Futures Trading Act of 1986
PL 99-641 (H.R.4613), enacted 11/10/1986

100 STAT. 3556 
PUBLIC LAW 99-641—NOV. 10, 1986 
Public Law 99-641 
99th Congress 
An Act 
Nov. 10, 1986 
[H.R. 4613] 
Futures Trading 
Act of 1986. 
Agriculture and 
agricultural 
commodities. 
7 u s e 1 note. 
To reauthorize appropriations to carry out the Commodity Exchange Act, and to 
make technical improvements to that Act. 
Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, 
SECTION 1. SHORT TITLE AND TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the "Futures Trading 
Act of 1986". 
(b) TABLE OF CONTENTS.—The table of contents is as follows: 
Sec. 1. Short title and table of contents. 
TITLE I—FUTURES TRADING 
Sec. 101. Fraudulent practices. 
Sec. 102. Options transactions. 
Sec. 103. Extraterritorial service of subpenas. 
Sec. 104. Ex parte appointment of temporary receivers. 
Sec. 105. Certain prohibited transactions. 
Sec. 106. Authorization for appropriations. 
Sec. 107, Registered futures association disciplinary actions and 
membership 
restrictions. 
Sec. 108. Rule review procedures. 
Sec. 109. Leverage transactions. 
Sec. 110. Technical corrections. 
Sec. 111. GAO study of trading in cattle futures contracts. 
TITLE II—MISCELLANEOUS PROVISIONS 
Sec. 201. Cross compliance for producers of extra long staple cotton. 
Sec. 202. Basis for computation of emergency compensation under the 1986 wheat 
program. 
Sec. 203. Valencia peanuts. 
Sec. 204. Local agricultural stabilization and conservation committees. 
Sec. 205. Eligibility of certain land under the conservation reserve program. 
Sec. 206. Marketing practices and training. 
TITLE ill—GRAIN QUALITY IMPROVEMENT 
Sec. 301. Short title. 
Sec. 302. Declaration of policy. 
Sec. 303. Foreign material recombination. 
Sec. 304. Insect infestation. 
Sec. 305. Study of premiums for high-quality grain. 
Sec. 306. Review of optimal grade proposal. 
Sec. 307. Study of uniform end-use value tests. 
TITLE IV—FEDERAL MEAT INSPECTION 
Sec. 401. Short title. 
Sec. 402. Purpose. 
Sec. 403. Amendments to Federal Meat Inspection Act. 
Sec. 404. Savings provision. 
Sec. 405. Sense of Congress. 
, 
.-•• 
Sec. 406. Annual report. 
Sec. 407. Congressional reevaluation. 
Sec. 408. Effective date; application of amendments. 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3557 
TITLE I—FUTURES TRADING 
SEC. 101. FRAUDULENT PRACTICES. 
Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is 
amended— 
(1) by striking out "on or subject to the rules of any contract 
market," the second place it appears in the first sentence; and 
(2) by adding at the end thereof the following new paragraph: 
"Nothing in this section shall apply to any activity that occurs on 
a board of trade, exchange, or market, or clearinghouse for such 
board of trade, exchange, or market, located outside the United 
States, or territories or possessions of the United States, involving 
any contract of sale of a commodity for future delivery that is made, 
or to be made, on or subject to the rules of such board of trade, 
exchange, or market.". 
SEC. 102. OPTIONS TRANSACTIONS. 
Subsection (c) of section 4c of the Commodity Exchange Act (7 
U.S.C. 6c(c)) is amended to read as follows: 
"(c) Not later than 90 days after the date of the enactment of the 
Futures Trading Act of 1986, the Commission shall 
issue 
regulations— 
"(1) to eliminate the pilot status of its program for commodity 
option transactions involving the trading of options on contract 
markets, including any numerical restrictions on the number of 
commodities or option contracts for which a contract market 
- 
may be designated; and 
"(2) otherwise to continue to permit the trading of such 
commodity options under such terms and conditions that the 
Commission from time to time may prescribe.". 
SEC. 
1
0
3
. 
EXTRATERRITORIAL 
SERVICE 
OF 
SUBPENAS. 
Section 60?) of the Commodity Exchange Act (7 U.S.C. 15) is 
amended— 
(1) in the third sentence, by inserting "(except as provided in 
the fifth sentence of this subsection)" immediately before "may 
administer oaths and affirmations, subpena witnesses"; 
(2) in the fourth sentence, by striking out "or any State" and 
inserting in lieu thereof ", any State, or any foreign country or 
jurisdiction"; and 
(3) by inserting after the fourth sentence the following new 
sentence: "A subpena issued under this section may be served 
upon any person who is not to be found within the territorial 
jurisdiction of any court of the United States in such manner as 
the Federal Rules of Civil Procedure prescribe for service of 
process in a foreign country, except that a subpena to be served 
on a person who is not to be found within the territorial 
jurisdiction of any court of the United States may be issued only 
on the prior approval of the Commission.". 
SEC. 104. EX PARTE APPOINTMENT OF TEMPORARY RECEIVERS. 
The proviso of the first sentence of section 6c of the Commodity 
Exchange Act (7 U.S.C. 13a-l) is amended by inserting within the 
parenthetical phrase before the closing parenthesis the following: ", 
and other than an order appointing a temporary receiver to admin-
ister such restraining order and to perform such other duties as the 
court may consider appropriate". 
Commerce and 
trade. 
Contracts. 
Regulations. 
Contracts. 
28 u s e app. 
100 STAT. 3558 
PUBLIC LAW 99-641—NOV. 10, 1986 
SEC. 105. CERTAIN PROHIBITED TRANSACTIONS. 
Securities. 
