Coffee, Sugar and Cocoa Exchange: Proposed Amendments Relating to the Quality Standards, Delivery Ports, Packaging, Demurrage, and Trading Month Specifications for the White Sugar Futures Contract

COMMODITY FUTURES TRADING COMMISSION

Coffee, Sugar and Cocoa Exchange: Proposed Amendments Relating to

the Quality Standards, Delivery Ports, Packaging, Demurrage, and

Trading Month Specifications for the White Sugar Futures Contract

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed contract rule change.

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SUMMARY: The Coffee, Sugar and Cocoa Exchange (``CSCE or Exchange'')

has submitted proposed amendments to its white sugar futures contract.

The primary amendments will: (1) Change the quality specifications by

increasing the maximum color and moisture allowable in deliverable

sugar, and eliminating the maximum ash content

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standard; (2) add 52 ports to the existing list of 20 ports at which

delivery may be made; (3) change the packaging material in which sugar

must be delivered; (4) establish a schedule of fees payable by the

deliverer to the receiver over and above the demurrage fees when

vessels remain on demurrage for a period exceeding 15 days; and (5) add

September and November and delete October from the list of delivery

months.

In accordance with Section 5a(a)(12) of the Commodity Exchange Act

and acting pursuant to the authority delegated by Commission Regulation

140.96, the Acting Director of the Division of Economic Analysis

(``Division'') of the Commodity Futures Trading Commission

(``Commission'') has determined, on behalf of the Commission, that the

proposed amendments are of major economic significance. On behalf of

the Commission, the Division is requesting public comment on the

proposal.

DATES: Comments must be received on or before March 14, 1996.

ADDRESSES: Interested persons should submit their views and comments to

Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street NW., Washington, DC 20581. Reference

should be made to the proposed amendments relating to changes in the

quality, delivery ports, packaging, demurrage, and trading month

specifications for the white sugar futures contract.

FOR FURTHER INFORMATION CONTACT: Frederick V. Linse, Division of

Economic Analysis, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street NW., Washington, DC 20581, telephone

(202) 418-5273.

SUPPLEMENTARY INFORMATION: The white sugar futures contract currently

requires delivery of 50 metric tons of white sugar, in sound jute bags,

meeting specified physical and chemical standards for polarization,

moisture, ash content, and color. Delivery is effected by loading white

sugar FOB-stowed aboard the receiver's vessel at a port selected by the

deliverer from a list of 20 designated ports located in the European

Community (Belgium, France, Germany, the Netherlands, and the United

Kingdom), the United States, Poland, Korea, Thailand, and Brazil.1

The delivery months are January, March, May, July, and October.

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\1\ The contract's existing delivery ports are: Antwerp,

Belgium; Rouen, France; Hamburg, Germany; Rotterdam and Flushing,

Netherlands; Gydansk/Gdynia, Poland; Immingham, United Kingdom;

Baltimore, Galveston, New Orleans, New York and Savannah, United

States; Imbituba/Itajai, Maceio, Recife, and Santos, Brazil; Inchon,

Pusan, and Ulsan, Korea; and Kosichang, Thailand.

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The proposed amendments will change the contract's quality

specifications for deliverable sugar by increasing to 100 from 60 the

maximum allowable number of color units using ICUMSA test method No.4,

increasing to .08 from .06 percent the maximum moisture content, and

eliminating the maximum ash content standard (the polarization standard

will not change). The amendments will also require that the sugar

delivered under the contract shall be from the crop or season current

at the time of shipment. Currently, the rules require that the sugar be

manufactured within the past twelve months.

The proposed amendments will increase by 52 the number of delivery

ports. Under the proposal, 40 new delivery ports would be specified for

23 countries that currently do not have delivery ports.2 In

addition, a total of 12 new delivery ports would be added for six

countries that currently have delivery ports.3

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\2\ The proposed new delivery ports for the 23 new countries

are: Porkkala and Helsinki, Finland; Lisbon, Portugal; Malmo,

Sweden; Odessa and Nikolayev, Ukraine; Dubai, Dubai; Jeddah, Saudi

Arabia; Mersin, Turkey; Nacala and Beira, Malawi; Durban, South

Africa; Maputo, Swaziland; Maputo and Beira, Zimbabwe; Buenos Aires,

Argentina; Buenaventura, Columbia; Axajutla, El Salvador; Quetzal,

Guatemala; Vera Cruz, Manzanillo and Mazatlan, Mexico; Corinto,

Nicaragua; Brisbane, Bundaberg, Fremantle, Mackay, Melbourne, and

Townsville, Australia; Shanghai, Dalian, and Huangpu, China; Bombay

and Madras, India; Penang, Malaysia; Singapore; and Iliolo, Manila,

and Ormoc, Philippines.

