Amendments to the Regulations for Cotton Warehouses Regarding the Delivery of Stored Cotton

[Federal Register Volume 64, Number 103 (Friday, May 28, 1999)]
[Proposed Rules]
[Pages 28938-28940]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13635]


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Proposed Rules
                                                Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 64, No. 103 / Friday, May 28, 1999 / Proposed 
Rules

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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 735

RIN 0560-AF13


Amendments to the Regulations for Cotton Warehouses Regarding the 
Delivery of Stored Cotton

AGENCY: Farm Service Agency, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to amend the regulations governing cotton 
warehouses under the United States Warehouse Act (USWA) to establish a 
cotton shipping standard that would define the statutory phrase 
``without unnecessary delay'' which could be used to determine whether 
warehouse operators deliver cotton timely. The Department of 
Agriculture (USDA) is taking this action as the result of two Federal 
District Court orders requesting USDA to define the statutory phrase 
``without unnecessary delay'' as set forth in the USWA. Concurrently, 
several segments of the cotton industry requested the implementation of 
a uniform national cotton shipping standard for the delivery of stored 
cotton that would increase the market value of producer cotton through 
timely and improved delivery. Before issuing this proposed rule, the 
Farm Service Agency (FSA) published an advanced notice of proposed 
rulemaking (ANPRM) in the May 26, 1998, Federal Register (63 FR 28488) 
seeking comments on two independent options and specific questions 
regarding National Cotton Flow Standard issues. Each option contained 
identical methods for defining ``without unnecessary delay,'' and 
establishment of both a uniform cotton shipping standard and dispute 
resolution. Along with minimal USDA involvement Option I offered 
nothing more. However, Option II offered standardized terminology, 
definitions, dispute mediation, a national cotton flow shipping status 
report, user fees, and greater USDA regulatory role. Public comments 
favored Option I and expressed a strong conviction that USDA should 
only establish a cotton shipping standard, but allowed enforcement by 
the cotton industry without USDA involvement, assessment of user fees, 
or increased governmental costs. This proposed rule expresses those 
public comments and provides another opportunity for the public to 
comment before FSA publishes a final rule.

DATES: Comments should be submitted on or before July 27, 1999 to be 
assured of consideration.

ADDRESSES: FSA invites interested persons to submit written comments on 
this proposed rule to: Steve Gill, Director, Warehouse and Inventory 
Division, U.S. Department of Agriculture, Farm Service Agency, STOP 
0553, 1400 Independence Avenue, SW, Washington, D.C. 20250-0553; 
telephone (202) 720-2121; fax (202) 690-3123; or by E-mail comments to: 
Steve Mikkelsen@wdc.fsa.usda.gov. Additionally, interested persons may 
send comments via the Internet through the National Cotton Flow's (NCF) 
homepage at: https://www.fsa.usda.gov/ncf.
    All written comments received in response to this proposed rule 
will be available for public inspection in Room 5968, South Agriculture 
Building, U.S. Department of Agriculture, 1400 Independence Avenue, SW, 
Washington, D.C., between 8:00 a.m. and 4:30 p.m., Monday through 
Friday, except holidays.

FOR FURTHER INFORMATION CONTACT: Steve Mikkelsen, Deputy Director, 
Warehouse and Inventory Division, U.S. Department of Agriculture, Farm 
Service Agency, STOP 0553, 1400 Independence Avenue, SW, Washington, 
D.C. 20250-0553; telephone (202) 720-2121; or fax (202) 690-3123. 
Persons with disabilities who require alternative means for 
communication of regulatory information (braille, large print, 
audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 
(voice and TDD).

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    The Office of Management and Budget has reviewed the proposed rule 
and determined the rule to be significant for the purposes of Executive 
Order 12866. A Cost-Benefit Assessment (CBA) was prepared. The costs 
associated with the implementation of the proposed rule will be minimal 
to all parties involved. The CBA summarized the cost and benefit impact 
of the proposed rule as follows:
    The cost associated with the implementation of the proposed rule 
will be minimal to all parties involved.
    The cotton industry will benefit from FSA establishing a shipping 
standard that the industry can apply through arbitration or legal 
proceedings to determine whether warehouse operators are delivering 
cotton ``without unnecessary delay.'' Establishment of a national 
shipping standard would potentially help (1) maintain the 
competitiveness of U.S. cotton in domestic and world markets, (2) 
improve the prices that producers receive in those areas affected by 
delivery delays, and (3) eliminate any disruption in commerce due to 
uncertainty of delivery expectations.
    Copies of the CBA are available upon request at the address listed 
above.

Executive Order 12988

    This proposed rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this proposed rule do not preempt State 
laws, are not retroactive, and do not involve administrative appeals.

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.

Executive Order 12612, Federalism

    This proposed rule would not involve any policies that have 
federalism implications under Executive Order 12612.

Executive Order 12372

    FSA programs are 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).

