[Federal Register Volume 61, Number 139 (Thursday, July 18, 1996)]
[Rules and Regulations]
[Pages 37544-37625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17486]
[[Page 37543]]
_______________________________________________________________________
Part II
Department of Agriculture
_______________________________________________________________________
Office of the Secretary
Farm Service Agency
Commodity Credit Corporation
_______________________________________________________________________
7 CFR Part 2 et al.
1996 Farm Bill: Implementation of Farm Program Provisions; Final Rule
Federal Register / Vol. 61, No. 139 / Thursday, July 18, 1996 / Rules
and Regulations
[[Page 37544]]
DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Part 2
Farm Service Agency
7 CFR Parts 718, 719, 720, 729, 790, 791, 793, 796
Commodity Credit Corporation
7 CFR Parts 1400, 1401, 1402, 1405, 1412, 1413, 1421, 1425, 1427,
1430, 1434, 1435, 1446, 1468, 1470, 1477, 1478, 1479, 1497, 1498
RIN 0560-AE81
Implementation of the Farm Program Provisions of the 1996 Farm
Bill
AGENCIES: Farm Service Agency, Commodity Credit Corporation; USDA.
ACTION: Final rule.
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SUMMARY: This final rule implements farm program provisions required by
Title I of the Federal Agriculture Improvement and Reform Act of 1996
(the 1996 Act). The primary issues concern: changes to the dairy,
sugar, and peanut programs; the establishment of production flexibility
contracts for producers of wheat, feed grains, upland cotton, and rice
that specify the terms and conditions for receiving payments from the
Commodity Credit Corporation (CCC); statutory payment limitation
provisions; implementation of marketing assistance loans, reduced loan
repayment rates, and loan deficiency payments; and a cap on Cotton User
Marketing Certificate payments.
This action will also: amend Chapter II to delegate authority to
implement these programs from the Secretary to the Under Secretary for
Farm and Foreign Agricultural Services and to the Administrator, Farm
Service Agency (FSA) and to correct an erroneous reference to an
existing delegation with respect to the Administrator, Foreign
Agricultural Service (FAS); reorganize Chapter VII to consolidate the
regulations in a more efficient manner, to free parts for future use
and to remove obsolete provisions; and reorganize Chapter XIV so that
the regulations of separate agencies that operate through CCC are
located and organized in separate and identifiable parts.
This regulation will complete many of the actions being taken by
FSA as part of the National Performance Review Initiative to eliminate
unnecessary regulations and improve those that remain in force.
EFFECTIVE DATE: July 12, 1996.
FOR FURTHER INFORMATION CONTACT: David Winningham, Director, Regulatory
Review Group, FSA, USDA, Stop 0572, 1400 Independence Ave. SW,
Washington, D.C. 20250-0572, Telephone: (202) 720-5457.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This final rule is issued in conformance with Executive Order 12866
and has been determined to be economically significant and has been
reviewed by the Office of Management and Budget.
Cost-Benefit Assessment
A cost-benefit assessment of the implementation of commodity
programs provided under the 1996 Act was completed. Most of the impact
on the farm sector is due to Title I provisions (Agricultural Market
Transition Act of 1996). However, the cost-benefit assessment also
incorporates, but does not separately analyze, the effects of the
implementation of Title II (Agricultural Trade) and Title III
(Conservation) provisions.
The assessment is based, in part, on analyses of supply, demand,
and price conditions and trends in agricultural commodity markets
conducted by the U.S. Department of Agriculture (USDA). Several USDA
agencies conduct these analyses, which are coordinated through USDA's
Interagency Commodity Estimates Committees. The Committees are composed
of senior analysts and are responsible for publishing official USDA
supply, demand, and price estimates/forecasts. Weather, trade policy,
and economic uncertainties surrounding production and use projections
can change these forecasts.
The 1996 Act was signed into law on April 4, 1996. The fiscal year
(FY) 1997 President's Budget baseline estimates, based on supply and
demand conditions as of January 1996 assumed an extension of 1995
program provisions as provided by the Agricultural Act of 1949, as
amended (the 1949 Act) prior to enactment of the 1996 Act. The primary
amendments to the 1949 Act which are incorporated in this analysis are
the provisions of the Food, Agriculture, Conservation and Trade Act of
1990 (the 1990 Act) and related budget reconciliation acts in 1990 and
1993.
The 1996 Act replaces target prices, deficiency payments, and
acreage reduction programs with fixed, but declining, payments to
producers of contract commodities (wheat, corn, grain sorghum, barley,
oats, upland cotton, and rice). Contract payments are based on
historical acreage on the farm and will not change if acreage or market
prices change. In general, producers with production flexibility
contracts are given total flexibility to plant any crop on the farm,
except fruits and vegetables. However, participating producers must
comply with wetland and conservation requirements under Title XII of
the Food Security Act of 1985.
The 1996 Act accelerates the trend of the previous two major farm
acts toward greater market orientation, which gradually reduced the
Government's influence in the agricultural sector. The reduced role of
Government programs may make the sector more vulnerable to supply and/
or demand shocks, but the increased planting flexibility and
elimination of production adjustment programs allow producers to
respond more rapidly. Thus, alternative production and marketing
strategies that manage risk could increase in importance.
In aggregate, the national level of acreage planted to most of the
major field crops under the 1996 Act is expected to be nearly the same
as under the FY 1997 President's Budget baseline assuming continuation
of the 1995 program provisions. However, the increased planting
flexibility may result in a shift at the farm level and regionally to
take advantage of differences in comparative advantage in production of
specific crops. Plantings of the eight major field crops are expected
to average only about 600,000 acres less compared with the baseline,
due largely to the decoupling of payments from planting decisions and
the freeing-up of haying and grazing restrictions. The 1996 Act will
have little effect on fruits and vegetables because planting
limitations are similar to the 1949 Act.
Total outlays for the contract commodities and marketing assistance
loan commodities under the 1996 Act are estimated at $36.8 billion,
about $23.0 billion higher than under the FY 1997 President's Budget
baseline assuming continuation of the 1995 program provisions. This
largely reflects higher contract commodity payments compared with
projected deficiency payments under the FY 1997 President's Budget
baseline.
Net farm income (including crop and livestock sectors) during the
1996-2002 calendar years is expected to be about $15 billion higher
under the 1996 Act than under the FY 1997 President's Budget baseline.
This largely reflects higher Government payments to farmers under the
1996 Act as production flexibility contract payments exceed
[[Page 37545]]
projected deficiency payments. Additionally, changes in the timing of
payments to farmers provide an additional boost to farm income in the
first year of the program--pushing 1996 net income up about $4 billion.
However, net farm income is up by less than the increase in Government
payments due to changes in the dairy and peanut programs. Crop sector
receipts are down slightly under the 1996 Act due to lower plantings
and production of the eight major commodities. Livestock sector
receipts are lower due primarily to lower dairy sector receipts. Cash
production expenses are up slightly due to increases in net cash rents,
which offset lower crop production expenses from lower plantings.
Farmland values are higher under the 1996 Act compared with the FY
1997 President's Budget, reflecting the capitalized value of higher
income. Land values average about 3 percent higher under the 1996 Act
compared with FY 1997 President's Budget estimates.
Consumer costs are expected to be only slightly lower under the
1996 Act. Because grain prices, on average, are expected to be
essentially unaffected, no appreciable change in grain-based food
product costs, such as cereal and meat products, is expected.
The livestock sector, excluding dairy, is expected to benefit
modestly from the 1996 Act because there are no restrictions on acreage
that may be hayed or grazed, and, on average, feed prices are expected
to be about unchanged. However, in aggregate, the net impact on
nondairy livestock prices and production is negligible. Alternatively,
the 1996 Act can be compared to a ``no program'' baseline. Under the
1996 Act, contract commodity payments represent a large portion of the
benefits received by producers and there are few planting restrictions.
The major differences between a no-program scenario (if the CRP and
export programs were continued) and the 1996 Act are that producers
would no longer receive contract commodity payments of about $35.9
billion and would no longer be subject to farm conservation and wetland
protection requirements. The loss in farm income would likely entail
substantial short-term adjustments and financial stress. However, over
the longer term, a no-program scenario is expected to have little or no
impact on supply, demand, and prices compared with the 1996 Act for
most commodities except for peanuts, sugar, and, in the initial years
of the period, dairy.
Plantings would be expected to decrease marginally with little or
no change in market prices. Farm income would likely be lower, but lost
revenue from eliminating contract commodity payments would be partially
offset by lower cash rents. Land values would be lower if there were no
program. In the aggregate, compared with a no-program scenario, impacts
of the 1996 Act on the livestock industry, input industry, consumers,
and the general economy would be minimal in the long run. However,
impacts in some sectors, such as those dependent on the peanut program
and sugar program, may be more significant.
The economic impacts of the peanut program provisions of the 1996
Act, including eliminating the peanut quota floor (which is addressed
in a separate rule), reducing the quota price support level, and
requiring the program to operate at no net cost are expected to reduce
producers' revenue by $1.5 billion from 1996 to 2002, while taxpayers
are expected to benefit by avoiding costs of $0.5 billion compared with
the FY 1997 President's Budget baseline. Consumers benefit from lower
prices. Quota lease and capitalized values of the quota are also
expected to decline.
Under a ``no peanuts program'' scenario, producer prices would
decline, resulting in gains to first buyers of peanuts of $150 to $160
million annually, compared with the 1996 provisions. Over the 7-year
life of the program, the capitalized gain to first buyers would total
about $800 million, assuming a 10 percent capitalization rate. Beet
sugar production under the 1996 Act is expected to expand slightly
faster than under the FY 1997 President's Budget baseline because of
the elimination of domestic marketing allotments. Production of raw
cane sugar is expected to be the same. Sugar imports are forecast to be
somewhat lower under the 1996 Act reflecting the increase in beet sugar
production. Based on the FY 1997 President's Budget baseline, the sugar
program is expected to offer nonrecourse loans in most years covered by
the 1996 Act because the tariff rate quota is expected to be above 1.5
million short tons, raw value. Sugar prices are not expected to change
significantly on average because supply is expected to be unchanged
from the FY 1997 President's Budget baseline. The 1996 Act is expected
to increase Federal revenues by $49 million over FY's 1996-2002,
compared with the FY 1997 President's Budget baseline, by increasing
assessments on sugar marketed.
One study estimated, under the assumptions of a low initial world
price for raw sugar, averaging 7.5 cents per pound, and unilateral
elimination of the U.S. sugar program, that the U.S. program increased
the domestic sugar price by an average of 13 cents per pound from 1984
to 1989. The study estimated that this domestic price premium cost U.S.
sweetener users $2.8 billion per year; increased returns to sugarcane
growers, sugar beet growers, and sweetener processors by $2.1 billion;
increased returns to foreign quota holders by $403 million; and cost
other foreign sugar suppliers $2.3 billion (by lowering the world
price); and benefitted foreign consumers $2.2 billion (1988 dollars).
Another study estimated that trade liberalization by the U.S., the
European Economic Union, China, and the former Soviet Union in sugar
would result in a domestic price of 22.4 cents per pound, which is
about the current domestic price under existing U.S. trade
restrictions. Since beet sugar production costs are lower than raw cane
sugar production and refining costs in the United States, very little
disruption of the domestic sugar industry would be expected with
multilateral deregulation of the world sugar market.
In the dairy sector, milk production is expected to be lower
compared with the FY 1997 President's Budget baseline as dairy farmers
respond to lower milk prices. Consumers benefit from lower milk and
dairy product prices as product clears through the marketplace as the
support program is being phased out by January 1, 2000. Cash receipts
in the dairy sector are lower under the 1996 Act, also a result of the
price support program being phased out. Lower farm milk prices are only
partially offset by the elimination of the assessment on all milk
marketings that became effective on May 1, 1996.
Lower producer prices under a ``no dairy program'' scenario would
result in gains to first buyers of milk of about $175 million per year
over the 7-year period, FY 1996-2002, compared with the new program.
Most of the gains to first buyers would occur during the first half of
the period, before the support program is eliminated. Lower farm-level
prices for milk could provide a temporary windfall to manufacturers and
retailers of milk and dairy products, but competitive pressures would
be expected eventually to lead to much of the reduction in producer
prices being passed on to retail consumers.
The 1996 Act provides the Secretary some limited implementation
options. Alternative options, reasons for selecting a particular
option, and
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analyses of the individual commodity sector impacts of the 1996 Act,
compared with FY 1997 President's Budget, are presented in the
assessment.
For further information, the following individuals may be contacted
regarding the different parts of the assessment:
Part I--Contract Commodity Payment, Marketing Assistance Loan, and
Related Provisions of the Agricultural Market Transition Act (Contact:
Philip Sronce, 202-720-2711)
Part II--Sugar (Contact: Dan Colacicco, 202-720-6733)
Part III--Dairy (Contact: John Mengel, 202-720-6733)
Part IV--Peanuts (Contact: Verner Grise, 202-720-5291)
Federal Assistance Programs
The titles and numbers of the Federal assistance programs, as
found in the Catalog of Federal Domestic Assistance, to which this
final rule applies are: Commodity Loans and Purchases-10.051; Cotton
Production Stabilization-10.052; Feed Grain Production
Stabilization-10.055; Wheat Production Stabilization-10.058; Rice
Production Program-10.065; and Conservation Reserve Program-10.069.
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this rule because the Office of the Secretary, FSA and
CCC are 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 this rule.
Environmental Evaluation
It has been determined by an environmental evaluation that this
action will have no significant impact on the quality of the human
environment. Therefore, neither an environmental assessment nor an
Environmental Impact Statement is needed.
Executive Order 12778
The final rule has been reviewed in accordance with Executive Order
12778. The provisions of this final rule preempt State laws to the
extent such laws are inconsistent with the provisions of this rule. The
provisions of this rule are not retroactive. Before any judicial action
may be brought concerning the provisions of this rule, the
administrative remedies must be exhausted.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372, which require 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).
Unfunded Mandates
The provisions of Title II of the Unfunded Mandates Reform Act of
1995 are not applicable to this rule because the Office of the
Secretary, FSA and CCC are 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 this rule.
Small Business Regulatory Enforcement Fairness Act of 1996
Section 161(d) of the 1996 Act requires that the regulations
necessary to implement Title I of the 1996 Act must be issued within 90
days of enactment and that such regulations shall be issued without
regard to the notice and comment provisions of 5 U.S.C. 553. These
regulations affect the immediate planting and marketing decisions of an
extraordinarily large number of agricultural producers. In addition,
with respect to the revision of 7 CFR part 2, 5 U.S.C. 553 specifically
provides that rules relating to agency organization may be published
without the issuance of a general notice of proposed rulemaking.
Accordingly, as authorized by section 808 of the Small Business
Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121, this rule
is effective upon publication in the Federal Register.
Background
1. Part 2 Delegations of Authority by the Secretary of Agriculture and
General Officers of the Department
Delegations of authority are made from the Secretary to the Under
Secretary for Farm and Foreign Agricultural Services and from the Under
Secretary for Farm and Foreign Agricultural Services to the
Administrator, FSA, to formulate policies and administer programs
authorized by Title I of the 1996 Act. In addition, an erroneous
delegation is corrected and obsolete delegations are removed.
2. Part 718 Reporting and Maintaining Farm Records and General
Compliance Provisions
The regulations regarding the determination of acreage and
compliance, such as requirements for acreage reports, are amended to
conform to the program changes required by the 1996 Act. As a result of
the broad planting flexibility under the new regulations producers will
no longer be required to submit acreage reports on the production on
the farms. Reporting will only be required regarding the planting of
fruits and vegetables in order to receive production flexibility
contract payments. Producers who seek marketing assistance loans shall
file an acreage report, before harvest, on the production to be used
for the marketing assistance loan. No additional voluntary reporting by
producers will be considered for the purpose of determining benefits
under future programs. Section 718.7 is reorganized to reduce its size
and improve clarity. Also, internal agency procedures are removed from
the regulations and obsolete references are updated or removed. Parts
719--Reconstitution of Farms, Allotments, Normal Crop Acreage, and
Preceding Year Planted Acreage, 720--General Policy and
Interpretations, 790--Incomplete Performance Based Upon Action or
Advice of an Authorized Representative of the Secretary, 791--Authority
to Make Payments When There Has Been a Failure to Comply Fully With the
Program, 793--Rule of Fractions, and 796--Denial of Program Eligibility
for Controlled Substance Violations are consolidated into part 718 for
efficiency and ease of use.
3. Part 729 Peanuts
The 1996 Act amended the Agricultural Adjustment Act of 1938 (the
1938 Act) to provide a poundage quota program for the 1996 through 2002
crops of peanuts. Quota matters under the 1938 Act will be addressed in
a separate rule. This rule amends part 729 to implement the provision
of section 155 of the 1996 Act dealing with peanut marketing
assessments. The price support provisions of section 155 will be
addressed in the portion of this rule amending part 1446.
Under section 155(g)(1) of the 1996 Act, the Secretary is directed
to collect a nonrefundable marketing assessment on peanuts produced in
each of the 1996 through 2002 crops on all peanuts marketed and
considered marketed in the same manner as the assessment previously
collected under provisions of the 1949 Act. The per-pound basis for the
assessment as a percentage of the national average quota or additional
peanut loan rate for the applicable crop is, for producers, 0.6 percent
for the 1996 crop and 0.65 percent for the 1997 through 2002 crops,
and, for the first purchaser, 0.55 percent for each of the 1996 through
2002 crop years. Sections 155(d)(4) and (7) of the 1996 Act provide
further that the amounts of the assessments not required to offset
losses in area quota marketing pools shall be transferred to the
Treasury.
Further, section 155(d)(8) of the 1996 Act requires that the
marketing
[[Page 37547]]
assessment collected from producers be increased if the offsets, as
provided in part 1446 of this title, are not sufficient to cover losses
in an area quota pool. The increased assessment will be in an amount
determined by the Secretary to be necessary to cover such losses and
shall apply to the quota peanuts produced in the marketing area covered
by that pool.
Accordingly, this rule amends Sec. 729.316, and adds a new
Sec. 729.317. Any shortfall in additional assessments made to cover
losses will be made up in increased assessments in subsequent years.
Any excess collections from increased assessments to cover losses shall
be held by the Secretary to cover net losses in the pool in subsequent
years in the same marketing area.
4. Part 1400 Payment Limitation and Payment Eligibility
This rule clarifies the existing policy and implements the payment
limitation and eligibility requirements of the 1996 Act. The payment
limitation and eligibility provisions formerly found at parts 1497 and
1498 are combined and revised in a new part 1400. The 1996 Act provides
a $40,000 limitation per fiscal year on payments made to a person under
one or more production flexibility contracts, a $50,000 limitation on
the total of adjustments made pursuant to sections 113(c)(1) and
113(c)(2) of the 1996 Act and paid to person under one or more
flexibility contracts, and a $75,000 limitation on the amount of
marketing loan gains and loan deficiency payments a person may receive.
The 1996 Act applies the payment limitation and payment eligibility
requirements and restrictions of the Food Security Act of 1985 to
payments made under production flexibility contracts, marketing loan
gains, and loan deficiency payments. This rule will also update
regulations providing that persons who are not U.S. citizens are not
eligible for farm program payments, and make other minor changes to
enhance the implementation of the 1996 Act.
5. Parts 1401 and 1470 Commodity Certificates, In Kind Payments, and
Other Forms of Payment
Chapter XIV provides regulations for programs operated by the
Commodity Credit Corporation (CCC). Currently, three agencies operate
programs under CCC: the Farm Service Agency (FSA), the Natural
Resources Conservation Service (NRCS), and the Foreign Agricultural
Service (FAS). Currently, regulations for each agency are not all co-
located. The chapter will be reorganized to combine and unify each
agency's regulations in easily identifiable parts, as follows:
Parts 1400-1409 General CCC Regulations and Policies
Parts 1410-1464 FSA
Parts 1465-1479 NRCS
Parts 1480-1499 FAS
Part 1470 is thus redesignated as part 1401.
6. Part 1402 Policy for Certain Commodities Available for Sale
This final rule amends part 1402 to delete the requirement that
general sales offering information will be issued on a monthly basis.
7. Part 1405 Loans, Purchases and Other Operations
This final rule implements changes to Sec. 1405.1 by incorporating
the additional 1 percent interest requirement set forth for CCC loans,
and reserves Sec. 1405.5. Also, the rule implements crop insurance
requirements and contract violation provisions set forth by the 1996
Act.
8. Part 1412 Production Flexibility Contracts for Wheat, Feed Grain,
Rice, Upland Cotton
This final rule sets forth the rules and regulation for a new
Federal farm subsidy program. In the past, payments were determined by
taking into consideration the acreage planted to a crop and acreage
devoted to a conserving use. In addition, payments were only made when
the price of a commodity fell below an established (``target'') price
set forth in the 1949 Act. The new program decouples farm program
payments from program crop planting requirements. This rule allows
farms having a 1996 crop acreage base established for one or more of
the following crops: wheat, corn, barley, grain sorghum, oats, cotton
and rice (``contract commodities'') to be enrolled under a Production
Flexibility Contract for a period of 7 years. A producer may enroll the
farm and one or more contract commodities in a 7-year contract.
Contract payments are calculated by multiplying 85 percent of the
contract acreage times the farm program payment yield for the crop
times the payment rate for the crop.
The major provisions of these regulations include the following
provisions. Farms with previous years' crop acreage bases established
on a rotation basis for a crop shall have 1996 crop acreage bases for
the crop established by dividing the sum of planted and considered
planted acreage for the rotation cycle by the number of years in the
rotation cycle. The sign-up period for the program begins May 20, 1996,
and ends August 1, 1996. A producer on an enrolled farm may plant any
crop, including crops other than the contract commodity, on acreage
normally devoted to a contract commodity crop except for certain fruits
and vegetables, for which limitations are set forth in this regulation.
Tobacco may be planted on contract acreage; however, tobacco acreage on
a farm cannot exceed that farm's tobacco quota or allotment. Any 1996
crop acreage bases on a farm not enrolled by August 1, 1996, shall not
be eligible to be enrolled after that date unless such crop acreage
base is released upon expiration of a Conservation Reserve Program
(CRP) contract that expires or is voluntarily terminated after August
1, 1996. Producers who violate a Production Flexibility Contract may be
denied benefits under the Production Flexibility Contract for its
duration, depending on the nature of the violation. No acreage
reduction program requirements apply to this program. The regulations
also provide that landowners must provide fair treatment to
sharecroppers and tenants in order for the landowner to receive program
benefits.
9. Part 1421 Loans and Loan Deficiency Payments for Grains and
Similarly Handled Commodities
Part 1421 provided price support loan and loan deficiency payments
for the 1991 and subsequent crops of wheat, feed grains, rice,
oilseeds, and loans for farm-stored peanuts. The 1996 Act continues to
authorize loan and loan deficiency payments for these commodities from
1996 through 2002. The 1996 Act does not authorize the following: (1)
purchase agreements; (2) farmer-owned reserve (FOR); (3) a rice
marketing certificate program; (4) loans for high moisture barley; (5)
loans and loan deficiency payments for rye; and (6) loan extensions.
This rule removes these references from part 1421. The 1996 Act changes
the repayment rate for rice loan and loan deficiency payments and the
maturity date for oilseeds. Provisions of part 1421 have been amended
as necessary to delete price support terminology; and to reflect the
reorganization of the Department of Agriculture (USDA) pursuant to the
Department of Agriculture Reorganization Act of 1994, Public Law 103-
354, 7 U.S.C. 6991.
Rules for the Rice Marketing Certificate Program are deleted.
10. Part 1425 Cooperative Marketing Associations
This rule implements changes in the regulations for cooperative
marketing
[[Page 37548]]
associations (CMA's) that obtain loan and loan deficiency payments on
behalf of their members for the 1996 through 2002 crop years. The 1996
Act does not authorize: (1) loans and loan deficiency payments for rye
and honey; (2) wool and mohair payments; and (3) purchase agreements.
This rule removes rye, honey, wool, and mohair as approved commodities,
removes purchase agreement provisions, deletes price support
terminology, makes changes necessary to reflect the reorganization of
USDA, and removes definitions found elsewhere in this title. The term
``cooperative'' is amended to CMA.
11. Part 1427 Cotton Loan Programs
The 1996 Act sets forth the statutory authority for the cotton loan
program. This rule makes amendments to part 1427 that will incorporate
applicable provisions of the 1996 Act, provide greater clarity, and
remove obsolete provisions. The provisions of these regulations are
generally the same as regulations in effect with regard to the 1991
through 1995 crops.
However, Sec. 1427.7(a) has been amended to remove the provisions
for 8-month extensions of upland cotton and extra long staple cotton
nonrecourse loans. The 1996 Act prohibits extensions for all loans
authorized under the 1996 Act. CCC will continue the provisions for 8-
month loan extensions for the 1995 upland cotton crop. Sections 1427.8
and 1427.11(g) and (h) have been amended to remove the provisions that
the amount of the loan shall be reduced by the amount of any unpaid
warehouse receiving charges, warehouse storage charges in excess of 60
days, or charges for new bale ties. However, Sec. 1427.13(e) has been
added to require the producer, if the producer elects to forfeit cotton
to CCC, to pay to CCC all warehouse receiving and storage charges that
accrued on such forfeited cotton prior to the date such cotton is
tendered for loan.
Section 1427.19 has been amended to modify the repayment level for
upland cotton loans beginning with the 1996 crop. The 1996 Act removed
the minimum repayment rate of 70 percent of the national average loan
rate. Under the 1996 Act, upland cotton loans may be repaid at the
lesser of: (1) the loan level and charges, plus interest; or (2) the
adjusted world price. In addition, Sec. 1427.19 has been amended to
clarify when CCC will pay warehouse storage charges to permit upland
cotton loans to be repaid at the adjusted world price. Report language
accompanying the 1996 Act provides that current policy for establishing
the repayment rate for upland cotton should be continued, including
crediting storage costs against the repayment amount. Accordingly, the
regulations provide that producers will be responsible for paying
storage costs, except when producers repay a loan at a lower rate when
the adjusted world price of upland cotton is less than the total of the
principal amount of the loan plus accrued interest and storage costs
accruing after the cotton was pledged as collateral for the loan. This
is the same procedure as was used in prior years. However, producers
will now be responsible for storage charges accruing before the loan
was obtained.
Section 1427.24 has been reserved. The 1996 Act does not authorize
recourse loans except for recourse seed cotton loans, which are covered
in subpart D of this part.
Section 1427.100 is amended to set forth changes to the upland
cotton user marketing certificate program. A proposed rule was
published in the Federal Register on March 13, 1996, at 61 FR 10289,
requesting comments on a proposal to address bunching of export sales
under the upland cotton user marketing certificate (Step 2) program by
setting the exporter payment rate on the date the cotton is shipped.
Comments were also solicited on several alternative policies to fix
bunching such as prohibiting sales through third parties or to foreign
affiliates, or requiring exporters to provide evidence of a bona fide
export sales contract, identify the end user, or disclose the amount of
the Step 2 payment applied to the sales price.
The 30-day public comment period ended on April 12, 1996. A total
of 123 comments were received from 85 producers, nine ginners, seven
regional producer associations, five producer co-ops, five U.S. textile
manufacturers, five shippers, the Embassy of Australia, and six
national organizations including the American Cotton Shippers
Association (ACSA), the National Cotton Council (NCC), the NCC Producer
Steering Committee, the American Textile Manufacturers Institute
(ATMI), the National Cotton Ginner's Association (NCGA) and the
Cottongrowers Warehouse Association (CWA).
One hundred and thirteen comments supported the proposal, including
all 85 producers, nine ginners, and five producer co-ops as well as six
regional producer associations, four textile manufacturers, the NCC
Producer Steering Committee, NCGA, CWA and ATMI. The following reasons
for supporting the proposal were cited by one or more of those who
commented: solves the bunching problem, fixes an otherwise good
program; maintains competitiveness in both domestic and export markets;
brings the program closer in line with the original legislative intent;
puts exporters and domestic mills on an equal basis; removes the
incentive for exporters to bunch; limits program abuse; limited
transportation facilities would make bunching under this proposal too
hard and expensive to control; results in a return to normal marketing
practices; gives exporters an incentive to ship U.S. cotton on optional
origin contracts; and enables exporters to be competitive on future
sales.
ACSA, the Embassy of Australia, one regional producer association
and four shippers opposed the proposal. The following reasons were
cited by one or more of those who commented: compromises the
competitiveness feature of the Step 2 program by decoupling the payment
rate from the sale date; could result in bunching, disrupt shipping,
and cause congestion at ports and container terminals; will not
increase sales of U.S. cotton in foreign markets; does not remove the
potential for Step 2 to produce a high value payment rate, unrelated to
the market, and may require further changes in the future to fix any
unintended effects; increases the reporting burden on program
participants and USDA; is a give-away program providing the exporter
with a windfall profit; will generate negative publicity; may
indirectly subsidize foreign buyers who compete with U.S. textile mills
if export contracts include agreements that pass on to buyers all or
part of any Step 2 payment received by the exporter; the U.S. Treasury
would not receive income tax revenue on payments shared with foreign
buyers; may result in higher cotton imports under Step 3 (import
quota), which would lower producer prices; and shippers would be the
only entities to reap the benefits of the program.
Several other comments on the proposed rule were received. One
textile manufacturer indicated that the Step 2 program should be for
mills only, but if exporters were included, the payment rate should be
set only when the final destination is declared. ACSA and two shippers
recommended that the Step 2 program be discontinued for exporters. The
Embassy of Australia recommended that the Step 2 program be eliminated
entirely. Although NCC supported a rule change to address bunching, the
organization could not achieve unanimity among the seven industry
segments on a specific solution, so NCC could not endorse the proposal.
One shipper commented that the Step 2 program is fundamentally flawed
and
[[Page 37549]]
cannot be fixed by this or any other proposal.
Several comments about alternative policies were received. The NCC
Producer Steering Committee and three regional producer associations
stated that basing the exporter payment rate on the date the final
destination is declared would also solve the bunching problem. The
Embassy of Australia indicated that, like the proposal, the alternative
policies listed in the proposed rule would likely have negative,
unintended consequences. One regional cotton producer association
recommended that USDA continue to study alternatives to improve Step 2.
As pointed out in several comments, the proposal would decouple the
exporter payment rate from the sales date. However, to derive a fair
solution to bunching, the interests of all participants must be
weighed. Although the legislative intent was to make U.S. cotton
competitive, Step 2 was not intended to favor one subset of
participants over another in the process. In the past, U.S. mills and
exporters without foreign affiliates have been at somewhat of a
disadvantage vis-a-vis exporters with foreign affiliates. Mills cannot
lock in payments until the cotton is actually consumed, whereas under
current procedures, exporters lock in their payment rate on the sale
date, which can be months before the cotton is actually shipped.
Exporters with foreign affiliates have a greater capacity to do this
than exporters without such affiliates. To leave existing rules in
place for exporters would continue to place these groups at a
disadvantage. Also, the 1996 Act put a $701 million cap on Step 2
payments for fiscal years 1996 through 2002. The proposed rule would
make access among participants to Step 2 payments more equitable.
Disruptions in the infrastructure caused by exporters' trying to
bunch their exports are not anticipated. Due to the physical
limitations of the transportation system, exporters will not be able to
bunch exports to the extent they were able to bunch sales contracts.
The recordkeeping and reporting burden on both program participants
and CCC would be reduced significantly under the proposed rule.
Exporters would only report to CCC those exports made during a week a
payment rate was in effect. There would no longer be a need to track
current-crop/forward-crop shipment data nor would the requirement to
register sales cancellations and replacements be retained. Also, as a
result of changes to the exporter side, CCC has determined that
domestic mills would no longer have to report as much data about their
consumption during weeks in which the payment rate is zero. Adopting
this proposal would simplify program administration for CCC and all
program participants.
ACSA, which represents a large segment of the U.S. shipping
industry, called for the removal of exporters from the Step 2 program.
One shipper stated that the provisions of the new farm bill should
provide ``all tools necessary to compete in foreign markets.'' CCC has
no authority to exclude exporters from the Step 2 program or to
eliminate the Step 2 program. Whenever certain price conditions occur,
CCC is obligated by law to issue Step 2 payments to program
participants who have signed an agreement. Since new agreements must be
signed in order to continue to participate in the program, exporters or
domestic mills who believe that participation in the program will not
serve their interests may elect to not sign.
The 1996 Act Statement of Managers directed the Secretary to
eliminate the bunching problem to the extent practicable without
significantly disrupting normal marketing processes in domestic and
export markets. The industry did not offer alternatives except to
suggest that basing the exporter payment rate on the date the final
destination of the cotton is declared would solve the bunching problem.
As one comment pointed out, the proposal may not remove the
potential for high payment rates. However, bunching, not high payment
rates, was identified in the proposed rule as the problem to be
addressed. The payment rate calculation is designed to close the gap
between U.S. and world prices, which may at times be significant. If a
high payment rate occurred, mills and exporters would have equal access
to payments under the proposed rule.
Under current rules, with the payment rate determined as of the
date of sale, bunching of sales in the Step 2 program may have given
foreign mills an advantage over domestic mills by giving foreign mills
access to U.S. cotton with high Step 2 payments. Although it is true
that under the proposed rule foreign buyers will still benefit as
exporters pass on to them all or part of the Step 2 payment, the
elimination of bunching should prevent the fixation of season-high Step
2 payment rates on large volumes of exports, as has been observed in
past years. Overall, the program should be fairer to U.S. mills.
After considering these comments, this rule adopts as final the
proposed rule published on March 13, 1996. However, because new
legislation was enacted on April 4, 1996, two additional changes to the
Step 2 regulations are incorporated into the final rule. First, the
1996 Act extended the Step 2 program through July 31, 2003, and second,
the legislation provided that total expenditures for the program during
fiscal years 1996 through 2002 shall not exceed $701,000,000.
Obligations incurred by CCC to exporters under this program before
April 5, 1996, are not subject to this funding restriction. Obligations
incurred by CCC on or after April 5, 1996, are subject to the
$701,000,000 restriction.
CCC has determined that cotton contracted for delivery after
September 30, 1996, by eligible exporters will be covered under the new
regulations and the terms and conditions of the revised agreement.
Exporters will be eligible to receive Step 2 payments on such cotton if
they sign a new agreement and if a payment rate is in effect during the
week the cotton is exported. However, if, prior to July 18, 1996, a
positive payment rate was secured for cotton sold for delivery after
September 30, 1996, CCC will make payments to eligible exporters in
accordance with the terms and conditions of CCC-1045 (4-15-94) Revision
2. Any payments made on cotton contracted for delivery after September
30, 1996, will count against the $701,000,000 statutory limit.
The new rules will become effective on July 18, 1996. To continue
to participate in the Step 2 program, exporters and domestic users must
sign and return the revised agreement to CCC.
12. Part 1430 Dairy Products
The amendments to the dairy regulations made by this rule address
requirements of the 1996 Act regarding: (1) The price support level for
milk; (2) ineligibility of certain products for price support purchase
when State-allowed manufacturing allowances exceed certain levels; (3)
the Dairy Refund Program; (4) the deletion of regulations for the Dairy
Termination Program; (5) a future recourse loan program for milk
products; and (6) technical revisions to part 1430 to reflect a recent
USDA reorganization. The 1996 Act addresses a number of other dairy
issues, such as milk promotion, export programs, and Federal marketing
orders. Other rules and/or notices regarding those subjects will be
issued as appropriate.
Section 141 of the 1996 Act authorizes the Milk Price Support
Program from May 1, 1996, through December 31, 1999. Authority for
price support previously provided by section 204 of the 1949 Act, as
amended by the Food, Agriculture, Conservation, and
[[Page 37550]]
Trade Act of 1990 (the 1990 Act), was repealed as of May 1, 1996. Milk
prices are to be supported through the purchase of butter, nonfat dry
milk and cheese. Under the 1996 Act, the levels of support for milk
containing 3.67 percent milkfat are: $10.35 per hundredweight during
calendar year 1996, $10.20 per hundredweight during calendar year 1997,
$10.05 per hundredweight during calendar year 1998, and $9.90 per
hundredweight during calendar year 1999.
Provisions for price support, previously codified at Sec. 1430.282,
have been deleted and Sec. 1430.2 has been added to implement the 1996
Act provisions. Section 1430.1 has been added to provide the
definitions for Subpart A--Price Support Program for Milk.
Section 141 of the 1996 Act further provides that: (1) The CCC
support purchase prices for each of the products of milk (butter,
cheese, and nonfat dry milk) announced by CCC shall be the same for all
of that product sold by persons offering to sell the product to CCC,
and (2) the purchase prices shall be sufficient to enable plants of
average efficiency to pay producers, on average, a price that is not
less than the rate of price support in effect for milk. The Secretary
may allocate the rate of price support between the purchase prices for
butter and nonfat dry milk in a manner that will result in the lowest
level of CCC expenditures, or achieve such other objectives as the
Secretary considers appropriate. The Secretary may make such
adjustments not more than twice during a calendar year. Purchase
announcements will reflect these provisions.
Also, however, Sec. 1430.3 is added to provide that CCC will
suspend the purchase of butter, cheese and nonfat dry milk from plants
in a State that provides, through its regulation of milk prices,
manufacturing allowances in excess of those authorized by section 145
of the 1996 Act. The maximum manufacturing allowances allowed by
section 145 are: (1) $1.65 per hundredweight for milk manufactured into
butter and nonfat dry milk; and (2) $1.80 per hundredweight for milk
manufactured into cheese. The new regulation also specifies appeal
procedures.
The Dairy Refund Program, as authorized by section 204(h) of the
1949 Act, provided for a reduction in the price dairy producers receive
and a method by which they could obtain a refund. Section 141(g) of the
1996 Act repeals section 204 of the 1949 Act, effective May 1, 1996.
However, section 141(e)(1) of the 1996 Act authorizes a refund of the
total reduction in a producer's price during calendar year 1996 to
producers who provide evidence that they did not increase total milk
marketings in calendar year 1996 compared to their total marketings in
calendar year 1995. Section 1430.362 is added to provide for refunds of
1996 reductions in price and to clarify procedures and ongoing policies
regarding refund payments and producer eligibility.
Also, rules for the Dairy Termination Program (DTP) are deleted
from part 1430 because the contract periods for DTP contracts have
expired. This will not affect rights and liabilities under any DTP
contract.
The Recourse Loan Program for Commercial Processors of Dairy
Products is authorized by section 142 of the 1996 Act, and becomes
effective on January 1, 2000. The program will offer recourse loans to
commercial processors of eligible dairy products to assist in the
management of inventories of eligible dairy products and to assure a
degree of price stability for the dairy industry. These eligible dairy
products are cheddar cheese, butter, and nonfat dry milk. The loan
rates will reflect a milk equivalency value of $9.90 per hundredweight
of milk containing 3.67 percent butterfat. The parties receiving the
loans will be liable for full repayment of the loan principal and
interest. Regulations have been added at subpart C of part 1430 to
provide for this program.
Finally, provisions of part 1430 have been amended as necessary to
reflect the reorganization of USDA.
13. Part 1434 General Price Support Regulations for Honey
The 1996 Act did not authorize loan and loan deficiency payment
programs for the 1996 and subsequent crops of honey. This action will
remove the regulations for the program.
14. Part 1435 Sugar Program
Section 156 of the 1996 Act repeals section 206 of the 1949 Act and
institutes new sugar loan and marketing assessment programs. The
regulations governing the administration of the sugar loan program will
be extended through the 2002 crop year and changed to reflect the
changes mandated by the 1996 Act, which are as follows:
(1) Section 156(a) requires the national loan rate for raw cane
sugar to be fixed at 18 cents per pound;
(2) Section 156(b) requires the national loan rate for refined beet
sugar to be fixed at 22.90 cents per pound;
(3) Section 156(e) requires the Secretary to offer recourse loans
unless the tariff-rate quota (TRQ) is established at, or increased to,
a level above 1.5 million short tons, raw value, at which time CCC must
offer nonrecourse loans and convert any existing recourse loans to
nonrecourse loans; and
(4) Section 156(g) requires a penalty of 1 cent per pound, raw
value, for raw cane sugar and 1.072 cents per pound of refined beet
sugar to be assessed on the forfeiture of sugar pledged as collateral
for nonrecourse loans.
Section 156(c) requires the Secretary to reduce the loan rates if
the major sugar producing nations reduce their support for their
domestic sugar industries more than their commitments as part of the
Uruguay Round Agreements Act. CCC will promulgate new regulations
should such a reduction occur.
This rule also eliminates redundancies, clarifies terms, and
simplifies the Sugar Loan Program regulations. These regulations are
also modified to reflect the 1996 Act's authorization of the loan
program through the 2002 crop year. The definitions in Secs. 1435.101,
1435.201, and 1435.401 are consolidated into Sec. 1435.2. Definitions
of recourse and nonrecourse loans and the tariff-rate quota have been
added. All references to the Deputy Administrator for State and County
Operations (DASCO) are changed to the Deputy Administrator for Farm
Programs (DAFP) to reflect the reorganization of USDA.
Part 1435 is renumbered to reflect the complete reorganization of
the part. A new section on loan types, Sec. 1435.102, is added to
reflect the availability of recourse loans and nonrecourse loans. The
fixed national loan average rates are listed in Sec. 1435.103. Section
1435.104 is expanded to consolidate requirements previously found in
Sec. 1435.7 and Sec. 1435.9. Supplemental loans remain limited to sugar
produced from sugarcane or sugar beets harvested during July, August,
and September. Storage facility requirements are now set forth in
Sec. 1435.108. Section 1435.107, Settlement and Foreclosure, has been
organized to reflect the differences between the settlements of
nonrecourse loans and recourse loans. The bonding and other provisions
of Sec. 1435.11 that required loan recipients to provide CCC with
financial assurances that producers would be paid the minimum grower
payments have been deleted from the regulations.
Section 156(f) of the 1996 Act requires sugar marketing assessments
to increase 25 percent for the fiscal years (FY) 1997 through 2003. The
assessment on raw cane sugar increases from 1.1 percent to 1.375
percent of the loan rate for raw
[[Page 37551]]
cane sugar, or an increase from 0.198 cents to 0.2475 cents per pound
in FY 1997. The assessment on refined beet sugar increases from 1.1794
percent to 1.47425 percent of the loan rate for raw cane sugar. Since
the raw cane sugar loan rate is fixed at 18 cents per pound, the
assessment rate increases from 0.2123 cents to 0.2654 cents per pound,
refined basis. If the raw cane sugar loan rate were to be reduced, the
marketing assessments would be reduced accordingly and put forth in
revised regulations.
Section 156(h) of the 1996 Act extends the information reporting
requirements through the 2002 crop year. The suspension of sugar
marketing allotments permits the simplification of the information
reporting regulations. The exhibits containing the reporting forms have
been removed from the revised regulations.
Section 171(a)(1)(E) of the 1996 Act suspends sugar marketing
allotments for the 1996 through 2002 crop years. The regulations
regarding sugar marketing allotments are removed because the crop year
ends June 30, 1996, and the deadline for announcing marketing
allotments for this fiscal year has passed.
Section 171(b)(1)(j) suspends section 401(e)(2) of the 1949 Act,
which provides for benefits to be paid to producers in the event of
bankruptcy or insolvency of processors. The regulations regarding
protection for sugar beet and sugarcane producers are, therefore,
removed.
15. Part 1446 Peanuts
The 1996 Act amends the 1938 Act and the 1949 Act to provide, for
the 1996 through 2002 crop years, the peanut price support program and
for the contracting, handling and disposing of additional peanuts. The
peanut price support regulations that relate to the making of
warehouse-stored price support loans on peanuts and other activities
are found at part 1446. The peanut marketing, storage, handling and
disposition requirements for peanuts for the 1991 through 1995 crops
shall continue to be governed by the regulations codified at part 1446,
as of January 1, 1996.
This rule also implements provisions of section 155 of the 1996 Act
dealing with peanut warehouse-stored loans, contract additional
peanuts, peanut handler operations and other matters. Specifically,
this rule changes the peanut regulations in part 1446 regarding these
provisions as follows:
1. In Sec. 1446.103, the definition of ``eligible producer'' has
been changed, in accordance with provisions of the 1996 Act, to provide
that, under the conditions stated in the section, producers who pledge
100 percent of the crop as loan collateral for 2 consecutive years may
not be eligible for price support.
2. In Sec. 1446.103, the definition of ``Support rate--National
Average'' has been changed to reflect the new statutorily set national
average price support rate for quota peanuts of $610.00 per ton.
3. In Sec. 1446.307, the disaster transfer provisions for producers
who transfer Segregation 2 or Segregation 3 peanuts from additional
loan pools to quota loan pools have been changed, as required by the
1996 Act, by limiting the quantity of peanuts eligible for such a
transfer to 25 percent of the total farm quota pounds, excluding pounds
transferred in the fall and by reducing the support rate on such
transferred peanuts to 70 percent of the quota support rate for the
marketing year in which the transfers occur.
4. In Sec. 1446.308(a)(2), the New Mexico pool eligibility
requirements have been changed, as required by the 1996 Act, by adding
a clause that controls the quantity of Valencia peanuts that are
physically produced in Texas that may be placed in the New Mexico pools
based on amounts previously produced in Texas on farms administratively
located in New Mexico.
5. In Sec. 1446.308 the rules have been amended to implement new
provisions of the 1996 Act relating to the recovery of losses in area
quota loan pools, including provisions for increased marketing
assessments to make the peanut program a ``no-net-cost'' program.
6. Miscellaneous changes to the regulatory text have been made as a
result of the USDA reorganization, the need to update references to
forms and to change dates, and for technical and grammatical
sufficiency.
16. Part 1468 Wool and Mohair
The National Wool Act of 1954, as amended, terminated the Wool and
Mohair program effective December 31, 1995. This action will remove the
regulations for the program.
17. Parts 1477, 1478, and 1479 Disaster Payment Program for 1990 and
Subsequent Crops, Tree Assistance Program, and Forage Assistance
Program
Authority for these programs has expired. Parts 1477, 1478, and
1479 are therefore removed.
Paperwork Reduction Act
As provided in section 161(d) of the 1996 Act, the Paperwork
Reduction Act is not applicable to these regulations. However, the
forms necessary to conduct these programs have been submitted for
clearance to the Office of Management and Budget under the provisions
of 44 U.S.C. chapter 35.
List of Subjects
7 CFR Part 2
Authority delegations (Government agencies).
7 CFR Part 718
Acreage inspection, Acreage measurement, Acreage reporting,
Compliance, Controlled substance violation, Crop insurance requirement,
Delegations of Authority, Eminent domain, Farm Constitution, Finality
rule, Reconstituting farms, Signature requirements, Substantive change,
Tolerance, Transfer of allotments and quotas, Variances.
7 CFR Part 729
Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping
requirements.
7 CFR Part 1400
Aliens, Production Flexibility Contracts for Wheat, Feed Grains,
Rice, and Upland Cotton, Price Support programs
7 CFR Part 1405
Federal crop insurance, Loan programs-agriculture, Price support
programs.
7 CFR Part 1412
Production Flexibility Contracts for Wheat, Feed Grain, Rice,
Upland Cotton.
7 CFR Part 1421
Grains, Loan programs/agriculture, Oilseeds, Peanuts, Price support
programs, Reporting and recordkeeping requirements, Soybeans, Surety
bonds, Warehouses.
7 CFR Part 1425
Cooperatives, Financial requirements, Loan and loan deficiency
payment programs--agriculture, Reporting and recordkeeping
requirements.
7 CFR Part 1427
Cotton loan programs/agriculture, Packaging and containers,
Marketing certificate programs, Price support programs, Reporting and
recordkeeping requirements, Surety bonds, Warehouses.
[[Page 37552]]
7 CFR Part 1430
Agriculture, Assessment, Dairy products, Manufacturing allowances,
Milk, Price support program, Recourse loans.
7 CFR Part 1434
Honey, Loan program--agriculture, Reporting and recordkeeping
requirements.
7 CFR Part 1435
Loan programs/agriculture, Reporting and recordkeeping
requirements, Sugar.
7 CFR Part 1446
Loan programs--agriculture, Peanuts, Price support programs,
Reporting and recordkeeping requirements, Warehouses.
7 CFR Part 1468
Assistance grant program--agriculture, Livestock, Mohair, Reporting
and recordkeeping requirements, Wool.
For the reasons set out in the preamble, 7 CFR Chapters I, VII and
XIV are amended as set forth below.
PART 2--DELEGATIONS OF AUTHORITY BY THE SECRETARY OF AGRICULTURE
AND GENERAL OFFICERS OF THE DEPARTMENT
1. The authority citation for Part 2 is revised to read as follows:
Authority: Sec. 212(a), Pub. L. 103-354, 108 Stat. 3210, 7
U.S.C. 6912(a)(1); 5 U.S.C. 301; Reorganization Plan No. 2 of 1953;
3 C.F.R. 1949-1953 Comp., p. 1024.
2. Section 2.16(a)(1) is amended by adding a new paragraph
(a)(1)(xxiv) to read as follows:
Sec. 2.16 Under Secretary for Farm and Foreign Agricultural Services.
(a) * * *
(1) * * *
(xxiv) Formulate policies and administer programs authorized by
Title I of the Federal Agriculture Improvement and Reform Act of 1996.
* * * * *
3. Section 2.16 is amended by removing and reserving paragraphs
(a)(3)(xxix) and (a)(3)(xxx).
4. Section 2.42(a) is amended by adding paragraph (a)(44) to read
as follows:
Sec. 2.42 Administrator, Farm Service Agency.
(a) * * *
* * * * *
(44) Formulate policies and administer programs authorized by Title
I of the Federal Agriculture Improvement and Reform Act of 1996.
* * * * *
5. Section 2.42(a)(43) is amended by removing the term ``charge''
and inserting the term ``arrange'' in its place.
Sec. 2.43 [Amended]
6. Section 2.43 is amended by removing and reserving paragraphs
(a)(29) and (a)(30).
7. Chapter VII is amended by revising part 718 to read as follows:
PART 718--PROVISIONS APPLICABLE TO MULTIPLE PROGRAMS
Subpart A--General Provisions
Sec.
718.1 Applicability.
718.2 Definitions.
718.3 State committee responsibilities.
718.4 Authority for farm entry and providing information.
718.5 Delegations of authority.
718.6 Signature requirements and time limitations.
718.7 Failure to fully comply.
718.8 Incomplete performance based upon action or advice of an
authorized representative of the Secretary.
718.9 Finality rule.
718.10 Rule of fractions.
718.11 Denial of benefits.
718.12 Furnishing maps.
Subpart B--Determination of Acreage and Compliance
718.101 Measurements.
718.102 Acreage reports.
718.103 Late-filed reports.
718.104 Revised reports.
718.105 Tolerance, variances, and adjustments for tobacco.
718.106 Acreages.
718.107 Skip rows and strip crops.
718.108 Deductions.
718.109 Adjustments.
718.110 Notice of determined acreage.
718.111 Redetermination.
Subpart C--Reconstitution of Farms, Allotments, Quotas, and Acreages
718.201 Farm constitution.
718.202 Guides for determining the land constituting a farm.
718.203 County committee action to reconstitute a farm.
718.204 Reconstitutions of allotments, quotas, and acreages.
718.205 Rules for determining farms, allotments, quotas, and
acreages when reconstitution is made by division.
718.206 Rules for determining allotments, quotas, and acreages when
reconstitution is made by combination.
718.207 Eminent domain acquisitions.
718.208 Exempting Federal prison farms and Federal wildlife
refuges.
718.209 Transfer of allotments and quotas--State public lands.
Authority: 7 U.S.C. 1373, 1374, 7201 et seq.; and 15 U.S.C. 714b
and 714c.
Subpart A--General Provisions
Sec. 718.1 Applicability.
(a) This part is applicable to all programs set forth in Chapters
VII and XIV of this title which are administered by the Farm Service
Agency (FSA).
(b) The provisions of this part will be administered under the
general supervision of the Administrator, FSA, and shall be carried out
in the field by State and county FSA committees (State and county
committees).
(c) State and county committees, and representatives and employees
thereof, do not have authority to modify or waive any of the provisions
of the regulations of this part.
(d) The State committee shall take any action required by these
regulations which has not been taken by the county committee. The State
committee shall also:
(1) Correct, or require a county committee to correct, any action
taken by such county committee which is not in accordance with the
regulations of this part; or
(2) Require a county committee to withhold taking any action which
is not in accordance with the regulations of this part.
(e) No provisions or delegation herein to a State or county
committee shall preclude the Administrator, FSA, or a designee, from
determining any question arising under the program or from reversing or
modifying any determination made by a State or county committee.
(f) The Deputy Administrator may authorize State and county
committees to waive or modify deadlines and other requirements in cases
where lateness or failure to meet such other requirements does not
adversely affect the operation of the program.
Sec. 718.2 Definitions.
Except as provided in individual parts of chapters VII and XIV of
this title, the following terms shall be as defined herein:
Administrative variance (AV) means the amount by which the
determined acreage may exceed the effective allotment and be considered
in compliance with program regulations.
Agricultural Use means devoting the land to annual or perennial
crops, including conserving uses, pasture, aquaculture or plantings of
trees for any purpose. Land may be left fallow, but weeds must be
controlled.
Allotment means an acreage for a commodity allocated to a farm in
accordance with the Agricultural Adjustment Act of 1938, as amended.
Allotment crop means any crop for which acreage allotments are
[[Page 37553]]
established pursuant to parts 723 and 729 of this chapter.
Combination means consolidation of two or more farms or parts of
farms into one farm.
Contract acreage means the quantity of acres enrolled in a contract
in accordance with part 1412 of this title.
Contract commodity means a crop of wheat, corn, grain sorghum,
oats, barley, upland cotton, or rice.
Controlled substances means the term as set forth in accordance
with 21 CFR part 1308.
County means the County or parish of a State. For Alaska, Puerto
Rico and the Virgin Islands, a county shall be an area designated by
the State committee with the concurrence of the Deputy Administrator.
Crop of economic significance means a crop that has contributed in
the previous year, or is expected to contribute in the current crop
year, 10 percent or more of the total expected value of all crops grown
by the producer. However, notwithstanding the preceding sentence, if
the total expected liability under the catastrophic risk protection
endorsement is equal to or less than the administrative fee required
for the crop, such crop will not be considered a crop of economic
significance.
Crop reporting date means date established by the Administrator,
FSA, representing the final date by which the farm operator, farm
owner, or properly authorized agent must report applicable crop acreage
for the report to be considered timely filed.
Cropland
(1) Means land which the county committee determines meets any of
the following conditions:
(i) Is currently being tilled for the production of a crop for
harvest;
(ii) Is not currently tilled, but it can be established that such
land has been tilled in a prior year and is suitable for crop
production;
(iii) Is currently devoted to a one- or two-row shelterbelt
planting, orchard, or vineyard;
(iv) Is in terraces, that, were cropped in the past, even though
they are no longer capable of being cropped;
(v) Is in sod waterways or filter strips planted to a perennial
cover; or
(vi) Is preserved as cropland in accordance with part 704 or 1410
of this title.
(2) Land classified as cropland shall be removed from such
classification upon a determination by the county committee that the
land is:
(i) No longer used for agricultural production;
(ii) No longer suitable for production of crops;
(iii) Subject to a restrictive easement or contract that prohibits
its use for the production of crops unless otherwise authorized by the
regulation of this chapter;
(iv) No longer preserved as cropland in accordance with the
provisions of part 704 or 1410 of this title and does not meet the
conditions in paragraphs (1)(i) through (1)(vi) of this definition; or
(v) Devoted to trees (other than those set forth in accordance with
part 704 or 1410 of this title, one- or two-row shelterbelt plantings,
orchards, or vineyards) which were planted in the preceding year except
that land planted to trees or devoted to ponds, lakes, or tanks from
September 1 through December 31 of the preceding year shall retain its
cropland classification for the succeeding year, and in the current
year shall retain its cropland classification for the current year.
Current year means the year for which applicable allotments,
quotas, and acreages, or other program determinations are established
for that program. For controlled substance violations, the year that
contains the date of actual conviction.
Deputy Administrator means Deputy Administrator for Farm Programs,
Farm Service Agency, U.S. Department of Agriculture or a designee.
Determination means a decision issued by a State, county or area
FSA committee or the employees of such a committee that affects a
participant's participation in a program administered by FSA.
Determined acreage means that acreage established by a
representative of the Department of Agriculture by use of official
acreage, digitizing or planimetering areas on the photograph or other
photographic image, or computations from scaled dimensions or ground
measurements.
Division means the division of a farm into two or more farms or
parts of farms.
Entity means a corporation, joint stock company, association
limited partnership, irrevocable trust, estate, charitable
organization, or other similar organization including any such
organization participating in the farming operation as a partner in a
general partnership, a participant in a joint venture, a grantor of a
revocable trust, or as a participant in a similar organization.
Family member means an individual to whom a person is related as
spouse, lineal ancestor, lineal descendant, or sibling, including:
(1) Great grandparent;
(2) Grandparent;
(3) Parent;
(4) Child, including legally adopted children;
(5) Great grandchildren;
(6) Sibling of the family member in the farming operation; and
(7) Spouse of a person listed in paragraphs (1) through (6) of this
definition.
