Source: https://www.federalregister.gov/documents/2003/11/20/03-28989/standards-for-approval-of-warehouses-for-ccc-interest-commodity-storage
Timestamp: 2018-03-18 12:14:35
Document Index: 687866689

Matched Legal Cases: ['ART 1423', 'arts 1500', 'art 799', 'art 1423', 'art 1423', '§\u20091423', '§\u20091423', '§\u20091423', '§\u20091423', 'art 780', 'art 780']

A Proposed Rule by the Commodity Credit Corporation on 11/20/2003
Comments on this rule, in order to be assured of consideration, must be received by January 20, 2004.
68 FR 65412
65412-65415 (4 pages)
03-28989
PART 1423—STANDARDS FOR APPROVAL OF WAREHOUSES FOR CCC INTEREST COMMODITY STORAGE
https://www.federalregister.gov/d/03-28989 https://www.federalregister.gov/d/03-28989
Start Preamble Start Printed Page 65412
This proposed rule is offered to revise regulations covering the storage of commodities in which the Commodity Credit Corporation (CCC) has an interest. For the most part, those commodities are acquired in connection with non-recourse commodity loan programs that benefit farmers. This rule will consolidate the regulations for all commodities stored by CCC into one set of regulations. In addition, this rule would, in some instances, revise the substantive provisions that are in effect under the existing regulations.
Comments and request for additional information should be directed to Howard Froehlich, Chief, Program Development Branch, Warehouse and Inventory Division, Farm Service Agency, United States Department of Agriculture, 1400 Independence Avenue, SW., STOP 0553, Washington, DC 20250-0553, telephone (202) 720-7398, FAX (202) 690-3123, e-mail Howard_Froehlich@wdc.fsa.usda.gov. Persons with disabilities who require alternative means for communication for regulatory information (braille, large print, audiotape, etc.) should contact USDA's TARGET Center at (202) 720-2600 (voice and TDD).
This rule has been determined to be not significant under Executive Order 12866 and has not, therefore, been reviewed by the Office of Management and Budget (OMB).
The title and number of the Federal assistance programs, as found in the Catalog of Federal Domestic Assistance, to which this proposed rule applies are: Commodity Loans and Loan Deficiency Payments, 10.051.
The environmental impacts of this proposed rule have been considered in accordance with the provisions of the national Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., the regulations of the Council on Environmental Quality (40 CFR parts 1500-1508), and FSA's regulations for compliance with NEPA, 7 CFR part 799. To the extent these authorities may apply, CCC has concluded that this rule is categorically excluded from further environmental review as evidenced by the completion of an environmental evaluation. No extraordinary circumstances or other unforeseeable factors exist which would require preparation of an environmental assessment or environmental impact statement. A copy of the environmental evaluation is available for inspection and review upon request.
Title II of the Unfunded Mandates Reform Act of 1995 does not apply to this rule because CCC is not required by 5 U.S.C. 553 or any other law to publish a notice of proposed rulemaking for the subject matter of this rule.
CCC is committed to compliance with the Government Paperwork Elimination Act (GPEA) and the Freedom to E-File Act, which require Government agencies in general and CCC in particular to provide the public the option of submitting information or transacting business electronically to the maximum extent possible. The forms and other information collection activities required for the warehousing matters covered by this rule are not yet fully implemented for the public to conduct business with CCC electronically. Documents needed in this regard may be obtained by mail or FAX. Electronic implementation of the matters covered by this rule is under consideration.
Under Title I of the Farm Security and Rural Investment Act of 2002, the Commodity Credit Corporation (CCC) makes marketing assistance loans to farmers that can lead to forfeiture of the commodities to CCC. Also, CCC can acquire commodities under other circumstances. Section 4(h) of the CCC Charter Act (7 U.S.C. 714b(h)) precludes CCC from acquiring real property for storage facilities for agricultural commodities unless CCC determines that private facilities for the storage of such commodities are inadequate. Further, section 5 of the CCC Charter Act (7 U.S.C. 714c) requires that in purchasing, selling, warehousing, transporting, or handling agricultural commodities, CCC shall use, to the maximum extent practicable, the usual and customary channels, facilities, and arrangements of trade and commerce.
CCC enters into storage agreements with private warehouse operators to provide for the storage of various commodities it acquires. CCC has Start Printed Page 65413regulations covering such storage at 7 CFR 1421.5551-1421.5559, part 1423, and 1427, subpart E. More specifically, those rules establish the standards a warehouse operator must meet to be approved to store CCC-interest commodities. This rule proposes to:
1. Consolidate the approval regulations at one location in the Code of Federal Regulations.
2. Revise the fire fighting equipment requirements in the approval regulations to specify that warehouses must meet local standards;
3. Reduce the financial information submission requirements for a warehouse seeking approval and delete the option of submitting a financial statement compilation report prepared by a management firm. All participating warehouses will now be required to submit an accountant's audit or review report. This will allow for standard filings and greater confidence in the independence of the analysis.