Section 9(d) of the Commodity Exchange Act (7 U.S.C. 13(d)) is 
amended— 
(1) by inserting inmiediately before the period at the end of 
f. • 
the first sentence the following: "if nonpublic information is 
^ '
*
^ 
j 
used in the investment transaction, if the investment trans-
action is prohibited by rule or regulation of the Commission, or 
if the investment transaction is effected by means of any in-
strument regulated by the Commission"; and 
(2) by striking out the second and third sentences and insert-
ing in lieu thereof the following new sentence: "The foregoing 
prohibitions shall not apply to any transaction or class of 
transactions that the Commission, by rule or regulation, has 
, 
u. determined would not be contrary to the public interest or 
otherwise inconsistent with the purposes of this subsection.". 
SEC. 106. AUTHORIZATION FOR APPROPRIATIONS. 
. •' 
Subsection (d) of section 12 of the Commodity Exchange Act (7 
U.S.C. 16(d)) is amended to read as follows: 
#,p 
"(d) There are authorized to be appropriated to carry out this Act 
such sums as may be necessary for each of the fiscal years during 
the period beginning October 1, 1986, and ending Septem-
; 
ber 30, 1989.". 
SEC. 107. REGISTERED FUTURES ASSOCIATION DISCIPLINARY ACTIONS 
AND MEMBERSHIP RESTRICTIONS. 
Subsections (h) and (i) of section 17 of the (Dommodity Exchange 
Act (7 U.S.C. 21 (h) and (i)) are amended to read as follows: 
"(hXD If any registered futures association takes any final dis-
ciplinary action against a member of the association or a person 
associated with a member, denies admission to any person seeking 
membership therein, or bars any person from being associated with 
a member, the association promptly shall give notice thereof to such 
member or person and file notice thereof with the (Dommission. The 
notice shall be in such form and contain such information as the 
Commission, by rule or regulation, may prescribe as necessary or 
appropriate to carry out the purposes of this Act. 
'(2) Any action with respect to which a registered futures associa-
tion is required by paragraph (1) to file notice shall be subject to 
review by the Commission on its motion, or on application by any 
person aggrieved by the action. Such application shall be filed 
within 30 days after the date such notice is filed with the (Commis-
sion and received by the aggrieved person, or within such longer 
period as the Commission may determine. 
.! ;e 
"(3XA) Application to the Ck)mmission for review, or the institu-
tion of review by the (Dommission on its own motion, shall not 
operate as a stay of such action unless the Clommission otherwise 
orders, summarily or after notice and opportunity for hearing on the 
question of a stay (which hearing may consist solely of the submis-
sion of affidavits or presentation of oral arguments). 
"(B) The dJommission shall establish procedures for expedited 
consideration and determination of the question of a stay. 
"(iXD In a proceeding to review a final disciplinary action taken 
by a registered futures association against a member thereof or a 
person associated with a member, after appropriate notice and 
opportunity for a hearing (which hearing may consist solely of 
consideration of the record before the association and opportunity 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3559 
for the presentation of supporting reasons to affirm, modify, or set 
aside the sanction imposed by the association)— 
"(A) if the Commission finds that— 
"(i) the member or person associated with a member has 
engaged in the acts or practices, or has omitted the acts, 
that the association has found the member or person to 
have engaged in or omitted; 
"(ii) the acts or practices, or omissions to act, are in 
violation of the rules of the association specified in the 
determination of the association; and 
"(iii) such rules are, and were appUed in a manner, 
consistent with the purposes of this Act, 
the Commission, by order, shall so declare and, as appropriate, 
afHrm the sanction imposed by the association, modify the 
^
-
sanction in accordsmce with paragraph (2), or remand the case 
^ < 
to the association for further proceedings; or 
"(B) if the Commission does not make any such finding, the 
Commission, by order, shall set aside the sanction imposed by 
the association and, if appropriate, remsmd the case to the 
association for further proceedings. 
"(2) If, after a proceeding under paragraph (1), the Commission 
finds that any penalty imposed on a member or person associated 
with a member is excessive or oppressive, having due regard for the 
public interest, the Commission, by order, shall cancel, reduce, or 
require the remission of the penalty. 
"(3) In a proceeding to review the denial of membership in a 
registered futures association or the barring of any person from 
being associated with a member, after appropriate notice and oppor-
tunity for a hearing (which hearing may consist solely of consider-
ation of the record before the association and opportunity for the 
presentation of supporting reasons to affirm, modify, or set aside the 
action of the association)-— 
"(A) if the Commission Hnds that— 
"(i) the specific grounds on which the denial or bar is 
based exist in fact; 
"(ii) the denial or bar is in accordance with the rules of 
' 
the association; and 
"(iii) such rules are, and were applied in a manner, 
,, 
consistent with the purposes of this Act, 
^v-t . 
the Commission, by order, shall so declare and, as appropriate, 
affirm or modify the action of the association, or remand the 
case to the association for further proceedings; or 
"(B) if the Commission does not make any such finding, the 
' 
** 
Commission, by order, shall set aside the action of the associa-
tion and require the association to admit the applicant to 
membership or permit the person to be associated with a 
« 
«
. member, or, as appropriate, remand the case to the association 
' 
" 
for further proceedings. 
"(4) Any person (other than a registered futures association) 
aggrieved by a final order of the Commission entered under this 
subsection may file a petition for review with a United States court 
of appeals in the same manner as provided in section 6(b).". 
Ante, p. 3557. 
SEC. 108. RULE REVIEW PROCEDURES. 
Section 17(j) of the Commodity Exchange Act (7 U.S.C. 21(j)) is 
amended by striking out the third sentence. 
100 STAT. 3560 
PUBLIC LAW 99-641—NOV. 10, 1986 
Metals. 
Regulations. 
Fraud. 
SEC. 109. LEVERAGE TRANSACTIONS. 
' ) 
Section 19 of the Ck)mmodity Exchange Act (7 U.S.C. 23) is 
amended to read as follows: 
Contracts. 
"SEC. 19. (a) Except as authorized under subsection (b), no person 
shall offer to enter into, enter into, or confirm the execution of, any 
transaction for the delivery of any commodity under a standardized 
contract commonly known to the trade as a margin account, margin 
contract, leverage account, or leverage contract, or under any con-
tract, account, arrangement, scheme, or device that the Commission 
determines serves the same function or functions as such a 
standardized contract, or is marketed or managed in substantially 
the same manner as such a standardized contract. 