Farm means land that is being operated by one producer with
equipment, labor, accounting system and management substantially
separate from that of any other unit. Land on which tenants provide
their own labor and equipment shall not be considered a separate farm.
Farm inspection (spot-check) means an inspection by an authorized
FSA representative using aerial or ground compliance to determine the
extent of producer adherence to program requirements.
Farm number means serial number assigned to a farm by the county
committee for the purpose of identification.
Farm program payment yield means the yield for a crop which is
determined in accordance with part 1413 of this title as in effect on
January 2, 1996.
Farmland means the sum of the cropland, forest, and other land on
the farm.
Field means a part of a farm which is separated from the balance of
the farm by permanent boundaries such as fences, permanent waterways,
woodlands, and croplines in cases where farming practices make it
probable that such cropline is not subject to change, or other similar
features.
Ground measurement means the distance between 2 points on the
ground, obtained by actual use of a chain tape, or other measuring
device, that is expressed in chains and links.
Joint operation means a general partnership, joint venture, or
other similar business organization.
Landlord means one who rents or leases farmland to another.
Measurement service means a measurement of acreage or farm-stored
commodities performed by a representative of FSA and paid for by the
producer requesting the measurement.
Measurement service guarantee means a guarantee provided when a
producer requests and pays for an authorized FSA representative to
measure acreage for FSA and CCC program participation unless the
producer takes action to adjust the measured acreage. If the producer
has taken no such action, and the measured acreage is later discovered
to be
[[Page 37554]]
incorrect, the acreage determined pursuant to the measurement service
will be used for program purposes for that program year.
Measurement service after planting means determining a crop or
designated acreage after planting but before the farm operator files a
report of acreage for the crop.
Minor child means an individual who is under 18 years of age. Court
proceedings conferring majority on an individual under 18 years of age
will not change such an individual's status as a minor.
Nonagricultural commercial or industrial use means land that is no
longer suitable for producing annual or perennial crops, including
conserving uses, or forestry products.
Normal planting period means that period during which the crop is
normally planted in the county, or area within the county, with the
expectation of producing a normal crop.
Normal row width means the normal distance between rows of the crop
in the field, but not less than 30 inches for all crops.
Operator means an individual, entity, or joint operation who is
determined by the county committee as being in general control of the
farming operations on the farm during the current year.
Owner means one who has legal ownership of farmland, including one:
(1) Who is buying farmland under a contract for deed;
(2) Who has a life-estate in the property; or
(3) (i) For purposes of enrolling a farm in a program authorized by
Chapters VII and XIV of this title one who has purchased a farm in a
foreclosure proceeding and:
(A) The redemption period has not passed; and
(B) The original owner has not redeemed the property.
(ii) One who meets the provisions of paragraph (3)(i) of this
definition shall be entitled to receive benefits in accordance with
such a program only to the extent the owner complies with all program
requirements.
Partial reconstitution means a reconstitution that is made
effective in the current year for some crops, but is not made effective
in the current year for other crops, which results in having two or
more farm numbers for the same farm.
Participant means one who participates in, or receives payments or
benefits in accordance with any of the programs administered by FSA.
Pasture means land that is used to, or has the potential to,
produce food for grazing animals.
Person means an individual, or an individual participating as a
member of a joint operation or similar operation, a corporation, joint
stock company, association, limited stock company, limited partnership,
irrevocable trust, revocable trust together with the grantor of the
trust, estate, or charitable organization including any entity
participating in the farming operation as a partner in a general
partnership, a participant in a joint venture, a grantor of a revocable
trust, or a participant in a similar entity, or a State, political
subdivision or agency thereof. To be considered a separate person for
the purpose of this part, the individual or other legal entity must:
(1) Have a separate and distinct interest in the land or the crop
involved;
(2) Exercise separate responsibility for such interest; and
(3) Be responsible for the cost of farming related to such interest
from a fund or account separate from that of any other individual or
entity.
Producer means an owner, operator, landlord, tenant, or
sharecropper, who shares in the risk of producing a crop and who is
entitled to share in the crop available for marketing from the farm, or
would have shared had the crop been produced. A producer includes a
grower of hybrid seed.
Production flexibility contract means a contract entered in
accordance with part 1412 of this title.
Prohibited plants means marijuana (cannabis sativa), opium poppies
(papaver somniferum), coca bushes (erythroxylum coca), cacti of the
genus lophophora and other drug producing plants, the planting or
harvesting of which is prohibited by Federal or State law.
Random inspection means an examination of a farm by an authorized
representative of FSA selected as a part of an impartial sample to
determine the adherence to program requirements.
Quota means the pounds allocated to a farm for a commodity in
accordance with the Agricultural Adjustment Act of 1938, as amended.
Reconstitution means a change in the land constituting a farm as a
result of combination or division.
Reported acreage means the acreage reported by the farm operator,
farm owner, or a properly authorized agent on form FSA-578, Report of
Acreage, or other form designated by the Deputy Administrator.
Required inspection means an examination by an authorized
representative of FSA of a farm specifically selected by application of
prescribed rules to determine the producer's adherence to program
requirements or to verify the farm operator's, farm owner's, or
properly authorized agent's report.
Secretary means the Secretary of Agriculture of the United States,
or a designee.
Sharecropper means one who performs work in connection with the
production of a crop under the supervision of the operator and who
receives a share of such crop for its labor.
Skip-row or strip-crop planting means a cultural practice in which
strips or rows of the crop are alternated with strips of idle land or
another crop.
Staking and referencing means determining an acreage before
planting by:
(1) Measuring a delineated area on photography or computing the
chains and links from ground measurement and sketching the field or
subdivision of a field; and,
(2) Staking and referencing the area on the ground.
Standard deduction means an acreage that is excluded from the gross
acreage in a field because such acreage is considered as being used for
farm equipment turn-areas. Such acreage is established by application
of a prescribed percentage of the area planted to the crop in lieu of
measuring the turn area.
State means each of the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United
States, American Samoa, the Commonwealth of the Northern Mariana
Islands, or the Trust Territory of the Pacific Islands.
Subdivision means a part of a field that is separated from the
balance of the field by temporary boundary, such as a cropline which
could be easily moved or will likely disappear.
Tenant means:
(1) One who rents land from another in consideration of the payment
of a specified amount of cash or amount of a commodity; or
(2) One (other than a sharecropper) who rents land from another
person in consideration of the payment of a share of the crops or
proceeds therefrom.
Tolerance means for marketing quota crops, and peanuts, a
prescribed amount within which the reported acreage may differ from the
determined acreage and still be considered as correctly reported.
Tract means a unit of contiguous land under one ownership which is
operated as a farm or part of a farm.
Tract combination means the combining of two or more tracts if the
tracts have common ownership and are contiguous.
[[Page 37555]]
Tract division means the dividing of a tract into two or more
tracts because of a change in ownership or operation.
Turn-area means the area across the ends of crop rows which is used
for operating equipment necessary to the production of a row crop (also
called turnrow, headland, or endrow).
Sec. 718.3 State committee responsibilities.
(a) The State committee shall, with respect to county committees:
(1) Take any action required of the county committee which the
county committee fails to take in accordance with this part;
(2) Correct or require the county committee to correct any action
taken by such committee which is not in accordance with this part;
(3) Require the county committee to withhold taking any action
which is not in accordance with this part;
(4) Review county office rates for producer services to determine
equity between counties;
(5) Determine, based on cost effectiveness, which counties will use
aerial compliance methods and which counties will use ground
measurement compliance methods; or
(6) Adjust the per acre rate for acreage in excess of 25 acres to
reflect the actual cost involved when performing measurement service
from aerial slides.
(b) The State committee shall submit to the Deputy Administrator
for Farm Programs, requests to deviate from deductions prescribed in
Sec. 718.108 of this part, or the error amount or percentage for
refunds of redetermination costs as prescribed in Sec. 718.111.
Sec. 718.4 Authority for farm entry and providing information.
(a) The provsions of this section are applicable to any farm
enrolled in a program authroized by Chapter XIV of this title, all
farms on which peanuts are planted for harvest (part 729 of this
chapter), and all farms that have an effective tobacco allotment or
quota (part 723 of this chapter).
(b) To ascertain compliance by producers to the regulations
specified in paragraph (a), a representative of FSA may enter any farm
specified in such paragraph. An owner, operator or producer on a farm
may refuse the FSA representative entry to the farm and request FSA to
provide written authorization for the entry. If entry is not allowed
within 30 days of such written notification:
(1) All program benefits otherwise available with respect to such
farm in accordance with such regulations shall be denied;
(2) The person objecting to the entry shall pay all costs
associated with cost of the inspection by FSA of the farm;
(3) The entire crop production on the farm will be considered to be
in excess of the quota established for the farm; and
(4) With respect to tobacco produced on such farm, the farm
operator must furnish proof of disposition of:
(i) Burley and flue-cured tobacco which is in addition to the
production shown on the marketing card issued with respect to such
farm; and
(ii) Other kinds of tobacco produced on the farm and no credit will
be given for disposing of any excess tobacco other than properly
identified by a marketing card unless such tobacco is disposed of in
the presence of a representative of FSA in accordance with
Sec. 718.109.
(c) If an owner or operator of a farm refuses to furnish reports or
data which are necessary to determine benefits in accordance with the
regulations specified in paragraph (a) or FSA determines that the
report or data was erroneously provided through the lack of good faith
by the operator or owner, all benefits will be denied with respect to
the farm which would otherwise be available in accordance with the
program under which the report or data is requested.
Sec. 718.5 Delegations of authority.
The State committee or State Executive Director, as authorized by
the Deputy Administrator may, in accordance with instructions issued,
exercise the authority provided in this part in cases where the total
of any payments and benefits extended under Chapters VII and XIV of
this title does not exceed:
(a) $5,000 for cases subject to Sec. 718.8; or
(b) $25,000 for cases subject to Sec. 718.9.
Sec. 718.6 Signature requirements and time limitations.
(a) When a program authorized by this chapter and parts 1410 and
1412 of this title requires the signature of a producer; landowner;
landlord; or tenant, a husband or wife may sign all such FSA or CCC
documents on behalf of the other spouse, unless such other spouse has
provided written notification to FSA and CCC that such action is not
authorized. The notification must be provided to the county FSA office
which administers FSA and CCC programs with respect to each farm.
(b) Except a husband or wife may not sign a document on behalf of a
spouse with respect to:
(1) Program documents required to be executed in accordance with
part 3 of this title and part 704 of this chapter;
(2) Easements entered into under part 1410 of this title;
(3) Form FSA-211, Power of Attorney and Form FSA-211-1, Power of
Attorney for Husband and Wife; and
(4) Such other program documents as determined by FSA or CCC.
(c) Whenever the final date prescribed in any of the regulations in
this title for the performance of any act falls on a Saturday, Sunday,
national holiday, State holiday on which the office of the county or
State Farm Service Agency committee having primary cognizance of the
action required to be taken is closed, or any other day on which the
cognizant office is not open for the transaction of business during
normal working hours, the time for taking required action shall be
extended to the close of business on the next working day. Or in case
the action required to be taken may be performed by mailing, the action
shall be considered to be taken within the prescribed period if the
mailing is postmarked by midnight of such next working day. Where the
action required to be taken is within a prescribed number of days after
the mailing of notice, the day of mailing shall be excluded in
computing such period of time.
Sec. 718.7 Failure to fully comply.
In any case in which the failure of a producer to fully comply with
the terms and conditions of a program authorized by this chapter
precludes the making of price support to such producer, the Deputy
Administrator for Farm Programs may authorize the making of such price
support in such amounts as determined to be equitable in relation to
the seriousness of the failure if the regulations of this title
authorizing the program specifically authorize such action. The
provisions of this part shall only be applicable to producers who are
determined to have made a good faith effort to comply fully with the
terms and conditions of the program and rendered substantial
performance.
Sec. 718.8 Incomplete performance based upon action or advice of an
authorized representative of the Secretary.
(a) Notwithstanding any other provision of the law, performance
rendered in good faith based upon action of, or information provided
by, any authorized representative of a County or State Farm Service
Agency Committee, may be accepted by the Administrator, FSA (Executive
Vice President, CCC), the Associate Administrator, FSA (Vice President,
[[Page 37556]]
CCC), or the Deputy Administrator for Farm Programs, FSA (Vice
President, CCC), as meeting the requirements of the applicable program,
and benefits may be extended or payments may be made therefor in
accordance with such action or advice to the extent it is deemed
desirable in order to provide fair and equitable treatment.
(b) The provisions of this section shall be applicable only if a
producer relied upon the action of a county or State committee or an
authorized representative of such committee or took action based on
information provided by such representative. The authority provided in
this part does not extend to cases where the producer knew or had
sufficient reason to know that the action or advice of the committee or
its authorized representative upon which they relied was improper or
erroneous, or where the producer acted in reliance on their own
misunderstanding or misinterpretation of program provisions, notices,
or advice.
Sec. 718.9 Finality rule.
(a) A determination by a State or county committee made on or after
October 13, 1994, becomes final and binding 90 days from the date the
application for benefits has been filed, and supporting documentation
required to be supplied by the producer as a condition for eligibility
for the particular program has been filed unless one of the following
conditions exist:
(1) The participant has requested an administrative review of the
determination in accordance with the provisions of part 780 of this
chapter;
(2) The determination was based on misrepresentation, false
statement, fraud, or willful misconduct by or on behalf of the
participant;
(3) The determination was modified by the Administrator, FSA, or
the Executive Vice President, CCC; or
(4) The participant had reason to know that the determination was
erroneous.
(b) Should an erroneous determination become final under the
provisions of this section, it shall only be effective through the year
in which the error was found and communicated to the participant.
Sec. 718.10 Rule of fractions.
(a) Rounding of fractions shall be done after the completion of the
entire computation which is being made. In making mathematical
determinations all computations shall be carried to two decimal places
beyond the required number of decimal places as specified in the
regulations governing each program. In rounding, fractional digits of
49 or less beyond the required number of decimal places shall be
dropped; if the fractional digits beyond the required number of decimal
places are 50 or more, the figure sat the last required decimal place
shall be increased by ``1'' as follows:
------------------------------------------------------------------------
Required decimal Computation Result
------------------------------------------------------------------------
Whole numbers...................... 6.49 (or less)....... 6
6.50 (or more)....... 7
Tenths............................. 7.649 (or less)...... 7.6
7.650 (or more)...... 7.7
Hundredths......................... 8.8449 (or less)..... 8.84
8.8450 (or more)..... 8.85
Thousandths........................ 9.63449 (or less).... 9.634
9.63450 (or more).... 9.635
10 thousandths..................... 10.993149 (or less).. 10.9931
10.993150 (or more).. 10.9932
------------------------------------------------------------------------
(b) The acreage of each field or subdivision computed for tobacco
and CCC disaster assistance programs shall be recorded in acres and
hundredths of an acre, dropping all thousandths of an acre. The acreage
of each field or subdivision computed for crops, except tobacco, shall
be recorded in acres and tenths of an acre, rounding all hundredths of
an acre to the nearest tenth.
Sec. 718.11 Denial of Benefits.
(a) For the purposes of this section, a person means an individual.
(b) Any person convicted under Federal or State law of planting
cultivating, growing, producing, harvesting, or storing a controlled
substance as defined in 21 CFR part 1308 shall be ineligible for:
(1) With respect to any commodity produced by such person that crop
year, and during the four succeeding crop years any price support loan
available in accordance with parts 1446 and 1464 of this title;
(2) Any payment made under any Act; and
(3) A payment made under the Commodity Credit Corporation Charter
Act (15 U.S.C. 714b and 714c) for the storage of an agricultural
commodity that is produced during such crop year, or any of the four
succeeding crop years by such person.
(c) If any person denied benefits under this part is a beneficiary
of a trust, benefits for which the trust is eligible shall be reduced,
for the appropriate period, by a percentage equal to the total interest
of the beneficiary in the trust.
Sec. 718.12 Furnishing maps.
The cost of furnishing reproductions of photographs, mosaics and
maps is free upon request to the farm operator, owner, Federal Crop
Insurance Corporation (FCIC) and reinsured companies, Natural Resources
Conservation Service (NRCS) and other Federal or State Agencies
performing their official duties in making FSA and related program
determinations. To all others, reproductions shall be made available at
the rate FSA determines will cover the cost of making such items
available.
Subpart B--Determination Of Acreage and Compliance
Sec. 718.101 Measurements.
(a) Measurement services include, but are not limited to, measuring
land and crop areas, quantities of farm-stored commodities, and
appraising the yields of crops when required for program administration
purposes. The county committee shall provide measurement service if the
producer requests such service and pays the cost, except that service
shall not be provided to determine total acreage of a crop when the
request is made:
(1) After the established final reporting date for the applicable
crop except as provided in Sec. 718.103;.
(2) After the farm operator has furnished the county office
production evidence when required for program administration purposes
except as provided in this subpart; or
(3) In connection with a late-filed report of acreage, unless there
is evidence of the existence and use made of the crop, the lack of the
crop or a disaster condition affecting the crop.
(b) The acreage requested to be measured by staking and referencing
shall not exceed the effective farm allotment for marketing quota crops
or acreage of a crop that is limited to a specific number of acres to
meet any program requirement.
(c) When a producer requests, pays for, and receives written notice
that measurement services have been furnished, the measured acreage
shall be guaranteed to be correct and used for all program purposes for
the current year even though an error is later discovered in the
measurement thereof, if the producer has taken action with an economic
significance based on the measurement service, and the entire crop
required for the farm was
[[Page 37557]]
measured. If the producer has not taken action with an economic
significance based on the measurement service, the producer shall be
notified in writing that an error was discovered and the nature and
extent of such error. In such cases, the corrected acreage will be used
for determining program compliance for the current year.
(d) When a measurement service reveals acreage in excess of the
permitted acreage by more than the allowable tolerance, the producer
must destroy the excess acreage and pay for an authorized employee of
FSA to verify destruction, in order to keep the measurement service
guarantee.
Sec. 718.102 Acreage reports.
(a) In order to be eligible for benefits, participants in the
programs specified in paragraph (b)(1) through (3) of this section and
those who are subject to the regulations cited in paragraph (b)(4) and
(5) of this section must submit accurate information as required by
these provisions.
(b)(1) Participants in the program authorized by part 1412 of this
title must report the acreage of fruits and vegetables planted for
harvest on a farm enrolled in such program;
(2) Participants in the programs authorized by parts 1421 and 1427
of this title must report the acreage planted to a commodity for
harvest for which a marketing assistance loan or loan deficiency
payment is requested; and
(3) Participants in the programs authorized by parts 704 and 1410
of this title must report the use of the land enrolled in such
programs;
(4) Participants in the programs authorized by parts 723 and 1464
of this title (except burley tobacco producers) must report the acreage
planted to tobacco by kind (except burley tobacco) on all farms that
have an effective allotment or quota greater than zero; and
(5) Participants in the programs authorized by parts 729 and 1446
of this title must report the acreage planted to peanuts by type.
(c) The reports required under paragraph (a) of this section shall
be timely filed by the farm operator, farm owner, or a duly authorized
representative with the county committee by the final reporting date
applicable to the crop as established by the county committee and State
committee.
(d) Peanut producers shall provide the county office evidence of
disposition of any peanuts that are kept on the farm, including:
(1) Type and quantity for use for seed on any farm in which the
producer has an interest; and
(2) Type, quantity, names, and addresses of purchases for peanuts
sold or given to others.
(e) Peanut producers shall provide the county office information
for acquisition of seed peanuts from other sources, including:
(1) Name and address of person who sold or gave producer the
peanuts;
(2) Type, farmer's stock or shelled basis, and quantity; and
(3) Acquisition date.
Sec. 718.103 Late filed reports.
(a) A farm operator's report may be accepted after the established
date for reporting if evidence is still available for inspection which
may be used to make a determination with respect to the existence and
use made of the crop, the lack of the crop or a disaster condition
affecting the crop.
(b) The farm operator shall pay the cost of a farm visit by an
authorized FSA employee unless the County Committee has determined that
failure to report in a timely manner was beyond the producer's control.
Sec. 718.104 Revised reports.
(a) The farm operator may revise a report of acreage with respect
to 1996 and subsequent years to change the acreage reported if the
county committee determines that the revision does not have an adverse
impact on the program and the acreage has not already been determined
by FSA.
(b) Revised reports shall be filed and accepted:
(1) At any time for all crops if evidence exists for inspection and
determination of the existence and use made of the crop, the lack of
the crop, or a disaster condition affecting the crop; and
(2) If the requirements of paragraph (a) have been met and the
producer was in compliance with all other program requirements by the
applicable established crop reporting date.
Sec. 718.105 Tolerances, variances, and adjustments for tobacco.
(a) Tolerance or variance for tobacco is the amount by which the
determined acreage may differ from the reported acreage or allotment
and still be considered in compliance with program requirements.
(b) Tolerance rules apply to those fields for which a staking and
referencing was performed but such acreage was not planted according to
those measurements or when a measurement service is not requested for
acreage destroyed to meet program requirements. Tolerance rules do not
apply to:
(1) Official fields when the entire field is devoted to one crop;
(2) Those fields for which staking and referencing was performed
and such acreage was planted according to those measurements; or
(3) The adjusted acreage for farms using measurement after planting
which have a determined acreage greater than the marketing quota crop
allotment.
(c) An administrative variance is applicable to all marketing quota
crop acreages. Marketing quota crop acreages as determined in
accordance with this part shall be deemed in compliance with the
effective farm allotment or program requirement when the determined
acreage does not exceed the effective farm allotment by more than an
administrative variance determined as follows:
(1) For all kinds of tobacco subject to marketing quotas, except
dark air-cured and fire-cured the larger of 0.1 acre or 2 percent of
the allotment; and
(2) For dark air-cured and fire-cured tobacco, an acreage based on
the effective acreage allotment as provided in the table as follows:
------------------------------------------------------------------------
Administrative
Effective acreage allotment is within this range variance
------------------------------------------------------------------------
0.01 to 0.99............................................ 0.01
1.00 to 1.49............................................ 0.02
1.50 to 1.99............................................ 0.03
2.00 to 2.49............................................ 0.04
2.50 to 2.99............................................ 0.05
3.00 to 3.49............................................ 0.06
3.50 to 3.99............................................ 0.07
4.00 to 4.49............................................ 0.08
4.50 and up............................................. 0.09
------------------------------------------------------------------------
(d) A tolerance applies to tobacco other than flue-cured or burley,
if the determined acreage exceeds the allotment by more than the
administrative variance but by not more than the tolerance. Such excess
acreage of tobacco may be adjusted to the effective farm acreage
allotment to avoid marketing quota penalties or receive price support.
Sec. 718.106 Acreages.
(a) If an acreage has been established by a representative of FSA
for an area delineated on an aerial photograph, such acreage will be
recognized by the county committee as the official acreage for the area
until such time as the boundaries of such area are changed. When
boundaries not visible on the aerial photograph are established from
data furnished by the producer, such acreage shall not be recognized as
official acreage until the boundaries are verified by an authorized
representative of FSA.
[[Page 37558]]
(b) Measurements of any row crop shall extend beyond the planted
area by the larger of 15 inches or one-half the distance between the
rows.
(c) The entire acreage of a field or subdivision of a field devoted
to a crop shall be considered as devoted to the crop subject to any
allowable deduction or adjustment credit except as otherwise provided
in this part.
Sec. 718.107 Skip rows and strip crops.
(a) To be considered under the skip row provisions of this section
the field must be planted in a uniform planting pattern and the number
of rows planted between skips cannot exceed 36 rows. If more than one
pattern is used within a field, the area planted to each pattern will
be considered a subdivision.
(b) The entire acreage of the field or subdivision shall be
considered as devoted to the crop where the crop is planted in strips
of two or more rows and the strips of idle land are less than 64 inches
wide, except where cotton is planted in skip row patterns:
(1) If the distance between the rows is 30 inches the strips of the
idle land are less than 60 inches wide; or
(2) If the distance between the rows is 32 inches or wider and the
strips of idle land are at least 60 inches but less than 64 inches, the
producer has the option to consider the crop as either solid planted or
skip row if the producer has a history of planting 32-inch or wider
rows.
(c) The county committee shall determine if the producer has a
history of 32-inch or wider rows by verifying that cotton acreage has
been planted in 32-inch or wider rows in past years and reported on the
acreage report, or reported to other State or Federal Agencies.
(d) If the strips of idle land are too wide to be classified as
solid planted in accordance with paragraph (b) of this section the
acreage of the strips planted to the crop, including one-half the
distance between the rows of the crop but not less than 15 inches
beyond the outside rows of the crop in each strip, shall be considered
as devoted to the crop.
(e) When one crop is alternating with another crop, the entire
acreage of the field or subdivision shall be considered as devoted to
the crop being measured where such crop is planted in strips of one or
more rows and the strips of the other crop are less than 64 inches.
(f) If strips of the alternating crop are too wide to be considered
solid planted in accordance with paragraph (b) of this section and if
the alternating crop:
(1) Has substantially the same growing season as the crop being
measured, only the acreage planted to the crop being measured,
including the smaller of one-half the distance between the strips of
the crop being measured or 30 inches shall be considered as being
devoted to the crop being measured; or
(2) Does not have substantially the same growing season as the crop
being measured, then the acreage of the crop being measured shall be
determined in accordance with paragraph (b) or (c) of this section.
(g) When the crops are planted in single wide rows, the entire
acreage of the field or subdivision shall be considered as devoted to
the crop where the distance between the rows of such crop is less than
64 inches. If the distance between the rows of the crop is at least 64
inches, only 64 inches in width for each row shall be considered as
being devoted to the crop.
Sec. 718.108 Deductions.
(a) Any contiguous area which is not devoted to the crop being
measured and which is not part of a skip-row pattern under Sec. 718.107
shall be deducted from the acreage of the crop if such area meets the
following minimum national standards or requirements:
(1) A minimum width of 30 inches;
(2) For tobacco, three-hundredths acre, except that turn areas,
terraces, permanent irrigation and drainage ditches, sod waterways,
noncropland, and subdivision boundaries each of which is at least 30
inches in width may be combined to meet the 0.03-acre minimum
requirement; or
(3) For all other crops and land uses, one-tenth acre. Turn areas,
terraces, permanent irrigation and drainage ditches, sod waterways,
noncropland, and subdivision boundaries each of which is at least 30
inches in width and each of which contain 0.1 acre or more may be
combined to meet any larger minimum prescribed for a State in
accordance with this subpart.
(b) If the area not devoted to the crop is located within the
planted area, the part of any perimeter area that is more than 33 links
in width will be considered to be an internal deduction if the standard
deduction is used.
(c) A standard deduction of 3 percent of the area devoted to a row
crop and zero percent of the area devoted to a close-sown crop may be
used in lieu of measuring the acreage of turn areas.
Sec. 718.109 Adjustments.
(a) The farm operator or other interested producer having excess
tobacco acreage (other than flue-cured or burley) may adjust an acreage
of the crop in order to avoid a marketing quota penalty if such person:
(1) Notifies the county committee of such election within 15
calendar days after the date of mailing of notice of excess acreage by
the county committee; and
(2) Pays the cost of a farm visit to determine the adjusted acreage
prior to the date the farm visit is made.
(b) The farm operator may adjust an acreage of tobacco (except
flue-cured and burley) by disposing of such excess tobacco prior to the
marketing of any of the same kind of tobacco from the farm. The
disposition shall be witnessed by a representative of FSA and may take
place before, during, or after the harvesting of the same kind of
tobacco grown on the farm. However, no credit will be allowed toward
the disposition of excess acreage after the tobacco is harvested but
prior to marketing, unless the county committee determines that such
tobacco is representative of the entire crop from the farm of the kind
of tobacco involved.
Sec. 718.110 Notice of measured acreage.
Written notice of measured acreage shall be on Form FSA-468, Notice
of Determined Acreage, when mailed to the farm operator and shall
constitute notice to all interested producers on the farm.
Sec. 718.111 Redeterminations.
(a) A redetermination of crop acreage, appraised yield, or farm-
stored production for a farm may be initiated by the county committee,
State committee, or Deputy Administrator at any time. Such
redeterminations may also be initiated by a producer who has an
interest in the farm upon filing a request within 15 calendar days
after the date of the notice furnished the farm operator in accordance
with Sec. 718.109 or Sec. 718.110 or within 5 calendar days after the
initial appraisal of the yield of a crop or before any of the farm-
stored production is removed from storage and upon payment of the cost
of making such redetermination. A redetermination shall be undertaken
in the manner prescribed by the Deputy Administrator. Such
redetermination shall be used in lieu of any prior determination.
(b) The county committee shall refund the payment of the cost for a
redetermination when, because of an error in the initial determination:
(1) The appraised yield is changed by at least the larger of:
(i) Five percent or 5 pounds for cotton;
(ii) Five percent or 1 bushel for wheat, barley, oats, and rye; or
(iii) Five percent or 2 bushels for corn and grain sorghum; or
[[Page 37559]]
(2) The farm stored production is changed by at least the smaller
of 3 percent or 600 bushels; or
(3) The acreage of the crop is:
(i) Changed by at least the larger of 3 percent or 0.5 acre; or
(ii) Considered to be within program requirements.
Subpart C--Reconstitution of Farms, Allotments, Quotas, and
Acreages
Sec. 718.201 Farm constitution.
(a) Land which has been properly constituted under prior
regulations shall remain so constituted until a reconstitution is
required under paragraph (c) of this section. The constitution and
identification of land as a farm for the first time and the subsequent
reconstitution of a farm made hereafter, shall include all land
operated by one person as a single farming unit except that it shall
not include:
(1) After August 1, 1996, land subject to a production flexibility
contract with land not subject to a production flexibility contract;
(2) Land under separate ownership unless the owners agree in
writing;
(3) Land under a lease agreement of less than 1 year duration;
(4) Land in different counties when the tobacco allotments or
quotas established for the land involved cannot be transferred from one
county to another county by lease, sale, or owner. However, this
paragraph shall not apply if:
(i) All of the land is owned by one person and operated by one
person and all such land is contiguous;
(ii) Two or more tracts are located in counties that are contiguous
in the same State and are owned by the same person if:
(A) A burley tobacco quota is established for one or more of the
tracts; and
(B) The county committee determines that the tracts will be
operated as a single farming unit as set forth in Sec. 718.202; or
(iii) Because of a change in operation, tracts or parts of tracts
will be divided from the parent farm that currently has land in more
than one county, and there is no change in operation and ownership of
the remainder of the farm, or if there is a change in ownership, the
new owner agrees in writing to the constitution of the farm.
(5) Federally owned land;
(6) State-owned wildlife land unless the former owner has
possession of the land under a leasing agreement;
(7) Land constituting a farm which is declared ineligible to be
enrolled in a program under the regulations governing the program;
(8) For land subject to production flexibility contracts, land
located in counties that are not contiguous. However, this subparagraph
shall not apply if:
(i) Counties are divided by a river;
(ii) Counties do not touch because of a correction line adjustment;
or
(iii) The land is within 20 miles, by road, of other land that will
be a part of the farming unit; and
(9) With respect to peanut poundage quotas, land across:
(i) County lines when the quotas established for the land involved
cannot be transferred; or
(ii) State lines.
(b)(1) If all land on the farm is physically located in one county,
the farm records shall be administratively located in such county. If
there is no FSA office in the county or the county offices have been
consolidated, the farm shall be administratively located in the
contiguous county most convenient for the farm operator.
(2) If the land on the farm is located in more than one county, the
farm shall be administratively located in either of such counties as
the county committees and the farm operator agree. If no agreement can
be reached, the farm shall be administratively located in the county
where the principal dwelling is situated, or where the major portion of
the farm is located if there is no dwelling.
(c) A reconstitution of a farm either by division or by combination
shall be required whenever:
(1) A change has occurred in the operation of the land after the
last constitution or reconstitution and as a result of such change the
farm does not meet the conditions for constitution of a farm as set
forth in paragraph (b) except that no reconstitution shall be made if
the county committee determines that the primary purpose of the change
in operation is to establish eligibility to transfer allotments subject
to sale or lease;
(2) The farm was not properly constituted under the applicable
regulations in effect at the time of the last constitution or
reconstitution;
(3) An owner requests in writing that the owner's land no longer be
included in a farm which is composed of tracts under separate
ownership;
(4) The county committee determines that the farm was reconstituted
on the basis of false information furnished by the owner or farm
operator;
(5) The county committee determines that the tracts of land
included in a farm are not being operated as a single farming unit;
(6) An owner of a farm, constituted as a single farming unit prior
to 1978, which is comprised of land located in two or more counties for
which there is a quota or allotment established for such farm and such
quota or allotment is subject to lease and transfer restrictions across
county lines, requests in writing that the farm be reconstituted by
dividing the tracts. The resulting farms shall be administratively
serviced by the county office serving the county in which the land is
geographically located; or
(7) Land is sold for or devoted to nonagricultural commercial or
industrial uses; however, a reconstitution is not required and
allotments, quotas and acreages may remain with the farm if either of
the following apply:
(i) The land is already devoted to residential, recreational,
industrial or commercial buildings; or
(ii) The owner would qualify to use the landowner designation
method of division in accordance with Sec. 718.205 or the allotments
and quotas can be transferred by sale or owner in accordance with this
part and parts 723 or 729 of this chapter and the owner of the parent
farm and the purchaser file a signed written memorandum of
understanding before Form FSA-476 or Form MQ-24 is issued, stating that
the land will be devoted immediately or within 3 years to:
(1) Nonagricultural commercial uses; or
(2) Recreational, residential, industrial or non-farm commercial
uses.
(d) Notwithstanding the provisions of paragraphs (c)(1) through
(c)(7), a reconstitution shall not be approved if the county committee
determines that the primary purpose of the reconstitution is to:
(1) Circumvent the provisions of part 12 of this title; or
(2) Circumvent any other chapter of this title.
Sec. 718.202 Determining the land constituting a farm.
(a) In determining the constitution of a farm, consideration shall
be given to provisions such as ownership and operation. For purposes of
this part, the following rules shall be applicable to determining what
land is to be included in a farm.
(b) A minor shall be considered to be the same owner or operator as
the parent or court-appointed guardian (or other person responsible for
the minor child) unless:
(1) The minor child is a producer on a farm;
[[Page 37560]]
(2) Neither the minor's parents nor guardian has any interest in
the minor's farm or production from the farm;
(3) The minor establishes and maintains a separate household from
the parent or guardian;
(4) Personally carries out the farming activities in the operation;
and
(5) Maintains a separate accounting for the farming operation.
(c) Notwithstanding paragraph (b) of this section, a minor shall
not be considered to be the same owner or operator as the parent or
court-appointed guardian if the minor's interest in the farming
operation results from being the beneficiary of an irrevocable trust
and ownership of the property is vested in the trust or the minor.
(d) A life estate tenant shall be considered to be the owner of the
property for their life.
(e) A trust shall be considered to be an owner with the beneficiary
of the trust; except a trust can be considered a separate owner or
operator from the beneficiary, if the trust:
(1) Has a separate and distinct interest in the land or crop
involved;
(2) Exercises separate responsibility for the separate and distinct
interest; and
(3) Maintains funds and accounts separate from that of any other
individual or entity for the interest.
Sec. 718.203 County committee action to reconstitute a farm.
Action to reconstitute a farm may be initiated by the county
committee, the farm owner, or the operator with the concurrence of the
owner of the farm. Any request for a farm reconstitution shall be filed
with the county committee.
Sec. 718.204 Reconstitution of allotments, quotas, and acreages.
(a) Farms shall be reconstituted in accordance with this subpart
when it is determined that the land areas are not properly constituted
and, to the extent practicable, shall be based on the facts and
conditions existing at the time the change requiring the reconstitution
occurred.
(b) Reconstitutions of farms subject to a production flexibility
contract in accordance with part 1412 of this title will be effective
for the current year if initiated on or before July 1 of the fiscal
year.
(c) For tobacco and peanut farms, a reconstitution will be
effective for the current year for each crop for which the
reconstitution is initiated before the planting of such crop begins or
would have begun.
(d) Notwithstanding the provisions of paragraph (b) and (c) of this
section, a reconstitution may be effective for the current year if the
county committee, with the concurrence of the State committee,
determines that the purpose of the request for reconstitution is not to
perpetrate a scheme or device the effect of which is to avoid the
statutes and regulations governing commodity programs found in this
title.
Sec. 718.205 Rules for determining farms, allotments, quotas, and
acreages when reconstitution is made by division.
(a) The methods for dividing farms, allotments, quotas, and
acreages in order of precedence, when applicable, are estate,
designation by landowner, contribution, agricultural use, cropland, and
history. The proper method shall be determined on a crop by crop basis.
(b)(1) The estate method is the proration of allotments, quotas,
and acreages for a parent farm among the heirs in settling an estate.
If the estate sells a tract of land before the farm is divided among
the heirs, the allotments, quotas, and acreages for that tract shall be
determined by using one of the methods provided in paragraphs (c)
through (g) of this section.
(2) Allotments, quotas, and acreages shall be divided in accordance
with a will, but only if the county committee determines that the terms
of the will are such that a division can reasonably be made by the
estate method.
(3) If there is no will or the county committee determines that the
terms of a will are not clear as to the division of allotments, quotas,
and acreages, such allotments, quotas, and acreages shall be
apportioned in the manner agreed to in writing by all interested heirs
or devisees who acquire an interest in the property for which such
allotments, quotas, and acreages have been established. An agreement by
the administrator or executor shall not be accepted in lieu of an
agreement by the heirs or devisees.
(4) If allotments, quotas, and acreages are not apportioned in
accordance with the provisions of paragraph (b)(2) or (3) of this
section, the allotments, quotas, and acreages shall be divided pursuant
to paragraphs (d) through (g) of this section, as applicable.
(c)(1) If the ownership of a tract of land is transferred from a
parent farm, the transferring owner may request that the county
committee divide the allotments, quotas, and acreages, including
historical acreage that has been doublecropped, between the parent farm
and the transferred tract, or between the various tracts if the entire
farm is sold to two or more purchasers, in a manner designated by the
owner of the parent farm subject to the conditions set forth in
paragraph (c)(4) of this section. In the case of land subject to a
Wetlands Reserve Program easement or Emergency Wetlands Reserve Program
easement, the parent farm shall retain the allotments, quotas, and
acreages.
(2) If the county committee determines that allotments, quotas, and
acreages cannot be divided in the manner designated by the owner
because of the conditions set forth in paragraph (c)(4) of this
section, the owner shall be notified and permitted to revise the
designation so as to meet the conditions in paragraph (c)(4) of this
section. If the owner does not furnish a revised designation of
allotments, quotas, and acreages within a reasonable time after such
notification, or if the revised designation does not meet the
conditions of paragraph (c)(4) of this section, the county committee
will prorate the allotments, quotas, and acreages in accordance with
paragraphs (d) through (g) of this section.
(3) If a parent farm is composed of tracts, under separate
ownership, each separately owned tract being transferred in part shall
be considered a separate farm and shall be constituted separately from
the parent farm using the rules in paragraphs (d) through (g) of this
section, as applicable, prior to application of the provisions of this
paragraph.
(4) A landowner may designate, as provided in this paragraph, the
manner in which allotments, quotas, and acreages are divided.
(i) The transferring owner and transferee shall file a signed
written memorandum of understanding of the designation with the county
committee before the farm is reconstituted and before a subsequent
transfer of ownership of the land. The landowner shall designate the
allotments, quotas, and acreage that shall be permanently reduced when
the sum of the allotments, quotas, and acreages exceeds the cropland
for the farm.
(ii) Where the part of the farm from which the ownership is being
transferred was owned for a period of less than 3 years, the
designation by landowner method shall not be available with respect to
the transfer unless the county committee determines that the primary
purpose of the ownership transfer was other than to retain or to sell
allotments or quotas. In the absence of such a determination, and if
the farm contains land which has been owned for less than 3 years, that
part of the farm which has been owned for less than 3 years shall be
considered as a separate farm and the allotments or
[[Page 37561]]
quotas, shall be assigned to that part in accordance with paragraphs
(d) through (g) of this section. Such apportionment shall be made prior
to any designation of allotments and quotas, with respect to the part
which has been owned for 3 years or more.
(5) The designation by landowner method is not applicable to:
(i) Burley tobacco quotas; or
(ii) Crop allotments or quotas which are restricted to transfer
within the county by lease, sale, or by owner, when the land on which
the farm is located is in two or more counties.
(6) The designation by landowner method may be applied at the
owner's request to land owned by any Indian Tribal Council which is
leased to two or more producers for the production of any crop of a
commodity for which an allotment, quota, or acreage has been
established. If the land is leased to two or more producers, an Indian
Tribal Council may request that the county committee divide the
allotments, quotas, and acreages between the applicable tracts in the
manner designated by the Council. The use of this method shall not be
subject to the conditions of paragraph (c)(4).
(d) (1) The contribution method is the proration of a parent farm's
allotments, quotas, and acreages to each tract as the tract contributed
to the allotments, quotas, or acreages at the time of combination and
may be used when the provisions of paragraphs (b) and (c) of this
section do not apply. The contribution method shall be used to divide
allotments and quotas for a farm that resulted from a combination which
became effective during the 6-year period before the crop year for
which the reconstitution is effective. This method for dividing
allotments and quotas shall be used beyond the 6-year period if FSA
records are available to show the amount of contribution.
(2) The county committee determines with the concurrence of the
State committee or representative thereof, that the use of the
contribution method would not result in an equitable distribution of
allotments and quotas, considering available land, cultural operations,
and changes in type of farming. The contribution method shall not be
used in cases involving the division of allotment or quota for any
commodity for which there was no allotment or quota established at the
time of the combination.
(e) The agricultural use method is the proration of contract
acreage to the tracts being separated from the parent farm in the same
proportion that the agricultural and related activity land for each
tract bears to the agricultural and related activity land for the
parent farm. This method of division shall be used if the provisions of
paragraphs (b) through (d) of this section do not apply.
(f) (1) The cropland method is the proration of allotments and
quotas to the tracts being separated from the parent farm in the same
proportion that the cropland for each tract bears to the cropland for
the parent farm. This method shall be used if the provisions of
paragraphs (b) through (d) of this section do not apply unless the
county committee determines that a division by the history method would
result in allotments and quotas which are more representative than if
the cropland method is used after taking into consideration the
operation normally carried out on each tract for the commodities
produced on the farm.
(2) The cropland method shall not be used to divide contract
acreage.
(g)(1) The history method is the proration of allotments and quotas
to the tracts being separated from the farm on the basis of the
allotments and quotas determined to be representative of the operations
normally carried out on each tract. The county committee may use the
history method of dividing allotments and quotas when it:
(i) Determines that this method would result in the proration of
allotments and quotas, more representative than the cropland method of
division of the operation normally carried out on each tract; and
(ii) Obtains written consent of all owners to use the history
method.
(2) Notwithstanding any other provision of this section, the county
committee may waive the requirement for written consent of the owners
for dividing allotments and quotas if the county committee determines
that the use of the cropland method would result in an inequitable
division of the parent farm's allotments and quotas and the use of the
history method would provide more favorable results for all owners.
(3) The history method shall not be used to divide contract
acreage.
(h) (1) Allotments, quotas, and acreages apportioned among the
divided tracts pursuant to paragraphs (d), (e), (f) and (g) of this
section may be increased or decreased with respect to a tract by as
much as 10 percent of the allotment, quota, or acreage determined under
such subsections for the parent farm if:
(i) The owners agree in writing; and
(ii) The county committee determines the method used did not
provide an equitable distribution considering available land, cultural
operations, and changes in the type of farming conducted on the farm.
Any increase in an allotment, quota, or acreage with respect to a tract
pursuant to this paragraph shall be offset by a corresponding decrease
for such allotments, quotas or acreages established with respect to the
other tracts which constitute the farm.
(2) Farm program payment yields calculated for the resulting farms
of a division performed according to paragraphs (d) through (g) may be
increased or decreased if the county committee determines the method
used did not provide an equitable distribution considering available
land, cultural operations, and changes in the type of farming conducted
on the farm. Any increase in a farm program payment yield on a
resulting farm shall be offset by a corresponding decrease on another
resulting farm of the division.
(i) If a farm with burley tobacco quota is divided through
reconstitution and one or more of the farms resulting from the division
are apportioned less than 1,000 pounds of burley tobacco quota, the
owners of such farms shall take action as provided in part 723 of this
chapter to comply with the 1,000 pound minimum by July 1 of the current
year or the quota shall be dropped. Exceptions to this are farms
divided:
(1) Among family members;
(2) By the estate method; and
(3) When no sale or change in ownership of land occurs.
Sec. 718.206 Rules for determining allotments, quotas, and acreages
when reconstitution is made by combination.
When two or more farms or tracts are combined for a year, that
year's allotments, quotas, and acreages, with respect to the combined
farm or tract, as required by applicable commodity regulations, shall
not be greater than the sum of the allotments, quotas, and acreages for
each of the farms or tracts comprising the combination, subject to the
provisions of Sec. 718.204(a)(3).
Sec. 718.207 Eminent domain acquisitions.
(a) This section provides a uniform method for reallocating
allotments and quotas, with respect to land involved in eminent domain
acquisitions. Such allotments and quotas, in accordance with this
section, may be pooled for the benefit of the owner who is displaced
from the acquired farm by eminent domain acquisition. Such pooling
shall be for a 3-year period from the date of displacement or during
such other period as the displaced owner may request for the transfer
of allotments and quotas, from the pool to other farms owned by such
person.
(b) An eminent domain acquisition is a taking of title to land, or
the taking of
[[Page 37562]]
an impoundment easement to impound water on the land, or the taking of
a flowage easement to intermittently flood the land, consummated with
respect to land which is, or could be, so taken under the power of
eminent domain by a Federal, State, or other agency. Such acquisition
may be by court proceedings to condemn the land or by negotiation
between the agency and the owner. An acquisition by an agency with
respect to land not subject to the agency's power of eminent domain
shall not be an eminent domain acquisition for purposes of this
section. All land acquired by an agency for the intended project,
including surrounding land not needed for the project but acquired as a
package acquisition, shall be considered to be in the eminent domain
acquisition if the agency expended funds for the package acquisition on
the basis of its power of eminent domain.
(c) For purposes of this section, owner means the person, or
persons in a joint ownership, having title to the land for a period of
at least 12 months immediately prior to the date of transfer of title
or grant of the impoundment or flowage easement under the eminent
domain acquisition. If such person or persons have owned the land for
less than such 12-month period, they may, nevertheless, be considered
the owner if the State committee determines that such person or persons
acquired the land for the purpose of carrying out farming operations
and not for the purpose of obtaining status as an owner under this
section. However, no person shall be considered the owner if he
acquired the land subject to an eminent domain acquisition under an
outstanding contract to an agency or an option by an agency or subject
to pending condemnation proceedings. In any case where the current
titleholders cannot be considered the owner for the purpose of this
section, the State committee shall determine the person or persons who
previously had title to the land and who qualify for status as the
owner under the criteria in this paragraph.
(d) The owner shall be considered displaced from a farm which is
subject to an eminent domain acquisition on the date:
(1) The owner loses possession of the land;
(2) The owner is voluntarily displaced if a binding contract for
acquisition has been executed;
(3) The owner, in the case of a flowage easement, determines it is
no longer practical to conduct farming operations on the land; or
(4) The owner loses possession of the land as lessee under a lease
from the agency or its designee if the lease provided uninterrupted
possession to the owner from the date of acquisition to the end of the
lease or extensions of the lease.
(e) The owner shall notify the county committee in writing of the
eminent domain acquisition and furnish the date of displacement within
30 days so that allotments and quotas may be pooled in accordance with
this section. Failure to so notify the county committee shall result in
the loss of the ability of the owner to extend the 3-year period of the
pool.
(f) Whenever the county committee determines, by notice from the
owner or otherwise, that an owner has been displaced from the farm, the
county committee shall establish a pool for the allotments and quotas
eligible for pooling under this section for a 3-year period beginning
on the date of displacement. Pooled allotments and quotas shall be
considered fully planted and, for each year in the pool, shall be
established in accordance with applicable commodity regulations.
(g) Pooling is not permitted or required:
(1) If the county committee determines that an agency has authority
under its eminent domain powers to acquire a farm for the continued
production of an allotment or quota and does so acquire a farm only for
such purpose and files a written notice with the county committee of
the county in which the farm is located at the time of acquisition
designating the allotment and quota to be produced on the farm, there
shall be no pooling of such allotment and quota. Such farm allotments
and quotas shall be established for the farm in accordance with
applicable commodity regulations. For acreages, there shall be no
pooling of the acreage under any circumstances if an agency acquires
land and retains the land in an agricultural or related activity;
(2) If the displaced owner files written notice with the county
committee of an intention to waive the right to have all the allotments
and quotas or any part thereof pooled and the county committee
determines that the displaced owner has not been coerced to waive such
right, the allotments and quotas shall be retained on the agency
acquired land;
(3) If an agency acquires part of a farm for non-farming purposes
and the cropland on the land so acquired represents less than 15
percent of the total cropland on the farm, the allotments and quotas
shall be retained on the portion of the farm not acquired by the agency
and shall not be pooled;
(4) If an agency acquires part of a farm for non-farming purposes
and the cropland on the land so acquired represents 15 percent or more
of the total cropland on a farm, the allotments and quotas attributable
to the acquired land shall be retained on the portion of the farm not
acquired by the agency if the owner files a written request with the
county committee for such retention. The amount of an allotment and
quota which may be retained on the farm cannot exceed the land devoted
to an agricultural or related activity. Allotments and quotas which are
not retained shall be pooled; or
(5) If, prior to pooling, an owner files a request to transfer the
allotments and quotas to other farms in the same county which are owned
by such owner, the county committee may approve a direct transfer
without the formal establishment of a pool. Such transfer shall be
subject to the requirements of paragraph (j) of this section. This
paragraph shall govern the release and reapportionment of pooled
allotments and quotas notwithstanding other provisions of applicable
commodity regulations.
(h) Pooled allotments and quotas may be released on an annual basis
by the owner to a county committee during any year for which allotments
and quotas are pooled and not otherwise transferred from the pool. The
county committee may reapportion the released allotments and quotas to
other farms in the same county that have allotments or quotas for the
same commodity. Pooled allotments and quotas shall not be released on a
permanent basis or surrendered after release to the State committee for
reapportionment in other counties. Reapportionment shall be on the
basis of past acreage of the commodity, land, labor, and equipment
available for the production of the commodity, crop rotation practices,
and other physical factors affecting the production of the commodity.
Pooled allotments and quotas which are released shall be considered to
have been fully planted in the pool and not on the farm to which such
allotments and quotas are reapportioned.
(i) Pooled allotments and quotas that may be transferred on a
permanent or temporary basis by sale, lease, or by owner designation
may be transferred permanently from the pool by the owner or
temporarily for the duration of the pooled allotment or quota, subject
to the terms and conditions for such transfers in the applicable
commodity regulations. The transfer of tobacco acreage allotment or
marketing quota shall be approved acre for acre.
[[Page 37563]]
(j) (1) The displaced owners may request a transfer of all or part
of the pooled allotments and quotas to any other farm in the United
States which is owned by the displaced owner, but only if there are
farms in the receiving county with allotments and quotas, for the
particular commodity or, if there are no such farms, the county
committee determines that farms in the receiving county are suited for
the production of the commodity. For purposes of this paragraph:
(i) Receiving farm means the farm to which transfer from the pool
is to be made;
(ii) Receiving State and county committee mean those committees for
the State and county in which the receiving farm is located; and
(iii) Transferring State and county committees mean those
committees for the State and county in which the agency acquired farm
is located.
(2) The displaced owner shall file with the receiving county
committee written application for transfer of an allotment and quota
from the pool within 3 years after the date of displacement. The
application shall contain a certification from the owner that no
agreement has been made with any person for the purpose of obtaining an
allotment or quota from the pool for a person other than for the
displaced owner. The owner shall attach to the application all
pertinent documents pertaining to the current ownership or purchase of
land and any leasing arrangements, such as the deed of trust or
mortgage, a warranty deed, a note, sales agreement, and lease.
(3) The receiving county committee shall consider each application
and determine whether the transfer from the pool shall be approved.
Before an application is acted upon by the receiving county committee,
the owner shall personally appear before the receiving county committee
after reasonable notice, bring any additional pertinent documents as
may be requested for examination by the receiving county committee, and
answer all pertinent questions bearing on the proposed transfer. Such
personal appearance requirement may be waived if the receiving county
committee determines from facts presented to it on behalf of the owner
that such personal appearance would unduly inconvenience the owner on
account of illness or other good cause and such personal appearance
would serve no useful purpose. Any action by the receiving county
committee shall be subject to the approval required under paragraph
(j)(5) of this section.
(4) The transfer from the pool will be approved by the receiving
county committee only if the county committee determines that the owner
has made a normal acquisition of the receiving farm for the purpose of
bona fide ownership to reestablish farming operations. The elements of
such an acquisition shall include, but are not limited to, the
following:
(i) Appropriate legal documents must establish title to the
receiving farm;
(ii) If the displaced owner was the operator of the acquired farm
at the date of displacement, such owner must personally operate and be
the operator of the receiving farm for the first year that the
allotment and quota is transferred;
(iii) If the displaced owner was not the operator of the acquired
farm at the date of displacement and was not a producer on that farm
because the leasing or rental agreement provided for cash, fixed rent,
or standing rent payment, such owner shall not be required to operate
personally and be the operator of the receiving farm, but at least 75
percent of the allotments for the receiving farm must be planted on the
receiving farm during the first year of the transfer. With respect to a
commodity for which a quota is applicable but for which there is no
acreage allotment, an acreage which is equal to the result of dividing
the quota transferred to the receiving farms by the receiving farm's
yield, multiplied by 75 percent must be planted during the first year
of the transfer;
(iv) If the displaced owner was not the operator of the acquired
farm at the date of displacement but was a producer on that farm at the
date of displacement as the result of having received a share of the
crops produced on the acquired farm, such displaced owner shall not be
required to be the operator of the receiving farm but must be a
producer on the receiving farm during the first year that an allotment
or quota is transferred;
(v) The contractual arrangements between the displaced owner and
the seller of the receiving farm must not contain a requirement that
the receiving farm be leased to the seller or a person designated by or
subject to the control of the seller. The seller or a person designated
by or subject to the control of the seller may not lease the receiving
farm for the first year the allotment or quota is transferred; and
(vi) The contractual arrangements under which the receiving farm
was purchased or leased must be customary in the community where the
receiving farm is located with respect to purchase price and timing and
amount of purchase or rental payments.
(5) The approval by the receiving county committee of a transfer
from the pool under this paragraph shall be effective upon concurrence
by the State committee of the State where the receiving farm is located
(the receiving State committee). Notwithstanding any other provision of
this section, the receiving State committee may authorize a transfer
from the pool in any case where the owner presents evidence
satisfactory to the receiving State committee that:
(i) The eligibility requirements of paragraph (j)(4) (ii), (iii)
and (iv) of this section cannot be met without substantial hardship
because of illness, old age, multiple farm ownership, or lack of a
dwelling on the farm to which an allotment or quota is to be
transferred; or
(ii) The owner has made a normal acquisition of the receiving farm
for the purpose of bona fide ownership to reestablish farming
operations for the displaced owner, even if the farm is leased to the
seller of the farm for the first year for which the allotment or quota
is transferred.
(6) Upon completion of all necessary approvals under this
paragraph, the receiving county committee shall issue an appropriate
notice of allotment and quota under the applicable commodity
regulations, taking into consideration the land, labor, and equipment
available for the production of the commodity, crop rotation practices,
and the soil and other physical factors affecting the production of the
commodity. For purposes of determining the amount of the allotment and
quota available for transfer, the receiving county committee shall
consider the receiving tract as a separate ownership. The acreage
transferred from the pool shall not exceed the allotments and quotas,
most recently established for the acquired farm placed in the pool.
When all or a part of the allotment and quota placed in the pool is
transferred and used to establish or increase the allotment and quota
for other farms owned or purchased by the owner, all of the
proportionate part of the past acreage history for the acquired farm
shall be transferred to and considered for purposes of future
allotments and quotas to have been planted on the receiving farm for
which an allotment and quota, are established or increased under this
section. If only a part of the available allotment and quota is
transferred from the pool, the remaining part of the allotment and
quota, shall remain in the pool for transfer to other farms of the
owner until all such
[[Page 37564]]
allotments and quotas have been transferred or until the period of
eligibility for establishing or increasing allotments and quotas under
this section has expired.
(7) If any allotment or quota is transferred under this section and
it is later determined by the receiving county or State committee, or
by the Deputy Administrator, that the transfer was obtained by
misrepresentation by or on behalf of the owner, or that the conditions
of paragraph (j)(4) of this section are not met, the allotment and
quota for the receiving farm shall be reduced for each year the
transfer purportedly was in effect by the amount attributable to the
allotment or quota transferred from the pool. If the time period for
the transfer of the allotment or quota from the pool has not expired,
the amount of allotment or quota initially transferred from the pool
shall be returned to the pool after the period of time has expired in
which the displaced owner could exercise the right of administrative
review. Any cancellation of the transfer of an allotment or quota by
the receiving county committee shall be subject to approval by the
receiving State committee. The receiving county committee shall issue a
notice of any marketing quota and penalty as may be required in
accordance with applicable commodity regulations.
