Cooperative Marketing Associations; Eligibility Requirements for Price Support

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1425

RIN 0560-AD70

Cooperative Marketing Associations; Eligibility Requirements for

Price Support

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: This final rule adopts, without change, the proposed rule

published in the Federal Register at 59 FR 44947-44952 on August 31,

1994. This rule amends the regulations governing the participation of

cooperative marketing associations (CMA) in Commodity Credit

Corporation (CCC) price support programs to ensure: the equitable

treatment of CMA members and individual producers; the Government does

not accept undue risk in providing CMA price support program benefits;

and the efficient delivery of CMA price support program benefits. This

rule: changes CMA bylaw requirements to reflect current CMA

organizational and operational procedures; requires approved cotton CMA

retention of services provided by servicing agent banks; requires

approved CMA monitoring of payment they receive on behalf of their

members to ensure that member payments do not exceed payment limits;

and makes other administrative changes.

EFFECTIVE DATE: January 11, 1995.

FOR FURTHER INFORMATION CONTACT: Richard M. Ackley, Chief, Cooperative

and Analysis Branch; Cotton, Grain, and Rice Price Support Division,

Consolidated Farm Service Agency, USDA, P.O. Box 2415, Washington, DC

20013-2415.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be not significant for

purposes of Executive Order 12866 and, therefore, has not been reviewed

by Office of Management and Budget (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 have no 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,

into Federal Register at 48 FR 29115 (June 24, 1983).

Executive Order 12778

This final 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. Prior to any judicial action in a court of

competent jurisdiction, administrative review under 7 CFR part 780 must

be exhausted.

Paperwork Reduction Act

Public reporting burden for all collections is estimated to average

from 1 to 2 hours per response, including time for reviewing

instructions, searching existing data sources, gathering and

maintaining the data needed, and competing and reviewing the collection

of information. The information collections have previously been

cleared under the current regulations by OMB, and assigned OMB No.

0560-0040.

Comments

No comments were received during the comment period which ended on

September 30, 1994.

List of Subjects in 7 CFR Part 1425

Cooperatives, Price support programs, Reporting and recordkeeping

requirements.

Accordingly, 7 CFR part 1425 is amended as follows:

PART 1425--COOPERATIVE MARKETING ASSOCIATIONS

1. The authority citation for 7 CFR part 1425 is revised to read as

follows:

Authority: 7 U.S.C. 1421(a), 1441, 1444(a), 1446(d), and 1447;

15 U.S.C. 714b, 714c, and 714j.

2. Section 1425.3 is amended.

A. Revising paragraph (d),

B. Redesignating paragraphs (i) and (j) as paragraphs (j) and (k)

respectively,

C. Adding a new paragraph (i), and

D. Revising redesignated newly redesignated paragraphs (j) and (k):

Sec. 1425.3 Definitions.

* * * * *

(d) Authorized commodity means those commodities for which an

approved cooperative may apply for price support, including barley,

canola, corn, cotton, flaxseed, honey, shorn mohair, mustard seed,

oats, rapeseed, rice, rye, safflower, seed cotton, shorn wool, sorghum,

soybeans, sunflower seed, and wheat.

* * * * *

(i) Participate in a Price Support Program means the pledging, on

behalf of members, of an eligible commodity as collateral for CCC price

support loans, entering into purchase agreements, and, when applicable,

obtaining loan deficiency payments.

(j) Person means an individual, joint stock company, corporation,

estate or

[[Page 2681]]

trust, association, or other legal entity, except that two or more

entities shall be combined as one person in accordance with:

(1) The regulations found at part 1497 of this chapter for the

purpose of administering maximum payment limitation provisions of the

Food Security Act of 1985;

(2) The regulations found at part 796 of this title for the purpose

of administering the provisions of the Food Security Act of 1985 with

respect to the production of controlled substances; and

(3) The regulations found at part 12 of this title pertaining to

the highly erodible land and wetland provisions (commonly know as

``sodbuster and swampbuster'' provisions) of the Food Security Act of

1985.

