This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

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Rules and Regulations Federal Register

7025 

Vol. 81, No. 27 

Wednesday, February 10, 2016 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

7 CFR Part 28 

[AMS–CN–15–0051] 

Classification of Foreign-Growth 

Cotton 

AGENCY: Agricultural Marketing Service, 

USDA. 

ACTION: Direct final rule. 

SUMMARY: The Agricultural Marketing 

Service (AMS) is amending regulations 

pertaining to administrative and 

operational procedures for the 

classification of foreign-growth cotton. 

In anticipation that cotton merchants 

may want to use AMS cotton quality 

determinations to establish foreigngrowth cotton as tenderable against the 

World Cotton futures contract offered by 

the Intercontinental Exchange (ICE), 

representatives of the U.S. cotton 

industry and ICE formally requested 

that AMS make any regulatory 

amendments necessary to better 

accommodate the classification of 

foreign-growth cotton. Consequently, 

AMS seeks to clarify the existing 

language, update the terms and 

practices described to comply with 

today’s industry norms and current 

cotton classification technologies, and 

establish procedural safeguards to the 

classification process for foreign-growth 

cotton that promote accuracy. 

DATES: This direct final rule is effective 

April 11, 2016, without further action or 

notice, unless significant adverse 

comment is received by March 11, 2016. 

If significant adverse comment is 

received, AMS will publish a timely 

withdrawal of the rule in the Federal 

Register. 

ADDRESSES: Written comments may be 

submitted to the addresses specified 

below. All comments will be made 

available to the public. Please do not 

include personally identifiable 

information (such as name, address, or 

other contact information) or 

confidential business information that 

you do not want publically disclosed. 

All comments may be posted on the 

Internet and can be retrieved by most 

Internet search engines. Comments may 

be submitted anonymously. 

Comments, identified by AMS–CN– 

15–0051, may be submitted 

electronically through the Federal 

eRulemaking Portal at http://

www.regulations.gov. Please follow the 

instructions for submitting comments. 

In addition, comments may be 

submitted by mail or hand delivery to 

Darryl Earnest, Deputy Administrator, 

Cotton & Tobacco Program, AMS, 

USDA, 3275 Appling Road, Room 11, 

Memphis, TN 38133. Comments should 

be submitted in triplicate. 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 rule may be found at: 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Darryl Earnest, Deputy Administrator, 

Cotton & Tobacco Program, AMS, 

USDA, 3275 Appling Road, Room 11, 

Memphis, TN 38133. Telephone (901) 

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

email at darryl.earnest@ams.usda.gov. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The U.S. cotton industry and the 

International Cotton Association (ICA) 

requested that Intercontinental 

Exchange (ICE) offer a World Cotton 

futures contract to better manage price 

risk in the global cotton market. In 

response, ICE began offering World 

Cotton futures contracts on November 2, 

2015. With this contract offering, cotton 

grown outside the United States is 

allowed to participate in a U.S. 

commodity exchange for the first time. 

The new contract is intended to serve 

as a price discovery and risk 

management vehicle for a broad set of 

cotton traded internationally. Unlike the 

Cotton No. 2 futures contract, which 

prices the delivery of U.S. cotton for 

U.S. delivery points only, the new 

World Cotton futures contract prices the 

delivery of cotton regardless of growth 

for U.S. and foreign delivery points. 

Cotton grown in the United States, 

Australia, Brazil, India, and the west 

African countries of Benin, Burkina 

Faso, Cameroon, Ivory Coast and Mali 

will be eligible for deliveries against the 

new World Cotton futures contract. 

To facilitate the participation of 

foreign-growth cotton in the World 

Cotton futures contract, Congress 

amended the U.S. Cotton Futures Act 

(Act) (Pub. L. 114–36, July 20, 2015, 129 

Stat. 435). This amendment allows for 

foreign-growth cotton to participate in 

U.S. cotton futures contracts without 

being subject to the provisions of the 

Act. While all cotton grown in the U.S. 

that is offered as tenderable against any 

cotton futures contract traded on a U.S. 

commodity exchange must continue to 

comply with the Act, commodity 

exchanges are now able to determine 

their own contract provisions for 

foreign-growth cotton. Of particular 

relevance are the contract provisions 

that establish the portion of the foreigngrowth cotton in each lot that must have 

official quality determinations and that 

specify what entities are eligible to 

make such official determinations of 

quality for this foreign-growth cotton. 

Consequently, ICE established a 

provision requiring that at least twenty 

percent of the foreign-growth cotton in 

a lot meet specified quality parameters. 

ICE also designated AMS and 

International Cotton Association (ICA) 

Breman as two entities eligible to make 

official cotton quality determinations for 

its World Cotton futures contract. 

In anticipation that cotton merchants 

may want to use AMS cotton quality 

determinations to establish foreigngrowth cotton as tenderable against the 

World Cotton futures contract, the U.S. 

cotton industry and ICE formally 

requested that the AMS, Cotton & 

Tobacco Program make any regulatory 

amendments necessary to better 

accommodate the classification of 

foreign-growth cotton. Since the 

November 2nd offering of the World 

Cotton futures contract, merchants have 

already contacted AMS, requesting that 

foreign-growth cotton samples be 

classified. 

With foreign-growth cotton excluded 

from the provisions of the U.S. Cotton 

Futures Act, AMS is no longer 

authorized to certify the quality of 

foreign-growth cotton as tenderable 

against a cotton futures contract as it 

does for U.S. cotton. However, AMS 

may provide cotton quality 


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7026 Federal Register / Vol. 81, No. 27 / Wednesday, February 10, 2016 / Rules and Regulations 

determinations for foreign-growth 

cotton under the authority of Cotton 

Statistics and Estimates Act (7 U.S.C. 