(8) If the displaced owner files a request for transfer of pooled
allotments or quotas, within the prescribed period for filing such
request, but the request for transfer is filed during a year in which
all or a part of the pooled allotments or quotas were released to the
transferring county committee pursuant to paragraph (h), the
application for transfer will be processed in the usual manner but the
amount of the commodity released shall not be effective on the
receiving farm until the succeeding year. When a request for transfer
of pooled allotment or quota involves a transfer from one State to
another, the receiving State committee shall obtain information from
the transferring State committee as to whether any part of the
allotment or quota for which the transfer is requested has been
released to the transferring county committee for the current year.
(k)(1) When the displaced owner leases part but not all of the
agency acquired land, such part shall be constituted as a separate farm
on the date of the displacement of the owner from the land not so
leased.
(2) If a parent farm consists of separate ownership tracts, each
such tract being acquired in whole or in part shall be considered as a
separate farm for purposes of paragraphs (g) (3) and (4) of this
section.
(3) If a portion of a farm is acquired by an agency and the owner
is displaced therefrom, the acquired portion shall be constituted as a
separate farm on the date of displacement unless the allotments and
quotas are retained on the portion not acquired as provided in
paragraphs (g) (3) and (4) of this section, in which case the farm
shall not be reconstituted but the farmland and cropland data shall be
corrected on all appropriate records for the parent farm.
(l)(1) The displaced owner may file with the county committee a
written designation of beneficiary of the rights in the allotments and
quotas attributable to the acquired land in the event of the death of
the displaced owner, and may revise such designation from time to time.
The beneficiary of a deceased owner may exercise the right to continue
a lease or negotiate a lease with the agency or its designee, the
regular transfer rights with respect to farms owned by such
beneficiary, and the release, sale, lease, and owner transfer rights
under this section.
(2) If the displaced owner does not file a designation of
beneficiary under paragraph (l)(1) and the displaced owner dies before
displacement or after pooling occurs, the following persons shall be
considered the beneficiary with the rights provided under paragraph
(l)(1) of this section:
(i) The surviving joint owner of the farm where two persons own the
farm as joint tenants with right of survivorship; and
(ii) The persons who succeed to the deceased displaced owner's
interest under a will or by intestate succession. However, in the case
of intestate succession, the person shall be limited to the surviving
spouse, parent, sibling or child of the deceased displaced owner. In
the settlement of the estate of the deceased displaced owner, the heirs
may file a written agreement with the county committee for the division
of the deceased displaced owner's rights under this section.
(m)(1) No transfer from the pool under paragraph (h), (i), or (j)
of this section shall be approved if there remains any unpaid marketing
quota penalty due with respect to the marketing of the commodity from
the acquired farm by the displaced owner, or if any of the commodity
produced on the agency acquired farm has not been accounted for as
required under applicable commodity regulations.
(2) If an allotment or quota for an acquired farm next established
after the data of displacement would have been reduced because of false
or improper identification of the commodity produced on or marketed
from the farm, or as the result of a false acreage report, the
allotment or quota shall be reduced in the pool in accordance with the
applicable commodity regulations.
Sec. 718.208 Exempting federal prison farms and Federal wildlife
refuges.
A marketing penalty shall not be assessed with respect to any
commodity which is produced on a Federal prison farm or Federal
wildlife refuge. This exception does not apply to penalties incurred by
an individual who has a separate interest in a crop which is subject to
marketing quotas and was produced on a Federal prison farm or Federal
wildlife refuge.
Sec. 718.209 Transfer of allotments and quotas--State public lands.
(a) Transfers of allotments and quotas between farms in the same
county may be permitted where both farms are lands owned by the State.
(b) An application requesting the transfer of one or more of the
allotments and quotas on a farm entirely comprised of lands owned by a
State shall be filed with the county committee by the State. The
application shall identify the farms as being within the same county,
show that each farm is entirely comprised of lands owned by the State,
and list the allotments and quotas requested to be transferred.
Additional information with respect to the present operations on the
farms, including all leasing arrangements, shall also be set forth in
the application.
(c) The State committee shall establish the closing date for filing
applications under paragraph (b) of this section for each year which
shall be no later than the general planting date in the county for the
commodity involved in the transfer.
(d)(1) Each transfer of an allotment and quota under this section
shall be adjusted for differences in farm productivity if the yield
projected for the year the transfer is to take effect for the farm to
which transfer is made exceeds by more than ten percent the yield
projected for the year the transfer is to take effect for the farm from
which transfer is made. The county committee shall determine the amount
of the allotment and quota to be transferred where a productivity
adjustment is required to be made by dividing:
(i) The product of the yield for the farm from which the transfer
is made and the acreage to be transferred from such farm, by
(ii) The yield for the farm to which the transfer is made.
(2) Acreage for the farm receiving the allotment or quota shall be
adjusted by
[[Page 37565]]
the same percentage as the allotment or quota being transferred is
adjusted. The amount of the allotment and quota and related acreage
transferred from the farm from which the transfer is made shall be the
full amount, but the amount of all allotment or quota and related
acreage for the farm to which the transfer is made shall be the
adjusted amount.
(e) The amount of allotment and quota on a farm after a transfer
under this section is made shall not exceed the average amount of
allotment or quota of at least three farms with acreage of cropland
similar to the farm receiving the transfer in the community having the
applicable allotment acreage and quota on these farms.
(f) Each transfer of any allotment and quota shall be subject to
the condition that an acreage equal to the allotment and quota
transferred, before any productivity adjustment, shall be devoted to
and maintained in permanent vegetative cover on the farm from which the
transfer is made. The acreage to be devoted to and maintained in
permanent vegetative cover with respect to quota crops shall be
determined by dividing the quota transferred by the yield of the farm
from which the quota is transferred.
(g) Transfer of an allotment and quota under this section shall
only be approved if:
(1) The county committee determines that a timely filed application
has been received and that the provisions of this section have been
met; and
(2) A representative of the State committee also determines that
the provisions of this section have been met. If such a transfer is
approved, the county committee shall issue revised notices of the
allotment or quota for each farm affected by the transfer. If a county
committee obtains evidence that the conditions applicable to any
transfer under this section have not been met, a report of the facts
shall be made to the State committee. If the State committee determines
that such conditions have not been met, the transfer will be canceled,
and the allotment and quota shall be retransferred to the original
farm. Where cancellation and retransfer is required, the county
committee shall issue revised notices of the allotment or quota showing
the reasons for the cancellation of the transfer.
PART 729--PEANUTS
8. The authority citation for part 729 continues to read as
follows:
Authority: 7 U.S.C. Chapters 1301, 1357 et seq., 1372, 1373,
1375; and 7 U.S.C. Chapter 1445c-3.
9. For the reason set out in the preamble, Sec. 729.316 is revised
to read as follows:
Sec. 729.316 Marketing assessments.
(a) Subject to adjustments in accordance with Sec. 729.317, a
nonrefundable marketing assessment shall, in the amount provided for in
this section, be due on each pound of farmers stock peanuts marketed or
considered marketed by a producer, including marketings by pledging
peanuts as collateral for a price support loan. The per pound
assessment as a percentage of the applicable national average quota or
additional peanut loan rate, shall be an amount equal to:
(1) 1.15 percent for the 1996 crop; and
(2) 1.2 percent for the 1997 through 2002 crops.
(b) Collections and payment of marketing assessments. The first
purchaser of peanuts shall:
(1) Collect from the producer a marketing assessment equal to the
quantity of peanuts acquired multiplied by:
(i) In the case of the 1996 crop, a per pound amount equal to .6
percent of the national average loan rate; and
(ii) In the case of each of the 1997 through 2002 crops, a per
pound amount equal to .65 percent of the applicable national average
loan rate.
(2) In addition to the amount collected under paragraph (1) of this
section, pay a marketing assessment in an amount equal to the quantity
of peanuts acquired multiplied by .55 percent of the applicable
national average loan rate.
(c) Private marketings. For all peanuts retained on the farm for
seed or other uses or marketed by such producer to any person outside
the United States or marketed in private marketings through a retail or
wholesale outlet to any person who is not required to register as a
handler in accordance with part 1446 of this title, the producer shall
pay a marketing assessment equal to the full amount determined by
multiplying the per pound amount provided in paragraph (a) of this
section by the gross weight of the peanuts if they are uninspected
farmers stock peanuts or, if inspected, the net weight of such peanuts.
If such peanuts are shelled before they are marketed, the quantity
marketed shall be converted to a farmers stock equivalent as consistent
with this part, for purposes of determining the amount of assessment
that is due.
(d) Loan collateral peanuts. With respect to peanuts that are
pledged as collateral for a price support loan through an approved
warehouse, an assessment shall be:
(1) Determined and paid by multiplying the net weight of such
peanuts by the applicable per pound amount provided in paragraph (b)(1)
of this section for private sales and deducting the total from the loan
value of such peanuts before other deductions may be made for any other
reason; and
(2) Further determined and paid by multiplying the net weight of
such peanuts, when sold from the price support inventory, by the
applicable per pound amount provided in paragraph (b)(2) of this
section for private sales and collecting that amount from the person
who acquires such peanuts from the applicable association or from the
CCC.
(e) Remittance of marketing assessments. With respect to marketing
assessments as provided in:
(1) Paragraph (b) of this section, such assessments shall be
remitted in a manner prescribed by the Deputy Administrator. To avoid a
penalty, as prescribed in this section, the marketing assessments due
with respect to any lot of peanuts acquired directly from a producer
must be remitted during the 15 days that follow the week in which the
data from the applicable Form FSA-1007 is due to be transmitted to FSA
in accordance with the provisions in part 1446 of this title. For
purposes of this section a week shall be the 168 hour period that
begins at 12:01 a.m. local time on any Sunday and the postmark on the
envelope in which such marketing assessment is remitted may be the
basis for determining whether the marketing assessment was remitted
timely;
(2) Paragraph (c) of this section, such assessments shall be
remitted, within 10 days after the date such peanuts are marketed, and
shall be remitted to the county FSA office that serves the county in
which the farm is administratively located. Peanuts that are retained
on the farm for seed or other use, shall be considered marketed at the
time the certification of marketings is filed or due to be filed at the
county FSA office, whichever is earlier;
(3) Paragraph (d)(1) of this section, such assessments shall be
credited by the association to the appropriate account of the CCC and
in accordance with instructions issued by the Executive Vice President,
CCC; and
(4) Paragraph (d)(2) of this section, such assessment shall be paid
at the time and in the manner prescribed in the applicable:
(i) Sales announcements for sales of farmers stock peanuts by CCC;
(ii) Sales announcement or other similar document issued by the
[[Page 37566]]
association for association sales of loan stocks of farmers stock
peanuts; and
(iii) Storage contract for farmers stock peanuts purchased by a
handler when peanuts are purchased by such handler in accordance with
the ``immediate buyback'' provisions set forth in Sec. 1446.309.
(f) Penalties. If any person fails to collect, pay or timely remit
the assessment required by this section, the person shall be liable in
addition to principal and interest, for a penalty determined by
multiplying the quantity of peanuts involved by 10 percent of the per
pound national average quota support rate for the applicable crop year.
10. Sec. 729.317 is added to subpart C to read as follows:
Sec. 729.317 Increased marketing assessments.
(a) Applicability. If area quota pool losses are not otherwise
covered by the offsets prescribed by part 1446 of this title, and the
transfer of marketing assessments collected in accordance with
provisions of this part, the marketing assessment for quota peanut
producers shall be:
(1) Increased by an amount needed by CCC to cover such losses; and
(2) Collected as determined by CCC on all quota peanuts marketed in
the next marketing year in the area covered by the quota pool which had
the loss.
(b) Insufficient collections. If the amount of such increased
assessments collected on the marketing of quota peanuts in any year is
less than the amount needed to cover the accumulated net pool losses
for any crop, there shall be an increased assessment in subsequent
years until the amount needed is collected.
(c) Excess collections. If the increased amount of assessments, as
provided in this section, collected on the marketing of quota peanuts
for any year is greater than the amount needed for the purpose for
which the collection is made, the excess amount shall be retained to
offset any losses which may occur in quota pools within that marketing
area in subsequent years.
(d) Collection procedures. Unless otherwise specified by CCC, the
collection procedures for the increased assessments shall be as
provided for in Sec. 729.316 and the assessment rates of Sec. 729.316
shall be increased accordingly.
Parts 719, 720, 790, 791, 793, and 796--[REMOVED]
11. Parts 719, 720, 790, 791, 793, and 796 are removed.
12. Chapter XIV is revised by adding part 1400 to read as follows:
PART 1400--PAYMENT LIMITATION AND PAYMENT ELIGIBILITY
Subpart A--General Provisions
Sec.
1400.1 Applicability.
1400.2 Administration.
1400.3 Definitions.
1400.4 Indian tribal ventures.
1400.5 Scheme or device.
1400.6 Commensurate contributions.
1400.7 Joint and several liability.
1400.8 Equitable adjustments.
1400.9 Appeals.
1400.10 Paperwork Reduction Act assigned number.
Subpart B--Person Determinations
1400.100 Timing for determining status of persons.
1400.101 Limited partnerships, limited liability partnerships,
limited liability companies, corporations and other similar
entities.
1400.102 Joint operations.
1400.103 Trusts.
1400.104 Estates.
1400.105 Husband and wife.
1400.106 Minor children.
1400.107 States, political subdivisions, and agencies thereof.
1400.108 Charitable organizations.
1400.109 Changes in farming operations.
Subpart C--Actively Engaged in Farming Determinations
1400.201 General provisions for determining whether an individual or
entity is actively engaged in farming.
1400.202 Individuals.
1400.203 Joint operations.
1400.204 Limited partnerships, limited liability partnerships,
limited liability companies, corporations and other similar
entities.
1400.205 Trusts.
1400.206 Estates.
1400.207 Landowners.
1400.208 Family members.
1400.209 Sharecroppers.
1400.210 Deceased and incapacitated individuals.
1400.211 Persons not considered to be actively engaged in farming.
1400.212 Hybrid seed producers.
Subpart D--Permitted Entities
1400.301 Limitation on the number of entities through which an
individual or entity may receive a payment and required
notification.
Subpart E--Cash Rent Tenants
1400.401 Eligibility.
Subpart F--Foreign Persons
1400.501 Eligibility.
1400.502 Notification.
Authority: 7 U.S.C. 1308, 1308-1, and 1308-2; 16 U.S.C. 3834.
Subpart A--General Provisions
Sec. 1400.1 Applicability.
(a) All of the provisions of this part are applicable to the
following programs and any other programs as may be provided for in
individual program regulations:
(1) The programs authorized by part 1412 of this chapter;
(2) Any program authorized by parts 1421 and 1427 of this chapter
under which a gain is realized by a producer from repaying a marketing
assistance loan for a commodity at a lower rate than the original loan
rate established for the commodity, and any program that authorizes the
making of a loan deficiency payment with respect to a commodity;
(3)(i) The program authorized by parts 704 and 1410 of this title
with respect to the Conservation Reserve Program (CRP) rental payments
made in accordance with a contract entered into on or after August 1,
1988. For contracts entered into before August 1, 1988, in accordance
with such contracts, the person may elect to have the provisions of
this part apply to such contract by notifying the county committee in
writing of such election. Such election shall be irrevocable.
(ii) The regulations set forth at part 795 of this title are
applicable to CRP contracts entered into before December 22, 1987, and
to CRP contracts entered into on or after such date and before August
1, 1988, if the person has not made the election specified in paragraph
(a)(3)(i) of this section.
(iii) This part is not applicable to rental payments made in
accordance with a CRP contract if such payments are made to a State,
political subdivision, or agency thereof in connection with agreements
entered into under a special conservation reserve enhancement program
carried out by such State, political subdivision, or agency thereof
that has been approved by the Secretary, or a designee of the
Secretary.
(iv) With respect to inherited land, this part is not applicable to
rental payments made in accordance with a CRP contract if such payments
are made to an individual heir who has succeeded to such contract. Such
land must have been subject to the CRP contract at the time it is
inherited by the individual.
(b) Only the provisions of subparts A and B are applicable to the
Agricultural Conservation Program (ACP) authorized under part 701 of
this title.
(c) This part shall be applied to the programs specified in
paragraph (a)(2) of this section on a crop year basis; and with respect
to the programs specified
[[Page 37567]]
in paragraphs (a)(1) and (3) and (b) of this section on a fiscal year
basis.
(d) This part shall be used to determine whether individuals and
entities are to be treated as one person or as separate persons for the
purpose of applying the respective payment limitation provisions
applicable to the programs specified in this section and to such other
programs as may be provided in individual program regulations.
(e) In cases in which more than one provision of this part are
applicable, the provision which is most restrictive shall apply.
(f) Payments shall not be subject to the payment limitation
provisions if they are made to:
(1) Public schools with respect to land owned by a public school
district; or
(2) A State with respect to land owned by a State that is used to
maintain a public school.
(g) The following amounts are the limitations on payments per
person per applicable period for each payment.
------------------------------------------------------------------------
Limitation per
Payment type program year or
fiscal year
------------------------------------------------------------------------
Production Flexibility Contract...................... \1\ $40,000
Production Flexibility Contract...................... \2\ 50,000
Marketing Loan Gain.................................. \3\ 75,000
Loan deficiency...................................... .................
CRP.................................................. 50,000
ACP cost-share....................................... 3,500
Non-Insured Crop Disaster Assistance Program (NAP)... 100,000
------------------------------------------------------------------------
\1\ Annual payment amount.
\2\ Amounts made in accordance with section 113(c) of the Federal
Agriculture Improvement and Reform Act of 1996.
\3\ The total of marketing loan gains and loan deficiency payments
cannot exceed $75,000 per crop year.
Sec. 1400.2 Administration.
(a) The regulations in this part will be administered under the
general supervision and direction of the Executive Vice President,
Commodity Credit Corporation (CCC), and the Administrator, Farm Service
Agency (FSA). In the field, the regulations in this part will be
administered by the FSA State and county committees (herein referred to
as ``State and county committees,'' respectively).
(b) State executive directors, county executive directors and State
and county committees do not have authority to modify or waive any of
the provisions of this part.
(c) The State committee may take any action authorized or required
by this part to be taken by the county committee which has not been
taken by such committee. The State committee may also:
(1) Correct or require a county committee to correct any action
taken by such county committee that is not in accordance with this
part; or
(2) Require a county committee to withhold taking any action that
is not in accordance with this part.
(d) No delegation herein to a State or county committee shall
preclude the Executive Vice President, CCC, and the Administrator, FSA,
or a designee, from determining any question arising under this part or
from reversing or modifying any determination made by a State or county
committee.
(e) The initial ``actively engaged in farming'' and ``person''
determinations shall be made within 60 days after the producer files
the required forms and any other supporting documentation needed in
making such determinations. If the determination is not made within 60
days, the producer will receive a determination for that program year
that reflects the determination sought by the producer unless the
Deputy Administrator determines that the producer did not follow the
farm operating plan that was presented to the county or State committee
for such year.
(f) Initial determinations concerning the provisions of this part
shall not be made by a county FSA office with respect to any farm
operating plan that is for a joint operation with more than five
members.
Sec. 1400.3 Definitions.
(a) The terms defined in part 718 of this chapter shall be
applicable to this part and all documents issued in accordance with
this part, except as otherwise provided in this section.
(b) The following definitions shall also be applicable to this
part:
Active personal labor. Active personal labor is personally
providing physical activities necessary in a farming operation,
including activities involved in land preparation, planting,
cultivating, harvesting, and marketing of agricultural commodities in
the farming operation. Other physical activities include those physical
activities required to establish and maintain conserving cover crops on
conserving use and CRP acreages and those physical activities necessary
in livestock operations.
Active personal management. Active personal management is
personally providing:
(1) The general supervision and direction of activities and labor
involved in the farming operation; or
(2) Services (whether performed on-site or off-site) reasonably
related and necessary to the farming operation, including:
(i) Supervision of activities necessary in the farming operation,
including activities involved in land preparation, planting,
cultivating, harvesting, and marketing of agricultural commodities, as
well as activities required to establish and maintain conserving cover
crops on conserving use and CRP acreage and activities required in
livestock operations;
(ii) Business-related actions, which include discretionary decision
making;
(iii) Evaluation of the financial condition and needs of the
farming operation;
(iv) Assistance in the structuring or preparation of financial
reports or analyses for the farming operation;
(v) Consultations in or structuring of business-related financing
arrangements for the farming operation;
(vi) Marketing and promotion of agricultural commodities produced
by the farming operation;
(vii) Acquiring technical information used in the farming
operation; and
(viii) Any other management function reasonably necessary to
conduct the farming operation and for which service the farming
operation would ordinarily be charged a fee.
Alien. Any person not a citizen or national of the United States.
Lawful Alien. Any person who is not a citizen or national of the
United States but who is admitted into the United States for permanent
residence under the Immigration and Nationality Act and possesses a
valid Alien Registration Receipt Card (Form I-551 or I-151).
(2) [Reserved]
Capital. Capital consists of the funding provided by an individual
or entity to the farming operation in order for such operation to
conduct farming activities. In determining whether an individual or
entity has contributed capital, in the form of funding, to the farming
operation, such capital must have been derived from a fund or account
separate and distinct from that of any other individual or entity
involved in such operation. Capital does not include the value of any
labor or management that is contributed to the farming operation or any
outlays for land or equipment. A capital contribution may be a direct
out-of-pocket input of a specified sum or an amount borrowed by the
individual or entity.
(1) With respect to a farming operation conducted by an individual,
a joint operation in which the capital is contributed by a member of
the joint operation or an entity, such capital contributed to meet the
requirements of:
[[Page 37568]]
(i) Section 1400.201(b) must be contributed directly by the
individual or entity and must not be acquired as a result of a loan
made to, guaranteed, or secured by:
(A) Any other individual, joint operation, or entity that has an
interest in such farming operation;
(B) Such individual, joint operation, or entity by any other
individual, joint operation, or entity that has an interest in such
farming operation; or
(C) Any other individual, joint operation, or entity in whose
farming operation such individual, joint operation, or entity has an
interest; and
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the individual or entity and if acquired as a result of a loan made
to, guaranteed, or secured by the individuals, joint operations, or
entities listed in paragraphs (1)(i)(A) through (1)(i)(C) of this
definition, the loan must bear the prevailing interest rate; and
(2) With respect to a farming operation conducted by a joint
operation in which the capital is contributed by such joint operation,
such capital contributed to meet the requirements of:
(i) Section 1400.201(b) must be contributed directly by the joint
operation and must not be acquired as a result of a loan made to,
guaranteed, or secured by:
(A) Any individual, entity, or other joint operation that has an
interest in such farming operation, including either joint operation's
members;
(B) Such joint operation by any individual, entity, or other joint
operation that has an interest in such farming operation; or
(C) Any individual, entity, or other joint operation in whose
farming operation such joint operation has an interest.
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the joint operation and if acquired as a result of a loan made to,
guaranteed, or secured by the individuals, entities, or joint
operations listed in paragraphs (2)(i)(A) through (2)(i)(C) of this
definition, the loan must bear the prevailing interest rate.
Entity. An entity is a corporation, joint stock company,
association, limited partnership, limited liability partnership,
limited liability company, irrevocable trust, revocable trust, estate,
charitable organization, or other similar organization, including any
such organization participating in the farming operation as a partner
in a general partnership, a participant in a joint venture, a grantor
of a revocable trust, or as a participant in a similar organization.
Equipment. Equipment is the machinery and implements needed by the
farming operation to conduct activities of the farming operation,
including machinery and implements involved in land preparation,
planting, cultivating, harvesting, or marketing of the crops involved.
Equipment also includes machinery and implements needed to establish
and maintain conserving cover crops on conserving use and CRP acreages
and those needed to conduct livestock operations.
(1) With respect to a farming operation conducted by an individual,
entity or joint operation in which the equipment is contributed by a
member of the joint operation, such equipment contributed to meet the
requirements of:
(i) Section 1400.201(b) must be contributed directly by the
individual or entity and must not be acquired as a result of a loan
made to, guaranteed, or secured by:
(A) Any other individual, joint operation, or entity that has an
interest in such farming operation.
(B) Such individual, joint operation, or entity by any other
individual, joint operation, or entity that has an interest in such
farming operation; or
(C) Any other individual, joint operation, or entity in whose
farming operation such individual, joint operation, or entity has an
interest.
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the individual or entity and if acquired as a result of a loan made
to, guaranteed, or secured by the individuals, joint operations, or
entities listed in paragraphs (1)(i)(A) through (1)(i)(C) of this
definition, the loan must bear the prevailing interest rate.
(2) With respect to a farming operation conducted by a joint
operation in which the equipment is contributed by such joint
operation, such equipment contributed to meet the requirements of:
(i) Section 1400.201(b) must be contributed directly by the joint
operation and must not be acquired as a result of a loan made to,
guaranteed, or secured by:
(A) Any individual, entity, or other joint operation that has an
interest in such farming operation, including either joint operation's
members.
(B) Such joint operation by any individual, entity, or other joint
operation that has an interest in such farming operation; or
(C) Any individual, entity, or other joint operation in whose
farming operation such joint operation has an interest; and
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the joint operation and if listed as a result of a loan made to,
guaranteed, or secured by the individuals, entities, or joint
operations provided in paragraphs (2)(i)(A) through (2)(i)(C) of this
definition, the loan must bear the prevailing interest rate.
(3) Such equipment may be leased from any source. If such equipment
is leased from another individual or entity with an interest in the
farming operation, such equipment must be leased at a fair market
value.
Family member. The term family member means an individual to whom
another member in the farming operation is related as lineal ancestor,
lineal descendant, or sibling, including spouses of those individuals
who do not make a significant contribution to the farming operation
themselves.
Farming operation. A farming operation is a business enterprise
engaged in the production of agricultural products that is operated by
an individual, entity, or joint operation and is eligible to receive
payments, directly or indirectly, under one or more of the programs
specified in Sec. 1400.1. An entity or individual may have more than
one farming operation if such individual or entity is a member of one
or more joint operations.
Interest in a Farming Operation. An individual, entity or joint
operation has an interest in a farming operation if the individual,
entity or joint operation:
(1) Owns or rents the land;
(2) Has an interest in the agricultural commodities produced; or
(3) Is a member of a joint operation that either owns or rents the
land or has an interest in the agricultural commodities produced.
Irrevocable trust. All trusts shall be considered to be revocable
trusts, except a trust may be considered to be an irrevocable trust if
it is a trust:
(1) That may not be modified or terminated by the grantor;
(2) In the corpus of which the grantor does not have any future,
contingent or remainder interest; and
(3) If established after January 1, 1987, that does not provide for
the transfer of the corpus of the trust to the remainder beneficiary in
less than 20 years from the date the trust is established except in
cases where the transfer is contingent upon either the remainder
beneficiary achieving at least the age of majority or the death of the
grantor or income beneficiary.
Joint operation. A joint operation is a general partnership, joint
venture, or other similar business organization.
[[Page 37569]]
Land. Land is farmland that meets the specific requirements of the
applicable program.
(1) With respect to a farming operation conducted by an individual,
a joint operation in which the land is contributed by a member of the
joint operation, or an entity, such land contributed to meet the
requirements of:
(i) Section 1400.201(b) must be contributed directly by the
individual or entity and must not be acquired as a result of a loan
made to, guaranteed, or secured by:
(A) Any other individual, joint operation, or entity that has an
interest in such farming operation;
(B) Such individual, joint operation, or entity by any other
individual, joint operation, or entity that has an interest in such
farming operation; or
(C) Any other individual, joint operation, or entity in whose
farming operation such individual, joint operation, or entity has an
interest; and
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the individual or entity and if acquired as a result of a loan made
to, guaranteed, or secured by the individuals, joint operations, or
entities listed in paragraphs (1)(i)(A) through (1)(i)(C) of this
definition, the loan must bear the prevailing interest rate; and
(2) With respect to a farming operation conducted by a joint
operation in which the land is contributed by such joint operation,
such land contributed to meet the requirements of:
(i) Section 1400.201(b) must be contributed directly by the joint
operation and must not be acquired as a result of a loan made to,
guaranteed, or secured by:
(A) Any individual, entity, or other joint operation that has an
interest in such farming operation, including either joint operation's
members;
(B) Such joint operation by any individual, entity, or other joint
operation that has an interest in such farming operation; or
(C) Any individual, entity, or other joint operation in whose
farming operation such joint operation has an interest; and
(ii) Sections 1400.6 and 1400.201(d) must be contributed directly
by the joint operation and if acquired as a result of a loan made to,
guaranteed, or secured by the individuals, entities, or joint
operations provided in paragraphs (2)(i)(A) through (2)(i)(C) of this
definition, the loan must bear the prevailing interest rate.
(3) Such land may be leased from any source. If such land is leased
from another individual or entity with an interest in the farming
operation, such land must be leased at a fair market value.
Payment. A payment includes:
(1) Payments made in accordance with part 1412 of this chapter;
(2) Loan gains and loan deficiency payments made in accordance with
parts 1421 and 1427 of this chapter;
(3) CRP annual rental payments made in accordance with parts 704 of
this title and 1410 of this chapter;
(4) ACP cost-share payments made in accordance with part 701 of
this title;
(5) Non-Insured Crop Disaster Assistance Program (NAP) payments;
and
(6) With respect to other programs, any payments designated in
individual program regulations.
Payment, loan, or benefit. A payment, loan, or benefit made in
accordance with the 1996 Act, the CCC Charter Act, or Subtitle D of the
1985 Act, which results in a direct expenditure by the CCC or any other
agency of the Federal Government, including a payment made in
accordance with part 1401 of this title. Such term does not include the
establishment of contract acreages, farm program payment yields,
acreage allotments, marketing quotas, and similar program provisions.
Permitted entity. A permitted entity is an entity designated
annually by an individual that is to receive a payment, loan, or
benefit under a program specified in Sec. 1400.1(a).
Person. (1) A person is:
(i) An individual, including any individual participating in a
farming operation as a partner in a general partnership, a participant
in a joint venture, or a participant in a similar entity;
(ii) A corporation, joint stock company, association, limited
partnership, limited liability partnership, limited liability company,
irrevocable trust, revocable trust combined with the grantor of the
trust, estate, or charitable organization, including any such entity or
organization participating in the farming operation as a partner in a
general partnership, a participant in a joint venture, a grantor of a
revocable trust, or as a participant in a similar entity; and
(iii) A State, political subdivision, or agency thereof.
(2) In order for an individual or entity, other than an individual
or entity that is a member of a joint operation, to be considered a
separate person for the purposes of this part, in addition to other
provisions of this part, the individual or entity must:
(i) Have a separate and distinct interest in the land or the crop
involved;
(ii) Exercise separate responsibility for such interest; and
(iii) Maintain funds or accounts separate from that of any other
individual or entity for such interest.
(3) With respect to an individual or entity that is a member of a
joint operation, such individual or entity will have met the
requirements of paragraph (2) of this definition if the joint operation
meets the requirements of such paragraph.
(4) Any cooperative association of producers that markets
commodities for producers shall not be considered a person with respect
to the commodities so marketed for producers.
Public school. A public school is a primary, elementary, secondary
school, college, or university that is directly administered under the
authority of a governmental body or that receives a predominant amount
of its financing from public funds.
Sharecropper. An individual who performs work in connection with
the production of the crop under the supervision of the operator and
who receives a share of such crop in return for the provision of such
labor.
Significant contribution. A significant contribution is the
provision of the following to a farming operation by an individual or
entity:
(1)(i) With respect to land, capital, or equipment contributed by
an individual or entity, a contribution that has a value at least equal
to 50 percent of the individual's or entity's commensurate share of:
(A) The total value of the capital necessary to conduct the farming
operation;
(B) The total rental value of the land necessary to conduct the
farming operation;
(C) The total rental value of the equipment necessary to conduct
the farming operation; or
(ii) If the contribution by an individual or entity consists of any
combination of land, capital, and equipment, such combined contribution
must have a value at least equal to 30 percent of the individual's or
entity's commensurate share of the total value of the farming
operation;
(2) With respect to active personal labor, an amount which is the
smaller of:
(i) 1,000 hours per calendar year; or
(ii) 50 percent of the total hours that would be necessary to
conduct a farming operation that is comparable in size to such
individual's or entity's commensurate share in the farming operation;
[[Page 37570]]
(3) With respect to active personal management, activities that are
critical to the profitability of the farming operation, taking into
consideration the individual's or entity's commensurate share in the
farming operation; and
(4) With respect to a combination of active personal labor and
active personal management, when neither contribution individually
meets the requirements of paragraphs (2) and (3) of this definition, a
combination of active personal labor and active personal management
that, when viewed together, results in a critical impact on the
profitability of the farming operation in an amount at least equal to
either the significant contribution of active personal labor or active
personal management as provided in paragraphs (2) and (3) of this
definition.
Substantial amount of active personal labor. Substantial amount of
active personal labor means the provision of active personal labor in
an amount that is the smaller of:
(1) 1,000 hours per calendar year; or
(2) 50 percent of the total hours that would be necessary to
conduct a farming operation that is comparable in size to such
individual's or entity's commensurate share in the farming operation.
Substantial beneficial interest. A substantial beneficial interest
in an entity is an interest of 10 percent or more. In determining
whether such an interest equals at least 10 percent, all interests in
the entity that are owned by an individual or entity directly or
indirectly through such means as ownership of a corporation that owns
the entity shall be taken into consideration. In order to ensure that
the provisions of this part are not circumvented by an individual or
entity, the Deputy Administrator may determine that an ownership
interest requirement of less than 10 percent shall be applied to such
individual or entity.
Total value of the farming operation. The total value of the
farming operation is the total of the costs, excluding the value of
active personal labor and active personal management contributed by a
person who is a member of the farming operation, needed to carry out
the farming operation for the year for which the determination is made.
Sec. 1400.4 Indian tribal ventures.
An individual American Indian who receives payments through other
than an Indian tribal venture is required to certify that they will not
accrue total payments, including payments made to the Indian tribal
venture and to the individual American Indian, in excess of the
applicable payment limitation for programs specified in Sec. 1400.1.
Sec. 1400.5 Scheme or device.
(a) All or any part of the payment otherwise due a person on all
farms in which the person has an interest may be withheld or be
required to be refunded if the person adopts or participates in
adopting a scheme or device designed to evade this part or that has the
effect of evading this part. Such acts shall include, but are not
limited to:
(1) Concealing information that affects the application of this
part;
(2) Submitting false or erroneous information; or
(3) Creating fictitious entities for the purpose of concealing the
interest of a person in a farming operation.
(b) If the Deputy Administrator determines that a person has
adopted a scheme or device to evade, or that has the purpose of
evading, the provisions of sections 1001, 1001A, or 1001C of the 1985
Act such person shall be ineligible to receive payments under the
programs specified in Sec. 1400.1 with respect to the year for which
such scheme or device was adopted and the succeeding year.
Sec. 1400.6 Commensurate contributions.
In order to be considered eligible to receive payments under the
programs specified in Sec. 1400.1 an individual or entity specified in
Secs. 1400.202 through 1400.210 must have:
(a) A share of the profits or losses from the farming operation
that is commensurate with the individual's or entity's contribution to
the operation; and
(b) Contributions to the farming operation that are at risk.
Sec. 1400.7 Joint and several liability.
If two or more individuals or entities are considered to be one
person and the total payment received is in excess of the applicable
payment limitation provision, such individuals or entities shall be
jointly and severally liable for any liability that arises therefrom.
The provisions of this section shall be applicable in addition to any
liability that arises under a criminal or civil statute.
Sec. 1400.8 Equitable adjustments.
Actions taken by an individual or an entity in good faith on action
or advice of an authorized representative of the Deputy Administrator
may be accepted as meeting the requirements of this part to the extent
the Deputy Administrator deems necessary to provide fair and equitable
treatment to such individual or entity.
Sec. 1400.9 Appeals.
(a) Any person may obtain reconsideration and review of
determinations made under this part in accordance with the appeal
regulations set forth at part 780 of this title. With respect to such
appeals, the applicable reviewing authority shall:
(1) Schedule a hearing with respect to the appeal within 45 days
following receipt of the written appeal; and
(2) Issue a determination within 60 days following the hearing.
(b) The time limitations provided in paragraph (a) shall not apply
if:
(1) The appellant, or the appellant's representative, requests a
postponement of the scheduled hearing;
(2) The appellant, or the appellant's representative, requests
additional time following the hearing to present additional information
or a written closing statement;
(3) The appellant has not timely presented information to the
reviewing authority; or
(4) An investigation by the Office of Inspector General is ongoing
or a court proceeding is involved that affects the amount of payments a
person may receive.
(c) If the deadlines provided in paragraphs (a) and (b) of this
section are not met, the relief sought by the producer's appeal will be
granted for the applicable crop year unless the Deputy Administrator
determines that the producer did not follow the farm operating plan
initially presented to the county committee for the year that is the
subject of the appeal.
(d) An appellant may waive the provisions of paragraphs (a) and (b)
of this section.
Sec. 1400.10 Paperwork Reduction Act assigned number.
The information collection requirements contained in this part have
been approved by the Office of Management and Budget (OMB) under the
provisions of 44 U.S.C. Chapter 35 and have been assigned OMB control
number 0560-0096.
Subpart B--Person Determinations
Sec. 1400.100 Timing for determining status of persons.
(a) Except as otherwise set forth in this part, for the 1996
program or fiscal year, the status of an individual or entity on July
12, 1996, shall be the basis on which determinations are made in
accordance with this part. Except as otherwise set forth in this part,
for 1997 and subsequent years, the status of an individual or entity on
April 1 of the applicable program or fiscal year, shall
[[Page 37571]]
be the basis on which determinations are made in accordance with this
part.
(b) Actions taken by an individual or entity after the applicable
status date set forth in paragraph (a) of this section, but on or
before the final harvest date of the last contract commodity in the
area, as determined by the Deputy Administrator, shall not be used to
determine whether there has been an increase in the number of persons
for the applicable program or fiscal year. Actions taken by a person
after the status date set forth in paragraph (a) of this section, but
on or before the harvest of the last contract commodity in the area,
shall be used to determine whether there has been a decrease in the
number of persons for the applicable program or fiscal year.
Sec. 1400.101 Limited partnerships, limited liability partnerships,
limited liability companies, corporations and other similar entities.
(a) A limited partnership, limited liability partnership, limited
liability company, corporation, or other similar entity shall be
considered to be a person separate from an individual partner,
stockholder, or member except that a limited partnership, limited
liability partnership, limited liability corporation, corporation, or
other similar entity in which more than 50 percent of the interest in
such limited partnership, limited liability partnership, limited
liability corporation, corporation, or other similar entity is owned by
an individual (including the interest owned by the individual's spouse,
minor children, and trusts for the benefit of such minor children) or
by an entity shall not be considered as a separate person from such
individual or entity.
(b) If the same two or more individuals or entities own more than
50 percent of the interest in each of two or more limited partnerships,
corporations, or other similar entities engaged in farming, all such
limited partnerships, limited liability partnership, limited liability
company, corporations, or other similar entities shall be considered to
be one person.
(c) The percentage share of the interest in a limited partnership,
limited liability partnership, limited liability company, corporation,
or other similar entity that is owned by an individual or other entity
shall be determined as of the status date set forth in paragraph (a) of
this section. If a partner, stockholder, or member acquires an interest
in the limited partnership, corporation, or other similar entity after
such date, and on or before the harvest of the last contract commodity
in the area as determined by the Deputy Administrator, the amount of
any such interest shall be included in determining the total ownership
interest of such partner, stockholder, or member.
(d) Where there is only one class of stock or other similar unit of
ownership, an individual's or entity's percentage share of the limited
partnership, limited liability partnership, limited liability company,
corporation, or other similar entity shall be based upon the
outstanding shares of stock or other similar unit of ownership held by
the individual or entity and compared to the total outstanding shares
of stock or other similar unit of ownership. If the limited
partnership, limited liability partnership, limited liability company,
corporation, or other similar entity has more than one class of stock
or other unit of ownership, the percentage share of the limited
partnership, limited liability partnership, limited liability company,
corporation, or other similar entity owned by an individual or entity
shall be determined by the Deputy Administrator on the basis of market
quotations. If market quotations are lacking or are too scarce to be
recognized, such percentage share shall be determined by the Deputy
Administrator on the basis of all relevant factors affecting the fair
market value of such stock or other unit of ownership, including the
various rights and privileges that are attributed to each such class.
Sec. 1400.102 Joint operations.
Members of joint operations may be separately treated as a person
in accordance with the requirements of this part. However, members of a
joint operation may request to be jointly treated as one person for the
purposes of this part.
Sec. 1400.103 Trusts.
(a) A trust shall be considered to be a person separate from the
individual income beneficiaries of the trust except that a trust that
has a sole income beneficiary shall not be considered to be a separate
person from such income beneficiary.
(b) Where two or more irrevocable trusts have common income
beneficiaries (including a spouse and minor children) with more than a
50 percent interest, all such trusts shall be considered to be one
person.
(c) A revocable trust and the grantor of such revocable trust shall
be considered to be one person.
Sec. 1400.104 Estates.
If the deceased individual had lived and would have been considered
to be one person with respect to an heir, the estate shall also be
considered to be one person with such heir.
Sec. 1400.105 Husband and wife.
(a) With respect to any married couple, the husband and wife shall
be considered to be one person except that a husband and wife, who:
(1) Prior to their marriage were separately engaged in unrelated
farming operations, will be determined to be separate persons with
respect to such farming operations so long as such operations remain
separate and distinct from any farming operation conducted by the other
spouse; or
(2) Except as provided in paragraph (b), do not hold, directly or
indirectly, a substantial beneficial interest in more than one entity
(including themselves) engaged in farm operations that also receive
payments as a separate person from either spouse, the spouses may be
considered as separate persons if each spouse otherwise meets the
requirements under this part to be considered a separate person and is
otherwise eligible to receive payment.
(b) With respect to any interest in an estate, for 2 program years
after the program year in which the individual died, a husband and wife
shall not be considered as having an interest in an entity to the
extent resulting from such interest in an estate for purposes of
determining persons.
Sec. 1400.106 Minor children.
(a) Except as provided in paragraph (b) of this section, a minor,
including a minor who is the beneficiary of a trust or who is an heir
of an estate, and the parent or any court-appointed person such as a
guardian or conservator who is responsible for the minor shall be
considered to be one person.
(b) A minor may be considered to be a separate person from the
minor's parent or any court appointed person such as a guardian or
conservator who is responsible for the minor, if the minor is a
producer on a farm and the minor's parent or any court appointed person
such as guardian or conservator who is responsible for the minor does
not have any interest in the farm on which the minor is a producer or
in any production from such farm. In addition the minor must:
(1) Have established and maintain a separate household from the
minor's parents or any court-appointed person such as a guardian or
conservator who is responsible for the minor and such minor personally
carries out the farming activities with respect to the minor's farming
operation for which there is a separate accounting; or
[[Page 37572]]
(2) Not live in the same household as such minor's parent and:
(i) Be represented by a court-appointed guardian or conservator who
is responsible for the minor; and
(ii) Have ownership of the farm vested in the minor.
(c) A person shall be considered to be a minor until the age 18 is
reached. Court proceedings conferring majority on a person under 18
years of age will not change such person's status as a minor.
Sec. 1400.107 States, political subdivisions, and agencies thereof.
A State, political subdivision and agencies thereof shall be
considered to be one person.
Sec. 1400.108 Charitable organizations.
A charitable organization, including a club, society, fraternal or
religious organization, shall be considered to be a separate person to
the extent that such an entity is engaged in the production of crops as
a separate person, except where the land or the proceeds from the
farming operation may transfer to an entity that exercises control or
authority over such organization.
Sec. 1400.109 Changes in farming operations.
Any change in a farming operation that would increase the number of
persons to which the provisions of this part apply must be bona fide
and substantive. If bona fide, the following shall be considered to be
substantive changes in the farming operation:
(a) The addition of a family member to a farming operation in
accordance with Sec. 1400.208, except that such an addition will not
affect the status of any other individual or entity that is added to
the farming operation;
(b) With respect to a landowner only, a change from a cash rent to
a share rent;
(c) An increase through the acquisition of cropland not previously
involved in the farming operation of approximately 20 percent or more
in the total cropland involved in the farming operation, if such
cropland has planting history of an amount at least normal for the
area;
(d) A change in ownership by sale or gift of a significant amount
of equipment from an individual or entity who previously has been
engaged in a farming operation to an individual or entity who has not
been involved in such operation. The sale or gift of equipment will be
considered to be bona fide and substantive only if the transferred
amount of such equipment is commensurate with the new individual's or
entity's share of the farming operation;
(e) A change in ownership by sale or gift of a significant amount
of land from an individual or entity who previously has been engaged in
a farming operation to an individual or entity who has not been
involved in such operation. The sale or gift of land will be considered
to be substantive only if the transferred amount of such land is
commensurate with the new individual's or entity's share of the farming
operation.
Subpart C--Actively Engaged in Farming Determinations
Sec. 1400.201 General provisions for determining whether an individual
or entity is actively engaged in farming.
(a) To be considered a person who is eligible to receive payments
with respect to a particular farming operation, a person must be an
individual or entity actively engaged in farming with respect to such
operation.
(b) Actively engaged in farming means, except as otherwise provided
in this part, that the individual or entity, independently makes a
significant contribution to a farming operation, of:
(1) Capital, equipment, or land, or a combination of capital,
equipment, or land; and
(2) Active personal labor or active personal management, or a
combination of active personal labor and active personal management.
(c) In determining if the individual or entity is actively
contributing a significant amount of active personal labor or active
personal management the following factors shall be taken into
consideration:
(1) The types of crops and livestock produced by the farming
operation;
(2) The normal and customary farming practices of the area; and
(3) The total amount of labor and management necessary for such a
farming operation in the area.
(d) In order to be considered to be actively engaged in farming an
individual or entity specified in Secs. 1400.202 through 1400.210 must
have:
(1) A share of the profits or losses from the farming operation
commensurate with the individual's or entity's contribution to the
operation; and
(2) Contributions to the farming operation that are at risk.
Sec. 1400.202 Individuals.
An individual shall be considered to be actively engaged in farming
with respect to a farming operation if the individual makes a
significant contribution of:
(a) Capital, equipment, or land, or a combination of capital,
equipment, or land; and
(b) Active personal labor or active personal management, or a
combination of active personal labor and active personal management.
Sec. 1400.203 Joint operations.
(a) A member of a joint operation shall be considered to be
actively engaged in farming with respect to a farming operation if the
member makes a significant contribution of:
(1) Capital, equipment, or land or a combination of capital,
equipment, or land; and
(2) Active personal labor or active personal management or a
combination of active personal labor and active personal management.
(b) If a joint operation separately makes a significant
contribution of capital, equipment, or land, or a combination of
capital, equipment, or land, and the joint operation meets the
provisions of Sec. 1400.201(d), the members of the joint operation who
make a significant contribution of active personal management, or a
combination of active personal labor and active personal management to
the farming operation shall be considered to be actively engaged in
farming with respect to such farming operation.
Sec. 1400.204 Limited partnerships, limited liability partnerships,
limited liability companies, corporations and other similar entities.
A limited partnership, limited liability partnership, limited
liability company, corporation, or other similar entity shall be
considered to be actively engaged in farming with respect to a farming
operation if:
(a) The entity separately makes a significant contribution to the
farming operation of capital, equipment, or land, or a combination of
capital, equipment, or land; and
(b) The partners, stockholders, or members collectively make a
significant contribution, whether compensated or not compensated, of
active personal labor, active personal management, or a combination of
active personal labor and active personal management to the farming
operation. The combined beneficial interest of all the partners,
stockholders, or members providing active personal labor or active
personal management, or a combination of active personal labor and
active personal management must be at least 50 percent.
Sec. 1400.205 Trusts.
A trust shall be considered to be actively engaged in farming with
respect to a farming operation if:
[[Page 37573]]
(a) The entity separately makes a significant contribution to the
farming operation of capital, equipment, or land, or a combination of
capital, equipment, or land;
(b) The income beneficiaries collectively make a significant
contribution of active personal labor or active personal management, or
a combination of active personal labor and active personal management
to the farming operation. The combined interest of all the income
beneficiaries providing active personal labor or active personal
management, or a combination of active personal labor and active
personal management must be at least 50 percent;
(c) The trust has provided a tax identification number of the trust
unless the trust is a revocable trust and the grantor is the sole
income beneficiary; and
(d) The trust has provided a copy of the trust agreement to the
county committee unless the trust is a revocable trust.
Sec. 1400.206 Estates.
(a) For 2 program years after the program year in which an
individual dies the individual's estate shall be considered to be
actively engaged in farming if:
(1) The estate makes a significant contribution of either:
(i) Capital, equipment, or land; or
(ii) A combination of capital, equipment, or land; and
(2) The personal representative or heirs of the estate collectively
make a significant contribution of either:
(i) Active personal labor or active personal management; or
(ii) A combination of active personal labor and active personal
management.
(b) After the period set forth in paragraph (a) of this section,
the deceased individual's estate shall not be considered to be actively
engaged in farming unless, on a case by case basis, the Deputy
Administrator determines that the estate has not been settled primarily
for the purpose of obtaining program payments.
Sec. 1400.207 Landowners.
A person who is a landowner, including landowners with an undivided
interest in land, making a significant contribution of owned land to
the farming operation, shall be considered to be actively engaged in
farming with respect to such owned land, if the landowner receives rent
or income for such use of the land based on the land's production or
the operation's operating results. A landowner also includes a member
of a joint operation if the joint operation holds title to land in the
name of the joint operation and if the joint operation or its members
submit adequate documentation to determine that, upon dissolution of
the joint operation, the title to the land owned by the joint operation
will revert to such member of such joint operation.
Sec. 1400.208 Family members.
With respect to a farming operation conducted by persons, a
majority of whom are individuals who are family members, an adult
family member who makes a significant contribution of active personal
management, active personal labor, or a combination of active personal
labor and active personal management shall be considered to be actively
engaged in farming.
Sec. 1400.209 Sharecroppers.
A sharecropper who makes a significant contribution of active
personal labor to the farming operation shall be considered to be
actively engaged in farming.
Sec. 1400.210 Deceased and incapacitated individuals.
The determining authority shall take into consideration the
circumstances involving individuals who have died or become
incapacitated during the program year or fiscal year, as applicable. If
the individual dies or is incapacitated before a determination is made
that the individual is ``actively engaged in farming,'' the
representative of the deceased individual's estate or the incapacitated
individual, or other person if necessary, must provide the determining
authority information to verify that such individual did make a
conscious effort to and would have been determined to be actively
engaged in farming if not for the individual's death or incapacitation.
If the individual dies or is incapacitated after being determined to be
``actively engaged in farming,'' the determining authority shall allow
such determination to be in effect for that program year or fiscal
year, as applicable. However, the following year such individual or the
individual's estate must meet all necessary requirements in order to be
determined to be ``actively engaged in farming'' for that year.
Sec. 1400.211 Persons not considered to be actively engaged in
farming.
An individual or entity who does not satisfy all of the provisions
of Secs. 1400.202 through 1400.210 and a landowner who rents land to a
farming operation for cash or a crop share guaranteed as to the amount
of the commodity shall not be considered to be actively engaged in
farming.
Sec. 1400.212 Hybrid seed producers.
The existence of a hybrid seed contract for a producer shall not be
taken into account when making an actively engaged in farming
determination with respect to such producer. However, such producer
must satisfy all other applicable provisions of this part.
Subpart D--Permitted Entities
Sec. 1400.301 Limitation on the number of entities through which an
individual or entity may receive a payment and required notification.
(a) An individual may receive a payment under a program specified
in Sec. 1400.1(a) either directly or indirectly from no more than three
permitted entities. An individual who receives such a payment shall
notify the county committee in the county in which such individual
maintains a farming operation whether or not the farming operation is
to be considered a permitted entity. An individual may only receive
such payments as a result of a farming operation conducted by:
(1) The individual and by no more than two entities in which the
individual holds a substantial beneficial interest; or
(2) No more than three entities in which the individual holds a
substantial beneficial interest.
(b) Except for entities specified in paragraph (c) of this section,
each entity entering into a contract or agreement under a program
specified in Sec. 1400.1(a) shall, by the date the contract or
agreement is submitted to the county committee, notify in writing:
(1) Each individual or other entity that acquires or holds an
interest in such entity of the requirements and limitations provided in
this part; and
(2) The county committee of the name and social security number of
each individual and the name and taxpayer identification number of each
entity that holds or acquires a substantial beneficial interest in such
entity.
(c) Entities shall not be subject to the provisions of paragraph
(b) of this section if, as determined by the Deputy Administrator:
(1) Because of the number of members of such entity no member is
likely to have a substantial beneficial interest in such entity; and
(2) Such provisions would cause undue financial hardship on such
entity.
(d)(1) An individual or entity that holds a substantial beneficial
interest in more than the number of permitted
[[Page 37574]]
entities specified in paragraph (a) of this section for which a
contract or agreement has been submitted to the county committee shall
notify the county committee in writing, in each county in which they
conduct a farming operation, of those entities that shall be considered
as permitted entities by a date as determined by the Deputy
Administrator following the date the contract or agreement was
submitted to the county committee.
(2) The remaining entities in which the individual or entity holds
a substantial beneficial interest shall be notified that such entity is
subject to reductions in the payments earned by the remaining entity.
Such a reduction shall be made in an amount that bears the same
relationship to the full payment that the individual's interest in the
entity bears to all interests in the entity. The remaining entity's
members shall have the opportunity to adjust among themselves their
proportionate shares of the program benefits in the designated entity
or entities before such reductions are made.
(e) If an individual or entity fails to make such a notification as
specified in paragraph (d) of this section, all entities in which the
individual or entity holds a substantial beneficial interest shall be
subject to a reduction in payments in the manner specified in paragraph
(d)(2).
Subpart E--Cash Rent Tenants
Sec. 1400.401 Eligibility.
(a) Any tenant that is actively engaged in farming in accordance
with the provisions of subpart C and conducts a farming operation in
which the tenant rents the land for cash, for a crop share guaranteed
as to the amount of the commodity, or by any arrangement in which the
tenant does not compensate the landlord by cash or a crop share, and
receives benefits, with respect to such land under a program specified
in Sec. 1400.1(a) shall be ineligible to receive any payment with
respect to such cash-rented land unless the tenant makes a significant
contribution to the farming operation of:
(1) Active personal labor; or
(2) Active personal management and equipment. If such equipment is
leased by the tenant from:
(i) The landlord, the lease must reflect the fair market value of
the equipment leased; and
(ii) The same individual or entity that is providing hired labor to
the farming operation, the contracts for the lease of the equipment and
for the hired labor must be two separate contracts that reflect the
fair market value of the leased equipment and the hired labor and the
tenant must exercise complete control over the use of a significant
amount of the equipment during the current crop year.
(b) [Reserved]
Subpart F-- Foreign Persons
Sec. 1400.501 Eligibility.
(a) Any person who is not a citizen of the United States or a
lawful alien shall be ineligible to receive payments, loans and
benefits, with respect to any commodity produced, or land set aside
from production, on a farm that is owned or operated by such person
unless such person is an individual who is providing land, capital, and
a substantial amount of active personal labor on such farm.
(b)(1) A corporation or other entity shall be ineligible to receive
payments, loan, and benefits if more than 10 percent of the beneficial
ownership of the entity is held by persons who are not citizens of the
United States or lawful aliens unless each foreign individual who is a
stockholder or other type of member provides a substantial amount of
active personal labor in the production of crops on a farm owned or
operated by such an entity. However, upon the written request of the
entity, the Deputy Administrator may make payments in an amount
determined by the Deputy Administrator to be representative of the
percentage interest of the entity that is owned by citizens of the
United States and lawful aliens or foreign stockholders or other type
of member who provide a significant contribution of active personal
labor in the production of crops on a farm owned or operated by such
entity.
(2) In determining whether more than 10 percent of the beneficial
ownership of an entity is held by persons who are not citizens of the
United States or by lawful aliens, the beneficial ownership interest
shall be the higher of the amount of such interest on:
(i) The date the applicable program contract or agreement is
executed by the entity; or
(ii) Any other date prior to the final harvest date that is
determined and announced by the Deputy Administrator to be normal in
the area for the applicable program crop.
(3) A corporation or other entity shall inform the county committee
of any increase in such ownership that occurs after the applicable
program contract or agreement is executed.
(4) In the event of an increase in such ownership after a payment,
loan, or benefit has been made, the entity shall refund such payment,
loan, or benefit.