\3\ The proposed new delivery ports for specified countries that

currently have existing delivery ports are: Calais and Le Harve,

France; Rostock, Germany; Amsterdam and Eemshaven, Netherlands;

Crockett, United States; Parangua and Rio de Janeiro, Brazil; and

Bangkok and Laem Chabang, Thailand.

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The proposed amendments will also establish a new requirement that

a minimum of one hundred contracts be delivered for each delivery port

designated on a delivery notice. In addition, receivers will be

required to provide a minimum five-ton geared vessel for loading or, if

the vessel provided is gearless, the receiver shall be responsible for

providing loading facilities. The proposal also will require that sugar

be delivered in woven polypropylene bags rather than in sound jute

bags, as currently specified.

The proposal will establish a schedule of daily fees that will

accrue to the receiver from the deliverer, over and above demurrage, if

the vessel is not loaded by the expiration of lay time for the declared

vessel. The proposed schedule of daily fees, which is expressed as

specified percentages of the daily demurrage rate that increase with

the number of calendar days that the vessel is subject to demurrage, is

shown below:

1st 15 days: 0% of the daily demurrage rate

2nd period of 15 days: 50% of the daily demurrage rate

All days thereafter: 100% of the daily demurrage rate.

The proposed amendments also will add September and November to,

and delete October from, the list of delivery months.

The proposed amendments will give the receiver the right to observe

the weighing, sampling, and testing procedures for the delivery sugar

by a superintendent appointed by the deliverer.4 In addition, the

amendments will give the receiver the right to request that another

superintendent weigh, sample, and test the sugar if a dispute arises,

and the decision of this superintendent shall be binding.

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\4\ The contract's current terms require the deliverer to

provide an internationally recognized or State superintendent to

weigh, sample, and test sugar.

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The CSCE intends to apply the proposed amendments only to newly

listed contract months following Commission approval.

In support of the proposal to specify new quality and packaging

standards, and increase the number of delivery ports, the Exchange

states that these changes reflect commercial practices and will

increase the supply of white sugar available for delivery on the

futures contract. The CSCE stated that the proposal to replace the

October delivery month with September and November contract months will

better serve the hedging needs of the sugar industry. The CSCE

indicates that the proposal to require the delivery of at least 100

contracts per port is justified because delivery of smaller quantities

at individual ports would be relatively expensive for receivers to

transport and would not be consistent with commercial practice. The

Exchange also said that the proposed procedure for third party testing

of sugar in the event of a dispute reflects commercial practice.

On behalf of the Commission, the Division is requesting comment on

the proposed amendments. Commenters are requested to address the extent

to which the proposed amendments reflect commercial practices and the

effect (if any) the proposed amendments would have on the quantity of

white sugar likely to be economically available for delivery on the

contract. In addition,

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comments specifically are requested regarding the following matters:

(1) the extent to which the proposal to permit delivery at par of all

sugar which has a color value equal to or less than 100 color units and

has a moisture content equal to or less than .08 percent reflects cash

market pricing relationships; (2) the extent to which the CSCE's

proposal to permit delivery at par at each proposed delivery port

reflects cash market pricing conditions between each such port and all

other existing and proposed delivery ports; and (3) the extent to which

the proposal to require the delivery of a minimum of 100 contracts at

each delivery port reflects commercial practices and whether it would

act as an impediment to delivery on the contract.

Copies of the proposed amendments will be available for inspection

at the Office of the Secretariat, Commodity Futures Trading Commission,

Three Lafayette Centre, 1155 21st Street NW., Washington, D.C. 20581.

Copies of the proposed amendments also can be obtained through the

Office of the Secretariat by mail at the above address or by phone at

(202) 418-5097.

The materials submitted by the CSCE in support of the proposed

amendments may be available upon request pursuant to the Freedom of

Information Act (5 U.S.C. 552) and the Commission's regulations

thereunder (17 C.F.R. Part 145 (1987)). Requests for copies of such

materials should be made to the FOI, Privacy and Sunshine Act

Compliance Staff of the Office of the Secretariat at the Commission's

headquarters in accordance with C.F.R. 145.7 and 145.8.

Any person interested in submitting written data, views or

arguments on the proposed amendments should send such comments to Jean

A. Webb, Secretary, Commodity Futures Trading Commission, Three

Lafayette Centre, 1155 21st Street NW., Washington, D.C. 20581 by the

specified date.

Issued in Washington, D.C. on February 29, 1996.

Blake Imel,

Acting Director.

[FR Doc. 96-5321 Filed 3-6-96; 8:45 am]

BILLING CODE 6351-01-P