COTTON CLASSIFICATION UNDER COTTON FUTURES LEGISLATION

• Citation: 7 CFR Part 27
• Sections: 64

§ 27.1 Meaning of words.

Words used in this subpart in the singular form shall be deemed to import the plural and vice versa, as the case may demand.

§ 27.2 Terms defined.

As used throughout this subpart, unless the context otherwise requires, the following terms shall be construed, respectively, to mean:

(a) The Act. The United States Cotton Futures Act (90 Stat. 1841-1846; 7 U.S.C. 15b).

(b) Department. The United States Department of Agriculture.

(c) Service. The Agricultural Marketing Service of the Department.

(d) Administrator. The Administrator of the Service, or any officer or employee of the Service, to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated, to act in the Administrator's stead.

(e) Cotton Division. The Cotton Division of the Service.

(f) Director. The Director of the Cotton Division, or any officer or employee of the Division to whom authority has heretofore been delegated, or to whom authority may hereafter be delegated to act in the Director's stead.

(g) Marketing Services Office. A facility of the Cotton Division established under the Act at any point.

(h) Quality Assurance Division. The Quality Assurance Division at Memphis, Tennessee; shall provide supervision of futures cotton classification.

(i) Exchange. Exchange, board of trade, or similar institution or place of business, at, on, or in which a basis grade contract may be made.

(j) Exchange inspection agency. The inspection agency of the New York Cotton Exchange, the New Orleans Cotton Exchange, the Board of Trade of the city of Chicago, or of any other exchange which may have an organized inspection agency recognized as such by the Director, as the case may be.

(k) Basis grade contract. Contract of sale of cotton for future delivery mentioned in the Act, made at, on, or in any exchange in compliance with subsection 15b(f) of the Act.

(l) Person. Individual, association, partnership, or corporation.

(m) Owner. Person who owns, controls, or has the disposition of any cotton.

(n) Classification. The classification of any cotton shall be determined by the quality of a sample in accordance with the Universal Cotton Standards (the official cotton standards of the United States) for cotton property measurements of American Upland cotton. High Volume Instruments will determine all cotton property measurements except extraneous matter. Cotton classers authorized by the Cotton and Tobacco Program will determine the presence of extraneous matter. Original Smith-Doxey data may serve as certification that bales submitted for quality verification meet quality and age parameters set by an applicable exchange inspection agency as a futures classification option.

(o) Micronaire determination. The measure of the fiber fineness and maturity of cotton, in combination, in terms of Micronaire readings as determined by an authorized employee of the Department in accordance with the official cotton standards of the United States for fiber fineness and maturity.

(p) Smith-Doxey data. Data reflecting the original classification of a cotton bale provided to producers of cotton under the Smith-Doxey Act of April 13, 1937 (Pub. L. 75-28).

§ 27.3 Requirements of subsection 15b(f) of the Act.

The inspection, sampling, classification, and Micronaire determination of cotton pursuant to subsection 15b(f) of the Act shall be performed as prescribed in this subpart. All tenders of cotton and settlements therefor under basis grade contracts shall be made subject to the regulations in this subpart. No contract shall for the purposes of this subpart be deemed to comply with subsection 15b(f) of the Act if it contain or incorporate therein, by reference or otherwise, any provision or any bylaw, rule, or custom of an exchange which is inconsistent or in conflict with any requirement of said subsection 15b(f), nor if the parties enter into any collateral or additional agreement or understanding, either verbal or written, respecting the subject matter of such contract which is inconsistent or in conflict with any requirement of said subsection 15b(f).

§ 27.4 Obligations and rights under Act: not affected by regulations.

Nothing in this subpart shall be construed as relieving any party to a basis grade contract of any obligation imposed upon the party, or as depriving the party of any right to which the party might be entitled under any provision of the contract or exchange rule made a part thereof which shall not be inconsistent with the act or the regulations made under the Act.

§ 27.5 Effect of amendments.

Any amendment to this subpart, unless otherwise stated therein, shall apply to all tenders of cotton and settlements therefor made on and after the effective date of such amendment, under basis grade contracts entered into prior, as well as subsequent, to such effective date.

§ 27.8 Director.

The Director shall perform for and under the supervision of the Administrator, such duties as the Administrator may require in enforcing the provisions of the Act and this subpart.

§ 27.9 Classing Offices; Quality Assurance Division.

Classing Offices shall be maintained at points designated for the purpose by the Administrator. The Quality Assurance Division shall provide supervision of futures cotton classification and perform other duties as assigned by the Deputy Administrator.

§ 27.10 Supervision of cotton inspection, weighing, sampling; and other duties.