(5) Where there is only one class of stock or other similar unit of
ownership, an individual's or entity's percentage share of the limited
partnership, corporation or other similar entity shall be based upon
the outstanding shares of stock or other similar unit of ownership held
by the individual or entity and compared to the total outstanding
shares of stock or other similar unit of ownership. If the limited
partnership, corporation or other similar entity has more than one
class of stock or other unit of ownership, the percentage share of the
limited partnership, corporation or other similar entity owned by an
individual or entity shall be determined by the Deputy Administrator on
the basis of market quotations. If market quotations are lacking or are
too scarce to be recognized, such percentage share shall be determined
by the Deputy Administrator on the basis of all relevant factors
affecting the fair market value of such stock or other unit of
ownership, including the various rights and privileges that are
attributed to each such class.
(c) A citizen of the United States, lawful alien, or entity that is
not subject to this part who is in lawful possession, through a lease
or otherwise, of a farm owned by an individual or entity who is subject
to this part may receive a payment, loan, and benefit without regard to
this part.
Sec. 1400.502 Notification.
(a) Any entity, whether foreign or domestic, that executes a
program contract or agreement under which a payment, loan, or benefit
may be available must provide written notification to the county
committee in the county where the entity conducts its farming operation
if:
(1) Any individual, group of individuals, entity, or group of
entities holds more than a 10 percent beneficial interest in such
entity; and
(2) Such individual, group of individuals, entity, or group of
entities, in accordance with Sec. 1400.501, are ineligible to receive a
payment, loan and benefit.
(b) Such written notification must, if known, include the name and
social security number or taxpayer identification number of such
individual or entity and of all individuals and entities that hold a
beneficial interest.
(c) The failure of the entity to provide this information will
result in the ineligibility of the entity to receive any payment, loan,
or benefit.
PARTS 1497 AND 1498--[REMOVED]
13. Parts 1497 and 1498 are removed.
[[Page 37575]]
14. Part 1470 is redesignated as part 1401.
15. Part 1402 is revised to read as follows:
PART 1402--POLICY FOR CERTAIN COMMODITIES AVAILABLE FOR SALE
Sec.
1402.1 General
1402.2 Submission of offers, terms, and conditions
1402.3 Information
1402.4 Other Sales
Authority: 7 U.S.C. 7285; 15 U.S.C. 714b and 714c.
Sec. 1402.1 General
To facilitate trade in private trade channels, the Commodity Credit
Corporation (CCC) will disseminate general sales offering information
in the CCC Sales List which is published in press release form. The CCC
Sales List will be revised and republished as necessary. CCC reserves
the right to make any amendments deleting or adding to the provisions
of the CCC Sales List or changing prices or methods of sale, including
but not limited to, changes in the minimum prices and carrying charges.
These lists are issued for the purpose of public information and do not
constitute an offer to sell by CCC or an invitation for offers to
purchase from CCC. The CCC Sales List will set forth either the prices
or the pricing basis at which commodity holdings of CCC are available
for sale for unrestricted or restricted use, and for export.
Information concerning barter and credit will also be included. To be
placed on the mailing list for the CCC Sales List press release,
requests should be made to the Director, Warehouse and Inventory
Division, Stop 0553, 1400 Independence Avenue, SW, Washington, DC
20250-9860.
Sec. 1402.2 Submission of offers, terms, and conditions
CCC will entertain offers from prospective buyers for the purchase
of any commodities on the CCC Sales List. Offers accepted by CCC will
be subject to terms and conditions prescribed by CCC. These terms
include, among others, payment by cash or irrevocable letter of credit
before delivery of the commodity, removal of the commodity from CCC
storage within a reasonable period of time, and, in sales for export,
proof of exportation.
Sec. 1402.3 Information
The terms and conditions of sale with respect to any commodity
appearing on the CCC Sales List will be furnished upon request
addressed to the Director, Warehouse and Inventory Division, Stop 0553,
1400 Independence Avenue, SW, Washington, DC 20250-9860.
Sec. 1402.4 Other Sales
The general policy of CCC of making sales on a competitive or
negotiated basis will continue to apply to all sales not covered by
this announcement. Inquiries with respect to such sales may be
addressed to the Director, Warehouse and Inventory Division, Stop 0553,
1400 Independence Avenue, SW, Washington, DC 20250-9860.
16. Part 1405 is revised to read as follows:
PART 1405--LOANS, PURCHASES, AND OTHER OPERATIONS
Sec.
1405.1 Interest.
1405.2 Basic rule of fractions.
1405.3 Effect of changes in regulations.
1405.4 Delegations of authority.
1405.5 Notice and comment.
1405.6 Crop insurance requirement.
Authority: 15 U.S.C. 714b and 714c.
Sec. 1405.1 Interest.
(a) Except as may otherwise be determined by CCC as provided in
individual program regulations, program contracts or such other means
as deemed appropriate by CCC the rate of interest that is applicable to
CCC loans shall be equal to the rate of interest charged by the U.S.
Treasury for funds borrowed by CCC on the date the loan is disbursed by
CCC, plus 1 percent. This rate of interest shall be in effect until the
earlier of the maturity of the loan or the next January 1.
(b) The rate of interest applicable to all CCC loans that are
outstanding as of January 1 of any year shall be adjusted as of such
date to equal the rate of interest charged by the U.S. Treasury for
funds borrowed by CCC on such date, plus 1 percent. This rate shall be
in effect until the earlier of the maturity of the loan or the next
January 1. The rate of interest applicable to CCC loans as of January 1
of any year shall be announced by CCC by press release or other means.
Sec. 1405.2 Basic rule of fractions.
Fractions shall be rounded in accordance with the provisions of 7
CFR part 718.
Sec. 1405.3 Effect of changes in regulations.
Unless otherwise indicated, the regulations in effect in this
chapter as of April 4, 1996, shall continue to apply to the 1991
through 1995 crops of agricultural commodities, to milk produced on or
before May 1, 1996, and to contracts entered into prior to any
amendments to this chapter after that date.
Sec. 1405.4 Delegations of authority.
The delegations of authority relating to the CCC programs and
activities are set forth in the by-laws of CCC and in dockets approved
by the CCC Board of Directors. Copies of the By-laws and the dockets
may be obtained from the Secretary of CCC.
Sec. 1405.5 Notice and comment.
The level of loans, purchases and payments made in accordance with
the programs set forth in this chapter shall be determined without
regard to the notice and comment provisions of 5 U.S.C. 553.
Sec. 1405.6 Crop insurance requirement.
(a) To be eligible for any benefits or payments under 7 CFR parts
1410, 1412, 1421, 1427, 1435, 1443, 1446, or 1464, the producer must
obtain at least the catastrophic level of insurance for each crop of
economic significance in which the producer has an interest or provide
a written waiver to the Secretary that waives any eligibility for
emergency crop loss assistance in connection with the crop, if
insurance is available in the county for the crop. In meeting this
requirement, the producer may:
(1) Obtain at least the catastrophic level of crop insurance in all
counties for each crop of economic significance in which the producer
has an interest;
(2) Obtain at least the catastrophic level of crop insurance for
some, but not all, crops of economic significance for which the
producer has an interest, and sign a waiver; or
(3) Sign a waiver that waives any eligibility for crop loss
assistance in connection with the producer's crop.
(b) Crop of economic significance. The term ``crop of economic
significance'' means a crop that has contributed in the previous year,
or is expected to contribute in the current crop year, 10 percent or
more of the total expected value of all crops grown by the producer.
However, notwithstanding the preceding sentence, if the total expected
liability under the catastrophic risk protection endorsement is equal
to or less than the administrative fee required for the crop, such crop
will not be considered a crop of economic significance.
17. Part 1412 is added to read as follows:
PART 1412--PRODUCTION FLEXIBILITY CONTRACTS FOR WHEAT, FEED GRAINS,
RICE, AND UPLAND COTTON
Subpart A--General Provisions
Sec.
1412.101 Applicability.
1412.102 Administration.
[[Page 37576]]
1412.103 Definitions.
1412.104 Performance based upon advice or action of county or state
committee.
1412.105 Appeals.
Subpart B--Production Flexibility Contract Terms and Enrollment
Provisions
1412.201 Production flexibility contract.
1412.202 Eligible producers.
1412.203 Notification of eligible contract acreage.
1412.204 Reconstitutions.
1412.205 Reducing contract acreage.
1412.206 Planting flexibility.
1412.207 Succession-in-interest to a production flexibility
contract.
Subpart C--Financial Considerations Including Sharing Production
Flexibility Payments
1412.301 Limitation of Production Flexibility Contract Payments.
1412.302 Contract Payment Provisions.
1412.303 Sharing of Contract Payments.
1412.304 Provisions Relating to Tenants and Sharecroppers.
Subpart D--Contract Violations and Diminution of Payments
1412.401 Contract Violations.
1412.402 Violations of Highly Erodible Land and Wetland
Conservation Provisions.
1412.403 Violations Regarding Controlled Substances.
1412.404 Contract Liability.
1412.405 Misrepresentation and Scheme or Device.
1412.406 Offsets and Assignments.
1412.407 Certification.
Subpart E--Production Flexibility and Conservation Reserve Programs
1412.501 Timing for Enrollment and Termination of Production
Flexibility of Contracts.
Authority: 7 U.S.C. 7201 et seq.; and 15 U.S.C. 714b and 714c.
Subpart A--General Provisions
Sec. 1412.101 Applicability.
The Federal Agriculture Improvement and Reform Act of 1996 (1996
Act) provides producers on farms with 1996 wheat, corn, barley, grain
sorghum, oats, upland cotton and rice crop acreage bases the
opportunity to enter into Production Flexibility Contracts with the
Commodity Credit Corporation (CCC) for the years 1996 through 2002.
Producers who participate in the program must fully comply with the
terms of the production flexibility contracts and this part, and in
return will receive production flexibility payments.
Sec. 1412.102 Administration.
(a) The program is administered under the general supervision of
the Executive Vice-President, CCC, and shall be carried out by State
and county Farm Service Agency (FSA) committees (herein called State
and county committees).
(b) State and county committees, and representatives and their
employees, do not have authority to modify or waive any of the
provisions of the regulations of this part.
(c) The State committee shall take any action required by the
regulations of this part that the county committee has not taken. The
State committee shall also:
(1) Correct, or require a county committee to correct any action
taken by such county committee that is not in accordance with the
regulations of this part; or
(2) Require a county committee to withhold taking any action that
is not in accordance with this part.
(d) No provision or delegation to a State or county committee shall
preclude the Executive Vice President (Administrator, FSA), or a
designee, from determining any question arising under the program or
from reversing or modifying any determination made by a State or county
committee.
(e) The Deputy Administrator may authorize State and county
committees to waive or modify deadlines, except statutory deadlines,
and other program requirements in cases where lateness or failure to
meet such other requirements does not adversely affect operation of the
program.
(f) A representative of CCC may execute a form CCC-478, ``1996
through 2002 Production Flexibility Contract'' only under the terms and
conditions determined and announced by the Executive Vice President,
CCC. Any contract that is not executed in accordance with such terms
and conditions, including any purported execution prior to the date
authorized by the Executive Vice President, CCC, is null and void.
Sec. 1412.103 Definitions.
The definitions set forth in this section shall be applicable for
all purposes of administering the Production Flexibility Program. The
terms defined in parts 718 of this title and 1400 of this chapter shall
also be applicable, except where those definitions conflict with the
definitions set forth in this section.
Annual payment amount is the amount to be paid under a contract in
effect for each fiscal year with respect to a contract commodity and
equals the product of:
(1) 85 percent of the enrolled contract acreage multiplied by
(2) The payment yield multiplied by
(3) The payment rate except that the total of such payments shall
not exceed $40,000 per person in accordance with part 1400 of this
chapter.
Contract means forms CCC-478 and CCC-478 Appendix.
Contract acreage means a quantity of acres enrolled in a contract.
Contract commodity means wheat, corn, grain sorghum, barley, oats,
upland cotton, and rice.
Contract payment means a payment made under this part pursuant to a
production flexibility contract.
Corn means field corn or sterile high-sugar corn. Popcorn, corn
nuts, blue corn, sweet corn, and corn varieties grown for decoration
uses are not corn.
Dry peas means Austrian, wrinkled seed, green, yellow, and
Umatilla.
Eligible acreage means the crop acreage base that would have been
established for a contract commodity in accordance with regulations in
effect on January 1, 1996, at part 1413 of this chapter. If a crop has
a designated crop-rotation crop acreage base for 1995, the 1996 crop
acreage base established for such crop is determined by averaging
planted and considered planted acreages determined in accordance with
part 1413 of this chapter as it was in effect on January 1, 1996,
taking into consideration the number of years in the most recent
rotation cycle. The sum of the crop acreage bases for a farm cannot
exceed the cropland for the farm, less cropland enrolled in the
Conservation Reserve Program in accordance with parts 704 and 1410 of
this title, except to the extent that such excess is due to an
established practice of double cropping on the farm in accordance with
regulations in effect as of January 1, 1996, at part 1413 of this
chapter.
Grain sorghum means grain sorghum of a feed grain or dual purpose
variety (including any cross that, at all stages of growth, has most of
the characteristics of a feed grain or dual purpose variety). Sweet
sorghum is not considered a grain sorghum.
Oilseeds means acreages of soybeans, sunflower seed, rapeseed,
canola, safflower, flaxseed, mustard seed, or, if designated by CCC,
other oilseeds, planted for harvest as seed, or volunteer acreages of
such crops from which the seed is harvested.
Owner means an owner as defined in part 718 of this title and, only
for purposes of enrolling a farm in the program authorized by this part
or taking any subsequent action to maintain the eligibility of the
farm, any agency of the Federal Government; however, such agency shall
not be eligible to receive any payment made pursuant to such contract.
[[Page 37577]]
Payment rate means the annual payment rate determined and announced
by CCC.
Payment yield means the payment yield established for the crop of a
contract commodity for the farm in accordance with the regulations in
effect on January 1, 1996, at part 1413 of this chapter. CCC shall
adjust the payment yield to reflect the additional payments made in
accordance with Sec. 1413.15 of such regulations.
Rice means rice excluding sweet, glutinous, or candy rice such as
Mochi Gomi.
Upland cotton means planted and stub cotton that is produced from
other than pure strain varieties of the Barbadense species, any hybrid
thereof, or any other variety of cotton in which one or more of these
varieties predominate. For program purposes, brown lint cotton is
considered upland cotton.
Sec. 1412.104 Performance based upon advice or action of county or
State committee.
The provisions of Sec. 718.8 of this title are applicable to this
part.
Sec. 1412.105 Appeals.
A producer may obtain reconsideration and review of any adverse
determination made under this part in accordance with the appeal
regulations found at parts 11 and 780 of this title.
Subpart B--Production Flexibility Contract Terms and Enrollment
Provisions
Sec. 1412.201 Production flexibility contract.
(a) CCC shall offer to enter into a 7-year contract with an
eligible producer on a farm having eligible acreage.
(b) A transfer (or change) in the interest of an owner or producer
subject to a contract in the contract acreage covered by the contract
shall result in the termination of the contract with respect to the
acreage, unless the transferee or owner of the acreage agrees to assume
all obligations under the contract. The termination shall be effective
on the date of the transfer or change.
Sec. 1412.202 Eligible producers.
Producers eligible to enter into a contract are:
(a) An owner of a farm who assumes all or a part of the risk of
producing a crop;
(b) A producer (other than an owner) on a farm with a share-rent
lease for such farm, regardless of the length of the lease, if the
owner enters into the same contract;
(c) A producer (other than an owner) on an eligible farm who rents
such farm under a lease expiring on or after September 30, 2002, in
which case the owner is not required to enter into the contract;
(d) A producer (other than an owner) on an eligible farm who cash
rents such farm under a lease expiring before September 30, 2002. The
owner of such farm may also enter into the same contract. If the
producer elects to enroll less than 100 percent of the crop acreage
bases in the contract, the consent of the owner is required;
(e) An owner of an eligible farm who cash rents such farm and the
lease term expires before September 30, 2002, if the tenant declines to
enter into a contract. In the case of an owner covered by this
paragraph, contract payments shall not begin under a contract until the
lease held by the tenant ends; and
(f) An owner or producer described in paragraphs (a) through (e)
regardless of whether the owner or producer purchased catastrophic risk
protection in accordance with part 1405 of this chapter.
Sec. 1412.203 Notification of eligible contract acreage.
The owner, and operator and all producers on a farm shall be
notified in writing of the number of acres eligible for enrollment in a
contract.
Sec. 1412.204 Reconstitutions.
Farms shall be reconstituted in accordance with part 718 of this
title.
Sec. 1412.205 Reducing contract acreage.
(a) A permanent reduction of all or a portion of a farm's contract
acreage or eligible contract acreage shall be allowed at the written
request of the owner to the county committee on Form CCC-505.
(b) If the producers convert contract acreage to a non-agricultural
commercial or industrial use, the contract acreage shall be reduced
accordingly.
Sec. 1412.206 Planting flexibility.
(a) For the 1996 through 2002 crop years, any crop may be planted
on contract acreage on a farm, except as limited in paragraph (c) of
this section. Any crop may be planted on cropland in excess of the
contract acreage.
(b) Contract acreage may be hayed or grazed at any time.
(c) Planting fruits and vegetables (except lentils, mung beans, and
dry peas), is prohibited on contract acreage, except:
(1) A producer may double crop fruits or vegetables with a contract
commodity in any region described in paragraph (d) of this section, in
which case contract payments will not be reduced. Double cropping for
purposes of this section means planting for harvest fruits or
vegetables in cycle on the same acres with a contract commodity planted
for grain or lint in a 12 month period under weather conditions normal
for the region and being able to repeat the same cycle in the following
12 month period;
(2) On a farm that the county committee determines has a history of
planting fruits or vegetables, in which case contract payments shall be
reduced in accordance with paragraph (e) of this section;
(3) By a producer that the county committee determines a history of
fruit or vegetables as the simple average of the sum of a specific
fruit or vegetable planted for harvest by the producer during the years
1991 through 1995, excluding any year in which a fruit or vegetable was
not planted, in which case contract payments shall be reduced in
accordance with paragraph (e); or
(4) On a farm with a 1995 rotation designation crop acreage base
established in accordance with part 1413 of this title as in effect on
January 1, 1996, and the producers on the farm planted fruits or
vegetables as a part of the rotation, in which case there will be no
reduction in contract payments if the acreage of fruits and vegetables
continue to be planted in the same rotation cycle with contract
commodities, the acreage of fruits and vegetables is not increased, and
an annual acreage report is filed for the farm.
(d) For purposes of this part, the following counties have been
determined to be regions having a history of doublecropping contract
commodities with fruits or vegetables. State committees have
established the following counties as regions within their respective
States:
Alabama
Baldwin, Barbour, Butler, Chambers, Chilton, Clarke, Covington,
Cullman, Geneva, Greene, Jackson, Jefferson, Lee, Madison, Mobile,
Montgomery, Randolph, Sumter, Talladega, Walker, and Washington.
Alaska
None.
Arkansas
Ashley, Benton, Clay, Conway, Crawford, Cross, Drew, Franklin,
Independence, Jackson, Lawrence, Lee, Lincoln, Little River, Logan,
Miller, Perry, Poinsett, Pope, Prairie, Pulaski, Sebastian, and
Woodruff.
[[Page 37578]]
Arizona
Cochise, Graham, Greenlee, LaPaz, Maricopa, Pima, Pinal, and Yuma.
California
Alameda, Amador, Butte, Colusa, Contra Costa, Fresno, Glenn,
Imperial, Kern, Kings, Madera, Merced, Riverside, Sacramento, San
Benito, San Joaquin, Santa Clara, Siskiyou, Solano, Stanislaus, Sutter,
Tehama, Tulare, Yolo, and Yuba.
Caribbean Office
None.
Connecticut
None.
Colorado
None.
Delaware
Kent, New Castle, and Sussex.
Florida
All counties.
Georgia
Appling, Atkinson, Bacon, Baker, Baldwin, Banks, Ben Hill, Berrien,
Bleckley, Brooks, Bryan, Bulloch, Burke, Calhoun, Candler, Catoosa,
Chatham, Clay, Clinch, Coffee, Colquitt, Columbia, Cook, Crisp,
Decatur, Dodge, Dooly, Dougherty, Early, Echols, Effingham, Emanuel,
Evans, Floyd, Forsyth, Franklin, Glascock, Grady, Hart, Houston, Irwin,
Jeff Davis, Jefferson, Jenkins, Johnson, Jones, Lamar, Lanier, Lauren,
Lee, Liberty, Long, Lowndes, McDuffie, Macon, Miller, Mitchell, Monroe,
Montgomery, Morgan, Peach, Pierce, Pike, Pulaski, Putnam, Randolph,
Richmond, Schley, Screven, Seminole, Stephens, Sumter, Tattnall,
Telfair, Terrell, Thomas, Tift, Toombs, Treutlen, Turner, Twiggs,
Upson, Ware, Warren, Washington, Wayne, Webster, Wheeler, Wilcox,
Wilkinson, and Worth.
Hawaii
None (no CAB's).
Idaho
None.
Illinois
Calhoun, Clark, Crawford, Edgar, Effingham, Gallatin, Iroquois,
Kankakee, Lawrence, Madison, Marion, Mason, Monroe, St. Clair, Union,
Vermilion and White.
Indiana
Allen, Bartholemew, Gibson, Hamilton, Knox, LaGrange, Lake,
Madison, Miami, Posey, Sullivan, Vandenberg, and Warrick.
Iowa
Louisa.
Kansas
None.
Kentucky
Clinton and Wayne.
Louisiana
Avoyelles, Franklin, Grant, Rapides, and Morehouse.
Maine
None.
Maryland
Baltimore, Caroline, Carroll, Dorchester, Kent, Queen Annes,
Somerset, Talbot, Wicomico, and Worcester.
Massachusetts
None.
Michigan
None.
Minnesota
None.
Mississippi
Calhoun, Carroll, Covington, Holmes, Jefferson Davis, Lowndes,
Marshall, Monroe, Montgomery, and Prentiss.
Missouri
Barton, Butler, Cape Girardeau, Dade, Dunklin, Jasper, Lawrence,
Mississippi, New Madrid, Newton, Ripley, Scott, and Stoddard.
Montana
None.
Nebraska
None.
Nevada
Clark.
New Jersey
Burlington, Cumberland, Gloucester, Mercer, Middlesex, Monmouth,
Salem.
New Hampshire
None.
New Mexico
Curry, Dona Ana, Eddy, Hidalgo, Lea, Luna, Quay, Roosevelt, San
Juan, and Sierra.
New York
Orange and Suffolk.
North Carolina
Beaufort, Bladen, Brunswick, Cabarrus, Camden, Carteret, Chowan,
Cleveland, Columbus, Craven, Cumberland, Currituck, Davidson, Davie,
Duplin, Edgecombe, Franklin, Granville, Greene, Harnett, Hertford,
Hoke, Hyde, Johnston, Jones, Lee, Lenoir, Lincoln, Martin, Mecklenburg,
Moore, Nash, New Hanover, Northampton, Onslow, Pamlico, Pasquotank,
Pender, Perquimans, Pitt, Richmond, Robeson, Rockingham, Rutherford,
Sampson, Scotland, Stanly, Stokes, Tyrell, Union, Warren, Washington,
Watauga, Wayne, Wilkes, Wilson, and Yadkin.
North Dakota
None.
Ohio
Auglaize, Brown, Henry, Logan, Morgan, Muskingham, and Wood.
Oklahoma
Adair, Alfalfa, Beckham, Blaine, Bryan, Caddo, Canadian, Carter,
Cherokee, Cotton, Custer, Delaware, Dewey, Ellis, Garfield, Garvin,
Grady, Grant, Greer, Harmon, Haskell, Hughes, Jackson, Kay, Kingfisher,
Kiowa, LeFlore, Logan, McClain, McIntosh, Major, Marshall, Mayes,
Muskogee, Noble, Nowata, Okmulgee, Osage, Pawnee, Payne, Pittsburg,
Pottawatomie, Roger Mills, Rogers, Sequoyah, Stephens, Tillman, Tulsa,
Wagoner, Washita, Woods, and Woodward.
Oregon
Benton, Linn, Morrow, and Umatilla.
Pennsylvania
Adams, Allegheny, Beaver, Bucks, Centre, Chester, Columbia,
Cumberland, Delaware, Franklin, Lancaster, Luzerne, Mifflin,
Montgomery, Montour, Northumberland, Schuylkill, Snyder, Union,
Wyoming, and York.
Rhode Island
None.
South Carolina
All counties.
South Dakota
None.
Tennessee
Bledsoe, Cannon, Carroll, Claiborne, Coffee, Crockett, Dyer,
Greene, Hardeman, Haywood, Jefferson, Knox, Lake, Lauderdale, Lincoln,
Madison, Meigs, McMinn, Pickett, Rhea, Robertson, and Union.
Texas
Anderson, Armstrong, Atascosa, Bailey, Baylor, Briscoe, Brooks,
Cameron, Castro, Cherokee, Cochran, Collingsworth, Cottle, Crosby,
Dallam, Deaf Smith, Dimmit, Duval, Floyd,
[[Page 37579]]
Foard, Frio, Gaines, Hale, Hall, Hartley, Haskell, Hidalgo, Jim Hogg,
Jim Wells, Kinney, Kleberg, Knox, Lamb, Lubbock, Maverick, Medina,
Moore, Motley, Nacogdoches, Oldam, Panola, Parmer, Pecos, Randall,
Rusk, San Patricio, Starr, Swisher, Terry, Uvalde, Webb, Wilbarger,
Willacy, Yoakum, Zapata, and Zavala.
Utah
Davis and Weber.
Vermont
None.
Virginia
Accomack, Augusta, Botetourt, Brunswick, Campbell, Charlotte,
Chesapeake, Cumberland, Dinwiddie, Halifax, Hanover, Isle of Wight,
King and Queen, King William, Lunenburg, Mecklenburg, Middlesex,
Nelson, New Kent, Northampton, Nottoway, Page, Pittsylvania, Powhatan,
Prince George, Richmond, Rockbridge, Rockingham, Shenandoah,
Southampton, Stafford, Suffolk, Sussex, Virginia Beach, and
Westmoreland.
Washington
Adams, Benton, Clark, Cowlitz, Franklin, Grant, Klickitat, Lewis,
Skagit, and Yakima.
West Virginia
Mason and Putnam.
Wisconsin
Brown, Calumet, Chippewa, Columbia, Dane, Dodge, Dunn, Eau Claire,
Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Kenosha,
Marquette, Racine, Richland, Rock, St. Croix, Sauk, Walworth, Waushara,
and Winnebago.
Wyoming
None.
(e) For each acre a producer plants to fruits or vegetables on
contract acreage under paragraphs (c)(2) or (3) of this section, 1 acre
will not be used in determining the contract payment. The calculation
for this reduction is based on the contract crop with the lowest
payment amount per acre. Reductions will be prorated among all
producers based on each producer's share of the total payment for the
farm. Such producers may adjust the reduction in payments as they agree
upon.
(f) Fruits and vegetables include but are not limited to all nuts
except peanuts, certain fruit-bearing trees and: acerola (barbados
cherry), antidesma, apples, apricots, aragula, artichokes, asparagus,
atemoya, (custard apple), avocados, babaco papayas, bananas, beans
(except soybeans, mung, adzuki, faba, and lupin), beets--other than
sugar, blackberries, blackeye peas, blueberries, bok choy,
boysenberries, breadfruit, broccoflower, broccolo-cavalo, broccoli,
brussel sprouts, cabbage, cai lang, caimito, calabaza, carambola (star
fruit), calaboose, carob, carrots, cascadeberries, cauliflower,
celeriac, celery, chayote, cherimoyas (sugar apples), canary melon,
cantaloupes, cardoon, casaba melon, cassava, cherries, chickpeas/
garbanzo beans, chinese bitter melon, chicory, chinese cabbage, chinese
mustard, chinese water chestnuts, chufes, citron, citron melon, coffee,
collards, cowpeas, crabapples, cranberries, cressie greens, crenshaw
melons, cucumbers, currants, cushaw, daikon, dasheen, dates, dry edible
beans, dunga, eggplant, elderberries elut, endive, escarole, etou,
feijoas, figs, gai lien, gailon, galanga, genip, gooseberries,
grapefruit, grapes, guambana, guavas, guy choy, chinese mustard,
honeydew melon, huckleberries, jackfruit, jerusalem artichokes, jicama,
jojoba, kale, kamut, kenya, kiwifruit, kohlrabi, kumquats, leeks,
lemons, lettuce, limequats, limes, lobok, loganberries, longon,
loquats, lotus root, lychee (litchi), mandarins, mangos, marionberries,
mongosteen, mar bub, melongene, mesple, mizuna, moqua, mulberries,
murcotts, mushrooms, mustard greens, nectarines, ny Yu, okra,
olallieberries, olives, onions, opo, oranges, papaya, paprika, parsnip,
passion fruits, peaches, pears, peas, all peppers, persimmon, persian
melon, pimentos, pineapple, pistachios, plantain, plumcots, plums,
pomegranates, potatoes, prunes, pummelo, pumpkins, quinces, radiochio,
radishes, raisins, raisins (distilling), rambutan, rape greens, rapini,
raspberries, recao, rhubarb, rutabaga, santa claus melon, salsify,
saodilla, sapote, savory, scallions, shallots, shiso, spinach, squash,
strawberries, suk gat, swiss chard, sweet corn, sweet potatoes,
tangelos, tangerines, tangos, tangors, taniers, taro root, tau chai,
teff, tindora, tomatillos, tomatoes, turnips, turnip greens,
watercress, watermelons, white sapote, and yam.
(g) Fruits or vegetables planted on contract acreage for green
manure, haying, or grazing are not considered as planted to fruits or
vegetables, but producers planting fruits and vegetables for such
purposes shall pay a fee to cover the cost of a farm visit, in
accordance with part 718 of this title, to verify that the crop has not
been harvested.
Sec. 1412.207 Succession-in-Interest to a production flexibility
contract.
(a) A person may succeed to the contract if there has been a change
in the operation of a farm, such as:
(1) A sale of land;
(2) A change of operator or producer, including a change in a
partnership that increases or decreases the number of partners; or
(3) A foreclosure, bankruptcy, or involuntary loss of the farm
after enrollment in a production flexibility contract.
(b) A succession in interest to the contract is not permitted if
CCC determines that the change results in a violation of the landlord-
tenant provisions set forth at Sec. 1412.303, or otherwise defeats the
purpose of the program.
(c) If a producer who is entitled to a contract payment dies,
becomes incompetent, or is otherwise unable to receive the contract
payment, the CCC will make the payment in accordance with part 707 of
this title.
(d) A producer or owner must inform the county committee of changes
in interest by:
(1) August 31 of the current fiscal year, if producers on the
contract remain the same, but payment shares change; or
(2) 30 days after the change is made on the farm but no later than
August 31, if a new producer is being added to the contract.
(e) In any case in which payment has previously been made to a
predecessor, such payment shall not be paid to the successor. If the
predecessor refunds an advance contract payment, such producer shall
not be assessed interest in accordance with part 1403 of this chapter.
Subpart C--Financial Considerations Including Sharing Production
Flexibility Payments
Sec. 1412.301 Limitation of production flexibility contract payments.
The sum total of annual contract payment amounts shall not exceed
the amounts specified in part 1400 of this chapter.
Sec. 1412.302 Contract payment provisions.
(a) A producer may request 50 percent of each fiscal year's
contract payment as an advance payment.
(b) At the option of the producer, for fiscal year 1997 and each
subsequent fiscal year, 50 percent of the annual contract payment shall
be made on December 15 or January 15, as requested by the producer. In
order to receive an advance payment the producers on the
[[Page 37580]]
farm must be in compliance with all of the requirements of the contract
at the time of the advance payment.
(c) A final contract payment shall be made not later than September
30 of each of the fiscal years 1996 through 2002.
(d) If a producer declines to accept, or is determined to be
ineligible for all or any part of the producer's share of the
production flexibility payment computed for the farm in accordance with
the provisions of this section:
(1) The payment or portions thereof shall not become available for
any other producer; and
(2) The producer shall refund to CCC any amounts representing
payments that exceed the payments determined by CCC to have been earned
under the program authorized by this part. Part 1403 of this chapter
shall be applicable to all unearned payments.
Sec. 1412.303 Sharing of contract payments.
(a) Each eligible producer on a farm shall be given the opportunity
to enroll in a contract and receive contract payments determined fair
and equitable as agreed to by the producers on the farm and approved by
the county committee.
(1) Producers must provide a copy of their written lease to the
county committee, and, in the absence of a written lease, must provide
to the county committee a complete written description of the terms and
conditions of any oral agreement or lease.
(2) A lease will be considered a cash lease if the lessor receives
only a sum certain cash payment, or a fixed quantity of the crop (for
example, cash, pounds, or bushels per acre).
(3) If a lease contains provisions that require the payment of rent
on the basis of the amount of crop produced or the proceeds derived
from the crop, or the interest such producer would have had if the crop
had been produced, or combination thereof, such agreement shall be
considered to be a share lease.
(4) If a lease provides for both a cash payment and a share of the
crop or proceeds, the county committee will determine a normal cash
lease amount by crop for the area. If the guaranteed production or cash
lease payment is equal to or exceeds the normal cash lease established
by the county committee for the area, then the lease shall be
considered to be a cash lease.
(5) If the lease is a cash lease, the landlord is not eligible for
a contract payment.
(6) For a lease providing both a cash payment and a share of the
crop or proceeds, if the cash guarantee is less than the normal cash
guarantee for the area, the lease shall be considered a share lease.
(b) When contract acreage is leased on a share basis, neither the
landlord nor the tenant shall receive 100 percent of the contract
payment for the farm.
(1) A landowner may receive up to 100 percent of the contract
payment if no lease exists with respect to the contract acreage. The
leasing of grazing or haying privileges is not considered cash leasing.
(2) [Reserved]
(c) The county committee shall approve a contract for enrollment
and approve the division of payment when all of the following apply:
(1) The landowners, tenants and sharecroppers sign the contract and
agree to the payment shares shown on the contract;
(2) The county committee determines that the interests of tenants
and sharecroppers are being protected; and
(3) That the division of payments is not done in a manner to
circumvent the provisions of part 1400 of this chapter.
Sec. 1412.304 Provisions relating to tenants and sharecropper.
(a) Contract payments shall not be made by CCC if:
(1) The landlord or operator has adopted a scheme or device for the
purpose of depriving any tenant or sharecropper of the payments to
which such person would otherwise be entitled under the program. If any
of such conditions occur or are discovered after payments have been
made, all or any such part of the payments as the State committee may
determine shall be refunded to CCC; or
(2) The landlord terminated a lease in violation of state law as
determined by a state court.
(b) If the landowners, tenants and sharecroppers on a farm fail to
reach an agreement regarding the division of contract payments for a
fiscal year, the county committee shall make the payment at a later
date if all persons eligible to receive a share of the contract
payment, have executed a contract no later than September 30 of that
fiscal year and subsequently agree to the division of contract payment.
Subpart D--Contract Violations and Diminution in Payments
Sec. 1412.401 Contract violations.
(a) Except as provided in paragraph (b) of this section, if a
producer subject to a contract violates a requirement of the contract
specified in Secs. 1412.201(6)(c), 1412.402, 1412.403, and 1412.405,
the Deputy Administrator shall terminate the contract with respect to
the producer on each farm in which the producer has an interest. Upon
such termination, the producer shall forfeit all rights to receive
future contract payments on each farm in which the producer has an
interest and shall refund all contract payments received by the
producer during the period of the violation, plus interest with respect
to the contract payments as determined in accordance with part 1403 of
this chapter.
(b) If the county committee determines that a violation is not
serious enough to warrant termination of the contract under paragraph
(a) of this section, the county committee may require the producer
subject to the contract either, or both of the following:
(1) Refund to CCC that part of the contract payments received by
the producer during the period of the violation, plus interest
determined in accordance with part 1403 of this chapter; and
(2) If there is a violation of Sec. 1412.206, accept a reduction in
the amount of current and future contract payments that is equal to the
sum proportionate to the severity of:
(i) Market value of the fruit and vegetables planted on each
contract acreage; and
(ii) The contract payment for each such acre.
(iii) Producers who do not plant a crop on contract acreage must
protect any such land from weeds and erosion, including providing
sufficient cover if determined necessary by the county committee. The
first violation of this provision by a producer will result in a
reduction in the producer's payment for the farm by an amount equal to
3 times the cost of maintenance of the acreage, but not to exceed 50
percent of the payment for the farm for that fiscal year. The second
violation of this provision will result in a reduction in the payment
for the farm by an amount equal to 3 times the cost of maintenance of
the acreage, not to exceed the payment for the farm for that fiscal
year.
Sec. 1412.402 Violations of highly erodible land and wetland
conservation provisions.
The provisions of part 12 of this title, apply to this part.
Sec. 1412.403 Violations regarding controlled substances.
The provisions of Sec. 718.12 of this title apply to this part.
Sec. 1412.404 Contract liability.
All producers receiving a share of the contract payment are jointly
and severally liable for contract violations and resulting repayments.
[[Page 37581]]
Sec. 1412.405 Misrepresentation and scheme or device.
(a) A producer who is determined to have erroneously represented
any fact affecting a program determination made in accordance with this
part shall not be entitled to contract payments and must refund all
payments, plus interest determined in accordance with part 1403 of this
chapter.
(b) A producer who is determined to have knowingly:
(1) Adopted any scheme or device that tends to defeat the purpose
of the program;
(2) Made any fraudulent representation; or
(3) Misrepresented any fact affecting a program determination shall
refund to CCC all payments, plus interest determined in accordance with
part 1403 of this chapter received by such producer with respect to all
contracts. The producer's interest in all contracts shall be
terminated.
Sec. 1412.406 Offsets and assignments.
(a) Except as provided in paragraph (b) of this section, any
payment or portion thereof to any person shall be made without regard
to questions of title under State law and without regard to any claim
or lien against the crop, or proceeds thereof, in favor of the owner or
any other creditor except agencies of the U.S. Government. The
regulations governing offsets and withholdings found at part 1403 of
this chapter shall be applicable to contract payments.
(b) Any producer entitled to any payment may assign any payments in
accordance with regulations governing assignment of payment found at
part 1404 of this chapter.
Sec. 1412.407 Certification.
As a condition of eligibility for contract payments, the operator
or owner must timely submit a report of fruit and vegetable acreage in
accordance with part 718 of this title. If such operator or owner does
not report all of the fruits and vegetables planted on contract
acreage, the contract shall be terminated with respect to such farm
unless the provisions of Sec. 1412.40(b)(1) and (2) are applicable.
Subpart E--Production Flexibility and Conservation Reserve Programs
Sec. 1412.501 Timing for enrollment and termination of production
flexibility contracts.
(a) At the beginning of each fiscal year, the Secretary shall allow
an eligible producer on a farm with acreage enrolled in a Conservation
Reserve Program contract in accordance with parts 704 or 1410 of this
title that terminates after August 1, 1996, to enter into or modify an
existing production flexibility contract if such land otherwise would
have been eligible for enrollment under this part as of August 1, 1996.
(b) A production flexibility contract shall begin with the 1996
crop of a contract commodity or in the case of acreage that was
enrolled in the Conservation Reserve Program, the date the production
flexibility contract was entered into or modified to include the
acreage previously subject to the Conservation Reserve Program
contract.
(c) All contracts shall terminate on September 30, 2002, unless
terminated at an earlier date by mutual consent of all parties.
(d) A contract for farms whose Conservation Reserve Program
contract terminates after August 1, 1996, shall be signed by a producer
no later than November 30 of the fiscal year following the fiscal year
the Conservation Reserve Program contract is terminated.
(e) A Conservation Reserve Program contract that is terminated:
(1) In fiscal year 1996, if the effective date of the Conservation
Reserve Program contract termination is earlier than August 1, 1996,
and the land that was subject to the Conservation Reserve Program
contract is enrolled in a production flexibility contract, the owner or
producer is eligible to receive both the 1996 production flexibility
contract payment and a prorated Conservation Reserve Program payment.
(2) In fiscal years 1997 through 2002, if a conservation reserve
contract is terminated, and the land that was subject to the
conservation reserve contract is enrolled in a production flexibility
contract, the owner or producer may elect to receive either the
production flexibility contract payments or a prorated Conservation
Reserve Program payment, but not both.
PART 1413--[REMOVED]
18. Part 1413 is removed.
PART 1421--GRAINS AND SIMILARLY HANDLED COMMODITIES
19. The authority citation for 7 CFR Part 1421 is revised to read
as follows:
Authority: 7 U.S.C. 7231-7235, 7237; and 15 U.S.C. 714b and
714c.
20. The subpart consisting of Secs. 1421.1 through 1421.32 and the
subpart heading are revised, the subpart heading preceding
Sec. 1421.200 and Sec. 1421.200 are revised, and Secs. 1421.201 through
1421.217 are removed, as set forth below:
Subpart--Loan and Loan Deficiency Payment Regulations for the 1996
Through 2002 Crops of Wheat, Feed Grains, Rice, Oilseeds (Canola,
Flaxseed, Mustard Seed, Rapeseed, Safflower, Soybeans, and Sunflower
Seed), and Farm-Stored Peanuts
Sec.
1421.1 Applicability.
1421.2 Administration.
1421.3 Definitions.
1421.4 Eligible producers.
1421.5 General eligibility requirements.
1421.6 Maturity dates.
1421.7 Adjustment of basic loan rates.
1421.8 Approved storage.
1421.9 Warehouse receipts.
1421.10 Warehouse charges.
1421.11 Liens.
1421.12 Fees, charges, and interest.
1421.13 [Reserved]
1421.14 [Reserved]
1421.15 Loss or damage to the commodity.
1421.16 Personal liability of the producers.
1421.17 Farm-stored commodities.
1421.18 Warehouse-stored loans.
1421.19 Liquidation of loans.
1421.20 Release of the commodity pledged as collateral for a loan.
1421.21 [Reserved]
1421.22 Settlement.
1421.23 Foreclosure.
1421.24 Protein determinations.
1421.25 Loan repayments.
1421.26 Transfer of farm-stored loan to warehouse-stored
association loan.
1421.27 Producer-handler purchases of additional peanuts pledged as
collateral for a loan.
1421.28 Required producer-handler records and supervision of farm-
stored additional peanuts pledged as collateral for a loan or
purchased by a producer-handler from loan.
1421.29 Loan deficiency payments.
1421.30 Death, incompetency, or disappearance.
1421.31 Recourse loans.
1421.32 Handling payments and collections not exceeding $9.99.
Subpart--Loan and Loan Deficiency Payment Regulations for the 1996
through 2002 Crops of Wheat, Feed Grains, Rice, Oilseeds (Canola,
Flaxseed, Mustard Seed, Rapeseed, Safflower, Soybeans, and
Sunflower Seed), and Farm-Stored Peanuts
Sec. 1421.1 Applicability.
(a) The regulations of this subpart are applicable to the 1996
through 2002 crops of barley, corn, grain sorghum, oats, peanuts, rice,
wheat, and oilseeds as set forth in Sec. 1421.3. These regulations set
forth the terms and conditions under which loans shall be entered into
and loan deficiency payments made by the Commodity Credit Corporation
(CCC). Additional terms and conditions are set forth in the note and
security agreement and the loan deficiency payment application that
must be executed by a producer to receive loans and loan deficiency
[[Page 37582]]
payments. All loans made under this subpart are nonrecourse unless as
noted in Sec. 1421.31. With respect to warehouse-stored loans for
peanuts, loans shall be made in accordance with part 1446 of this
chapter.
(b) Basic county loan rates, the schedule of premiums and
discounts, and forms that are used in administering loans and loan
deficiency payments for a crop of a commodity are available in State
and county FSA offices (State and county offices, respectively). The
forms for use in connection with the programs in this section shall be
prescribed by CCC.
(c)(1) Loans and loan deficiency payments shall be available as
provided in this part with regard to barley, corn, grain sorghum, oats,
oilseeds, and wheat produced in the United States.
(2) Loans and loan deficiency payments shall be available only with
respect to rice produced in the continental United States.
(3) Farm-stored loans shall be available only with respect to
farmer stock peanuts, as defined in part 1446 of this chapter, that are
produced in the United States and that are also of a type specified in
part 729 of this title.
(d) Loans and loan deficiency payments shall not be available with
respect to any commodity produced on land owned or otherwise in the
possession of the United States if such land is occupied without the
consent of the United States.
Sec. 1421.2 Administration.
(a) The loan and loan deficiency payment program that is applicable
to a crop of a commodity shall be administered under the general
supervision of the Executive Vice President, CCC (Administrator, FSA)
and shall be carried out in the field by State and county FSA
committees (State and county committees, respectively).
(b) State and county committees, and representatives and employees
thereof, do not have the authority to modify or waive any of the
provisions of the regulations of this part.
(c) The State committee shall take any action required by these
regulations that has not been taken by the county committee. The State
committee shall also:
(1) Correct, or require a county committee to correct, an action
taken by such county committee that is not in accordance with the
regulations of this part; or
(2) Require a county committee to withhold taking any action that
is not in accordance with the regulations of this part.
(d) No provision or delegation herein to a State or county
committee shall preclude the Executive Vice President, CCC, or a
designee or the Administrator, FSA, or a designee, from determining any
question arising under the program or from reversing or modifying any
determination made by a State or county committee.
(e) The Deputy Administrator for Farm Programs, FSA, may authorize
State and county committees to waive or modify deadlines and other
program requirements in cases where lateness or failure to meet such
other requirements does not affect adversely the operation of the loan
and loan deficiency payment program.
(f) A representative of CCC may execute loans and loan deficiency
payment applications and related documents only under the terms and
conditions determined and announced by CCC. Any such document that is
not executed in accordance with such terms and conditions, including
any purported execution before the date authorized by CCC, shall be
null and void.
Sec. 1421.3 Definitions.
The definitions set forth in this section shall be applicable for
all purposes of program administration. The terms defined in part 718
of this title and parts 1412, 1425, and 1427 of this chapter shall also
be applicable, except where those definitions conflict with the
definitions set forth in this section.
Basic loan rate means the loan rate established by CCC for a
commodity before any adjustment for premiums and discounts.
Charges means all fees, costs, and expenses incurred in insuring,
carrying, handling, storing, conditioning, and marketing the commodity
tendered to CCC for loan. Charges also include any other expenses
incurred by CCC in protecting CCC's or the producer's interest in such
commodity.
High moisture commodities means corn and grain sorghum normally
harvested and intended to be stored or marketed in a high moisture
condition.
Loan deficiency quantity means the eligible quantity that was
certified by the producer as eligible to be pledged as collateral for a
loan, for which the producer elected to forgo obtaining the loan.
Loan quantity means the quantity on which the loan was disbursed
shown on the note and security agreement.
Oilseeds means any crop of soybeans, sunflower seed, canola,
rapeseed, safflower, flaxseed, mustard seed, and other oilseeds as
determined and announced by CCC.
Sec. 1421.4 Eligible producers.
(a) An eligible producer of a crop of a commodity shall be a person
(i.e., an individual, partnership, association, corporation, estate,
trust, State or political subdivision or agency thereof, or other legal
entity) that:
(1) Produces such a crop as a landowner, landlord, tenant, or
sharecropper, or in the case of rice, furnishes land, labor, water, or
equipment for a share of the rice crop;
(2) Meets the requirements of this part; and
(3) Meets the requirements of parts 12, 718, 1405, 1412, and 1446
of this title.
(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 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 trustee. Loan or
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.
(c) A minor who is otherwise an eligible producer shall be eligible
to receive loans or loan deficiency payments only if the minor meets
one of the following requirements:
(1) The right of majority has been conferred on the minor by court
proceedings or by statute;
(2) A guardian has been appointed to manage the minor's property
and the applicable loan or loan deficiency payment documents are signed
by the guardian;
(3) Any note signed by the minor is cosigned by a person determined
by the county committee to be financially responsible; or
(4) A bond is furnished under which a surety guarantees to protect
CCC from any loss incurred for which the minor would be liable had the
minor been an adult.
(d)(1) Two or more producers may obtain a single joint loan with
respect to commodities that are stored in the same farm storage
facility. Two or more producers may obtain individual loans with
respect to their share of the commodity that is stored commingled in
[[Page 37583]]
a farm storage facility with commodities owned by other producers if
such other producers execute Form CCC-665 that provides that such
producers shall obtain the permission of a representative of the county
committee before removal of any quantity of the commodity from the
storage facility. All producers who store a commodity in a farm storage
facility in which commodities that have been pledged as collateral for
a loan shall be liable for any damage incurred by CCC with respect to
the deterioration or unauthorized removal or disposition of such
commodities in accordance with Sec. 1421.17.
(2) Two or more producers may obtain a single joint loan with
respect to commodities that are stored in an approved warehouse if the
warehouse receipt that is pledged as collateral for the loan is issued
jointly to such producers.
(3) If more than one producer executes a note and security
agreement with CCC, each such producer shall be jointly and severally
liable for the violation of the terms and conditions of the note and
the regulations set forth in this part. Each such producer shall also
remain liable for repayment of the entire loan amount until the loan is
fully repaid without regard to such producer's claimed share in the
commodity pledged as collateral for the loan. In addition, such
producer may not amend the note and security agreement with respect to
the producer's claimed share in such commodities, or loan proceeds,
after execution of the note and security agreement by CCC.
(e)(1) The county committee may deny a producer a loan on farm-
stored commodities if the producer has:
(i) Been convicted of a criminal act;
(ii) Has made a misrepresentation, with respect to acquiring a
farm-stored loan or in the maintenance of the commodity pledged as
security for a farm-stored loan; or
(iii) Failed to protect adequately the interests of CCC in the
commodity pledged as security for a farm-stored loan.
(2) In such cases, the producer shall be ineligible for subsequent
farm-stored loans unless the county committee determines that the
producer will adequately protect CCC's interest in the commodity that
would be pledged as collateral for such a loan. A producer who is
denied a farm-stored loan will be eligible to pledge a commodity as
collateral for a warehouse-stored loan.
(f) Warehouse-stored loans may be made to a warehouse operator who,
acting on behalf and with the authorization of a producer, tenders to
CCC warehouse receipts issued by such warehouse operator for a
commodity produced by such warehouse operator only in those States
where the issuance and pledge of such warehouse receipts is valid under
State law.
(g) An approved cooperative marketing association (CMA) may obtain
a loan on the eligible production of such commodity or loan deficiency
payment with respect to such commodity on behalf of the members of the
CMA who are eligible to receive loans and loan deficiency payments with
respect to a crop of a commodity. For purposes of this subpart and in
applicable loan and loan deficiency payment forms, the term producer
includes an approved CMA.
(h) With respect to peanuts tendered to CCC for loan, a producer
must also meet the provisions of part 1446 of this title. Before
obtaining a farm-stored loan with respect to additional peanuts, a
producer must register as a handler with the State FSA office of the
State in which the producer's farm is located.
(i)(1) Two or more producers may obtain a single joint loan
deficiency payment with respect to commodities that are stored in the
same farm storage facility. Two or more producers may obtain individual
loan deficiency payments with respect to their share of the commodity
that is stored commingled in a farm storage facility with commodities
owned by other producers. All producers who store a commodity in a farm
storage facility in which commodities for which a loan deficiency
payment has been requested shall be liable for any damage incurred by
CCC with respect to incorrect certification of such commodities in
accordance with Sec. 1421.16.
(2) Two or more producers may obtain a single joint loan deficiency
payment with respect to commodities that are stored in an approved or
unapproved warehouse if the acceptable documentation representing an
eligible commodity for which a loan deficiency payment is requested is
completed jointly for such producers.
(3) Each producer who is a party to a joint loan deficiency payment
will be jointly and severally responsible and liable for the breach of
the obligations set forth in the loan deficiency payment documents and
in the applicable regulations in this subpart.
Sec. 1421.5 General eligibility requirements.
(a) A producer must, unless otherwise authorized by CCC, request
loans and loan deficiency payments at the county office that, in
accordance with part 718 of this title, is responsible for
administering programs for the farm on which the commodity was
produced. An approved CMA must, unless otherwise authorized by CCC,
request loans and loan deficiency payments at the location designated
by CCC. An eligible producer who produces a crop of barley, corn, grain
sorghum, oats, rice, or wheat on a farm covered by a production
flexibility contract shall be eligible for a loan on any production of
that commodity. In the case of oilseeds, any production produced by an
eligible producer shall be eligible for a loan. To receive loans or
loan deficiency payments for a crop of a commodity, a producer must
execute a note and security agreement or loan deficiency payment
application on or before:
(1) January 31 of the year following the year in which the crop of
peanuts is normally harvested for additional peanuts pledged as
collateral for a farm-stored loan;
(2) March 31 of the year following the year in which the following
crops are normally harvested: quota peanuts pledged as collateral for a
farm-stored loan, barley, canola, flaxseed, oats, rapeseed, and wheat;
(3) April 30 of the year following the year in which the crop of
peanuts is harvested for quota peanuts tendered for purchase; or
(4) May 31 of the year following the year in which the following
crops are normally harvested: corn, grain sorghum, mustard seed, rice,
safflower, soybeans, and sunflower seed.
(b)(1) To be eligible to receive loans or loan deficiency payments,
commodities must be tendered to CCC by an eligible producer and must be
eligible and in existence when approved by CCC. To be eligible to
receive loans, commodities must also be stored in approved storage at
the time of disbursement of loan proceeds. The commodity must not have
been sold, nor any sales option on such commodity granted, to a buyer
under a contract that provides that the buyer may direct the producer
to pledge the commodity to CCC as collateral for a loan or to obtain a
loan deficiency payment. Such commodities must also be merchantable for
food, feed, or other uses determined by CCC and must not contain
mercurial compounds, toxin producing molds, or other substances
poisonous to humans or animals. Notwithstanding any other provision of
this part, such commodities that contain vomitoxin levels of 5 or less
parts per million or contain levels of more than 5 parts per million,
may be eligible for a nonrecourse or recourse loan, respectively. Corn
containing aflatoxin levels not exceeding 20 parts
[[Page 37584]]
per billion may be eligible for a nonrecourse loan.
(2) The determination of class, grade, grading factors, milling
yields, and other quality factors, including the determination of type,
quality and quantity for peanuts:
(i) With respect to barley, canola, corn, flaxseed, grain sorghum,
oats, rice, soybeans, sunflower seed for extraction of oil, and wheat,
shall be based upon the Official United States Standards for Grain and
the Official United States Standards for Rice as applied to rough rice
whether or not such determinations are made on the basis of an official
inspection. The costs of an official grade determination may be paid by
CCC. The grade and grading requirements that are used in administering
loans and loan deficiency payments for the commodities in this
paragraph are available in State and county offices.
(ii) With respect to a crop of mustard seed, rapeseed, safflower
seed, and sunflower seed used for a purpose other than to extract oil,
shall be based on quality requirements established and announced by
CCC, whether or not such determinations are made on the basis of an
official inspection. The costs of an official quality determination may
be paid by CCC. The quality requirements that are used in administering
loans and loan deficiency payments for the oilseeds in this paragraph
are available in State and county offices.
(iii) With respect to peanuts, shall be determined at the time of
delivery to CCC by a Federal-State Inspector authorized or licensed by
the Secretary.
(3) Corn pledged as collateral for a farm-stored loan may be ear or
shelled corn, but may not be ground ear corn. If the collateral is ear
corn, the producer must:
(i) Before delivery to CCC, shell such corn without cost to CCC;
and
(ii) Before removal of the commodity for shelling, have the
approval of CCC in accordance with Sec. 1421.20. Corn pledged as
collateral for a warehouse-stored loan must be shelled corn.
(4) When a quantity of a commodity is determined by weight, the
following shall apply:
(i) A bushel of barley shall be 48 pounds of barley free of
dockage;
(ii) A bushel of corn shall be 56 pounds of shelled corn;
(iii) A bushel of oats shall be 32 pounds of oats;
(iv) Quantities of peanuts shall be determined in tons and
hundredths of a ton;
(v) Quantities of farm-stored rice shall be in whole units of 100
pounds of rice;
(vi) A bushel of soybeans shall be 60 pounds of soybeans with no
more than 1 percent foreign material;
(vii) A bushel of grain sorghum shall be 56 pounds of grain sorghum
free of dockage;
(viii) A bushel of wheat shall be 60 pounds of wheat free of
dockage;
(ix) Quantities of farm-stored canola, flaxseed, mustard seed,
rapeseed, safflower seed, and sunflower seed shall be determined in
whole units of 100 pounds of the respective commodity;
(x) A bushel of canola shall be 50 pounds of canola free of
dockage;
(xi) A bushel of flaxseed shall be 56 pounds of flaxseed free of
dockage;
(xii) A bushel of mustard seed shall be 54 pounds of mustard seed
free of dockage;
(xii) A bushel of rapeseed shall be 50 pounds of rapeseed free of
dockage;
(xiv) A bushel of safflower seed shall be 40 pounds of safflower
seed free of dockage; and
(xv) A bushel of sunflower seed shall be 28 pounds of sunflower
seed free of foreign material.
(5) With respect to farm-stored loans and loan deficiency payments,
all determinations of weight and quality, except as otherwise agreed to
by CCC, shall be determined at the time of delivery of the commodity to
CCC or at the time the loan deficiency payment application is filed.
