U.S. Code of Federal Regulations
Regulations most recently checked for updates: Nov 30, 2022
(a) This subpart is applicable to crops of upland and extra long staple seed cotton and as otherwise determined appropriate by the Deputy Administrator. This subpart specifies the terms and conditions under which recourse seed cotton loans will be made available by CCC. Such loans will be available through March 31 of the year following the calendar year in which such crop is normally harvested. CCC may change the loan availability period to conform to State or locally imposed quarantines. Additional terms and conditions are in the note and security agreement that must be executed by a producer in order to receive such loans.
(b) Loan rates and the forms that are used in administering the recourse seed cotton loan program for a crop of cotton are available in FSA State and county offices. Loan rates will be based on the base quality loan rate for upland cotton and the national average loan rate for extra long staple cotton.
(c) A producer must, unless otherwise authorized by CCC, request the loan at the FSA county office that, under part 718 of this title, is responsible for administering programs for the farm on which the cotton was produced. All note and security agreements and related documents necessary for the administration of the recourse seed cotton loan program will be prescribed by CCC and will be available at FSA State and county offices.
(d) Loans will not be available for seed cotton produced on land owned or otherwise in the possession of the United States if such land is occupied without the consent of the United States.
(a) The Recourse Seed Cotton Loan Program that is applicable to a crop of cotton will be administered under the general supervision of the Executive Vice President, CCC, or a designee and will be carried out in the field by FSA State and county committees.
(b) State and county committees, and representatives and employees thereof, do not have the authority to modify or waive any of the provisions of the regulations of this subpart.
(c) The State committee will take any action required by these regulations which has not been taken by the county committee. The State committee will also:
(1) Correct, or require a county committee to correct, an action taken by such county committee which is not under the regulations of this subpart; or
(2) Require a county committee to withhold taking any action which is not under the regulations of this subpart.
(d) No provision or delegation herein to a State or county committee will preclude the Executive Vice President, CCC (Administrator, FSA), or a designee from determining any question arising under the recourse seed cotton program or from reversing or modifying any determination made by the State or county committee.
(e) The Deputy Administrator, FSA, may authorize waiver or modification of deadlines and other program requirements where lateness or failure to meet such other requirements does not adversely affect the operation of the recourse seed cotton loan program.
(f) A representative of CCC may execute loan applications and related documents only under the terms and conditions determined and announced by CCC. Any such document which is not executed under such terms and conditions, including any purported execution before the date authorized by CCC, will be null and void.
(a) A producer or the producer's agent must request a loan at the FSA county office for the county that, under part 718 of this title, is responsible for administering programs for the farm on which the cotton was produced and which will assist the producer in completing the loan documents, except that CMAs designated by producers to obtain loans on their behalf may, unless otherwise authorized by CCC, obtain loans through a central FSA county office designated by the State committee.
(b) Disbursement of each loan will be made by the FSA county office of the county that is responsible for administering programs for the farm on which the cotton was produced, except that CMAs designated by producers to obtain loans in their behalf may, unless otherwise authorized by CCC, obtain disbursement of loans at a central FSA county office designated by the State committee. Service charges will be deducted from the loan proceeds.
(1) The producer or the producer's agent must not present the loan documents for disbursement unless the cotton is in existence and in good condition.
(2) If the cotton is not in existence and in good condition at the time of disbursement, the producer or the agent must immediately return the check issued in payment of the loan or, if the check has been negotiated, the total amount disbursed under the loan, and charges plus interest must be refunded promptly.
(a) Seed cotton pledged as collateral for a loan must be tendered to CCC by an eligible producer and must:
(1) Be in existence and in good condition at the time of disbursement of loan proceeds;
(2) Be stored in identity-preserved lots in approved storage meeting requirements of § 1427.171;
(3) Be insured at the full loan value against loss or damage by fire;
(4) Not have been sold, nor any sales option on such cotton granted, to a buyer under a contract which provides that the buyer may direct the producer to pledge the seed cotton to CCC as collateral for a loan;
(5) Not have been previously sold and repurchased; or pledged as collateral for a CCC loan and redeemed;
(6) Be production from acreage that has been reported timely under part 718 of this title; and
(b) The quality of cotton that may be pledged as collateral for a loan is the estimated quality of lint cotton in each lot of seed cotton as determined by the FSA county office, except that if a control sample of the lot of cotton is classed by an AMS Cotton Classing Office or other entity approved by CCC, the quality for the lot is the quality shown on the applicable documentation issued for the control sample.
(c) To be eligible for loan, the beneficial interest in the seed cotton must be in the producer who is pledging the seed cotton as collateral for a loan as provided in § 1427.5(c).
The seed cotton must be insured at the full loan value against loss or damage by fire.
If there are any liens or encumbrances on the seed cotton tendered as collateral for a loan, waivers that fully protect the interest of CCC must be obtained even though the liens or encumbrances are satisfied from the loan proceeds. No additional liens or encumbrances shall be placed on the cotton after the loan is approved.
