[Federal Register Volume 59, Number 40 (Tuesday, March 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4674]
[[Page Unknown]]
[Federal Register: March 1, 1994]
VOL. 59, NO. 40
Tuesday, March 1, 1994
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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1427
RIN 0560-AD58
Revisions to the Upland Cotton User Marketing Certificate Program
AGENCY: Commodity Credit Corporation, USDA.
ACTION: Proposed rule.
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SUMMARY: Concerns have been raised about the cost of the upland cotton
user marketing certificate program and the way in which it has been
administered. A notice requesting comments regarding the program was
published in the Federal Register on August 20, 1993, at 58 FR 44320.
Comments were solicited with respect to several of the concerns that
have been raised. The Commodity Credit Corporation (CCC) is now
requesting further comments with respect to proposed changes in the
formula for determining the user marketing payment rate; whether export
contracts that specify shipment after September 30 should be eligible
for payments beginning October 1, and, if so, whether the maximum
payment rate should be 2.5 cents per pound until such time as the
payment rate calculation is based entirely on Northern Europe forward
prices; and whether a destination should be required to be declared for
export sales contracts.
DATES: Comments must be received by March 11, 1994, in order to be
assured of consideration.
ADDRESSES: Comments must be mailed to Director, Fibers and Rice
Analysis Division (FRAD), Agricultural Stabilization and Conservation
Service (ASCS), United States Department of Agriculture (USDA), room
3754-S, PO Box 2415, Washington, DC 20013-2415.
FOR FURTHER INFORMATION CONTACT: Wayne Bjorlie, FRAD, ASCS, USDA, room
3754-S, PO Box 2415, Washington, DC 20013-2415 or call 202-720-7954.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
The proposed rule is issued in conformance with Executive Order
12866. Based on information compiled by USDA, it has been determined
that this proposed rule would materially alter the budgetary impacts of
entitlements and the rights and obligations of entitlement recipients.
A change in the method of determining the payment rate under the
program could raise payment rates for domestic textile mills and lower
payment rates for exporters of U.S.-grown cotton, reducing budgetary
expenditures. The ability of exporters to earn a payment on forward-
crop sales beginning earlier in the marketing year could afford them
greater benefits under the program and result in more price
competition. The requirement that exporters designate the country of
destination of the cotton before CCC will fix a payment rate will
entail additional paperwork for exporters and could reduce exports of
U.S. cotton.
These program changes are projected to increase the average rate at
which domestic mills are being paid by about one-half cent and to
decrease the average rate at which exporters are being paid by about
two cents. As a result, domestic mill use of upland cotton is expected
to increase by 50,000 bales per year and exports of U.S. cotton are
expected to be reduced by 100,000 bales per year. These changes are not
significant enough to have any impact on acreage reduction programs,
prices, or farm income. Government outlays for Step-2 payments are
projected to be reduced by an average of almost $30 million per year.
Other than the impacts indicated above, this action:
(1) Will not have an annual effect on the economy of $100 million
or more or adversely affect in a material way the economy, a sector of
the economy, productivity, jobs, the environment, public health or
safety, or State, local or tribal governments or communities;
(2) Will not create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency;
(3) Will not materially alter the budgetary impacts of user fees or
loan programs, and;
(4) Will not raise novel legal policy issues arising out of legal
mandates, the President's priorities, or the principles set forth in
Executive Order 12866.
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this proposed rule since the CCC is not required by 5
U.S.C. 553 or any other provision of law to publish a notice of
proposed rulemaking with respect to the subject matter of these
determinations.
Environmental Evaluation
It has been determined by an environmental evaluation that this
action will not have a significant impact on the quality of the human
environment. Therefore, neither an Environmental Assessment nor an
Environmental Impact Statement is needed.
Federal Assistance Program
The title and number of the Federal Assistance Program, as found in
the Catalog of Federal Domestic Assistance, to which this rule applies
are: Cotton Production Stabilization--10.052.