471–476). Regulations pertaining to the 

classification of foreign-growth cotton 

are found in 7 CFR part 28 in subpart 

B. Upon review of these regulations, 

AMS determined that amendments to 

both administrative and classification 

procedures are required. 

Historically, very little foreign-growth 

cotton has been imported and, until 

recently, foreign-growth cotton was not 

able to be tendered against futures 

contracts offered by U.S. commodity 

exchanges. For these reasons, demand 

for AMS’ foreign-growth cotton 

classification services was almost 

exclusively limited to providing 

classification data intended for noncommercial/research purposes only. 

Significant differences exist between the 

procedures and processes employed for 

generating classification data intended 

for commercial use and classification 

data intended for non-commercial use. 

Cotton classification data that is 

intended for commercial use is 

generated by a set of processes and 

procedures that have multiple 

safeguards that contribute to confidence 

in the data’s accuracy. One prominent 

procedural safeguard specifically for 

commercial classification of cotton 

futures requires each sample submitted 

to be classed twice—an initial 

classification (a.k.a., set-up 

classification) and an automatic review 

classification (a.k.a., final classification). 

In the event that the initial and review 

classifications fail a statistical 

comparison, a third classification is 

performed and its measurements 

considered in the final quality 

measurements assigned. Furthermore, in 

instances where a merchant submits the 

bale’s Permanent Bale Identification 

(PBI) number along with the futures 

sample, statistical comparisons are 

made between the original Smith-Doxey 

classification data and the futures 

classification data. None of these 

safeguards are included in the current 

regulations pertaining to foreign-growth 

cotton, making the quality data resulting 

from current foreign-growth cotton 

classification procedures unsuitable for 

commercial use. Therefore, AMS is 

amending regulations in 7 CFR part 28 

to help assure that foreign-growth cotton 

is classified according to the same rigor 

as U.S. grown cotton. 

Subpart A 

Subpart A of part 28 defines the 

administrative and operational 

regulations pertaining to the 

classification of Form A determinations, 

Form C determinations, Form D 

determinations, and Micronaire reading 

services. Amendments in this subpart 

are limited to sections that are 

referenced in subpart B and are 

necessary to comply with recent 

administrative changes, to be consistent 

with current industry norms, and to add 

clarification. 

The terms ‘‘Division’’, ‘‘Quality 

Control Section’’, and ‘‘Universal 

standards’’ and their definitions are 

amended in § 28.2, paragraphs (g), (j) 

and (q), respectively. The terms 

‘‘Division’’ and ‘‘Quality Control 

Section’’, were changed by 

administrative action. ‘‘Division’’ was 

changed to ‘‘Program’’ at the same time 

the Cotton Division and the Tobacco 

Division were merged into the Cotton 

and Tobacco Program. Therefore, the 

term ‘‘Division’’ in paragraph (g) of 

§ 28.2 is replaced by ‘‘Program’’ and the 

term ‘‘Cotton Division’’ is replaced by 

‘‘Cotton and Tobacco Program’’ in the 

definition of ‘‘Program’’. Likewise, the 

term ‘‘Division’’ in §§ 28.121 and 28.177 

is replaced by ‘‘Program’’. The ‘‘Quality 

Control Section’’ of the Cotton and 

Tobacco Program was changed to the 

‘‘Quality Assurance Division’’ by 

administrative action. Therefore, the 

term ‘‘Quality Control Section’’ in 

paragraph (j) of § 28.2 is replaced by 

‘‘Quality Assurance Division’’. 

Likewise, the term ‘‘Quality Control’’ in 

§ 28.32(a) subparagraph (3) is replaced 

by ‘‘Quality Assurance’’ and ‘‘Quality 

Control Section’’ is replaced by ‘‘Quality 

Assurance Division’’ in § 28.177. The 

Universal Cotton Standards are the 

official cotton standards of the United 

States. To ensure accuracy and 

consistency within the regulatory text, 

the term ‘‘Universal standards’’ in 

paragraph (q) of § 28.2 is replaced by 

‘‘Universal Cotton Standards’’ and the 

definition is amended to include a note 

about familiar versions of this term. 

Likewise, § 28.35 is amended by adding 

‘‘the Universal Cotton Standards,’’ to 

clearly identify in part 28 the official 

cotton standards of the United States. 

Both Classing Offices and the Quality 

Assurance Division provide the services 

specified in part 28. Therefore, the 

authorities granted to the Area Director 

in §§ 28.36 and 28.37 are extended to 

the Quality Assurance Director also. For 

the same reason, the term ‘‘Classing 

Office’’ in § 28.37 is replaced with the 

broader term, ‘‘Program’’. 

It is generally accepted that the term 

‘‘grade’’ specifically pertains to color or 

leaf quality measures. To more 

accurately reflect that differences in 

quality between two sub-samples drawn 

from the same bale may extend beyond 

just color or leaf grade and staple length, 

‘‘grade’’ in the heading of § 28.38 is 

replaced with ‘‘class’’ and the phrase 

‘‘grade or shorter length’’ in this same 

section is replaced by the more generic 

term, ‘‘class’’. 

The practice of reducing cotton in 

grade for the presence of extraneous 

matter or other irregularities was 

common when a ‘‘grade’’ reflected 

multiple quality characteristics. 

However, this practice has been 

replaced by the issuance of quality 

metrics for each individual quality 

characteristic. Therefore, the current 

language in § 28.39 is removed and the 

section number is held in reserve. 