Authorized employees of the Cotton Division will act, when necessary, as supervisors of cotton inspection to supervise the inspection, weighing, and sampling of cotton to be classified and will perform such other duties as may be required of them for the purposes of this subpart.

§ 27.11 Area Director, Marketing Services Office; responsibility.

Subject to this subpart and the instructions of the Director, the Area Director of each Marketing Services Office shall be responsible for the proper performance of the duties imposed on such office and on the persons connected therewith.

§ 27.12 Classification request for each lot of cotton.

For each lot or mark of cotton of which the applicant desires separate classification and certification, the applicant shall make a separate written request in a form prescribed or supplied by the Cotton Division for that purpose.

§ 27.13 Micronaire determination request incidental to classification request.

The classification request may include a request for Micronaire determination.

§ 27.14 Filing of classification requests.

Requests for futures classification shall be filed with the Quality Assurance Division within 10 days after sampling and before classification of the samples.

§ 27.15 Withdrawal or rejection of classification or Micronaire determination requests.

Any request for classification or for Micronaire determination may be withdrawn by the applicant at any time before the classification or Micronaire determination of the cotton covered thereby, subject to the payment of such fees, if any, as may be prescribed under §§ 27.80 to 27.92. Any request for classification or for Micronaire determination may be rejected for noncompliance with the act or this subpart.

§ 27.16 Inspection; weighing; samples; supervision.

The inspection, weighing, and sampling of cotton for which classification is desired and the preparation and delivery of samples to the Marketing Services Office shall be (a) under the supervision of a supervisor of cotton inspection, or (b) by or under the direction of an exchange inspection agency and subject to the supervision of a supervisor of cotton inspection.

§ 27.18 Persons not to be employed for inspection or sampling.

No person shall, after notice to the interested parties, be employed in any way in connection with any phase of the inspection and sampling of cotton or the preparation of the samples thereof, for the purposes of classification under this subpart, who for good cause is disapproved by the Director.

§ 27.20 Drawing and handling of samples of cotton; inspection of bales.

One sample shall be drawn from the top side of each bale and one from the bottom side. Each such sample shall weigh not less than 5 ounces, the two samples from each bale to weigh together not less than 10 ounces. The bale shall be inspected and any condition not fully indicated by the samples shall be explained by the supervisor of cotton inspection or exchange inspection agency in a written memorandum, which shall acompany the samples to the Marketing Services Office. Samples shall not be dressed or trimmed and shall be carefully handled in such manner as not to cause loss of leaf, sand, or other material, or otherwise change their representative character. Any sample which does not meet the requirements of this section may be rejected by the supervisor of cotton inspection or the Area Director.

§ 27.22 Wrapping and marking of samples of cotton.

The original sets of samples of the bales constituting a lot or mark to be classified separately shall be inclosed in one or more wrappers or containers, as the case may require. The wrappers or containers of original samples shall be so labeled or marked, or both, as to show that they contain original samples, together with the lot number, if any, the marks, and the number of bales, and such other information as may be necessary in accordance with the instructions of the Area Director of the Marketing Services Office to which the samples are to be delivered.

§ 27.23 Duplicate sets of samples of cotton.

The duplicate sets of samples shall be inclosed in wrappers or containers separate and apart from the original sets in the manner prescribed or original samples in the foregoing section, except that the wrappers or containers shall be labeled or marked, or both, so as to show that they contain duplicate samples and shall be delivered to the person requesting the classification of the cotton.

§ 27.24 Delivery of samples of cotton.

The original sample from each bale to be classified shall be delivered to the Marketing Services Office with which the classification request was filed, at its classification room. If there is no Marketing Services Office at the point where the cotton is sampled, the supervisor of cotton inspection or the exchange inspection agency shall forward the samples to the proper Marketing Services Office. No samples covered by pending classification requests which are ready for delivery as provided for herein shall be withheld from such delivery except as authorized in writing by the Area Director or the Director.

§ 27.25 Additional samples of cotton; drawing.

In addition to the samples hereinbefore prescribed, separate samples, if desired, may be drawn and furnished to the owner of the cotton.

§ 27.28 Disposition of samples.

Samples submitted to a Marketing Services Office shall become the property of the Department and shall be disposed of in accordance with the property regulations of Department when no longer needed for classification or Micronaire determinations.

§ 27.31 Classification of cotton.

For purposes of subsection 15b (f) of The Act, classification of cotton is the determination of 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 leaf grade of American upland cotton, and fiber property measurements such as micronaire. High Volume Instruments will determine all fiber property measurements except extraneous matter. High Volume Instrument colormeter measurements will be used for determining the official color grade. Cotton classers authorized by the Cotton and Tobacco Programs will determine the presence of extraneous matter and authorized employees of the Cotton and Tobacco Programs will determine all fiber property measurements using High Volume Instruments.

