JIM MAlTOX 

Attorney General 

Supreme Court Building 

P. 0. Box 1254S 

A”lll”. TX. 7871 I- 2545 

512l4752591 

Telex 91018711357 

Telecopier 51214750286 

714 Jackson. Suite 799 

Dallas, TX. 75202-4508 

214n42a944 

4s2, Alberm Ave.. suite 160 

El Paso. TX. 7S9C52793 

915/5353.(84 

1091 Texas. Suile 700 

Hou,,~“. TX. 77902-3111 

713/223-5886 

905 Broadway. Suits 312 

Lubbock. TX. 794013479 

Sm-747.5235 

4309 N. Tenlh. Suite B 

McAllen. TX. 78541-1885 

512mS2.4547 

200 Main Phza. Suite 400 

!3m Antonio. TX. 782052797 

51212254191 

An Equal Opportunity/ 

Affirmalive Acllon Employer 

The Attorney General of Texas 

April 9, 1985 

Arthur G. Ransen, Ph.D. 

Chancellor 

Opinion No. JM-305 

Texas A 6 H Universj.tp System 

College Station. Tems 77843 

Re: Whether the sale of “gin 

trash” by a gin is exempt under 

section 141.002(c)(4) of the 

Agriculture Code 

Dear Dr. Eansen: 

You ask us the following two questions: 

Can a cotton gin be considered s representative 

or agent of the farmer In disposal of the cotton 

plant by-product ‘gin trash’ under the circumstances outlined and thus be exempt from the 

economic provisions of the statute under section 

141.002(~:11:4)? Does it make any difference if the 

gin is a cooperative of farmers? 

We conclude that the answer to your first question will depend upon 

the facts in each :.ustance. If title to the produce passes from the 

farmer to the ginner, the subsection (c)(4) exemption from the code’s 

registration, 1abe:lKng and inspection requirements for commercial 

agricultural feed, does not follov the produce in a subsequent sale. 

If. on the other hand, title does not paw. the subsection (c)(4) 

exemption remains operable. We answer your second question in the 

affirmative. 

Chapter 141 of the Agriculture Code governs the registration, 

labeling. and Inspection of commercial agricultural feed. Section 

141.002(c) restricts the definition of “commercial feed” for purposes 

of this chapter: 

The foAlowing sre not conunarcial feeds subject 

to this chapter: 

(1) unground hay; 

co uhole grain or whole seed not containing 

torrins or chemical adulterants; 

(3) unadulterated cottonseed, peanut, or rice 

hulls: 

p. 1385 
Arthur G. Nansen - Page 2 (~i+f-:)()5) 

(4) 

(5) 

(6) 

a feed product produced and sold by a 

farmer; - 

an individual mineral substance not mixed 

with another inaterial; or 

a material furnished by a purchaser for 

use in s customer-formula feed that was 

produced by the purchaser or acquired by 

the purchaser from a source other than the 

person whose! services are engaged in the 

milling. m:.r:iag , or processing of a 

customer-formula feed. (Emphasis added). 

Under the following subm:tssion of facts, you essentially wish to 

know under what circumstances .the sale of “gin trash” can be held to 

be the sale of “a feed product produced and sold by a farmer.” 

Fanners produce the cotton plant, harvest it 

and deliver the harrested mixture to a cotton gin 

which, for a charge or fee, performs a processing 

service. The cotton mixture is divided into three 

basic fractions dur%rlg the ginning process: lint, 

cottonseed, and gin trash. 

The lint, which 1s formed into bales, is carefully identified such that each farmer is paid 

exactly according to the amount generated from his 

cotton and the grade quality of same. The ginner 

may either buy the cotton bales directly from the 

farmer on behalf 01: a third party, act as broker 

for the farmer, or merely transfer the bales to a 

warehouse for storage pending later sale. The 

ginner charges a f’!e for the transport to warehouse. Upon warehousing, the farmer is issued 

negotiable receipts :for his cotton. 

While the quantity of cottonseed generated from 

a particular lot 0:: cotton is recorded, the seed 

from one lot are co,-mingled in bulk with that of 

other lots and marketed as such by the gin. The 

proceeds from sale of seed extracted from a 

particular l.ot of cotton are prorated directly 

back to the gin service charges made to a farmer. 

Specific records of the quantity of gin trash 

from s particular lot of cotton are not maintained. While the farmer has the option of 

receiving the gin trash from his lot of cotton, 

the impracticality c#f handling the gin trash most 

frequently results in its disposal by the gin. 

Any proceeds are applied against gin operating 

p. 1386 
Arthur G. Hansen - Page 3 (311-305) 

costs and assist In keeping ginner service costs 

down to a minimum level. In many cases the cotton 

gin is a cooperative of farmers who jointly sell 

the gin trash to lower their costs of production. 

Gin trash is Irimarlly being sold to cattle 

feedlot operations to be used in finished rations 

for animals owned by their clientele. 

Gin trash is a low density nutrient which is 

not utilized as a ~?rimsry source of protein or fat 

in an animal ratica as are most feed ingredients, 

but more for its ",ulk' or fiber content. In this 

respect gin trash is similar to unadulterated 

cottonseed hulls, peanut hulls and rice hulls, 

which are currently exempted from the act under 

section 141.002(c) (,4). 