"(b)(1) Subject to paragraph (2), no person shall offer to enter into, 
enter into, or confirm the execution of, any transaction for the 
delivery of silver bullion, gold bullion, bulk silver coins, bulk gold 
coins, or platinum under a standardized contract described in 
subsection (a), contrary to the terms of any rule, regulation, or order 
that the Commission shall prescribe, which may include terms 
designed to ensure the financial solvency of the transaction or 
prevent manipulation or fraud. Such rule, regulation, or order may 
be made only after notice and opportunity for hearing. The Commis-
sion may set different terms and conditions for transactions involv-
ing different commodities. 
"(2) No person may engage in any activity described in paragraph 
(1) who is not permitted to engage in such activity, by the rules, 
regulations, and orders of the Commission in effect on the date of 
the enactment of the Futures Trading Act of 1986, until the 
Commission permits such person to engage in such activity in 
accordance with regulations issued in accordance with subsection 
(0(2). 
"(c)(1)(A) Not later than 2 years after the date of the enactment of 
the Futures Trading Act of 1986, the Commission shall— 
"(i) with the assistance of a futures association registered 
under this Act, conduct a survey concerning the persons in-
terested in engaging in the business of offering to enter into, 
entering into, or confirming the execution of, the transactions 
described in subsection (b)(1); and 
Reports. 
"(ii) transmit a report of the results of the survey to the 
Committee on Agriculture of the House of Representatives and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate. 
Reports. 
"(B) Notwithstanding any other provision of law, for purposes of 
completing such report the Commission may direct, by rule, regula-
tion, or order, a futures association registered under this Act to 
render such assistance as the Commission shall specify. 
Reports. 
"(C) Such report shall include the findings and any recommenda-
tions of the Commission concerning— 
"(i) whether such transactions serve an economic purpose; 
"(ii) the most efficient manner, consistent with the public 
interest, to permit additional persons to engage in the business 
j . , _ 
of offering to enter into, entering into, and confirming the 
execution of such transactions; and 
"(iii) the appropriate regulatory scheme to govern such trans-
g 
actions to ensure the financial solvency of such transactions and 
to prevent manipulation or fraud. 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3561 
"(2) The report shall also include Commission regulations govern- Reports. 
ing such transactions. The regulations shall provide for permitting 
Regulations. 
additional persons to engage in such transactions. The regulations 
shall become effective on the expiration of 90 calendar days on 
which either House of Congress is in session after the date of the 
transmittal of the report to Congress. The regulations— 
"(A) may authorize or require, notwithstanding any other 
provision of law, a futures association registered under this Act 
to perform such responsibilities in connection with such trsins-
actions as the Commission may specify; and 
"(B) may require that permission for additional persons to 
engage in such business be given on a gradual basis, so as not to 
place an undue burden on the i-esources of the Commission. 
"(d) This section shall not affect any rights or obligations arising 
out of any transaction subject to this section, as in effect before the 
date of the enactment of the Futures Trading Act of 1986, that was 
entered into, or the execution of which was confirmed, before the 
date of the enactment of such Act.". 
SEC. no. TECHNICAL CORRECTIONS. 
The Commodity Exchange Act is amended— 
(1) m the third sentence of section 2(aXlXBXivXD (7 U.S.C. 
2a(iv)(I)), by striking out "Securities Exchange Commission" and 
inserting 
in 
lieu 
thereof 
"Securities 
and 
Exchange 
Commission"; 
(2) in the fourth full sentence of section 5a(12) (7 U.S.C. 
7a(12)), by striking out "particpate" and inserting in lieu thereof 
"participate"; 
(3) m the first sentence of section 9(c) (7 U.S.C. 13(c)), by 
striking out "section 4k." and inserting in lieu thereof "section 
4k,"; 
(4) in the first sentence of section 9(d) (7 U.S.C. 13(d)), by 
striking out "advance guarantee" and inserting in lieu thereof 
"advance guaranty"; 
(5) by repealing section 11 (7 U.S.C. 14 note); 
7 USC 14. 
(6) in the second full sentence of section 17(bX2) (7 U.S.C. 
21(bX2)), by striking out "with in" and inserting in lieu thereof 
, ^ 
"within"; and 
(7) in section 17(kXl) (7 U.S.C. 21(kXl)), by striking out "title" 
and inserting in lieu thereof "section". 
SEC. i n . GAO STUDY OF TRADING IN CATTLE FUTURES CONTRACTS. 
7 USC 20 note. 
(a) STUDY.—The Comptroller General of the United Stat^ shall 
conduct and complete a comprehensive study of the effect of trading 
in contracts for the future delivery of live cattle on the cash market 
price of live cattle, with particular emphasis on— 
(1) whether the reaction of the live cattle futures market to 
the results of the milk production termination program in 
March 1986, conducted under section 201(dX3) of the Agricul-
tural Act of 1949 (7 U.S.C. 1446(dX3)), was based on and ac-
curately reflected the then prevailing conditions of supply and 
demand; 
(2) the effect of the trading in contracts for the future delivery 
of live cattle on— 
(i) the price relationship between feeder cattle and fed 
cattle; 
100 STAT. 3562 
PUBLIC LAW 99-641—NOV. 10, 1986 
., 
(ii) the price discovery process with respect to live cattle; 
. * ' 
and 
' 
(iii) price competition within the cattle industry; 
(3) the effect of the use of packer contracts, as a means of 
obtaining slaughter cattle, on the increase in short hedging in 
contracts for the future delivery of live cattle and the effect of 
this increase in short hedging on prices in the futures and cash 
markets; 
(4) the effect on the ability of the cash markets to accurately 
reflect prevailing conditions of supply and demand if packer 
contracts become the prevalent method of marketing fed cattle; 
(5) whether the present delivery system for contracts for the 
future delivery of live cattle creates any bias (either upward or 
downward) in the cash price for cattle; 
(6) whether the present delivery system for contracts for the 
future delivery of live cattle creates price volatility during the 
delivery month; and 
(7) whether there are advantages or disadvantages to a cash 
settlement system in lieu of the present delivery system in the 
case of contracts for the future delivery of live cattle. 
