or the

loan deficiency payment rate for the first offense; or

(ii) 25 percent of the loan rate applicable the loan note or the

loan deficiency payment rate for the second offense; or

(2) Did not act in good faith with regard to the violation, or for

cases other than first or second offense, liquidated damages will be

assessed by multiplying the quantity involved in the violation by 25

percent of the loan rate applicable to the loan note or the loan

deficiency payment rate.

(f) * * *

(2) Assess liquidated damages in accordance with paragraph (e) of

this section.

(3) If the producer fails to pay such amounts within 30 calendar

days from the date of notification, the county committee shall call the

applicable loan involved in the violation and require repayment of any

market gain previously realized for the applicable loan, or for loan

deficiency payment, require repayment of the loan deficiency payment

and charges plus interest.

(g) * * *

(2) Call the applicable loan involved in the violation and require

repayment of any market gain previously realized for the applicable

loan, and with respect to a loan deficiency payment, require repayment

of the loan deficiency payment and charges plus interest.

* * * * *

(j) Any or all of the liquidated damages assessed in accordance

with the provisions of paragraph (e) of this section may be waived as

determined by CCC.

10. Section 1427.23 is amended by:

A. Removing paragraph (f)

B. Redesignating paragraph (g) as paragraph (f), and revising

redesignated paragraph (f), and

C. Redesignating paragraph (h) as paragraph (g) and revising

redesignated paragraph (g) to read as follows:

Sec. 1427.23 Cotton loan deficiency payments.

* * * * *

(f) If the producer enters into an agreement with CCC on or before

the date of ginning a quantity of eligible cotton, and the producer has

the beneficial interest in such quantity as specified in accordance

with Sec. 1427.5(c) on the date the cotton was ginned, the loan

deficiency payment rate applicable to such cotton will be the loan

deficiency payment rate based on the date the cotton was ginned. In

such cases, the producer must meet all the other requirements in

paragraph (b) of this section on or before the final date to apply for

a loan deficiency payment in accordance with Sec. 1427.5.

(g) Notwithstanding any other provision of this section, CCC will

not accept applications for loan deficiency payments that specify the

payment rate beginning at 4 p.m. eastern time each Thursday until an

announcement of the adjusted world price for the succeeding weekly

period has been made in accordance with Sec. 1427.25(e). In the event

that Thursday is a nonworkday, such applications for loan deficiency

payments will not be accepted beginning at 7 a.m. eastern time the next

workday until an announcement of the adjusted world price for the

succeeding weekly period has been made in accordance with

Sec. 1427.25(e).

Sec. 1427.168 [Removed and Reserved]

11. Section 1427.168 is removed and reserved.

12. Section 1427.171 is amended by revising the first sentence to

read as follows:

Sec. 1427.171 Approved storage.

Approved storage shall consist of storage located on or off the

producer's farm (excluding public warehouses) which is determined by a

county committee representative to afford adequate protection against

loss or damage and which is located within a reasonable distance, as

determined by CCC, of an approved gin. * * *

13. Section 1427.174 is revised to read as follows:

Sec. 1427.174 Maturity of loans.

Seed cotton loans mature on demand by CCC but no later than May 31

following the calendar year in which such crop is normally harvested.

14. Section 1427.175 is amended by:

A. Revising paragraph (a)(1),

B. Revising paragraph (e),

C. Revising paragraph (f)(2),

D. Adding paragraph (f)(3), and

E. Adding paragraph (i) to read as follows:

Sec. 1427.175 Liability of the producer.

* * * * *

(a)(1) If a producer makes any fraudulent representation in

obtaining a loan, maintaining a loan, or settling a loan or if the

producer disposes of or moves the loan collateral without the prior

approval of CCC, such loan shall be refunded upon demand by CCC.

* * * * *

(e) The producer and CCC agree that it will be difficult, if not

impossible, to prove the amount of damages to CCC for if a producer

makes any fraudulent representation in obtaining a loan or in

maintaining, or settling a loan or disposing of or moving the loan

collateral without the prior approval of CCC. Accordingly, if the

county committee determines that the producer has violated the terms or

conditions of the note and security agreement, liquidated damages shall

be assessed on the quantity of the commodity which is involved in the

violation. If CCC determines the producer:

(1) Acted in good faith when the violation occurred, liquidated

damages will be assessed by multiplying the quantity involved in the

violation by:

(i) 10 percent of the loan rate applicable to the loan note for the

first offense;

(ii) 25 percent of the loan rate applicable to the loan note for

the second offense; or

(2) Did not act in good faith with regard to the violation, or for

cases other than first or second offense, liquidated damages will be

assessed by multiplying the quantity involved in the violation by 25

percent of the loan rate applicable to the loan note.

(f) * * *

(2) Assess liquidated damages in accordance with paragraph (e) of

this section.

(3) If the producer fails to pay such amount within 30 calendar

days from the date of notification, the county committee shall call the

applicable loan involved in the violation.

* * * * *

(i) Any or all of the liquidated damages assessed in accordance

with the provision of paragraph (e) of this section may be waived as

determined by CCC.

Signed in Washington, DC, on July 25, 1994.

Alan King,

Acting Executive Vice President, Commodity Credit Corporation.

[FR Doc. 94-18694 Filed 8-1-94; 8:45 am]

BILLING CODE 3410-05-P