Executive Order 12778
This proposed rule has been reviewed in accordance with Executive
Order 12778. The provisions of this proposed rule do not preempt State
laws, are not retroactive, and do not involve administrative appeals.
Executive Order 12372
This program/activity is not subject to the provisions of Executive
Order 12372, which requires intergovernmental consultation with State
and local officials. See notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115 (June 24, 1983).
Paperwork Reduction Act
The information collection requirements contained in the current
regulations have been approved by the Office of Management and Budget
(OMB), under the provisions of 44 U.S.C. chapter 35, through August 31,
1994 (OMB No. 0560-0136). Changes made to the Upland Cotton Domestic
User/Exporter Agreement as a result of this proposed rule have been
submitted to OMB for approval in addition to one new information
collection requirement (see Attachment 1).
Preliminary Regulatory Impact Analysis
The Preliminary Regulatory Impact Analysis describing the options
considered in developing this proposed rule and the impact of the
implementation of each option is available on request from the above-
named individual.
Background
This proposed rule amends 7 CFR part 1427 to set forth proposed
determinations with respect to the upland cotton user marketing
certificate program. A notice requesting comments on the administration
of the program was published on August 20, 1993, at 58 FR 44320.
Comments were requested on these specific concerns:
(1) How to make the program equitable to exporters with and without
foreign affiliates, to domestic textile mills, and to other members of
the U.S. cotton industry;
(2) How best to meet the legislative objectives of the program as
they relate to U.S. cotton competitiveness;
(3) How to assure that export contracts considered eligible to lock
in rates in advance under the program represent actual sales and how to
institute appropriate measures that discourage program abuse but do not
unduly penalize exporters if they are unable to ship cotton due to
unforseen and unavoidable circumstances;
(4) How to operate a program that interferes as little as possible
with normal cotton marketing practices, that does not overly influence
or dominate decision-making in the cotton market, that will not result
in cotton price distortions, and that will not commit Federal funds
unnecessarily to the competitiveness program; and
(5) How to accomplish the above objectives in a way that is not
administratively burdensome.
A total of sixteen comments were received in response to the notice
requesting comments.
With regard to changing the formula for calculating the user
marketing certificate payment rate, four respondents supported a
proposal that would limit the weekly increase in the forward payment
rate calculation to 25 percent of the current week's payment rate
calculation. Two respondents recommended basing the user marketing
certificate payment rate throughout the year on a four-week moving
average of the payment rate formula. One respondent commented that
domestic mills should receive the same rate as exporters or the formula
should be eliminated. Another respondent urged elimination of the
current and forward dual rate structure and suggested that CCC make
adjustments in the price quotations to reflect actual sales prices.
Four respondents recommended eliminating the program altogether, one
respondent recommended eliminating the program for exporters only, and
one respondent suggested using a fixed certificate rate of 0.5 cents
per week. Two respondents did not comment on the payment rate formula.
With regard to the formula used to determine whether a special
import quota is in effect, three respondents recommended that only
current Northern Europe price quotations be used.
With regard to sales to foreign affiliates, one respondent asked
that sales to foreign affiliates be allowed to continue, one respondent
asked that sales to foreign affiliates not be allowed, and three
respondents asked that only sales to end users be allowed. In addition,
one respondent requested that CCC not establish regulations that
interfere with traditional international marketing practices.
Two respondents requested that there not be a time limit for
specifying the destination of any exports. One respondent asked that
liquidated damages be calculated based on 50 percent of the certificate
value and another respondent asked that CCC increase penalties for non-
performance on export contracts.
Several respondents commented on various provisions of the upland
cotton loan program. One respondent suggested lowering the loan rate to
45 cents. One respondent asked that the loan period be shortened to ten
months with a two-month extension, that preliminary notice of any
discretionary adjustment to the adjusted world price (AWP) be given and
that producers be ineligible for loans if they have cotton under loan
from a previous crop. One respondent suggested that CCC deduct carrying
charges from the loan proceeds.