(c)(1) To be eligible to receive loans or loan deficiency payments,
a producer must have the beneficial interest in the commodity that is
tendered to CCC for a loan or loan deficiency payment. The producer
must always have had the beneficial interest in the commodity unless,
before the commodity was harvested, the producer and a former producer
whom the producer tendering the commodity to CCC has succeeded had such
an interest in the commodity. Commodities obtained by gift or purchase
shall not be eligible to be tendered to CCC for loans or loan
deficiency payments. Heirs who succeed to the beneficial interest of a
deceased producer or who assume the decedent's obligations under an
existing loan or loan deficiency payment shall be eligible to receive
loans and loan deficiency payments whether succession to the commodity
occurs before or after harvest so long as the heir otherwise complies
with the provisions of this part.
(2) A producer shall not be considered to have divested the
beneficial interest in the commodity if the producer retains control,
title, and risk of loss in the commodity, including the right to make
all decisions regarding the tender of such commodity to CCC for loans
or loan deficiency payments, and the producer:
(i) Executes an option to purchase, whether or not a payment is
made by the potential buyer for such option to purchase, with respect
to such commodity if all other eligibility requirements are met and the
option to purchase contains the following provision:
Notwithstanding any other provision of this option to purchase,
title, risk of loss, and beneficial interest in the commodity, as
specified in 7 CFR part 1421, shall remain with the producer until
the buyer exercises this option to purchase the commodity. This
option to purchase shall expire, notwithstanding any action or
inaction by either the producer or the buyer, at the earlier of: (1)
The maturity of any CCC loan which is secured by such commodity; (2)
the date the CCC claims title to such commodity; or (3) such other
date as provided in this option
or
(ii) Enters into a contract to sell the commodity 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 or any incentive payment amount to enter into such contract
except as provided in part 1425 of this chapter.
(3) If loans and loan deficiency payments are made available to
producers through an approved CMA in accordance with part 1425 of this
chapter, the beneficial interest in the commodity must always have been
in the producer-member who delivered the commodity to the CMA or its
member CMA's, except as otherwise provided in this section. Commodities
delivered to such a CMA shall not be eligible to receive loans or loan
deficiency payments if the producer-member who delivered the commodity
does not retain the right to share in the proceeds from the marketing
of the commodity as provided in part 1425 of this chapter.
(d)(1) A producer may, before the final date for obtaining a loan
for a commodity, re-offer as collateral for such a loan any commodity
that had been previously pledged as collateral for a loan, except with
respect to:
(i) Commodities that have been acquired in accordance with part
1401 of this chapter;
(ii) Commodities that have been redeemed at a rate that is less
than the loan rate as determined in accordance with Sec. 1421.25; and
(iii) Commodities for which a payment has been made in accordance
with Sec. 1421.29.
(2) The commodity re-offered as security for the subsequent loan
shall
[[Page 37585]]
have the same maturity date as the original loan.
(e) Producers who redeem loan collateral at the lower loan
repayment rate in accordance with Sec. 1421.25 or, in lieu of receiving
a loan receive a loan deficiency payment in accordance with
Sec. 1421.29, shall provide CCC with:
(1) Evidence of production of the collateral such as sales receipts
or other written documentation acceptable to CCC; or
(2) The storage location of the collateral that has not been
otherwise disposed of and allow CCC access to such collateral; and
(3) Permission to inspect, examine, and make copies of the records
and other written data as deemed necessary to verify the eligibility of
the producer and commodity.
(f) Producers who redeem loan collateral or receive a loan
deficiency payment for a commodity in accordance with paragraph (e) of
this section must provide evidence of production acceptable to CCC
before the final loan availability date of the crop year for such
commodity following the crop year for which the loan or loan deficiency
payment was made. Production evidence includes but is not limited to:
(1) Evidence of sales;
(2) Load summary or assembly sheets;
(3) Warehouse receipts issued by a warehouse that is approved
according to Sec. 1421.8(b) or by a warehouse that is not approved; and
(4) Quantities determined by measurement at CCC's discretion.
(g) If the producer fails to provide acceptable evidence of
production as required in paragraph (e)(1) of this section, such
producer shall be required to repay the market gain or loan deficiency
payment and charges, plus interest.
(h) The loan documents shall not be presented for disbursement
unless the commodity subject to the note and security agreement is an
eligible commodity, in existence, and is in approved storage. If the
commodity was not either an eligible commodity, in existence, or in
approved storage at the time of disbursement, the total amount
disbursed under the loan and charges plus interest shall be refunded
promptly by the producer.
(i) CCC shall limit the total loan quantity for a loan disbursement
or loan deficiency quantity for a loan deficiency payment based on a
subsequent increase in the quantity of eligible commodity by the final
loan availability date to 100 percent of the outstanding quantity of
such loan or loan deficiency payment application. A producer may obtain
a separate loan or loan deficiency payment before the final loan
availability date for the commodity for quantities in excess of 100
percent of such quantity if such quantities are an otherwise eligible
commodity.
Sec. 1421.6 Maturity dates.
(a)(1) All loans shall mature on demand by CCC and with respect to:
(i) All commodities, except peanuts and loan collateral transferred
in accordance with Sec. 1421.17(c) and (d), no later than the last day
of the 9th calendar month following the month in which the note and
security agreement is filed in accordance with Sec. 1421.5(a) and
approved; and
(ii) Peanuts, April 30 of the year following the year the commodity
is normally harvested.
(2) CCC may at any time accelerate the loan maturity date by
providing the producer notice of such acceleration at least 30 days in
advance of the accelerated maturity date.
(3) The request for a loan shall not be approved until all
producers having an interest in the collateral sign the note and
security agreement and CCC approves such note and security agreement.
(b) If a producer fails to settle the loan in accordance with
paragraph (a) of this section within 30 days from the maturity date of
such loan, or other reasonable time period as established by CCC, a
claim for the loan amount and charges plus interest shall be
established. CCC shall:
(1) Inform the producer before the maturity date of the loan of the
date by which the loan must be settled or a claim will be established
in accordance with part 1403 of this title; and
(2) If the producer delivers the loan collateral in accordance with
Sec. 1421.22 after a claim is established:
(i) Determine the value of the settlement for such collateral in
accordance with Sec. 1421.22;
(ii) Waive interest on the loan amount that accrued before the
establishment of the claim with respect to the settlement value of the
quantity delivered from the date such loan proceeds were disbursed
through the loan maturity date. Interest that accrues after the
establishment of the claim shall not be waived; and
(iii) Reduce the outstanding claim amount arising from the loan by
the amount of the settlement value of the quantity delivered plus the
amount of interest that was waived.
Sec. 1421.7 Adjustment of basic loan rates.
(a) Basic loan rates for a commodity may be established on a State,
regional, or county basis and may be adjusted by CCC to reflect quality
and location applicable to the commodity and as otherwise provided in
this section.
(b) The basic loan rates for the wheat, corn, barley, oats, grain
sorghum, rice, peanuts, soybean, canola, flaxseed, mustard seed,
rapeseed, safflower, and sunflower seed crops will be determined by CCC
and made available at State and county offices.
(c)(1) With respect to all commodities except peanuts and rice,
warehouse-stored loans shall be disbursed at levels based on the basic
county loan rate for the county where the commodity is stored, adjusted
for the schedule of premiums and discounts established for the
commodity on the basis of quality factors set forth on warehouse
receipts or supplemental certificates and for other quality factors, as
determined and announced by CCC.
(2) With respect to rice, warehouse-stored loans shall be disbursed
at levels based on the milling yields times the whole and broken kernel
loan rates, adjusted for the schedule of discounts on the basis of
quality factors set forth on warehouse receipts or supplemental
certificates and for other quality factors, as determined and announced
by CCC.
(3) With respect to commodities moved from one warehouse to another
in accordance with the terms and conditions prescribed by CCC on Form
CCC-699, Reconcentration Agreement and Trust Receipt, the loan rate
will be adjusted to reflect the new storage location.
Sec. 1421.8 Approved storage.
(a) Approved farm storage shall consist of a storage structure
located on or off the farm (excluding public warehouses) that is
determined by CCC to be under the control of the producer and to afford
safe storage of the commodity pledged as collateral for a loan. As may
be determined and announced by the Executive Vice President, CCC,
approved farm storage may also include on-ground storage, temporary
storage structures, or other storage arrangements.
(b) Approved warehouse storage shall consist of:
(1) A public warehouse for which a CCC storage agreement for the
commodity is in effect and that is approved by CCC for price support
purposes. Such a warehouse is referred to in this subpart as an
approved warehouse. The names of approved warehouses may be obtained
from the Kansas City Commodity Office, P.O. Box 419205, Kansas City,
Missouri 64141-6205, or from State and county offices.
(2) A warehouse operated by an approved CMA as defined in part 1425
of this chapter.
[[Page 37586]]
(c) The approved storage requirements provided in this section may
be waived by CCC if the producer requests a loan deficiency payment
pursuant to the loan deficiency payment provisions contained in
Sec. 1421.29.
Sec. 1421.9 Warehouse receipts.
(a) Warehouse receipts tendered to CCC with respect to a loan or
loan deficiency payment must meet the provisions of this section and
all other provisions of this part, and CCC program documents.
(b) Warehouse receipts must be issued in the name of the eligible
producer or CCC. If issued in the name of the eligible producer, the
receipts must be properly endorsed in blank in order to vest title in
the holder. Receipts must be issued by an approved warehouse and must
represent a commodity that is deemed to be stored commingled. The
receipts must be negotiable and must represent a commodity that is the
same quantity and quality as the eligible commodity actually in storage
in the warehouse of the original deposit. However, warehouse receipts
may be issued by another warehouse if the eligible commodity was
reconcentrated in accordance with the provisions of Sec. 1421.20(c).
(c) If the receipt is issued for a commodity that is owned by the
warehouse operator either solely, jointly, or in common with others,
the fact of such ownership shall be stated on the receipt. In States
where the pledge of warehouse receipts issued by a warehouse operator
on the warehouse operator's commodity is invalid, the warehouse
operator may offer the commodity to CCC for loan if such warehouse is
licensed and operating under the U.S. Warehouse Act.
(d) Each warehouse receipt or accompanying supplemental certificate
representing a commodity stored in an approved warehouse that has a
storage agreement with CCC shall indicate that the commodity is insured
in accordance with such agreement. The cost of such insurance shall not
be for the account of CCC.
(e) A separate warehouse receipt must be submitted for each grade
and class of any commodity tendered to CCC and, with respect to rice,
such receipt must also state the milling yield of the rice.
(f)(1) Each warehouse receipt, or a supplemental certificate (in
duplicate) that properly identifies the warehouse receipt, must be
issued in accordance with the Uniform Grain and Rice Storage Agreement
or the U.S. Warehouse Act, as applicable, and must indicate:
(i) The name and location of the storing warehouse;
(ii) The warehouse code assigned by CCC;
(iii) The warehouse receipt number;
(iv) The date the receipt was issued;
(v) The type of commodity;
(vi) The date the commodity was deposited or received;
(vii) The date to which storage has been paid or the storage start
date;
(viii) Whether the commodity was received by rail, truck or barge;
(ix) The amount per bushel, pound, or hundredweight of prepaid in
or out charges;
(x) The signature of the warehouse operator or the authorized
agent; and
(xi) For warehouses operating under a merged warehouse code
agreement (KC-385), the location and county to which the producer
delivered the commodity.
(2) In addition to the information specified in paragraph (f)(1) of
this section, additional commodity specific requirements shall be
determined by CCC and are available at State and county offices and the
Kansas City Commodity Office.
(g) If a warehouse receipt indicates that the commodity tendered
for loan grades ``infested'' or ``contains excess moisture'', or both,
the receipt must be accompanied by a supplemental certificate as
provided in Sec. 1421.18 in order for the commodity to be eligible for
a loan. The grade, grading factors, and quantity to be delivered must
be shown on the certificate as follows:
(1) When the warehouse receipt shows ``infested'' and the commodity
has been conditioned to correct the infested condition, the
supplemental certificate must show the same grade without the
``infested'' designation and the same grading factors and quantity as
shown on the warehouse receipt.
(2)(i) When the warehouse receipt shows that the commodity
contained excess moisture and the commodity has been dried or blended,
the supplemental certificate must show the grade, grading factors, and
quantity after drying or blending of the commodity. Such entries shall
reflect a drying or blending shrinkage as provided in paragraph
(g)(2)(iv) of this section.
(ii) When a supplemental certificate is issued in accordance with
paragraphs (g)(1) and (g)(2)(i) of this section, the grade, grading
factors and the quantity shown on such certificate shall supersede the
entries for such items on the warehouse receipt.
(iii) If the commodity has been dried or blended to reduce the
moisture content, the quantity specified on the warehouse receipt or
the supplemental certificate shall represent the quantity after drying
or blending.
(iv) For commodities dried or blended in accordance with paragraph
(g)(2)(iii) of this section, such quantity shall reflect a minimum
shrinkage in the receiving weight excluding dockage:
(A) For the following commodities, 1.3 times the percentage
difference between the moisture content of the commodity received and
the following percentages for the specified commodity:
(1) Barley: 14.5 percent;
(2) Corn: 15.5 percent;
(3) Grain sorghum: 14.0 percent;
(4) Oats; 14.0 percent;
(5) Rice: 14.0 percent;
(6) Soybeans; 14.0 percent; and
(7) Wheat: 13.5 percent.
(B) For the following commodities, 1.1 times the percentage
difference between the moisture content of the commodity received and
the following percentages for the specified commodity:
(1) Canola: 10.0 percent;
(2) Flaxseed: 9.0 percent;
(3) Mustard Seed: 10.0 percent;
(4) Rapeseed: 10.0 percent;
(5) Safflower Seed: 10.0 percent; and
(6) Sunflower Seed: 10.0 percent.
(h)(1) If, in accordance with paragraph (g) of this section, a
supplemental certificate is issued in connection with a warehouse
receipt, such certificate must state that no lien for processing will
be asserted by the warehouse operator against CCC or any subsequent
holder of such receipt.
(2) Warehouse receipts and the commodities represented by such
receipts that are stored in an approved warehouse that is operating in
accordance with a Uniform Grain and Rice Storage Agreement (UGRSA) may
be subject to a lien for warehouse charges only to the extent provided
in Sec. 1421.10. In no event shall a warehouse operator be entitled to
satisfy such a lien by sale of the commodities when CCC is the holder
of such receipt.
(i) Warehouse receipts representing commodities that have been
shipped by rail or by barge, must be accompanied by supplemental
certificates completed in accordance with paragraph (f) of this
section.
Sec. 1421.10 Warehouse charges.
(a) CCC-approved handling and storage rates that may be deducted
from loan proceeds are available in State and county offices. Such
deductions shall be based upon the entries on the warehouse receipt or
supplemental certificate, but in no case shall be higher than the CCC
approved rate. No storage deduction shall be made if written evidence
acceptable to CCC is submitted indicating that:
[[Page 37587]]
(1) Storage charges through the maturity date have been prepaid; or
(2) The producer has arranged with the warehouse operator for the
payment of storage charges through the maturity date and the warehouse
operator enters an endorsement in substantially the following form on
the warehouse receipt:
Storage arrangements have been made by the depositor of the
grain covered by this receipt through (date through which storage
has been provided). No lien will be asserted by the warehouse
operator against CCC or any subsequent holder of the warehouse
receipt for the storage charges that accrued before the specified
date.
(b) The beginning date to be used for computing storage deductions
on the commodity stored in an approved warehouse shall be the later of
the following:
(1) The date the commodity was received or deposited in the
warehouse;
(2) The date the storage charges start; or
(3) The day following the date through which storage charges have
been paid.
(c) For commodities delivered to CCC in settlement for a loan, CCC
shall pay to the producer the warehouse charges for receiving the
commodity, or in-charges. If the warehouse receipt delivered to CCC in
settlement for a loan shows that such charges have been paid, CCC shall
issue such payment to the producer. If the receipt shows that such
charges have not been paid, the producer will assign such payment to
the warehouse and CCC shall issue such payment to the warehouse for the
producer's account.
Sec. 1421.11 Liens.
(a) The county office shall file or record, as required by State
law, all security agreements that are issued with respect to
commodities pledged as collateral for loans. The cost of filing and
recording shall be paid for by CCC.
(b) If there are any liens or encumbrances on the commodity,
waivers that fully protect the interest of CCC must be obtained even
though the liens or encumbrances are satisfied from the loan proceeds.
No additional liens or encumbrances shall be placed on the commodity
after the loan is approved.
Sec. 1421.12 Fees, charges, and interest.
(a) A producer shall pay a nonrefundable loan service fee to CCC at
a rate determined by CCC. The amount of such fees are available in
State and county offices and are shown on the note and security
agreement.
(b) Interest that accrues with respect to a loan shall be
determined in accordance with part 1405 of this chapter. All or a
portion of such interest may be waived with respect to a quantity of
commodity that has been redeemed in accordance with Sec. 1421.25 at a
rate that is less than the principal amount of the loan plus charges
and interest.
(c) For each crop of soybeans, the producer, as defined in the
Soybean Promotion, Research, and Consumer Information Act (7 U.S.C.
Chapter 6301), shall remit to CCC an assessment that shall be
determined at the time CCC acquires the commodity, and shall be at a
rate equal to one-half of 1 percent of the amount determined in
accordance with Sec. 1421.19.
(d) Additional fees representing amounts voted on by producers for
marketing or promotional fees may be deducted from loan proceeds by CCC
as requested and agreed to by the governing body of such marketing or
promotional fee and CCC. Deduction of such fees from amounts due
producers and the payment of such fees to such governing body shall be
made by CCC in a manner and at such time as determined by CCC.
Sec. 1421.13 [Reserved]
Sec. 1421.14 [Reserved]
Sec. 1421.15 Loss or damage to the commodity.
The producer is responsible for any loss in quantity or quality of
the commodity pledged as collateral for a farm-stored loan. CCC shall
not assume any loss in quantity or quality of the loan collateral for
farm-stored loans.
Sec. 1421.16 Personal liability of the producers.
(a) When a producer obtains a commodity loan or requests a loan
deficiency payment, the producer agrees:
(1) When signing Form CCC-666, Farm Stored Loan Quantity
Certification, when applicable, Form CCC-677, Farm Storage Note and
Security Agreement, and Form CCC-678, Warehouse Storage Note and
Security Agreement, that the producer will not:
(i) Provide an incorrect certification of the quantity or make any
fraudulent representation for the loan; or
(ii) Remove or dispose of a quantity of commodity that is
collateral for a CCC farm-stored loan without prior written approval
from CCC in accordance with Sec. 1421.20;
(2) When signing Form CCC-666 LDP, Loan Deficiency Payment
Application and Certification, or CCC-709, Direct Loan Deficiency
Payment Agreement, as applicable, that the producer will not provide an
incorrect certification of the quantity or make any fraudulent
representation for loan deficiency payment purposes; and
(3) That violation of the terms and conditions of the Form CCC-677,
Form CCC-678, Form CCC-666 LDP, or Form CCC-709, as applicable, will
cause harm or damage to CCC in that funds may be disbursed to the
producer for a quantity of a commodity that is not actually in
existence or for a quantity on which the producer is not eligible.
(b) The violations referred to in paragraph (a) of this section are
defined as follows:
(1) Incorrect certification is the certifying of a quantity of a
commodity for the purpose of obtaining a commodity loan or a loan
deficiency payment in excess of the quantity eligible for such loan or
loan deficiency payment or the making of any fraudulent representation
with respect to obtaining loans or loan deficiency payments;
(2) Unauthorized removal is the movement of any farm-stored loan
quantity from the storage structure in which the commodity was stored
or structures that were designated when the loan was approved to any
other storage structure whether or not such structure is located on the
producer's farm without prior written authorization from the county
committee in accordance with Sec. 1421.20, if the movement of loan
collateral prevents CCC from obtaining the first lien on such
collateral; and
(3) Unauthorized disposition is the conversion of any loan quantity
pledged as collateral for a farm-stored loan without prior written
authorization from the county committee in accordance with
Sec. 1421.20.
(c) The producer and CCC agree that it will be difficult, if not
impossible, to prove the amount of damages to CCC for the violations in
accordance with paragraph (b) of this section. Accordingly, if the
county committee determines that the producer has violated the terms
and conditions of Form CCC-677, Form CCC-678, Form CCC-666 LDP, or Form
CCC-709, as applicable, liquidated damages shall be assessed on the
quantity of the commodity that 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
[[Page 37588]]
deficiency payment rate for the first offense; or
(ii) 25 percent of the loan rate applicable to 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 the 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.
(d) For liquidated damages assessed in accordance with paragraph
(c)(1) of this section, the county committee shall:
(1) Require repayment of the loan principal applicable to the loan
quantity incorrectly certified or the loan quantity removed or disposed
of for loan deficiency payment, the loan deficiency payment rate
applicable to the loan deficiency quantity incorrectly certified, and
charges, plus interest applicable to the amount repaid; and
(2) If the producer fails to pay such amount within 30 days from
the date of notification, call the applicable loan involved in the
violation, or for loan deficiency payments, require repayment of the
entire loan deficiency payment and charges plus interest.
(e) For liquidated damages assessed in accordance with paragraph
(c)(2) of this section, the county committee shall call the loan
involved in the violation, or for loan deficiency payments, require
repayment of the entire loan deficiency payment and charges plus
interest.
(f) The county committee:
(1) May waive the administrative actions taken in accordance with
paragraphs (c)(1) and (d) if the county committee determines that:
(i) The violation occurred inadvertently, accidentally, or
unintentionally; or
(ii) The producer acted to prevent spoilage of the commodity.
(2) Shall not consider the following acts as inadvertent,
accidental, or unintentional:
(i) Movement of loan collateral off the farm;
(ii) Movement of loan collateral from one storage structure to
another on the farm, except as provided for in Sec. 1421.17(b)(1); and
(iii) Feeding the loan collateral.
(3) Shall furnish a copy of its determination to the State
committee, and the Administrator. If the determination of the county
committee is not disapproved by either the State committee or the
Administrator, FSA, or a designee, within 60 calendar days from the
date the determination is received, such determination shall be
considered to have been approved.
(g) If, for any violation in accordance with paragraph (b) of this
section, the county committee determines that CCC's interest is not or
will not be protected, the county committee shall call any or all of
the producer's farm-stored loans, and deny future farm-stored loans and
loan deficiency payments without production evidence for 24 months
after the date the violation is discovered. Depending on the severity
of the violation, the county committee may deny future farm-stored
loans and loan deficiency payments without production evidence for an
additional 12 month period.
(h) If the county committee determines that the producer has
committed a violation in accordance with paragraph (b), the county
committee shall notify the producer in writing that:
(1) The producer has 30 calendar days to provide evidence and
information regarding the circumstances that caused the violation, to
the county committee; and
(2) Administrative actions will be taken in accordance with
paragraphs (d) or (e) of this section.
(i) If the loan is called in accordance with this section, the
producer may not repay the loan at the lower of the loan repayment rate
in accordance with Sec. 1421.25 and may not utilize the provisions of
part 1401 of this chapter with respect to such loan.
(j) Producers who have been refused a farm-stored loan under
provisions of this section may apply for a warehouse-stored loan.
(k)(1) If a producer:
(i) Makes any fraudulent representation in obtaining a loan or loan
deficiency payment, maintaining, or settling a loan; or
(ii) Disposes or moves the loan collateral without the approval of
CCC, such loan shall be payable upon demand by CCC. The producer shall
be liable for:
(A) The amount of the loan or loan deficiency payment;
(B) Any additional amounts paid by CCC with respect to the loan or
loan deficiency payment;
(C) All other costs that CCC would not have incurred but for the
fraudulent representation, the unauthorized disposition or movement of
the loan collateral;
(D) Interest on such amounts; and
(E) Liquidated damages assessed under paragraph (c) of this
section.
(2) With regard to amounts due for a loan, the payment of such
amounts may not be satisfied by:
(i) The forfeiture of loan collateral to CCC of commodities with a
settlement value that is less than the total of such amounts; or
(ii) By repayment of such loan at the lower loan repayment rate as
prescribed in Sec. 1421.25 and may not utilize the provisions of part
1401 of this chapter with respect to such loans.
(3) Notwithstanding any provisions of the note and security
agreement, if a producer has made any such fraudulent representation or
if the producer has disposed of, or moved, the loan collateral without
prior written approval from CCC in accordance with Sec. 1421.20, the
value of the settlement for such collateral delivered to or removed by
CCC shall be determined by CCC in accordance with Sec. 1421.22.
(l) A producer shall be personally liable for any damages resulting
from a commodity delivered to or removed by CCC containing mercurial
compounds, toxin producing molds, or other substances poisonous to
humans or animals.
(m) If the amount disbursed under a loan or in settlement thereof,
or loan deficiency payment exceeds the amount authorized by this part,
the producer shall be liable for repayment of such excess and charges,
plus interest.
(n) If the amount collected from the producer in satisfaction of
the loan is less than the amount required in accordance with this part,
the producer shall be personally liable for repayment of the amount of
such deficiency and charges, plus interest.
(o) In the case of joint loans or loan deficiency payments, the
personal liability for the amounts specified in this section shall be
joint and several on the part of each producer signing the note or loan
deficiency payment application.
(p) Any or all of the liquidated damages assessed in accordance
with the provisions of paragraph (c) may be waived as determined by
CCC.
Sec. 1421.17 Farm-stored commodities.
(a) The quantity of a commodity that shall be used to determine the
amount of a farm-stored loan shall not exceed a percentage (the loan
percentage), as established by the State committee that shall not
exceed a percentage established by CCC, of the certified or measured
quantity of the eligible commodity stored in approved farm storage and
covered by the note and security agreement. The quantity of a commodity
pledged as security for a farm-storage loan shall be measured or
certified in accordance with paragraph (e). Farm-stored loans may be
made on less than the maximum quantity eligible
[[Page 37589]]
for loan at the producer's request. If the loan quantity is reduced by
the State committee, the county committee, or by request of the
producer, such reduced quantity shall be the mortgaged quantity on the
note and security agreement for the commodity in a bin, crib, or lot on
which the loan is made.
(1) With respect to additional peanuts, loans shall be made on 100
percent of the estimated quantity pledged as collateral for a farm-
stored loan.
(2) With respect to all other commodities, the State committee may
establish a loan percentage that does not exceed a percentage
established by CCC or may apply quality discounts to the loan rate,
each year for each commodity on a Statewide basis or for specified
areas within the State. Before approving a county committee request to
establish a different loan percentage, or to apply quality discounts,
the State committee shall consider conditions in the State or areas
within a State to determine if the loan percentage should be reduced
below the maximum loan percentage or the quality discounts should be
applied to the basic county loan rate to provide CCC with adequate
protection. Loans disbursed based upon loan percentages previously
lowered and loan rates adjusted for quality shall not be altered if
conditions within the State or areas within the State change to
substantiate removing such reductions; percentages established or loan
rates adjusted for quality in accordance with this section shall apply
only to new loans and not to outstanding loans. The factors to be
considered by the State committee in determining loan percentages or
the necessity to apply quality discounts shall include but are not
limited to:
(i) General crop conditions;
(ii) Factors affecting quality peculiar to an area within the
State; and
(iii) Climatic conditions affecting storability.
(3) The loan percentages established by the State committee may be
reduced by the county committee when authorized on an individual farm,
area, or producer basis when determined to be necessary in order to
provide CCC with adequate protection. The factors to be considered by
the county committee in reducing the loan percentages shall include but
not be limited to:
(i) The condition or suitability of the storage structure;
(ii) The condition of the commodity;
(iii) The hazardous location of the storage structure, such as a
location that exposes the structure to danger of flood, fire, and theft
by a person not entrusted with possession of the commodity;
(iv) Any disagreement with respect to the quantity of the commodity
to be pledged as collateral for a loan; and
(v) Such other factors that relate to the preservation or safety of
the loan collateral.
(b) If an eligible quantity of a commodity except peanuts, has been
commingled with an ineligible quantity of the commodity, the commingled
commodity is not eligible to be pledged as collateral for a loan
unless:
(1) The producer, when requesting a loan shall designate all
structures that may be used for storage of the loan collateral. In such
cases, the producer is not required to obtain prior written approval
from the county committee before moving loan collateral from one
designated structure to another designated structure. In all other
instances, if the producer intends to move loan collateral from a
designated structure to another undesignated structure, the producer
must request prior approval from the county committee. Such approval
shall be evidenced on Form CCC-687-1 and the eligible or ineligible
commodity must be measured by a representative of the county office, at
the producer's expense, before commingling; or
(2) The producer has made a certification with respect to the
acreage planted to the commodity that is to be commingled for all farms
in which the producer has an interest. When certifying to the acreage
on all farms in which interest is held, the producer must provide
acceptable evidence of the production and purchase of the commodity
from which the county committee may determine whether the eligible
production claimed by the producer is reasonable in relation to the
production practices on such farm or similar farms in the same county;
or have either the eligible or ineligible commodity measured by a
representative of the county office at the producer's expense, before
commingling. Peanuts pledged as collateral for a loan must be stored
separately from peanuts produced on any other farm and handled in such
a manner that only the actual peanuts produced on the farm and on no
other farm will be delivered to CCC.
(c) Upon request by the producer before transfer, the county
committee may approve the transfer of a quantity of a commodity that is
pledged as collateral for a farm-stored loan to a warehouse-stored loan
at any time during the loan period.
(1) Liquidation of the farm-stored loan or part thereof shall be
made through the pledge of warehouse receipts for the commodity placed
under warehouse-stored loan and the immediate payment by the producer
of the amount by which the warehouse-stored loan is less than the farm-
stored loan or part thereof and charges plus interest. The loan
quantity for the warehouse-stored loan cannot exceed 110 percent of the
loan quantity transferred from the farm-stored loan.
(2) Any amounts due the producer shall be disbursed by the county
office. The maturity date of the warehouse-stored loan shall be the
maturity date applicable to the farm-stored loan that was transferred.
(d) Upon request by the producer before the transfer, the county
committee may approve the transfer of a warehouse-stored loan or part
thereof to a farm-stored loan at any time during the loan period.
Quantities pledged as collateral for a farm-stored loan shall be based
on a measurement by a representative of the county office before
approving the farm-stored loan. The producer must immediately repay the
amount by which the farm-stored loan is less than the warehouse-stored
loan and charges plus interest on the shortage. The maturity date of
the farm-stored loan shall be the maturity date applicable to the
warehouse-stored loan that was transferred.
(e) The quantity of a commodity pledged as security for a farm-
stored loan or for which a loan deficiency payment is requested may be
determined on the basis of the quantity of the commodity that an
eligible producer certifies in writing on Form CCC-666 for a loan and
Form CCC-666 LDP or CCC-709, as applicable, for a loan deficiency
payment, is eligible to be pledged as collateral and is otherwise
available for loan or loan deficiency payment purposes.
(f) If the county committee determines, by measurement or
otherwise, that the actual quantity serving as collateral for a loan is
less than the loan quantity, the county committee shall take the
actions specified in Sec. 1421.16.
Sec. 1421.18 Warehouse-stored loans.
(a) The quantity of a commodity that may be pledged as collateral
for a loan shall be the quantity of any eligible commodity delivered to
CCC for storage at an approved warehouse. Such quantity shall be the
net weight specified on the warehouse receipt or supplemental
certificate.
(b)) To be eligible to be pledged as collateral for a loan, the
commodity must not be Sample Grade and must meet the requirements of
Sec. 1421.5 and the commodity eligibility requirements, as determined
by CCC. These
[[Page 37590]]
requirements are available at State and county offices.
Sec. 1421.19 Liquidation of loans.
(a) If a producer does not pay to CCC the total amount due in
accordance with a loan, CCC shall have the right to acquire title to
the loan collateral and to sell or otherwise take possession of such
collateral without any further action by the producer. With respect to
farm-stored loans, the producer may, as CCC determines, deliver the
collateral for such loan in accordance with instructions issued by CCC.
CCC will not accept delivery of any quantity of a commodity in excess
of 110 percent of the outstanding farm-stored loan quantity. If a
quantity in excess of 110 percent of the outstanding farm-stored loan
quantity is shown on the warehouse receipt or other documents, the
producer shall provide replacement warehouse receipts and delivery
documents. If the warehouse receipt and such other documents applicable
to the settlement are not replaced showing only the quantity eligible
for delivery, CCC shall provide for such corrected documents and apply
charges for such service, if any, to the producer's account as charges
for settlement on the loan.
(b) If the producer desires to deliver eligible commodities to CCC
in satisfaction of the loan, the producer must notify CCC of such
intention before the loan maturity date by giving written notice to the
county office that disbursed the proceeds for such loan. If the
producer fails to deliver such commodities to CCC by the date specified
on Form CCC-691, Commodity Delivery Notice, and the producer
subsequently redeems the commodity pledged as collateral for the loan
before delivery is completed, interest shall continue to be assessed on
such amount in accordance with part 1405 of this chapter.
(c) If, either before or after maturity, the commodity is going out
of condition or is in danger of going out of condition, the producer
shall so notify the county office and confirm such notice in writing.
If the county committee determines that the commodity is going out of
condition or is in danger of going out of condition and the commodity
cannot be satisfactorily conditioned by the producer and delivery
cannot be accepted within a reasonable length of time, the county
committee shall arrange for an inspection and grade and quality
determination. When delivery is completed, settlement shall be made on
the basis of such grade and quality determination or on the basis of
the grade and quality determination made at the time of delivery,
whichever is higher, for the quantity actually delivered.
(d) If the producer loses control of the storage structure, or if
there is insect infestation that cannot be controlled, danger of flood,
or damage to the storage structure making it unsafe to continue storage
of the commodity on the farm, the commodity may be delivered before the
maturity date of the loan upon prior approval of the county committee
in accordance with paragraph (a). Settlement will be made with the
producer as provided in Sec. 1421.22.
Sec. 1421.20 Release of the commodity pledged as collateral for a
loan.
(a) A producer, when requesting a loan shall designate specific
storage structures on Form CCC-677, in accordance with
Sec. 1421.17(b)(1). The producer is not required to request prior
approval before moving loan collateral between such designated
structures. Movement of loan collateral to any other structures not
designated on CCC-677, or the disposal of such loan collateral without
prior written approval of the county committee, shall subject the
producer to the administrative actions specified in Sec. 1421.16. A
producer may at any time obtain the release, in accordance with this
section, of all or any part of the commodity remaining as loan
collateral by paying to CCC, with respect to the quantity of the
commodity released:
(1) The principal amount of the loan that is outstanding and
charges plus interest; or
(2) If CCC so announces, an amount less than the principal amount
of the loan and charges plus interest under the terms and conditions
specified by CCC at the time the producer redeems the commodity pledged
as collateral for such loan in accordance with Sec. 1421.25. The
producer may request and CCC may approve removal of a quantity of the
commodity from storage, without the payment to CCC of the loan amount,
if the principal amount outstanding on such loan before such removal
does not exceed the maximum loan value of the quantity of the commodity
remaining in storage after such removal. When the proceeds of the sale
of the commodity are needed to repay all or a part of a farm-stored
loan, the producer must request and obtain prior written approval of
the county office on a form prescribed by CCC in order to remove a
specified quantity of the commodity from storage. Any such approval
shall be subject to the terms and conditions set forth in the
applicable form, copies of which may be obtained by producers at the
county office. Any such approval shall not constitute a release of
CCC's security interest in the commodity or release the producer from
liability for any amounts due and owing to CCC with respect to the loan
indebtedness if full payment of such amounts is not received by the
county office. If a producer fails to repay a loan within the time
period prescribed by CCC for a farm-storage loan and commodity pledged
as loan collateral has been delivered to a buyer in accordance with
Form CCC-681-1, Authorization for Delivery of Loan Collateral for Sale,
such producer may not repay the loan at the rate that is less than the
loan rate determined in accordance with Sec. 1421.25(a)(1)(ii) or
(b)(2).
(b) CCC may allow a producer to establish a loan repayment rate
determined in accordance with Sec. 1421.25 (a)(1)(ii) or (b)(2) on Form
CCC-681-1, Authorization for Delivery of Loan Collateral for Sale,
provided the producer complies with all terms and conditions set forth
on Form CCC-681-1. If a producer fails to repay a loan within the time
period prescribed by CCC in accordance with the terms and conditions of
Form CCC-681-1 and the commodity pledged as collateral for such loan
has been delivered to a buyer in accordance with Form CCC-681-1, such
producer may not repay the loan at the rate that is less than the loan
rate determined in accordance with Sec. 1421.25 (a)(1)(ii) or (b)(2).
(c)(1) The producer may arrange with the county office for the
release of all or part of the commodity that is pledged as collateral
for a warehouse-stored loan at or before the maturity of such loan by,
with respect to the quantity of the commodity to be released, paying to
CCC:
(i) The principal amount of the loan and charges plus interest; or
(ii) If CCC so announces, an amount less than the principal amount
of the loan and charges plus interest under the terms and conditions
specified by CCC at the time the producer redeems the commodity pledged
as collateral for such loan in accordance with Sec. 1421.25. Each
partial release of the loan collateral must cover all of the commodity
represented by one warehouse receipt. Warehouse receipts redeemed by
repayment of the loan shall be released only to the producer. However,
such receipts may be released to persons designated in a written
authorization that is filed with the county office by the producer
within 15 days before the date of repayment.
(2) Upon the filing of Form CCC-699, Reconcentration Agreement and
Trust Receipt, by the producer and warehouse operator, CCC may, during
the loan period, approve the reconcentration in
[[Page 37591]]
another CCC-approved warehouse of all or part of a commodity that is
pledged as collateral for a warehouse-stored loan. Any such approval
shall be subject to the terms and conditions set forth in Form CCC-699,
Reconcentration Agreement and Trust Receipt.
(3) A producer may, before the new warehouse receipt is delivered
to CCC, pay to CCC:
(i) The principal amount of the loan and charges plus interest and
applicable charges; or
(ii) If CCC so announces, an amount less than the principal amount
of the loan and charges plus interest under the terms and conditions
specified by CCC at the time the producer redeems the commodity pledged
as collateral for such loan in accordance with Sec. 1421.25.
(d) The note and security agreement shall not be released until the
loan has been satisfied in full.
(e) If the commodity is moved on a non-workday from storage without
obtaining prior approval to move such commodity, such removal shall
constitute unauthorized removal or disposition, as applicable, of such
commodity unless the producer notifies the county office the next
workday that such commodity has been moved and such movement is
approved by CCC.
Sec. 1421.21 [Reserved]
Sec. 1421.22 Settlement.
(a) The value of the settlement of loans shall be made by CCC on
the following basis:
(1) With respect to nonrecourse loans, the schedule of premiums and
discounts for the commodity:
(i) If the value of the collateral at settlement is less than the
amount due, the producer shall pay to CCC the amount of such deficiency
and charges, plus interest on such deficiency; or
(ii) If the value of the collateral at settlement is greater than
the amount due, such excess shall be retained by CCC and CCC shall have
no obligation to pay such amount to any party.
(2) With respect to recourse loans, the proceeds from the sale of
the commodity:
(i) If the value of the collateral at settlement is less than the
amount due, the producer shall pay to CCC the amount of such deficiency
and charges, plus interest on such deficiency; or
(ii) If the proceeds received from the sale of the commodity are
greater than the sum of the amount due plus any cost incurred by CCC in
conducting the sale of the commodity, the amount of such excess shall
be paid to the producer or, if applicable, to any secured creditor of
the producer.
(3) If CCC sells the commodity described in paragraph (a)(1) or
(a)(2) in settlement of the loan, the sales proceeds shall be applied
to the amount owed CCC by the producer. The producer shall be
responsible for any costs incurred by CCC in completing the sale. CCC
may deduct such amount from the sales proceeds.
(b) Settlements made by CCC with respect to eligible commodities
that are acquired by CCC and that are stored in an approved warehouse
shall be made on the basis of the entries set forth in the applicable
warehouse receipt, supplemental certificate, and other accompanying
documents.
(c)(1) All eligible commodities that are stored in other than
approved warehouses shall be delivered to CCC in accordance with
instructions issued by CCC. Settlement for such commodities shall be
made on the basis of entries set forth in the applicable warehouse
receipt, supplemental certificate, and other accompanying documents.
(2) With respect to all commodities, except peanuts, that are
delivered from other than an approved warehouse, settlement shall be
made by CCC on the basis of the basic loan rate that is in effect for
the commodity at the producer's customary delivery point, as determined
by CCC.
(3)(i) With respect to peanuts, settlement values for quota and
additional peanuts shall be determined and announced annually by CCC.
Settlement shall be made by CCC on the amount computed on the basis of
net weight and quality of such peanuts with an allowance of 4 percent
for Virginia type peanuts and an allowance of 3.5 percent for other
types of peanuts in order to compensate producers for shrinkage during
storage on peanuts delivered on or after January 31 of the year
following the year in which the crop was produced less discounts of:
(A) $2 per ton, net weight, for each full 1 percent of foreign
material in excess of 15 percent; and
(B) $10 per ton, net weight, for peanuts containing more than 10
percent moisture.
(ii) No allowance for shrinkage shall be made for storage with
respect to peanuts delivered before February 1 of the year following
the year in which the crop was produced.
(iii) If a producer delivers peanuts from a farm to CCC in a
quantity that would exceed the farm poundage quota when added to the
peanuts marketed, and considered marketed from the farm as quota
peanuts, the additional peanut loan rate shall be used with respect to
such peanuts if CCC determines that the producer made an inadvertent
error in determining the quantity of peanuts pledged as collateral as
quota peanuts. If CCC determines that such error was not inadvertent, a
loan shall not be made available with respect to such quantity and
marketing quota penalties shall be assessed in accordance with part 729
of this title.
(iv) The loan rate for additional peanuts shall be used for all
peanuts that do not grade Segregation 1 at the time of delivery to CCC
if the producer does not elect to settle such additional peanuts as
quota peanuts. If the producer elects to settle such peanuts as quota
peanuts, the quantity shall not exceed the lesser of:
(A) The difference between the production of Segregation 1 peanuts
on the farm and the farm poundage quota; or
(B) The amount of the under-marketings of quota peanuts as shown on
the farm marketing card.
(4) With respect to rice acquired by CCC at a location other than
an approved warehouse, settlement shall be made on the basis of the
class, grade, and quality entries set forth in the Federal-State
inspection certificate and on the basis of the quantity set forth in
the weight certificates.
(d) A producer may be required to retain and store the commodity
that is pledged as collateral for a loan for a period of 60 days after
the maturity date of a loan without any cost to CCC if CCC is unable to
take delivery of the commodity. If CCC is unable to take delivery of
the commodity within the 60-day period after the loan maturity date,
the producer shall be paid a storage payment upon delivery of the
commodity to CCC. The storage payment shall be computed at the storage
rate stated in the applicable CCC storage agreement for the commodity
in effect at the delivery point where the producer delivers the
commodity. The period for earning such storage payment shall begin the
day following the expiration of the 60-day period after such maturity
date and extend through the earlier of:
(1) The final date of actual delivery; or
(2) The final date for delivery as specified in the delivery
instructions issued to the producer by the county office.
(e) When a producer is directed by the county office to haul the
commodity for delivery, except aromatic rice, a greater distance than
would have been necessary to make delivery to the producer's customary
delivery point, as determined by CCC, the producer will be allowed
compensation, as determined by the State committee at a
[[Page 37592]]
rate not to exceed the common carrier truck rate or the rate available
from local truckers, for hauling the eligible commodity the additional
distance. In determining the rate of payment for excess hauling, the
State committee may establish reasonable mileage minimums below which
producers will not receive compensation for hauling.
(f)(1) Producers may request trackloading for loan collateral where
approved warehouse space is not available locally or where KCCO
determines that it would be to the benefit of CCC. Where local weighing
facilities are not available or when requested by producers,
destination weights may be used for settlement purposes. All producers
loading in the same car must sign an agreement stating the percentage
share of the total quantity to be credited to each. When requested by
producers before delivery of the commodity, settlement may be made on
the basis of destination grades. Such destination grade determination
for a car shall be applied to the entire quantity of a commodity loaded
into the same car, regardless of the grade or quality of a commodity
loaded into the car by any producer.
(2) A trackloading payment of 19 cents per bushel (or 31.66 cents
per hundredweight in the case of sorghum, oilseeds, and rice, excluding
aromatic rice) shall be made to the producer on an eligible commodity
delivered to CCC under this subsection.
(g) If a farm-stored commodity is delivered in advance of the
applicable loan maturity date as provided in Sec. 1421.19, a deduction
for storage charges shall be made. The deduction shall be made for the
period from the date of delivery to the applicable maturity date for
the commodity. Such deduction shall be at the rate charged by the
warehouse to which the commodity was delivered. No deduction for
storage charges shall be made for early delivery of a farm-stored
commodity if the loan maturity date is accelerated by CCC under a
general acceleration of the maturity date in a particular area.
(h) A refund of warehouse storage charges will be made by CCC to
the producer if the maturity date of a warehouse storage loan is
accelerated by CCC for reasons other than any wrongful act or omission
on the part of the producer, and the commodity is not redeemed. The
amount of the storage charges to be refunded shall be computed at the
lesser of the UGRSA rate or the rate prepaid by the producer for the
period of unearned storage.
(i) If a warehouse charges the producer for either the receiving
charges or the receiving and loading out charges on an eligible
commodity in an approved warehouse, the producer shall, upon delivery
to CCC of warehouse receipts representing the commodity stored in such
warehouse, be reimbursed or given credit by the county office for such
prepaid charges at the lesser of the UGRSA rate or the rate prepaid by
the producer. The producer must furnish to the county office, written
evidence signed by the warehouse operator that such charges have been
paid.
Sec. 1421.23 Foreclosure.
(a) Upon maturity and nonpayment of a warehouse-stored loan, title
to the unredeemed collateral securing the loan shall immediately vest
in CCC. Upon maturity and nonpayment of farm-stored loan, title to the
unredeemed collateral securing the loan shall vest in CCC upon demand.
When CCC acquires title to the unredeemed collateral, CCC shall have no
obligation to pay for any market value that such collateral may have in
excess of the loan indebtedness, (the unpaid amount of the note and
charges plus interest).
(b) If the total amount due on a farm-stored loan (the unpaid
amount of the note and charges, plus interest) is not satisfied upon
maturity, CCC may remove the commodity from storage, and assign,
transfer, and deliver the commodity or documents evidencing title
thereto at such time, in such manner, and upon such terms as CCC may
determine, at public or private sale. Any such disposition may also be
effected without removing the commodity from storage. The commodity may
be processed before sale and CCC may become the purchaser of the whole
or any part of the commodity at either a public or private sale.
(c) If a farm-stored commodity removed by CCC from storage is sold,
the value of the settlement for the commodity shall be determined
according to Sec. 1421.22. If a deficiency exists, the amount of the
deficiency may be setoff from any payment that would otherwise be due
the producer from CCC or any other agency of the United States.
Sec. 1421.24 Protein determinations.
(a) With respect to Hard Red Winter and Hard Red Spring wheat
tendered to CCC that is stored in an approved warehouse, producers must
obtain official protein content determinations or, if determined
acceptable by CCC, protein content determinations arrived at by mutual
agreement between the producer and the warehouse operator. Costs of
such determinations shall not be paid by CCC.
(b) With respect to farm-stored wheat, the basic loan rate shall
not be adjusted to reflect the protein content.
Sec. 1421.25 Loan repayments.
(a) Rice market repayments.
(1) A producer may repay a nonrecourse loan for a 1996 through 2002
crop of rice at a rate that is the lesser of:
(i) The loan rate and charges, plus interest determined for a crop;
or
(ii) The prevailing world market price, as determined by CCC.
(2) The prevailing world market price for a class of rice shall be
determined by the CCC based upon a review of prices at which rice is
being sold in world markets and a weighting of such prices through the
use of information such as changes in supply and demand of rice, tender
offers, credit concessions, barter sales, government-to-government
sales, special processing costs for coatings or premixes, and other
relevant price indicators, and shall be expressed in U.S. equivalent
values f.o.b. vessel, U.S. port of export, per hundredweight as
follows:
(i) U.S. grade No. 2, 4 percent broken kernels, long grain milled
rice;
(ii) U.S. grade No. 2, 4 percent broken kernels, medium grain
milled rice; and
(iii) U.S. grade No. 2, 4 percent broken kernels, short grain
milled rice.
(3) Export transactions involving rice and all other related market
information will be monitored on a continuous basis for the purposes of
paragraph (2). Relevant information may be obtained for this purpose
from U.S. Department of Agriculture field reports, international
organizations, public or private research entities, international rice
brokers, and any other source of reliable information.
(4) The prevailing world market price for a class of rice adjusted
to U.S. quality and location (the adjusted world price (AWP)), that is
determined in accordance with paragraph (5), shall be applicable to the
provisions in this section.
(5) The AWP for each class of rice shall equal the prevailing world
market price for a class of rice (U.S. equivalent value) as determined
in accordance with paragraphs (a) (2) and (3) and adjusted to U.S.
quality and location as follows:
(i) The prevailing world market price for a class of rice shall be
adjusted to reflect an f.o.b. mill position by deducting from such
calculated price an amount that is equal to the estimated national
average costs associated with:
(A) The use of bags for the export of U.S. rice, and
[[Page 37593]]
(B) The transfer of such rice from a mill location to f.o.b. vessel
at the U.S. port of export with such costs including, but not limited
to, freight, unloading, wharfage, insurance, inspection, fumigation,
stevedoring, interest, banking changes, storage, and administrative
costs.
(ii) The price determined in accordance with paragraph (a)(5)(i)
shall be adjusted to reflect the market value of the total quantity of
whole kernels contained in such milled rice by deducting the world
value of broken kernels contained therein, with such value of the
broken kernels to be determined by multiplying the quantity of such
broken kernels (4% per hundredweight) by the world market value of such
broken kernels. The world market value of broken kernels shall be based
upon the relationship of whole and broken kernel world prices as
estimated from observations of prices at which rice is being sold in
world markets.
(iii) The price determined in accordance with (a)(5)(ii) shall be
adjusted to reflect the per pound market value of whole kernels by
dividing the price by the quantity of whole milled kernels contained in
the milled rice (96% per hundredweight).
(iv) The price determined in accordance with paragraph (a)(5)(iii)
shall be adjusted to reflect the market value of whole kernels
contained in 100 pounds of rough rice by multiplying such price by the
estimated national average quantity of whole kernel rice by class
obtained from milling 100 pounds of rough rice.
(v) The price determined in accordance with paragraph (a)(5)(iv)
shall be adjusted to reflect the total market value of rough rice by:
(A) Adding to such price:
(1) The market value of bran contained in the rough rice, computed
by multiplying the domestic unit market value of bran by the estimated
national average quantity of bran produced in milling 100 pounds of
rice; and
(2) The market value of broken kernels contained in the rough rice,
computed by multiplying the estimated world market value of broken
kernels by the estimated national average quantity of broken kernels
produced in milling 100 pounds of rice;
(B) Deducting from such price:
(1) An estimated cost of milling rough rice; and
(2) An estimated cost of transporting rough rice from farm to mill
locations.
(vi) The price determined in accordance with paragraph (a)(5)(v)
may be adjusted to a whole kernel loan rate basis by deducting the
estimated world market value of the total quantity of broken kernels
contained in such rice and dividing the resulting value by the
estimated national average quantity of milled whole kernels produced in
milling 100 pounds of rice.
(6)(i) The adjusted world price for each class for rice, loan rate
basis, shall be determined by CCC and shall be announced, to the extent
practicable, on or after 3 p.m. eastern time each Tuesday, but may be
announced more frequently, as determined by CCC, continuing through the
later of:
(A) The last Tuesday of July 2003; or
(B) The last Tuesday of the latest month the 2002-crop rice loans
mature.
(ii) In the event that Tuesday is a non-workday, the determination
will be made on the next workday, on or after 3 p.m. eastern time.
(iii) The announced prices will be effective upon announcement and
will remain in effect for a period as announced by the CCC.
(7) Notwithstanding any other provision of this section, on the day
of the announcement of the adjusted world price, between 2 p.m. eastern
time and the time of the world price announcement, CCC will not accept
repayments of rice loans at a world market price level not previously
locked-in, and applications for lock-in of a rice loan repayment rate.
(b) For 1996 through 2002 crops of barley, corn, grain sorghum,
oats, wheat, and oilseeds, a producer may repay a nonrecourse loan at a
rate that is the lesser of:
(1) The loan rate and charges, plus interest determined for such
crop; or
(2) The alternative repayment rate for barley, corn, grain sorghum,
oats, wheat, and oilseeds.
(c) To the extent practicable, CCC shall determine and announce the
alternative repayment rate, based upon the previous day's market prices
at appropriate U.S. terminal markets as determined by CCC, adjusted to
reflect quality and location for each crop of a commodity as follows:
(1) On a weekly basis in each county for oilseeds, except soybeans;
and
(2) On a daily basis in each county for barley, corn, grain
sorghum, oats, soybeans, and wheat.
Sec. 1421.26 Transfer of farm-stored loan to warehouse-stored
association loan.
Producers may deliver peanuts under a farm-stored loan to the
association and obtain loan advances on such peanuts with the prior
approval of the county office anytime on or before January 31 following
the calendar year in which the crop was grown. Association advances
shall be payable jointly to the producer and the CCC and shall be used
to settle the farm-stored loan.
Sec. 1421.27 Producer-handler purchases of additional peanuts pledged
as collateral for a loan.
(a) Producer-handlers may, at any time before loan maturity,
forfeit their additional peanuts to CCC and immediately repurchase such
peanuts from CCC by paying the amount necessary under the following
sales policies:
(1) For unrestricted use, at a price determined by CCC but, for the
applicable type, not less than 105 percent of the quota loan rate, if
purchased before December 31 of the calendar year in which the crop was
grown, and at not less than 107 percent of the quota loan rate, if
purchased after December 31 of the calendar year in which the crop was
grown;
(2) For edible export, at a price determined by CCC but not less
than any minimum sales price determined and announced by CCC;
(3) The 1996 minimum CCC sales price for additional peanuts sold
for export edible use is $400 per short ton; and
(4) For crushing (either domestic or export), at a price determined
by CCC but not less than the additional loan rate for the applicable
type.
(b) For purchases on or before January 31 following the calendar
year in which the crop was grown, the county committee shall determine
the sale price under the appropriate sales policy specified in
paragraph (a). Loans will be settled at the county office, and amounts
collected in excess of that necessary to settle loans will be remitted
to the association for the respective area. The association will credit
such amounts to the appropriate loan pool. The producer should be
listed as a participant in the loan pool for the purpose of determining
and distributing net gains from the loan pool.
(c) For purchases after January 31 following the calendar year in
which the crop was grown, the county committee shall determine the sale
price under the appropriate sales policy specified in paragraph (a).
Any amount collected in excess of the loan indebtedness shall accrue to
CCC.
Sec. 1421.28 Required producer-handler records and supervision of
farm-stored additional peanuts pledged as collateral for a loan or
purchased by a producer-handler from loan.
(a)(1) Each producer-handler shall maintain records as required in
part 1446 of this chapter for all additional peanuts that are purchased
and sold for which an ASCS-1007, Inspection
[[Page 37594]]
Certificate and Sales Memorandum, is issued.
(2) The following records shall be maintained for all peanuts
purchased from CCC that are not inspected. Each producer-handler shall
maintain records that show all sales and other disposals of peanuts.
Such records shall show date of sale, quantity, type, and to whom sold.
Records shall be maintained in such a manner that will enable the
county office to readily reconcile quantities sold with all peanuts
produced by the producer. All records shall be maintained for a period
of three years following the end of the marketing year in which the
peanuts were produced.
(b)(1) The county office shall inspect and account for all
additional peanuts pledged as collateral for a loan as determined
necessary by the county committee.
(2) The county office shall supervise the disposition of all
additional peanuts purchased for use as seed and not inspected. The
identical peanuts pledged as collateral for a loan must be disposed of
and the producer must account for all peanuts that were under
additional loan. The producer-handler shall request a county office
representative to supervise the disposition of the peanuts and shall
give the county office at least 3 working days notice of the date of
such disposition. The county office shall determine the extent to which
supervision is needed.
(3) With respect to additional peanuts on which ASCS-1007 is
issued, the producer-handler shall be subject to all provisions in part
1446 of this chapter relating to the disposition of additional peanuts.
(c) The producer-handler shall pay all costs of supervision, as
determined by the county committee for county office supervision when
county office supervision is completed, and or determined by the
association for peanuts supervised by association representatives when
association supervision is completed.
(d) The producer-handler is subject to penalties as provided in
part 1446 of this chapter with respect to any peanuts purchased in
accordance with Sec. 1421.27.
Sec. 1421.29 Loan deficiency payments.
(a) CCC will announce whether loan deficiency payments will be made
available to producers on a farm for a specific crop for a crop year.
(b) In order to be eligible to receive loan deficiency payments if
such payments are made available for a crop, the producer of such
commodity must:
(1) Comply with all of the program requirements to be eligible to
obtain loans in accordance with this part;
(2) Agree to forego obtaining such loans;
(3) File and request payment on Form CCC-666 LDP, unless the
producer enters into an agreement according to paragraph (h), for a
quantity of an eligible commodity; and
(4) Otherwise comply with all program requirements.