Terms pertaining to cotton 

classification are defined in § 28.40. 

Since these terms were last amended, 

several have become irrelevant or are in 

need of updating to comply with current 

industry norms and practices. 

Furthermore, several new terms have 

become commonplace within the 

industry and need to be added to the 

regulations. Amendments are made to 

paragraphs (a), (c), (d), (g), and (h). In 

paragraph (a), the definition of the 

obsolete term, ‘‘Cotton of perished 

staple’’, is replaced by the new term 

‘‘Fire-Damaged Cotton’’ and its 

definition. The definition of the obsolete 

term, ‘‘Gin-cut cotton’’, in paragraph (c) 

is replaced by the new term, 

‘‘Extraneous Matter’’, and its definition. 

Amendments to the definition of Reginned cotton in paragraph (d) are 

intended to add clarity to the definition 

and specify that the owner of the cotton 

or owner’s agent are responsible for 

identifying re-ginned cotton. The 

definition of ‘‘Mixed-packed cotton’’ in 

paragraph (g) is updated to reflect 

current cotton classification terminology 

and to officially assign the designation 

for mixed-packed cotton that has 

become commonplace within the 

industry. ‘‘Water-packed cotton’’, which 

is defined in paragraph (h), is now more 

commonly called ‘‘water-damaged 

cotton’’. In addition to updating the 

term’s name, the amendment provides 

additional instruction on how waterdamaged cotton is marked on the 

classification record. 

Amendments to § 28.47 reflect a 

change in standard operating 

procedures, which were made possible 

by technological advances and 

motivated to provide complete 

information to customers. Specifically, 

the amendment eliminates the 

subjective rankings of samples (‘‘better,’’ 

‘‘equal,’’ or ‘‘deficient’’) submitted for 

comparison and, instead, provides 

objective quality measures for each 

sample being compared. 

The term ‘‘Division’’, used in § 28.121 

to represent the Cotton and Tobacco 

Program, is replaced by ‘‘Program’’. This 


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Federal Register / Vol. 81, No. 27 / Wednesday, February 10, 2016 / Rules and Regulations 7027 

amendment more accurately reflects the 

current administrative structure, adding 

clarity to the language. 

Subpart B 

Subpart B of part 28 defines the 

administrative and operational 

regulations pertaining to the 

classification of foreign-growth cotton. 

Amendments to this subpart seek to 

clarify the existing language, update the 

terms and practices described to comply 

with today’s industry norms and cotton 

classification technologies, and add 

procedural safeguards to the 

classification process that promote 

accuracy. 

As previously stated, AMS is no 

longer authorized by the U.S. Cotton 

Futures Act to certify the quality of 

foreign-growth cotton as tenderable 

against a cotton futures contract as it 

does for U.S. cotton. However, AMS 

may provide cotton quality 

determinations for foreign-growth 

cotton that are robust enough for 

commercial purposes under the Cotton 

Statistics and Estimates Act (7 U.S.C. 

471–476). Therefore the authority 

citation in subpart B is amended by 

adding ‘‘7 U.S.C. 471–476’’. 

The definition of ‘‘foreign-growth 

cotton’’ is clarified in § 28.175 to 

include both cotton produced outside of 

the continental United States and U.S. 

cotton that is sampled while being 

stored at a location outside of the 

United States. Since samples stored at 

foreign locations are not drawn from 

bales under the jurisdiction of a USDAlicensed warehouse, the expansion of 

the definition of foreign-growth cotton 

to include U.S. cotton stored at a foreign 

location is necessary to restrict the 

representation of classification data to 

the cotton sample submitted. 

Cotton classification terms as they 

pertain to section 203(h) of the 

Agricultural Marketing Act of 1946, as 

amended by Public Law 272, 84th 

Congress, are defined in § 28.176. 

Amendments to paragraphs (a), (b), (c) 

and (d) of this section update and clarify 

these definitions so as to reflect the 

classification of foreign-growth cotton. 

Paragraph (a) expands the definitions of 

official certificate to include electronic 

forms; replaces ‘‘inspection, sampling, 

class, grade, quality, quantity, or 

conditions’’ with ‘‘fiber quality and 

conditions’’; and replaces ‘‘products’’ 

with ‘‘samples submitted’’ to reflect the 

more limited scope of services provided 

under subpart B. Likewise, ‘‘inspecting, 

or sampling’’ is replaced by ‘‘and 

classing’’ throughout paragraph (b). The 

definition of official mark is amended in 

subsection (c) to limit the types of 

products ‘‘marked’’ in subpart B to 

samples submitted for classification. To 

reflect the more limited scope of 

services provided under subpart B in 

the definition of official identification in 

paragraph (d), the designation of 

‘‘quantity’’ is removed and the term 

‘‘products’’ is replaced with ‘‘samples 

submitted’’. 

The administrative process for 

requesting the classification and/or 

comparison of foreign-growth cotton is 

specified in § 28.177. Amendments 

update these procedures, specifying that 

an application provided by the Program 

is to be used and applications are to be 

filed with the Quality Assurance 

Division or the Classing Office 

designated by the Deputy Administrator 

of the Cotton and Tobacco Program. 

Physical specifications for foreigngrowth cotton samples and instructions 

for submitting these samples to USDA 

for classification are specified in 

§ 28.178. Amendments to this section 

include the insertion of new paragraphs 

(a) thru (g). New paragraphs (a) thru (f) 

are sample specifications for Form A, 

Form C and Form D determinations 

listed in §§ 28.25–28.27 that have been 

customized to facilitate the process of 

classifying foreign-growth cotton. New 

paragraph (g) contains amendments that 

specify the types of information that 

must accompany foreign-growth cotton 

samples. Furthermore, a statement about 

financial responsibility for 

transportation charges is removed. 