4. Reduce the number of alternatives and forms of financial assurance allowed to document the warehouse operator's compliance with minimum net worth requirements. This rule proposes to delete the option of a legal liability insurance policy as an alternative for calculated net worth deficiencies and requires net worth deficiencies be met with bonds, cash, negotiable securities, an irrevocable letter of credit, or other alternative instruments. Legal liability policies are rarely used and including that option in the regulations is an unnecessary complication and distraction.
5. Allow submission of irrevocable letters of credit from financial institutions subject to the Farm Credit Act of 1971. This change is in response to requests from warehouse operators that receive their financing through the Farm Credit Administration rather than through commercial banks insured by the Federal Deposit Insurance Corporation. This will allow greater flexibility, and conform regulations with industry practice, without compromising CCC's interests.
6. Make technical and clarifying changes in the wording and structure of the regulation and other substantive changes to specify fees applicable to examination of approved warehouses.
For the reasons set forth in the preamble, 7 CFR part 1423 is revised to read as follows:
Exemption from standards.
(a) This part sets forth the terms and conditions for approval of a warehouse operator by the Commodity Credit Corporation (CCC) to store and handle CCC interest commodities.
(b) A warehouse must be approved by CCC and a storage agreement must be in effect between CCC and the warehouse operator before CCC will consider storing or store CCC interest commodities in this warehouse. The approval of a warehouse by CCC or the completion of a storage agreement on behalf of CCC does not constitute a commitment that CCC will use the warehouse, and no official or employee of the U.S. Department of Agriculture is authorized to make such a commitment.
(c) By entering into a storage agreement with CCC, the warehouse operator agrees to perform and comply with the terms and conditions prescribed in the storage agreement.
(d) Warehouse operators who are under agreement with CCC shall meet the terms and conditions of these regulations.
(a) On behalf of CCC, the Farm Service Agency (FSA) will administer this part under the supervision of the Deputy Administrator, Commodity Operations (Deputy Administrator), FSA.
(b) The Deputy Administrator or a designee may authorize a waiver or modification of deadlines and other program requirements in cases where lateness or failure to meet requirements does not adversely affect the operation of the program, and may set such additional requirements as will facilitate the operation of the program.
Agreement means agreements covering storage and handling of any such commodity the Secretary of Agriculture may determine appropriate for storage.
CCC interest commodities means commodities either pledged as collateral for a CCC commodity loan or owned by CCC.
Warehouse operator means an individual, partnership, corporation, association, or other legal entity engaged in the business of storing or handling for hire, or both, the applicable commodity.
(a) Unless otherwise provided in this part, approved warehouse operators shall have:
(1) A current and valid license for the kind of storage operation for which the warehouse operator seeks approval if such a license is required by State or local laws or regulations;
(2) A minimum and required net worth in such amount as is specified by CCC or as otherwise meets the requirements of § 1423.7;
(3) Sufficient funds to meet ordinary operating expenses;
(4) Corrected any deficiencies in the performance of any previous storage agreement with CCC; and
(5) Accurate and complete inventory and operating records.
(b) Approved warehouses may only use pre-numbered warehouse receipts meeting the information requirements in the applicable commodity's CCC loan program regulations and requirements and may only use pre-numbered scale tickets, if applicable; or other documents as CCC may prescribe.
(c) In addition, the warehouse must have:
(1) Adequate and operable fire fighting equipment as required by the state and local fire authorities for the type of warehouse and stored commodity;
(2) A work force and equipment available to provide adequate storage and handling services as specified in the applicable agreement or as otherwise determined by CCC;
(3) Necessary experience, organization, technical qualifications, and skills in the warehousing business regarding the applicable commodities to provide proper storage and handling Start Printed Page 65414services. This includes officials and supervisory employees of the warehouse operator in charge of warehouse operations;
(4) A satisfactory record of integrity, judgment, and performance as determined by CCC; provided further that owners, officials, and supervisory employees of the warehouse operator in charge of warehouse operations must also have such a satisfactory record; and
(5) No record, either itself or among its owners, officials, and supervisory employees, of suspension or debarment under applicable Federal suspension and debarment regulations.
(d) Unless otherwise provided in this part, each approved warehouse used to store or handle CCC interest commodities, shall:
(1) Be under the control of the warehouse operator at all times;
(2) If leased, furnish a copy of the written lease agreement to CCC with the application. The lease agreement must be renewable and must provide that the lease holder cannot cancel the agreement without giving at least 120 days notice to the warehouse operator. All leases are subject to CCC approval;
(3) At all times meet the conditions for approval; and
(4) Not be subject to greater than normal risk of fire, flood, or other hazards, as determined by CCC.
