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.

Proposed Rules Federal Register

54970 

Vol. 78, No. 174 

Monday, September 9, 2013 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 27 

[AMS–CN–13–0043] 

RIN 0581–AD33 

Cotton Futures Classification: Optional 

Classification Procedure 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Proposed rule. 

SUMMARY: The Agricultural Marketing 

Service (AMS) proposes regulatory 

amendments that would allow for the 

addition of an optional cotton futures 

classification procedure—identified and 

known as ‘‘registration’’ by the U.S. 

cotton industry and the Intercontinental 

Exchange (ICE). In response to requests 

from the U.S. cotton industry and ICE, 

AMS proposes to offer a futures 

classification option whereby cotton 

bales may be certificated for the purpose 

of an exchange’s cotton futures contract 

using Smith-Doxey data to verify that 

submitted bales meet more restrictive 

quality requirements and age parameters 

established by that exchange. The 

implementation of ICE’s Cotton 

Resolution No. 2 is scheduled to 

commence with the March 2014 

contract month. It is anticipated that 

AMS would make the futures 

classification option available December 

2013. 

DATES: Comments must be received on 

or before October 9, 2013. 

ADDRESSES: Interested persons may 

comment on the proposed rule using the 

following procedures: 

• Internet: http://

www.regulations.gov. 

• Mail: Comments may be submitted 

by mail to: Darryl Earnest, Deputy 

Administrator, Cotton & Tobacco 

Programs, AMS, USDA, 3275 Appling 

Road, Room 11, Memphis, TN 38133. 

Comments should be submitted in 

triplicate. All comments should 

reference the docket number and the 

date and the page of this issue of the 

Federal Register. All comments will be 

available for public inspection during 

regular business hours at Cotton & 

Tobacco Program, AMS, USDA, 3275 

Appling Road, Memphis, TN 38133. A 

copy of this notice may be found at: 

www.ams.usda.gov/cotton/

rulemaking.htm. 

FOR FURTHER INFORMATION CONTACT: 

Darryl Earnest, Deputy Administrator, 

Cotton & Tobacco Programs, AMS, 

USDA, 3275 Appling Road, Room 11, 

Memphis, TN 38133. Telephone (901) 

384–3060, facsimile (901) 384–3021, or 

email darryl.earnest@ams.usda.gov. 

SUPPLEMENTARY INFORMATION: 

Executive Order 12866 

This proposed rule has been 

determined to be not significant for 

purposes of Executive Order 12866; and, 

therefore has not been reviewed by the 

Office of Management and Budget 

(OMB). 

Executive Order 12988 

This proposed rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. It is not intended to 

have retroactive effect. There are no 

administrative procedures that must be 

exhausted prior to any judicial 

challenge to the provisions of this rule. 

Regulatory Flexibility Act 

Pursuant to requirements set forth in 

the Regulatory Flexibility Act (RFA) (5 

U.S.C. 601–612), AMS has considered 

the economic impact of this action on 

small entities and has determined that 

its implementation will not have a 

significant economic impact on a 

substantial number of small businesses. 

The purpose of the RFA is to fit 

regulatory actions to the scale of 

businesses subject to such actions so 

that small businesses will not be 

disproportionately burdened. There are 

approximately sixty cotton merchant 

organizations of various sizes active in 

trading U.S. cotton. Cotton merchants 

voluntarily use the AMS cotton futures 

classification services under the Cotton 

Futures Act (Act) (7 U.S.C. 15b). Many 

of these cotton merchants are small 

businesses under the criteria established 

by the Small Business Administration 

(13 CFR § 121.201). Establishing the 

registration option for cotton futures 

classification will not significantly 

affect small businesses as defined in the 

RFA because: 

(1) The established user fee for cotton 

futures classification services is $3.50 

per bale (7 CFR 27.80). Users choosing 

the registration option would incur no 

additional charges; 

(2) The established cotton futures 

classification fee represents a very small 

portion of the cost per-unit currently 

borne by those entities utilizing the 

service; 