§ 27.32 Order of classification.

All cotton for which classifications requests shall be pending shall be classified as far as practicable in the order in which proper samples thereof, ready for such classification, shall have been delivered to the Marketing Services Office, except as otherwise provided in this subpart or when the Area Director or the Director shall find that an emergency exists and shall order otherwise.

§ 27.33 Exposing of samples for classification.

Classification shall not proceed until the samples, after being delivered to the Marketing Services Office, shall have been exposed for such length of time as in the judgment of the Area Director shall be sufficient to put them in proper condition for the purpose.

§ 27.34 Classification procedure.

Classification shall proceed as rapidly as possible, but not when light or other conditions make uncertain the accuracy of the results to be obtained.

§ 27.35 Lower class of two samples to prevail.

In case a sample drawn from one portion of a bale is lower in 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.

§ 27.36 Classification determinations based on official standards.

All cotton shall be classified on the basis of the official cotton standards of the United States in effect at the time of such classification.

§ 27.37 Cotton reduced in grade.

If cotton be reduced in grade, by reason of the presence of extraneous matter or other irregularities or defects, below its grade according to the official cotton standards of the United States, the grade from which it is so reduced, and the condition or reason which so reduces its grade shall be determined and stated.

§ 27.38 Terms defined for purposes of classification.

For the purposes of classification the following terms shall be construed, respectively, to mean:

(a) Cotton of perished staple. Cotton that has the strength of fiber as ordinarily found in cotton destroyed or unduly reduced through exposure to the weather either before picking or after baling, or through heating by fire, or on account of water packing, or by other causes.

(b) [Reserved]

(c) Gin cut cotton. Cotton that shows damage in ginning, through cutting by the saws, to an extent that reduces its value more than two grades.

(d) Reginned cotton. Cotton that has passed through the ginning process more than once, and cotton that, after having been ginned, has been subjected to a cleaning process and then baled.

(e) Repacked cotton. Cotton that is composed of factors', brokers', or other samples, or of loose or miscellaneous lots collected and rebaled, or cotton in a bale which is composed of cotton from two or more smaller bales or parts of bales that are combined after the cotton leaves the gin.

(f) False packed cotton. Cotton in a bale (1) containing substances entirely foreign to cotton, (2) containing damaged cotton in the interior with or without any indication of such damage upon the exterior, (3) composed of good cotton upon the exterior and decidedly inferior cotton in the interior, in such manner as not to be detected by customary examination, or (4) containing pickings or linters worked into the bale.

(g) Mixed packed cotton. Cotton in a bale which, in the sample taken therefrom, shows (1) a difference of three or more grades, or (2) a difference of three or more color groups, or (3) a difference in length of staple of one-eighth inch or more. For purposes of this paragraph, White Cotton (including the Plus grades), Light Gray Cotton, and Gray Cotton shall constitute one color group, and Light Spotted Cotton, Spotted Cotton, Tinged Cotton, and Yellow Stained Cotton shall each constitute a color group.

(h) Water packed 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.

§ 27.39 Issuance of classification records.

Except as otherwise provided in this section, as soon as practicable after the classification of cotton has been completed by the Cotton and Tobacco Programs, the Quality Assurance Division shall issue an electronic cotton classification record showing the results of such classification. Each electronic record shall bear the date of its issuance. The electronic record shall show the identification of the cotton according to the information in the possession of the Cotton and Tobacco Programs, the classification of the cotton and such other facts as the Deputy Administrator may require.

§ 27.40 New certificates; conditions of issuance.

For the business convenience of a holder of a cotton class certificate issued under this subpart a new certificate may be issued at the request of the holder, to take the place of the former certificate without the reclassification of the cotton and without a new Micronaire determination for the cotton. In any case where a new certificate is issued in accordance with this section, the former certificate shall be surrendered for cancellation, and such new certificate shall bear a new number, the date of its issuance, and the date of original certification, and shall otherwise comply with this subpart.

§ 27.41 Lost certificate; duplicate.

Upon the written request of the last holder of a valid cotton class certificate and a showing to the satisfaction of the Area Director of the Marketing Services Office which issued such certificate, that it has been lost or destroyed and, if lost, that diligent effort has been made to find it without success, a new certificate shall be issued without the reclassification of the cotton and without a new Micronaire determination for the cotton. Such new certificate shall bear the same number and date of issuance as the lost or destroyed certificate, and shall include a statement to the effect that it is a duplicate issued in lieu of the lost or destroyed original, as the case may be.