(b) REPORTS.— 
(1) PREUMINARY REPORT.—Not later than January 15, 1987, 
the Comptroller General shall submit a preliminary report on 
the results of the study required under subsection (a) to the 
Committee on Agriculture of the House of Representatives and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate. 
(2) FINAL REPORT.—Not later than 1 year after the date of 
enactment of this Act, the Comptroller General shall submit to 
such committees a detailed final report of the results of the 
study required under subsection (a). 
i 
1 
. TITLE II—MISCELLANEOUS PROVISIONS 
i 
SEC. 201. CROSS COMPLIANCE FOR PRODUCERS OF EXTRA LONG STAPLE 
COTTON. 
Loans. 
Paragraph (16) of section 103(h) of the Agricultural Act of 1949 
(7 U.S.C. 1444(hX16)) is amended to read as follows: 
"(16XA) Notwithstanding any other provision of law, except as 
provided in subparagraph (B), compliance on a farm with the terms 
and conditions of any other commodity program may not be re-
quired as a condition of eligibility for loans or pa3mients under this 
subsection. 
"(B) In the case of each of the 1989 and 1990 crops of extra long 
staple cotton, the Secretary may require that, as a condition of 
eligibility of producers for loans or payments under this subsection, 
the acreage planted for harvest on the farm to any other commodity 
for which an acreage limitation program is in effect shall not exceed 
the crop acreage base established for the farm for that commodity. 
"(C) Notwithstanding any other provision of law, in the case of 
each of the 1987 and 1988 crops of extra long staple cotton, compli-
ance with the terms and conditions of the program authorized by 
this subsection may not be required as a condition of eligibility for 
loans, purchases, or pajrments under any other commodity pro-
gfram.". 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3563 
SEC. 202. BASIS FOR COMPUTATION OF EMERGENCY COMPENSATION 
UNDER THE 1986 WHEAT PROGRAM. 
Section lOTEKcXlXEXii) of the Agricultural Act of 1949 (7 U.S.C. 
1445b-3(cXlXEXii)) is amended by striking out "marketing year for 
such crop" and inserting in lieu thereof "first 5 months of the 
marketing year for the 1986 crop and the marketing year for each of 
the 1987 through 1990 crops". 
SEC. 203. VALENCIA PEANUTS. 
Section 108B(4XA) of the Agricultural Act of 1949 (7 U.S.C. 1445c-
2(4XA)) is amended by inserting after "additional peanuts" the 
following: "(other than net gains on additional peanuts in separate 
tjrpe pools established under paragraph (3XBXi) for Valencia peanuts 
produced in New Mexico)". 
SEC. 204. LOCAL AGRICULTURAL STABILIZATION AND CONSERVATION 
COMMITTEES. 
The fifth paragraph of section 8(b) of the Soil Conservation and 
Domestic Allotment Act (16 U.S.C. 590h(b)) (as amended by section 3 
of Public Law 99-253 (100 Stat. 36)) is amended— 
(1) by inserting after the third sentence the following new 
sentence: "Notwithstanding the preceding sentence, there may 
be one local administrative area in any county for which there 
had been established less than three local administrative areas 
as of December 23,1985."; and 
(2) in the sixth sentence (as it existed before the amendment 
made by paragraph (1)), by striking out ": Provided," and all 
that follows through the period and inserting in lieu thereof a 
period. 
SEC. 205. ELIGIBILITY OF CERTAIN LAND UNDER THE CONSERVATION 
RESERVE PROGRAM. 
Section 1231 of the Food Security Act of 1985 (16 U.S.C. 3831) is 
amended by adding at the end thereof the following new subsection: 
"(f) For purposes of this subtitle, alfalfa and other multiyear 
grasses and legumes, in a rotation practice approved by the Sec-
retary, shall be considered agricultural commodities.". 
SEC. 206. MARKETING PRACTICES AND TRAINING. 
(a) MARKETING PRACTICES OF F M H A APPUCANTS AND BORROW-
ERS.— 
(1) STUDY.—The Comptroller General of the United States 
shall conduct a study of marketing practices used by applicants 
for and borrowers of farm loans made, insured, or guaranteed 
under the Consolidated Farm and Rural Development Act (7 
U.S.C. 1921 et seq.). The study shall include an examination of 
the methods used by the applicants and borrowers in marketing 
agricultural commodities, livestock, and aquacultural producte 
and the extent to which the applicants and borrowers use 
advanced marketing techniques for such sales. 
(2) REPORT.—Not later than 1 year after the date of enactment 
of this Act, the Comptroller General shall submit to the 
Committee on Agriculture of the House of Representatives and 
the Committee on Agriculture, Nutrition, and Forestry of the 
Senate a report describing the results of the study con-
ducted under pareigraph (1), together with any appropriate 
recommendations. 
New Mexico. 
7 u s e 2271a 
note. 
100 STAT. 3564 
PUBLIC LAW 99-641—NOV. 10, 1986 
7 u s e 2271a. 
Grain Quality 
Improvement 
Act of 1986. 
7 u s e 71 note. 
(b) ADVANCED MARKETING TRAINING FOR FARMERS AND RANCH-
ERS.—The Secretary of Agriculture may establish a program to train 
farmers and ranchers in advanced techniques for the marketing of 
agricultural commodities, livestock, and aquacultural products pro-
duced by such farmers and ranchers, including (where appropriate 
as determined by the Secretary) training in the use of futures and 
options markets. 
TITLE III—GRAIN QUALITY IMPROVEMENT 
* 
SEC. 301. SHORT TITLE. 