(c) The loan deficiency payment rate for a crop shall be the amount
by which the loan rate for the crop exceeds the rate at which CCC has
announced that producers may repay their loans in accordance with
Sec. 1421.25. Such rate shall be the amount determined on the day the
producer submits a completed request for a loan deficiency payment to
the county office. When such request is for rice and the request
provides that the loan deficiency payment rate shall be based on the
date of delivery, and the documentation of delivery indicates the rice
was delivered after 3 p.m. eastern time, the loan deficiency payment
rate in effect after 3 p.m. eastern time of the delivery date shall be
used. In all other cases for rice where the loan deficiency payment
rate is based on the delivery date, the payment rate in effect at
12:00:01 a.m. eastern time of the delivery date shall be used.
(d) The loan deficiency payment applicable to such crop shall be
computed by multiplying the loan deficiency payment rate, as determined
in accordance with paragraph (c), by the quantity of the crop the
producer is eligible to pledge as collateral for a nonrecourse loan for
which the loan deficiency payment is requested.
(e) The total amount of loan deficiency payment a producer may
receive is limited in accordance with the regulations at part 1400 of
this chapter.
(f) CCC will make the loan deficiency payment in accordance with
paragraph (d). Notwithstanding any provisions in this part, a loan
deficiency payment may be based on 100 percent of the net eligible
quantity specified on acceptable evidence of production of the
commodity certified as eligible for loan deficiency payment if such
production evidence is provided for such commodity. If such production
evidence is provided, CCC shall limit such increase in loan deficiency
payment quantity to 110 percent of the quantity certified as eligible
for such payment.
(g) Notwithstanding any other provision of this section, on the day
of the announcement of the adjusted world price, applications for loan
deficiency payments for rice that specify the payment rate will not be
accepted between 2 p.m. eastern time and the time of the world price
announcement.
(h) If the producer enters into an agreement with CCC on or before
the date of harvesting a quantity of an eligible commodity and the
producer has the beneficial interest in such quantity as specified in
accordance with Sec. 1421.5(c) on the date the commodity was harvested,
the loan deficiency payment rate applicable to such commodity would be
the loan deficiency payment rate based on the date the commodity was
delivered to the processor, buyer, warehouse, or CMA. In such cases,
the producer must meet all the other requirements in paragraph (b) on
or before the final date to apply for a loan deficiency payment in
accordance with Sec. 1421.5.
Sec. 1421.30 Death, incompetency, or disappearance.
In case of the death, incompetency, or disappearance of any
producer who is entitled to the payment of any sum in settlement of a
loan or loan deficiency payment, payment shall, upon proper application
to the county office that made the loan or loan deficiency payment, be
made to the persons who would be entitled to such producer's payment
under the regulations contained in part 707 of this title.
Sec. 1421.31 Recourse loans.
(a) CCC shall make recourse loans available to eligible producers
of high moisture corn and high moisture grain sorghum. Repayment of
such recourse loans shall be in accordance with the terms and
conditions set forth by CCC.
(b) CCC may make recourse loans available to eligible producers
with respect to commodities not specified in paragraph (a). Repayment
of such recourse loans shall be in accordance with the terms and
conditions set forth by CCC when the availability of such recourse
loans is announced.
(c) The value of the collateral for settlements described in
paragraphs (a) and (b) shall be determined by CCC according to
Sec. 1421.22.
Sec. 1421.32 Handling payments and collections not exceeding $9.99.
In order to avoid administrative costs of making small payments and
handling small accounts, amounts of $9.99 or less that are due the
producer will be paid only upon the producer's request. Deficiencies of
$9.99 or less, including interest, may be disregarded unless demand for
payment is made by CCC.
[[Page 37595]]
Subpart--Regulations Governing the Wheat and Feed Grain Farmer-
Owned Reserve Program for 1990 through 1995 Crops
Sec. 1421.200 Administration.
The Wheat and Feed Grain Farmer Owned Reserve (FOR) Program was not
reauthorized by Congress for the 1996 crop. Effective for the 1990
through 1995 crops, the regulations setting forth the applicable terms
and conditions for the Wheat and Feed Grain Farmer Owned Reserve (FOR)
Program can be found in the regulations published in 7 CFR Part 1421 as
of January 1, 1996, shall be applicable for any outstanding FOR loans
on or after April 4, 1996.
Subpart--Rice Marketing Certificate Program [Removed]
21. The subpart consisting of Secs. 1421.320 through 1421.324 is
removed.
* * * * *
22. Part 1425 is revised to read as follows:
PART 1425--COOPERATIVE MARKETING ASSOCIATIONS
Sec.
1425.1 Applicability.
1425.2 Administration.
1425.3 Definitions.
1425.4 Approval.
1425.5 Confidentiality.
1425.6 Approved CMA's.
1425.7 Suspension and termination of approval.
1425.8 Ownership and control.
1425.9 Charter and bylaw provisions.
1425.10 Financial condition.
1425.11 Operations.
1425.12 Conflict of interest.
1425.13 Uniform marketing agreement.
1425.14 Member business.
1425.15 Vested authority.
1425.16 Payment limitation.
1425.17 Eligible commodity and pooling.
1425.18 Distribution of proceeds.
1425.19 Member CMA's.
1425.20 [Reserved]
1425.21 Records required.
1425.22 Inspection and investigation.
1425.23 Reports.
1425.24 OMB control number assigned pursuant to Paperwork Reduction
Act.
1425.25 Appeals.
Authority: 7 U.S.C. 7231-7237; and 15 U.S.C. 714b, 714c, and
714j.
Sec. 1425.1 Applicability.
This part sets forth the terms and conditions that a Cooperative
Marketing Association (CMA) must meet to obtain from CCC marketing
assistance loans (loans) and loan deficiency payments on behalf of its
members for the 1996 and subsequent crops of a commodity. A CMA meeting
such terms and conditions may obtain loans and loan deficiency payments
with respect to any crop of an eligible commodity for which a loan and
loan deficiency payment program is in effect.
Sec. 1425.2 Administration.
On behalf of CCC, the FSA will administer the provisions of this
part under the general direction and supervision of the Deputy
Administrator. In the field, the provisions of this part will be
administered by the State and county FSA committees.
Sec. 1425.3 Definitions.
The following definitions set forth in this section shall be
applicable for all purposes of program administration. The terms
defined in part 718 of this title and parts 1421 and 1427 of this
chapter shall also be applicable except where those definitions
conflict with the definitions in this section.
Active member means a member who has utilized the services offered
by a CMA 1 of the 3 preceding CMA fiscal years or such shorter period
as may be provided in the CMA's articles of incorporation or bylaws.
Approved cooperative marketing association means a CMA that has
been approved by CCC to participate in loan and loan deficiency payment
programs authorized with respect to one or more authorized commodities.
Authorized commodity means those commodities for which an approved
CMA may apply for loans, including barley, canola, corn, cotton,
flaxseed, mustard seed, oats, rapeseed, rice, safflower, seed cotton,
sorghum, soybeans, sunflower seed, and wheat.
Eligible commodity means a commodity that meets the eligibility
requirements applicable to such commodity set forth in Chapter XIV of
this title that is delivered to, or that is acquired by, a CMA.
Member means a person who has fully paid for the membership stock
or earned equity credits; was accepted by the CMA; and is entitled to
all membership rights including voting and holding office except where
the law of the State in which the CMA is incorporated provides for
stock subscribers as members but does not allow them to hold office.
Sec. 1425.4 Approval.
(a) For a CMA to participate in a loan program with respect to the
1996 through 2002 crops of authorized commodities, a CMA must submit an
application for approval with respect to such authorized commodities to
CCC. An application must include:
(1) A completed Form CCC-846;
(2) The latest financial audit of the CMA including any
accompanying notes, schedules, or exhibits, certified by a certified
public accountant from the books of original entry as fairly
representing the financial condition of the CMA;
(3) A copy of the articles of incorporation or articles of
association, bylaws, all marketing agreements for eligible commodities,
and any other document that is requested by CCC with respect to the
CMA's methods of conducting business that an official of the CMA has
certified as being current;
(4) A conflict of interest statement (Form CCC-846-2) from each
director, officer, and principal employee;
(5) Resolutions made by the CMA board of directors that provide
that the CMA will abide by provisions of this part and the
nondiscrimination provisions thereof;
(6) A statement of any CMA transactions that have occurred either
in the year before the initial application for approval is submitted,
or are contemplated by the CMA as provided in Sec. 1425.12;
(7) A detailed description of the method by which proceeds from a
pool of eligible commodities for which loans are obtained will be
distributed as provided for in Sec. 1425.18; and
(8) Other information requested by CCC concerning the
organizational, operational, financial or any other aspect of the CMA
determined by CCC to be necessary to act upon the application for
approval.
(b) An approved CMA must submit, on an annual basis, the following
information to CCC:
(1) A completed Form CCC-846-1;
(2) The CMA's latest complete financial audit;
(3) The numbers of active and inactive members;
(4) A statement showing the allocated equity in the CMA owned by
active members, inactive members, and others, and the un-allocated
equity in the CMA;
(5) The names of any members who own in excess of 10 percent of the
equity of the CMA and the amount owned by each;
(6) The quantity of each eligible commodity delivered to the CMA
for marketing and the portion of such commodities received from active
members during the prior year;
(7) The quantity of each eligible commodity tendered by the CMA to
CCC as security for a loan and the quantity of such commodities
redeemed during the prior year;
(8) The quantity of each commodity tendered to CCC for loan during
the prior year; and
[[Page 37596]]
(9) A statement of any CMA transactions that either have occurred
in the CMA's prior fiscal year of operations or are contemplated to
occur in the CMA's current fiscal year as provided for in Sec. 1425.12.
(c) An approved CMA shall promptly furnish to CCC:
(1) Any changes in the articles of incorporation, bylaws, and
marketing agreements of the CMA;
(2) Any resolutions affecting loan operations;
(3) Any changes in officers, directors, or principal employees and
conflict of interest statements in accordance with Sec. 1425.12(d);
(4) Any change in pooling operations with an explanation of the
change and why such change was necessary; and
(5) Additional information as may be requested by CCC at any time
with respect to the continued approval by CCC of the CMA.
(d) Approved CMA's must submit revised applications as required by
this section every 5 years, or more often if CCC requests.
(e) CMA's applying for approval to participate in the loan program
for cotton shall execute Form CCC-Cotton G, Cotton Cooperative Loan
Agreement, with CCC.
Sec. 1425.5 Confidentiality.
Information submitted to CCC with respect to trade secrets,
financial or commercial operations, or information concerning the
financial condition of a CMA, whether for initial approval or continued
approval, shall be kept confidential by the officers and employees of
CCC and the Department of Agriculture except to the extent CCC
determines such disclosures are necessary for the conduct of a loan
program or such information is required to be disclosed by law.
Sec. 1425.6 Approved CMA's.
(a) CCC shall, in accordance with the provisions of this part,
approve a CMA to obtain loans and loan deficiency payments.
(b) CCC may approve a CMA to participate in a loan program with
respect to the 1996 through 2002 crop of a commodity as:
(1) Unconditionally approved; or
(2) Conditionally approved.
(c)(1) A CMA 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 CMA and not due to the CMA's negligence; and
(2) Such CMA must agree in writing to meet all requirements for
approval set forth in this part within the time period specified by
CCC. When a CMA 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 CMA 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.
(d) A CMA is approved to participate in a loan program for an
authorized commodity until such time as the CMA's approval is suspended
or terminated by CCC.
Sec. 1425.7 Suspension and termination of approval.
(a) An approved CMA may be suspended by CCC from further
participation in a loan or loan deficiency payment program if CCC
determines that the CMA or a member CMA, as specified in Sec. 1425.19:
(1) Has not operated in accordance with the conditions specified in
such CMA'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 CMA's operations with respect
to a loan program.
(b) Such suspension may be lifted upon the receipt of documents
indicating that the CMA has complied with all requirements for
approval. If such documents are not received within 1 year from the
date of the suspension, the CMA's approval for participation in a loan
program will terminate automatically.
(c)(1) CCC may terminate the approval of the CMA's ability to
pledge commodities as collateral for CCC loans or loan deficiency
payments by giving the CMA written notice of such termination.
(2) An approved CMA may at anytime, upon written notice to CCC,
voluntarily terminate the CMA's participation in a loan program,
provided that the CMA does not have any outstanding loans at the time
of voluntary termination.
(d) Ten days after the date CCC suspends or terminates the approval
of a CMA to participate in a loan program or anytime thereafter, CCC
may, on demand, call all outstanding CCC loans made to the CMA. The
commodities pledged as collateral for such loans may be redeemed not
later than the date specified by CCC. If redemption is not made by such
date, title to the commodity shall vest in CCC and CCC shall have no
obligation to pay for any market value the commodity may have in excess
of the principal amount of such loans.
Sec. 1425.8 Ownership and control.
(a) All approved CMA's must be owned and controlled by active
members of the CMA.
(b) The CMA must establish that its active members own more than 50
percent of the allocated equity of the CMA. Such ownership equity shall
be in the form of stock, revolving fund certificates, capital, retains
book credits, or other capital interests issued by the CMA. In
determining the requisite equity held by active members, the following
shall be deducted from the amount of equity allocated to each active
member:
(1) The allocated equity held by any active member who owns more
than 10 percent of the CMA's total equity; and
(2) The allocated equity of any active member that has acquired
equity as a result of a loan from the CMA unless the member is
obligated to repay the loan within 1 year.
(c) The organization and operation of the CMA shall be under the
control of its active members. A CMA shall be considered to be under
the control of its active members if more than 50 percent of its
membership consists of active members.
(d) All directors must be:
(1) Active members of the CMA;
(2) Representatives of active members who are also employed as a
farm manager or its equivalent (including an officer of a CMA or a
partner in partnership); or
(3) Officers, employees, or active members of an active member CMA;
and
(4) A director shall be nominated and elected by members except
when selected to fill the unexpired term of a director so elected.
(e) An applicant or an approved CMA not under the ownership or
control, or both, of its active members, may be approved by CCC to
participate in a loan program if the CMA is able to establish that, by
retiring the equity of its inactive members or by obtaining new
members, the CMA can vest ownership and control in its active members,
as required by this section, by a date specified by CCC.
Sec. 1425.9 Charter and bylaw provisions.
(a) The articles of incorporation, articles of association, or the
bylaws of the CMA shall comply with each of the following requirements:
[[Page 37597]]
(1) The CMA shall hold an annual meeting of members or delegates at
one or more locations within its operating area that will afford a
reasonable opportunity for all members or their delegates to attend and
participate;
(2) The CMA shall give written notice to each member or delegate,
of the time, place, and purpose of all regular and special meetings of
members or delegates; and
(3) The CMA shall admit to membership every applicant who applies
for admission for the purpose of participating in the activities of the
CMA, and is eligible for membership under the statute incorporating the
CMA.
(b) A CMA may refuse membership to an applicant whose admission
would prejudice, hinder, or otherwise obstruct the interests or
purposes of the CMA.
(c)(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 CMA'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.
(d) The election of directors, delegates, and officers shall be by
ballot when there are two or more nominees for a position, or there are
more nominees than there are positions to be filled.
(e) Each member of the CMA shall have a single vote except that CCC
may approve another voting method that will adequately protect the
ownership and control interests of the members of the CMA.
(f) Voting by proxy shall be prohibited, except if a CMA:
(1) Determines that voting by proxy is necessary to amend the CMA's
articles of incorporation, articles of association, or bylaws; and
(2) Establishes, to the satisfaction of CCC, that the law of the
State in which the CMA is incorporated permits voting by proxy, but
does not permit members to vote by mail, with respect to such issue.
(g) Each member of the CMA shall annually be given a summary
financial statement of the CMA that is based on an annual audit
conducted by a certified public accountant.
Sec. 1425.10 Financial condition.
(a) An approved CMA must be financially able to make financial
advances to its members and to market commodities of such members.
(b) The factors that will be considered in determining the
financial condition of a CMA include:
(1) The ability of the CMA to meet current obligations, including
the expenses of marketing the commodities on behalf of its members; and
(2) The ability of the CMA to make advance payments to its members,
either from its own funds or through arrangements with financial or
other institutions.
(c) The CMA 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 CMA is approved, or requesting
approval, to participate in loan programs and handled by the CMA during
the preceding marketing year, or, if the CMA is in its first full
marketing year of operations, the estimated quantity of such commodity
that it will handle during such year.
(1) If the amount of the net worth of the CMA is between 34 and 99
percent of the amount computed in accordance with paragraph (c), and
the CMA is determined by CCC to be otherwise financially sound, CCC may
determine that such CMA meets the requirements of this section. Such a
determination by CCC may be made if:
(i) The board of directors of the CMA agrees to retain capital in
the amount set forth in table 2 with respect to each unit of the
commodity delivered to the CMA until the net worth of the CMA is at
least equal to the amount computed in accordance with paragraph (c),
and
(ii) The CMA agrees to deduct from pool proceeds the full amount of
the estimated expenses of handling the commodities received by the CMA.
(2) The failure to carry out such capital retention agreements
shall be grounds for suspending a CMA approval.
Table 1
------------------------------------------------------------------------
Amount
Commodity Unit per unit
------------------------------------------------------------------------
Barley............................... Bushel................. 0.13
Canola............................... Hundredweight.......... 0.62
Corn................................. Bushel................. 0.13
Cotton............................... Bale................... 6.40
Flaxseed............................. Hundredweight.......... 0.62
Mustard Seed......................... Hundredweight.......... 0.62
Oats................................. Bushel................. 0.13
Rapeseed............................. Hundredweight.......... 0.62
Rice................................. Hundredweight.......... 0.52
Safflower............................ Hundredweight.......... 0.62
Seed Cotton (lint basis)............. Pound.................. 0.008
Sorghum.............................. Hundredweight.......... 0.19
Soybeans............................. Bushel................. 0.43
Sunflower Seed....................... Hundredweight.......... 0.62
Wheat................................ Bushel................. 0.15
------------------------------------------------------------------------
Table 2
------------------------------------------------------------------------
Amount
Commodity Unit per unit
------------------------------------------------------------------------
Barley............................... Bushel................. 0.07
Canola............................... Hundredweight.......... 0.32
Corn................................. Bushel................. 0.07
Cotton............................... Bale................... 3.20
Flaxseed............................. Hundredweight.......... 0.32
Mustard Seed......................... Hundredweight.......... 0.32
Oats................................. Bushel................. 0.07
Rapeseed............................. Hundredweight.......... 0.32
Rice................................. Hundredweight.......... 0.26
Safflower............................ Hundredweight.......... 0.32
Seed Cotton (lint basis)............. Pound.................. 0.004
Sorghum.............................. Hundredweight.......... 0.10
Soybeans............................. Bushel................. 0.22
Sunflower Seed....................... Hundredweight.......... 0.32
Wheat................................ Bushel................. 0.08
------------------------------------------------------------------------
(d) For the purposes of paragraphs (b) and (c), the net worth of
the CMA shall be reduced by the value of the amount of any assets or
funds that are not reflected as a liability of the CMA in the financial
statement of the CMA and that are:
(1) Pledged as security, deposited, or otherwise used to secure or
guarantee any indebtedness of the CMA; or
(2) Deposited in a restricted account or otherwise used to
guarantee the performance of an obligation of the CMA.
Sec. 1425.11 Operations.
(a) A CMA shall establish to the satisfaction of CCC, with respect
to the commodity for which approval is requested, that the CMA is so
organized and staffed by individuals employed directly by the CMA that
it is able to perform contracts with its members and to provide an
effective marketing operation for its members.
(b) If a CMA cannot satisfactorily establish that it can provide an
effective marketing operation for its members, the CMA may enter into a
marketing agreement with another CMA to market the commodity only if:
(1) Such marketing agreement is permitted by law;
(2) The articles of incorporation, articles of association, or
bylaws of the CMA acquiring the marketing service and the marketing
agreement such CMA has entered into with its members
[[Page 37598]]
provide the necessary authority to enter into such agreement;
(3) The CMA acquiring the marketing service is a member of the CMA
that will provide the marketing service; and
(4) The CMA that will provide the marketing service has been
approved under this part to obtain loans for such commodity.
(c) Any marketing agreement entered into by a CMA in accordance
with the provisions of paragraph (b), must, as determined by CCC:
(1) Adequately protect the ownership and control interests of the
CMA members;
(2) Be in the best interest of the members of the CMA acquiring the
service; and
(3) Require that all proceeds from the marketing operation be
distributed as provided in Sec. 1425.18.
Sec. 1425.12 Conflict of interest.
(a) The CMA shall not be approved for participation in loan
programs unless CCC determines that the CMA's transactions, if any,
that are of a kind described in this section, have not operated and
will not operate to the detriment of members of the CMA.
(b) The CMA shall submit with the initial application for approval,
and with each recertification, a detailed report concerning all of the
transactions of the CMA (including transactions involving purchases,
sales, handling, marketing, insurance, transportation, warehousing, and
related activities) with the following persons that differ from
transactions entered into by the CMA with its general membership:
(1) Any director, officer, or principal employee of the CMA, or any
of their family members;
(2) Any partnership from which any person is entitled to receive a
percentage of the gross profits;
(3) Any CMA in which any person owns stock;
(4) Any business entity from which any person receives fees for
transacting business with or on behalf of the CMA; or
(5) Any business entity in which an agent, director, officer or
employee of the CMA was an agent, director, officer or employee of such
business entity.
(c) The CMA shall also submit a statement as to whether any
transactions of the kind described in paragraph (b) are contemplated
between the date of the application, or the date such information is
requested to be submitted in accordance with Sec. 1425.4, as
applicable, and the end of the next marketing year for the authorized
commodity. If any transactions are contemplated, the CMA shall submit a
detailed explanation of such contemplated transactions and a statement
of the reasons for such transactions.
(d) The CMA shall furnish information, as requested, showing the
interest or relationship of its directors, officers, and principal
employees and their family members with persons who engage in any
business relating to a commodity for which the CMA is approved to
obtain loans. Such information shall be revised to reflect any change
in any such interest or relationship.
Sec. 1425.13 Uniform marketing agreement.
(a) The CMA must enter into a uniform marketing agreement with each
member who delivers a commodity to an eligible pool for which a loan is
obtained on any quantity of the commodity in such pool.
(b) A CMA may provide alternative methods of marketing commodities
to its members, in addition to the methods set forth in its marketing
agreement, if the terms and conditions thereof are reasonable to its
members, and information concerning the use of such methods of
marketing are made available to all members.
(c) An approved CMA, when authorized by CCC, may offer additional
marketing methods to its members on a limited membership basis for a
period not to exceed 2 crop years before making such marketing method
available to all members. If such limited marketing method is adopted
as a permanent marketing method by the CMA, information concerning such
method and participation in such method shall be made available to all
members. Such information may be published in the CMA's membership
publication or included in other written notice mailed to members.
Sec. 1425.14 Member business.
At least 80 percent of a crop of an authorized commodity that is
acquired by, or delivered to, the CMA for marketing must be produced by
its members in order for the CMA to obtain a loan for such crop. CCC
may, for a period not to exceed 2 years, waive such requirement for a
CMA if:
(a) The quantity of such crop acquired by the CMA for marketing,
from its members, has a value greater than the value of the quantity
acquired or received from nonmembers for marketing;
(b) The CMA can establish to the satisfaction of CCC that such
authorization is necessary for the efficient operation of the CMA; and
(c) The CMA has a plan, approved by CCC, that CCC determines to be
in the CMA members' best interest and will bring the CMA 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.
Sec. 1425.15 Vested authority.
An approved CMA shall have the authority to pledge as collateral
for a loan the commodity delivered to it by its members, to place a
lien on such commodity, and to market the commodity on behalf of its
members even though the individual members retain the right, in effect,
to determine the price at which the commodity can be marketed by the
CMA.
Sec. 1425.16 Payment limitation.
Approved CMA's 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 1400 of this chapter.
Sec. 1425.17 Eligible commodity and pooling.
(a) A CMA may establish separate pools as needed for quantities of
a commodity.
(b) Loans will be made available to approved CMA's with respect to
a quantity of an eligible commodity included in an eligible pool as
provided in paragraph (e) and the beneficial interest provisions of
parts 1421 and 1427 of this chapter.
(c) A pool shall be eligible for loans if:
(1) All of the commodity included in the pool is eligible for
loans, except as provided in paragraph (d);
(2) The eligible commodity in such pool was delivered to the CMA
for marketing for the benefit of the members of the CMA by members who
retain the right to share in the proceeds from the marketing of the
commodity in accordance with Sec. 1425.18.
(3) Except with respect to a quantity of a commodity pledged as
collateral for a loan and that is redeemed within 15 work days from the
date the CMA 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 CMA with respect to such commodity in accordance with
Sec. 1425.18(a).
[[Page 37599]]
(d) If CCC determines that a CMA has inadvertently included in a
pool a quantity of commodity that is ineligible for loan 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 loan.
(e) Loans and Loan Deficiency Payments will be available to the CMA
for the quantity of a commodity stored commingled in an approved
warehouse equal to the smaller of:
(1) The quantity of an eligible commodity received from members of
the CMA; or
(2) the quantity of commodity that is in the CMA's inventory.
(f) The CMA must have in inventory a quantity of commodity of each
class and grade at least equal to the quantity of that commodity of
each class and grade pledged as loan collateral.
(g) Loans will be available to the CMA for the quantity of a farm-
stored commodity that is, pursuant to such CMA marketing agreement with
a member, part of the CMA's pool.
(h) Except as provided in paragraph (c)(2), loans will be available
to the CMA for the quantity of the eligible commodity stored identity
preserved in an approved warehouse that was received from members of
the CMA and that is in the CMA's inventory at the time the commodity is
pledged as collateral for a loan.
(i) Loan eligibility for commingled commodities stored on a farm or
in a warehouse may be transferred to an approved warehouse.
(j) Commodities pledged as collateral for CCC loans shall be free
and clear of all liens and encumbrances based on an approved CMA's
financial agreements or the CMA shall obtain a completed Form CCC-679,
Lien Waiver. Approved CMA's shall not take any action to cause a lien
or encumbrance to be placed on a commodity after a loan is approved.
(k) If a loan is obtained with respect to any quantity of a crop of
a commodity that has been pooled, allocations by the CMA of costs and
expenses among separate pools for the crop of the commodity in a pool
shall be made in accordance with sound accounting principles and
practices.
(l)(1) Any losses incurred by the CMA in the marketing of a crop of
a commodity for which a loan has not been obtained shall not be
assessed against the proceeds from the marketing of a crop of a
commodity included in a pool for which a loan was obtained.
(2) Except as provided in paragraph (l)(3), losses incurred by the
CMA in the marketing of a crop of a commodity included in a pool for
which a loan has been obtained may not be carried forward and applied
against subsequent crops of commodities included in a pool for which a
loan is obtained.
(3) CCC may authorize an approved CMA to carry forward losses
incurred by the CMA in the marketing of a crop of a commodity included
in a pool for which a loan has been obtained when CCC determines that
such action will result in the equitable treatment of all members
participating in comparable eligible pools in the period needed to
offset losses and is not contrary to the purposes of the loan program.
(4) The authorization referred to in paragraph (l) will be approved
on the basis of a plan, subject to the approval of CCC, for the
carrying forward of losses submitted by an approved CMA and will be
continued on the condition that the approved CMA remains in substantial
compliance with the approved plan, as reflected in periodic progress
reports.
(5) Factors that will be considered in determining whether to
approve such a plan include, but are not limited to, the following:
(i) The stability of the membership and participation between
affected pools;
(ii) the financial condition of the CMA; and
(iii) whether the loss can reasonably be expected to be amortized
and recovered from future earnings over the proposed time period.
(6) The plan submitted by the CMA must include the following:
(i) A provision for notifying existing and new members of the CMA
of the plan to deduct eligible pool losses from subsequent eligible
pool gains; and
(ii) a procedure for maintaining necessary data and records needed
to generate periodic progress reports as directed by CCC.
(7) Any losses incurred subsequent to those contained in the
approved plan may only be carried forward against subsequent eligible
pools in accordance with a revised plan that has been approved by CCC
under the criteria specified in paragraph (e)(3).
Sec. 1425.18 Distribution of proceeds.
(a)(1) If CCC makes available loans or loan deficiency payments
with respect to any quantity of the eligible commodity in a pool, the
proceeds from such loans 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 that is
included in the pool less any authorized charges for services performed
or paid by the CMA that are necessary to condition the commodity or
otherwise make the commodity eligible for loans or loan deficiency
payments. Except with respect to commodities that are pledged as
collateral for a loan and that are redeemed within 15 work days from
the date the CMA 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.
(2) Any advances by the CMA to its members who have a quantity of
the commodity in the eligible pool for which advances are made prior to
the pledging of the commodity as security for a CCC loan or used to
obtain a loan deficiency payment with CCC may be credited by the CMA
against the distribution required in paragraph (a)(1).
(b)(1) If loans or loan deficiency payments are obtained from CCC
for any quantity of the eligible commodity in a pool, all proceeds of
such pool shall be distributed only to members participating in such
pool on the basis of the quantity and quality of the commodity
delivered by each member that is included in such pool.
(2) Except as provided in paragraph (b)(3), all proceeds from an
eligible pool for which a loan has been obtained shall not be combined
with proceeds from ineligible pools for distribution and final
settlement, and the method of distribution of proceeds shall be as
specified in the information provided to CCC in accordance with
Sec. 1425.4(b)(7).
(3) Sales proceeds from an eligible pool may be combined with sales
proceeds from ineligible pools or other eligible pools if the proceeds
from such pools are allocated among the pools according to the quantity
and quality of the commodity included in such pools.
(4) Pool proceeds obtained from loans made by CCC shall not be
combined with proceeds from other eligible or ineligible pools.
(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, CMA
shall refrain from making such pool distributions and shall, if
appropriate, reimburse CCC for such distributions.
(c) If a CMA has attempted to distribute to its members a part of
its equity, as defined in Sec. 1425.8, in accordance with the articles
of incorporation, articles of association or the bylaws of the CMA and
has given notice of distribution both by publication and personal
letter addressed to such members, the CMA may provide, to the extent
permitted by
[[Page 37600]]
the law of the State applicable to such distribution, for reallocation
of such undistributed equity to its members and patrons on an equitable
basis if:
(1) The period of limitation for the payment of debts has run, such
period to begin on the date the equity to be distributed was declared
to be payable by the CMA;
(2) The CMA, 30 days prior to the lapse of the period of limitation
specified in paragraph (c)(1), has given the affected member notice (by
certified mail, return receipts requested, at the member's last known
address as reflected on the books of the CMA) of the amount of equity
payable to such member(s) and notice that such equity may be
distributed to other members and patrons if the affected member does
not make a claim for such equity within the period of limitation
specified in paragraph (c)(1); and
(3) No claim for payment of the equity to be distributed has been
made within the period of limitation described in paragraph (c)(1).
Sec. 1425.19 Member CMA's.
(a) Except as provided in paragraph (c) for a CMA to obtain loans
or loan deficiency payments for any quantity of an eligible commodity
delivered by a member CMA or for a CMA to obtain loans for any quantity
of an eligible commodity included in the same pool with the commodity
delivered by a member CMA, the CMA and such member CMA must meet the
requirements of this paragraph.
(1) The eligible commodity delivered by the member CMA must be
produced by the members of such member CMA.
(2) The member CMA must be authorized to:
(i) Sell the commodity;
(ii) Pledge such commodity as collateral for a loan;
(iii) Place a lien on such commodity; and
(iv) Deliver such commodity to the CMA for marketing.
(3) The CMA must either:
(i) In its articles of incorporation, articles of association,
bylaws, or marketing agreement, require each such member CMA to meet
the requirements of this part; or
(ii) Determine and certify annually to CCC that each such member
CMA meets the requirements of this part.
(b) The CMA shall determine and certify annually to CCC that its
member CMA's that are not subject to paragraph (a) are in compliance
with the producer ownership, membership meeting, and voting
requirements of applicable State law.
(c) An approved CMA is required to meet only the provisions
contained in paragraphs (a) (1) and (2) with respect to a member CMA
for whom the member CMA markets the production of the member CMA's
members in accordance with Sec. 1425.11(b).
Sec. 1425.20 [Reserved]
Sec. 1425.21 Records required.
(a) An approved CMA and its member CMA's shall maintain a record
that shows the quantity of commodity that is received from each of its
members and nonmembers, the date received, the eligibility status for
loans of each such quantity, the quality factors specified in the
applicable regulations for the commodity (including class, grade, and
quality, where applicable), and the quantity to which each applicable
quality factor applies.
(b) The CMA shall maintain a record that shows each quantity of
commodity that is disposed of; and, if sold, the date sold and the
price received; and the date removed for processing or shipped. Except
as provided in paragraph (c), inventory shall be allocated in the
following manner until the entire inventory in a particular pool is
depleted:
(1) Commodities that are processed. The inventory of an eligible
pool or ineligible pool or both eligible and ineligible pools shall be
adjusted at the time the commodity is withdrawn from inventory for
processing.
(2) Commodities not processed. The quantity of a commodity to be
shipped shall be allocated to an eligible pool, an ineligible pool, or
a combination of eligible and ineligible pools and the pool inventories
shall be adjusted accordingly when the commodity is shipped.
(c) Records of eligible and ineligible pool dispositions need not
be maintained separately so long as sales proceeds from such pools are
allocated among the pools according to the quantity and quality of
commodity included.
Sec. 1425.22 Inspection and investigation.
(a) The books, documents, papers, and records of the approved CMA,
member CMA's, and subsidiaries, shall be maintained for a period of 5
years and shall be made available to CCC for inspection and examination
at all reasonable times.
(b) CCC shall have the right at any time after an application is
received, to examine all books, documents, papers, and determine
whether the CMA is operating or has operated in accordance with the
regulations in this part, its articles of incorporation or articles
association, bylaws, and agreements with producers, the representations
made by the CMA in its application for approval, and, where applicable,
its agreements with CCC.
Sec. 1425.23 Reports.
(a) Approved CMA's shall annually provide CCC with a report to
applicable county FSA offices. The report shall include all eligible
and ineligible commodity receipts by FSA farm number for each member.
(b) Approved CMA's 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.
Sec. 1425.24 OMB control number assigned pursuant to Paperwork
Reduction Act.
The information collection requirements contained in these
regulations (7 CFR part 1425) have been approved by the Office of
Management and Budget (OMB) under the provisions of 44 U.S.C. Chapter
35 and have been assigned OMB number 0560-0040.
Sec. 1425.25 Appeals.
A CMA may obtain reconsideration and review of determinations made
under this part in accordance with the appeal regulations set forth at
part 780 of this title.
PART 1427--COTTON
23. Part 1427 is amended by designating the subparts and
revising the headings in the first column to read as shown in the
second column;
------------------------------------------------------------------------
Old subpart New subpart
------------------------------------------------------------------------
Subpart--Cotton Loan Program Subpart A--Regulations for the
Regulations. Nonrecourse Cotton Loan and
Loan Deficiency Payment
Programs.
Subpart--Upland Cotton First Handler Subpart B--Regulations for the
Marketing Certificate Program Upland Cotton First Handler
Regulations. Marketing Certificate Program.
Subpart--Upland Cotton User Marketing Subpart C--Regulations for the
Certificate Program Regulations. Upland Cotton User Marketing
Certificate Program.
[[Page 37601]]
Subpart--Seed Cotton Loan Program Subpart D--Regulations for the
Regulations. Recourse Seed Cotton Loan
Program.
Subpart--Standards for Approval of Subpart E--Standards for
Warehouses for Cotton and Cotton Approval of Warehouses for
Linters. Cotton and Cotton Linters.
------------------------------------------------------------------------
24. The authority citation for part 1427 is revised to read as
follows:
Authority: 7 U.S.C. 7231-7237; and 15 U.S.C. 714b and 714c.
25. Subpart A is revised to read as follows:
Subpart A--Regulations for the Nonrecourse Cotton Loan and Loan
Deficiency Payment Programs
Sec.
1427.1 Applicability.
1427.2 Administration.
1427.3 Definitions.
1427.4 Eligible producer.
1427.5 General eligibility requirements.
1427.6 Disbursement of loans.
1427.7 Maturity of loans.
1427.8 Amount of loan.
1427.9 Classification of cotton.
1427.10 Approved storage.
1427.11 Warehouse receipt and insurance.
1427.12 Liens.
1427.13 Fees, charges and interest.
1427.14 [Reserved]
1427.15 Special procedure where funds are advanced.
1427.16 Reconcentration of cotton.
1427.17 Custodial offices.
1427.18 Liability of the producer.
1427.19 Repayment of loans.
1427.20 Handling payments and collections not exceeding $9.99.
1427.21 Settlement.
1427.22 Death, incompetency, or disappearance.
1427.23 Cotton loan deficiency payments.
1427.24 [Reserved]
1427.25 Determination of the prevailing world market price and the
adjusted world price for upland cotton.
1427.26 Paperwork Reduction Act assigned numbers.
Subpart A--Regulations for the Nonrecourse Cotton Loan and Loan
Deficiency Payment Programs
Sec. 1427.1 Applicability.
(a) The regulations of this subpart are applicable to the 1996
through 2002 crops of upland cotton and extra long staple cotton. These
regulations set forth the terms and conditions under which the
nonrecourse cotton loan program and the loan deficiency payment program
shall be administered by the Commodity Credit Corporation (CCC).
Additional terms and conditions shall be set forth in the note and
security agreement and loan deficiency payment application which must
be executed by a producer to receive loans and loan deficiency
payments.
(b) The basic loan rates, the schedule of premiums and discounts,
and forms applicable to the nonrecourse cotton loan and loan deficiency
payment programs are available in State and county Farm Service Agency
(FSA) offices (State and county offices, respectively). The forms for
use in connection with the programs in this subpart shall be prescribed
by CCC.
(c) Loans and loan deficiency payments shall not be available for
any cotton produced on land owned or otherwise in the possession of the
United States if such land is occupied without the consent of the
United States.
Sec. 1427.2 Administration.
(a) The nonrecourse loan and loan deficiency payment programs which
are applicable to a crop of cotton shall be administered under the
general supervision of the Executive Vice President, CCC,
(Administrator, FSA), or a designee and shall be carried out by State
and county FSA committees (State and county committees, respectively).
(b) State and county committees, and representatives and employees
thereof, do not have the authority to modify or waive any of the
provisions of the regulations of this subpart.
(c) The State committee shall take any action required by these
regulations which has not been taken by the county committee. The State
committee shall also:
(1) Correct, or require a county committee to correct, an action
taken by such county committee which is not in accordance with the
regulations of this subpart; or
(2) Require a county committee to withhold taking any action which
is not in accordance with the regulations of this subpart.
(d) No provision or delegation herein to a State or county
committee shall preclude the Executive Vice President, CCC
(Administrator, FSA), or a designee from determining any question
arising under the cotton loan and loan deficiency payment programs or
from reversing or modifying any determination made by the State or
county committee.
(e) The Deputy Administrator for Farm Programs, FSA, may authorize
State or county committees to waive or modify deadlines and other
program requirements in cases where lateness or failure to meet such
other program requirements does not adversely affect the operation of
the nonrecourse cotton loan or loan deficiency payment programs.
(f) A representative of CCC may execute loan note and security
agreements and loan deficiency payment applications and related
documents only under the terms and conditions determined and announced
by CCC. Any such document which is not executed in accordance with such
terms and conditions, including any purported execution prior to the
date authorized by CCC, is null and void.
Sec. 1427.3 Definitions.
The definitions set forth in this section shall be applicable for
all purposes of program administration regarding the cotton loan and
loan deficiency payment programs. The terms defined in parts 718 of
this title and 1412 of this chapter shall also be applicable.
Approved cooperative marketing association (CMA) means a
cooperative marketing association approved in accordance with part 1425
of this chapter which has executed Form CCC-Cotton G, Cotton
Cooperative Loan Agreement.
Charges means all fees, costs, and expenses incurred by CCC in
insuring, carrying, handling, storing, conditioning, and marketing the
cotton tendered to CCC for loan. Charges also include any other
expenses incurred by CCC in protecting CCC's or the producer's interest
in such cotton.
Cotton clerk means a person approved by CCC to assist producers in
preparing loan and loan deficiency documents.
Cotton means upland cotton and extra loan staple cotton meeting the
definition set forth in the definitions of ``upland cotton'' and
``extra long staple (ELS) cotton'' in this section, respectively, and
excludes cotton not meeting such definitions.
Extra long staple (ELS) cotton means any of the following varieties
of cotton which is produced in the United States and is ginned on a
roller gin:
(1) American-Pima;
(2) Sea Island;
(3) Sealand;
(4) All other varieties of the Barbadense species of cotton, and
any hybrid thereof; and
[[Page 37602]]
(5) Any other variety of cotton in which one or more of these
varieties predominate.
Financial institution means:
(1) A bank in the United States which accepts demand deposits; and
(2) An association organized pursuant to Federal or State law and
supervised by Federal or State banking authorities.
Form A loans means a nonrecourse loan executed on Form CCC--Cotton
A, Cotton Producer's Note and Security Agreement.
Form G loans means a nonrecourse loan to a CMA on eligible cotton
delivered to the CMA by eligible members of the CMA.
Loan servicing agent 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 loan servicing agent 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 reconcentration of cotton in accordance with
Sec. 1427.16;
(4) Accepting loan repayments;
(5) Handling documents involved with forfeiture of loan collateral
to CCC; and
(6) Providing loan, loan deficiency payment, and accounting data to
CCC for statistical purposes.
Lint cotton means cotton which has passed through the ginning
process.
Seed cotton means cotton which has not passed through the ginning
process.
Servicing agent bank means the bank designated as the financial
institution for a CMA or loan servicing agent.
Upland cotton means planted and stub cotton which is produced in
the United States from other than pure strain varieties of the
Barbadense species, any hybrid thereof, or any other variety of cotton
which one or more of these varieties predominate.
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 FSA or CCC to operate such system;
or
(3) Other such acceptable evidence of title, as determined by CCC.
Sec. 1427.4 Eligible producer.
(a) An eligible producer of a crop of cotton shall be a person
(i.e., an individual, partnership, association, corporation, CMA,
estate, trust, State or political subdivision or agency thereof, or
other legal entity) which:
(1) Produces such a crop of cotton as a landowner, landlord,
tenant, or sharecropper;
(2) Meets the requirements of this part; and
(3) Meets the requirements of parts 12 and 718 of this title, and
parts 1405 and 1412 of this chapter.
(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.
(c) A minor who is otherwise an eligible producer shall be eligible
to receive loans and loan deficiency payments only if the minor meets
one of the following requirements:
(1) The right of majority has been conferred on the minor by court
proceedings or by statute;
(2) A guardian has been appointed to manage the minor's property
and the applicable loan or loan deficiency payment documents are signed
by the guardian;
(3) Any note and security agreement or loan deficiency payment
application signed by the minor is co-signed by a person determined by
the county committee to be financially responsible; or
(4) A bond is furnished under which a surety guarantees to protect
CCC from any loss incurred for which the minor would be liable had the
minor been an adult.
(d) Two or more producers may obtain a single joint loan or loan
deficiency payment with respect to the eligible cotton if the cotton is
jointly owned by such producers. The cotton in a bale may have been
produced by two or more eligible producers on one or more farms if the
bale is not a repacked bale.
(e) Loans may be made to a warehouse operator who, in the capacity
of a producer, tenders to CCC warehouse receipts issued by such
warehouse operator on cotton produced by such warehouse operator only
in those States where the issuance and pledge of such warehouse
receipts are valid under State law.
(f) A CMA may obtain loans and loan deficiency payments on eligible
cotton on behalf of their members who are eligible to receive loans or
loan deficiency payments with respect to a crop of cotton. For purposes
of this subpart, the term ``producer'' includes a CMA.
Sec. 1427.5 General eligibility requirements.
(a) To receive loans or loan deficiency payments for a crop of
cotton, a producer must execute a note and security agreement or loan
deficiency payment application on or before May 31 of the year
following the year in which such crop is normally harvested.
(1) Form A loan documents or loan deficiency payment applications
must be signed by the producer and mailed or delivered to applicable
county office or loan servicing agent within 15 calendar days after the
producer signs such documents and within the period of loan
availability. A producer, except for a CMA, must request loans and loan
deficiency payments:
(i) At the county office which, in accordance with part 718 of this
title, is responsible for administering programs for the farm on which
the cotton was produced; or
(ii) From a loan servicing agent.
(2) Form G loan documents and requests for loan deficiency payments
by a CMA must be signed by the CMA and delivered to CCC or the
servicing agent bank within the period of loan availability.
(b) For a bale of cotton to be eligible for a loan or loan
deficiency payment, the bale must:
(1) Be tendered to CCC by an eligible producer;
(2) Be in existence and in good condition at the time of
disbursement of the loan or loan deficiency payment proceeds, except as
provided in Sec. 1427.23(f);
(3) Be represented by a warehouse receipt meeting the requirements
of Sec. 1427.11, except as provided in Sec. 1427.23(a)(4);
(4) Not be false-packed, water-packed, mixed-packed, re-ginned, or
repacked;
[[Page 37603]]
(5) Not be compressed to universal density at a warehouse where
side pressure has been applied;
(6) Not have been sold, nor any sales option on such cotton
granted, to a buyer under a contract which provides that the buyer may
direct the producer to pledge the cotton to CCC as collateral for a
loan or to obtain a loan deficiency payment;
(7) Not have been previously sold and repurchased or pledged as
collateral for a CCC loan and redeemed except as provided in
Sec. 1427.172(b)(4);
(8) Not be cotton for which a loan deficiency payment has been
previously made;
(9) Weigh at least 325 pounds net weight;
(10) Be packaged in materials which meet the specifications adopted
by the Joint Cotton Industry Bale Packaging Committee sponsored by the
National Cotton Council of America for the applicable crop year or
which are identified and approved by the Joint Cotton Industry Bale
Packaging Committee as experimental packaging materials for the
applicable crop year.
(i) Copies of the applicable crop year specifications for cotton
bale packaging materials published by the Joint Cotton Industry Bale
Packaging Committee are available upon request at the county office and
at the following address: Joint Cotton Industry Bale Packaging
Committee, National Cotton Council of America, P.O. Box 12285, Memphis,
Tennessee 38112. Copies may be inspected at the South Agriculture
Building, room 4089 A, 1400 Independence Avenue SW., Washington, DC,
between 8 a.m. and 4:30 p.m., Monday through Friday.
(ii) Information with respect to experimental packaging material
may be obtained from the Joint Cotton Industry Bale Packaging
Committee.
(11) Be ginned by a ginner:
(i) Who has entered the tare weight of the bale (bagging and ties
used to wrap the bale) on the gin bale tag or otherwise furnish
warehouse operator the tare weight; and
(ii) Who has entered into CCC-809, Cooperating Ginners' Bagging and
Bale Ties Certification and Agreement, or certified that the bale is
wrapped with bagging and bale ties meeting the requirements of
paragraph (b)(10) and;
(12) Be production from acreage that has been reported timely in
accordance with part 718 of this title.
(c) In addition to the requirements of paragraph (b), for ELS
cotton the bale must:
(1) Be a Grade and staple length specified in the schedule of loan
rates for ELS cotton;
(2) Not have a micronaire reading of 2.6 or less; and
(3) Not have noted on the classing record the presence of spindle
twist, preparation, grass, oil, and/or other extraneous matter.
(d) In addition to the requirements of paragraph (b), for upland
cotton the bale must:
(1) Have been produced on a farm with a production flexibility
contract in accordance with part 1412 of this chapter;
(2) Have been graded by using a High Volume Instrument;
(3) Be a grade, staple length, and leaf specified in the schedule
of premiums and discounts for grade, staple, and leaf for upland
cotton;
(4) Have a strength reading greater than 18 grams per tex, rounded
to whole grams;
(5) Have a micronaire specified in the schedule of micronaire
premiums and discounts for upland cotton;
(6) Have a extraneous matter specified in the schedule of discounts
for extraneous matter for upland cotton; and
(e)(1) To be eligible to receive loans or loan deficiency payments,
a producer must have the beneficial interest in the cotton which is
tendered to CCC for a loan or loan deficiency payment. The producer
must always have had the beneficial interest in the cotton unless,
before the cotton was harvested, the producer and a former producer
whom the producer tendering the cotton to CCC has succeeded had such an
interest in the cotton. Cotton obtained by gift or purchase shall not
be eligible to be tendered to CCC for loans or loan deficiency
payments. Heirs who succeed to the beneficial interest of a deceased
producer or who assume the decedent's obligations under an existing
loan shall be eligible for loans whether succession to the cotton
occurs before or after harvest as long as the heir otherwise complies
with the provisions of this part.
(2) A producer shall not be considered to have divested the
beneficial interest in the cotton if the producer retains control,
title, and risk of loss in the cotton, including the right to make all
decisions regarding the tender of the cotton to CCC for loans or loan
deficiency payments and does any or all of the following:
(i) Executes an option to purchase whether or not a payment is made
by the potential buyer for such option to purchase with respect to such
cotton if all other eligibility requirements are met and the option to
purchase contains the following provision:
Notwithstanding any other provision of this option to purchase,
title; risk of loss; and beneficial interest in the commodity, as
specified in 7 CFR part 1427, shall remain with the producer until
the buyer exercises this option to purchase the commodity. This
option to purchase shall expire, notwithstanding any action or
inaction by either the producer or the buyer, at the earlier of: (1)
The maturity of any Commodity Credit Corporation loan which is
secured by such commodity; (2) the date the Commodity Credit
Corporation claims title to such commodity; or (3) such other date
as provided in this option.
(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; or
(iii) Executes Form CCC-605, Designation of Agent. Such
designation:
(A) Allows the producer to authorize an agent or subsequent agent
to redeem all or a portion of the cotton pledged as collateral for a
loan;
(B) Identifies the warehouse receipts for which the authorization
is given;
(C) Expires upon maturity of the loan;
(D) Allows agents so designated by the producer to designate a
subsequent agent by endorsement of the form by the agent;
(E) Must be presented at the time the loan is repaid at the county
office or loan servicing agent where the loan originated if the agent
or subsequent agent exercises any authority granted by the producer;
and
(F) May be canceled by the producer by providing the custodial
office a written request signed and dated by the producer showing the
name of the agent, the loan number, and the bales applicable to the
Form CCC-605. The effective date of the cancellation shall be the date
the request is received by the custodial office.
(3) If loans or loan deficiency payments are made available to
producers through a CMA, the beneficial interest in the cotton must
always have been in the producer-member who delivered the cotton to the
CMA or its member cooperative, except as otherwise provided in this
section. Cotton delivered to such a CMA shall not be eligible to
receive a loan or a loan deficiency payment if the producer-member who
delivered the cotton does not retain the right to share in the proceeds
from the marketing of the cotton as provided in part 1425 of this
chapter.
(f) If the person tendering cotton for a loan or a loan deficiency
payment is a landowner, landlord, tenant, or
[[Page 37604]]
sharecropper, such cotton must represent such person's separate share
of the crop and must not have been acquired by such person directly or
indirectly from a landowner, landlord, tenant, or sharecropper.
(g) Each bale of upland cotton sampled by the warehouse operator
upon initial receipt which has not been sampled by the ginner must not
show more than one sample hole on each side of the bale. If more than
one sample is desired when the bale is received by the warehouse
operator, the sample shall be cut across the width of the bale, broken
in half or split lengthwise, and otherwise drawn in accordance with AMS
dimension and weight requirements. This requirement will not prohibit
sampling of the cotton at a later date if authorized by the producer.
Sec. 1427.6 Disbursement of loans.
(a) Disbursement of loans to individual producers may be made by:
(1) County offices;
(2) Loan servicing agent; or
(3) An approved cotton clerk who has entered into a written
agreement with CCC on Form CCC-810.
(b) Loan proceeds may be disbursed by CCC or a servicing bank agent
bank to CMA's.
(c) The loan documents shall not be presented for disbursement
unless the cotton covered by the mortgage or pledged as security is
eligible in accordance with Sec. 1427.5. If the cotton was not eligible
cotton at the time of disbursement, the total amount disbursed under
the loan, and charges plus interest shall be refunded promptly.
Sec. 1427.7 Maturity of loans.
(a) (1) Form A loans and Form G loans mature on demand by CCC and
no later than the last day of the 10th calendar month from the first
day of the month in which the loan or loan advance is disbursed.
(2) CCC may at any time accelerate the loan maturity date by
providing the producer notice of such acceleration at least 30 days in
advance of the accelerated maturity date.
(b) If the loan is not repaid by the loan maturity date, title to
the cotton shall vest in CCC the day after such maturity date and CCC
shall have no obligation to pay for any market value which such cotton
may have in excess of the amount of the loan, plus interest and
charges.
Sec. 1427.8 Amount of loan.
(a) The loan rates for crops of upland cotton and ELS cotton will
be determined and announced by CCC and made available at State and
county offices.
(b) The quantity of cotton which may be pledged as collateral for a
loan shall be the net weight of the eligible cotton as shown on the
warehouse receipt issued by an approved warehouse, except that in the
case of a bale which has a net weight of more than 600 pounds, the
weight to be used in determining the amount of the loan on the bale
shall be 600 pounds. Cotton pledged as collateral for loans on the
basis of reweights will not be accepted by CCC.
(c) The amount of the loan for each bale will be determined by
multiplying the net weight of the bale, as determined under paragraph
(b) by the applicable loan rate.
(d) CCC will not increase the amount of the loan made with respect
to any bale of cotton as a result of a redetermination of the quantity
or quality of the bale after it is tendered to CCC, except that if it
is established to the satisfaction of CCC that a bona fide error was
made with respect to the weight of the bale or the classification for
the bale, such error may be corrected.
Sec. 1427.9 Classification of cotton.
(a) References made to ``classification'' in this subpart shall
include grade, staple length, and micronaire, and for upland cotton,
leaf, extraneous matter, and strength readings. All cotton tendered for
loan must be classed by an Agricultural Marketing Service (AMS) Cotton
Classing Office (Cotton Classing Office) or other entity approved by
CCC and tendered on the basis of such classification.
(b) An AMS cotton classification or other entity's classification
acceptable by CCC showing the classification of a bale must be based
upon a representative sample drawn from the bale in accordance with
instructions to samplers drawing samples under the Smith-Doxey program.
(c) If the producer's cotton has not been classed or sampled in a
manner acceptable by CCC, the warehouse shall sample such cotton and
forward the samples to the Cotton Classing Office or other entity
approved by CCC serving the district in which the cotton is located.
Such warehouse must be licensed by AMS or be approved by CCC to draw
samples for submission to the Cotton Classing Office or other entity
approved by CCC.
(d) If a sample has been submitted for classification, another
sample shall not be drawn, except for a review classification.
(e) Where review classification is not involved, if through error
or otherwise two or more samples from the same bale are submitted for
classification, the loan rate shall be based on the classification
having the lower loan value.
(f) If a review classification is obtained, the loan value of the
cotton represented thereby will be based on such review classification.
Sec. 1427.10 Approved storage.
(a) Eligible cotton may be pledged as collateral for loans only if
stored at warehouses approved by CCC.
(1) Persons desiring approval of their facilities should
communicate with the Kansas City Commodity Office, P.O. Box 419205,
Kansas City, Missouri 64141-6205.
(2) The names of approved warehouses may be obtained from the
Kansas City Commodity Office or from State or county offices.
(b) When the operator of a warehouse receives notice from CCC that
a loan has been made by CCC on a bale of cotton, the operator shall, if
such cotton is not stored within the warehouse, promptly place such
cotton within such warehouse.
(c) Warehouse charges paid by a producer will not be refunded by
CCC.
(d) The approved storage requirements provided in this section may
be waived by CCC if the producer requests a loan deficiency payment
pursuant to the loan deficiency payment provisions contained in
Sec. 1427.23.
Sec. 1427.11 Warehouse receipt and insurance.
(a) Producers may obtain loans on eligible cotton represented by
warehouse receipts only if the warehouse receipts meet the definition
of a warehouse receipt and provide for delivery of the cotton to bearer
or are properly assigned by endorsement in blank, so as to vest title
in the holder of the receipt or are otherwise are acceptable to CCC.
Any open yard endorsement on the warehouse receipt must have been
rescinded. The warehouse receipt must:
(1) Contain the gin bale number;
(2) Contain the warehouse receipt number;
(3) Show that the cotton is covered by fire insurance; and
(4) Be dated on or prior to the date the producer signs the note
and security agreement.
(b) Warehouse receipts, in accordance with Sec. 1427.3, when issued
as block warehouse receipts will be accepted when authorized by CCC
only if the owner of the warehouse issuing the block warehouse receipt
owns the cotton represented by the block warehouse receipt and the
warehouse is
[[Page 37605]]
not licensed under the U.S. Warehouse Act.
(c)(1) Each receipt must set out in its written or printed terms
the tare and the net weight of the bale represented thereby. The net
weight shown on the warehouse receipt shall be the difference between
the gross weight as determined by the warehouse at the warehouse site
and the tare weight. The warehouse receipt may show the net weight
established at a gin if:
(i) The gin is in the immediate vicinity of the warehouse and is
operated under common ownership with such warehouse or in any other
case in which the showing of gin weights on the warehouse receipts is
approved by CCC; and
(ii) Gin weights are permitted by the licensing authority for the
warehouse.
