§ 1427.109 - Contract cancellations.

(a) For the purposes of this subpart, except as provided in paragraph (e) of this section, any contract entered into by an exporter that is canceled or amended to reduce the contract quantity shall be replaced by the exporter with a subsequent contract (“replacement contract”) designated by the exporter at the time a copy of the replacement contract is submitted to CCC, as specified in the Upland Cotton Domestic User/Exporter Agreement (“the Agreement”). Optional origin export contracts that are canceled/amended must be replaced with either an optional origin export contract or a contract to export United States cotton. The replacement contract shall specify shipment of the cotton by not later than September 30 following the shipment date specified in the original contract, except if the cancellation/amendment of a contract that specified shipment by not later than September 30 occurs after September 1, the replacement contract shall be entered into within 30 days after the cancellation/amendment and shipment shall be completed within 30 days after the replacement contract is entered into, but in no event may shipment be completed later than December 31. The provisions of this paragraph shall apply to—

(1) All undelivered (open) export contracts (including optional origin export contracts) outstanding as of the later of the date the Agreement was executed by the exporter or August 29, 1991;

(2) Any export contracts that were canceled, or amended to reduce the contract quantity, between the later of June 18, 1991, or 75 days prior to the date the Agreement was executed by the exporter and the later of the date the Agreement was executed by the exporter or August 29, 1991, which are not replaced by the later of the date the Agreement was executed by the exporter or August 29, 1991; and

(3) All new export contracts entered into by the exporter on or after August 30, 1991, and prior to July 18, 1996 which are for delivery by not later than September 30, 1996.

(b) Notwithstanding the provisions of § 1427.107, the payment rate for a replacement contract shall be the lesser of the payment rate in effect on the date of the original contract or the payment rate in effect on the date of the replacement contract.

(c) If shipment of the cotton on any replacement contract is—

(1) Completed by October 31, the payment rate shall be the payment rate determined in accordance with paragraph (b) of this section;

(2) Not completed by October 31, the payment rate shall be zero;

(3) Not completed, or a replacement contract is not designated by the exporter by December 31, the exporter shall pay liquidated damages to CCC in an amount determined by multiplying the quantity of cotton not shipped by the higher of:

(i) The difference between the highest payment rate paid to, or earned by, the exporter between the date the original contract was entered into and December 31 of the year in which the original contract shipment period ends, regardless of whether the highest payment rate paid to, or earned by, the exporter was a current or forward-crop payment rate, and the payment rate determined in accordance with paragraph (b) of this section, or

(ii) 50 percent of the original contract payment rate.

(d) Notwithstanding the provisions of paragraphs (a) through (c) of this section, with respect to optional origin export contracts, shipment of foreign cotton will fulfill the shipment requirements but such cotton will be ineligible for payments.

(e) The provisions of paragraphs (a) through (d) of this section will not apply if CCC determines, based upon written evidence provided by the exporter, that a contract cancellation, amendment, or failure to export is due to reasons beyond the control of the exporter. If, as determined by CCC, the cancellation is beyond the control of the exporter, replacement contracts are not required, and the assessment of liquidated damages by CCC is waived. Documentation to support that contract cancellations are beyond the control of the exporter must be submitted to CCC. Requests for relief from naming a replacement contract will be examined by CCC on a case-by-case basis to determine if relief is warranted.