This title may be cited as the "Grain Quality Improvement Act of 
1986". 
SEC. 302. DECLARATION OF POLICY. 
Section 2 of the United States Grain Standards Act (7 U.S.C. 74) is 
amended— 
(1) by inserting "(a)" after the section designation; and 
(2) by adding at the end thereof the following new subsection: 
"(b) It is also declared to be the policy of Congress— 
"(1) to promote the marketing of grain of high quality to both 
domestic and foreign buyers; 
"(2) that the primary objective of the official United States 
standards for grain is to certify the quality of grain as ac-
curately as practicable; and 
"(3) that official United States standards for grain shall— 
"(A) define uniform and accepted descriptive terms to 
facilitate trade in grain; 
"(B) provide information to aid in determining grain 
storability; 
"(C) offer users of such standards the best possible 
information from which to determine end-product yield and 
quality of grain; and 
"(D^ provide the framework necessary for markets to 
establish grain quality improvement incentives.". 
SEC. 303. FOREIGN MATERIAL RECOMBINATION. 
(a) PROHIBITED ACT.—Section 13 of the United States Grain Stand-
ards Act (7 U.S.C. 87b) is amended by adding at the end thereof the 
following new subsection: 
"(dXD Subject to paragraphs (2) and (3), to ensure the quality of 
grain marketed in or exported from the United States— 
"(A) no dockage or foreign material, as defined by the Sec-
retary, once removed from grain shall be recombined with any 
grain; and 
"(B) no dockage or foreign material of any origin may be 
added to any grain. 
"(2) Nothing in paragraph (1) shall be construed to prohibit— 
"(A) the treatment of grain to suppress, destroy, or prevent 
insects and fungi injurious to stored grain; 
"(B) the marketing, domestically or for export, of dockage or 
foreign material removed from grain if such dockage or foreign 
material is marketed— 
"(i) separately and uncombined with any such whole 
grain; 
"(ii) in pelletized form; or 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3565 
' 1 
"(iii) as a part of a processed ration for livestock, poultry, 
or fish; 
"(C) the blending of grain with similar grain of a different 
quality to adjust the quality of the resulting mixture; 
"(D) the recombination of broken corn or broken kernels, as 
defined by the Administrator, with grain of the type from which 
the broken corn or broken kernels were derived; 
"(E) effective for the period ending December 31, 1987, the 
recombination of dockage or foreign material, except dust, re-
moved at an export loading facility from grain destined for 
shipment as a cargo under one export official certificate of 
inspection if— 
"(i) the recombination occurs during the loading of the 
cargo; 
;,_• 
"(ii) the purpose is to ensure uniformity of dockage or 
,. 
foreign material throughout that specific cargo; and 
"(iii) the separation and recombination are conducted in 
accordance with regulations issued by the Administrator; or 
"(F) the addition to grain of a dust suppressant, or the addi-
tion of confetti or any other similar material that serves the 
same purpose in a quantity necessary to facilitate identification 
of ownership or origin of a particular lot of grain. 
"(3)(A) The Secretary may, by regulation, exempt from paragraph 
Business and 
(1) the last handling of grain in the final sale and shipment of such industry. 
grain to a domestic user or processor if such exemption is deter-
mined by the Secretary to be in the best economic interest of 
producers, grain merchants, the industry involved, and the public. 
"(B) Grain sold under an exemption authorized by this paragraph 
shall be consumed or processed into one or more products by the 
purchaser, but may not be resold into commercial channels for such 
grain or blended with other grain for resale. Neither products nor 
byproducts derived therefrom (except vegetable oils as defined by 
the Secretary and used as a dust suppressant) shall be blended with 
or added to grain in commercial channels.". 
(b) EFFECTIVE DATE.—The amendments made by this section shall 7 use 87b note, 
become effective on May 1,1987. 
SEC. 304. INSECT INFESTATION. 
Not later than 6 months after the date of enactment of this Act, 
the Administrator of the Federal Grain Inspection Service shall 
issue a final rule that revises grain inspection procedures and 
standards established under the United States Grain Standards Act 
(7 U.S.C. 71 et seq.) to more accurately reflect levels of insect 
infestation. 
SEC. 305. STUDY OF PREMIUMS FOR HIGH-QUALITY GRAIN. 
(a) STUDY.—After public comment from and in consultation with 
grain producers, grain merchants, grain processors, and grain 
exporters, the Secretary of Agriculture shall conduct a study of the 
feasibility and appropriateness of adjusting Commodity Credit Cor-
poration grain premium and discount schedules— 
(1) to encourage the delivery, storage, and export of high-
quality, clean grain; and 
(2) to offer incentives to minimize the quantity of moisture, 
: 
foreign material, dockage, shrunken and broken kernels, and 
damaged kernels in lots of grain pledged as collateral for 
Regulations. 
7 u s e 76 note. 
100 STAT. 3566 
PUBLIC LAW 99-641—NOV. 10, 1986 
Federal 
Register, 
publication. 
Business and 
industry. 
7 u s e 76 note. 
Commodity Credit Corporation loans or in grain owned by the 
Commodity Credit Corporation, 
(b) REPORT.—Not later than 180 days after the date of enactment 
of this Act, the Secretary shall transmit a report describing the 
results of the study required under subsection (a), together with 
recommendations, to the Committee on Agriculture of the House of 
Representatives and the Committee on Agriculture, Nutrition, and 
Forestry of the Senate. 
SEC. 306. REVIEW OF OPTIMAL GRADE PROPOSAL. 
(a) NOTICE AND COMMENT.—To evaluate the effects of moving to an 
optimal grain grading system, the Administrator of the Federal 
Grain Inspection Service shall— 
(1) publish in the Federal Register a detailed description of 
the proposals contained in H.R. 5354, 99th Congress, the Opti-
mal Grain Grading Act of 1986; and 
(2) solicit public comment, during a period of not less than 60 
days on— 
(A) the optimal grain grading system as proposed in H.R. 