After considering these comments, the following changes are
proposed to be made with respect to the regulations governing the
upland cotton user marketing certificate program:
(1) Beginning with the period each year when both Northern Europe
current prices and Northern Europe forward prices are available,
determine the payment rate for both domestic mills and exporters using
a blend of the two prices similar to the method used to make a
transition in the AWP from current to forward prices. Establish a six-
week transition period during which blended prices would be used.
Following the transition period, calculate payment rates based on the
Northern Europe forward prices. If adopted, this proposal would require
that a complementary procedure be established for determining the
``Step 3'' special import quota;
(2) Allow export contracts that specify delivery after September 30
to qualify for payments beginning about October 1. Such contracts would
earn the lower of the rate in effect for a given week or 2.5 cents per
pound until such time as the payment rate is based entirely on Northern
Europe forward prices. Thereafter, no limitation on the payment rate
would apply; and
(3) Require exporters to declare the country of destination before
a Step-2 payment rate can be established for an export contract.
List of Subjects in 7 CFR Part 1427
Cotton, Loan programs/agriculture, Packaging and containers, Price
support programs, Reporting and recordkeeping requirements, Surety
bonds, Warehouses.
Accordingly, it is proposed that 7 CFR part 1427 be amended as
follows:
PART 1427--COTTON
1. The authority citation for 7 CFR part 1427 continues to read as
follows:
Authority: 7 U.S.C. 1421, 1423, 1425, 1444, and 1444-2; 15
U.S.C. 714b and 714c.
2. Section 1427.102 is amended by:
A. Adding ``End user'' definition, and
B. Revising definitions of ``Northern Europe current price'',
``Northern Europe forward price'', ``Northern Europe price'', ``U.S.
Northern Europe current price'', ``U.S. Northern Europe forward
price'', and ``U.S. Northern Europe price'' to read as follows:
Sec. 1427.102 Definitions.
* * * * *
End user means the person or entity who opens a bale of cotton for
use in the manufacture of cotton products.
* * * * *
Northern Europe current (NEc) price means the average of the
current shipment prices for the preceding Friday through Thursday for
the five lowest-priced growths of the growths quoted for Middling (M)
1\3/32\ inch cotton C.I.F. northern Europe.
Northern Europe forward (NEf) price means the average of the
forward shipment prices for the preceding Friday through Thursday for
the five lowest-priced growths of the growths quoted for M 1\3/32\ inch
cotton C.I.F. northern Europe.
Northern Europe (NE) price means, during the period in which only
one daily price quotation is available for the growth quoted for M 1\3/
32\ inch cotton, C.I.F. northern Europe, the average for the preceding
Friday through Thursday period of the five lowest-priced growths of the
growths quoted for M 1\3/32\ inch cotton, C.I.F. northern Europe.
* * * * *
U.S. Northern Europe current (USNEc) price means the average of the
current shipment prices for the preceding Friday through Thursday for
the lowest-priced United States growth as quoted for Middling (M)\3/32\
inch cotton C.I.F. northern Europe.
U.S. Northern Europe forward (USNEf) price means the average of the
forward shipment prices for the preceding Friday through Thursday 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 (USNE) price means, during the period in which
only one daily price quotation is available for the growth quoted for M
1\3/32\ inch cotton, C.I.F. northern Europe, the average for the
preceding Friday through Thursday period of the lowest-price United
States growth as quoted for M 1\3/32\ inch cotton, C.I.F. northern
Europe.
3. Section 1427.107 is amended by:
A. Redesignating paragraphs (d) through (g) as paragraphs (f)
through (i), respectively,
B. Revising paragraphs (a), (b), and (c),
C. Adding new paragraphs (d) and (e), and
D. Revising redesignated paragraph (f)(3)(i) to read as follows:
Sec. 1427.107 Payment rate.