(3) The average price paid to 

producers for cotton from the 2012 crop 

was 72.05 cents per pound, making a 

500 pound bale of cotton worth an 

average of $360.25. The current user fee 

for futures classification services, $3.50 

per bale, is less than one percent of the 

average value of a bale of cotton; 

(4) The fee for this service will not 

affect competition in the marketplace; 

(5) The futures classification option is 

expected to streamline marketing and 

create logistical efficiencies for all 

entities utilizing this option; and 

(6) The use of futures classification 

services are voluntary. For fiscal year 

2012, there were 318,337 cotton futures 

samples (approximately 2.1 percent of 

the 2012 cotton crop) voluntarily 

submitted for the futures classification 

service. 

Paperwork Reduction Act 

In compliance with OMB regulations 

(5 CFR part 1320), which implement the 

Paperwork Reduction Act (PRA) (44 

U.S.C. 3501), the information collection 

requirements contained in the 

provisions to be amended by this 

proposed rule have been previously 

approved by OMB and were assigned 

OMB control number 0581–0008, Cotton 

Classing, Testing, And Standards. 

Background 

The Act requires USDA-verified 

quality measurements for each bale to 

be included in futures contracts for the 

purpose of verifying that each bale 

meets the minimum quality 

requirements for cotton futures trading. 

Furthermore, the Act authorizes the 

charging of user fees required to recover 

the cost associated with providing 

futures quality verification services. 

USDA was first directed to provide 

cotton classification services to 

producers of cotton under the SmithDoxey Act of April 13, 1937 (Pub. L. 75– 

28). Therefore, the original classification 

of a cotton bale’s sample and quality 


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Federal Register / Vol. 78, No. 174 / Monday, September 9, 2013 / Proposed Rules 54971 

data which results from this 

classification is commonly referred to as 

the Smith-Doxey classification or SmithDoxey data. While cotton classification 

is not mandatory, practically every 

cotton bale grown in the United States 

today is classed by AMS under the 

authority of the Cotton Statistics and 

Estimates Act (7 U.S.C. 471–476) and 

the U.S. Cotton Standards Act (7 U.S.C. 

51–65) and under regulations found in 

7 CFR part 28—Cotton Classing, Testing, 

and Standards. The U.S. cotton industry 

uses Smith-Doxey data to assign qualityadjusted market values to U.S. cotton 

and market U.S. cotton both 

domestically and internationally. SmithDoxey data is commonly used by the 

cotton merchant community to indicate 

which bales may be tenderable against 

a cotton futures contract. 

Conventional procedures employed 

for verifying quality measurements for 

bales to be included in futures contracts 

consists of two futures classifications: 

(1) Initial futures classification and (2) 

final futures classification. AMS, Cotton 

and Tobacco Programs revised these 

procedures to incorporate Smith-Doxey 

data into the cotton futures 

classification process in March 2012 (77 

FR 5379). When verified by a futures 

classification, Smith-Doxey data serves 

as an initial futures classification with 

the verifying futures classification 

serving as a final futures classification. 

The use of Smith-Doxey data 

significantly reduced the number of 

futures classifications required for many 

of the bales that were submitted for 

certification. 

The successful incorporation of 

Smith-Doxey data into the futures 

classification procedures prompted the 

U.S. cotton industry and ICE to request 

that the AMS, Cotton and Tobacco 

Programs use Smith-Doxey data to 

certify that bales submitted for quality 

verification meet more restrictive 

quality requirements and age parameters 

set by ICE for use in a cotton futures 

contract. The U.S. cotton industry and 

ICE refer to this optional procedure the 

‘‘registration option’’. Furthermore, the 

U.S. cotton industry and ICE have 

requested that AMS, Cotton and 

Tobacco Programs make this option 

available in December 2013 to coincide 

with the implementation of ICE’s Cotton 

Resolution No. 2, which is scheduled to 

commence with the March 2014 

contract month. 