' : 
5354; and 
(B) the general objective of improving grain quality by 
revising the official United States grain standards to pro-
vide greater economic incentives for production and sale of 
high-quality grain. 
(b) REPORT.—The Administrator shall report to Congress, by May 
1, 1987, on the comments received and on the recommendations of 
the Administrator with respect to the matters on which comments 
were solicited. 
SEC. 307. STUDY OF UNIFORM END-USE VALUE TESTS. 
(a) STUDY.—The Secretary of Agriculture shall direct the Federal 
Grain Inspection Service and the Agricultural Research Service to 
conduct a study of the need for and availability of uniform end-use 
value tests for grain. The study shall include the following: 
(1) A survey of domestic and foreign buyers of grain to 
- 
identify the information about grain characteristics that would 
be most useful to such buyers. The survey shall take into 
account those factors that buyers specify in contracts, test for, 
measure, or would measure if tests were available, including— 
(A) the starch, oil, and protein content, breakage suscepti-
bility, and individual kernel moisture of corn; 
(B) the baking characteristics, protein content, gluten 
content and quality, and milling hardness of wheat; and 
(C) the protein, oil, and free-fatty-acid 
content of 
soybeans. 
(2) A review of the development and availability of tests for 
the characteristics identified in the survey conducted under 
paragraph (1), including an evaluation of the costs of providing 
i- 
such tests. 
OD) END-USE TESTS.— 
(1) ONGOING REVIEW.—The Secretary of Agriculture shall 
direct the Federal Grain Inspection Service and the Agricul-
tural Research Service to maintain an ongoing review to deter-
mine the end-use tests that are of economic value to buyers, and 
the availability and costs of such tests. 
i\ 
(2) REVISION OF PROCEDURES.—The Administrator of the Fed-
('•• 
era! Grain Inspection Service, to the extent practicable, shall 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3567 
revise official grain inspection and certification procedures to 
include within official inspection (as defined in section 3(i) of the 
United States Grain Standards Act (7 U.S.C. 75(i))) those tests 
that are identified under the study conducted under subsection 
(a) as useful, available, and economically feasible, 
(c) REPORTS.— 
(1) STUDY AND REVISION OF PROCEDURES.—Not later than 1 
year after the date of enactment of this Act, the Administrator 
of the Federal Grain Inspection Service shall submit a report to 
Congress setting forth the results of the study conducted under 
subsection (a) and actions taken under subsection (b)(2). 
(2) ONGOING REVIEW.—The Administrator shall report yearly 
to (Jongress on the ongoing review conducted under subsection 
(bXl). 
TITLE IV—FEDERAL MEAT INSPECTION 
SEC. 401. SHORT TITLE. 
This title may be cited as the "Processed Products Inspection 
Improvement Act of 1986". 
SEC. 402. PURPOSE. 
The amendments made by this title are in furtherance of the 
findings made by Congress in section 2 of the Federal Meat Inspec-
tion Act (21 U.S.C. 602). 
SEC. 403. AMENDMENTS TO FEDERAL MEAT INSPECTION ACT. 
(a) MANNER AND FREQUENCY OF INSPECTION.—Effective only 
during the 6-year period beginning on the date of enactment of this 
Act, section 6 of the Federal Meat Inspection Act (21 U.S.C. 606) is 
amended by striking out "That for the purposes" and all that 
follows through "Provided, That" and inserting in lieu thereof the 
following: 
"(aXD For the purposes set forth in the preceding provisions of 
this Act, the Secretary shall cause to be made, by inspectors ap-
pointed for that purpose, an examination and inspection of meat 
food products prepared for commerce in any slaughtering, meat-
canning, salting, packing, rendering, or similar establishment. 
"(2) Such examination and inspection shall be conducted with 
such frequency and in such manner as the Secretary considers 
necessary, £is provided in rules and regulations issued by the Sec-
retary, taking into account such factors as the Secretary considers to 
be appropriate, including— 
"(A) the nature and frequency of the processing operations at 
such establishment; 
"(B) the adequacy and reliability of the processing controls 
and sanitary procedures at such establishment; and 
"(C) the history of compliance with inspection requirements 
in effect under this Act, by the operator of such establishment 
or anyone responsibly connected with the business (as described 
in section 401(g)) that operates such establishment. 
"(bXD All such products found by anv of such inspectors and by 
the operator of such establishment to be not adulterated shall be 
marked, stamped, tagged, or labeled as 'Inspected and passed'. 
"(2) All such products found by any of such inspectors or by the 
operator of such establishment to be adulterated shall be marked, 
stamped, tagged, or labeled as 'Inspected and condemned'. Each 
Processed 
Products 
Inspection 
Improvement 
Act of 1986. 
21 u s e 601 note. 
Commerce and 
trade. 
Post, p. 3568. 
Labeling. 
100 STAT. 3568 
PUBLIC LAW 99-641—NOV. 10, 1986 
Law 
enforcement 
crime. 
Courts, U.S. 
Health and 
medical care. 
Safety. 
21 u s e 601. 
and 
21 u s e 601. 
Records. 
such condemned product shall be destroyed for human food pur-
poses. The Secretary may suspend inspection at, and remove inspec-
tors from, any establishinent that fails to so condemn adulterated 
meat food products or fails to so destroy condemned meat food 
products. 
"(c) For purposes of any examination and inspection, such inspec-
tors shall have access to every part of an establishment at all times, 
by day or night, and without regard to whether such establishment 
is operated. 
"(d) Notwithstanding the preceding provisions of this section,". 