§ 27.42 Surrender of certificate.

For good cause any certificate issued under this subpart shall be surrendered to a Marketing Services Office for correction or cancellation. If such certificate be not surrendered upon request it shall nevertheless be invalid under subsection 15b(f) of the Act and this subpart.

§ 27.43 Validity of cotton class certificates.

Each cotton class certificate for cotton classified as tenderable shall be valid for use in the tender of such cotton on a basis grade contract made in accordance with the Act and this subpart and the rules of an exchange not inconsistent therewith.

§ 27.44 Invalidity of cotton class certificates.

Any cotton class certificate shall become invalid for use in the tender or delivery of the cotton covered thereby on a basis grade contract whenever such cotton shall be removed from the place of storage specified therein, except when it is handled and re-stored or transferred to a different place of storage and restored under the supervision of an exchange inspection agency or a supervisor of cotton inspection.

§ 27.45 No storage of cotton for classification at disapproved place.

No cotton submitted for classification under subsection 15b(f) of the Act shall be located or stored at a place disapproved for the purpose by the Area Director or the Director on account of being unsuitable for the safekeeping or proper storage of such cotton, or on account of the failure or refusal of the custodian thereof to comply or to permit compliance with the requirements of this subpart. Notice of such disapproval shall be given in such manner as the Director may direct. Thereafter every cotton class certificate previously issued for cotton located or stored at such place shall be invalid for the delivery of such cotton on a basis grade contract, unless the cotton shall be removed under the supervision of an exchange inspection agency, or a supervisor of cotton inspection, to a place which shall be suitable for the purpose. Upon such removal and the request of the holder of the cotton class certificate for such cotton a new certificate in lieu thereof, as provided elsewhere in this subpart, shall be issued.

§ 27.46 Cotton withdrawn from storage.

The exchange inspection agency under the supervision or control of which any cotton classified pursuant to this subpart shall be held or stored shall furnish to the Marketing Services Office which classified such cotton, on the first business day of each week, a written statement of all cotton withdrawn from storage, or the lot number or other identification of which has been changed, or which has otherwise been removed from the supervision or control of such exchange inspection agency during the next preceding week. Such statement shall show each lot number, and, if changed, the new lot number, and in case of the withdrawal or removal of a portion only of the lot, the tag numbers of the bales so withdrawn or removed. If such removal shall be to a different place of storage under the supervision or control of the exchange inspection agency, the statement shall show the new location.

§ 27.47 Tender or delivery of cotton; conditions.

Subject to the provisions of §§ 27.52 through 27.55, no cotton shall be tendered or delivered on a basis grade contract unless on or prior to the date fixed for delivery under such contract, and in advance of final settlement of the contract, the person making the tender shall furnish to the person receiving the same a valid outstanding cotton classification record complying with the regulations in this subpart, showing such cotton to be tenderable on a basis grade contract.

§ 27.52 Delivery without certification.

If upon the date fixed for delivery in accordance with subsection 15b(f) of the Act cotton class certificates shall not have been issued by a Marketing Services Office for cotton to be delivered pursuant to such notice, samples of which cotton shall have been in the custody of the Marketing Services Office for the time hereinafter prescribed, the delivery of such cotton may be made upon compliance with and subject to the conditions specified in §§ 27.52 through 27.55. Sections 27.52 through 27.55 shall not apply to cotton upon which a Marketing Services Office has already issued cotton class certificates pursuant to this subpart.

§ 27.53 Notice for delayed certification; requirements.

On the date of giving the transferable notice of the delivery in accordance with subsection 15b(f) of the act the person issuing such notice or the person on whose behalf it was issued shall also give written notice to the Marketing Services Office with which the classification request was required to be filed, specifying the date of delivery and the number of bales so to be delivered which have not been certified. In such notice, or later in writing before the delivery of the samples to the Marketing Services Office the lot numbers of the cotton so to be delivered shall be specified.

§ 27.54 Inspection and sampling for delayed certification.

Such cotton must have been duly inspected and sampled, and the original samples thereof properly prepared in accordance with this subpart must be delivered to the Marketing Services Office not later than the date of issuance of the transferable notice, except when the delivery day fixed by such transferable notice is the last delivery day in the month of delivery. In such case the cotton must have been duly inspected and sampled, and the original samples thereof properly prepared in accordance with this subpart must have been delivered to the Marketing Services Office in accordance with all regulations applicable and in readiness for classification not later than 8 p.m. of the second business day preceding such last delivery day.

§ 27.55 Requirements in lieu of cotton class certificates on delivery day.