(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.
(d) If warehouse storage charges have been paid, the receipt must
show that date through which the storage charges have been paid.
(e) If warehouse receiving charges have been paid or waived, the
warehouse receipt must show such fact. Except for bales stored in the
States of Alabama, Florida, Georgia, North Carolina, South Carolina,
and Virginia, if receiving charges due on the bale include a charge, if
any, for a new set of ties for compressing flat bales tied with ties
which cannot be reused, the warehouse receipt must indicate the
receiving charges and include a charge for new set of ties. If the bale
is stored at a warehouse not having compress facilities and bales
shipped from the warehouse are normally compressed in transit, the
warehouse receipt must show the bale ties are not suitable for reuse
when the bale is compressed and charges will be assessed by the nearest
compress in line of transit for furnishing new bale ties.
(f) In any case where loan collateral is forfeited, any unpaid
storage or receiving charges will be paid to the warehouse by CCC after
loan maturity or as soon as practicable after the cotton is ordered
shipped by CCC.
(g) The warehouse receipt must show the compression status of the
bale; i.e., flat, modified flat, standard, gin standard, standard
density (short), gin universal, universal density (short), 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. 1427.12 Liens.
If there are any liens or encumbrances on the cotton tendered as
collateral for a loan, waivers that fully protect the interest of CCC
must be obtained before disbursement even though the liens or
encumbrances are satisfied from the loan proceeds. No additional liens
or encumbrances shall be placed on the cotton after the loan is
approved.
Sec. 1427.13 Fees, charges and interest.
(a) A producer shall pay a nonrefundable loan service fee to CCC
or, if applicable, to a loan servicing agent, at a rate determined by
CCC. Any such fee shall be in addition to any cotton clerk fee paid to
a cotton clerk in accordance with paragraph (b) of this section. The
amount of such fees is available in State and county offices and are
shown on the note and security agreement and shall be deducted from the
loan proceeds.
(b) Cotton clerks may only charge fees for the preparation of loan
or loan deficiency payment documents at the rate determined by CCC.
(1) Such fees may be deducted from the loan or loan deficiency
payment proceeds instead of the fees being paid in cash.
(2) The amount of such fees is available in State and county
offices and is shown on the note and security agreement.
(c) Interest which accrues with respect to a loan shall be
determined in accordance with part 1405 of this chapter. All or a
portion of such interest may be waived with respect to a quantity of
upland cotton which has been redeemed in accordance with Sec. 1427.19
at a level which is less than the principal amount of the loan plus
charges and interest.
(d) For each crop of upland cotton, the producer, as defined in the
Cotton Research and Promotion Act (7 U.S.C. Chapter 2101), shall remit
to CCC an assessment which shall be transmitted by CCC to the Cotton
Board and shall be deducted from the:
(1) Loan proceeds for a crop of cotton and shall be at a rate equal
to one dollar per bale plus up to one percent of the loan amount; and
(2) Loan deficiency payment proceeds for a crop of cotton and shall
be at a rate equal to up to one percent of the loan deficiency payment
amount.
(e) If the producers elects to forfeit the loan collateral to CCC,
the producer shall pay to CCC, at the rates that are specified in the
storage agreement between the warehouse and CCC, the following accrued
warehouse charges:
(1) All warehouse storage charges associated with the forfeited
cotton that accrued before the period the cotton was pledged as
collateral for the loan; and
(2) Any accrued warehouse receiving charges associated with the
forfeited cotton, including, if applicable, charges for new ties as
specified in Sec. 1427.11.
Sec. 1427.14 [Reserved]
Sec. 1427.15 Special procedure where funds are advanced.
(a) This special procedure is provided to assist persons or firms
which, in the course of their regular business of handling cotton for
producers, have made advances to eligible producers on eligible cotton
to be placed under loan or to receive a loan deficiency payment. A
person, firm, or financial institution which has made advances to
eligible producers on eligible cotton may also obtain reimbursement for
the amounts advanced under this procedure.
(b) This special procedure shall apply only:
(1) If such person or firm is entitled to reimbursement from the
proceeds of the loans or loan deficiency payments for the amounts
advanced and has been authorized by the producer to deliver the loan or
loan deficiency payment documents to a county office for disbursement
of the loans or loan deficiency payments; and
(2) To loan or loan deficiency payment documents covering cotton on
which a person or firm has advanced to the producers, including
payments to prior lienholders and other creditors, the note amounts
shown on the Form A loan, except for:
(i) Authorized cotton clerk fees;
(ii) The research and promotion fee to be collected for
transmission to the Cotton Board by CCC; and
(iii) CCC loan service charges.
(c)(1) All loan or loan deficiency payment documents shall be
mailed or delivered to the appropriate county office and shall show the
entire proceeds of the loans or loan deficiency
[[Page 37606]]
payments, except for CCC loan service charges and research and
promotion fees, for disbursement to:
(i) The financial institution which is to allow credit to the
person or firm which made the loan or loan deficiency payment advances
or to such financial institution and such person or firm as joint
payees; or
(ii) The person, firm, or financial institution which made the loan
or loan deficiency payment advances to the producers.
(2) The documents shall be accompanied by Form CCC-825, Transmittal
Schedule of Loan and Loan Deficiency Payment Documents, in original and
two copies, numbered serially for each county office by the person,
firm, or financial institution which made the loan or loan deficiency
payment advance. The Form CCC-825 shall show the amounts invested by
the person, firm, or financial institution in the loans or loan
deficiency payments.
(3) Upon receipt of the loan or loan deficiency payment documents
and Form CCC-825, the county office will stamp one copy of the Form
CCC-825 to indicate receipt of the documents and return this copy to
the person, firm, or financial institution.
(d) County offices will review the loan or loan deficiency payment
documents prior to disbursement and will return to the person, firm, or
financial institution any documents determined not to be acceptable
because of errors or illegibility. County offices will disburse the
loans or loan deficiency payments for which loan or loan deficiency
payment documents are acceptable by issuance of one check to the payee
indicated on the applicable form and will mail the check to the address
shown for such payee on the applicable form with a copy of Form CCC-
825. The Form CCC-825 will show the date of disbursement by a county
office and amount of interest earned by the person, firm, or financial
institution.
(e) The person, firm, or financial institution shall be deemed to
have invested funds in the loans or loan deficiency payment as of the
date loan or loan deficiency payment documents acceptable to CCC were
delivered to a county office or, if received by mail, the date of
mailing as indicated by postmark or the date of receipt in a county
office if no postmark date is shown. Patron postage meter date stamp
will not be recognized as a postmark date.
(f) Interest will be computed on the total amount invested by the
person, firm, or financial institution in the loan or loan deficiency
payment represented by accepted documents from and including the date
of investment of funds by the person, firm, or financial institution
to, but not including, the date of disbursement by a county office.
(1) Interest will be paid at the rate in effect for CCC loans as
provided in part 1405 of this chapter.
(2) Interest earned by the person, firm, or financial institution
on the investment in loans disbursed during a month will be paid by
county offices after the end of the month.
Sec. 1427.16 Reconcentration of cotton.
(a) CCC may under certain conditions, before loan maturity,
compress, store, insure, or reinsure the cotton against any risk, or
otherwise handle or deal with the cotton as it may deem necessary or
appropriate for the purpose of protecting the interest therein of the
producer or CCC.
(b) CCC may reconcentrate the cotton pledged for the loan from one
CCC-approved warehouse to another with the written consent of the
producer and upon the request of the local warehouse and certification
that there is congestion and lack of storage facilities in the area.
However, if CCC determines such loan cotton is improperly warehoused
and subject to damage, or if any of the terms of the loan agreement are
violated, or if carrying charges are substantially in excess of the
average of carrying charges available elsewhere and the local
warehouse, after notice, declines to reduce such charges, such written
consent need not be obtained.
(1) The county office, loan servicing agent, or CMA shall arrange
for reconcentration of the cotton under the direction of the Kansas
City Commodity Office.
(2) Any fees, costs, or expenses incident to such actions shall be
charges against the cotton.
(3) After the cotton is reconcentrated, the Kansas City Commodity
Office shall obtain new warehouse receipts, allocate to individual
bales, shipping and other charges incurred against the cotton, and
return new warehouse receipts and reconcentration charges applicable to
each bale to the county office, loan servicing agent, or CMA. Such
reconcentration charges shall be added to bale loan amounts and must be
repaid for bales redeemed from loan.
Sec. 1427.17 Custodial offices.
Forms CCC-Cotton A and CCC-Cotton A-1, collateral warehouse
receipts and related documents will be maintained in the custody of
CCC, the county office, the loan servicing agent, or the servicing
agent bank, whichever disbursed the loan evidenced by such documents.
Sec. 1427.18 Liability of the producer.
(a)(1) If a producer makes any fraudulent representation in
obtaining a loan or loan deficiency payment or in maintaining or
settling a loan, or disposes of or moves the loan collateral without
the prior written approval of CCC, such loan or loan deficiency payment
shall be payable upon demand by CCC. The producer shall be liable for:
(i) The amount of the loan or loan deficiency payment;
(ii) Any additional amounts paid by CCC with respect to the loan or
loan deficiency payment;
(iii) All other costs which CCC would not have incurred but for the
fraudulent representation or the unauthorized disposition or movement
of the loan collateral;
(iv) Applicable interest on such amounts;
(v) Liquidated damages in accordance with paragraph (e); and
(vi) With regard to amounts due for a loan, the payment of such
amounts may not be satisfied by the forfeiture of loan collateral to
CCC of cotton with a settlement value that is less than the total of
such amounts or by repayment of such loan at the lower loan repayment
rate as prescribed in Sec. 1427.19.
(2) Notwithstanding any provision of the note and security
agreement, if a producer has made any such fraudulent representation or
if the producer has disposed of, or moved, the loan collateral without
prior written approval from CCC, the value of such collateral delivered
to or acquired by CCC shall be equal to the sales price of the cotton
less any costs incurred by CCC in completing the sale.
(b) If the amount disbursed under a loan, or in settlement thereof,
or loan deficiency payment exceeds the amount authorized by this
subpart, the producer shall be liable for repayment of such excess,
plus interest. In addition, the commodity pledged as collateral for
such loan shall not be released to the producer until such excess is
repaid.
(c) If the amount collected from the producer in satisfaction of
the loan or loan deficiency payment is less than the amount required in
accordance with this subpart, the producer shall be personally liable
for repayment of the amount of such deficiency plus applicable
interest.
(d) If more than one producer executes a note and security
agreement or loan deficiency payment application with CCC, each such
producer shall be jointly and severally liable for the violation of the
terms and conditions of the note and security agreement or loan
deficiency payment application and the
[[Page 37607]]
regulations set forth in this subpart. Each such producer shall also
remain liable for repayment of the entire loan or loan deficiency
payment amount until the loan is fully repaid without regard to such
producer's claimed share in the cotton pledged as collateral for the
loan or for which the loan deficiency payment was made. In addition,
such producer may not amend the note and security agreement or loan
deficiency payment application with respect to the producer's claimed
share in such cotton after execution of the note and security agreement
or loan deficiency payment application by CCC.
(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 CCC 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 cotton 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 to 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) For first and second offenses, if CCC determines that a
producer acted in good faith when the violation occurred, CCC shall:
(1) Require repayment of the loan principal and charges, plus
interest applicable to the loan quantity affected by the violation or
for loan deficiency payment, the loan deficiency payment amount
applicable to the loan deficiency quantity involved with the violation,
and charges plus interest from the date the loan deficiency payment was
made; and
(2) Assess liquidated damages in accordance with paragraph (e);
(3) If the producer fails to pay such amounts within 30 calendar
days from the date of notification, CCC shall call the applicable loan
involved in the violation and require repayment of any market gain
previously realized for the applicable loan, plus any interest
previously waived and any storage paid by CCC, or for loan deficiency
payment, require repayment of the loan deficiency payment and charges
plus interest from the date the loan deficiency payment was made.
(g) For cases other than first or second offenses, or any offense
for which CCC cannot determine good faith when the violation occurred,
CCC shall:
(1) Assess liquidated damages in accordance with paragraph (e); and
(2) Call the applicable loan involved in the violation and require
repayment of any market gain previously realized for the applicable
loan, plus any interest previously waived and any storage paid by CCC,
and with respect to a loan deficiency payment, require repayment of the
loan deficiency payment and charges plus interest from the date the
loan deficiency payment was made.
(h) If the county committee acting on behalf of CCC determines that
the producer has committed a violation in accordance with paragraph
(e), the county committee shall notify the producer in writing that:
(1) The producer has 30 calendar days to provide evidence and
information regarding the circumstances which caused the violation, to
the county committee; and
(2) Administrative actions will be taken in accordance with
paragraph (f) or (g).
(i) If the loan is called in accordance with this section, the
producer must repay the loan at principal and charges, plus interest
and may not repay the loan at the lower of the loan repayment rate in
accordance with Sec. 1427.19 or utilize the provisions of part 1401 of
this chapter with respect to such loan.
(j) Any or all of the liquidated damages assessed in accordance
with the provisions of paragraph (e) may be waived as determined by
CCC.
Sec. 1427.19 Repayment of loans.
(a) Warehouse receipts will not be released except as provided in
this section.
(b) A producer or agent or subsequent agent authorized on Form CCC-
605 may redeem one or more bales of cotton pledged as collateral for a
loan by payment to CCC of an amount applicable to the bales of cotton
being redeemed determined in accordance with this section. CCC, upon
proper payment for the amount due, shall release the warehouse receipts
applicable to such cotton.
(c) A producer or agent or subsequent agent authorized on Form CCC-
605, may repay the loan amount for one or more bales of cotton pledged
as collateral for a loan:
(1) For upland cotton, at a level that is the lesser of:
(i) The loan level and charges, plus interest determined for such
bales; or
(ii) The adjusted world price, as determined by CCC in accordance
with Sec. 1427.25, in effect on the day the repayment is received by
the county office, loan servicing agent, or servicing agent bank that
disbursed the loan.
(2) For ELS cotton, by repaying the loan amount and charges, plus
interest determined for such bales.
(d) CCC shall determine and publicly announce the adjusted world
price for each crop of upland cotton on a weekly basis.
(e) The difference between the loan level, excluding charges and
interest, and the loan repayment level is the market gain. The total
amount of any market gain realized by a person is subject to part 1400
of this chapter.
(f) Repayment of loans will not be accepted after CCC acquires
title to the cotton in accordance with Sec. 1427.7.
(g) Notwithstanding any other provision of this section, CCC will
not accept repayment of upland cotton at a rate based on the adjusted
world price 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 non-workday, such loan repayments 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).
(h) If the upland cotton pledged as collateral is eligible to be
repaid at a rate less than the loan level and charges, plus interest,
and the adjusted world price determined in accordance with Sec. 1427.25
is:
(1) Below the national average loan rate for upland cotton, CCC
will pay at the time of loan repayment to the producer or agent or
subsequent agent authorized on Form CCC-605 the warehouse storage
charges which have accrued, with respect to the cotton pledged as
collateral for such loan, during the period the cotton was pledged for
loan;
[[Page 37608]]
(2) Above the national average loan rate by less than the sum of
the accrued interest and warehouse storage charges, that accrued during
the period the cotton was pledged for loan, CCC will pay at the time of
loan repayment to the producer or agent or subsequent agent authorized
on Form CCC-605 that portion of the warehouse storage charges, that
accrued during the period the cotton was pledged for loan, that are
determined to be necessary to permit the loan to be repaid at the
adjusted world price without regard to any warehouse charges that
accrued before the cotton was pledged for loan; or
(3) Above the national average loan rate by as much as or more than
the sum of the accrued interest and warehouse storage charges that
accrued during the period the cotton was pledged for loan, CCC shall
not pay any of the accrued warehouse storage charges.
Sec. 1427.20 Handling payments and collections not exceeding $9.99.
To avoid the administrative costs of making small payments and
handling small accounts, amounts of $9.99 or less will be paid to the
producer only upon the producer's request. Deficiencies of $9.99 or
less, including interest, may be disregarded unless demand for payment
is made by CCC.
Sec. 1427.21 Settlement.
(a) The settlement of loans shall be made by CCC on the basis of
the quality and quantity of the cotton delivered to CCC by the producer
or acquired by CCC.
(b) Settlements made by CCC with respect to eligible cotton which
are acquired by CCC which are stored in an approved warehouse shall be
made on the basis of the entries set forth on the applicable warehouse
receipt and other accompanying documents.
(c) If a producer does not pay to CCC the total amount due in
accordance with a loan, CCC shall take title to the cotton in
accordance with Sec. 1427.7(b).
Sec. 1427.22 Death, incompetency, or disappearance.
In the case of death, incompetency, or disappearance of any
producer who is entitled to the payment of any proceeds in settlement
of a loan or loan deficiency payment, payment shall, upon proper
application to the county office or loan servicing agent which
disbursed the loan or loan deficiency payment, be made to the person or
persons who would be entitled to such producer's payment as provided in
the regulations entitled Payment Due Persons Who Have Died,
Disappeared, or Have Been Declared Incompetent, part 707 of this title.
Sec. 1427.23 Cotton loan deficiency payments.
(a) Producers may obtain loan deficiency payments for 1996 through
2002 crops of upland cotton in accordance with this section.
(b) In order to be eligible to receive such loan deficiency
payments, the producer of the upland cotton must:
(1) Comply with all of the upland cotton loan eligibility
requirements in accordance with this subpart;
(2) Agree to forgo obtaining such loans;
(3) File a request for payment for a quantity of eligible cotton in
accordance with Sec. 1427.5(a) on Form CCC-Cotton AA, Form CCC-709, or
other form approved by CCC;
(4) Provide warehouse receipts or, as determined by CCC, a list of
gin bale numbers for such cotton showing, for each bale, the net weight
established at the gin;
(5) Provide classing information for such quantity in accordance
with Sec. 1427.9; and
(6) Otherwise comply with all program requirements.
(c) The loan deficiency payment applicable to a crop of cotton
shall be computed by multiplying the applicable loan deficiency payment
rate, as determined in accordance with paragraph (d) of this section,
by the quantity of the crop the producer is eligible to pledge as
collateral for a loan.
(d) The loan deficiency payment rate for a crop of upland cotton
shall be the amount by which the loan rate determined for a bale of
such crop exceeds the adjusted world price, as determined by CCC in
accordance with Sec. 1427.25, in effect on the day the request is
received by the county office, loan servicing agent, or servicing agent
bank.
(e) The total amount of any loan deficiency payments that a person
may receive is subject to part 1400 of this chapter.
(f) If the producer enters into an agreement with CCC on or before
the date of ginning a quantity of eligible upland 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) 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 non-workday, 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. 1427.24 [Reserved]
Sec. 1427.25 Determination of the prevailing world market price and
the adjusted world price for upland cotton.
(a) The prevailing world market price for upland cotton shall be
determined by CCC as follows:
(1) During the period when only one daily price quotation is
available for each growth quoted for Middling one and three-thirty-
second inch (M 1\3/32\ inch) cotton C.I.F. (cost, insurance, and
freight) northern Europe, the prevailing world market price for upland
cotton shall be based upon the average of the quotations for the
preceding Friday through Thursday for the 5 lowest-priced growths of
the growths quoted for M 1\3/32\ inch cotton C.I.F. northern Europe.
(2) During the period when both a price quotation for cotton for
shipment no later than August/September of the current calendar year
(current shipment price) and a price quotation for cotton for shipment
no earlier than October/November of the current calendar year (forward
shipment price) are available for growths quoted for M 1\3/32\ inch
cotton C.I.F. northern Europe, the prevailing world market price for
upland cotton shall be based upon the following: Beginning with the
first week covering the period Friday through Thursday which includes
April 15 or, if both the average of the current shipment prices for the
preceding Friday through Thursday for the 5 lowest-priced growths of
the growths quoted for M 1\3/32\ inch cotton C.I.F. northern Europe
(Northern Europe current price) and the average of the forward shipment
prices for the preceding Friday through Thursday for the 5 lowest-
priced growths of the growths quoted for M 1\3/32\ inch cotton C.I.F.
northern Europe (Northern Europe forward price) are not available
during that period, beginning with the first week covering the period
Friday through Thursday after the week which includes April 15 in which
both the Northern Europe current price and
[[Page 37609]]
the Northern Europe forward price are available, the prevailing world
market price for upland cotton shall be based upon the result
calculated by the following procedure:
(i) Weeks 1 and 2: (2 x Northern Europe current price) + Northern
Europe forward price/3.
(ii) Weeks 3 and 4: Northern Europe current price + Northern Europe
forward price/2.
(iii) Weeks 5 and 6: Northern Europe current price + (2 x
Northern Europe forward price)/3.
(iv) Week 7 through July 31: Northern Europe forward price.
(3) The prevailing world market price for upland cotton as
determined in accordance with paragraphs (a)(1) or (a)(2) of this
section shall hereinafter be referred to as the ``Northern Europe
price.''
(4) If quotes are not available for one or more days in the 5-day
period, the available quotes during the period will be used. If no
quotes are available during the Friday through Thursday period, the
prevailing world market price shall be based upon the best available
world price information, as determined by CCC.
(b) The prevailing world market price for upland cotton, adjusted
in accordance with paragraph (c) of this section (adjusted world
price), shall be applicable to the 1996 through 2002 crops of upland
cotton.
(c) The adjusted world price for upland cotton shall equal the
Northern Europe price as determined in accordance with paragraph (a) of
this section, adjusted as follows:
(1) The Northern Europe price shall be adjusted to average
designated U.S. spot market location by deducting the average
difference in the immediately preceding 52-week period between:
(i)(A) The average of price quotations for the U.S. Memphis
territory and the California/Arizona territory as quoted each Thursday
for M 1\3/32\ inch cotton C.I.F. northern Europe during the period when
only one daily price quotation for such growths is available, or
(B) The average of the current shipment prices for U.S. Memphis
territory and the California/Arizona territory as quoted each Thursday
for M 1\3/32\ inch cotton C.I.F. northern Europe during the period when
both current shipment prices and forward shipment prices for such
growths are available; and
(ii) The average price of M 1\3/32\ inch (micronaire 3.5 through
3.6 and 4.3 through 4.9, strength 24 through 25 grams per tex) cotton
as quoted each Thursday in the designated U.S. spot markets.
(2) The price determined in accordance with paragraph (c)(1) of
this section shall be adjusted to reflect the price of Strict Low
Middling (SLM) 1\1/16\ inch (micronaire 3.5 through 3.6 and 4.3 through
4.9, strength 24 through 25 grams per tex) cotton (U.S. base quality)
by deducting the difference, as announced by CCC, between the
applicable loan rate for a crop of upland cotton for M 1\3/32\ inch
(micronaire 3.5 through 3.6 and 4.3 through 4.9, strength 24 through 25
grams per tex) cotton and the loan rate for a crop of upland cotton of
the U.S. base quality.
(3) The price determined in accordance with paragraph (c)(2) shall
be adjusted to average U.S. location by deducting the difference
between the average loan rate for a crop of upland cotton of the U.S.
base quality in the designated U.S. spot markets and the corresponding
crop year national average loan rate for a crop of upland cotton of the
U.S. base quality, as announced by CCC.
(4)(i) The prevailing world market price, as adjusted in accordance
with paragraphs (c)(1) through (c)(3), may be further adjusted if it is
determined that:
(A) Such price is less than 115 percent of the current crop-year
loan level for U.S. base quality cotton, and
(B) The Friday through Thursday average price quotation for the
lowest-priced United States growth as quoted for M 1\3/32\ inch cotton
C.I.F. northern Europe (U.S. Northern Europe price) is greater than the
average of the quotations for the preceding Friday through Thursday for
the 5 lowest-priced growths of the growths quoted for M 1\3/32\ inch
cotton C.I.F. northern Europe.
(ii) During the period when both current shipment prices and
forward shipment prices are available for growths quoted for M 1\3/32\
inch cotton C.I.F. northern Europe, the U.S. Northern Europe price
provided in paragraph (c)(4)(i)(B) shall be determined as follows:
Beginning with the week covering the period Friday through Thursday
which includes April 15 or, if both the average of the current shipment
prices for the preceding Friday through Thursday of the lowest-priced
United States growth as quoted for M 1\3/32\ inch cotton C.I.F.
northern Europe (U.S. Northern Europe current price) and the average of
the forward shipment prices for the preceding Friday through Thursday
of the lowest-priced United States growth quoted for M 1\3/32\ inch
cotton C.I.F. northern Europe (U.S. Northern Europe forward price) are
not available during that period, beginning with the first week
covering the period Friday through Thursday after the week which
includes April 15 in which both the average of the U.S. Northern Europe
current price and the average of the U.S. Northern Europe forward price
are available, the result calculated by the following procedure:
(A) Weeks 1 and 2: (2 x U.S. Northern Europe current price)+(U.S.
Northern Europe forward price) /3.
(B) Weeks 3 and 4: (U.S. Northern Europe current price)+(U.S.
Northern Europe forward price) /2.
(C) Weeks 5 and 6: (U.S. Northern Europe current price)+(2 x U.S.
Northern Europe forward price) /3.
(D) Week 7 through July 31: U.S. Northern Europe forward price.
(iii) In determining the U.S. Northern Europe price as provided in
paragraphs (c)(4)(i)(B) and (c)(4)(ii):
(A) If quotes for either the U.S. Memphis territory or the
California/Arizona territory are not available for any week, the
available quotations will be used.
(B) If quotes are not available for one or more days in the 5-day
period, the available quotes during the period will be used.
(C) If no quotes are available for either the U.S. Memphis
territory or the California/Arizona territory during the Friday through
Thursday period, no adjustment will be made.
(iv)(A) The adjustment shall be based on some or all of the
following data, as available:
(1) The U.S. share of world exports;
(2) The current level of cotton export sales and shipments; and
(3) Other data determined by CCC to be relevant in establishing an
accurate prevailing world market price, adjusted to United States
quality and location.
(B) The adjustment may not exceed the difference between the U.S.
Northern Europe price, as determined in paragraphs (c)(4)(i) through
(c)(4)(iii), and the Northern Europe price, as determined in paragraph
(a).
(d) In determining the average difference in the 52-week period as
provided in paragraph (c)(1):
(1) If the difference between the average price quotations for the
U.S. Memphis territory and the California/Arizona territory as quoted
for M 1\3/32\ inch cotton C.I.F. northern Europe and the average price
of M 1\3/32\ inch (micronaire 3.5 through 3.6 and 4.3 through 4.9,
strength 24 through 25 grams per tex) cotton as quoted each Thursday in
the designated U.S. spot markets for any week is:
(i) More than 115 percent of the estimated actual cost associated
with transporting U.S. cotton to northern Europe, then 115 percent of
such actual
[[Page 37610]]
cost shall be substituted in lieu thereof for such week.
(ii) Less than 85 percent of the estimated actual cost associated
with transporting U.S. cotton to northern Europe, then 85 percent of
such actual cost shall be substituted in lieu thereof for such week.
(2) If a Thursday price quotation for either the U.S. Memphis
territory or the California/Arizona territory as quoted for M 1\3/32\
inch cotton C.I.F. northern Europe is not available for any week, CCC:
(i) May use the available northern Europe quotation to determine
the difference between the average price quotations for the U.S.
Memphis territory and the California/Arizona territory as quoted for M
1\3/32\ inch cotton C.I.F. northern Europe and the average price of M
1\3/32\ inch (micronaire 3.5 through 3.6 and 4.3 through 4.9, strength
24 through 25 grams per tex) cotton as quoted each Thursday in the
designated U.S. spot markets for that week, or
(ii) May not take that week into consideration.
(3) If Thursday price quotations for any week are not available for
either,
(i) both the Memphis territory and the California/Arizona territory
as quoted for M 1\3/32\ inch cotton C.I.F. northern Europe, or
(ii) the average price of M 1\3/32\ inch (micronaire 3.5 through
3.6 and 4.3 through 4.9, strength 24 through 25 grams per tex) cotton
as quoted in the designated U.S. spot markets, that week will not be
taken into consideration.
(e) The adjusted world price for upland cotton as determined in
accordance with paragraph (c), and the amount of the additional
adjustment as determined in accordance with paragraph (f), shall be
announced, to the extent practicable, at 5 p.m. eastern time each
Thursday continuing through the last Thursday of July 2003. In the
event that Thursday is a non-workday, the determination will be
announced, to the extent practicable, at 8 a.m. eastern time the next
workday. The adjusted world price and the amount of the additional
adjustment will be effective upon announcement and will remain in
effect for a period as announced by CCC.
(f)(1)(i) The adjusted world price, as determined in accordance
with paragraph (c), shall be subject to further adjustments as provided
in this section with respect to all qualities of upland cotton eligible
for loan except the following grades of upland cotton with a staple
length of 1\1/16\ inch or longer:
(A) White Grades--Strict Middling and better, leaf 1 through leaf
6; Middling, leaf 1 through leaf 6; Strict Low Middling, leaf 1 through
leaf 6; and Low Middling, leaf 1 through leaf 5;
(B) Light Spotted Grades--Strict Middling and better, leaf 1
through leaf 5; Middling, leaf 1 through leaf 5; and Strict Low
Middling, leaf 1 through leaf 4; and
(C) Spotted Grades--Strict Middling and better, leaf 1 through leaf
2; and
(ii) Grade and Staple length must be determined in accordance with
Sec. 1427.9. If no such official classification is presented, the
coarse count adjustment shall not be made.
(2) The adjustment for upland cotton provided for by paragraph
(f)(1) shall be determined by deducting from the adjusted world price:
(i) The difference between the Northern Europe price, and
(A) During the period when only one daily price quotation for each
growth quoted for ``coarse count'' cotton C.I.F. northern Europe is
available the average of the quotations for the corresponding Friday
through Thursday for the three lowest-priced growths of the growths
quoted for ``coarse count'' cotton C.I.F. northern Europe; or
(B) During the period when both current shipment prices and forward
shipment prices are available for the growths quoted for ``coarse
count'' cotton C.I.F. northern Europe, the result calculated by the
following procedure: Beginning with the first week covering the period
Friday through Thursday which includes April 15 or, if both the average
of the current shipment prices for the preceding Friday through
Thursday for the three lowest-priced growths of the growths quoted for
``coarse count'' cotton C.I.F. northern Europe (Northern Europe coarse
count current price) and the average of the forward shipment prices for
the preceding Friday through Thursday for the three lowest-priced
growths of the growths quoted for ``coarse count'' cotton C.I.F.
northern Europe (Northern Europe coarse count forward price) are not
available during that period, beginning with the first week covering
the period Friday through Thursday after the week which includes April
15 in which both the Northern Europe coarse count current price and the
Northern Europe coarse count forward price are available:
(1) Weeks 1 and 2: (2 `` x '' Northern Europe coarse count current
price) + Northern Europe coarse count forward price/3;
(2) Weeks 3 and 4: Northern Europe coarse count current price +
Northern Europe coarse count forward price/2;
(3) Weeks 5 and 6: Northern Europe coarse count current price + (2
x Northern Europe coarse count forward price)/3; and
(4) Week 7 through July 31: The Northern Europe coarse count
forward price, minus:
(ii) The difference between the applicable loan rate for a crop of
upland cotton for M 1\3/32\ inch (micronaire 3.5 through 3.6 and 4.3
through 4.9, strength 24 through 25 grams per tex) cotton and the loan
rate for a crop of upland cotton for SLM 1\1/32\ inch (micronaire 3.5
through 3.6 and 4.3 through 4.9, strength 24 through 25 grams per tex)
cotton.
(iii) The result of the calculation as determined in accordance
with this paragraph (f)(2) shall hereinafter be referred to as the
``Northern Europe coarse count price.''
(3) With respect to the determination of the Northern Europe coarse
count price in accordance with paragraph (f)(2)(i):
(i) If no quotes are available for one or more days of the 5-day
period, the available quotes will be used;
(ii) If quotes for three growths are not available for any day in
the 5-day period, that day will not be taken into consideration; and
(iii) If quotes for three growths are not available for at least
three days in the 5-day period, that week will not be taken into
consideration, in which case the adjustment determined in accordance
with paragraph (f)(2) for the latest available week will continue to be
applicable.
(g) If the 6-week transition periods from using current shipment
prices to using forward shipment prices in the determination of the
Northern Europe price in accordance with paragraph (a)(2), and the
Northern Europe coarse count price in accordance with paragraph
(f)(2)(i)(B) do not begin at the same time, CCC shall use either
current shipment prices, forward shipment prices, or any combination
thereof, to determine the Northern Europe price and/or the Northern
Europe coarse count price used in the determination of the adjustment
for upland cotton provided for by paragraph (f)(1) and determined in
accordance with paragraph (f)(2), in order to prevent distortions in
such adjustment.
(h) The adjusted world price, determined in accordance with
paragraph (c), shall be subject to further adjustments, as determined
by CCC based upon the Schedule of Premiums and Discounts and the
location differentials applicable to each warehouse location as
announced in accordance with the loan program for a crop of upland
cotton.
[[Page 37611]]
Sec. 1427.26 Paperwork Reduction Act assigned numbers.
The information collection requirements contained in these
regulations have been submitted to the Office of Management and Budget
in accordance with 44 U.S.C. chapter 35 and OMB Control number 0560-
0040, 0560, 0074, 0560-0027, and 0560-0054 was assigned.
26. Sec. 1427.100 is amended by revising the first sentence of
paragraph (a), paragraph (b)(1) introductory text, and by adding a new
paragraph (b)(3) to read as follows:
Sec. 1427.100 Applicability.
(a) The regulations in this subpart are applicable during the
period beginning August 1, 1991, and ending July 31, 2003. These
regulations set forth the terms and conditions under which the CCC
shall make payments, in the form of commodity certificates or cash, to
eligible domestic users and exporters of upland cotton who have entered
into an Upland Cotton Domestic User/Exporter Agreement with CCC to
participate in the upland cotton user marketing certificate program in
accordance with Section 136(a) of the Federal Agriculture Improvement
and Reform Act of 1996.
(b)(1) During the period beginning August 1, 1991, and ending July
31, 2003, CCC shall issue marketing certificates or cash payments to
domestic users and exporters in accordance with this subpart in any
week following a consecutive 4-week period in which--
* * * * *
(3) Notwithstanding the provisions of this subpart, user marketing
certificate program payments shall not exceed $701,000,000 during
fiscal years 1996 through 2002. Any outstanding obligations incurred by
CCC to exporters under this program before April 5, 1996, will not be
subject to the $701,000,000 limitation. Obligations incurred by CCC on
or after April 5, 1996, will be charged against the $701,000,000.
27. Section 1427.101 is amended by revising paragraph (a) to read
as follows:
Sec. 1427.101 Administration.
(a) The upland cotton user marketing certificate program shall be
administered under the general supervision of the Executive Vice
President, CCC (Administrator, FSA), or a designee and shall be carried
out in the field by FSA's Kansas City Commodity Office (KCCO) and
Kansas City Management Office (KCMO).
* * * * *
28. Section 1427.103 is amended by revising paragraphs (a)(1) and
(a)(2) to read as follows:
Sec. 1427.103 Eligible upland cotton.
(a) * * *
(1) Opened by an eligible domestic user on or after August 1, 1991,
and on or before July 31, 2003, or, excluding cotton covered under
paragraph (a)(2), exported by an eligible exporter on or after July 18,
1996 and on or before July 31, 2003, during a Friday through Thursday
period in which a payment rate, determined in accordance with
Sec. 1427.107, is in effect, and which meets the requirements of
paragraphs (b) and (c); or
(2) Sold for export by an eligible exporter under a written
contract entered into on or after August 1, 1991, and prior to July 18,
1996 during a Friday through Thursday period in which a payment rate,
determined in accordance with Sec. 1427.107, is in effect and which is
contracted for delivery by the eligible exporter by not later than
September 30, 1996, and which meets the requirements of paragraphs (b)
and (c).
29. Sec. 1427.107 is amended by revising paragraphs (a)(1)
introductory text, (a)(1)(ii), (a)(2) introductory text, (d)
introductory text, (e) introductory text, and by adding (f)(1)(iii) to
read as follows:
Sec. 1427.107 Payment Rate.
(a) * * *
(1) For exporters for cotton shipped on or after July 18, 1996
(excluding cotton covered under paragraph (a)(2)) and for domestic
users for bales opened during the period--
(i) * * *
(ii) Beginning the Friday through Thursday week after the week in
which the NEc price and the NEf price first become available and ending
the Thursday following July 31, the payment rate shall be the
difference between the USNEc price, minus 1.25 cents per pound, and the
NEc price in the fourth week of a consecutive 4-week period in which
the USNEc price exceeded the NEc price each week by more than 1.25
cents per pound, and the AWP did not exceed the current crop-year loan
level for the base quality of upland cotton by more than 130 percent.
(iii) * * *
(2) For exporters prior to July 18, 1996 for cotton which is
contracted for delivery by not later than September 30, 1996,--
* * * * *
(d) Notwithstanding any other provision of this section, for
contracts made by exporters prior to July 18, 1996, that specify
shipment of the cotton by not later than September 30, 1996,--
* * * * *
(e) For U.S. cotton sold by the exporter under an optional origin
contract for delivery by not later than September 30, 1996, prior to
July 18, 1996, the payment rate * * *
(f) * * *
(1) * * *
(iii) Beginning July 18, 1996, if no daily quotes are available for
the entire 5-day period for either or both the USNEc price and the NEc
price, the marketing year transition shall be implemented immediately
as provided for in paragraph (c)(1).
* * * * *
30. Section 1427.108 is amended by revising paragraphs (c)(2), and
(d) and by adding paragraph (c)(3) to read as follows:
Sec. 1427.108 Payment.
* * * * *
(c) * * *
(2) From August 1, 1991, through July 17, 1996, sold by the
exporter on the date the contract for sale is confirmed in writing and
which is contracted for delivery by not later than September 30, 1996;
and
(3) Excluding cotton covered under paragraph (c)(2), through July
31, 2003, exported by the exporter on the date that CCC determines is
the date on which the cotton is shipped.
(d) Payments in accordance with this subpart shall be made
available upon application for payment and submission of supporting
documentation, including proof of purchases and consumption of eligible
cotton by the domestic user or proof of export of eligible cotton by
the exporter, as required by the provisions of the Upland Cotton
Domestic User/Exporter Agreement issued by CCC.
31. Sec. 1427.109 is amended by revising paragraph (a)(3) to read
as follows:
Sec. 1427.109 Contract cancellations.
(a) * * *
(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.
* * * * *
32. Subpart D is revised to read as follows:
Subpart D--Regulations for the Recourse Seed Cotton Loan Program
Sec.
1427.160 Applicability.
1427.161 Administration.
[[Page 37612]]
1427.162 Definitions.
1427.163 Disbursement of loans.
1427.164 Eligible producer.
1427.165 Eligible seed cotton.
1427.166 Insurance.
1427.167 Liens.
1427.168 [Reserved]
1427.169 Fees, charges, and interest.
1427.170 Quantity for loan.
1427.171 Approved storage.
1427.172 Settlement.
1427.173 Foreclosure.
1427.174 Maturity of seed cotton loans.
1427.175 Liability of the producer.
Subpart D--Regulations for the Recourse Seed Cotton Loan Program
Sec. 1427.160 Applicability.
(a) The regulations in this subpart are applicable to the 1996
through 2002 crops of upland and extra long staple seed cotton. These
regulations set forth the terms and conditions under which recourse
seed cotton loans shall be made available by the Commodity Credit
Corporation (``CCC''). Such loans will be available through March 31 of
the year following the calendar year in which such crop is normally
harvested. CCC may change the loan availability period to conform to
State or locally imposed quarantines. Additional terms and conditions
are set forth in the note and security agreement which must be executed
by a producer in order to receive such loans.
(b) Loan rates and the forms which are used in administering the
recourse seed cotton loan program for a crop of cotton are available in
State and county Farm Service Agency (FSA) offices (State and county
offices, respectively). Loan rates shall be based upon the location at
which the loan collateral is stored.
(c) A producer must, unless otherwise authorized by CCC, request
the loan at the county office which, in accordance with part 718 of
this title, is responsible for administering programs for the farm on
which the cotton was produced. A CMA must, unless otherwise authorized
by CCC, request the loan at a central county office designated by the
State committee. All note and security agreements and related documents
necessary for the administration of the recourse seed cotton loan
program shall be prescribed by CCC and shall be available at State and
county offices.
(d) Loans shall not be available for seed cotton produced on land
owned or otherwise in the possession of the United States if such land
is occupied without the consent of the United States.
Sec. 1427.161 Administration.
(a) The recourse seed cotton loan program which is applicable to a
crop of cotton shall be administered under the general supervision of
the Executive Vice President, CCC (Administrator, FSA), or a designee
and shall be carried out in the field by State and county FSA
committees (State and county committees, respectively).
(b) State and county committees, and representatives and employees
thereof, do not have the authority to modify or waive any of the
provisions of the regulations of this subpart.
(c) The State committee shall take any action required by these
regulations which has not been taken by the county committee. The State
committee shall also:
(1) Correct, or require a county committee to correct, an action
taken by such county committee which is not in accordance with the
regulations of this subpart; or
(2) Require a county committee to withhold taking any action which
is not in accordance with the regulations of this subpart.
(d) No provision or delegation herein to a State or county
committee shall preclude the Executive Vice President, CCC
(Administrator, FSA), or a designee from determining any question
arising under the recourse seed cotton program or from reversing or
modifying any determination made by the State or county committee.
(e) The Deputy Administrator, FSA, may authorize State or county
committees to waive or modify deadlines and other program requirements
in cases where lateness or failure to meet such other requirements does
not adversely affect the operation of the recourse seed cotton loan
program.
(f) A representative of CCC may execute loan applications and
related documents only under the terms and conditions determined and
announced by CCC. Any such document which is not executed in accordance
with such terms and conditions, including any purported execution prior
to the date authorized by CCC, shall be null and void.
Sec. 1427.162 Definitions.
Section 1427.3 of this part shall be applicable to this subpart.
Sec. 1427.163 Disbursement of loans.
(a) A producer or the producer's agent shall request a loan at the
county office for the county which, in accordance with part 718 of this
title, is responsible for administering programs for the farm on which
the cotton was produced and which will assist the producer in
completing the loan documents, except that CMA's designated by
producers to obtain loans in their behalf may, unless otherwise
authorized by CCC, obtain loans through a central county office
designated by the State committee.
(b) Disbursement of each loan will be made by the county office of
the county which is responsible for administering programs for the farm
on which the cotton was produced, except that CMA's designated by
producers to obtain loans in their behalf may, unless otherwise
authorized by CCC, obtain disbursement of loans at a central county
office designated by the State committee. Service charges shall be
deducted from the loan proceeds. The producer or the producer's agent
shall not present the loan documents for disbursement unless the cotton
is in existence and in good condition. If the cotton is not in
existence and in good condition at the time of disbursement, the
producer or the agent shall immediately return the check issued in
payment of the loan or, if the check has been negotiated, the total
amount disbursed under the loan, and charges plus interest shall be
refunded promptly.
Sec. 1427.164 Eligible producer.
(a) An eligible producer of a crop of cotton shall be a person
(i.e., an individual, partnership, association, corporation, CMA
estate, trust, State or political subdivision or agency thereof, or
other legal entity) which:
(1) Produces such a crop of cotton as a landowner, landlord,
tenant, or sharecropper;
(2) Meets the requirements of this part; and
(3) Meets the requirements of parts 12 and 718 of this title, and
part 1412 of this chapter.
(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.
(c) A minor who is otherwise an eligible producer shall be eligible
to receive loans only if the minor meets one of the following
requirements:
[[Page 37613]]
(1) The right of majority has been conferred on the minor by court
proceedings or by statute;
(2) A guardian has been appointed to manage the minor's property
and the applicable loan documents are signed by the guardian;
(3) Any note and security agreement signed by the minor is cosigned
by a person determined by the county committee to be financially
responsible; or
(4) A bond is furnished under which a surety guarantees to protect
CCC from any loss incurred for which the minor would be liable had the
minor been an adult.
(d) Two or more producers may obtain a single joint loan with
respect to cotton which is stored in an approved storage if the cotton
is jointly owned by such producers. The cotton may have been produced
by two or more eligible producers on one or more farms.
(e) A CMA may obtain loans on the eligible production of such
cotton with respect to such cotton on behalf of the members of the CMA
who are eligible to receive loans for a crop of cotton. For purposes of
this subpart, the term ``producer'' includes a CMA.
Sec. 1427.165 Eligible seed cotton.
(a) Seed cotton pledged as collateral for a loan must be tendered
to CCC by an eligible producer and must:
(1) Be in existence and in good condition at the time of
disbursement of loan proceeds;
(2) Be stored in identity-preserved lots in approved storage
meeting requirements of Sec. 1427.171;
(3) Be insured at the full loan value against loss or damage by
fire;
(4) Not have been sold, nor any sales option on such cotton
granted, to a buyer under a contract which provides that the buyer may
direct the producer to pledge the seed cotton to CCC as collateral for
a loan;
(5) Not have been previously sold and repurchased; or pledged as
collateral for a CCC loan and redeemed;
(6) Be production from acreage that has been reported timely in
accordance with part 718 of this title; and
(7) For upland cotton, be production from a farm with a production
flexibility contract in accordance with part 1412 of this chapter.
(b) The quality of cotton which may be pledged as collateral for a
loan shall be the estimated quality of lint cotton in each lot of seed
cotton as determined by the county office, except that if a control
sample of the lot of cotton is classed by an Agricultural Marketing
Service (AMS), Cotton Classing Office or other entity approved by CCC,
the quality for the lot shall be the quality shown on the applicable
documentation issued for the control sample.
(c) To be eligible for loan, the beneficial interest in the seed
cotton must be in the producer who is pledging the seed cotton as
collateral for a loan as provided in Sec. 1427.5(c).
Sec. 1427.166 Insurance.
The seed cotton must be insured at the full loan value against loss
or damage by fire.
Sec. 1427.167 Liens.
If there are any liens or encumbrances on the seed cotton tendered
as collateral for a loan, waivers that fully protect the interest of
CCC must be obtained even though the liens or encumbrances are
satisfied from the loan proceeds. No additional liens or encumbrances
shall be placed on the cotton after the loan is approved.
Sec. 1427.168 [Reserved]
Sec. 1427.169 Fees, charges, and interest.
(a) A producer shall pay a nonrefundable loan service fee to CCC at
a rate determined by CCC.
(b) Interest which accrues with respect to a loan shall be
determined in accordance with part 1405 of this chapter.
Sec. 1427.170 Quantity for loan.
(a) The quantity of lint cotton in each lot of seed cotton tendered
for loan shall be determined by the county office by multiplying the
weight or estimated weight of seed cotton by the lint turnout factor
determined in accordance with paragraph (b).
(b) The lint turnout factor for any lot of seed cotton shall be the
percentage determined by the county committee representative during the
initial inspection of the lot. If a control portion of the lot is
weighed and ginned, the turnout factor determined for the portion of
cotton ginned will be used for the lot. If a control portion is not
weighed and ginned, the lint turnout factor shall not exceed 32 percent
for machine-picked cotton and 22 percent for machine-stripped cotton
unless acceptable proof is furnished showing that the lint turnout
factor is greater.
(c) Loans shall not be made on more than a percentage established
by the county committee of the quantity of lint cotton determined as
provided in this section. If the seed cotton is weighed, the percentage
to be used shall not be more than 95 percent. If the quantity is
determined by measurement, the percentage to be used shall not be more
than 90 percent. The percentage to be used in determining the maximum
quantity for any loan may be reduced below such percentages by the
county committee when determined necessary to protect the interests of
CCC on the basis of one or more of the following risk factors:
(1) Condition or suitability of the storage site or structure;
(2) Condition of the cotton;
(3) Location of the storage site or structure; and
(4) Other factors peculiar to individual farms or producers which
related to the preservation or safety of the loan collateral. Loans may
be made on a lower percentage basis at the producer's request.
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, from an approved gin. If the cotton is not stored on
the producer's farm, the producer must furnish satisfactory evidence
that the producer has the authority to store the cotton on such
property and that the owner of such property has no lien for such
storage against the cotton. The producer must provide satisfactory
evidence that the producer and any person having an interest in the
cotton including CCC, have the right to enter the premises to inspect
and examine the cotton and shall permit a reasonable time to such
persons to remove the cotton from the premises.
Sec. 1427.172 Settlement.
(a) A producer may, at any time prior to maturity of the loan,
obtain release of all or any part of the loan seed cotton by paying to
CCC the amount of the loan, plus interest and charges.
(b)(1) A producer or the producer's agent shall not remove from
storage any cotton which is pledged as collateral for a loan until
prior written approval has been received from CCC for removal of such
cotton. If a producer or the producer's agent obtains such approval,
they may remove such cotton from storage, sell the seed cotton, have it
ginned, and sell the lint cotton and cottonseed obtained therefrom. The
ginner shall inform the county office in writing immediately after the
seed cotton removed from storage has been ginned and furnish the county
office the loan number, producer's name, and applicable gin bale
numbers. If the seed cotton is removed from storage, the loan principal
plus interest and charges
[[Page 37614]]
thereon must be satisfied not later than the earlier of:
(i) The date established by the county committee;
(ii) 5 days after the date of the producer received the AMS
classification in accordance with Sec. 1427.9 (and the warehouse
receipt, if the cotton is delivered to a warehouse), representing such
cotton; or
(iii) The loan maturity date.
(2) If the seed cotton or lint cotton is sold, the loan principal,
interest, and charges must be satisfied immediately.
(3) A producer, except a CMA, may obtain a nonrecourse loan or loan
deficiency payment in accordance with subpart A of this part, on the
lint cotton, but:
(i) The loan principal, interest, and charges on the seed cotton
must be satisfied from the proceeds of the nonrecourse loan in
accordance with subpart A of this part; or
(ii) The loan deficiency payment must be applied to the loan
principal, interest, and charges on the outstanding seed cotton loan.
(4) A CMA must repay the seed cotton loan principal, interest, and
charges before pledging the cotton for a nonrecourse loan or before a
loan deficiency payment can be approved in accordance with subpart A of
this part, on the lint cotton. If CMA's authorized by producers to
obtain loans in their behalf remove seed cotton from storage prior to
obtaining approval to move such cotton, such removal shall constitute
conversion of such cotton unless the CMA:
(i) Notifies the county office in writing the following morning by
mail or otherwise that such cotton has been moved and is on the gin
yard;
(ii) Furnishes CCC an irrevocable letter of credit if requested;
and
(iii) Repays the loan principal, plus interest and charges, within
the time specified by the county committee.
(5) Any removal from storage shall not be deemed to constitute a
release of CCC's security interest in the seed cotton or to release the
producer or CMA from liability for the loan principal, interest, and
charges if full payment of such amount is not received by the county
office.
(c) If, either before or after maturity, the producer discovers
that the cotton is going out of condition or is in danger of going out
of condition, the producer shall immediately notify the county office
and confirm such notice in writing. If the county committee determines
that the cotton is going out of condition or is in danger of going out
of condition, the county committee will call for repayment of the loan
principal, plus interest and charges on or before a specified date. If
the producer does not repay the loan or have the cotton ginned and
obtain a nonrecourse loan in accordance with subpart A of this part on
the lint cotton produced therefrom within the period as specified by
the county committee, the cotton shall be considered abandoned.
(d) If the producer has control of the storage site and if the
producer subsequently loses control of the storage site or there is
danger of flood or damage to the seed cotton or storage structure
making continued storage of the cotton unsafe, the producer shall
immediately either repay the loan or move the seed cotton to the
nearest approved gin for ginning and shall, at the same time, inform
the county office. If the producer does not do so, the seed cotton
shall be considered abandoned.
Sec. 1427.173 Foreclosure.
Any seed cotton pledged as collateral for a loan which is abandoned
or which has not been ginned and pledged as collateral for a
nonrecourse loan in accordance with subpart A of this part by the seed
cotton loan maturity date may be removed from storage by CCC and ginned
and the resulting lint cotton warehoused for the account of CCC. The
lint cotton and cottonseed may be sold, at such time, in such manner,
and upon such terms as CCC may determine at public or private sale. CCC
may become the purchaser of the whole or any part of such cotton and
cottonseed. If the proceeds received from the sales of the cotton are
less than the amount due on the loan (including principal, interest,
ginning charges, and any other charges incurred by CCC), the producer
shall be liable for such difference. If the proceeds received from sale
of the cotton are greater than the sum of the amount due plus any cost
incurred by CCC in conducting the sale of the cotton, the amount of
such excess shall be paid to the producer or, if applicable, to any
secured creditor of the producer.
Sec. 1427.174 Maturity of seed cotton 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.
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 amount shall be refunded upon demand by CCC.
The producer shall be liable for:
(i) The amount of the loan;
(ii) Any additional amounts paid by CCC with respect to the loan;
(iii) All other costs which CCC would not have incurred but for the
fraudulent representation or the unauthorized disposition or movement
of the loan collateral;
(iv) Applicable interest on such amounts; and
(v) Liquidated damages in accordance with paragraph (e).
(2) Notwithstanding any provision of the note and security
agreement, if a producer has made any such fraudulent representation or
if the producer has disposed of, or moved, the loan collateral without
prior written approval from CCC, the value of such collateral acquired
by CCC shall be equal to the sales price of the cotton less any costs
incurred by CCC in completing the sale.
(b) If the amount disbursed under a loan, or in settlement thereof,
exceeds the amount authorized by this subpart, the producer shall be
liable for repayment of such excess, plus interest. In addition, seed
cotton pledged as collateral for such loan shall not be released to the
producer until such excess is repaid.
(c) If the amount collected from the producer in satisfaction of
the loan is less than the amount required in accordance with this
subpart, the producer shall be personally liable for repayment of the
amount of such deficiency plus applicable interest.
(d) If more than one producer executes a note and security
agreement with CCC, each such producer shall be jointly and severally
liable for the violation of the terms and conditions of the note and
security agreement and the regulations set forth in this subpart. Each
such producer shall also remain liable for repayment of the entire loan
amount until the loan is fully repaid without regard to such producer's
claimed share in the seed cotton pledged as collateral for the loan. In
addition, such producer may not amend the note and security agreement
with respect to the producer's claimed share in such seed cotton, after
execution of the note and security agreement by CCC.
(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 in maintaining or
settling a loan or disposing of or moving the collateral without the
prior approval of CCC. Accordingly, if CCC or 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 seed cotton which is
[[Page 37615]]
involved in the violation. If CCC or the county committee 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) For first and second offenses, if CCC or the county committee
determines that a producer acted in good faith when the violation
occurred, the county committee shall:
(1) Require repayment of the loan principal applicable to the loan
quantity affected by the violation, and charges plus interest
applicable to the amount repaid;
(2) Assess liquidated damages in accordance with paragraph (e); and
(3) If the producer fails to pay such amount within 30 calendar
days from the date of notification, call the applicable loan involved
in the violation.
(g) For cases other than first or second offenses, or any offense
for which CCC or the county committee cannot determine good faith when
the violation occurred, the county committee shall:
(1) Assess liquidated damages in accordance with paragraph (e);
(2) Call the applicable loan involved in the violation.
(h) If CCC or the county committee determines that the producer has
committed a violation in accordance with paragraph (e), the county
committee shall notify the producer in writing that:
(1) The producer has 30 calendar days to provide evidence and
information to the county committee regarding the circumstances which
caused the violation, and
(2) Administrative actions will be taken in accordance with
paragraphs (f) or (g).
(i) Any or all of the liquidated damages assessed in accordance
with the provision of paragraph (e) may be waived as determined by CCC.
PART 1430--DAIRY PRODUCTS
33. The authority citation for 7 CFR part 1430 is revised to read
as follows:
Authority: 7 U.S.C. 7251 and 7252; and 15 U.S.C. 714b and 714c.
Secs. 1430.450-1430.470 [Removed]
34. The subpart titled ``Dairy Termination Program''
(Secs. 1430.450-1430.470) is removed.
35. The subpart heading which reads ``Price Support Program'',
preceding Sec. 1430 is designated as Subpart A and the heading is
revised to read ``Subpart A--Price Support Program for Milk''.
36. Subpart A is revised to read as follows:
Subpart A--Price Support Program for Milk
Sec.
1430.1 Definitions.
1430.2 Price support levels and purchase conditions.
1430.3 Ineligibility for purchase of products produced in States
with excessive manufacturing allowances.
Subpart A--Price Support Program for Milk
Sec. 1430.1 Definitions.
For purposes of this subpart, unless the context indicates
otherwise, the following definitions shall apply:
AMS means the Agricultural Marketing Service, USDA.
CCC means the Commodity Credit Corporation, USDA.
FSA means the Farm Service Agency, USDA.
Manufacturing allowance means:
(1) For milk used to produce butter and nonfat dry milk, the amount
by which the product price value of butter and nonfat dry milk
manufactured from 100 pounds of milk containing 3.5 pounds of butterfat
and 8.7 pounds of nonfat milk solids resulting from a State's yields
and product price formulas exceeds the State's class price for the milk
used to produce those products; or
(2) For milk used to produce cheese, the amount by which the
product price value of cheese manufactured from 100 pounds of milk
containing 3.5 pounds of butterfat and 8.7 pounds of nonfat milk solids
resulting from a State's yields and product price formulas exceeds the
State's class price for the milk used to produce cheese.