(k) Producer means a person who, as owner, landlord, tenant, or

sharecropper, shares in the risk of producing the crop, and is entitled

to share in the crops available for marketing from the farm, or would

have shared had the crops been produced.

3. In Sec. 1425.4, paragraphs (a), (b)(7), and paragraph (c)

introductory text are revised and paragraphs (e) and (f) are added to

read as follows:

Sec. 1425.4 Approval.

(a) Application. In order for a cooperative to participate in a

price support program with respect to the 1994 and subsequent crops of

authorized commodities, a cooperative must submit an application for

approval with respect to such authorized commodities to CCC.

(b) * * *

(7) A detailed description of the method by which proceeds from a

pool of eligible commodities for which price support is obtained will

be distributed as provided for in Sec. 1425.18.

* * * * *

(c) Annual recertification. An approved cooperative must submit, on

an annual basis, the following information to CCC:

* * * * *

(e) Reapplication. Approved cooperatives must submit revised

applications as required by this section instead of an annual

recertification every 5 years, or more often if CCC determines that

such application is necessary to determine if a cooperative has

implemented an organizational or operational change that would affect

compliance with the provisions of this part.

(f) Form CCC-Cotton G. Cooperative marketing associations applying

for approval to participate in the price support program for cotton

shall execute Form CCC-Cotton G, Cotton Cooperative Loan Agreement,

with CCC.

4. Section 1425.6 (b)(2) is revised to read as follows:

Sec. 1425.6 Approved cooperatives.

* * * * *

(b) * * *

(2) Conditionally approved. (i) A cooperative may be conditionally

approved if CCC determines that it has substantially met all the

requirements of this part, and the failure to meet the remaining

requirements is due to reasons beyond the control of the cooperative

and not due to the cooperative's negligence; and

(ii) Such cooperative must agree in writing to meet all

requirements for approval set forth in this part within the time period

specified by CCC. When a cooperative can only comply with the

regulations by amending its articles of incorporation or bylaws at a

membership meeting, CCC may accept a board of directors' resolution

agreeing to recommend to the members at the next meeting of the members

the required changes to the articles of incorporation or bylaws as

compliance with the requirements for approval for purposes of this

section.

Board resolutions in which the cooperative agrees to comply with

other provisions of this part may be accepted by CCC as compliance with

the requirements for approval for purposes of this section.

* * * * *

5. Section 1425.7 (a) is revised to read as follows:

Sec. 1425.7 Suspension and termination of approval.

(a) Suspension. An approved cooperative may be suspended by CCC

from further participation in a price support program if CCC determines

that the cooperative or a member cooperative, as specified in

Sec. 1425.19:

(1) Has not operated in accordance with the conditions specified in

such cooperative's application for approval;

(2) Has not complied with applicable regulations; or

(3) Has failed to correct deficiencies noted during an

administrative review or an audit of the cooperative's operations with

respect to a price support program. Such suspension may be lifted upon

the receipt of documents indicating that the cooperative has complied

with all requirements for approval. If such documents are not received

within one year from the date of the suspension, the cooperative's

approval for participation in a price support program shall be

terminated.

* * * * *

6. In Sec. 1425.8, paragraphs (b)(2) and (e) are revised to read as

follows:

Sec. 1425.8 Ownership and control.

* * * * *

(b) * * *

(2) The allocated equity of any active member that has acquired

equity as a result of a loan from the cooperative unless such member is

obligated to repay the loan within one year.

* * * * *

(e) Approved plan. An applicant or an approved cooperative not

under the ownership or control, or both, of its active members, may be

approved by CCC to participate in a price support program if the

cooperative is able to establish that, by retiring the equity of its

inactive members or by obtaining new members, the cooperative can vest

ownership and control in its active members, as required by this

section, by a date specified by CCC.