New regulatory language is added to 

subpart B. Four new sections are 

inserted after § 28.178 and, therefore, 

current §§ 28.179–28.182 are 

redesignated as § 28.183 and §§ 28.185– 

28.187, respectively. 

New language, derived from §§ 28.28– 

28.30 under subpart A, is added to 

redesignated §§ 28.179–28.180. This 

language pertains to financial 

responsibility for lost or damaged 

samples and the return and subsequent 

ownership of U.S. cotton samples 

submitted for classification. The 

language was added in order to clearly 

state that the Program is not financially 

responsible for lost or damaged samples, 

and that samples of foreign-growth 

cotton submitted for classification/

comparison become the property of the 

Program. 

New language, based on § 28.19 under 

subpart A, is added to redesignated 

§ 28.181. It states the right of applicants 

to withdraw a request for classification/ 

comparison before classing begins and 

the obligation of applicants to pay for 

requested services if the classification/

comparison process has already begun. 

The terms for denial of services 

expressed in § 28.31 in subpart A are 

revised and added to redesignated 

§ 28.182 in order to promote clarity. 

Methods of foreign-growth cotton 

classification and comparison are 

stipulated in redesignated § 28.183 and 

its paragraphs. New paragraph (a) is a 

modified version of § 28.8, while new 

paragraph (b) refers directly to §§ 28.36 

through 28.40 for additional procedures 

and methods pertaining to the 

classification of foreign-growth cotton 

samples. Newly designated paragraph 

(c) refers to §§ 28.45 through 28.47 for 

procedures and methods used for 

comparison of cotton samples. 

Since cotton classification results are 

most commonly communicated 

electronically, new § 28.184 is added to 

define the types of information to be 

included in electronic cotton 

classification reports. Reports must 

identify that classification records 

represent only the samples submitted 

rather than a particular bale of cotton. 

This information is necessary because 

the sampling procedures for foreigngrowth cotton are not conducted by or 

under the supervision of a USDAlicensed agent. 

Redesignated § 28.185 defines the 

information to be included in an 

optional cotton classification 

memorandum. The amendment to this 

section includes the elimination of 

references to a Classing Office 

performing the classification. References 

to the Universal Cotton Standards are 

corrected in paragraph (d). New 

language in paragraph (e) explicitly 

states that classification data resulting 

from foreign-growth classification/

comparison services applies only to the 

sample submitted. The amendment to 

new subsection (f) requires that the 

signature of the Director of the facility 

providing the classification service be 

applied to the memorandum rather than 

just the signature of the Area Director of 

the Classing Office. This amendment is 

appropriate since all classification/

comparison of foreign-growth cotton 

may be conducted under the 

supervision of the Quality Assurance 

Division. 

Amendments to redesignated § 28.186 

make immediate review classifications 

automatic for foreign-growth cotton. 

Immediate reviews to verify initial 

classifications are appropriate given that 

resubmitting samples for an optional 

review classification at some later date 

is cost prohibitive. The amendment also 

states that the cost of an automatic 

review is included in the classification 

fee for foreign-growth cotton. 

Amendments clarifying to which 

entity memorandum are surrendered 

and who has the authority to request the 


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7028 Federal Register / Vol. 81, No. 27 / Wednesday, February 10, 2016 / Rules and Regulations 

surrender of memorandum are stated in 

the redesignated § 28.187. 

Amendments to redesignated § 28.188 

change which sections in subpart A are 

cited, limiting citations to only those 

that pertain specifically to fee amounts. 

Citations of §§ 28.115, 28.122–28.123 

are removed since they do not apply to 

this subpart. Citations of §§ 28.120 and 

28.121 are removed since they require 

language specific to foreign-growth 

cotton. Since similar language will exist 

in a new section of this subpart, citation 

of § 28.125 is removed. Citation of 

§ 28.126 is removed since it does not 

exist in current regulations. References 

to ‘‘costs’’ and ‘‘method of payment’’ are 

removed from this paragraph as these 

issues are covered in other amendments. 

Lastly, the term ‘‘foreign-growth cotton’’ 

replaces the phrase ‘‘cotton produced 

outside the continental United States’’ 

because it is not consistent with 

previous amendments. 

New § 28.189 is derived from 

§ 28.120, explicitly stating that expenses 

related to sampling and transporting 

samples are the financial responsibility 

of the owner of the cotton or the owner’s 

agent. This section relieves the Program 

of any financial responsibility for the 

stated expenses. 

New § 28.190 refers back to § 28.121 

in order to define when advance 

deposits are required for services 

rendered under this subpart. 

New § 28.191 defines the acceptable 

methods of payment or advance deposit 

for foreign-growth cotton classification 

services. 

New § 28.192 is the same as § 28.125 

in subpart A. It is being restated in this 

subpart for clarity. 

B. Good Cause Finding That Proposed 

Rulemaking Is Unnecessary 

Rulemaking under section 553 of the 

Administrative Procedure Act (5 U.S.C. 

551 et seq.) ordinarily involves 

publication of a notice of proposed 

rulemaking in the Federal Register and 

the public is given an opportunity to 

comment on the proposed rule; 

however, an agency may issue a rule 

without prior notice and comment 

procedures if it determines for good 

cause that public notice and comment 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest for such rule, and incorporates 

a statement of the finding with the 

underlying reasons in the final rule 

issued. 