Plant means the physical assets of an individual, partnership,
association, corporation, cooperative, or other business enterprise
used in the production of dairy products.
USDA means the United States Department of Agriculture.
Sec. 1430.2 Price support levels and purchase conditions.
(a)(1) The levels of price support provided to farmers marketing
milk containing 3.67 percent milkfat from dairy cows are: $10.35 per
hundredweight for calendar year 1996, $10.20 per hundredweight for
calendar year 1997, $10.05 per hundredweight for calendar year 1998,
and $9.90 per hundredweight for calendar year 1999.
(2) Subject to paragraph (b), price support for milk will be made
available through CCC purchases of butter, nonfat dry milk, and Cheddar
cheese, offered subject to the terms and conditions of FSA's purchase
announcements.
(3) CCC purchase prices for dairy products will be announced by
USDA news release.
(4) CCC may, by special announcement, offer to purchase other dairy
products to support the price of milk.
(5) Purchase announcements setting forth terms and conditions of
purchase may be obtained upon request from the United States Department
of Agriculture, Farm Service Agency, Procurement and Donations
Division, Stop 0552, 1400 Independence Ave. SW., Washington, DC 20250-
0552, or the United States Department of Agriculture, Farm Service
Agency, Kansas City Commodity Office, P.O. Box 419205, Kansas City,
Missouri 64141-6205.
(b)(1) The block cheese purchased shall be U.S. Grade A or higher,
except that the moisture content shall not exceed 38.5 percent; the
barrel cheese shall be U.S. Extra Grade, except that the moisture
content shall not exceed 36.5 percent.
(2) The nonfat dry milk purchased shall be U.S. Extra Grade, except
that the moisture content shall not exceed 3.5 percent.
(3) The butter purchased shall be U.S. Grade A or higher.
(c) The products purchased shall be manufactured in the United
States from milk produced in the United States and shall not have been
previously owned by CCC.
(d) Purchases will be made in carlot weights specified in the
announcements. Grade and weights shall be evidenced by USDA issued
inspection certificates.
Sec. 1430.3 Ineligibility for purchase of products produced in States
with excessive manufacturing allowances.
(a) For the period beginning May 1, 1996, and ending December 31,
1999, no product produced in a plant in a State under State milk
pricing regulation will be eligible for sale to the CCC under
Sec. 1430.2 of this subpart, if the State, as determined by the
Director, Dairy Division, AMS, provides in formulas establishing prices
that handlers must
[[Page 37616]]
pay for milk, a manufacturing allowance that exceeds either:
(1) $1.65 per hundredweight of milk for milk manufactured into
butter and nonfat dry milk; and
(2) $1.80 per hundredweight of milk for milk manufactured into
cheese.
(b) Prior to a final determination that a State has in effect a
manufacturing allowance that exceeds the manufacturing allowances
provided in (a) of this section, the State shall be provided the
opportunity to present information at a hearing before the Director,
Dairy Division, AMS. The Director shall establish the procedures for
such hearing.
(c) Reconsideration and review of the determinations made under (b)
of this section may be sought by petition to the Deputy Administrator,
Marketing Programs, AMS under procedures established by the Deputy
Administrator.
Subpart B--Regulations Governing Reductions in the Price of Milk
Marketed by Producers, January 1, 1991, to December 31, 1997
37. The subpart heading which reads ``Regulations Governing
Reductions in the Price of Milk Marketed by Producers, January 1, 1991,
to December 31, 1997'', preceding Sec. 1430.340 is designated as
Subpart B.
38. Subpart B is amended by adding Sec. 1430.362 to read as
follows:
Sec. 1430.362 Assessment Termination, Refund Provisions for 1996
Assessments, and Clarification of Certain Procedures and Delegations.
(a) Notwithstanding any other provision of this part, no assessment
shall be collected for milk marketed after April 30, 1996. Amounts
collected for 1996 marketings shall be refundable as otherwise provided
for in this subpart so long as, determined pursuant to this subpart,
the producer's total milk marketings for calendar year 1996 were equal
to or less than the producer's total marketings for calendar year 1995.
(b) For purposes of applying the provisions of this subpart:
(1)(i) No adjustment shall be made for milk marketings in a leap
year, but rather comparisons between the refund and base period milk
marketings shall be made on a calendar year basis.
(ii) If a producer quits marketing milk from a dairy operation
during the refund period, the comparison of marketings with the
preceding year shall be made by comparing the marketings of the months
and days of production in the refund period with the corresponding
months and days of the base period, subject, in addition, to the
provisions in paragraph (a).
(2)(i) A producer under this subpart may be deemed to include the
combination of all persons or entities with an interest in the
production of milk on a farm or dairy operation.
(ii) The addition or removal of an individual or entity, who adds
to or removes from existing dairy units any dairy cows, to or from
those with an interest in a dairy operation, shall constitute the
formation of a new producer and shall be deemed to end the production
history on that farm or dairy operation of the previous producer.
(3) All delegations to persons or agencies contained in this
subpart shall be deemed, as appropriate, to be made to the successor
official or agency resulting from any reorganization made pursuant to
Public Law 103-354.
39. Part 1430 is amended by adding Subpart C--Recourse Loan Program
for Commercial Processors of Dairy Products to read as follows:
Subpart C--Recourse Loan Program for Commercial Processors of Dairy
Products
Sec.
1430.400 Definitions.
1430.401 Applicability.
1430.402 Administration.
1430.403 Loan rates.
1430.404 Quantity eligible for loan.
1430.405 Quality eligibility requirements.
1430.406 Storage facility requirements.
1430.407 Availability, disbursement, and maturity of loans.
1430.408 Loan maintenance and liquidation.
1430.409 Miscellaneous provisions.
1430.410 Applicable forms.
Subpart C--Recourse Loan Program for Commercial Processors of Dairy
Products
Sec. 1430.400 Definitions.
The definitions set forth in this section shall be applicable for
all purposes of program administration under this subpart. The terms
defined in parts 1405 and 1421 of this chapter shall also be
applicable.
CCC means the Commodity Credit Corporation, USDA.
FSA means the Farm Service Agency, USDA.
Processor means a person or legal entity that commercially
processes milk into Cheddar cheese, butter, or nonfat dry milk.
Recourse loan means a loan that requires repayment in full on or
before the maturity date and forfeiture does not necessarily satisfy
the loan indebtedness.
USDA means the United States Department of Agriculture.
Sec. 1430.401 Applicability.
(a) The regulations in this subpart are applicable to eligible
dairy products produced after December 31, 1999. These regulations set
forth the terms and conditions under which CCC will make recourse loans
to eligible processors. Additional terms and conditions shall be those
set forth in the loan application and the note and security agreement
which a processor must execute in order to receive such a loan.
(b) Loan rates for the eligible dairy products shall be made
available in FSA State and county offices.
(c) Recourse loans shall be available as provided in this part for
eligible Cheddar cheese, butter, and nonfat dry milk.
Sec. 1430.402 Administration.
(a) The loan program shall be administered under the general
supervision of the Executive Vice President, CCC (Administrator, FSA),
and shall be carried out in the field by FSA State and county
committees.
(b) State and county committees, and representatives and employees
thereof, do not have the authority to modify or waive any of the
provisions of this subpart.
(c) The State committee shall take any action these regulations
require which the county committee has not taken. The State committee
shall also:
(1) Correct, or require a county committee to correct, a county
committee action which is not in accordance with the regulations of
this subpart; or
(2) Require a county committee to withhold taking any action which
is not in accordance with the regulations of this subpart.
(d) No provision or delegation herein to a State or county
committee shall preclude the Executive Vice President, CCC
(Administrator, FSA), from determining any question arising under the
program or from revising or modifying any State or county committee
determination.
(e) The Deputy Administrator, FSA, may authorize State and county
committees to waive or modify deadlines and other program requirements
in cases where lateness or failure to meet such other requirements do
not adversely affect recourse loan program operation.
(f) A CCC representative may execute loans and related documents
only under the terms and conditions CCC determines and announces. Any
such document which is not executed in accordance with such terms and
conditions, including any purported
[[Page 37617]]
execution prior to the CCC authorized date, is null and void.
Sec. 1430.403 Loan rates.
(a) The Secretary will announce before January 1, 2000, and
thereafter, before October 1 of each year, that a recourse loan program
is available under this subpart, and loan rates for Cheddar cheese,
butter, and nonfat dry milk based on a milk equivalent value of $9.90
per hundredweight of milk containing 3.67 percent butterfat.
(b) Such loan rates will be announced by USDA news release.
Sec. 1430.404 Quantity eligible for loan.
(a) Any processor is eligible for a recourse loan on eligible dairy
products owned by such processor.
(b) The total quantity of eligible dairy product which a processor
may pledge as collateral for a loan at any single time may not exceed:
(1) the quantity of eligible dairy products processed during the
fiscal year in which application is being made; plus
(2) the quantity of eligible dairy products processed during and
under loan on September 30 of the prior fiscal year, if such products
are immediately repledged as collateral for a supplemental loan on
October 1 of the current fiscal year.
(c) All eligible dairy products pledged as collateral for a loan
are required to be stored identity-preserved in eligible storage
facilities.
(d) The processor shall furnish CCC such certification as CCC
considers necessary to verify compliance with quantitative limitations.
Sec. 1430.405 Quality eligibility requirements.
(a) For dairy products to be eligible to be pledged as collateral
for a recourse loan, the processor must furnish CCC such certification
as CCC considers necessary to verify the following minimum quality
requirements:
(1) Cheddar cheese shall be:
(i) U.S. Grade A or higher and moisture shall not exceed 38.5
percent for block cheese; or
(ii) U.S. Extra Grade and moisture shall not exceed 36.5 percent
for barrel cheese.
(2) Nonfat dry milk shall be U.S. Extra Grade and moisture shall
not exceed 3.5 percent; and
(3) Butter shall be U.S. Grade A or higher.
(b) Any eligible dairy product pledged as collateral must be free
of any contamination by either natural or manmade substances and must
not contain chemicals or other substances which are poisonous or
harmful to humans or animals.
(c) CCC shall, at any time, have the right to inspect collateral in
the storage facilities in which it is stored.
Sec. 1430.406 Storage facility requirements.
Eligible dairy products will be stored under the terms and
conditions CCC prescribes.
Sec. 1430.407 Availability, disbursement, and maturity of loans.
(a)(1) To obtain an initial recourse loan on eligible dairy
products, a dairy processor:
(i) Must file a request for an initial recourse loan, as CCC
prescribes, with the State committee of the State where such processor
is headquartered or a State committee designated county committee;
(ii) Must execute a note and security agreement and a storage
agreement as CCC prescribes; and
(iii) Shall be responsible for all costs incurred in moving
eligible dairy products to an eligible storage facility.
(2) A request for an initial loan must be filed no later than
September 30 of the fiscal year in which the product was produced, but
no earlier than January 1, 2000.
(3) If there are any liens or encumbrances on eligible dairy
products pledged as collateral for a recourse loan, waivers that fully
protect CCC's interest must be obtained even though the liens or
encumbrances are satisfied from the loan proceeds. No additional liens
or encumbrances shall be placed on the eligible dairy product after the
loan is approved.
(4) A processor shall pay CCC a loan service fee in connection with
the disbursement of each loan. The amount of the service fee shall be
determined and announced by the Executive Vice President, CCC.
(b) No loan proceeds may be disbursed for dairy products until they
have actually been produced and are established as being eligible to be
pledged as loan collateral.
(c) Loans will mature no later than September 30 following
disbursement of the loan.
(1) Loan maturity dates may be accelerated by CCC in accordance
with Sec. 1430.428 (d) of this subpart.
(2) CCC may offer supplemental loans at the maturity of initial
loans.
(d)(1) A processor may, if supplemental loans are offered, before
the maturity date of an initial loan, request a supplemental loan by:
(i) Repaying the initial loan principal plus interest on September
30;
(ii) Repledging as collateral for a supplemental loan, on October
1, eligible dairy products identified as collateral for an initial loan
maturing on September 30 of the immediately preceding fiscal year; and
(iii) Executing a note and security agreement and a storage
agreement as CCC prescribes.
(2) Such supplemental loan:
(i) Shall be requested by the processor no later than September 30
of the fiscal year in which the initial loan is maturing.
(ii) Shall be at the loan rate and interest rate applicable to the
month in which the supplemental loan is disbursed.
(iii) Shall mature as CCC specifies, but not later than September
30 following disbursement of the supplemental loan.
(iv) May only be authorized for 1 fiscal year.
(e) The county office shall file or record, as required by State
law, all security agreements which are issued with respect to eligible
dairy products pledged as collateral for loan. The cost of filing and
recording shall be paid for by CCC.
Sec. 1430.408 Loan maintenance and liquidation.
(a) The processor shall:
(1) Abide by the terms and conditions of the loan application and
the note and security agreement;
(2) Pay interest on the principal at a rate determined under part
1403 of this chapter;
(3) be responsible for storage costs through loan maturity;
(4) Be responsible for any loss in quantity or quality of the loan
collateral, and
(5) be responsible for maintaining the quality and quantity of the
loan collateral.
(b) The processor must pay CCC the principal and interest due and
redeem their collateral no later than the loan maturity date.
(c) A processor may, at any time before maturity of the loan,
redeem all or any part of the loan collateral by paying CCC the loan
principal and interest applicable to the quantity of dairy product
redeemed.
(d) CCC may at any time accelerate the date of repayment of the
loan indebtedness, including interest. CCC will give the processor
notice of such acceleration at least 15 days in advance of the
accelerated loan maturity date.
(e) Prior to loan maturity:
(1) The processor may request and obtain prior written approval of
the loan making office to remove a specified quantity of the loan
collateral from storage for the purpose of delivering it to a buyer
before repayment of the loan by executing a Marketing Authorization for
Loan Collateral (Form CCC-681-1).
[[Page 37618]]
(2) The loan making office will approve such a request when the
buyer of eligible dairy products agrees to pay CCC an amount necessary
to satisfy the processor's loan indebtedness regarding the dairy
products the buyer purchased. Any such approval shall not:
(i) Constitute a release of CCC's security interest in the dairy
product, or
(ii) Relieve the processor of liability for the full amount of the
loan indebtedness, including interest.
(f) If a processor's loan indebtedness is not satisfied in
accordance with the provisions of this section:
(1) Late payment charges in addition to interest on the processor's
indebtedness shall accrue at the rate specified in part 1403 of this
chapter and shall accrue until the debt is paid;
(2) CCC may, upon notice, with or without removing the collateral
from storage, sell such collateral at either a public or private sale;
and
(3) The processor shall be liable for the deficiency if the net
proceeds are less than the amount of principal, interest, and any other
charges incurred by the CCC.
(g) If CCC determines that the actual eligible quantity serving as
collateral for a recourse loan is less than the loan quantity because
of incorrect certification, unauthorized removal, or unauthorized
disposition, CCC may call all loans of the processor. Such
determination shall result in the processor being deemed ineligible for
loans for at least the remainder of the fiscal year.
(h) The security interests obtained by the CCC as a result of the
execution of a security agreement by an eligible processor shall be
superior to all statutory and common law liens on the collateral.
Sec. 1430.409 Miscellaneous provisions.
(a) CCC will not require the processor to insure the eligible dairy
product pledged as collateral. However, if the processor insures such
eligible dairy product and an indemnity is paid thereon, such indemnity
shall accrue to the benefit of CCC to the extent of CCC's interest in
the eligible dairy product involved in the loss.
(b) The regulations the Secretary issues governing offsets and
withholding set forth at part 3 of this title and part 1403 of this
chapter are applicable to the program set forth in this subpart.
(c) A processor may obtain reconsideration and review of
determinations made under this subpart in accordance with the
regulations of part 780 of this title.
(d) CCC, as well as any other U.S. Government agency, shall have
the right of access to the premises of the processor in order to
inspect, examine, and make copies of the books, records, accounts, and
other written data as the examining agency deems necessary to verify
compliance with the requirements of this subpart. Such books, records,
accounts, and other written data shall be retained by the processor for
not less than 3 years from the loan disbursement date.
(e) Any false certification made for the purpose of enabling a
processor to obtain or retain a recourse loan to which it is not
entitled will subject the person making such certification to liability
under applicable federal civil and criminal statutes.
Sec. 1430.410 Applicable forms.
The CCC forms used in connection with the dairy recourse loan
program will be available from the appropriate State committee or
designated county committee. For any CCC form that refers to program
participation by producers, the term ``producer'' shall be deemed to
mean ``processor'' and the term ``crop year'' shall be deemed to mean
``fiscal year''.
40. Part 1434 is revised to read as follows:
PART 1434--HONEY
Authority: 7 U.S.C. 1421, 1423, 1425a, 1446h, 4601 et seq.; 15
U.S.C. 714b and 714c.
Sec. 1434.1 Termination.
The price support and loan deficiency program for honey was
terminated at the conclusion of the 1995 marketing year. The
regulations setting forth the applicable terms and conditions for the
Honey Program for the 1995 and prior marketing years found at part 1434
of this title as of January 1, 1996, shall be applicable to
determinations made with respect to the administration of loans
outstanding on or after July 18, 1996.
41.-42. Part 1435 is revised to read as follows:
PART 1435--SUGAR PROGRAM
Subpart A--General Provisions
Sec.
1435.1 Applicability.
1435.2 Definitions.
1435.3 Maintenance and inspection of records.
Subpart B--Loan Program
1435.100 Applicability.
1435.101 Administration.
1435.102 Loan types.
1435.103 Loan rates.
1435.104 Eligibility requirements.
1435.105 Availability, disbursement, and maturity of loans.
1435.106 Loan maintenance.
1435.107 Loan settlement and foreclosure.
1435.108 Storage facility requirements.
1435.109 Processor storage agreement.
1435.110 Miscellaneous provisions.
1435.111 Applicable forms.
Subpart C--Sugar Marketing Assessments
1435.200 General statement.
1435.201 Marketing assessment rates.
1435.202 Remittance.
1435.203 Civil penalties and interest.
1435.204 Refunds.
Subpart D--Information Reporting and Recordkeeping Requirements
1435.300 General statement.
1435.301 Civil penalties.
Authority: 7 U.S.C. 7272; and 15 U.S.C. 714b and 714c
Subpart A--General Provisions
Sec. 1435.1 Applicability.
(a) The regulations of this part in effect on January 1, 1995,
shall govern the price support loan program and producer protections
for the 1995 crop year. These regulations have been removed from the
CFR but may be found in the previous CFR volume containing revisions as
of January 1, 1995.
(b) These regulations set forth the terms and conditions under
which Commodity Credit Corporation (CCC) will make loans and enter
agreements with eligible processors for the 1996-2002 crop years.
Additional terms and conditions are set forth in the loan application
and the note and security agreement which the processor must execute in
order to receive a loan. These regulations stipulate the requirements
for making sugar marketing assessment payments to CCC for fiscal years
1996 through 2003 and the information reporting requirements for the
1996-2002 crop years.
Sec. 1435.2 Definitions.
The definitions set forth in this section are applicable for all
purposes of program administration. The terms defined in part 718 of
this title are also applicable.
Beet sugar means sugar which is processed directly or indirectly
from sugar beets or sugar beet molasses.
Cane sugar refiner means a person who processes raw cane sugar into
refined crystalline sugar or liquid sugar.
CCC means the Commodity Credit Corporation, USDA.
Crop year means the period from July 1 through June 30, inclusive.
In referring to the crop year for a particular crop, the crop year
begins on July 1 of the year of that crop. For example, the crop year
for the 1996 crop begins on July 1, 1996, and is referred to as the
``1996 crop
[[Page 37619]]
year.'' The 1996 crop means sugar processed from domestically-produced
sugar beets or sugarcane during the 1996 crop year. Sugar from
desugaring molasses is considered to be from the crop year during which
the desugaring took place.
First processor means a person who commercially produces beet sugar
or raw cane sugar, directly or indirectly, from domestically-produced
sugar beets or sugarcane, or from molasses or thick juice derived from
domestically-produced sugar beets or sugarcane.
Market means, relative to any first processor, the shipment in
conjunction with a sale or other disposition, or the forfeiture to CCC,
of beet sugar or raw cane sugar by the first processor of such sugar,
and the movement of raw cane sugar into the refining process. Beet
sugar or raw cane sugar is deemed to be marketed as of the date of
shipment from the first processor's facility, the date on which raw
cane sugar was moved into the refining process, or the date on which
sugar was forfeited to CCC.
Nonrecourse loan means a loan for which the eligible sugar offered
as loan collateral may be delivered or forfeited to CCC, at loan
maturity, in satisfaction of the loan indebtedness.
Raw sugar means any sugar which is to be further refined or
improved in quality.
Raw value of any quantity of sugar means its equivalent in terms of
raw sugar testing 96 sugar degrees, as determined by a polarimetric
test performed in accordance with procedures recognized by the
International Commission for Uniform Methods of Sugar Analysis
(ICUMSA). Direct-consumption sugar derived from sugar beets and testing
92 or more sugar degrees by the polariscope shall be translated into
terms of raw value by multiplying the actual number of pounds of such
sugar by 1.07. Sugar derived from sugarcane and testing 92 sugar
degrees or more by the polariscope shall be translated into terms of
raw value in the following manner: raw value = {[(actual degree of
polarization - 92 ) x 0.0175 ] + 0.93} x actual weight. For sugar
testing less than 92 sugar degrees by the polariscope, derive raw value
by dividing the number of pounds of the ``total sugar content'' (i.e.,
the sum of the sucrose and invert sugars) thereof by 0.972.
Recourse loan means a loan that requires repayment in full on or
before the maturity date and forfeiture of the sugar does not
necessarily satisfy the loan indebtedness.
Sugar means any grade or type of saccharine product derived,
directly or indirectly, from sugarcane or sugar beets and consisting
of, or containing, sucrose or invert sugar, including all raw sugar,
refined crystalline sugar, liquid sugar, edible molasses, and cane
syrup.
Sugar beet processor means a person who produces sugar by
commercially processing sugar beets or sugar beet molasses.
Sugarcane processor means a person who produces raw cane sugar by
commercially processing sugarcane or sugarcane molasses.
Tariff-rate quota means the total of the aggregate quantities of
raw cane sugar and other sugars, syrups and molasses established, or
subsequently modified, by the Secretary pursuant to the provisions of
additional U.S. note 5(a) to chapter 17 of the Harmonized Tariff
Schedule of the United States (HTS) for imports to be entered, or
withdrawn from warehouse for consumption, under subheadings 1701.11.10,
1701.12.10, 1701.91.10, 1701.99.10, 1702.90.10, and 2106.90.44 of the
HTS or successor subheadings.
Sec. 1435.3 Maintenance and inspection of records.
(a) CCC, as well as any other U.S. Government agency, has the right
of access to the premises of any sugar beet processor, sugarcane
processor, cane sugar refiner, or of any other person having custody of
records that the examining agency deems necessary to verify compliance
with the requirements of this part. The examining agency has the right
to inspect, examine, and make copies of such books, records, accounts,
and other written or electronic data as the examining agency deems
relevant.
(b) Each sugar beet processor, sugarcane processor, and cane sugar
refiner or any person having custody of the records shall retain such
books, records, accounts, and other written or electronic data for not
less than 3 years from the date:
(1) A loan is disbursed in accordance with subpart B;
(2) A marketing assessment is remitted to CCC in accordance with
subpart C; and
(3) Market data are reported to CCC in accordance with subpart D.
Subpart B--Loan Program
Sec. 1435.100 Applicability.
(a) This subpart is applicable to the 1996 through 2002 crops of
sugar beets and sugarcane. These regulations set forth the terms and
conditions under which CCC will make recourse and nonrecourse loans
available to eligible processors. Additional terms and conditions are
set forth in the loan application and note and security agreement which
a processor must execute to receive a loan.
(b) Loan rates used in administering the loan program are available
in FSA State and county offices.
(c) Loans shall not be available for sugar produced from imported
sugar beets, sugarcane, or molasses.
Sec. 1435.101 Administration.
(a) The loan program shall be administered under the general
supervision of the Executive Vice President, CCC, (Administrator, FSA)
and shall be carried out in the field by FSA State and county
committees.
(b) State and county committees, and representatives and employees
thereof, may not modify or waive any of the provisions of the
regulations of part 1435.
(c) The State committee shall take any action part 1435 requires
which the county committee has not taken. The State committee shall
also:
(1) Correct, or require a county committee to correct, a county
committee action which is not in accordance with part 1435; or
(2) Require a county committee to withhold taking any action which
is not in accordance with part 1435.
(d) No provision or delegation herein to a State or county
committee shall preclude the Executive Vice President, CCC,
(Administrator, FSA) from determining any question arising under the
program or from reversing or modifying any State or county committee
determination.
(e) The Deputy Administrator, FSA, may authorize State and county
committees to waive or modify deadlines and other program requirements
in cases where lateness or failure to meet such requirements do not
adversely affect program operation.
(f) A CCC representative may execute loans and related documents
only under the terms and conditions CCC determines and announces. Any
such document which is not executed in accordance with such terms and
conditions, including any purported execution prior to the CCC-
authorized date, shall be null and void.
Sec. 1435.102 Loan types.
(a) CCC will make available to eligible processors of the 1996
through 2002 crops of domestically-produced sugar beets and sugarcane:
(1) Recourse loans if the tariff-rate quota is not above 1,500,000
short tons, raw value, at the time of loan approval
[[Page 37620]]
and has never been above 1,500,000 short tons, raw value, at any time
during the fiscal year;
(2) Nonrecourse loans if the tariff rate quota exceeds 1,500,000
short tons, raw value, at the time of loan approval or has exceeded
1,500,000 short tons, raw value, at any time during the fiscal year.
(b) Outstanding recourse loans will be automatically converted to
nonrecourse loans if the tariff-rate quota is increased to a level
above 1,500,000 short tons, raw value. However, if the recourse loan
recipient pays the principal amount of the loan, plus interest, within
30 days from the date the tariff-rate quota was increased, then the
loan will be treated for all purposes whatsoever as if it had not been
converted to a nonrecourse loan. Once nonrecourse loans are made
available, they will not be converted to recourse loans any time during
the fiscal year, even if the tariff-rate quota is subsequently reduced
to a level equal to, or less than, 1,500,000 short tons, raw value.
Sec. 1435.103 Loan rates.
(a) The national average loan rate for raw cane sugar produced from
the 1996 through 2002 crops of domestically-grown sugarcane is 18 cents
per pound, raw value.
(b) The national average loan rate for refined beet sugar from
1996-2002-crop domestically-grown sugar beets is 22.90 cents per pound
of refined beet sugar.
(c) The loan rates for eligible sugar are adjusted to reflect the
processing location of the sugar offered as loan collateral and are
available from State and county offices.
Sec. 1435.104 Eligibility requirements.
(a) An eligible producer is the owner of a portion or all of the
domestically-produced sugar beets or sugarcane, including share rent
landowners, at both the time of harvest and the time of delivery to the
processor, except producers determined to be ineligible as a result of
the regulations governing highly erodible land and wetland conservation
found at 7 CFR part 12, regulations governing crop insurance at 7 CFR
part 400, or the regulations governing controlled substance violations
at 7 CFR part 718.
(b) A sugar beet or sugarcane processor is eligible for loans if
the processor agrees to all the terms and conditions in the loan
application and the note and security agreement.
(c) Sugar pledged as collateral during the crop year:
(1) May not exceed the quantity derived from processing
domestically-grown sugar beets or sugarcane from eligible producers
during the applicable crop year;
(2) Must be processed and owned by the eligible processor and
stored in suitable storage;
(3) May not have been processed from imported sugarcane, sugar
beets, or molasses;
(4) Must have been processed in the United States or Puerto Rico;
and
(5) Must have processor certification in the loan application that
the sugar is eligible and available to be pledged as collateral.
(d) Sugar must meet the following minimum quality requirements to
be eligible to be pledged as loan collateral:
(1) Refined beet sugar to be pledged as loan collateral must be:
(i) Dry and free flowing;
(ii) Free of excessive sediment; and
(iii) Free of any objectionable color, flavor, odor, or other
characteristic which would impair its merchantability or which would
impair or prevent its use for normal commercial purposes.
(2) Raw cane sugar to be pledged as loan collateral must be:
(i) Of reasonable grain size;
(ii) Free from excessive color or moisture; and
(iii) Free of any objectionable color, flavor, odor, or other
characteristic which would impair its merchantability or which would
impair or prevent its use for normal refining or commercial purposes.
(3) Sugarcane syrup or edible molasses must be free from any
objectionable color, flavor, odor, or other characteristic which would
impair the merchantability of such syrup or molasses or would impair or
prevent the use of such syrup or molasses for normal commercial
purposes.
Sec. 1435.105 Availability, disbursement, and maturity of loans.
(a) To obtain a loan, a processor must:
(1) File a loan request, as CCC prescribes, no earlier than October
1 and no later than June 30 of the applicable crop year, with the State
committee of the State where such processor is headquartered, or with a
county committee designated by the State committee;
(2) Execute a note and security agreement as CCC prescribes; and
(3) Pay CCC a loan service fee in connection with the disbursement
of each loan. The Executive Vice President, CCC, will determine and
announce the service fee amount.
(b) If there are any liens or encumbrances on sugar pledged as
collateral for a loan, the processor must obtain waivers that fully
protect CCC's interest even though the liens or encumbrances are
satisfied from the loan proceeds. No additional liens or encumbrances
shall be placed on the sugar after the loan is approved.
(c) No loan proceeds may be disbursed until the sugar has actually
been processed and is otherwise established as being eligible to be
pledged as loan collateral.
(d) A processor may, within the loan availability period, repledge
as collateral sugar that previously served as loan collateral for a
repaid loan.
(1) In making application for such loan, the processor shall:
(i) Specify that the loan collateral should be treated as a
quantity of eligible sugar that previously served as loan collateral
for a repaid loan; and
(ii) Designate the loan to which the reoffered loan collateral was
originally pledged.
(2) The subsequent loan shall have the same maturity date as the
original loan.
(3) Loan collateral repledged that was previously redeemed from CCC
is not included in determining the total quantity of sugar on which
loans have been obtained for purposes of Sec. 1435.104.
(e)(1) Disbursements shall be made without regard to the actual
polarity of the sugar pledged as loan collateral but shall be made on
the assumption that the polarity of such sugar is 96 degrees by the
polariscope.
(2) Adjustments for polarity are only made at the time of loan
forfeiture.
(f)(1) Loans will mature at the earlier of:
(i) the end of the 9-month period beginning on the 1st day of the
first month after the month in which the loan is made; or
(ii) September 30 following disbursement of the loan.
(2) CCC may accelerate loan maturity dates in accordance with
Sec. 1435.107(g).
(g)(1) Notwithstanding any other provision of this subpart,
relative to sugar processed from sugar beets or sugarcane that normally
is harvested during July, August, and September, a processor:
(i) May obtain a loan on such sugar;
(ii) Must settle the loan by September 30 following disbursement;
and
(iii) May request a supplemental recourse or nonrecourse loan,
depending on which type of loan is in effect according to
Sec. 1435.102.
(2) Such supplemental loan:
(i) Shall be requested by the processor during the following
October;
(ii) Shall be at the loan rate in effect at the time the
supplemental loan is made; and
(iii) Shall mature in 9 months minus the number of whole months
that the initial loan was in effect.
[[Page 37621]]
Sec. 1435.106 Loan maintenance.
(a) All processors receiving loans shall:
(1) Abide by the terms and conditions of the loan application and
the note and security agreement; and
(2) Pay interest on the principal at a rate determined in part
1405.
(b) The security interests obtained by CCC as a result of the
execution of security agreements by the processors of sugarcane and
sugar beets shall be superior to all statutory and common law liens on
raw cane sugar and refined beet sugar in favor of the producers of
sugarcane and sugar beets and all prior recorded and unrecorded liens
on the crops of sugarcane and sugar beets from which the sugar was
derived.
(c) Nonrecourse loan recipients shall pay all eligible producers
who have delivered or will deliver sugar beets or sugarcane to such
processor for processing not less than the minimum payment levels CCC
specifies for the applicable crop year when nonrecourse loans are in
effect, except that processors who repay a recourse loan within the 30-
day period provided for in Sec. 1435.102(b) are not required to pay the
minimum payment levels.
(d) A processor shall maintain eligible sugar of sufficient quality
and quantity as collateral to satisfy the processor's loan indebtedness
to CCC. CCC shall not assume any loss in quantity or quality of the
loan collateral.
(1) The borrower is responsible for storage costs through the loan
maturity date.
(2) Sugar pledged as loan collateral need not be stored identity
preserved.
(3) When the proceeds of the sale of the sugar pledged as loan
collateral are needed to repay all or part of a sugar loan, the
processor may request and obtain prior written approval from the
loanmaking office by executing a Market Authorization for Loan
Collateral (form CCC-681-1) to remove a specified quantity of the loan
collateral from storage for the purpose of delivering it to a buyer
prior to repayment of the loan. Any such approval shall be subject to
the terms and conditions set forth in the applicable form and the
loanmaking office shall not approve such a request unless the buyer of
the sugar agrees to pay CCC an amount necessary to satisfy the
processor's loan indebtedness regarding the sugar being sold. Any such
approval shall not:
(i) Constitute a release of CCC's security interest in the sugar;
or
(ii) Relieve the processor of liability for the full amount of the
loan indebtedness, including interest.
(4) If CCC determines, by actual measurement or otherwise, that the
actual quantity serving as collateral for a recourse or nonrecourse
loan is less than the loan quantity, because of incorrect
certification, unauthorized removal, or unauthorized disposition, CCC
may call the loan and other outstanding loans. Such determination shall
result in the processor being ineligible for recourse loans for the
remainder of that crop year and through the next crop year.
Sec. 1435.107 Loan settlement and foreclosure.
(a) A processor may, at any time prior to loan maturity, redeem all
or any part of the loan collateral by paying CCC the applicable
principal and interest.
(b) Recourse loan recipients must pay CCC the principal and
interest on the loan and redeem their sugar collateral no later than
the loan maturity date.
(c) Forfeiture will be accepted as payment in full of the principal
and interest due under a nonrecourse loan, applicable to the quantity
of sugar delivered, subject to adjustment for polarity, if the
processor:
(1) Notifies in writing the appropriate loanmaking office of the
processor's intent to forfeit the loan collateral, states the amount of
loan collateral intended to be forfeited, and delivers the notice to
the loanmaking office no later than 30 days prior to the maturity date
of the loan;
(2) Executes a storage agreement, as CCC prescribes, prior to
forfeiture or delivers the loan collateral to a CCC-approved storage
facility upon forfeiture; and
(3) Pays the following forfeiture penalty on sugar pledged as
collateral at the time of forfeiture:
(i) The penalty for raw cane sugar is 1 cent per pound; and
(ii) The penalty for beet sugar is 1.072 cents per pound; and
(4) Reduces payments owed producers by the producer's share of the
aggregate loan forfeiture penalty incurred by the processor. The
producer's share of the aggregate loan forfeiture penalty is calculated
as the producer's share of the net selling price of the processor's
sugar, provided for explicitly or implicitly in the contract between
producers and processor, times the aggregate loan forfeiture penalty.
(d) Even though a processor gave notice of intent to forfeit, the
processor may, at any time prior to maturity of the nonrecourse loan,
redeem the loan collateral in accordance with this section.
(e) CCC shall not accept delivery of sugar in settlement of a
nonrecourse loan in excess of:
(1) the amount specified in the notice of intent to forfeit; or
(2) the quantity of sugar which is shown on the note and security
agreement minus any quantity that was redeemed or released for removal
in accordance with this section.
(f) If the processor does not redeem any amount of the nonrecourse
loan collateral and the conditions of paragraph (c) of this section
have been fulfilled, the unredeemed nonrecourse loan collateral will,
without further CCC or processor action, be deemed to have been
forfeited and delivered to CCC in-store at the processor's storage
facility on the day following the maturity date of the loan. Title, all
rights, and interest to the sugar immediately vests in CCC upon
delivery.
(g)(1) CCC may at any time accelerate the date for loan repayment
indebtedness, including interest. CCC will give the processor notice of
such acceleration at least 15 days in advance of the accelerated loan
maturity date.
(2) In the event of any such acceleration of nonrecourse loans, the
required notice of intent to forfeit, as set forth in paragraph (d)(1),
may be given at any time prior to the accelerated maturity date.
(h) If a processor's recourse or nonrecourse loan indebtedness is
not satisfied in accordance with the provisions of this section:
(1) Interest on the processor's indebtedness shall accrue as
specified in part 1403 in this chapter and shall accrue until the debt
is paid;
(2) CCC may, upon notice, with or without removing the collateral
from storage, sell such collateral at either a public or private sale;
and
(3) The processor shall be liable for the deficiency if the net
proceeds are less than the amount of principal, interest, and any other
charges incurred by the CCC.
Sec. 1435.108 Storage facility requirements.
(a) Sugar forfeited to CCC must be delivered in or to a CCC-
approved storage facility.
(1) Eligible storage is any storage facility which:
(i) Meets CCC Standards for Approval of Dry and Cold Storage
Warehouses for Processed Agricultural Commodities, Extracted Honey, and
Bulk Oils (part 1423 of this chapter); and
(ii) Is placed under a storage contract with CCC.
(2) If the sugar is delivered in or to an ineligible storage
facility, the processor is responsible for all costs incurred in moving
the sugar to an eligible storage facility.
(b) CCC has the right to inspect loan collateral or CCC-owned sugar
and the storage facilities in which the sugar is situated at any time.
[[Page 37622]]
(c) Regardless of whether CCC inspected the sugar and storage
facility prior to delivery, the processor is liable to CCC for any
damages CCC suffers if:
(1) The processor delivers ineligible sugar to CCC; or
(2) The processor delivers sugar into ineligible storage.
Sec. 1435.109 Processor storage agreement.
(a) By executing a note and security agreement, the processor
agrees to store any forfeited loan collateral on behalf of CCC under
the terms and conditions specified in this subpart and any storage
agreement entered into between CCC and the processor. Should the terms
of these regulations and the terms of the storage agreement conflict,
the terms set forth in the regulations are applicable.
(b) The storing processor is responsible for maintaining the
quality and condition of CCC-owned sugar. The processor is liable to
CCC for any damages CCC suffers due to the failure of the processor to
load out sugar meeting the criteria set forth in Sec. 1435.104(d).
Also, the processor shall store the sugar in the eligible storage where
delivered for as long as CCC deems necessary.
(c) If a processor forfeits loan collateral and CCC and the
processor fails to enter into a storage contract, the processor is
responsible for all costs incurred in moving the sugar to an eligible
storage facility.
(d) A processor storing CCC-owned sugar is responsible for all
load-out expenses in the event that CCC sells the sugar.
(e) CCC shall make monthly storage payments to the processor for
the period of time the processor stores the forfeited sugar. The
storage payment rate shall be as CCC and the processor agree, and
according to the terms and conditions CCC sets forth when executing a
note and security agreement.
Sec. 1435.110 Miscellaneous provisions.
(a) The regulations issued by the Secretary governing setoffs and
withholding set forth at part 3 of this title and part 1403 of this
chapter are applicable to the program set forth in this subpart.
(b) A producer or processor may obtain reconsideration and review
of determinations made under this subpart in accordance with the
regulations at 7 CFR part 780.
(c) Any false certification, including those made for the purpose
of enabling a processor to obtain a loan to which it is not entitled,
will subject the person making such certification to liability under
applicable Federal civil and criminal statutes.
Sec. 1435.111 Applicable forms.
CCC forms used for this program are available from the appropriate
State committee or designated county committee. For purposes of any CCC
form that refers to program participation by producers, the term
``producer'' shall be taken to mean ``processor.''
Subpart C--Sugar Marketing Assessments
Sec. 1435.200 General statement.
(a) This subpart sets forth the terms and conditions for the
payment to CCC of marketing assessments for beet sugar and raw cane
sugar marketed during fiscal years 1996 through 2003.
(b) The marketing assessment applies to:
(1) First processor marketings of all raw cane sugar processed
during fiscal years 1996 through 2003 from domestically-produced
sugarcane or sugarcane molasses, and
(2) First processor marketings of all beet sugar processed during
fiscal years 1996 through 2003 from domestically-produced sugar beets
or sugar beet molasses.
Sec. 1435.201 Marketing assessment rates.
(a) For marketings during fiscal year 1996, the assessment rate per
pound of beet sugar is 0.2123 cents per pound. The assessment rate for
fiscal years 1997 through 2003 is 0.2654 cents per pound.
(b) For marketings during fiscal year 1996, the assessment rate per
pound of raw cane sugar is 0.1980 cents per pound, raw value. The
assessment rate for fiscal years 1997 through 2003 is 0.2475 cents per
pound, raw value.
Sec. 1435.202 Remittance.
(a) The monthly amount of the beet sugar marketing assessment to be
remitted to CCC is determined by multiplying the number of pounds of
beet sugar marketed in the calendar month by the assessment rate.
(b) The monthly amount of the marketing assessment on raw cane
sugar to be remitted to CCC is determined by multiplying the number of
pounds, raw value, of raw cane sugar marketed, or estimated to be
marketed in accordance with (e)(1) of this section, in the calendar
month by the assessment rate.
(c)(1) First processors shall remit marketing assessments to CCC no
later than the 30th calendar day following the end of the month in
which the beet sugar or raw cane sugar subject to the assessment was
marketed.
(2) Mailed remittances will be considered timely if they are
postmarked not later than the 25th calendar day following the month in
which the beet sugar or cane sugar subject to the assessment was
marketed.
(3) CCC must receive electronic remittances by the 30th calendar
day following the month in which the beet sugar or raw cane sugar
subject to the assessment was marketed.
(4) Any processor who fails to file a remittance by the due date
shall be assessed a civil penalty and interest in accordance with
Sec. 1435.203.
(d)(1) First processors shall prepare and submit a fully and
accurately completed form CCC-80 each month that shows:
(i) Beet sugar marketings during the previous calendar month; and
(ii) Raw cane sugar, raw value, marketings during the previous
calendar month.
(2) First processors who do not operate on a calendar month basis
may pay their assessments based on marketings on several extra days or
fewer days than the calendar month reporting period, consistent with
the processor's standard accounting period. However:
(i) Assessments must be paid on all marketings of specific crop
year sugar in the fiscal year it is due; and
(ii) The marketing assessments must be remitted monthly and by the
dates specified in this section.
(3) The entire assessment that is due and payable shall be remitted
with the Form CCC-80.
(e)(1) If, when a raw cane sugar assessment is due and payable, the
first processor cannot determine the exact raw value of such sugar, an
estimate of raw value based on the recent experience of the processor
shall be made and the assessment submitted on the estimated quantity.
(2) Whenever an assessment is based on an estimate of raw value
pursuant to (e)(1), any necessary adjustments to the quantity of raw
sugar subject to the assessment shall be made by filing a corrected
Form CCC-80 no later than 30 calendar days after the last day of the
month in which the estimated assessment was paid. If, according to the
corrected Form CCC-80:
(i) The assessment was underpaid, the first processor shall remit
the additional assessment due with the corrected Form CCC-80, and
(ii) If the assessment was overpaid, the first processor shall
subtract the overpayment from any assessment due at the time the
corrected Form CCC-80 is filed, or if none is due at that time, from
the assessment next due.
(f) By October 30 of each year, first processors shall determine
the quantity of beet sugar or raw cane sugar on hand that was produced
during the preceding
[[Page 37623]]
fiscal year but not marketed by September 30 of such preceding fiscal
year and shall remit a marketing assessment to CCC as if the sugar had
been marketed in September of such preceding fiscal year. Such sugar is
not subject to a second assessment when it is marketed.
(g) First processors shall send remittances and CCC-80 forms as CCC
specifies.
Sec. 1435.203 Civil penalties and interest.
(a) A first processor is liable for a civil penalty of up to 100
percent of the relevant national average loan rate times the marketings
of beet sugar or raw cane sugar involved in the violation if the
processor:
(1) Fails to remit, on a timely basis, the entire amount of any
marketing assessment in accordance with this subpart;
(2) Fails to submit Form CCC-80 fully and accurately completed; or
(3) Fails to maintain and permit inspection of records as required
by Sec. 1435.204.
(b) In addition to any civil penalty assessed in accordance with
this section, interest on unpaid assessments or deficiencies in
assessments paid is due and payable at the rate specified in part 1403
of this chapter beginning on the 1st day of the month after the
marketing assessment was due in accordance with Sec. 1435.203. Interest
shall continue to accrue until such amount is paid. However, if full
payment of an assessment is received within 30 calendar days of the
date on which the assessment was due, no interest shall apply.
(c) The Controller, CCC, shall assess civil penalties and interest.
(d) Affected first processors may request reconsideration of civil
penalties by filing a request, within 30 days of receipt of certified
written notification by the Controller, CCC, of such assessment of
civil penalties, with the Executive Vice President, CCC, Stop 0501,
1400 Independence Ave. SW, Washington, D.C. 20250-0501.
(e) After reconsideration, affected first processors may appeal
civil penalties by filing a notice of appeal, within 30 calendar days
of receipt of certified written notification by the Executive Vice
President, CCC, of an affirmation of the assessment of civil penalties,
with the National Appeals Division in accordance with part 780 of this
chapter.
Sec. 1435.204 Refunds.
Marketing assessments are nonrefundable. However, upon presentation
of evidence acceptable to the Controller, CCC, adjustments to an
assessment may be made by CCC to reflect the actual marketings of beet
sugar or raw cane sugar, or a first processor may adjust the amount of
the assessment due in accordance with Sec. 1435.202.
Subpart D--Information Reporting and Recordkeeping Requirements
Sec. 1435.300 General statement.
(a) Every sugar beet processor, sugarcane processor, and cane sugar
refiner shall report, on a monthly basis on CCC required forms, its
imports and receipts, processing inputs, production, distribution,
stocks, and other information necessary to administer sugar programs.
(b) Any processor must, upon CCC's request, provide such
information as CCC deems appropriate for determining regional loan
rates.
(c) The sugar information reporting and recordkeeping requirements
of this subpart are administered under the general supervision of the
Executive Vice President, CCC.
Sec. 1435.301 Civil penalties.
(a) Any processor or refiner who willfully fails or refuses to
furnish the information, or who willfully furnishes false data required
under Sec. 1435.300, is subject to a civil penalty of no more than
$10,000 for each such violation.
(b) The Controller, CCC, shall assess civil penalties and interest.
(c) Affected first processors may request reconsideration of civil
penalties by filing a request, within 30 days of receipt of certified
written notification by the Controller, CCC, of such assessment of
civil penalties, with the Executive Vice President, CCC, Stop 0501,
1400 Independence Ave. SW, Washington, D.C. 20250-0501.
(d) After reconsideration, affected first processors may appeal
civil penalties by filing a notice of appeal, within 30 calendar days
of receipt of certified written notification by the Executive Vice
President, CCC, of an affirmation of the assessment of civil penalties,
with the National Appeals Division in accordance with part 780 of this
chapter.
PART 1446--PEANUTS
43. The authority citation for part 1446 is revised to read as
follows:
Authority: 7 U.S.C. 7271; 15 U.S.C. 714b and 714c.
44. Section 1446.101 is amended by revising the first and second
sentences of the section to read as follows:
Sec. 1446.101 General statement.
This part sets out provisions relating to the 1996 through 2002
crops of peanuts as authorized and in accordance with the applicable
provisions of Public Law 104-127. The peanut marketing, storage,
handling and disposition requirements for peanuts for the 1991 through
1995 crops shall continue to be governed by the regulations codified in
this part 1446 as of January 1, 1996. * * *
45. In Sec. 1446.103, the definition of ``eligible producer'' is
amended by redesignating paragraph (4) as paragraph (5) and adding a
new paragraph (4) in its place, and paragraph (1) of the definition of
``support rate'' is revised to read as follows:
Sec. 1446.103 Definitions
* * * * *
Eligible producer. An eligible producer for purposes of price
support under this part shall be a person who meets all of the
following criteria:
* * * * *
(4) The person has not marketed 100 percent of a quota peanut crop
that meets the quality requirements for domestic edible use, through a
marketing association for the 2 marketing years immediately preceding
the current marketing year, if handlers have provided the producer with
written offers, upon delivery, for the purchase of all the quota
peanuts, at a price equal to or in excess of the quota support price.
If a producer is rendered ineligible for quota price support under this
or any other provision, the producer may appeal the ineligibility
determination utilizing procedures provided in part 780 of this title.
* * * * *
Support rate.--(1) National average. The national average price
support rate for quota peanuts, for each of the 1996 through 2002
crops, shall be $610.00 per ton. The national average price support
rate for additional peanuts, for each of the 1996 through 2002 crops,
shall be the rate announced by the Secretary.
* * * * *
46. In Sec. 1446.203, paragraph (b) is revised to read as follows:
Sec. 1446.203 Marketing card entries and collection of assessments,
penalties and debts.
* * * * *
(b) Farmers Home Administration or Farm Service Agency lien. If a
Farmers Home Administration or Farm Service Agency lien has been
recorded on the marketing card that was issued for the use of a
producer when marketing peanuts, the purchaser of such peanuts shall
make the check, for the proceeds
[[Page 37624]]
from such peanuts, payable jointly to the producer and the Farm Service
Agency. However, if a peanut poundage quota lien was also recorded on
the marketing card against such producer, the check shall be made
payable jointly to the producer, CCC and the Farm Service Agency.
47. Section 1446.307 is amended by revising paragraphs (b) and (d)
to read as follows:
Sec. 1446.307 Disaster transfer of Segregation 2 or Segregation 3
peanuts from additional loan to quota loan.
* * * * *
(b) Limitation of amount eligible for transfer. A transfer made in
accordance with this section shall not exceed the smaller of:
(1) The difference between:
(i) The total quantity of Segregation 1 peanuts marketed from the
farm, plus the amount of peanuts retained on the farm for seed or other
use, and
(ii) The effective farm poundage quota, excluding quota pounds
transferred to the farm in the fall; or
(2) Twenty-five percent of the effective farm poundage quota,
excluding quota pounds transferred to the farm in the fall.
* * * * *
(d) Loan value for transferred peanuts.--(1) Segregation 2 peanuts.
The quota loan value for any lot of Segregation 2 peanuts transferred
from an additional loan to a quota loan shall be determined by
multiplying 70 percent of the quota loan rate that otherwise would have
been applicable for such lot of peanuts as quota peanuts, exclusive of
any discount for damaged kernels, by the net weight of peanuts being
transferred and deducting from the result the amount of any special
discount that may apply for Segregation 2 peanuts transferred in
accordance with this section.
(2) Segregation 3 peanuts. The quota loan value for any lot of
Segregation 3 peanuts transferred from an additional loan to a quota
loan shall be determined by multiplying 70 percent of the quota loan
rate that otherwise would have been applicable for such lot of peanuts
as quota peanuts, exclusive of any discount for damaged kernels, by the
net weight of peanuts being transferred and deducting from the result
the amount of any special discount that may apply for Segregation 3
peanuts transferred in accordance with this section.
* * * * *
48. Section 1446.308 is amended by revising paragraphs (a), (d) and
(e)(1), removing paragraph (f), and redesignating paragraph (g) as
paragraph (f) to read as follows:
Sec. 1446.308 Loan pools.
(a) Establishment of pools.--(1) Each marketing association shall
establish six separate loan pools; one for each of the three
segregations of additional peanuts and one for each of the three
segregations for quota peanuts. These pools shall be formed without
regard to the type of peanuts (Runner, Virginia, Spanish, or Valencia)
involved. However, the SWPGA shall also establish 12 separate loan
pools for Valencia peanuts produced in New Mexico, namely, for bright
hull peanuts and for dark hull peanuts separately, to include for each
of them separate, by segregation, additional peanuts and quota peanuts
pools. Each marketing association shall maintain separate, complete and
accurate records for each loan pool that is established by the
marketing association.
(2) Eligibility to participate in New Mexico Pools.
(i) In general. Except as provided in clause (a)(2)(ii) of this
section, in the case of the 1996 and subsequent crops, Valencia peanuts
not physically produced in the State of New Mexico shall not be
eligible to participate in the pools of the State even if the farm on
which the peanuts are produced is constituted for administrative
purposes within the State of New Mexico.
(ii) Exception. A producer of Valencia peanuts may enter Valencia
peanuts that are physically produced in Texas into the pools for New
Mexico in a quantity not greater than the average annual quantity of
the peanuts that the producer entered into the New Mexico pools for the
1990 through 1995 crops; however, to qualify, the peanuts must be
produced on the same farm on which the peanuts were produced during the
base years of 1990 through 1995.
* * * * *
(d) Recovery of losses in quota area loan pools.--(1) If the loan
indebtedness on the peanuts in a quota area pool exceeds the proceeds
from the sale of the peanuts in such pool, such excess shall be
recovered using the following sources in the following order of
priority:
(i) Proceeds due any individual producer from any pool, as a result
of the transfer of peanuts for pricing purposes from an additional loan
pool to a quota loan pool, pursuant to the provisions in Sec. 1446.307.
(ii) Gains of any producer in the same pool, by the amount of pool
gains attributed to the same producer from the sale of additional
peanuts for domestic and export edible use.
(iii) Gains or profits resulting from the sale of additional
peanuts, other than Valencia peanuts produced in New Mexico in separate
type pools established under paragraph (a) of this section, in the same
marketing area for domestic edible use, that are owned or controlled by
CCC. This paragraph shall not apply to gains or profits from the sale
of peanuts that were produced on farms with 1 acre or less of peanut
production.
(iv) Marketing assessments, collected from producers under
Sec. 729.316 of this title, that the Secretary determines are necessary
to cover losses in area quota pools.
(v) Gains or profits from quota pools in other marketing areas,
other than separate type pools established under paragraph (a) of this
section for Valencia peanuts produced in New Mexico.
(vi) Gains or profits resulting from the sale of additional peanuts
in other marketing areas, other than Valencia peanuts produced in New
Mexico in separate type pools established under paragraph (a) of this
section, for domestic edible use, that are owned or controlled by CCC.
This paragraph shall not apply to gains or profits from the sale of
peanuts that were produced on farms with 1 acre or less of peanut
production.
(vii) Marketing assessments, collected from handlers under
Sec. 729.316 of this title, that the Secretary determines are necessary
to cover losses in area quota pools.
(viii) Increased marketing assessments on quota peanuts in the
production area covered by the pool, which shall be assessed as needed
and collected from producers under Sec. 729.317 of this title.
(2) The exceptions provided for Valencia peanuts in paragraph
(d)(1) of this section shall only apply as to prevent offsets between
pools for each of the Valencia types (bright-hull and dark-hull) for
New Mexico and other peanuts.
* * * * *
(e) Pool distribution.--(1) Net gains as determined in accordance
with this section on peanuts in each area pool shall be distributed to
each producer who placed peanuts in that pool in proportion to the
dollar value of peanuts placed in such pool by that producer, except
that the proceeds available for the amount of distribution shall be
subject to any other conditions and offsets set forth in this section;
and
* * * * *
49. Section 1446.401 is amended by revising paragraph (a)(1) to
read as follows:
Sec. 1446.401 Contracts for additional peanuts for crushing or export.
* * * * *
[[Page 37625]]
(a) Contract form and addendum.--(1) Contract form. In order to be
approved by the county committee, the contract must be completed on
Form CCC-1005, Handler Contract With Producers for Purchase of
Additional Peanuts for Crushing or Export, or on a form approved by the
Executive Vice President, CCC, or designee, which follows the
organization of the CCC-1005 and contains as a minimum all of the
requirements provided for in paragraph (c)(2) of this section.
* * * * *
50. Section 1446.410 is amended by revising paragraph (b) to read
as follows:
Sec. 1446.410 Disposition date.
* * * * *
(b) Extension of final disposition date. The final disposition date
for an individual handler may be extended by the marketing association
to November 30 of the year following the calendar year in which the
crop was grown if, by the final disposition date identified in
paragraph (a) of this section, the handler files a written request with
the marketing association that specifies the number of pounds for which
an extension is requested.
51. Part 1468 is revised as follows:
PART 1468--WOOL AND MOHAIR
Authority: 7 U.S.C. 1781-1787; 15 U.S.C. 714b and 714c.
Sec. 1468.1 Termination.
The price support program for wool and mohair was terminated at the
conclusion of the 1995 marketing year. The regulations setting forth
the applicable terms and conditions for the Wool and Mohair Program for
the 1995 and prior marketing years found at part 1468 of this title as
of January 1, 1996, shall be applicable to determinations made with
respect to the administration of payments outstanding on or after July
18, 1996.
Dated: July 3, 1996.
Dan Glickman,
Secretary of Agriculture.
Dated: July 3, 1996.
Eugene Moos,
Under Secretary for Farm and Foreign Agricultural Services.
[FR Doc. 96-17486 Filed 7-12-96; 11:39 am]
BILLING CODE 3410-05-P