(a) Payments will be made to domestic users for all eligible bales
opened and exporters on contracts which specify shipment of the cotton
by not later than September 30 following such contract period and for
which a country of destination has been named, whenever the formula
defined in paragraph (c) of this section (hereinafter referred to as
the ``payment rate calculation'') results in positive values for the
four preceding consecutive weeks and the adjusted world price,
determined in accordance with Sec. 1427.25 of this part (hereinafter
referred to as the ``AWP''), does not exceed the current crop-year loan
level for the base quality of upland cotton by more than 130 percent in
any week of the 4-week period. Payments will not be made if the payment
rate calculation, adjusted for the value of any certificate or cash
payments issued under this section, results in a positive value for
each week of the immediately preceding 10-week period. The payment rate
for any Friday through Thursday period is equal to the payment rate
calculation for the immediately preceding Friday through Thursday
period.
(b) Payments will be made to exporters on contracts which specify
shipment of the cotton after September 30 following such contract
period and for which a country of destination has been named beginning
the Friday through Thursday week which includes October 1 whenever the
payment rate calculations defined in paragraph (c) of this section are
positive for the preceding four consecutive weeks and the AWP does not
exceed the current crop-year loan level for the base quality of upland
cotton by more than 130 percent in any week of the 4-week period. No
payments will be allowed on contracts which specify shipment of the
cotton after September 30 following such contract period if the
contract was made prior to the Friday through Thursday week which
includes the preceding October 1. With respect to contracts which
specify shipment of the cotton after September 30, 1994 but before
September 30, 1995, no payments will be made on contracts made prior to
the week following the first week covering the period Friday through
Thursday which includes April 15, 1994 or, if the USNEc, the USNEf, the
NEc and the NEf are not available, prior to the week following the
first week covering the period Friday through Thursday after the week
which includes April 15, 1994 in which the USNEc, the USNEf, the NEc
and the NEf are available. Payments will not be made if the payment
rate calculation, adjusted for the value of any certificate or cash
payments issued under this section, results in a positive value for
each week of the immediately preceding 10-week period. Beginning the
Friday through Thursday week which includes October 1 and until the
seventh week following the first week covering the period Friday
through Thursday which includes April 15 or, if the USNEc, the USNEf,
the NEc and the NEf are not available, until the seventh week following
the first week covering the period Friday through Thursday after the
week which includes April 15 in which the USNEc, the USNEf, the NEc and
the NEf are available, the payment rate for any Friday through Thursday
period is equal to the lower of the payment rate calculation for the
immediately preceding Friday through Thursday period or 2.5 cents.
Beginning the seventh week following the first week covering the period
Friday through Thursday which includes April 15 or, if the USNEc, the
USNEf, the NEc and the NEf are not available, beginning with the
seventh week following the first week covering the period Friday
through Thursday after the week which includes April 15 in which the
USNEc, the USNEf, the NEc and the NEf are available, the payment rate
for any Friday through Thursday period is equal to the payment rate
calculation for the immediately preceding Friday through Thursday
period.
(c) (1) Beginning August 1 until the first week covering the period
Friday through Thursday which includes April 15 or, if the USNEc, the
USNEf, NEc and the NEf are not available, until the first week covering
the period Friday through Thursday after the week which includes April
15 in which the USNEc, the USNEf, the NEc and the NEf are available,
the payment rate calculation is the USNE minus the NE price minus 1.25
cents per pound.
(2) Beginning with the first week covering the period Friday
through Thursday which includes April 15 or, if the USNEc, the USNEf,
the NEc and the NEf are not available, beginning with the first week
covering the period Friday through Thursday after the week which
includes April 15 in which the USNEc, the USNEf, the NEc and the NEf
price are available, the payment rate calculation will be based on an
average of the USNEc price and the USNEf (hereinafter referred to as
the ``blended U.S. Northern Europe price'') and an average of the NEc
and the NEf (hereinafter referred to as the ``blended Northern Europe
price'') as follows:
(i) Weeks 1 and 2: Blended U.S. Northern Europe price equals
((2 x USNEc)+USNEf)/3. Blended Northern Europe price equals
((2 x NEc)+NEf)/3.