As described in this Federal Register 

notice, regulations in 7 CFR part 28 

pertaining to administrative and 

operational procedures for the 

classification of foreign-growth cotton 

are being amended to assure that 

foreign-growth cotton is classified 

according to the same rigor as U.S. 

grown cotton. For the reasons 

mentioned in section A of this 

preamble, AMS finds that publishing a 

proposed rule and seeking public 

comment is unnecessary because the 

U.S. cotton industry and ICE have made 

formal declaration of their support of 

any regulatory amendments necessary to 

better accommodate the classification of 

foreign-growth cotton. Furthermore, 

implementation of the rule materially 

enhances the value of U.S. cotton by 

allowing U.S. cotton merchants to 

forward cotton onward through the 

supply chain—store at locations closer 

to foreign customers—while still 

providing the price risk mitigating 

benefits of a futures market. Reducing 

the transactional costs of cotton 

marketing will help cotton compete for 

market share with man-made fibers. 

Storing cotton closer to customers 

allows for U.S. merchants to meet 

demand faster, reducing competitive 

disadvantage with merchants of cotton 

grown in the Eastern hemisphere and 

with manufacturers of man-made 

synthetic fibers. Therefore, the 

publishing of a proposed rule and 

seeking public comment is contrary to 

the public interest. 

If AMS receives significant adverse 

comment during the comment period, it 

will publish, in a timely manner, a 

document in the Federal Register 

withdrawing this direct final rule. AMS 

will then address public comments in a 

subsequent direct final rule. AMS will 

not institute a second comment period 

on this rulemaking. Any parties 

interested in commenting must do so 

during this comment period. 

C. Regulatory Impact Analysis 

Executive Order 13175 

This action has been reviewed in 

accordance with the requirements of 

Executive Order 13175, Consultation 

and Coordination with Indian Tribal 

Governments. The review reveals that 

this regulation would not have 

substantial and direct effects on Tribal 

governments and would not have 

significant Tribal implications. 

Executive Order 12866 and 13563 

Executive Orders 12866 and 13563 

direct agencies to access all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health, and safety 

effects, distributive impacts and equity). 

Executive Order 13563 emphasizes the 

importance of quantifying both costs 

and benefits, reducing costs, 

harmonizing rules, and promoting 

flexibility. This action has been 

designated as a ‘‘non-significant 

regulatory action’’ under section 3(f) of 

Executive Order 12866, and therefore, 

review has been waived, and this action 

has not been reviewed by the Office of 

Management and Budget. 

Executive Order 12988 

The Act provides that administrative 

proceedings must be exhausted before 

parties may file suit in court. Under 

section 12 of the Act, any person subject 

to an order may file with the Secretary 

of Agriculture (Secretary) a petition 

stating that the order, any provision of 

the plan, or any obligation imposed in 

connection with the order is not in 

accordance with law and requesting a 

modification of the order or to be 

exempted therefrom. Such person is 

afforded the opportunity for a hearing 

on the petition. After the hearing, the 

Secretary would rule on the petition. 

The Act provides that the District Court 

of the United States in any district in 

which the person is an inhabitant, or 

has his principal place of business, has 

jurisdiction to review the Secretary’s 

ruling, provided a complaint is filed 

within 20 days from the date of the 

entry of the Secretary’s ruling. 

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). The 

Small Business Administration defines, 

in 13 CFR part 121, small agricultural 

service firms as having receipts of no 

more than $7,500,000. Many of these 

cotton merchants are small businesses 

under this criterion. Some of these U.S. 

cotton merchants, along with non-U.S. 

cotton merchants, may request AMS 

classification services for foreign-growth 

cotton in order to use USDA’s official 

cotton quality determinations to 

establish foreign-growth cotton as 

tenderable against the World Cotton 


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Federal Register / Vol. 81, No. 27 / Wednesday, February 10, 2016 / Rules and Regulations 7029 

futures contract. Expanding cotton 

classification services for foreign-growth 

cotton will not significantly affect small 

businesses as defined in the RFA 

because: 

(1) The use of foreign-growth cotton 

classification services would be 

voluntary; 

(2) The fee for this service will not 

affect competition in the marketplace; 

(3) The per-sample user fee for 

foreign-growth cotton classification 

services, determined using standardized 

formulas established by The Department 

of Agriculture for calculating and 

implementing the fees charged by AMS 

user-funded programs (79 FR 67313), is 

anticipated to represent a very small 

portion of the cost per-unit currently 

borne by those entities that would 

utilize the service; and 

(4) The 2014 crop-year average ‘‘A’’ 

Index—a proxy for world price of 

cotton—was 83.90 cents per pound, 

making a 500 pound bale of cotton 

worth an average of $419.50. The user 

fee for foreign-growth cotton 

classification services is anticipated to 

be less than 1.5 percent of this average 

value of a bale of cotton on the world 

market. 

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 rule 

have been previously approved by OMB 

and were assigned OMB control number 

0581–0008, Cotton Classing, Testing, 

And Standards. 

A 30-day comment period is provided 

to comment on the amendments 

described herein. This period is deemed 

appropriate because this rule will 

enhance access to cotton marketing 

tools that assist cotton merchants in 

managing cotton price risk in a very 

competitive global fiber market. 

Reducing the transactional cost of 

cotton marketing will help cotton 

compete for market share with manmade fibers. 

List of Subjects in 7 CFR Part 28 

Commodity futures, Cotton. 

For the reasons set forth in the 

preamble, 7 CFR part 28 is amended to 

read as follows: 

PART 28—[AMENDED] 

■ 1. The authority citation for subpart A 

of 7 CFR part 28 continues to read as 

follows: 

Authority: 7 U.S.C. 55 and 61. 