7. Section 1425.9 is amended by revising the introductory text and

paragraphs (d) and (g) to read as follows:

Sec. 1425.9 Charter and bylaw provisions.

The articles of incorporation, articles of association, or the

bylaws of the cooperative shall comply with each of the following

requirements:

* * * * *

(d) Nominations. (1) Nominations for election of delegates and

directors shall be made by members.

(2) Nominations for officers shall be made by elected directors or

by members when nomination by members is authorized in the

cooperative's articles of incorporation or bylaws.

(3) Nominations may be made by balloting, nominating committee,

petition of members, or from the floor, provided that nominations from

the floor shall be requested in addition to nominations made by a

nominating committee or by petition.

* * * * *

(g) Proxy. (1) Except as provided in paragraph (g)(2) of this

section, voting by proxy shall be prohibited.

(2) Voting by proxy may be permitted if a cooperative:

(i) Determines that it is necessary to amend the cooperative's

articles of incorporation, articles of association, or bylaws, and

(ii) Establishes to the satisfaction of CCC that the law of the

State in which the cooperative is incorporated permits voting by proxy,

but does not permit members to vote by mail, with respect to such

issue.

* * * * *

[[Page 2682]]

8. In Sec. 1425.10, paragraph (b)(3) is revised to read as follows:

Sec. 1425.10 Financial condition.

* * * * *

(b) * * *

(3)(i) The net worth of the cooperative. The cooperative shall be

considered to have a sufficient net worth if such net worth is equal to

the product of an amount per unit for a commodity (as set forth in

table 1) multiplied by the total number of such units of commodity for

which the cooperative is approved, or requesting approval, to

participate in price support and handled by the cooperative during the

preceding marketing year, or, if the cooperative is in its first full

marketing year of operations, the estimated quantity of such commodity

that it will handle during such year.

(ii) (A) If the amount of the net worth of the cooperative is

between 34 and 99 percent of the amount computed in accordance with

paragraph (b)(3)(i) of this section and the cooperative is determined

by CCC to be otherwise financially sound, CCC may determine that such

cooperative meets the requirements of this section. Such a

determination by CCC may be made if:

(1) The board of directors of the cooperative agrees to make a

capital retain in the amount set forth in table 2 with respect to each

unit of the commodity delivered to the cooperative until the net worth

of the cooperative is at least equal to the amount computed in

accordance with paragraph (b)(3)(i) of this section, and

(2) The cooperative agrees to deduct from pool proceeds the full

amount of the estimated expenses of handling the commodities received

by the cooperative.

(B) The failure to carry out such agreements shall be grounds for

suspending a cooperative's approval.

Table 1

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Amount

Commodity Unit per

unit

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Barley............................... Bushel.................. 0.13

Canola............................... Hundredweight........... 0.62

Corn................................. Bushel.................. 0.13

Cotton............................... Bale.................... 6.40

Flaxseed............................. Hundredweight........... 0.62

Honey................................ Hundredweight........... 1.90

Mustard Seed......................... Hundredweight........... 0.62

Oats................................. Bushel.................. 0.13

Rapeseed............................. Hundredweight........... 0.62

Rice................................. Hundredweight........... 0.52

Rye.................................. Bushel.................. 0.13

Safflower............................ Hundredweight........... 0.62

Seed Cotton (lint basis)............. Pound................... 0.008

Shorn Mohair......................... Pound................... 0.16

Shorn Wool........................... Pound................... 0.38

Sorghum.............................. Hundredweight........... 0.19

Soybeans............................. Bushel.................. 0.43

Sunflower Seed....................... Hundredweight........... 0.62

Wheat................................ Bushel.................. 0.15

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Table 2

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Amount

Commodity Unit per

unit

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Barley............................... Bushel.................. 0.07