(a) A producer must pay a non-refundable loan service fee at a rate determined by CCC.
(b) Interest which accrues for a loan will be determined under part 1405 of this chapter.
(a) The quantity of lint cotton in each lot of seed cotton tendered for loan will be determined by the FSA county office by multiplying the weight or estimated weight of seed cotton by the lint turnout factor determined under paragraph (b) of this section.
(b) The lint turnout factor for any lot of seed cotton will be the percentage determined by the county committee representative during the initial inspection of the lot. If a control portion of the lot is weighed and ginned, the turnout factor determined for the portion of cotton ginned will be used for the lot. If a control portion is not weighed and ginned, the lint turnout factor will not exceed 32 percent for machine-picked cotton and 22 percent for machine-stripped cotton unless acceptable proof is furnished showing that the lint turnout factor is greater.
(c) Loans will not be made on more than a percentage established by the county committee of the quantity of lint cotton determined as provided in this section. If the seed cotton is weighed, the percentage to be used will not be more than 95 percent. If the quantity is determined by measurement, the percentage to be used will not be more than 90 percent. The percentage to be used in determining the maximum quantity for any loan may be reduced below such percentages by the county committee when determined necessary to protect the interests of CCC on the basis of one or more of the following risk factors:
(1) Condition or suitability of the storage site or structure;
(2) Condition of the cotton;
(3) Location of the storage site or structure; and
(4) Other factors peculiar to individual farms or producers which related to the preservation or safety of the loan collateral. Loans may be made on a lower percentage basis at the producer's request.
Approved storage consists of storage located on or off the producer's farm (excluding public warehouses) that is determined by a county committee representative to afford adequate protection against loss or damage and is located within a reasonable distance, as determined by CCC, from an approved gin. If the cotton is not stored on the producer's farm, the producer must furnish satisfactory evidence that the producer has the authority to store the cotton on such property and that the owner of the property has no lien for such storage against the cotton. The producer must provide satisfactory evidence that the producer and any person having an interest in the cotton including CCC, have the right to enter the premises to inspect and examine the cotton and permit a reasonable time to such persons to remove the cotton from the premises.
(a) A producer may, at any time before maturity of the loan, obtain release of all or any part of the loan seed cotton by paying to CCC the amount of the loan, plus interest and charges.
(b)(1) A producer or the producer's agent must not remove from storage any cotton that is pledged as collateral for a loan until prior written approval has been received from CCC for removal of the cotton. If a producer or the producer's agent obtains CCC approval, they may remove the cotton from storage, sell the seed cotton, have it ginned, and sell the resulting lint cotton and cottonseed. The ginner must inform the FSA county office in writing immediately after the seed cotton removed from storage has been ginned and furnish the county office the loan number, producer's name, and applicable gin bale numbers. If the seed cotton is removed from storage, the loan principal plus interest and charges must be paid not later than the earlier of:
(i) The date established by the county committee;
(ii) 5 days after the date of the producer received the AMS classification under § 1427.9 (and the warehouse receipt, if the cotton is delivered to a warehouse), representing such cotton; or
(iii) The loan maturity date.
(2) If the seed cotton or lint cotton is sold, the loan principal, interest, and charges must be satisfied immediately.
(3) A producer, except a CMA, may obtain a nonrecourse loan or LDP under subpart A of this part, on the lint cotton, but:
(i) The loan principal, interest, and charges on the seed cotton must be satisfied from the proceeds of the nonrecourse loan under subpart A of this part; or
(ii) The LDP must be applied to the loan principal, interest, and charges on the outstanding seed cotton loan.
(4) A CMA must repay the seed cotton loan principal, interest, and charges before pledging the cotton for a nonrecourse loan or before an LDP can be approved under subpart A of this part, on the lint cotton. If a CMA, which is authorized by producers to obtain loans in their behalf, removes seed cotton from storage before obtaining approval to move the cotton, the removal will constitute conversion of the cotton unless the CMA:
(i) Notifies the FSA county office in writing the following morning by mail or otherwise that such cotton has been moved and is on the gin yard;
(ii) Furnishes CCC an irrevocable letter of credit if requested; and
(iii) Repays the loan principal, plus interest and charges, within the time specified by the county committee.
(5) Any removal from storage will not be deemed to constitute a release of CCC's security interest in the seed cotton or to release the producer or CMA from liability for the loan principal, interest, and charges if full payment of such amount is not received by the FSA county office.
(c) If, either before or after maturity, the producer discovers that the cotton is going out of condition or is in danger of going out of condition, the producer must immediately notify the FSA county office and confirm such notice in writing. If the county committee determines that the cotton is going out of condition or is in danger of going out of condition, the county committee will accelerate the maturity date and request repayment of the loan principal, plus interest and charges on or before a specified date. If the producer does not repay the loan or have the cotton ginned and obtain a nonrecourse loan under subpart A of this part on the resulting lint cotton within the period specified by the county committee, the cotton will be considered abandoned.