■ 2. Amend § 28.2 to revise paragraphs 

(g), (j) and (q) to read as follows: 

§ 28.2 Terms defined. 

* * * * * 

(g) Program. The Cotton and Tobacco 

Program of the Agricultural Marketing 

Service. 

* * * * * 

(j) Quality Assurance Division. The 

national classing supervision office at 

Memphis, Tennessee performing final 

review of cotton classification. 

* * * * * 

(q) Universal Cotton Standards. The 

official cotton standards of the United 

States for the grade of American upland 

cotton. May be referenced informally as 

‘‘Universal standards.’’ 

* * * * * 

■ 3. Amend § 28.32 to revise paragraph 

(a)(3) to read as follows: 

§ 28.32 Misrepresentation; deceptive or 

fraudulent acts or practices; violations. 

* * * * * 

(a) * * * 

(3) the making, issuing, or using of 

any memorandum or certificate of 

classification issued by a Classing Office 

or the Quality Assurance Division or 

* * * * * 

■ 4. Revise § 28.35 to read as follows: 

§ 28.35 Method of classification. 

All cotton samples shall be classified 

on the basis of the Universal Cotton 

Standards, the official cotton standards 

of the United States in effect at the time 

of classification. 

■ 5. Revise § 28.36 to read as follows: 

§ 28.36 Order of classification. 

All samples for which classification 

requests are pending shall be classified, 

as far as practicable, in the order in 

which the samples are delivered for 

classification. When in the opinion of 

the Area Director or Quality Assurance 

Director there is a need to deviate from 

this order of classification, the director 

shall designate which samples will be 

given priority in classification. 

■ 6. Revise § 28.37 to read as follows: 

§ 28.37 Exposing of samples for 

classification. 

Classification shall not proceed until 

the samples, after being delivered to the 

Program, shall have been exposed for 

such length of time as in the judgment 

of the Area Director or Quality 

Assurance Director shall be sufficient to 

put them in proper condition for the 

purpose. 

■ 7. Revise § 28.38 to read as follows: 

§ 28.38 Lower class (of two samples) to 

determine classification. 

If a sample drawn from one portion of 

a bale is lower class than one drawn 

from another portion of such bale, 

except as otherwise provided in this 

subpart, the classification of the bale 

shall be that of the sample showing the 

lower class. 

§ 28.39 [Removed and Reserved] 

■ 8. Remove and reserve § 28.39. 

■ 9. Revise paragraphs (a), (c), (d), (g), 

and (h) of § 28.40 to read as follows: 

§ 28.40 Terms defined; cotton 

classification. 

* * * * * 

(a) Fire-damaged cotton. In those 

cases where it is certain that the cotton 

is fire damaged, the classification record 

shall be marked Code 97 (Fire-Damaged 

Upland Cotton saw ginned) and no 

official color grade assigned to the 

sample. 

* * * * * 

(c) Extraneous matter. Extraneous 

matter is any substance appearing in a 

cotton sample that is not discernible in 

the official cotton standards. Such 

material may consist of rough 

preparation, sand, dust, oil, grass, whole 

seeds, parts of seeds, motes, spindle 

twist, bark, stems, cloth and plastic. 

(d) Re-ginned cotton. Cotton that, after 

having been ginned and baled, has been 

subjected to a ginning process and then 

re-baled. Responsibility for identifying 

cotton, which has been actually reginned, rests with the owner of the 

cotton or the owner’s agent. 

* * * * * 

(g) Mixed-packed cotton. Cotton in a 

bale which, in the sample taken 

therefrom, shows a difference of two or 

more color grades, and/or a difference of 

two or more color groups, or grade of 

the other side that is one color grade 

and one color group higher between the 

two portions of the sample. White, Light 

Spotted, Spotted, Tinged, and Yellow 

Stained shall each constitute a color 

group. The classification assigned will 

be that of the portion showing the lower 

color grade. The classification record for 

the bale will contain a code 75, to 

designate mixed quality. 

(h) Water-damaged cotton. Cotton in 

a bale that has been penetrated by water 

during the baling process, causing 

damage to the fiber, or a bale that 

through exposure to the weather or by 

other means, while apparently dry on 

the exterior, has been damaged by water 

in the interior. If such condition can be 

ascertained, the classification record 

shall be marked Code 98 (WaterDamaged Upland Cotton saw ginned) 


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and no official color grade will be 

assigned. 

■ 10. Revise § 28.47 to read as follows: 

§ 28.47 Statement of finding for 

comparisons. 

For requests to compare samples to a 

type, findings shall be stated in terms of 

the classification of each sample 

submitted, the classification of the type 

as measured by the official cotton 

standards of the United States, and 

other explanatory notations as needed. 

■ 11. Revise § 28.121 to read as follows: 

§ 28.121 Advance deposits. 

Upon request, the person from whom 

any payment under this subpart may 

become due shall make an advance 

deposit to cover such payment in such 

amount as may be necessary in the 

judgment of the official of the Program 

requesting the same. 

Subpart B—Classification for ForeignGrowth Cotton 

■ 12. The authority citation for subpart 

B of 7 CFR part 28 is revised to read as 

follows: 

Authority: Sec. 205, 60 Stat. 1090, as 

amended (7 U.S.C. 1624); 7 U.S.C. 471–476. 

■ 13. Revise subpart B heading to read 

as set forth above. 

■ 14. Revise § 28.175 to read as follows: 

§ 28.175 Administrative and general. 

Insofar as applicable, and not 

inconsistent with this subpart, the 

provisions of subpart A of this part shall 

likewise apply to the classification and 

comparison of foreign-growth cotton. 