If on the morning of the delivery day specified in the transferable notice the cotton class certificates covering the cotton involved are not ready for delivery when called for, the tenderer of the cotton shall present to the receiver a receipt issued by an exchange inspection agency certifying that warehouse receipts, listed by lot numbers, representing cotton weighed and sampled in an approved warehouse under the supervision of such agency, have been received by the exchange inspection agency and are in the custody of the Cotton Division Marketing Services Office where certification requests are required to be filed. The requirements of §§ 27.52-27.55 shall be complied with prior to delivery by the tenderer of the agency's receipt to the receiver. Upon issuance by Marketing Services Office, the tenderer shall furnish to the receiver the cotton class certificates complying with the regulations in this subpart, showing the cotton to be tenderable on a basis grade contract.

§ 27.57 Request for postponement.

If the applicant desires the postponement of the classification of any cotton covered by a classification request filed pursuant to the regulations in this subpart until later notice, the original classification request must so state, or the applicant must so advise the Marketing Services Office in writing before the classification has been entered upon. Such request must show cause and that it is not made merely for dilatory reasons.

§ 27.58 Postponed classification; must be within 30 days.

If thereafter the classification of the cotton be desired, notice thereof shall be filed not later than the expiration of 30 days after the date upon which the samples were drawn from the cotton, and the original samples must have remained continuously in the possession of the Marketing Services Office or under its control.

§ 27.59 Postponed classification; interference.

Classification pursuant to such suspended request shall not be allowed to interfere with or delay the classification of other samples previously made ready for classification or which are otherwise entitled to priority.

§ 27.60 When original request deemed withdrawn.

If the period of 30 days specified in § 27.58 shall expire without the filing of the notice of desire for classification the applicant shall be deemed to have withdrawn the original request for the classification of such cotton.

§ 27.73 Supervision of transfers of cotton.

Whenever the owner of any cotton inspected and sampled for classification pursuant to this subpart and for which the owner holds valid cotton class certificates desires to transfer such cotton to a different delivery point, or to a different warehouse at the same delivery point, for the purpose of having it made available for delivery upon a basis grade contract, such transfer shall be effected under the supervision of an exchange inspection agency or a supervisor of cotton inspection.

§ 27.80 Fees; review classification, futures classification and supervision.

For services rendered by the Cotton and Tobacco Programs pursuant to this subpart, whether the cotton involved is tenderable or not, the person requesting the services shall pay fees as follows:

(a) For each calendar year, AMS will calculate the rate for services, per hour per program employee using the following formulas:

(1) Regular rate. The total AMS grading or classification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase, plus the benefits rate, plus the operating rate, plus the allowance for bad debt rate. If applicable, travel expenses may also be added to the cost of providing the service.

(2) Overtime rate. The total AMS grading or classification program personnel direct pay divided by direct hours, which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 1.5 plus the benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service.

(3) Holiday rate. The total AMS grading or classification program personnel direct pay divided by direct hours which is then multiplied by the next year's percentage of cost of living increase and then multiplied by 2, plus benefits rate, plus the operating rate, plus an allowance for bad debt. If applicable, travel expenses may also be added to the cost of providing the service.

(b) For each calendar year, based on historical costs, AMS will calculate the benefits, operating, and allowance for bad debt components of the regular, overtime and holiday rates as follows:

(1) Benefits rate. The total AMS grading or classification program direct benefits costs divided by the total hours (regular, overtime, and holiday) worked, which is then multiplied by the next calendar year's percentage cost of living increase. Some examples of direct benefits are health insurance, retirement, life insurance, and Thrift Savings Plan (TSP) retirement basic and matching contributions.

(2) Operating rate. The total AMS grading or classification program operating costs divided by total hours (regular, overtime, and holiday) worked, which is then multiplied by the percentage of inflation.

(3) Allowance for bad debt rate. Total AMS grading or classification program allowance for bad debt divided by total hours (regular, overtime, and holiday) worked.

(c) Basis. The calendar year cost of living expenses and percentage of inflation factors used in the formulas in this section are based on the most current Office of Management and Budget's Presidential Economic Assumptions.

§ 27.81 Fees; certificates.

For each new certificate issued in substitution for a prior certificate at the request of the holder thereof, for the purpose of business convenience, or when made necessary by the transfer of cotton under the supervision of any exchange inspection agency as provided in § 27.73, the person making the request shall pay a fee determined as described in § 27.80.

§ 27.83 No fees for certain certificates.

No fee shall be collected for a new cotton class certificate issued in lieu of a prior certificate solely for the purpose of correcting clerical errors therein or for the purpose of substituting a new form applicable to outstanding certificates, or without an application therefor.