(a) Documents required. To apply for approval under this part, a warehouse operator shall submit to CCC the following:
(1) An application as prescribed by CCC for the applicable commodity storage agreement;
(2) Evidence of compliance with § 1423.4;
(3) Current financial information sufficient to meet the requirements of § 1423.6;
(4) For State licensed or non-licensed warehouse operators, a sample copy of the warehouse operator's warehouse receipts or electronic warehouse receipt record descriptor when applicable; and
(5) Such other documents or information as CCC may require.
(b) Examination required. Before approval, a warehouse must be examined by a person designated by CCC to determine whether it meets the standards for approval for the storage or handling of commodities under this part.
(a) To be approved to store CCC-interest commodities, warehouse operators shall submit the following to CCC:
(1) An audit or review report by an independent Certified Public Accountant or an independent public accountant. The report must be prepared in accordance with standards established by the American Institute of Certified Public Accountants according to generally accepted auditing principles including the accountant's certifications, assurances, opinions, comments, and notes with respect to such audit or review report. The report must also include a:
(ii) Statement of income (profit and loss);
(iii) Statement of retained earnings; and
(iv) Statement of cash flows.
(2) Such other information as CCC may require.
(b) Financial statements submitted:
(1) May be submitted on other forms than required in paragraph (a) of this section when so approved by CCC;
(2) Shall show the financial condition of the warehouse operator no earlier than ninety (90) days before the date of the warehouse operator's application, or such other date as CCC may prescribe, and must indicate any material changes that have occurred in the interim; and
(3) Shall be updated and resubmitted annually and at such other times as CCC may require; and
(c) Subject to CCC approval, the financial reporting requirements set forth in paragraphs (a) and (b) of this section may be met by one of the following:
(1) Appraisals of the value of fixed assets in excess of the book value when prepared by independent appraisers acceptable to and approved by CCC.
(2) A parent company of a wholly-owned subsidiary when the warehouse operator's financial position is separately identified on all applicable consolidated statements, or
(3) A guaranty agreement from:
(i) A parent company submitted on behalf of a wholly-owned subsidiary, or
(ii) An entity with substantial interest in the warehouse operator when applicable financial statements are prepared at the audit level.
(iii) Is effective for at least 1 year and cannot be canceled without a one hundred twenty (120) days notice to CCC. Excess coverage on a bond for one warehouse will not be accepted by CCC against insufficient bond coverage on other warehouses;
(c) An irrevocable letter of credit meeting CCC requirements that is effective for at least 1 year and cannot be canceled without a one hundred twenty (120) days notice to CCC. The issuing bank must be a commercial bank insured by the Federal Deposit Insurance Corporation or a financial institution subject to the Farm Credit Act of 1971, Public Law 92-181, 85 Stat. 583; or
(a) CCC will notify warehouse operators approved under this part in writing. Approval does not relieve the warehouse operator of any obligation under any agreement to CCC or any other agency of the United States, and does not obligate CCC to use the warehouse.
(b) CCC will notify the warehouse operator of rejection under this part in writing. The notification will state the cause(s) for rejection. Except for rejections due to the requirements of § 1423.4(c)(5), CCC may reconsider a warehouse for approval when the warehouse operator establishes that the reasons for rejection have been Start Printed Page 65415remedied or requests reconsideration of the action and presents to the Director, KCCO, in writing, information in support of such request. The warehouse operator may, if dissatisfied with the Director's determination, obtain a review of the determination and an informal hearing by submitting a request with the Deputy Administrator. Appeals shall be as prescribed in 7 CFR part 780.
The financial requirements, net worth alternatives, and examination provisions of this part do not apply to any warehouse operator approved or applying for approval for the storage and handling of commodities under CCC programs if the warehouse is licensed under the U.S. Warehouse Act (USWA) for such commodities. A special examination shall be made of such warehouse whenever CCC determines such action is necessary.
The Deputy Administrator may temporarily exempt the standards of this part for approval of warehouses to store CCC-interest commodities where such exemption is considered necessary to protect the interests of CCC and when necessary to carry out CCC programs.
Each warehouse operator not licensed under USWA shall pay to CCC an application fee, as well as inspection fees, and annual agreement fees, for each warehouse approved by CCC or for which approval is sought. The terms and conditions of such fees will be set forth in the applicable agreement.
(a) The application and inspection fees shall be the inspection fee applicable to the commodity announced by FSA for USWA warehouse operators; and
(b) The annual agreement fee shall be fifty (50) percent of the applicable USWA annual license fee.
(a) After initial approval, warehouse operators may request that CCC reconsider adverse actions when the warehouse operator establishes that the reasons for the action have been remedied or requests reconsideration of the action and presents to the Director, KCCO, in writing, information in support of such request. The warehouse operator may, if dissatisfied with the Director's determination, obtain a review of the determination and an informal hearing by submitting a request to the Deputy Administrator. Appeals shall be as prescribed in 7 CFR part 780, and under such regulations, the warehouse operator shall be considered as a “participant.”
[FR Doc. 03-28989 Filed 11-19-03; 8:45 am]