(b) ENFORCEMENT METHODS.—Effective only during the 6-year 
period beginning on the date of enactment of this Act, section 401 of 
the Federal Meat Inspection Act (21 U.S.C. 671) is amended— 
(1) by inserting "(a)" after the section designation; 
(2) in the first sentence— 
(A) by striking out "applicant, for" and inserting in lieu 
thereof "applicant for"; 
(B) by striking out "any felony, or (2)"; and 
(C) by inserting before the period at the end thereof "or 
(2) any felony"; 
(3) in the second sentence— 
(A) by indenting the first word so as to create a new 
paragraph; and 
(B) by inserting "(f)" before the first word; 
(4) by inserting "(g)" before the first word of the third sen-
tence; 
•,!'-,, 
(5) in the fourth sentence— 
(A) by striking out "The" and inserting in lieu thereof 
"(h) Except as provided in subsection (eX2), the"; and 
(B) by striking out "this section" and inserting in lieu 
thereof "subsection (e)"; and 
(6) by inserting after subsection (a), as so designated by para-
graph (1) of this subsection, the following new subsections: 
"(bXD On the request of the Secretary at the time of the sentenc-
ing of an individual who is a person responsibly connected with any 
business requiring inspection under title I and who is convicted of a 
felony involving— 
"(A) the intentional adulteration of food (except as defined in 
section l(mX8)); 
"(B) the adulteration of food, as defined in section l(mX8), 
with intent to defraud; 
"(C) bribery; or 
"(D) extortion; 
the sentencing court shall issue a temporary order forbidding such 
individual to exercise operational control of, or to be physically 
present at, any establishment requiring inspection under title I if 
the court finds that the exercise of operational control by, or the 
presence of, such individual at any such establishment either poses 
a direct and substantial threat to the public health or safety or, if 
such individual is convicted of a felony described in subpara-
graph (B), poses a clear likelihood of significant economic harm to 
consumers. 
"(2) Such order shall terminate— 
"(A) whenever the Secretary determines by order, after a 
hearing on the record, whether such individual should exercise 
operational control of, or be physically present at, any establish-
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3569 
District of 
Columbia. 
Courts, U.S. 
Records. 
Law 
enforcement and 
crime. 
Courts, U.S. 
21 u s e 674. 
21 u s e 601. 
Health and 
medical care. 
Safety. 
merit requiring inspection under title I, and judicial review, if 
21 use 601. 
any, of such determination is completed; or 
"(B) 90 days after the issuance of such temporary order by the 
court if the Secretary does not commence such hearing before 
the expiration of such 90 days; 
whichever occurs earlier. 
"(c) Any determination and order of the Secretary issued under 
subsection (a) or (b) shall be conclusive and enforceable unless the 
affected applicant for, or recipient of, inspection service or the 
affected individual files, not later than 30 days after the effective 
date of such order, a petition for review of such order in the United 
States Court of Appeals for the District of Columbia Circuit or the 
court of appeals for the circuit in which the relevant establishment 
is doing business. Judicial review of such order shall be on the 
record on which the determination and order are based. 
"(d)(1) Subject to paragraph (3), the Secretary may commence a 
civil action in an appropriate court, as provided in section 404, to 
withdraw inspection service under title I with respect to any 
establishment or to prevent any individual responsibly connected 
with any business requiring inspection under title I from exercising 
operational control of, or being present at, any establishment requir-
ing inspection under title I. 
(2) If the court finds, on the basis of clear and convincing 
evidence, that the recipient of inspection service or such individual 
has repeatedly failed to comply with the requirements of this Act, or 
the rules and regulations issued under this Act, in a manner that 
poses a direct and substantial threat to the public health or safety, 
the court shall issue an order— 
"(A) withdrawing inspection at such establishment; or 
' 
"(B) forbidding such individual to exercise operational control 
of, or to be physically present at, such establishment, 
for such period as the court determines is necessary to carry out the 
purposes of this Act. 
"(3) Not less than 90 days, and not more than 450 days, before 
commencing a civil action under paragraph (1), the Secretary shall 
provide to each recipient of inspection service, and each individual 
responsibly connected with the business, with respect to which such 
action is commenced, a written notice that includes— 
"(A) a statement that the Secretary intends to commence 
such action; 
"(B) a comprehensive description of the violations of this Act 
and the regulations issued under this Act alleged by the Sec-
retary; and 
"(C) a description of the actions the Secretary considers nec-
essary to be taken by such recipient or such individual to 
comply with this Act and to eliminate the need to commence 
such civil action. 
"(e)(1) The Secretary may temporarily withdraw inspection serv- Records. 
ice under title I with respect to any establishment for such period as 
21 USC 601. 
is necessary to ensure the safe and effective performance of official 
duties under this Act if the Secretary determines, after an oppor-
tunity for a hearing on the record, that an officer, employee, or 
; , 
agent of such establishment— 
"(A) threatened to forcibly assault; 
"(B) forcibly assaulted; 
"(C) forcibly intimidated; or 
"(D) forcibly interfered with, 
100 STAT. 3570 
PUBLIC LAW 99-641—NOV. 10, 1986 
• an employee of the United States engaged in, or on account of, the 
Safety. 
performance of any of such official duties. 
Records. 
"(2XA) Notwithstanding paragraph (1), the Secretary may tempo-
21 use 601. 
rarily suspend inspection service under title I with respect to any 
establishment, pending an expedited administrative hearing on the 
record and judicial review of the order of the Secretary based on 
such record, if the Secretary determines that temporary suspension 
J
. 
of such inspection service is necessary for the safety of any employee 
who performs official duties under this Act. 
"(B) If the Secretary receives, before or after temporarily suspend-
ing such inspection service in accordance with subparagraph (A), 
adequate written assurances from the recipient of inspection serv-
ice, or the individuals involved, that the conduct or circumstances 
that threatened the safety of such employee will not continue or 
recur, the Secretary may continue or restore such inspection service 
on condition that such assurances are fulfilled.". 