[[Page 28939]]

Paperwork Reduction Act

    The amendments set forth in this proposed rule do not affect 
information collection or recordkeeping requirements.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule because this rule will not have a 
significant effect on a substantial number of small businesses. 
Licensing under the USWA is strictly voluntary on the warehouseman's 
part.

Unfunded Mandate Reform Act of 1995 (UMRA)

    This proposed rule contains no Federal mandates under the 
regulatory provisions of Title II of the UMRA for State, local, and 
tribal governments or the private sector. Thus, this rule is not 
subject to the requirements of sections 202 and 205 of the UMRA.

Background

    Since the early 1960's, the timely delivery and shipping of stored 
cotton (cotton flow) has been an ongoing issue throughout the cotton 
industry. While cotton shippers and cotton merchants require timely 
delivery and shipping to meet the demands of the marketplace, cotton 
warehousemen contend that the delivery and shipping demands placed on 
them by shippers and merchants are unreasonable and exceeded warehouse 
capabilities. When delivery and shipping delays began to occur during 
the 1995/96 crop year, rather than exercising the arbitration rights 
incorporated in the voluntary standard that was implemented by the 
Coalition for Cotton Flow Standards (CCFS), an organization created by 
the National Cotton Council, several cotton shippers filed complaints 
with FSA. These shippers requested FSA to investigate the cotton flow 
situation, and suspend the federal license of those warehouses that had 
not delivered and shipped cotton ``without unnecessary delay'' as 
required by the USWA. USWA personnel investigated and found the lack of 
uniform common terms and a standard process for requesting services may 
have contributed to confusion and the appearance of longer delivery and 
shipping delays.
    In addition to filing complaints with FSA, several shippers also 
filed lawsuits in United States District Courts against two cotton 
warehousemen. In each of these cases, the lack of determination by USDA 
in the use and meaning of the USWA statutory phrase ``without 
unnecessary delay'' was a key issue for the courts. Ultimately, the 
shippers elected to dismiss their suits after jointly agreeing to 
request that the cases be remanded for USDA to determine the definition 
of the statutory phrase ``without unnecessary delay.'' The Courts 
agreed and remanded the matter of defining ``without unnecessary 
delay'' to USDA.
    Concurrently, several segments of the cotton industry requested 
USDA to implement a uniform national cotton shipping standard, based on 
weekly deliveries of 4.5% of each warehouse's Commodity Credit 
Corporation's (CCC) Cotton Storage Agreement (CSA) approved capacity. 
The industry presented 4.5% as the level that would expedite the 
delivery and shipment of U.S. cotton into marketing trade channels and 
enhance prices paid producers while reducing the cost of handling 
cotton. Because the CSA's applicability was for CCC-interest cotton 
only and about 80% of all cotton being receipted under the USWA's 
electronic warehouse receipt authority. USDA perceived that a delivery 
and shipping standard should be based on the USWA rather than the CSA.
    As a result of these events, on May 26, 1998, USDA published an 
ANPRM (63 FR 28488) that sought public comments on two independent 
options and specific questions regarding National Cotton Flow Standard 
issues. Each contained identical methods for defining ``without 
unnecessary delay,'' and establishment of both a uniform cotton 
shipping standard and dispute resolution. Along with minimal USDA 
involvement Option I offered nothing more. However, Option II offered 
standardized definitions, terminologies, dispute mediation, a national 
cotton flow shipping status report, operated with user fees, and a 
greater USDA regulatory role. Public comments favored Option I and 
strongly expressed a conviction that USDA should only establish a 
cotton shipping standard, but allow enforcement by the cotton industry 
without USDA involvement, assessment of user fees, or increased 
governmental costs.

Summary of Public Comments

    FSA received 47 public comments in response to the ANPRM that was 
published on May 26, 1998 (63 FR 28488). Comments and suggestions were 
received from 6 sectors of the trade-industry as follows: 6 Cotton 
Trade Associations; 23 Cotton Warehouse Operators; 15 Cotton Brokers/
Merchants; 1 Attorney; 1 Retired USDA Employee; and 1 Cottonseed Oil 
Processor. Of the comments received, 1 respondent approved of the 
ANPRM's Option I as written; 35 respondents approved of the ANPRM's 
stated cotton flow standard, but believed that any dispute resolution 
should be administered by cotton industry arbitration procedures; 4 
respondents favored the ANPRM's stated cotton flow standard without 
arbitration procedures; 2 respondents believed that compliance should 
be enforced through the Commodity Credit Corporation's Cotton Storage 
Agreement with modified cotton industry arbitration provisions; 1 
respondent favored the ANPRM's 4.5% shipping requirement, but opposed 
the 14-day shipping period included in Option II; 1 respondent favored 
the ANPRM's 4.5% shipping requirement, but wanted it to be based on the 
previous week's ending inventory rather than a licensed or approved 
capacity; 1 respondent opposed the entire ANPRM, but favored cotton 
industry self-regulation; and 2 respondents favored no established 
cotton shipping standard.
    Public comments received in response to the ANPRM expressed the 
strong conviction that USDA should define ``without unnecessary delay'' 
through the establishment of a national cotton shipping standard based 
on weekly deliveries of 4.5% of a warehouse's approved capacity, but 
allowed enforcement by the cotton industry without governmental 
involvement, assessment of user fees, or increased governmental costs. 
Since public comments strongly expressed that USDA limit its role and 
involvement to defining ``without unnecessary delay'' through 
establishing a national cotton shipping standard, reserving enforcement 
by the cotton industry without governmental involvement, assessment of 
user fees, or governmental costs. FSA is limiting USDA's role and 
involvement in publishing this proposed rule that sets forth a national 
cotton shipping standard that defines ``without unnecessary delay,'' 
and reserves any compliance or dispute resolution for the cotton 
industry without USDA enforcement or involvement.
    The provisions in this proposed rule would be applicable to cotton 
warehousemen licensed under the USWA and warehousemen who utilize 
electronic warehouse receipts stored in a central filing system 
approved under the USWA.