Canola............................... Hundredweight........... 0.32

Corn................................. Bushel.................. 0.07

Cotton............................... Bale.................... 3.20

Flaxseed............................. Hundredweight........... 0.32

Honey................................ Hundredweight........... 0.95

Mustard Seed......................... Hundredweight........... 0.32

Oats................................. Bushel.................. 0.07

Rapeseed............................. Hundredweight........... 0.32

Rice................................. Hundredweight........... 0.26

Rye.................................. Bushel.................. 0.07

Safflower............................ Hundredweight........... 0.32

Seed Cotton (lint basis)............. Pound................... 0.004

Shorn Mohair......................... Pound................... 0.08

Shorn Wool........................... Pound................... 0.19

Sorghum.............................. Hundredweight........... 0.10

Soybeans............................. Bushel.................. 0.22

Sunflower Seed....................... Hundredweight........... 0.32

Wheat................................ Bushel.................. 0.08

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* * * * *

9. In Sec. 1425.11, paragraph (c)(3) is revised to read as follows:

Sec. 1425.11 Operations.

* * * * *

(c) * * *

(3) Require that all proceeds from the marketing operation be

distributed as provided in Sec. 1425.18.

10. In Sec. 1425.14, paragraph (c) is revised to read as follows:

Sec. 1425.14 Member business.

* * * * *

(c) The cooperative has a plan, approved by CCC, which CCC

determines to be in the cooperative members' best interest and will

bring the cooperative into compliance with the provisions of this

section. Commodities purchased or acquired from CCC and processed

products acquired from other processors or merchandisers shall not be

considered in determining the volume of member or nonmember business.

Secs. 1425.16-1425.21, 1425.22, 1425.23 [Redesignated as

Secs. 1425.17-1425.22, 1425.24, 1425.25]

11. Sections 1425.16 through 1425.21 and Secs. 1425.22 and 1425.23

are redesignated as Secs. 1425.17 through 1425.22 and Secs. 1425.24 and

1425.25, respectively, and a new Sec. 1425.16 is added to read as

follows:

Sec. 1425.16 Payment limitation.

Approved cooperatives shall monitor marketing loan gains, loan

deficiency payments, and other payments they receive from CCC on behalf

of their members and ensure that the sum of the amounts received for

each member does not exceed the member's payment limitation determined

in accordance with part 1497 of this title that, for purposes of

administering such part, is assigned by CCC to the cooperative.

12. Redesignated Sec. 1425.17 is amended by revising paragraphs

(a)(2), (b)(1)(i), (b)(1)(ii), (b)(1)(iii), (b)(2), (c)(2), and adding

paragraph (c)(5) to read as follows:

Sec. 1425.17 Eligible commodity and pooling.

(a) * * *

(2) Price support will be made available to approved cooperatives

with respect to a quantity of an eligible commodity included in an

eligible pool as provided in paragraph (c) of this section and the

beneficial interest provisions of parts 1421, 1427, 1435, and 1468 of

this chapter.

(b) * * *

(1) * * *

(i) All of the commodity included in the pool is eligible for price

support, except as provided in paragraph (b)(2) of this section;

(ii) The eligible commodity in such pool was:

(A) Delivered to the cooperative for marketing for the benefit of

the members of the cooperative, and

(B) Delivered by members who retain the right to share in the

proceeds from the marketing of the commodity in accordance with

Sec. 1425.18.

(iii) Except with respect to a quantity of a commodity pledged as

collateral for a price support loan and which is redeemed within 15

work days from the date the cooperative receives the proceeds from CCC,

all of the commodity placed in such pool was delivered by members who

have agreed to accept a payment of the initial advances made available

to such producers by the cooperative with respect to such commodity in

accordance with Sec. 1425.18(a).

(2) If CCC determines that a cooperative has inadvertently included

in a pool a quantity of commodity which is ineligible for price support

because of grade, quality, bale weight or repacking in the case of

cotton, or other factors, the remaining quantity of commodity shall

remain eligible for price support.