The Ginners Association maintains that cotton 

gins act on beha,lf of the farmer, offering a 

service which is an extension of the harvesting 

process. It is further maintained that a farmer 

relinquishes ownership only when the disposition 

of lint, seed and gin trash is completed. The gin 

management actsf#>:c the grower in delivering gin 

trash. to the point of its disposal, whether that 

disposal be I to channels of the feed trade. in 

distribution across farmland, to s landfill.~ or 

otherwise. This disposal service is provided as 

part and parcel of' the ginning service and in many 

cases may provide a. return to the farmers in lower 

fees or charges. 

The guiding principle of statutory construction is to ascertain 

legislative intent. Jessem Associates, Inc. v. Bullock, 531 S.W.2d 

593 (Tex. 1975). 

-- 

From reading chapter 141 as a whole, It is clear 

that the legislature intendocl to set up a comprehensive scheme for the 

registration, labeling, ar.d. inspection of commercial agricultural 

feed. Section 141.002 sets forth certain specific exceptions to such 

requirements. The subsection (c)(4) exemption applies only to "a feed 

product produced and sold by a farmer." (Emphasis added). It is 

clear that the exemption:, intended to reach a farmer only when he 

sells his product; he is then removed from the ambit of the rezration. labeling, and inspection requirements. Once ownership of the 

giu trash passes from thf! farmer, however, the subsection (c) (4) 

exemption ceases to operet~r. It is unclear in your letter whether, 

and if so when. such title passes. The determination of your first 

question will finally deperdi on the facts involved in each instance. 

If title passes from the farmer to the ginner. then clearly the 

subsection (c)(b) exemptlot. does not extend to the ginner when there 

is a subsequent sale by the ginner. The ginner would perforce be 

required to comply with th'c provisions of chapter 141. On the other 

p. 1387 
Arthur G. Eansen - Page 4 (m-305) 

hand, if the ginner acts as a broker pursuant to some form of agency 

contract or accepts the cotton unde!: some form of consignment 

agreement, the subsection (c)(4) exemption may still be operable. 

You inform us that in many instar,ces, a gin is operated as a 

cooperative of farmers. Therefore, you further ask whether the 

subsection (c)(4) exemption would extend to gin trash processed at a 

gin so operated. In section 51.004 of the Agriculture Code, a 

farmers’ cooperative society is empowered to “act as an egent for its 

members in selling the members’ agricul.tural products. . . ." 

(Emphasis added). Agric. Code 151.004(a)(3). In such an instance, 

courts will look to the intention of the parties to the contract at 

issue and examine the contract as a wholr rather than rely on the mere 

form of the contract. In Texas Certified Cottonseed Brieders’ Ass’n 

v. Aldridge. 61 S.W.2d 79 (Tex. 1933). ,the Texas Supreme Court held 

that a marketing contract by which a cotton producer delivered 

cottonseed for resale to a co-bperstive marketing &sociation did not 

effect an absolute sale, even though the agreement specifically 

provided that the association “buys” snd the producer “sells and 

agrees to deliver” the produce. The cour't declared: 

The members of the association. in order to 

promote their welfare, delivere,d their seed to the 

association. They constitutejd the association 

their agent with broad and ~rxclusive powers to 

handle end sell their commodity. This was 

necessary to accomplish the very purposes for 

which it wss created. It being the clear 

intention of the members to create a true 

co-operative marketing association, under the 

powers enumerated by law and by the contracts, to 

perform certain services exclusivelv for Its 

members, and to hold in the face of this intention 

that the delivery of the seei; to the association 

was an absolute sale would destroy it as a 

co-operative marketing asso&%. The members 

have conferred on this association, as their 

selling agent, such title to the cottonseed with 

plenary powers to handle and dzlspose of same. but 

the a&&.ation handles the proceeds thereoi for 

the benefit of itself and its%mbers. (Emphesis 

added). 

Id. at 83. 

- 

In another context, this office has previously determined that 

farm products held by a farm co-operative remain in the hands of the 

producer for purposes of article VIII. section 19 of the Texas 

Constitution which exempts from aii valorem taxation "(flarm 

products . . . in the hands of the producer. . . ." Attorney General 

Opinions R-938 (1977); M-632 (1970); O-5404 (1943). The opinions 

concluded that farm products held by a co-operative remained in the 

p. 1388 
Arthur C. Ransen - Pago 5 (JM-305) 

hands of the producer becauec! the producers, in effect, constituted 

the co-operative as their agent. No absolute title to such products 

passed from the farmers to ocher parties. Analogously, ue conclude 

that “gin trash” held by a gin operated as a farmers’ co-operative may 

still receive the benefit of the subsection (c)(4) exemption because 

title to such product remeinn with the farmer with the co-operative 

acting merely as the producere’ agent. 

“Gin trash” In the control of a cotton ginner 

falls within thlz ambit of the section 

141.002(c)(4) Agriculture Code exemption from 

registration. labeling, and inspection requirements for commerci;%:l agricultural feed only If 

title to such feed product has not passed from the 

farmer to another party. “Gin trash” in the 

control of a cotton &inner which is operated as a 

farmers’ co-operative does fall within the examption provisions. 

- 

JIM M ANT T 0 X 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney Gene,cal 

. . 

DAVID R. RICEARDS 

Executive Assistant Attorney General 

RICX GILPIN 

Chairman, Opinion Conunittee 

Prepared by Jim Moellinger 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Rick Cilpin. Chairman 

Jon Bible 

Colin Carl 

Susan Garrison 

Tony Guillory 

Jim Moellinger 

Jennifer Riggs 

Nancy Sutton