For the purposes of this subpart, 

foreign-growth cotton is defined as 

either cotton produced outside the 

continental United States or cotton 

produced in the continental United 

States but it is stored in and sample 

submitted for classification from 

location outside the continental United 

States. 

■ 15. Amend § 28.176 by revising 

paragraphs (a), (b), (c) and (d) to read as 

follows: 

§ 28.176 Designation of official 

certificates, memoranda, marks, other 

identifications, and devices for purpose of 

the Agricultural Marketing Act. 

* * * * * 

(a) Official certificate means any form 

of certification, either written, printed 

or electronic, used under this subpart to 

certify with respect to the fiber quality 

and conditions of samples submitted 

(including the compliance of submitted 

samples with applicable specifications). 

(b) Official memorandum means any 

initial record of findings made by an 

authorized person in the process of 

grading and classing, pursuant to this 

subpart, any processing or plantoperation report made by an authorized 

person in connection with grading and 

classing under this subpart, and any 

report made by an authorized person of 

services performed pursuant to this 

subpart. 

(c) Official mark, for the purposes of 

this subpart, means the grade mark, 

inspection mark, and any other mark 

associated only with the samples 

submitted to the Department for 

classification. 

(d) Official identification means any 

United States (U.S.) standard 

designation of class, grade, quality, or 

condition specified in this subpart or 

any symbol, stamp, label, or seal 

indicating that the submitted sample 

has been officially graded and/or 

indicating the class, grade, quality, or 

condition of the submitted sample. 

* * * * * 

■ 16. Revise § 28.177 to read as follows: 

§ 28.177 Request for classification and 

comparison of cotton. 

The applicant shall make a separate 

request, using an application supplied 

by the Program, for each lot or mark of 

cotton that the applicant desires 

classified or compared separately. All 

requests for classification or comparison 

shall be filed with the Quality 

Assurance Division or the Classing 

Office designated by the Deputy 

Administrator of the Cotton and 

Tobacco Program. 

■ 17. Revise § 28.178 to read as follows: 

§ 28.178 Submission of cotton samples. 

Samples for foreign-growth cotton 

classification or comparison shall be 

drawn, handled, identified, and shipped 

according to the methods and 

procedures specified in this section. 

Any samples or set of samples which do 

not meet these specified requirements 

may be rejected by the Program. 

(a) Samples shall be freshly drawn. 

(b) Each sample shall consist of two 

portions, one drawn from each side of 

the bale. Each portion shall be at least 

six (6) inches (15.25 cm) wide and 

approximately twelve (12) inches (30.5 

cm) long and shall weigh at least eight 

(8) ounces (227 grams). 

(c) Dressing, trimming, or discarding 

part of the sample is prohibited. No part 

of the cotton or pieces of bagging, leaf, 

grass, dirt, sand, or any other material 

shall be removed from either side of the 

sample. 

(d) A barcoded coupon showing the 

correct location/warehouse code and 

bale number along with the name and 

address of owner/owner’s agent shall be 

placed between the two portions of each 

sample. 

(e) Samples shall be identified and 

sacked immediately after they are cut 

without further handling prior to 

shipment to the Program. 

(f) Samples shall be addressed to and 

mailed, shipped, or delivered direct to 

the Program without being routed 

through the owner of the cotton or the 

owner’s agent. All expenses related to 

the sampling and transportation of 

samples—including but not limited to 

any fees related to Customs clearance 

such as fumigation and/or phytosanitary 

certification—shall be prepaid by the 

owner of the cotton or the owner’s 

agent. 

(g) All foreign-growth cotton samples 

submitted for classification and/or 

comparison shall be enclosed in one or 

more wrappers, which shall be labeled 

or marked, or both, in such manner as 

to show the location/warehouse code; 

name and address of the owner/owner’s 

agent; the number of bales represented 

by the samples in each wrapper; and 

such other information as may be 

necessary in accordance with the 

instructions of the Deputy 

Administrator. 

■ 18. Redesignate §§ 28.179, 28.180, 

28.181, 28.182, and 28.183 as §§ 28.183, 

28.185, 28.186, 28.187, and 28.188 

respectively. 

■ 19. Add new § 28.179 to read as 

follows: 

§ 28.179 Lost or damaged samples. 

The Program is not responsible for 

compensating the owner or owner’s 

agent of cotton samples that are lost, 

damaged or mutilated prior to the 

Program taking receipt of said samples. 

The Program shall inform applicants in 

the event that samples are lost, damaged 

or mutilated. 

■ 20. Add new § 28.180 to read as 

follows: 

§ 28.180 No return of samples. 

Samples submitted for foreign-growth 

classification and/or comparison will 

not be returned to the applicant. Loosed 

cotton samples shall become the 

property of the Program. 

■ 21. Add new § 28.181 to read as 

follows: 

§ 28.181 Withdrawal of classification 

request. 

Any classification or comparison 

request may be withdrawn by the 

applicant at any time before the 

classification of the cotton covered 

thereby. If the withdrawal request is 

communicated after the classification/

comparison has been started, the 


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applicant shall pay the fees prescribed 

in § 28.188. 

■ 22. Add new § 28.182 to read as 

follows: 

§ 28.182 Denial of service. 

The Deputy Administrator may for 

good cause, including the acts or 

practices set forth in § 28.32(a) or any 

knowing violation of the regulations in 

this subpart, deny any person, including 

the agents, officers, subsidiaries, or 

affiliates of such person, from any or all 

benefits of this subpart for a specified 

period, after notice and opportunity for 

hearing has been afforded. Procedures 

outlined, or referred, in part 50 of this 

chapter (7 CFR 50.1 through 50.12) shall 

govern proceedings under this section. 