(ii) Weeks 3 and 4: Blended U.S. Northern Europe price equals
(USNEc+USNEf)/2. Blended Northern Europe price equals (NEc+NEf)/2.
(iii) Weeks 5 and 6: Blended U.S. Northern Europe price equals
(USNEc+(2 x USNEf))/3. Blended Northern Europe price equals
(NEc+(2 x NEf))/3. The payment rate calculation for the 6-week period
is the blended U.S. Northern Europe price minus the blended Northern
Europe price minus 1.25 cents per pound.
(3) Beginning with the seventh week following the first week
covering the period Friday through Thursday which includes April 15 or,
if the USNEc, the USNEf, the NEc and the NEf are not available,
beginning with the seventh week following the first week covering the
period Friday through Thursday after the week which includes April 15
in which the USNEc, the USNEf, the NEc and the NEf are available, until
July 31, the payment rate calculation is the USNEf minus the NEf minus
1.25 cents per pound.
(d) For contracts entered into before August 30, 1991, the payment
rate shall be zero.
(e) All export contracts must specify a country of destination in
order to determine the applicable payment rate. If the country of
destination is declared on the date the export sale is first confirmed
in writing, the payment rate shall be the rate in effect for that
Friday through Thursday week. If the country of destination is declared
after the date that sale is first confirmed in writing but prior to
shipment, the payment rate shall be the lower of the rate in effect at
the time the sale was made or the rate in effect at the time the
destination was declared. If no destination is declared prior to
shipment, the payment rate shall be the lower of the rate in effect at
the time the sale was first confirmed in writing or the rate in effect
on the shipment date. The exporter shall notify CCC if there is a
change in the country of destination previously declared for any export
contract. Upon receipt of such notification, CCC will establish the
payment rate for cotton shipped under such contract at the lower of the
payment rate in effect when the original contract was made, or the
payment rate in effect on the date written notification which is
submitted to CCC stating that the cotton shipped, or to be shipped,
under such contract was, or shall be shipped to a country other than
that shown in the original contract.
* * * * *
(f) * * *
(3) * * *
(i) The difference between the highest payment rate paid to, or
earned by, the exporter between the date the original contract was
entered into and December 31 of the year in which the original contract
shipment period ends, regardless of whether the highest payment rate
paid to, or earned by, the exporter was based upon a current or forward
contract, and the lower of the original contract payment rate or if a
replacement contract has been made, the replacement contract payment
rate, or if a change of destination country was made, the payment rate
in effect at the time change of destination is declared, or
* * * * *
4. Section 1427.108 (c)(2) and (d) are revised to read as follows:
Sec. 1427.108 Payment.
* * * * *
(c) * * *
(2) Sold by the exporter on the date the contract for sale is first
confirmed in writing by the exporter or importer and the destination
country is named.
(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 and instructions issued by CCC.
Retention of export payments is predicated upon the receipt by CCC of
proof of delivery to the designated country within 60 calendar days of
such payment.
5. Section 1427.109(c)(3)(i) is revised to read as follows:.
Sec. 1427.109 Contract cancellations.
* * * * *
(c) * * *
(3) * * *
(i) The difference between the highest payment rate paid to or
earned by, the exporter between the date the original contract was
entered into and December 31 of the year in which the original contract
shipment period ends, regardless of whether the highest payment rate
paid to, or earned by the exporter was based upon a current or forward
contract and the lower of the original contract payment rate or if a
replacement contract has been made, the replacement contract payment
rate, or if a change of destination country was made, the payment rate
in effect at the time the change of destination is declared, or
* * * * *
Signed at Washington, DC, on February 24, 1994.
Bruce R. Weber,
Executive Vice President, Commodity Credit Corporation.
Note: The following form will not appear in the Code of Federal
Regulations.
BILLING CODE 3410-05-P
TP01MR94.000
[FR Doc. 94-4674 Filed 2-24-94; 4:22 pm]
BILLING CODE 3410-05-C