List of Subjects in 7 CFR Part 735

    Administrative practice and procedure, Cotton, Delivery, Reporting 
and recordkeeping requirements, Shipping, Surety bonds, Warehouses.

    For the reasons stated in the preamble, the Farm Service Agency

[[Page 28940]]

proposes to amend 7 CFR part 735 as follows:

PART 735--COTTON WAREHOUSES

    1. The authority citation for 7 CFR part 735 continues to read as 
follows:

    Authority: 7 U.S.C. 241 et seq.


Secs. 735.106 through 735.199  [Added and Reserved]

    2. Sections 735.106 through 735.199 are added and reserved.
    3. Section 735.2 is amended by adding paragraph ((jj) to read as 
follows:


Sec. 735.2  Terms defined.

* * * * *
    (jj) Force majeure. Severe weather conditions, fire, explosion, 
flood, earthquake, insurrection, riot, strike, labor dispute, act of 
civil or military authority, non-availability of transportation 
facilities, or any other cause beyond the control of the warehouseman 
that renders performance impossible.
    4. Add an undesignated center heading entitled, ``Delivery and 
Shipping'' after reserved Sec. 735.199.
    5. Sections 735.200 through 735.202 are added under the 
undesignated heading ``Delivery and Shipping'' to read as follows:


Sec. 735.200  Applicability.

    The cotton shipping standard set forth in Sec. 735.201 is 
applicable to all cotton warehousemen licensed under the Act and to all 
warehousemen that issue electronic warehouse receipts through an 
authorized electronic warehouse receipt provider in accordance with 
Secs. 735.100 through 735.105 regardless of whether the warehouse is 
licensed under the Act.


Sec. 735.201  Cotton Shipping Standard.

    Unless prevented from doing so by force majeure, a warehouseman 
identified in Sec. 735.200 shall deliver stored cotton without 
unnecessary delay. A warehouseman shall be considered to have delivered 
cotton without unnecessary delay if for the week in question, the 
warehouseman has delivered or staged for scheduled delivery at least 
4.5% of either their licensed capacity or Commodity Credit Corporation 
approved storage capacity or other storage capacity as determined by 
the Secretary to be in effect during the week of shipment.


Sec. 735.202  Compliance and Dispute Resolution.

    (a) Any claims for noncompliance with the cotton shipping standard 
will be resolved by the parties involved through established industry, 
professional, or mutually agreed upon arbitration procedures. The 
arbitration procedures shall be nondiscriminatory and provide all 
persons equal access and protection relating to the cotton shipping 
standard.
    (b) No arbitration determination or award resulting from 
noncompliance with the shipping standard shall affect, obligate, or 
restrict the Farm Service Agency's authority to provide, administer, 
and regulate the issuance of licenses and receipts, contractual 
agreements, or authorized electronic warehouse receipt provider systems 
in accordance with the Act.
    (c) The Farm Service Agency shall not settle unresolved disputes 
involving the cotton shipping standard or associated damages.
    (d) In the event any party requests assistance from or initiates 
the involvement of the Farm Service Agency in matters relating to the 
cotton shipping standard, the initiating party shall be responsible for 
all costs incurred by the Farm Service Agency. Before any such 
assistance is provided, the initiating party shall make payment to the 
Farm Service Agency in an amount equal to the Agency's good faith 
estimate of costs and expenses that will be incurred in fulfilling the 
request. Costs incurred that exceed the Agency's good faith estimate 
will be the responsibility of the initiating party.

    Signed at Washington, D.C., on May 24, 1999.
Parks Shackelford,
Acting Administrator, Farm Service Agency.
[FR Doc. 99-13635 Filed 5-27-99; 8:45 am]
BILLING CODE 3410-05-P