■ 23. Revise redesignated § 28.183 to 

read as follows: 

§ 28.183 Methods of cotton classification 

and comparison. 

(a) The classification of foreigngrowth cotton samples 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 the color grade 

and the leaf grade of Upland Cotton, the 

length of staple, and fiber property 

measurements such as length 

uniformity, strength, and micronaire. 

High Volume Instruments will 

determine all fiber property 

measurements except the determination 

of the presence of extraneous matter, 

special conditions and remarks. High 

Volume Instrument colorimeter 

measurements will be used for 

determining the official color grade. 

Cotton classers certified by the Cotton 

and Tobacco Program will determine 

the presence of extraneous matter, 

special conditions and remarks and 

authorized employees of the Cotton and 

Tobacco Program will determine all 

fiber property measurements using High 

Volume Instruments. The classification 

record issued by the Quality Assurance 

Division with respect to any cotton 

sample shall be deemed to be the 

classification record of the Department. 

(b) Additional procedures and 

methods pertaining to the classification 

of foreign-growth cotton samples are 

outlined in §§ 28.36 through 28.40. 

(c) When a comparison of such cotton 

samples with other actual samples or 

with a type is requested, the procedure 

and methods shall be as outlined in 

§§ 28.45 through 28.47. 

■ 24. Add § 28.184 to read as follows: 

§ 28.184 Availability of electronic cotton 

classification data. 

As soon as practicable after the 

classification or comparison of cotton 

has been completed, electronic cotton 

classification data for each sample 

submitted will be made available for the 

owner or the owner’s agent to retrieve. 

The data record transmitted is 

representative of only the sample 

submitted by the owner or the owner’s 

agent rather than any particular cotton 

bale. 

■ 25. In redesignated § 28.185, revise 

the introductory text and paragraph (d); 

redesignate paragraph (e) as (f); add a 

new paragraph (e); and revise 

redesignated paragraph (f) to read as 

follows: 

§ 28.185 Issuance of cotton classification 

memoranda. 

Upon request, there shall be issued a 

cotton classification memorandum 

which shall embody within its written 

or printed terms: 

* * * * * 

(d) A statement that any classification 

made has been on the basis of the 

Universal Cotton Standards (the official 

cotton standards of the United States) at 

the time of such classification. 

(e) A statement that any classification 

made applies only to the samples as 

submitted by the owner or the owner’s 

agent and does not purport to represent 

any particular cotton bales. 

(f) The signature of the Director of the 

facility providing the classification 

service and the date of issuance of the 

memorandum. 

■ 26. Revise redesignated § 28.186 to 

read as follows: 

§ 28.186 Review of cotton classification or 

comparison. 

An immediate review of every 

classification or comparison made 

pursuant to this subpart is performed 

automatically. Therefore, separate 

review classification services for 

foreign-growth cotton are not offered by 

the Program. Costs associated with such 

review classifications are integrated into 

the fees established in § 28.188. 

■ 27. Revise redesignated § 28.187 to 

read as follows: 

§ 28.187 Surrender of memoranda. 

For good cause, any memorandum 

issued under this subpart shall be 

surrendered to the Program, upon the 

request of the Director of the Quality 

Assurance Division, and a new 

memorandum complying with this 

subpart issued in substitution therefor. 

If the memorandum is not surrendered 

upon such request, it shall nevertheless 

be invalid for the purpose of this 

subpart. 

■ 28. Revise redesignated § 28.188 to 

read as follows: 

§ 28.188 Fee amounts. 

The provisions of §§ 28.116 through 

28.119 relating to fees shall apply to 

services performed with respect to 

foreign-growth cotton. 

■ 29. Add § 28.189 to read as follows: 

§ 28.189 Expenses to be borne by party 

requesting classification. 

For any samples submitted for 

foreign-growth classification, all 

expenses related to the sampling and 

transportation of samples, which may 

include but is not limited to any fees 

related to Customs clearance such as 

fumigation and/or phytosanitary 

certification, shall be prepaid by the 

owner of the cotton or the owner’s 

agent. 

■ 30. Add § 28.190 to read as follows: 

§ 28.190 Advance deposits. 

Advance deposit requirements for 

services rendered under this subpart are 

specified in § 28.121. 

■ 31. Add § 28.191 to read as follows: 

§ 28.191 Payments methods. 

Acceptable methods of payment or 

advance deposit for fees specified in 

§ 28.188 are as follows: 

(a) Credit card (Visa, MasterCard, 

Discover, or American Express): For 

remittance of payment by credit card, 

cardholder’s name, billing address, 

credit card number, expiration date, etc. 

are required. 

(b) Wire transfers/Electronic Fund 

Transfers (EFT): Electronic payments 

are processed through the Federal 

Reserve Bank. Customer/company name 

and government issued identification 

number are required. All fees associated 

with wire transfers/EFT are the 

responsibility of the remitter. Orders 

will not be processed until the total 

amount of the order is collected. 

(c) Check: Checks must be drawn on 

a United States bank in United States 

currency and include the bank routing 

number on the check. Checks should be 

made payable to ‘‘USDA, AMS, Cotton 

and Tobacco Program’’. 

■ 32. Add § 28.192 to read as follows: 

§ 28.192 No voiding or modifying claims 

for payment. 

Nothing in this subpart shall be 

construed to void or modify any claim 

which a person or party requesting and 

paying for a service may have against 

any other person or party for the 

payment of part or all of such costs. 

Dated: February 3, 2016. 

Erin Morris, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2016–02461 Filed 2–9–16; 8:45 am] 

BILLING CODE 3410–02–P 


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