(c) * * *

(2) Price support will be available to the cooperative for the

quantity of a farm-stored commodity that is, pursuant

[[Page 2683]]

to such cooperative's marketing agreement with a member, part of the

cooperative's pool.

* * * * *

(5) Commodities pledged as collateral for CCC price support loans

shall be free and clear of all liens and encumbrances based on an

approved cooperative's financial agreements or the cooperative shall

obtain a completed Form CCC-679, Lien Waiver. Approved cooperatives

shall not take any action to cause a lien or encumbrance to be placed

on a commodity after a loan is approved.

* * * * *

13. Redesignated Sec. 1425.18 is amended by revising paragraphs (a)

and (a)(1) and adding paragraph (b)(5) to read as follows:

Sec. 1425.18 Distribution of proceeds.

(a) CCC loans, purchases, and loan deficiency payments. (1) If CCC

makes available price support loans, purchases, or loan deficiency

payments with respect to any quantity of the eligible commodity in a

pool, the proceeds from such loans, purchases, or loan deficiency

payments shall be distributed to members participating in such pool on

the basis of the quantity and quality of the commodity delivered by

each member which is included in the pool less any authorized charges

for services performed or paid by the cooperative which are necessary

to condition the commodity or otherwise make the commodity eligible for

price support. Except with respect to commodities which are pledged as

collateral for a price support loan and which are redeemed within 15

work days from the date the cooperative receives the loan proceeds from

CCC, such proceeds shall be distributed within 15 work days from such

date. Loan deficiency payments received from CCC shall be distributed

within 15 work days of receipt from CCC.

* * * * *

(b) * * *

(5) When notified by CCC that pool distributions to a member of any

eligible pool must be reduced for a program year, farm, or crop,

cooperatives shall refrain from making such pool distributions and

shall, if appropriate, reimburse CCC for such distributions.

* * * * *

14. Redesignated Sec. 1425.20 is revised to read as follows:

Sec. 1425.20 Nondiscrimination.

The cooperative shall not, on the basis of race, color, age, sex,

religion, marital status, national origin, physical disability, or

mental disability, deny any producer participation in, or otherwise

subject any producer to discrimination with respect to any benefits

resulting from its approval to obtain price support and shall comply

with the provisions of Title VI of the Civil Rights Act of 1964 and the

Secretary's regulations issued thereunder, appearing in Secs. 15.1

through 15.12 of this title; section 504 of the Rehabilitation Act of

1973, as amended by the Rehabilitation Comprehensive Services and

Developmental Disabilities Amendments of 1978; and provisions of the

Age Discrimination Act of 1975, as amended. The cooperative shall not

discriminate against employees under Title VII of the Civil Rights Act

of 1964, as amended, or the Equal Pay Act of 1963 or Title VI of the

Civil Rights Act of 1964 as administered by the Equal Employment

Opportunity Commission, and shall handle employee discrimination

complaints as provided for in 28 CFR part 42 and 29 CFR part 1691. The

United States shall have the right to enforce compliance with such

statutes and regulations by suit or by any other action authorized by

law. The cooperative shall submit a certification with its application

that the regulations cited in this section have been read and

understood and that the cooperative will abide by them.

15. A new Sec. 1425.23 is added to read as follows:

Sec. 1425.23 Reports.

(a) Approved cooperatives shall annually provide CCC with a PSL-86R

report to applicable county Consolidated Farm Service Agency offices.

The report shall include all eligible and ineligible commodity receipts

by Farm Service Agency farm number for each member.

(b) Approved cooperatives shall at least annually report by

commodity and by crop the marketing loan gains, loan deficiency

payments, and any other CCC program payments received on behalf of each

producer member.

Signed in Washington, DC, on December 23, 1994.

Bruce R. Weber,

Acting Executive Vice President, Commodity Credit Corporation.

[FR Doc. 95-560 Filed 1-10-95; 8:45 am]

BILLING CODE 3410-05-P