The established user fee for cotton 

futures classification services is $3.50 

per bale (7 CFR 27.80). Customers 

choosing this cotton futures 

classification option would incur this 

charge. In the event that AMS 

determines that a bale submitted under 

this option fails to meet quality or age 

parameters set by the exchange 

inspection agency, the owner of the bale 

would be notified of the bale’s failure. 

AMS, Cotton and Tobacco Programs 

propose regulatory amendments that 

would allow the use of original SmithDoxey data to certify that bales 

submitted for quality verification meet 

quality and age parameters set by the 

applicable exchange inspection agency. 

Accordingly, the definition of 

‘‘Classification’’ in § 27.2, paragraph (n) 

would be amended to allow for the 

proposed registration option for the 

futures classification services. Also in 

§ 27.2, the term ‘‘Smith-Doxey data’’ 

would be defined in new paragraphs (p). 

A thirty day comment period is and 

deemed appropriate. It is anticipated 

that AMS would make the futures 

classification option available December 

2013 to coincide with the 

implementation of ICE’s Cotton 

Resolution No. 2. 

List of Subjects in 7 CFR Part 27 

Commodity futures, Cotton. 

For the reasons set forth in the 

preamble, 7 CFR part 27 is proposed to 

be amended to read as follows: 

PART 27—[Amended] 

■ 1. The authority citation for 7 CFR 

part 27 is revised to read as follows: 

Authority: 7 U.S.C. 15b, 7 U.S.C. 473a–b, 

7 U.S.C. 1622(g). 

■ 2. Amend § 27.2 to revise paragraph 

(n) and add paragraph (p) to read as 

follows: 

§ 27.2 Terms Defined. 

* * * * * 

(n) Classification. The classification of 

any cotton shall be determined by the 

quality of a sample in accordance with 

the Universal Cotton Standards (the 

official cotton standards of the United 

States) for cotton property 

measurements of American Upland 

cotton. High Volume Instruments will 

determine all cotton property 

measurements except extraneous matter. 

Cotton classers authorized by the Cotton 

and Tobacco Programs will determine 

the presence of extraneous matter. 

Original Smith-Doxey data may serve as 

certification that bales submitted for 

quality verification meet quality and age 

parameters set by an applicable 

exchange inspection agency as a futures 

classification option. 

* * * * * 

(p) Smith-Doxey data. Data reflecting 

the original classification of a cotton 

bale provided to producers of cotton 

under the Smith-Doxey Act of April 13, 

1937 (Pub. L. 75–28). 

* * * * * 

Dated: August 30, 2013. 

Rex A. Barnes, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2013–21658 Filed 9–6–13; 8:45 am] 

BILLING CODE 3410–02–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–161948–05] 

RIN 1545–BF43 

Limitations on the Importation of Net 

Built-In Losses 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document contains 

proposed regulations under sections 

334(b)(1)(B) and 362(e)(1) of the Internal 

Revenue Code of 1986 (Code). The 

proposed regulations apply to certain 

nonrecognition transfers of loss property 

to corporations that are subject to 

Federal income tax. The proposed 

regulations affect the corporations 

receiving the loss property. This 

document also invites comments from 

the public regarding these proposed 

regulations. 

DATES: Written or electronic comments 

and a request for a public hearing must 

be received by December 9, 2013. 

ADDRESSES: Send submissions to 

CC:PA:LPD:PR (REG 161948–05), Room 

5203, Internal Revenue Service, P.O. 

Box 7604, Ben Franklin Station, 

Washington, DC 20044. Submissions 

may be hand-delivered Monday through 

Friday between the hours of 8 a.m. and 

4 p.m. to CC:PA:LPD:PR (REG–161948– 

05), Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue NW., 

Washington, DC, or sent electronically, 

via the Federal eRulemaking Portal at 

www.regulations.gov (IRSREG–161948– 

05). 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

John P. Stemwedel (202) 622–7790 or 

Theresa A. Abell (202) 622–7000, and, 

concerning submissions of comments 

and requests for a public hearing, 

Oluwafunmilayo (Funmi) Taylor at 

(202) 622–7180 (not toll free numbers). 

SUPPLEMENTARY INFORMATION: 


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