(c) WARNING; REPORTING OF VIOLATIONS.—Effiective only during 
the 6-year period beginning on the date of enactment of this Act, 
section 406 of the Federal Meat Inspection Act (21 U.S.C. 676) is 
amended— 
(1) in subsection (b), by adding at the end thereof the following 
new sentence: "In determining whether the public interest 
- . y 
could be adequately served by a written notice of warning, the 
•^ 
Secretary shall take into account, among other factors— 
"(1) the compliance history of such establishment; 
"(2) the magnitude of the violation; 
"(3) whether compliance with this Act would likely be ob-
tained as a result of such notice; and 
"(4) whether such violation is of a minor or technical 
nature."; and 
(2) by adding at the end thereof the following new subsection: 
"(c) Unless the Secretary by regulation provides otherwise, before 
any violation of this Act is reported by the Secretary for prosecution 
in a criminal proceeding, the Secretary shall give the person alleged 
to have committed such violation— 
"(1) reasonable notice that the Secretary intends to report 
such violation for prosecution; and 
"(2) an opportunity to present to the Secretary, orally or in 
writing, views with respect to such proceeding.". 
(d) CONFORMING AMENDMENTS.— 
(1) NIGHTTIME.—Effiective only during the 6-year period begin-
ning on the date of enactment of this Act, section 9 of the 
Federal Meat Inspection Act (21 U.S.C. 609) is amended by 
inserting ", except as provided in section 6," after "equines, 
and" the first place it appears. 
(2) ADMINISTRATION.—Effective only during the 6-year period 
•' 
beginning on the date of enactment of this Act, section 21 of the 
Federal Meat Inspection Act (21 U.S.C. 621) is amended by 
striking out "and meat food products" and inserting in lieu 
thereof "thereof, and of meat food products". 
21 use 606 note. 
(e) CONSTRUCTION OF AMENDMENTS.—The amendments made by 
this section shall not be construed to authorize the Secretary of 
Agriculture to refuse to provide inspection under the Federal Meat 
Inspection Act (21 U.S.C. 601 et seq.) at an establishment solely 
because such establishment does not participate in a total plant 
quality-control program. 
PUBLIC LAW 99-641—NOV. 10, 1986 
100 STAT. 3571 
SEC. 404. SAVINGS PROVISION. 
21 USC 606 note. 
The expiration date provisions of section 403 shall not have the 
effect of releasing or extinguishing any penalty, forfeiture, or liabil-
ity incurred under the Federal Meat Inspection Act (21 U.S.C. 601 et 
seq.), as gimended by section 403, or under the rules or regulations 
issued under such Act. 
SEC. 405. SENSE OF CONGRESS. 
21 USC 606 note. 
It is the sense of Congress that the Secretary of Agriculture 
should— 
(1) carry out a program to detect residues in livestock that are 
sulsject to inspection under title I of the Federal Meat Inspec-
tion Act (21 U.S.C. 601 et seq.); and 
(2) evaluate the feasibility of, and develop, a program that 
would enable the Secretary to trace any particular livestock 
that are subject to inspection under title I of the Federal Meat 
Inspection Act, in order to identify the producer of such live-
stock. 
SEC. 406. ANNUAL REPORT. 
21 USC 606 note. 
Not later than 1 year after the date of the enactment of this Act, 
and annu£dly thereafter, the Secretary of Agriculture shall submit 
to the (Committee on Agriculture of the House of Representatives 
and the Committee on Agriculture, Nutrition, and Forestry of the 
Senate a report describing— 
(1) any action proposed or taken by the Secretary to imple-
ment the amendments made by section 403; 
(2) any action proposed or taken by the Secretary to carry out 
a program to detect residues in livestock that are subject to 
inspection under title I of the Federal Meat Inspection Act (21 
U.S.C. 601 et seq.); 
(3) any action proposed or taken by the Secretary to evaluate 
the feasibility of, and develop, a program that would enable the 
Secretary to trace any particular livestock that are subject to 
inspection under such title, in order to identify the producer of 
such livestock; and 
(4) any personnel action proposed or taken by the Secretary as 
a result of the amendments made by section 403 and any effort 
made by the Secretary to minimize any adverse economic effect 
of such amendments on employees of the Department of 
Agriculture. 
SEC. 407. CONGRESSIONAL REEVALUATION. 
21 USC 606 note. 
It is the sense of Congress that, not later than 6 years after the 
date of the enactment of this Act, Congress shall— 
(1) evaluate the operation and effects of the amendments 
made by section 403, for the purpose of determining whether to 
extend or modify the operation of such amendments; and 
(2) enact such legislation as may be necessary to efficiently 
and effectively carry out the Federal Meat Inspection Act (21 
U.S.C. 601 et seq.). 
SEC. 408. EFFECTIVE DATE; APPLICATION OF AMENDMENTS. 
21 USC 606 note. 
(a) GENERAL ErFEcrrivE DATE.—Except as provided in subsection 
(b) of this section, this title and the amendments made by this title 
shall become effective on the date of the enactment of this Act. 
100 STAT. 3572 
PUBLIC LAW 99-641—NOV. 10, 1986 
(b) TEMPORARY APPUCATION OF EXISTING LAW.—Sections 6, 9, and 
21 of the Federal Meat Inspection Act (21 U.S.C. 606, 609, and 621), 
as in effect immediately before the date of the enactment of this Act, 
shall apply with respect to establishments until the Secretary of 
Agriculture first issues rules and regulations to implement the 
amendments made by section 403(a). 
Approved November 10, 1986. 
LEGISLATIVE HISTORY—H.R. 4613 (S. 2045): 
HOUSE REPORTS: No. 99-624 (Comm. on Agriculture) and No. 99-995 (Comm. of 
V o n r(Pl*finC6 f 
SENATE REPORTS: No. 99-291 accompanying S. 2045 (Ck)mm. on Agriculture, 
Nutrition, and Forestry). 
CONGRESSIONAL RECORD, Vol. 132 (1986): 
July 16, considered and passed House. 
Sept. 24, Oct. 6, S. 2045 considered in Senate; proceedings vacated and H.R. 
4613, amended, passed in lieu. 
Oct. 15, House rejected conference report; concurred in Senate amendment with 
an amendment. 
, 
> 
Oct. 17, Senate concurred in House amendment. 
. i ;sii 
;>«"