(d) If the producer has control of the storage site and if the producer subsequently loses control of the storage site or there is danger of flood or damage to the seed cotton or storage structure making continued storage of the cotton unsafe, the producer must immediately either repay the loan or move the seed cotton to the nearest approved gin for ginning and must, at the same time, inform the FSA county office. If the producer does not do so, the seed cotton will be considered abandoned.
(e) CCC will not assume any loss in quantity or quality of the loan collateral for recourse seed cotton loans.
Any seed cotton pledged as collateral for a loan that is abandoned or has not been ginned and pledged as collateral for a nonrecourse loan under subpart A of this part by the seed cotton loan maturity date may be removed from storage by CCC and ginned and the resulting lint cotton warehoused for the account of CCC. The lint cotton and cottonseed may be sold at such time, in such manner and upon such terms as CCC may determine, at public or private sale. CCC may become the purchaser of the whole or any part of such cotton and cottonseed. If the proceeds received from the sales of the cotton are less than the amount due on the loan (including principal, interest, ginning charges, and any other charges incurred by CCC), the producer is liable for such difference. If the proceeds received from sale of the cotton are greater than the sum of the amount due plus any cost incurred by CCC in conducting the sale of the cotton, the amount of such excess will be paid to the producer or, if applicable, to any secured creditor of the producer.
Seed cotton loans mature on demand by CCC but no later than May 31 following the calendar year in which such crop is normally harvested.
(a)(1) If a producer makes any fraudulent representation in obtaining a loan, maintaining a loan, or settling a loan or if the producer disposes of or moves the loan collateral without the prior approval of CCC, such loan amount must be refunded upon demand by CCC. The producer will be liable for:
(i) The amount of the loan;
(ii) Any additional amounts paid by CCC for the loan;
(iii) All other costs which CCC would not have incurred but for the fraudulent representation or the unauthorized disposition or movement of the loan collateral;
(iv) Applicable interest on such amounts; and
(v) Liquidated damages under paragraph (e) of this section.
(2) Notwithstanding any provision of the note and security agreement, if a producer has made any such fraudulent representation or if the producer has disposed of, or moved, the loan collateral without prior written approval from CCC, the value of such collateral acquired by CCC will be equal to the sales price of the cotton less any costs incurred by CCC in completing the sale.
(b) If the amount disbursed under a loan, or in settlement thereof, exceeds the amount authorized by this subpart, the producer is liable for repayment of such excess, plus interest. In addition, seed cotton pledged as collateral for such loan will not be released to the producer until such excess is repaid.
(c) If the amount collected from the producer in satisfaction of the loan is less than the amount required under this subpart, the producer is personally liable for repayment of the amount of such deficiency plus applicable interest.
(d) If more than one producer executes a note and security agreement with CCC, each such producer is jointly and severally liable for the violation of the terms and conditions of the note and security agreement and the regulations in this subpart. Each such producer also remains liable for repayment of the entire loan amount until the loan is fully repaid without regard to such producer's claimed share in the seed cotton pledged as collateral for the loan. In addition, such producer may not amend the note and security agreement for the producer's claimed share in such seed cotton, after execution of the note and security agreement by CCC.
(e) If a producer makes any fraudulent representation in obtaining a loan, in maintaining or settling a loan, or disposing of or moving the collateral without the prior approval of CCC, that is a violation of the terms or conditions of the note and security agreement. If CCC or the county committee determines that the producer has violated the terms or conditions of the note and security agreement, liquidated damages will be assessed on the quantity of the seed cotton that is involved in the violation by multiplying the quantity involved in the violation by 10 percent of the loan rate applicable to the loan note. This amount will apply for both good faith and not good faith determinations.
(f) For first and second offenses, if CCC or the county committee determines that a producer acted in good faith when the violation occurred, the county committee will:
(1) Require repayment of the loan principal applicable to the loan quantity affected by the violation, and charges plus interest applicable to the amount repaid;
(2) Assess liquidated damages under paragraph (e) of this section; and
(3) If the producer fails to pay such amount within 30 calendar days from the date of notification, call the applicable loan involved in the violation.
(g) For cases other than first or second offenses, or any offense for which CCC or the county committee cannot determine good faith when the violation occurred, the county committee will:
(1) Assess liquidated damages under paragraph (e) of this section;
(2) Call the applicable loan involved in the violation.
(h) If CCC or the county committee determines that the producer has committed a violation under paragraph (e) of this section, the county committee shall notify the producer in writing that:
(1) The producer has 30 calendar days to provide evidence and information to the county committee regarding the circumstances which caused the violation, and
(2) Administrative actions will be taken under paragraphs (f) or (g) of this section.
(i) Any or all of the liquidated damages assessed under the provision of paragraph (e) of this section may be waived as determined by CCC.